Obama’s clean-air plans create more jitters for auto industry

January 20, 2009


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 more than 13 states to enforce their own greenhouse-gas emissions 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 by 2020, according to some calculations.

Environmentalists and state regulators say 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,” said General Motors spokesman Greg Martin. “Right now, we’re just trying to make it through the current situation.”

U.S., foreign opposition

GM and other automakers, including foreign brands like Toyota and Honda, have vigorously opposed implementation of the California rule 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 also 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 became president.

According to Mary Nichols, chairwoman of California’s Air Resources Board — the agency that would implement and enforce the regulation — the likelihood of getting the waiver is “over 95 percent.” 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.

CAFE vs. California

Currently, the only standard that automakers have to meet is Corporate Average Fuel Economy, or CAFE. Slightly more than 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 fleet-wide 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 to the California rule.

Under it, carmakers have to show a 30 percent overall reduction in greenhouse gas emissions on their vehicles by 2016. That’s the same kind of regulation employed in Europe and Japan, where cars have strict emissions requirements but not specific mileage standards.

GM Vice Chairman Bob Lutz said he expects help in negotiating an alternative to the California rule 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 rule would add up to $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.”


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