Debate Begins on CAFE Credits for EVs

Shell Game

There’s a new federal proposal on the table to give makers of pure electric cars bonus points to help them meet new tougher fuel economy standards. Joseph White of the Wall Street Journal calls it the auto industry version of a “buy one, get one free” deal.

The debate over CAFE and electric cars is already underway—more than a year from the introduction of the first mainstream electric cars.

The immediate reaction from environmentalists, and fans of hybrid and electric cars, might be to shout “Yes” and throw a fist in the sky. That is, until you hear that the Alliance of Automobile Manufacturers, the lobbying organization representing 11 of the biggest automakers in the US market, is championing the idea. “The ability to earn, trade and bank credits” by producing electric and hybrid vehicles “is essential to meeting the goals of the national program,” which calls for automakers to boost the average fuel efficiency of their fleets to 35.5 miles per gallon by 2016, said Charles Territo, an Alliance spokesman.

A Failed Precedent

How would the system work? Makers of electric cars would not only get a stellar rating for producing zero tailpipe emissions and using a super-efficient electric drivetrain, the carmaker would use a multiplier of 1.2 or 2.0 when counting toward its fleet-wide average. A similar strategy is already in place for cars that can—but seldom do—use an 85 percent of ethanol.

Since 1988, automakers have been allowed to assign flexible-fuel vehicles higher fuel economy ratings under the government’s CAFE fuel economy regulations. This means that a full-size SUV that averages 13 mpg is rated at roughly 23 mpg for CAFE purposes, even if its owner never fueled it with E85. EVs will only use electricity as fuel, but the same game of banking, shifting, and selling credits would apply. Proponents say this would help automakers keep costs down, and sell electric and hybrid cars for cheaper—although there’s no guarantee that the savings wouldn’t be applied to producing more SUVs or giving bonuses to executives.

Potential Confusion

We wholeheartedly support consumer adoption of advanced fuel-efficient vehicles such as electric cars. But at face value, EV extra credits—rather than 1:1 numbers—would lower the bar on overall fleet averages.

Some analysts believe using electric cars—which don’t use petroleum-based fuel—as a tool to meet or shift fuel efficiency standards is inherently misleading. “There’s a lot of confusion out there on the issue because CAFE is defined based on petroleum use, so non-petroleum fuel options like EVs get credit disproportionate to their actual emissions reduction impact,” John DeCicco, senior lecturer at the University of Michigan’s School of Natural Resources and Environment, told “This is similar to the issue leading to the eye-popping MPG numbers for the Chevy Volt.”

DeCicco believes that this scheme is not only confusing, but counter-productive. “Funny math can’t substitute for engineering breakthroughs. EVs of any sort can only make a real difference if they succeed on their merits for both customer value and emissions reduction. Bonus credits may fool a few starry-eyed policymakers, they won’t fool either the marketplace or the Earth’s atmosphere.”

He would like to see a level playing field, in which all extra credits are dropped, and compliance is measured “strictly on the basis of actual measured energy use per mile, regardless of the fuel or energy source.”

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  • Mr.Bear

    Let me get this straight…. The Alliance of Automobile Manufacturer’s is endorsing a version of cap and trade on carbon emissions for vehicles. Is the Republican Party listening? Okay, there really isn’t a “cap” in what they have proposed, but maybe that’s what Congress needs to bring to the negotiation.

    I would be more inclined to give extra credit for EVs than E85s. How easy is it for someone to get to an E85 fueling source compared to an electrical outlet? Its more likely that someone who buys an EV will fuel with electricity all of the time. And I think it is more likely that EVs (and not E85s) are the path to the future. The more EVs are accepted at early stages of the game, the faster ICEs will be phased down or phased out.

    The scheme, if it does result in lowering the price of EVs would encourage more early adoption of the technology.

    Don’t get me wrong, I’m still not a big fan of the EV pricing structure. But I think
    Tesla’s plan for a $57k EV that drives 200-300 miles on a charge or Coda’s EV at $45k that drives 100 miles are better that Chevy’s $45k EV with gas generator that drives 40 miles electric or Toyota’s Plug-in Prius at $50k and 12-miles electric.

    I also suspect that if DeCicco ran the numbers and compared the amount of carbon emissions coming out of a coal-fired electrical plant and proportioned the percentage off that was caused by charging only one EV and compared that to the carbon emissions coming directly out of the tailpipe of a conventional gasoline car, the EV would have a multiplier greater than the 1.2 to 2 factor assigned to it under the trade scheme proposed by the car companies.

  • JohnM

    This will mean that by buying an EV, one is encouraging the production of a guzzler. Why should I pay more to do “the right thing”, if it makes it cheaper for someone else to make the opposite choice?

