Journal Hypes Costs, Ignores Benefits Of Fuel Economy Standards

WSJ: EPA Estimated Fuel Economy Standards “Will Cost $157 Billion, Meaning The Real Number Is Vastly Greater.” From a Wall Street Journal editorial titled “The United States of EPA”:

The EPA heaved its weight against another industry this month, issuing a regulation to sharply increase fuel economy. Under this new rule, America's fleet of passenger cars and light trucks will have to meet an average of 54.5 miles per gallon by 2025, a doubling of today's average of about 27 mpg. By the EPA's estimate the rule will cost $157 billion, meaning the real number is vastly greater. [Wall Street Journal, 11/28/11]

NHTSA Estimates That Vehicle Manufacturers “Will Recover Most Or All” Of These Costs. The cost estimate cited by the Wall Street Journal represents what vehicle manufacturers will have to spend to meet the standards through 2025. The estimate was made by the National Highway Traffic Safety Administration, not the EPA. NHTSA also “estimates that manufacturers employing compliance flexibilities and advanced technologies to meet the standards could significantly reduce these outlays” and “projects that manufacturers will recover most or all of these additional costs through higher selling prices for new cars and light trucks.” [National Highway Traffic Safety Administration, 11/16/11]

Government Estimates Net Benefit To Society Of $311 Billion To $421 Billion. According to EPA and NHTSA, the proposed standards are “projected to save approximately 4 billion barrels of oil and 2 billion metric tons of GHG emissions over the lifetimes of those vehicles sold in MY [Model Year] 2017-2025,” with net benefits to society " in the range of $311 billion to $421 billion (7 and 3 percent discount rates, respectively) over the lifetimes of those vehicles sold in MY 2017-2025." [EPA and NHTSA, 11/16/11]

NRDC: Regulators Tend To Overestimate -- Not Underestimate -- The Costs Of Vehicle Pollution Controls. The chart below, compiled by the Natural Resources Defense Council, shows that regulators have previously overestimated the cost of motor vehicle pollution controls. NRDC said that regulators tend to overestimate costs because “unanticipated technological innovation,” sometimes induced by the rules themselves, has “dramatically lowered the actual compliance costs in many instances.”

[Natural Resources Defense Council, 2/2/11; April 2006]

Journal Overstates Cost Of New Standards To Consumers

WSJ Pushes Estimate That New Standards Will Add $3,100 To Price Of New Cars. From the editorial:

The National Automobile Dealers Association, which has opposed the EPA rule, has compiled Obama Administration documents showing the average price of a new vehicle will increase by $3,100 by 2025, thanks to the cumulative fuel-efficiency rules. [Wall Street Journal, 11/28/11]

Consumers Will Actually Save Money Overall Through Lower Fuel Costs. EPA estimates that “the monthly fuel savings more than offsets the higher monthly payment due to the higher incremental vehicle cost”:

Higher costs for new vehicle technology will add, on average, about $2,000 for consumers who buy a new vehicle in MY 2025. Those consumers who drive their MY 2025 vehicle for its entire lifetime will save, on average, $5,200 to $6,600 (7 and 3 percent discount rates, respectively) in fuel savings, for a net lifetime savings of $3,000 to $4,400 -- assuming gasoline prices remain at essentially current levels. For those consumers who purchase their new MY 2025 vehicle with cash, the discounted fuel savings will offset the higher vehicle cost in less than 4 years, and fuel savings will continue for as long as the consumer owns the vehicle. Those consumers that buy a new vehicle with a typical 5-year loan will benefit from an average monthly cash flow savings of about $12 during the loan period, or about $140 per year, on average, as the monthly fuel savings more than offsets the higher monthly payment due to the higher incremental vehicle cost. [EPA, November 2011]

Consumer Advocates Support New Standards. Jack Gillis of the Consumer Federation of America stated; “Our analysis shows that the higher standards for 2025 will save consumers money, increase auto sales and auto industry employment, enhance national security by dramatically lowering oil imports and reducing pollution.” [Consumer Federation of America, 11/16/11]

Consumer Reports Poll: Over 80% Would Pay Higher Price For Car With Lower Operating Cost. From a national Consumer Reports survey conducted in October:

Eighty-six percent of the interviewed car owners want to see automakers' fleet average rise to 35 mpg by 2016 and 80 percent would like to see fuel economy standards rise to 55 mpg by 2025--a current proposal that Consumer Reports supports.

