Bush’s Final Fumble on Fuel Economy

January 16, 2009

Two weeks ago, the Bush Administration said that it “will not finalize its rulemaking on Corporate Fuel Economy Standards.” That’s a shame because the regulations were understood to be all but finalized and ready for White House sign-off more than a month ago. It would have, at least, given Bush a chance to burnish the “light green” part of his legacy.

The Department of Transportation’s CAFE proposal, covering model years 2011-2015, was on track toward meeting the 2020 target of 35 miles per gallon. But the Administration couldn’t resist taking one last dig at California’s tough greenhouse gas regulations for cars, known as Pavley standards, by adding language saying that state regulations for CO2 tailpipe emissions “are expressly and impliedly preempted” by its interpretation of Federal law.

Forget that the Bush interpretation had already been struck down by two Federal courts. Such a posture was another attempt to lend legal ammunition to automakers still hoping to derail California and other states’ leadership on stronger steps to protect the climate.

Then, Bush punted to Obama to finalize the rules.

The “Costs Too Much” Excuse

The Bush Administration used the auto industry’s financial woes as a reason for the delay. That’s not, however, a good excuse. Opponents of fuel economy increases often tell a lopsided story, painting a picture of the need to re-tool using costly technology. In fact, automakers need to re-tool on an ongoing basis to remain competitive. Their current engineering budgets are now tight, but if an automaker fails to invest, it won’t be able to stay in business. That is, after all, the rationale for the bridge loans just given to GM and Chrysler.

It’s not more technology that’s needed, but a different set of priorities. After all, an 8-cylinder engine costs more to build than a 6.

Improving fuel economy across the fleet doesn’t need to be a matter of investing more than an automaker would otherwise. Rather, it’s a matter of investing differently. In fact, although gasoline prices have dropped, the future is likely to bring ongoing risks of volatility even if the price isn’t always painfully high. Moreover, consumer interest in “green” for its own sake, out of environmental concern, is also here to stay and bound to grow. The broad direction is set and a smart automaker will re-orient its product strategy accordingly while keeping to a budget based on what it can expect in terms of market share.

Under new CAFE standards—which require all automakers to improve—automakers can plan a mix of vehicles that are more efficient without necessarily spending more than they would in reverting to a product plan based on mass and muscle. Thus, it’s not more technology that’s needed, but a different set of priorities for which technology is chosen and how it is used. After all, an 8-cylinder engine costs more to build than a 6. Time is money, and planning certainty saves money. A sound and timely CAFE proposal would give automakers firm targets that would enable them to get their plans in place and budget accordingly.

Recovering the Fumble

It’s a sad state of affairs that the Bush team made this final fumble, given that the country was finally gaining ground after decades of stagnant higher fuel economy laws. It’s also a disservice to the hard-working civil servants that contributed to the fuel economy effort. This leaves yet another chore for an incoming Administration already saddled with huge problems. The Obama team will need to huddle quickly on the CAFE issue in order to release a new rule by the April 1 deadline and offer automakers maximum lead time for planning more efficient products.

The story will go from sad to tragic if the new CAFE rule, when rewritten by the Obama Administration, is any weaker than last April’s proposal or if it fails to remove language that attacks California’s initiative to set its own greenhouse gas standards for motor vehicles. The country would be put even further behind in urgent effort to lessen global warming. Hopefully, Obama’s team will recover Bush’s fumble and sprint toward getting Americans into truly climate-friendly cars.

This article was contributed to HybridCars.com by John DeCicco, senior fellow, Environmental Defense Fund.


Posted in Incentives and Laws, News
Tagged as

Related Readings

  • crd100

    Bush is a fool for a president (and I’m a republican) but one comment here. Auto companies will have to increase their fuel economy or face going out of business. I think everyone in America knows this price decrease is temporary. Once the economy gets back on track the hedge fund idiots will do all they can to drive the price back through the roof. My requirements for a new vehicle purchase have changed dramatically. If it not over 30MPG it’s not getting purchased (and that goes for an SUV or Truck too). I sold my BMW M5 and did NOT replace it with another Bimmer as BMW still has their head in the sand. Right now I’m looking at getting a new Prius when they come out or maybe just sitting tight to see who can get out the first reliable plug in. I bet many Americans are doing the same. Listen up Auto Makers! Increase your gas mileage or be prepared to go out of business.

