Monday, 27 June 2011 17:05

The Fight for Higher MPG Standards May Go to Feds, Individual States

The Obama administration is considering requiring cars and light trucks to average 56.2 miles per gallon by 2025—a move that could end up boosting the cost of vehicles by $2,100 or more.

That represents an improvement of about a 5 percent per year in each company’s fleetwide average fuel economy from 2016--when they are required to have a 35.5 mpg average for vehicles sold in the US, according to Bloomberg.

Federal regulators and White House executives met with the Detroit Big Three automakers and foreign-based automakers earlier this month to debrief them on the initial proposal, according to the Wall Street Journal. The White House also has met with the UAW on the issue.

The 56.2 mpg figure and EPA's proposed greenhouse gas emissions limits equivalent likely is an opening bargaining point. The final proposal could change as automakers and the White House hold more meetings to try to reach agreement.

“There’s a way to go in this process,” said Greg Martin, a spokesman for Detroit-based GM, according to Bloomberg. “Any number out there right now has the rigidity of Jello.”

The administration hopes to formally propose new standards in September and finalize them by July 2012.

It estimated last fall that hiking fuel efficiency to 56 mpg by 2025 would boost the average vehicle cost by $2,100 to $2,600. But the administration said the rule would save car owners $5,500 to $7,000 over the vehicle's lifetime in fuel costs, and owners would be able to recoup the additional up-front cost within 2.5 to 3.5 years.

The high mileage requirement would dramatically reshape what Americans currently drive. Currently, passenger vehicles must average 30.2 mpg and light trucks 24.1 mpg in government testing, but vehicles get far less in real-world driving.

Environmental groups including the Natural Resources Defense Council are pushing for a 62 mpg standard by 2025, saying increasing the fuel economy average will help US automakers regain market share they lost to foreign competitors who sold more smaller cars in the US.

“We’re cautiously optimistic,” NRDC Transportation Program Director Roland Hwang said about the 56.2 mpg proposal in an interview with Bloomberg. “That’s a good number as long as there aren’t any loopholes by the automakers” such as making most of the improvements in the later years of the rule, Hwang said.

Detroit's Big Three, Toyota Motor Corp. and eight other automakers, through the Alliance of Automobile Manufacturers lobbying group, are emphasizing possible job losses if such high MPG standards are made mandatory. There are no guarantees that fuel prices will continue to climb and consumers may not be willing to pay more for hybrid powered or advanced diesel cars--cutting into automakers' bottomlines, according to the Wall Street Journal. They are running radio ads against standards that would negatively impact the industry, criticizing the 60 mpg proposal.

"Today's policymakers have a process under way to develop data-driven standards that avoid higher car prices, job losses and government deciding what Americans drive," said Gloria Bergquist, a spokeswoman for the group, according to the Detroit News. "We need to let that process work."

But the proposal caught some Michigan members of Congress off guard, and was higher than some automakers expected.

US automakers plan to respond to the administration's proposal in the coming weeks.

Automakers are pushing to "back-load" higher efficiency increases to the end of the eight-year time frame, when more advanced technologies, including electric vehicles, are on the roads in bigger numbers. Administration officials repeatedly have promised "flexibility" to automakers in getting to 2025 requirements.

NHTSA is expected to conduct a full-fledged regulatory review for the 2022-25 period in 2017 or 2018 to ensure that higher requirements are achievable by then.

The administration previously said it is considering annual increases in fuel efficiency ranging from 3 percent to 6 percent between 2017 and 2025, which equates to a fleetwide average for all vehicles produced by each automaker of 47 mpg to 62 mpg by 2025. The range of costs per vehicle is $770 to $3,500.

Also at issue is the fact that California and a dozen other states are working on a separate proposal to limit greenhouse gas emissions for the period.

California's top regulator, Mary Nichols, took part in the White House meetings on June 22, as did National Highway Traffic Safety chief David Strickland, and senior Environmental Protection Agency officials.

In early 2009, automakers held secret meetings with California and the White House and struck a deal to hike fuel efficiency standards nationally to an average 34.1 mpg by 2016-—a move that will cost the industry $51.5 billion over five years, EPA and NHTSA have said.

California agreed not to set its own standards through 2016, but is now moving forward with its own proposal for 2017-25.

Arizona is also considering cutting the state's current clean-car program, which was adopted in 2008 and based entirely on California's more-stringent emissions program.

Under the Clean Air Act, California is the only state allowed to write its own emissions rules, but other states can choose to adopt them instead of federal standards, according to the Arizona Republic. Arizona was among a dozen states that decided to adopt the California-based emission standards during the Bush administration.

Automakers fear that California could lead the way for a "patchwork" of state and regional standards for fuel efficiency across the nation.


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