Environmental Defense Fund Explores Strategies for Building a Sustainable American Car Industry
The viability of the Big Three automakers (GM, Chrysler, and Ford), and of the entire American Auto Industry, is in question. Congress and the American public, in response to the economic recession, are faced today with the difficult task of not only bailing out the auto industry but also preparing it for the realities of a carbon constrained economy. In the following VerdeXchange News interview, John DeCicco, senior fellow for automotive strategies at the Environmental Defense Fund, lays out his organization’s frustraton with the presently unsustainable auto industry, and he suggests an alternative, integrated strategy for the creation of a more economically and environmentally sustainable American auto industry.
VerdeX: A new president, a new administration, and new members of Congress mean new national priorities for energy, the environment, the climate, and transportation policy. Obviously, automakers and highway users are facing unprecedented changes. From your perspective at Environmental Defense Fund (EDF), what do you predict those changes may be, and what signals should the industry and the public be looking for?
John DeCicco: Everyone now appreciates what is meant by unsustainable. The path that the country has been on in many aspects of the economy—but certainly with respect to transportation and automobile transportation—has been unsustainable. It is particularly unsustainable when you look at energy and greenhouse gas emissions, which is EDF’s major concern.
At the same time, our country was on an unsustainable path economically. The auto industry is always a bellwether of the health of the economy. Car sales are a big-ticket item, but they’re also a discretionary purchase for people. For most people cars are a necessity because we have underinvested in transit and smart land use. Even though they are a necessity, you can always put off your car purchase. The auto industry has seen a collision of the unsustainable aspects of their product strategies and their unsustainable approaches with respect to energy and the environment. For example, consider their over-reliance on leasing and a movement up-market—everything getting more luxurious—when times were good. For the Big Three in particular, during the good times of the ‘90s the profits fueled by SUVs enabled them to postpone more fundamental needs to restructure their businesses in light of globalization and other factors. You may be familiar with a book that Micheline Maynard wrote a few years ago called The End of Detroit. Even before the crisis hit, we knew the problems faced by the Big Three. The proverbial chickens have come home to roost.
VerdeX: What is EDF’s interest and investment in making the United States auto industry more sustainable?
DeCicco: We have to look to the roots of things we can address from an environmental policy perspective. The country shifts literally hundreds of billions of dollars overseas because of our oil bill, related to unsustainable product strategies by the auto industry—vehicles that up until recently were burning more fuel per mile and emitting more carbon per mile than they were 20 years ago. One key part of a sustainability vision is going to be a policy framework that guides the industry to a more sustainable approach on products in the future through a market-based strategy. Some of that has already started; some of it is still being litigated. The part that has been started is the CAFE standards that were passed the year before last. California standards are still being litigated.
The big missing piece of sustainability in this industry is the carbon cap. We can’t make the automobiles sustainable unless we do something about fuel, our reliance on oil, and the unrestrained greenhouse gas emissions associated with it. President Obama talked about energy to the joint session of Congress recently. The many dimensions of energy are one of his key themes. He said that to really transform our economy we need to have a climate policy, and he articulated that in terms of cap-and-trade legislation.
The key thing for transportation in general, and the automobile industry in particular, is that the vision includes putting oil and fossil fuels under a cap. That means that for the first time ever the country will put a hard limit on the CO2 emissions from petroleum fuel. That approach will legally create a framework that will enable the auto industry and the rest of the transportation community to begin transforming itself into something that is much less petroleum intensive. It will allow the industry to reinvest in a forward-looking industry instead of the 100-year-old, oil-based technology we had. Making that type of reinvestment keeps money here in America. Reinvesting in America can become one aspect of a sustainable economy that will then feed back into strengthening car sales and everything else as a way of putting the overall economy on a more sustainable footing.
VerdeX: What kinds of discussions are you participating in with respect to the government’s consideration of a cap-and-trade program? What’s the nature of the dialogue? What are the alliances?
DeCicco: The Environmental Defense Fund has been part of a coalition called the U.S. Climate Action Partnership (USCAP). The website is www.us-cap.org. That partnership includes the Big Three Detroit automakers, as well as three oil companies, and other associated industrial interests. In January, we collectively released what we call a “Blueprint for Climate Action.” That covers a vision for a climate program for the whole economy, but it does have a section in there for transportation which represents a breakthrough policy vision different than the approach that has been taken to date on these issues. It says that we need to put fuels under the cap. Mind you, there are three oil companies—Conoco Phillips, BP, and Shell—buying into this. We need to have policies under the cap that address all three legs of the stool—vehicles and their efficiency, the amount of driving or VMT, and the characteristics of the fuel in terms of its carbon intensity.