  • TD

    I don’t think they’ve been listening to the public for many years.

    They’ve been designing cars for the trade rags. Before Ford junior left, Ford mounted a PR campaign touting the Mustang, bigs SUV’s and V8′s. Chrysler is the worst offender in this regard. They design cool looking vehicles with big thirsty Hemi’s which earn lots of design awards from the trade rags, but looking at their current business state it has not won them many adherents in the car buying public. Farewell Chrysler, you lasted much longer than you should have.

  • Charles

    If you want to make it easy on the car companies to make CAFE of 35, make gas prices around $4.00. Ford Fusion Hybrids will sell like hotcakes. The wait for a Prius will go to 6+ months. The new Honda Insight, could sell 100,000 a year. The new Ford Fiesta will be an even bigger hit. Now F-150s and other big trucks and SUVs will be gone. All in all a big improvement.

  • John McMillen

    You’d think that ding bat in the white house would of did one good thing for America before leaving office but nope, had to go out as the worst ever !

  • Noel

    Final Fumble????

    His term is not over yet.

  • Charles

    W did one thing that was good for me. Before W, if I was asked who was the worst president in my life time, I did not know the answer (Nixon or Reagan). Now it is an easy answer. Reagan and Nixon were both a mix of good and bad (mostly bad), W is all bad.

  • The Intellectual Redneck

    The Bail Out Game
    There is is new web based game called the “Bail Out Game.” It has you driving a truck load of money around a Monopoly like board while you make decisions about what companies to bail out. Economic events like stock market drops often occur. This would be hilarious if it didn’t so closely resemble reality. You can play it here. Have fun while the money lasts

  • AP

    Bush made mistakes, but this was not one of them.

    Higher fuel economy standards won’t help. We need to 1) tax gas more heavily and 2) return to tax filers as an income tax credit. That way we really change behavior without hurting the economy.

    History shows that the American public has a short memory when it comes to fuel prices and conservation. Our comments here are the same things we said in 1973, 1978, and 1980. We won’t change our buying habits permanently unless taxes keep fuel prices up.

  • Anonymous

    The next generation Prius is supposed to get 50 MPG overall. So the technology is available to meet the CAFE standards now. That makes the CAFE standards a joke where government regulators take credit for technological innovation. But where is the regulation to require plug in cars with an “All Electric Range, AER” of at least 20 miles? No where in sight. As I said, the CAFE regulations are a joke.

  • AP

    “So the technology is available to meet the CAFE standards now.”

    That can be said about many technologies that aren’t necessarily good business (carbon fiber for car bodies, automatically guided vehicles, etc.). There are a lot of things we can do, but are they affordable?.

    Currently no one saves enough on fuel costs to pay back a hybrid car, if the real costs are paid for by the customer (governments and companies can’t subsidize hybrids forever). With petroleum inventories continuing to rise, it may be a while before gasoline gets to $4/gallon, where hybrids began to (maybe) break even.

    The reason CAFE is a joke is because it doesn’t change driving behavior. For Americans, “High MPG” + “Cheap Gas” = “Road Trip.”

  • Charles

    < < Currently no one saves enough on fuel costs to pay back a hybrid car, if the real costs are paid for by the customer (governments and companies can't subsidize hybrids forever). With petroleum inventories continuing to rise, it may be a while before gasoline gets to $4/gallon, where hybrids began to (maybe) break even. >>

    So the question is how to get gas to $4.00 and not hurt the struggling economy. All the options I know of have some very nasty side effects. I am also sure we need to find a way to do it.

