The New White House Fuel Efficiency Rule: Count the Loopholes

The final fuel-efficiency rule released by the Obama administration this morning includes what some lobbyists have nicknamed "the German provision," giving automakers that sell less than 400,000 vehicles in the U.S. an exemption for 25 percent of their fleet.

462_general_motors_president_and_ceo_fritz_henderson.jpgGM CEO Fritz Henderson’s company can earn fuel-efficiency "credits" for its Chevy Volt. (Photo: IB Times)

"[W]e recognize that we had to give a little bit," Environmental Protection Agency (EPA) chief Lisa Jackson told reporters today. "The good
news is that, by 2016, we will have caught up, and all
autos sold in this country are going to have to meet the one standard."

But the "German provision" isn’t the only loophole that made it into today’s new rule.

The Obama administration also would allow car companies to earn credits for achieving a lower CO2 emissions standard than the government requires in any specific year.

Those credits could be carried forward five years or back three years, used to make up for deficiencies in other vehicle fleets, and even earned this year, ahead of the new fuel-efficiency standard’s phase-in period, which begins in 2012.

For instance, an automaker that beats the standard for its cars could use the credits it earns to safely produce more gas-guzzling trucks. That automaker could earn even more credits for any electric vehicles it produces, for improving its air-conditioning systems, or for making more "flex-fuel" autos that can run on ethanol-blended E85 gas — which is available in fewer than 2,500 gas stations nationwide.

Today’s rule even allows automakers to trade credits with other manufacturers, opening the door to a bit of horse-trading between Ford and Honda or Toyota and General Motors.

The concept of credit trading is not a new one; the EPA has employed it in other pollution regulations that were drafted under Clean Air Act authority. Still, the extent of the credits proposed today unsettled veteran fuel-efficiency advocate Dan Becker, director of the Safe Climate Campaign.

California and 13 other states have gotten the go-ahead to begin imposing stricter fuel standards on automakers before the national rule starts taking effect in 2012, Becker said in an interview.

That could create a perverse incentive for car companies to earn extra credits, he added, "by shuffling more efficient vehicles into those states, then com[ing] back
in 2012 and say[ing] we over-complied with the national law by selling these cleaner cars."

For some domestic automakers, however, the "German provision" may sting most of all. The chairman of the Center for Automotive Research in Michigan told the Detroit News last week that the loophole amounted to a "subsidy" for foreign companies. 

The EPA states in today’s fuel rule that it believes the "environmental
impact of the [‘German provision’] will be very small," resulting in
0.4 percent more greenhouse gas emissions if every eligible car company
took advantage of the exemption.

In fact, not every company selling fewer than 400,000 vehicles is expected to avail themselves of the loophole. Becker, pointing out that most automakers are already meeting Japanese and European fuel-efficiency standards stronger than those in the U.S., urged the smaller companies to comply with the full extent of the law.

"BMW and Mercedes talk about
the prowess of their engineers," he said. "One would think their engineers are good enough that they could comply with what
GM and Honda have to comply with."

There is a 60-day window for public comments on the new fuel rule, after which time the White House could make changes. Given the intensity of industry lobbying in favor of the efficiency loopholes, however, Becker said environmental advocates would push for a "backstop" that forces automakers to meet higher fuel standards if they fail to comply with the previous year’s limits.


Final Obama Fuel-Efficiency Rule Gives Breaks to Electric, Luxury Cars

The Obama administration today released its final rule raising U.S. auto fuel-efficiency standards to an average of 35.5 miles per gallon (mpg) by 2016, winning plaudits from environmental groups while offering extra benefits to makers of electric and luxury cars. Transportation Secretary Ray Lahood, at left, with EPA chief Lisa Jackson at right. (Photo: Getty […]

Takeaway From Today’s EPA Hearing: Fuel Efficiency is a Money-Maker

A major step towards more fuel-efficient U.S. vehicles is being taken today in Detroit, where the Environmental Protection Agency (EPA) and the U.S. DOT are holding their first in a series of public hearings on the new emissions standards the Obama administration released in May. These GM executives long resisted higher fuel-efficiency standards. Now a […]

On Emissions, CA Lawmaker Questions Whether CA Should Lead the Way

Environmental Protection Agency (EPA) chief Lisa Jackson today told House members that she would soon begin work on new auto fuel-efficiency rules for the year 2017 and beyond, responding to calls from carmakers searching for certainty — and warily eyeing the new fuel standards being crafted in California. (Photo: The Weekly Driver) The political and […]

EPA to Declare CO2 a Pollutant, Release Final Fuel-Efficiency Rules

Environmental Protection Agency chief Lisa Jackson made news on two fronts in a meeting with reporters yesterday: she is preparing to officially declare carbon dioxide a pollutant under the Clean Air Act and release the final version of the Obama administration’s new fuel economy standard for autos. EPA administrator Lisa Jackson (Photo: Legal Planet) Neither […]

Higher Gas Prices Alone Won’t Make Cleaner Cars a Reality

The average carbon emissions of U.S. vehicles. (Image: EPA) It’s a storyline that the media and the auto industry have embraced: Higher gas prices are the magic ingredient that U.S. carmakers need in order to sell more fuel-efficient vehicles to consumers.  The narrative is tempting, especially for those who believe federal gas taxes need to […]

Consumer Group: White House Left Fuel-Efficiency Savings on the Table

The Obama administration’s proposal to raise auto fuel-efficiency (CAFE) standards to 35.5 miles per gallon by 2016 could have gone even further in order to reap the maximum environmental and economic benefits of cleaner cars, according to a new analysis [PDF] released today by the Consumer Federation of America. In his analysis, Consumer Federation research […]