Let's Make A Gas-Saving Deal

	Deron Lovaas February 23, 2007

Deron Lovaas is the vehicles campaign director for the Natural Resources Defense Council.

On the classic game show “Let’s Make a Deal,” a contestant chose from one of three doors, behind one of which was a prize like a coveted new car. The host, Monty Hall, would then do the contestant a favor by revealing what was behind one of the unpicked doors. With two doors left, the contestant now has a chance to either stick with his or her original choice or switch. What the contestants might not realize is that it was always to their advantage at that point to switch; statistically, there was now a two-thirds chance that the car was behind the door they did not choose.

In a way, the automobile industry, including labor, is now in a similar situation. In the bitter debate over fuel economy standards, industry and labor have chosen the door of no serious change in a three-decade-old policy. They have not chosen what is behind the door of higher fuel economy standards. But it now knows that the prize of a cleaner, more efficient and more prosperous industry is not behind some third door. Even more so than on the game show, it is clear that the best deal would be to switch.

The resistance to higher fuel economy standards is a shame, given that new government standards in 1975 spurred a near doubling of fuel economy for passenger cars and a 50 percent increase for light trucks. Without it, the U.S. would have used about 2.8 million barrels a day more gasoline in 2000. And while fuel economy peaked in 1988, one recent study found that efficiency continued to increase by about one percent (or about .2 mpg) per year since 1987, but this gain was overwhelmed by increases in vehicle weight, size, power and accessories.

Some blame producers for over-reliance on large SUV sales, some claim that consumers have made these choices, and others claim that producers and consumers are both complicit. But in the end, we must get beyond the blame game that industry, politicians and environmentalists have been playing. The bottom line is that fuel economy performance has stalled out, and there’s ample evidence that the industry has the engineering know-how to reverse this trend. Further evidence is provided by the remarkable popularity of vastly more efficient advanced technologies such as hybrid-electric cars and soon-to-come plug-in hybrids.

Industry and labor have long clung to a position of obstructing policy reform. While this may once have been useful, there’s growing evidence that it is no longer in the best interest of either management or labor. For example, the research of Walter McManus of the University of Michigan – formerly employed by J.D. Powers and General Motors – shows that increases in fuel economy performance would benefit the Detroit-based automakers as well as their employees. A few weeks ago, he told the Senate Energy and Natural Resources Committee that such increases “cannot happen without federal leadership.”

Pulling back the lens, we see that the bigger context has changed dramatically. New constituencies, including business and military leaders, have joined forces to advocate for change. As one group of luminaries, including the CEOs of FedEx, UPS and Southwest Airlines recently put it in a report: “reformed and strengthened fuel efficiency standards—combined with appropriate government incentives and strict adherence to technology neutrality—are the critical components of any comprehensive plan to reduce U.S. oil dependence.”

Even President Bush urged that this underutilized policy tool be used “to conserve up to 8.5 billion more gallons of gasoline by 2017.” As the Union of Concerned Scientists noted, this would take the vehicle fleet to a 34 mile-per-gallon (mpg) average, a 30 percent leap in fuel economy. And remarkably, this new stand mirrors that of Democratic presidential candidate Senator Barack Obama, who led a bipartisan group of sponsors to introduce a bill in the last Congress that requires similar boost to performance.

The rapidly changing landscape is akin to Monty’s opening of a second door. And what exactly does a good bargain look like? Some have already hinted at it. For example, Mark Fields of Ford told Business Week in January that he would “like Washington to invest much more to help with our plans to make more fuel-efficient vehicles.” The UAW has expressed a similar interest.

So here’s the deal: Automakers agree to a substantial boost in fuel economy performance, yielding huge energy security and carbon dioxide pollution reduction benefits. In exchange for those public benefits, taxpayers like myself will help to bridge the financial gap between the industry’s current infrastructure and the retooled factories and assembly lines needed to provide consumers with more efficient, cleaner vehicle choices.

The former can be achieved by the tried-and-true method of increasing fuel economy standards, while the latter can take any one of a number of forms, such as health care legacy cost relief, loan guarantees or tax credits—whatever is most useful to industry. There may even be a way to link this with a new cap-and-trade regime for global-warming pollution from smokestacks, currently being debated in Congress, giving the auto industry some of the valuable emissions allowances in a carbon cap and trade system, which they can sell to raise capital for retooling. This is a win-win-win, for the environment, for managers and shareholders of beleaguered auto companies, as well as working families facing the prospect of continued hemorrhaging of good jobs.

And a great place to strike a deal would be the Apollo Summit beginning this weekend in Washington, which includes among its goals the commitment to create work groups to tackle such challenges and aims explicitly to “build a united federal policy agenda for the 2007-2008 cycle.” The convener of the summit, the Apollo Alliance , was created for the purpose of bringing blue (labor) and green (enviros) together to advance big goals for the country, echoing the shining example set by President John F. Kennedy when he launched the mission to the moon four decades ago. This is the perfect venue to discuss ways of jumpstarting the debate about fuel economy to the enduring benefit of workers as well as the planet.