1. The Case for Nationwide Standards Fuel Economy and Greenhouse Gas Emissions Regulation for Motor Vehicles 1

2. Participants Shane Karr Alliance of Automobile Manufacturers Cody Lusk American International Automobile Dealers Association Mike Stanton Association of Internation Automobile Manufacturers David Regan National Automobile Dealers Association

3. In December 2007, the U.S. Congress passed, and President Bush signed into law, H.R. 6, the Energy Independence and Security Act of 2007 (EISA). The energy legislation’s centerpiece was an unprecedented increase in Corporate Average Fuel Economy (CAFE) standards. EISA: … is a dramatic and unprecedented mileage increase. This is a 40 percent increase in mileage standards by 2020, with additional increases required through 2030. … is a fuel economy milestone. The energy bill marks the first fuel economy standard increase by Congress since 1975. …provides the opportunity for major reductions in carbon dioxide emissions. Burning fuel produces carbon dioxide, so higher mileage will result in a 30 percent reduction in carbon dioxide emissions from individual vehicles by 2020. 3

4. California AB 1493 In 2002 the California legislature passed AB 1493 which directed the Air Resources Board (CARB) to create a regulation to reduce greenhouse gas emissions from motor vehicles. In 2005 CARB promulgated the regulation for MY2009-2016. Carbon dioxide (CO 2 ) is the primary greenhouse gas. Carbon dioxide regulations are synonymous with fuel economy standards. The U.S. EPA measures carbon dioxide to determine the fuel economy of new vehicles. Federal law prohibits states from setting fuel economy standards. In order to implement these standards California needed to apply for a waiver from the Environmental Protection Agency (EPA). In December 2007, EPA announced its intention to deny California’s waiver. In February 2008, EPA formally denied the waiver. Legislation has since been introduced in both the House and Senate (H.R. 5560 and S. 2555) to overturn EPA’s waiver decision. 4

5. Critical Differences Between Federal and California Standards EISA CA(1493) ‏ Different overall MPG Stringency 35 mpg42.5 mpg Small Trucks in Car DefinitionNo Yes Attribute Based StandardsYesNo Domestic/Import Fleets DistinctionYesNo FFV CreditYesNo (unless exclusive use of Alt Fuels) 5

6. Overview Nationwide standards for reducing greenhouse gas emissions from motor vehicles: Allow CO 2 emissions reductions by motor vehicles to be part of a comprehensive national climate change program that fairly allocates the contributions among all sectors of the economy. Eliminate the confusion, unnecessary duplication, market disruption and increased compliance costs that result from a patchwork of state and federal standards. Guarantee that all States have input and share the risks and rewards, rather than letting certain states dictate the national agenda. 6

7. Nationwide standards Allow CO 2 emissions reductions by motor vehicles to be part of a comprehensive national climate change program that fairly allocates the contributions among all sectors of the economy. 7

8. According to EPA*, autos account for 20% of all man-made carbon dioxide emissions in the U.S. TRANSPORTATION SECTOR The Transportation Sector, which includes trucking, airlines, ships and boats, railroads and autos, produces about 32% of U.S. CO 2 emissions. *www.epa.gov/climatechange/emissions/usinventoryreport.html 20% Passenger Cars & Light Trucks 31% Industry 12% Other Transportation 16% Commercial 19% Residential 2% Agriculture Autos are 20% of U.S. Emissions of CO 2 8

9. More MPG = Less CO 2 25 26 27 28 29 30 31 32 33 34 35 250 260 270 280 290 300 310 320 330 340 350 2008201020122014201620182020 EISA CAR + LDT FUEL ECONOMY AND CO 2 EMISSIONS FUEL ECONOMY (MPG) ‏ CO 2 EMISSIONS (G/MI) ‏ Sources: Fuel Economy: Air Improvement Resource Draft Combined Car+LDT Estimate for 2007 Energy Bill CO 2 Conversion: 19.564 ibs CO2/gallon, from EIA, http://www.eia.doe.gov/oiaf/1650/coefficients.htmlhttp://www.eia.doe.gov/oiaf/1650/coefficients.html Air Improvement Resource, Inc. 9

