Topic: Energy and Environment

Cash for Clunkers Lesson: How to Use the $$ to Buy a Gas Guzzler

My son’s station car is an old Ford Explorer AWD which, despite being a V-6, was rated at about 15 mpg.  Approaching 100,000 miles, the SUV’ s resale value is very low.

The House approved a bill to give him a $3,500 voucher to buy a car that is supposed to get only 18 mpg, or $4,500 if it gets 20 mpg.  Only 18-20 mpg?  That’s not moving us much closer to President Obama’s pie-in-the-sky 35.5 mpg goalpost is it?

Consider how easy it would be to game this giveaway program by using that $4,500 voucher to buy a big SUV or V-8 muscle car.

First of  all, with Chrysler and GM dealerships folding, it should be easy to buy a mediocre Chevy Cobalt or Dodge Caliber for about $10,000 more than the voucher.

What you do next is sell that boring econobox, even if you end up with $1,000 less than you paid – that still leaves you with $3,500 of free money, courtesy of taxpayers.

As this  process unfolds, the flood of resold small cars will make it even  harder for GM, Chrysler and Ford dealers to get a decent price for small cars, because of added competition from new cars being resold as used.

That’s their problem, not yours.

So, take the $9,000 net from reselling the crummy little car plus the $4,500 from Uncle Sam.  Then use that $13,500 to make a big down payment on a used Cadillac Escalade,  Toyota Tundra pickup or Corvette.

File this under “unintended consequences” (my own file is running out of space).

Which Is Greener?

Which uses less energy and emits less pollution: a train, a bus, or a car? Advocates of rail transportation rely on the public’s willingness to take for granted the assumption that trains – whether light rail, subways, or high-speed intercity rail – are the most energy-efficient and cleanest forms of transportation. But there is plenty of evidence that this is far from true.

Rail advocates often reason like this: the average car has 1.1 people in it. Compare the BTUs or carbon emissions per passenger mile with those from a full train, and the train wins hands down.

The problem with such hypothetical examples is that the numbers are always wrong. As a recent study from the University of California (Davis) notes, the load factors are critical.

The average commuter car has 1.1 people, but even during rush hour most of the vehicles on the road are not transporting commuters. When counting all trips, the average is 1.6, and a little higher (1.7) for light trucks (pick ups, full-sized vans, and SUVs).

On the other hand, the trains are rarely full, yet they operate all day long (while your car runs only when it has someone in it who wants to go somewhere). According to the National Transit Database, in 2007 the average American subway car had 25 people in it (against a theoretical capacity of 150); the average light-rail car had 24 people (capacity 170); the average commuter-rail car had 37 people (capacity 165); and the average bus had 11 (capacity 64). In other words, our transit systems operate at about one-sixth of capacity. Even an SUV averaging 1.7 people does better than that.

When Amtrak compares its fuel economy with automobiles (see p. 19), it relies on Department of Energy data that presumes 1.6 people per car (see tables 2.13 for cars and 2.14 for Amtrak). But another Department of Energy report points out that cars in intercity travel tend to be more fully loaded – the average turns out to be 2.4 people.

“Intercity auto trips tend to [have] higher-than-average vehicle occupancy rates,” says the DOE. “On average, they are as energy-efficient as rail intercity trips.” Moreover, the report adds, “if passenger rail competes for modal share by moving to high speed service, its energy efficiency should be reduced somewhat – making overall energy savings even more problematic.”

Projections that high-speed rail will be energy-efficient assume high load factors (in the linked case, 70 percent). But with some of the routes in the Obama high-speed rail plan terminating in such relatively small cities as Eugene, Oregon; Mobile, Alabama; and Portland, Maine, load factors will often be much lower.

Even if a particular rail proposal did save a little energy in year-to-year operations, studies show that the energy cost of constructing rail lines dwarfs any annual savings. The environmental impact statement for a Portland, Oregon light-rail line found it would take 171 years of annual energy savings to repay the energy cost of construction (they built it anyway).

Public transit buses tend to be some the least energy-efficient vehicles around because agencies tend to buy really big buses (why not? The feds pay for them), and they run around empty much of the time. But private intercity buses are some of the most energy efficient vehicles because the private operators have an incentive to fill them up. A study commissioned by the American Bus Association found that intercity buses use little more than a third as much energy per passenger mile as Amtrak. (The source may seem self-serving, but DOE data estimate intercity buses are even more efficient than that–compare table 2.12 with intercity bus passenger miles in this table).

