OPINION: Winds of Change in the U.S. Auto Industry

Hummer LimoWhat a difference a crisis can make. When U.S. President Obama announced on May 19 that his administration was aiming to raise fuel economy standards four years earlier than was envisioned in legislation, he was joined by the chief executives of 10 auto companies. These are the very people who pushed gas-guzzling vehicles and for years blocked attempts to boost fuel efficiency.

The winds of change are unmistakable. The recent oil price rollercoaster made the public think twice about buying more gas guzzlers. The Bush administration is no longer in office to do the industry's bidding. Climate legislation is on the horizon. The Environmental Protection Agency, by declaring carbon dioxide and five other heat-trapping gases to be pollutants, cleared the way for regulating these gases. Most of all, perhaps, the auto industry finds itself in deep crisis and on the public dole, with Chrysler in bankruptcy and GM not far behind.

The Obama administration seeks to raise Corporate Average Fuel Economy (CAFE) standards from 27.5 miles per gallon for cars and 24 mpg for light trucks, to 39 mpg for cars and 30 mpg for light trucks by 2016. This overall average of 35.5 mpg is more ambitious than the 35 mpg goal by 2020 embedded in the Energy Independence and Security Act of December 2007.

Phased-in starting in 2012, the new measure is expected to save 1.8 billion barrels of oil over the life of the program and avoid 900 million tons of greenhouse gas emissions. Essentially, the standards that California has sought for years to put in place (but was blocked from doing so by the Bush administration) will now become federal rules.

The United States has been a fuel economy laggard for the past quarter century. According to the International Council for Clean Transport, European Union rules will push new-car fuel economy from 40.5 mpg in 2006 to 48.9 mpg by 2015. Japan plans to go from 39.1 mpg in 2004 to 46.9 mpg by 2015. The United States has fallen behind even China, which raised fuel economy from 29 mpg in 2002 to a current 35.8 mpg.

Obama's new rules are welcome and overdue. But if the United States wants an auto industry that can compete in a climate-constrained world, it will need to aim even higher after 2016. Through new carbon emission standards, the European Union is proposing to raise efficiency levels further, to 65 mpg by 2020.

In addition to CAFE standards, the administration might examine recent French experience. In December 2007, the French government adopted an "ecological bonus-malus" program for buyers of new cars. It offers a bonus of €200-1,000 ($275-1,380) for vehicles emitting a maximum of 130 grams of carbon dioxide (CO2) per kilometer, and €5,000 for those emitting no more than 60 grams per kilometer. On the other hand, vehicles emitting more than 160 grams of CO2 are liable to a malus-a fee-of €200-2,600 ($275-3,580). As a result, the share of newly registered vehicles that emit less than 120 grams per kilometer rose from 20 percent to 35.3 percent in a single year.

Transportation contributes almost a quarter of carbon emissions from fossil-fuel burning worldwide. The United States, where cars travel far greater distances each year than anywhere else on the planet, bears special responsibility to reduce the environmental impacts of its cars.

Michael Renner is a senior researcher at the Worldwatch Institute, an environmental research organization based in Washington, D.C.