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Car Makers Mobilize Over CO2 Curbs

WSJ.com – April 9, 2007

This article discusses how the automotive industry is trying to deal with legislative restrictions on carbon dioxide production of its products. This is all part of the political process which as reader of my blog know I think is premature. When we are still trying to figure out all of the science of this issue, the only politics that we should be discussing is how much money do we spend on doing full and accurate models.

Auto makers are shifting into high gear to protect themselves under a federal global-warming cap they see around the corner. Cars and light trucks generate about one-fifth of U.S. emissions of carbon dioxide, the main global-warming gas, which is produced when fossil fuel is burned. With pressure for U.S. emission curbs intensifying, auto makers are mobilizing to try to shift the potential economic pain onto someone else.

Auto makers long have operated under what amounts to a carbon-emission limit: a federal requirement that the fleet of vehicles they make each year meets a minimum average fuel-economy standard. Over the years, the industry has beaten back calls for toughening those rules. Now political momentum to significantly toughen the rules is increasing.

Robert Lutz, GM vice chairman for global product development, said in a recent interview. “Meeting these accelerated and very, very steep standards would consume the quasi-totality of our investment in engineering resources,” he said.

The industry is starting to throw its support behind a policy that it has decided is a lesser threat: an economy-wide carbon constraint, whose heaviest economic burden is likely to fall on other sectors, notably the utility industry. The likeliest model is what is known as a cap-and-trade rule, under which the government would give companies permits to emit a certain amount of greenhouse gas each year, and companies could buy and sell those permits among each other.

Yet any policy would impose some costs on the auto industry. One spat is over how the federal government should structure tax breaks for vehicles that consume less fossil fuel, including hybrid gasoline-and-electric models. The government recently boosted tax breaks for them but capped the number of vehicles eligible each year.

Similarly, a quiet fight has erupted over an idea for how to structure a cap-and-trade program for auto emissions. The concept was written by Environmental Defense, a green group. As currently stated, it would replace the current federal fuel-economy rules with a cap-and-trade program requiring all auto makers to reduce total carbon emissions from their new-vehicle fleets by the same percentage each year.

That would require a far greater fuel-economy improvement from Honda and Toyota than from Detroit’s Big Three. Honda and Toyota’s fleets already get better fuel economy than the Big Three’s, so further improvements would be tougher.

Read the article here.

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