    People make personal economic decisions. Raise the price of fuel and the mileage will go up. Half of all cars built are still on the road after 15 years. We’d better get started.

  • Samie

    We like to think that a topic like this is a either or situation, when in reality it depends on what objectives you want to accomplish. The bonus point scheme is a way for auto manufactures to continue to produce the same old SUV’s while meeting new standards hence the AAM support . If you look at this as a environmentalist this is somewhat of a scam.

    But if you look at this as a way to diversify how we “fuel” our vehicles it may encourage more development of EV’s. Hopefully this credit skips plugins and requires producers of all EV’s to not lease battery technology to a consumer.

    For policy makers and policy in general, the smart thing to do is to give the AAM the profit margins of monster SUV’s while making them sacrifice something, even if you don’t agree with this idea… Eg. applies to EV’s not plugings, EV’s must meet a certain level of production (meaning no games in production or deliberate holding back from consumer demand) Batteries not leased to customers and the E85 provision removed. Again the question is what does the AAM give up in order to produce the same SUV’s under the new rules. That is where the discussion needs to be not one side is better than the other junk that people fall into.

    If people were better informed and demanded politicians be tough negotiators with these private firms we would get a better result out of policies like this instead of typical backroom deals between lobbyists and the politician they want to influence while spinning the debate so the public is ill informed about the issue and only focuses on narrow moral opinions of right and wrongs of a potential policy change that in all likelihood will be included at some point in the new CAFE standards.

  • jmd

    Mr. Bear is quite right that the amount of CO2 per mile when driving an EV, even when charged using average U.S. electric power that comes 50% from coal, is much less than that of a similarly sized gasoline car (yes, I have run the numbers). The benefit is due to the EV’s greater energy efficiency — that is, lower energy use per mile — which is the basis that I recommend for scoring vehicles under CAFE or any new EPA standards.

    So honest energy-based CAFE scoring will actually make EVs look quite good in automakers’ CAFE tallies. What I’m critical of is extra credit, beyond their measured energy efficiency; that’s what will lead to distortions of the sort that JohnM points out, whereby disproportionate credits for EVs will lead to excess guzzlers and undermine overall fuel savings.

  • john iv

    I don’t think this will actually produce more EVs. The number of cars that can fill up using E85 are going up, but I don’t see more E85 fueling stations. If the AMA is for it I’m going to take a closer look at it before I commit to the program.

  • Mr.Bear

    I must be confused. You don’t want a system where a disproportionately high credit is given to the EVs because it allows too many gas guzzlers to be built. Yet you agree with me that EVs have an energy efficiency greater than the 1.2 to 2 factor credit being proposed by the auto makers.

    It seems to me that what it being proposed, at least as the article presents it, is actually disproportionately low and fewer gas guzzlers will be subsidized by EV credits than under your proposed system.

  • Lost Prius to wife

    Personally, this sounds like a shell game. If I am a gas car manufacture, this is honey from heaven. With the extra credit of one EV to my car lineup I might not have to change any of my fuel efficiencies of the other gas cars I build to meet CAFE requirements. No matter that the EV is only a half of a percent of my sales. And with two EV designs in my car lineup, I can actually decrease my fuel efficiencies of my gas cars and still meet CAFE requirements. The possibility of this kind of abuse is more than likely.

  • AP

    This is one more reason to ditch the charade of CAFE. Instead, raise fuel taxes slowly by a certain amount (call it a Strategic Fuel Tax), and return ALL that money to taxpayers in the form of a Strategic Fuel Refund.

    For each dollar that comes out of the economy in the fuel tax, a dollar goes back in from the refund. Everyone can calculate the tax collected, everyone can verify the amount disbursed. No fear of the government diverting funds (I don’t trust the government too much right now).

    No muss, no fuss, no stupid CAFE provisions and loopholes.

  • CAFE is arcane

    AP has it right. CAFE and cash for clunkers never made sense. It would make a lot more sense to just raise gas taxes. No loopholes and fuzzy math. Individuals can decide the value of an EV or a hybrid or gas guzzler.

  • Peter

    All the gasoline vehicles would be now E85 (and the diesel B100) as a obligation reflected in the law (acts and regulations). Also only-internal-combustion-engine vehicles (AICEVs) shall be banned, only allowing plug-in vehicles with an established minimal all-electric range. The question is which minimal all-electric range?. Regards.

  • Anonymous

    I just hope what the proponents say that this would help automakers keep costs down, and sell electric and hybrid cars for cheaper—although there’s no guarantee that the savings wouldn’t be applied to producing more SUVs or giving bonuses to executives, won’t be lip service.– advertising agencies arizona