[Senate Hearing 107-645]
[From the U.S. Government Publishing Office]
S. Hrg. 107-645
REPORT OF THE NATIONAL ACADEMY OF SCIENCES ON THE EFFECTIVENESS AND
IMPACT OF CORPORATE
AVERAGE FUEL ECONOMY (CAFE) STANDARDS
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
AUGUST 2, 2001
Printed for the use of the Committee on
Commerce, Science, and Transportation and the
Committee on Energy and Natural Resources
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COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska
Virginia CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon SAM BROWNBACK, Kansas
MAX CLELAND, Georgia GORDON SMITH, Oregon
BARBARA BOXER, California PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri GEORGE ALLEN, Virginia
BILL NELSON, Florida
Kevin D. Kayes, Democratic Staff Director
Moses Boyd, Democratic Chief Counsel
Margaret Spring, Democratic Senior Counsel
Mark Buse, Republican Staff Director
Jeanne Bumpus, Republican General Counsel
Ken Nahigian, Republican Counsel
COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
DANIEL K. AKAKA, Hawaii FRANK H. MURKOWSKI, Alaska
BYRON L. DORGAN, North Dakota PETE V. DOMENICI, New Mexico
BOB GRAHAM, Florida DON NICKLES, Oklahoma
RON WYDEN, Oregon LARRY E. CRAIG, Idaho
TIM JOHNSON, South Dakota BEN NIGHTHORSE CAMPBELL, Colorado
MARY L. LANDRIEU, Louisiana CRAIG THOMAS, Wyoming
EVAN BAYH, Indiana RICHARD C. SHELBY, Alabama
DIANNE FEINSTEIN, California CONRAD BURNS, Montana
CHARLES E. SCHUMER, New York JON KYL, Arizona
MARIA CANTWELL, Washington CHUCK HAGEL, Nebraska
THOMAS R. CARPER, Delaware GORDON SMITH, Oregon
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
Brian P. Malnak, Republican Staff Director
James P. Beirne, Republican Chief Counsel
Shirely Neff, Staff Economist
Bryan Hannegan, Staff Scientist
C O N T E N T S
Allen, Hon. George, U.S. Senator from Virginia................... 9
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 1
Burns, Hon. Conrad, U.S. Senator from Montana.................... 2
Feinstein, Hon. Dianne, U.S. Senator from California............. 8
Kerry, Hon. John F., U.S. Senator from Massachusetts............. 4
Murkowski, Hon. Frank H., U.S. Senator from Alaska............... 7
Portney, Dr. Paul R., Chair of the Committee on Effectiveness and
Impact of the Corporate Average Fuel Economy Standards,
National Research Council; accompanied by Drs. John J. Wise,
Philip R. Sharp, Adrian Lund, and David L. Greene (all Members of the NRC
CAFE Committee)..................................... 10
Smith, Hon. Gordon, U.S. Senator from Oregon..................... 9
REPORT OF THE NATIONAL ACADEMY OF SCIENCES ON THE EFFECTIVENESS AND
IMPACT OF CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS
THURSDAY, AUGUST 2, 2001
U.S. Senate, Committee on Commerce, Science, and
Transportation, and the Committee on Energy and
The Committees met, pursuant to notice, at 2:40 p.m. in
room SH-216, Hart Senate Office Building, Hon. John F. Kerry
OPENING STATEMENT OF HON. JEFF BINGAMAN,
U.S. SENATOR FROM NEW MEXICO
Senator Bingaman [presiding]. Why don't we go ahead and
start the hearing. This is a joint hearing of the Commerce and
Energy Committees, both of which Senator Burns is on, and so
both Committees are well represented here. We are going to go
ahead and start.
We just completed two days of mark-up in the Energy
Committee on the Comprehensive Energy Policy Bill, on the first
section. I see the focus of that bill as trying to build a 21st
century energy infrastructure that contributes to our economic
prosperity, gives consumers a wider range of affordable energy
choices, while being responsible stewards of the environment.
In the last 2 days, we found broad bipartisan agreement in
the Energy Committee on a robust research and development
program. That R&D program needs to cover all aspects of energy
production and energy efficiency and basic research. That is
clearly an important element in finding new energy technology
so that we will overcome some of the traditional obstacles and
conundrums that we have in establishing our energy policy.
One of those conundrums is how to improve vehicle fuel
efficiency while maintaining passenger safety. When we return
in September, the Energy Committee and the Commerce Committee
both will be discussing proposals for improved vehicle fuel
efficiency and diversified fuel use in vehicles. The Committees
have jurisdiction for separate parts of that question.
In today's hearing, both Committees have an opportunity to
discuss the National Academy of Sciences report on
effectiveness and impact of the corporate average fuel economy
or CAFE standards, and we have several members of the Committee
that prepared this report for the National Research Council.
This comprehensive analysis provides a framework for
looking at a number of issues that the CAFE standards
encompass; issues like the economy, emissions, automobile
safety, oil imports, and the environment. These concerns, as I
am sure the Committee members will note, are very much
I asked the staff to put up this one chart, which I have
shown at several other Energy Committee hearings, because I
think it points out the importance of the issue we are talking
about and tries to portray both the history from 1970 until
2000 and then the period from now until 2020. It looks at
petroleum consumption by different sectors of our economy. The
transportation sector, as the chart amply demonstrates, is the
sector of the economy that has been increasing its use of
petroleum relative to other sectors, and is projected to
increase its share of petroleum usage in our economy even more
over the years ahead. So I think the issue of vehicle fuel
efficiency is extremely important and extremely relevant as we
discuss our energy future.
Let me stop with that very brief statement and call on
Senator Burns for any statement he would have, and then we will
hear from the panel.
OPENING STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA
Senator Burns. Thank you very much, Mr. Chairman and you
know, what a difference 30 days makes, right? 30 days ago when
gasoline was $1.80 a gallon, this place you couldn't get
another person in with a shoe horn, and today with gasoline at
$1.30, and I gassed up the other day in Grand Island, Nebraska
for $1.21, you know, all at once the urgency goes away for us
to do something.
I want to thank you and I want to thank the Chairman of the
Commerce Committee for holding this hearing, because I think we
have a lot of things in common to both Committees. I think both
Committees have a responsibility to look at this thing called
fuel efficiency and efficiency standards, that it becomes very
There's no doubt among us today that today's automobile is
entirely different than the automobile even when I came to the
Senate just 12 years ago, that the difference in our lifetime
has been drastic. The cars, both automobiles and trucks, they
run cleaner, they are safer, they are more efficient than they
were, say 30 years ago.
While some would like to give the credit to the U.S.
Congress for all the rules and standards that it developed, I
would rather give credit where credit is due and thank the
automakers, because I would say technology and competition has
brought us to where we are today, and someone around the world,
and of course the automobile industry is around the world
Coming from Montana, we look at a vehicle entirely
different than say you would look at them out here on the
beltway. Performance for Montana has a different meaning. We
have longer distances and we have to cover those distances and
we don't have a choice, because we are at the end of the
freight line, so to speak. If you look at the distance in
Montana from Eureka down to Alzada, as the crow flies, and that
is from the northwest corner to the southeast corner, it is
further than it is from Chicago to Washington D.C.
And what we do out there with our automobiles is a little
bit different than our trucks. We have to haul product to the
farm and then we haul product from the farm. And of course,
they would always say about agriculture, we operate under very
different circumstances. We buy retail, sell wholesale, and we
pay the freight both ways, and that sort of puts us in a pinch.
But number one, we look at our vehicle and at our roads for
one thing, and that is reliability and will they get the
product from point A to point B? So for these kinds of jobs we
need reliable trucks and automobiles to get our jobs done, and
the confidence that it takes to move us from one point to
another. It is not for fun in our country and it is not to look
cool on the expressway, it is because it is a part of our life.
Today's automakers have no choice but to build a better car
and truck next year than they did this year, but I will say
this. I am looking for a pickup now, prior to 1960, I think. I
buy my automobiles in garage sales, I find that very economical
at times, and other times it is not so economical. Nonetheless,
we have to, we buy them for a different reason, but I will tell
you this. The automakers keep making pickups for the urban
crowd; it does not serve those of us who use pickups for the
real thing, and that is to move product and then for them to
stand up. I will tell you, the four-wheel drive pickups we get
now do not last near as long as the old ones we had, say just
25 years ago.
I have no doubt that they will continue to do this with or
without the change in CAFE standards. However, if we make
changes in the standard without thinking about what our effects
will be, that will be a big mistake. For example, by forcing
manufacturers to pour all their resources into fuel efficiency,
what do we trade for in safety and reliability that we may have
And I think that is the question that we are looking for
here today, and I look forward to listening to our panels, and
our experts that have studied this for a long long time. So Mr.
Chairman, I would ask unanimous consent that my full statement
be made part of the record, as I am looking forward to hearing
Senator Bingaman. That will be the case. Since Senator
Kerry is here, he will chair the rest of this hearing, and I
[The prepared statement of Senator Burns follows:]
Prepared Statement of Hon. Conrad Burns, U.S. Senator From Montana
Thank you Mr. Chairman, and thank you to our witnesses for being
here today to discuss the National Research Council's report on The
Effectiveness and Impact of CAFE Standards, or Corporate Average Fuel
Efficiency Standards. As a member of both the Energy and Commerce
Committees, this is a subject which is important to me in many
There is no doubt among any of us that today's auto is cleaner,
safer, and more efficient than those made 30 years ago. While some
would like to give the credit for that to the U.S. Congress for all the
rules and standards it has developed, I would rather give credit where
credit is due and thank the automakers. I would say technology and
competition have brought to where we are today much more than any rule
Coming from Montana, I have a different way of looking at cars and
trucks than many of my colleagues. Performance in Montana has a much
different meaning than it does on the Beltway. Yes, we have a lot of
big cars and trucks to haul equipment, but remember, people are hauling
a lot more than boats and RV's in Montana. We are moving livestock
around, or carrying ranch or farm equipment from one place to another.
And it might be 80 or 100 miles from one town to the next. For that
kind of a job you need a reliable truck, and you need to have the
confidence that it will get you and your merchandise without any
trouble. Not for fun, or because it looks cool, but because it's your
Before we get too far into this, I ask my colleagues to take into
consideration the different situations that drivers in different parts
of the country face. Larger vehicles cannot and should not be
classified into some sort of luxury status. Without the use of those
vehicles at an affordable price, the American West would be a very
different place than it is today. By asking that automakers place fuel
efficiencies over any other goal, I fear that a big chunk of the burden
will fall on the people who need these vehicles most to make a living.
These are the farmers and ranchers who feed this country, but are being
squeezed from every direction. They are facing higher prices for the
goods they buy including fuel and fertilizer, and lower places for the
goods they sell. Ranchers and farmers are interested in fuel
efficiency, because that hits them in the pocketbook. But they are also
dependent on a lot of other features that cars and trucks provide. By
focusing purely on fuel efficiency, we are minimizing the importance of
reliability, safety, and performance.
Today's automakers have no choice but to build a better car or
truck next year than they did this year just to stay ahead of the
competition. I have no doubt they will continue to do this with or
without a change in CAFE standards. However, if we make changes in the
standard without thinking about what the other effects will be that is
a big mistake. For example, by forcing manufacturers to pour all their
resources into fuel efficiency, what do we trade for it in safety and
reliability that may have been achieved otherwise?
The report estimates that 1300 to 2600 highway fatalities in 1993
alone may be attributable to smaller, lighter cars that resulted partly
from strict CAFE standards. Fuel efficiency, or any other attribute
come at a cost. We need to know what those costs are.
I support the continued research and development of technologies
that may not undertaken without federal support: The technology cycle
can be drastically cut when we are willing to undertake this research
for the public good before it is feasible in the marketplace. I would
like to recommend that we focus on research before we focus on
restrictions because this gives our American automakers a chance to
compete in the global marketplace.
