Will the Auto Industry Surrender to Energy Efficiency?

December 4, 2007

Share Like Tweet Add Email

Congress has agreed to raise fuel-economy standards by 40 percent for cars and light trucks by 2020. Environmental groups have hailed the deal as historic, because it would be the first time Congress has taken significant action on fuel efficiency since the mid-1980s. The latest version of the measure, if it becomes law, will force radically severe changes on all aspects of the American car companies.

Congressional negotiators reached a deal late last week on energy legislation that would force American automakers to improve the fuel efficiency of their cars and light trucks by 40 percent by 2020. In a key concession to Detroit automakers, the deal sets separate standards for cars and light trucks — a major departure from Senate-passed legislation that sets unified standards across the board.

While some lawmakers have described the move as a historic step toward cutting United States oil consumption and curbing global warming, others are grumbling about the bill because it lacks strong incentives to boost U.S. use of renewable fuels like ethanol.

Gasoline demand accounts for about 45 percent of the almost 21 million barrels of oil consumed in the U.S. daily. As such, many energy experts see boosting vehicle fuel requirements as the biggest way to reduce U.S. oil imports.

The new rules would require the U.S. to set mileage standards for each type of vehicle to meet a national average of 35 miles per gallon, Bloomberg News notes: "In exchange for a higher benchmark than automakers had wanted, the industry would continue to get credit for making vehicles that run on alternate fuels such as gasoline blended with ethanol."

This latest proposal is similar to a measure that was passed in the summer by the Senate but was bitterly opposed by the auto companies, who argued they did not have the technology or the financial resources to reach that goal. Throughout most of this year, many industry leaders argued that such a plan was too aggressive and warned of serious consequences for automakers, suppliers, workers, dealers and consumers.

Nonetheless, industry has made its concessions.

The automotive companies gave up their long-held opposition to fuel-economy increases not long before the Senate version was passed, but they proposed a markedly weaker alternative. In recent weeks, the chief executives of General Motors, Ford Motor Co. and Chrysler visited Capitol Hill in an effort to fend off a stronger measure. Clearly, the compromise announced on Friday shows those efforts had little effect.

Automotive News reports:

Faced with almost certain defeat on fuel economy in Congress, automakers and their allies have decided to join proponents of sharply higher standards and declare victory. The industry issued statements over the weekend in favor of a 35-mpg fleet-wide national average by 2020 — about 40 percent higher than today. The statements followed announcements Friday night by top congressional Democrats vowing to soon pass an energy bill containing a 35-mpg standard.

The bill is also expected to include requirements to use more renewable fuels like ethanol, which is now made from corn, but there appear to be significant differences between the House and Senate over the size of the increase.

According to a draft of the energy bill obtained by Reuters, the legislation would require 20.5 billion gallons of renewable fuels like ethanol to be mixed with U.S. motor fuel supplies by 2015, with 5.5 billion gallons of that coming from non-food sources like cellulosic ethanol.

Al Hubbard, the director of the National Economic Council, has warned that the bill could face a veto if several provisions aren't made. President Bush's chief economic advisor said the bill appeared to fall short of Bush's target of 35 billion gallons of fuel from alternative sources by 2017. Moreover, the administration opposes any attempt to raise taxes as part of an energy bill, as well as standards requiring electric utilities to generate specific amounts of energy from renewable sources by 2020.

The standards set by the corporate average fuel economy (CAFE) program require that automakers achieve 27.5 mpg for passenger cars — a figure that has not changed since 1985 — and 22.2 mpg for light trucks, including minivans, sport utility vehicles and pickups.

The average fuel efficiency of U.S. cars and trucks sold in the 2006 model year "showed no improvement" from the prior year at 25.4 mpg, as "increased sales of fuel-thirsty cars offset slightly more efficient trucks," according to the first new data in two years, from the National Highway Traffic Safety Administration earlier this year. The NHTSA report estimated automakers' progress toward meeting the standards set by the corporate average fuel economy (CAFE) program of 27.5 mpg for passenger cars and 21.6 mpg for pickups, vans and SUVs.

Based on estimates from mid-model year sales in 2006, the report said automakers were on track to average 25.4 mpg across all vehicles sold, the same as in the 2005 model year.

"The latest version of the measure, if it becomes law, will force wrenching changes on the American car companies, from design studios to new-car showrooms to executive suites," The New York Times says.

Then again, even if the bill becomes law, will the fuel-economy improvement it calls for be great enough to prevent some increase in American fuel consumption because of the expected growth in the number of cars on the road and miles traveled?

Earlier: Toyota to Supplant GM as World's Top Automaker? It's Happening It's Happened

References

Bloomberg News

Automotive News

Reuters

National Highway Traffic Safety Administration

The New York Times, 1 and 2

Detroit Free Press

Share Like Tweet Add Email

Comments

comments powered by Disqus