To get the job done, most people (83 percent) said they would be willing to pay extra for a more fuel-efficient vehicle, if they could recover that extra outlay within five years. [Consumer Reports, 11/14/11]

Journal Falsely Suggests Rules Are Not Based In Laws Passed By Congress

WSJ Suggests “Authoritarian” EPA Is Overstepping Authority Given To It By Congress. From the editorial:

President Jackson is now casting aside 35 years of Congressional prerogative. Because the Obama EPA has declared carbon dioxide a “pollutant,” and because cars emit CO2, Ms. Jackson is citing the Clean Air Act in her bid to commandeer Detroit. While the EPA officially worked with the National Highway Traffic Safety Administration (Nhtsa, the agency previously in charge of efficiency standards), it's clear the EPA is calling the shots.

[...]

The EPA is seeking to impose, by fiat, greenhouse gas reductions that even a Democratic Congress rejected with the Waxman-Markey bill in 2009, and that would drive policy at least 13 years past this Administration. It's all more than a tad authoritarian. [Wall Street Journal, 11/28/11]

In Fact, The Supreme Court Determined That Greenhouse Gases Are A “Pollutant.” Contrary to the Journal's claim that “the Obama EPA has declared carbon dioxide a 'pollutant,'” a 2007 Supreme Court ruling determined that greenhouse gases like CO2 “fit well within the Clean Air Act's capacious definition of 'air pollutant.'” From the majority opinion:

The Clean Air Act's sweeping definition of “air pollutant” includes "any air pollution agent or combination of such agents, including any physical, chemical ... substance or matter which is emitted into or otherwise enters the ambient air ... ." §7602(g) (emphasis added). On its face, the definition embraces all airborne compounds of whatever stripe, and underscores that intent through the repeated use of the word “any.” Carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons are without a doubt “physical [and] chemical ... substance[s] which [are] emitted into ... the ambient air.” The statute is unambiguous. [Massachusetts v. EPA, 4/2/07]

CRS: Clean Air Act Requires EPA To Regulate Vehicle Emissions That Endanger Public Health And Welfare. In December 2009, the EPA determined that greenhouse gases threaten the public health and welfare in an endangerment finding. Due to that finding, the EPA is required to regulate greenhouse gas emissions from motor vehicles, as the Congressional Research Service explained:

The Court gave EPA three options: (a) determine that GHG emissions from new motor vehicles “cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare”; (b) determine that such GHG emissions do not do so; or (c) explain why the agency is unable to make a determination under either (a) or (b). EPA chose option (a)--that is, to make a positive “endangerment finding” for GHG emissions from new motor vehicles. That finding was made in December 2009, whereupon the CAA required EPA to promulgate standards to address the endangerment.

[...]

The endangerment finding has no effect on outside parties in itself; its importance is that it triggers a duty under section 202(a) for EPA to promulgate emission standards for the source category creating the endangerment--in this case, new motor vehicles. [Congressional Research Service, 8/16/11]

Even Bush Administration Said EPA Couldn't Avoid Making Endangerment Finding. According to a letter released in February, Stephen Johnson, EPA Administrator under President George W. Bush, told the president in January 2008 that the Supreme Court's 2007 decision “combined with the latest science of climate change requires the Agency to propose a positive endangerment finding.” From the letter:

[Y]our Administration is compelled to act on this issue under existing law given the many lawsuits and petitions before the Environmental Protection Agency (EPA). It is my intent to do so in a way that is responsible and that does not foreclose a superior legislative solution.

First, the Supreme Court's Massachusetts v EPA decision still requires a response. That case combined with the latest science of climate change requires the Agency to propose a positive endangerment finding, as was agreed to at the Cabinet-level meeting in November. Some have noted that the Energy Independence and Security Act (EISA) enables implementation of your 20-in-l0 plan without an endangerment finding. Even if that is true, a finding is still required by the Supreme Court case, and the state of the latest climate change science does not permit a negative finding, nor does it permit a credible finding that we need to wait for more research. EISA also did not change EPA's obligation regarding the regulation of vehicles although it did expand the Department of Transportation's authority in a way that will facilitate a joint rulemaking. [U.S. Environmental Protection Agency, Johnson Letter to President Bush, 1/31/08]

Bush-Era Energy Law Authorized NHTSA To Further Increase Fuel Economy Standards. Congress also authorized NTHSA to raise fuel efficiency standards, as explained by the Union of Concerned Scientists:

Congress created the first fuel efficiency standards in 1975 in response to the OPEC oil embargo. The first CAFE standards were administered by the National Highway Traffic Safety Administration (NHTSA), a part of the U.S. Department of Transportation. These standards succeeded in nearly doubling the fuel efficiency of new vehicles in ten years. However, after this initial progress, NHTSA made little meaningful improvement in CAFÉ during the following two decades.

