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The Obama administration recently announced that it was gradually raising fuel-efficiency standards to 54.5 miles per gallon by 2025. That’s good news for the environment, but it’s not the best possible news for the environment, argues Eric Morris at Freakonomics. That would be raising the federal gas tax:

This raises the true problem with CAFE (the fuel-economy standard). It misses out on a potentially key part of the solution to reducing fuel use: driving less. In fact, ironically, increased CAFE standards will have a perverse and unwelcome effect; better fuel economy will increase the fixed cost of driving (i.e. vehicle prices) but will actually reduce the marginal cost (i.e. fuel expenditures). To a degree, less thirsty cars will actually cause people to increase the number of miles they drive (as I’ve written about here).

With increased gas taxes, on the other hand, less driving will be part of the consumer’s toolkit. Some who absolutely need vehicles with poor fuel economy will have the option of avoiding the tax by driving less instead. As long as their fuel use goes down, why not give them that choice? Greater economic efficiency would result. In fact, the Congressional Budget Office ran the numbers in 2004 and found that cutting fuel use through taxes was considerably cheaper in the long run than raising CAFE.

Read the full article at The Infrastructurist.

Earthgarage – Greener Car. Fatter Wallet.