CAFE, Hybrids & Gas: Economic Sins Against the Poor always suffer most?
No, CAFE is not a new hip type of Coffee; nor place to imbibe such. However, it is an acronym for the gas mileage regulations car makers must abide by. Given RTs recent post, along with the recent spike in gas costs, and a recent NYT article about the increasing role economists play amongst environmental groups, I thought a short article was in order. Disclaimer: I'm not an economist and I'm sure my reasoning has been written about, with better evidence and detail, in other places.
CAFE requires cars and "light trucks" (i.e. vans, SUVs, non-18 wheeler trucks) to meet certain minimum mile per gallon gas requirements. Great idea, right? Save the environment, right? Well...maybe, although it certainly doesn't help the poor. Why?
Rich folks can afford more expensive gas and/or more expensive vehicles that get better gas mileage much more effectively than poor people can. CAFE standards effectively increase the overall price of a given vehicle by a set amount [Note: following numbers are representative only, not meant to be realistic]. This is an upfront cost that most poor folks are least well equipped to deal with. If Car A would cost 10k w/o CAFE regulations, and get 25mpg, it would cost (for example) 12k in order to meet the 30mpg cost. Poor man Joe will find it much easier to pay the extra cost for gas on a monthly basis than paying an increased amount to buy outright, or borrow, for the car upfront. In an unregulated world, those that care about MPG can also choose to buy Car B, which costs 25k and gets 50mpg (my Toyota Prius).
Theoretically, the government could set a car CAFE level of 50mpg. This would effectively force all car makers to license Toyota hybrid technology and force all car buyers to pay 25k (instead of 10-12k, for example) for vehicles. Again, the poor get the short end of a very heavy stick.
This was recently highlight by the NYT, where they talk of how a "green" group convinced Congress to require higher energy efficiency standards in air conditioners. The increased cost per unit? $300. However, consumers would save slightly over $300 over the life of the air conditioner (at current prices). Congress of course bought it. Sad. Frankly, the folks in my congregation who are poor would probably much rather pay a few extra dollars a month in air conditioning costs in the summer than pay $300 extra up front.
When will Congress learn to let the market make these decisions rather than imposing harsh de jure taxes on the poor?