What Grade Will Your Car Get?

by Stuart Shapiro

The EPA yesterday proposed changing the mileage rating stickers that come on every new cars.  One option would include a letter grade assigned by EPA and the Department of Transportation for the fuel economy of the car.

EPA and DOT are proposing two new label designs for comment. One label design prominently features a letter grade to communicate the vehicle’s overall fuel economy and greenhouse gas emissions performance. The new design will also provide consumers with an estimate of the expected fuel cost savings over five years compared to an average gasoline-powered vehicle of the same model year.

The proposed regulation, if finalized, (and you can comment here) would be a prominent example of the Obama Administration’s philosophy of using information in the place of stricter regulation.  This philosophy was captured in this memo by Cass Sunstein. The basic idea is that if you inform people in a straightforward manner about the consequences of their choices, then you increase the chance they will make decisions in a way that improves their welfare.  This is seen as less coercive than restricting their choices.  These labels will hopefully prove this point by reducing fuel consumption and greenhouse gas emissions without imposing huge costs.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.