The Wonk Room

Counterpoint From Auto Alliance On Fuel Standards: The Market Is Working

Our guest blogger is Charles Territo, Director of Communications for the Auto Alliance.

Last Thursday’s Progress Report took a few shots at the auto industry over our views on fuel standards and environmental policy. We asked for a chance to respond and the Center for American Progress Action Fund was kind enough to give us this opportunity to explain our view on policy.

When President Bush signed into law the landmark Energy Independence and Security Act, environmentalists and automakers both applauded its 40% increase in fuel economy standards and corresponding 30% reduction in greenhouse gas emission. In fact, the Auto Alliance didn’t just support the legislation after it passed – we threw our support behind the legislation to increase CAFE standards and actually helped to push for the increase.

The question is not whether we support higher standards – we do – but what mechanisms are most efficient and effective at getting us from here to there.

Since the beginning of the CAFE program in 1975, the auto industry has been the only carbon constrained industry in the United States. Automakers have acknowledged our responsibility in helping to enhance energy security and reduce greenhouse gas emissions. However, we also understand that meeting these challenging standards will be very difficult if consumers are not made part of the equation.

That is the message we have been explaining to policymakers over the past year. We believe the recent rise in gas prices has vindicated our argument.

Consumers are responding by purchasing smaller vehicles and changing their driving habits. Fleet wide fuel economy is increasing and greenhouse emissions from the auto sector are falling. The market is working.

Meeting higher CAFE standards remains a challenge, but the rise in gas prices allows automakers to swim with, rather than against the current. As a result of gas prices, fuel efficient auto sales are increasing and there have been significant reductions in carbon dioxide emissions.

Consider:

– Americans Drove 1.4 Billion Fewer Highway Miles in April of 2008 than in April 2007

– Vehicle Miles Traveled (WMT) has decreased by nearly 20 billion miles this year, and nearly 30 billion miles traveled since November.

– Americans took 2.6 billion trips on public transportation in the first three months of 2008. This is almost 85 million more trips than last year for the same time period.

– EIA estimates U.S. petroleum consumption will shrink by 290,000 bbl/day in 2008.

– This will lead to a corresponding 20 million ton CO2 reduction in 2008.

It’s not just consumers who are adapting, though. We already have more than 70 alternative fuel autos available today, and an automotive revolution is underway as engineers and scientists design the future of mobility. However, the price-induced changes have not decreased the cost associated with and time needed to develop new technologies. In 2006, the auto industry invested $74 billion in R & D – accounting for four of the top ten R & D investors in the world – and we continue to make enormous investments in new technologies that will accelerate the gains we have already made.

We have been making those investments for many years, but it was just recently that this investment has truly paid off. This is why we think it is so important that policymakers ensure the consumers be a part of the equation. Legislators can mandate higher fuel standards and we do work to achieve them, but it was sustained higher gas prices that led to the increase in fuel efficient auto sales and the reductions in CO2 and miles driven.

The mortgage crisis, housing downturn and high gas prices have created a difficult economic environment for Americans. However, with 1 in 10 American jobs dependent on the auto industry, we remain the engine that drives our economy. Our ability to adapt to this new market is an important element to the overall economic recovery of our nation.