The heat is on
How global warming is closing in on the U.S. auto industry
Photo credit: PETER VAN WAGNER/ISTOCKPHOTO
"I think our policy statement, as I recall, was crafted about 10 years ago, when Harry Pearce was here," General Motors' CEO said in his office high above the Detroit River. "And the comment was along the lines that there's certainly ample debate on both sides."
In the decade since Pearce, then vice chairman, urged government, industry and environmentalists to study the issue and seek ways to head off potential problems, scientists have reached near unanimity that human activity - including the burning of gasoline in cars and trucks - contributes to global warming.
And they say the phenomenon is happening faster than they had feared. Average global temperatures in the past 10 years were among the highest since records have been kept.
During that same period, automakers have fended off nearly every government attempt to reduce the fuel consumption of cars and trucks.
They have brought hybrids and other engineering marvels to market and talk about even more exotic technology for a distant, greener future. But the hard fact of the here and now is that the average U.S. vehicle is heavier and less fuel-efficient than it was 20 years ago.
So far, automakers have succeeded in avoiding government mandates, stressing a voluntary approach and the wisdom of the marketplace. But suddenly the issue of global warming has turned very hot for the auto industry.
Among recent key developments:
The key question for automakers: After failing to lead in the move toward more fuel-efficient vehicles, will they be forced by shifting public sentiment and resulting legislation to places they'd rather not go?
A trip to the auto show
Each January, automakers from around the world come to the Detroit auto show to display their best ideas for the future as well as the models they're hoping to sell right now. And there's no better place to witness the industry's split personality.
For every concept at this year's show that promised - always far in the future - climate-friendly technology, such as the plug-in hybrid Chevrolet Volt and Ford's fuel cell Airstream, there was another escalation of the horsepower war in the here and now:
Clearly, the auto industry has developed impressive technology over the past two decades to make engines and powertrains more efficient and to trim weight from components. But it's also clear that this technology has been used in large part to increase the size and power of vehicles. The proof:
The average light vehicle sold in 2006 got 21.0 mpg, down from 22.1 mpg in 1987, according to the EPA. The EPA's numbers reflect real-world consumption and are lower than the ratings used in determining compliance with corporate average fuel economy rules, or CAFE.
And the average 2006 vehicle - now as likely to be a truck as a car - weighed almost 1,000 pounds more and had about 100 more horsepower than its 1987 counterpart.
Speaking with a reporter at the Detroit show, Derrick Kuzak, Ford's group vice president of global product development, linked global warming to fuel economy - a logical stance, since there's a direct relationship between the amount of fuel burned and the release of greenhouse gases. Burning one gallon of gasoline puts about 20 pounds of CO2 into the atmosphere.
Kuzak - whose employer is alone among domestic automakers in publicly acknowledging that cars and trucks contribute to global warming - said that if you pursue higher fuel economy, you're automatically contributing to the fight against greenhouse-gas emissions. And the marketplace is pulling Ford toward higher fuel economy, he said.
"Fuel economy is our number-one opportunity with our customers," said Kuzak. "It is customer-driven. Global warming doesn't hang over my head. Our customer needs are exactly aligned with society's needs on CO2."
But nearby in the Ford display was the company's new people mover, the Edge crossover, rated at 18 mpg in the city and 25 on the highway. A 1997 Windstar minivan was about the same, at 17 and 25.
And Kuzak made his remarks while seated next to the Ford Interceptor concept. It's built on a stretched Mustang platform and powered by a beefy 5.0-liter V-8 racing engine that kicks out 400 hp and has a deep, throaty muscle car roar.
Winds of change in D.C.
The promises of using advanced technology to save fuel and reduce greenhouse-gas emissions sometime in the future are starting to ring hollow in Washington. Newly empowered Democrats are vowing a dramatic change in course.
At the Senate Environment and Public Works Committee, former Chairman James Inhofe, R-Okla., called climate change a "hoax." He was replaced in January by Barbara Boxer, D-Calif., who favors California-style controls that seek to cap total emissions of greenhouse gases from both mobile and stationary sources.
