Timothy Carney: Fuel efficiency mandates cost consumers, aid Alcoa

|

Congress’ new energy bill garnered strong support from both parties and from all sorts of industries, which is a sure sign regular people are getting scammed. Among the victorious lobbyists on the Energy Independence and Security Act are Alcoa and the rest of the aluminum industry, who stand to profit from the heightened fuel efficiency standards in the bill.

President Bush signed the energy bill Wednesday, after the final version had passed the House 314 to 100. Alongside heightened mandates for biofuels such as ethanol were higher federal standards for fuel efficiency.

Before this bill was passed, federal law required every automaker to attain an average fuel efficiency over all its car sales of 27.5 miles per gallon. The new law raises that to 35 mpg.

While chalked up as a win for environmental groups, H.R. 6 is another example of regulatory profiteering, and more evidence that a bill becomes a law only when somebody influential stands to get rich from it. In this case, it was the world’s largest aluminum company.

Alcoa is well connected. Paul O’Neill served as its chairman in between stints in Republican White Houses as Gerald Ford’s deputy budget director and George W. Bush’s first Treasury secretary. Alcoa’s current VP for "environment, health and safety and public strategy" is former Clinton White House spokesman Jake Siewert, who also served on Clinton’s National Economic Council.

Alcoa’s in-house lobbyists include 30-year K Street veteran Russell Wisor, who contributed $100,000 to George W. Bush’s first inauguration, and Lee Califf, a former aide to Sen. John Warner, R-Va. Their outside lobbyists include alumni from the offices of former Speaker of the House Thomas Foley, D-Wash., and the Joint Chiefs of Staff.

On the energy bill, Alcoa appears to have used this influence in three ways. First, the energy bill establishes "partnerships" between the Department of Energy and aluminum companies — new channels for corporate welfare. Second, Washington will now study how to put more aluminum in cars — doing Alcoa’s R&D for them. Finally, the company won stricter fuel efficiency rules.

After the House passed the bill in early January Alcoa applauded the fuel-economy regulations, and helpfully pointed out to carmakers, "Lightweight materials, such as aluminum, play a critical role in making vehicles safer, cleaner and more fuel efficient. … Light weighting represents one of the most viable options available to carmakers worldwide as they seek to improve the fuel efficiency and environmental performance of their products."

In short, Alcoa was thanking the House for forcing more carmakers to do business with Alcoa.

Cars using aluminum isn’t a bad thing. Aluminum is lighter than steel. This means cars made with more aluminum save on gas, but there is also a potential safety benefit: by allowing the same fuel efficiency in bigger cars, which are safer. But aluminum costs five times as much by weight.

In a free market, a car buyer will weigh safety, fuel efficiency and cost, along with other factors. He will decide whether it’s worth his money to buy a car that uses aluminum, or whether steel is preferable. Just as some people may choose a Ford Taurus over a Lexus, some will choose steel over aluminum. Tightening fuel efficiency standards is analogous to forcing Detroit to make only Lexuses.

Also, when more carmakers will use aluminum, the effect on the environment will be unclear. Mining and smelting aluminum is an energy-intensive process, using eight or nine times as much energy as manufacturing steel. Focusing so much on energy use by cars, then, could result in greater energy use overall.

From a consumer perspective, as this law makes new cars get more expensive, families will hold onto their older, more polluting, less efficient cars longer. Finally, increasing gas mileage often encourages more driving, thus leaving gasoline usage flat.

Taking this choice away from consumers and carmakers may not hurt the carmakers, because all of their competitors are bound by the same rules. The car buyers who would buy the more expensive car anyway also don’t suffer. It’s the middle-class or poor car shopper who really gets constrained, and it’s Alcoa who reaps the benefit.

Examiner columnist Timothy P. Carney is senior reporter for the Evans & Novak Political Report.

View article comments Leave a comment