New research reveals an unintended consequence of a signature policy of the Obama era.
Alongside the Clean Power Plan, which the Trump administration proposes to destroy, a key pillar of President Obama’s U.S. climate policy was a regulatory commitment to making cars more fuel efficient. In 2012, the Obama administration predicted that gradually ratcheting up CAFE standards to 54.5 miles per gallon by 2025—nearly double the fuel economy of the average vehicle at the time—would reduce greenhouse gas emissions by six billion metric tons.
The move was widely cheered by environmental advocates. But new research on car purchasing choices questions whether the CAFE rules are likely to hit those emissions targets—because of psychology more than politics. Drivers may be finding ways of compensating for their more fuel-efficient vehicles.
In a new white paper, scientists at Yale University, University of California, Davis, and the Massachusetts Institute of Technology reveal an unintended consequence of tighter fuel standards: When a two-car household goes to replace one of its vehicles, a household that already owns a fuel-efficient car tends to buy a gas hog for its second car. This decision-making erodes more than 60 percent of the fuel savings that first car should have yielded, they found.
Economists call this phenomenon “attribute substitution,” says David Rapson, a professor of economics at UC Davis and one of the authors of the new white paper, which is not yet peer-reviewed. The idea is that, because these drivers already own small, gas-sipping car, they’ll seek out a vehicle with the opposite attributes when it comes time to replace a car.
It could be that drivers are compensating for what they don’t have, or, like those who eat a donut after a workout, they feel they have some moral license to buy an Escalade because they already own an Prius. “But I think more likely it’s just that people value having two cars with attributes that are different,” Rapson says. “With a subsequent car purchase, people might want to have more power, comfort and safety.”
The researchers tapped a rich dataset: all California vehicle registration records, from 2001 to 2007. That allowed them to look at every two-car household in California over time, and to see every instance in which one car was replaced another. Isolating the effects of gas prices and vehicle depreciation, the researchers developed an analytical framework that allowed them to test how, as households dropped cars and purchased new ones, the attributes of the car they kept affected the choice of the new car they bought.
Their findings don’t sound like great news for advocates of tighter fuel economy standards, but they won’t come as a surprise to those who’ve followed the CAFE debate. Obama’s auto standards faced plenty of resistance when they were first rolled out, and not just from the anti-regulation crowd that has applauded President Trump’s ongoing efforts to dismantle them. The standards left wide loopholes for carmakers, and may have ended up lengthening the lives of gas-guzzlers on the roads by phasing them out in showrooms, which boosted their value on the used car market. Meanwhile, the decline of gas prices in recent years has eroded the appeal of fuel-efficient cars.
Economists on all points of the ideological spectrum also worried that cars capable of going further on the same tank of gas are liable to be driven more—a classic example of the so-called “rebound effect.” The new paper finds that this backlash-like behavior, combined with attribute substitution, contributed to the 60 percent loss in fuel savings.
While it’s difficult to parse the exact consequences of each problem, it is clear that Obama’s CAFE rules haven’t lived up to their promise: It’s estimated that, between 2012 and 2014, the new standards shaved off 60 million metric tons of CO2—roughly one percent of the six billion target.
That doesn’t mean climate advocates should either welcome CAFE’s demise or give up on regulations. Rather, the findings make the case for policies that directly incentivize the behavior environmental regulators want to see, rather than attempting to manipulate less-direct levers. Imposing a price on carbon dioxide, or raising gasoline taxes, would encourage people to buy more fuel-efficient cars, drive those cars less, and increase the rate at which older, less-efficient cars are being scrapped, Rapson says. As long as the grid keeps getting greener, subsidizing the growth of electric vehicles can also make a big dent in U.S. emissions.
Ratcheting up gas prices has proved politically infeasible time and again. But that’s not a reason to give up on one of the few levers known to truly cut back on driving, Rapson says: “I think we just need to change the political calculus.”