A final point I would like to make regards an assumption that is
made throughout the report that greenhouse gases are decreased when
fuel efficiency increases. I would like to find out further about the
link between these two. I would suggest that as our cars get better
mileage and it becomes less expensive to travel per mile, then people
make choices accordingly. All told, people could be driving more miles
today because it is cheaper to do so than it would have been otherwise.
That would mean more people on the road for longer periods of time, and
quite possibly emitting more carbon dioxide. CAFE standards are not,
and should not be used as a tool for decreasing greenhouse gases in the
atmosphere because the net effect is unknown. Better mileage may very
well have the effect of increasing total carbon dioxide emissions, and
I'd like to discuss this possibility with the panel and with my
I am glad that the time and energy was put into producing this
report because it answers some questions about what CAFE standards have
and have not accomplished. It guides us in deciding how to make these
standards more fair and effective. But it does not answer all my
questions, and I am glad to have the witnesses here today to answer
some of them.
STATEMENT OF HON. JOHN F. KERRY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Kerry [presiding]. Mr. Chairman, thank you for your
cooperation in this joint hearing, and thank you for your
leadership of the Energy Committee. I thank those of you who
are here from the Academy and other sectors to discuss this
question of the National Academy of Sciences' National Research
Council's special report on CAFE standards.
As I listened to Senator Burns, I was thinking, and I say
this very respectfully, how familiar the arguments I heard
sound. They are almost a recap of the arguments we heard in the
original discussions about CAFE standards.
Back in 1967 and 1974, we had rising oil prices and we also
had declining fuel economy in the new car fleet, so the public
was looking for more efficient automobiles. And in 1975, we
required automobile manufactures to increase the average fuel
economy in cars and light trucks, which then didn't include
minivans, pickups and sport utility vehicles (SUVs).
Specifically, the Act applied a different standard to
passenger cars and light trucks because of the rare use of
light trucks, and limited information about light trucks. SUVs
later came along and went through a definitional loophole, and
qualified as trucks. Nobody anticipated the kind of widespread
passenger use of SUVs the way we have it today. But we heard
all the same arguments: increasing standards is going to kill
the economy, if you do this it is going to hurt the country,
the steel and auto industry, and so forth and so on.
I remember hearing those arguments in the Clean Air Act
debate in 1990 where the projection, by the industry, was that
if we mandated sulphur reductions, it was going to cost the
industry $10 billion. That was the figure floated around
Congress, to which everybody said ``Oh, God, how are we going
to afford this?''
The Environmental Protection Agency said ``No, it is going
to cost $4 billion.'' In fact, we put a cap and trade program
for SO2 in place. We have now reduced significantly
the level of SOX emissions and we did it for $2
billion. Why? Because nobody factored in sufficiently, if at
all, how technology itself can reduce costs and improve
efficiency, and nobody could predict with certainty what would
come down the road.
What we have learned historically in this country is that
when you liberate the entrepreneurial spirit of the United
States of America, when you excite particular industries with a
certainty of a marketplace, they fill the void. They come to it
with solutions. There is, after all, no inherent public
marketplace for Abrams tanks or for many of the planes we build
or for missiles. There is a threat that we define, and we put a
certain amount of money to the threat. Then, given that money,
the private sector creates the response.
It is absolutely the same thing in the field of clean
technology and environmental technology. If there is a
sufficient marketplace and a guarantee of it, countless
companies will fill that market. I am chairman of the Small
Business Committee, and we just had a hearing yesterday, at
which we heard the countless stories of small entities with
hydrogen fuel cells and other alternatives that need the
capacity of market, venture capital and other things to bring
them to the marketplace. But the possibilities of offering
alternatives to our citizens are enormous if we will dare to
imagine it and to incentivize it.
That is what we are here to talk about today; the same
thing happened with the CAFE standards. When they went into
place, we doubled automotive fuel economy, and we significantly
increased not just the capacity of our automobiles, but their
safety as well. So I think there are many things to look at
here if we keep open minds. I will put the text of my own
statement in the record so it can be read in full, and I ask my
other colleagues if they would have any opening statements at
this time. Senator Murkowski.
[The prepared statement of Senator Kerry follows:]
Prepared Statement of Hon. John F. Kerry,
U.S. Senator From Massachusetts
To begin, I want to thank our panelists for being here today and
for the time, energy and effort they expended in writing the National
Research Council report on CAFE.
In 1975 the nation set a goal of doubling the fuel economy of
America's automobiles with the CAFE program--and in many respects we
succeeded. Thanks to federal standards and innovation by the auto
industry, the average passenger car on the road today is twice as
efficient, safer, more reliable and a better overall product. We save
roughly 3 million barrels of oil daily, save more than $20 billion in
reduced fuel purchases, and we have significantly reduced pollution
that degrades the environment and public health. In this regard, I
believe that CAFE has been a success.
However, in other areas, CAFE has not been as successful. The
overall fleet of cars, SUVs, trucks and minivans is increasingly
inefficient. In fact, the efficiency of the overall fleet has been
declining since 1987 and is now at its lowest since 1980. The NRC
report reveals that the regulatory framework of the CAFE program needs
to be updated to reflect the modern auto industry. For example, the SUV
loophole no longer makes sense as these vehicles have replaced cars in
many households and now makeup more than half of the new vehicles sold.
The NRC has also focused on the ``2-fleet'' rule that treats domestic
and foreign built autos manufactured by the same company separately,
the ``dual fuel'' rule that provides credits for vehicles that have the
capability of running on ethanol but most often run on gasoline and
other areas of concern. It seems that CAFE needs to be reformed.
Most of the blame for the CAFE program's current problems rests
with Congress, because, year after year, the Congress enacted riders
that prevented the Department of Transportation from even studying how
these problems could be avoided and remedied. And the predictable
result has now come to fruition, as the program is failing to meet even
its most basic objective of increasing auto efficiency. I hope the NRC
report and the work of the Commerce Committee and the Energy Committee
will move us beyond that gridlock.
The NRC also concluded that CAFE has had a negative impact on
safety in some instances. We must take that conclusion very seriously
and think carefully about how a CAFE program can be structured to have
no impact or a positive impact on safety, as the NRC says is possible.
The most important factor seems to be providing the industry sufficient
lead time to meet new standards. Doing so will allow industry to
innovate with more efficient engines, new materials and safety design
so that efficiency gains are not achieved through size reduction alone,
which may harm safety.
In closing, I want to say that the Commerce Committee plans
additional hearings on this issue and, I hope, will produce legislation
that can be brought before the full Senate. My view is that such a
proposal must reform the CAFE program. That might mean closing the SUV
loophole, setting new standards for all vehicles and including some
other proposals from the NRC and others. I hope and expect that the
Committee will be inclusive and deliberative in that process, taking
testimony from the automakers, autoworkers, technical experts,
environmentalists and others.
My work will be guided by four principles:
We must reverse the trend of decreasing efficiency as soon
We must make significant efficiency gains over the coming
We must minimize any negative impact on our auto companies
We must ensure public safety.
Hopefully we can find common ground and enact just such a proposal
this Congress. I look forward to the panel, and I thank the Energy
Committee for working with the Commerce Committee to organize this
STATEMENT OF HON. FRANK H. MURKOWSKI,
U.S. SENATOR FROM ALASKA
Senator Murkowski. Good morning, Senator Kerry. I
appreciate the opportunity to participate as the ranking member
of the Energy Committee in this joint hearing, to conduct
oversight on the National Academy report on fuel economy, I
want to welcome the distinguished panel today.
Many of us are focusing on the report's suggestion that we
can increase fuel economy standards to 30 miles per gallon by
the year 2015 or thereabouts, but I think it is important to
consider some of the small print associated with that general
comment. And I quote: ``Raising CAFE standards would reduce
future fuel consumption below what it would otherwise be.
However, there are other policies that could accomplish the
same end at a lower cost, providing more flexibility to
manufacturers for addressing these standards than the current
system.'' The NAS then points out several ``superior''
alternatives for fair consideration. I hope that you will
explore these new recommendations here at this hearing.
One of these alternatives, tax incentives for fuel
efficient vehicles, is contained in the comprehensive energy
bill that Senator Bingaman and I are working on in the
Committee. No one disagrees that improved fuel economy provides
benefit to consumers, the economy and environment, but Congress
should focus on the proper policies, and I emphasize policy, to
foster technology innovation. I do not think we should be
spending our time arguing whether the number is 27.5, 30, 40,
110, or whatever.
We should instead ask why, why the 10 most efficient
vehicles on the market today for sale to the American public
only comprise a little less, a little less than 1.5 percent of
the automobile sales. That is a fact. Why don't consumers buy
these fuel efficient vehicles? Why is fuel economy ranked 25th
on a list of attributes to consumers when they are looking for
purchasing new cars? That is the Norris poll.
Perhaps instead of pointing fingers at the automakers in
Detroit, we should look at our own buying habits. Americans
have consistently demanded vehicles with safety, improved
performance, heavier weight, and more features, but consider
this: if we had maintained the same weight and performance of
our vehicles as in 1981, our fleet-wide fuel economy would
average 36 miles per gallon. Today's cars are bigger, they are
safer, with more features. Fuel economy gains have been offset
by improved performance or electrical requirements. We clearly
cannot legislate an arbitrary number and assume that the
vehicles produced as a result will be necessarily as safe and
as affordable as is desired by consumers.
And NHTSA already has the authority to review CAFE
standards based on this NAS report. Why don't we let the
experts do the job and get out of the way? I think we are all
aware that Senators don't make very good engineers, and
Congress can take to heart the recommendation contained in the
NAS report when considering changes. This is clearly a part of
our national energy fate.
Let me conclude with one final thought. We can mandate the
manufacture of all of the fuel efficient cars and trucks in the
world, but if nobody buys them, then what have we done? Does it
not make sense to provide American consumers with safe,
affordable, and desirable vehicles and fuel economy as well?
There is a balance as far as what we are attempting to do in
terms of energy policy. We can do this if we take the
recommendations of the National Academy panel to heart.
I look forward to your testimony, and I encourage you to
remind us that we make decisions so often here on the rhetoric
as opposed to the sound science, and you folks are here and I
expect you to put your recommendations to us, and that is based
on your expertise and commitment to science, because if we
cannot look to you, who can we look at? We are but generalists.
Senator Kerry. Thank you very much, Senator Murkowski.
STATEMENT OF HON. DIANNE FEINSTEIN,
U.S. SENATOR FROM CALIFORNIA
Senator Feinstein. Thank you very much, Mr. Chairman. I
want to thank you, Senator Hollings, Senator Bingaman as well
as Senator Murkowski, for having this hearing, and I
particularly want to thank the National Academy. I did have an
opportunity to come and speak with you informally and I want
you to know how much I appreciated that opportunity.
I was actually heartened by your report. As you know,
Senator Snowe and I have some legislation pending which would
close the SUV light truck loophole and bring the SUV from 20
miles a gallon in conformance with the sedan's 27.5 miles per
gallon within the next 6 years. What I garnered from your
report is that the technology is available to improve fuel
efficiency, the only question is the length of time required to
implement that technology, and I guess how you structure that
as well. So I would like to ask you later some questions about
The second point that you made to me was that you refuted
the argument that increasing fuel efficiency will make U.S.
workers less competitive, and I very much appreciated that.
And the third point you made, which to me was important, is
that you recognized the very critical role that transportation
plays in reducing greenhouse gasses and foreign oil imports.
Actually, I believe the transportation sector is some 30
percent of the global warming issue, and one of the things in
our bill, namely closing the SUV loophole, if we have to
lengthen the time to accommodate that, that certainly is
acceptable to me.
I do think, though, that the savings that we get from it
are important, the 240 million tons a year of carbon dioxide
that we keep out of the atmosphere, the number one global
warming gas, I think that is important. Reducing oil imports by
10 percent, I think that is important. Saving the consumer at
the pump $300 to $600 a year, I think that is important. Saving
a million barrels of oil a day, by closing this loophole, I
think that is important.
