Loopholes Could Sap Potency of Obama Fuel Deal, Policy Experts Say

Concerns center around the formula used to reach the 54.5 mpg standard, the leniency granted to big trucks and how emissions for EVs will be counted

President Barack Obama
Pres. Barack Obama greets auto industry executives following his announcement of the 2025 fuel efficiency standards on July 29. Credit: White House Photo by Pete Souza

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WASHINGTON—Half-starved conservationists have been thrown so few crumbs by the Obama administration that it’s tempting for some to praise the bread bits tossed their way as the most scrumptious they have ever feasted upon.

Take fuel economy standards, for instance.

When the president announced a Friday pact with 13 automakers that would force cars and light trucks to achieve 54.5 miles per gallon by 2025, hallelujahs were emitted nationwide. It is being praised as a historic, job-creating, dollar-saving, air-cleansing, carbon-curbing savior.

The new round of standards, which covers model years 2017 through 2025, is heralded as a pathway for raising fuel economy 75 percent above 2010 levels. It has the potential to save more oil — 1.5 million barrels per day — than this nation now imports from Saudi Arabia and Iraq combined.

All of that red, white and blue pageantry, however, dwarfed the caution flags raised by transportation policy experts. Among those adding a hue of yellow to the conversation is think tank specialist Therese Langer, who saw plenty of space for loopholes when she lifted up the hood to examine the agreement.

“Don’t get me wrong, I also think this is a big deal,” Langer told SolveClimate News. “Getting to that level of 54.5 miles per gallon is an impressive achievement.”

But Langer, transportation program director at the American Council for an Energy-Efficient Economy, also sees some shortcomings in the way the proposal is being ironed out.

One, she fears the auto industry will try to water down regulations during the built-in “mid-course review.” And, two, she is afraid the deal doesn’t maximize the potential of advanced vehicle technology and includes provisions that could undermine economic and environmental benefits. Her specific concerns center around the formula used to reach the much-ballyhooed 54.5 mpg standard, the leniency granted to big trucks, and how emissions from electric vehicles will be counted.

“The essence of it is that manufacturers have an ingrained aversion to regulation, even when it is going to help them out” in the long run, Langer said. “If they can introduce some level of uncertainty, they will do it. Then it becomes a question regulators have to ask themselves: Are we jeopardizing an industry that is just getting back on its feet in difficult economic times?”

Miles Per Gallon: Is 54.5 a Mere 36?

The 2017-2025 agreement expands on the 2012 to 2016 pact reached under the mandate of the Clean Air Act and the Energy Independence and Security Act of 2007. The miles-per-gallon standard is slated to reach 34.1 by 2016. It stands at 28.3 this year.

But these fuel efficiency formulas are incredibly complex and the final numbers are confusing to the public because they aren’t what they appear to be on the surface. That has been the frustrating case for decades.

For instance, auto manufacturers are allowed to take credit for upgrading their vehicles’ air conditioning systems so they don’t leak or use harmful refrigerants. Do that math, Langer said, and 54.5 mpg tapers off to 50 mpg.

There’s also what’s known as the “real world correction factor,” which knocks that 50 mpg down another 20 to 30 percent. The difference varies by vehicle and occurs because standards are based on laboratory testing, while the sticker attached to the vehicle window factors in adjustments for actual road performance.

So, clunk, that 50 mpg figure then drops to somewhere between a less exhilarating 36 mpg and 40 mpg.

Kateri Callahan, president of the nonprofit Alliance to Save Energy, says the testing procedures used for measuring fuel economy standards are outdated leftovers from an era of the 1970s when the national speed limit was 55 mph and cars weren’t technologically advanced.   

“The full economic, national security and social benefits of the standards cannot be realized until the government updates the woefully out-of-date testing procedures,” Callahan said.

Some green organizations lobbied the Obama administration for a fuel standard as high as 62 mpg, which Langer said could be achieved through modest vehicle weight reductions and the increased use of non-hybrid plugins.

“There’s still a lot to be gotten out of the internal combustion engine and a lot more to wring out of conventional technologies,” Langer said. “If the role of the rule is to maximize reductions in greenhouse gas emissions and fuel consumption, then this was an opportunity to do it.”

Possible Off-Ramp for Industry

The fine print in the new agreement is especially important, Langer and others emphasized, because the mid-course review lets players such as EPA, NHTSA, the California Air Resources Board and industry representatives revisit the rule to determine if revisions are necessary beginning in 2022.

“This basically allows for reconsideration of the target,” Langer said. “It makes us nervous that industry will look at this as an off-ramp, saying that the standards are too tough to meet through 2025. They could claim it’s already a hazardous situation for them and they’re being asked to do more.”

