CLIMATE:

Obama admin boosts auto fuel-economy standards, imposes tailpipe GHG curbs

The Obama administration finalized a suite of new automobile standards today that will raise the fuel economy of the nation's passenger fleet and impose the first-ever federal greenhouse gas emissions standards on cars and trucks beginning next year.

The standards were crafted jointly by U.S. EPA and the Transportation Department and represent a White House-brokered compromise between carmakers and more than a dozen states that had pushed to create their own auto emissions standards.

Administration officials sought to paint the new rules as both an environmental and economic boon to the country, particularly for consumers, who have watched the average price of a gallon of gasoline climb by more than 75 cents since last year.

"These historic new standards set ambitious, but achievable, fuel economy requirements for the automotive industry that will also encourage new and emerging technologies," Transportation Secretary Ray LaHood said. "We will be helping American motorists save money at the pump, while putting less pollution in the air."

According to White House estimates, the new rules will reduce carbon dioxide emissions by nearly 1 billion metric tons over the lifetime of the vehicles covered, or roughly the equivalent of taking 50 million cars and trucks off the road in 2030. Vehicles purchased under the new rules will conserve an estimated 1.8 billion barrels of oil over their lifetime.

The administration said the new rules will add an estimated $950 to the price of a model year 2016 car or truck, but that consumers will save roughly $3,000 over the life of the vehicle.

"By working together with industry and capitalizing on our capacity for innovation, we've developed a clean cars program that is a win for automakers and drivers, a win for innovators and entrepreneurs, and a win for our planet," EPA Administrator Lisa Jackson said.

Today was the congressionally mandated deadline for the administration to issue the rules, which will kick in for model year 2012 cars, slated to arrive in showrooms at the start of October 2011. The rules will push the nation's corporate average fuel economy, or CAFE, to 35.5 miles per gallon by 2016, four years ahead of the schedule Congress laid out in a 2007 energy law.

The carbon dioxide limit -- which will apply to passenger cars, light-duty trucks and medium-duty passenger vehicles -- would reach an average of 250 grams per mile per vehicle in 2016. The new standard would be equivalent to 35.5 miles per gallon if all reductions came from fuel economy improvements.

The emission standards are the first federal greenhouse gas regulation and come in response to a 2007 Supreme Court ruling that EPA has the authority to regulate greenhouse gases as pollutants under the Clean Air Act.

The Obama administration determined last December that the heat-trapping emissions "endanger" public health and welfare and that auto emissions are significant contributors to the mix of greenhouse gases in the atmosphere.

When the vehicle standards take effect, greenhouse gases will officially become "subject to regulation" under the Clean Air Act, which will trigger Clean Air Act permitting requirements for industrial sources like power plants, refineries and other large facilities.

EPA earlier this week said it will start to regulate stationary sources as soon as Jan. 2, 2011, when automakers must begin to comply with the rule (E&ENews PM, March 29).

EPA has still not specified which industrial facilities must account for their greenhouse gas emissions. The agency will detail what sources will be subject to New Source Review and operating permit requirements in its so-called "tailoring" rule expected later this spring.

Legal battles loom

The auto industry had long challenged efforts to regulate auto emissions, arguing that they would create a "regulatory patchwork" that would depress overall sales and put some dealers at a competitive disadvantage. But the litigation was unsuccessful, and the automakers ultimately agreed to drop their legal challenges in exchange for a single set of federal emissions standards for cars and trucks.

"America needs a roadmap to reduced dependence on foreign oil and greenhouse gases, and only the federal government can play this role," Dave McCurdy, president of the Alliance of Automobile Manufacturers, said in a statement. "Today, the federal government has laid out a course of action through 2016, and now we need to work on 2017 and beyond."

Still, experts say lawsuits challenging the emissions standards are inevitable.

"I'm sure there will be some people who will litigate," said Earthjustice attorney David Baron. "There have been polluters who have challenged and will challenge any EPA effort to address climate change; that's a given."

