Essay on U.S. CAFE Standards: Reducing Pollution & Increasing Fuel Economy

CAFE is an acronym standing for Corporate Average Fuel Economy. These are standards found in the United States, which were established by the Congress in 1975 (Bastani, Parisa, John and Chris 2012). These standards were set with the aim of increasing the fuel economy of trucks and cars. Precisely, these standards were directed to car makers after an increase in pollution was noted. As well, the cost of gasoline was at a higher level after the Arab Oil Embargo. CAFE standards in the automobile industry in the U.S. helps reduce consumption of gasoline.

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The automobile industry has had some concerns; some of them being technical concerns.

Consistently, technology is disrupting the automotive industry bringing in severe impacts in the market. Over time, the focus has shifted from ads to experience, confusing the market. Today, any automotive company concentrating on ads is an indication of a failing company (Klier 1-4)Customers have associated some brands, and glossy advertising spends with a lack of innovation some of them being the ads. Any technological innovation and creativity in the automobile industry are based on the experience of the customers where the technology is aimed to do more advertisements and marketing. However, some people such as Tesla have argued that it is better to use data to get customer-centricity, buyer experiences and digital services right rather than advertising. The shift from building products to selling experiences has been facilitated by "Amazon effect" which states that customers have come to expect such swift which tend to integrate skills when researching and buying products and services in other industries that are demanding (Forman, Grant 7625-7633).

Politically, the automobile industry has had some concerns, as indicated below. The National Automobile Dealers Association (NADA) reported that sales in the sector would decline. Reducing taxes as promised by President Trump would increase the demands for cars but make cars more expensive because of his tariffs (Klier 1-4). Auto dealers will be affected by some of the policies proposed by President Trump in the following ways. One, North American Free Trade Agreement has done away with many tariffs and taxes on exports and imports between the U.S., Mexico and Canada. President Trump claimed the America's manufacturing sector has been eroded by the deal. President Trump planed on imposing higher tariffs on every good bought from the U.S. by foreign countries. These tariffs will lead to increased production cost as well as imposing high prices to the retail customers. Such high costs will lead to customers staying longer with old cars and not buy other new vehicles.

Trump's policies are expected to reduce fuel efficiency requirements and eliminate E.V. tax credits. If no changes are made, then the standards of meeting the EPA standards will be high. As far as increasing the fuel economy is crucial, it is essential to balance between the costs of cars, creating jobs and protecting the environment. In case the president implements less restrictive fuel economy standards, it would allow automakers to keep the price of vehicles low and help the focus on creating more jobs and investing more in sovereign vehicles.

Economically, the automobile industry in the U.S. has had some concerns, some of which are discussed below. The automobile industry has the "big three" among which two of them (General Motors and Chrysler) went through financial difficulties that broke their survival (Klier 1-4). The other one (Ford) did not face the economic crisis because they did refinancing. To prevent such financial crisis again, there was developed an agreement which aimed at adjusting working conditions and involve workers in the production and innovation decision-making processes. To help deal with the economic concerns, President Obama focused on saving the industry through a plan which had two parts. One, the American Recovery and Reinvestment Act (ARRA) a rescue plan was containing a package of measures to improve demand throughout the economy. Secondly, the recovery efforts continued with provisions aimed at supporting the Big Three as part of the TARP (Troubled Asset Relief Program) established in 2009.

Socially, culture, religion and language have been a challenge in the industry. Cultural training programs have had a contribution to the training policies incorporated by the companies. An employee is required to know more than one language to be able to work effectively, something that has been a challenge. Different languages bring in market differences. Pollution is another social concern that has led to the creation of CAFE standards (Forman, Grant 7625-7633)

Significance of my findings

It has been indicated that the automobile sector holds a central and critical place in the economy of the United States. This is because this industry is the second-largest market in the World. Auto sales are divided into three categories. One, heavy trucks account for 2.2% of all U.S. sales. Secondly, passengers vehicles are sold up to 38.5%.

The third category includes the light utility vehicles which account up to 59.3%. Light utility vehicles have a high percentage because customers have a high purchasing power as well as considering these vehicles to be safe. Again, these vehicles have a lower tendency of consuming fuel; thus, they are cheap to maintain. Additionally, the findings have helped know that the significant location for automobile assembly in the U.S. For instance, the value-added of the U.S. automobile industry totalled to 0.9% of the US GDP. However, for some time the industry has been performing poorly since it declined from 3% of the GDP to 1% in 2006. The automobile industry has contributed drastically to innovation.

For instance, 7.2% was invested in the private sector R&D spending (Yacobucci, Brent and Robert .2007). It's a source of job creation having in mind that it employees 83000 people some of them being scientists, technicians, engineers, managers and support staff among others. It is important to note that Foreign Direct Investment are attracted to the country through the automobile industry. The geographical balance of the automobile industry has been affected by internationalization. Mostly, in the 20th century, the automobile industry was dominated by the "big three", but other carmakers came in and re almost dominating. From 90% of their distribution, the big three were at 45% in 2016 which indicates a decline (Yacobucci and Robert 2007)

How can politicians implement the CAFE standards

Politicians can implement CAFE standards by reviewing the fuel economy and emissions standards to ensure they are not harming to consumers or American workers. Through such review, politicians can create job opportunities in the auto manufacturing sector. The politicians should ensure that CAFE incorporates broad trading of fuel economy credits. For these standards to be implemented and put in place, the government should impose a penalty. Failure to comply with these stands attracts penalties, and this has been done in U.S. The ministry of road transport, and highway must be pushed by the government to address the problems that are evident in CAFE currently. Thirdly, politicians need robust data to report and provide verification tests. This will help get the actual number of cars sold and what make or model. Through such data, the government will be able to identify the level of compliance of the CAFE standards. In conclusion, therefore, these standards aim to ensure pollution is reduced through decreased emission of toxic gases. The automobile industry is faced with technical, social, economic as well as political challenges.

Works Cited

Bastani, Parisa, John B. Heywood, and Chris Hope. "Us cafe standards." (2012).

Forman, Grant S., et al. "US refinery efficiency: impacts analysis and implications for fuel carbon policy implementation." Environmental science & technology 48.13 (2014): 7625-7633.

Klier, Thomas. "Challenges to the US auto industry." Chicago Fed Letter 200 (2004): 1-4.

Sutherland, J., et al. "A global perspective on the environmental challenges facing the automotive industry: state-of-the-art and directions for the future." International Journal of Vehicle Design 35.1 (2004): 86-110.

Yacobucci, Brent D., and Robert Bamberger. "Automobile and light truck fuel economy: the CAFE standards." Congressional Research Service, Library of Congress, 2007.