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New Fuel Standards for Cars

August 24, 2005 at 12:00 AM EDT

TRANSCRIPT

JEFFREY BROWN: With gas prices averaging $2.61 a gallon and rising every day…

MAN: I’m probably going to have to let the Explorer go, which is the gas hog.

JEFFREY BROWN: …the cost of filling up a sports utility vehicle, small truck or mini-van is higher than ever. And a long-running question has returned: Should these vehicles be required to get more miles to the gallon? Yesterday the Bush administration proposed the first revision of fuel economy standards for these popular vehicles. The rules for Corporate Average Fuel Economy, or CAFE standards, were first set for automobiles during the Carter years. Transportation Secretary Norman Mineta made the announcement.

NORMAN MINETA: The old system squeezed all vehicles into a one standard fits all structure. And when the new CAFE is fully implemented in the year 2011, nearly all manufacturers will be required to produce more fuel efficient light trucks and will have to improve the fuel economy of the vehicles in all size categories.

JEFFREY BROWN: Starting in 2008, mini-vans, light trucks and SUVs will be divided into six different categories depending on size. Each would have its own target for efficiency. Once implemented, the smallest and lightest trucks would be required to increase efficiency to 28 miles a gallon. The largest vehicles would need to get over 21. The average increase is around two miles per gallon. But the very largest and thirstiest vehicles, like the Hummer H-2, will not be affected by the new guidelines. Environmental groups said the plan is a start, but doesn’t go nearly far enough.

BRENDAN BELL: We will have a modest improvement out of this, but we’re really in a race to cut our oil dependence. And today the Bush administration ran the first 100 yards and then they quit.

JEFFREY BROWN: The Bush administration says the plan will save ten billion gallons of gasoline over a period of years. That’s less than 10 percent of the 140 billion gallons Americans consumed last year alone.

And to steer us through these new proposals, I’m joined by Alex Kaplun, reporter for Environment and Energy Daily. Welcome Alex.

ALEX KAPLUN: Thank you.

JEFFREY BROWN: I suppose it’s no coincidence that this is happening as Americans see prices rising at the pump.

ALEX KAPLUN: Yes and no. This is something that’s been in the works for a couple years now. The Bush administration indicated they might change the CAFE standards in 2003, but, you know, there certainly has been pressure in recent months and in the last couple of years to address gas prices, to address oil dependence so the administration really had to do something and take some kind of step to show that, you know, we’re paying attention to this issue.

JEFFREY BROWN: I’ve seen this — every news report I read describes it as a complicated system being set up. So what’s the simple way of explaining this six-tier system and why that would work better than what we have now?

ALEX KAPLUN: Yes. It is quite a complicated formula. What we have now is a system where for each manufacturer all their light trucks, which is mini-vans, SUV’s, pick-up trucks, even some station wagons, they all have to meet a certain number. What some of the manufacturers want and especially the American manufacturers was to break it up by the size of the vehicle; in this case it’s going to be done by the length and width.

JEFFREY BROWN: Let me ask you — stop you. Why do they want to change the system?

ALEX KAPLUN: There’s a couple of factors. The big factor is that American automakers say that the current system is unfair to them; it favors the Japanese automakers who make a lot of smaller light trucks, and they can sort of balance out their small light trucks with the big ones. And it’s a lot easier for them to hit sort of an across-the-level benchmark than a broken apart system.

JEFFREY BROWN: The American automakers sell more of the larger vehicles.

ALEX KAPLUN: Yes. For the American automakers really the big moneymaker for the last few years has been the really big SUV’s, the really large pick-up trucks. For the Japanese automakers, it’s kind of a combination. They certainly sell big SUV’s, but they also sell a lot of smaller vehicles.

JEFFREY BROWN: So you were describing the new system. It will divide it into six categories. How will that change things?

ALEX KAPLUN: It changes things in that instead of having sort of everything fall under one guideline, the heavier trucks will have to meet one mileage standard. The lighter trucks and some of the station wagons will have to meet a much higher standard. Again, it really depends on what kind of vehicle you’re producing now on where that vehicle needs to be in fuel efficiency.

JEFFREY BROWN: Now, as we said, there was immediate criticism from environmental groups. What’s their argument?

ALEX KAPLUN: There’s a couple of big points. The first one is that they don’t think this goes far enough. They think fuel economy can be a lot tougher than it needs to be and that really what this is, is sort of a give-away to the automakers. Basically, a couple points increase is not sufficient considering where gas prices are and considering how much oil this country is using. Their second argument, and sort of the big objection to the system, is that with a six-tier approach what the automakers might do is that they might make some of their vehicles just a little bit bigger to get them into sort of a higher bracket so they can meet a lower fuel efficiency rating. They’re afraid that’s what’s going to happen. You’re really going to see a lot more bigger vehicles and some of the smaller vehicles are going to get squeezed out.

