Close the CAFE Loophole
Posted by Robert Rapier on September 24, 2006 - 12:35pm
While I support the production of more flex-fuel vehicles, the CAFE loophole for flex-fuel vehicles is appalling. The government regulates fuel efficiency in the U.S. with Corporate Average Fuel Efficiency, or CAFE standards. When the average fuel efficiency falls below a certain level for a car manufacturer, they must pay a penalty. This provides an incentive for auto makers to produce fuel-efficient vehicles.
However, there are a couple of loopholes that have limited the effectiveness of the standard. One is that light trucks have an exemption that allows them to get worse fuel efficiency without being penalized. Because SUVs are classified as light trucks, there is an incentive for the auto maker to produce SUVs. The good news is that the government recently passed legislation to close the loophole. The bad news is that it doesn't take place until 2011, meaning we have 5 more years of gas-guzzling SUV sales to contend with.
While this loophole is being closed, another is being opened. Did you wonder why automakers have embraced E85? Have they suddenly gone "green", and therefore E85 just seems like the right thing to do? No. By making flex-fuel vehicles, they are able to exploit another loophole in the standards. This loophole has recently been reported on in the press. Car and Driver was the first to bring this to my attention in Tech Stuff: Ethanol Promises. The article explains:
With fewer than 600 stations selling E85 fuel in 37 states, why have GM, Ford, and DaimlerChrysler been cranking out these flex-fuel vehicles by the millions?The answer is the mandatory Corporate Average Fuel Economy (CAFE) standards. Federal law requires that the cars an automaker offers for sale average 27.5 mpg; light trucks must achieve 22.2 mpg. Failure to do so can result in substantial fines. However, relief is available to manufacturers that build E85 vehicles to encourage their production.
The irony here is that although E85 in fact gets poorer fuel economy than gasoline, for CAFE purposes, the government counts only the 15-percent gasoline content of E85. Not counting the ethanol, which is the other 85 percent, produces a seven-fold increase in E85 mpg. The official CAFE number for an E85 vehicle results from averaging the gas and the inflated E85 fuel-economy stats.
Consumer Reports recently weighed in with The Ethanol Myth. On the CAFE issue, they reported:
GM's advertising says, "Energy independence? The answer may be growing in our own backyard," and has coined the slogan "Live green, go yellow," referring to the corn from which most U.S. ethanol is made. DaimlerChrysler, Ford, and GM have said that they plan to double production of FFVs and other biofuel vehicles to 2 million by 2010.The FFV surge is being motivated by generous fuel-economy credits that auto-makers get for every FFV they build, even if it never runs on E85. This allows them to pump out more gas-guzzling large SUVs and pickups, which is resulting in the consumption of many times more gallons of gasoline than E85 now replaces.
With the loophole in place, their motto should be "Live green, go yellow, consume more fossil fuels." By all means, build flex-fuel vehicles. But close this loophole, which may very well result in much higher gasoline consumption in the future.
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The Legislature as Sausage Factory: It's About Time We Examine This Metaphor
http://www.apsanet.org/~lss/Newsletter/Jan02/sausage.htm
My guess is "serious lobbying from the auto makers."
Judging from the 2011 date, there is some powerful backroom "sausage making" (two things you don't want to see made - sausage and law)
I think the 2011 date was part of Bush's contribution to "we are addicted to oil." But closing one loophole, he can claim to have done something about it, albeit long after he is out of office. But the FFV loophole will render closure of that loophole meaningless, since they will just start making all SUVs in the FFV variety, meaning they will get an even larger credit than they received with the previous loophole. Bottom line? With this loophole, overall CAFE standards can slide with no penalty.
<rant alert>The industry can buy CAFE legislation and, to some extent, buy sales volume via no margin promotions. They can deploy deceptive selling practices like go green with corn!!!, and deceptive accounting practices like their treatment of health and pension liabilities or, as has been reported: finagling leases.
But they are only, to use an old expression, painting the turd white. They have lost control of their business. This loophole is not worth classifying as life support, Robert. These guys are toast.
> are addicted to oil."
How much will the price of a SUV rise when this loophole is closed? Do you expect the average SUV-customer to care about it? They have the money ..