The Alliance of Automobile Manufacturers, a trade association representing many of the carmakers involved in the agreement, referred SolveClimate News to individual manufacturers for comment on the pact.

Greg Martin, a General Motors spokesman based in Washington, D.C., said that the mid-course review is reasonable because auto manufacturers’ product plans extend only five to seven years — not the 14 years covered by the agreement. Reconvening would allow all the negotiators to study the market and other variables to see if fuel economy standards should be recalibrated — either up or down.

“By the time you reach 2020 or 2021 you’re sailing into uncharted waters,” he told SolveClimate News. “We need to stop, take a look around and see if the forecast and assumptions we made 10 years ago still hold true today.”

Martin said that unlike the debt ceiling debacle that unfolded recently in the nation’s capital, the fuel-economy negotiations represented the model of compromise because all parties displayed a willingness to bend.

“We feel proud of the progress we’ve made and we certainly understand there’s a lot more work to be done,” he said. “Fuel efficiency is certainly important to consumers and to the country. And it’s important to us or we wouldn’t be investing in the products we are.”

While Martin said he doesn’t want to discount the passion of the environmental community, he noted that GM has a responsibility to meet the car, van and truck needs of all consumers whether they are urban singles, suburban families or contractors and landscapers.

Big Trucks, Electric Vehicles

Langer worries that the agreement doesn’t have enough safeguards to keep manufacturers from gaming the system.

While the proposal calls for cars to bump up fuel efficiency 5 percent each year through 2025, light trucks don’t have to match that until 2022. Small trucks have to boost efficiency 3.5 percent beginning in 2017 but their heavier cousins — such as the Ford F150, Chevy Silverado and Dodge Ram — are off the hook until 2022.

Those less stringent requirements could prompt manufacturers to classify more vehicles as light trucks, Langer said.

“Subtleties are important because we’re in a regime with size-based standards,” she said. “That’s sort of distorting the market when you expect smaller vehicles to improve and next to nothing from big trucks.”

Langer is also concerned that manufacturers won’t have to begin accounting for “upstream emissions” of electric vehicles — that is, the pollutants spewed from power plants while these “clean” cars are juiced up.

For instance, the 2012 to 2016 car treaty allows each manufacturer to count 300,000 cars as “zero-emissions” vehicles. The newest agreement proposes to remove any sort of cap by 2022, so emissions from the electric grid for charging those vehicles would be counted.

“We can live with this to get the electric vehicle industry going,” Langer noted. “But it’s important to signal that this will stop after a certain number of vehicles.”

Next Step in September

EPA and DOT authorities have been crafting their separate but coordinated proposals to reduce pollution and augment fuel efficiency since Obama’s May 2010 request, and it’s expected that a fleshed-out federal regulation will be introduced by late September. A final rule should be ready by July 2012.

Numerous studies show it could have an enormous impact.

An analysis by the Natural Resources Defense Council, the United Auto Workers and the Center for American Progress shows it producing up to 150,000 new auto jobs by 2021. Another NRDC analysis, in tandem with the Union of Concerned Scientists, projects that a 40 percent reduction in fuel consumption could save drivers as much $80 billion annually at the gas pump by 2030.

The potential drop in carbon pollutants is also significant. Think about these numbers. U.S. drivers could slice their emissions by up to 280 million tons annually — the equivalent of what 72 coal-fired power plants spit out over the course of a year, according to the advocacy group NRDC.

Halving today’s level of carbon emissions from new cars and trucks by 2025 will literally help everybody breathe easier, environmental organizations stressed.

Roland Hwang, the NRDC’s transportation program director, said that manufacturers will be incorporating four well-known and affordable technologies to meet the 54.5 mpg standard.

They include fuel injection, turbo-charging, and cooling and boosting exhaust gas from conventional gasoline engines; hybrid technologies called “parallel 2-clutch” systems; plug-in hybrids with advanced lithium batteries; and lightweight, high-strength body materials to pare mass 10 percent from 2016 levels.

Matching Europe and Asia

While Langer understands that auto manufacturers are wary of government directives, she said they should be keeping their eye on the global prizes that reward fuel efficiency and lower carbon emissions.

The baker’s dozen of auto manufacturers involved in the deal — General Motors, Ford, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo — account for at least 90 percent of the vehicles sold in this country, according to EPA statistics.

“If domestic manufacturers are going to stay in the game, they need to keep up with the most advanced technologies,” Langer said, pointing to much of Europe and Asian countries such as Japan and China as leaders. “There are other places in the world where this is happening.”

Indeed, numbers compiled by the International Council on Clean Transportation indicate this country tails its overseas competitors when it comes to fuel economy and emissions.

“These standards will go quite far in closing the gap,” Langer concluded. “But the United States is still coming from behind.”