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New Emissions Rules Mark Strategy Turn for Auto Industry

May 19, 2009 at 6:00 PM EST
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White House Climate Policy Chief Carol Browner explains the administration's vehicle emissions standards plan to reduce greenhouse gas emissions.
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JIM LEHRER: President Obama announced sweeping new standards today on gas mileage and auto emissions. He said it marked the start of a comprehensive national effort toward a clean-energy economy.

Judy Woodruff has our lead story report.

BARACK OBAMA, President of the United States: The sun is out, because good things are happening.

JUDY WOODRUFF: An apparently revved-up president made the announcement after months of talks with the auto industry and interest groups.

BARACK OBAMA: We have set in motion a national policy aimed at both increasing gas mileage and decreasing greenhouse gas pollution for all new trucks and cars sold in the United States of America.

JUDY WOODRUFF: The proposed fuel efficiency standards, known as CAFE for “corporate average fuel economy,” would mandate 30 percent better mileage by 2016. Cars would need to get 39 miles per gallon; trucks, 30 miles per gallon.

The president said the U.S. could save 1.8 billion barrels of oil as a result. And together, he said the mileage and emissions rules would amount to taking 177 million cars off the roads.

The emissions target is to cut carbon dioxide coming from tailpipes by one-third as of 2016. And it could mean longstanding legal battles involving carmakers, the states, and the federal government will be abandoned.

Today’s changes hew closely to a proposal long advocated by California. The industry and the Bush administration resisted that effort for years.

But Gov. Arnold Schwarzenegger said much is different now.

GOV. ARNOLD SCHWARZENEGGER (R), California: The car manufacturers, you know, needed money. They need the taxpayers’ money. They need the federal government to help them. So in order to get that help, I’m sure that President Obama said, “OK, we’re going to give you the help, but here’s what you need to do.”

JUDY WOODRUFF: The auto industry has been severely weakened by last year’s sky-high gas prices and the credit crunch. Now General Motors is on government life support, and Chrysler is in bankruptcy.

Alan Mulally of Ford, one of ten domestic and foreign carmakers involved in today’s announcement, said the changes will help.

ALAN MULALLY, CEO, Ford: We’re going to be best-in-class in fuel efficiency, in addition to quality and safety and that every year, year after year, we’re going to improve the fuel mileage going forward and reduce the CO2.

So, of course, improve the internal combustion engines, then more hybrids, and then we’ve also announced that we’re moving to all electric vehicles. So that’s kind of the basic fundamental roadmap going forward.

JUDY WOODRUFF: And the president himself gave an impromptu pitch for the beleaguered industry.

BARACK OBAMA: I still have my Ford parked in Chicago, Ford hybrid, runs great. You guys should take a look. But there are also some outstanding hybrids…and energy-independent cars represented up here. So I didn’t want to just advertise for one.

JUDY WOODRUFF: The new rules do mean prices will go up $1,300 per vehicle when combined with standards approved earlier, but the president said potential gasoline savings would be more than $2,800 over the life of that new vehicle.

Negotiating with automakers

Carol Browner
White House Energy and Climate Chief
We said to the car companies: We want a certain outcome in terms of fuel economy, in terms of greenhouse gas reductions. We'll work with you on the flexibilities.

JUDY WOODRUFF: For more on today's announcement, I'm joined from the White House by Carol Browner, assistant to President Obama for energy and climate change.

Carol Browner, thank you very much for joining us. How significant is this announcement? And how long before we see tangible results?

CAROL BROWNER, Assistant to the President for Energy and Climate Change: It's historic. What we've done is we've brought together two government agencies -- EPA, DOT -- the state of California, 10 companies, all agreeing that we need a new national policy when it comes to fuel efficiency standards and the first-ever greenhouse gas emissions.

We'll start to see results in model year 2012. That's when the program gets up and running. And it will run out -- it will go out to model year 2016, when we will achieve 35.5 miles per gallon on average from our cars.

JUDY WOODRUFF: Now, with the auto industry in the very weakened condition that it's in, dependent on the federal government, was the administration essentially able to impose its will on the auto folks?

CAROL BROWNER: You know, no, I mean, we have lots of companies who were participating in these discussions, actually all of the companies, some of them in different shape than others.

But what we did is we said to the car companies: We want a certain outcome in terms of fuel economy, in terms of greenhouse gas reductions. We'll work with you on the flexibilities.

