New mileage standards

Sept. 3, 2012
The Obama administration's aggressive move on vehicle fuel mileage Aug. 28 receives important context from its legislative origins.

The Obama administration's aggressive move on vehicle fuel mileage Aug. 28 receives important context from its legislative origins. The Environmental Protection Agency and National Highway Traffic Safety Administration (NHTSA) didn't conjure out of nothing an average industry fuel economy standard of 54.5 mpg across the fleet of new vehicles by 2025. The Energy Independence and Security Act of 2007 (EISA) already required an increase to at least 35 mpg by 2020. The administration is exercising its prerogative to regulate beyond statutory minimums. In 2010, it set a first-phase fuel-mileage standard 35.5 mpg for model years beginning in 2016.

EISA also leapfrogged predecessor standards. While increasing vehicle mileage standards for the first time in years, the law also expanded a requirement set 2 years earlier for vehicle fuel made from renewable substances. The Energy Policy Act of 2005 had mandated that at least 7.5 billion gal of renewable fuel be sold in blends with gasoline by 2012. EISA raised the requirement to 36 billion gal by 2022 and stipulated that no more than 15 billion gal be ethanol from corn, the main renewable vehicle fuel, and that at least 16 billion gal of the 2022 target be ethanol from cellulose.

Excessive ambition

Congressional ambition on the renewable fuel standard was excessive. The US gasoline market is near its ethanol saturation point, yet the mandate keeps rising. And the requirement for cellulosic ethanol has begun to phase in, but no one yet can make the additive commercially. When they passed EISA, lawmakers failed to heed physical and economic practicalities. They set high targets and let meeting those targets be someone else's problem. Now the whole country has a problem.

A question worth asking is whether EPA and NHTSA have gotten similarly carried away.

By itself, elevation of vehicle-fuel mileage standards needn't be seen as a mistake. An ideological argument can be made that regulators ought not to tinker with markets this way. An economic argument can be made that regulated vehicle-fuel efficiencies encourage driving and don't lower fuel use overall. Still, improvement in energy-use efficiency represents an indisputable public benefit, and toughened vehicle mileage standards receive widespread public support as a way to pursue it, whatever their effectiveness.

As with EISA, practicality of the EPA-NHTSA approach is the larger problem. To achieve a 54.5 mpg fleetwide standard, automakers will have to improve engines and lighten vehicles for a market that favors power and size. Prices of new vehicles will increase. The EPA and NHTSA say fuel savings will compensate for the elevated vehicle cost after a few years. Yet they can only guess at vehicle and fuel costs 10 years from now. Automakers don't know how they'll achieve the new standard any more than fuel-additive manufacturers knew how they'd make cellulosic ethanol when Congress passed EISA.

What's more, EPA and NHTSA haven't confined their program to fuel use. They've calibrated their mileage standards to assumed emissions per mile of carbon dioxide. The program thus isn't just about lowering gasoline consumption; it's also about lowering emissions of greenhouse gases. That's an aspiration about which the elected representatives of Congress haven't been able to agree but into which the unelected regulators of EPA have plunged with unalloyed zeal.

Vehicle selection

From this self-assigned platform of CO2 mitigation, the agencies have dived into governmental vehicle selection, offering manufacturers incentives to produce officially preferred cars and trucks assumed to lower emissions. While this isn't quite the same as setting volumetric mandates for mostly subsidized fuel types, it comes from the same presumption that government officials know better than consumers do what to buy. The EISA experience makes hash of that view.

With EISA, Congress outdid itself. With the new vehicle-fuel mileage standards, the Obama administration outdoes Congress. If the new standards prove in 10 years to have been as wrong-headed as the EISA renewable-fuel mandates, Americans will know whom to blame.

Of course, some other administration will be in office then.