10. According to EPA’s Analysis of Lieberman-Warner (S.2191), EISA reduces a greater percentage of CO 2 from autos than S.2191 proposes to reduce from any other sector by 2020 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% S.2191Federal EISA Sources: S2191 percent benefit estimated from EPA's Reference and S2191 ADAGE model cases in "EPA Analysis of the Lieberman-Warner Climate Security Act of 2008, March 14, 2008, Table: U.S. Greenhouse Gas Emissions for 2020, page 125. HR6-CAFÉ standard percent benefit estimated from EISA 2020 target of 35 mpg car+LDT converted to CO 2, and 2006 estimated car +LDT 25 mpg converted to CO 2 (CO2 = 19.564 lbs/gallon from EIA, www.eia.doe.gov/oiaf/1605/coefficients.html). 10

11. Nationwide standards Eliminate the confusion, unnecessary duplication, market disruption and increased compliance costs that result from a patchwork of state and federal standards. 11

12. Under Nationwide standards, automakers have the flexibility to average sales in one state or region with sales in other states. Here are some examples of estimated state fuel economy values in 2020 under EISA. 12

13. Under the California standards supplying vehicles that are identical to those offered in California will not assure compliance in New York or Vermont. Here are some examples of estimated state fuel economy averages under California’s AB 1493 in 2016. Because California’s standards are applied to individual manufacturers not the overall industry fleet, the challenge for individual manufacturers to meet the standards will be substantial. Source: AIR estimate based on 2007 R.L. Polk sales data and 2007 EPA Trends Report. 13

14. Emergence of a Cross-Border Sales Loophole -Vehicle sales vs. vehicle registrations -Policy goals unmet -Needlessly disrupting local economies 14

15. Nationwide Standards Guarantee that all States have input and share the risks and rewards, rather than letting certain states dictate the national agenda. 15

16. No State Regulatory Agency Should Be a Surrogate For the U.S. Congress EISA establishes nationwide fuel economy standards 16

17. Only Congress can balance disparate interests and impacts of fuel economy regulations While Congress gave California the right to be a laboratory for Clean Air Act standards, these standards are very different Tailpipe standards have local impacts Regulation of greenhouse gases are a nationwide/worldwide challenge California’s GHG standards would require redesign of the entire vehicle (7.5 mpg above EISA)-not just exhaust after-treatment No single state agency should have such broad-reaching authority for issues that are national or even global in scope, not local 17

18. Most States That Have Adopted California Standards Have Little or No Auto Manufacturing or Related Employment California, Connecticut, Massachusetts, Maryland, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington 18

19. Beyond Fuel Economy 19

20. Fuels Cleaner fuels = cleaner cars Vehicles and fuels are a system; cleaner fuels mean lower emissions Cleaner fuels also enable new technologies (e.g., fuel efficient lean burn gasoline engines cannot be used in this country because sulfur is too high) ‏ RFS/LCFS will further reduce CO 2 from transport sector Infrastructure 12 million alternative fuel capable vehicles on the road today H.R. 6 incentivizes additional production of alt-fuel capable vehicles Need to grow E85 outlets -- less than 1300 out of 170,000 stations FFV owners must be encouraged to use more E85 R&D to develop next generation of vehicles Batteries, batteries, batteries… 20

21. Consumers & Policymakers Incentivize fuel efficient vehicles; new technologies Reducing Traffic Congestion: According to the Texas Transportation Institute, Americans annually waste 2.9 billion gallons of fuel (32 million metric tons of CO 2 ) because of traffic congestion. Policymakers can help us save fuel and cut CO 2 emissions by reducing traffic congestion. Driving More Efficiently: The U.S. Department of Energy & U.S. Environmental Protection Agency have identified specific actions drivers can take to improve their fuel economy 21

22. Conclusion The Energy Independence & Security Act of 2007 (EISA) enforced by NHTSA, establishes at least a 35 mpg combined car and truck standard by 2020 with additional increases required through 2030. In April NHTSA will issue an NPRM in accordance with EISA. Congress- not California- should set nationwide fuel economy standards. A national standard gives automakers and dealers the increased flexibility needed to meet fleet-wide fuel economy standards while at the same time providing consumers with the type of vehicles they demand. Legislation (H.R. 5560 and S. 2555) that would overturn EPA ‘s waiver decision and irrevocably cede control of fuel economy and GHG emissions standards to California should be opposed. 22