Do Fuel Economy Standards Really Make Driving Less Safe?

A few weeks ago I wrote about the looming showdown over fuel economy standards. In that post, I argued that corporate average fuel economy standards (CAFE standards) are not an efficient way of saving fuel or pollution.

Now the EPA has released a proposal to freeze CAFE standards that largely bypasses the efficiency issue. It focuses, instead, on the claim that current fuel economy standards make driving less safe. It even gives the rule the cute name of Safer and Affordable Fuel-Efficient Vehicles Rule, or “SAFE Vehicle Rule,” for short.

So, do CAFE standards really make driving less safe? Does that justify the EPA proposal? The answers, in my view, are “Yes,” and “No.” CAFE standards are flawed, but the best approach would not be just to freeze them in place, but to replace them with a carbon tax, or at least with a higher tax on motor fuel. Here is why.

The rebound effect

The EPA’s first point is that CAFE standards encourage more driving, and more vehicles on the road mean more accidents. That happens because CAFE standards encourage fuel saving only at the dealership, not at the pump. Once a consumer buys a low-mileage vehicle, the cost of driving an extra mile goes down, thereby reducing the incentive for fuel-saving measures like moving closer to work, working at…