New Senate Majority Leader Harry Reid, D-Nev., promises a Senate vote on a climate bill by spring.
Among 2008 presidential election hopefuls, the perceived front-runners, Democratic Sen. Hillary Rodham Clinton of New York and Republican Sen. John McCain of Arizona, favor federal action on global warming.
Privately, some in the industry say they can't acknowledge the role of autos in global warming without opening a Pandora's box of government scrutiny. Will that position change as the political debate heats up?
Eileen Claussen, president of the nonprofit Pew Center on Global Climate Change, thinks it should, for the automakers' own good. The interest groups that are most vigorously present at the table when negotiations occur will have the most influence, she says.
Her advice to the auto industry: Get off the sidelines.
Bob Lutz, GM's outspoken vice chairman, could be the industry's poster boy for skeptics in the global warming debate. Lutz says the planet has been warming for hundreds of years, and "I remain totally unconvinced that it has anything to do with human activity."
He and other skeptics argue that vehicle emissions account for a tiny and irrelevant fraction of the total volume of greenhouse gases produced each year. Most of the gases come from natural sources, such as the decay of vegetation and the breathing of animals and humans.
In 1998, while at Chrysler Corp., Lutz suggested to reporters that people worried about global warming should investigate ways to regulate cow flatulence and the eruption of volcanoes.
The Alliance of Automobile Manufacturers, which represents the Detroit 3 and six import-brand automakers, says U.S. light-duty vehicles account for just 0.13 percent of total annual global greenhouse-gas emissions. And global human activity - including running factories, heating homes, producing electricity, flying planes and driving cars and trucks - accounts for less than 4 percent of global greenhouse gases, the alliance says.
But climate scientists say the human contribution is critical. Natural forces that have kept atmospheric concentrations of CO2 and other greenhouse gases at acceptable levels over time are delicately balanced, they say. And the relatively modest emissions from human activity - in particular, burning fossil fuels - are upsetting the balance.
In a 2003 statement, the American Geophysical Union, with 41,000 scientist members, said, "Scientific evidence strongly indicates that natural influences cannot explain the rapid increase in global near-surface temperatures observed during the second half of the 20th century."
In the United States, transportation and electricity generation each accounts for about 30 percent of man-made greenhouse-gas emissions, the EPA says. All other sources - including homes, factories and farms - yield the other 40 percent.
Around the world, proportions vary by region. Transportation and electricity generation are rising sharply in rapidly industrializing China and India.
Globally, about 25 percent of emissions come from electricity generation and about 14 percent from transportation, says the World Resources Institute. Deforestation is a major source in some regions, notes institute spokesman Paul Mackie.
Cars and trucks account for 12 percent of the world's man-made carbon dioxide and about 20 percent of the U.S. total of man-made CO2, the most common greenhouse gas, according to an April 2006 study by the research firm David Gardiner & Associates, of Arlington, Va.
The United States, with less than 5 percent of the world's population, produces nearly 30 percent of the carbon dioxide from all man-made sources.
Rising concentrations of greenhouse gases will cause average global temperatures to rise 2.5 to 10.4 degrees Fahrenheit by 2100 compared with 1990 levels, predicts the Intergovernmental Panel on Climate Change, which represents hundreds of scientists and is overseen by the United Nations. The panel said melting glaciers and ice caps will raise sea levels by as much as 3 feet, swamping many islands and flooding coastal areas.
In a joint 2005 statement, the science academies from 16 nations, including the United States, said, "It is vital that all nations identify cost-effective steps that they can take now to contribute to substantial and long-term reduction in net global greenhouse-gas emissions."
2 billion vehicles
By midcentury, the world's vehicle population is expected to reach 2 billion, almost triple the current figure. To keep global vehicle emissions near today's levels, the average fuel economy of cars and trucks would have to rise to about 60 mpg in 50 years or less, according to calculations by the Carbon Mitigation Initiative at Princeton University, a research effort funded in part by Ford.
Stephen Pacala, a self-described "car guy" who is director of the initiative, says such a reduction in fuel consumption can be made with available and emerging technologies (see story, Page 64). But automakers and consumers need to get started now.
