President Obama is expected to announce new fuel efficiency standards and a mandate which would switch all government vehicle purchases to "green" designs. The announcement is expected to come later today.  (Source: EGM Car Tech)

The decision could give a boost to American hybrids and EVs, like the Chevy Volt. The government almost exclusively buys cars from companies whose headquarters are in America.
Government will only buy hybrids, PHEVs, BEVs, ethanol vehicles, compressed natural gas, and fuel cell vehicles

While auto purchases by the U.S. government are dwarfed by the private sector's purchases, they are still significant.  Sedans, trucks, cargo vans -- the government regularly refreshes its fleet, buying up to 50,000 vehicles a year [source].

Thus U.S. President Barack Obama's plan to shift all federal government vehicle purchases to "green" designs by 2015 could be a market-shifting event.  The President will unveil his plan today -- The Detroit News received early word of the announcement.

I.  What's a "Green" Car?

According to the government's laws "advanced vehicles" (aka "green" designs) include electric vehicles, hybrid vehicles, plug-in hybrid electric vehicles, fuel cell vehicles, and vehicles that can run on E85 ethanol.  It is unclear if compressed natural gas (CNG) vehicles will qualify, but it seems likely.

The move won't be as dramatic a transition as one might suspect.  In 2010, of its approximately 50,000 vehicles purchased, approximately 9,000 were hybrids and another 14,000 were E85-ready.

The U.S. government primarily purchases American vehicles.  Last year Ford (F) led sales to the government, with General Motors (GM) close behind.  Chrysler was a distant third.

Certain models could see a particular boost from the decision to go all green, for example Ford's Transit Connect EV (a cargo van) and GM's ethanol-capable trucks.

II. Obama Pushes Alternative Fuels

In addition to the green car promise, Obama also is expected to try to push hard for new incentives for compressed natural gas (CNG) vehicles.  In 2010, the White House endorsed a bill that looked to give $4B USD in incentives for CNG vehicles.  It saw some support from both parties, but ultimately fell as the government sought to a degree of "fat" from the budget.

President Obama released a October 2009 mandate asking government employees to drive government vehicles less and to use alternative fuels (such as ethanol) whenever possible.

Ethanol is a hotly debated topic, which has largely flown off the radar as the EV craze has hit the market.  Corn ethanol is expensive, raises food prices, and has been shown to increase emissions of carbon dioxide and pollutants.  By contrast the growing supply of cellulosic ethanol from companies like Coskata greatly reduces lifespan emissions and mitigates the impact to food crops.  

The problem is you don't know which kind of ethanol you're getting at the pump, and the government has supported both kinds with past legislation and policy decisions under the Obama and Bush administrations.

III. New Fuel Efficiency Standards: 2017-2025

Congress in May 2009 enacted legislation to support President Obama's mandate that all automakers reach an average of 34.1 mpg for light vehicles by 2016.  That's a 40 percent increase in fuel efficiency and is expected to save approximately 1.8 billion barrels of oil over the lifetime of the vehicles produced in the 2016 model year.  

The administration estimates that automakers will have to pay $51.5B USD to implement the proposal, but automakers have complained that the actual cost may be higher.  The administration has offered them a number of loans and research grants to help ease the burden.

Today President Obama is expected to reveal what the government fuel economy goals are for the 2017-2025 time frame.  

According to current proposals by the U.S. National Highway Traffic Safety Administration (NHTSA) and U.S. Environmental Protection Agency (EPA), fuel economy targets could 47 to 62 mpg for 2025.  The low figure would represent a 3 percent annual efficiency gain, while the high one would come from a 6 percent annual gain.  The low target would cost $770 USD per vehicle, while the high target would cost an estimated $3,300 USD per vehicle.

The two agencies will announce their separate proposals on September 1.  Congress must then consider Obama's earlier proposal and the two agency proposals and try to craft legislation to implement the mandate.

Approving the plan may be tricky business given the divided, partisan nature of the House.  Without legislative backing from the U.S. Congress, the proposals will have no authority to enforce their targets.

One disadvantage to pushing fuel efficiency gains is that it tends to force automakers to push lighter vehicles out to consumers.  Lighter vehicles tend to fare worse in crashes and have higher fatality rates.

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