business

Let The Market Fight Auto Pollution

In the 1890s, American entrepreneurs made automobiles powered by steam, electric batteries, and the internal-combustion gasoline engine.

Now, a century later, government regulators are giving electric vehicles (EVs) another chance to best gasoline. The reason is that EVs don't produce tailpipe emissions. The California Air Resources Board is mandating that 2% of sales in the state by each of the major auto makers be electric vehicles by 1998, a figure that rises to 10% by 2003. New York and Massachusetts are on similar timetables, and 10 other Eastern states plus the District of Columbia may follow suit.

Opponents and proponents of the rules both have a case to make. The auto industry complains that government is mandating a market for a new, expensive technology that is too inconvenient to attract very many consumers. Shades of synfuel? And environmentalists are right that the societal benefits of cleaner air are clear, and that auto makers typically resist innovation. Remember air bags?

California, with its smog-bound cities, has reason for concern. EVs may be the quickest way for it to meet federal air-quality standards. What makes less sense is for other states to copy California. For instance, the Northeast generates much of its electricity with oil and coal-fired plants, so electric vehicles may not cut smog by much in the region.

Governments shouldn't be picking electric as the best alternative to gasoline. Instead, they should be using their research dollars and buying power to encourage competing technologies that pollute less than traditional gasoline power, and then let the market decide. Government supported research has unleashed a wave of entrepreneurship in the electric-vehicle business. The innovations are not just in EVs, though. Some vehicles use compressed natural gas, and researchers are testing fuel cells, which consume hydrogen without combusting it. Restricting innovation is a mistake.

Regulators and lawmakers are also mistaken in pointing fingers at the auto industry and demanding it take care of the environment. Regulators need to think about what mix of economic incentives would encourage consumers to see it in their self-interest to get old internal-combustion engines off the road and to use EVs or other alternatives. If government misplays its mandate hand, the electric-vehicle effort could join synfuels in the pantheon of industrial policy blunders.

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