President Barack Obama announced today that his administration will enact dramatically tougher fuel economy standards and the first ever greenhouse gas pollution mandates for cars. He made the announcement at a press conference attended by auto executives, labor leaders, California governor Arnold Schwarzenegger and Michigan governor Jennifer Granholm.
The proposal will require carmakers to reach an average of 27.3 mpg by 2011, and 35.5 mpg by 2016—four years faster than previously scheduled. This means an average of 39 mpg for cars, and 30 mpg for trucks and SUVs. Currently, cars must average 27.5 mpg and trucks must get 24 mpg.
The increase to 39 mpg within one or two product cycles will mean a radical change to product lineups—effectively requiring the discontinuation of the worst gas-guzzlers and the introduction of a wide array of fuel-saving technologies in vehicles of all sizes. The only cars currently on the market capable of reaching the 2016 benchmark are hybrid gas-electric vehicles, meaning that conventional gas-powered cars, on average, will need to achieve the same level of fuel efficiency as today’s hybrids—or significantly more hybrids and other electric-drive vehicles must be put on the market and sold in high quantities.
John DeCicco, senior fellow for automotive strategies at Environmental Defense Fund, said today’s announcement represents a major breakthrough. “It will give a boost to hybrid technologies as well as to advanced engines, lightweight materials and other engineering solutions,” said DeCicco in an interview with HybridCars.com. “It’ll be important for helping the Detroit automakers develop much more robust recovery plans, and of course it’s a huge step forward for climate protection.”
For several years, California and 13 other states have attempted to apply tougher emissions standards than the CAFE standards mandated by the federal government, leading to a court battle with the EPA and fierce opposition from the auto industry. The administration’s proposal puts an end to that fight.
One MPG Law of the Land
This compromise between the auto industry, labor, legislators and environmentalists brings an end to a major challenge facing the administration in delivering on its promises for radical change on energy policy. According to Rep. Edward Markey, who co-wrote the previous CAFE standards, the administration has “solved the energy and economic policy equivalent of a Rubik’s Cube.”
Perhaps the most shocking thing about the new standards is how it came with the blessing of carmakers and the auto unions, who had so virulently resisted the California standards. Their agreement was won through the establishment of a single law of the land, cutting the cost of producing and marketing different cars for different states. In addition, the industry can expect a doubling of the $25 billion in low-interest retooling loans already promised by the administration. In a background briefing late Monday, a senior administration official said that the new standards had resulted from extensive negotiations with the industry, which has thus far unanimously endorsed the plan.
“The fact is, everyone wins,” said Obama at today’s event. “Consumers pay less for fuel, which means less money going overseas and more money to save or spend here at home. The economy as a whole runs more efficiently by using less oil and producing less pollution. And companies like those here today have new incentives to create the technologies and the jobs that will provide smarter ways to power our vehicles.”
How exactly automakers plan to meet the standards so quickly isn’t entirely clear at this point, but the Obama administration estimates that average additional cost to the consumer will be around $1,300 per vehicle, a cost it says will be offset by gasoline savings within the first three years of ownership. Over the life of the vehicle, the average savings to the consumer is expected to hit $2,800. The administration is basing its calculations using an average price of $3.50 a gallon. If auto industry executives are uncertain about how to achieve the goals at a reasonable cost, if consumers will respond to a new landscape of more efficient cars, or feel like Obama has been heavy-handed with the specific goals, they are quietly nodding along at this stage.
The auto industry’s move to greater fuel efficiency and advanced technologies, such as hybrids, has been underway for a few years. The new fuel economy goals will rapidly accelerate the trend.