Auto Makers Pushing For A Rethink Of Fuel Economy Standards.


Auto makers are lobbying the federal government to rethink its mandate to raise average fuel economy to 54.5 mpg by 2025. The new rules are set to go into effect in 2018. The companies have several concerns about the tighter standards, but it all comes down to selling cars. They worry that consumers will not like the changes meeting the new rules will require and that will hurt sales. The car industry is hugely important to the US economy. A decline in sales could have a ripple effect that would take some of the steam out of an economy that is just showing signs of life after the debacle of 2008.

June fuel economy stats

The debate about what to do with fuel economy standards dates back to the 70’s. Before that, gas was 60 cents a gallon, global warming was something only Al Gore worried about, and people were content to lumber around in big cars powered by V-8 engines. 4 cylinder cars were for wimps and losers. Then OPEC was formed and America went into cardiac arrest, economically speaking. CAFE, or Corporate Average Fuel Economy ratings, were orignally designed to help America break free of imported oil.

We went along with the plan because it was our patriotic duty. 4 cylinder cars were suddenly cool. Models like the original Volkswagen Rabbit GTI proved that being fuel efficient didn’t have to mean driving dull cars. Since then, the size of the vehicles Americans prefer has gone up and down in lockstep with fuel prices. Soon gas was cheap again. General Motors brought out its Hummer lineup, featuring thirsty ground pounders that looked like military assault vehicles. Ford countered with the F250 based Excursion. People couldn’t get enough of them.

Then 9/11 happened, followed closely by the collapse of the global economy engineered by the robber barons of Wall Street. Gas shot up to over $4.00 a gallon and Americans decided they really wanted small cars after all…for awhile. In late 2014, oil prices plummeted and gas was selling for under 2 bucks a gallon. The demand for larger, thirstier vehicles returned with a vengeance.

First CARB then the EPA stopped using fuel economy standards as a way to reduce dependence on foreign oil. Instead, they changed it into a tool for addressing the carbon  emissions being emitted by the transportation sector. In fact, fuel economy is a poor way of addressing emissions. The European Union takes a much more direct and honest approach with regulations that target emissions rather than mpg. The two are related, or course, but using fuel economy as a measuring stick only complicates the process.

The CAFE system has become grossly distorted over the years. For one thing, CAFE numbers are different for different categories of vehicles. The smaller the car, the higher the standard. The larger the vehicle, the lower its fuel economy can be and still comply with EPA targets. The upshot of that piece of bureaucratic brilliance is that Fiat Chrysler has decided to stop making smaller sedans with good fuel economy so it can concentrate on making large trucks and SUV with an outsize appetite for gasoline. The regulations end up encouraging manufacturers to make vehicles that pollute more rather than less. How stupid is that?

For another thing, CAFE numbers are calculated using the old formula. It was discarded years ago as the way to calculate the numbers you see on the window stickers of new cars because it had absolutely no relationship to real world mileage. If CAFE regulations used the more realistic method, the target would be about 20% less — 43.6 mpg instead of 54.5. Building cars that get 43.6 mpg seems fairly doable in a day when many passenger cars already get 35 mpg or better. After all, we are talking about 8 years from now. Surely car companies could find a way to wring 43.6 mpg out of their cars by then?

John Bozzella, CEO of the Association of Global Automakers, told the EPA and CARB recently he wants the upcoming analysis to review assumptions about fuel prices, consumer preferences, and technologies to see whether the targets are still feasible. He says ideas like start-stop systems and hybridization will be required to meet the higher standard. Customers will notice and that may hurt sales. “When we think about the really challenging standards out to 2025 … we’re talking about investments and strategies that are no longer invisible to customers,” Bozzella said.

Bozella also would like EPA, NHTSA, and CARB to harmonize their regulations, so automakers would have one clear goal, not three. That part makes eminently good sense, so much so that we can be sure the regulators will ignore it entirely. Common sense is rarely a component of the regulatory process.

The point this debate misses is that we need to reduce or eliminate carbon emissions from passenger vehicles. The car companies are really looking at the world through the wrong end of the telescope. It’s not about selling more and bigger cars that spew more pollution. It is about changing the driving habits of Americans. The lunatic fringe on the right screams about honest businessmen trying to make a living but being balked by heavy handed regulations. That’s not what this is about at all.

