May 20, 2011


Fuel Economy or Fools Economy: An International Overview


From a unique set of authoritative national data we present trends in car use and fuel economy across Japan, Australia, North American and European countries. We also examine new vehicle characteristics and test fuel economy /CO2 emissions across these countries. We show that test fuel economy in Europe started to improve after a voluntary agreement on new vehicle emissions began there, even if the actual target was not made, while in the US new vehicle fuel economy for cars only improved after fuel prices started to rise. We note that in addition to modest improvements in on-road fuel economy, car user per capita had stagnated even before the economic decline in most of the observed countries. Thus we note real examples of fuel economy and emissions savings.

We then note some good examples of “fools’ economy” steps that were expected to lead to saved fuel and lower emissions, such as the shift to diesels in Europe or cash –for-clunkers in the US. Noting the accumulating literature on “green car incentives” and other schemes, we conclude that fuel economy standards and higher fuel prices together lie behind the observed stagnation in car use and fuel consumption/emissions. Finally we note that the current popularity of subsidies and incentives “elsewhere emission vehicles” (EEV), i.e., biofuel or electric drive vehicles raises complex issues about the effectiveness of such instruments when the main stream new car in the US still increased in weight and power in model year 2010. We conclude as many others that without strong price signals coupled to stronger fuel economy standards, the US and other countries are unlikely to meet strong oil and CO2 reduction goals.

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