Big news is coming from the White House tomorrow, as President Obama is expected to announce that automakers will have to meet a fleetwide corporate average fuel economy (CAFE) standard of 54.5 mpg by 2025. Seven major automakers (i.e., the heavy hitters in the U.S.) -- GM, Ford, Chrysler, Toyota, Honda, Hyundai and Nissan -- are reportedly on-board with the deal, but other import players (whose lineups are low on light trucks) are hold-outs.
Our own green car advisor, John O'Dell, has written an in-depth story over on Auto Observer, and it's worth a read if you actually like to read and want to understand the issues in play here. A couple key points:
--> As O'Dell makes clear, a 54.5 mpg CAFE standard translates to a 40 mpg EPA rating. Back in June, when the Administration suggested a 56.2 mpg CAFE standard (41 mpg EPA), the industry came out against that. California (and the 12 other states in its consortium) looks to be in support of the 54.5 mpg standard, meaning we'd have one national mpg standard.
--> The bigger deal in Obama's plan is that passenger cars will be subject to a 5-percent annual increase in fuel efficiency from 2017-2025. Light trucks, meanwhile, only have to improve 3.5 percent annually through 2021, and only in 2022 will the 5-percent rule be applied to them.
--> Although government policy leaders and automakers worked together on this plan, consumers were not involved in the process, even though they'll have to drive the new generation of fuel-miser cars and pay what's certain to be at least a modest increase in up-front costs. Edmunds.com CEO Jeremy Anwyl wrote a letter to EPA director Lisa Jackson expressing this concern.
Anwyl writes, "Consumers are voicing real concerns. How will their choices be limited? Will prices rise? By how much?
"Adding to this angst is the sheer complexity of the proposed standards. Shouldn’t a goal of any new standards be that they are easy to understand?"
Jeremy Anwyl: Raising CAFE Reasonably (Auto Observer)
stovt001 says:
11:32 AM, 07/28/11
This is just like trying to reduce the populace's weight by outlawing large clothing sizes. Unfortunately, politicians have an easy time framing regulations like these as a way to get consumers fuel-efficient vehicles at no cost.
csubowtie says:
11:54 AM, 07/28/11
If improved mpg's are really that important to American's, then it will reflect in the market. Automakers will strive to have the most fuel efficient cars to continue to beat the competition. We don't need Washington to dictate this for us. It's pretty unrealistic to set standards that cannot be met technologically. And I don't ever remember voting for, or even asking my government in any way/shape/or form, to waste tax payer money dictating what kind of car everybody should drive. Maybe they should get off thier ass, and do what the jobs we did ask them to do, you know, like create budgets, not run out of money. This is just a way to help politicians win brownie points. Everybody gets all impressed by the big numbers, ohh, in 10 years my car will get 54 mpg! They don't broadcast the realities to the laymen.
cml says:
12:51 PM, 07/28/11
csubowtie says:
11:54 AM, 07/28/11
If improved mpg's are really that important to American's, then it will reflect in the market. Automakers will strive to have the most fuel efficient cars to continue to beat the competition. We don't need Washington to dictate this for us. It's pretty unrealistic to set standards that cannot be met technologically. And I don't ever remember voting for, or even asking my government in any way/shape/or form, to waste tax payer money dictating what kind of car everybody should drive. Maybe they should get off thier ass, and do what the jobs we did ask them to do, you know, like create budgets, not run out of money. This is just a way to help politicians win brownie points. Everybody gets all impressed by the big numbers, ohh, in 10 years my car will get 54 mpg! They don't broadcast the realities to the laymen.
Well said! I agree
firstwagon says:
01:01 PM, 07/28/11
Make more sense to just raise gas taxes and use the money to pay down the debt. It would get people to drive more efficient cars and solve the budget problem.
bugeye_02 says:
01:57 PM, 07/28/11
@csubowtie: I'm generally anti-regulation and pro free-market, but in this particular case the market is inefficient. The price we pay at the pump for gas is too low - it does not reflect the additional environmental and political costs to our country of consuming as much oil as we do. So in effect, our gas is government subsidized. And as a result, the incentive for each of us as individuals to consume less gas is not as high as it would be if we were paying the true cost. That means fuel efficiency will not reach it's optimal level using just market forces, assuming the current gas pricing model.
