debate over the next
Corporate Average Fuel Economy (CAFE) standard (set to run from 2017
to 2025) has just begun, and the political posturing appears to be in full
effect. From Department of Transportation (DOT)
Secretary Ray LaHood to Senators and governors, everyone was expressing vocal
thoughts about the "rough draft" of standards that United States
President Barack Obama's (D) advisors unveiled on Monday.
I. 56 MPG = Lost Jobs?
Given that much of America is still recovering from recession, the topic of job
loss is a sensitive one for many Americans, and is a powerful phrase to invoke
Rick Snyder (R-Michigan), whose state is home to America's three
biggest automakers, was among 14 governors who wrote a cautionary letter to
the heads of the DOT and the Environmental Protection Agency (EPA),
employing this phrase to its full effect.
If fuel economy standards are increased too quickly, resulting in
more expensive vehicles, many consumers can be expected to hold onto their
older vehicles longer and defer buying a new car, which could put auto jobs
across the country at risk.
The letter does not specify whether the proposed 56.2 mpg standard counts as
increasing fuel economy "too quickly", but the timing certainly make
it seem like a criticism of the plan. Governor Snyder points to estimates
that the plan will add between $2,100 USD and $2,600 USD to the cost of a
vehicle, on average. He urges the government to adopt a
"sensible" standard, but stopped short at saying what such a standard
would be in mpg.
The White House apparently decided to take the letter as a compliment,
with spokesman Matt Lehrich writing:
We appreciate the governors' support for a national fuel economy
standard that will save American families money at the pump and keep the jobs
of the future here in America, and we share their commitment to preserving
affordability and consumer choice.
II. Mich. Sen. Levin (D) Expresses Mixed Feelings on Bill
Sen. Carl Levin (D-
Michigan) sent a separate letter to the White House demanding information on
what data they used to decided on the proposed CAFE numbers. In an
interview he states, "We want to know how they arrived at that starting
point. We will get that information one way or another."
The Senator admits, though, that without an agreement on the standard, the
solution might be even less appealing. If an agreement is not put in
place, states like California will likely look to enact their own guidelines.
While this might please some state rights advocates, it is something
automakers oppose -- they prefer a national standard. Sen. Levin
also opposes such provisions, stating,
"[States] should not be given a waiver [to set their own
But without a binding national agreement, the government may have a tough time
stopping states from doing so. Technically the U.S. Environmental Protection
Agency, a federal entity, has to approve of states' plans and grant them
waivers from national standards. A 2007 Supreme Court ruling in the
case Massachusetts v. EPA, (No.
05-1120) found that it was illegal for the EPA to obstruct states from
implementing their own standards by refusing to grant waivers. The
message seems unequivocal -- the EPA must grant waivers if states want them.
Sen. Levin adds that he is "very concerned" about the prospect of
lost sales and jobs from the proposal.
III. Ray LaHood Wants Standard to be Finalized by July
Whether or not the final draft of the standard contains compromises, such as a
lower mpg target, Secretary LaHood wants it to be delivered to the EPA and DOT
by the end of July.
Secretary LaHood was critical in finalizing the current CAFE standard, which
will require automakers to reach
34.1 mpg by 2016. That standard, first set into motion by departing
President George W. Bush (R) and finalized by President Obama, is estimated to
cost automakers $51.5B USD over its course.
The tricky part about the standards is that while they cost on the vehicle
side, they force savings at the pump. The current standards are estimated
to cut 1.8 billion barrels of oil by 2016. With oil currently at $94.77
USD/barrel, that's a savings of $170.6B USD. Further, by cutting fossil
fuel combustion, the bill reduces emissions of toxic nitrogen and
sulfur-containing gases that have been linked conclusively to chronic
conditions such as asthma.
On the other hand, the bill may have raised other costs, as it is thought to
have made the average vehicle less safe, contributing
to automotive fatalities.
More extreme elements of the environmentalist movement have criticized both the
previous and the pending CAFE provisions as
being too weak.
The DOT Secretary offered cautious optimism that a compromise will be reached, commenting,
"Our people are very professional at this. I think we proved that with the
last CAFE standard. We got it right because we had every car company standing
in the Rose Garden with the president. We want to get it right this
quote: if the air quality is bad in the city where you live you should move to a smaller one.
quote: if electrics and hybrids were such good deals they wouldn't need subsidies to sell at the higher than average prices they are at now.
quote: Such statements show a complete lack of understanding of the basic economic principle called "economies of scale."