New Federal CAFE Standard Announced by President Obama; Edmunds.com Comments

MORE: U.S. Energy Policy Needs Bold, Obama Gives Same Old

Publishers Note: We absolutely agree with the position of Edmunds.Com on this issue!

SANTA MONICA, Calif.--Today changes are being announced for the Corporate Average Fuel Economy (CAFE) regulations, which are intended to encourage automakers to build and sell more fuel efficient cars, leading to a cleaner environment and less dependence on foreign oil. The new regulations, which will go into effect in 2011, will eliminate the discrepancy between the federal standard and the standards generated by California and other states, making it easier for automakers to coordinate their product plans for the United States market.

However, fundamental problems with CAFE remain.

“Defining what should be built does not create demand,” asserted Edmunds.com CEO Jeremy Anwyl. “There are tons of great fuel-efficient cars out there today but most consumers aren’t interested, and CAFE doesn’t deal with the demand side at all.”

“A lesson regulators and many in the green community still haven't learned is that autos are still a major investment made as much with emotion as with common sense,” wrote John O’Dell, Editor of GreenCarAdvisor.com. “It won't matter that the vehicles that result from this national program effort average 50 or 60 miles per gallon if no one wants to buy them.”

Automakers whose sales-weighted average fuel economy is above the CAFE standard must pay a fine to the government. A number of automakers resign themselves to paying that fine each year since it is more cost-effective and less brand-damaging than attempting to sell unwanted vehicles just to meet the standards.

“For some automakers, it would be market suicide to meet CAFE standards,” Anwyl acknowledged. “Minimizing our impact on the environment is a great goal, but this isn’t the way to get there.”

Instead, Anwyl suggests that politicians look overseas for ideas and inspiration.

“One reason that foreign automakers do well when gas gets expensive here in the US is because they need fuel efficient vehicles for their home markets, which have high fuel prices that are consistently inflated through taxes,” noted AutoObserver.com Editor Michelle Krebs.

Also, some countries levy a heavier tax on vehicles with higher horsepower and bigger engines.