James Hansen, a pioneering climate researcher at NASA's Goddard Institute and at Columbia University, says humans must act within 10 years to stop the annual increases in CO2 emissions and to begin cutting other greenhouse gases, or the results will be even worse than those predicted by the Intergovernmental Panel on Climate Change.
In an article for the New York Review of Books last July, Hansen wrote that the biggest obstacles to avoiding greater disaster are utility plants and motor vehicles that use too much fuel. Said Hansen: "Automakers oppose efficiency standards and prominently advertise their heaviest and most powerful vehicles, which yield the greatest short-term profits."
The industry position
Fred Webber, who will retire this year as president of the Alliance of Automobile Manufacturers, has been the top organizational voice for domestic and import-brand automakers in the nation's capital. His attitude about climate change accurately represents the industry view.
On a personal level, he said, he believes global warming is occurring. But he questions the degree to which human activity is causing the change.
He emphasized that his view is personal - because the nine alliance members, with a combined share of more than 70 percent of the U.S. market, have not answered those fundamental questions about climate change.
The alliance's formal position is that the debate about climate change is continuing, but in the meantime, members are working to limit greenhouse-gas emissions, said alliance Vice President Gloria Bergquist.
She noted that alliance members have promised to cut emissions from their factories by 10 percent by 2012. They have not set a goal for their vehicles.
Webber disputed suggestions that automakers lack commitment to the issue.
"I think, for example, the commitment to ethanol, the commitment to clean diesel and biodiesel, the commitment to hybrids, all of these advanced technologies are our answer to the challenge when it comes to climate," he said.
Webber said automakers spend more on r&d than any other industry: $15 billion annually in the United States and $39 billion globally.
Alliance officials can't say what percentage is for improving fuel economy or reducing CO2. But Webber said of the massive investment: "One of the big reasons we're doing it is we want to improve the climate."
He warned that rushing into arbitrary government controls, such as a cap-and-trade program, would be risky for business and have uncertain benefits for the environment. Such a program would set an economywide cap on greenhouse-gas emissions and set limits on individual emitters, such as utilities and factories.
Under cap-and-trade programs, emitters that beat their limits could sell credits to those that don't comply, creating financial incentives to cut emissions. Similar programs have been successful in reducing the pollution that caused acid rain.
Cap and trade is the suggested method of the business coalition that includes General Electric, DuPont and Alcoa, but no automaker. The coalition proposes a nationwide limit that would reduce CO2 emissions by 10 to 30 percent within 15 years.
Many in the industry, and their friends in Congress, remain opposed to any CAFE increase.
CAFE was created in 1975 to deal with energy conservation. Increasingly, in some quarters, it is viewed as a potential tool for dealing with greenhouse gases.
In an online posting in December, GM's Lutz said any tougher CAFE standard "puts us, the domestic manufacturers, at odds with the desires of most of our customers, namely larger vehicles." And it "hands the truck and SUV market over to the imports, particularly the Japanese."
In Jan. 9 letters to President Bush, potential presidential candidates and members of Congress, U.S. Rep. Joe Knollenberg, R-Mich., wrote that higher CAFE standards would be disastrous for domestic automakers. The suburban Detroit congressman said tougher standards could doom some of Detroit's best-sellers, such as the Chevrolet Silverado, Ford F-150 and Dodge Ram pickups.
"We must say NO WAY to higher CAFE," he wrote.
Other executives, like Ford's Kuzak, say they pursue fuel economy voluntarily because customers are starting to demand it and are concerned about the nation's reliance on imported oil from unstable regions of the world. Helping fight global warming would be a spinoff benefit, they note.
Said Chrysler group COO Eric Ridenour, "There's an underlying trend in all that for fuel efficiency."
A statement by a Chrysler group spokesman on DaimlerChrysler's position on global warming said in part: "We believe that the competitive marketplace is the best solution to this challenge, and we expect to be a leader in developing and introducing advanced technologies designed to reduce greenhouse-gas emissions. Voluntary actions, because of their inherent flexibility, allow for the greatest greenhouse-gas reductions at the lowest cost."
