AUTOS:

Stricter CAFE standards or Calif. waiver? Industry faced with both

A more stringent national fuel economy standard would be more palatable to the auto industry than allowing California and other states to adopt their own set of tailpipe emission regulations, one of the industry's most ardent supporters on Capitol Hill said yesterday.

"Whatever that standard is, it ought to be the same for the manufacturers in all the states, that's what I believe," said Sen. Carl Levin (D-Mich.). "Whether it's the same one that we adopted last year, which we thought was a strong standard. If it's going to be changed, we'll do it nationally."

Meanwhile, House Energy and Environment Subcommittee Chairman Ed Markey (D-Mass.) is pushing the Transportation Department to rewrite the standards to make them higher for 2012 and beyond -- regardless of the waiver outcome.

Under the proposed rulemaking issued by the Transportation Department last year, automakers would be forced to raise corporate average fuel economy, or CAFE, standards by 25 percent, to 31.6 miles per gallon by 2015. The proposal would get carmakers more than halfway toward the goal set by Congress in the 2007 energy law, an industry average of 35 mpg by 2020.

President Barack Obama yesterday pushed new Transportation Secretary Ray LaHood to finalize the 2011 standard by the April deadline, while beginning a separate rulemaking process for later years that considers a range of legal, scientific and technological issues.

The auto industry has said it is committed to meeting the 35 mpg target but has complained that hitting the 31.6 mpg mark by 2015 may place too much strain on the ailing industry. Still, carmakers yesterday stressed that their focus was on one "national standard." The industry had for years opposed the new CAFE standards but ultimately came around to the idea in the face of a mounting challenge from California to regulate auto greenhouse gas emissions.

Under the Clean Air Act, California is the only state that can enforce its own standards -- but only with an EPA waiver. If California receives the waiver, other states would then be permitted to enforce the same tailpipe standard. Thirteen other states have moved to adopt the stricter standards, and at least another three have indicated that they will follow if the waiver is granted. In all, the 17 states represent about half of the U.S. auto market.

California has been pushing since 2002 for the federal EPA's permission to enforce a state law that would require automakers to reduce carbon dioxide emissions from new vehicles by 30 percent by 2016. The Bush administration sat on the state's request for four years before rejecting it last March, citing as legal justification the arrival of new federal automobile efficiency standards.

The auto industry, and its congressional backers, argue granting the waiver would create a "patchwork" of confusing standards for carmakers, dealers and consumers. Levin said yesterday that in addition to the confusion, the state regulations would also be a blow to the U.S. industry because it would make moot a provision in the fuel economy legislation that he and others fought for that defines CAFE by vehicle attributes, such as size, instead of by fleet -- a provision that helps Detroit automakers that have relied more on profits from larger trucks and SUVs than their foreign competitors.

"That corrects a long-standing discriminatory use of CAFE, which shafted the domestic industries and pushed people into foreign large vehicles instead of domestic large vehicles with no benefit for the environment," Levin said.

Despite the auto industry's concerns, Senate Environment and Public Works Chairman Barbara Boxer (D-Calif.) said the new standards would be a boon and not a burden to an industry that endured a yearlong slump of sagging profits and falling profits.

"Here we are handing to Detroit on a silver platter our outreached hand, saying we want to help you come into this century, we want to help up you come into the century," Boxer said. "We want to help you reverse your mistakes of the past. We want to make sure that you're the first one in at this market. Now if you turn away and give us the back of your hand, then you'll lose, because there's no way we can continue business as usual."

House Minority Leader John Boehner (R-Ohio) and Sen. George Voinovich (R-Ohio) were among the lawmakers critical of Obama's actions yesterday, arguing it came at the worst possible time for Detroit's Big Three. "Millions of American jobs will be placed in further jeopardy if automakers are forced to spend billions to comply with potentially dozens of different emissions standards in dozens of different states," Boehner said.

Strengthening CAFE

Regardless of the EPA decision on California's waiver, Levin and the auto industry still may face a push to increase the CAFE standards beginning for model year 2012.

In addition to Obama leaving the door open for increasing the standards that will follow the first 2011 requirement, Markey, who also chairs the Select Committee on Energy Independence and Global Warming, jumped on Obama's decision to open up the proposed rulemaking to more scientific and technological review in hopes of strengthening the standards.

"By using better science, and having faith in the automotive industry's capacity to innovate, America can make great strides toward ending our dependence on foreign oil and revitalizing our auto industry," said Markey, who was one of the authors of the 2007 CAFE legislation, the first increase to the standards in more than three decades.

In a letter to Secretary LaHood, Markey urged DOT to recalculate the CAFE standards by including a host of new data. He also renewed calls for the analysis to rely on mid- to high-range fuel price estimates as opposed to the low-end forecast used by DOT in the current rulemaking.

In calculating the "maximum feasible average fuel economy level" achievable in a given year by automakers, DOT cited Energy Information Administration midrange estimates that the price of a gallon of gasoline would be $2.42 in 2016 and $2.51 in 2030.

Markey floated legislation last summer to require DOT to use, at minimum, the high-range EIA forecast for each year. According to a DOT analysis, if EIA's high-end price forecasts of $3.14 per gallon in 2016 and $3.74 per gallon in 2030 were used, the cost-benefit equation would change to the point that the maximum achievable average would be nearly 35 mpg by 2015.

Among the several dozen lawmakers to join Markey in sending a letter to DOT last June to reconsider the forecasts was then Illinois Democratic congressman and current White House chief of staff Rahm Emanuel.

E&E reporter Robin Bravender contributed.

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