[ Issues ]

Energy and the Environment

CAFE

During 2007 the House and Senate considered broad energy legislation that sought to reduce the dependence of the United States on foreign oil, and to thereby increase our energy security. Among the key issues that were debated in the context of this legislation were proposals to increase the corporate average fuel economy (CAFE) standards for passenger cars and light trucks (SUVs, minivans and pickups).

In June the Senate passed an energy bill that contained an extreme, dangerous proposal to increase the CAFE standards. This measure would have required the auto companies to meet a 35 mpg standard by 2020 for their combined passenger car and light truck fleets, and also eliminated the long-standing distinction between domestic and foreign passenger car fleets. For a number of reasons, the UAW and most major automakers strongly opposed this proposal.

• Combining the passenger car and light truck fleets would punish companies whose product mix is more oriented toward pickups, SUVs and minivans, and would force them to curtail production and jobs at facilities that produce these vehicles.

• Eliminating the distinction between domestic and foreign passenger car fleets would allow the auto companies to offshore all of their small car production, thereby threatening the jobs of thousands of UAW members who assemble and produce parts for these vehicles.

• The extreme standard in the Senate bill would entail enormous retooling costs, and would not be economically feasible for the Detroit-based auto companies. It would inevitably trigger deep cutbacks in jobs and the wages and benefits of active and retired workers.

Unfortunately, we were not able to build sufficient support for a more reasonable alternative. Thus, despite our strong opposition the Senate finally approved this extreme CAFE proposal.

The House took up broad energy legislation shortly before the August recess. The UAW and the auto companies strongly supported a reasonable CAFE proposal (H.R. 2927) sponsored by Reps. Baron Hill, D-Ind. and Lee Terry, R-Neb. This proposal maintained the distinction between passenger cars and light trucks, and thus would not have jeopardized production and jobs at the facilities that produce pickups, minivans and SUVs. This proposal also continued the distinction between domestic and foreign passenger car fleets, thereby protecting small car production and jobs in the United States. The Hill-Terry proposal required that both the passenger car and light truck CAFE rules be increased, so that the fuel economy for all vehicles sold in 2022 would average 32-35 mpg. In our judgment, this proposal was economically feasible for the Detroit-based auto companies, and would not have threatened the jobs and benefits of active and retired UAW members. Thanks to a strong grassroots mobilization by the UAW and the companies, we were able to get 170 representatives to co-sponsor the Hill-Terry proposal.

At the same time, the UAW and the auto companies strongly opposed a dangerous CAFE proposal sponsored by Rep. Ed Markey, D-Mass., that was even more extreme than the provisions passed by the Senate. It would have combined the passenger car and light truck fuel economy rules, and mandated a 35 mpg standard by 2019. It also eliminated the distinction between domestic and foreign passenger cars.

In the end, the Democratic leadership decided not to allow a vote on either of these CAFE proposals when the House took up the broad energy legislation. Thus, the energy bill that finally passed the House was silent on the CAFE issue.

In the fall of 2007, key House and Senate leaders met to iron out differences between the energy legislation passed by the two bodies. The UAW and the auto companies argued strenuously against the dangerous Senate CAFE proposals, and urged the legislators to adopt provisions similar to the reasonable Hill-Terry bill. At the time this paper was written, it was unclear how this issue finally would be resolved by Congress.

During consideration of the energy legislation, the UAW urged the House and Senate to include provisions to assist the auto companies with the enormous retooling costs associated with meeting the higher CAFE standards. This is particularly important for the Detroit-based companies, given their already difficult financial situations. This issue was also unresolved at the time this paper was written.

Congress can provide assistance to the automakers through various mechanisms, including making tax- free bonds or direct treasury loans available for retooling facilities, as well as federal loan guarantees. Whatever the mechanism, any legislation should be structured so that federal assistance is tied to domestic production and the creation of jobs for American workers.

Action

Global Warming

The UAW shares the growing national concern about climate change. Scientific studies have confirmed that human use of fossil fuels is contributing to global warming. These studies underscore the major environmental challenges posed by global warming, including changes in climate patterns and threats to coastal areas. To avoid these dangers, the growth in greenhouse gas emissions must be reduced, and ultimately reversed.