Neither. It's about engineering and construction. See the scores for my 2006 Civic?
http://www.iihs.org/ratings/ratingsbyseries.aspx?id=300
Actually, I think the IIHS ratings are based on vehicle size/class, so your Civic's "good" performance is relative to other small cars. An interesting tidbit from the IIHS website:
I think the IIHS is assuming that because most other vehicles are smaller that large SUVs, the other vehicle would probably bear the brunt of the momentum change in a collision. Too bad for the people in the smaller vehicle.
Does anyone know whether insurance companies take into account how much damage you're likely to do to the other vehicle (or people inside) when setting insurance rates?
Michael
Chevy Suburban 7200 lbs
In a head on collision, your civic will look like a crumpled up tin can. The surburban may have some dented sheet metal
Most of us think that S.U.V.s are much safer than sports cars. If you asked the young parents of America whether they would rather strap their infant child in the back seat of the TrailBlazer or the passenger seat of the Boxster, they would choose the TrailBlazer. We feel that way because in the TrailBlazer our chances of surviving a collision with a hypothetical tractor-trailer in the other lane are greater than they are in the Porsche. What we forget, though, is that in the TrailBlazer you're also much more likely to hit the tractor-trailer because you can't get out of the way in time. In the parlance of the automobile world, the TrailBlazer is better at "passive safety. " The Boxster is better when it comes to "active safety," which is every bit as important.
Consider the set of safety statistics compiled by Tom Wenzel, a scientist at Lawrence Berkeley National Laboratory, in California, and Marc Ross, a physicist at the University of Michigan. The numbers are expressed in fatalities per million cars, both for drivers of particular models and for the drivers of the cars they hit. (For example, in the first case, for every million Toyota Avalons on the road, forty Avalon drivers die in car accidents every year, and twenty people die in accidents involving Toyota Avalons. ) The numbers below have been rounded:
Make/Model Type Driver
Deaths Other
Deaths Total
Toyota Avalon
large 40 20 60
Chrysler Town & Country
minivan 31 36 67
Toyota Camry
mid-size 41 29 70
Volkswagen Jetta
subcompact 47 23 70
Ford Windstar
minivan 37 35 72
Nissan Maxima
mid-size 53 26 79
Honda Accord
mid-size 54 27 82
Chevrolet Venture
minivan 51
34
85
Buick Century
mid-size 70 23 93
Subaru Legacy/Outback
compact
74 24 98
Mazda 626
compact 70 29 99
Chevrolet Malibu
mid-size 71 34 105
Chevrolet Suburban
S.U.V. 46 59 105
Jeep Grand Cherokee
S.U.V. 61 44 106
Honda Civic
subcompact 84 25 109
Toyota Corolla
subcompact 81 29 110
Ford Expedition
S.U.V. 55 57 112
GMC Jimmy
S.U.V. 76 39 114
Ford Taurus
mid-size 78 39 117
Nissan Altima
compact 72 49 121
Mercury Marquis
large 80 43 123
Nissan Sentra
subcompact 95 34 129
Toyota 4Runner
S.U.V. 94 43 137
Chevrolet Tahoe
S.U.V. 68 74 141
Dodge Stratus
mid-size 103 40 143
Lincoln Town Car
large 100 47 147
Ford Explorer
S.U.V. 88 60 148
Pontiac Grand Am
compact 118 39 157
Toyota Tacoma
pickup 111 59 171
Chevrolet Cavalier
subcompact 146 41 186
Dodge Neon
subcompact 161 39 199
Pontiac Sunfire
subcompact 158 44 202
Ford F-Series
pickup 110 128 238
Are the best performers the biggest and heaviest vehicles on the road? Not at all. Among the safest cars are the midsize imports, like the Toyota Camry and the Honda Accord. Or consider the extraordinary performance of some subcompacts, like the Volkswagen Jetta. Drivers of the tiny Jetta die at a rate of just forty-seven per million, which is in the same range as drivers of the five-thousand-pound Chevrolet Suburban and almost half that of popular S.U.V. models like the Ford Explorer or the GMC Jimmy. In a head-on crash, an Explorer or a Suburban would crush a Jetta or a Camry. But, clearly, the drivers of Camrys and Jettas are finding a way to avoid head-on crashes with Explorers and Suburbans. The benefits of being nimble--of being in an automobile that's capable of staying out of trouble--are in many cases greater than the benefits of being big.
