White House Releases Fuel Economy Report, Loopholes Still Out Of Sight
The announcement of President Obama’s proposed 54.5 MPG 2025 CAFE standard was hailed nearly unanimously today in a ceremony attended by many auto industry executives as well as government officials. Volkswagen and Daimler were conspicuous by their absence, as the Bloomberg quotes VeeDub spokesman Tony Cervone arguing
The proposal encourages manufacturers and customers to shift toward larger, less-efficient vehicles, defeating the goal of reduced greenhouse-gas emissions,
while Reuters notes Daimler’s response
Mercedes-Benz, the luxury car line owned by German car and truck maker Daimler, did not back the new program, saying it “clearly favors large SUVs and pickup trucks.”
“Our customers expect a range of vehicles from which to choose so this program creates a very real disconnect between government regulation and customer demand,” the carmaker said in a statement.
But are these concerns well-grounded? We don’t know yet, as the details of the proposal (specifically the loophole details) have not yet been released. Instead of publicizing the full rule, the White House released a report [ PDF], highlighting the easy-to-like aspects of the proposed rule. But how easy-to-like is the standard really?
Politically, the new CAFE standard has been attacked primarily from the right, the administration has had to more prominently justify the the standard based on fuel savings rather than any C02 output reductions or other environmental impacts. The savings are said to be worth $1.7 trillion through 2025, although it’s not at all clear if this includes projected cost increases for vehicles in order to meet these standards, and the cost increases were a huge bone of contention in the debate leading up to this announcement. And with only VW (attacking from the left) and Daimler (a notorious CAFE fine payer) holding out against the proposal, Obama’s right flank seems largely clear… except for Dennis Virag of the Automotive Consulting Group, who tells Reuters
I have to really question the sanity behind that. It’s going to be a very difficult mark to achieve and I think it’s going to be very costly.
Eric Noble, president of The CarLab, an automotive consulting firm in Orange, California, adds:
It’s not doable unless there’s enough in the fine print that they won’t have to get there anyway. It’s not achievable, nor would consumers accept those vehicles.
Since we don’t know how helpful those loopholes are yet, we don’t know if he’s right or not. But that kind of talk does worry the environmental groups who fear that the mid-term review that automakers demanded will become an opportunity to abandon the standard. Says Dan Becker of the Safe Climate Campaign:
The automakers insisted on a mid-term review. We are concerned that that review will be an opportunity for automakers to lobby to try to end or weaken that program.
The fear seems somewhat legitimate: with automakers largely on board for the moment, it’s surprising to see so many industry consultants publicly damning the proposal. Besides, the toughest challenges don’t come until after the mid-term review, so the industry could well derail the trajectory noted in the Obama report. But environmentalists are happy for the moment, and over the long term Obama clearly believes (as do I) that the market will ultimately support CAFE rather than create a gaping disconnect. His report concludes:
Vehicle fuel economy is an increasingly important factor for consumers as they consider new vehicle options. According to a recent study, 42% of consumers view fuel economy as an ‘Extremely Important’ purchase decision factor, up from 14% a decade ago.1 Over the past several years, average fuel economy for passenger cars has improved from 31 mpg in 2007 to 34 mpg in 2010. The average vehicle is up to 29 mpg in 2010. In addition, demand for advanced technology vehicles has also increased, growing 37% in the first quarter of 2011. These vehicles make up a small portion of overall sales, but they are growing rapidly.
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I've been in favor of FE standards for a long time, just as I've been driving cars capable of 27+ mpg all my life. But this standard leaves me behind. Looking at the kind of cars that get 50+ MPG -- the Prius and what else? -- I don't see anything appealing. How much more aerodynamic must these cars be? What will that do to comfort and visibility, which I can't find in today's streamliners? Never mind, I'll be driving some small SUV that gets 30-40 mpg and lets me sit upright, not in a ganstalean. The other day, while I was discussing said Prius with my wife who wants one for our next car, I pointed out the diminishing returns that are hidden by MPG calculations. Fifty MPG sounds like a LOT more than 30 or 40. Framing it in Euro-style terms of fuel-per-mileage tells a different story. Suppose her present car, a Forester, gets just 20 mpg on the worst traffic-clogged commute. That's five gallons of gas used for 100 miles of travel. To save one gallon, you just need to get 25 mpg (100/4=25). Saving the next gallon requires an eight MPG bump, to 33 mpg. The next precious gallon saved means a 50 mpg average, a jump of 17 MPG. Want to do 100 miles on a single only gallon? The math is obvious. Fuel economy standards wouldn't be necessary if US gas prices weren't so cheap. I'd rather see a gradual increase in fuel taxes, increasing perhaps $.25 per year. The increasing gas tax would reflect and offset the now-hidden external costs of our oil economy, and help us with our current fiscal woes. many folks on this site won't be swayed by that argument, so how about this one: let's drop all US FE standards and use a higher price to influence consumer behavior and drive design towards greater efficiency.
Hard to imagine how these kinds of numbers can be achieved. I get 42 mpg in my diminutive Smart for Two - and that's on a good day. So my featherweight, plastic Smart car would be considered a gas-guzzler in the era of 54 mpg averages? I've never understood how CAFE can exist and why there isn't more of a public outcry to such a concoction. What other industry would stand for this? We can all understand the need for government setting certain safety/pollution standards, but telling a company that they need to maintain a certain average mpg number, selling to customers that are free to buy whatever they want seems impossible. Imagine the goverment regulating something equally arbitrary in another industry, say computer screen sizes. Hey Apple Dell, HP: the average screen size all the desktop and laptop computers you sell next year must average 15 inches. Bizarre. It's clear that the public responds to financial incentives - It was reported that the last run-up in prices a few years ago achieved a greater reduction in consumption than all the previous ham-fisted government attempts. I'm in favor of adding a dollar per gallon tax - phase it in if you have to - and you'll see some great results. (And use the money to fix my roads, please!)