What is is about is avoiding a climatic catastrophe that will imperil the lives of billions of people.We have to stop dumping the effluent of civilization into our skies, our oceans, and our land. We have to stop injecting billions of gallons of contaminated water into the earth to release a few more molecules of natural gas. We have to stop burning coal. We have to stop selling cars with internal combustion engines. There is no other way.

Trying to accomplish all those things using CAFE as the main policy tool is just ridiculous. The only way for it happen is to make the cost of fossil fuels higher than the alternative. Then people will demand non-polluting cars without the need for regulations. Its time to stop fooling around with policies that don’t work and start devising mechanisms that do. Create the right economic incentives, then get out of the way and let the great unseen hand of the marketplace work its magic.

Source: Scientific American via Climatewire

About the Author

I have been a car nut since the days when Rob Walker and Henry N. Manney, III graced the pages of Road & Track. Today, I use my trusty Miata for TSD rallies and occasional track days at Lime Rock and Watkins Glen. If it moves on wheels, I’m interested in it. Please follow me on Google + and Twitter.

  • trackdaze

    Anything that incentiveses the automakers to electrify suvs and large vehicles should be on the table. Mild hybrids that improve mpg only marginally wont cut it.

    Time to bolster government finances with a sin tax on fuel based on carbon emmissions.

    • Jim Smith

      no. time to get the government out of peoples lives and let people spend their money how they want. You are free to buy whatever vehicle you want. Get out of my life.

      • Steve Hanley

        I agree completely, provided the price of fossil fuels is adjusted to reflect its true cost to society and and the environment. People should not be allowed to defecate on our lands with impunity just because its costs less to do so.

        • Jim Smith

          sure. so end all electricity. People should not be allowed to defecate on our lands with impunity, right? And of course it pollutes to manufacture solar cells, inverters, wind turbines, etc…

          • super390

            And if the price of fossil fuels is adjusted to reflect its true cost, then that will incentivize the manufacturers of solar cells and wind turbines to use as little of them as possible in production. The end product will still be cheaper than using the fossil fuels to generate electricity directly.

            So in the free market paradise you’re demanding, why the hell shouldn’t I build a dioxin waste dump next door to your property and watershed? What are you going to do about it? Isn’t suing in court a form of oppression? That’s what conservatives now claim. So what good are your private property rights if I have the right to contaminate the air and water you use?

      • trackdaze

        Stop polluting mine.

        • Jim Smith

          you too, disconnect your electricity, get rid of all manufactured goods, travel by foot, etc… so you do not pollute mine

          • AaronD12

            Straw man argument. Put solar on your house, drive an EV… no pollution at all. Getting rid of all manufactured goods isn’t realistic at this point, and you know it. Reducing personal transportation pollution IS possible.

          • Jim Smith

            not straw man at all. You just cop’d out since i blew up your comeback. I called you out for polluting my environment.

          • super390

            Then mind being polluted before we all kill each other. Markets require perfect information. Exxon stands accused, based on the historical record, of knowing that global warming was a concern in the 1970s and then paying groups to put out contradictory claims to cover its ass. Meaning it used its wealth to put out false information so that markets would not punish it. Therefore, why should I believe that markets will save us from pollution?

          • trackdaze

            A Rubbish argument that proves the point seeing how green my electricity is.

            If you want to be truly free fine. Give back your share of the trillions in fossil fuel subsides and well call it square.

            We Dont get it do we a carbon tax allows us to keep some level of freedom over what drive. It will allow freedom of choice and more options.

          • Jim Smith

            slavery is freedom….right.

          • trackdaze

            To keep being shackled to big oil and its influence is freedom?

          • Jim Smith

            one is free to choose

  • Jim Smith

    “…collapse of the global economy engineered by the robber barons of Wall Street. ”

    fiction. The crash was due to government distorting markets. You progressives love to blame the market for everything, even though the government is clearly to blame.

    • AaronD12

      So there was no personal responsibility of any of the companies distorting the market? You need to do some research. Where did all these home refinancing companies (and their jobs) go? Oh yeah, they did it to themselves. Stop this tea-bagging, government-blaming rhetoric.

      • Jim Smith

        no. The market crash was a direct result of government meddling in the markets. Do a bit of googling to understand this, or go on believing the progressive propaganda. A simple google for: “government role in financial crisis 2008” will turn up a bunch of research and deeply nuanced analysis.

