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Obama Fuel Efficiency Deal Could Provide an ‘Out’ for Detroit

By Stephen Lacey  

"Obama Fuel Efficiency Deal Could Provide an ‘Out’ for Detroit"

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The Obama Administration is set to announce aggressive new fuel efficiency standards tomorrow, scoring a rare victory on the environmental front. But the details of the agreement may weaken the standards and allow automakers to delay action on improving the efficiency of America’s fleet of vehicles.

At issue is a “technology re-opener” that allows auto manufacturers to fight the standards after 2021 in the hopes that they can re-negotiate rules with a future administration that may be more lenient on the industry. The re-opener potentially gives auto companies an incentive not to develop technologies immediately so they can argue down the road that the standard can’t be met.

Under the current timeline, the administration’s proposal would increase fuel efficiency for cars by 5% per year and increase efficiency of light trucks by 3.5% per year through 2021. After 2021, standards for light trucks would climb to 5% through 2025 – bringing the efficiency of the entire U.S. vehicle fleet to 54.5 mpg from today’s 27.3 mpg. Those are the highest standards proposed since 1987. The most recent standards passed in 2009 require the nation’s fleet to average 35.2 mpg by 2016.

Despite the rise in value for used fuel-efficient cars and surveys showing two thirds of Americans want more efficient automobiles — and the inevitably of rising gasoline prices because of peak oil — American manufacturers say they are skeptical that consumers will buy them. Hence, the inclusion of a re-opener that gives auto companies a “self destruct” mechanism if they don’t think the standard is working — or if they decide to make it unworkable themselves.

Foreign manufacturers are also criticizing the deal, saying that tax credits and more-lenient standards favor American companies that produce larger trucks and SUVs. But as of today, at least ten top auto companies say they support the deal. The ability to re-negotiate standards in the future likely played a major role in picking up so much industry support.

While the re-opener does present some potential challenges, the agreement does demonstrate that aggressive, workable environmental regulations can be agreed upon by industry. In fact, the United Autoworkers Union came out in support of new regulations because they would “create new opportunity for American workers.”

In June, a group of 15 prominent republicans sent a letter to the White House urging it to increase fuel-efficiency standards beyond 50 mpg, mostly for national security reasons. Some groups, including Center for American Progress, have called for a standard as high as 60 mpg – a move that would reduce American oil consumption by 44 billion gallons by 2030. While lower than what some groups wanted, the current standard would still save tens of billions of gallons in the coming decades.

With anti-environmental rhetoric among Republicans at an all-time high, the White House has had few wins on the energy front. But even with major trade-offs, passage of a new fuel-efficiency standard is a big move for the Obama Administration, which reportedly convinced auto manufacturers to drop demands for a 40-mpg standard and agree to a 54-mpg standard.

Along with fuel-economy standards, the Administration is currently working on a first-ever mercury and air-toxics standard for power plants. Although Obama has been criticized as not doing enough on the energy front, these proposals would be two of the most significant pieces of environmental policy in years.

Is that something to celebrate or lament?

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