Embracing New Restrictions

By Luigi Fraschini

The newly proposed Corporate Average Fuel Economy (CAFE) regulations, recently unveiled with much fanfare by President Barack Obama are by far the most stringent ones ever imposed on the industry and consumers. The new rules, which are expected to win quick approval, are so tough that in years past, automakers would have fought against them tooth-and-nail. Yet these new regulations were met by automakers not with derision, not with predictions of the end of the auto industry as we know it, but with an almost uncanny unanimity.

Certainly, two of the three American car manufacturers are essentially under the government’s thumb these days, so you wouldn’t expect much squawking from them, but no other manufacturer uttered a peep of protest either. And while some auto manufacturing executives might have been working overtime to keep a smile on their faces as President Obama introduced the new rules -- which require the U.S. passenger ehicle fleet to average 35.5 miles per gallon by 2016 -- the overall feeling seemed to be one of relief…and perhaps a bit of inevitability.

As might be expected from skilled political hands, the announcement seemed to have something in it for everyone. The environmentalists can take heart from the establishment of a set of fuel economy standards that specify the biggest jump in government-mandated fuel economy in history -- incremental increases of some 5 percent each year. No, the rules don’t ban gasoline cars, but they will definitely build a fire under electrics and hybrids. And the environmentalists also won clear acknowledgement that the federal government feels carbon dioxide emissions are a public health threat and must be curbed, despite the fact that the evidence supporting that is controversial.

The auto manufacturers received strong assurances that they would have to meet just one set of standards to participate in the United States market, not two or perhaps more in a possibly never-ending stream of state and local emissions standards. In addition, the government promised to spend billions of dollars to subsidize the research and development efforts of the car manufacturers in reaching the new standards. That aspect helped mollify not only the vehicle makers but also the United Auto Workers union, which otherwise might have seen in the proposal a serious threat to the survival of the domestic automakers and thus its own survival as well.

The constituency that didn’t get addressed in the new fuel economy rules is the general public. While the case can be made that a lessening of the nation’s reliance on foreign oil is a benefit to the population as a whole, that case ignores the fact that previous fuel economy regulations haven’t curbed the importation of oil. In fact, even with fuel economy restrictions in place over more than three decades, imported oil now makes up a larger portion of the total petroleum used in America than before the restrictions were imposed. Why? Well, one reason among many is that when vehicles get better fuel economy and driving gets cheaper, people drive more. That’s not a hard-to-grasp concept, but it seems to have eluded the politicians. 

Won’t the new fuel restrictions help in the battle against global climate change, you ask. Well, that is one of the talking points, but if you ask anyone in the Department of Energy or the Department of Transportation to quantify that in terms of its effect on global temperature, we predict you will get nothing back but a blank stare. Yes, trimming the growth of fuel use will cut the production of carbon dioxide, but efforts to calculate the effects of that are imprecise at best. What we do know is that your next new car will probably cost you more. So how do you feel about that?

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