During his first week in office, President Barack Obama announced two moves aimed at improving fuel economy and lowering tailpipe emissions. This could be a big break for consumers, especially if gasoline prices bounce back up in the next couple of years.

In remarks at the White House the President said he asked the Environmental Protection Agency (EPA) to revisit a decision it made last year to refuse the state of California’s request to implement tough new tailpipe-emission rules that would limit carbon-dioxide emissions. Reducing CO2 emissions would require cars to burn less gasoline, which under the California law would be the  equivalent of the state’s vehicles getting returning greater fuel economy than required by current federal law.

Obama’s other automotive initiative was to request the Department of Transportation (DOT) issue the official regulations necessary to implement new fuel-economy standards passed by Congress in 2007. The Congressional mandate dealt directly with fuel economy by raising the Corporate Average Fuel Economy (CAFE) standards from the 27.5 mpg average that’s prevailed for some 25 years. It would boost  the fleet average to 35 mpg by 2020, with a phase-in beginning in 2011.

So, what does this mean?
California’s plan would effectively preempt the federal regulation by effectively raising the standard to 32.3 mpg by 2016 and 39.2 mpg by 2020 (pdf).

Since it hinges on tailpipe emissions rather than fuel economy per se, California’s proposal comes under the aegis of the EPA. Under the 1970 Clean Air Act, California has the right to set tighter emissions standards than the federal government if it gets a waiver from the EPA.

And it's not just California. The Clean Air Act stipulates that other states can choose to follow either California or federal emissions standards, though they cannot set their own. Thirteen other states, including half a dozen in the Northeast, already follow California’s lead on air quality standards, and two more are considering following suit.

If California is granted the waiver, cars in all of these states would have to meet the new de facto 39.2 mpg fuel-economy standard.

The auto industry has sued California and the EPA in several jurisdictions, arguing that the California law is a fuel-economy rather than an emissions regulation and that the state has no right to set fuel-economy standards. California won all those suits, and the EPA waiver is now the last legal roadblock to implementation.

The auto industry’s main lobbying group, the Alliance of Automobile Manufacturers has lobbied hard against the California rules, arguing that it would create a “patchwork” of fuel economy regulations (pdf), which federal law forbids. And it has threatened to file additional lawsuits to block the standard if the EPA waiver is granted. 

While federal law allows for only two sets of emissions standards (and one set of fuel economy standards), automakers would have to comply with the new California emissions standards in each state individually. That means they would have to sell exactly the same ratio of small cars to large trucks (and even the same ratio of individual models) in Massachusetts as in California, and in Washington, for example. Since buyers in some states today buy fewer small cars than in others, this effectively means the new laws would raise the average requirements much more quickly in some states than in others. (Today, those extra truck sales in Washington state can be offset by more car sales elsewhere, since the fuel economy standard is national. Unless the Obama administration or Congress finds a way to change the rules, that would no longer be the case under a California-led, state-based standard.)

Yet to be worked out is how to enforce such a standard in states that share borders with those that follow a different standard. (If California GMC dealers had already reached their maximum allotment of trucks, for example, could a California buyer purchase a truck in Nevada and still register it in California?)

Automakers say complying with the regulations would cost billions of dollars and add thousands to the price of every new car, at a time when car sales have plummeted and automakers have had to rely on federal assistance for survival.

Mary Nichols, chairperson of the California’s Air Resources Board, told National Public Radio on Monday that lobbying against the law was “another example of the auto industry shooting itself in the foot.”
She pointed out that the states that follow California’s lead now include a large portion of the driving public. Further, CARB estimates that compliance would run only about $400 per new car and that amount would be quickly recouped in fuel-cost savings. If gasoline prices bounce up from their current low levels, as, she said, most California officials expect, then the payback time could be shortened.

Our take
For decades Consumer Reports has advocated for better fuel economy and lower emissions. We feel that making it a top priority to allow California and other states to set lower carbon-dioxide emissions standards than the federal government is a welcome step. This will reduce gasoline usage, and thereby reduce our dependence on foreign oil. To achieve such ambitious goals, there will need to be increased focus on the electrification of the modern automobile, creating greater demands on the national grid and elevating the need for more clean energy source.

We hope that going forward policymakers pay close attention to meeting the many goals important to the public, such as improved air quality, reduced fossil fuel consumption, affordable motoring, improved motorist safety, and a strengthened economy.

—Gordon Hard and Eric Evarts