US EPA to hear state vehicle emissions case

By Bernard Simon in Toronto
Published: March 4 2009 18:10

The US motor industry’s financial woes will collide with the administration’s drive against global warming at a hearing on Thursday in Washington on whether states are allowed to set tighter vehicle emission standards.
The US Environmental Protection Agency will reconsider an application by California and 13 other states to set their own vehicle emission standards. It could overturn a March 2008 decision that prevented them setting stricter standards than the federal government.

In a reversal of the former Bush administration’s policy, President Barack Obama directed the EPA shortly after taking office to move swiftly on the states’ application. He has also asked the Transportation Department to implement tighter fuel-economy standards for cars and light trucks.
”Our goal is not to further burden the struggling American auto industry,'' said Mr Obama. “We must help them thrive by building the (fuel-efficient) cars of tomorrow”.
The motor industry has launched a vigorous campaign against the states’ application, contending that it will lead to a costly patchwork of state regulations.
The Detroit carmakers – General Motors, Ford Motor and Chrysler – are especially concerned that tighter emission regulations will dampen demand for sport-utility vehicles and pick-up trucks, which are their most profitable vehicles.
Under legislation passed in 2007, carmakers are already committed to lifting their vehicles’ fuel economy to an average of 35 miles a gallon by 2020, a 40 per cent improvement on previous standards.
Eric Fedewa, a powertrain specialist at CSM Worldwide, a Michigan consultancy, will tell Thursday’s hearing that “these improvements will be staggeringly expensive to the manufacturers. Many of those costs will be passed on to consumers.”
Mr Fedewa adds that “California’s regulatory agenda could start a domino effect of business failures reaching into every corner of the auto industry and the national economy”.
Instead, he proposes a variable fuel tax setting a floor price for petrol of $3 a gallon. The average price is currently $1.93, down from last July’s record of $4.11. But US politicians have so far adamantly resisted calls for higher gasoline taxes.
Environmentalists dismiss the industry’s objections to the waiver application. John DeCicco, senior fellow at the Environmental Defence Fund, said that carmakers have exaggerated the costs of complying with the proposed California standards.
He noted that BMW, the German carmaker, has operated profitably in the US while cutting its vehicles’ carbon footprint. Sales of BMW’s small Mini surged by 29 per cent last year, among the biggest gains for any model.
Mr DeCicco describes the proposed split between federal and state standards as a “two-tier” system rather than a patchwork, because the other 13 states would implement the same standards as California.
As an alternative to higher fuel taxes, the Obama administration has begun working with Congress on cap-and-trade legislation governing greenhouse gas emissions. The administration takes the view that such a system would also be more effective than the current regulatory approach under the Clean Air Act.
The EPA is not expected to rule on the states’ waiver application for several months.
Copyright The Financial Times Limited 2009