To address the problem of global warming in a meaningful way, the UAW believes we need a broad, comprehensive policy that requires all sectors of the economy to come to the table to help reduce our nation’s greenhouse gas emissions. This includes all mobile sources, not just light-duty vehicles. It also includes stationary sources, such as power plants and factories. And, of course, it includes fossil fuels such as coal, oil and natural gas. Each sector should be required to contribute to the reduction of greenhouse gases in a proportionate manner. No sector should enjoy a free ride. No sector should be required to bear a disproportionate burden, or to shoulder costs that would have a devastating impact on its operations or employment.

Specifically, the UAW strongly supports the establishment of an economywide mandatory tradable-permits program that will slow the growth of, and eventually reduce greenhouse gas emissions in the United States. We believe this type of “cap-and-trade” program should be done as much as possible on an “upstream” basis in order to minimize regulation and to ensure that all sectors of the economy participate in a proportionate manner. We also believe this program should include the following features:

• Emission reduction targets to gradually reduce greenhouse gas emissions, while avoiding too drastic a disruption in our economy.

• A “safety value” cost cap to ensure that no sector is hit with unacceptable burdens that would have a negative impact on economic growth and jobs.

• Measures to ensure that our businesses and workers are not placed at an unfair competitive disadvantage with U.S. trading partners, especially China, India and other developing nations.

• Mechanisms to use the revenues generated from the auction of carbon permits to provide incentives for various low-carbon energy initiatives, especially the UAW’s proposal for a Marshall Plan to help retool the U.S. auto industry to accelerate domestic production of advanced technology vehicles and their key components. This can help the environment by reducing greenhouse gas emissions, while also helping to create tens of thousands of jobs for American workers.

The UAW believes that a comprehensive “cap-and-trade” program with these features can make a major contribution to reducing greenhouse gas emissions, and ensure that such reductions are accomplished in an economically efficient manner. At the same time, it would help to protect and create jobs for American workers, and ensure continued economic growth.

During 2007, a number of bills were introduced in the House and Senate to establish “cap-and-trade” programs to combat climate change. The UAW and other unions endorsed legislation introduced by Sens. Jeff Bingaman, D-N.M., and Arlan Specter, R-Pa., the proposed “Low Carbon Economy Act of 2007” (S. 1766). This bill included the essential features discussed above.

In 2008 a number of congressional committees are expected to take up the climate change issue, with possible action by the full House and Senate. The UAW and the rest of the labor movement will be working to build support in Congress for climate change legislation similar to the Bingaman-Specter bill.

Unfortunately, the Bush administration continues to oppose any type of meaningful actions to address the problem of global warming. Some environmental groups and their allies are pushing extreme climate change proposals that would threaten American jobs and economic growth, and create yet another incentive for companies to shift automotive jobs to developing countries. The UAW believes it is important to reject both of these extremes, and to join with other like-minded groups to promote balanced proposals that will improve our environment while also protecting American jobs.

The UAW recognizes that the auto sector has an important role to play in addressing the climate change and energy security issues. In addition to emitting about 17 percent of greenhouse gases, light-duty vehicles account for about 42 percent of oil consumption in the United States.

In considering auto sector policies to address these issues, the UAW believes Congress should keep in mind several key principles. First, to be effective, any policies must address the fuels that go into vehicles, as well as the efficiency of the vehicles themselves. The promotion of alternative fuels can make an enormous contribution to reducing greenhouse gas emissions and our dependence on foreign oil.

Second, any auto sector policies should recognize that it is much more expensive to achieve reductions in greenhouse gas emissions from light-duty vehicles than from other sectors. In our judgment, the best way to address this disparity is to integrate any auto sector policies with economywide efforts to reduce greenhouse gas emissions. At a minimum, the federal government should provide assistance to the auto industry to offset this much higher compliance cost.

Third, any auto policies requiring improvements in vehicle efficiency must be coupled with measures to help level the playing field in the automotive industry, and to provide struggling manufacturers with the resources needed for retooling efforts. This is necessary to avoid massive disruptions in the industry, and to protect the jobs and benefits of active and retired workers.

As previously indicated, Congress is considering CAFE legislation that will require significant improvements in vehicle efficiency and fuel economy. Congress needs to include in such legislation measures to provide auto manufacturers with assistance for the massive retooling costs associated with meeting tougher fuel economy standards.

