by Kenneth Green

Created on: April 03, 2007   Last Updated: April 22, 2007

With concern over climate change growing, and concern over conventional air pollutants still a concern in many cities, a great deal of discussion now centers around whether or not we should take active steps to raise the fuel economy of our vehicle fleets.

Like most environmental questions, this one is not as straightforward as it might seem. On the surface, of course, it seems self-evident. All things being equal, reducing the amount of fuel used in traveling a given distance will reduce the amount of pollution produced in traveling that distance. But all things are rarely equal.

Let's think about what it means to raise fuel economy, and the incentives it creates. When we raise fuel economy, we make it less expensive for people to drive a given distance on a unit of fuel. And when we make something less expensive, we know what happens: when prices drop for a commodity with latent demand, people use more of it. When it comes to cars, people have already sunk cost into buying, licensing, and insuring a vehicle, so their incentive is to get the most value out of it, and they do that by driving it. And this is not hypothetical - according to economist Ian Parry of Resources for the Future, 15% of the reduction in fuel use caused by the establishment of corporate average fuel efficiency standards was canceled out by people driving more. It's not hard to imagine that if people drive more, in already-congested cities and suburbs, the slow-down effect on the other motorists could not only offset the potential savings, but even make things worse.

The real question is not whether increased fuel economy will reduce air pollution; it is whether increasing fuel economy will give people the incentive to use less fuel. The answer to that is, in fact, counterintuitive. By reducing the cost of driving, we give people the incentive to drive more, cause more traffic congestion, and through both actions, increase vehicle emissions rather than decrease them. If we want to reduce air pollution, the key is to get people to use less fuel, and drive at less-congested times. A better way to do that would be to increase the cost of fuel with a pollution tax, and to institute time-of-day pricing on highways to reduce congestion.

Learn more about this author, Kenneth Green.
Click here to send this author comments or questions.