One of President Obama's first acts was ordering the Environmental Protection Agency's review of California's request to impose its own tailpipe emission standards for CO2. In so doing, Obama delivers on his campaign promise to overturn the Bush administration's denial of California's plan. Bush was correct in denying California's request. The automobile industry has already been hit hard by the new fuel economy rules with compliance cost estimates running as high as $100 billion.
Approval of California's request will result in the California fuel economy standard becoming the de-facto standard for the country as 12 other states have indicated they intend to follow California's lead. If adopted, this prohibitively expensive plan would prove disastrous for already financially strapped automakers, forcing them to expend precious capital to develop different cars for different states.
Allowing states to set their own tailpipe standards for CO2 is essentially permitting individual states to set fuel economy standards that are more stringent than federal regulations. The proposed California standard of 42.5 mpg by 2020 is much more severe than the already stringent federal standards of a minimum fleetwide average of 35 mpg by 2020 passed just last year by Congress.
When the federal Clean Air Act was passed in 1970, California had the worst air quality problem (smog) in the country. Due to California's unique air quality problems, the Clean Air Act allowed California to petition the EPA for approval to set more stringent standards for smog-causing tailpipe emissions for cars sold in the state. Lawmakers at that time never contemplated that the California waiver provision would be used in the future by other states to also set their own fuel economy standards.
It's a fact that states pushing for higher automobile fuel economy standards (mostly on the East and West coasts) manufacture few vehicles. California Gov. Arnold Schwarzenegger has been leading the charge for higher fuel economy standards that punish the economies of the industrial Midwest states while simultaneously lobbying for a federal bailout of California's $30 billion deficit.
Automakers' public response to the Obama announcement thus far is tepid to nonexistent — even though they previously filed lawsuits to prevent the California waiver. Perhaps this is not surprising. During a recent visit to the North American Auto Show in Detroit, I was struck by the proliferation of green-vehicle marketing, which appeared most evident at the General Motors exhibit.
It's difficult to discern the logic of an automaker on the verge of bankruptcy pitching expensive green technology to cash-strapped customers when gasoline is selling for less than $2 per gallon — leading to the conclusion that automakers aren't marketing so much to the consumers who actually purchase vehicles, but rather pandering to the federal government that, for all practical purposes, is now running GM and Chrysler.
Those hoping for "real change" have to be disappointed with the Obama administration's approach to automobile fuel economy standards. Real leadership would be for President Obama to promote a tax on gasoline (one that could be revenue neutral with rebates to taxpayers) that would send the right signals to the marketplace and allow the automakers to produce vehicles that customers actually want. Rather it appears Washington is poised to force automakers to employ expensive technology (estimated to increase costs per vehicle from $3,000 to $10,000) in order to comply with the California mandates. This approach will hasten the bankruptcy of Detroit automakers and force customers to pay more for vehicles they do not want to buy.
Russ Harding is director of the Property Rights Network at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.