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Feature Story
Stuck In Reverse
Page 5

A LOOK IN THE MIRROR

But what about us, the consumer? What's our role in all this? Americans consistently express a desire for better fuel economy. It's not just environmental pollsters who find this. Research by Ford and JD Power, the marketing and consumer research firm, noticed it well before our $2-a-gallon summer. Yet on the car lot, not only do we choose less efficient models overall; we also tend to choose the least efficient package of engine size and accessories. We like power. When cars are available in four- and six-cylinder models, it's six by a landslide. Stick shifts are more efficient than automatics, but we've chosen automatics so often that manual transmissions are no longer available on many car models.

QuoteConsider, though, that cars operate in a very public realm. They take up space, consume fuel, exhale soot and other pollutants that cause asthma, and release greenhouse gases like carbon dioxide. Cars are 99 percent cleaner than they were four decades ago. It didn't happen because we, as individual consumers, were given the option of spending an extra few hundred bucks for clean air. It happened because California, with its tough emissions laws and huge car market, and then Washington, D.C., demanded it. "If one person buys a car to lower emissions it doesn't do any good," explains NRDC economist Ashok Gupta. "We all have to participate to get those social benefits. We all benefit and we should all pay. More stringent standards do that. They impose a cost which, in effect, we all pay."

Unlike emissions control, fuel economy does benefit the individual consumer in a tangible way. But when practiced in the car market as a whole, it also has public benefits, such as reducing our dependence on foreign oil. And because we're such big consumers, if we use less it's likely global prices will drop. David Cole, chairman of the Center for Automotive Research, a not-for-profit group in Ann Arbor, Michigan, estimates huge economic returns on automotive conservation. "A billion dollars invested is going to generate $10 billion in savings to the economy in lower oil prices," he says. "I believe a full-court press on efficiency and alternative technology is going to lower the price of oil in the world market."

This demonstrates both the potential for conservation and the peril for Detroit. If U.S. carmakers invest aggressively in fuel economy, oil prices could drop again -- and wipe out the very market impetus for fuel economy. Americans have very high performance expectations, and given the competitive price advantage of foreign manufacturers, the Big Three are pressed simply to meet the demand for towing power and acceleration -- a demand that, of course, the automakers themselves feed in nearly every advertisement they produce. "What scares the industry more than anything else is getting out of step with the market," explains Cole. With razor-thin profit margins, one misstep could prove fatal. American automakers are already on the edge as they try to integrate new technology with the dynamics of the global marketplace, he says. "They're trying to change the fan belt with the engine running."

How has the foreign competition done it? A voluntary agreement between European manufacturers and the European Union promises a per-vehicle reduction in carbon dioxide emissions of 25 percent between 1995 and 2008. National standards in Japan require about a 23 percent increase in the fuel economy of gasoline-powered vehicles by 2010. Only in the United States is a significant public benefit like fuel economy left to market whim. Indeed, by manipulating the campaign finance system with barrels of cash and exploiting the job-loss fears of its workers, the industry has helped defeat, by increasingly wide margins, any attempt by Congress to raise U.S. standards.

China, with the authoritarian privilege to do whatever it likes, has decided its future lies in following Japan and Europe. An array of new standards aggressively lay out improvements expected in the near future. The largest vehicles must achieve 19 miles per gallon by 2005, and 21 by 2008. For smaller cars, the standards are 38 and 43 by those dates. According to an analysis by the U.S. Public Interest Research Group, only 19 percent of our cars and 14 percent of trucks meet China's 2008 standard.

The consumers who have the greatest say about the car of the future, therefore, might live in China and India. Both countries have burgeoning middle classes and double-digit growth in automotive sales. Both are oil-poor and leery of a supply line at the mercy of America's navy. Both have relatively little invested in a fueling infrastructure and could choose hydrogen if the technology progresses. And both have attracted billions of dollars in investment from global automotive manufacturers -- including the very companies that have resisted fuel economy gains in this country. It's entirely possible that by the end of the next decade those same consumers in Beijing and Bombay will have better automotive choices than folks in Burbank. Unless we get our act together we may not only be unable to buy cars as thrifty as those in China, but be unable to export to these markets either.

Fires Down Under
The Secret Harvest

GREENER MARKETS


A key antidote to the regulatory stalemate between the auto industry and government involves the crafting of financial incentives to reward reductions in fuel use. Ecos Consulting, based in Portland, Oregon, has advised the National Commission on Energy Policy on devising such programs. Here are a few examples:

CASH BACK Through a system of fees and rebates, manufacturers, dealers, or consumers would pay ever larger fees for vehicles that are less efficient than average; those fees would in turn fund ever larger rebates on vehicles more efficient than average. What better way to encourage fuel savings than to price them into the vehicle at the time of sale?

FILL 'ER UP Instead of paying a fixed amount per year for basic liability coverage, drivers would buy coverage incrementally, with each fill-up. The money would go into a shared pool of funds. (This would have the added benefit of cutting down on the large percentage of uninsured motorists.) Why shouldn't people who drive less or choose more efficient vehicles pay less for insurance? Such programs are being developed in several states.

TRADE UP The federal government or states would offer a financial bounty to retire older, less efficient, less safe, more polluting vehicles. This would complement fees and rebates for new cars by further increasing the efficiency of the existing vehicle fleet. It would also be an economic boon to low-income drivers.

CHECK THE OIL Shift oil industry subsidies to cost-effective oil savings. The federal government currently gives $1.5 billion in annual subsidies to oil companies, regardless of how much oil they find. This in spite of a projected 2004 net profit for the seven largest Western oil companies in the amount of $71.3 billion, according to the Wall Street Journal. Gee, do they really need government subsidies? Instead, that $1.5 billion could be invested in innovative private sector programs to save gasoline. Programs to accelerate sales of more efficient tires and motor oil look especially promising. For each gallon of gas saved, the government would pay only $0.25 to $0.45, substantially less than it now spends on new oil subsidies per gallon discovered. Ultimately it would be cheaper for the government (and certainly better for the planet) to fund ways to save oil rather than drill for new sources of oil.

For more details and related ideas, see Winning the Oil Endgame, a new book by the Rocky Mountain Institute.





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OnEarth. Winter 2005
Copyright 2004 by the Natural Resources Defense Council