To date, the policy framework has been to tackle these things individually without any clear, overarching principle. The individual elements of policy all have their merits, including California’s Low Carbon Fuel Standard, efforts on renewable fuels, and sustainable transportation in terms of transit, smart growth, land use planning, and so on. To date, the policy framework has been a case where all of these different pieces haven’t added up.
What we articulated in USCAP, and something that we offer to Congress and the administration, is a balanced framework that says this has to be done through an integrated strategy with a clear goal linked to carbon reduction. That’s what is going to drive transformation. Discussions leading to that are something we have been a part of for the past couple of years. It is something we continue to be part of. We are working to educate policy makers about the value of an integrated approach.
VerdeX: Where does the push back come from?
DeCicco: The push back at this point is happening at a higher level of conversation. Unfortunately not everybody has bought into the need for climate policy. Some people are saying that a tax is a better way to go. We hear about the preference for a carbon tax from folks like Rex Tillerson and perhaps some members of Congress who say “this is a better way to go,” but don’t necessarily write bills that would spell that out. The debate has begun to shift from a debate about the science or calling global warming a hoax to solving the problem. USCAP has come down, of course, on the side of a cap-and-trade system.
We’re still at a stage of debate where the country is adjusting to the fact that we have an administration that is getting ready to move policy forward in this area. Unfortunately, a lot of that push back is still partisan.
VerdeX: There are reports out of Washington that the administration might try to link climate change and energy policy into one set of bills. What are your thoughts on that strategy?
DeCicco: That is the only way to do it. We had an energy bill in the previous Congress—EISA, the Energy Independence and Security Act—that did some good things but also left a lot of unfinished business. We had an energy bill two years before that, the Energy and Security Act of 2005, from the previous Congress. It did some things that were unsatisfactory at the end of the day. This country now has a clear track record that business as usual for energy policy is broken.
For that reason I hark back to the words the president used in his address to Congress about transforming out economy. A climate bill can be the integrating approach. From President Obama, Speaker Pelosi, and Senator Reid, we’re seeing the beginning of a consensus that it’s finally time to do this right, sit down, and come up with an energyclimate strategy instead of just picking off what seems to be the next piece of low hanging fruit that leaves more to be done for another day.
VerdeX: You’re based in Detroit and your perspective is important. Another focus on Congress right now is what to do with the request from the auto industry for more bailout funds. What are your thoughts about the conditions being proposed on such funding?
DeCicco: In terms of the financial conditions I’m going to back off. I’m not really a financial analyst, and that’s not for me to second-guess. In terms of environmental conditions, I’ve looked over the submissions that General Motors and Chrysler made this month. They stated they would meet federal requirements. They were a little more circumspect about California requirements, although they did say they would meet them if they had to.
When you look at environmental requirements on the industry, one has to recall that it’s not just the firms facing bankruptcy, such as General Motors and Chrysler, it’s really the whole industry that needs to meet standards in a way that is fair and doesn’t advantage or disadvantage any particular firm. The most important aspects of the environmental policy for the auto industry are to be handled outside of the financial rescue being developed for two firms. To put it bluntly, it’s just as important to hold Toyota accountable on environmental policy as GM. I don’t think there is a whole lot that can be done in the context of financial rescue to move the ball forward on the environment. To make progress on the environment means a climate policy that will put transportation fuels under the cap. That kind of a policy can help any of the firms invest in more efficient, lower carbon products. The idea has been put on the table. We don’t recommend targeting any particular firm or subset of firms for additional regulation or special environmentally-linked money. The environment is an industry wide challenge and opportunity and it should be treated that way.
VerdeX: Our newsletter did an interview of Dan Sperling about his book, Two Billion Cars, which says that an electric drive technology is the centerpiece of a portfolio that can move the transportation sector away from carbon-emitting fossil fuel technology. What is EDF’s position on the fuel that is most appropriate to reach the goal?
DeCicco: EDF absolutely does not take a position on that. We feel that the policy framework should set the broad goal—and we believe carbon is the right metric for doing that—and that the market should decide and move toward the most efficient set of options for meeting a carbon reduction goal.
With respect to Professor Sperling, I have known him for many years, and he is a great guy and a great academic. This is not the first time he has been a proponent of electric drive. He was part of the intellectual foundation for the California ZEV mandate almost 20 years ago. I personally own a hybrid Honda Civic and I think electric drive has a lot of great potential. It certainly will play a big role in the future, but EDF is loath to make an assertion as to what the future will be as some academics do. There are no facts about the future. Facts about the future are limited to what we can predict, the sun will rise and set and the planets will move.
