Obama to Request $2B USD for EV, Hybrid Research; Tax Credit for LNG Trucks
March 15, 2013 11:48 AM
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He's learned his lesson about risky loans, but Obama wants to increase research grants
The auto industry isn't very happy with the federal government. After two decades of inaction on the fuel economy, President George W. Bush (R) and his successor, current President Barack H. Obama (D) have pushed legislation through Congress to
stiffen fuel economy rules
. Those rules have cost the industry billions. But both Presidents tried to make up with automakers by pushing federal funding initiatives that help automakers with the cost of fuel economy research,
on the taxpayer dollar
I. After a Decade and a Half Stall, Bush Kick-Started MPG Progress
A debate of economics aside, the approach seems to be working. In a report to be released today, the
U.S. Environmental Protection Agency
(EPA) is expected to announce that between 2007 and 2012 fuel economy rose 16 percent, while carbon dioxide emission decreased by 13 percent.
In a report last year called "
One Decade of Innovation, Two Decades of Inaction
", the Pew Institute points out that there was essentially no gain in fuel economy between 1985 and 2000, despite rising oil prices in the late 1990s. The agency says that this was the result of so-called "Reagonomics", writing:
In the mid-1980s, however, Ford and General Motors lobbied the Reagan administration to lower the standard. NHTSA complied, setting a 26-mpg standard for 1986, prompting Chrysler Chairman Lee Iacocca to declare, “We are about to put up a tombstone: ‘Here lies America’s energy policy.’ ”
(Note: 26 mpg was actually a drop from the 1985 standard of 27.5 mpg for cars.)
This chart speaks for itself. [Image Source: Pew Institute; AP, White House]
But it was another Republican President -- George W. Bush -- who reversed that stall. In his 2006 State of the Union speech he turned heads, commenting:
This Congress must act to encourage conservation, promote technology, build infrastructure.... so America is less dependent on foreign oil.
He would go on to
sign into law
Energy Independence and Security Act of 2007
(EISA). The EISA would bump fuel economy standards to 35 mpg by 2020.
EISA prompted automakers to invest in new
fuel efficiency technology
, such as
direct injection/turbo-boosting engine technology
. At the same time, automakers were forced to
discontinue some "gas guzzling" models
to boost their average fuel economy.
II. Obama Follows up With Stricter Standards, but New Incentives
But for all the moaning and groaning among automakers with EISA, it was about to even stricter with President Obama. President Obama
struck down a Bush-era mandate
that forbid states from enacting their own stricter standards, paving the way for
some states like California
to set much loftier targets.
The new President also rolled back the deadline for
reaching 34.1 mpg
to 2016 in a 2010 CAFE update. Those updates are expected to cost the auto industry $52B USD to implement, while potentially raising vehicle prices slightly and limiting selection to an extent.
President Obama's "test drive" of a Chevrolet Volt back in 2010. [Image Source: AP]
President Obama has also proposed rules that would set a CAFE target of
54.5 mpg by 2025
. Automakers are
upset about the proposal
, which the
National Highway Traffic Safety Administration
(NHTSA) estimates will cost them $144-152B USD.
The EPA and NHTSA claim that the 2017-2025 push to 54.5 mpg will save $1.7T USD in fuel costs (although the
price impact on vehicles
is not mentioned; one report suggest vehicle prices may rise $10K USD by 2025). They say that by 2025, America will have reduced its oil consumption by 2 million barrels per day. They add that by cutting 2 billion metric tons of carbon dioxide emissions over the same period society will have "saved" $326-451B USD (operating on the
controversial "carbon credits" model
Some fear the new fuel economy standards
may cost lives
, as automakers often reduce frame integrity during weight cutting, and also tend to cut out features like extra airbags. Automakers are at least relieved that the President backed of an earlier stricter target of 62 mpg, which they argued
could "kill the auto industry"
III. Speech to Call for $2B USD in Research Grants
At a speech at
Argonne National Laboratory
, a top federally funded research institution in the President's home state, President Obama is today
set to unveil
a proposal to toss a carrot to the auto-industry, which has at times been less than happy with him.
The video below will go live at 2:30 p.m., along with a corresponding live chat on Facebook.