I wrote to some of the companies asking them to do some of
this voluntarily and I got a very interesting letter back from
Honda, from the American Honda Company from their executive
vice president, and you know, they point out to me that Honda
has consistently maintained the leadership throughout the years
because it's part of their corporate philosophy, and that the
CAFE rating of their passenger cars and light trucks is the
highest of any major manufacturer, 31.2 miles per gallon for
passenger cars and 25.4 miles per gallon for light trucks.
They also point out that the new Acura MDX sports utility
vehicle achieves the best fuel economy in its class. I
certainly think Honda is really to be commended on that basis.
What Honda goes on to say is they don't want to continue to do
things voluntarily unless everybody in the field is willing to
respond in the same way.
And I have kept hearing how, well, the three big American
motor companies will lose their competitive edge if they
improve fuel efficiency. I don't believe that is true, I don't
think you believe that is true. I think the question is, how do
we get from point A to point B, and I think your report frankly
has shown a lot of light on that, and I am very grateful for
it, and I am hopeful that we might be able to consider our
closing the SUV loophole legislation very shortly. Thank you
very much, Mr. Chairman.
Senator Kerry. Thank you very much, Senator Feinstein. We
have been joined by additional Senators. We didn't have this
many Senators when we began the hearing, and I am not going to
suggest that we do not hear them, because I think that would be
unfair, but I do want to try to get to the panel. The first
Senator in order will be Senator Allen.
STATEMENT OF HON. GEORGE ALLEN,
U.S. SENATOR FROM VIRGINIA
Senator Allen. Thank you, Mr. Chairman. I will not make a
long opening statement, I came here to learn and listen. I know
that we ought to make decisions on sound science and whatever
tax or regulatory policies we have in this Nation ought to be
based on trusting our free enterprise and letting people--if
Toyota has those vehicles, that is----
Senator Feinstein. Honda.
Senator Allen. Honda, excuse me. And with Ford or General
Motors or whatever, consumers can make those decisions. I look
forward to listening to the testimony here and I will forego
Senator Kerry. Thank you, Senator Allen.
STATEMENT OF HON. GORDON SMITH,
U.S. SENATOR FROM OREGON
Senator Smith. In that spirit, Mr. Chairman, I will keep my
opening statement short.
As Senator Allen just stated, a lot of us would like to be
guided on science and not on politics on this. We would like to
have for the American people cars that are safe but also I
think the American people would appreciate a break when it
comes to gas mileage and would like us to push as much as we
can in public policy to get them something that is both
friendly to the family budget and the environment, and I think
you have done some work that helps guide us in that process,
and I thank you.
Senator Kerry. Thank you, Senator Smith.
Gentlemen, thank you very much for your patience. Again, I
apologize for personally being late but I was negotiating an
amendment to the current bill on the floor.
We are delighted to have the members of the Committee on
the Effectiveness and Impact of Corporate Average Fuel Economy
Standards with us today. I think what we will do, Dr. Greene,
is begin with you and just go across, unless you all have a
different order. You do. Dr. Portney, you can start please.
STATEMENT OF DRS. PAUL R. PORTNEY, CHAIR OF THE
COMMITTEE ON EFFECTIVENESS AND IMPACT OF THE
CORPORATE AVERAGE FUEL ECONOMY STANDARDS, NATIONAL RESEARCH
COUNCIL; ACCOMPANIED BY JOHN J. WISE, PHILIP R. SHARP, ADRIAN
LUND, AND DAVID L. GREENE
Dr. Portney. Mr. Chairman, thank you very much. Other
members of the Commerce and Energy Committees, thank you for
being here and thank you for this opportunity.
I am Paul Portney, I am president of Resources for the
Future, a think tank here in Washington, but I am here in the
capacity today as the chairman of the National Academy of
Sciences Committee on Effectiveness and Impact of the Corporate
Average Fuel Standards.
If I could, let me begin by introducing my colleagues who
are here today. I will then make a very brief statement and
then invite you to ask all the questions that you want. As
skillfully as I can, I will direct the hard ones to my
colleagues here on my Committee.
To my far right is David Greene. David is a senior research
scientist at Oak Ridge National Labs. To my immediate right is
Jack Wise. Jack is retired as vice president for research at
Mobil. To my immediate left is Phil Sharp, professor at the
Kennedy School at Harvard, probably better known to many of you
as a former Member of the House of Representatives and the
Energy and Commerce Committees at the time that the Energy
Policy and Conservation Act was being debated in the late
1970's. And to my far left is Adrian Lund. Adrian is president
and chief operating officer of the Insurance Institute for
The five of us, along with eight other Committee members
who aren't here, have been laboring for the past 5 or 6 months
to produce this report. I have noted in other forums that some
people are upset with us for taking so long to do the work that
we have done; there seems to be an equal number of people who
were upset with us that it didn't take us 2 months longer. And
so, I am sorry to everybody who is unhappy with the timing of
this report. We're all very pleased to have it behind us.
I think it was Senator Murkowski who said in his statement
that Senators don't make very good engineers. I don't know
whether that is true or not, but I think all of the members of
the CAFE Committee feel that engineers and economists and
policy analysts probably don't make very good Senators either,
and for that reason, I have begun all of the presentations that
I have made on this CAFE Committee report by pointing out that
the Committee makes no recommendation whatsoever about specific
fuel economy standards for passenger cars or light duty trucks.
What we've tried to do over the past 5 or 6 months is to
develop as carefully as we could, the very best information
possible that will indicate to you the trade-offs, quite
complicated trade-offs, that have to be made in balancing
corporate average fuel economy standards against safety,
emissions, the price of a vehicle, the performance
characteristics to which Senator Burns alluded, et cetera. The
hope is that in the 6 months that we pulled together this
information that we've pulled together that as you begin to
deliberate and debate on this, you will have the kind of sound
science base that I think you all want when you are making
important public policy decisions.
Let me talk very briefly about what the Committee found
during its deliberations and if I could, I'm going to reverse
the order in which I discuss these just a little bit.
Watching on C-SPAN and in other places the debates in the
House over the last couple of days, we now have seen a number
of people who have purported to speak for the Committee or at
least say what they think that the Committee said. We're
pleased to have this opportunity to say in our own words what
the Committee said.
So first let me summarize for you what our findings were
about possible future improvements in fuel economy and the
trade-offs that will necessitate. Then I will turn to what the
Committee found about the past impacts of CAFE, both the pro
and con. Then I will touch briefly on a series of
recommendations we made about ways in which CAFE might be
changed, having nothing to do with the specific numerical
targets that are involved.
Let me start first with our prospective findings, what we
see in the future. The Committee was very clear in saying if
one takes a 10- to 15-year perspective, one is able to identify
a series of technology packages, some based on existing
technology, some on technologies that we call emerging, which
in combination would make it possible to significantly improve
the fuel economy of the light duty fleet in the United States,
both passenger cars and trucks.
In my prepared testimony, which I hope will be entered into
the record, I identified several of these technologies, and in
our Committee report, we told you quite exhaustively on a drive
train basis, on an aerodynamic basis, and on other
technological bases the nature of these technologies, and try
to indicate which vehicles they can be easily introduced into,
and in some cases the pace at which these technologies can be
Now, in addition to having identified these significant
improvements in fuel economy and having identified how much
they will cost, we also engaged in what we called a break-even
analysis and that was an effort on our part to identify a
series of technology packages which when added to vehicles
today, over the next decade to decade and a half, and that's
important, would produce gains in fuel economy that would save
enough gasoline to pay for the addition to the up-front or
purchase price of the vehicle that these technologies would
I emphasize again that there is nothing normative about the
identification of these break-even technologies. We're not
recommending that this is the appropriate goal, we are just
identifying a package of technologies which will add enough to
the purchase price of the car so that they would be offset at
the margin by the last dollar of technology increase by the
fuel economy savings that the motorist would get.
Now I also want to hasten to point out that does not mean
that if you were to look at the fuel levels, those percentage
increases by vehicle type, and say well, we're going to strive
to get that goal, it would necessarily be the case that you
could accomplish all of those goals without some loss of
safety. And I say this for the following reason: When we look
at these technology packages, we are very careful to say that
these are improvements in fuel economy that are consistent with
holding constant the performance, the size and the weight of
So that when we identify these break-even technologies,
these are adding technologies that do not result in any
downsizing or downweighting of the vehicle and for that reason,
they should have no adverse side effects on safety.
However, if one were to choose those fuel economy goals,
ask the automakers to meet those goals, they might decide to
try to meet those higher fuel economy standards not by
introducing those technologies, but possibly by downweighting
or downsizing the car. If that's the case, the Committee is not
confident in saying that there would be no adverse safety
effects; in fact, there could be some adverse safety effects if
the fuel economy goals were met not by adopting the technology
packages that we identified, but rather through some
combination of that along with downsizing and downweighting.
We are also very careful to identify the increases in the
prices of cars, vehicle type by vehicle type, that would be
necessitated by the additions of these technologies and in the
case of what we call the 14-year horizon, where we assume the
car owners are looking over the next 14 years of the life of
their car when they buy it, those purchase price increases
could be between $250 and $1,400 depending on the size of the
vehicle we're talking about.
So again to summarize, looking forward, technologies exist
or are in development and could be applied which would produce
significant improvements in fuel economy without adverse
effects on size, performance or weight. However, there are
significant costs associated with this, and to speak to a point
that Senator Burns made, there is no question that by requiring
these improvements in fuel economy, if automakers do install
these technology packages, then that's money that could not go
into the development of other alternative amenities in a car
that people might want to have, towing capacity, carrying
capacity, et cetera. To put it bluntly, there are trade-offs,
there's no question about it.
Very briefly looking backwards, we looked at the imposition
of the CAFE program going back to 1978 and found that that
program along with increases in gasoline prices, which also had
a significant effect, because gas prices of course went up
dramatically at that time, the CAFE program, increases in
gasoline prices, and some downsizing and downweighting of
vehicles that car makers engaged in anyway to try to take
materials out of the car to reduce the purchase price of the
car, played a significant role in the improvement of the fuel
economy of the fleet in the United States during the period
starting in 1978.
Now, in terms of the cost of those improvements in gasoline
consumption, we saw reductions in greenhouse gas emissions,
less dependence on foreign oil. In terms of the cost of those
changes, we found that vehicle performance declined during that
period of time. And perhaps most importantly, we found that the
very rapid downsizing of the vehicle fleet, particularly
between 1978 and 1982, quite probably had an adverse effect on
the safety of the vehicle fleet. A majority of the Committee
was making the prediction, although acknowledging the
uncertainties that are apparent in this, that the rapid
downsizing that took place over a 4-year period probably added
between 1,300 and 2,600 deaths to the annual fatality rate
relative to what fatalities would have been absent that
downweighting and downsizing.
Now I want to mention, if one looks at the automobile
fatality rate over time, it has continued to fall. What we're
saying is that it would have fallen even more had it not been
for that rapid downweighting and downsizing of the fleet that
was partially due to the CAFE standards.
Now, moving ahead, our congressional charge asked us to
look into three things. What did CAFE do retrospectively, and
I've spoken to that. Are there technologies available in the
future to improve the fuel economy of the fleet and what are
those costs, I've tried to briefly summarize those. We were
also asked by Congress to take a look at recommendations we
might have for improvements in the way the CAFE system
functions quite apart from changes in the numerical standards,
and here we had a number of specific recommendations.
I will turn to them in just a second but I want to speak to
one of the findings of the Committee, which is that there is
really a profound inconsistency between on the one hand
expressing the view that our car makers ought to make cars that
are more fuel efficient and on the other hand, convening
congressional investigations anytime the price of gasoline goes
above $1.50 a gallon.