We can’t predict a battery breakthrough. EDF does not take a position on the fuel of the future. We just don’t look at the world that way.
VerdeX: You’ve been a principal in helping to create greenercars.org. Talk a little bit about that enterprise.
DeCicco: I developed the Green Book and the green score approach in the late '90s. We launched the first edition in 1998. One of the reasons I developed the green score approach was because the debate over alternative cars and fuels back then was much as it is now. The particulars were somewhat different, but there was a cacophony of voices saying that, “No, it’s going to be electric. No, it’s going to be methanol, fuel cells, natural gas, etc.” Every proponent of one technology or another would marshal their arguments about why their approach was the best and, ergo, why the taxpayers should support them through subsidies or policies. From a customer point of view there was an unmet need among the public of, “what can I do?” Many of these solutions that were being proffered then, just like unfortunately many of them are today, were really out of reach for the vast majority of consumers.
I thought that there should be a simple way to measure the relative greenness of cars, independently of their design, fuel, and so on, that was based on reliable data from the EPA about emissions and fuel efficiency. I wanted to offer consumers a simple answer of how to buy green and offer it in a way that was empowering, practical, and gave them a choice around the options that they actually have at their disposal. That was really the motive when I developed the Green Book.
Since I’ve been atEDF, I led a partnership where we helped develop similar ratings for Yahoo! Autos (http://autos.yahoo.com/green_center/). A very important part of transforming the market is to cultivate goodwill and an ethic among the public to make greener choices. To do that you have to give people practical options and steps they can feel empowered to take, not just hold up visions and options for the future that are out of the reach for 99 percent of people. That’s what the Green Book is about. That’s what the Yahoo! green ratings are about. If you want to buy green, here is a single number that counts both the tailpipe and fuel economy. You can find, in a simple way, the greenest vehicle that fit your needs and fit your budget.
Advanced technologies will always score well on a rating like that. The top rated vehicle in this edition of the Green Book is still Honda’s natural gas Civic. We’re not saying that to be green you have to buy a natural gas vehicle. For those to whom a vehicle like that makes sense, and there are a few people, that’s a great choice. We wanted to come up with a metric that lets people compare the set of Minivans available. If you need a minivan or a mid-sized SUV, you can rate them in a simple way. Because it’s those types of choices that make a difference for most people and empower people. It gives you a way, if you care about the environment, to act on that. So much of what gets driven by the public relations of car companies and investors—and I don’t intend to detract from the importance of creativity—is advanced technology, like the pug-in hybrids or the fuel cells. But we can’t transform a market with things that are exotic or costly or maybe not even available at all.
VerdeX: You were in Los Angeles recently for the Art Center Summit of 2009: Expanding the Vision of Sustainable Mobility. What is in the near future regarding sustainable mobility?
DeCicco: The way you get to sustainable mobility, like many other things, is watching where you put your feet today. It’s watching how you take the step forward that you’re going to take on a day-to-day basis, in terms of your daily choices. This country is spending too much time looking out across the shining horizon on the distant ridge of some sustainable environmental nirvana future, when we’re not watching what we’re stepping in today.
If you’re in an urban area and you have choices of transportation, look at the most efficient mode. If you have a transit option, use it. When it’s time to move, you should be thinking about the transportation implications of where you’re going to live. For ordinary drivers, really basic things are important: keeping your tires inflated, not driving aggressively, and so-called eco driving. These are small steps that help cultivate the epic. If one is confronted with the need to buy a car there are a lot of things you’re going to care about. You might care about the quality of the stereo, the color, the performance or the sex appeal. Be mindful to its fuel efficiency. Go to Yahoo! Autos or the Green Book and compare its green rating. In that case, take the step and make the choice that is the greenest one available for you today and that meets your needs and your budget.
VerdeX: In your opinion, what will be instructive from California in shaping the federal climate and energy policies?
DeCicco: The most important step that California has taken is AB 32—the global warming solutions act—because it puts a cap on greenhouse gas emissions. That is what the Obama Administration has called for—that overarching commitment that we are going to lower our emissions. That is the key political decision that needs to be made in this country. California has made that decision. AB 32 has been a sterling example of California’s leadership. It harks back to California’s seminal actions on clean air back in the ‘60s that led the way for the Clean Air Act.