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Business Voice for the Environment
California Adopts New Global Warming Regulations
On Friday, September 24, the California Air Resources Board (CARB) voted unanimously to approve regulations that will reduce global warming pollution (GWP) from passenger vehicles sold in California. The regulations will be phased in between 2009 and 2016 and will result in a 29 percent reduction in global warming pollution (such as carbon dioxide) coming from passenger vehicles, light duty trucks, and SUVs. CARB staff estimates that by 2016, the regulations will add about $1,000 to the average price of a vehicle and will save the vehicle's owner about $2,000 in fuel costs over the life of the vehicle.
E2 provided testimony during the hearing supporting the positive effects of California's environmental policies on California's economy. E2 submitted our Cleantech report (see previous article) as written testimony demonstrating the value of environmental regulations to California's economy
Of the 46 witnesses that testified during the CARB meeting, only 5 were opposed to the regulations. Those opposed included the Alliance of Automobile Manufacturers, Sierra Research (an auto industry consulting service) and Association of International Automobile Manufacturers Surprisingly not a single automotive manufacturer chose to testify nor did any really actively engage in the two-year process to develop the regulations, according to CARB board member Mark DeSaulnier
The opposition focused on a few key objections:
1. The regulations go beyond what can reasonably be accomplished in the time frame.
2. Actual cost increase per vehicle will be closer to $3,000 and savings will be closer to $1,000 thus making the regulations not cost effective as required by law
3. The regulation is illegal because it really regulates fuel economy. Only the federal government is allowed to set fuel economy standards.
4. There will be no health benefit from the regulation because the actual reduction in GWP California will be about .3 percent.
When asked by Chairman Lloyd what the opposition would propose to do instead, there was no concrete response except to work with the federal government.
Response to Opposition
The CARB staff responded to some of the specific criticism during the meeting and many of those testifying in support of the bill answered the questions during their testimony. To summarize:
1. Timeframe: The CARB proposal was based on existing technologies to reduce GWP that are already in production in some vehicles. These included 6-speed transmission, turning off cylinders when power isn't needed, turning off the engine when stopped, etc. They then took logical collections of technologies and packaged them into different vehicle classes and developed estimates for purchasing the technologies. They assumed two product cycles - each of 4 years in duration. In fact, industry spokesperson, Fred Webber of the Alliance of Automobile Manufacturers, in his testimony against the regulations, stated that the industry consistently improves fuel efficiency by 2% per year (but neglected to mention they are putting all of that improvement into maker vehicles bigger and more powerful). If one projects that for the period 2005 to 2016, is would be 24% improvement or a 20% reduction in emissions (as compared to the CARB required 29%).
2. Actual costs. The cost difference was caused by two assumptions. The first was how much to mark-up the technology to get from manufacturers purchase price to consumer price. CARB used 1.4 and Sierra Research suggested it was closer to 2.05. The second discrepancy was the estimate of miles driven during the lifetime of a vehicle. Based on the testimony, CARB did change their cost benefit figures slightly but still showed a substantial benefit to the consumer. 1.4 is the standard markup that has been used by regulators.
3. Pollution emissions vs. fuel economy. No one disagrees that the majority of ways one would reduce tailpipe emissions of GWP also will reduce the amount of fuel used. However, since CO2 and other GWP clearly meet the definition of the Clean Air Act, California is well within its authority to set these standards, not withstanding any impact on fuel economy. The Clean Air Act allows California to regulate any physical or chemical entities that enters the air and causes air pollution that can reasonably affect the health and welfare (including climate) of California's residents; including pollutants not yet regulated by the federal government.
In fact, previous regulations have reduced air pollution yet made fuel economy worse. They were all deemed legal so a regulation that both reduces air pollution and improved fuel efficiency should be no different.
4. Won't Make a Difference. Passenger vehicles produce about 40% of California's GWP (including upstream refinery emissions) and a 29% reduction is significant. In the global atmosphere, it will matter particularly if other states adopt California's clean air regulations as they typically do and this becomes a standard affecting much of the United States. It was also argued that climate change will not be addresses by a single action but a collection of actions by many governments and California has both a history and a moral obligation to be first since it is one of the worst polluters. The fact that the regulation will also improve the California economy should not be overlooked!
Next Steps
The California legislature has until the end of 2005 to modify the regulation by majority vote if it so chooses. This is unlikely but E2 will work proactively with NRDC to prevent the legislature from weakening the regulation.
We can reasonably expect two or three legal actions to be taken by the auto industry and supported by the Bush administration:
1. The industry will sue California claiming the regulation is a violation of the Energy Policy and Conservation Act which gives the federal government sole authority for setting corporate average fuel economy standards (CAFE).
2. When California files the regulations with the EPA, requesting a waiver as required by the Clean Air Act, we can expect a Bush administration to refuse the waiver on the basis of GWP not being part of the Clean Air Act. A similar suit is currently underway by NRDC because of EPA's historic failure to establish any standards for GWP. NRDC is confident in the merits of the case. We can also expect some in Congress to attempt to change the Clean Air Act legislatively.
3. The regulation may also be challenged in court with claims that the regulations don't meet the legal requirements of AB1493 because they are not cost effective.
The decision of the CARB is an important next step in addressing climate change. The auto industry is fully capable of meeting the regulations but would prefer, as would any business, to invest their capital and research in a manner of their own choosing. As an industry, they have opposed nearly every clean air regulation and safety requirement from seat belts to catalytic converters yet none of those prior regulations has put a dent in the volume of vehicles on the roads nor in the ability of the industry to move forward. We congratulate CARB and Chairman Lloyd and also Assemblymember Pavley who had the courage to take up this issue.

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