Print 82 comment(s) - last by chick0n.. on Mar 19 at 11:56 PM

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.)

Reagan v. Bush
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 the 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.

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.

Argonne National Lab
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, yet expensive 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 and 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 of U.S. Department of Energy Secretary Steven Chu, 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, according to the 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).

CNG Ford Truck
President Obama wants tax credits for CNG truck buyers. [Image Source: Truck Trend]

It appears the President has dropped a separate proposal 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, recent reports 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. (TSLA) recently announced a plan to repay its government loans early, amid strong sales.

Source: The Detroit News

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RE: Taxpayers money
By kingmotley on 3/15/2013 2:31:37 PM , Rating: 1
The results of said research, like cleaner air, and better security through less dependance on foreign oil?

RE: Taxpayers money
By GotThumbs on 3/15/2013 3:37:55 PM , Rating: 1
You forget about the companies that have been funded by the US Government ......and then fail or are bought by foreign companies.

The US Government NEEDS to stay out of investing, because they suck at it.

Space X is making great strides and is a privately funded company. Good businesses will succeed on their own.

RE: Taxpayers money
By MichaelR on 3/15/2013 11:13:15 PM , Rating: 4
Space X is making great strides and is a privately funded company

Space X has received hundreds of millions in government research grants:

RE: Taxpayers money
By GotThumbs on 3/18/2013 9:10:02 AM , Rating: 1
A grant is NOT the same as the Federal Loans that solyndra, A123, and Fisker have received.

Personally, I'd like to see the grant funding eliminated or reduced as well. If/when Space-x builds a replacement....they will still own/license it and the grant money will NOT be re-paid to the true investors.....US. I can personally wait an extra 5 years for space travel to focus tax dollars where their immediately needed.

Best Wishes,

RE: Taxpayers money
By CeriseCogburn on 3/18/2013 11:33:12 AM , Rating: 1

obama says repubs suck ! SEQUESTER OH DEAR GOD SEQUESTER !!!



Obama: "I think i'll blow a couple billion on my cronies"

RE: Taxpayers money
By JediJeb on 3/15/2013 8:23:13 PM , Rating: 5
If GM, Ford, Toyota, ect develops new tech through government funding, then it should be considered open source for anyone to use. That should be the condition of tax payer money being used for their research.

If you want taxpayers to fund the research you need to meet new guidelines then that is what you must sacrifice, else you must fund it yourself.

RE: Taxpayers money
By TSS on 3/17/2013 4:08:13 AM , Rating: 3
+10 for the moral, -100 for business sense.

What's the point in tax payers funding research if that research can then not create funds for the tax payers? Open source means anybody can use it, so the chinese can just copy it, retool a factory or 2 and ship you cheap stuff of whatever it is you paid for to research, so you can ship even more money to china.

The whole point of subsidy and incentive is to take away artificial barriers of entry to markets. And by artificial i mean ideas that work can't get funding because of a financial crisis having everybody scared, or simply because a bank manager has no clue about inventions.

Because yknow what those companies then do? Hire people, create jobs. That's how the benifit flows back to the tax payers. That's not just a 100% return, that's a 500% return as each tax payer (should) only pay about 20% of his income on tax. And that works, it has always worked and will continue to work.

What your problem is is corrupt politicians corrupting ideas such as incentives and subsidies. The idea is to give they money for ideas that WORK, but just can't get the money. The idea is NOT for goverments to try and control the market to determine what should be developed, by only offering subsidies and incentives in 1 area and ignoring or even taxing other markets.

For example, why has the government canned subsidies and incentives for fuel cells and hydrogen technology? Both are just as unviable as EV is at this point but why is EV being developed and not those? Why isn't there any money going into nuclear research to actually power all these EV's, or to power elecrolysis plants to create hydrogen etc.

I'll tell you why. Cause the politicians are corrupt, they told their friends to get a stake in EV companies and then suddenly "EV's are the future!". That's simply it. It's the core of your problems, and unless that is solved, you can put tax payer money into anything and it will simply vanish.

RE: Taxpayers money
By chick0n on 3/16/13, Rating: 0
RE: Taxpayers money
By Paj on 3/18/2013 9:36:58 AM , Rating: 2
Ethanol is cleaner burning

That has nothing to do with energy security

No it doesnt

Learn to spell before you post

RE: Taxpayers money
By chick0n on 3/19/2013 11:56:27 PM , Rating: 2
ROFL Ethanol is cleaner burning ?

ok genius. ya the one needs to get ur facts straight.

so it cost 10 to create 5 and the output is 2 means its a good thing. Dang.

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