Auto Mileage and Carbon Emissions Agreement: Harbinger of Good Things to Come?
This week, President Obama announced a plan to increase national automobile emissions and mileage standards for cars and trucks in the United States starting in 2012. If it survives a public review process, this agreement will create a single new national standard for the US car and light truck fleets that is almost 40 percent cleaner and more fuel-efficient by 2016 than it is today -- an average 35.5 miles per gallon (as reported in the NY Times).
The announcement resonates loudly in national climate change policy, because it marks the first federal regulatory standard for carbon dioxide emissions in the United States. It will also mean federal regulation of a sector (transportation) which accounts for a third of the nation’s carbon emissions.
The announcement also resonates in the energy community, since President Obama predicted that as result of the agreement, demand for oil would fall by 1.8 billion barrels over the lifetime of the vehicles sold over the next five years.
It is also significant in the broader national quest for overall air quality improvements because per-mile-traveled particulate, carbon monoxide, and nitrogen oxide emissions will drop as well.
For automakers, the agreement is also a much-needed win. They need no longer fear multiple standards across the states of the nation. The autos will obtain long sought-after certainty over the regulatory future of their businesses.
Dave McCurdy, head of the Alliance of Automobile Manufacturers, said:
What's significant about the announcement is it launches a new beginning, an era of cooperation. The President has succeeded in bringing three regulatory bodies, 15 states, a dozen automakers and many environmental groups to the table. We're all agreeing to work together on a National Program.
Some may see the agreement as a long-overdue revival of regulatory negotiation, a means of reaching agreement that last saw effective use in the 1980s. But the times, they are a-changing, and others see an entire new consensus-based approach to reaching accords on important issues of public policy. The President and the key participants managed to bring together and obtain the “yesses” of a remarkable group of historic adversaries, including those who were locked in litigation that for the most part now will be dismissed if the agreement holds.
One wonders if President Obama sensed this opportunity from his administration’s earliest days. One of the EPA’s first public actions was to announce a review California’s request for a Clean Air Act waiver to allow it to pursue stricter limits on tailpipe emissions. In his remarks, Obama suggested that it was the prospect of complying with and enforcing of a patchwork of state and federal regulations that ultimately brought the parties to the table.
Another fact that amazes me: they reached this deal without a word leaking to the press.
Finally, keep in mind that even if the agreement holds in the concept stage, the fine print is yet to come. The Environmental Protection Agency and the Department of Transportation will have to propose rules to implement the agreement, and anyone will be able to comment then. Will the consensus survive that process? In one notorious “reg neg” of the early 90s, corn ethanol interests first agreed on rules for implementing the renewable fuels standard of the 1990 Amendments to the Clean Air Act. Later, they reneged and the rulemaking turned much more difficult and contentious.
Climate versus Growth?
The Obama Administration says it is laying the groundwork for a long, green, economic recovery. But plenty of people argue that the recovery part and the green part contradict each other.
One piece of evidence to support the pessimists emerged from Washington last week. Inside EPA reports that the administration environmental champions are not getting their way when it comes to the ongoing restructuring of Chrysler and General Motors.
Environmentalists are noting that neither Chrysler's bankruptcy announcement nor GM's most recent shareholder prospectus mention or endorse some of the administration's major environmental initiatives that impact the auto industry:
- EPA's pending GHG limit on the transportation sector
- National Highway Traffic Safety Administration's pending rule to tighten CAFE standards, or
- EPA's reconsideration of California's request to regulate tailpipe emissions.
As I've indicated before, I tend to be more sanguine about the prospects of melding a green economy and a recovery for the auto industry.
Detroit should take the initiative and leverage the administration's environmental inclinations to the hilt, recommending newer, bolder green innovations in exchange for additional support. For its part, the administration should hold the line and make sure that any auto industry that rises from the ashes because of taxpayer support is an environmentally sensitive industry as well.
Praise for a Climate Policy in Regression?
The praise keeps pouring in for the Administration’s recent first steps toward withdrawing EPA’s objections to California's effort to implement tough emission standards for automobiles. I wrote about this earlier, pointing out that Congress needs to act quickly or get left behind.
Today’s editorial page of the Washington Post suggests that the most effective action might not be regulation at all, or at least not regulation alone -- state or federal. The editorial writers at the Post say the best way to proceed would be to “change the incentives so that people want to buy fuel-efficient vehicles; then companies will make such cars, even without commands from Washington.”
