Sunday, December 5, 2010

Bad solutions

December's Car and Driver (sorry, not online) has an article on the California Air Resource Board's attempts to force car-makers in California to produce high numbers of Zero-Emission Vehicles.

Starting in 2012, CARB regulations get stricter, requiring large-volume automakers that sell more than 10,000 vehicles in California yearly--currently Toyota, Honda, Nissan, Ford, GM, and Chrysler--to produce among them a total of 7500 ZEVs between 2012 and 2014, a figure that rises to 25,000 for the 2015-2017 time frame.

There's also a cap-and-trade component that allows companies like Tesla to sell credits to companies not yet in compliance. This strikes me as a very bad approach to the worthy goal of reducing carbon emissions and other air pollution. Telling companies to produce a certain type of product is intrusive and far from guaranteed to work.

Think back to when subcompacts and hybrids really took off. It was when gas prices spiked to over $4/gallon. Ezra Klein calculated that the true cost of gasoline, counting all the unpriced externalities, would be closer to $4.37/gallon. Putting a proper price on carbon is a far better way to spur innovation and production of ULEVs and ZEVs.

Clearly there's no current appetite right now for a nationwide carbon tax, but states can raise the price of gasoline by raising the state gas tax. The deficit commission also recommended raising the federal gas tax. These solutions would raise revenue (which the country and California badly need) and accomplish the goal of getting people to buy more efficient vehicles, and they would do so in a far more free-market way. Pricing carbon and/or gasoline properly is more likely to work and more efficient than top down regulation. Ironically, in flatly opposing any sort of tax increase, conservatives are causing environmental regulation to move in a less free-market direction. That should change.

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