What kind of cars Americans drive, and at what cost, could shift significantly over the next decade, and who wins the White House could be a catalyst for change.
But a less appreciated factor is the drive by several states — California in particular — to reduce emissions of carbon dioxide, a gas that has what scientists call a greenhouse effect on the Earth’s atmosphere. One-third of U.S. CO2 emissions comes from vehicles, and there's a direct correlation between higher mileage and less CO2.
"Climate change is a nightmare issue" because of its potential impact on America's economy and its car culture, says David Cole, director of the Center for Automotive Research, a think tank in Ann Arbor, Mich.
At Resources for the Future, a Washington, D.C., think tank, senior fellow Ray Kopp agrees, saying climate change issues will shake up our habits and accelerate the development of new technologies, particularly hybrid vehicles.
The thinking goes that while higher oil prices can create short-term momentum for purchases of higher-mileage cars, regulations have the potential of long-term change for the entire auto industry — and against its will.
Whatever the catalyst, that shift would mean drivers paying less at the pump but more up front.
"There's no question about that," says Cole. Hybrids, for example, cost several thousand dollars more than comparable, gas-only cars.
The Bush approach
President Bush, for his part, has drawn the regulatory line on fuel economy with a 1.5-mile-per-gallon increase for new light trucks. He opposes regulating carbon dioxide, a reversal of his position in the 2000 presidential campaign.
In both cases, Bush cites estimates that tougher regulations would mean more expensive cars with no guarantee Americans would buy them. He has instead pushed for technological solutions, especially on climate change, which he considers a serious but not immediate threat.
"They are real believers on technology as the solution," Kopp says of the Bush administration, adding that most people don't appreciate that. "They're willing to put a lot of investment in the technology side."
A key administration goal is to find ways to capture and safely store C02 emissions underground or underwater.
Bush stressed technology as well in his 2003 State of the Union speech, when he surprised Americans by talking about a future of hydrogen fuel cell cars. Congress has approved $300 million of the $1.7 billion for research sought by Bush over 15 years.
But ever since the FreedomCar program was criticized as not providing short-term solutions, the administration has "begun to reposition their program and talk about hybrids," notes Mike Flynn, director of the University of Michigan's Office for the Study of Automotive Transportation.
Bush has also proposed increasing the tax credit for hybrid purchases, from $1,500 at present to up to $4,000.
The Kerry approach
Kerry, on the other hand, has pushed for regulating carbon dioxide and tightening fuel economy standards.
But pushing and doing are not always equal. In 2002, Kerry endorsed increasing fuel economy standards from 24 mpg to 36 mpg within 10 years, but that ran into opposition from auto workers, a key constituency, and he has since said he's not wedded to a specific increase.
"Kerry would probably push harder on some of these issues," says Cole, "but in the end the practicalities and economics" will dictate what happens.
Like Bush, Kerry might find financial incentives more feasible. Kerry proposes a hybrid tax credit of up to $5,000 as well as $1 billion in tax breaks to help the U.S. auto industry retool to build hybrids more quickly and catch up with Japanese carmakers Toyota and Honda.
Flynn sees the interest in hybrids as a sign of an even bigger move in that direction. "The issue is when is it going to be," he says. "I think it’s likelier with Kerry and in the long run that’s probably good."
States on regulation road
At the presidential level, the climate-and-cars debate reflects a deep philosophical difference on regulations: Republicans see them as distorting free markets, while Democrats see them as making those markets socially acceptable.
But ironically it could be two Republican governors — California's Arnold Schwarzenegger and New York's George Pataki — who take the nation down a regulatory path.
Schwarzenegger endorsed rules by his state's Air Resources Board earlier this year that require carmakers to reduce greenhouse gas emissions on new cars, phasing in cuts beginning in 2009 and meeting a 30 percent reduction by 2016.
Pataki has organized eight states to join a regional plan to reduce greenhouse gases and promised to follow California's lead if its new car emissions standards survive the auto industry's legal challenges.
California's role is particularly important. It has a "significant share of the U.S. market," notes Flynn, "and if California regulations are tougher than the rest of the nation and they don’t cost that much more, it’s cheaper to make all cars live up to that standard."
The auto industry won't give up without a fight and has sued, charging that the California rules will cost car buyers $3,000 more. California's Air Resources Board estimated the changes would cost $1,000 at most.
Cole says the industry's estimate is not unrealistic. Others say that paying $3,000 more for a car could be tolerable if drivers get a sizeable mileage improvement. Hybrids are one route, but high-mileage diesels could also see a boom when low-sulfur diesel is required nationwide in 2006.
Eileen Claussen heads the Pew Center on Climate Change, which brings industries together to look for ways to deal with the issue. She's in the can-do camp.
"There's no reason to believe you cannot significantly increase the efficiency of autos to some reasonable level without significant costs and without even changing Americans love for SUVs," she said, pointing to Ford's new hybrid Escape SUV. It costs around $3,000 more than its gas-only sibling while doubling fuel economy to nearly 40 mpg.
"It’s politically difficult," she says of regulating carbon dioxide emissions, "but it should be easier, too, since there aren’t that many car companies."