Your Mileage May Vary: White House Floats Proposal Requiring Auto Makers to Double Fuel Efficiency
Tuesday, June 28, 2011
Your Mileage May Vary: White House Floats Proposal Requiring
Auto Makers to Double Fuel Efficiency
By: Josh Mitchell and Sharon Terlep, Wall Street
Journal
The Obama administration may require auto makers to roughly
double the average fuel economy of their car and light truck fleets
from current levels to 56.2 miles per gallon by 2025.
White House officials outlined the plan to auto industry
officials last week, said two people familiar with the matter,
setting off a fight among auto makers, environmentalists and
others.
Car makers say the proposal would effectively require most new
vehicles sold in the U.S. to be battery-powered by 2025 and raise
prices by thousands of dollars. Makers of electric vehicle
technology say declining costs for lithium batteries will allow the
auto industry to make big gains in fuel efficiency without stoking
sticker shock.
Environmental groups, meanwhile, said they were generally
pleased with the Obama proposal; they had sought a
62-miles-per-gallon standard.
The new plan, being drafted jointly by the Department of
Transportation and the Environmental Protection Agency, would build
on the administration's new rules put in place last year that
requires new cars and light trucks sold in the U.S. to average 35.5
mpg by 2016, up from 27.3 mpg today.
Auto makers, particularly Detroit companies like General Motors
Co. and Ford Motor Co. that build bigger cars and sport-utility
vehicles, are fighting for a lower target, or provisions that would
allow larger vehicles if gas prices moderate.
"The government's own reports indicate that this would be a
steep climb with costs," said Gloria Bergquist, a spokeswoman for
the Alliance of Automobile Manufacturers, the industry's main trade
group. She said research shows such big gains in fuel economy could
raise vehicle prices by $6,000 or more.
Government officials have estimated the costs of the new
standards would add between $770 and $3,500 to a new car in
2025.
Ms. Bergquist called the 56.2 miles per gallon figure a starting
point in talks toward a final number the industry believes will be
much lower.
"Typically the government then factors in greater costs to
consumers, loss of jobs, and negative effects on safety and vehicle
utility and arrives at the maximum feasible fuel economy," she
said. This is how fuel economy standards have traditionally been
set, addressing the need for affordable work vehicles, as well as
families seeking safety and passenger room, Ms. Bergquist said.
Unless fuel prices continue to climb, say auto makers, consumers
may not be willing to pay more for cars powered by hybrid, advanced
diesel or more efficient gas engines. Fewer sales means fewer jobs,
they argue.
The White House proposal could be adjusted in coming weeks as
regulators prepare a formal draft. But the talks indicate a new
phase in the months-long debate over fuel-economy and emissions
targets.
The plan comes amid worries about the U.S. economy's
vulnerability to volatile oil prices. The Obama administration last
week led an international move to release 60 million barrels of oil
from emergency reserves, including 30 million barrels from U.S.
stockpiles.
A White House spokesman declined to discuss the proposal Sunday.
"We continue to work closely with a broad range of stakeholders to
develop an important standard that will save families money and
keep the jobs of the future here," said the spokesman, Clark
Stevens. "A final decision has not been made, and as we have made
clear we plan to propose a standard in September."
The administration has said it was looking to set 2025 fuel
targets between 47 and 62 miles per gallon.
U.S auto makers have boosted the fuel efficiency of their fleets
by more than 70% since 1975, when Congress first enacted CAFE
standards, even as they increased average horsepower. But some car
companies say planned improvements over the next five years are
slated to meet fuel economy requirements already in place.
Auto makers have been pushing the administration to set
long-range targets so they can better plan future models and
technology investments. They also want the administration to
preempt California and other states from setting their own fuel
standards.
Negotiations between the industry and the White House will
include the setting of annual targets leading to the 2025 standard.
The industry is likely to argue for much lower targets in the early
years, followed by a review of such factors as gas prices and the
expense of new technology. Auto makers say that would give
regulators the option of scaling back fuel efficiency standards if
they prove unneeded.
A 56.2 miles per gallon requirement is feasible, say supporters,
in part because auto makers have long been allowed to sell cars
with a fuel efficiency lower than the government standards;
credits, for example, are given for such features as air
conditioning.
Also, cars on the road can be much less efficient than the
computer simulations that determine the official fuel rating,
environmental groups say.
Note: This article appeared in the Wall Street Journal on
June 27.