Only $30 million for our energy future?

The U.S. spends $30 billion a month on oil imports, but only ponied up $30 million (with an 'm') to research plug-in hybrid cars, our best chance to reduce our reliance on oil.

Hmm. Nothing to do but count the days.

Getting over 100 MPG!

An Ontario blogger got to borrow a plug-in hybrid Prius over the last week and he regularly got over 100 mpg! Driving on electricity is the way to go!

With higher gas prices, a hybrid pays off

You can make back the hybrid price premium in gasoline savings within a year, depending on your driving habits.

Things that make me pissed #1

1. All the scare stories about Americans having to buy smaller cars because of new fuel economy regulations. No, I don't disagree that cars will likely have to be smaller to meet the 35 mpg standard. What makes me angry is the assumption that Americans should continue to be able to buy the biggest, heaviest, most powerful car they f***ing want:

In the U.S. today, about 70% of car and truck sales sport six- or eight-cylinder engines. In Europe, 89% of vehicles sold have a four-cylinder or smaller engine.

I'm generous, so here's a choice of ways you can contribute to covering the cost of your rampant fuel use. Suck it up and buy a car that helps meet a lower fuel economy standard (the easy way out) or hit up the ATM to cover a $1/gallon gas tax.

Oil prices have nowhere but up to go

The U.S. Senate might have just passed increased fuel economy standards (35mpg by 2020), but with world oil demand increasing at twice the rate of 2006, it's going to take a lot more than more Honda Civics on the road.

Comments on CAFE standard

Thanks to the two folks who wrote in about the CAFE standards. Both had interesting perspectives I'd like to share.

E noted that carbon demand (fossil fuel use) is very inelastic (doesn't change easily despite price fluctuations) and that a carbon cap operates like a quota. In other words, it will drive prices up almost immediately.

I'm confident that my family's farming business would end very quickly, as diesel fuel is -needed- for it to function, and our profit margins are slim to begin with.

Otto also shared his perspective on CAFE, although it was more to promote his support for weaker CAFE standards than anything else. From the Auto Alliance, he supports Pryor-Bond-Levin, which would scale back the fuel economy increases in the current legislation.

To Otto: I appreciate your support for lower CAFE standards on the basis of allowing Americans to continue to indulge their desire for large SUVs and light trucks. But I'm not only disagreeing that it's environmentally feasible to cop out on CAFE, but arguing that CAFE standards fall completely short in the long run, as fuel economy increases simply reduce demand and lower prices for fossil fuels.

To E: I'm not sure exactly how to deal with the externalities of a carbon cap, and I agree they may not be desirable. The problem is that a carbon cap/tax/etc is improving the market by internalizing the cost of carbon emission. So while government might need to help level the inequity of a carbon tax (for low income, perhaps family farmers), there's no option for stopping global warming other than lowering carbon emissions and we can't do that by farming/driving/or burning diesel fuel at the rate we've been doing it.

The good news is that stabilizing climate change at 2 degrees Celsius can be done primarily with efficiency improvements, costing less than $52/ton of carbon. This poster illustrates another way to look at it: holding carbon emissions to twice pre-industrial levels (pdf). The 15 "wedges" of 1 gigaton discussed are all eminently do-able, and only 7 are needed.

Are CAFE standards the right path?

A post by my favorite oil-and-gas-price analyst Robert Rapier got me thinking about CAFE standards amidst the challenges of oil dependency, carbon emissions, and energy security. He's a skeptic of CAFE not because he opposes fuel efficiency, but because it shifts responsibility:

The problem I see is that this attempts to address the issue in the same way that windfall profits' proposals attempt to address the issue of high gas prices. There are plenty of high fuel efficiency cars on the market now. The problem is, people aren't demanding them. They want their SUVs and big trucks. What people are really after here is a free lunch. They think increasing CAFE standards will make everyone else drive a fuel-efficient vehicle...Increasing CAFE standards is not going to increase the public's desire to drive fuel efficient cars, nor is it going to result in a 35 mpg Ford Expedition. (emphasis original)

Solving oil dependency, global warming, et al, requires that we act to use fuel more efficiently. While a fuel mandate does work (fuel efficiency doubled from 1978 to 1985), it worked in the context of supply shortages and high prices. In other words, though the standard worked, it got its political strength from a high price environment (and a time when fewer people drove SUVs).

The last time CAFE standards were increased dramatically, average vehicle weight shrank by 1000 pounds (almost 25%) in five years as cars dumped steel, used lighter components, and shrank in size. This time around, the heavy cars still use lighter components, they're just big. In other words, cars will likely get smaller. The car companies know this, so they've started a big ad campaign against CAFE standards (and a plug for hydrogen technology which will a) never happen and b) is pointless because it uses fossil fuels).

The problem is, we're in a lose-lose. CAFE standards themselves will help, but they are a halfway solution because increases in fuel economy decrease fuel demand and lower prices (which then has the opposite effect). Without CAFE standards, however, we're not likely to make a significant dent in carbon emissions.

Other solutions?

1. Gas tax increase - price up, demand down. People can see right on the car sticker (XX mpg) how much this car will cost them and the additional revenue can be used to give income tax rebates to low-income folks. Disadvantages - doesn't deal with carbon emissions from other sources; Americans are surprisingly willing to adjust to higher prices.
2. Carbon tax - price up, demand down. This would catch all the carbon emissions (on-road and off-road) and provide revenue for income tax rebates to the poor, but it still runs the risk of allowing people to buy their way into higher emissions. Americans have a lot of money - they'll probably give up the third TV, second home, and eating out before the give up driving solo to work.
3. Moving carbon cap with auctioned carbon credits - price up, demand down, supply constrained. Lowers carbon emissions by fiat, but allows the market to allocate carbon to the highest bidder. Provides revenue to offset impact on the poor, invest in new technology, and provide alternative transportation. And best of all, it guarantees that carbon emissions will actually decrease.
   

