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Green grades for cars rankle auto industry

When federal agencies proposed new ways of labeling fuel economy last week, they set the stage for a debate: As Americans shop for cars, how will they consider the climate change impact?

U.S. EPA and the Department of Transportation issued two new designs for the fuel-economy stickers affixed to the windows of new cars. The designs aren't final -- they won't appear until the auto class of 2012, and the agencies have requested public input during the next two months. But the labels are distinct.

One design would feature a large letter grade for a car's fuel economy and emissions levels. The other design would feature numbers: the car's miles-per-gallon score and the estimated annual cost of filling its gas tank or battery.

Both labels carry essentially the same information. But since they emphasize different things and, arguably, have different connotations, they may have different effects on the consumer cruising the dealership.

According to the agencies, almost 80 percent of 2010 vehicles will land between C+ and B. So far, the only vehicles getting an A -- 40 mpg equivalent or better -- are hybrids and electric cars. There is no F rating, the agencies said, because all vehicles will have met Clean Air Act standards.

The agencies were acting on the 2007 Energy Independence and Security Act, which charged them to rate vehicles for fuel economy, greenhouse gases and smog-forming pollutants. The labels will only measure tailpipe emissions, leaving aside the emissions from recharging electric batteries. (Information on upstream emissions may still be accessible to consumers who bring smart phones to the dealership.)

Already, a discussion is brewing about how customers will interpret the labels and how each one would affect the move to low-emissions cars.

A familiar ranking system

Academics leaned toward the letter-grade approach. They said it's familiar, emotive and appropriate to the environmental goal.

"If there's any rating system that people in this country understand, it's letter grades from A to F. We've all been through that," said Dan Sperling, who directs the Institute of Transportation Studies at the University of California, Davis.

Dan Ariely, a behavioral economist at Duke University and author of "Predictably Irrational," said letter grades instantly show where a car stacks up against the best and the worst. Stars or number rankings, for example, don't have clear endpoints unless one knows how many stars or digits are on the scale.

"A or B tell you what is the top range, but the other label [the one highlighting miles per gallon and fuel cost] doesn't tell you what to aspire to," he said.

Another psychologist credited the grade label for emphasizing something other than money.

Robert Cialdini, a psychology professor at Arizona State University and a scientist for an energy efficiency firm, said a car label should give people information on cash savings. But he said people also have a variety of non-monetary motives, like fitting in, helping others, and even valuing the environment.

"When you monetize things, other, more powerful factors that influence behavior fade into the background. They're not the focus any longer," he said.

Industry fears grades could confuse consumers

At least one auto company has thrown its support behind the letter-grade idea. Nissan Motor Co. Ltd., which will release a 100-mile-range, fully electric car this year, said it doesn't yet know what mpg-equivalent rating, or letter grade, the Leaf will get. But based on the agencies' documents and the fact that the Leaf has no tailpipe emissions, it would be very likely to get an A.

The response from the rest of the auto industry has been less approving.

Gloria Bergquist, vice president of the Alliance of Automobile Manufacturers, said "our first initial reaction is that the letter grade probably had connotations of passing/failing, government label of approval, and there might be another yardstick that can be used."

Bergquist said people could lose track of what the letter is supposed to measure -- the overall quality of the car, or its fuel-economy and climate performance? And since most cars would get Bs and Cs, shoppers will most likely be parsing pluses and minuses, not As versus Ds.

"We think cars are pretty complicated products and you can't really rate them like you'd rate a movie to go see," she said. "You can't give a 'four thumbs up' movie rating to a sedan."

If Americans took those grades to heart, it could affect sales of the big cars that have brought rich profits for the major automakers. Of 675 pickup and SUV models in 2010, only eight models reach B+; most get B- or below.

The letter-grade rating seems to have blindsided the industry. Automakers had been talking to EPA for several years about what would go into the label; all agreed that with the new generation of electric, hybrid and biofuel cars, customers would need new information to help them compare vehicles.

But according to a source with one major automaker, who asked not to be identified because the company will give formal comments on the labels, the discussion with EPA became bogged down by engineer-speak and companies vying for a label that would favor them individually.

The source said that's when EPA turned to consumer focus groups to work on making the label accessible.