A host of states, lawmakers, industry groups and others critical of EPA's climate policies have already taken on the endangerment finding in court, and observers say some of those same opponents might sue over the auto rules (Greenwire, Feb. 17).

Automobile dealers are widely cited as potential challengers to the vehicle standards. The National Automobile Dealers Association (NADA) last month offered its support to a Republican-led effort in the Senate to hobble EPA's ability to regulate greenhouse gases (E&ENews PM, March 2).

NADA also sued to overturn the administration's decision to grant California the waiver it needs to enforce its own standards and argues that the CAFE rules make state standards duplicative because the higher fuel economy standards will work to curb auto emissions.

NADA spokesman Bailey Wood declined to comment on the group's legal strategy.

Some attorneys expect appeals court judges to consolidate the challenges to the auto rule with the lawsuits against the endangerment finding because the rules are so closely intertwined.

Some parties are suing over the endangerment finding because they see it as a steppingstone to the eventual application of EPA permitting requirements for stationary sources, said David Doniger, policy director of the Natural Resources Defense Council's Climate Center. However, "it is the vehicle standards, not the endangerment determination, that plays that role," he added.

Bill Bumpers, an industry attorney at the Washington law firm Baker Botts LLP, said it's unlikely that the court will consolidate challenges to the endangerment finding and auto rule because the "underpinning arguments are completely distinct."

Reactions

Environmental groups called today's announcement an important step toward combating climate change.

"These standards will deliver a trifecta of benefits to Americans: less dependence on Middle Eastern oil, less pollution, and more savings at the gas pump," said Environmental Defense Fund President Fred Krupp. "Cleaner cars will deliver immediate results as the Senate finishes work on bipartisan climate and energy legislation."

The Center for Biological Diversity called the standards a significant improvement on the status quo, but said that they will leave U.S. automakers lagging behind foreign automakers.

"Despite the increase, the rule will leave the United States far behind the fuel efficiency that European and Japanese cars achieve today, at close to 44 mpg and 43 mpg, respectively," said Kieran Suckling, executive director of the Center for Biological Diversity. "Until U.S. standards are improved as our laws require, the battered U.S. auto industry will continue to lag behind its international rivals," he said.

Rep. Edward Markey (D-Mass.), chairman of the Select Committee on Energy Independence and Global Warming, also hailed the new rules.

"April Fools Day is usually reserved for practical jokes, but today's April Fuels Day shows how a practical program can help America's consumers and national security," he said in a statement. "In just a few years, American consumers won't feel like the joke's on them when they tally up their gasoline costs."

Industry groups, however, warned that the EPA rule -- by triggering stationary source regulations -- could have broad economic consequences.

The American Petroleum Institute said improving vehicle efficiency makes sense but warned that EPA's role in the rulemaking "sets the nation on the disastrous course of Clean Air Act regulation of stationary source greenhouse gas emissions."

"The Department of Transportation, which has been the agency issuing vehicle fuel economy standards, could have proceeded without EPA," API said in a statement. "EPA's imposition of greenhouse gas emission standards duplicates DOT's fuel economy standards, without achieving any significant environmental benefit."

Charles Drevna, president of the National Petrochemical Refiners Association, said his group was disappointed that EPA chose to move forward with the rulemaking, given the potential economic consequences.

"Such misguided and flawed policy has the potential for devastating consequences to American consumers, businesses, jobs and the economy," Drevna said.

Rep. Earl Pomeroy (D-N.D.) also blasted the policy, saying that EPA climate rules will unfairly hurt his state's energy industry. Pomeroy has introduced legislation to block EPA's authority to regulate greenhouse gases.

"These new regulations are too likely to cost jobs at a time when we're trying to grow our economy and strengthen the domestic energy sector. Yet the EPA keeps moving down this wrongheaded path," Pomeroy said. "I think this move today will give new momentum to my legislation to put a stop to these regulations so the issue can be addressed by Congress, not unelected bureaucrats."

Click here to read the new rule.

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