    1) We could spend some of the stimulus money buying up gas hogs and paying based on the improvement in MPG of the replacement car or truck.

    2) Increase the gas tax by $2.00/gallon, but have a gas tax rebate for the first four hundred gallons (14,000 miles @ 35 MPG) per year (per tax payer, per driver or per car?). Nasty book keeping, but worth it if I can get $800 back.

    Any other ideas?

  • AP

    Charles, I agree in principle with your second suggestion; I have a few differences in detail. I would pass a law that would

    1) Increase the gasoline tax by $.10 every 3 months for 5 years (total of $2 at the end of the 5th year), and
    2) Split the total tax revenue evenly and return that to every tax filer as an income tax credit.

    This way there’s no new infrastructure or book keeping, and even people who take public transit are rewarded for not using gasoline. With the decreased gasoline usage, road tax revenue would drop, so we’d need to

    1) Increase the diesel tax by $.10 every 3 months for 5 years (total of $1 at the end of the 5th year), and
    2) Use it for roads and bridges.

    The diesel tax serves as a way to fund roads when electric cars become more common, since it will be difficult to tax them for their wear on the road. Most trucks will be using diesel for the foreseeable future.

    I’ve seen the proposal to buy up “gas hogs,” and (even though I work for a car company and would benefit), programs that eliminate running vehicles in good working condition make me nervous. What if that car hardly ever gets driven? Is it worth the cost of buying?

    I’ve also seen proposals to place heavy taxes on old “gas-guzzlers,” but what if you’re a car collector that drives each of these vehicles 20 miles per year? I think punishing ownership is the wrong thing to do. Discouraging use through a (revenue-neutral) higher tax seems simpler and more even-handed.

  • Anonymous

    The technology is available now, and is affordable, the new Prius will sell like hot cakes.

    How do you raise the price of gas without hurting the economy? You don’t. But since the average licensed driver uses about 60 gallons of fuel per month, it would be easy discourage gas guzzling by keeping track of the amount of fuel purchased by each licensed driver. Your driver’s license would be swiped when you authorized fuel disbursement, and if that car had purchased more than 60 gallons in the last 30 days, then a surcharge of 25% of the market price would be added to the bill. There would be no exceptions for diesel or commercial vehicles.

    With such a system in place, an incentive for high MPG vehicles would be created.

    Lets look at two vehicles, one that gets 20 MPG overall, and the new Prius that gets 50 MPH overall. Lets say the drivers drive an average of 18,000 miles per year or 1500 miles every 30 days.

    The driver of the average vehicle uses about 75 gallons and is encouraged to drive less or buy a higher MPG vehicle. The Prius driver uses 30 gallons and does not worry about the surcharge.

    On the other hand, someone driving a 15 MPH SUV will pay the surcharge frequently and seek a higher MPG vehicle.

    After a couple of years, the point where the surcharge kicks in could be lowered to say 45 gallons in the last 30 days.

  • Danface

    No. This would just enable them to run their assembly lines directly into car crushers. Think about it. Why not just subsidize heroin?

  • danface

    The shift to better fuel economy is attainable. Perhaps one of the ‘sacrifices’ we as a country need to make to fight terror is to drive fuel efficient vehicles? Gasp, how we live without mortgaging our houses to buy Lincoln Navigators that only go off road when we park to close to the lawn?

    I hope this moment of ‘change’ is not lost. I think the Obama Administration is smart enough to figure this out. Can the folks in Congress who take money from (and give money to) the automakers have enough grit to do the ‘right thing’? The ‘right thing’ being to take advantage of the bail out to force (yes, the government will force) better gas mileage?

    Stay tuned folks and remember DON’T “follow the money”. It will just make you sick to your stomachs

    Dan

  • AP

    Anonymous, your idea is easily gotten around by having someone who doesn’t hardly drive fill your tank. Most proposed solutions are too full of loopholes. A revenue-neutral gas tax is simple. The Prius will sell like hotcakes, not because its technology is afforable, but because it is subsidized by Toyota (shielding the customer from the real cost). They are willing to lose money on them (despite their claims to the contrary) in order to punch their green ticket.

