Agency Comments

California Air Resources Board Motor Vehicle Greenhouse Gas Standards Report

Date:
Sep 23, 2004

Contact:
John Cabaniss
Director, Environment & Energy
703.247.2107

STATEMENT OF

JOHN CABANISS
DIRECTOR, ENVIRONMENT & ENERGY
ASSOCIATION OF INTERNATIONAL AUTOMOBILE MANUFACTURERS

BEFORE THE
CALIFORNIA AIR RESOURCES BOARD

CLIMATE CHANGE EMISSIONS REGULATIONS FOR
LIGHT-DUTY VEHICLES

September 23, 2004

Good day. My name is John Cabaniss, director, environment and energy, for the Association of International Automobile Manufacturers (AIAM). AIAM is a trade association representing fourteen international motor vehicle manufacturers which account for over half of all passenger cars and light trucks sold annually in the state of California. Many AIAM members base their U.S. headquarters in California, and as a result are significant employers in the state. AIAM members include Aston Martin, Ferrari, Honda, Hyundai, Isuzu, Kia, Maserati, Mitsubishi, Nissan, Peugeot, Renault, Subaru, Suzuki and Toyota. AIAM also represents original equipment suppliers and other automotive-related trade associations.

AIAM appreciates the opportunity to offer its views regarding the establishment of climate change gas emission standards for new motor vehicles in California. AIAM has historically taken progressive positions regarding motor vehicle regulation to address public health and safety concerns, including the issues of global climate change and fuel efficiency improvement. Some of the most fuel efficient, and consequently lowest climate change gas emitting, vehicles are produced by AIAM member companies. Our members have been leaders in the introduction of advanced automotive technology to reduce climate change gas emissions.

AIAM has several fundamental and overriding concerns about the ARB proposal that fall into the following categories:

1. Climate change gases cannot be effectively regulated state by state, because they are fundamentally different from criteria air pollutants.
2. ARB’s cost estimates are flawed by omitting all research, development, and tooling costs.
3. Customer reaction is overlooked.
4. Environmental benefits are not addressed.
5. Two specific regulatory approaches are inconsistent with established practices.

Climate change gases cannot be effectively regulated state by state, because they are fundamentally different from criteria air pollutants.

Throughout the entire Staff Report, ARB treats climate change gases the same way it treats criteria air pollutants. This is a fundamental error that distorts all of ARB’s analyses.

1. Air pollution is primarily a local problem. Climate change is truly a worldwide phenomenon, as it makes no difference where the carbon dioxide or other greenhouse gas emissions occur.
2. California’s air quality needs are special in many respects, but California does not have a special or unique situation with respect to global climate change.
3. At the time of the passage of the Federal motor vehicle provisions of the Clean Air Act, California already had its motor vehicle emissions standards program in place. Conversely, the federal government has been regulating carbon dioxide emissions from vehicles through the Corporate Average Fuel Economy (CAFE) program, pursuant to the Energy Policy and Conservation Act adopted nearly thirty years.
4. Pollution from motor vehicles has been successfully dealt with using narrowly focused aftertreatment strategies that deal with a limited number of motor vehicle components. Aftertreatment or other control of carbon dioxide emissions is not possible. Instead, vehicle climate change emissions are inherently linked to the amount of fuel consumed. Fuel consumption is impacted by virtually every aspect of vehicle design and construction, ranging from engine and transmission modifications to possible changes in the shape, size, and materials of passenger cars and light trucks.
5. Vehicles are designed, built, distributed, and marketed for the entire U.S. market, not just for California. While it has generally been possible for the industry to produce vehicles with separate California-only aftertreatment strategies to meet California’s air pollution requirements, such an approach would not be feasible given the comprehensive nature of the necessary changes to comply with the ARB greenhouse gas proposal.

The past decisions of Congress on preemption should not be treated simply as a legal issue. These were not arbitrary decisions; rather they properly reflected the differences between criteria air pollutants and fuel economy (and indirectly climate change). Congress, when it adopted the Clean Air Act, recognized that California had special air quality concerns differing significantly from the other states and provided California the unique ability to set its own motor vehicle emission standards to meet their needs. Congress also correctly recognized that motor vehicle manufacturing and marketing are necessarily conducted on a national level and that varying state-to-state regulation of fundamental vehicle design elements would be extremely harmful to the industry and costly to consumers. For these reasons, Federal law establishes the U.S. Department of Transportation as the sole agency authorized to set light-duty fuel economy standards, expressly preempting states from setting standards “related to” fuel economy. See 49 U.S.C. 32919(a).