Among the domestic automakers, Ford alone officially acknowledges that its products contribute to global warming. Ford Executive Chairman Bill Ford was one of the first top industry executives to say he was personally concerned about the issue.
In 2005, in a first for the domestic industry, Ford Motor issued a report on the business implications of climate change. The report acknowledged that "global climate change caused by human combustion of fossil fuels (is an) issue with a range of potential effects on human health, community infrastructure, ecosystems, agriculture and economic activity."
The rebel: Honda
While most of the auto industry is in lockstep in opposition to more government limitations on fuel consumption, Honda is something of a rebel. It is the only automaker that supports tougher fuel economy standards as part of the effort to combat global warming.
Ed Cohen, vice president of government relations for Honda North America Inc., said his company thinks government should curb greenhouse gases from cars and trucks by using the CAFE program.
And the Association of International Automobile Manufacturers, a trade association for Honda, Nissan, Toyota and 11 other import-brand companies, disclosed to Automotive News in late January that it has moved close to that position over the past couple of months.
The distinction: It says the National Highway Traffic Safety Administration, which runs the CAFE program, should use its existing authority to determine whether higher standards are technologically and economically feasible. If they are, then those bureaucratically mandated standards, rather than any action by Congress, should be considered the auto industry's contribution to the global warming issue.
Mike Stanton, a former longtime lobbyist for the Detroit 3 and then the alliance, became AIAM president last year. In late January, he told Automotive News that the import-brand automakers think climate change is a public policy issue that needs to be addressed, and "we want to participate in the solution to it."
Stanton said that if regulators use their authority under the law to set "maximum feasible" fuel economy standards, "that really is our contribution to reducing greenhouse gases from our vehicles."
Stanton said the organization's new position tries to make the point that fuel consumption and greenhouse-gas emissions are inextricably linked. And if CAFE standards are raised, government should not try additional controls on vehicles.
"You can't hit us twice on the same issue," he said.
In Asia and Europe, automotive executives are more likely than their U.S. counterparts to acknowledge the role of vehicles in global warming.
Said Katsuaki Watanabe, president of Toyota Motor Corp.: "Of course, I believe the automobile has made some contribution to this global-warming phenomenon. But right now what's lacking is this global-level root-cause analysis."
People certainly contribute to greenhouse gases, said Frederic Saint-Geours, managing director of PSA/Peugeot-Citroen, "from the mere fact of breathing to driving cars."
Under a voluntary program, vehicles sold in Europe achieved a 13 percent reduction in average CO2 emissions from 1995 to 2004. But automakers appear unlikely to meet new targets for 2008-09, and the European Union is considering mandatory controls (see story, Page 64).
GM's lawyerly approach
GM Vice President Beth Lowery, the company's chief environmental officer, is a lawyer, not an engineer or scientist. And she approaches the climate question with lawyerly caution.
She declines to acknowledge that cars and trucks contribute to global warming, and hers is a position that comes from the top.
CEO Wagoner told Automotive News his company can contribute to "an avoidance of the problem" without having to decide whether human activity is involved.
Some legal experts expect companies that emit greenhouse gases to become targets of class-action lawsuits. In September, California's attorney general sued the six largest automakers for climate-related damage that he says their products are causing.
Lowery said it's important that someone pursues the scientific answers to why global temperatures appear to be rising, but it's not the job of GM or the automobile industry.
"Our view is we have a certain role to play, which is to make sure that we are providing the technologies that can reduce CO2 emissions," she said.
"From a business plan standpoint, our job is to bring cars and trucks to the market that reduce CO2 emissions, and that's why we have our whole advanced technology plan."
The plan encompasses new technologies and alternative fuels. It is aimed not only at climate but also at national energy security and making personal transportation available for people all over the world in sustainable ways, Lowery said.
The company is wary of a single regulatory scheme and thinks more innovation will occur if companies are free from regulation and thus free to find ways to reduce emissions voluntarily, she said.
Despite that claim, GM's technological advances to improve fuel efficiency, like those of most automakers, have gone primarily into making vehicles more powerful - either faster or capable of carrying more weight or both - annual government reports repeatedly show (see chart, Page 54).
