The reason why we see so many Hummer H2s cruising on streets, as opposed to those of Europe, is our comparatively lax environmental regulation.
In the ‘70s, the Carter administration had to handle stagflation woes, a hostage crisis in Iran, and an Organization of Petroleum Exporting Countries (OPEC) embargo. Stagflation ended with Reagan’s undisciplined military spending, the hostages were released minutes after Carter left office, and the energy crisis was only partly resolved.
The ‘70s were an unstable time for Middle Eastern countries; OPEC limited oil supply to the U.S. During the summer of 1979, they increased gas prices even further, resulting in long lines at the gas station. Carter, faced with an approval rating of 26%, retreated to Ca,p David to meet with his closest economic advisors. Ten days later, he emerged with an ambitious plan to curtail American dependence on foreign oil.
These policies were unreasonably aggressive for the era, considering the unregulated nature of the automobile industry at the time. It caused many American automakers to temper their rear-wheel drive philosophy.
However, these laws are now ineffective due to a lack of updating. Corporate Average Fuel Economy (CAFE) standards have not changed since 1989, the gas guzzler tax has not been revised to include the growing number of road-going SUVs.
CAFE is a penalty manufacturers incur for not selling an acceptable number of fuel economical cars. It is calculated by factoring in domestic content, sales of that vehicle, and finally fuel economy.
However, it only penalizes the automaker for not selling enough fuel-efficient cars. If customers do not want to buy as many hybrid Priuses for Toyota as Tundra trucks, then it lowers Toyota’s CAFE. It should not be Toyota’s fault that customers favor the more fuel-efficient vehicles because of low gas prices. In addition, CAFE gives domestic automakers a lower standard; it is no surprise then that the majority of motor vehicles they produce are trucks.
The gas-guzzler tax is also ineffective for improving fuel economy. Its purpose was to cause consumers to think twice about purchasing large-engine vehicles. Sports cars are the most fuel-thirsty type of vehicle; the Ferrari Enzo gets 8 miles to the gallon. What will an $8,000 tax do to the buying process of the purchaser of this $650,000 car? Absolutely nothing.
Europe and Japan have regulations, which have forced consumers to rely on small, efficient cars. Their gasoline (measured in liters) comes out to about $5.00 a gallon. They have taxes on engine displacement and horsepower – Japan even has a self-imposed 280 horsepower limit – as well as substantially higher insurance rates for anything more upscale than a Ford Focus. The result? Everyone drives a Ford Fiesta or uses public transportation.
The American love affair with the automobile and the freedom that comes with it will not allow European-like standards to be instituted. Congress should consider stricter licensing practices, marginally higher gasoline taxes, and further investment in hydrogen technology to address this problem.