SEMA eNews Vol. 12, No. 13, April 2, 2009

Feds Establish New Fuel-Economy Standards for Model Year 2011

The National Highway Transportation Safety Administration (NHTSA) raised the Corporate Average Fuel Economy (CAFE) standards for model year 2011 vehicles by about 2 miles per gallon (mpg) above the 2010 standards. The NHTSA will use an attribute-based system, which sets CAFE standards for individual fleets of vehicles based on size, taking into account the differences between cars and light trucks (SUVs, pickups and vans).

The industry-wide combined car/truck standard will be 27.3 mpg, based on a 30.2-mpg car standard (up from 27.5 mpg) and 24.1-mpg light-truck standard (up from 23.1 mpg).

Individual car companies have flexibility on how to achieve the rules, whether placing more emphasis on hybrids or reducing vehicle size and weight. Nevertheless, a standard based on each vehicle’s footprint should force automakers to increase the efficiency of every vehicle rather than downsizing some vehicles in order to offset the sale of bigger cars.

By establishing an industry-wide standard with proportional targets, the rule takes into account differing vehicle demographics for individual automakers.

The NHTSA estimates that manufacturers will incur more than $2 billion in costs for additional fuel-saving technologies to achieve the standards. The agency estimates that the resulting price increases to buyers of model year 2011 vehicles will be paid back in additional fuel savings in an average of 4.4 years for cars and 7.7 years for light trucks.

Under the rule, the NHTSA reclassified two-wheel-drive sport-utility vehicles to the passenger-car category rather than light truck.

The NHTSA was directed to raise the CAFE standards under a SEMA-supported federal energy law enacted in late 2007. The law mandates an industry car/truck fleet average of 35 mpg by model year 2020.

Future Actions on CAFE & Greenhouse Gases

Setting new CAFE standards is just the first in a series of inter-related actions being undertaken by NHTSA, the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) to address fuel economy and greenhouse gas (GHG) emissions, namely carbon dioxide (CO2). The reason is simple: CO2 is released in the same proportion to the amount of carbon-based fuel that is burned. Less carbon-fuel consumption translates into fewer CO2 emissions.

Only the federal government can establish fuel-economy standards. SEMA and the automakers have opposed California’s efforts to implement its own GHG program for tailpipe emissions, arguing that it is a surrogate fuel-economy standard. The Bush Administration held the same position.

The Obama Administration is now re-examining the federal government’s position, given the fact that policies to address energy use and climate change are interrelated. The NHTSA has also started working on new CAFE standards for model year 2012 and beyond.

In related news, the EPA is reconsidering a 2007 decision to deny California’s waiver request to regulate CO2 emissions from automobiles starting in 2009. At the time, the EPA reasoned that the 2007 federal energy law would be more effective at reducing CO2 emissions while having the benefit of creating a single, national approach to regulating CO2. Simultaneously, the EPA has tentatively recommended that greenhouse gases be considered a threat to the public’s “health” and “welfare.”

If finalized, the finding would help justify moves in Congress to regulate CO2 emissions using tools other than the Clean Air Act—such as limiting CO2 emissions from smokestacks of utilities and large factories, and allowing emissions trading (“cap and trade”).

Finally, there is wide speculation that the EPA may issue a waiver and allow California to regulate CO2 emissions, while simultaneously establishing an identical federal program. NHTSA’s CAFE standards could form the basis for such an approach. This could accomplish two SEMA-supported goals: creating a national program that overrides a state patchwork system and allowing auto companies to target sales to meet specific market demands.

Under the latter issue, fleet sales would be balanced on a national rather than state-by-state basis.

For more information, contact Stuart Gosswein at stuartg@sema.org.

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