"It Can't Be Done"It wasn't so long ago - back in the early 2000s - that the mere suggestion of increasing fuel economy standards sent automakers in a frenzy. "It can't be done," they said, "not without making vehicles that americans won't want to buy!" A US congressman even showed some slides of small European cars hoping to scare people ("After all," Trent Lott declared, "this is still America.... We shouldn't have the federal government saying you are going to drive the purple people eater here.") and show how terrible things would be if CAFE regulations were tightened... Fast-forward a few years, and it's now obvious that these were lies designed to keep the status quo and minimize the efforts that carmakers have to make to improve their products.
As an example, let's look at Nissan's just announced all-new 2013 Pathfinder SUV. I'm taking it as an example because it's a rather big SUV that gets MPG similar to what many much smaller sedans got back when the major automakers and people like Trent Lott made their claims about fuel economy.The 2013 Pathfinder is as powerful as the 2012 model it replaces, yet it is 500lbs lighter, meaning that its power/weight ratio is actually better. It also has an extra 8.4 cubic feet (238 liters) of interior space than the previous model. Yet it is 30% more fuel efficient, getting 26 MPG highway, 20 MPG city and 22 MPG combined, and those gains were made without expensive or exotic technologies (more fuel economy gains could have been made if Nissan had incorporated an idle-stop system, or even better, a full hybrid drivetrain). This was all made possible thanks to incremental engine improvements, some aerodynamic tweaks, weight reduction, and a fuel efficient transmission.
And this particular model is just one example among many that shows us that when they have to, carmakers figure out ways to make more efficient vehicles. That why the new CAFE standards that will progressively increase to 54.4 MPG over the next decade are a good idea, and why incentives to kickstart the electric car is a great idea. Maybe the market would get there on its own eventually, I don't know, but there are so many externalities created by burning oil that aren't taken into account by market forces that I think it's fair to create a framework that pushes things in the right direction. Picking winners and losers probably won't work, but general incentives and regulations for more efficiency and decarbonization certainly can.