Tuesday, March 2, 2010

Don't believe that government regulations are good for business? Ask the auto industry

Even as Sen. Lisa Murkowski plans to torpedo the EPA's authority to regulate CO2 emissions, on the grounds that regulations will be costly for industry, opposition to Murkowski's plan is being launched by... the US auto industry. Check it out:

They may not be the most natural of environmental campaigners, but in a surprise reversal US car firms could prove crucial in the fight to stop Republicans stripping the Environmental Protection Agency (EPA) of its right to legislate carbon emissions.

Republican senator Lisa Murkowski is widely expected to move forward next week with her controversial plan to seek a motion of disapproval in Congress that would, in effect, reverse the EPA's recent ruling that carbon emissions constitute a health risk and can therefore be regulated under the existing Clean Air Act.

However, despite having secured support from a number of business groups, the move could face opposition from the auto industry after it emerged that the motion could reignite a long-running row over national vehicle emission standards, raising the prospect of different fuel-efficiency rules in different states.

According to a letter sent to Democrat senator Diane Feinstein by the Department of Transportation, overturning the EPA's ruling on carbon emissions would stop the agency from implementing the National Fuel-Efficiency standards that were announced by President Obama last year.

The letter – from O. Kevin Vincent, chief counsel at the National Highway Traffic and Safety Administration (NHTSA), the department responsible for fuel economy standards – warned that if the agency were forced to proceed on its own without the EPA's involvement, many of the benefits of national standards would "substantially erode".

He added that stripping the EPA of its powers would also likely drive California and 13 other states to revive their plan to enforce their own tougher emissions standards, which had been dropped following Obama’s announcement of more demanding national standards. Vincent said the move would create confusion, encourage renewed litigation, and drive up the cost of compliance for automobile manufacturers and motorists.

The letter mirrors one sent earlier this week by EPA administrator Lisa Jackson to a group of eight senators, which warned that Murkowski's proposals would "undo a historic agreement among states, automakers, the Federal government and other stakeholders".

Back in September, the Alliance of Automobile Manufacturers and the Association of International Automobile Manufacturers also sent a joint letter to senator Feinstein, signalling their opposition to an earlier effort by Murkowski to challenge the EPA’s ruling.

The move marks something of a reversal for the auto industry, which has consistently lobbied against more demanding fuel economy standards, but is even more fiercely opposed to the prospect of a patchwork of numerous vehicle emissions targets being adopted by different states.

The move came in the same week as opposition to Murkowski’s proposal (which could come to a vote as early as next week) heated up, with nine environmental commissioners from states that had agreed to originally adopt California’s vehicle emissions standards writing to Senate leaders to warn that the resolution would disrupt the rollout of standards that have "been widely praised by the automobile industry, environmental organisations, labour unions, states, the Obama administration, and many members of Congress".

Business leaders oppose supposedly "pro-business" efforts to gut environmental regulations? Yes, the narrative of "low taxes and low regulation = good for business" continues to crumble. Though the GOP would have you believe that regulation always increases costs and always hurts business, the truth is just not so simple. In this case, federal regulations give auto makers much-needed consistency and predictability in their manufacturing operations, allowing them to benefit from scale nationwide instead of having to adapt to a patchwork of state mandates.

Indeed, if you look at the historical relationship between the auto industry and fuel economy regulations, Detroit's financial bosses opposed the initial Corporate Average Fuel Economy (CAFE) Standards. However, once imposed, Detroit's engineers had little trouble rising to meet the new requirements:

[Link to original graphic: http://www.theoildrum.com/uploads/12/fuel_efficiency_1945_2005.png]

Thanks to government regulation, we spend half as much on gas today as we otherwise would. Had Detroit willingly accepted the federal government's challenge to improve its cars, instead of fighting tooth and nail against change, maybe the Japanese wouldn't have eaten the Big Three alive.

The auto industry is finally waking up to the fact that it makes better business sense to innovate new technologies for meeting federal regulations, rather than fighting against change. Now if only GOP ideology could catch up to the business leaders whose interests the party ostensibly understands, they'd realize that their anti-regulation stance is just blowing smoke.


Yes, government creates jobs


  1. More regulation? Less regulation?

  2. This comment has been removed by the author.