One of the things that is the biggest spur to fuel economy
in Europe and Japan is the fact that gasoline is $2 or $3 per
gallon more expensive there. That means that you have consumers
who have a strong financial incentive to seek out fuel
efficient cars, and that makes it easier for the car makers to
sell those cars. Here in the United States, we prefer cheap
gasoline and there are a number of benefits that are
appurtenant to that but one of the adverse consequences is that
through the CAFE program--even the current program, much less
tightening it--we're sending the automakers a signal that they
should make more fuel efficient cars, while all the signals
that they get from the marketplace, and one of you read some
statements to this effect earlier, is that at $1.50 a gallon
gasoline, fuel economy is not very high up the list of
attributes that people look at when they purchase a new care.
Having said that, let me mention the recommendations that
we made. First of all, every member of the Committee feels that
the CAFE program as presently constituted or as it might be
changed in the future could be dramatically improved if the
CAFE credits, the fuel economy credits that can now be
accumulated and used against shortfalls in future years were
made tradable or sellable between companies.
And here there is a very good precedent. It was the same
way in the 1990 amendments to the Clean Air Act. We both
required coal powered powerplants to reduce their emissions,
but at the same time we gave them the opportunity to buy and
sell emission reductions between them. That both enabled us to
meet the emission reductions at least cost to society, and it
has done something else very valuable. It has allowed us to
observe how expensive it is to reduce sulphur dioxide
emissions, because there is a market price for these emission
And if we make CAFE credits tradable, we could see if an
automaker is buying CAFE credits at a certain price, we know
that that company could have, but expensively, improved its
fuel economy, because if it could, it would do that rather than
buy these expensive credits. So making the credits tradable, we
think would be a significant improvement in the CAFE program.
The Committee also urges that Congress and NHTSA consider
what we call a look at an attribute-based CAFE or fuel economy
system in which the fuel economy target that vehicles were
required to meet might vary in proportion say to their weight
or some other attribute of the vehicle and we sketch out in our
report one particularly appealing, at least to us, one
particularly appealing possible approach at creating an
attribute-based fuel economy standard.
We also recommend the abolition of what's called the dual
fleet requirement in CAFE. That is, that imported cars and
domestic cars be averaged separately. We think that distinction
has outlived its usefulness and we don't see any reason to
And perhaps more controversial than we recognize, we
recommend the abolition of the dual fuel provisions which give
car makers extra credits for producing cars that run on both
gasoline and ethanol.
Two quick final recommendations. One has to do with
research and development, which one of you mentioned earlier.
We urge the Government to continue considering participation in
joint industry government ventures like the Partnership for a
New Generation of Vehicles. We think that partnership has
turned up some interesting leads that shed light on fuel
economy, and could do so in the future, and we hope that the
government will remain open to that.
And finally, because of the very important and
controversial role that safety plays in the fuel economy
debate, we have recommended that the National Highway Traffic
Safety Administration undertake a new study like that completed
in 1997, using much more recent data, on traffic fatalities,
which would make possible, we think, a more careful and up-to-
date analysis of the links between improved fuel economy on the
one hand and traffic accidents, injuries and fatalities on the
That concludes my prepared remarks and thank you again very
much for this opportunity, and we're prepared to answer any and
all questions that you may ask.
[The prepared statement of Dr. Portney follows:]
Prepared Statement of Dr. Paul R. Portney, Chair of the Committee on
Effectiveness and Impact of the Corporate Average Fuel Economy
Standards, National Research Council
Good afternoon, Mr. Chairman and members of the Committee. I am
Paul R. Portney, President of Resources for the Future and Chair of the
Committee on Effectiveness and Impact of the Corporate Average Fuel
Economy Standards of the National Research Council. The Research
Council is the operating arm of the National Academy of Sciences, the
National Academy of Engineering, and the Institute of Medicine, charted
by Congress in 1863 to advise the government on matters of science and
It is a pleasure to be here to introduce the report on CAFE
standards. That is not a pro forma statement. The last 6 months have
been extremely demanding for the entire Committee as well as the NRC
staff, and it is a genuine pleasure to see it end. This study was
requested by Congress last year to provide assistance in its decisions
related to fuel economy standards. Since we started in February 2001,
the full Committee has met on a total of 17 days, and there have been
an additional 11 subgroup meetings. Quite an investment of time for a
group of unpaid volunteers.
I would like to provide a brief overview of the report. This is
really a joint presentation. My colleagues from the Committee, John
Wise, Philip Sharp, Adrian Lund, and David Greene may fill in the holes
I leave in the presentation, but on almost all issues, the Committee
reached unanimous conclusions. The report is complicated, and I cannot
do it justice in a few minutes. Therefore I request that we include the
Executive Summary as part of the record.
The Committee had a 3-part mission:
1. Determine the effect that CAFE standards have had on fuel
economy, and the impact on the industry, consumers, safety, and
2. Estimate the impact that changes to CAFE standards might
have in the future; and
3. Evaluate the structure of the CAFE program and recommend
Review of the Current CAFE Program
Our review of past and current impacts of CAFE standards convinced
us that the program has significantly reduced fuel consumption. Other
factors also have been important, especially the reaction of consumers
and the automotive industry to higher fuel prices in the 1970s and
early 1980s. The Committee could not apportion responsibility among
these factors, but notes that CAFE was clearly important. In recent
years, CAFE indisputably played an important role in maintaining higher
fuel economy than would have resulted from the lower fuel prices that
prevailed for most of this period.
There have been adverse consequences as well. Safety is most
important. The majority of the Committee concludes that the downsizing
and downweighting that occurred in the 1970s and 80s (partially in
response to CAFE) resulted in an additional 1,300 to 2,600 fatalities
in 1993. While fatalities were declining in this period, most Committee
members believe that they would have declined this much more had the
downweighting and downsizing not occurred. Two members of the Committee
dissent from this view. They believe that the data does not support
this conclusion, and that the net effect on highway fatalities of the
increases in fuel economy may have been zero. David Greene, one of the
authors of the dissent in the report, may elaborate on that conclusion.
An additional impact, although one we were unable to quantify, may
have been restrictions on consumer choice. Requiring automotive
manufacturers to focus on fuel economy diverted their resources from
improving other attributes valued by consumers, such as acceleration
and carrying capacity.
Impact of Higher Standards
First let me note that the Committee does not recommend whether or
by how much the government should raise standards. We believe that that
is a decision belonging to Congress, the President, and appointed
officials because it involves tradeoffs among factors very important to
the people of this country--the costs of driving, the environment,
national security, consumer choice, safety, and others. In so far as
possible, the Committee identifies these tradeoffs, but a full analysis
was not possible within the short time allotted to this study.
The Committee believes that it is incumbent on decisionmakers to
understand why they want to increase fuel economy and to ensure that
the costs of the increases are consistent with the motivation. The two
main factors the Committee considered are oil imports and global
climate change. Analysts assign a wide variety of costs to these
externalities. The Committee considered this range, and ultimately
chose values which, in total, are equivalent to about 30 cents/gallon
of fuel. I mention this figure not because the Committee endorses it
(indeed other analysts might chose values much higher or lower), but
because it helps to understand how hard one can push on fuel economy.
With that as context, the Committee concludes that significant
improvements in fuel economy are quite possible at reasonable cost. A
variety of technologies to improve fuel economy are available for cars
and light trucks. Many have been developed and are being implemented in
Europe and Japan where fuel prices are much higher than here. Variable
valve lift and timing can reduce fuel consumption by 3-8%. Continuously
variable transmissions can achieve another 4-8%. Other technologies are
under development and will be available for wide scale use within 15
years. Fuel economy can be raised more for heavier vehicles than for
light ones, and the resulting fuel savings will be much higher for the
heavier vehicles also. For example, a midsize SUV might see a 34%
increase (from 18 to 28 miles per gallon). Over the lifetime of the
vehicle, these improvements would save nearly 2,000 gallons, which
would more than pay for the incremental cost.
As with the current CAFE program, raising standards will have other
consequences as well, with safety again being the most contentious. Any
increase in fatalities will depend on how manufacturers meet higher
standards. While the technologies examined by the Committee generally
appear to be more cost-effective than weight reduction, CAFE standards
as currently structured do not preclude any methods. Thus some
manufacturers might include some weight reduction, which the majority
of the Committee believes would involve some safety consequences.
However, it is also possible that weight reductions could be
concentrated in the heavier vehicles. This would reduce the weight
disparity in the fleet, which would have beneficial consequences for
safety. This could occur because the greater risk for the occupants of
the downsized vehicles would be more than balanced by the lessened risk
for other road users.
Again it should be noted that increased fuel economy is not a high
priority for most consumers. If manufacturers have to meet higher
standards, they will have to have to neglect other attributes that
consumers might find preferable.
Recommendations on the Structure of the CAFE Program
First, I would like to point out that there is a marked
inconsistency between raising fuel economy standards while keeping fuel
taxes low. The Committee certainly does not recommend raising taxes to
the level of European countries (or to any specific level for that
matter), but the members believe that efforts to raise fuel economy
would work much better if consumers had more motivation from higher
The Committee recommends that a tradable credit program be part of
any regulatory program on fuel economy. Even if the current structure
is maintained and the standards not raised, the program can be made
more efficient and effective with tradable credits. All manufacturers
would have incentive to raise the economy of all their vehicles, and
the results are likely to be less costly than the current approach of
treating each manufacture separately. Tradable credits have worked well
in reducing the costs of sulfur dioxide emissions from coal-fired power
plants, and the Committee believes that will work as well on fuel
An attribute-based system should be considered for the regulatory
standard. The partially weight-based system we call ``Enhanced CAFE''
is particularly intriguing. Lighter vehicles (up to 3,500 or 4,000
pounds) would be on a standard inversely proportional to their weight.
Heavier vehicles would all have the same standard. This system would
avoid any incentive for manufacturers to reduce the weight of light
vehicles, but would encourage lightening the heavier vehicles, with
advantages in safety as I noted earlier.
The Committee recommends abolishing the foreign-domestic
distinction. Given the global nature of the auto industry, this
distinction makes no sense now.
The Committee also recommends abolishing the credit for dual-fuel
vehicles. There may be valid policy reasons for encouraging alcohol
fuels, but CAFE is not a good way to do it. Owners of these vehicles
essentially never buy alcohol fuel because it is expensive and
difficult to find, but the credit lowers the fuel economy of the entire
The government should continue cooperative programs with industry
to improve fuel economy. The Partnership for a New Generation Vehicle
(PNGV) is the most prominent of these programs.
Finally, the National Highway Traffic Safety Administration should
update its analysis of the relationship between safety and fuel economy
Thank you Mr. Chairman, that concludes my comments. My colleagues
and I would be happy to take any questions you may have.
Effectiveness and Impact of Corporate Average Fuel Economy (CAFE)
In the wake of the 1973 oil crisis, the U.S. Congress passed the
Energy Policy and Conservation Act of 1975 with the goal of reducing
the country's dependence on foreign oil. Among other things, the act
established the Corporate Average Fuel Economy (CAFE) program, which
required automobile manufacturers to increase the salesweighted average
fuel economy of the passenger car and light-duty truck fleets sold in
the United States. Today, these include minivans, pickups, and sport
utility vehicles. Congress itself set the standards for passenger cars,
which rose from 18 miles per gallon (mpg) in automobile model year (MY)
1978 to 27.5 mpg by MY 1985. As authorized by the Act, the Department
of Transportation (DOT) set standards for light trucks for model years
1979 through 2002. The standards are currently 27.5 mpg for passenger
cars and 20.7 mpg for light trucks. Provisions in DOT's annual
appropriations bills since fiscal year 1996 have prohibited the agency
from changing or even studying CAFE standards.
In legislation for fiscal year 2001, Congress requested that the
National Academy of Sciences, in consultation with the Department of
Transportation, conduct a study to evaluate the effectiveness and
impacts of CAFE standards.\1\ In particular, it asked that the study
examine, among other factors:
\1\ Conference Report on H.R. 4475, Department of Transportation
and Related Agencies Appropriations Act, 2001. Report 106-940, as
published in the Congressional Record, October 5, 2000, pp. H8892-H-
(1) the statutory criteria (economic practicability,
technological feasibility, need for the U.S. to conserve
energy, the classification definitions used to distinguish
passenger cars from light trucks, and the effect of other
(2) the impact of CAFE standards on motor vehicle safety;
(3) disparate impacts on the U.S. automotive sector;
(4) the effect on U.S. employment in the automotive sector;
(5) the effect on the automotive consumer; and
(6) the effect of requiring separate CAFE calculations for
domestic and non-domestic fleets.