The amazing thing is how easy a carbon cap would be. There are essentially three major sources of carbon in the economy: oil, natural gas, and coal. Everyone who retrieves it domestically or imports it has to buy the credits (you could even charge slightly more for imports to promote energy independence). The consumer simply sees the final price - with carbon factored in.

That's a great idea.

Note: I didn't address carbon "cap and trade" in my solutions. Here's why.

Should revised mpg mean a revised CAFE standard?

The Corporate Average Fuel Economy (CAFE) standard for American vehicles has required that each car manufacturer reach an average fuel economy standard for their fleet of vehicles: 27.5 mpg for cars, 22.2 mpg for light trucks. However, you may have noticed recent news about the EPA having overestimated - for some cars, drastically - the average fuel economy of the nation's vehicles.

Apparently, there are three different fuel economy figures. From the National Highway Transportation Safety Administration (NHTSA):

[There are] three different sets of fuel economy values- NHTSA’s CAFE values, EPA’s unadjusted dynamometer values, and EPA’s adjusted on-road values:

• NHTSA’s CAFE values are used to determine manufacturers’ compliance with the applicable average fuel economy standards
  
• The EPA's unadjusted dynamometer values are calculated from the emissions generated during the testing using a carbon balance equation. EPA knows the amount of carbon in the fuel, so by measuring the carbon compounds expelled in the exhaust they can calculate the fuel economy.
  
• EPA’s adjusted on-road values are those values listed in the Fuel Economy Guide and on new vehicle labels, adjusted to account for the in-use shortfall of EPA dynamometer test values. (formatting mine)
  

The NHTSA values are the law for the manufacturer, but the manufacturer's fuel economy average is computed via one of two methods:

EPA is responsible for calculating the average fuel economy for each manufacturer. CAFE certification is done either one of two ways: 1) The manufacturer provides its own fuel economy test data, or 2) the EPA will obtain a vehicle and test it...using the same laboratory test that they use to measure exhaust emissions (fuel economy standard #2 from above).

This laboratory test has always been modified down to better mirror real world fuel economy (#3), so the CAFE standard has apparently been overestimating actual average fuel economy of the American fleet for years.

Bring that story up to date with this fact: the EPA estimate of on-road fuel economy has also been overestimating mpg for American cars, by as much as 50% (link discusses hybrids, but the overestimate applies to all vehicles). So, to summarize:

Actual fuel economy <>

If conserving fuel means saving fuel in the tank, not just on paper, then we need a CAFE test and a CAFE standard based on reality.

Replacing gasoline: efficiency, alternatives or both?

Over at Energista they're examining a proposed state tax credit for alternative fuel vehicles in Minnesota, and I think Christopher's comments are worth examining. He decries a credit for alternative fuel vehicles because it can end up subsidizing the purchase of fuel inefficient cars.

The implied argument is that when it comes to developing energy independence, reducing overall fuel use is more important than alternative fuel capability. (It's also important to distinguish between a vehicle that's capable of using alternative fuels from one that is actually run on them - an E85 compatible car can also use straight gasoline)

That particular distinction is what makes this tax credit bad policy. Helping people buy an E85 car is counter-productive if they end up filling up with 100% gasoline. Furthermore, as this op-ed piece notes, tax credits tend to skew benefits toward upper incomes. Shouldn't we expect people of all income levels to help reduce gasoline use? And shouldn't we make sure that government incentives for alternative fuel use actually guarantee that use?

Instead, government could subsidize alternative fuel use - as the feds do, to the tune of 51 cents/gallon - making it more price competitive.

But what about the efficiency issue? Cheaper fuel, even alternative fuel, tends to encourage greater fuel use (although fuel demand is relatively inelastic). And alternative fuels will be able to displace more gasoline use if our overall use is lower. From that perspective, perhaps government is better off just increasing the price of gasoline with a gas tax (exempting alternative fuels like ethanol or biodiesel based on their proportion in our fuel - e.g. 10% off for 10% blend).

A gas tax with a renewable exemption can reduce overall fuel use and shift consumption to alternative fuels. To keep tax burdens equitable, the proceeds can be used to reduce taxes on the poor, who will otherwise be disproportionately burdened by increased gas taxes.

So, a tax credit that may be ineffective (and that will put a hole in the budget) or a gas tax that could be revenue-neutral? Tough choice...

Save gas, lose weight!

Fuel efficiency and hybrids aren't the only things affecting gas consumption. Larger Americans are also affecting fuel economy, for the worse. With so many overweight Americans, we're using almost a billion more gallons of gasoline a year than we did in 1960 just to move that extra pudge around.

Hybrids may save the environment, but not your pocketbook

The Omninerd has a thorough analysis of the economics of hybrid cars and concludes that for overall savings, it's still far more economical to drive a conventional high efficiency vehicle like a Toyota Corolla than a "gas sipping" hybrid Prius. Those who also employ an environmental consideration in their purchasing decision may be willing to pay a premium for lower overall gas consumption, but saving the Earth is not equal to saving money in this case.

Don't buy that hybrid just yet

Fuel efficiency doesn't have to mean hybrid. 7 of the 10 most fuel efficient cars are actuall driven by conventional gas engines.