    The gas tax idea in my post returns the money to income tax filers, keeping the money in the economy. In fact, it helps the economy by suppressing the amount of crude oil purchased, and its wholesale price, reducing the amount of money sent to other countries (which would also reduce terrorism funding).

    danface, I think your worries are unfounded. The government loan hearings showed that the Detroit automakers have no great political clout (many people think they haven’t donated ENOUGH campaign money, at least in comparison to the banks).

    Despite the moronic and repetitive “Detroit needs to build the vehicles people wants” from the press and certain politicians, Detroit has done exactly that. The combination of high CAFE for cars and low gasoline prices drove people to SUV’s, and Detroit (and Japan) complied (Why are Hummers vilified and Sequoias aren’t?). Check out the wholesale price of gasoline in 1998; it was about 40 cents per gallon! When gasoline was less than a dollar in the 1990′s, I had to ask myself why I was driving a Prizm. I just don’t like big vehicles, but when gas is cheap, how can you blame someone for buying the biggest thing they can fit in their garage?

    It isn’t Detroit that has caused this mess: it’s Washington and their lack of political courage to address the real problem: gas prices. Washington just likes using Detroit as a scapegoat.

  • cho cha

    Thank God Jesus “Obama” Christ is here to save the world! What would we do without the man who has done nothing? Except talk?

    Good luck, fools.

  • Need2Change

    Bush has been awful, and I too am a Republican. But I think this was the correct decision. Obama would have changed it anyway. He’s clearly supporting the California approach to emissions — both on what he says and who his has appointed to key environmental positions.

    Why pass a law that will be changed before implemented?

    Don’t worry, the price of energy will increase — not only for gasoline, but everything else including electricity and home heating.

    Obama has stated that immediately after 9/11 that the U.S. should have significantly increased the tax on oil.

    With Obama supporting huge government handouts, including improving roads and hybrid vehicles, rest assured that gasoline taxes are headed up. He must increase revenue somewhere.

    Yes, owners of hybrids like seeing the price of gasoline high. It helps justify their decision. But a majority of Americans want gaslone as low as possible. Increasing the tax on gasoline will be a hard pill for most Americans to shallow, but it will happen.

  • Shines

    I have to agree with AP once again. The fuel tax and rebate is simple and direct. It doesn’t require any additional government infrastructure (keeps government small).
    Increasing the tax on gasoline will be a hard pill for most Americans to swallow. Yes and having terrorists slam planes into the World Trade Center and Pentagon was a hard pill to swallow also.
    Even if the tax is used to develop alternative fuels and improve infrastructure it is still the right way to get more Americans to realize we need to wean ourselves from foreign oil and (If you believe CO2 is a pollutant) fossil fuels.

  • Shines

    cho cha – did you say something?

    I didn’t think so…

  • WIZZARD

    you must be out of your deranged mind.
    giving more tax dollars to the government.
    they raided the social security fund twice without any remorse.
    why should we give those imbeciles more to spend?
    “Miss”-appropriation is the name of the game in DC
    americans are so ignorant, they do not know that the french are building diesel cars for at least 15 years which get 50 miles to the gallon (4 cylinders) and more than that, outperform many gas engines with emission standards california would be proud of.
    with crude oil in the mid 30′s we are still getting fleeced at the pump by at least 50cents/gal
    let detroit go to hell.
    they had more than one chance to shape up.
    the unions ruined GM.

  • anon Imus

    Bush: a great beer, an awful president.

  • ty

    Gee WIZZARD tell us how you really feel. :>)

    I would include California in the ‘go to hell’ list. CARB deserves a special place in hell to be tortured by the very best (worst?). Put them in the same place child molesters go.

  • PulSamsara

    Go Barack —- Way overdue… but we may have finally gotten the knuckle draggers out of the way.