All in all, my 1982 M-B 240D was about the safest (active & passive) car made when new. Now, it is still among the better ones, despite no airbag.
I have been in a number of salvage yards, and seen dozens of crushed W123 M-Bs. IMHO, the driver could have survived everyone with minimal injuries if belted in.
BTW, I get 31 mpg in the city with my manual transmission. This is the car IO chose to see me through Peak Oil.
In addition, cars then didn't have rear shoulder belts, so an additional risk is present if you have passengers.
Also anti-lock (ABS) brakes were invented later on. They make a big difference to collision avoidance, I believe.
Agree they were nice cars although if I can recall correctly they needed a lot of TLC (frequent oil changes etc.).
Chrysler actually found that by making the rear windows smaller they increased the feeling of safety of the car buyer. So they made the windows smaller.
SUV drivers, riding above the flow of traffic, think they are safer.
Following a flash winter storm on the freeway to the Toronto airport, I once watched a (mum with kids) SUV driver power past me on the on ramp. The road ahead was littered with fender benders-- 10 or 15 as far as the eye could see. There was very little traction for stopping (ice with a thin layer of snow on top).
But her 4 wheel drive and heavy axle loading gave her the power to nose past me (I was in a Lincoln Town Car). If she had to stop, she wouldn't have been able to.
The human brain will confuse traction accelerating with traction decelerating. She would have been horrified if I told her she was guilty of unsafe driving, but she was.
Of course, the biggest improvement would probably be to require all "light trucks" to have a maximum bumper height of 14" or so.
Your stopping distance rises linearly (I think) with the weight of the vehicle. Not sure of the friction equations (more than KE = 1/2 MV squared).
Also because an SUV is quieter, with less 'road feel', you tend to drive faster on average. The surrounding environment isn't giving you the same warning signals about speed.
A third factor is crumple zones. As Keith Bradsher points out in 'high and mighty' the original SUVs weren't built with the '3 box' crumple zones that sedans are-- the safety mandate is only '2 box'.
The result is in a head on collision the engine comes into the passenger compartment.
A fourth factor is I would bet (but don't know) that SUV (and pickup) drivers are less likely to wear seatbelts. Again because of the feeling of safety (in the former) plus the 'young, male, western, independent' personality type in the latter.
If you are in a non head-on collision, your air bag is of limited utility. Without the seat belt, you are toast.
http://www.malcolmgladwell.com/2001/2001_06_11_a_crash.htm
Let everyone who doesn't wear a seatbelt see the beginning of the film 'Dead Calm' (with Sam Neil and Nicole Kidman). I saw that film 20 years ago, and the scene still shakes me.
SUVs make the road more dangerous for other people, but not safer for their drivers.
Take a look at 26 USC 4001 for the luxury tax, 26 USC 4064 for the gas guzzler excise tax, 49 USC 32901 et seq. for the CAFE standards (including the subject exemption for E85), and 26 USC 280F for the accelerated commercial depreciation).
I think that this exemption is related in part to the large size of vehicles today. Look at the vehicles over 6000 lbs:
Audi Q7 6294 lbs
Cadillac Escalade 7000 lbs
Chevy Suburban 7200 lbs
Chevy Tahoe 7100 lbs
Chrysler Aspen 6450 lbs
BMW X5 6008 lbs
Chevy Trailblazer SS 6001 lbs <-- nice use of limit!
Ford Explorer 6125 lbs
Well, you get the picture. Everything in the "large SUV" category is well over the threshold, and many of the midsize SUVs are apparently a couple pounds over the threshold for some reason.
You can't say with a straight face that these are not "passenger vehicles" by any reasonable definition.
I found this information for the least expensive model on Edmunds.com
For each of these vehicles, the purchaser is exempt from all Federal regulations because it is not considered a "Passenger Vehicle". For a Hummer H2, the exemptions can be worth over $10,000 in subsidies, if you're a "business" like a doctor or realtor, for example.
Most states do not require you to get a commercial driver's license until the vehicle exceeds 15,000 lbs. I think that the definition of passenger vehicle should include all vehicles with more than three passenger seats up to 15,000 lbs.
Michael Perkins
I think these CAFE laws are quite bit of political bullshit. If the customers want to by large gas-guzzling cars they will find a way to get it from car manufacturers.