When it comes to energy consumption per passenger mile, the real waste is generated by public transit agencies and Amtrak. Instead of trying to fill seats, they are politically driven to provide service to all taxpayers, regardless of population density or demand. One of Amtrak’s unheralded high-speed (110-mph) rail lines is between Chicago and Detroit, but it carries so few people that Amtrak loses $84 per passenger (compared with an average of $37 for other short-distance corridors).

Meanwhile, transit agencies build light-rail lines to wealthy suburbs with three cars in every garage. With capacities of more than 170, the average light-rail car in Baltimore and Denver carries less than 15 people, while San Jose’s carries 16. For that we need to spend $40 million a mile on track and $3 million per railcar (vs. $300,000 for a bus)?

If we really wanted to save energy, we would privatize transit, privatize Amtrak, and sell highways to private entrepreneurs who would have an incentive to reduce the congestion that wastes nearly 3 billion gallons of fuel each year (p. 1). But of course, the real goal of the rail people is not to save energy but to reshape American lifestyles. They just can’t stand to see people enjoying the freedom of being able to go where they want, when they want to get there.

Americans Want Global Warming Action Now

Dana Milbank has the evidence:

For the past few years, liberal activists have gathered in Washington each spring for the Take Back America conference….

But now that Obama has actually taken back America, the activists at this year’s gathering feel a bit like the dog that finally caught up with the car. Organizers changed the name from Take Back America to America’s Future Now, but that didn’t prevent a sharp decline in participation. …

Hickey estimates attendance dropped from 2,500 last year to 1,500 this year, and even that may overstate things. At yesterday morning’s four concurrent “issue briefings,” 585 chairs were set out. Only 213 of them were occupied, including just 15 for the session on global warming.

Obama’s Energy Reading

The Washington Post writes about how President Obama became obsessed with grabbing our complex energy systems by the scruff of the neck and shaking them into something more appealing to Ivy League planners. I was struck by this vignette:

But even before the late-night session in July, Obama had begun to educate himself about energy and climate and to use those issues to define himself as a politician, say people who have advised him. He read a three-part New Yorker series on climate change, for instance, and mentioned it in three speeches.

It’s great that he read a three-part series in the New Yorker. But has the president ever actually read anything by a climate change skeptic? Actually, a better term would be “a climate change moderate.” Leading “skeptic” Patrick J. Michaels, for instance, of Cato and the University of Virginia, isn’t skeptical about the reality of global warming. His summary article in the Cato Handbook for Policymakers begins:

Global warming is indeed real, and human activity has been a contributor since 1975.

But he also notes that climate change is complex, and its policy implications are at best unclear. “Although there are many different legislative proposals for substantial reductions in carbon dioxide emissions, there is no operational or tested suite of technologies that can accomplish the goals of such legislation.” The flawed computer models on which activists rely cannot reliably predict the future course of world temperatures. The apocalyptic visions that dominate the media are not based on sound science. The best guess is that over the next century there will be very slight warming, without serious implications for our environment our society. Michaels’s closing appeal to members of Congress would also apply to President Obama and his advisers:

Members of Congress need to ask difficult questions about global warming.

Does the most recent science and climate data argue for precipitous action? (No.) Is there a suite of technologies that can dramatically cut emissions by, say, 2050? (No.) Would such actions take away capital, in a futile attempt to stop warming, that would best be invested in the future? (Yes.) Finally, do we not have the responsibility to communicate this information to our citizens, despite disconnections between perceptions of climate change and climate reality? The answer is surely yes. If not the U.S. Congress, then whom? If not now, when? After we have committed to expensive policies that do not work in response to a misperception of global warming?

Please, President Obama – in addition to the lyrical magazine articles on the apocalyptic vision that you read, please read at least one article by a moderate and widely published climatologist before rushing into disastrously expensive policies.

Secretary of Behavior Modification

George Will recently accused Obama’s token Republican, Transportation Secretary Ray LaHood, of being the “Secretary for Behavior Modification” because of his support for programs designed to coerce people into driving less. Speaking before the National Press Club on May 21, LaHood pleaded guilty as charged.

