Green Update: Controversial New Fuel Economy Standards

August 2nd, 2011

Infographic: New fuel economy standards

Everything the Obama administration does these days is controversial, and yet most of the media (and the auto industry) have hailed the new CAFE (corporate average fuel economy) standards, signed last Friday.

They raise the targets for cars to 54.5 mpg by 2025 (from the current 35.5 mpg standard), and most environmentalists cheered.

The auto industry majors, with the exception of Volkswagen, have endorsed the new regs and in fact helped create them.

They got two important concessions from the administration: Light trucks and SUVs get a lower standard (3.5 percent improvement per year vs. 5 percent for cars), and the regs will get a “mid-course review to see if targets during the latter part of the nine-year period have to be adjusted in light of manufacturer costs, technology and sales.”

We know how important trucks are for the industry. And, as the debt deal just showed, the administration is adept at providing escape hatches.

But on balance, the cheerleaders tell us, there may be as much as a $1.7 trillion cost savings for consumers down the road—even though the vehicles will cost more. How much more, of course, we don’t know.

A whole bunch of credits and incentives is expected to benefit electrics, and the EPA has yet to set specifics for how the fleet averages will be calculated. There is nothing in the regs to encourage clean diesels. So a lot of questions remain.

I have never liked CAFE standards for two big reasons. First, the government basically tells the industry how to build its cars to a certain standard, and the rules it sets are complex, sometimes with unforeseen consequences.

Gas prices in U.S. vs. EuropeFar better would be a much higher gas tax that would “force manufacturers to make fuel efficient cars to keep up with the market demand and would create a more natural mpg floor.”

This market-driven approach has made European cars in many cases a better fit with American consumer demands. We know how few Volts and Leafs are being sold.

Second, CAFE sets a fleet average and permits automakers to shift mpg averages from one category to another. Even so, will the small number of $40,000 Volt sales be able to offset low-mpg cars like the Malibu and Corvette? How many Leafs will it take to balance the Altima’s sales? Will U.S. muscle cars be on the way out with the new regs?

These are just some of the questions raised in an interesting post that I recommend.

Are the new CAFE regs going to benefit the consumer in the next 14 years? Give us your opinion.

—jgoods

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  1. Randy
    | #1

    Having been in automotive R&D for some decades, I can tell you that:
    1. There is no 100mpg invention that is being suppressed by the car makers.
    2. Automakers have fought virtually every government requirement imposed ever.
    3. Automakers have always risen to the challenge and surpassed the government requirements.

    I think the automakers are finally starting to realize that they can reach these goals and that the price of oil is never going to go back to even levels of ten years ago. They also realize their lack of responsibility over the past few years caused them to go into bankruptcy in the first place and they must change their ways to survive.

    It’s great to see them embrace these new economy standards. They may not be able to achive these levels of efficiency, but I think if they can’t the government will give them some leeway. The end result will be less dependence on foreign oil and more efficient cars for consumers.

  2. panayoti
    | #2

    CAFE standards have always been rigged, more for political rather than practical reasons. You can’t create uniform standards across a broad swath of vehicles and companies when you rig the formula for each manufacturer based on their product mix. The consumer is only an indirect statistical variable in the larger scope of your question. When left to their own bean counters directives, manufacturers will then ignore or decide to follow the rules set up by government bureaucrats.

    If you had said that a bunch of manufacturers could achieve a 40 mpg goal for highway driving for a non hybrid vehicle 5 years ago, you would have been laughed off the street. Low and behold that threshold has been achieved by science and innovation. The problem is that it is a myth. No one believes or actually achieves that 40 mpg figure in real world driving. Dynamometers, mpg measurements and the hills and mountains of West Virginia, Colorado and Pennsylvania are highly uncorrelated. Yet every advertisement you see gives the highway figure for mpg and not the far more realistic city rating.

    In 14 years we could all be driving Prii, TDI diesels, EVs and conventional hybrids because of wars, supply disruptions in the Middle East and world wide depressions and economic dislocations. So the question is moot for a 14 year time frame, but for now, I see no benefit for the consumer other than falsely raising hopes for a more economical future. Only when the profit motive surpasses the idyllic dreams of Nirvana and government planners will the consumer see any benefit….and then it will cost them.

  3. jgoods
    | #3

    @ panayoti
    I dunno, Sr. P. As much as I don’t like it, I really think CAFE is and was an important force for fuel efficiency. Remember how California used its power to finally get its approach recognized by the EPA? As you said, before 5 years ago, most people did not take this stuff seriously. Nor did the manufacturers until the govt got on their collective asses. Then and ONLY THEN did they put “science and innovation” to work.

    You are right about the artificiality of mpg figures, yes, but if the govt didn’t provide them, you’d have all kinds of chaos and false claims.

    Re the future: Of course we don’t have the answers at this stage, but my question assumed that the new regs would be in place and would hold, unless the govt copped out “mid-course.” How would the new regs negate the profit motive, as you suggest?

  4. panayoti
    | #4

    @ jgoods
    I believe you misunderstood my comment. I think you assumed that new regulations would negate the profit motive. I was suggesting that new regs don’t truly benefit consumers because the improvements in mileage efficiency always come at a cost. That cost is always borne by the consumers in the form of higher prices paid for the vehicle for the gain in efficiency.

    Automakers always balk at governments telling them what they must do because it raises the cost of doing business. Ultimately those costs are always passed on to consumers. Much like today, consumers are balking at buying new and are instead buying used (a big mistake, in my opinion) because new car purchase prices have risen dramatically over the years (used car prices have risen even more). Those increases in new car prices are justified because of all the R&D, safety, performance and fuel economy improvements over the years.

    To your point, clearly, we are driving far superior, technologically advanced and fuel efficient cars today than we did yesterday, but, at a far greater cost than yesterday, which is the point I was trying to make. Manufacturers would prefer to “innovate” on their own rather than have to be pushed. Being pushed deters innovation because of the mandated costs imposed by government and diverts energies that might be directed elsewhere and prove to be more profitable.

  5. Randy
    | #5

    I have to disagree somewhat. My first car was a 1955 chevy ragtop with a straight six and three on the column. Now that was a low tech car. Carburator, no emission control (well, actually it did have a PCV system) and mediocre mileage. Us old farts all remember the pre-computer days with the annual (or more often) tune ups, new plugs, carburator rebuilds, rotted-out exhaust systems, hard starting, flooding, stuck chokes, and clouds of blue or black smoke. In addition, the simple suspension systems and primitive tires and brakes meant tires didn’t last long, brakes didn’t last long, shocks didn’t last long, etc.
    Lets be realistic. If you compare the price (in adjusted dollars) for base-level vehicles today compared to, lets say 1965, you’ll see the new car is cheaper, equipped like (or far beyond) the luxury car of 1965, much more economical and reliable, better riding, quieter, faster, smoother and of course light years ahead in safety. In addition, the common practice of leasing was unheard of in those days for the average consumer, which makes it much easier to drive a nice car economically. (depending on the car)

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