        Of course it is easier to just accept the big government loving progressive explanation and want more big government to “fix” the problem government created in the first place. More government jobs after all which means more voters.

        • Shiggity

          Are you one of those fools that doesn’t understand that the private sector and the public sector have become one large vertically integrated corporation?

          There is one segment of the United States doing well. That segment is the 20 million+ net worth club. (99% vs 1% is a fallacy, the problem lies in the 99.99% vs .01%).

          They interchange between government worker / corporate lobbyist as though there was no distinction at all.

          Wake up man.

          • Jim Smith

            if the government were not so big, there would be no favors to buy. See how simple it is. Right, the wealthy have a smaller percentage of their wealth stolen by the government and they invest in the stock market. The stock market has risen and the people who invest in the stock market have made a lot of money. Stop the government from stealing SS money and let every american invest the same market the rich do.

            I would be retired right now (and so would a lot of people) if I had put all the SS money stolen from me in the stock market.

          • super390

            If everyone had put their Social Security money in the stock market, valuations would have inflated so much more that the crash would have been larger. Without intervention, traditional stock crashes go from way overvaluing stocks to way undervaluing them. The ’29 Crash was a 90% loss, and after 4 brutal years there was no recovery, just signs that the banks were ready to collapse too. The rich create bubbles, the middle class follows them in after prices have already gotten too high, the rich take the word of their advisers and start to pull, out leaving the middle class holding the bag in the crash. It’s a siphon that polarizes wealth – as it did between the Civil War and 1929.

        • super390

          America had market crashes, called “panics”, about every decade before the New Deal, each one blamed on a different free-market bubble collapsing. After 1937, there were no depressions or stock panics until Reagan and his gang came in. Then we had the worst recession seen in decades, then the S&L collapse, then a stock market crash, then another recession. Since then, we’ve had multiple market bubbles collapse – just like in the old days. Face it, Mr. Smith, this is what capitalism looked like when the rich had all power. They refuse to plow their profits back into higher wages and thus consumption can only grow through debt, which is often collateralized by chasing the rich into new asset bubbles. That’s the essence of the Roaring Twenties economy.

          Asset bubbles do not obey the sacred laws of the marketplace. Read George Cooper’s book, “The Origin of Financial Crises,” for a simple explanation of why speculative “goods” like stocks do not obey the rule of supply and demand, but actually rise in demand when their prices rise. When real estate is treated the same way, as a speculative good, the same thing happens.

          So go back to 1929 if you love you chances of survival so much. Try to find a single place on Earth that is willing to go back to that.

  • Brunel

    You could put a big tax on petrol/diesel.

    And on vehicles that do not have a 2 kWh battery.

    Increasing to 5kWh in 2020.

    But I agree that government should not be regulating the size of our shower heads and toilets! Get out of our bathrooms!

    I get my electricity from solar power anyway.

  • kevin mccune

    I cringe when I see what the trophy wives and others drive ,the cost of Petrol is high all the way around,every time I get complacent about energy all I have to do is look at pictures of mountaintop removal ,pit mines,burning oil rigs ,oil spills and know this cant go on ,I would to think people would do the right thing,but it seems that they wont .Face it people govt will never get out of our lives ,lets work to make the govt more manageable ,not controlled by lobbyists and special interests.
    People are free to drive the Highway to Hell if they want ,but the price of the Infernal is high our children will suffer for our greed and short sightedness,doesnt matter if there is a couple hundred years of dirty fossil fuels left,when they are gone they are gone.One of the most ridiculous things I have heard of is the Abiotic Oil hypothesis,most Phd people will tell you ,the oil is basically of a biological origin.
    The real problem that needs to be addressed is the burgeoning population,a US standard of living doesnt seem possible for seven plus billion people .

  • smartacus

    how far can the downsizing of engine displacement and cylinder count go?
    Pretty soon 4-bangers will be overtaken by Turbo-Triples in popularity

    • AaronD12

      That’s the problem. There is only so much you can do with the internal combustion engine. We are right at the cusp of what we can do, even with all the electronics and computerization of our engines. VW cheating on emissions test is a perfect example: They couldn’t get emissions low enough so they had to cheat. The future is EVs.

      • smartacus

        i hope they don’t start embracing parallel twins
        (a couple of compact cars around the globe are already there)

        inline-triple is the lowest you can go and still have multi-cylinder smoothness; albeit with uneven vibration that requires balancing.

