w w w. a u t o s t e e l. o r g

w w w. a u t o s t e e l. o r g Great Designs in Steel is Sponsored by: ArcelorMittal Dofasco, ArcelorMittal USA, Nucor Corporation, Severstal North America, Inc. and United States Steel Corporation 1

ENVIRONMENTAL DEFENSE FUND Automotive Lightweighting and Upcoming Energy-Climate Policy Opportunities John M. DeCicco Senior Fellow Automotive Strategies Environmental Defense Fund Great Designs in Steel Livonia, Michigan May 13, 2009

Outline Current Policy Overview CAFE, California, EPA National Climate Legislation USCAP approach, Waxman bill Implications for Automobiles Ongoing policy driver likely, fuels issues Role of Lightweighting Clear role regardless of powertrain / fuel Conclusions 3

Current Policy Overview Fuel economy / auto CO2 emissions have been a longstanding challenge for public policy Result has been an evolving mix of requirements CAFE: historical federal policy rationalized largely around energy security CA AB 1493 (Pavley): automobile GHG standards enacted in 2002; status unresolved (EPA, courts) EPA: Mass. vs EPA 2007 Supreme Court decision, leading to the April 17 proposed endangerment finding that would trigger GHG regulation 4

Automotive Technology Trends New U.S. vehicles, car and light truck combined fleet 1975-2008 1.75 FUEL ECONOMY Index (1 1975=1) 1.50 1.25 1.00 HORSE POWER WEIGHT 0.75 1970 1980 1990 2000 2010 Model Year Source: derived from EPA data 5

2.0 Total Air Pollution and Fuel Consumption Trends for U.S. Cars and Light Trucks INDEX (1970=1) 1.5 1.0 0.5 Fuel Demand Air Pollution +73% -65% 0.0 1970 1980 1990 2000 2010 The Clean Air Act framework has proven to be a critical driver for success. 6

Need for New Policy Importance of regulatory coordination Automakers call for "one national standard" Obama Administration is reviewing California waiver application and policy context. Waxman bill: 211(a) " to the extent practicable, harmonize standards by [NHTSA, EPA, Calif.]" Desire for new national climate policy "Notwithstanding this required regulatory process, both President Obama and Administrator Jackson have repeatedly indicated their preference for comprehensive legislation to address this issue and create the framework for a clean energy economy." USCAP: Blueprint for Legislative Action (Jan 2009) 7

USCAP BLA Cover Page

Diverse Voices Represented Member Organizations:

The Scientific Case for Action Science is sufficiently clear to justify prompt action to protect our environment Each year we delay action increases the risk of unavoidable and potentially costlier consequences Warming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice and rising global average sea level. Intergovernmental Panel on Climate Change, Climate Change 2007: Synthesis Report 10

The Economic Case for Action Unchecked greenhouse gas emissions will strain public budgets, limit economic growth Investment in 21st century technologies and practices can generate jobs, economic growth U.S. needs to be positioned to succeed in the new lowlow-carbon, global economy " to truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy. So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America." President Barack Obama, Address to Joint Session of Congress, Feb. 24, 2009 11

Cap and Trade Federal cap cap--and and--trade program coupled with cost containment measures and complementary policies ensures environmental integrity, economic stability Declining, economyeconomy-wide emission reduction targets Provides incentives to transition to new technologies while ensuring GHG emissions reductions 12

What is the Blueprint Blueprint?? Detailed framework for climate legislation An approach to achieve aggressive environmental goals in a responsible and economically sustainable manner Consensus of a diverse organization, but not the only path forward 13

Core Blueprint Components Targets & Timetables Climate Protection 80% GHG Reduction by 2050 Scope of Coverage 14

Core Blueprint Components Cost Containment Targets & Timetables Economic Protection Climate Protection 80% GHG Reduction by 2050 Allocation of Allowance Value Offsets Scope of Coverage 15

Core Blueprint Components Cost Containment Targets & Timetables Economic Protection Climate Protection 80% GHG Reduction by 2050 Allocation of Allowance Value Offsets Scope of Coverage 16

Fair and Equitable Allocation Blueprint identifies principles to guide fair and equitable allocation of allowances to: EndEnd-use consumers of electricity, natural gas, transportation fuels Energy intensive industries facing international competition Trade Trade--exposed commodity products Competitive power generators and other nonnon-utility large stationary sources Low Low--income consumers and workers in transition Programs to achieve technology transformation Adaptation needs of vulnerable people and ecosystems at home and abroad 17

