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How many lives do we trade in for SUVs?Author: Jey Ping Econ 123: Intro Seminar in Microeconomics
In 1975, Congress established mandatory fuel economy standards on domestic automobile producers beginning with the 1978 model year. The Corporate Average Fuel Economy Standards was a part of the Energy Policy Conservation Act (EPCA), and was to be adjusted constantly to provide an added incentive for producers to improve fuel efficiency. CAFE has had an undeniable effect on the design of domestic vehicles in the past 25 years, as the average weight of cars has decreased 500 pounds. However, this weight reduction has produced an significant overall compromise in automobile safety. The last modification to the CAFE standards was in 1990, and since then all domestic auto producers must average at least 27.5 mpg for cars, and 20.6 mpg for light trucks. The CAFE standards define light trucks as any 4-wheeled vehicle weighing less than 8500 pounds that is not a car, meaning all SUVs, pickup trucks, vans, and minivans. In spite of the regulations, in the past 25 years, CAFE has not successfully reduced fuel consumption, but instead we have seen an decrease of 1 mpg in the average fuel economy of all automobiles.1 Therefore, we must reevaluate the goals behind the CAFE standards, since we appear to have received no fuel economy benefits from CAFE, but we have paid a high price of increased automobile deaths and injuries. The market share for light trucks has risen from 20.9 percent to 49 percent since CAFE was enacted. Paul Godek, in "The Regulation of Fuel Economy and the Demand for "Light Trucks,"" calculates the light truck share of the auto market would be 29.2 percent without the influence of CAFE.2 Therefore, 19.8 percent, or close to 1 in 5, of the total automobile market has substituted cars for SUVs due to CAFE regulations according to his calculation. The national fleet of all passenger vehicles as of 1999 in the United States was 220 million vehicles, according to the Federal Highway Administration. Applying the 19.8 percent to the national fleet, 43.6 million vehicles are SUVs that are substituting for large cars. This substitution effect is significant because SUVs are statistically more dangerous than the large passenger cars they replace. According to the Insurance Institute for Highway Safety (IIHS)3, in the year 2000, the death rate for passenger cars (including minivans) was 126 deaths per million vehicles. The death rate for large cars, which the IIHS defines as cars with wheelbase 111-115 inches, and length 196-210 inches (examples include the 2001 Ford Taurus and Chevrolet Lumina) is 96 deaths per million vehicles. In contrast, the SUVs that widely replaced the popular market share of these vehicles have a much higher death rate. The death rate for two-wheel-drive SUVs is 176 per million vehicles, and 115 per million for four-wheel-drive SUVs. Because of limited availability of statistics regarding the distribution of 2WD versus 4WD SUVs, we will assume the proportion is roughly equal, giving us an overall SUV death rate of 145.5 per million vehicles. The difference between the SUV and large car death rate, therefore, is 49.5 per million vehicles, which is just over 50% greater than the large car death rate. That means, by substituting an SUV for a large car, the driver takes over a 50% increased risk in death. Applying this death-rate difference to the 43.6 million SUVs that exist now because of the CAFE standards, this translates to 2156 more deaths per year. This probably is a very conservative number, because two-wheel-drive SUVs are more likely to be car-substitutes, since the owner obviously does not feel the need to have the four-wheel-drive feature that allows the vehicle to be taken off-road. In other words, two-wheel-drive SUVs are essentially substitutes for the two-wheel-drive station wagons popular in the early and pre-CAFE days. Another safety compromise with SUVs worth noting is the issue of crash compatibility. According to a study by the U.S. National Highway Traffic Safety Administration in 1998, 2000 more people die in cars that were struck by SUVs because of the aggressive nature in which SUVs with high bumpers hit cars.4 Since 40% of the current SUV fleet is a direct result of the CAFE standards, according to Godek, 800 of these 2000 deaths can be attributed to the SUV substitution. Adding this spillover effect with the direct safety compromises of SUVs shows that almost 3000 deaths per year can be associated with SUV substitution. This study, combined with Crandall and Graham's study on the effects of CAFE's reduction in the weight of passenger cars, can provide us with a new view on the total effects of the CAFE legislation. Crandall and Graham concluded that CAFE is responsible for 3000 additional deaths per year due to automakers producing cars that average 500 pounds less than what would be expected without CAFE.5 This brings the total cost of CAFE per year to a grand total of approximately 6000 deaths. According to the IIHS, 31,790 people died in auto accidents in 1999, 3.2 million were injured, and the total economic cost of car crashes was approximately $150 billion. Hypothetically, without the CAFE standards, the death count would be closer to 25790, or 18.8% less. This also can be expressed as 27 deaths per million cars per year. This proportion can be scaled down to, say, the Washington University student community over time. Over a course of 10 years, we can expect CAFE to be responsible for 2.7 deaths to Wash U students while they are attending school here, assuming each student owns one car. With car accidents as the leading cause of death for those between the ages of 6 and 27, it is important to investigate a factor that accounts for 18.8% of these deaths. When legislation is introduced to make it more costly for consumers to buy large cars, they find substitutes. Automakers respond to the surge in demand for this substitute, SUVs, and the effect can be seen by the profit margins automakers gain from SUVs versus passenger cars. Domestic automakers can bring up to $20,000 in profits from a large SUV. In order to meet the CAFE standards and avoid the stiff fines, automakers dropped heavy cars from their product lines, and are willing to sell light cars even below profit margin to push the average fuel economy of their fleet down. Consumers responded to the disappearing large car by purchasing SUVs instead, but in the meantime subject themselves to over 50% increase in fatality risk.
Direct CAFE effect(safety compromise of SUVs vs. large cars)
Total CAFE effect(including overall vehicle fleet weight reductions, direct SUV safety, and spillover safety compromises in crash compatibility)
Notes/Sources
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