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Obama Orders Regulators to Revisit Fuel Standards

January 26, 2009 at 6:20 PM EDT
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President Barack Obama pledged renewed U.S. leadership to fight global warming Monday, as he ordered regulators to revisit the tightening of fuel-economy standards for new cars and trucks. Experts debate the significance of the announcement for automakers.

RAY SUAREZ: The president directed the head of the Environmental Protection Agency, Lisa Perez Jackson, to evaluate whether states have the authority to regulate vehicle pollution.

In 2007, the Bush administration denied a request by California to impose more restrictive greenhouse gas emissions standards. More than a dozen other states have adopted California’s proposed restrictions, which would force automakers to cut emissions by 30 percent in new cars and light trucks by 2016.

EPA Administrator Jackson is widely expected to give the states that authority.

U.S. PRESIDENT BARACK OBAMA: The days of Washington dragging its heels are over. My administration will not deny facts; we will be guided by them. We cannot afford to pass the buck or push the burden onto the states.

RAY SUAREZ: California Gov. Arnold Schwarzenegger praised the development at a news conference in Sacramento this afternoon.

GOV. ARNOLD SCHWARZENEGGER, R-Calif.: For too long, Washington has been asleep at the wheel when it comes to the environment. Now California finally has a partner and an ally in Washington at the White House.

And let me again be clear: This has absolutely nothing to do in punishing the automakers. As a matter of fact, what we want to do is just give them a little push to be innovative and to develop new techniques that will ultimately make better cars that will be more competitive around the world.

RAY SUAREZ: Mr. Obama said his decision was not intended as a slight to the U.S. auto industry.

The president also ordered the Department of Transportation to move forward on implementing new fuel efficiency guidelines for cars sold in 2011.

BARACK OBAMA: Increasing fuel efficiency in our cars and trucks is one of the most important steps that we can take to break our cycle of dependence on foreign oil. It will also help spark the innovation needed to ensure that our auto industry keeps pace with competitors around the world.

RAY SUAREZ: Today, automakers indicated they will comply with the new rules. Dave McCurdy is president of the Alliance of Automobile Manufacturers.

DAVE MCCURDY, president and CEO, Alliance of Automobile Manufacturers: What we’re asking for is clarity, simplicity, making sure that we don’t have different structures, different timelines, and different compliance requirements. If we can reduce that differences, then I think we have an opportunity to really advance the ball, which is the bottom line.

Waivers would empower states

Ian Bowles
Mass. Sec. of Energy and Environment
Americans are going to have more choices and cars that have lower impact on the environment. It's a good thing.

RAY SUAREZ: Automakers said they also worried about the high costs of implementing new technology.

With big changes ahead for both regulators and automakers, we get a look at the impact on states and the auto industry. Ian Bowles is the secretary of energy and environmental affairs for the state of Massachusetts. It's one of the states expected to adopt rules similar to California. And Mike Dushane, executive editor of, joins us from outside Detroit.

Secretary Bowles, let me start with you. If the EPA administrator complies with the president's request, what will you be able to do that you can't do right now?

IAN BOWLES, secretary of energy and environmental affairs, Massachusetts: Well, you know, we've had a history for 20 years in Massachusetts of following the California standards relative to automobile emissions. This puts us back on that track of being able to go after ever more stringent standards to reduce air pollution and improve the environment around us. So we'll be moving forward together with California. It's a requirement of Massachusetts law.

RAY SUAREZ: What will change about the act of buying a car in Massachusetts? And how soon until consumers see a change?

IAN BOWLES: Well, simply put, consumers in Massachusetts will have more options to buy more fuel-efficient, lower impact in terms of emissions vehicles. We think it will create new clean energy jobs in the United States and overall give our consumers greater choices.

And many consumers have preferences already. You saw the SUV market really trail off a lot in the economic hard times. We think this will help get back the United States in a leadership position on innovation in the automobiles.

RAY SUAREZ: Some are speculating that it will also be more expensive to buy a car in Massachusetts. Is it? Will it?

IAN BOWLES: Well, you know, in today's world, there are certain cars you can't buy in Massachusetts and California that you can buy in other places. It's important to remember there's a long history of this. Some 20 waivers have been granted to California to allow more stringent standards, so this isn't a new set of relationships.

We've got one set of standards from California and one from the federal government. But, you know, I think we've -- there's a lot of technologies that are already in place in Europe. Their fuel efficiency is much higher than it is here. So many of those technologies can be just taken off the shelf and put into American automobiles.

RAY SUAREZ: Well, looking at the list of states that, like your own, want to follow the California standard, one is just over your border -- one exception is just over your border in New Hampshire. What's to stop people from just heading up to Manchester and visiting an auto dealership up there and then registering their car in Massachusetts?

IAN BOWLES: Well, bear in mind that, you know, that happens all the time, whether it's purchasing certain goods in Massachusetts or in another state. I think the bigger picture is every other state from Maryland to Maine has been asking for this from the federal government.

And so, you know, the other piece of President Obama's announcement today is a rapid increase in the default standard, the federal standard. So really it's a two-pronged effort where both standards are going to go up and Americans are going to have more choices and cars that have lower impact on the environment. It's a good thing.

Carmakers wary of new rulings

Mike Dushane
[T]here has to be an energy policy that somehow fosters demand for these fuel-efficient vehicles or we're going to have these very expensive, very small cars that no one wants to buy.

