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COMPLEXITIES OF CAFE COMPLIANCE FEES PART 2
YESTERDAY WE BEGAN ANALYZING Corporate Average Fuel Economy standards and their encouraging average mpgs from 13.5 to more than double that today. In Part 2 we continue—and close with a Tesla profit ploy.
Cost of CAFE. Christopher C. Douglas, Ph.D., offers “The Costs and Benefits of CAFE,”Mackinac Center for Public Policy, October 3, 2022. Full disclosure: The MCPP is an avowed conservative think tank. Nonetheless, let’s see what Dr. Douglas has to offer.
“CAFE standards,” Douglas claims, “create unintended consequences in new and used car markets. These impose costs to automakers and to consumers, which must be considered before assessing their effectiveness…. Given Asian automakers’ superior ability to increase fuel efficiency and the European automakers’ willingness to simply pay the noncompliance fine, CAFE standards serve to increase the sales, market share, and profit of foreign automakers at the expense of the domestic Big Three automakers.”
A Sob Story? This smacks me as akin to Trump’s feeling sorry for himself. But then I’m not writing for an admittedly conservative think tank. For example, I don’t recall anyone bailing out Toyota back in 2008. Or forcing folks to buy Camrys built in Georgetown, Kentucky, Toyota’s largest vehicle manufacturing plant in the world.
I Hope You’re Seated. Indeed, Douglas offers a Policy Recommendation that is not without its own consequences: “Abolish CAFE Standards and Replace Them With a Fuel Tax.” Admitting one of its tradeoffs, he observes, “The disadvantage of a fuel tax is that it is a visible cost to the driver [especially those of lower income], while the cost of CAFE standards is buried in the sticker price of a new vehicle. This makes fuel taxes more difficult to implement since politicians, rather than automakers, will bear the wrath of consumers. If improved fuel economy and reduced gasoline consumption is the goal, then policymakers should meet this goal with a fuel tax, despite the political costs.”
Gee, I wonder which politicos Douglas has consulted about this.
A Gasoline-Fool’s Paradise. On the other hand, I confess to living in a gasoline-fool’s paradise, albeit an energy-independent one for the U.S. since 2019: Compare our average gas price of $3.19/gal. to prices elsewhere in the world: for example, Iran 11¢/gal., Venezuela 13¢/gal., Angola $1.32/gal., and Saudi Arabia $2.35/gal. (all significant oil producers), and extending to the U.K. $6.78/gal., Germany $7.18/gal., Italy $7.35/gal., Denmark $8.13/gal., and Hong Kong $13.01/gal.
Hmm…. A show of hands, please, of places where you’d prefer to pump your gas.
Automakers Pay or Purchase Credits or.… Back in October 2, 2023, Reuters’ David Shepardson observed, “GM, Stellantis Face $9.5 Bln in US Fuel Economy Fines—Industry Group Letter.” Also, upmarket—and high-powered—German marques have come to accept compliance fees as a cost of doing business in the U.S.
The Tesla Profit Ploy. By contrast, Mack Hogan reports at InsideEVs “Over 40 Percent of Tesla’s Profit Comes From Selling Regulatory Credits,” November 22, 2024. He notes, “Tesla had made $2.1 billion this year by selling regulatory credits to automakers that haven’t hit emissions targets. Credit sales account for 43 percent of the automaker’s profit.”
And, Hogan observes, “If environmental standards get rolled back [or zeroed-out], that money may dry up.”
Plus, “But in hitching his wagon to Trump’s, Musk has gambled that Tesla no longer needs government incentives for consumer purchases, or for its EV and battery factories or to drive its regulatory credit business.”
Hogan concludes, “Despite supposedly being in it for the altruistic purpose of transitioning the whole world to sustainable energy, it sure looks like Musk is trying to pull up the ladder behind him. That’s not a great look. But when you haven’t stepped off the ladder yourself, it could be quite dangerous, too.”
Again, I write “hmm…”
In summary, I’m OK with CAFE achievements, fees and all. ds
© Dennis Simanaitis, SimanaitisSays.com, 2025
Simanaitis Says 
A nitpick: while the US may be self-sufficient for oil on an aggregate basis, it varies by location. The West Coast, and California in particular, is anything but self-sufficient due to a lack of pipeline connections to Texas and the Midwest where most of the oil is produced. Most of the gasoline and other fuels (except natural gas, for which pipelines exist) are therefore imported on tankers and trains, or the oil refined locally to produce those fuels is imported similarly.
Hence, of course, high (for the US) fuel prices, made worse by a lack of refining capacity (especially in California) and, in California (for smog as well as climate reasons), restrictions and taxes on fuel formulation and emissions. As bad as it is, the air quality in places like the LA Basin and the San Joaquin Valley would be far worse, even life-threatening, without the California regs. Still, compared to Europe, even California has affordable gas; retail for unleaded regular in my part of CA has recently been in a $4-5.50 range depending on brand and station location ($4.19 at my nearest Arco; over $5 posted for Chevron).
Thanks for this. A nit worth the picking.
I’m okay with the C.A.F.E. regulations, I know that modern cars _can_ be extremely miserly on their fuel use _if_ the manufacturer desires .
Just look at all those 1980’s & 1990’s imports ~ they often got in excess of 40 MPG and no one really cared .
I did then and I do now, why I still drive a 1959 VW Beetle that easily gets 32 MPG .
My truck is a basic short bed work rig, 4 cylinder, made in America (St. Louis) by Ford, it should get better fuel economy than the current 16 ~ 20 MPG but I can live with it .
My imported (made in Canada) Chevy 4 cylinder econo mobile is comfy and gets similar mileage .
-Nate
Mike B. and VWNate add good points. This pro-business liberal Democrat in favor of encouraging industry and production nonetheless realizes, and has seen, the need for a federal guidance counselor, hall monitor, which the C.A.F.E. regs have well served our health and wallets.
Meanwhile, sounding like a broken record, mea culpa, but all the above is but reason #237 why every poll shows scientists in whelming accord that overpopulation remains our by far biggest problem, their words: “bigger than climate.”
Given there are not enough raw materials to convert the globe’s vehicle fleet to EVs, that such conveyances use six (6) times as many minerals as i.c. cars, including cobalt, lithium, nickel, copper, manganese, graphite, zinc, rare earths like neodymium, thallium, and dysprosium, the latters’ extraction requiring huge amounts of carcinogens like ammonia, hydrochloric acid, sulfates. Much of these minerals are imported from politically unstable regions.
Most urban dust is from tire wear, which has naught to do with form of propulsion. So our focus should be clear, but given the consumer-driven media’s blackout on mentioning overpopulation, we remain hostage both to those whose business plan so weak it dependent on ever more customers and cheap labor, and those unimaginative souls thinking we cannot save Social Security and Medicare without more people.