In the video of LaHood’s presentation, he was asked if the administration’s “livability initiative” is really “an effort to make driving more tortuous and to coerce people out of their cars.” His answer: “It is a way to coerce people out of their cars, yeah.”

The next question was, “Some conservative groups are wary of the livable communities program, saying it’s an example of government intrusion into people’s lives. How do you respond?” His complete answer: “About everything we do around here is government intrusion in people’s lives.”

While these are certainly quotable, defenders of “livability” (code for “transportation by any mode but automobile”) would be quick to point out that all of LaHood’s examples are aimed at giving people choices other than driving: walkways, bike paths, streetcars, light rail. LaHood never mentions any actual techniques aimed at coercing people out of their cars.

Yet those coercive techniques are a major part of the livability campaign, as shown by Portland, Oregon, which LaHood touted as “the example” of a livability program. The most important of these techniques is to divert highway user fees to expensive forms of transportation that receive little use. Portland is deliberately allowing congestion to grow while it spends money collected from highway users on streetcars and light rail.

Not that Portland’s program is very successful. Despite spending more than $2 billion on rail transit since 1980, transit’s share of Portland-area commuting declined from 9.8 percent in 1980 to 6.9 percent in 2007. (The table says 6.5 percent but that includes the people who worked at home.)

Much of the money that Portland does spend on roads goes into “traffic calming,” a euphemism for “congestion building.” This consists of putting barriers in roads, speed humps, narrowing streets, and turning auto lanes into exclusive bike lanes. Portland’s official objective (see table 1.2) is to allow rush-hour traffic to grow to near-gridlock levels (“level of service F”) on most major freeways and arterials.

“People don’t like spending an hour and a half getting to work,” said LaHood. But if more congestion is a key part of “livability,” then a lot more people are going to be doing that under the administration’s plans.

Beyond not seeing anything wrong with government coercion, LaHood can’t see the difference between transportation systems that pay for themselves (such as the interstate highways) and transportation systems that require huge subsidies (such as streetcars and light rail). “If somebody wants to ride streetcars or light rail to work,” says LaHood, then it is up to the government to provide it for them.

What if someone wants to take a helicopter to work? Or a dirigible or rocketship or a personal limousine? Does LaHood really believe that, just because someone wants something, all other taxpayers should fund it?

When in Congress, LaHood was known as a “moderate Republican.” I guess that is a euphemism for “central planner in waiting.”

The President’s New Cars

I had an op-ed yesterday in USA Today about President Obama’s proposed new fuel-economy standards. Don’t like ‘em. Unfortunately, an editing snafu over at the newspaper inadvertently left out the fact that there are four models at present that meet the proposed new standard — the 2010 Honda Insight (41 mpg) and the 2010 Ford Fusion Hybrid (39 mpg) were left off the list.

Space prohibited me from making an additional point. Even if there is no rebound effect, my colleague Pat Michaels finds that global temperatures will only be reduced by 0.005 degrees Celsius by 2050 and 0.0078 degrees Celsius by 2100 once you plug those emissions reductions into the computer models used by the IPCC. Of course, proponents contend that U.S. action on fuel efficiency will lead to like action abroad. Well, good luck with that. But even if all of the signatories to the Kyoto Protocol adopted Obama’s proposed fuel-economy standards, global temperatures would be reduced by only 0.038 degrees Celsius by 2050 and 0.071 degrees Celsius by 2100. If you tried to monetarize those benefits, you would be hard pressed to come up with an defensible number of consequence.

So what should be done instead? Nothing. At the risk of sounding politically irrelevant, there is no good case for the government to reduce U.S. gasoline consumption via fuel economy standards or fuel taxes; an argument I made at length in a study I co-authored almost two years ago with my colleague Peter Van Doren.

[Cross-posted at The Corner]

Obama’s Fuel-Economy Standards

If you like driving a big car or SUV, the good news about Obama’s new fuel-economy standards is that they won’t dictate what kind of car you will be able to buy in the future. If you want to buy a 15-mpg SUV, Detroit (or Aichi or Wolfsburg) will be free to make and sell you one.

