On Friday, the California Air Resources Board issued new emissions regulations that mandate that by 2025 one out of seven new cars sold in the state must be powered by electricity or be some other form of zero emission vehicle. CARB, which voted unanimously on the new standards, ordered a 75% drop in vehicles’ smog creating pollutants by that same year, and a 50% drop in greenhouse gas emissions from current regulations. While automakers, who treasure the California market and are loathe to do anything that might offend CARB members, supported the measures, car dealers, who literally deal with car buyers on a daily basis, say that CARB is overestimating potential consumer demand for EVs and ZEVs and that the regulations will add an average of $3,200 to the cost of every car. Just because some bureaucrats say that a certain percentage of certain kinds of cars must be sold doesn’t mean that consumers will buy them – unless, of course, the bureaucrats make it even more expensive to buy something else. It’s easy to see that $3,200 figure growing in a scenario where automakers have to cut the price of EVs and ZEVs to get sales up to the mandated percentages. The folks who buy conventional cars and light trucks will be the ones who pay the difference.
I can understand the actions of the automakers. See Lenin on capitalists and rope. You might also want to check out the actions of certain German car companies from 1933 to 1945. Okay, so maybe that’s a Godwin violation but the simple truth is that car companies will do what they have to do to stay in business. If the price of admission to the California market is devoting a percentage of production to EVs and ZEVs and jiggering sales prices to make sure they make up 1/7th of California sales, well then, that’s what the car companies will do and other car consumers will pay for it. If the automakers have to choose between the bureaucrats and their dealers, the dealers don’t have nearly the same political (and ultimately economic) power as CARB does.
What I can’t understand is how in a federal system of fifty individual states, in a country whose political system is ultimately based on local precinct meetings and local school board and city council elections, over 300 million Americans are willing to let an unelected board of eleven Californians dictate what kinds of cars the rest of us will drive. How can we let CARB force the rest of us to subsidize the transportation choices of people in the Golden State? One of the reasons for CARB’s existence in the first place is that California, particularly in southern California and the Los Angeles basin, has unique air pollution problems not found in much of the rest of the country. CARB, though, is knowingly using its power to force what are de facto national standards on the rest of us. If Ford is moving to making and selling virtually the same cars globally, does anyone think that CARB’s decisions won’t affect your own choices in the showroom even though your nearest showroom is thousands of miles from Sacramento? Even if the CARB decision means that EVs and ZEVs will proliferate only in California showrooms, does anyone think that automakers won’t pass on the losses they take on those cars to consumers in other states in the form of higher MSRPs on cars that run on gasoline?
That’s hardly consistent with the way we practice democracy in America. To begin with, the 11 members of CARB who are dictating what kinds of cars companies can make have not been elected nor have they been given any statutory power by citizens of the other 49 states. I’ll concede that in California there is at least the appearance of democratic oversight concerning CARB. CARB members are appointed by the governor of California and those appointments are confirmed by the California senate. Members serve at the pleasure of the governor. Californians can vote for their governor and senate so there’s no theoretical problem with CARB telling businesses or consumers how to act in California. On the other hand, consumers and businesses in the other 49 states that aren’t California (plus Puerto Rico, Guam, the US Virgin Islands and other territories) have absolutely no say in the makeup of CARB.
That makeup, by the way, is heavy on politicians, bureaucrats, and academics, many with an environmental tilt. That may be unavoidable. It’s no coincidence that CARB seems as much driven by an environmental agenda for the entire country as it is to keep hot rods out of the HOV lane in LA. Just one out of the eleven members of CARB, Sandra Berg, comes from an industrial background. Only two of the eleven have any significant private sector experience, Ms. Berg, and Dr. Alexander Sherriffs, a private practice physician who represents a regional air quality board. By statute five of the eleven members must be chosen from regional air quality control boards. I don’t think it’s a stretch to assume that those five members will be more likely to regulate than less likely. Three other members must have specific backgrounds, one with expertise in automotive engineering, one with expertise in science, agriculture or law, and a physician or health expert. That leaves three remaining CARB members, two of which can come from the public and one of which has to have either expertise in air pollution control or meets the criteria for one of the other three categorized slots.
I suppose that on paper CARB could possibly be impartial but it’s hard to avoid feeling that there’s a built in institutional bias in favor of regulation and against industry. When you look at the CVs of the experts on the board, that sense of a built in bias becomes palpable. The automotive expert is a professor whose academic background is environmental engineering and alternative energy and whose first job out of college appears to have been at the EPA. The health expert is a physician, a specialist in occupational and environmental health whose research focuses on the respiratory effects of ambient air pollutants. The law expert’s day job is senior policy advisor to a Democratic congressman on environmental, water and agriculture issues.
While it’s possible that a professor of environmental engineering and alternative energy, a doctor who researches the health effects of air pollution and a congressional aide that works on environmental issues might not be predisposed towards more regulations and controls on industry, it would be naive to think so.
If you want a clearer look at the mindset behind CARB. Take a look at the Staff Report: Initial Statement Of Reasons for the new regulations. By statute, CARB regulations must consider costs to consumers, businesses and government agencies. It’s interesting how the CARB staff decided to demonstrate that costs to consumers will be offset by savings due to the regulations. CARB acknowledges that PHEVs, BEVs and FCVs will cost consumers more money than conventional combustion powered cars. CARB strives mightily to show that fuel cost savings, though, will offset those increased costs, projected to be about $9,000 to $11,000 over today’s conventional cars. The problem is that those savings will only completely offset the increased costs of low powered PHEVs and BEVs. Hybrids and EVs with larger battery packs (you know, the kind with range) and fuel cell vehicles will end up costing consumers more money than they save, just like hybrids usually do today. The CARB staff tried to minimize that impact but the text I’ve emphasized shows what the bottom line really is.
For two vehicle types shown [of five], the consumer payback occurs within the median life of the vehicle. The “consumer payback period” is the year at which the cumulative fuel savings equals the incremental purchase price. Though the payback period will not occur within the life of the vehicle for the three other vehicle types, consumers will still experience $6,000 to $10,000 in lifetime savings.
No, if the payback period will not occur within the life of the vehicle there is no lifetime savings because you’ve still ended up spending more in terms of absolute dollars. While the fuel costs may be reduced, unless the amount they’re reduced exceeds the incremental costs, you haven’t “saved” a penny. Less gasoline will be consumed, but consumers will end up spending more money, not less. CARB also doesn’t stress how much of compliance costs will be passed on to consumers of conventional automobiles and trucks. They left that for the car dealers to calculate. Those costs to regular drivers will most likely dwarf the dollar figures involved with consumers of electrified cars.
As I said, by statute CARB also has to measure the economic impact on government agencies. We just saw how CARB tries to imply that private consumers (and businesses that buy vehicles as well) won’t be terribly impacted by the increased cost of electrifying our light vehicle fleet though just about all drivers will pay more for their cars and few will recoup that increase through fuel savings. It’s telling, though, how CARB addresses the issue of decreased fuel tax revenue because all that gasoline is being saved. Though CARB says that improved fuel economy of conventional cars and increased use of electrified cars will indeed cut state revenues from taxes on gasoline and diesel fuels, the board’s staff blithely says that those shortfalls will be made up by increased sales tax revenue because the regulations will make all cars significantly more expensive. While telling consumers they’ll save money, CARB tells its fellow bureaucrats the truth.