Special Coverage

Management Briefing Seminars

Raising the corporate average fuel economy requirement to 35 mpg (6.7L/100 km) by 2020, as a leading energy bill in Washington would do, will not significantly trim greenhouse gas emissions or increase the nation’s energy independence.

But neither would alternative powertrains, such as electric hybrids and hydrogen fuel cells, or greater use of domestic sources of energy such as ethanol, concludes a new study.

It would take an aggressive combination of those three, as well as a greater number of newer vehicles on the road, to help keep emissions totals and foreign-oil dependence at current levels into 2025, says Daniel Cheng, vice president of automotive consulting group A.T. Kearney Inc.

“You need some combination of technology and policy if you want to address both climate change and energy security,” says Cheng, co-author of the firm’s annual A.T. Kearney Report at Townsend, which also examines topical issues such as private-equity ownership of suppliers; the financial outlook for Asian, American, and European auto makers; and keys to effective supply-chain management.

“If the population continues to grow and people continue to drive more, you tend to get more vehicles, and it (becomes) a moving target. That makes it doubly challenging,” Cheng tells Ward’s.

Never has the industry faced greater pressure to solve the dilemma of achieving better fuel economy, fewer emissions and greater energy independence without sacrificing consumer demands than it does today. For starters, it’s an election year, and that places the issue front-and-center on nightly news reports and in campaign speeches.

Over the last three years, the number of news stories on energy independence has grown 104% and coverage of climate change has leapt 88%, A.T. Kearney says.

Speaking pragmatically about global warming, Cheng says voter awareness of the issue has reached new heights.

“There’s a lot of coverage about it, and if enough people believe it, they will elect people to do something about it,” he says. “As we enter the presidential election, it is a hot issue.”

U.S. dependence on foreign oil, meanwhile, shows no signs of weakening, as imports nudged up slightly to 66% of total petroleum consumption in 2006, A.T. Kearney says. Perhaps more disconcerting, however, is that the U.S. obtained 22.6% of its imported oil last year from countries with which it faces political tensions, vs. 12.3% in 2005.

“It makes the U.S. more vulnerable,” Cheng says, noting that much of the increase in imports from high-risk countries relates to deteriorating relations with Venezuela.

But a stricter CAFE requirement, for example, will go only so far in addressing emissions levels and foreign-oil dependence, because it only targets new vehicles, or a scant 8% of the cars and trucks in use today. More than 33% of all vehicles on the road are at least 11 years old, A.T. Kearney’s research shows.

“So for every hybrid you sell, with a gas guzzler still out there, you’re still creating more emissions,” Cheng says.

Looking 10 years ahead, any new regulation or technology adopted in 2008 would affect about 72% of all vehicles. “Anything you do is going to take a long time if you’re just going to impact new-vehicle sales.”

Other public-policy alternatives, such as a steep gasoline tax or forcing drivers to scrap their vehicles after 10 years, would make a greater impact than CAFE. But, Cheng warns, those options carry large social implications.

Alternative powertrains represent another avenue, although their effect on fuel consumption and greenhouse gas emissions varies.

For instance, today’s flex-fuel powertrains can trim gasoline consumption upwards of 85% vs. a conventional internal combustion engine, but corn-based ethanol can cut greenhouse gas emissions only by 25%, the report says.

Corn production also consumes a significant amount of energy. Non-food-stock cullulosic ethanol, however, would trim those emissions up to 90% and deliver the fuel-economy gains. Sources of cellulosic ethanol also are more abundant, but processing is more difficult than producing ethanol from corn.

Plug-in hybrids, hydrogen fuel cells and gaseous powertrains would save the most fuel and trim emissions by the greatest margin, but mass production remains several years into the future. The efficiency of hybrids and diesel engines falls somewhere between flex-fuel and plug-in/hydrogen applications.

“They all have an impact, but they don’t have a significant impact” in terms of keeping greenhouse gas emissions and gasoline consumption at 2007 levels, Cheng observes.

The most effective solution, A.T. Kearney’s study says, would combine a higher CAFE requirement with greater sales of vehicles with flex-fuel and hybrid powertrains and a nationwide fuel blend that contains at least 10% ethanol.

“You need a combination. That’s the key message,” Cheng says. “It’s not just one policy. There is no silver bullet.”

jamend@wardsauto.com