As a result of the greenhouse gas emissions regulations announced yesterday, the purchase price of cars will increase.
Officials estimated the cost of an average car would climb by $700 in 2021 and by $1,800 by 2025 when the rules would be fully phased in, though some industry analysts say the price tag could be as much as $5,200 per vehicle depending on the technology needed to achieve the efficiency gains. But Canadian officials also say the motorists would save $900 annually in fuel costs at today’s gasoline prices…
The Center for Automotive Research , an auto industry think-tank based in Ann Arbor, Mich., estimates the cost of the average new vehicle will rise by $5,200 in 2012 dollars as auto makers add expensive new technologies to meet the higher miles per gallon standard. “The [auto makers’] research and development departments tell us the true cost is more like $10,000 per vehicle by 2025,” Sean McAlinden, CAR’s executive vice-president of research and chief economist said Tuesday.
The new regulations follow current regulations that will also increase the purchase price. The Canadian regulations are modelled on the American regulations, which Eduardo Porter questioned in September.
What the government didn’t mention is that these improvements come at a high cost for drivers, automakers and society in general. They could be achieved much more cheaply by raising taxes on gasoline to a level comparable to that of pretty much every other industrialized nation. The new mileage rules are so expensive, in fact, that even if one factors in all the expected gains from the policy — like less damage from climate change and fewer deaths from respiratory disease — many economists think that the costs actually outweigh the benefits.
The reason is fairly straightforward. Fuel-efficiency standards do not really change drivers’ behavior in a helpful way. Gas taxes do. Consider how a gas tax would work. Because it would make gas more expensive at the pump, we would drive less. When time came to replace the old family S.U.V., we would be more likely to consider a more fuel-efficient option. As more Americans sought gas-sipping hybrids, carmakers would develop more efficient vehicles.
Peter Kent’s speech yesterday announcing the changes is here.