Bailing out Big Motor

While all eyes were fixed on the banking bail-out, public money was quietly sloshed into the pockets of another undeserving cause.

Two weeks ago, George Bush agreed to lend $25-billion to United States car manufacturers. It’s a soft loan, which will cost the government $7,5-billion. Few people noticed; fewer fought it. The House of Representatives approved the measure by 370 votes to 58. The great corporate bail-out is spreading like the plague.

It has already crossed the Atlantic. Last week European car makers demanded that the European Union hand them €40-billion in cheap loans to match the US subsidy.

The motor companies in Europe and the US claim they need these loans to go green. They will invest the money in new environmental technologies.

There is more joy in heaven over one sinner who repents … but how strange this green enthusiasm seems, now that there’s the smell of public money in the air. For the past 10 years the car manufacturers have driven every useful green initiative into the wall.

In 1998 European car makers promised to show that they could cut their greenhouse gases voluntarily.

By the end of 2008, they pledged, they would reduce the average emissions produced by their cars from 190 grams of carbon dioxide per kilometre to 140.

How well have they done?

By the end of last year they had cut average pollution to 158g/km across Europe and 165g/km in the United Kingdom: they will miss their target by 40%.

Discerning, only 10 years too late, that lobby groups’ promises are worth as much as a share in Lehman Brothers. In 2006 the European commission announced that it would set compulsory standards: by 2012 all manufacturers would have to reduce their average CO2 emissions to 120g/km.

It looked like progress, until you remembered that 120g was the target proposed by the European Union in 1994 to be met by 2005.

Last year the 2012 target fell to the same forces. Angela Merkel, lobbying on behalf of companies such as DaimlerChrysler and BMW, demanded that the European commission put the brakes on.

The commission agreed to revise the figure to 130g, and to cover the gap by raising the contribution from biofuels.

Since then we have seen evidence that most biofuels, as well as spreading starvation, produce more greenhouse gases than petrol, but the policy remains unchanged.

Now the pollutocrats are whingeing that they can’t meet the 130g target either. A month ago they persuaded the European Parliament’s industry committee to take up their case: it proposed postponing the target until 2015, reducing the fines if they don’t comply and allowing manufacturers to offset eco-innovations against the target, even if these don’t actually reduce emissions.

Fortunately this scam was rejected two weeks ago by Parliament’s environment committee.

In the US, manufacturers have still not reached the standard (an average of 27,5 miles per gallon) that they were supposed to have met under the Energy Policy Conservation Act by 1985.

What makes this dithering so frustrating is that to be talking, in 2008, about targets of 130 or 120g/km is a bit like discussing whether modern computers should have 10 rows of sliding beads or 100.

In 1974 a stripped-down 1959 Opel T-1 managed 160km/l, which equates to 15 grams of CO2 per kilometre. There is no technical reason why the maximum limit for mass-produced cars shouldn’t be 50g/km.

Nor is there a good commercial reason. A poll by the Newspaper Marketing Agency shows that 80% of car buyers say economy is more important than performance.

The car industry’s failure results from lobbying by the companies now demanding public money.

The film Who Killed The Electric Car? shows how the manufacturers, working with oil companies and corrupt officials, sank California’s attempt to change vehicle technologies.

Having bumped off battery power, they persuaded the federal government to pour money into hydrogen vehicles, aware that the technological hurdles are so high that mass-produced models might never be possible.

Electric cars, by contrast, have been ready for the mass market for almost a century. The $1,2-billion that the US government is spending on research and development for hydrogen cars — like the €2-billion pledged to the same quest by the European Union — is a subsidy for avoiding technological change.
The “green loans” they are soliciting are an excuse for bailing out another failing industry.

New car registrations in the UK fell by 21% last month.

There is no need to spend public money on greening the motor industry. As a recent report by the House of Commons environmental audit committee shows, you could achieve the same outcome by creating a bigger differential between vehicle tax bands: it proposes that people buying the least efficient cars should pay around £2 000 more a year than those buying the most efficient. This would kill the market for gas guzzlers and force the industry to make the changes it has long resisted.

But the government has taken all the flak a good tax policy would have generated for little gain. Its controversial new vehicle tax banding will save 0,16 million tonnes of CO2 per year: a drop in the ocean.

At scarcely greater political cost it could have hammered emissions and generated much of the money it needs to revolutionise public transport. Again there has been a great historical slide — between 1920 and 1948 cars were taxed at £1 per horsepower — in real terms (and in some cases in nominal terms) a higher rate for gas guzzlers than today’s.

But subsidies are what governments pay when regulation doesn’t happen. If you don’t have the guts to force companies to do something, you must bribe them instead.

It’s a fair guess that European car makers will still fail to meet their environmental targets, even if they get the money they’re demanding. The greenest thing governments could do is to allow these foot-dragging, planet-eating spongers to go under.–

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