Higher huel emission standards and the law of unintended consequences...

Taken at face value, President Obama's policy to increase fuel standards for domestic car manufacturers---for the purpose of reducing aggregate emissions---has all the appearance of a reasonable environmental policy.  After all, who could possibly be for increasing pollution in the Earth's atmosphere?

In addition, the President's policy introduces the new standards gradually over the next decade.  For example, the administration has already mandated an average fuel economy of 35.5 miles/gallon by 2016.  Then, the mandate will increase to an average fuel economy of 54.5 miles/gallon by 2025.  "Slow and easy does it," no?  Better yet, the administration has stated that the more fuel-efficient vehicles will save between $5.2k and $6.6k on gasoline during the vehicle's life.

Lower emissions.  Less gasoline used.  Who possibly could be against this policy?

After reading the response of National Automobile Dealers Association (NADA) to the administrations projections, The Motley Monk is much less enthusiastic about the policy.

Why?

NADA believes the administration's projections underestimates the policy's impacts on automobile buyers.

First, the projections don't include compliance costs which, in turn, will raise sticker prices.  The administration's conservative estimate of the cost of compliance is $3k.  NADA believes the real figure is closer to $5k because the administration has ignored some fixed costs.  The first phase of regulations will cost $52B while the second phase of regulations will cost somewhere in the range of $133B  to $157B.

Second, even if the conservative estimate is accurate, 6.8M automobile buyers will be priced out of the market by 2025.  They will be unable to secure a loan to purchase the more fuel efficient automobile.

The trade off is lower pollution and fuel costs over the life of the vehicle or a substantially higher sticker price.

Maybe the administration's real goal, The Motley Monk is wondering, is to force dependency on public transportation.


Let the discussion begin...



To read the FoxNews article, click on the following link:
http://www.foxnews.com/politics/2012/02/15/auto-dealers-warn-fuel-efficiency-proposal-will-price-out-millions-buyers/