Sam Newell

Look at that car's MPG!

By Sam Newell
August 12, 2010

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WHEN THE Senate returns from its August recess and takes up the energy bills, here is a simple idea it should consider: require auto manufacturers to emblazon the EPA fuel economy rating prominently and permanently next to the license plate on every new car.

Customers would see the score of all the cars on the road and notice the amazing variability. For example, the Toyota Prius gets 50 miles per gallon (combined city/highway) and the Ford Fusion Hybrid gets 39, compared to low- to mid-20s for most midsize sedans. The 4-cylinder diesel VW Jetta SportWagon gets 34 mpg, compared to low 20s for most wagons. The Toyota Highlander Hybrid gets 26 mpg and the Jeep Patriot 2WD gets 25, compared to 15 to 20 for most SUVs that are larger, more powerful, or non-hybrid.

This information is already available in the showroom and online, but making the information more visible could make customers more attuned to fuel economy. Customers might also be more likely to take ownership of the consequences of their purchase decisions. The durability and transparency of the label (to their neighbors as well as themselves) could harness feelings of responsibility, just like most people feel responsible not to litter. Fuel economy labeling could thus influence customers’ purchasing decisions and driving habits.

To the extent that customer preferences transform, manufacturers would also have more incentive to offer more efficient products. Product offerings could improve almost immediately, since many manufacturers already sell more efficient models in Europe and Asia.

Imagine if this approach eventually led to a 1 mpg improvement in the average efficiency of the auto fleet (and did so by harnessing transparency and customer choice instead of relying on coercion or taxes). That would reduce our total gasoline consumption for passenger vehicles by 4 percent, or nearly 6 billion gallons per year. As a result, accidents such as the disaster in the Gulf and many other smaller spills might be less frequent; there would be less risk of catastrophic climate change; and the net exporters on the world oil market, such as Saudi Arabia and Iran, would have less wealth, and America more. The realization of even a small amount of such benefits would far outweigh the trivial cost of affixing a label on every new car.

Sam Newell is an energy economist with The Brattle Group in Cambridge.

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