Myth: “But It Is Too Hard,” Claims the Auto Industry.
Issue
To fight global warming, California adopted regulations limiting greenhouse gas emissions from cars, SUVs and pick-up trucks. The auto industry has sued in various forums to stop those regulations. When those lawsuits have not succeeded, the auto industry has tried to convince Congress and the Bush Administration to block California’s global warming efforts.
Myth
The auto industry claims that the California greenhouse gas emission regulations are too difficult for them to meet.
Truth
Based on product projections, all automakers can meet the model-year 2009 requirements of the California regulations, virtually all of the automakers can meet the second year, model-year 2010 requirements and many automakers can already meet the model-year 2011 requirements. Further emissions reductions are required each year through model-year 2016, but the automakers have a huge range of options to meet those cleaner standards; also, they have time to do it.
California built key features into its regulation to assure the automakers’ success:
- Total flexibility is allowed. Each auto manufacturer can decide what is best for it to meet its company’s fleetwide requirement.
- Each individual vehicle is not required to meet the regulations. A manufacturers’ fleet as a whole must meet the requirement so one type of vehicle can offset another.
- The regulation is divided into two categories of vehicles and heavier vehicles, such as large pick-up trucks, are allowed more emissions.
- Nothing new needs to be invented. Existing technologies to improve engines, eliminate air conditioning leaks and make tires roll easier will do the trick; they just need to be placed on more vehicles.
- Long before model-year 2016, there will be even more technology options for the auto industry. Automakers announced new “clean diesel” vehicles for model-year 2009 to be released summer 2008. Both U.S. and foreign-based automakers have announced plans for plug-in hybrid vehicles as early as model-year 2010.
- Technology improvements for the new vehicles are cost-effective for the consumer, especially given the high price of gas.
- Compliance bonus credits are available to automakers when their vehicles use alternative fuels such as ethanol (E85), natural gas, biodiesel, electricity (including plug-in hybrids), and, looking to the future, hydrogen fuel cells. Alternative fuel use will expand in the next few years, and definitely before the model-year 2016 vehicles are marketed. Bonus credits are another option for the auto industry to use to meet the greenhouse gas regulations.
Not only can automakers meet the California greenhouse gas regulations, they can make a profit doing it. Citicorp Global Markets Inc.’s recent study analyzed automakers’ claims that the Congressional proposals to improve fuel economy would “undermine their economic health and stability.” 1 Not so. Citicorp highlighted the parallels between the California requirements and the Congressional proposals, discounted the automakers’ claims and concluded that the requirements were attainable and “surprisingly – generating some growth in variable profits for most automakers.” 2
The bottom line: California has confidence in the ability of the auto manufacturers to adapt and innovate. Since the auto industry has so much flexibility and so many options, their claim that it is “too hard” to meet California’s regulations is just wrong.
- Citi Investment Research is a division of Citigroup Global Markets Inc. Its industry focus report “CAFE and the U.S. Auto Industry, A Growing Auto Investor Issue, 2012-2020" dated October 22, 2007 see pp. 5-6.
- Id. at p. 6.; see also pp. 1, 19 (automakers will primarily rely on improved conventional gasoline vehicle technologies and not on the more expensive advanced drivetrains).