Congress should also pursue a range of other initiatives to promote the use of alternative fuels in motor vehicles. This includes measures to promote the production of vehicles that are capable of running on alternative fuels. Although the Detroit-based companies have committed to making half of their fleets flex-fuel capable by 2012, other automakers are lagging far behind in this area. The technology required to make vehicles flex-fuel capable is relatively inexpensive. Thus, the UAW supports federal legislation requiring that certain percentages of all vehicles sold in the United States by each automaker must be flex-fuel capable by specified dates.

To expand the use of alternative fuels, Congress also needs to take steps to overcome technical hurdles facing cellulosic ethanol and bottlenecks in distribution networks. Thus, the UAW supports the continuation of existing incentives for the production of biofuels. We also support additional incentives or mandates relating to the conversion of existing filling stations so they have the capability to distribute alternative fuels.

In addition, the UAW supports proposals to increase the renewable fuels mandate. We also believe there should be a carbon cap on fuels, to encourage movement toward renewable fuels with lower carbon emissions.

During 2008 the UAW will continue to urge Congress to approve legislation that includes the foregoing auto sector policies. In particular, we will be pressing the House and Senate to approve legislation that will expand the use of alternative fuels, assist the auto industry with retooling costs, and help to integrate auto sector policies with broader climate change legislation.

Action

Domestic Production of Advanced-Technology and Alternative-Fuel Vehicles and Their Components

The federal government currently provides tax credits to consumers who purchase certain advanced-technology (hybrid, diesel, fuel cell) vehicles. These incentives are designed to encourage consumers to purchase more fuel-efficient vehicles. However, the tax credits are available regardless of where the vehicles and their key components are built. They are not tied to domestic production. Unfortunately, many advanced-technology vehicles currently are assembled in other nations. Even worse, virtually all of the key components (hybrid electric motors, diesel engines) for these vehicles are built overseas, including the key components for vehicles assembled in this country, as well as those assembled in other countries. As these advanced-technology vehicles gain a larger share of the market, this means we are replacing vehicles with higher domestic content with vehicles that have much lower domestic content. As a result, the consumer tax credits effectively subsidize the movement of automotive jobs overseas. For this reason, we believe it would be a major mistake for the federal government to rely solely on these consumer tax credits to encourage the expansion of advanced-technology vehicles. Certainly, these tax credits should not be expanded by increasing the amounts or lifting the cap on the number of qualifying vehicles.

Instead of this flawed approach, the UAW has called for the establishment of a Marshall Plan to help retool the U.S. auto industry to accelerate domestic production of advanced-technology and alternative-fuel vehicles and their key components. This includes hybrid, diesel and fuel cell vehicles, as well as vehicles that run on ethanol and other alternative fuels. In our judgment, this initiative would help create tens of thousands of automotive jobs for American workers, while at the same time helping to improve our environment and reduce our reliance on foreign oil.

As was demonstrated by a November 2004 study by the University of Michigan’s Transportation Research Institute, if the federal government were to provide tax incentives to encourage the domestic production of advanced-technology vehicles and their key components, this would create tens of thousands of jobs for American workers. The study also showed that this increased employment would result in higher tax revenues for the federal and state governments. For similar reasons, the UAW believes the federal government should provide incentives to encourage domestic production of alternative fuel vehicles and their key components.

In addition to expanding automotive employment in this country, incentives for the domestic production of advanced-technology and alternative-fuel vehicles and their key components can help to accelerate the introduction of these vehicles. This would help our country to dramatically reduce its reliance on foreign oil, thereby enhancing our nation’s energy security. It would also improve our environment by reducing global warming emissions.

In 2007 a number of bills were introduced that contained proposals similar to the UAW’s Marshall Plan for the domestic auto industry. These bills had significant support on both sides of the aisle, and also attracted support from business and environmental groups. Unfortunately, the Bush administration displayed little interest in such initiatives.

During 2008 the UAW will be redoubling its efforts to urge Congress to move forward with a Marshall Plan to help reinvigorate the domestic auto industry. We will be sending a loud message to Congress that providing incentives for domestic production of advanced-technology and alternative-fuel vehicles and their components would be good for jobs, and also good for the environment and energy security.

Action