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February 08, 2006

Futility Vehicles

Oy.  I used to think that the introduction of hybrid SUVs was generally a good thing -- with even greater potential for saving fuel than hybrid cars.  But this New York Times article brings up a point I simply hadn't considered: buying a fuel-efficient SUV makes it possible for car companies to sell big gas guzzlers without incurring any penalties under federal CAFE (i.e., corporate average fuel economy) standards.  From the article:

[E]very Toyota Highlander hybrid S.U.V. begets a hulking Lexus S.U.V., and every Ford Escape — the hybrid S.U.V. that Kermit the Frog hawked during the Super Bowl — makes room for a Lincoln Navigator, which gets all of 12 miles a gallon. Instead of simply saving gas when you buy a hybrid, you're giving somebody else the right to use it.

This is vexing, to say the least.  And it underscores a point that's hard to overstress:  when it comes to saving energy, a broken system can trump individual virtue.  That is, any time a conscientious and enlightened consumer decides to do something selfless, our energy system pushes back a bit. Use a little less gas, and the oil market responds by letting someone else tank up a little more cheaply.  Buy an efficient vehicle, and you make room under CAFE standards for someone else to buy a wheeled behemoth.  And so it goes.

Of course, I don't mean to suggest that it's completely futile to make efficient buys -- not by a long shot.  But particularly when it comes to energy, the collective good done by environmentally conscious consumers is typically less than one might hope.  To me, this underscores a simple point:  changing your own behavior is a good idea, but changing the system is far, far more important.

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"To me, this underscores a simple point: changing your own behavior is a good idea, but changing the system is far, far more important."

Or changing the government...

Posted by: Ron | Feb 8, 2006 4:55:09 PM

Let's think about this for a second-- by your logic, buying an H2 will do some good because it will require the car companies to sell a few hybrids or other fuel-efficient cars, and it will make gas more expensive because I'm hogging it. That's right-- conservation is waste and waste is conservation. Peace is war and slavery is freedom, by the way.

Seriously, we are making the perfect the enemy of the good here. Do hybrids solve our energy problems? No. Do they help? Of course-- even the author of the poorly reasoned article admits they do. He's just upset that they're not perfect and that our regulations suck.

The meta message here is that hybrid drivers are tools which is just stupid. Every time you repeat that crap about conservation leading to consumption you serve as a tool of the anti-conservationists on the WSJ editorial board and all their AEI friends. If someone chooses to drive something more fuel-efficient than another car of the same type, that's a net gain. The more hybrids there are, the better because economies of scale will make them cheaper and more mainstream and they send the message to car companies that people care about efficiency.

Just because you read it in the New York Times doesn't mean it's true. The paper has gone way, way downhill since I was a subscriber seven years ago, c.f., Jayson Blair, Judith Miller and Adam Nagourney. The guy who wrote the article clearly doesn't know how to drive a hybrid-- just like I can save the brakes on my old Subaru by downshifting as I coast downhill, so can a hybrid driver conserve his fuel by not gunning it and braking hard all the time.

Hybrids are the first step toward freedom from the fossil fuel cartel, and a big step at that. People are already souping up their hybrids to charge overnight from regular grid power and people are learning how to drive them to maximize efficiency. Hybrids are far better for sustainability than hydrogen cell cars because they get us closer to electric vehicles which can get their power from really any source-- home solar, wind, geothermal, biodiesel, off-peak grid power, whatever.

Posted by: Jason | Feb 8, 2006 11:42:57 PM

Jason's Right. This article doesn't make any sense. His thesis only applies IF the automaker only sells the exact same number of each car model? The CAFE standards apply to to the number of models in the fleet, not the overall sales figures, right?

So yes, Toyota sells both the Prius and the Highlander. But if (and this is a big IF) the Prius outsells the Highlander by, say, 10-to-1, then the point being made here is moot. It's not like when I walk into a dealer and buy a Prius, the sales guy calls up the stockroom and says, "we get to sell one more Highlander today because some sucker just came in and bought a Prius!" It's not a one-for-one ratio, an important point that this NYT author glosses over.

I don't want to defend CAFE. I hate CAFE. But this article doesn't prove anything. It's half-baked.

Posted by: Frank Bruno | Feb 9, 2006 8:44:47 AM

Frank -

There are separate CAFE standards for cars and light trucks. Each manufacturer's car fleet has to get 27.5 mpg on average, or they face a penalty for each car they sell. The light truck fleet has to get 21.6 in the 2006 model year, up from 20.7 a few years ago. More info. here...