The Post is right, and here’s why: we can impose emissions restrictions on the cars Detroit produces or we can shape the demand for Detroit’s products. Emission regulations like the ones California will pursue will do the former, but a consistent and high gasoline price signal will do the latter. If it were adopted, it would likely produce real emissions reductions more quickly and efficiently. There are many ways to do this, and Congress knows all of them. But the important thing is to support gas prices at consistent and high enough levels to allow market incentives to go to work. Cap-and-trade? Perhaps. Or a gas tax? Perhaps. And rebates to the public, as the Post says, are entirely consistent with this strategy.
It’s only been six months since John McCain and Hillary Clinton called for gas tax holidays during the Presidential race. President Obama wisely refused to support those efforts. Is he willing to go even further and work for a “a gradual rise in fuel prices that would not shock the system,” as the Post put it? Is Congress willing to do the same? That would be leadership.
It would also be leadership if the auto manufacturers took the initiative, as I suggested yesterday, and softened the path for the Administration and Congress by convening key interest groups and agencies to join with them in fashioning a single omnibus vehicle performance standard. Who knows? Out of such a group might come consensus on a gradual rise to a sustained gas price level that would incentivize people to buy fuel-efficient low-GHG emissions cars.
California 1, US 0
The Obama Administration has taken the first steps toward withdrawing EPA’s objections to a California's effort to implement tough emission standards for automobiles. Could that be bad news for those hungry for federal action on transportation emissions?
At first glance, the news seems to be a win for federal leadership, since the lifting of the roadblock in Washington makes California's efforts possible. But the roadblock's removal could soon be seen as a victory for the states. And that could end up leaving Washington's aspirations to lead the regulation of emissions from cars in the dust.
For years, the Bush administration rebuffed California's effort to regulate carbon emissions from cars, officially a waiver of a Clean Air Act allowing the state to regulate greenhouse gases (GHGs) in automobiles. The automobile industry has objected strongly to state-based regulation efforts, stating that different standards in different states are confusing and expensive. In practice, state standard-making forces the industry to design cars to meet all standards, which means the decision is up to the strictest state with a market that the autos can't ignore. Enter the California Air Resources Board.
If Congressional action doesn't follow an Obama decision in due course, we'll all be looking to the states led by bellwether California for emission standards for the auto industry. And how might the auto manufacturers best proceed to get the best deal from Congress in the Obama era? Consensus solutions and public-private collaboration to break policy deadlock are the new watchwords. The auto manufacturers might take a page from the many highly diverse multi-stakeholder groups that have sprung up recently to address everything from climate legislation to chemical testing and production.
The manufacturers might be well advised at this point to ask key state and federal agencies, labor unions, fleet purchasers, non-governmental environmental and consumer organizations, and other potential legislative “deal-breakers” to join with them in fashioning a single omnibus vehicle performance standard for mileage, emissions, air-conditioning refrigerant, electrification, and other green elements. This might be the best path to a uniform federal approach to autos in climate legislation.
Greening the Detroit Bailout
Detroit’s request for a bailout presents the Obama administration with an opportunity to “put its money where its mouth is.” President-elect Obama’s pledge to advance the dual goals of energy independence and reducing greenhouse gas (GHG) emissions can be advanced by imposing the following condition on the Detroit bailout: insist that Detroit commit to development of plug-in electric hybrid cars.
As Thomas Friedman notes in his outstanding new book Hot, Flat and Crowded, electric plug-in hybrid cars “have the potential to make a huge impact on lowering energy demand, promoting renewable energy and reducing carbon emissions.” (You can add making Detroit competitive to the list of reasons for moving toward plug-in hybrid cars.)
Friedman’s argument is impregnable. Approximately 30 percent of GHG emissions come from the transportation sector, so weaning our vehicles off gasoline could make a big difference. Conceptually, plug-in hybrids would be all-electric; that is, they would be powered entirely by electricity from the grid. Thus, converting to plug-in hybrids would dramatically shift the US away from dependence on foreign oil.
You may ask: Given that 50 percent of the electricity on our grid is derived from coal, and given that plug-in hybrids simply utilize electricity from the grid, why would plug-in hybrids reduce GHG emissions? The answer: electricity coming from coal translates to less GHG emission than gasoline! According to Friedman:
That’s right -- it is cleaner and greener, as well as being much cheaper, to generate electricity even from coal and convert that electricity into the motive force necessary to propel your car than to combust gasoline in the vehicle’s internal combustion engine. The reason is that, from well to wheels, an electricity-powered system has far fewer energy losses along the way than a gasoline-fueled system, when you include all the losses in the gasoline system from oil extraction, transportation, refining and distribution of the gas -- plus the lower efficiency of an internal combustion engine.
