CAFE Standards Come to Big Rigs

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The Obama administration has just announced new fuel efficiency standards for long-haul trucks, the first time the US government has attempted to set these sorts of rules for the big rigs:


The regulations call for reductions on fuel consumption and greenhouse gas emissions by 2018 of 9 to 23 percent, depending on the type of vehicle. Trucks and other heavy vehicles make up only 4 percent of the domestic vehicle fleet, but given the distance they travel, the time they spend idling and their low fuel efficiency, they end up consuming about 20% of all vehicle fuel, according to the Union of Concerned Scientists.

Experts say that a 20 percent reduction in heavy vehicle emissions would boost fuel efficiency to an average of 8 miles per gallon from 6 miles now.
That doesn't sound like a lot, but as I blogged last year, when it comes to fuel efficiency, you get the biggest bang from the smallest improvements:

fuel for improvment.png

The question I have is: why is this going to work?

I am not a huge fan of CAFE standards; in general, I think they're the worst possible way to reach the goal of higher fuel efficiency.  But at least with the standards for consumer cars, you can argue that there's a market failure.  The standard narrative from CAFE proponents is that they show that automakers will just whine and say they can't do things until you make them, at which point, they'll go ahead and do what they should have.  This narrative is rather too simple--while collective action may have forced some genuine improvements, others consisted of engineering advances that would have happened anyway--and still other "improvements" consisted of manufacturers sacrificing safety and horsepower, or selling a bunch of junky econoboxes below cost in order to up their average fleet efficiency.

Still, in the individual market you can tell a story where price competition forces manufacturers to make bad tradeoffs because people aren't necessarily rational value maximizers, and they don't pay enough attention to fuel efficiency when they're deciding what car to buy.

But in the market for big rigs?

Trucking companies obsess about fuel costs.  Talk to a trucker right now: you'll get an earful.  Better yet, talk to his manager.  It's like finding some sort of Rain Man savant whose hobby is tracking the price of diesel.  And there is capital out there to help them make the transition to a more efficient fleet, if the trucks are available.  So I have a hard time believing that if there were some even nominally cost-effective way to make trucks 25% more efficient, truck owners and haulers would be passing it up in favor of upgrading the leather on the heated seats.  Or that if the manufacturers had any idea how to do this, they'd discard the idea as too risky.  Anyone who can deliver a truck that cuts your biggest cost by 25% is going to clean up in the marketplace.

So the question is: why hasn't this been done?  What tradeoffs will the makers of big-rigs have to make in order to meet the new standards?  

The article presents it as win-win:

"We'd be able to meet the standards by reducing weight, using low rolling-resistance tires to cut down on drag, making vehicles more aerodynamic and have less idling: those are available in the U.S. now," said Jed Mandel, president of the Engine Manufacturers Association, the truck and engine makers' trade group. The federal government has "done a great job in allowing flexibility for truck makers to build vehicles."

The new standards would increase the cost of heavy duty trucks, which cost tens of thousands of dollars, by several thousand dollars each, depending on the vehicle. But the administration and the manufacturers' group estimated that the higher costs would be recouped very quickly, often within a year or two, because of savings at the pump, one of the biggest expenses for any cargo or trucking business.

The administration estimated that businesses using big trucks could save about $50 billion in fuel costs over the program's duration.
But seriously?  You guys could have done this before for a fairly trivial amount (relative to the cost of fuel, and the price of the truck), but . . . no one bothered?  Either something is missing in this story, or American manufacturing is in even worse shape than I suspected.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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