JOIN THE LIVE CHAT
Located approximately 30 minutes west of Chicago, ANL conducts
a great deal of battery, fuel cell, and biofuel research
-- a seemingly appropriate setting for the President to unveil a new fuel efficiency proposal at. Under the President's requested proposal for Congress "[$2B USD in] funds would be set aside from royalty revenues generated by oil and gas development in federal waters of the Outer Continental Shelf."
The proposed $2B USD trust may in reality see a
far smaller funding total
, particularly amid the rancorous federal budget debates. In 2012 President Obama asked Congress for $650M USD for advanced vehicle research, but Congress only offfered up $330M USD.
President Obama's call for vehicle research funding will be held at
Argonne National Lab. in Illinois. [Image Source: ANL]
While hybrids have sold well in recent years,
EV sales have disappointed
, even as automakers put their marketing might behind the green,
cars. Critics say that it's good Congress isn't giving more funding, in that the technology appears to be failing. Proponents, conversely argue that the lack of funding is slowing development, which in turns increases EV costs and reduces their performance.
But critics are at least relieved that the President has turned away from providing loans to individual automakers or alternative energy startups. After the boondoggle of
Solyndra LLC going under
taking $553M USD in federal loans with it
, President Obama has carefully shifted funding requests towards research. No loans have been granted in the last two years from a
$25B USD fund Congress set aside
for vehicle research.
The Obama Administration's energy policy is in the midst of an overhaul
amid the departure
U.S. Department of Energy
, a Nobel Prize winner.
IV. CNG Tax Credit Proposal Revived
Also on the President agenda Friday will be plugging natural gas for vehicles.
Compressed natural gas
(CNG). The U.S. produced 25.3 trillion cubic feet (25.3e12) of natural gas last year,
U.S. Energy Information Administration
Low costs and domestic production
make this fossil fuel an attractive alternative to petroleum; the President thinks it could play a small, yet important role in the automotive market.
The President wants a tax credit for CNG and EV truck buyers equal to half the incremental costs (50% of the
premium over a similar model gas vehicle
President Obama wants tax credits for CNG truck buyers. [Image Source: Truck Trend]
It appears the President has dropped
a separate proposa
l dubbed "
National Community Deployment Challenge
", which called for $1B USD to fund 10-15 "green" EV-friendly communities (paying for public chargers, etc.).
To contrast these funding initiatives with past government transportation funding,
estimated that the government has spent around $1T USD to date to develop the commercial airport system.
And not all EV firms have proven disappointments. Tesla Motors Comp. (
) recently announced a plan to
repay its government loans early
, amid strong sales.
The Detroit News
This article is over a month old, voting and posting comments is disabled
3/15/2013 12:14:26 PM
The obvious reason the federal government has pushed efficiency has one direct correlation to crude oil prices.
It takes a few years of bureaucratic inefficiency for the ball to start rolling, then another few years for the industry to research, engineer, and adapt to those requirements. The 70's oil crisis was delayed into the early 80's and efficiency problems were mostly solved with fuel injection, and the spike in oil prices beginning in 2002 weren't compensated for until 2005+ with the ramp up in production and sales of hybrids, record orders of the 4-cylinder option, 6-speed automatic transmissions, direct injection, and now turbo charging/electric vehicles.
The federal government wouldn't have to pass this legislation (to increase "MPG") if their
agendas didn't destabilize fuel prices in the first place...
RE: Fuel prices
3/15/2013 8:58:20 PM
I know everyone will argue supply and demand when it comes to the price of oil, but with the way this product is structured in society it seems it works backwards.
Oil producers want a set amount of revenue per year from their product, if consumers purchase less they raise the price to compensate. Oh wait, but it is traded on the markets so it should drop in price with lower demand, but then remember the producers can also control how much supply is available so they lower the supply with the lower demand so the price rises to bring revenue back to normal.
Only when there is a viable alternative to oil will supply and demand have any chance of working as it does in other markets. But then if the oil companies are the ones who develop the alternatives, where will we be?
RE: Fuel prices
3/15/2013 10:41:25 PM
You've completely left out prospecting. They have far more impact on the price than you give them credit. And without them we really WOULD be in the situation of the suppliers controlling prices.
"Young lady, in this house we obey the laws of thermodynamics!" -- Homer Simpson
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