Energy

Obama Orders Fuel Efficiency

The president clears away obstacles to reducing U.S. gasoline consumption.

On Monday morning, President Barack Obama signed executive orders that could speed the reduction of greenhouse-gas emissions from automobiles by improving fuel economy and setting stricter emissions standards. While the technology exists to reach the stricter standards, it’s not clear that automakers can implement them fast enough. What’s more, additional policy measures may be needed to reduce overall fuel consumption.

Obama signed two orders on Monday. One required the Department of Transportation (DOT) to enforce a law that will increase fuel-economy standards to a minimum of 35 miles per gallon by 2020. The law was passed in 2007, but detailed rules telling automakers how to comply were never implemented by the Bush administration. The second order signed by the president calls for the Environmental Protection Agency (EPA) to revisit a request from the state government of California asking for permission to implement emissions standards that are more strict than federal rules. Those standards call for decreasing carbon-dioxide emissions from new vehicles by 30 percent by 2016; more than a dozen other states have since followed California’s example. Under President Bush, that request was denied, but experts say it’s likely that the EPA will now approve it.

The orders are meant to reduce both carbon emissions and gasoline consumption, Obama said on Monday. They will help on the country’s “journey toward energy independence” and will “spark the innovation needed to ensure that our auto industry keeps pace with competitors around the world,” he added.

The technology does exist to make it possible, and much of it is simple. For example, low-rolling resistance tires can help make cars more efficient by reducing the amount of energy lost through waste heat. Reducing the weight of vehicles by using lightweight steels and aluminum can also boost fuel efficiency. And automakers can use smaller engines to improve efficiency, making up for lost power by turbo-charging them. Greater improvements can come from advanced technologies such as plug-in hybrids, which run electricity part of the time. But there may not be enough time “to get the technology out there in the volumes needed,” says John Heywood, a professor of mechanical engineering at MIT.

The California standard’s 2016 deadline is “just around the corner,” adds David Greene, an energy policy analyst at the Oak Ridge National Laboratory, in Tennessee. He believes the soonest that automakers could make changes based on the new rules would be 2011, and it may be five years beyond that before the companies can modify their entire fleet of vehicles. It will take time to ramp up production of new technologies, in part because of the need for new equipment from other manufacturers, and in part because there aren’t enough engineers to redesign a whole fleet faster than that, Greene says. What’s more, the automakers don’t have abundant resources right now to invest in the necessary changes: many are facing bankruptcy because of very bad sales.

“This will be hard for the manufacturers,” says James Sweeney, a senior fellow of the Stanford Institute for Economic Policy Research at Stanford University. “It would have been much better for them to have made the changes five years ago, rather than now. But they fought the changes tooth and nail.” The rules may have to be adjusted in light of the recession, he says.

To complicate matters further, not everyone agrees that fuel-economy standards or carbon-emission requirements for new vehicles will actually reduce gasoline consumption and carbon emissions. One of the arguments against such regulations is that they will cause a “rebound effect.” In other words, if automakers make cars that use less gas or emit less carbon dioxide per mile, drivers will see their gas bills go down and then start driving more, so total gasoline consumption may stay the same. By contrast, a gasoline tax would more directly reduce gasoline consumption by increasing gas bills and encouraging people to drive less.

Some experts counter that the rebound effect is small. For one thing, there is a limit to how much more people will drive, regardless of how little they pay for gas. (Several estimates, based on data from past fuel-economy standards, suggest that for every 10 percent improvement in fuel economy, about 20 percent of the improvement, or two percentage points, is lost because people drive more.)

Corporate Average Fuel Economy (CAFE) standards have also been criticized because their wording has had unintended side effects. The rules inadvertently pushed some automakers to sell more trucks (including SUVs), since trucks had lower fuel-economy standards. What’s more, automakers with cars that were already very efficient had little incentive to keep improving. The 2007 legislation has been crafted to counter these objections, Sweeney says.

Greene says that the best policy would include both requirements that improve fuel economy and market-based incentives, such as a gas tax to limit driving. A system of fees and rebates could also be used to encourage people to buy more efficient cars, following a model that has proved successful in France. Under this system, the government gives rebates to those who buy efficient cars, and it pays for these rebates by charging fees to those who purchase inefficient cars. Heywood says that this could make it easier for automakers to meet the new fuel-economy standards.

If the automakers can meet the standards, the reductions in greenhouse-gas emissions could be significant. The new federal rules could reduce greenhouse-gas emissions in California alone by 20 million metric tons by 2020, Sweeney says. The new California standard would reduce emissions by a further 14 million metric tons in the state. He adds that states with higher standards could be a sort of laboratory for proving that better fuel economy is possible, which could eventually lead to even higher federal standards.

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