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You are here: Home / Energy & The Environment / Justifying trucking fuel economy standards

Justifying trucking fuel economy standards

August 11, 2011 By Mark Kleiman @markarkleiman

Megan McArdle wants to know how fuel-efficiency standards for big trucks could possibly be efficiency-improving: after all, if making trucks more energy-efficient paid for itself, the trucking companies would do so voluntarily.

Reasonable question, but the answer isn’t far to seek. Increased consumption of oil increases the rents that oil producers can collect at the expense of oil consumers. So consumers as a group benefit from reduced consumption; it’s in the interest of each consumer to have other consumers reduce their consumption to an extent greater than justified by the individual benefit.

True, such “pecuniary externalities” don’t generally count in a benefit-cost analysis, but for a country that is a net importer to a big enough extent to move the world market – as we are – a trucking CAFE is an opportunity to confiscate foreign producers’ rents for the benefit of domestic consumers.

(The military and security implications of having to keep the oil flowing, the role of oil in sustaining kleptocracy and generating insurgency, and the link to pollution – including greenhouse-gas emissions – are just icing on the cake.)

Now, if Megan wants to respond that we could do just as well tax oil imports, or motor fuels at the pump, or do a carbon tax or a cap-and-trade, and that any of those things would outperform CAFE standards, I’m not going to disagree. As soon as the Tea Party has been ground into the dust and the GOP transformed into a party capable of seeing reason, we can talk about it. In the meantime, kudos to the President for using his executive powers to do the right thing. And recall that none of his Republican opponents would have done the same.

Filed Under: Energy & The Environment Tagged With: Microeconomics and policy analysis

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