Auto Industry Leaders Tell Congress They Would Support Mobile Source CO2 Caps in Principle

16 March 2007

In testimony before the House Subcommittee on Energy and Air Quality this week, the heads of the United Autoworkers, GM, Toyota North America, Ford, and the Chrysler Group all agreed, in response to a question from the committee, that they would support national caps on mobile source CO₂ emissions, depending on the details of the program and especially assuming that it factored in the entire sector—i.e., fuel providers as well as automakers.

The hearing was exploring the feasibility of using a new version of the Corporate Average Fuel Economy (CAFE) program—specifically the 4% per year increase proposed by the Administration. Although the enthusiasm for such a boost in existing CAFE-style regulations ranged from non-existent to barely tepid, the witnesses agreed to work with the committee on developing regulations targeted at reducing greenhouse gas emissions.

Over the years, proponents of reform have discussed raising, lowering, or reforming CAFE standards. Energy conservation, consumer protection, economic growth, oil independence, and as recently as last Congress, rising gas prices at the pump, have all fueled these debates.

This year, the Committee has undertaken an inquiry into an issue that is arguably more critical than, though not unrelated to, any of the above issues. Scientists have been telling us for years that greenhouse gas emissions from human activity are contributing to warming the planet, and the recent Intergovernmental Panel on Climate Change report expressed little doubt that this conclusion is a justifiable one. It should cause all to reevaluate their approach to energy policy in the transportation sector and the economy as a whole.

Ladies and Gentleman, Hannibal is at the gates. The old debate is no longer sufficient. It is time to stop emphasizing what is wrong and what will not work. We need to talk about what can be done, and what can work. This should no longer be a political discussion; the time has come for us to discuss policy. I want to hear from our witnesses about their ideas to address climate change, and I want to hear what they think about the various policy proposals we have already seen.

—Congressman John Dingell, Chairman Committee on Energy and Commerce

The witnesses in the hearing were: Ron Gettelfinger, President, UAW; Rick Wagoner, Chairman and CEO, GM; Jim Press, President and COO, Toyota North America; Alan Mulally, President and CEO, Ford; and Tom LaSorda, CEO and President, Chrysler Group of DaimlerChrysler.

In general, the five witnesses focused on three areas for delivering carbon reductions:

• Support for lower carbon fuels, especially E85 ethanol.

• Support for developing advanced batteries for electric drive trains.

• Continuing incentives for consumer purchases of advanced vehicle technologies and fuels.

Rick Wagoner, who declared that CAFE had failed in meeting in stated goal of reducing petroleum imports, argued a 4% per year CAFE increase would be extraordinarily expensive and would result in an 8.5-billion annual reduction in gasoline consumption by 2017—only enough to slow projected increases.

If all of the E85 capable vehicles on the road today—along with those that GM, Ford, and DaimlerChrysler have already committed to produce over the next decade—were to run on E-85, we could displace 22 billion gallons of gasoline annually. And, if all automakers were to produce half of all new vehicles to be capable of running on E85 by 2012, we could increase the savings to 37 billion gallons of gasoline annually. That’s more than quadruple the savings that a 4 percent-per-year CAFE increase would achieve—and, very importantly, enough to actually reduce America’s gasoline consumption and CO2 emissions.

—Ric Wagoner

Wagoner also emphasized GM’s commitment to electrically driven vehicles: plug-in hybrids, fuel-cell vehicles and range-extended electric vehicles like the Chevy Volt.

Toyota’s Jim Press also argued for the development of advanced automotive technology and a lower-carbon fuel infrastructure together.

Toyota supports the use of national performance-based regulatory programs, so long as the program is fair, technologically feasible, cost effective and does not discourage early compliance, technological innovation and safety improvement. In this context, we support increasing both the passenger car and light-duty truck fuel economy standards, and giving NHTSA the authority to reform the passenger car standard.

—Jim Press

(The emphasis on “national” in the remarks was likely a reference to Toyota’s opposition to the California LEV CO₂ limits.)

Alan Mulally, who said that CAFE “isn’t a silver bullet,” said that Ford would support a reformed CAFE standard based on vehicle footprint—similar to the reformed CAFE standard for light trucks.

Ford supports federal incentives that encourage the production, distribution, and use of low carbon, affordable renewable fuels and flexible fuel vehicles capable of running on renewable E85 ethanol. We support increasing passenger car CAFE standards to maximum feasible levels and reforming the CAFE structure, similar to the light truck reform which set standards based on size or “footprint.”