The solution is either to have the price of gas be more reflective of the real cost (by raising gas taxes as firstwagon said), or else to directly regulate fuel-efficiency standards for new cars.
I would personally prefer the approach of raising gas taxes and using the taxes to cover the indirect costs of oil consumption. But can you imagine the consumer backlash if gas prices were to be doubled? So regulating fuel-efficiency standards is more politically acceptable, since the costs are 'hidden' from consumers.
stovt001 says:
02:42 PM, 07/28/11
Lets not forget that SUVs came into fashion partly due to their favorable treatment under CAFE regs. Every time the government sets new regulations, there will be those who put a lot of energy into finding loopholes, and the resulting unintended consequences often produce exactly the opposite result of what the government was going for in the first place.
greenpony says:
02:44 PM, 07/28/11
Cost is going to be a big factor here. (We're just talking cost due to fuel economy & emissions standards; nobody also considers ever-increasing safety standards or additional arbitrary legislative requirements). Is it more expensive to maintain a 30 mpg car that's ten years old, or is it more expensive to buy a brand new 50 mpg car? I'd wager that for most people, keeping their older vehicle is the much more cost-effective option, even looking ten years down the road. After all, the difference between 30 mpg and 50 mpg is only $1k savings a year ($5.00/gal, 15k mi/yr). So I would expect a sustained decrease in new-car sales, coupled with stagnant used-car sales, as more people opt to keep their older vehicles. Especially the enthusiast crowd.
church123 says:
02:54 PM, 07/28/11
I think the whole "our gas prices do not properly account for indirect costs" argument is highly suspect.
Let's run some numbers.
The US uses about 19 million barrels of oil per day. From that, we consume about 9 million barrels of gasoline/day.
That amounts to 137 billion gallons of gas/year. Now, what are the indirect costs of that gasoline consumption? Some would argue that much of our defense spending goes toward securing world energy supplies. There is some logic in that, but the question becomes, how much? Adjusted for inflation, defense spending today is approximately $100 billion higher than it was in 1970 when the US ostensibly became an oil importer. Can all of that money be attributed to energy defense initiatives? Half?
The other indirect costs many people mention are health related. In most cases, the claims that are made relate to deaths caused by air pollution. The problem here is that almost no one suddenly drops dead from air pollution (short of people who leave cars running in closed garages ;). Yes, there are fatal asthma attacks. And lung cancer, severe emphysema and other respitory illnesses may be caused in some cases by auto emissions. But the numbers are uncertain at best, and most of the conclusions are correllation, not causation based. I don't dispute that auto emissions may indirectly cause some deaths, but simply assert that the numbers are uncertain. Furthermore, what about the benefits that accrue because of cheap transportation? Rapid access to emergency medical treatment. Older or disabled persons able to travel with minimal effort vs an exhausting or simply impossible journey? The ability to live in clean, low crime suburbs instead of a crowded city?
If someone were to argue that we should levy a $1/gal tax to offset the costs of keeping shipping lanes open and maintaining a presence in places like the Middle East, I could see some logic in that. But only if we truly route that money into defense spending and not to misc pork projects (good luck with that). Regardless, I would also argue that since virtually every person in this country uses substantial quantities of oil based upon 1) energy needs for transport/electricity 2) food production 3) petroleum based products (plastics for example), that using general tax receipts for these alleged indirect costs is perfectly reasonable since oil usage is nearly universal.
blueguydotcom says:
04:44 PM, 07/28/11
Agreed church. The costs go beyond a simple "what do i pay at the pump" approach.
As for the market should decide...hmmm. I don't know I buy that. Not when it comes to cars or food or healthcare or...well Americans aren't exactly informed, healthy, or miserly when it comes to any of those thing.
kevm14 says:
04:50 PM, 07/28/11
The idea that SUVs (or any high volume gas guzzler including sporty sedans) should be made *illegal* because of the high probability of a fleet of models dragging down that company's CAFE rating is ABSURD and very much against American values.
