CAFE 2025: Resigned Approval From Industry
By Scott Doggett August 1, 2011
When President Obama announced on Friday the next-generation of fuel economy standards, he was joined at the podium by a dozen major automakers that sell more than 90 percent of the vehicles offered in America, the United Auto Workers (UAW) union and California’s air-quality regulators, indicating the new rules are ones all parties can live with and automakers can achieve. The new CAFE standards build on the Obama Administration's Corporate Average Fuel Economy (CAFE) standards for model year 2012-2016 vehicles that raise fuel-efficiency requirements to 35.5 mpg. Using the same formula already in place for calculating CAFE, the next-generation standards require fuel economy equivalent to 54.5 mpg for cars and trucks weighing less than 6,000 pounds (pickups, vans and SUVs included) by model-year 2025.
Using the U.S. Environmental Protection Agency’s formula to calculate mileage -- one that is different from the formula to figure CAFE -- the CAFE 54.5 mpg equates to 40 mpg. The EPA formula determines the fuel-economy figures found on window stickers of new cars at auto dealerships. According to the Obama Administration, the CAFE standards through 2025 will save American families $1.7 trillion dollars at the pump, and by 2025 result in an average fuel savings of more than $8,000 per vehicle. "Additionally, these programs will dramatically cut oil consumption, saving a total of 12 billion barrels of oil, and by 2025 reduce oil consumption by more than 4 million barrels of oil a day – more than America currently imports from the Persian Gulf, Venezuela, and Russia combined," the White House said in a statement.
The standards will also curb carbon pollution, cutting more than 6 billion metric tons of greenhouse gas over the life of the program – equivalent to an entire year's worth of carbon-dioxide emissions from the U.S., the White House said. The oil savings, consumer, and environmental benefits of this comprehensive program are detailed in a new report, "Driving Efficiency: Cutting Costs for Families at the Pump and Slashing Dependence on Oil," which the Administration released Friday.
Final Rules Two Years Off
The new CAFE standards would increase the stringency of standards for passenger cars by an average of five percent each year from model years 2017-2025 if formally adopted; the final rules, which won't come until the EPA has collected public comments on the first draft, aren't due until 2013. The stringency of standards for pickups and other light-duty trucks would increase an average of 3.5 percent annually for the first five model years and an average of five percent annually for the last four model years of the program, "to account for the unique challenges associated with this class of vehicles," the White House said.
Most automakers praised the new standards Friday, saying in general that while achieving them would not be easy, the rules as drafted were reasonable. But Volkswagen and Daimler weren't happy with the new rules, claiming that they focus is too heavily on passenger cars, giving an unfair pass to certain automakers – specifically, the Detroit Three – who make large numbers of light trucks. The standards also contain no incentives for automakers who development and manufacture diesel powertrains, components that are popular with the European automakers but aren't a focal point of research and development with American automakers.
Various other interests reacted to the announcement on Friday. Go60MPG – a joint effort of Environment America, the National Wildlife Federation, Natural Resources Defense Council, the Safe Climate Campaign, the Sierra Club, and the Union of Concerned Scientists – described the agreement as "a critical step forward to save consumers money at the gas pump, clean up our air, and cut America's oil dependence. The Obama Administration and California should be applauded for their efforts to secure this agreement that demonstrates that the full range of interests can come together to achieve major benefits for the environment, energy security and the American economy."
Automakers Get a 'Sue California' Clause
That said, the automakers received more than California's word that it would abide by the agreement. As IHS Automotive analysts have noted, the carmakers retain the right to sue California pending the result of a mid-term review in 2021, wherein the federal government will evaluate the situation at the time in terms of technology, cost, and marketability of higher yet requirements, and make a decision whether to keep or lower requirements in the later years of the program. California has said that it will abide by the federal rules; the lawsuit clause will give automakers recourse to hold them to the program should state regulators decide otherwise after the mid-term review.
"Volkswagen does not endorse the proposal under discussion," VW Executive Vice President Tony Cervone said in a statement Monday. "The largest trucks carry almost no burden for the 2017-2020 timeframe, and are granted numerous ways to mathematically meet targets in the outlying years without significant real-world gains. The proposal encourages manufacturers and customers to shift toward larger, less efficient vehicles, defeating the goal of reduced greenhouse-gas emissions."
Cervone noted that VW diesel products are among the most fuel-efficient vehicles on the road today. "Our new mid-size Passat TDI, built here in the U.S. in Chattanooga, Tennessee, achieves 43 mpg highway and can travel almost 800 miles on a single tank of fuel. If one-third of the vehicles on the road today were clean diesel, the U.S. would save 1.4 million barrels of oil a day. Yet there is no consideration in the current proposal for the positive impact clean diesels can have on fuel consumption here in the US." He said VW looks forward to continuing our discussions with the White House to achieve a national standard that is "fair and equitable."
Big Loss in Highway Funding
One of the other negative responses to Friday's announcement came from the American Road & Transportation Builders Association (ARTBA), which said the agreement would result in the loss of more than $65 billion in federal funding for state and local highway, bridge and transit improvements. The impact on the nation's transportation improvement program, ARTBA President Pete Ruane said, would be like eliminating all federal highway funding for nearly two years. Per gallon federal gasoline and diesel taxes collected at the pump are deposited into the federal Highway Trust Fund (HTF). By law, these excises are the primary revenue source for financing road, bridge and transit projects. The less motor fuel used by drivers, the less revenue generated for improvements financed through the HTF. As new cars and light trucks are purchased in the future and old ones retired, average fuel economy will improve, reducing gasoline sales and HTF revenues.
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