President Obama Instructs EPA to Review Decision to Deny State Greenhouse-Gas Limit Waiver

Fulfilling a campaign pledge, President Obama announced today that he has instructed the Environmental Protection Agency to reconsider its 2007 decision that denied California and the 13 states that have adopted California’s auto emissions rules a Clean Air Act waiver that would have allowed them to establish limits on CO2 emission from automobiles.

California and the other states (Arizona, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont and Washington) wanted the EPA to allow them to restrict CO2 as it allows them to restrict other pollutants from internal combustion engines, but the EPA’s argument was that California’s rules at the time would result in actually higher greenhouse gas emissions (and fuel consumption).

Unlike the smog-forming pollution that California and its compatriot states are allowed to regulate, CO2 is not a smog-forming gas, but a greenhouse gas, that has been linked to an increase in global warming.  California argues that CO2 is something that it should be able to regulate; historically, California has been allowed to set its own pollution standards because it enacted the first of its emission standards prior to Federal regulations covering the same; however, the Federal government has historically held the authority to set fuel efficiency standards.  Basically, California’s regulation to reduce CO2 emissions is a de-facto fuel economy standard, because the only way to reduce CO2 emissions is to burn less fuel.  As fuel is burned, CO2 is released; that’s the simple science behind it.

It’s funny how certain news items just keep coming up year after year.  Last year, on February 26, we wrote about how California wanted to require a fleet average of 44 miles per gallon by 2020 under its proposed greenhouse gas limits.  The current California CO2 standards, however, cover model years 2009 through 2016, and would shorten the time for compliance from the 35 mpg by 2020 requirement that CAFE calls for by four years.

This move – which Senator McCain, then-Senator Clinton also proposed during their presidential campaigns – is probably the least prudent choice of all the ways to reduce dependence on imported oil and reduce greenhouse gas emissions.  The problems are numerous; first, allowing individual states (or even a block of states with a single unified regulation) to set CO2 limits – and therefore fuel economy standards – risks adding thousands of dollars to the cost of everyone’s new car or truck, or even more thousands of dollars to the cost of everyone’s new cars or trucks in those states, or restricting market choice in the California-mirroring states.

Second, automakers may complain about the cost of complying with higher CAFE standards, but having to maintain two separate fleets for different halves of the country would be an even bigger, and more expensive, problem.  They might need smaller, lighter pickup trucks for California and friends, while still offering larger pickup trucks to buyers in other states, because Texans, for example, probably have little interest in a 33-mpg California-spec pickup truck.  Automakers will be faced with the prospect of either abandoning half of the market (California and the states that adopt California standards), building vehicles that the other half of their market doesn’t want to buy, or producing the aforementioned two distinct fleets.

An obviously politically unpopular alternative (OK, one that might be considered political suicide) that we at Full Metal Autos have advocated from time to time is simply increasing the gas tax.  Has there ever been a time in history like the summer of 2008 when automobile buyers altered their purchasing habits more dramatically because of the spike in gasoline prices (such as the Honda Civic outselling the Ford F-150)?  If you compare the fleet mileage of vehicles sold in July 2008 with the fleet mileage of vehicles sold in July 2007, it’s probably an even more dramatic improvement than what California is looking for over the next few years, and certainly more dramatic than California and the other states were hoping to see in a single year.   That situation was a perfect example of how higher gasoline prices will alter consumer behavior far more dramatically than would gradually offering a high-efficiency vehicle mix.  Californians still buy new pickup trucks and SUVs, and while the Toyota Prius may be a very popular car in California, not everyone drives a 40+ mile per gallon car in that state.

I see this move, if the EPA reverses course on its December 2007 decision as expected, as yet another nail in the coffin of the US domestic auto industry.  For his part, President Obama said his administration intends to consider the “unique challenges facing the American auto industry and the taxpayer dollars that now support it.” He also said, “Our goal is not to further burden an already-struggling industry. It is to help America’s auto makers prepare for the future.”

He’s saying the right things, but I have trouble seeing how this decision can do anything but hurt GM, Ford, Chrysler, and even the larger transplants such as Toyota.  I disagree with this decision, which seems to cater more toward the environmental fringe – or those with uninformed viewpoints – rather than to the political center, where I believe politicians should govern from in most cases.  When politicians – not just President Obama, but members of Congress and Governor Schwarzenegger of California – assume that they can legislate their way out of a problem, and that there will not be unintended consequences stemming from a move such as this one, they are showing that they apparently do not have a full grasp of the issues at hand.

Bob Lutz famously said [and I’m paraphrasing], CAFE is like trying to make people skinnier by mandating smaller pants sizes.  While I object to the concept of CAFE and have observed that over the past three decades, it’s not doing what it was intended to do.  The definition of insanity is trying the same thing that didn’t work the first time and expecting a different result the second time; if CAFE has failed over 30 years, why continue using it?  But if we’re stuck with CAFE, I’d sooner see some sort of compromise hashed out where there is a single standard for the entire country; if California wants 44 mpg by 2020 and Congress wants 35 mpg, and California and its ilk make up half of the vehicle market, why not use some simple mat, split the difference, and go for 39.5 mpg by 2020 nationwide?  The result would be the same overall, but the implementation would be much simpler.  I still think, however, that a $2 per gallon gas tax would do far more to reduce greenhouse gases and incent the purchase of more efficient vehicles than mandating the manufacture of small vehicles.