Tougher Fuel Economy Rule Nears Approval

President Bush, in what would be a major break from environmental and energy policy under the Ronald Reagan Administration, is on the verge of ordering auto makers to increase the average fuel efficiency of new cars, government officials said Friday.

The decision, which could “come any time,” one official said, has been strongly advocated by environmentalists who contend it would reduce air pollution and U.S. dependence on foreign oil. But the move has been fought by most auto industry leaders, who maintain that the higher standard would hurt auto production and reduce industry employment.

Within the Administration, officials said, the issue has been a matter of “heated” debate in recent weeks, with Transportation Secretary Samuel K. Skinner arguing in favor of the tougher standard.

Skinner’s spokesman, David Prosperi, confirmed late Friday that the secretary had made a recommendation to President Bush that was under White House review, but he would not disclose what position Skinner had taken.

However, another Administration official said Skinner had made clear his support for higher fuel efficiency and that Bush was considered likely to follow Skinner’s recommendation.

The anticipated action would increase the efficiency mandate, formally known as the Corporate Average Fuel Economy standard, from the current average of 26.5 miles per gallon for all cars sold by a single manufacturer to 27.5 miles per gallon.

Such a move would overturn a preliminary decision made late in Reagan’s last term and would also reverse a position advocated by Bush when he was vice president and head of Reagan’s deregulatory task force.

Although Bush has generally opposed government regulations like the fuel standard, the potential environmental benefits of higher fuel efficiency and the Administration’s desire to shore up its environmental image appear to be pushing the President toward the tighter standard.

A higher fuel efficiency standard has been a priority of environmental advocates for several reasons.

U.S. oil consumption and oil imports have been rising steadily in recent years. Bush has generally favored increased domestic oil production to reduce imports, but the potential hazards of that approach have been underscored by last month’s massive oil spill in Alaska’s Prince William Sound. Environmentalists have argued that even relatively small increases in overall fuel efficiency could make a significant dent in the nation’s need for new oil sources.

More recently, environmentalists have contended that increased fuel efficiency would reduce the danger of global temperature increases, the so-called “greenhouse effect.” Within the Administration, Environmental Protection Agency chief William K. Reilly has advanced that argument, one official said.

Produces Carbon Dioxide

The burning of gasoline and other fossil fuels produces carbon dioxide. Many scientists believe that increased levels of carbon dioxide in the atmosphere are beginning to trap heat, slowly raising global temperatures much as a glass roof traps heat inside a greenhouse.

Bush has made a point in recent months of emphasizing his concern about the potential of global warming.

Auto makers, however, have strongly disputed the usefulness of efficiency standards, which were first adopted in 1975. An initial average of 18 m.p.g. was established for the 1978 model year.

Because the standard applies to the average efficiency of all cars sold in the United States by a domestic or foreign manufacturer in a given year, a higher standard forces auto makers to offer more small cars and fewer large cars for sale.

The effect of a higher standard is merely to make consumers “hang on to old, less fuel efficient cars,” because they cannot find the larger new cars they would prefer to buy, said General Motors spokesman William H. Noack.

“The law just doesn’t work,” Noack said, arguing that the higher standard “threatens American production and American jobs.”

Because auto makers earn a considerably higher profit on large cars than on compact models, any increase in the fuel efficiency standard is likely to cut into industry revenue.

Noack, however, said that GM had no estimate of how much the new rule might cost the company and would make no official comment on it until Bush made a final decision.

GM and other auto makers, however, have lobbied for several years for lowered standards. They were successful in 1985 in having the average, then 27.5 m.p.g., temporarily rolled back to 26 m.p.g. The standard was frozen at that level until the current model year, when it rose to 26.5 m.p.g.

Reagan Administration Transportation Secretary James H. Burnley IV proposed late last year to keep the standard at 26.5 m.p.g. through 1990, but he left for the new Administration the final decision on the matter.

Under the law, Bush does not need to take any formal action to cause the standard to increase. Simply refusing to make Burnley’s recommendation final would cause the standard to revert to 27.5 m.p.g.

Auto makers are subject to fines if they fail to meet the average fuel efficiency standard. Some specialized manufacturers, such as Great Britain’s Rolls Royce, routinely pay the fines as a cost of producing large, less efficient cars.

For major manufacturers, however, the fines are significant deterrents because they could run into the millions of dollars.