Lowery's remarks - and GM's sudden interest in plug-in electric hybrid vehicles - suggest an evolution of the company's recent position that hydrogen fuel cells soon will take vehicles out of the environmental equation.
It's the position that has been touted frequently and passionately by Larry Burns, who has been GM's vice president for r&d since 2000. He and others at GM have said repeatedly that they will have a commercially viable fuel cell vehicle by 2010.
Said Lowery: "There's going to be a long time where you're going to have various technologies in the marketplace, and various fuels."
Though no believer in global warming, Lutz has become a booster of GM's program for a plug-in electric car whose battery is charged by an electrical socket or a small gasoline motor. At the Detroit auto show, the Chevrolet Volt concept got a lot of good publicity.
"It may take five to 10 years to bring the Volt to market," said a Washington Post story. "But what is important is that GM, still the biggest car company in the world, has committed to spending billions of dollars to develop the Volt and similar electric vehicles."
But Lutz's enthusiasm isn't from fear of global warming. Because more and more consumers and government officials are concerned about the issue, Lutz concluded, "We have to behave as if it were real."
The government role
As Webber of the auto alliance suggests, his views and those of many other industry leaders on global warming paralleled those of the Bush administration - until the president called for higher fuel economy standards in his State of the Union address.
The administration has encouraged businesses to undertake voluntary reductions of greenhouse-gas "intensity" - that is, emissions, adjusted for economic growth. It does not mean an absolute reduction in emissions.
With the auto industry's support, Congress kept fuel economy standards frozen from the 1996 model year until 2005, when modest increases for light trucks took effect. The truck standard will rise from 20.7 mpg in 2004 to about 24 mpg by 2011. But the car standard has stayed at 27.5 mpg since 1990. (CAFE numbers are higher than the "real-world" estimates from the EPA.)
With approval from Congress, the administration has expanded global-warming studies and spent taxpayer money on research that could lead to reduced emissions. Programs include FreedomCAR.
With the Detroit 3, suppliers, universities and national labs as participants, FreedomCAR is researching hydrogen fuel cells, which make electricity by stripping electrons from hydrogen atoms and directing them to a motor or battery. The remaining hydrogen ions combine with oxygen from the air to make water as the only emission.
The federal government spends more than $150 million a year on FreedomCAR and related vehicle technology programs. The funding is comparable to the amounts spent for the Clinton-era Partnership for a New Generation of Vehicles, which was supposed to lead to affordable 80-mpg family sedans by 2004. It didn't.
In addition, the U.S. Department of Energy has issued a plan for developing and sharing advanced technology over the next 100 years.
And the administration has formed, with Pacific Rim countries, a partnership for sharing technology to combat climate change.
But critics note that the president rejected the Kyoto global-warming treaty and say the administration has ignored, sugar-coated and sometimes suppressed scientists' pessimistic predictions about global warming.
Hansen, of NASA, has complained that political appointees tried to keep him from speaking freely in public about his research.
And the Union of Concerned Scientists says the administration "has consistently sought to undermine the public's understanding of the view held by the vast majority of climate scientists that human-caused emissions of carbon dioxide and other heat-trapping gases are making a discernible contribution to global warming."
Among the administration's transgressions, the group alleges, are improper manipulations of EPA reports.
States getting involved
Some state officials view the federal effort as too little, too slow. Standing out among them is former teacher Fran Pavley. As a California state legislator, Pavley sponsored the bill that has become the automobile industry's biggest climate-change headache.
It led to the 2004 regulations requiring the average vehicle sold in California to emit 30 percent less greenhouse gases by 2016. So far 10 other states have copied the rules, and more are considering them.
In effect, the rules require automakers to sell vehicles that burn 30 percent less fuel. But California officials characterized the plan as a clean-air program, not a fuel economy program.
That's an important distinction: Although states can adopt tougher clean-air rules, federal law says fuel economy is the responsibility of the federal government.
In late 2004, the automobile industry filed a federal lawsuit against the California regulations. The plaintiffs included some individual California dealers; GM and DaimlerChrysler AG, individually; and the Alliance of Automobile Manufacturers. The Association of International Automobile Manufacturers joined later.