Why is the average car on Europe much more economic ?
Mileage is a real argument for car buyers here because gas is expensive because it is taxed quite heavily. I know this is politically impossible in the US, but the only thing would work.
Even in Europe politics play an important role. Diesel is cheaper because there is less tax. This because trucks use diesel and there is a truck lobby.
Markus
Diesel is also the subject of government policies to encourage sales of passenger diesels (which are more energy efficient).
You could say the lobbying has been by the makers of diesel engines-- certain emission controls are laxer than the US, so diesel engines can be used in passenger cars.
It has backfired, to some extent. Diesel petrol is more expensive than petrol, because the refineries were built in the 70s for a different 'ideal' output mix, with more gasoline.
So at least in the UK, diesel fuel prices are a few pence higher than gas prices.
As of June 1, 2006, refineries have bto make 85% of their on-road diesel very low sulfur. 0.00l.5% 15% from memory. This is the first step of several till 100% of all diesel, on & off road is very low sulfur.
The assumption in the supply chain is that all diesel at the pump will be very low sulfur by 1/1/7. 0.5% sulfur will be available for fleets without new 2007 emmissions controls and at "special" pumps for older trucks.
Why not drop the federal truck excise tax minimum weight from 32,000lbs to 6,000 lbs? Go with a CAFE vehicle or pay 12% tax.
I don't reasonably see how this loophole can be closed, politically speaking. It seems like politicians on both sides have incentive to keep this one on the books, what with the Republicans continuing a "let the market decide" philosophy (ignoring the fact that these regulations are influencing the market greatly), and the Democrats being backed by unions in the industrial heartland who will scream that the American automakers will lose jobs (news flash: American automakers are already losing jobs!)
Check this guy out, it's one pound short of the 26,000 lb limit:
Big Ass Truck
Michael
> limit:
Ideal car for the average soccer Mom .. she shouldn't be satisfied with less ..
And we're supposed to think that there is a chance in hell these people will tackle the tough issues necessary to successfully reorder our entire infrastructure to cope with declining energy supplies?
Harumph!!!
The real damage of this time lost is still out in front of us, however.
As of now, I personally know people who are in the market for a new vehicle, and are "shopping down" in size and weight. Many people have grown children, and no longer feel they need a large SUV, and are looking at enjoying a nice middle size sedan, some of which are very efficient in comparison to SUV's.
But, the SUV they trade in wll not disappear, will it? Someone mentioned the middle class soccer moms. A fair percentage of these people do not buy new SUV's, but shop in the one, two and three year old market.
If the ethanol CAFE loophole is allowed to prevail for even 3 years, it essentially rolls backward the improvement in fuel mileage of the total fleet on the highway, and means that the "turnover" to better total efficiency on the road is essentially a decade or more out in front of us.
The same is true by the way of housing. The housing boom is supposedly dead, but even here in relatively poor KY, they are throwing up whole neighborhoods at an almost frantic pace. The energy consumption of these houses will be "built in" for the better part of a half century. It is possible to retrofit, but not easy, and the design of the home itself sets limits on efficiency.
The long and short of it is this: We are building in the status quo for the next 20 years at this moment. This is the whole point of the Hirsch report (s)
If we do not close the CAFE loopholes NOW, we will go after the oil in whatever way we must, because we will no choice.
Roger Conner known to you as ThatsItImout
Lack of legislation and codes is allowing poor fuel economy and energy inneficient houses onto the market. These will not go away for decades.
Even if people want to change consumption in the future there will be limits. You can only retrofit so far to gain efficiency. Return on investments is likely to be worse than building new energy efficient cars and houses.
So the richest segment of people in the future will buy, new, the most fuel efficient lifestyle and the poor will buy the old stuff cheap and spend a fortune monthy on energy, if it is available. We went through this in the 1970's and early 80's and then turned our backs on energy efficiency.
Poor efficiency should be illegal the same way polluting is illegal. We still pollute just not as much as we used to and there are monetary costs to subverting the system. The same should happen for vehicles, HVAC sytems and appliances. This lack of efficiency planning is going to bite us all soon when energy becomes intermittantly limited not just expensive.
It won't matter how efficient you are personally if there is no supply because others are wasteful.