"Lets not forget that SUVs came into fashion partly due to their favorable treatment under CAFE regs. "
No. SUVs came into the fashion party because Americans voted with their wallet: when they could afford to fill them up, THAT'S what they wanted to drive. What YOU are suggesting is that SUV production should have essentially been made illegal. And that is utter nonsense.
There are many theories on why CAFE is the completely wrong way to go about whatever it is CAFE claims to help accomplish.
Here's what former Car and Driver Editor-in-Chief Csaba Csere had to say about CAFE in 2008:
http://www.caranddriver.com/features/08q1/higher_cafe_regulations_seem_painless_which_is_why_they_won_t_do_any_good-column
cwc1 says:
06:13 PM, 07/28/11
Do we live in a dictatorship? Apparently so, as our formerly constitutional republic continues to be morphed into a kind of soft (for the moment) tyranny that will be unrecognizable to those who've sacrificed much for the liberty we're foolishly letting slide away.
devnix says:
06:26 PM, 07/28/11
I, too, support the gas tax instead of the CAFE standard. Better roads, fewer unnecessary SUVs, and more realistic (read: more expensive) gas prices are just a few of the things that I think would be achieved with this relatively simple change. If you want to reduce dependence on foreign oil, don't make it so cheap!
activ8 says:
06:55 PM, 07/28/11
All the above who're scared of losing their SUV's - its not so dire as you make it sound. Conspiracy theories do not make technology move forward, but newer laws can do that. Today a diesel Audi A8 (>4000lb luxury sedan) can get 40mpg already. By 2025 (which is a decade and half away) if you think that a diesel SUV can't get that much, you would be really dumb or, like, stovt001 quoting directly from Fox (I just heard that same comment today on 'the Five'). As an automotive engineer and an auto industry executive, I'd say bring it on - this is the kind of tech targets that we should be striving to meet to develop better vehicles. There's plenty solutions already in the market and costs will come down only with mass manufacture - from ULSAB to carbon-fibre in terms of weight and from diesels to hydrogen in terms of fuel. Don't bang the drums of ignorance yet. America should and can lead.
sohcammer says:
07:34 PM, 07/28/11
In case you geniuses didn't know, these MPG standards are being pushed by the current administration, so it's more of a political decision than anything. The other party wants you to have freedom of choice and not legislate your choice.
blueguydotcom says:
02:29 PM, 07/29/11
sohcammer - what party wants choice? You mean the party not in the white house? The ones against freedom of choice regarding religion, sex, marriage? The ones who pushed so hard for wars without reason? The same party that helped make the government ever bigger, more intrusive and more restrictive from 2000-2008? Neither party is for choice. The members align themselves with the cash...
Let's be clear...nobody is on the side of freedom of choice in government. They're on the side of the $$$$$$$$$$ or PACs and the people who go to their 10k a plate dinners. Average Americans don't matter in the equation.
bodyblue says:
12:43 PM, 07/30/11
The free market is democracy in action. The people vote with their hard earned dollars for the item they think is best.
"The ones against freedom of choice regarding religion, sex, marriage?"
Complete and total Democratic talking point garbage...1487 would be so proud. You just regurgitate the same old liberal lies. You have demonstrated your disdain for the US over and over. The current party in the White House wants to change the US into a Euro style big government system. The radical Republicans that surged into power last November are proof indeed that there are HUGE differences in the party. It is a revolution against big government.......all all the Left can do is vilify them as crazy loons. It is revolting. The people spoke loud and clear....the old ways of doing things are done at least for now. Do you think that this debate over spending would not be happening except for the Tea Party? More power to them and hail the shit disturbers in that caucus!
blueguydotcom says:
03:44 PM, 07/31/11
@body - so nice how you ignore the massive expansion of government during the last administration. They both play the same game: bigger, bigger, bigger.
The old ways are not gone - slightly different wrapping but same prize inside. You still have boomers declaring that nobody has a "right" to cut their medicare and social security. They believe by virtue of birth they are entitled to support by the taxpayers. Nobody will dare rip into the massive programs that benefit the elderly as the elderly vote in big numbers. Likewise, good luck seeing a change in laws that benefit tech, oil, healthcare, etc. Those laws were essentially written by those industries and those laws help squash choice, driving all consumers to a few big players for everything.