As the U.S. government battles California and other states that want to augment federal automobile-emissions standards with their own tougher rules, it's important to note that there's a point at which tightening emissions laws can actually become counterproductive.
The first thing to realize is that U.S. air quality has been improving every single year for 45 years in a row. This ought to be obvious to anyone who has been alive during this period.
This means that some emissions laws are both necessary and desirable. We can't have no emissions laws.
However, overtly strict emissions rules can actually hurt more than they help. To understand why, you have to realize that the only thing that moves the needle in cleaning up emissions is the rate at which consumers replace the oldest cars on the road.
U.S. emissions laws have been tightening in "stair-steps" every few years. That means the cars sold today are vastly cleaner than those sold five, 10, 15 or 20 years ago.
So to truly reduce emissions, you have to design a policy that makes it as attractive as possible for consumers to replace the oldest cars on the road. How do you do that?
First, it's important to recognize that the oldest, dirtiest cars on the road (other than classic cars, which are effectively museum pieces and not really driven much) are typically driven by the poorest people. They drive those 15- and 30-year-old cars not because they want to, but because they can't afford newer ones.
So, it follows that if you want to cut auto emissions, you have to make the least-expensive cars on the market as inexpensive as possible. That's how you maximize the replacement of the oldest, dirtiest cars on the road.
This brings us to the current battle between Washington and California. The Golden State and others like it are seeking to impose an unprecedented cost on cars by imposing draconian new emissions rules.
Let me give you a hypothetical example. Let's say it will cost an extra $3,000 per car to improve a vehicle's emissions level from 99.999% clean to 99.99999% clean.
If you increase the price of the cheapest cars on the market by $3,000 -- say, from $15,000 to $18,000 -- fewer people will buy them. Any car dealer will tell you that the market for $18,000 cars is a lot smaller than the market for $15,000 ones.
But that's exactly what California's new auto-emissions law would do: raise car prices by thousands of dollars. Frankly, that could cause a depression in the U.S. car market. The poorest people would be unable to afford newer cars, meaning that they'd continue driving the oldest and dirtiest ones on the road.
That's essentially what happened in Sweden when officials there imposed a variant of the California emissions law in July 2018. The Swedes used taxation instead of equipment mandates as the policy tool, but had the same practical effect of raising prices on new gas- and diesel-powered cars.
The result? In the 12 months following Sweden's new policy, new-car sales declined 28%.
Now, a 28% decline in U.S. car sales -- or even in car sales in California plus other states that joined it for this purpose -- would create a total depression in America. Forget a mere recession; it would tank the entire U.S. economy.
People who watch the auto industry already lose their minds when they hear about U.S. car sales falling 2% or 3%, as happened at various points during the past year. But a 28% drop would be 10 times worse. It would be as bad as 2008, when multiple automakers were careening into bankruptcy.
Instead of incentivizing people to buy new cars, California's emissions law would create what we who follow the auto market call the "Cubanization of the fleet."
If you visited Cuba at most points in the 1990s or so, you would have noticed that most cars on the road were built before the Communists took power in 1959. By making new cars too expensive (or simply impossible to come by), Cuba forced people to keep the oldest, dirtiest ones on the road.
The bottom line: If you care about the environment, you need to oppose California's emissions laws. Cars need to be as inexpensive as possible so that people replace the oldest one.
That's the only way to reduce emissions. That might seem counterintuitive at first glance, but it's true.