Mexico clashes with auto industry over fuel efficiency

SAO PAULO Fri Oct 26, 2012 12:14pm EDT

SAO PAULO Oct 26 (Reuters Point Carbon) - Carmaker Toyota and Mexico's auto industry have sued the Mexican government to try to block proposed regulations to align the fuel efficiency standard of cars and light trucks with that of the United States to cut greenhouse gas emissions.

Toyota last month obtained a federal court injunction to stop the government's work on Nom-163, a rule that would require the fleet of new cars and light trucks to achieve a fuel economy rate of 14.9 kilometers per liter, or 35 miles per gallon, by 2016.

Mexico appealed but the local carmakers association, Amia, joined Toyota in its legal action to block the rule, which would also align the fuel economy standard of Mexico's new cars with that of Canada.

The controversy highlights the resistance by Mexico's manufacturing sector to the low-carbon regulations introduced in the last few years by the government as the global economy drags and competition increases.

The companies allege the proposed standard is too strict and would increase vehicle prices, therefore reducing sales.

The government thinks the auto industry is challenging the regulation in order to be able to sell cars in Mexico that it can no longer sell abroad to markets with tougher regulations.

Mexico has led a high profile effort to decarbonize its economy, and drew international attention by being one of the few countries to enact comprehensive climate legislation.

Although it is a developing country, Mexico has pledged to reduce greenhouse gas emissions by 30 percent from business-as-usual levels by 2020.

The energy sector accounts for up to 70 percent of Mexico's emissions and almost 30 percent of that share is transportation-related. Reducing the amount of fuel necessary to move Mexico's fleet is an important step for the country to reach its target, the government contends.

REGULATORY HARMONY

Mexico is the world's eighth largest car producer, having produced 2.6 million vehicles in 2011, and ranks fifth among the major exporters. The country decided to change its norms for vehicles to harmonize regulations with its North American trade partners.

The regulation is based on the United States' Corporate Average Fuel Economy (CAFE) developed by the Obama administration and the top U.S. automakers.

Mexico estimates the standard could reduce carbon dioxide emissions by 160 million tonnes by 2030.

Amia says the government, however, did not include some of the incentives contained in the U.S. regulation, such as credits for production of hybrids and for cars that could run on a mix of ethanol. It also complained that the limit for light trucks' fuel consumption was changed after the public consultation period ended.

The lobby group also argued that the rule should be more flexible than CAFE since central Mexico's high altitude makes higher fuel efficiency harder to achieve.

"Without the flexibilities and with the late change for trucks the new norm will become even stricter than the CAFE regulation," Amia said in a statement.

"The objective was to suspend the work on the new rule because we could not have a dialogue with the government," Ana Maria Vallarino, Toyota's public relations director in Mexico, told Reuters Point Carbon on Thursday.

"Toyota is not against the rule but wants an efficient regulation that benefits the Mexican consumer," she said.

MARKET PROTECTION

Sandra Herrera Flores, Mexico's environment undersecretary and one of the officials working on the new standard, said companies had almost two years to discuss the regulation so a late legal challenge is not justified.

"Mexico exports 80 percent of all cars produced locally. From that, 75 percent head to U.S., Canada and Europe, so these vehicles already comply with regulations we are trying to pursue, or even tougher regulations," she said.

"So, it is hard to understand what is going on. We hope the court decides that the rule is in the public's interest and allows work to proceed," said the official.

The government said it is uncertain how long the legal fight with the industry will last.

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