Hidden Problems With CAFE Deal?

The recent deal on fuel-economy requirements that will kick in later in this decade and run through 2025 is being widely praised by a wide cross-section of industry and consumer groups, but the outcome might not be as rosy -- or non-contentious -- as it might seem now. The proposed 54.5-miles-per-gallon standard, which still requires approval, was the result of a compromise between environmental forces that were pumping for a 60-mpg standard and the car industry, which was seeking something in the 40- to 45-mpg range. The compromise that resulted wasn’t just a split-the-difference mpg figure; it also includes several more concessions to the car industry to try to turn opponents of the plan into supporters. That ploy worked, but it also riled the “greens,” and even the Sierra Club now admits that the standard might actually result in something more like a 40-mpg real-world result than the 54.5 mpg it claims to offer.

Among the biggest of the changes to the initial proposal is special treatment for light trucks, like pickups. Rather than hitting the 5-percent annual mpg increases that are required of new cars, new trucks will only have to achieve 3.5 percent annual increases during the first five years of the initiative, finally bumping up to 5 percent over the balance ending in 2025. This move was welcomed by not only the domestic Big Three, but also the United Auto Workers, who were leery of earlier proposals as job-killers.

Future controversy might erupt from the possibility of a midcourse review of the whole procedure that was also part of the compromise to draw in car manufacturers. It calls for a potential review and reworking of the regulations and implementation timetable prior to 2022, allowing manufacturers a chance to get relief if the standards actually prove to be impossible to implement, or if vehicle sales and auto industry jobs suffer. In essence, any proposed regulations for 2022 and beyond might be largely meaningless, except as a negotiating point.

Other credits worked into the proposal favor individual manufacturers and/or groups of manufacturers. For example, pickup-truck-makers would get special credit for hybridization beyond what would accrue to car manufacturers. Although all the details aren’t available as this is being written, it seems the proposal is designed to be reasonably palatable for environmental groups and the domestic car companies, while the Asian and European car companies are left to struggle.

Consumers might also struggle with the proposal, though there is a possibility that they won’t know what hit them. The administration has suggested that meeting the new standards will cost something like $2,000 per vehicle. That $2,000 is unlikely to be made up in fuel-cost savings during the vehicle’s initial ownership period. But if you want a new car, you’ll have to pay. Better fuel economy and less reliance on foreign-sourced petroleum are laudable goals, and compromise is a time-honored U.S. tradition. But this compromise might eventually serve no group well.