In consultation with the U.S. Department of Transportation, a
statement of work for the Committee was developed (see Appendix C) [NRC
Report]. The emphasis of the Committee's work was to be directed toward
recent experience with CAFE standards, the impact of possible changes,
as well as the stringency and/or structure of the CAFE program in
future years. The National Research Council established the Committee
on Impact and Effectiveness of Corporate Average Fuel Economy
Standards, which had its first meeting in early February 2001. In
effect, since the congressional appropriations language asked for the
report by July 1, 2001, the Committee had less than 5 months (from
February to late June) to complete its analysis and prepare a report
for the National Research Council's external report review process. In
its findings and recommendations, the Committee has noted where
analysis is limited and further study is needed.
The CAFE program has been controversial since its inception. Rather
sharp disagreements exist regarding the effects of the program on: the
fuel economy of the U.S. vehicle fleet; the current mix of vehicles in
that fleet; the overall safety of passenger vehicles; the health of the
domestic automobile industry; employment in that industry; and the
well-being of consumers. It is this set of concerns that the Committee
was asked to address.
These concerns are also very much dependent on one another. For
example, if fuel economy standards were raised, the manner in which
automotive manufacturers would respond would affect the purchase price,
attributes, and performance of their vehicles. For this reason, the mix
of vehicles that a given manufacturer sold could change, perhaps
resulting in a greater proportion of smaller and lighter vehicles; this
in turn could have safety implications, depending on the eventual mix
of vehicles that ended up on the road. If consumers were not satisfied
with the more fuel-efficient vehicles, that would in turn affect
vehicle sales, profits, and employment in the industry. Future effects
would also depend greatly on the real price of gasoline; if it were
low, consumers would have little interest in fuel-efficient vehicles.
High fuel prices would have just the opposite effect. In addition,
depending on the level at which fuel economy targets were set, and the
time frame the companies would have to implement changes, differential
impacts across manufacturers would likely occur depending on the types
of vehicles that they sell and their competitive position in the
marketplace. Thus, understanding the impact of potential changes to
CAFE standards is, indeed, a difficult and complex task.
In addition to the requirement that companies meet separate fleet
averages for automobiles and light-duty trucks they sell, there are
other provisions of the CAFE program that affect manufacturers'
decisions. For example, a manufacturer must meet the automobile CAFE
standard separately for both its import and its domestic fleet (``2-
fleet rule''), where a domestic vehicle is defined as one for which at
least 75 percent of its parts are manufactured in the United States.
Also, CAFE credits can be earned by manufacturers who produce
``flexible-fuel'' vehicles that can run on both gasoline and
alternative fuels, such as ethanol.
Why care about fuel economy at all? It is tempting to say that
improvements in vehicle fuel economy will save money for the vehicle
owner in reduced expenditures for gasoline. The extent of the annual
savings will depend on the improvements in the fuel economy (in miles
per gallon of gasoline), the price of gasoline, and the miles traveled
per year, as well as the higher cost of the vehicle resulting from the
fuel economy improvement. While a strong argument can be made that such
savings or costs are economically relevant, that is not by itself a
strong basis for public policy intervention. Consumers have a wide
variety of opportunities to exercise their preference for a fuel-
efficient vehicle if that is an important attribute to them. Thus,
according to this logic, there is no good reason for the government to
intervene in the market and require new light-duty vehicles to achieve
higher miles per gallon, or to take other policy measures designed to
improve the fuel economy of the fleet.
There are, however, other reasons for the nation to consider policy
interventions of some sort to increase fuel economy. The most important
of these, the Committee believes, is concern about the accumulation in
the atmosphere of so-called greenhouse gases, principally carbon
dioxide. Continued increases in carbon dioxide emissions are likely to
further global warming. Concerns like those about climate change are
not ones normally reflected in the market for new vehicles. Few
consumers take into account the environmental costs that the use of
their vehicle may occasion; in the parlance of economics, this is a
classic ``negative externality.''
A second concern is that petroleum imports have been steadily
rising because of the nation's increasing demand for petroleum without
a corresponding increase in domestic supply. This has meant a steadily
increasing reliance on imported oil. The demand for gasoline has been
exacerbated by the increasing sales of light trucks, which have lower
fuel economy levels than those of automobiles. High costs of imports
can both put downward pressure on the strength of the dollar (which
would drive up the costs of goods that Americans import) and, possibly,
increase U.S. vulnerability to macroeconomic ``shocks'' that cost the
economy considerable real output. Some experts argue that these
vulnerabilities are another form of externality that vehicle purchasers
do not factor into their decisions, but that can represent a true and
significant cost to society. Other experts take a more skeptical view,
arguing instead that the macroeconomic difficulties of the 1970s (high
unemployment coupled with very high inflation and interest rates) were
due more to unenlightened monetary policy than to the inherent
difficulties associated with high oil prices. Either way, no one could
deny that reducing our nation's oil import bill would have favorable
effects on the terms of trade, and that these are valid considerations
in deliberations about fuel economy.
The Committee believes it is critically important to be clear about
the reasons for considering improved fuel economy. Moreover, and to the
extent possible, it is useful to try to think about how much it is
worth to society in dollar terms to reduce emissions of greenhouse
gases (by one ton, say) and reduce dependence on imported oil (say, by
one barrel). If it is possible to assign dollar values to these
favorable effects (no mean feat, the Committee acknowledges), it
becomes possible to make at least crude comparisons between the
beneficial effects of measures to improve fuel economy on the one hand,
and the costs (both out-of-pocket and more subtle) on the other.
In conducting its study, the Committee first assessed the impact of
the current CAFE system on reductions in fuel consumption, on emissions
of greenhouse gases, on safety and on impacts on the industry (see
Chapters 1 and 2) [NRC Report]. To assess potential impacts of modified
standards, the Committee examined opportunities through the application
of existing (production intent) or emerging technologies, estimated the
costs of such improvements, and examined the lead times that would
typically be required to introduce such vehicle changes (see Chapter 3)
[NRC Report]. The Committee reviewed many sources of information on
technologies and costs for improvements in fuel economy, which included
presentations at its meetings and information available from studies
and reports. It also used consultants under its direction to facilitate
its work under the tight time constraints of the study. Some of the
consultants' work provided analyses and information that helped the
Committee better understand the nature of previous fuel economy
analyses. In the end, however, the Committee conducted its own
analyses, informed by the work of consultants, the technical
literature, and presentations at its meetings, as well as the expertise
and judgment of the Committee members, to arrive at its own range of
estimates of fuel economy improvements and associated costs. Based on
these analyses, the implications of modified CAFE standards are
presented in Chapter 4 [NRC Report], along with an analysis of what the
Committee calls break-even fuel economy levels. The Committee also
examined the stringency and structure of the current CAFE system, and
it assessed possible modifications to it, as well as alternative
approaches to achieving higher fuel economy for passenger vehicles,
which resulted in recommendations for improved policy instruments (see
Chapter 5) [NRC Report].
The CAFE program has clearly contributed to increased fuel economy
of the nation's light-duty vehicle fleet during the past 22 years.
During the 1970s, high fuel prices and a desire on the part of
automakers to reduce costs by reducing the weight of vehicles
contributed to improved fuel economy. CAFE standards reinforced this
effect. Moreover, the CAFE program has been particularly effective in
keeping fuel economy above the levels to which it might have fallen
when real gasoline prices began their long decline in the early 1980s.
Improved fuel economy has reduced dependence on imported oil, improved
the nation's terms of trade, and reduced emissions of carbon dioxide, a
principal greenhouse gas, relative to what they otherwise would have
been. If fuel economy had not improved, gasoline consumption (and crude
oil imports) would be about 2.8 million barrels per day higher than it
is, or about 14 percent of today's consumption.
Past improvements in the overall fuel economy of the nation's
light-duty vehicle fleet have entailed very real, albeit indirect,
costs. In particular, all but two members of the Committee concluded
that the downweighting and downsizing that occurred in the late 1970s
and early 1980s, some of which was due to CAFE standards, probably
resulted in an additional 1,300 to 2,600 traffic fatalities in 1993.\2\
In addition, the diversion of carmakers' efforts to improve fuel
economy deprived new-car buyers of some amenities they clearly value,
such as faster acceleration, greater carrying or towing capacity, or
\2\ A dissent by Committee members David Greene and Maryann Keller
on the impact of downweighting and downsizing is contained in Appendix
A [NRC Report]. They believe that the level of uncertainty is much
higher than stated and that the change in the fatality rate due to
efforts to improve fuel economy may have been zero. Their dissent is
limited to the safety issue alone.
Certain aspects of the CAFE program have not functioned as
The distinction between a car for personal use and a truck
for work use/cargo transport has broken down, initially with
minivans, and more recently with sport utility vehicles and
``cross-over'' vehicles. The car/truck distinction has been
stretched well beyond the original purpose.
The Committee could find no evidence that the ``2-fleet
rule'' distinguishing between domestic and foreign content has
had any perceptible effect on total employment in the U.S.
The provision creating extra credits for multi-fuel vehicles
has had, if any, a negative effect on fuel economy, petroleum
consumption, greenhouse gas emissions, and cost. These vehicles
seldom use any fuel other than gasoline, yet enable automakers
to increase their production of less fuel efficient vehicles.
In the period since 1975, manufacturers have made considerable
improvements in the basic efficiency of engines, drive trains, and
vehicle aerodynamics. These improvements could have been used to
improve fuel economy and/or performance. Looking at the entire light-
duty fleet, cars and trucks, between 1975 and 1984 the technology
improvements were concentrated on fuel-economy; it improved by 62
percent without any loss of performance as measured by 0-60 mph
acceleration times. By 1985, light-duty vehicles had improved enough to
meet CAFE standards. Thereafter, technology improvements were
concentrated principally on performance and other vehicle attributes
(including improved occupant protection). Fuel economy remained
essentially unchanged while vehicles became 20 percent heavier and 0-60
acceleration times became, on average, 25 percent faster.
Technologies exist that, if applied to passenger cars and light-
duty trucks, would significantly reduce fuel consumption within 15
years. Auto manufacturers are already offering or introducing many of
these technologies in other markets (Europe and Japan, for example)
where much higher fuel prices ($4-5/gal) have justified their
development. However, economic, regulatory, safety and consumer
preference-related issues will influence the extent to which these
technologies will be applied in the United States.
Several new technologies such as advanced lean exhaust gas after-
treatment systems for high-speed diesels and direct-injection gasoline
engines, which are currently under development, are expected to offer
even greater potential for reductions in fuel consumption. However,
their development cycles as well as future regulatory requirements will
influence if and when these technologies will penetrate deeply into the
The Committee has conducted a detailed assessment of the
technological potential for improving the fuel efficiency of 10
different classes of vehicles, ranging from subcompact and compact cars
to sport utility vehicles (SUVs), pickups and minivans. In addition,
the Committee has estimated the range in incremental costs to the
consumer that would be attributable to the application of these engine,
transmission and vehicle-related technologies.
Chapter 3 presents the results of these analyses as curves that
represent the incremental benefit in fuel consumption versus the
incremental cost increase over a defined baseline vehicle technology.
