Thursday, May 21, 2009

Is A Combination Of Old And New Vehicles Better Than CAFE?

President Obama proposed changes to CAFE standards that will increase the average mile per gallon of cars and trucks by 2016. The changes are expected to increase the price of a vehicle, on average, by $1300.

We will have a technological change and a price change, without a functional change. A car and truck will still be a people and goods transporter.

Analyses at this point, prior to actual vehicle prototypes, are assuming that carrying capacity in both weight and cubic feet will remain unchanged. However, this is speculative and carrying capacity may reduce per vehicle or on average. Vehicles are functionally used for business transport and multiple passenger transport.

It is too early to speculate on the physical vehicle changes and the effect they will have on number of cars/ truck needed in actual life situations. Prius and Insights are nice cars, but after a school sporting or social event, you need more of them to transport the kids home or to pizza, than if larger, less fuel-efficient 6-9 seat SUVs were used. Splitting a passenger to put into two cars is not a practical option. A similar logic applies to some cargo. Are there analyses of fuel use inputting real life situations to see what combination of old and new cars/trucks use the least fuel in actual, everyday usage? Since capacity is changing, it is not a price (or mpg) elasticity.

It is an optimization problem with real life inputs. Given the new vehicle and old vehicle characteristics, what quantity mix of the vehicles will minimize fuel use and CO2 emissions?

It could very well be that large, fuel inefficient cars/ trucks in the mix reduce total miles driven, fuel use, and CO2 emissions. It would mean not achieving the new CAFE standards, yet achieving all the end benefits. It is not difficult to imagine than in suburban and rural settings, large vehicles mean fewer vehicles per event, fewer total miles driven and less CO2 production. Does the benefit of higher mpg vehicles more than offset their possible increased usage in both miles and number of vehicles per event? Alternatively, are fuel use and CO2 emissions minimized with a combination of fuel-efficient and non-fuel efficient vehicles so that the combination does not meet CAFE standards?

CAFE standards are determined by car sales and not by actual vehicle usage. Cars that are 30 percent more efficient but get used twice as much, are less environmentally friendly than fuel inefficient cars.

Additionally, price increases per vehicle will make a used vehicle more attractive, in addition to less expensive new models. Moreover, dealers have more profit margin leeway to reduce used car prices to make their prices more attractive. Three times as many used cars and trucks as new ones are purchased each year. The total dollar valued of used vehicle purchases exceeds new ones and the average price of a used vehicle is about 30 percent of a new vehicle. Used vehicles are also more profitable per vehicle to dealers than new vehicles.

In addition to buying cheaper models or used cars, a price increase could also shift families to do more car sharing and to own fewer vehicles per household. One fewer car may or may not reduce total miles driven by two cars in a household.

The goals of Obama's proposal are to reduce fuel consumption and CO2 emissions. However, the metric is CAFE standards and not actual fuel usage or emissions. CAFE is based on sales and not actual vehicle usage. It is not like a water meter. It is a proxy for the desirable results and as such can be achieved without actually producing the intended results at the lowest cost or with the most benefit. Inputs of real life usage of vehicles under different situations into an optimization model are needed to see what combinations of vehicles, old and new, efficient and inefficient, will produce the minimum fuel use and emissions.

Just using economics and engineering could produce results that meet CAFE, but do not achieve the intended objectives.

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