How the Government is Helping Automakers Develop Green TechnologyThe automobile industry in the United States has been mass producing vehicles and conventional internal combustion engines (ICEs) for more than a century. Over the years, hundreds of millions of vehicles have been produced, thousands of support companies (suppliers and related ancillary industries) have been created to provide tooling and parts to support vehicle manufacturing, and hundreds of thousands of employees go to work each day to build the vehicles we drive.

Given this long and expansive history, how does the U.S. government persuade automakers and their suppliers, who have been committed to ICE technology, to switch gears and focus on expanding into green technology? Increasingly stringent fuel economy and exhaust emission regulations, combined with incentives to produce more alternative technologies, have been the most common formula.

With an energy crisis gripping the world in the early 1970s, the U.S. environmental protection agency (EPA) was quick to establish fuel economy standards (launched 1972) that gave consumers a clearer picture of how their ICE-powered vehicle was performing. Besides making public which vehicles had the highest and lowest fuel economy averages, vehicle owners also quickly came to understand that car and trucks with lower fuel economy numbers were generally considered greater polluters.

By 1975, the EPA established its Corporate Average Fuel Economy (CAFE) regulations, policies designed to establish fuel economy targets and improve the average vehicle fuel efficiency of all new vehicles sold in the U.S. Today, the CAFE numbers are regulated by the National Highway Traffic Safety Administration (NHTSA) based on numbers measured by the EPA.

CAFE is a big motivator for automakers to invest in green technology. If an automaker's corporate-wide average fuel economy of all cars and trucks sold falls below the current CAFE target, the automaker is required by law to pay a penalty (it is currently $5.50 USD per 0.1 mpg under the standard, multiplied by the manufacturer's total production for the U.S. domestic market). These costs, understandably, add up very quickly. Today's CAFE standards are much more stringent than just one decade ago - and they continue to get even tougher. In 2010, the U.S. government passed a law increasing CAFE targets to 35.5 mpg by the 2012 model year (this represents an increase of 8.2 mpg between 2011 and 2016).