When those SUVs are sold by their first owners, they don't disappear. They become the cars of marginal car buyers: poor people, students, teenagers etc.
I would guess the average SUV only lives with its first owner for about 5 years. After that, it will spend the next 10-12 years in the hands of a succession of buyers.
The people who buy them are the people who cannot afford the cost of a 2 year old Honda or Toyota upfront-- those cars have very low depreciation, and are expensive.
Working class people buy and drive the highly depreciated gas guzzlers-- the same thing happened with all the gas guzzlers Detroit was pumping out in the 70s.
There is an analogy in housing. Poorer people rent, and buy, less well made housing with poorer insulation. They then pay for that choice for the rest of their tenure there. Same thing in the market for used appliances.
I'm in a little of a hurry, but I think I learned that here
BTW GM 6.6L turbodiesels arent "light-duty", cant somebody beside VW sell >2L TDs here.
Great job beating the drum on what really is an appalling scam at the heart of the US ethanol promotion policy. Regardless of other issues regarding the pros and cons of ethanol, the CAFE loopholes ensure it is bad environmental and energy policy.
I remain convinced that there are certain circumstances in which ethanol can contribute to replacing declining oil resources. However, I think the discussion should be transparent and ethanol should be forced to compete on equal footing with other renewables.
In the law, the amount of fuel efficiency increase due to "clean" fuels is capped, at 0.9 miles per gallon. So the damage done by this policy is limited, a little. The logic behind the policy, that the ethanol is "free" when it comes to calculating efficiency, could potentially lead to disastrous "reform" to increase the amount allowable.
From 49 USC 32906: "[T]he maximum increase in
average fuel economy for a manufacturer for each of the model years
2005-2008 attributable to dual fueled automobiles is .9 mile a gallon."
Write your Congressperson (assuming you're a US citizen) and demand to know why we allow automakers to take credit for "clean" fuels that aren't even a large fraction of the market (I think we get less than 10% of our liquid fuels from ethanol today?). Shouldn't the formula include some correction for how much E85 is actually out there?
Michael
Assume that a Chevy Tahoe gets around 18mpg overall on gasoline, and 14mpg overall on E85. The overall CAFE efficiency should be, under current law:
18 * 0.5 + (14 / .15) * 0.5 = 55.6 mpg.
If we took into account the market shares for gas/E85:
18 * 0.97 + (14 /.15) * 0.03 = 20.3 mpg.
Much closer to reality. It's still like polishing a turd, though. Not to mention that for a Tahoe, GM doesn't care about CAFE since it's larger than 6000 lbs, and therefore is not a "passenger vehicle".
Michael
I don't think ethanol research is very profitable for the investors themselves, so it's essentially underfunded, like so many other public goods in the world. The alternatives are
- Government funding. The traditional way of supplying public goods that would be hard to charge for otherwise. Ideologically difficult, especially in some parts of the world. Also, there's no point denying that there are problems related to finding the optimal focus areas that markets would be much better at, if they could only find a way.
- Charity. This is the best way the private sector has found for supplying public goods so far, it doesn't really solve the problem
3.?This is a vast understatement.
if fuel is expensive enough, even a big fat subsidy won't make you buy a SUV instead of a Yaris.
Subsidies on SUVs phased out by 2011! That's completely surrealist! and irrelevant, to US car makers at least, because they will no longer exist by then. We're talking about people (GM) who believe that hydrogen fuel cells are the future of motoring!
Realistically, I anticipate an economic and environmental meltdown in the not too distant future. The only thing that might possibly buy some time is a real estate collpase that results in a sever recession.
Conventional oil production will peak. Oil prices will soar, perhaps to $200/bl. The economy will make major adjustments, just as it did in the 1970s-- but adjust it will (the nature of free market economies is that they are robust to big shocks as long as the banking system is preserved).
The alternatives (Coal to Oil, Tar Sands, Heavy Oil) are all big producers of CO2. I think for tar sands something like 5 times as much CO2 per barrel as a conventional barrel of oil, by the time both are burnt.
The world is drowning in CO2-- atmospheric CO2 is already as high as it has been in the last 20 million years. Geologic evidence suggests that the world climate is not fully stable. It switches equilibria in very dramatic moves, sometimes running only over a few years. The new equilibria are often outside those in which civilisation, if not human life itself, can survive (imagine a world where Africa and the Amazon are deserts, and the temperature of the Sahara is the temperature of London, and the sea levels are 10 metres higher).