Congress broke this deadlock with the passage of the Energy Independence and Security Act of 2007 (EISA). This law required NHTSA to raise fuel efficiency standards to at least 35 miles per gallon fleetwide by model year 2020 - with additional authority to set standards through 2030. As a result, NHTSA is required by statute to set fleetwide average fuel efficiency standards for each new model year at the maximum feasible level. [Union of Concerned Scientists, March 2011]

Journal Claims New Standards Are “Crushing” For Auto Makers

WSJ Laments “Struggle” Of Auto Industry “Hostages” Against “Crushing” Rule. The editorial stated that “the industry is struggling to keep pace” with fuel economy standards already in place, adding:

Yes, 13 automakers agreed to this standard in July, confirming behavioral science on hostages. The industry has been living for years under the threat of California's strict efficiency mandate. Federal law pre-empts states from setting their own standards, and the Bush Administration refused to grant California a waiver. But the Obama administration made clear to automakers that their choice was between one crushing EPA-devised rule, or a national patchwork of crushing rules from California and acolyte states. They chose the federal poison. [Wall Street Journal, 11/28/11]

Politico: Standards Have Industry Support Due To “Flexible Compliance Approaches Built Into The Agreement.” Politico reported:

The industry support appears to be contingent on several flexible compliance approaches built into the agreement and limiting California's ability to set its own emission standards, a right it has under the Clean Air Act.

“Automakers really wanted to see a single national program, and we believe that the White House understands how much of an economic disruption would occur from multiple standards at the state and federal levels,” said Gloria Bergquist, a spokeswoman at the Alliance for Automobile Manufacturers. “So, we are moving one step closer to a single national program for greenhouse gases and fuel economy for the next 14 years.”

General Motors, Chrysler, Ford, Honda, Hyundai and Nissan are reportedly behind the White House plan, even though none have spoken up publicly about the plan, according to several sources tracking the talks. [Politico, 7/27/11]

Actual Standard Will Be Lower Than 54.5 MPG. From Automotive News:

Thanks to federal incentives for fuel-efficient and low-emissions technologies, automakers will be able to get credit for meeting the 2017-25 model year standards with a number far lower than the one in all the headlines.

Automakers also will be able to get extra credit for bringing fuel-saving technologies to market as early as possible.

As a result of the incentives, the real-world industrywide fleet average in the 2025 model year is likely to be about 40 mpg, not the 54.5 mpg proposed by the Obama administration, according to the EPA and environmental groups.

[...]

The administration seeks to reduce carbon dioxide emissions to 163 grams per mile by the 2025 model year. Because such emissions are related to fuel economy, this would equate to a fuel economy standard of 54.5 mpg -- if all the pollutant reductions were achieved with fuel-economy technology. [Automotive News, 8/11/11]

Edumnds: “Most Automakers Agree That Existing Technologies Can Be Used To Achieve This Plan's Goals.” From a November 10 Edmunds.com FAQ on the new fuel economy standards:

Q: Whether it's 49.6 mpg or 54.5, will automakers be able to comply with the new proposed standards?

A: Most companies say that they will. Thirteen major automakers signed the preliminary agreement worked out with the White House. (There also were some non-signers.) Regulators, environmentalists and most automakers agree that existing technologies can be used to achieve this plan's goals -- although there is a lot of debate about their cost.

And while some critics believe that compliance will dramatically alter the automotive landscape, eliminating some types of vehicles altogether, most automakers say they don't see that happening.

Compliance will require dramatic changes in the types of powertrains offered, however. The cost of the average vehicle will rise, thanks to such expensive technologies as turbocharging, direct fuel injection, 8- to 10-speed automatic transmissions, electric drive and other fuel-saving and emissions-cutting measures. These technologies now are limited to a few, usually high-end vehicles, but to achieve the goals set, they will need to be spread widely throughout the vehicle fleet. [Edmunds.com, 11/10/11]

Scientific American: “Incremental Changes” Can Drastically Improve Mileage Of Gasoline-Powered Vehicles. From a November 16 Scientific American post:

Electric vehicles can certainly raise fleet averages. But changes to good ol' gasoline-powered vehicles can achieve a great portion of the needed hike in fuel efficiency. The kicker is that many of the technology improvements have been sitting on auto industry shelves for years. And some of the improvements have already been rolled out in high-end gasoline vehicles and in standard hybrid cars.

