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The road to new fuel economy standards was not smooth

The fuel economy standards announced this week were hammered out over three years in sometimes tense talks among federal and state officials, automakers and environmentalists.

November 18, 2011|By Neela Banerjee, Los Angeles Times
  • President Obama challenged automakers during his presidential campaign to build cars that got far better gas mileage. Above, Obama this week.
President Obama challenged automakers during his presidential campaign… (Lukas Coch, Associated…)

Reporting from Washington — On an August morning in 2008, a handful of executives from the country's top car companies, several environmentalists and two of California's most powerful pollution regulators met in a windowless conference room in a hotel next to Los Angeles International Airport.

For 30 years, the car companies had been locked in battle with California and environmentalists over increasing vehicle fuel efficiency and cutting air pollution.

But that meeting at the Radisson Hotel brought together new government and industry leaders able to capitalize on new technologies in a market ready to adopt fundamental changes in cars.

The meeting created momentum that would result in the Obama administration's announcement Wednesday that new fuel economy standards — backed by the automakers — would nearly double to an average of 54.5 miles per gallon for passenger vehicles by 2025.

Hammered out over three years in sometimes tense talks among federal and state officials, automakers and environmentalists, the fuel economy standards mark the single biggest environmental achievement in a generation, akin to the landmark 1970 Clean Air Act, analysts and participants in the talks said.

The standards "are more like a meteor hitting the Earth than a gradual evolution," said Mary Nichols, head of the California Air Resources Board, which regulates tailpipe emissions.

"A new generation of leaders taking over both the U.S. government and the global auto industry coincided with dramatic shifts in public expectations for technology and the engineers' ability to deliver multiple new kinds of engine-fuel combinations," she said.

The 2008 meeting was spurred by a phone call from a Toyota Motor Corp. executive to Nichols, a sign of California's key role in any emissions talks. Auto executives also contacted the transition teams being assembled for Obama and GOP presidential nominee Sen. John McCain.

The auto industry — especially General Motors Corp., Chrysler and Ford Motor Co. — had reason to make nice. The Detroit Three had lost considerable market share to foreign competitors, and the unfolding recession threatened their existence.

Obama, who was leading McCain in the polls, had challenged automakers during his campaign to build cars that got far better gas mileage. And the U.S. Supreme Court had ruled a year earlier that the Environmental Protection Agency had authority to set fuel-economy standards.

But most unnerving to the industry, California and 13 other states were poised to set their own standards for vehicle greenhouse gas emissions, a proxy for fuel economy that would plunge the automakers into the nightmare of making different cars for different parts of the country.

"The thought of having a patchwork set of fuel economy rules around the country — there was no way we could meet those state by state," said one auto executive who didn't want to be identified because he was involved in ongoing negotiations.

Or, as a former Obama transition team member said recently: "California had a gun to their heads."

Besides Nichols, others at the meeting included her agency's deputy chief executive, Tom Cackette; environmentalists from the Natural Resources Defense Council, the Sierra Club and the Union of Concerned Scientists; and executives from GM, Ford, Toyota and Honda Motor Co.

On the table suddenly was one of the most ambitious and elusive environmental goals: a single national fuel economy standard that would satisfy California's ambitious air pollution goals and allow companies to build cars that still made money.

California's role arguably created a unique set of pressures for automakers. It proposed the toughest rules in the nation, and they were likely to be adopted.

For some, the talks held lessons for how the administration, other industries and labor could work together to craft new environmental rules at a time when most businesses have pushed hard to dismantle regulations.

"The proposed rule is proof that a diverse group of stakeholders can find a solution by working together and relying on data to drive the process," said Ziad Ojakli, head of government affairs for Ford.

"This approach can provide the kind of regulatory certainty we need to both help the environment while protecting jobs and providing customers with a full range of affordable vehicle choices," Ojakli said.

By mid-2008, gasoline prices were high, and labor was convinced that fuel-efficient cars would preserve jobs. Obama had signaled his willingness, if elected president, to issue California a waiver from weaker federal rules to set its own standards for tailpipe emissions, reversing a decision by George W. Bush in 2008.

Soon after Obama's inauguration, the administration granted California its waiver. By February 2009 the White House had launched formal negotiations with California and the automakers to broker a deal for a first set of standards, for model years 2012 through 2016.

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