We also support taking the politics out of the CAFE decision. Setting CAFE standards can only be properly accomplished after a thorough analysis of the data—technical data, economic data, and safety data. We believe NHTSA has this capability.

We all agree on the same goals, reducing carbon emissions and reducing US dependence on foreign oil, but we must also recognize that CAFE has been one solution but may not be the best way to achieve our shared goals. We need to focus on using less high carbon fuels like gasoline and transitioning to low carbon fuels including ethanol, new bio-fuels, bio-diesel, electricity, and eventually hydrogen. This will do more for reducing carbon emissions and our dependency on foreign petroleum than an approach focused solely on CAFE.

—Alan Mulally

(One of the many aspects of a new CAFE to be decided will include who sets the standards: Congress or NHTSA—the National Highway Traffic Safety Administration).

Chrysler’s LaSorda, who also talked about diesel technology as well as biofuels and hybrids, noted that there are other ways than CAFE to achieve similar goals, and adduced the European market as an example.

For those who advocate 4 percent annual CAFE increases over the next 10 years—which translates to a 50 percent fuel economy increase—we know how to do that, too. In fact, we already do it...in Europe. The US combined fleet averages 24-25 mpg, and in Europe the fleet averages 36 mpg. That’s a 50 percent difference.

Why is there a huge disparity between our fleets there and here? After all, we are the same companies in Europe that we are in the US, with access to similar technologies. The difference is the European approach to energy and greenhouse gas policies. They’ve made some tough political choices. They’ve highly taxed gasoline, making the price three times higher than in the US, and they have incentives on diesel fuel. As a result of these policies, fuel economy is always high on a customer’s list, and not just when there’s a spike in fuel prices.

Through policies which affect consumer demand, the mix of vehicles sold in Europe is radically different than here—about 60 percent compacts or smaller, compared to about 15 percent here; and about 50 percent of passenger vehicles are diesel powered. There’s no magic at work here. A gas-engine mid-size car in Europe gets the same mileage as a gas-engine mid-size car in the US. It’s just that customers demand a very different mix of vehicles in Europe.

The European model, while far from perfect, is based on policies that leverage demand and market forces, not on policies that fight them. However, in the US, our policies have historically addressed the supply side—light-duty vehicle fuel-economy standards. But, consider how a 50-percent fuel-economy improvement relates to new vehicle technology alone. If all the new vehicles sold in the US 10 years from now were hybrids or diesels—something that no one really believes is feasible—fuel economy would improve by only 25-30 percent.

—Tom LaSorda

LaSorda called for US policymakers to adopt a new approach that includes vehicle efficiency improvements, the expanded use of alternative fuels and the use of market forces to help drive consumer demand.

The UAW also argued that any carbon reduction policy must address fuels as well as vehicle efficiency. The union is especially worried about stringent increases in CAFE standards leading to the loss of additional automotive jobs in the US.

The UAW urges Congress to explore the feasibility of establishing an additional carbon control policy that would require reductions in the carbon emissions of light duty vehicles sold in the United States, as well as reductions in the carbon intensity of the fuels that go into these vehicles. This two-pronged approach could make a direct, major contribution to reducing greenhouse gas emissions. At the same time, it also would contribute enormously to a reduction in oil consumption.

Under this approach, auto manufacturers would have a strong incentive to improve the efficiency of their vehicles. But there also would be a strong incentive to increase the availability and use of alternative fuels. This approach could be integrated with the economy-wide cap-and-trade program, thereby increasing the overall efficiency of efforts to reduce greenhouse gases and oil consumption. It would also avoid the gaming and other complications that have arisen in connection with the CAFE program. Significantly, this approach could also help generate the revenues needed to provide assistance to struggling auto manufacturers and to level the playing field in the auto industry.

—Ron Gettelfinger

Although the automakers present expressed a willingness to consider a cap-and-trade scheme that was sector-wide, none of them were interested in a cap-and-trade scheme that would have one automaker selling CAFE credits to a competitor.

Resources:

• Webcast of the hearing

• Testimony of Ron Gettelfinger

• Testimony of Rick Wagoner

• Testimony of Jim Press

• Testimony of Alan Mulally

• Testimony of Tom LaSorda