July 25, 2019 / 9:17 PM / 10 months ago

Breakingviews - U.S. car-pollution pact cuts through D.C. smog

Highway traffic travels into Los Angeles, California, U.S., March 29, 2017. REUTERS/Mike Blake

NEW YORK (Reuters Breakingviews) - A pact on pollution between California and four of the world’s top automakers cuts through the smog from Washington, D.C. America’s largest state by population and economic output on Thursday unveiled a deal to reduce vehicle emissions with BMW, Ford Motor, Honda Motor and Volkswagen. It effectively sidelines an intransigent White House, aligns more closely with overseas standards and offers some handy incentives to boot.

Transportation accounts for almost a third of all greenhouse-gas emissions in the United States, according to the Environmental Protection Agency. Internal combustion engines have been getting more efficient, but in 2012 former President Barack Obama decided to speed up the process by demanding each automaker boost its fleet’s average mileage to almost 47 miles per gallon by 2025. His successor, President Donald Trump, wants to freeze that at the 2020 target of 37 mpg. He also wants to remove the Golden State’s ability to set its own enforceable targets, arguing only the federal government should have such power.

Thursday’s deal provides a neat bypass. It allows automakers to voluntarily accept California’s emissions policies. The pact’s emissions standards apply to the companies’ nationwide fleets, and will also encompass the 13 other states that had already adopted California’s policies. In return, the four manufacturers get an extra year, until 2026, to meet Sacramento’s tailpipe-gas targets compared with the Obama-era ruling.

Those are more in line with what a number of European countries as well as China are pushing for. That ought to reduce compliance and development costs, boosting both progress on low-carbon propulsion systems as well as profitability.

The signatories also will receive incentives ranging from emissions credits to faster approvals of pollution-reducing technology. That might put only a small dent in the almost $110 billon the four have committed to developing electric vehicles, according to Reuters estimates, but every little bit helps.

They may also be joined by more of their peers. Just last month 17 automakers, including California’s gang of four, implored Trump in a letter to find a compromise on emissions that “all parties could support – including California.” The more who sign up – not least General Motors and Toyota Motor, the two largest sellers of new cars in the country – the better the results for the environment and the auto industry’s bottom line.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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