1 Brunner, Christine From: Sargeant, Kathryn Sent: Monday, January 27, 2014 11:08 AM To: Tier 3 Rule Team Subject: FYI: Automotive News on Tier 3: Automakers set to receive EPA anti-smog mandate 

# Automakers set to receive EPA anti-smog mandate COMMENTARY

Gabe Nelson is a reporter for Automotive News and is based in Washington, D.C.

Gabe Nelson Automotive News January 27, 2014 - 12:01 am ET DETROIT -- Rarely does the auto industry want the g overnment to speed up new regulatory mandates. But for the past few years, automakers have been ur ging the EPA to set down tougher federal tailpipe e missions standards to mirror the ones in Europe and Californ ia. Relishing the prospect of selling the same vehi cles globally, the industry has vowed to outfit all of its product s with better emissions controls, as long as the oi l industry does its part by selling cleaner gasoline. Now, after years of waiting, the EPA appears ready to accept the offer. At the Detroit auto show, EPA Administrator Gina McCarthy told automakers that the agency will take final action next month on the "Tier 3" standa rds, which would impose stricter limits on tailpipe emissions, along with a mandate on oil companies to limit the amount of sulfur in gasoline. If the rules go into effect as envisioned, smog-for ming emissions would likely plummet a few years lat er, reducing the cost of any subsequent EPA crackdown on smog. The advance of Tier 3 suggests that the cooperation between government and the auto industry that prod uced an agreement on fuel-economy standards in 2011 wasn't a onetime deal, but rather a template for a new typ e of relationship, where technology helps bridge regulat ory and commercial imperatives. "We're talking about a rule that's less than a penn y a gallon ... but the kind of health protections t hat it provides is enormous," McCarthy told Automotive News in Detroit this month. For the EPA and the White House, the health benefit s of lower tailpipe emissions might be reason enoug h to move forward. But Tier 3 would also help the administrat ion with one of its toughest environmental decision s: what to do about smog.2 Smog is not only a health hazard, but it's also an impediment to economic development. That's because under the Clean Air Act, areas that exceed permissible levels of ozone, the main component of smog, must work to clean up pollution before issuing permits for new industrial projects, such as auto plants. Cars and trucks are big contributors to the ozone p roblem. But other than California, whose clean-air laws predate the federal Clean Air Act, states have no latitude to regulate vehicle emissions. So state officials h ave to focus on their local businesses -- even small ones such as b akeries, dry cleaners and auto body shops. Connecticut, for its part, has already cleaned up o ld power plants and boilers to fight smog. Its elec tricity rates are among the highest in the nation. Yet the state stil l flunks the ozone standard, thanks to pollution fr om the densely populated I-95 corridor. "We feel like we're scratching the bottom of the ba rrel," says Anne Gobin, air pollution bureau chief at the Connecticut Department of Environmental Protection. Even so, McCarthy's predecessor, Lisa Jackson, soug ht to further tighten the ozone standard in 2011, b ut fears of the economic and political costs ultimately deraile d the proposal, a setback to the EPA. And now, along comes Tier 3, a shot at redemption f or federal regulators in their fight against smog, and a boon for state governments reeling under existing regulation s. "You might have to take 15 more measures to take th e kind of reductions you'd get from Tier 3," says B ill Becker, executive director of the National Association of C lean Air Agencies, a coalition of state and local r egulators. The auto industry, too, has much to gain. The rules would align U.S. and California standards, lesseni ng compliance costs. They would set clear targets for soot and sm og, so automakers can focus on improving fuel econo my. Oil companies aren't happy. Upgrading a refinery to produce low-sulfur gasoline could cost them tens, or even hundreds of millions of dollars. But this time, the Obama administration shows no signs of backing dow n. "It's not just the cheapest but it's the quickest w ay in which we can reduce the kinds of pollutants t hat contribute to ozone," McCarthy said. For Tier 3 to become final in February, it will nee d to win approval from the White House's cost-benef it analysts. But the rule should have a fairly clear path, thanks to its broad coalition of supporters. "Rarely do you see the auto companies, and the labo r groups, and the business community, and the envir onmental and health groups, and the state and local agencies all embracing the same strategy," says Becker. "He re you do."

You can reach Gabe Nelson at gnelson@crain.com

.