The American automobile will soon change dramatically. The Ford Taurus of the future will be the same size as today's Taurus, deliver the same performance, and cost about as much, but it will have a new engine efficient enough to go from Washington to Miami on a single tank of fuel. Without great sacrifice, Americans will release less of the "greenhouse gases" that contribute to global warming and depend less on oil from volatile parts of the world.
That, at least, is the vision of Vice President Al Gore. It is also the goal of an unusual alliance created in 1993 between the federal government and Detroit's Big Three automakers. Known as the Partnership for a New Generation of Vehicles, the joint effort aims to help Detroit produce midsize sedans capable of getting 80 miles per gallon, starting sometime after 2004, an objective that Gore often likens to putting a man on the moon. He hopes the Partnership will not only help build a new generation of cars but also redefine federal environmental policy by serving as a model of a "third way" environmentalism that transcends old adversarial relationships to find "win-win" solutions.
You might think that experience has proved Gore right. In the past year, the first ultra-fuel-efficient automobiles have started to appear on the market. The Insight (a spiffy two-seater capable of getting 70 miles per gallon on the highway) went on sale in December, and the Prius (a small four-door sedan that gets roughly 60 miles per gallon) goes on sale this summer, both for about $20,000. The trouble is that the Insight is made by Honda, the Prius by Toyota. Both companies were excluded from the Partnership. The companies that have benefited from the roughly $250 million a year spent by the government to support the Partnership--General Motors, Ford, and DaimlerChrysler--have only unveiled one-of-a-kind, ultra-fuel-efficient "concept cars." Meanwhile, they've focused on rolling out a new generation of gas-guzzling SUVs, such as the new 19-foot-long Ford Excursion.
The appearance of the Honda Insight and the Toyota Prius reveals profound flaws in the Partnership. Despite more than $1 billion in government spending on clean-car technology, overall fuel efficiency has actually fallen during the Clinton-Gore administration. While the Partnership claims a "super car" solution is just around the corner, the super car taking shape under its sponsorship may well be a fiasco. Far from validating Gore's vision of a third way, the story of the Partnership for a New Generation of Vehicles shows that sometimes the third way is no way at all.
The Clinton administration's decision to pursue higher fuel-efficiency standards via a partnership with Detroit came as a surprise to environmentalists and automakers alike. In the past, the federal government had increased fuel efficiency by legislative mandate. In 1975, two years after the Arab oil embargo had quadrupled the price of gasoline in the United States, Congress passed legislation that required automakers to increase the overall fuel efficiency of their car fleets to 18 miles per gallon in 1978 or face hefty fines. This target became known as the Corporate Average Fuel Economy (CAFE) standard. The CAFE standard rose annually during the next seven years, leveling off at 27.5 miles per gallon in 1985. Light trucks and SUVs were required to meet a lower CAFE standard of 20.7 mile per gallon. So when Bill Clinton in 1992 proposed raising the CAFE standard from the current 27.5 miles per gallon to 40 miles per gallon by the end of the decade and then to 45 miles per gallon in 2015, environmentalists applauded.
The automakers were horrified by Clinton's proposal. They had always disliked CAFE standards, which forced them to spend millions of dollars to re-engineer their product lines and favored Japanese automakers that produce smaller cars. And they were even more aghast when Clinton selected Al Gore as his running mate. In his book Earth in the Balance, Gore had identified the gas-powered internal combustion engine as "a mortal threat to the security of every nation that is more deadly than that of any military enemy we are ever again likely to confront."
Clinton's goal of boosting the CAFE standard to 40 miles per gallon by the year 2000 might have been a bit ambitious, but it was in the ballpark and would have been sound public policy. Upon taking office, however, the Clinton administration, led by Vice President Al Gore, shifted gears. In September 1993, after six months of negotiations between Washington and Detroit, the president and vice president stood on the South Lawn of the White House with the CEOs of Detroit's Big Three automakers to announce the formation of the Partnership. The Big Three, hundreds of automotive suppliers, seven federal government agencies, and the national laboratories would join together to improve manufacturing techniques, apply innovative technology to today's cars, and, most important, achieve fuel efficiencies up to three times greater than today's automobiles. Under the terms of the agreement, automakers would produce 80-mile-per-gallon concept cars in 2000, preproduction prototypes in 2004, and actual production models soon thereafter. The proposal to raise the CAFE standard was never explicitly disavowed, but after the Partnership's creation, it was quietly abandoned.
