Today, the single largest source
of carbon dioxide emissions in the United States is transportation. It might surprise you to know that we actually
have a plan for dealing with vehicles’ emissions. We’re just not using it yet. Well, it’s a little more complicated than that. So let me tell a story. In the 1970s, there were 2 oil embargoes
against the United States. Oil prices shot up, there were
gasoline lines everywhere. So a Republican president, Gerald Ford decided we should double the fuel efficiency of cars. He signed a law, that from 1975 to 1985 moved cars
from 13 miles per gallon to 26 miles per gallon. Reducing by half the fuel of a new car. That was a pretty amazing
achievement, in one decade. But after we achieved 26 miles per gallon in 1985 fuel efficiency just stayed essentially
flat for the next 25 years. But what if Gerald Ford had done
something slightly different? What if instead of doubling fuel efficiency in 10 years he said let’s just increase it at 4% a year. Let’s have continuous improvement. What do I mean by “continuous improvement?” It means every year your
buildings get more efficient. Every year your cars consume less gasoline. It creates a competitive incentive
to build better cars. The magic policy lesson here is
don’t set a numerical target. Set a rate of improvement and demand
that we get products that are better and better. Could we have kept improving at 4% a year? Emphatically yes. How do we know that? Because the Japanese did it. They set stronger and stronger standards. And they made better engines better transmissions, better tires. They reduced weight in the vehicle
without reducing safety. They made the car safer at the
same time, as a matter of fact. They had better aerodynamics. They kept going, we fell asleep. And as a consequence we gave away
vast amounts of market share. We helped bankrupt the American auto companies and we wasted incalculable sums
of money on imported oil. The concept of continuous improvement
is a key element of good policy design. Technology keeps improving let’s capture some of that
improvement for the public good. And you know if it was insane to freeze fuel
economy standards for 25 years back in 1985 it’s really insane to roll them back today. So the current administration is trying
to prevent future improvements in fuel economy standards. They’re now doing this at the objection
of the auto companies. The auto companies understand now, finally that they need to innovate in order
to compete in a global market. So who requested this roll back? The oil companies. They want to sell more oil. It’s not too late to win this battle. We can adopt tomorrow fuel efficiency
standards that have continuous improvement in them that make our cars better and better. And simultaneously we accelerate
the deployment of electric vehicles. If we do that, we win.