Vehicle fuel economy is no minor issue for Barack Obama – its right at the centre of the US President-elect’s planned environmental policy shake up. Ambitious and far reaching in his proposals, Obama has pledged to change the face of the US auto sector. Key strands of his $150 billion 10-year energy package include: a $50 billion loan deal for US automakers to hasten the development of more fuel efficient vehicles; a goal of putting 1 billion plug-in hybrids on American roads by 2015; a requirement that all new vehicles made in the US would be flex-fuel capable by the end of his first term in office; and a $7,000 tax credit for consumers who buy early model plug-in vehicles.
The proposals played well during the campaign with Obama able to proclaim in his stump speech that he would “help our auto companies retool, so that the fuel-efficient cars of the future are built right here in America”. While the ambition cannot be faulted, the policies are likely to face some significant challenges once Obama takes office after the current transition period. The Bush administration has already put together a $25 billion loan package for fuel efficient vehicle technologies and the President-elect’s proposed doubling of the fund would have to overcome criticism that it is in effect a “bailout” for the auto industry. The goal of accelerating the roll out of plug-in hybrid technology could also prove challenging, particularly as the first plug-in hybrids will not be launched until late 2010. Flex-fuel could also face difficulties given the economic and environmental questions over corn ethanol and the fact that the technology for producing cellulosic ethanol is still very much in its nascent stages.
However, there are reasons to be optimistic that key pledges can be achieved, particularly when taking Obama’s record into account as a senator. His 2006 bill, “The Healthcare for Hybrids Act," was a good example of incentivising auto manufacturers to invest in alternative fuel technologies while helping to provide employee benefits. Obama will be hoping his policy agenda can follow this lead.
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