Wednesday, December 26, 2007

Automobile Efficiency and Replacement Thoughts

This isn't a wholly original thought, as I'm sure I've read elements of what I'm about to suggest in many other sources. I don't think that I've read this specific combination. The problem that I'm looking to address is the lag in fuel efficiency and pollution standards that cause a 15 year lag in full influence of any new regulations affecting auto emissions, if they have to be implemented in vehicles.

So a simple suggestion, really only two parts:

Alter CAFE Standards to not be based on fleet fuel efficiency, but based on vehicle weight and type classes. Instead of aggregate harmonic means of the vehicles sold by a manufacturer, set standards for pollutant levels to be emitted during operation covering CO2, NOx, particulates, etc. If I'm not mistaken, this is closer to the standard used in Europe where automakers have recently been told to make improvements in their emissions. Vehicle emissions is a relatively easy problem to have law around and pushes the solution and cost onto auto manufacturers who then pass the cost to consumers. Could this lead to more expensive vehicles? Quite possibly, which would probably push consumers to purchase smaller, more efficient vehicles when they next need to replace their current model.

The second problem to address is the slow replacement rate of in service vehicles. At the risk of triggering calls of giving the automakers handouts and increasing resource load through a mandatory purchasing scheme (Japan's vehicle replacement program comes to mind), I'm suggesting an incentive to auto buyers who trade-in a vehicle older than 10 years. I'd suggest giving an instant rebate or subsidizing the trade in on the new vehicle to a reasonable level and requiring a demolition certificate or some other guarantee that the vehicle is off the road. If the vehicle purchase credit were something significant, say $2,000 guaranteed, perhaps with a small bump for each year after 10 that a vehicle has been in service (say $500/year), this could act as an incentive for an older vehicle owner to trade their vehicle in on a more efficient model. On the dealer side, some means of certifying, perhaps with an incentive payment to the dealer as well to have the vehicle destroyed or recycled, as appropriate and possible.

The problem with this approach that I can see is that it could act to provide a base level of vehicle turnover for manufacturers to exploit and fuels consumerism in replacing vehicles that still have useful life left. Perhaps some basis in the incentive based on pollution output of the vehicle versus current standard, the wider the differential, the larger the incentive.