Tighter emission rules seen
If the auto industry thinks it has problems now, wait until Barack Obama takes the wheel.
Not long after assuming the presidency, Obama is expected to grant a waiver allowing California and more than a dozen other states to enforce their own greenhouse-gas emission standards on autos.
That would completely change the landscape for vehicle regulation and obligate automakers to produce cars that are far more efficient than those called for under current federal standards -- an average of 3 miles per gallon more by 2015, and 7 mpg more by 2020, according to some calculations.
Environmentalists and state regulators say that the rules are key to combating global warming and point to a series of court rulings backing their implementation.
“This is an essential piece of the nation’s environmental strategy,” said Tim Carmichael, president of the Coalition for Clean Air. Environmentalists estimate that cars create about a quarter of U.S. carbon emissions.
But it’s a nightmare scenario for automakers, which argue that complying with the California guidelines would create regulatory headaches and a technology burden that could add at least $1,000 and as much as $5,000 to the cost of each vehicle.
As such, the prospect of the waiver is creating a fierce debate about automotive regulation, pitting concerns about the environment against the deeply troubled finances of an industry that has thrown itself at the mercy of Washington just to remain solvent.
Asking carmakers to comply with California’s rules would be tantamount to forcing a cancer patient to “finish chemo and then go run the Boston Marathon,” General Motors Corp. spokesman Greg Martin said. “Right now, we’re just trying to make it through the current situation.”
GM and other automakers, including foreign companies Toyota Motor Corp. and Honda Motor Co., have vigorously opposed implementation of the California rules and have fought it in court for years.
Nonetheless, their efforts have provoked judicial rulings in four different federal courts that open the door to California -- along with 17 states that have adopted the Golden State’s rules -- regulating its own carbon emissions under a 2002 law.
The final barrier to implementation, a waiver from the Environmental Protection Agency, was held up a year ago when the Bush administration denied the request. California then sued the EPA, a congressional investigation was launched and during the campaign, Obama pledged to grant the waiver if he was elected.
Mary Nichols, chairwoman of California’s Air Resources Board -- the agency that would implement and enforce the regulation -- said the likelihood of getting the waiver was “over 95%.” She said that Obama’s transition team has “had conversations” with her agency to coordinate how and when the waiver should be granted.
“A plan of action is already pretty much in hand,” she said.
Last week, Lisa Jackson, Obama’s nominee to head the EPA, addressed the emission issue as well.
“If I am confirmed, I will immediately revisit the waiver,” Jackson said.
Currently, the only standard that automakers have to meet is Corporate Average Fuel Economy, or CAFE. Just over a year ago, Congress passed a law that will ramp up the national average fuel economy for cars and trucks.
Final rules for implementing the new CAFE standard have not been issued -- the outgoing administration threw that football to Obama earlier this month -- but the law calls for a nationwide average of 35 mpg by 2020.
That’s a substantial increase from the previous standard of 27.5 mpg for cars and 22.5 mpg for trucks, but pales in comparison with the California rules.
Under those, carmakers have to show a 30% overall reduction in greenhouse gas emissions on their vehicles by 2016. That’s the same kind of regulation as in Europe and Japan, where cars have strict emission requirements but not specific mileage standards.
Emission reductions do have a direct effect on vehicle mileage, however. Simply put, reduced carbon emissions track very closely with higher fuel efficiency since they are measured in grams of carbon per mile. According to the Air Board, California’s rules would require a national average of 34.5 mpg by 2015, compared with 31.6 mpg under the federal rules. By 2020, that could be as high as 42 mpg.
That will require carmakers to spend huge amounts of money on new technology, while penalizing them for selling less-efficient trucks and sport utility vehicles.
“We’re committed to increasing efficiency, but these kinds of increases take time and money, and unfortunately that’s something in very short supply right now,” said Charles Territo, spokesman for the Alliance of Automobile Manufacturers, a trade group that has led legal efforts to squelch the California rules.
Only California and the U.S. government are allowed to regulate air quality, but other states may choose the federal standard or the California rules.
A Toyota spokesman said the states adopting California’s rules -- including New York, Florida and Massachusetts -- represent about 40% of the U.S. population, and potentially even a greater slice of the vehicle market.
Since the complicated California rules are written based on state-by-state sales of vehicles, the Japanese company fears having to market different vehicles to meet each state’s target, as well as another group of vehicles in states that haven’t signed on to the California rules.
“For the industry, it’s important that there’s just one national standard that we’re chasing,” said Jim Lentz, president of Toyota’s U.S. sales arm.
He and others indicate their hopes that the Obama administration will be sensitive to the industry’s challenges, including the possibility that in 2009 sales could drop about 20% for the second year in a row.
Unfortunately for carmakers, the industry’s top defender in Congress, Rep. John D. Dingell (D-Mich.), lost his chairmanship of the powerful Energy and Commerce Committee to Henry Waxman, a California Democrat known for an environment-first platform.
GM Vice Chairman Bob Lutz said he expected help in negotiating an alternative to the California rules from the so-called car czar, an intermediary to be appointed by Obama under terms of the $24.9 billion in government aid committed to GM, Chrysler and their financing units.
“We’ve never had a go-to person in Washington,” said Lutz, who estimates that compliance with the rules would add as much as $5,000 to the retail price of a car. Lacking such help, “we can meet the law, but it’s going to take a lot of money.”
Based on the restructuring plans submitted to Congress by GM, Ford and Chrysler in November, the Natural Resources Defense Council released a study that indicates all three would be able to comply with California emission standards with current technology.
But to do that, they would have to substantially change the way they do business, said Roland Hwang, senior policy analyst at the council.
“They’re going to have to find a way to make money on small cars, because it will be too hard to make the standards with big cars,” Hwang said.
Not all companies are kicking and screaming.
Ed Cohen, vice president for government affairs at Honda, believes that carbon-based standards are inevitable. He said Honda had been preparing for the Obama administration to grant the waiver, making plans for a fleet far more efficient than even that called for under the California rules.
“We’re setting a pattern for the future,” Cohen said. “Any company that is not assuming a constant rate of improvement in fuel economy and carbon emissions is making a big mistake.”