The Beltway
An occasional column by Gabe Nelson, Automotive News' D.C. correspondent, analyzing the auto industry's relationship with Washington.
GABE NELSON

Automakers set to receive EPA anti-smog mandate

COMMENTARY
Gabe Nelson is a reporter for Automotive News and is based in Washington, D.C.
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Editor's note: An earlier version of this story incorrectly stated the effect of Tier 3 vehicle emissions regulations proposed by the EPA. They would mirror the emissions standards in California and would be stricter than those in Europe.

DETROIT -- Rarely does the auto industry want the government to speed up new regulatory mandates.

But for the past few years, automakers have been urging the EPA to set down tougher federal tailpipe emissions standards to mirror the ones in California.

Relishing the prospect of selling the same vehicles across the country, the industry has vowed to outfit all of its products with better emissions controls, as long as the oil industry does its part by selling cleaner gasoline.

Now, after years of waiting, the EPA appears ready to accept the offer. At the Detroit auto show, EPA Administrator Gina McCarthy told automakers that the agency will take final action next month on the "Tier 3" standards, which would impose stricter limits on tailpipe emissions, along with a mandate on oil companies to limit the amount of sulfur in gasoline.

If the rules go into effect as envisioned, smog-forming emissions would likely plummet a few years later, reducing the cost of any subsequent EPA crackdown on smog.

The advance of Tier 3 suggests that the cooperation between government and the auto industry that produced an agreement on fuel-economy standards in 2011 wasn't a onetime deal, but rather a template for a new type of relationship, where technology helps bridge regulatory and commercial imperatives.

"We're talking about a rule that's less than a penny a gallon ... but the kind of health protections that it provides is enormous," McCarthy told Automotive News in Detroit this month.

For the EPA and the White House, the health benefits of lower tailpipe emissions might be reason enough to move forward. But Tier 3 would also help the administration with one of its toughest environmental decisions: what to do about smog.

Smog is not only a health hazard, but it's also an impediment to economic development.

That's because under the Clean Air Act, areas that exceed permissible levels of ozone, the main component of smog, must work to clean up pollution before issuing permits for new industrial projects, such as auto plants.

Cars and trucks are big contributors to the ozone problem. But other than California, whose clean-air laws predate the federal Clean Air Act, states have no latitude to regulate vehicle emissions. So state officials have to focus on their local businesses -- even small ones such as bakeries, dry cleaners and auto body shops.

Connecticut, for its part, has already cleaned up old power plants and boilers to fight smog.

Its electricity rates are among the highest in the nation. Yet the state still flunks the ozone standard, thanks to pollution from the densely populated I-95 corridor.

"We feel like we're scratching the bottom of the barrel," says Anne Gobin, air pollution bureau chief at the Connecticut Department of Environmental Protection.

Even so, McCarthy's predecessor, Lisa Jackson, sought to further tighten the ozone standard in 2011, but fears of the economic and political costs ultimately derailed the proposal, a setback to the EPA.

And now, along comes Tier 3, a shot at redemption for federal regulators in their fight against smog, and a boon for state governments reeling under existing regulations.

"You might have to take 15 more measures to take the kind of reductions you'd get from Tier 3," says Bill Becker, executive director of the National Association of Clean Air Agencies, a coalition of state and local regulators.

The auto industry, too, has much to gain. The rules would align U.S. and California standards, lessening compliance costs. They would set clear targets for soot and smog, so automakers can focus on improving fuel economy.

Oil companies aren't happy. Upgrading a refinery to produce low-sulfur gasoline could cost them tens, or even hundreds of millions of dollars. But this time, the Obama administration shows no signs of backing down.

"It's not just the cheapest but it's the quickest way in which we can reduce the kinds of pollutants that contribute to ozone," McCarthy said.

For Tier 3 to become final in February, it will need to win approval from the White House's cost-benefit analysts. But the rule should have a fairly clear path, thanks to its broad coalition of supporters.

"Rarely do you see the auto companies, and the labor groups, and the business community, and the environmental and health groups, and the state and local agencies all embracing the same strategy," says Becker. "Here you do."

You can reach Gabe Nelson at gnelson@crain.com.

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