The Hidden Costs of Fuel Efficiency Standards

Published on: September 17, 2012

The New York Times has an article that shows the unintended consequences and high costs of government policy that is designed to fool the voters.  Many politicians believe that it is important to reduce our consumption of fossil fuels like gasoline.  The obvious, straightforward and economically rational way to do this is to increase the costs of that consumption, for example by raising taxes on gasoline.

Unfortunately, the proponents of reduced consumption do not have the courage (or the votes) to enact new taxes.  So instead we get increases in mandated fuel economy standards.  The voters don’t realize what the costs of this will be or that they will have to pay them.  Politicians get the policy they want without taking the risk of telling the voters what it will actually cost them.  Win-Win!

Not so much.