Obama steps up a gear with new standards on fuel efficiency for cars

Barack Obama pleasantly surprised many today with his announcement on fuel efficiency standards today – or at least he would have done if 54.5 mpg by 2025 target hadn’t been conveniently ‘leaked’ earlier in the week.

“This agreement on fuel standards represents the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil. Most of the companies here today were part of an agreement we reached two years ago to raise the fuel efficiency of their cars over the next five years. We’ve set an aggressive target and the companies are stepping up to the plate. By 2025, the average fuel economy of their vehicles will nearly double to almost 55 miles per gallon.”

At an increase of 5% a year, this is almost the highest rate of increase in fuel efficiency Obama could have opted for. Campaigners leveled their bargaining position at the highest rate, 6% from 2017, resulting in a 62mpg fleetwide. Some would have pushed for higher targets. The Ceres group for example published a report, More Jobs per Gallon, which sketched an economic scenario at the 6% rate:

“U.S. federal, state, and local government tax revenues increase by $9.5 billion under six percent scenario, from more than $9 billion (2009 dollars) under the three percent scenario to nearly $19 billion (2009 dollars) under the six percent scenario.”

Most economists would agree that increasing fuel efficiency would divert money from the 55% of oil imports for vehicles and pump that into the economy instead of fuel tanks.

And the Obama administration has done its own maths, estimating that American families will save $1.7 trillion in fuel costs and cut oil consumption by 12 billion barrels of oil “and by 2025 reduce oil consumption by 2.2 million barrels a day – as much as half of the oil we import from OPEC every day.”

Driving Efficiency: Cutting Costs for Families at the Pump and Slashing Dependence on Oil, also estimates that the standards will cut more than 6 billion metric tons of greenhouse gas over the life of the program – more than the amount of carbon dioxide emitted by the United States last year.

But what was billed even by campaigners as a “historic compromise” could equally be described as a “historic achievement.”

Obama had invited Ford, GM, Chrysler, BMW, Honda, Nissan, Toyota and Volvo among others as well as the United Auto Workers.

But perhaps the key player in this was Mary Nichols, the chairwoman of the California Air Resources Board who had also been invited to the announcement in Washington.

Carb has been working behind the scenes with the EPA, the DOT and NHTSA to thrash out a deal that the auto-industry would agree to and submitted its suggestions in June. The fact that this compromise was agreed to way before the September 1 deadline is testament to the way Nichols is such an effective negotiator among stakeholders and has now achieved in DC what she has already achieved in Sacramento by winning the support of business in California’s cap and trade scheme.

Obama didn’t directly name Nichols. But he might as well have done. When he thanked the “state of California” he was addressing one person and her agency, not its population of 38m.

Obama’s remarks today were also genuinely strong on the power of policy to create innovation that fuel the next generation of technology – and repeatedly connected decreased use of fossil fuels with increased developed of clean energy.

"$4 billion in subsidies we provide to oil and gas companies every year at a time when they’re earning near-record profits, and put that money toward clean energy research, which would really make a big difference.

"In the long run, we’re going to have to do more. We’re going to have to harness the potential of startups and clean energy companies across America. We’re going to need to build on the progress that I’ve seen in your factories, where workers are producing hybrid cars and more fuel-efficient engines and advanced electric vehicles. We need to tap into this reservoir of innovation and enterprise.

"Lastly, these standards aren’t just about the bad things we’ll prevent; it’s about the good things that we’ll build. As these companies look for ways to boost efficiency, they’ll be conducting research and development on test tracks. They’re going to look to startups working on biofuels and new engine technologies. They’re going to continue to invest in advanced battery manufacturing. They’re going to spur growth in clean energy. And that means new jobs in cutting-edge industries all across America

Clearly exasperated by the battles in Congress over raising the debt ceiling, Obama made no secret that this is the kind of dealmaking he would welcome:

“So when it comes to tackling the deficit, or it comes to growing the economy, when it comes to giving every American an opportunity to achieve their American Dream, the American people are demanding the same kind of resolve, the same kind of spirit of compromise, the same kind of problem solving that all these folks on stage have shown. They’re demanding that people come together and find common ground; that we have a sensible, balanced approach that’s based on facts and evidence and us reasoning things out and figuring out how to solve problems, and asks everybody to do their part.”

Of course the rule is still only a proposal and there is still time potentially for the automakers to expand the loopholes on small trucks and the 2021 ‘review’ but for now, the US really has changed gear.

Without no energy or climate policy on the horizon, the announcement today could be the single most effective decision to date in the development of clean energy in the US.