Ranges in both fuel consumption benefits and incremental costs are
estimated to reflect anticipated uncertainties. Three potential
development paths are chosen as examples of possible product
improvement approaches, which illustrate the trade-offs auto
manufacturers may consider in future efforts to improve fuel
Assessment of currently offered product technologies suggests that
light-duty trucks, including SUVs, pickups and minivans, offer the
greatest potential to reduce fuel consumption, on a total-gallons-saved
In an attempt to evaluate the economic trade-offs associated with
the introduction of existing and emerging technologies to improve fuel
economy, the Committee conducted what it called ``break-even''
analysis. That is, the Committee identified packages of existing and
emerging technologies that could be introduced over the next 10 to 15
years that would result in fuel economy improvement up to the point
where further increases in fuel economy would not be reimbursed by fuel
savings. Size, weight and performance characteristics of the vehicles
were held constant. The technologies, fuel consumption estimates, and
cost projections described in Chapter 3 were used as inputs to this
These break-even calculations depend critically on the assumptions
one makes about a variety of parameters. For the purpose of
calculation, the Committee has assumed that: (1) gasoline is priced at
$1.50/gal; (2) a car is driven 15,600 miles in its first year, after
which miles driven decline at 4.5 percent annually; (3) on-the-road
fuel economy is 15 percent less than the Environmental Protection
Agency's test rating; and (4) the added weight of equipment required
for future safety and emission regulations will exact a 3.5 percent
fuel economy penalty.
One other assumption is required to ascertain break-even technology
packages--the horizon over which fuel economy gains ought to be
counted. Under one view, car purchasers consider fuel economy over the
entire life of a new vehicle; even if they intend to sell it after five
years, say, they care about fuel economy because it will affect the
price they will receive for their used car. Alternatively, consumers
may take a shorter-term perspective, not looking beyond, say, three
years. This latter view, of course, will affect the identification of
break-even packages because there will be many fewer years of fuel
economy savings to offset the initial purchase price.
The full results of this analysis are presented in Chapter 4. To
provide one illustration, however, consider a mid-size sport utility
vehicle. The current sales-weighted fleet fuel economy average for this
class of vehicle is 21 mpg. If consumers consider only a 3-year payback
period, fuel economy of 24 mpg would represent the break-even level.
If, on the other hand, consumers consider the full 14-year average life
of a vehicle as their horizon, the break-even level increases to 28 mpg
(with fuel savings discounted at 12 percent). The longer the consumer's
planning horizon; in other words, the greater are the fuel economy
savings against which to balance the higher initial costs of fuel
The Committee cannot emphasize strongly enough that the break-even
fuel economy levels identified in Tables 4-2 and 4-3 in Chapter 4 [NRC
Report] are NOT recommended fuel economy goals. Rather, they are
reflections of technological possibilities, economic realities and
assumptions about parameter values and consumer behavior. Given the
choice, consumers might well spend the money on other vehicle
amenities, such as greater acceleration or towing capacity, rather than
on the fuel economy break-even technology packages.
There is a marked inconsistency between pressing automotive
manufacturers for improved fuel economy from new vehicles on the one
hand and insisting on low real gasoline prices on the other. Higher
real prices for gasoline, for instance, through increased gasoline
taxes-would create both a demand for fuel-efficient new vehicles and an
incentive for owners of existing vehicles to drive them less.
The Committee identified externalities of about $0.30 per gallon of
gasoline, associated with the combined impacts of fuel consumption on
greenhouse gas emissions and on world oil market conditions. These
externalities are not necessarily taken into account when consumers
purchase new vehicles. Other analysts might produce lower or higher
estimates of externalities.
There are significant uncertainties concerning the societal costs
and benefits of raising fuel economy standards for the light-duty
fleet. Uncertainties include the cost of implementing existing
technologies or developing new ones; the future price of gasoline; the
nature of consumer preferences for vehicle types, performance, and
other features; and potential safety consequences of altered standards.
The higher the target for average fuel economy, the greater the
uncertainty about the cost of reaching that target.
Raising CAFE standards would reduce future fuel consumption below
what it otherwise would be; however, other policies could accomplish
the same end at lower cost, provide more flexibility to manufacturers,
or address inequities arising from the present system. Possible
alternatives that appear to the Committee to be superior to the current
CAFE structure include tradable credits for fuel economy improvements,
feebates,\3\ higher fuel taxes, standards based on vehicle attributes
(for example, vehicle weight, size, or payload), or some combination of
\3\ Feebates are taxes on vehicles achieving less than the average
fuel economy coupled with rebates to vehicles achieving better than
average fuel economy.
Changing the current CAFE system to one featuring tradable fuel
economy credits and a ``cap'' on the price of these credits appears to
be particularly attractive. It would provide incentives for all
manufacturers, including those that exceed the fuel economy targets, to
continually increase fuel economy, while allowing manufacturers
flexibility to meet consumer preferences. Such a system would also
limit costs imposed on manufacturers and consumers if standards turn
out to be more difficult to meet than expected. It would also reveal
information about the costs of fuel economy improvements and thus
promote better-informed policy decisions.
The CAFE program might be improved significantly by converting it
to a system in which fuel economy targets depend on vehicle attributes.
One such system would make the fuel economy target dependent on vehicle
weight, with lower fuel consumption targets set for lighter vehicles
and higher targets-for heavier vehicles, up to some maximum weight,
above which the target would be weight-independent. Such a system would
create incentives to reduce the variance in vehicle weights between
large and small vehicles, thus providing for overall vehicle safety. It
has the potential to increase fuel economy with fewer negative effects
on both safety and consumer choice.
Above the maximum weight, vehicles would need additional advanced
fuel economy technology to meet the targets. The Committee believes
that such a change is promising, but requires more investigation than
was possible in this study.
If an increase in fuel economy is effected by a system that
encourages either downweighting or the production and sale of more
small cars, some additional traffic fatalities would be expected.
However, the actual effects would be uncertain and any adverse safety
impact could be minimized, or even reversed, if weight and size
reductions were limited to heavier vehicles (particularly those over
4,000 lb). Larger vehicles would then be less damaging (aggressive) in
crashes with all other vehicles and thus pose less risk to other
drivers on the road.
Advanced technologies--including direct-injection lean-burn
gasoline engines, direct-injection compression-ignition (diesel)
engines, and hybrid electric vehicles--have the potential to improve
vehicle fuel economy by 20 to 40 percent or more, although at a
significantly higher cost. However, lean-burn gasoline engines and
diesel engines, the latter of which are already producing large fuel
economy gains in Europe, face significant technical challenges to meet
the Tier 2 emission standards established by the Environmental
Protection Agency under the 1990 amendments to the Clean Air Act, and
the California low emission vehicle (LEV II) standards. The major
problems are the Tier 2 emissions standards for nitrogen oxides and
particulates and the requirement that emission control systems be
certified for a 120,000-mile lifetime. If direct-injection gasoline and
diesel engines are to be used extensively to improve light-duty vehicle
fuel economy, significant technical developments concerning emissions
control will have to occur or some adjustments to the Tier 2 emissions
standards will have to be made. Hybrid electric vehicles face
significant cost hurdles, and fuel-cell vehicles face significant
technological, economic, and fueling infrastructure barriers.
Technology changes require very long lead times to be introduced
into the manufacturers' product lines. Any policy that is implemented
too aggressively (that is, in too short a period of time) has the
potential to adversely affect manufacturers, their suppliers, their
employees, and consumers. Little can be done to improve the fuel
economy of the new vehicle fleet for several years because production
plans already are in place. The widespread penetration of even existing
technologies will likely require 4 to 8 years. For emerging
technologies that require additional research and development, this
time lag can be considerably longer. In addition, considerably more
time is required to replace the existing vehicle fleet (on the order of
200 million vehicles) with new, more efficient vehicles. Thus, while
there would be incremental gains each year as improved vehicles enter
the fleet, major changes in the transportation sector fuel consumption
will require decades.
Because of concerns about greenhouse gas emissions and the level of
oil imports, it is appropriate for the federal government to ensure
fuel economy levels beyond those expected to result from market forces
alone. Selection of fuel economy targets will require uncertain and
difficult trade-offs among environmental benefits, vehicle safety,
cost, oil import dependence, and consumer preferences-trade-offs the
Committee believes rightfully reside with elected officials.
The CAFE system, or any alternative regulatory system, should
include broad trading of fuel economy ``credits.'' The committee
believes a trading system would be less costly than the current CAFE
system; provide more flexibility and options to the automotive
companies; give better information on the cost of fuel economy changes
to the private sector, public interest groups, and regulators; and
provide incentives to all manufacturers to improve fuel economy.
Importantly, trading of fuel economy credits would allow for more
ambitious fuel economy goals than exist under the current CAFE system,
while simultaneously reducing the economic cost of the program.
Consideration should be given to designing and evaluating an
approach with fuel economy targets that are dependent on vehicle
attributes, such as vehicle weight, that inherently influence fuel use.
Any such system should be designed to have minimal adverse safety
Under any system of fuel economy targets, the 2-fleet rule for
domestic and foreign content should be eliminated.
CAFE credits for dual-fuel vehicles should be eliminated, with a
long enough lead-time to limit adverse financial impacts on the
To promote the development of longer-range, breakthrough
technologies, the government should continue to fund, in cooperation
with the automotive industry, pre-competitive research aimed at
technologies to improve vehicle fuel economy, safety, and emissions. It
is only through such breakthrough technologies that dramatic increases
in fuel economy will become possible.
Because of its importance in the fuel economy debate, it is
desirable to clarify the relationship between fuel economy and safety.
The Committee urges the National Highway Traffic Safety Administration
to undertake additional research on this subject, including (but not
limited to) a replication using current field data of its 1997 analysis
of the relationship between vehicle size and fatality risk.
Senator Kerry. Well, Chairman Portney, thank you very much
for that statement, and I want to thank you particularly for
the work of you and your committee in helping us to have a
framework from which to begin to grapple with this issue.
Without objection, your full comments will be placed in the
record and I thank you for that, and any subsequent text or
additions you would like to submit also will be included.
I want to have adequate time, and I know 5 minutes is
always a squeeze, but we will limit ourselves to 5 minutes each
for the first round of questions.
Chairman Portney, you talked a little bit about this, but I
want to come back at it. The report cites a finding that the
distinction between passenger cars and light trucks as defined
in the current provisions has broken down, and I wonder, are
you making a recommendation to us? Should we merge those
Dr. Portney. No. And again, when I conclude here, I would
like to give my fellow members an opportunity to speak to this,
but no, we are not necessarily urging that the distinction be
abolished altogether. What we are saying, it was quite
understandable back in the mid-1970's when this distinction was
created, because I think people in Congress, you and your
colleagues tended to think of a certain class of vehicles as
being used as passenger vehicles and other vehicles, vans,
being used by plumbers and electricians and workmen and women,
and the same thing was true with pickup trucks.
At that time, I don't think anybody envisioned that
vehicles would begin to be built on truck frames that would
essentially become passenger vehicles that would be used the
same way cars were used in the past, not as work vehicle, just
bigger lines of cars. And the fact that a separate standard was
established at that time, I don't think the committee
necessarily feels caused the shift to SUVs, but at that time
there began to be a demand for large, more family friendly
vehicles, and I think what happened was the SUV sort of arose
as a natural consequence of that decision, and because they
have become so overwhelmingly popular because of the
multiplicity of uses that they make possible, what has happened
obviously is now that they have become half of all vehicles
sold in the United States as they will be this year for the
first time, we have so many more vehicles that have to meet the
Senator Kerry. Would you agree that there is a loophole,
and somehow we need to create a definition that works to either
improve its coverage or put some sort of restraint in the
definition with respect to passenger use? Do we need some
Dr. Portney. Sure. Loophole sounds pejorative. There is a
distinction and an attempt, at least one counterproductive
objective, but let me let my fellow members comment.
Senator Kerry. Dr. Wise, did you want to be heard?
Dr. Wise. I would just like to mention the weight based
standard that we talked about that we think might be desirable
to look seriously at because that distinction goes over a range
from cars to trucks, and we didn't have time to fully explore
that, but I think the committee would not support the idea of
making one number a standard for both cars and trucks.
