megatrends

GHG emissions - something that does not
require additional action by Congress. Many
of these efforts will focus on stationary
sources, especially new and potentially
existing power plants, but they could well
affect car and truck emissions too.
Most notably for the coming year, the carbon
emissions and corporate average fuel
economy (CAFE) rules for passenger cars
and light trucks issued in 2012 will be fully
implemented between now and model year
(MY) 2025. These rules could be modified for
their final four years (MY 2022-25) through a
mid-term review in 2018, but wholesale
changes at that time are very unlikely. These
rules are already pushing manufacturers to
make significant increases in light-vehicle fuel
economy; credits and incentives are also
helping to drive continued interest in electric,
plug-in hybrid-electric, and fuel cell vehicles,
particularly in light of zero-emission vehicle
(ZEV) sales requirements in California and a
dozen other states.
GHG emissions and fuel consumption
standards
Looking to the medium- and heavy-duty
market, rules finalised in 2011 for the first
time subject medium- and heavy-duty
vehicles to GHG emissions and fuel
consumption standards. The current rules will
be phased in over model years 2014-18; the
Obama administration is expected to use its
second term to propose a new set of fuel
consumption and GHG emissions rules for
the heavy-duty market to take effect starting
in MY 2019.
It is also widely expected that the
Environmental Protection Agency will now
move ahead with planning new Tier Three
rules to reduce light-vehicle emissions of
’criteria’ pollutants - such as carbon
monoxide, nitrogen oxides, etc. - and to
reduce the sulphur content of fuel. The
automotive industry has generally been
supportive of a national Tier Three standard,
which would keep vehicle manufacturers
from having to certify vehicles to separate
California and federal standards. Conversely,
the oil industry opposes the low-sulphur fuel
rules needed to allow more stringent
emissions controls. These Tier Three
proposals could come in 2013, with a goal of
taking effect as early as MY 2017.
Support for the development of
advanced vehicle technologies
The Obama administration will also continue
Q1 2013
to advocate federal support for developing
advanced vehicle technologies and vehicle
electrification, including development of
advanced batteries, though the administration
recently recognised that electric vehicle
demand has increased more slowly than it
once expected. These efforts to support the
development of vehicle technologies will be
limited, however, by budget realities. In fact,
such programmes at the Department of
Energy (DOE) are already facing mandatory
cuts as part of debt and deficit reduction
efforts, and those financial pressures are
unlikely to ease.
President Obama’s
re-election, and the
somewhat surprising
expansion of the Democrats’
Senate majority, ensure that
there will be no fundamental
changes in many of the
policies that most directly
affect the automotive
industry
Many of these programmes saw significant
increases in funding under the economic
stimulus strategy implemented during the
recession, but such a surge in federal dollars
cannot be expected over the next few years.
At the same time, federal advanced vehicle
technologies programmes have enough
support from industry and the White House
to avoid overly steep budget cuts.
Development of vehicle-to-vehicle (V2V) and
vehicle-to-infrastructure (V2I) technologies
could also be affected by ongoing cooperative
research between industry and the
Transportation Department, which may also
decide in the year ahead how to proceed
with rules related to connected-vehicle
technologies.
Interest in natural gas is expected to
grow…
Natural gas will be an area of growing
interest in the coming months, especially in
the commercial vehicle market, but this
interest is being fueled more by market
developments than government mandates or
incentives. The dramatic increase in US
natural gas production using hydraulic
fracturing (fracking) and directional drilling
has pushed domestic natural gas prices to
very low levels, where they are expected to
remain for some time. These low prices in
Megatrends
turn are driving interest in natural gas-fuelled
vehicles. Interest is focused for now on the
medium- and heavy-duty commercial vehicle
markets, most notably transit and short-haul
vehicles, but interest could grow in the longhaul
market as a national natural gas
infrastructure is developed. Budget pressures
will likely limit any federal financial incentives
aimed at promoting the use of natural gas in
vehicles, though federal emissions rules do
offer credits for natural gas vehicles, and the
federal government may have a role to play in
developing a natural gas infrastructure.
…as interest in biofuels fades
In sharp contrast to the growing interest in
natural gas, Washington’s interest in biofuels
has faded notably. Several key federal
incentives for ethanol and other biofuels
were recently allowed to lapse, though the
federal renewable fuel standard RFS2 will
require continued increases in the use of
ethanol through 2022. In addition, the EPA
recently allowed the use of E-15 - 85%
gasoline, 15% ethanol - in MY 2001 and
newer light vehicles, despite automotive
industry concerns about the damage that
could be caused in vehicles designed to use
E-10. Further federal incentives for biofuels
seem unlikely in the near future.
These comments have focused largely on
regulatory or legislative developments that
directly affect the car and truck industries,
but the US vehicle market will also be
affected by a host of policy decisions - on
such issues as the federal debt ceiling, federal
spending, tax reform, etc. - that could have a
huge impact on the economic recovery. More
importantly, the automotive industry, like all
of American business, would benefit if the
Obama administration and members of
Congress could break the partisan gridlock
that made the outgoing Congress the least
popular and most ineffective in recent history.
Ending that dysfunctional situation would be
the best gift Washington could give to the
automotive industry in 2013.
Ian C. Graig, chief executive of Global Policy
Group, Inc., has written in the past for Automotive
World and Megatrends magazine on a wide
variety of US policy trends and their implications
for the automotive industry. Global Policy Group is
a Washington-based policy research and
consulting firm whose clients include leading US,
European, and Japanese firms in the automotive,
energy, utility, information technology, and financial
services sectors. For more information, visit
www.globalpolicy.com or contact Ian Graig directly
at ian.graig@globalpolicy.com.
Automotive World Megatrends magazine | www.automotiveworld.com
58