And so we were able to give them some flexibility so that they can, in fact, meet these standards. And they're all saying -- all of the car companies are saying they will be able to meet them.

JUDY WOODRUFF: Can you give us any more of a sense of the give-and-take in those discussions not only with the auto industry, but with the states that wanted these standards sooner?

CAROL BROWNER: Right, and that's what we had to do. We had to sort of weave together what each of the parties needed.

The car companies needed the certainty of one national policy, not a California rule, an EPA rule, a DOT rule. California wanted a certain level of greenhouse gas reductions.

And so, you know, sort of looking at the bottom lines for each of the groups involved in this, we were able to weave the program together and sort of create this new proposed national policy, which at the end of the day will mean a lot to consumers, because every time you fill up your car with gasoline, that gallon is going to go a little bit further than it used to.

Gas savings offset car costs

Carol Browner
White House Energy and Climate Chief
With these more fuel-efficient, cleaner cars will come gas savings. And so while there is an incremental cost, the payback for the consumer who buys their car in cash is 3.2 years.

JUDY WOODRUFF: Up until now, we know that Americans have mainly -- only mainly turned to fuel-efficient cars when the price of gasoline has gone up. But now, for example, that it's gone down again, many people are turning back to those gas-guzzlers. Do you think that is going to change by the time these cars are available?

CAROL BROWNER: Well, one of the -- we did something relatively new here, which is we set standards for each class of vehicles. We set what are called attribute or footprint standards.

And what that means is, if you want to buy a bigger car, if that's what the consumer wants, if the soccer mom wants her minivan, you can buy that car. It will be more fuel-efficient. So all cars become fuel-efficient, not just some cars.

JUDY WOODRUFF: But even with that, is the administration prepared to offer some incentives to Americans who just don't want to pay the extra it's going to cost to get these more fuel-efficient, cleaner cars?

CAROL BROWNER: Well, remember that, with these more fuel-efficient, cleaner cars will come gas savings. And so while there is an incremental cost, the payback for the consumer who buys their car in cash is 3.2 years.

But for the consumer who buys their car, like most consumers do, and pays it off, you know, over several months, maybe 60 months, the average life of a loan, they could start to see the benefits even more quickly.

JUDY WOODRUFF: So no thought being given to tax credits or other, essentially, incentives?

CAROL BROWNER: Well, right now what we've been focused on is, how do we create a national policy about fuel economy and greenhouse gas?

And that's what we've achieved today. It's historic. It will be, I think, a very significant, in terms of preserving consumer choice and giving people more fuel-efficient cars.

Next moves on rule

Carol Browner
White House Energy and Climate Chief
The car companies will do what they do best, which is figure out how to innovate and find new solutions to give the consumers what they want, which are more fuel-efficient cars, which means savings to the consumers.

JUDY WOODRUFF: At the same time, Carol Browner, we know these new standards are going to cost the auto industry a lot. I saw one government estimate from last year that said just raising the standard to 31 miles per gallon by 2015 was going to cost the industry almost $50 billion a year. This is a much stiffer standard, is going to cost much more, making it one of the most expensive rule-makings in history.

CAROL BROWNER: Well, remember that the car companies were facing the possibility of three standards. What we achieved today was one proposed national policy. And if you look at the cost of having to comply with three different standards, that would be significantly higher than the cost of complying with one proposed national policy.

JUDY WOODRUFF: I guess I saw one analysis that said this might be likened to kicking the auto industry while it's down.

CAROL BROWNER: You know, that's not what the auto industry was saying to us. And as you saw, all of the auto execs stood with the president today. They're in support of this.

They think it is good for the industry. They think it is good for their individual companies. You know, they want to be a part of creating more fuel-efficient cars. They want to be a part of reducing greenhouse gas emissions from tailpipes.

And I think they deserve a lot of credit for coming to the table and working through this. We were able to preserve the environmental benefits that were important to California, and I think this is a win-win.

JUDY WOODRUFF: And, finally, remind us what has to happen before these recommendations can become law.

CAROL BROWNER: So what will happen next is the government will go through its traditional proposed rulemaking, and then a final rule will be adopted. There are lawsuits that the parties have agreed to settle; those lawsuits will be settled.

And then the car companies will do what they do best, which is figure out how to innovate and find new solutions to give the consumers what they want, which are more fuel-efficient cars, which means savings to the consumers.

JUDY WOODRUFF: Carol Browner, assistant to the president for climate change and energy, thank you very much.