As the NYT article points out, Toyota's car fleet is already well above the 27.5 mpg standard. I expect that Honda is as well; it did even better than Toyota as of a few years ago. So the Prius for sure -- as probably the Insight, hybrid Civic, and hybrid Accord -- don't have this hidden perverse effect.

The Ford Escape & other hybrid SUVs, apparently, are another matter. Ford historically has reaped its biggest profit margins on its largest (and least efficient) SUVs. So all else being equal, the company would happily sell nothing other than Excursions, Expeditions, Navigators, and the like. The only thing that reigns this in -- other than consumer demand -- is the penalties issued under federal CAFE standards.

To maximize the sales of their most profitable models without incurring penalties, Ford & other manufacturers of light trucks play a bit of a game with CAFE standards. They discount the most efficient light trucks so that they can still sell a bunch of heavy vehicles; the enormous profit margins for big trucks make up for the discounts. Their goal, basically, is to bring their light truck sales for any given model year just about *exactly* at the CAFE standards. From the most recent report I could find on the NHTSA, Ford was right on the nose in 2002, and just a hair over in 2003. (Under CAFE rules, being a hair over one year means that you can be a hair under the next.)


Ford did just about the same thing in the 1996-2001, consisitently falling just a couple tenths of a point under the standards -- keeping the penalty (and public outrage) at a minimum. So I have to expect that, Escape or no, Ford will continue to try to target their vehicle fleet efficiency at just about the CAFE standards (maybe a little lower if profit margins and public relations considerations justify it).

Rising oil prices, consumer preferences, etc. might change all this. But unless Ford's fleet-wide average for SUV mileage begins to creep up above the CAFE standards, what's really driving their fleetwide fuel economy is the level of the standards, not the number of Escapes sold.

Which makes me believe that improving the fuel-efficiency of the vehicle fleet is less a matter of promoting & celebrating the creation of a niche market for SUVs that get relatively high mileage, and much more a matter of systemic changes: CAFE standards, feebates, higher gas taxes, pay-by-the-mile insurance, etc.

Posted by: Clark Williams-Derry | Feb 9, 2006 10:23:26 AM

Clark -

Thanks for clearing that up. The difference between Car and Light Truck CAFE is very subtle and it wasn't at all clear from the article.

Much appreciated.

Posted by: Frank Bruno | Feb 9, 2006 12:49:06 PM

Happy to help -- and I like your blog!

Posted by: Clark Williams-Derry | Feb 9, 2006 1:46:37 PM

The important thing is to remember that hybrid technology makes it possible for companies easily rase their average fuel economy, so we need to push our legislators to raise CAFE standards faster so that they do in fact do this. Have the standards rise quickly so that sooner or later they'll have to make their SUVs hybrid if they want to be able to sell them.

Posted by: Eric L | Feb 9, 2006 2:34:43 PM

Eric --
That seems exactly right. The car companies can't hide behind the pretext that a higher-mileage truck fleet is technologically infeasible. They can still make the argument that it will cut into their profits (or, really, deepen their losses). But they can't say it can't be done.

So the existence of the Escape -- and its viability in the marketplace -- helps us make the case that CAFE standards can be raised, or vehicle fuel economy improved by some other mechanism, without a massive feat of engineering.

Posted by: Clark Williams-Derry | Feb 9, 2006 3:29:16 PM

The calculations you describe Ford as making are interesting, because they suggest that CAFE is actually working, within its rather unambitious remit: it's forcing Ford to sell more hybrids than they otherwise would, by making failure to do so hurt their bottom line. To me, this looks like an even more persuasive argument to tighten the CAFE standards.

Posted by: eldan | Feb 9, 2006 6:37:02 PM

Yeah, I do think CAFE standards function more or less as they're intended to. They're not necessarily the policy implement I'd choose in the ideal world (see here for one reason why why: http://cascadiascorecard.typepad.com/blog/2005/05/burnt_cafe.html But I do think they've raised fuel economy above where it would be in the absense of any standards.

Posted by: Clark Williams-Derry | Feb 9, 2006 9:38:35 PM

Agreed. I didn't mean that to come out like an argument for CAFE as opposed to any other method of improving fuel-efficiency, just as an argument that as long as we're stuck with CAFE, some good could be done by raising the bar.

Posted by: eldan | Feb 10, 2006 1:03:50 PM

I respect the comments here and I agree that a way around CAFE standards is not what is wanted. However, I cannot help but be supportive of hybrid SUV's because every one sold in place of a standard gas fueled SUV is good. It would be wonderful if we all drove zero emission vehicles but that is not reality. Small change may lead to big change. For example, if hybrid SUV's can lead to fleet trucks switching over to this technology then there is a real reduction in emissions in the world.

Posted by: ethan meginnes | Feb 17, 2006 10:19:26 PM