At some point, we cross a point in atmospheric CO2 where the planet no longer acts to reduce CO2-- the biosystem is overwhelmed. We don't know where that point is, but we are coming very close to it, at a best guess-- possibly within the next 100 years, possibly within the next 20.
In the case of the Permian extinction, permafrost methane was released (alternative: it was volcanic methane) and the planet heated up so much that 95%+ of animal life became extinct. There is that amount of methane locked up in the permafrost, currently.
http://environment.guardian.co.uk/climatechange/story/0,,1869133,00.html
Solving this problem is not beyond our technical means, (see George Monbiot's new book as a practical example), but it appears to be entirely beyond our political and institutional means.
There are widespread lobbying programmes run by major carbon polluters to spread doubt regarding the scientific consensus on global warming ('CO2 we call it life' ads etc.). There are people who would literally rather die, than allow governments to tamper with the burning of coal and oil.
http://environment.guardian.co.uk/climatechange/story/0,,1881023,00.html
If you read Jared Diamond, Collapse, one of the things he identifies in the failure of human societies is the failure of political/religious/social/governmental/business elites (depending on a society, these may be one and the same) to adapt their behaviour to changing environmental circumstances.
http://us.penguingroup.com/nf/Book/BookDisplay/0,,9780143036555,00.html
http://www.anansi.ca/titles.cfm?pub_subid=237 for a more succinct version of the same topic
http://chronicle.com/colloquylive/2001/05/complexity/
is a quickie guide to the debate regarding the underlying mathematics (my own background is financial markets, and financial markets are a wonderful demonstration of this 'jump between equilibria').
CAFE standard loopholes for SUVs as light trucks and other maligned legislation in support of SUVs (at the behest of lobbied interests) are far more encompassing and egregious than the loophole for FFVs - the latter not being an issue until the ethanol debate and the go yellow agenda really took off.
Furthermore, GM, Ford, and Chrysler are not cranking out flex fuel vehicles by the millions - that's misleading.
Tongue in cheek perhaps (considering the overall strategies and $ employed to endear drivers to these vehicles) but they're right just the same. People do in fact hold the fate of the SUV in their very hands and as you've probably noted, sales of these types of vehicles have hit rock bottom - a trend likely to continue regardless of how many E85 Avalanches are made.
If GM is smart, they will bring this beauty to our shores:
http://www.popsci.com/popsci/bown2005/autotech/dab07a58a5327010vgnvcm1000004eecbccdrcrd.html
http://www.greencarcongress.com/2004/12/saab_biopower_f.html
More horsepower, more torque and greater fuel efficiency; there's even a bio-hybrid model on the way.
Picture a young guy standing at the pump debating between ho-hum $3.00 gasoline or YE-HAH! $3.20 E85 with 30% more torque and horspower to impress his friends.
Which fuel do you think he'll choose?
The FFV future is ours to determine.
For example an 03 Saab 93 petrol gets 25-35mpg. Same car with a diesel gets 35-45. This drop-in mileage improvement is available today and city mileage can obviously be extended with even primitive hybrid teck.
We need all options on the table, not just the ones our nannies will give us.
It's a classic problem. people worry much more about local emissions which they can see, and feel the damage of, than distant emissions.
When acid rain was first tackled, it was the super high smokestacks on power stations which were causing the big problem: moving the SO2 from being a local problem to a national and international one. Those smokestacks were built to deal with local emissions control regulations.
Here in Europe, we are about 1/2 of new cars as diesels. Hybrids are still much more expensive though than conventional cars.
One problem for GM and Ford is they don't have the cash flow to invest in building diesels for North American markets. European diesels are (mostly) too small capacity to be useful.
US politics will revolve around the threatened bankruptcy of GM and Ford-- Michigan is a swing state, electorally.
Not around what is best for the country.
A vehicle 5 MPG under the standard would cause $275 in fines. That seems very small for a vehicle costing $30k. In fact, a car that got 22.5 MPG instead of 27.5 MPG would cost ((15000/22.5) - (15000/27.5)) * 2.75 = $333 each year in additional gas costs--more each year than the single CAFE penalty.