The Economic Consequences of Phasing Out Internal Combustion Engines: A Threat to the US Economy?

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| Aug 28, 2024 2:03 PM

The Economic Consequences of Phasing Out Internal Combustion Engines: A Threat to the US Economy?

The Biden-Harris administration has made it clear that they intend to phase out internal combustion engines (ICE) in favor of electric vehicles (EVs). While this move is touted as a necessary step towards reducing greenhouse gas emissions and mitigating climate change, it has significant economic implications that cannot be ignored. In this article, we will delve into the economic consequences of phasing out ICE and explore the potential impact on the US economy.

The Role of NHTSA and EPA in Regulating Fuel Economy

The National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) play crucial roles in regulating fuel economy standards in the US. NHTSA is responsible for setting fuel economy standards for new vehicles under the Corporate Average Fuel Economy (CAFE) program, while EPA measures automakers' compliance with these standards.

However, the EPA has taken on a more prominent role in setting fuel economy requirements, which has led to concerns about the agency's overreach. The EPA's rules are functionally equivalent to setting minimum mile-per-gallon fuel economy requirements, which can have significant economic implications.

The New Fuel Economy Standards: A Recipe for Disaster?

The NHTSA has finalized two sets of fuel economy standards: one for model years 2024-2026 and another for model years 2027-2032. These standards are extremely stringent, requiring automakers to achieve average fuel economy levels of nearly 60 miles per gallon for passenger cars and higher than 42 mpg for light trucks.

While these standards may seem laudable, they are unachievable for most ICE vehicles and will force automakers to transition to EVs. This transition will come at a significant cost, which will be passed on to consumers in the form of higher prices.

The Economic Consequences of Phasing Out ICE

The economic consequences of phasing out ICE will be far-reaching and devastating. Some of the potential consequences include:

Higher Prices: The cost of new vehicles will rise dramatically, making them unaffordable for many Americans.
Job Losses: The transition to EVs will lead to job losses in the US auto industry, as many workers will not have the necessary skills to work on electric vehicles.
Dependence on China: The US will become dependent on China for critical minerals and other inputs needed for EVs, posing a national security risk.
Strain on the Electricity Grid: The transition to EVs will strain the electricity grid and require a huge increase in power production, leading to higher electricity prices.

The Controversy Surrounding EVs

The wisdom of using administrative power to coerce EV production has become a highly charged public policy issue. Many experts argue that the Biden-Harris administration's Green Dream scheme will have no meaningful effect on global temperatures due to China's increasing production of energy from dirty coal.

Conclusion

The economic consequences of phasing out internal combustion engines will be severe and far-reaching. While the goal of reducing greenhouse gas emissions is laudable, it must be achieved in a way that does not devastate the US economy. Policymakers must carefully consider the potential consequences of their actions and work towards a more balanced approach that takes into account the needs of all stakeholders.

Recommendations

Based on our analysis, we recommend the following:

Repeal the New Fuel Economy Standards: The NHTSA should repeal the new fuel economy standards and work towards a more balanced approach that takes into account the needs of all stakeholders.
Invest in Alternative Technologies: The US government should invest in alternative technologies, such as hydrogen fuel cells, that can help reduce greenhouse gas emissions without devastating the US economy.
Promote Free Market Solutions: Policymakers should promote free market solutions that allow consumers to choose the vehicles that best meet their needs, rather than relying on administrative power to coerce EV production.

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