How is a gas tax better than just improving emissions standards?

Question: How is a gas tax better than just improving emissions standards?

Answer: The full question asked by Garth Brazelton was: "How is this better than just tweaking CAFE to fix the problem of SUV substitution (which I know for a fact the US DOT is doing)"

For those of you not familiar with Corporate Average Fuel Economy (CAFE), the EPA describes it as:

"Corporate Average Fuel Economy (CAFE) is the required average fuel economy for a vehicle manufacturer's entire fleet of passenger cars and light trucks for each model year. It applies to passenger cars and light trucks with a gross vehicle weight rating (GVWR) of 8,500 pounds or less manufactured for sale in the United States."

We saw in How would a gas tax reduce consumption? that more fuel efficient cars were just one of the ways to reduce to reduce fuel usage:

• Taking public transportation.
  
  
• Bicycling or walking, if possible.
  
  
• Carpooling to places like work or to children's events - instead of each parent driving only their child to hockey practice.
  
  
• Invest in a motor scooter or motorcycle for quick trips to local stores.
  
  
• Instead of going to the post office, supermarket, and hair salon in three seperate trips, pool them together in one trip.
  
  
• Keep tires properly inflated.
  
  
• Change spark plugs and air filters on a regular basis.
  
  
• Invest in a more fuel efficient car.
  
  

Increased gasoline taxes reduce gasoline usage through a number of different mechanisms, where as improving CAFE standards only impacts one of these.

In fact, improving CAFE standards can actually make the problem worse in the short run, if the new standards increase the price of engines (and cars). In that case, people may hold on to their older, less efficient, cars longer instead of upgrading, so fuel usage may be higher than it otherwise would have been. In the long-run, this is not an issue.

In the final section, we discuss why economists should care about this issue:

Next: Why should an economist support such a political infeasible thing as a gas tax?
Previous: How long would it take for a gas tax to be effective?
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