Why U.S. fuel-economy standards don't work

Dan Carney • E-mail

You can lead a columnist to cars, but you can’t make him think.

Thomas L. Friedman, the New York Times’ Pulitzer Prize-winning opinion columnist, is feeling betrayed by Toyota. In a 2005 column, Friedman, an expert on Middle Eastern affairs and economics, fantasized about Toyota taking over General Motors for the latter’s supposed manifold inadequacies and the former’s inherent and absolute purity of heart.

Is there something in the Hudson River’s water that makes people who rarely drive cars decide they are experts on their design and use?

Now, in a column titled “Et Tu, Toyota?,” Friedman is incredulous that the company he canonized a short two years ago is speaking environmental heresy. Toyota’s offense? Lobbying against an increase in federal fuel economy standards for carmakers.

There is a good reason that Toyota and the other carmakers oppose the government’s attempt to dictate what kinds of cars they sell: It doesn’t work. Friedman imagines, incorrectly, that the rise in sales by Honda and Toyota at the expense of domestic manufacturers has been due to the greater fuel economy of the smaller Japanese models.

That drove sales during the gas crunch of the ‘70s. But those purchases introduced American shoppers to the quality and dependability of those brands, and it is these factors that propelled their sales growth in the subsequent decades.

Today, the Honda Accord is classified by the federal government as a large car. Toyota’s full-size Tundra pickup trucks don’t score as well as GM’s in the government’s fuel economy tests. So today’s Japanese-brand cars and trucks are largely indistinguishable from domestics in terms of size and fuel economy. But they still have a better reputation for quality, which is why many customers prefer them.

Ever since fuel prices plummeted and stayed near historic lows for a couple decades, American consumers have had little interest in buying smaller cars, which is why the Japanese now sell large cars and trucks too. Manufacturers build what consumers are buying, not the other way around.

Consider the case of the Mazda6 station wagon, the only mainstream midsized wagon offered in the United States.  This car would be an efficient, easy-to-park SUV alternative for many suburban families. With all the talk about fuel prices, this model must be red-hot right now, with other companies rushing to fill the segment, right?  Wrong. The Mazda6 wagon garners just 1 percent of Mazda6 sales and is expected to be discontinued. Consumers who want family wagons buy bigger, thirstier vehicles because there is little reason not to.

While tougher fuel-economy requirements, known as CAFE standards, could force manufacturers to offer efficient cars such as the Mazda6 wagon, it can’t force consumers to buy them. During the Cold War, we ridiculed the Soviet Union’s command economy for attempting such absurd mandates. In Friedman's column, he claims that European countries and Japan have successfully applied such policies to drive sales of more fuel-efficient cars, but that is flagrantly untrue.

Recognizing that burning less fuel is beneficial for a multitude of reasons, those countries employ an array of policies designed to encourage frugality. Some countries have a higher sales tax on cars with bigger engines. The fuel itself is taxed, making its purchase sting enough that consumers are willing to sacrifice some interior space. The tax on diesel fuel is lower, encouraging sales of more fuel-efficient diesel-powered models.

Friedman seeks to be seen as punishing “Detroit” rather than the little guy. And the little guy is a factor. People with lower income spend a proportionally higher amount of their money on gas, so liberals are reluctant to tax them directly.

Convoluted income-tax rebates have been proposed to alleviate this concern, and maybe that would work. But if not, perhaps people in lower-income brackets would react rationally by driving smaller, more efficient vehicles or driving fewer miles.

Applying taxes to consumers is an unpopular and unpleasant solution. But dependency on foreign oil and global warming are unpleasant problems. If other consumer-level, demand-driven tools can be devised, so much the better. If not, then taxes on engine power and fuel may be neccesary. But mandating command economy efficiency standards will not address the problem, no matter what Hudson River water-drinking columnists might fantasize.

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