Craigslist, iPod and Pandora leaders pushed for simplicity

As part of that process, the agency brought in an expert panel known for its success in getting product and health-related information to consumers. The panel, which included the founder of Craigslist, someone who helped market the iPod, and a co-creator of MTV, met in June for a one-day session at EPA headquarters.

No one in the room that day was from the auto industry.

"The intent of the expert panel was to explore best practices from outside experts," EPA said. The agency said it also used citizen focus groups, reviewed reports on how consumers shop for new vehicles and ran an online survey on the different labels.

In reviewing a number of data-drenched labels, the expert panel's message was to keep it simple.

"We felt that the samples they provided to us were way, way too complex and it would be a label someone would glance at, walk away, and not even try to understand because there was so much information," said the Centers for Disease Control and Prevention's Faye Wong. Wong said she was asked to be on the panel because of her success directing the CDC's VERB campaign, an effort that encouraged tweens to be physically active every day.

On a napkin, the group sketched out a label with a letter grade, closely resembling the option now put forward by EPA for comment.

Panel member Tom Conrad, whose job is to make the Pandora website simple and easy to use, said that the letter grade option EPA is floating is "bordering on identical" to what they drew that day.

The label without the letter runs the risk of being tuned out, said Conrad. "As an example, I spent a day in a conference room talking about this issue, and I couldn't tell you what label two has on it," he said.

On the other hand, he said, "I could tell you what label one does. I could walk through a lot of new automobiles and tell you how to compare the vehicles and how to learn more if you want to."

How will emissions stack up against comfort and safety choices?

The group batted around ideas about ranking cars with numbers or stars, but the letter option took the lead because of everyone's familiarity with letter grades and what they mean, Wong said.

But the approach has some critics outside the auto industry, as well. Jack Gillis, director of public affairs for the Consumer Federation of America, said both of EPA's proposed labels are an improvement over the current label -- but that for the American consumer, money still talks.

He said CFA's research shows that "economic issues and concern about our dependence on foreign oil seem to have a greater impact on consumer attitudes than environmental concerns."

When shoppers see the figure on label two -- "annual fuel cost" -- it will cure them of sticker shock: "Oh my gosh, this is going to cost me $3,000 more? And I was thinking I was going to get a better deal because it was $200 cheaper than another car."

Gillis said this doesn't move people from buying an SUV to a compact car, but it does move them to look at the fuel-efficient varieties within a class.

Others question whether the labels will have any influence at all.

Joseph Arvai, a professor of judgment and decisionmaking in the environmental sciences program at Michigan State University, argues that car shoppers weigh many factors, such as safety and comfort, alongside mileage and emissions. So, he said, they might not really care about a letter grade that only evaluates some of these.

"I don't want to sound too pessimistic about it, but I am pretty pessimistic about it," Arvai said.

Tapping into emotion over global warming

When gas prices rise, for example, shoppers might be drawn to cars with an A rating. Otherwise, they might be more likely to buy cars based on capacity or safety, he said. Carmakers, in turn, won't be motivated to improve their vehicles if consumers do not give the grade much credence, he said.

By a similar token, shoppers who encounter the sticker without the letter grade might pick out a factor that is of importance to them -- like miles per gallon -- but dismiss the rest of the sticker's data entirely, according to Arvai.

Duke University's Ariely disagrees. Merely measuring something and putting it on the windshield automatically assigns it value in the decisionmaking process, even with the constellation of other considerations shoppers care about, he said.

"Every time we show people a concrete measure of something, we basically make it more salient and make it more of a focus of attention, so therefore, we are increasing the chances people will pay attention to it," he said. The label with that letter grade only helps make that value clearer, he added.

If one were to measure the words a writer puts out each week, the writer would begin to notice and care about that number, even if she never really thought about it before, Ariely said.

To some researchers, the hope is that the switch to letters will draw a visceral reaction -- and begin moving people to buy for the environment, not just their pocketbooks.

George Loewenstein, a professor of economics and psychology at Carnegie Mellon University, gives the slight edge to the letter-grade label for being less confusing. While a letter grade tells someone how a car ranks -- and even how to feel about it -- he says that's not a bad thing.

"Our world is heating up, with disastrous consequences for us and other animals and life as we know it. There should be an emotional outcry much greater than what we observe," he said. "If letter grades evoke some of the emotion that we aren't experiencing that we should be experiencing, in my opinion, that would be a wonderful thing."

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