        *if they did start going with twins; i’d be OK with a flat-twin (like half a Sube engine) because if one half breaks, the engine will continue to run as a thumper.

  • Gerard Ryan

    I cant stand how those fuel auto makers always try to play by their own rules. They already played for decades, now its time to make rules little bit stricter. No difference whatever will fuel car makers be able to use their own rules or no, in 1-2 years world will see most powerfuel EVs from different companies like Neutrino GmbH with charging speed of 1 minute. Or many other US, Asian electric vehicle makers. And exactly these ev brands will be grabbing shares of market. So whatever will happen with fuel rules, trend is going to change to EVs and all fuel car makers will have to follow that trend but they will not stay in that market for long. Companies (fuel car makers) who care only about money never can compete with companies (new makers of EV) who care about their customers, technologies and their own idea of clean cars.

  • Bart_R

    I worked at Ford world headquarters, and at Nissan when they had a North American hq; during that era, automakers fiercely attacked fuel standards, too. And they won. Electric cars were recalled and scrapped on a whim, despite being more popular, and far more lucrative, than expected. Edsel Ford personally led the charge against regulations and programs for fuel economy, breaking the will of legislators with the SUV, help of states, and campaign donations to the corruptible.

    The upshot? Road safety nosedived. Fuel economy nosedived. Air quality at street level nosedived. And a decade later, the industry begged for bailouts.

    Automakers, read the road signs; try the PIE:

    + Privatize fossil waste disposal at a Market price, with revenues paid to each citizen with lungs, as a way to send a price signal for fossil intensity. In North America, the British Columbia Revenue Neutral Carbon Tax Act and the Whitehouse-Schatz American Opportunity Carbon Fee Bill are a good start in that direction. If government won’t see this as much its duty as administering weights and measures, then do it yourself by telling those who sell to you that you only buy from those who have paid their CO2 debt by offsets; it’s not the ideal of charging real Market rents, but eventually we will get there one step at a time.

    + Indict those racketeers whose payments to obscure, perjure and lie about fossil waste liability to stakeholders are provable in court, diluting the fossil carbon price signal. If your government won’t do it, then get a class action going to balance the unfairness we all feel.

    + End subsidy to fossil, that the Market might choose the winners by price signal, not the donors of elected officials. We need no subsidizer or supporter of tax deferrals for fossil.

  • Jonny_K

    Don’t automakers always say everything is impossible or too expensive and will hurt sales, seat belts, airbags, the tail pipe emission standards of 1975, etc. Then somebody figures out a way and life goes merrily along.

    (PS. Don’t feed the trolls)

    • Steve Hanley

      The Prius numbers are close to real world accurate. If translated to the formula EPA uses, they would be nearly 20% higher!

      The real issue is automakers don’t want to build Priuses ( Prii?) They want to build SUVs and pickup trucks because they are more profitable. But that profit is illusory. The damage those vehicles do is what economists call an “untaxed externatily”, which is a polite way of saying the manufacturers reap the benefit while passing off the burden onto the shoulders of the public.

      It’s a rigged system. Don’t eliminate internal combustion engines. No, not at all. Just make the cost at the pump of the fuel they run on commensurate with its true cost — in other words, make the fossil fuel industry stop pissing in the community pool and expecting others to pay to clean up their mess — and the rest will take care of itself.

      Once those SUV and pickup truck buyers find gas and diesel are properly priced — probably at around $5 – $6 a gallon — the changeover will happen rapidly.

      Of course, this should be phased in over time. 10 years ought to do it. There will be economic pain. Some companies will go out of business. But is that a reason to allow the earth to become so polluted that it can no longer support human life? If your answer to that is yes, then you are a fool.

      The one question I always want to ask the people who remonstrate about how we should go slow so we don’t put too much burden on business is, “Who are you going to sell your products too when most of the world is at war fighting over access to high ground, clean water, and clean air?

      As the military why they see climate change as the number one threat to global stability. They are not Henny Penny running around screaming the sky is falling. They see what is happening. And what they see is massive unrest and upheaval worldwide if we do not stop the headlong rush to destruction.

  • Mike Dill

    I expect Tesla Motors will have a medium to heavy duty pickup truck and SUV by 2025 that will kill off the remaining ICE demand. Start thinking about saying goodby to the remaining auto manufacturers that do not adapt.