RAY SUAREZ: Mike Dushane, let me bring you in. We saw a representative of the auto manufacturers, and he wasn't exactly celebrating this potential new ruling. He said he wanted clarity; he wanted simplicity. What's unclear about what the EPA is going to allow now?

MIKE DUSHANE, Well, if there are different laws in different states, it's going to create a very difficult situation for carmakers which, first of all, takes a long time to develop vehicles, and, second of all, save money by producing a uniform set of vehicles for the whole country.

But what I'm hearing here is that there's all this technology that could be used by car companies and just isn't. The reality is that that technology means vehicles will be smaller; they will be less powerful; they will be less safe; and they will be thousands of dollars more expensive for people living in those states where these rules may be adopted.

RAY SUAREZ: For a long time, California had different standards for automobiles registered in the states than other places in the country. Can we use that as a test case? Was a car in California more expensive?

MIKE DUSHANE: The differences were not nearly as dramatic as what we're talking about now. We're talking about, in six years, a 30 percent increase in economy standards. That is virtually unobtainable unless everyone starts buying compact cars with hybrid systems, meaning those cars are going to be small and they're going to cost probably $4,000 more than comparable compact cars today, so get ready to buy a compact car for $25,000 in those states.

RAY SUAREZ: The states that, like Massachusetts, are ready to join with California include some considerably big chunks of the national car market, Florida, New York...

MIKE DUSHANE: Half of the population.

RAY SUAREZ: Well, wouldn't that effectively become the new national standard rather than, as you suggest, several different standards in operation?

MIKE DUSHANE: It would. It would be very difficult for the car companies, because they can't just change a factory that currently produces, say, a Ford Taurus or a Chevy Malibu to suddenly produce a Ford Fiesta or a Chevrolet Aveo, two cars that with modern technology might be able to meet these standards.

So it would be difficult for the carmakers to make larger cars for the rest of the country, and it would shift the entire fleet smaller and more expensive.

RAY SUAREZ: So are you saying that, if there was more time, this is a transition that the car companies could make and it's just this deadline that's a problem?

MIKE DUSHANE: Well, both things are true. No matter what the deadline is, there is no technology now or in the foreseeable future that will allow these regulations to be met without spending a huge amount more money and making cars smaller. The sooner it happens, the less likely it is that it's going to happen without the significant cost and dramatic shift.

The other thing that's important to realize here is that there is not really demand. This is not the will of the people. Sales of the Prius, one of the few cars that today would be able to make these standards, have absolutely tanked as fuel prices have gotten lower. Toyota has ceased construction of its Prius factory in the U.S. because sales have so slowed.

So there has to be an energy policy that somehow fosters demand for these fuel-efficient vehicles or we're going to have these very expensive, very small cars that no one wants to buy. People will simply gravitate toward used vehicles.

Chance to 'take a big step forward'

Ian Bowles
Mass. Sec. of Energy and Environment
[W]e'll create jobs; we'll reclaim our innovation and leadership. The clean energy economy is coming, and I think that consumers are ready for that.

RAY SUAREZ: Secretary Bowles, what about that? You heard Mike Dushane suggest that the federal government here is trying to create a market for something that many consumers aren't demanding at the moment.

IAN BOWLES: Well, first, I think it's important to understand on these sort of "too much, too fast," "this is coming on us quickly," "we only have six years," I mean, this law was passed in 2002 in California. They applied for the waiver in 2005.

President Obama, as well as his opponent, Senator McCain, said they were going to grant this waiver. So this is not new news, and it's not coming up quickly.

I think the EPA will have to work carefully on the details of when this actually takes effect, assuming, of course, they grant the waiver. But I think there is a major opportunity. And this is, again, a standard that doesn't only address fuel efficiency. It addresses energy use and greenhouse gas emissions throughout all aspects of the car, the weight of the car, the air conditioning. So it's really an opportunity to take a big step forward.

You've got, again, a lot of fuel-efficient cars available around, really, all the rest of the industrialized world that are available and can improve our efficiency. And I think it's the time for us in the United States to look forward, to reclaim our leadership.

I think everyone around the world knows we're going to be doing a lot more to cut greenhouse gas emissions and we have to get on with that. The United States has been way behind the rest of the world. So we'll create jobs; we'll reclaim our innovation and leadership. The clean energy economy is coming, and I think that consumers are ready for that.

Did carmakers see this coming?

Mike Dushane
There is a complete disrespect for how complex vehicles are and how long it takes to develop vehicles.

RAY SUAREZ: Mike Dushane, as the secretary suggests, should the automakers have seen this coming?

MIKE DUSHANE: The notion that the automakers should have staked and bet billions of dollars on what was essentially at that point politicking is ludicrous. There is a complete disrespect for how complex vehicles are and how long it takes to develop vehicles.

The automakers had only one thing to go on and that was the regulations that were signed into law as they were developing these vehicles and this technology.

Now, that said, all automakers -- domestic, Japanese, German and otherwise -- have been working on these technologies. They have the technologies in Europe, absolutely.

The fact of the matter is, they are still very expensive. This is not for lack of effort that we don't have the availability of these high-fuel-efficiency vehicles. It's because of cost, and it's because of lack of demand for these very small vehicles.

RAY SUAREZ: Mike Dushane, Secretary Bowles, gentlemen, thank you both.

IAN BOWLES: Thank you.

JUDY WOODRUFF: On our Web site, you can learn more about your car emission and the potential effects of global warming. Visit us at Just click on "TV Shows" and then "Online NewsHour."