The bad news is that the standards may make your car more expensive. Corporate Average Fuel Economy (CAFE) standards are actually calculated as the mean of gallons per mile, not miles per gallon. So, as of 2016, for every 15-mpg model made by an auto maker, that company will have to make five models of cars that can go 50 mpg in order for its fleet to meet Obama’s new target. Since bringing each new model to market can cost billions of dollars, if there are not enough people who want to buy those fuel-efficient cars to cover their design costs, the company will have to add a share of those costs to your SUV.

If you want to save energy, the good news is that Obama’s standards are more stringent than those in the Energy Independence and Security Act of 2007 – but not by much. While the 2007 law required new car fleets to average 35 mpg by 2020, Obama’s standard requires fleets to average 35.5 mpg by 2016.

The bad news is that nothing in Obama’s standard guarantees that they will actually save energy. The rule only requires that the mean fuel economy of all models, not all cars, made by a manufacturer meet the 35.5 mpg standard. Not much energy will be saved if gas guzzlers sell well and hybrids don’t.

If gas prices go up, people will buy the fuel-efficient models that auto makers are forced to make – but that would have happened anyway. If gas stays cheap, people will continue to buy fuel-inefficient cars (tempered only by having to pay extra to cover the start-up costs of models no one wants). If you believe that saving energy or reducing dependence on foreign oil is important, then you should prefer a stronger form incentive over this mandate.

The worst-cast scenario is that the new standards increase the cost of buying new cars but don’t save any energy (except to the extent that a few people can’t afford to own a car at all). The best-case scenario is that Obama’s standards result in future auto fleets that are not much different from what a free market would have produced. Considering that Honda and Toyota are now in a price war over their Insight vs. the third-generation Prius, that may be closer to the actual outcome.

The good news is that auto makers readily acquiesced to this standard, partly because they feared something worse but partly because they didn’t think it would cost much. The Obama administration estimates that the added cost of the new standard will be $1,300 per car, but that (if gasoline remains $3 per gallon) it will save drivers $500 per year. That means it could pay for itself in the long run – but only if people actually do buy more fuel-efficient cars.

The debate over the standard reminds me of the debate after Congress gave the Environmental Protection Agency the authority to regulate air quality in 1970. One faction favored of technical solutions to pollution, such as catalytic converters. The other faction argued for behavioral tools aimed at getting people to drive less.

Today, we know the behavioral solutions were a complete failure. Although many cities imposed urban-growth boundaries, built light rail, and implemented various disincentives to driving, not one can say they have reduced per-capita driving by even 1 percent.

On the other hand, the technical solutions were highly successful. Though we drive nearly three times as many miles as in 1970, total automotive air pollution has declined more than 50 percent.

There was a third faction in 1970 whose voice was almost inaudible: economists who argued that incentives would clean the air better than mandates. The mandates that were put in place only acted on new cars, and it took more than a decade (and now takes almost two decades) to turn over the American auto fleet. Properly designed incentives could have acted on all cars and cleaned the air much faster (by, for example, giving people a choice between retrofitting their cars or paying a pollution fee that was dedicated to cleaning up pollution elsewhere).

The lesson libertarians take from this is that incentives are better than mandates. But the point I like to make is that, though incentives might work better than mandates, technical solutions work far better than behavioral ones.

Despite the past failure of behavioral tools, there is a strong movement in the administration and Congress today for more behavioral controls aimed at reducing driving to save energy and greenhouse gas emissions. These behavioral tools will be expensive, they will have costly unintended consequences, and in the end they will do little to protect the environment.

I remain unpersuaded that we need to reduce greenhouse gas emissions. But if there is a political need to do so, we should at least do it in ways that cost little and provide other benefits that will help cover those costs. McKinsey & Company estimates that the United States can meet the most stringent greenhouse gas targets by investing in programs that cost no more than $50 per ton of greenhouse gas abatements. More fuel-efficient cars meet this test, says McKinsey, and will also reduce the emissions of other pollutants such as nitrogen oxides.

Meanwhile, light rail, growth boundaries, and other behavioral tools, if they save energy and reduce greenhouse gases at all, will only do so at costs of tens of thousands of dollars per ton. Though I am far from thrilled about Obama’s new policy, at least it reminds us that, for a relatively low cost, we can significantly reduce energy consumption and various pollution emissions without trying to socially engineer American lifestyles.