COMPLEMENTARY MEASURES 18

Transportation Economy Economy--wide emission reduction targets require systematic approach involving: Fuel providers Vehicle and equipment manufacturers Consumers and other end users Public transportation, infrastructure and land use officials Recommendations include improving fuel and vehicle standards, efficiency of transportation system 19

Auto Efficiency is a Matter of Design Priority Technology progress has been steady Most technologies have multiple benefits Whether fuel efficiency is gained depends on: - Design objectives of a given vehicle - Overall mix of vehicles sold (e.g., car vs. truck) Until very recently, past two decade's auto technology improvements have gone mainly to improving power, capacity and other amenities Going forward, outcome will depend on jointly expressed priorities of consumers, automakers, and policymakers 20

Options for Auto Efficiency Powertrain efficiency Advanced gasoline engines: many opportunities Improved transmissions Hybrid-electric, diesel in some applications? Breakthrough options: fuel cells, plug-in electric Platform efficiency Mass reduction through balancing of fleet mix, plus lightweight materials and design techniques Aerodynamic drag reduction Tire and accessory improvements Cost-effective approaches for mass reduction will be fundamental regardless of the powertrains and fuels used. 21

Biofuels Fuel Options Many are promising, but few will be chosen. Fuels ultimately will succeed only by demonstrating market competitiveness Ethanol Biodiesel Fully fungible fuels: green gasoline & diesel (including coal+biomass to liquids with carbon capture & storage) Electricity Plug-in hybrids Pure electric (battery only) Natural gas ("Pickins Plan") Hydrogen ("FreedomCAR") The most efficient vehicle mix possible will be crucial no matter what fuels are chosen, to minimize both consumer costs and other impacts. 22

Advanced Gasoline Engines GM's upcoming inline 4-cylinder engine with Variable Valve Timing All-new, 1.4L turbo version to power 2011 Chevy Cruze 140 hp output and 148 lb-ft of torque Also to be used in two additional GM vehicles not yet announced Non-turbo version to serve as range- extender for the Chevy Volt Source: GM Media 2008 General Motors and Wieck Media Services, Inc. 23

Findings from MIT "On the Road in 2035" study Costs and Benefits of Technology Options Relative to a 2006 Midsize Car Increa ase in Cost 70% 60% 50% 40% 30% 20% 10% 0% GASOLINE DIESEL TURBO BATTERY ELECTRIC FUEL CELL GASOLINE TURBO PLUG-IN HYBRID 0% 20% 40% 60% 80% Reduction in GHG Emissions GASOLINE HYBRID Source: http://web.mit.edu/sloan-auto-lab/research/beforeh2/otr2035/ (July 2008) 24

ULSAB-AVC AVC design results: Steel-based 52 mpg Midsize Car Source: American Iron and Steel Institute ULSAB-AVC AVC report 25

Selection of low CO 2 -intensive materials is critical for reducing a vehicle's fuel use and net CO 2 footprint Source: WorldAutoSteel Steel Lifecycle GHG Benefits 26

Incentives for Progress Lightweight steel technologies are an important but perhaps under-recognized recognized technology option for vehicle efficiency and GHG reduction "Advanced Technology Vehicles Manufacturing Incentive Program" (EISA 2007, 136) Powertrain orientation: 25% higher fuel economy requirement for qualifying vehicles Does allow for qualifying components and vehicle integration costs A need to educate policy makers regarding the critical enabling role played by technologies for lightweighting, particularly "the new steel." 27

Conclusions Current policy is in flux but presents opportunities Many parties point to need for new legislation to enable a balanced approach on energy and climate Climate policy will establish a steady, measured driver for higher vehicle efficiency (as opposed to the unsteadiness of energy policy and unanticipated market forces) Ultimately, auto efficiency is a matter of design priority, not just "technology" Important role for platform efficiency and material solutions, especially advanced high-strength steels Truly technology-neutral neutral policy is essential for maximizing associated economic opportunities 28

Thank you! Contact: John M. DeCicco, Ph.D. Senior Fellow for Automotive Strategies Environmental Defense Fund jdecicco@edf.org / www.edf.org 29