May 23, 2010 by Allen
Posted in
Last Friday, in a Rose Garden ceremony, President Barack Obama signed a Presidential Memorandum regarding vehicle fuel efficiency that will start the next phase for the auto industry. The goal of the memorandum is to improve energy security, increase American competitiveness and job creation, and environmental protection by creating new standards for medium- and heavy-duty trucks, a category of vehicles without any fuel-efficiency targets. This step comes after the April 1st announcement of new fuel-efficiency and emissions standards for cars and light-duty trucks. That new standard raised the fuel-efficiency mandate for this segment of the domestic vehicle fleet to an average of 35.5 miles per gallon by model year 2016. That represents a 42 percent increase in the average mileage rating and a 30 percent reduction in tailpipe emissions.
The Presidential Memorandum directs the administrators of the Environmental Protection Administration and the National Highway Traffic Safety Administration to begin work on a joint rulemaking under the Clean Air Act and the Energy Independence and Security Act of 2007 to establish these fuel-efficiency and greenhouse gas emissions standards by model year 2014. The President directs the administrators to consider the use of existing technologies and to consider rules that are harmonized with State standards (primarily California’s) and that enhance job creation in the United States.
There is also a direction that the administrators consider the development of infrastructure and promotion of fuels, including biofuels, which will enable the development and widespread deployment of advanced technologies. It goes on to talk about the possible need for the administrators to review non-greenhouse gas emissions regulations of new motor vehicles, new motor vehicle engines and other vehicle fuels. It also directs The Secretary of Energy to work with stakeholders to promote the deployment of advanced technology vehicles, in particular electric vehicle, plug-in hybrids and all electric vehicles.
In the Memorandum, the administrators are told to consider the findings and recommendations published in theNational Academy of Science report on medium- and heavy-duty truck regulation. It is clear with all the mandates and specifications for promoting electric vehicles in the Memorandum that no one read the National Academy of Science report. In the 414-page pre-publication version, one of the key recommendations is that increasing fuel taxes be strongly considered as opposed to instituting mandatory standards. A key reason is that the industry is very complex – many types of vehicles performing varied tasks. That means there are multiple considerations in trying to assess the appropriate fuel standard for any particular class of truck, and because of this industry complexity, mandatory fuel standards can distort their desired impact. Equally important, the report cited that medium- and heavy-duty truck owners are already highly motivated to achieve the maximum improvement in fuel efficiency.
The report also suggested that regulators should not be attempting to pick winning technologies due to their inability to know and understand all aspects of a vehicle’s use. In addition, the report acknowledges that many of the newer engine technologies are not fully developed and may cost more than anticipated or will take longer to be perfected, both scenarios with a long history of occurring. The authors of the report also were concerned about the capital and operating cost impacts of these new technologies and how they might shift buyer decisions that could prove detrimental to fuel consumption goals.
There was another very interesting point made in the report about alternative ways to impact fuel consumption. As the report put it: “There may be more effective, less costly, and complementary approaches than vehicle fuel efficiency standards for reducing fuel consumption of MHDVs [medium- and heavy-duty vehicles], such as training truck drivers on best practices, adjusting size and weight restrictions on trucks, implementing market-based instruments (e.g., fuel taxes), providing incentives for mode shifting, or developing intelligent vehicle and highway systems.”
The Presidential Memorandum pointed out that large tractor trailers represent half of all greenhouse gas emissions from the medium- and heavy-duty truck sector and that significant savings can be had by the use of existing technologies. It is that opportunity that encouraged Boone Pickens to push his natural gas vehicle initiative into the over-the-road truck segment. Natural gas for local vehicle fleets already has established a toehold and will likely expand in the future given various tax incentives. But what we find interesting is that the National Academy of Science, in looking at all the complexities of the truck segment, argues strongly that fuel prices and other rule changes may have a much more significant impact on fuel savings than mandatory standards. Allowing price signals to drive innovation and its pace of adoption in the truck industry seems like such a novel concept for Washington that seems more concerned about government power that comes from regulatory mandates. We wish the White House had actually read and embraced the recommendations of the National Academy of Science report.
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