The car industry's embrace of the automobile mileage standards announced yesterday by President Barack Obama is a sure sign of just how overdue they were.
California was already moving in the direction of cleaner, more fuel-efficient cars - with states like Maryland committed to follow. There was also a distinct possibility that the U.S. Environmental Protection Agency might clamp down further as part of an effort to address the growing threat posed by greenhouse gas emissions and climate change.
Can Detroit meet the 35.5-miles-per-gallon corporate average fuel economy (CAFE) standard by 2016, a full four years earlier than envisioned just two years ago? The answer appears to be yes. It just required the proper motivation, and a solid uniform national standard (that gets California and the EPA off their back) appears to be just the kind of kick in the rear fender the industry needs.
But there's still a measure of uncertainty in the president's plan: Consumers might not want these fuel-efficient cars if gas prices remain where they are today.
A plug-in electric commuter car is a lot more attractive when gas is selling for $4 a gallon then at the current $2.30. Even the White House's estimate that the added cost of $1,300 per vehicle can be recovered in three years of driving is based on much higher gas prices.
Those prices are likely to return within seven years, but why wait for big corporations and foreign producers to pocket the inevitable windfall? President Obama needs to gradually raise the gas tax to make up the difference beginning next year to ensure car buyers are properly motivated.
And what would Washington do with the money? Return it right back to consumers in the form of a lower personal income tax rate or perhaps a rebate on new car purchases as a way to stimulate the economy. With high gas prices, automakers would be scrambling to meet consumer demand for energy-efficient vehicles.
On the other hand, a policy that requires fuel efficiency but doesn't ensure higher energy prices could ultimately prove counterproductive if, for instance, it causes people to drive more. That would not only harm the environment, but it would maintain the nation's costly dependence on foreign producers.
Government regulations have their value, but ensuring higher gas prices produces a market-based solution that in the long term is bound to be more effective. It's also a win-win for consumers who shouldn't mind paying twice as much at the pump for a car that uses half as much gas. The bonus? Perhaps the world is spared the most disastrous effects of climate change and rising sea levels.
