Sometimes in negotiations, it's best to open with an unrealistic offer.

That leaves room to deal.

In the end, the party making the offer gets what it really wanted--less than its opener--and the opposing party feels like it's extracted some concessions.

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According to a new book from an insider, that's partly how the Environmental Protection Agency (EPA) negotiated the current set of Corporate Average Fuel Economy (CAFE) standards.

Those rules, which run through 2025, raise the average fleet fuel economy to 54.5 miles per gallon.

Initially the EPA bluffed carmakers, requesting higher fuel-economy improvements for trucks over several years.

2015 Ram 1500 Laramie Limited

2015 Ram 1500 Laramie Limited

But it didn't actually want these improvements, former EPA Office of Transportation and Air Quality head Margo Oge says in her new book (via The Detroit News).

In Driving the Future: Combating Climate Change with Cleaner, Smarter Cars, she writes that the EPA initially asked for a 5-percent annual boost in light-truck fuel economy, starting in 2017--something it felt was unrealistic.

Oge argues that it made sense for the EPA to ask for more than what it wanted, because it expected strong pushback from the carmakers regardless of what it offered.

MORE: Fuel-Economy Rules Likely To Stay Put Through Midterm Review: Consensus (Dec 2014)

That 5-percent proposal would have raised the CAFE target to 56.2 mpg by 2025.

Instead, the EPA and carmakers eventually agreed on an annual improvement of 3.5 percent for light trucks between 2017 and 2021, and a 5-percent improvement for passenger cars over the same period.

That resulted in the current 54.5-mpg target, which is equivalent to about a rated 42 mpg on the EPA window sticker in every new vehicle.

2015 Ford F-150

2015 Ford F-150

Several foreign carmakers subsequently criticized the relatively lenient standard for trucks, claiming the EPA was biased in favor of the Detroit Three.

Oge acknowledges that it was imperative to get Ford, General Motors, and Chrysler to sign on. But she claims EPA analysts themselves didn't think the tougher standard for trucks was realistic.

The "tech team" at the agency's Ann Arbor, Michigan, laboratory had concluded that annual 5-percent fuel-efficiency gains couldn't be achieved, she says in the book.

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The book also covers reported clashes between the EPA and the National Highway Traffic Safety Administration (NHTSA) during both the Bush Administration and the early part of the Obama Administration.

Analysts at the NHTSA calculated that stricter fuel-economy standards would add more to the cost of each new car than those at the EPA had.

In 2009, the NHTSA had estimated raising fuel economy to an average 35.5 mpg by 2016 would cost about $4,000 per car, while the EPA argued it would only cost $1,000.

Southwest Airlines Boeing 737 (Image: Flickr user Aero Icarus, used under CC license)

Southwest Airlines Boeing 737 (Image: Flickr user Aero Icarus, used under CC license)

Moving forward, Oge argues that the upcoming "midterm review" of feasibility of the 2025 CAFE standards should include preliminary discussion of a further round of standards, from 2026 through 2035.

After the current rules end in 2025, she says, the EPA and NHTSA should require fuel-economy improvements of 5 percent per year.

This policy would essentially phase out internal-combustion engines by 2050, she says, as it would be virtually impossible for carmakers to meet the more aggressive targets with large volumes of gasoline-fueled vehicles.

And, once the government has settled on further standards for cars and trucks, Oge suggests that it should move on to aircraft--followed by trains and ships as well.


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