A global climate program can only be effective if it is a coordinated national effort. While global climate change cannot be effectively addressed at the state level, California, working with Western and other interested states, can and should have an important role in helping develop the U.S. climate change policy. AIAM urges California to focus its efforts on working at the national level to have a truly effective U.S. global climate change policy. Additionally, with respect to fuel economy regulations, the National Highway Traffic Safety Administration (NHTSA) has just begun a process for improving the CAFE program. NHTSA’s rulemaking is one appropriate venue for addressing vehicle fuel economy (and consequently carbon dioxide emissions).

California could also take steps to complement Federal efforts to improve vehicle fuel efficiency. For example, California could disseminate consumer information on vehicle fuel efficiency based upon the Federally derived fuel economy ratings. California may also set criteria for the fuel efficiency of vehicles purchased by state and local government agencies. In fact, as part of the West Coast Governors’ Global Warming Initiative, such use of the State’s purchasing power is identified as an important strategy. Additionally, there may also be certain market-based incentive programs encouraging vehicle purchasers to select fuel-efficient vehicles that California could adopt and not be subject to federal preemption constraints.

One area where ARB has been and can continue to be supportive of industry efforts to introduce advanced, low-emitting automotive technology is the promotion of enhanced fuel quality. Certain types of fuel-efficient engine technology require very specific fuel parameters. Notable examples are diesel engines and direct injection gasoline engines, which both require extremely low sulfur fuel. AIAM urges ARB to continue to move in the direction of lowering fuel sulfur content to enable these technologies.

AIAM looks forward to working with ARB in the future on a variety of issues, including promotion of reductions in climate change gas emissions. However, we believe that California’s proposal to adopt climate change gas emission standards is ineffective, counter-productive, and inconsistent with Federal law. For these reasons, we are unable to support ARB’s efforts in this area.

Cost Estimates

A primary concern related to cost is that ARB’s estimates do not include the basic research and development costs that are associated with developing advanced technologies and the investments needed to bring the technologies to market. Instead ARB’s cost estimates are based primarily on per-unit charges estimated by component suppliers for what ARB refers to “long term, learned-out” production volumes of 500,000 units in a single plant using “flexible manufacturing” processes that enable a variety of models to be produced in one plant. Such costs do not account for the sizable research and development costs for advanced vehicle technologies or the sizable investments that would be needed for establishing the advanced manufacturing facilities that may be entailed.

The fact that the Staff Report omits R&D and facility costs is an issue of overwhelming importance. It is like estimating the cost of a house by carefully accounting for the price of each piece of lumber while simultaneously ignoring land and labor costs. The error is so enormous that it makes quibbling over the variable piece cost of individual technologies utterly meaningless.

Customer Acceptance

ARB’s analysis fails to recognize the critical role consumers play in the equation. Most vehicle purchasers expect to get technology tailored to their particular vehicle choice, not generic technology, when they purchase a vehicle. This is especially true for engine technology. For example, purchasers of Honda vehicles expect to get Honda engines. Purchasers of Fords expect to get Ford engines. Given the variation in market share among the major automakers, it is unreasonable to expect technologies to be able to be delivered in generic lots of 500,000 units. It is also unreasonable for a California specific rulemaking to be based on assumptions about sales or use of technologies outside of California.

ARB has identified a long list of various technologies that could be used to reduce greenhouse gas emissions from motor vehicles. However, ARB failed to adequately consider consumer preferences in determining the maximum feasible level of emissions reductions that can be achieved. One example is the assumptions made about engine downsizing in conjunction with the use of turbochargers. Many customers expect a certain engine configuration when they purchase a vehicle. Many mid-size and near-luxury car purchasers would balk at a smaller inline 4- or 5-cylinder engine instead of their customary V-6. Similarly, it would be difficult to convince consumers purchasing large pickup trucks, sport utility vehicles, or large passenger cars to forego the tried-and-true V-8 engine in favor of a smaller V-6, turbocharged engine. The realities of customer acceptance of engine downsizing are completely omitted in the Staff Report.

Environmental Benefits

The Staff Report discusses some of the potential adverse environmental impacts associated with global climate change, citing possible impacts on public health, air and water quality, and agricultural productivity. The Staff Report describes generally direct health impacts that could be associated with extreme weather events (such as heat waves), droughts, increased fire frequency, and increased storm intensity (resulting in flooding or landslides). However, neither the Staff Report nor its cited supporting materials provide any evidence that such impacts will be mitigated in any way by the proposed regulation. In fact, the Staff Report actually states the opposite view on page viii of the Executive Summary and on page 145 of the body of the report, given the fact that California’s greenhouse gas emissions are only a tiny fraction of worldwide carbon dioxide emissions.

