Obama’s climate action plan and the automotive industry
On 25 June, President Obama used a widely covered speech at Georgetown University in Washington to present a new action plan to reduce carbon emissions and mitigate the effects of global warming. Repeatedly wiping sweat from his brow on a hot and humid afternoon, Obama highlighted a series of climate, environmental, and energy policies that his Administration can implement without action by a Congress that is clearly not inclined to pass climate legislation. Obama used the speech, which included proposals both new and recycled, to boost the profile of an issue that environmental groups say he often ignored during his first term. While he remains committed to global, regional, and bilateral efforts to address climate change, the focus of President Obama’s plan was clearly on domestic policy proposals.
The speech included several plans with important implications for the automotive industry. The most significant of these was hardly a surprise: the President said that his Administration would, as long expected, begin developing a new set of greenhouse gas (GHG) emissions and fuel consumption standards for medium- and heavy-duty commercial vehicles and heavy-duty engines. Specifically, the White House said that the Environmental Protection Agency (EPA) “in partnership with industry leaders” would soon begin writing “post-2018 fuel economy standards for heavy-duty vehicles.”
The EPA has long hinted that it planned a second round of fuel consumption and GHG emissions standards for heavy vehicles to follow on the first-ever such rules, which are being phased in between model year (MY) 2014 and MY 2018. The agency has already started technical work on the post-2018 standards with the Department of Transportation’s National Highway Traffic Safety Administration (NHTSA), which has jurisdiction over federal fuel economy standards, and the California Air Resources Board (CARB), which administers clean air rules in California; other states have the option under the federal Clean Air Act to implement either federal or California vehicle emissions rules, though California has recently worked with the EPA to formulate nationwide standards. The agencies plan to collaborate with the vehicle and engine industries, which were actively involved in formulation of the MY 2014-18 rules.
The EPA has indicated that heavy vehicle producers will be able to use a wide range of technologies, including advanced engines, mass reduction, and alternative fuels, to meet the post-2018 standards. Agency officials have also expressed hope that this, in turn, could help position US firms to sell clean-vehicle technologies to markets in Europe and Asia. The rules may also include aerodynamic and other requirements for trailers, which were considered but not included in the MY 2014-18 rulemaking.
While the heavy vehicle proposal has not been particularly controversial, the same could not be said of President Obama’s statement that he is directing the EPA to propose GHG emissions standards for both new and existing power plants. The Agency proposed GHG emissions standards for new fossil fuel-fired power plants in April 2012. However, it has revised its original proposal based on extensive public comments, and is expected to publish a new document in September. The effective date for the new regulations, which are certain to face legal challenges, have not yet been clarified.
Plant goal
Even more controversial was President Obama’s commitment to propose GHG emissions standards for existing power plants – a major goal of environmental groups. President Obama called on the EPA to propose such a rule by 1 June 2014, and finalise it by 1 June 2015 – though it would not take effect until at least 2016. The proposal, which would have an enormous impact on utilities that rely heavily on coal-fired power plants, is certain to be the focus of intense legal challenges. Utilities warn that such a rule could boost the cost of electricity significantly, which would have an impact on energy-consuming manufacturing companies in the automotive and other industries – though environmental groups say industry is exaggerating the likely impact of such standards. Higher electricity costs could affect the price competitiveness of electric and plug-in hybrid electric vehicles.
President Obama also used the speech to highlight a number of smaller domestic initiatives to reduce GHG emissions. He noted that his Administration will continue to set new energy-efficiency standards for appliances and buildings, while speeding approvals of wind and solar energy projects on public lands. He also said that the federal government will continue to expand its use of renewable energy sources, a commitment that could further ongoing efforts to increase purchases of alternative-fuel vehicles for federal fleets.
Clean tech development
President Obama vowed to continue supporting development of clean energy technologies, though Department of Energy (DOE) programmes to develop such technologies face severe budget pressures. For example, House Republicans have proposed halving the budget for the DOE’s clean energy and energy-efficiency programs next fiscal year, including sharp cuts in funding for its Vehicle Technologies programme. The House would cut spending even more dramatically when compared with Obama Administration funding proposals. While the House proposal is unlikely to be enacted into law, it highlights the strong resistance among many Congressional Republicans to Obama’s plans for funding the development of clean energy technologies.
One notable aspect of Obama’s speech was that he moved beyond proposals to curb GHG emissions and discussed the need to prepare for and adapt to climate change – reflecting a recent increase in interest among elected officials at all levels of government in developing policies to deal with increasingly severe weather, rising sea levels, and increased risks of flooding. Such emerging concerns could influence future infrastructure projects, including those related to the surface transportation infrastructure.
Obama’s climate action plan and his broader clean air agenda ensure a busy few years for the EPA and its newly confirmed Administrator Gina McCarthy (previously head of the EPA office charged with administering the Clean Air Act). In fact, the EPA’s most recent regulatory agenda includes over 75 clean air rulemakings, 33 of which are at the final rule. While Obama’s proposed regulations will be written during his second term, many will not be implemented until after he leaves office and most will face extensive legal challenges.
In addition to the climate initiatives, the EPA is working on several other clean air rules of importance to the automotive industry. Most notably, the Agency is in the process of writing Tier 3 low-sulphur fuel and light-vehicle emissions standards, which will affect emissions of non-GHG criteria pollutants like carbon monoxide, nitrogen oxide, and particulate matter. EPA published its proposed Tier 3 rules in May, and the public comment period closed 1 July. The agency is now reviewing the comments and hopes to publish a final rule by the end of 2013, to take effect in 2017.
President Obama’s speech and his climate action plan reflect the realities of politics in Washington today. The current Congress is not going to pass a cap-and-trade proposal like the one that it considered early in Obama’s first term, and the prospects for carbon tax proposals are not good either. Many Congressional Republicans also strongly oppose expanding federal support for “clean” energy technologies. As a result, Obama’s proposals rely largely on regulatory actions that are not dependent on Congress. Court decisions thus far have generally upheld the EPA’s efforts to regulate GHG emissions under the Clean Air Act, though the agency faces further legal challenges. The focus of US efforts to address climate change during President Obama’s second term will thus shift to the White House, EPA, and US court system. The automotive industry should watch those institutions closely, since their decisions on climate issues could have a clear impact on the industry and on the US economy.
Ian C. Graig, Chief Executive of Global Policy Group, has written for Megatrends and AutomotiveWorld.com on a variety of US policy trends and their implications for the automotive industry.
