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
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)
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
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