May 15, 2018
Do Obama's Rules Fuel Production of Bigger Cars?
Fuel economy rules from the Bush and Obama administrations incentivize automakers to increase the size of their cars in order to comply, a new study by Harris Public Policy's Koichiro Ito and James Sallee finds.
By Camille von Kaenelvia E&E News
Most agree American vehicles are getting bigger, undermining overall improvements in mileage. That could be partly due to the fuel economy requirements themselves.
It's important to understand the forces shaping the size of vehicles because it's a key factor in the Trump administration's review of the clean car rules. Automakers have argued that people are buying heavier, larger and more gas-guzzling vehicles because of cheap gas prices and changing consumer preferences. They say that makes it difficult to meet the ambitious targets projected by the Obama administration, and they want relief from Trump.
But a new analysis suggests that there may be an additional reason behind the trend: The design of the rules actually encourages manufacturers to make larger vehicles. The Review of Economics and Statistics published the study by Koichiro Ito of the University of Chicago and James Sallee of the University of California, Berkeley, this month.
The study found that the design of fuel economy rules in Japan incentivized manufacturers to build larger vehicles to get away with lower fuel economy increases at lower cost.
That lends credence to the argument of some that consumer trends aren't the only forces shaping the American market.