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The CEO of Ford (F) is saying that in order to reduce climate change and American dependence on foreign oil, we should consider the implementation of a European-style gasoline tax. He further suggests that our current fuel economy policy is doing more harm than good. Ford […]

The CEO of Ford (F) is saying that in order to reduce climate change and American dependence on foreign oil, we should consider the implementation of a European-style gasoline tax. He further suggests that our current fuel economy policy is doing more harm than good.

Ford Motor head Allan Mulally told attendees of an auto conference in Michigan that the Corporate Average Fuel Economy (CAFE) policy, which was put into place way back in 1975 and forces automakers to maintain an average fuel economy level, is actually harming the auto industry, according to Agence France-Presse.

The U.S. needs to “make an economic decision” similar to the one made in Europe, Mulally was quoted as saying, one which he notes has resulted in gas prices of as much as $7 to $8 per gallon. Say what? He did waffle a bit, and when asked by reporters if he was straight up endorsing a gas tax he said, “No, not exactly.”
But he said that the problem is that the CAFE standard is forcing automakers to produce too many small cars, while consumers are demanding more gas-guzzling big cars.

“Corporate Average Fuel Economy (CAFE) is the sales weighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer’s fleet of passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8,500 lbs. or less, manufactured for sale in the United States, for any given model year.” – CAFÉ Overview, National Highway Traffic Safety Administration

The current CAFE standard is 27.5 mpg for passenger automobiles. A legislative proposal to raise it to 35mpg by 2019, sponsored by Rep. Edward Markey, D-Mass, was removed from the set of energy bills that were just approved by the House of Representatives. He plans to give the proposal another go later on this year. While the new CAFE standard has its supporters, Ford’s CEO doesn’t seem to be one of them.

“Energy independence is really important,” he said, according to the AFP. “But we’ve also got to do it in a rational way so we don’t destroy a phenomenal manufacturing industry in the United States.”

That industry is suffering, but it’s unclear if the CAFE standards are to blame. GM (GM), Ford and Toyota (TM) have each reduced their forecasts for industry sales this year, reports Dow Jones.

Not everyone thinks CAFE standards are bad for the auto industry. Last month, the University of Michigan’s Transportation Research Institute completed a study that said that even tougher fuel standards could be good for automakers. The study said that when standards are based on a vehicle’s size, automakers could profit by being required to make larger cars more fuel-efficient when compared with their foreign competitors.

  1. A gas tax is clearly the most efficient way to reduce our dependence on foreign oil.

    http://gregmankiw.blogspot.com/2006/10/pigou-club-manifesto.html

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  2. This is EXACTLY what is required. Way to tell it like it is. Now… just make sure that 100% of the collected goes towards renewable energy technology commercialization! NOT like the WPT of 1980-1988: What a waste!

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