Honda gets boost from fuel-economy rule it disliked

Honda, which last year complained that a proposed fuel-economy rule was unfair to non-U.S. automakers, got a boost when the final version added extra credits for sellers of natural-gas-powered vehicles.

Honda is the only automaker selling compressed natural-gas-powered cars to U.S. drivers and will be able to use the credits to meet the fuel-economy standards.

It's one of the few changes made to a rule for 2017 to 2025 that was proposed in November 2011 and released in final form by President Obama's administration on Tuesday.

"Providing incentive credits for natural-gas vehicles makes a great deal of sense under this regulation," Edward Cohen, Honda vice president of government and industry relations, said in an email Tuesday.

"A dedicated natural-gas vehicle reduces CO2 emissions by 25 percent and petroleum consumption by 100 percent."

The corporate average fuel economy, or CAFE, rule may cost the auto industry as much $136 billion to comply with while saving consumers up to $451 billion in fuel costs, regulators from the U.S. Environmental Protection Agency and National Highway Traffic Safety Administration said in a briefing.

Honda, Japan's third largest carmaker, signed on to the rule's framework after complaining in an email that the plan, containing extra credits for hybrid trucks made by U.S.- based automakers, "communicates favoritism and an unfair playing field to all market participants."

Providing extra credit for sales of natural-gas vehicles may allow fuel cell-powered cars to become more common in the U.S., said an EPA official who wasn't authorized to speak about the rule and declined to be named.

Fuel cells operate on hydrogen, the universe's most abundant element, which is available in high volume for industrial use by reforming natural gas or splitting water molecules using electricity.

Small automakers such as Tesla may benefit from another change written into the final rule that builds on a market California opened this year for sellers of zero-emission vehicles such as plug-ins or those powered by hydrogen.

While companies with fewer than 1,000 employees are exempt from the rule, the final version allows them to opt in. That would allow Tesla, which only makes plug-in electric vehicles, to sell any credits for exceeding the fuel-economy standards to companies that don't meet their quotas.

The Obama administration says that the rule announced Tuesday, coupled with another fuel-economy improvement mandate for vehicles from model years 2012 to 2016, will reduce U.S. oil consumption by 12 billion barrels and lead to fuel savings of more than $8,000 by 2025 over the life of a vehicle.

Boosting average fuel economy is part of Obama's plan to reduce oil imports and use.

The National Automobile Dealers Association said it's concerned that vehicle-price increases of about $3,000 from the two rules will price consumers out of the new-car market.

"If the consumer isn't buying new cars, we've got the jalopy effect going that they're going to keep the car they have and won't be able to get to new things," said Bill Underriner, the group's chairman and a Montana auto dealer.

The fuel standards announced Tuesday will add as much as $1,800 to the average cost of vehicles by 2025 and be more than offset by savings in fuel spending, EPA Administrator Lisa Jackson said Tuesday.

By Angela Greiling Keane Bloomberg News

By Angela Greiling Keane
Bloomberg News