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The race is on for car companies to meet harmonized rules in both Canada and the United States that will set fuel economy standards for new vehicles at a combined average of 6.67 litres/100 km (35.5 miles per U.S. gallon) by 2016. (Darren McGee/The Globe and Mail/Darren McGee/The Globe and Mail)
The race is on for car companies to meet harmonized rules in both Canada and the United States that will set fuel economy standards for new vehicles at a combined average of 6.67 litres/100 km (35.5 miles per U.S. gallon) by 2016. (Darren McGee/The Globe and Mail/Darren McGee/The Globe and Mail)

Efficient driving

Are consumers to blame for stagnation in fuel economy? Add to ...

The good news first: the world’s big car companies have produced amazing increases in fuel efficiency in recent decades. Now the other news: we’ve witnessed fantastic, creative technological advances that have barely nudged overall fleet-wide fuel economy even as the efficiency of vehicles has improved dramatically.

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Fuel efficiency up while overall fuel economy has stagnated? As Massachusetts Institute of Technology economist Christopher Knittel puts it, major innovations in fuel efficiency have produced paltry gains in fuel economy for a simple and easily understood reason: automobiles have grown much bigger and far more powerful than they were one, two and three decades ago.

Who gets credit or blame here?

“I find little fault with the auto manufacturers, because there has been no incentive to put technologies into overall fuel economy,” says Knittel. “Firms are going to give consumers what they want, and if gas prices are low, consumers are going to want big, fast cars.” And between 1980 and 2004, gas prices dropped by 30 per cent when adjusted for inflation.

Aha, so it’s cheap gas that’s to blame. Yes. And gas is cheap, notes Knittel, because politicians are too cowardly – not his exact word, but mine – to take the one, foolproof and overwhelmingly simple route to nailing down outstanding fleet-wide fuel economy and the lower tailpipe emissions that come with it: raise fuel taxes. Want to suppress demand for gas guzzlers? Make them prohibitively expensive to drive.

“It’s the policymakers’ responsibility to create a structure that leads to these (fuel-saving) technologies being put toward fuel economy” rather than building the bigger, faster, more powerful vehicles consumers will buy if fuel is cheap, he says.

Knittel, of course, has done a little research on the subject and you’ll find it in his paper Automobiles on Steroids in a recent American Economic Review. No sensible person, he says, would blame a vast swatch of car consumers for choosing larger, powerful vehicles if driving them is economically sound.

As an economist and a very reasonable observer of human nature, he argues that the most logical way to improve fuel economy across the board, and thus reduce greenhouse gas emissions, is to increase the fuel tax. If you want consumers to value fuel efficiency, make the cost of driving a gas guzzler obnoxiously expensive – at the fuel pump, at every fill-up.

“When it comes to climate change,” Knittel says, “leaving the market alone isn’t going to lead to the efficient outcome. The right starting point is a gas tax,” he points out, adding, “I think 98 per cent of economists would say that we need higher gas taxes.”

The reality here is that while the politicians have failed to do the right and sensible thing, car companies have actually done their part in delivering a suite of innovative and reliable fuel-saving, emissions-reducing technologies. Knittel points to efficient fuel-injection systems that have replaced wasteful carburetors; multiple camshafts (which control the valves and thus the efficiency of an engine’s breathing, rather than just one which allows for a smoother flow of fuel, air and exhaust in and out of engines); and variable-speed transmissions that let engines better regulate their revolutions per minute. All save fuel, as do lightweight materials, low-rolling-resistance tires and a host of other advances in cars now and coming soon.

And yet in the United States between 1980 and 2006, the average gas mileage of vehicles barely moved, having increased slightly more than 15 per cent. Meanwhile, during that time the average curb weight of those vehicles increased 26 per cent, while horsepower rose 107 per cent. Toss out the weight and horsepower gains and overall fuel economy actually increased by a stunning 60 per cent between 1980 and 2006, Knittel notes.

It’s a similar story in Canada and for that we turn to economist and auto analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants. His research shows that in Canada we have witnessed a 1.0 litre/100 km improvement in overall fuel economy over the last 25 years: 11.0 litres/100 km to 10 litres/100 km or roughly a 10 per cent improvement during a period of unprecedented technological gains.

“Our governments don't give the [original equipment manufacturers]credit for this success,” he says in his own research paper on the subject. “Our governments simply say, ‘Imagine how fuel-efficient vehicles would be if horsepower had not increased.’

“This may be true, but no one would be buying these vehicles,” he says.

Knittel says that if Americans today were driving cars of the same size and power that were typical in 1980, the country’s fleet of autos would have jumped from an average of about 23 miles per gallon to roughly 37 mpg, well above the current average of around 27 mpg. Instead, “most of that technological progress has gone into [compensating for]weight and horsepower.”

Now the race is on for car companies to meet harmonized rules in both Canada and the United States that will set fuel economy standards for new vehicles at a combined average of 6.67 litres/100 km (35.5 miles per U.S. gallon) by 2016. The Corporate Average Fuel Economy standards also call for a fleet-wide average of 54.5 mpg by 2025, according to U.S. President Barack Obama. Canada’s federal Government has said it will harmonize with the U.S. rules.

Interestingly, Knittel calculates that auto makers could meet the new CAFE standards by simply maintaining the rate of technological innovation since 1980 while cutting 25 per cent of the weight and horsepower. There is fat chance of that. But if we could turn back the clock to 1980 when cars were lighter and less powerful, that path would lead to a fleet-wide average of 52 mpg by 2020.

The greatest irony of all, he adds, is that CAFE-style regulations actually “end up reducing the cost of driving. If you force people to buy more fuel-efficient cars through CAFE standards, you actually get what’s called ‘rebound,’ and they drive more than they would have.” Rebound is a phenomenon by which greater efficiency leads to potentially greater consumption. On the other hand, higher gas taxes would create demand for more fuel-efficient cars without as much rebound.

The simple solution, high fuel taxes, is not necessarily the easy one. But if the politicians had gone down that honest and brave route from the beginning, all those huge advances in fuel efficiency would have resulted in greater fleet-wide fuel economy – that is if you believe the economists who have studied this carefully.

Follow on Twitter: @catocarguy

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