Friday, April 11, 2008

The Energy Independence and Security Act of 2007…

Should be known as “The mandatory Increase in Global Warming and Corn Growers Enrichment Act.”

The Energy Independence and Security Act of 2007 was passed by the then newly elected Democratic Congress as part of their “100 hour plan” of things they promised to do within their first 100 hours of business and it was signed into law by President Bush. It is a counterproductive measure and should be repealed.

Among the major components of the Energy Independence and Security Act of 2007 is a mandate that by the year 2020, automakers must increase CAFE standard to 35 MPG and it also mandates that by the year 2022 that the use of biofuels added to gasoline must be increased from 4.7 million gallons 36 billion gallons.

The causal feel-good environmentalist and environmental activist celebrated the passage of this bill. After all, the evil global-warming-denying and fellow-traveling Republicans had been defeated; the people who really “care” about the environment had won the election.

Well, if only “caring” was enough, wouldn’t it be a grand world. The 2007 Energy Act should have been called the “The mandatory Increase in Global Warming and Corn Growers Enrichment Bill.” There should have been no doubt about the detrimental effects of ethanol on the environment at the time the bill was passed. The truth was well known. The truth is that ethanol is not a solution to global warming but use of ethanol will drastically increase global warming greenhouse emissions. Not only does ethanol increase global warming greenhouse emissions, the increase use of fertilizers and pesticides is destroying life in the oceans, is creating water shortages, is destroying the most bio-diverse regions of the world, and is turning food into fuel and increasing food prices.

The CAFE standards portion of the bill may also prove to be counterproductive or at least useless. The original CAFE standards passed in 1975 gave rise to the SUV. Because SUV’s are classified as “light trucks”, consumers who wanted to drive big cars switched to SUV’s. If you are old enough, you may recall that station wagons were once very popular. Those vehicles were particularly popular among families because of the extra room they provided as opposed to the typical sedan. When CAFE became law, automakers could not create station wagons that met the higher fuel efficiency standards for cars, so the auto companies killed the popular models and switched to SUV’s, which are passenger vehicles put on a truck frame.

Part of what the 2007 Energy bill was attempted to do was to close that loophole by making “light trucks” also subject to the same CAFE as passenger vehicles. Will this new law give rise to the “super SUV”, maybe putting a passenger vehicle on a REALLY big truck frame? Who knows? The law of unintended consequences could lead to the introduction of the Monster SUV, the SUV on steroids.

Perhaps a result of the higher CAFE standards will be that Americans will simply drive more. If vehicles get 30% more gas mileage, maybe Americans will simply drive 30% more, thus expanding urban sprawl and all its accompanying harmful effects. The better fuel efficient vehicles people may move even further from where they work and they may take more vacations in their personal family automobile. If the new CAFE standards actually increase MPG, in the absence of gasoline price increases, then driving and dependence on the automobile becomes actually cheaper.

Another result increased CAFE may be that we will see a slowing in the rate of fleet turnover. Fleet turnover takes a long time. If Americans cannot purchase the car they desire, they may simply put-off trading in their old car for a new car. Any slowing of the fleet turnover rate could negate any positive increase in CAFE standards by several years. If CAFE slows fleet turn over enough, then global warming emissions are actually increased.

More likely, however, the increase in gas prices will achieve a lower MPG rate without any action on the part of government. We are already seeing it. With higher gas prices, people are driving less and voluntarily choosing vehicles that get better MPG. The most likely scenario is that the increase in CAFE will have no negative impact. Just as it does no harm to raise minimum wage if the market has already raised the minimum wage above the mandated minimum wage, it will probably do no harm to mandate the higher CAFE standards since Americans are already curtailing their gas consumption. As gasoline prices increase, people choose to drive less and choose cars that get better MPG. It is not an accident that Europeans drive those tiny little cars. People respond to prices. The increase in CAFE will probably do no harm, but it is very doubtful it will do any good.

If the feel-good environmentalist and the environmental activist were rational people and really cared about the environment they would propose a repeal of the “The mandatory Increase in Global Warming and Corn Growers Enrichment Bill of 2007” and would put their energy behind a bill that taxed carbon emissions. It is an economic law: If you want more of something, subsidize it; if you want less of something, tax it.

Archimedes once said, "Give me a place to stand and I can move the world." What he meant was that if he could stand far enough away from the earth he could use a lever to move it. Levers make heavy objects easier to move. Tax policy can leverage market forces. Environmentalist would achieve much more if they would learn to work with and leverage market forces rather than oppose market forces.

Unfortunately, trying to tell a liberal environmentalist that an energy bill mandating higher CAFE standards and ethanol use can actually lead to more global warming is useless. They will view an appeal to logic as a dirty trick. It there were enough rational environmentalist we could actually do something about global warming. Unfortunately, there are not enough environmentalist who are rational, and not enough rationalist who are environmentalist.

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