Who benefits from federal fuel efficiency mandates?

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When President Barack Obama brought American, European, and Japanese carmakers to the Rose Garden to announce his hike in fuel-efficiency regulations, he heralded it as “the harbinger of a change in the way business is done in Washington.”
 
David McCurdy, president of the Alliance of Automobile Manufacturers, said the policy “launches a new beginning, an era of cooperation.” In this case, at least, “cooperation” means businesses and politicians getting together to make us buy things we evidently weren’t willing to pay for.
 
And the President’s fuel-efficiency mandates may not hurt struggling auto companies, because Obama’s philosophy is the one Ronald Reagan mocked: If it moves, tax it. If it keeps moving regulate it. If it stops moving, subsidize it.
 
Carmakers have long been able to make more efficient cars, but consumers haven’t been willing to pay enough to make them profitable. In the bailout era launched by President Bush, however, profitability is hardly a concern: If the government likes what you’re doing, taxpayers pick up the tab.
 
There’s nothing extraordinary about automakers’ supporting regulations when the costs are offloaded to consumers and future taxpayers. Don’t forget that intervention also keeps out new competitors who lack the lobbyists and lawyers to navigate the politics and regulations.
 
Auto industry companies’ recent lobbying filings show how profit increasingly depends on government.
 
Smaller companies have started lobbying for the first time recently, such as the hedge fund Bingham Capital, which owns a company called MileageMatrix. MileageMatrix sells two products aimed at improving the fuel efficiency of cars or trucks: one product captures the heat coming off a vehicle’s exhaust and uses that heat to power the car; another refines the fuel within in the car.
 
These sound like great products, but they appear not to be commercial successes on the open market—perhaps because the efficiency gains do not offset the costs. On March 1 of this year, MileageMatrix hired its first lobbying firm to advocating new government policies for “improving the energy efficiency of engines and reducing harmful carbon dioxide emissions.” The lobbyists on this account include: former congressman Matt Salmon, R-Ariz.; former staff director for the House Small Business Committee John Drew Hiatt; and longtime top Republican staffer and Reagan speech writer William Nixon.
 
Then there’s Remy International, which describes itself as “the world’s largest independent production hybrid motor supplier.” Remy hired the lobbying firm Greenberg Traurig a week before Election Day last year, to lobby, among other issues, on fuel economy standards. Alan Slomowitz, former top staffer at the House Transportation Committee, is one of Remy’s lobbyists.
But Remy and MileageMatrix are not agenda-setters. At most, these small guys, with less than $20,000 in lobbying spending per month, win tweaks and small carve-outs in the laws and regulations.
 
The real agenda setters are the corporate giants. One of the biggest companies to advocate and profit from stricter fuel economy standards is Alcoa, the world’s top aluminum company. A Beltway powerhouse, Alcoa spent $2 million on lobbying over the past 12 months, including lobbying for stricter fuel-efficiency standards. Jake Siewert, President Bill Clinton’s former press secretary, was Alcoa’s vice president for “Public Strategy,” until Timothy Geithner hired him at the Treasury Department this month. Paul O’Neill, former Treasury Secretary, headed Alcoa’s in the 1990s.
 
Fuel efficiency regulations create demand for Alcoa’s product. As Alcoa helpfully pointed out when applauding the previous increase in federal mileage standards, building cars with aluminum frames instead of steel, “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.”
 
Aluminum is lighter than steel and just as strong, but far more expensive. Some carmakers and car buyers have been willing to pay for aluminum frames, but it’s not worth the trade-off for most. Now, carmakers may have no choice.
 
Alcoa’s support reveals how the environmental benefits of mileage restrictions may not be as great as advertised. Alcoa manufactures much of its aluminum—an extremely energy-intensive process compared to steel manufacture—in Australia, where it has lobbied against greenhouse gas restrictions. The energy saved on the backend by having a lighter car is at least partly offset—if not totally offset—by the energy lost in the car frame’s manufacture.
 
But the right blend of policies makes it all work out for Alcoa. It may not help consumers, taxpayers, or the planet, but its “cooperation.”
 
Timothy P. Carney is The Washington Examiner's Lobbying Editor. His K Street column appears on Wednesdays. 
 
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