Hot Flat & Crowded, at 291.
But why should Obama commingle the goals of the Detroit bailout (i.e., survival of the US auto industry and the 3 million jobs that depend on it) with the goals of energy independence and reducing GHG emissions? Because they intersect: Plug-in hybrids offer Detroit an opportunity to regain its competitive edge over foreign imports. Based on the success of Toyota’s Prius in the US, plug-in hybrids are likely to appeal to the increasingly green-leaning Americans. In addition to demonstrating their environmental creds, plug-in hybrid purchasers will be demonstrating their patriotism by buying US products and freeing us from addition to foreign oil. Finally, pushing the development of plug-in hybrids advances the goal of creating those “green jobs” we keep hearing about, and creating them in Michigan where unemployment currently hovers at 9 percent.
Time for a More Climate-friendly Mobile Air-Conditioning Refrigerant?
What is driving the search for the next, “third generation” mobile refrigerant is both California's desire to move on and European Union regulations that will require air-conditioned vehicles sold in EU countries to use refrigerants with global warming potentials (GWP) less than 150 beginning in 2011 for new type vehicles and in all vehicles by 2017. HFC-134a has a 100-year GWP of 1,430, according to the Intergovernmental Panel on Climate Change. But, these regulations cannot be complied with in the EU alone without unacceptable impacts on the global market for autos and trucks, which today is a fully integrated international market. Vehicle manufacturers feel they must select a single global refrigerant that satisfies regulatory authorities in all markets worldwide.
Systems satisfying the EU regulation using carbon dioxide (R-744) and HFC-152a (R-152a) have been engineered and tested, and component and systems suppliers have announced their commercial availability. Additionally, global chemical manufacturers have developed and are currently testing new refrigerants that meet the GWP 150 limit. They would like to optimize fuel savings, cost savings, and environmental benefits by selecting the refrigerant that best satisfies life-cycle performance accounting standards for both direct greenhouse gas emissions and the indirect greenhouse gas emissions of the fuel burned to power the air conditioner.
HFC-1234yf has a GWP of four (4); the air conditioning system that uses it is safe and not substantially different from the system used for HFC-134a; and, perhaps most important of all, its system efficiency would allow 12 billion gallons of gasoline to be saved worldwide by 2025. Its slightly greater cost would be more than made up in fuel cost savings to the driving public over the life of the vehicle. The numbers involved are truly impressive: globally, vehicle air-conditioning consumes between four and twenty percent of national transportation fuels, depending on climate, traffic congestion, national wealth, and other factors. In the US, six percent of fuel use -- seven billion gallons -- is consumed annually just to operate vehicle air-conditioners. Refrigerant emissions have the carbon equivalent of burning another seven billion gallons of fuel. US vehicle air-conditioning fuel and refrigerant GHG emissions are equivalent to about 130 million metric tons of CO2 equivalent or 36 million metric tons of carbon equivalent.
An HFC-1234yf air-conditioning system achieving 30 percent higher fuel efficiency worldwide would have an incremental cost of about $200 per car purchased but would save a typical car owner over $800 during the life of the car. Global benefits spread over 20 years might include 50 billion gallons of fuel saved -- a potential $200 billion benefit ($10 billion a year) if gasoline were valued at four dollars a gallon. Additional value for the carbon emissions saved if this fuel is not burned, and for HFC-134a emissions avoided, would add $4-6 billion more to the 20-year benefit total. These rough estimates are just that; they can be substantially refined by the vehicle manufacturers, research institutions, the National Renewable Energy Laboratory, and EPA, but for an initial indication of benefits of selecting HFC-1234yf, these “back-of-the-envelope” estimates show that significant benefits would accompany the switch in refrigerant.
What stands in the way of selection of HFC-1234yf? A number of issues need to be addressed, including EC REACH and US state approvals, some regional bans on flammable refrigerants, anti-trust concerns (cured if governmental agencies play a leading role), technology licensing to ensure competitive supply, “not invented here” syndrome, and ensuring leak-tight systems designed for high energy efficiency. But none of these problems is insurmountable, and great good can be achieved by not having to go as promptly to the fourth generation selection of a refrigerant because the third generation selection was not carefully done.
Perhaps what is most needed is for an appropriate entity -- perhaps the Transatlantic Economic Council is the place to start -- to convene the global vehicle manufacturers from the US, the EU, Japan, and perhaps India and China, as well as the relevant governmental agencies in these countries and California, environmental NGOs, and other key stakeholders, to seek prompt agreement on this solution.