The Staff Report also draws broad, inappropriate, and misleading conclusions regarding the relationship between an increase in temperatures due to greenhouse gas emissions and an increase in ground level ozone in California. The Staff Report provides only a cursory discussion, leaving the reader with the impression that any increase in greenhouse gases and/or temperature will lead to higher ozone levels, which is clearly not the case. One need only look at California’s own data to show that there is no correlation between increasing carbon dioxide emissions and increased ozone levels. According to California EPA’s Environmental Protection Indicators for California (EPIC) report of April 2002, since 1980 both peak ozone levels across the state and the total annual exposure to unhealthy levels of ozone have declined dramatically. For example, in the South Coast Air Basin peak ozone levels have been reduced by over 60 percent since 1980, and total annual exposure to unhealthy ozone levels has declined by over 70 percent since 1990.

ARB should be commended for its part in achieving these significant improvements in ozone air quality. But it should be understood that these improvements occurred due to the reduction of ozone precursor emissions during this time frame. During the same time period, again as reported in the EPIC report, there was about a 70 percent increase in total vehicle miles traveled and an increase in total on-road fuel consumption (and therefore carbon dioxide emissions) of almost 30 percent.

Since ARB and the California air quality management districts have programs in place to continue to reduce ozone precursors, there is every reason to believe that Californians will continue to see declining ozone levels in the future despite any further increases in greenhouse gas emissions from vehicles.

Despite the significant increases in carbon dioxide greenhouse gas emissions over the past century, California’s average temperature has increased by only 0.7 degree F, as reported in the Staff Report and confirmed from Historical Climatology Network data. One hundred years ago there were very few motor vehicles in California, while today there are over 25 million vehicles registered in the state. Even if this gradual warming trend continues for the next thirty years, the temperature increase would be only 0.22 degree F. With the expected reductions in ozone precursors and the related sensitivity of ozone to temperature, this small temperature increase would be expected to increase ozone by no more 1 ppb, an almost unmeasurable value compared to the ozone health standards. See attached Air Improvement Resource paper.

Regulatory Items

There are two regulatory items that AIAM has identified which are inconsistent with ARB’s other regulations or with current practice and which are unnecessarily burdensome on manufacturers:

1. Definition of “intermediate volume manufacturer”
2. Proposed test procedures

Intermediate Volume Manufacturer Definition – This definition in the ARB greenhouse gas proposal contains new criteria governing when sales must be aggregated among companies with joint ownership. In the ARB greenhouse gas proposal the aggregation criteria are based on a “more than 10 percent” ownership criterion. This differs substantially from the recently adopted zero emission vehicle (ZEV) regulatory amendments which adopted a “more than 50 percent” ownership criterion. The Staff Report does not explain this departure from the ARB’s other regulatory position

Under the proposed “more than 10 percent” criterion, nearly all manufacturers currently considered as intermediate volume manufacturers under the ZEV regulation would be required to meet the requirements for large manufacturers. However, generally these manufacturers do not derive any substantial technological or engineering expertise from their larger part-owner. Instead, the ownership relationship primarily represents a financial business interest. Thus, the small number of current intermediate volume manufacturers which could retain this classification under the ARB greenhouse gas proposal could gain a significant marketing advantage over the reclassified intermediate volume manufacturers by not having to comply until the 2016 MY.

Proposed Test Procedures – The proposed test procedures in Part 1 section G of the draft regulations in the ARB proposal do not parallel the current applicable EPA test procedures for fuel economy testing. Again the Staff Report does not explain why a different test procedure is appropriate. While AIAM understands ARB’s proposal is stated in terms of greenhouse gas emissions standards (i.e., carbon dioxide) rather than as fuel economy standards, from a practical testing perspective it is impossible to separate the two. While EPA’s fuel economy testing procedures have been in place for many years and all auto manufacturers are thoroughly familiar with them, the EPA procedures have evolved over the years to improve accuracy and prevent manufacturers from gaming the system. It would be burdensome on manufacturers and serve no environmental purpose for ARB to adopt a completely new testing approach.

Conclusion

The AIAM member companies intend to pursue enhanced vehicle fuel efficiency as a principal design objective for their products, as they have since the first introduction of their products in the U.S. market. We believe that such products constitute a positive element in an internationally coordinated effort to address global climate change. However, efforts to address global climate change at the state level are doomed to be ineffective, as they ignore the vast differences between air pollution and climate change. This is implicitly recognized by the Staff Report, which fails to provide any evidence of any health benefit to California residents. Congress properly recognized these differences when they preserved Federal authority over such regulations.

AIAM urges ARB to work with other states to build consensus for a national climate protection program and a national energy policy. AIAM also urges ARB to work with the NHTSA to develop an improved national motor vehicle fuel economy program. AIAM is prepared to work with ARB to pursue other measures to address global climate change.

Thank you for the opportunity to comment.

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