Trust the ABC and other Australian media outlets to have jumped on the Obama Administration’s move to lift the efficiency of US cars from 2012 by using new greenhouse gas emission standards from the country’s Environmental Protection Agency.

It’s green, green, full of all the right words, emissions, gases, environment, greenhouse etc etc. It was interesting, perhaps groundbreaking news. But it also showed President Obama at his worst, almost Kevin Rudd-like in refusing to take direct action at a time of crisis that would hurt a lot of people, but force dramatic change on US motorists and the stricken car sector.

The dramatic altering of the rules governing US pollution and emissions last month escaped most of the Australian media, but the big change overnight (as oil prices rose, then fell back under the $US60 a barrel level in New York and US petrol prices jumped sharply) was reported extensively.

It’s a pity the reports didn’t point out that it was a “soft” option by Obama, full of headlines and wise words, but a huge opportunity missed to do two things: force a dramatic change on driver behaviour, to buy more efficient cars, replenish road building and maintenance funds, and help the budget positions of the US and State and local Governments.

How would that have happened? By a sharp rise in petrol tax and other charges. Remember the kerfuffle we had here about petrol excise last year with Malcolm Turnbull and Brendan Nelson and their teams parading as the motorists’ friends. Higher petrol prices do change behaviour: we have seen it here and in every major country as car sales plunged, especially of fuel guzzlers and cars were used less.

(It’s ironic now that Malcolm is claiming that his proposal to put up tobacco taxes will force people to cut smoking or abandon it, thereby saving on health costs, but he said the direct opposite about higher petrol taxes).

It’s why the US car industry is crippled and now has joined the Obama push, as we saw yesterday. The once dinosaur like car companies now with green cloth and ashes, claiming to be the friends of the environment after years of bitter opposition.

Under the new vehicle standards, American passenger vehicles and light trucks (SUVs) must average 35.5 miles per gallon (6.62 litres/100km) by 2016, which President Obama said would save 1.8 billion barrels of oil over the lifetime of the program. That’s a 40% improvement, but will make cars up to $US600 dollars and more expensive. The Environmental Protection Agency will regulate car tailpipe emissions for the first time under the standards (As we forecast they could last month).

The US Congress does not have to approve the standards, which will be implemented through federal rules (that’s clever politics). Because the new policy is bad news for ethanol producers and oil refiners, having the new rules set by regulation instead of Congress, lessens the chance for a weakening in them and backsliding as rural interests lobby hard.

The plan was praised by automakers and environmentalists, but means higher price tags for consumers. Officials said they would recoup the money with lower fuel costs.

The President was joined by executives from 10 automakers, union leaders and Michigan Democrat Governor Jennifer Granholm in embracing the plan for giving the struggling industry cost certainty by setting a uniform national standard.

The new standard will apply America-wide and means for the first time in decades, car industry emission standards in the US and globally will not be determined by the tougher standards of California. (That is at least a very sensible part of the deal).

It was all wonderful and is getting front page and bulletin leading treatment in the US.

But it was an opportunity missed.

The US car industry has lost all its lobbying clout, especially against higher taxes. For years it has managed to neuter the very mileage standards now being lifted and blocked any move to increase petrol taxes. It is broke and feeble. The US Government holds the whip hand.

The mileage system forces car companies to meet targets for their entire fleet or pay fines, but does not reduce the miles driven. Lifting petrol taxes and making fuel more expensive would reduce miles driven, quickly and dramatically.

America’s road maintenance and building trust funds are broke because motorists are buying fewer cars and using less petrol, so income from existing petrol taxes has fallen sharply. The main fund has had to be bailed out by the US Government at least once in the past year.

The car companies will have to get cash to invest in new engine plants and other technology. In their current parlous state, that will almost certainly come from federal Government and US taxpayers. Americans could pay for this twice over without any discernible and immediate benefit.

The Financial Times pointed out this morning that the America’s Congressional Budget Office has estimated that a 46-US cent-a-gallon tax increase would achieve a 10% cut in demand, while a another study at Stanford University calculates that direct taxes can achieve an equivalent reduction” to the mileage rules at one-sixth the cost.

The FT said the existing standards have had unintended consequences. By making “light trucks” a separate category, it encouraged a boom in the large vehicles that became Detroit’s cash cow, at least until recently. Now they are a millstone and are being abandoned by drivers and manufacturers with equal alacrity. The FT reported:

For an administration ready to spend billions on a “cash for clunkers” program, its policies are inconsistent.

Higher standards could add $US1300 to the cost of a vehicle, incentivising consumers to keep older, inefficient ones.

By contrast, raising pump prices would have an immediate impact on miles driven and make gas guzzlers unattractive.

But Washington is run by politicians, not economists. A subsidy for buying new cars is viewed by voters as a gift, even though they ultimately foot the bill.

German car buyers are now being conned by five billion Euros of subsidies to scrap cars nine years and older to keep the country’s huge car sector alive and not on life support like America’s is currently (and prospectively).

The FT says that tinkering with the standards “creates the illusion” among voters that costs are borne by someone else whereas the effect of an increase in pump prices is felt directly.

And we are now learning how wedded to illusion is the President of the US (and our Prime Minister as well).