(credit: Richard Masoner @ Flickr)
Individual tax credits and rebates aren't the only policy levers we use to try and increase the adoption of electric cars and other alternative fuel vehicles. The Environmental Protection Agency and the National Highway Traffic Safety Administration both have quite a lot to say about the matter as well, especially through rules that set fleet-wide standards for both fuel efficiency (the Corporate Average Fuel Efficiency, or CAFE standards) and an associated Greenhouse Gas Emission standard. But a new paper from Prof. Jeremy Michalek and colleagues suggests that the incentives built into those standards—meant to encourage the uptake of alternative fuel vehicles—might actually increase fuel consumption and CO2 emissions.
New CAFE standards were announced by the NHTSA in 2015 that get increasingly stricter over time. CAFE mandates fleet-wide targets for car makers, with a formula that takes into account the footprint of each model. Bigger cars or light trucks are allowed to get lower fuel efficiency than smaller models, and a car maker's total sales are taken into account to calculate the average across their model range.
At the same time, the EPA has another set of standards for the amount of greenhouse gas emissions across a manufacturer's range (this is separate to the EPA fuel efficiency rating that new cars get, which also differs quite a bit from the CAFE numbers). Failing to meet these targets comes with a set of different consequences. OEMs that don't meet their CAFE target have to pay a fine ($5.50 per 0.1mpg per vehicle sold), which several car makers have historically chosen to accept as cheaper than the alternative. The EPA's emissions standards aren't quite as lenient, however; it's within the agency's power to revoke one's license to sell vehicles inside the US.
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