Senator Kerry. Understood. We were intrigued by the weight
based concept. I think it has certain merit, and I am sure my
colleagues may pursue that more. Dr. Greene, did you want to
Dr. Greene. I just wanted to add that we do say that the
distinction is broken down, and if you look at the concept of
fuel economy improvement estimates that we see based on
technologies, there are far greater potentials for improving
the fuel economy of light trucks than of cars, and in part this
may be due to the different treatment they have received under
the current law.
Senator Kerry. Do you want to share with us some of the
ways in which you think that could be most easily achieved?
Dr. Greene. Improving the fuel economy of trucks?
Senator Kerry. Yes.
Dr. Greene. Well, we have tables in Chapter 3 which list a
whole variety of technologies. Most of these have to do with
improving the efficiency of engines and transmissions, going to
six-speed transmissions, use of continuously variable
transitions on smaller trucks, various kinds of valve train
technology including automated valve timing technology. Also
cylinder deactivation for larger engines, the kind of engines
that are found in trucks can be very effective in fuel economy.
Most of the time the vehicle does not require anywhere near all
of the maximum horsepower that it has.
Senator Kerry. Let me just ask quickly, while that's true
of so many vehicles we make, and we have vehicles capable of
going 120 miles an hour while the speed limit is half of that
or somewhere close, but that again appears to be a consumer-
driven phenomenon or preference.
You focused on improvements in fuel economy that can pay
for themselves in fuel savings over the life of the vehicle. I
thought it was interesting because, as in any model, that
analysis depends on the assumptions. You considered only
certain technologies, and there were some other limitations. I
am particularly concerned about the time assumption that you
put down. The report says that the results are very sensitive
to what we assume the consumer's payback period is on a car.
Can you say why the panel developed the break-even fuel
economy model? It seemed a little strange that anyone should
expect pay back in 3 years? Dr. Lund, do you want to start with
Dr. Lund. Well, I can certainly start, I can give you my
interpretation of that. The issue here has to do with how
people will respond to the price of the new technology. If they
really take a 14-year horizon, then you have 14 years to sort
of amortize the initial investment they are making in the new
technology. People don't think that far ahead, maybe they only
think 2 or 3 years ahead, then they have much less time to
amortize that cost and they say, oh, a thousand bucks, I need
to recover that in three years.
So we said, this has to do with the acceptability of this
technology to the consumer and whether they will buy it if it's
Senator Kerry. Dr. Greene, and then my time is up.
Dr. Greene. Thank you, Senator. I would like to say
something about this because I think this is the single most
misunderstood aspect of our study. I have read a lot of news
reports on it and I have yet to read any newspaper that got
this break-even analysis right, and that must be our fault
because they couldn't possibly all get it wrong.
Every news report interprets the break-even analysis as the
point at which the fuel economy level produces savings over the
life of the vehicle that exactly equals the price, additional
price of the fuel economy technology, and that's not correct.
For every fuel economy increase shown in our Table 4-2 and 4-3,
the value of the fuel savings over the life of the vehicle far
exceeds the increase in vehicle price, and often by twice as
much. At the break-even point, it is the point where the price
increase of the last increment of fuel economy equals the fuel
savings produced by that last increment of fuel economy.
Senator Kerry. In other words, it's a curve, and there is a
specific point in the curve you are referring to, but the curve
summarizes the entire gain. Is that what you are referring to?
Dr. Greene. You are essentially accumulating a number of
fuel economy technologies when you arrive at that point for
which the value of the savings exceeds the price.
Senator Kerry. Does it continue beyond that, in terms of
Dr. Greene. Well, no, you don't. You stop there in our
break-even analysis. I brought versions of examples 4-3 and 4-2
that show the value of fuel savings alongside the costs. For
example, increasing the fuel economy of a mid-size SUV by 34
percent costs a little over $1,000, but the estimated value of
lifetime fuel savings is a little over $2,000.
And additionally, while we identified in our report values
for greenhouse gas emissions and values for release of local
chemicals, we did not include those values in this table.
Senator Kerry. Thank you.
Dr. Wise. Can I explain it further?
Senator Kerry. Take just a minute, because I am trying to
stay on our limits here.
Dr. Wise. The way you look at this is the very first
increment of technology you add adds more value than the costs
to put it in, and then it successfully gets proportionately
less and less until you get to the break-even point where the
cost exactly equals what you saved. So it sort of accumulated
first increments of technology that were worth so much, that is
the reason why total savings is greater than the cost.
Senator Kerry. Thank you very much. We're going to go just
in the order of Senator Bingaman, Senator Burns, Senator
Murkowski, Senator Feinstein, and then Senators Allen, Smith
Senator Bingaman. Thank you all very much for all your work
on this report. One of the suggestions I have heard by some is
that the way to increase fuel efficiency standards is to take
each manufacturer essentially and require a percentage
improvement in their overall fleet. Any of you have a reaction
to that, whether that would be a logical approach or illogical?
Dr. Portney. I think the Committee was fairly unanimous and
I hope the report is clear in saying that a so-called uniform
percentage increase approach would be very unfair and much less
good than other ways to do this and the reason is that it would
require the biggest additional percentage increase on the
companies that already have the best fuel economy, so in a
sense it is sort of punishing the innocent and for that reason,
we think that while it may have some logic in terms of
simplicity, what's required for everybody to do the same
percentage amount, I think we all think it would be quite
inequitable and in a sense one of the least preferred
approaches to improving the fuel economy of the fleet.
Senator Bingaman. Let me follow up and ask about the
tradable credit that you're proposing, and how that would work.
Who would you start by giving credits to? On what basis? Do you
give credits to companies? I guess where I'm headed in this
question is, does this tradable credit program wind up doing
exactly what you said you don't think would be fair? Do you
wind up giving credits out on the basis of who has already made
progress and who was has not?
Dr. Portney. No. In fact, Senator Bingaman, I think we
probably think it would have opposite effect for the following
reason: If it turns out that those auto companies that produce
cars currently that are well above their CAFE standard, either
in the passenger car or the light duty truck segment, it's
probably because they are very clever technologically.
One problem with the current system is that you have no
incentive to improve the fuel efficiency of your vehicles if
you're already above the standard. However, under a credit
system, if you were to improve your fuel economy still further,
even though you were above the system, you now have something
that you can sell to companies that may be struggling to bring
their fleet up, if they are below the standard, that are
struggling to bring their fleet up to that standard.
So one of the real advantages is it would reward the
technologically superior companies because they would have an
incentive to continue to innovate.
Senator Bingaman. Okay. Let me ask Dr. Green, you just said
that in this first appendix on the report, you dissent from the
view which was described. I gather the majority view on the
Committee is that fatalities would have declined much more had
the downweighting and downsizing not occurred.
Dr. Greene. Correct.
Senator Bingaman. Could you just describe your point of
view on that?
Dr. Greene. Actually, Maryann Keller and I found it
necessary to write a dissent, because we think that the
evidence of a link between improving overall fuel economy and
traffic fatalities doesn't stand up to a robust analysis.
First of all, there is no correlation between the overall
fuel economy of passenger cars and light trucks, and highway
fatalities. Considering the entire period of time from before
the fuel economy standards were put in place, say in 1967, to
1999, there is no statistically significant relationship
between actual light duty fuel economy and annual traffic
fatalities. I have been doing statistical analysis for 25
years, and I can tell you that those two factors are about as
uncorrelated as they could possibly be.
However, several studies have found relationships between
vehicle size and weight and traffic fatalities, including the
one used by the majority to make its impact estimates. These
studies suffer from two fundamental flaws that are explained in
greater detail in the dissent than I can do here.
First, none of the studies relates changes in weight and
size that actually occurred as a result of fuel economy
improvements to traffic fatalities. Instead, they rely on the
assumption that the variation of the size and weight in an
existing fleet of vehicles represents the changes that would
occur over time if fuel economy were improved, but that's not
The assumption implies that as mass is reduced or capacity
is reduced, a six-passenger car would become a five-passenger
care, a subcompact would become a two-seater, a large van would
become a minivan and so on, but that's not what happened.
Instead, antiquated technologies like chassis on the frame was
replaced by a unibody construction, rear-wheel drive was
replaced by front-wheel drive, cast iron engines by aluminum
blocks, low strength steel was replaced by high strength steel
and so on. The vehicles didn't just shrink, their designs
changed in important ways.
Second, studies based on statistical analysis show that
fatality data are highly susceptible to spurious correlations.
One cannot be sure whether the fatalities associated with
smaller lighter vehicles are truly the result of the size and
weight of the vehicles or of the behavior of the people who
drive them at the places and times they are driven. It is
notoriously difficult to control for such factors in safety
analyses and we think that most safety experts would agree that
the exposure data you would need to do that are far from
My final point. A 1996 National Academy Committee of safety
and statistical experts convened to review the very methods
that the majority used to predict the impacts of vehicle size
and weight on traffic fatalities, and specifically warned
against what the majority has done because of uncertainties and
methodological flaws. The 1996 Committee also explicitly stated
that they believed the defects in the methods and data were not
There is no fundamental scientific reason why increasing
fuel economy should be deadly compensated. We are saying,
therefore, because increasing fuel economy does mean completely
redefining vehicles in major increases, and whenever you do
that, safety is always a concern, so vigilance and caution are
I thank you for the opportunity to state that.
Senator Bingaman. Thank you.
Senator Kerry. Thank you.
Senator Burns. Thank you, Mr. Chairman. I just have a
couple questions here and I want to get into the report a
little deeper. One of the findings of the report is that
raising CAFE standards would reduce fuel consumption. However,
other policies could achieve the same end at a lower cost.
Could you give me some examples of those alternative ways?
Dr. Portney. Sure. I will give you an example of one that I
am sure you all would be crazy about, higher gasoline taxes.
And the reason I say that is that increases in gasoline prices
not only create an inducement for new car buyers to buy more
fuel efficient cars and an inducement for new car purchasers to
buy more fuel efficient cars, we also create a strong incentive
for people who have existing cars on the road. And remember,
212 million vehicles on the road now, only 16 million new
vehicles sold each year, so that's one of the effects of higher
Now look, some of my fellow Committee members were born at
night, but not last night, and we understand full well what the
downside is to higher gasoline prices. That's the reason that
the CAFE program is really at best the second best program, but
it's another effort to try to address this issue of fuel
consumption without touching the price of gasoline, which
obviously is politically quite controversial.
Senator Burns. Anyone else want to comment on any other
alternative ways other than just higher taxes or higher prices?
Dr. Greene. There are several. The tradable credit system
we recommend, in theory would be less costly. Also, we don't
talk about the rebate systems, but those have been proposed
where essentially inefficient vehicles are taxed and efficient
vehicles are subsidized. Those are other possibilities.
Senator Burns. You found that CAFE standards and fuel
prices combined contributed to the increase in fuel efficiency
of vehicles between 1970 and 1992. Can you tell me whether the
efficiency is due to the fact that fuel prices went up or the
CAFE standards, or at least which part can be attributed to
Dr. Greene. Well, the Committee said that both were
responsible, and we did not try to apportion exact amounts.
Dr. Portney. And Senator Burns?
Senator Burns. Yes?
Dr. Portney. In the same way we felt both contributed to
improvements in the fuel economy, both also contributed to a
pretty rapid downsizing and downweighting, which the majority
of the Committee felt pretty comfortable in saying had these
adverse effects on safety too. We couldn't parcel out those
effect on either the pro side or the con side.
Senator Burns. Just a follow-up question. Does the National
Highway Safety and Transportation Administration have the
authority under existing law to set CAFE standards?
Dr. Portney. My understanding is they have the authority to
set CAFE standards for trucks. CAFE standards for cars were set
by Congress in the Energy Policy and Conservation Act, and I
think that authority still resides with Congress for passenger
cars. NHTSA has the authority for light duty trucks.
Senator Burns. Thank you very much.
Senator Kerry. Thank you, Senator Burns.