The Partnership has turned out to be a piece of misguided industrial policy that is all carrot and no stick. It suffers from several major flaws. First, it spends federal dollars to support a goal--developing more fuel-efficient cars--that automakers could meet on their own. Detroit already spends almost $1 billion a year researching alternative fuels and fuel-efficiency technology. Automakers don't need stealth technology from the military or engine technology from the space shuttle to produce a car that can get 80 miles per gallon. The problem isn't building concept cars that get high mileage; it's mass-producing and selling them. Ultra- fuel-efficient cars will almost certainly cost more than conventional gas-powered automobiles. Although Americans support cleaner, more fuel-efficient cars, they won't pay more for them, unless fuel prices rise dramatically. The federal government might need to subsidize the purchase of ultra-fuel-efficient cars, perhaps through tax benefits (which Gore, to his credit, recently proposed). It doesn't need to subsidize their development.
A second problem with the Partnership is that its ambitious goals are distorting automakers' research and development priorities. The Partnership agreement calls for the Big Three to develop preproduction prototypes of their super cars by 2004 and to prepare for full-scale production sometime soon thereafter. To come even close to meeting the 2004 target, the Big Three's super cars will almost certainly be powered by hybrid diesel-electric engines. But while diesel engines are more energy efficient than their gasoline-powered counterparts, they're also dirtier. In particular, diesel engines release considerably more smog-forming nitrogen oxide than gasoline-powered engines. That's a no-no in smog-conscious areas, such as California. In November 1998, California imposed tough new tailpipe emissions standards that will effectively ban the sale of diesel-powered vehicles in California by 2004. According to Jason Mark, a senior transportation analyst at the Union of Concerned Scientists (and a Partnership skeptic), current configurations of the super car produce three times more smog-forming pollutants than California's new standards allow. Amazingly, the super car may not even be sold in California. (In contrast, the less ambitious Honda Insight and Toyota Prius are powered by hybrid gasoline-electric engines that will meet California's tough new standards.)
In light of the emissions problems with hybrid dieselelectric cars, an independent group of experts--convened by the National Research Council to review the super car project--recommended that the Partnership refocus its efforts on developing nonhybrid vehicles that could get 60 miles per gallon. It also gingerly pointed to another problem: The Partnership does nothing at all about light trucks and SUVs. Sales of light trucks and SUVs now account for more than 50 percent of all automotive sales in the United States. Despite a decade of technological advances, automakers are struggling to meet the old 20.7-mile-per-gallon CAFE standard.
There is clearly a better way to achieve increases in fuel efficiency: incrementally raising CAFE standards. The Honda Insight and Toyota Prius demonstrate that U.S. automakers could almost certainly have met a mandate similar to the one proposed in the 1992 Clinton-Gore platform, without spending millions of dollars in taxpayer support. Instead, the administration hitched environmental progress to a ill-conceived partnership with the auto industry. A partnership is a relationship between equals and requires achieving a consensus about means as well as ends. But that's not how the federal government and the automotive industry should relate. Elected officials should not hesitate to set reasonable goals and require the private sector to meet them.
The December 1999 appearance of the Honda Insight and the production of increasingly outlandish SUVs, such as the Ford Excursion (10 to 18 miles per gallon), came as an embarrassment to Gore. According to press reports, hoping to extract concrete pledges of action from the Big Three that he could announce at a March 31 Partnership celebration at the White House, the vice president went to his "partners" in Detroit with two long-overdue requests. He asked them to speed up the introduction of fuel-efficient cars and to bring SUVs into the Partnership, with a fuel-efficiency goal of 50 miles per gallon for small SUVs.
But automakers would agree only to start introducing hybrid family-size cars and SUVs with "significant improvements" in fuel efficiency in 2003. They refused to agree to a numerical target for SUV fuel efficiency improvements. Administration officials had to scuttle their big announcement. "We'll have to leave that announcement for another day," Transportation Secretary Rodney Slater told The Detroit News. "Let's bask in the glow of these accomplishments."
The accomplishments, however, have been mostly illusory. The Partnership has failed to deliver improvements in fuel economy. By defusing environmentalists' demands for increases in CAFE standards, it has probably done more harm than good. If Vice President Gore is serious about improving fuel efficiency, reducing U.S. emissions of carbon dioxide, and decreasing America's dependence on foreign fuels, he should return to the policies he advocated in 1992 and support an increase in fuel-efficiency standards. ¤
