Billions spent by federal government on alternative fuel cars with little to show

Articles — By forcechange on November 28, 2008 1:55 pm

Not surprisingly, a federal government program to invest in alternative fuel vehicles has been less than successful and has produced some significant unintended consequences. 

Under the federal EPAct, for the past 16 years, federal agencies have invested billions of dollars to build-up a fleet of 112,000 alternative fuel vehicles.  However, the positive effects of this policy have been limited, if not negated by the real world implementation of the program. 

Of the thousands of alternative fuel vehicles purchased by the feds in recent years, 92% of them still run on standard gasoline.  This is because many of these vehicles have been sent to locations that are hundreds of miles away from any alternative fueling stations. 

Not only that, but a lot of the alternative fuel vehicles that are built today come standard with engines that are larger than the ones they replaced in the fleet.  As a result, these new vehicles actually consume more gasoline and emit more greenhouse gases than the cars they replaced.

This silly situation reminds us of the flex-fuel boondoggle that automakers have been taking advantage of for years.  A quick refresher– the flex-fuel boondoggle, as we call it, is a regulation that gave automakers a higher credit under the CAFE standards for building cars that could run on both traditional gasoline and the E85 blend.  This would have been decent policy, except for the fact that virtually none of these flex-fuel car owners live anywhere near a E85 gas station.  As a result, there are thousands of SUVs driving around the country with a nice greenwashed “flex-fuel” emblem attached to the back of the car, all burning regular gasoline.  But GM, and others, were getting extra credit under the CAFE standards for each conversion, which only cost them a few hundred dollars.

Both the EPAct and the flex-fuel boondoggle illustrate the inherent risk of unintended consequences resulting from federal environmental regulations.  Both policies were intended to reduce our consumption of oil and to encourage the use of alternative fuels, yet billions have been spent and neither policy has accomplished this goal.  The real lesson to learn is that government is not very good at picking solutions.  Its best role would be in creating the market conditions necessary for change through a carbon tax or cap-and-trade system.  But since government is unlikely to get out of the planning business anytime soon, and is equally unlikely to impose a politically suicidal across-the-board carbon tax, the next best lesson to learn is caution.  Caution that there are more often than not, unintended consequences of government policy, and as a result, those policies must stay flexible and open to change if and when they are found to be misguided.

This is, in fact, what happened with the EPAct, which in 2005, 13 years after its passage, was amended to require all government alternative fuel vehicles to be within 5 miles of an alternative fuel source.  Baby steps, I guess.