Higher CAFE standards force manufacturers to build cars that get better mileage, or at least adjust the mix of vehicles they sell. In the decades since the first set of CAFE standards were imposed, we've gone from an average fuel economy of just 13.1 mpg to a less-awful 22.5 mpg. As time goes on, that value will increase, as the Obama administration recently set a target of 54.5 mpg by 2025.
Over time, we're getting more efficient cars, lower oil consumption per driver, and less pollution per car. However, while Freakonomics author Eric Morris agrees that raising CAFE standards does work to reduce oil consumption, he says that economists have known a secret for a long time: CAFE standards are only the second-best solution.
What's the better option? Increasing the gas tax. That way, consumers could choose to address rising gas prices in a number of ways, from buying more efficient cars to demanding better public transportation to simply driving less. At the same time, higher gas prices, as opposed to higher mileage standards, would result in less traffic, which would then cut infrastructure costs.
Increased gas taxes could also have immediate impact. They're not dependent on technological breakthroughs and not waiting for the millions of cars currently on the road to be replaced. Why wait until 2025, anyway?
Unlike most taxes, the federal gas tax was fixed in 1993 at 18.4 cents per gallon. That means the tax is not a percentage of price, so no matter how high the cost of gasoline goes or how high the cost of maintaining the highway infrastructure soars, gas tax revenues don't keep up. Also, compared to other developed nations, America's current tax rate is extremely low. It's too low to pay for federal highway costs, much less contribute to development of public transportation or transportation R & D.
We could fix that. According to Morris, economists are clear that gas taxes would be a more effective way of reducing consumption while providing flexibility to consumers. Why don't we do it? Because Americans won't support tax increases, even when they make sense.