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To let Americans buy smaller cars, Trump had to weaken fuel-efficiency standards. Does that sound crazy? Small cars, of course, have much higher fuel efficiency. Yet this is exactly how the Corporate Average Fuel Economy (CAFE) standards work.
Since 2011, fuel-economy targets scale with a vehicle’s “footprint” (wheelbase × track width). Big vehicles get lenient targets; small vehicles face demanding ones. A microcar that gets 40 MPG might be judged against a target of 50-60 MPG, while a full-size truck doing 20 MPG can satisfy a 22 MPG requirement.. The small car is clearly more efficient, yet it fails the rule that the truck passes.
The policy was meant to be fair to producers of large vehicles, but it rewards bloat. Make a car bigger and compliance gets easier. Add crash standards built around heavier vehicles and it’s obvious why the US market produces crossovers and trucks while smaller and much less expensive city-cars, familiar in Europe and Asia, never show up. At a press conference rolling back CAFE standards, Trump noted he’d seen small “kei” cars on his Asia trip—”very small, really cute”—and directed the Transportation Secretary to clear regulatory barriers so they could be built and sold in America.
Trump’s rollback—cutting the projected 2031 fleet average from roughly 50.4 MPG to 34.5 MPG—relaxes the math enough that microcars could comply again. Only Kafka would appreciate a fuel-economy system that makes small fuel-efficient cars hard to sell and giant trucks easy. Yet the looser rules remove a barrier to greener vehicles while also handing a windfall to big truck makers. A little less Kafka, a little more Tullock.
The post Welcome to the Crazy CAFE appeared first on Marginal REVOLUTION.
