California Should Follow Europe’s Lead on CO2

Commentary

Europe has a better idea.

And if state politicians followed its lead on curbing carbon-dioxide emissions, they could avoid a lengthy, pointless tug of war and greatly impact how Americans view – and ultimately do their part to combat – global warming.

Here in the U.S., Washington regulators, the auto industry and nearly a dozen states are locked in a battle over who has the right to set the bar for reducing global-warming CO2 emissions from car and truck tailpipes.

Last April, the Supreme Court ruled the Environmental Protection Agency is empowered to set limits on the formerly unregulated gas. The only way to cut CO2 is to burn less fuel, and when President Bush signed into law in December new fuel-economy regulations calling for the U.S. fleet to average 35 mpg (6.7L/100 km) by 2020, the EPA took the opportunity to declare that the last word on the subject, prohibiting individual states from establishing their own CO2 standards.

California, New York, Oregon, Minnesota and a handful of other states now are suing the EPA for the right to force auto makers to meet separate, even tougher mileage standards. They want to follow a California proposal to mandate an estimated 43-mpg (5.5 L/100 km) bogey for 2016.

Car manufacturers rightly argue there should be only one, national fuel-economy requirement. Forcing them to meet a patchwork of standards would be complicated and costly and take the regulatory power away from the federal government. It’s a battle that could go all the way to the Supreme Court.

But here’s where the states could get what they’re purportedly after – cleaner air – if, like several Western European countries, they step up to the plate and work the problem from the consumer, instead of the manufacturer, side.

The European Union is on the verge of setting a CO2 standard of 130 g/km, roughly equivalent to 45 mpg. Auto makers have to hit that fleet target, but to encourage buyers to switch to more fuel-efficient vehicles, individual countries are establishing graduated carbon taxes that make it more costly to purchase a gas-guzzler.

In Spain, for instance, vehicles producing less than 120 g/km are exempt from the carbon tax, which tops out at a stiff 14.75% of the sale price of the vehicle emitting more than 200 g/km.

Austria employs a more complicated system that rebates part of the graduated tax depending on whether the vehicle runs on alternative fuels or is a diesel that incorporates an emissions-reducing particulate filter, for example.

Europe also has launched CO2-awareness campaigns, encouraging consumers to drive more efficiently, keep tires properly inflated and eliminate unnecessary junk in the trunk that adds weight and burns more fuel.

If California and friends took a similar tack, they could maintain power over the makeup of their vehicle fleets and possibly help move the entire country along the path to better fuel efficiency.

The problem today is auto makers make their biggest profits on the least fuel-efficient vehicles, rather than the other way around, points out Global Insight analyst Nigel Griffiths. "They will have to transform their business model (under the new fuel-economy rules) or their profitability will be decimated."

A state-led surcharge system could help the auto industry make that shift, because buyers willingly would pay more for fuel-efficient models that cut or eliminate their tax bills. Manufacturers could split the difference with consumers and plow some of those higher profits back into developing and proliferating fuel-saving technology.

Car makers no longer simply would be charged with building more efficient vehicles, they would have the incentive to sell more of them as well.

Social pressure to buy high-mileage cars and trucks would heighten as CO2 ratings are added to Monroney stickers and become an integral part of the vehicle buyer’s lexicon.

Such a movement likely would have the backing of the auto industry, avoid interference at the national level and potentially spread nationwide to the point where actual fleet fuel economy might even exceed federal standards and time targets.

Of course, politicians find it easier to put the burden on the industry than require a commitment from their own constituency. Tax credits, rather than fees, could take some of the sting out of such legislation. But either way, it would take political will that is less about winning a power struggle and more about actually achieving clean-air goals.

As one of California Gov. Arnold Schwarzenegger’s film characters once noted, "I don’t know what the problem is, but I’m sure it can be solved without resorting to violence."

Working both sides of the equation, with the feds pushing auto makers on technology and the states engineering a change in buyer behavior, would get much more accomplished than slugging it out in court for control of a single side of the teeter-totter.

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