JEFFREY BROWN: You mean this would actually push the automakers to in essence finding a loophole to make their car a little bit bigger and therefore have a slightly lower gas standard?

ALEX KAPLUN: Yes. I mean, that’s kind of what the environmentalists are thinking will happen. An example that’s been given a lot is the Subaru Outback. If you make it just a quarter of an inch longer and a quarter of an inch wider, which is basically unnoticeable to the consumer, it will get pushed into a whole new bracket and would not need to get the same fuel efficiency.

JEFFREY BROWN: Have the car companies responded on that?

ALEX KAPLUN: The car companies have sort of been vague on this whole proposal – they’re saying that — especially the American automakers — that they like the idea. They think it’s a more fair approach but they’re going to use this 90-day comment period sort of to really examine the proposal to make their statement on it. So they’re not giving a definitive yes or no.

JEFFREY BROWN: I gather there’s an ongoing debate over whether the technology exists to make cars — these kinds of vehicles more efficient and, if so, how much it would cost.

ALEX KAPLUN: Yeah. You really get a lot of different answers depending on who you speak to. The automakers say, "Look, we can’t make a car that’s going to get 40 miles per gallon and have a lot of horsepower and be very safe. Or if we can make it, it will cost way more than any consumer is going to pay." Environmentalists counter with, "Well, some of the technology is out there. The automakers fight any kind of advancement, any kind of mandate and they’re just not willing to go take the steps that they could take and boost fuel economy a significant amount with not a large price increase." It’s one of the things depending on which side kind of spins the best that side seems to win.

JEFFREY BROWN: Now, one thing that we pointed out here is that some of the largest vehicles — the Hummer, the Ford Excursion — are not affected by this. Why not?

ALEX KAPLUN: It’s been sort of a standard CAFE policy that vehicles above 8,500 pounds have not been regulated. This isn’t really a change. One of the reasons that’s been given is if you include the Hummer, which is not officially tested for fuel efficiency but people say it’s gets something around 11 miles per gallon, if you include it in any kind of formula, it will push down the whole formula and for the whole fleet you are not going to be able to get the same CAFE number. One of the explanations I heard from a Transportation Department official is that you actually save more by not including the Hummer, setting a higher CAFE number than including the Hummer and sort of pushing the whole thing down.

JEFFREY BROWN: Of course, there’s another side to that, I suppose, which is that these are the precisely the vehicles that should be –

ALEX KAPLUN: Yes. I mean, one of the things environmentalists will say over and over is that these are the vehicles that are sort of the worst offenders and again with the six-tier system what you could have happen is that vehicles are already heavy. Maybe the automakers will push them above 8,500 pounds and say they won’t be regulated and you’ll have more and more vehicles on the road that won’t have to meet any kind of fuel efficiency standard.

JEFFREY BROWN: The argument from car companies for a long time, of course, has been that this is what the American public wants; they’re just playing to the market. Is there any sign yet of any change in behavior or any new talk about what might be happening now that prices are going so high?

ALEX KAPLUN: Yes, there’s some sign. I mean, the hybrids, some of the hybrids are very popular. SUV sales and some of the large truck sales slumped a little bit earlier this year which, you know, environmental groups and some lawmakers jumped on as a sign that consumers want change. I mean, that’s all still very unclear. There were about 80,000 hybrids sold in the U.S. last year out of a car market of 16 million new cars. So I mean to say that hybrids are going to change the market completely or that some new technology is going to change it completely, it’s a little too soon to reach that conclusion.

JEFFREY BROWN: And at the other end, the very large, the Hummers, for example, any signs that they might become less popular?

ALEX KAPLUN: Not much. I mean, vehicle sales slump somewhat and they have slump and they did slump a little bit earlier in the year, some of the very large vehicles. But I mean, one of the explanations I’ve heard from people is that, look, the people who are going to spend $80,000 or $60,000 on a huge SUV are not really going to not buy it because gas prices are a dollar higher. They’re not the ones who are squeezed by high gas prices. It’s low-income individuals.

JEFFREY BROWN: Now these are just proposals we’ve said. What happens next with this?

ALEX KAPLUN: Yes. There’s now a 90-day comment period where basically anyone can submit to the administration their thoughts on this issue. The automakers will certainly submit what they want. The environmental groups will do the same thing. A proposal has to be settled on by April 2006. This is scheduled to go in effect for Model Year 2008. So one way or another, the decision needs to be made by next April.

JEFFREY BROWN: That would be the earliest Americans would see some change in the market.

ALEX KAPLUN: Yes. And it still remains unclear just how much of a change in the market you would have. I mean, some people are saying that with this proposal, the automakers might need to do some tweaking but it’s not like you’re going to see really new models or some models get pulled off the market. You might see more or less the same thing with just slightly better fuel efficiency.

JEFFREY BROWN: Okay. Alex Kaplun, thanks much.