In the past, independent engineering studies by experts at M.I.T., the University of Michigan, Argonne National Laboratory and the Natural Resources Defense Council have shown that gasoline-powered vehicles can get dramatically higher mileage by incorporating a number of incremental changes. [Scientific American, 11/16/11]

Europe Will Meet A Higher Efficiency By 2020. The New York Times reported: “The United States has the world's most lenient vehicle emissions and mileage standards, lagging as much as 10 m.p.g. behind the rest of the world. Europe is expected to reach about 60 m.p.g. by 2020.” [New York Times, 7/3/11]

Journal Claims New Standards Will Decrease Safety

WSJ: “Rule Will Reduce The Mass Of A Car By 15% to 25%, Decreasing Safety.” The Wall Street Journal editorial said that the “rule will reduce the mass of a car by 15% to 25%, decreasing safety.” [Wall Street Journal, 11/28/11]

ICCT: Structure Of New Standards Provides “Incentives For Manufacturers To Build Vehicles In Every Size Class.” The argument that higher fuel economy standards will compromise safety is based on an assumption that automakers will be forced to downsize cars in order to meet new requirements. But in a recent post at The Hill, the International Council on Clean Transportation's John German explains that the new curved fuel efficiency standards will eliminate incentives for automakers to rely on smaller vehicles to meet them:

Take one of the main carmakers' talking points: They keep telling people that stringent standards require smaller, unsafe cars. There used to be some truth in that standards were easier to meet with smaller vehicles. But that's simply not true now -- and the carmakers know it.

The truth is that the National Highway Traffic Safety Administration and the Environmental Protection Agency are drafting rules that grade manufacturers -- and the cars, trucks, and SUVs they build -- on a curve. This was mandated by the 2007 Energy Information and Security Act. The proposed 56 mpg standard by the year 2025 is not an inflexible line in the sand requiring all manufacturers to make only cars, trucks and SUVs go at least 56 miles on a gallon of gas.

Instead, the new standards are designed so that each manufacturer's goal is custom-calculated, based on that manufacturer's own product line. An automaker that builds mostly larger cars, SUVs, and trucks will have lower mileage goals than a competitor that builds mostly compact and subcompact cars. And an SUV or truck with a larger “footprint” will not be required to get the same mileage as a small car. While the curves have not been proposed yet for 2025, the footprint curve for the 2016 standards established targets of 41.1 mpg for the Honda Fit compact car, 32.6 mpg for the Chrysler 300 full-size car, 32.9 mpg for the Ford Escape small SUV, and 24.7 mpg for the Chevy Silverado pickup truck.

Because automakers will be graded on a curve, there are incentives for manufacturers to build vehicles in every size class. The standards simply mandate that each of those vehicles, regardless of size, be as energy-efficient as possible. [The Hill, 7/27/11]

Free Press: “If The SUV Meets The Fuel Standard For Its Own Footprint, The Automaker Can Sell All It Wants.” The Detroit Free Press reported:

Most dramatic: large and small vehicles are no longer in competition with each other.

Instead, each is judged based on its “footprint” -- a formula based on the distance between the axles and a vehicle's width. There is a curve, and each footprint has its own fuel economy requirement on that curve.

The result is that automakers don't have to balance sales of SUVs with poor fuel efficiency and subcompacts that get better mileage to meet CAFE targets. If the SUV meets the fuel standard for its own footprint, the automaker can sell all it wants. [Detroit Free Press, 7/17/11]

NY Times: Innovation Is Allowing Drivers To Choose Large Vehicles “Without Compromising On Fuel Economy.” The New York Times reported:

The formula for better fuel economy in cars has long been a simple equation: the smaller the vehicle, the farther it goes on a gallon of gas.

Fuel-conscious consumers have been forced to make trade-offs. More size and interior room translated into heavier vehicles and larger engines and increasingly expensive trips to the pump. Saving on gasoline meant choosing narrower, shorter and less powerful vehicles, whether it was a compact pickup truck or a little sedan with a token back seat and minimal creature comforts.

But a quiet revolution has been taking place in the design studios and engineering centers of the world's major automakers, one that is allowing drivers to select vehicles in virtually every market segment without compromising on fuel economy.

It's all happening under the hood, where improvements in engine technology are turning gas-guzzlers into relative fuel-sippers, yet still delivering the horsepower, acceleration and utility that American consumers crave.

[...]

Direct-injection technology pushes fuel into the combustion chambers of a traditional engine to create more horsepower at greater efficiency, resulting in better fuel economy and lower emissions. While hardly an automotive breakthrough, the system allows consumers like Mr. Herring to enjoy improved mileage without compromising on size. [New York Times, 10/13/11]