The industry's principal claim is that the state, through the California Air Resources Board, is illegally assuming federal authority to regulate fuel economy.
A trial scheduled for Jan. 30 has been postponed pending the outcome of a global-warming case at the U.S. Supreme Court. A separate trial on a parallel lawsuit is possible in Vermont.
Whatever the outcomes, appeals seem certain.
And in January, California Gov. Arnold Schwarzenegger directed that rules be adopted requiring that vehicles use fuels with reduced carbon content, a likely boost for ethanol.
The climate case at the Supreme Court was brought by a group of states and environmental groups asking that the EPA be directed to use the Clean Air Act to regulate carbon dioxide emissions from cars and trucks. Automakers and the National Automobile Dealers Association joined in opposition to regulation.
Arguments were heard Nov. 29. A decision is expected in the first half of this year.
In their brief to the Supreme Court, the Alliance of Automobile Manufacturers and NADA argued that even if the EPA were to regulate emissions from new U.S. vehicles, "it is purely speculative whether such regulation would spur a large enough reduction in worldwide greenhouse gases to affect the composition of the Earth's atmosphere and avoid the injuries predicted" by states and environmental groups.
The industry's principal argument is that carbon dioxide is not a pollutant that can be regulated by federal clean air law.
On the cusp of change?
State actions, court cases, mounting scientific evidence and growing interest by business and the public are contributing to the pressure that Claussen of the Pew Center says will force the federal government to act, perhaps by 2009.
She made that prediction even before Democrats took power in the November election.
Some industry lobbyists acknowledge privately that they feel the pressure growing. They note that perceived presidential front-runners McCain and Clinton favor federal action on global warming.
And U.S. Sen. Joe Lieberman of Connecticut - who co-sponsored with McCain legislation to create a cap-and-trade program - is emboldened by his victory as an independent.
To proponents of change, the stakes are high.
Said Hansen of NASA: "If human beings follow a business-as-usual course, continuing to exploit fossil fuel resources without reducing carbon emissions or capturing and sequestering them before they warm the atmosphere, the eventual effects on climate and life may be comparable to those at the time of mass extinctions.
"Life will survive, but it will do so on a transformed planet. For all foreseeable human generations, it will be a far more desolate world than the one in which civilization developed and flourished during the past several thousand years."
* * *
And how, in hindsight, does the situation look to Harry Pearce, author of the GM's global-warming policy a decade ago?
Not much different.
Pearce, now 64, left GM in 2001 to run Hughes Electronics Corp. He's now the nonexecutive chairman of Nortel, the Canadian telecommunications company; and of MDU Resources, an oil, gas and electric utility.
In a 1998 speech to the Automotive News World Congress, Pearce made a passionate call for dramatic improvements in fuel economy, in part because of global warming. He
wasn't ready to concede that it was a bona fide scientific reality, but he said cutting fuel consumption made sense as a precautionary measure.
He also said the government shouldn't mandate those improvements.
And in a recent interview Pearce reiterated that although there still are unanswered questions about global warming, it makes sense to take some action, just in case.
But he wasn't surprised that fleet fuel economy hasn't changed since his time at GM.
"We've known for a long time that consumers aren't going to pay more for environmentally better vehicles," he said.
He notes that GM and others are investing in alternative technologies. And he sees a future when GM or another automaker creates the first economical fuel cell vehicle and when nuclear power will provide the energy to make plenty of hydrogen.
As for Rick Wagoner, he's basking in the good publicity that the Chevrolet Volt plug-in hybrid generated for GM at the Detroit auto show. And in a speech last month to the Automotive News World Congress, he committed GM to leadership in electric vehicles and urged - much as Pearce did nine years earlier - government cooperation in developing alternative-fuel vehicles.
GM's lobbyists in Washington will be aggressive in seeking that help, for battery research and for developing an infrastructure for ethanol.
But they'll also be riding herd on the energy bills that seek to raise CAFE or otherwise force a reduction in fuel consumption.
Richard Truett contributed to this report
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