Senator Feinstein. Thanks, Mr. Chairman. In reading your
written text, you point out in the paragraph that begins with,
``the Committee concludes that significant improvements in fuel
economy are quite possible at reasonable costs,'' and then go
on to detail the variable valve lift and timing, and actually
get an 8 percent reduction with continuous variable
transmissions, 4 to 8 percent, and mention that other
technologies will be available for wide scale use within 15
If you look at Senator Snowe's and my legislation to close
the SUV light truck loophole, with the technology that is here
in a reasonable and cost effective way, what is the length of
time that you would advise that we provide in that legislation?
Dr. Portney. That's a very good question and I'm not trying
to hedge my answer, it's a little--if we had had more time and
perhaps more resources, I think we might not only have been
able to say here's the break-even fuel economy level and what
it would cost, we might have been able to sort of show how much
you could get at various stages along the way. But the problem
was, you had us on a pretty short time leash to complete this
report and in addition to looking at those technological issues
we had safety issues to look at, a variety of concerns about
employment impacts and other things and frankly, we just
weren't able to say how much of it could you get at what stages
along the way to this break-even level.
Senator Feinstein. Would I be right in assuming that 15
years is the out-year limit?
Dr. Portney. Yes, I think we're within 15 years, and I
think every member of the Committee would agree that it would
be possible to get some improvements in fuel economy probably
beginning 3 or 4 years from now. If I could, and I hope I'm
speaking for my Committee members here, the really important
thing, Senator Feinstein and to the rest of you as well is, if
you look back at the original CAFE program, it calls for a 33
percent improvement in a 4-year period of time, and that's
simply woefully inadequate to bring on the kinds of technology
that need to be brought on.
And that's one reason why to meet those standards,
downsizing and downweighting was really the only strategy in a
short period of time, with the attendant safety effects that a
majority of the Committee thought. The longer the car makers
have to consider this, the more they can use technology rather
than quick downweighting as the preferred way of improving fuel
economy and the easier it becomes and the less expensive.
Senator Feinstein. From reading your report and from
reading the draft report, I really came to the conclusion that
if 6 years is too little, it could well be done between 8 and
10 years. Would you respond to that?
Dr. Portney. That's, in my opinion, that's sort of, that's
being pretty optimistic. You certainly could get something done
in 8 to 10 years, I don't think there is any question about
that. Whether you could get close to the break-even levels that
we talk about here, I'm personally skeptical about but I guess
my fellow panelists ought to speak to that as well.
Senator Feinstein. Dr. Greene.
Dr. Greene. Yes, Senator. You really can't expect the
manufacturers to change the fundamental design plans of the
vehicles until about 2004. In between, the designs are all
locked in place; beginning in that year they could begin to
implement new technologies.
After that, it's a question of how rapidly they have to
replace their production lines, the equipment they use to
manufacture engines and so on.
Senator Feinstein. Can I just inject in this, then why have
they already pledged a 25 percent increase by 2005?
Dr. Greene. Some manufacturers already have plans in place
to improve their fuel economy and I think Ford announced
voluntarily that they would improve the fuel economy of their
sport utility vehicles by 25 percent. So you could expect that
that company has taken a leadership position and they want to
be out in front of anything that you do, but others perhaps are
not in the same position.
And so, if you're looking across the whole industry, 2004
is really the first time you could expect someone to change
their plans. Now they may already have plans to improve but if
you want them to change direction and move towards fuel
economy, they need to have about 3 years lead time, then after
that, it's about 8 years per model design, let's say, and with
engine lines, manufacturing equipment and so on, generally
lasts for 8 to 12 years in a normal process of capital
So this bounding range of 10 to 15 years is a fuzzy way of
saying that they need enough time to change all their
production plans, completely redesign all their vehicles and
implement those changes in an orderly fashion so they don't
have to scrap productive equipment before its useful life is
Senator Feinstein. Could I conclude from those comments of
Dr. Greene, to the other gentlemen then, that 10 to 15 years
would be the prudent number?
Dr. Wise. Yes. And the numbers that we quote for cost in
here make that assumption, that costs would be much higher if
you try to cram the capital stock into a much shorter time
Senator Feinstein. Could I ask a question on the tradable
credits? I don't understand how they would work unless we close
the loophole, because why should a company get a 2-mile credit
for a 22.7 mile per gallon SUV, while another company is
penalized 2 miles for a 25.5 mile per gallon car?
Dr. Portney. I guess I would want to--I'm not sure that the
credit system would work that way. It would work by either
working off of the current base or possibly by raising the fuel
economy goals for both cars and light duty trucks, in other
words, tightening the standard, requiring greater fuel economy.
Senator Feinstein. Then build in the tradable credits?
Dr. Portney. Right, in the same way that the SO2
trading program was driven by overall reductions in
SO2 emissions. Then you said that while companies
had to reduce their emissions, if they wanted to reduce less
they could buy an even greater emission reduction from someone
else. Here if somebody had to reduce their, or increase their
mileage, they could pay somebody else to have an even bigger
increase in mileage.
Senator Feinstein. You also say--I'm sorry. I heard that, I
will cease and desist.
Senator Kerry. We will give you another round in a moment.
Senator Feinstein. Thank you.
Senator Kerry. Senator Allen.
Senator Allen. Thank you, Mr. Chairman, and thanks to these
gentlemen and all those who worked on this very important
issue. There are a variety of issues and concerns and values
There are two areas I would like to talk to and try to get
answers from you in 5 minutes. One, I would like to hear an
elaboration generally on the improvements in technology; you
are talking about engine design materials and so forth, which I
think are important. I also would like to hear some views on
say fuel cells or other energy sources, whether natural gas,
electric vehicles, or fuel cells, looking beyond the way we
look at automobiles right now and looking beyond making them
plastic, or aluminum versus steel, and so forth. All that's
fine. But rather than these absurd out-of-touch, harmful,
punishing ideas such as raising gas taxes just for the heck of
social engineering. You are all very astute individuals but in
the real world that's just flat ignorant as far as I am
concerned and a terrible idea.
But rather than punish people, what if you provide
incentives? Have you considered incentives for people who might
have the more fuel efficient vehicles? I know you want to get
rid of the distinction on the ethanol versus the gasoline, but
what if you did have incentives that get to the values that we
all have here: concern for air quality, less dependence on
foreign oil while not harming safety, and the choice of an
individual to be in a larger vehicle for capacity, for towing
or for the safety of themselves and their children.
Dr. Sharp. First of all, I don't know in terms of how much
you're willing to deplete the Treasury of the U.S. Government,
but you can certainly provide purchase incentives for all kinds
of technologies that you might try to encourage people to buy,
and that could be reinforced if you combined it with the CAFE
standards, a sort of double punch in the economy.
But basically, I think the Committee came to the conclusion
that in terms of widespread use of these new technologies as an
example, or even with the use of an engine that's being driven
and proven in the European markets, that it was not going to be
something that you could get in a cost effective way in the
near term in the U.S. market, even though there is a lot of
promising talk about it and a lot of promising action.
And so, the Committee generally took the view that the
longer-term things ought to keep the Government engaged in them
through the PNGV or some similar program, a research program
for those. What it focused on was what is the near term
availability of real world technologies that might be
encouraged in the marketplace. But certainly, we could have
purchase incentives that will help advance this if you wish,
but defining what those are, administrating that and making
that effective without bankrupting the U.S. Government will
take some skill.
Senator Allen. Well, one would have to determine the value
of that. If there is a value in cleaner air and greater fuel
efficiency while not harming safety, there is a value. Yes,
sir, Dr. Wise?
Dr. Wise. Making cars more fuel efficient doesn't really
change the emissions from the cars, because the emission
standards are set on grams per mile driven, so changing fuel
efficiency is only a secondary effect. What it does affect,
however, are the greenhouse gas emissions, because that's
directly related to the carbon burn.
Senator Allen. Thank you for that distinction.
Dr. Wise. You're welcome.
Senator Allen. Now Dr. Greene had his dissenting exposition
on safety, and I can understand what Dr. Greene is saying,
because per 100,000 miles driven, people, there are fewer
fatalities year after year after year. Some of it is for a
variety of reasons, including--I remember hearing these
arguments amid the speed limit increases and so forth. If speed
limits go up, then the safety decreases.
Dr. Lund, real quickly, since you are with the Insurance
Institute of Highway Safety, rather than talking about theory,
you all have actual experiences. You have to pay claims. You
insure vehicles based, or insurance companies do it, based upon
experiences that actually happen. Could you share with us from
those who have to assess this risk that is actually based on
actual data, the property damage, personal injury, death of
occupants for example, in vehicles based on their size and
weight, could you share with us your findings in those areas?
Dr. Lund. Thank you, Senator, I would be happy to. I think,
as you noted, Dr. Greene said that one cannot be sure of what
the safety effects have been. One cannot be sure of a number of
things in this world. You know, we're sitting here talking
today about a five mile per gallon increase in fuel economy and
the effect that it will have on the climate 50 to 100 years
from now. There is certainly some uncertainty around this as
The Committee has expressed its conclusions in that regard,
we have also expressed our conclusions in regard to safety. The
fact is that there is a lot of data, all of which points to the
increasing risk of serious injury and fatality as vehicles get
smaller. It is extraordinary to believe that you could take
vehicles that, and take say 3 or 400 hundred pounds out of one,
and that that would not affect your safety. It affects your
interactions with larger trucks on the highway, it affects the
likelihood that you suffer damage and in a single vehicle
accident these are straightforward laws of physics.
There are many studies which have looked at the
relationship between car size, car weight and the risk of
serious injury or fatality. Without exception, those studies
find that as you decrease the size of a vehicle, you increase
the risk of injury. This is one of the best known facts in
It is true that the fatality rate has come down year after
year after year. Pardon the pun, that is no accident. We have
taken, as a country, a lot of steps to assure that the safety
of our cars, that the safety of our roadways is improving year
after year. We are removing drunk drivers from the road, we are
increasing seat belt use; all these things are improving
Now, repealing the speed limit goes the other way, as our
data also show, but nevertheless, overall, the positive things
that we've done for safety are outweighing the negatives.
Senator Allen. Thank you, Dr. Lund, and thank you, Mr.
Senator Kerry. Thank you, Senator Allen.
Senator Smith. Picking up where Senator Allen left off, you
stated in your report, I believe, that if fuel economy
regulations were structured in such a way as to encourage the
sale of smaller vehicles, that we can expect more fatalities.
Is that accurate?
Dr. Lund. That's correct.
Senator Smith. And what motivated the change in this view
from 1992 when the last report was put out, that said that the
impacts on safety were ambiguous? Is it just we have more
experience now? We have gathered more data?
Dr. Lund. In actuality, the report in 1992 concluded that
in all likelihood, all other things being equal, there would be
an adverse safety effect if vehicles were downweighted.
However, they noted that there were a number of uncertainties.
In particular, they were concerned about the increasing
population of light duty trucks on the road, they were
concerned that the overall societal impacts of downsizing
hadn't been fully accounted for.
That is, if you downsize a very heavy truck, you increase
the risk of that truck's occupants but on the other hand, you
decrease the risk to occupants of other vehicles with whom that
truck might interact. So they noted these uncertainties.
In 1997, the National Highway Travel and Safety
Administration released a new report which was designed to
answer many of the very uncertainties that the 1992 report
identified, and the majority of this Committee thinks that they
did a pretty good job.
There was a review by a TRB Committee of a draft report of
the NHTSA study, which suggested that the study needed to do a
better job of expressing the uncertainty around its estimates.
And in fact, the author of that study, Chuck Gahain, went back
and he did exactly what he had been asked. He looked at the
sensitivity of the study, the various assumptions, and he
specified the degree of the statistical uncertainty in his
estimates, and I think that is a good job.
Senator Smith. Do you believe that NHTSA has sufficient
authority and expertise to weigh the impacts, for example, on
safety of vehicle technology and consumer preferences, market
economics, all of those things? Are they in a better position
than we to make these judgments?
Dr. Lund. Well, in this case speaking obviously personally,
I think it would be good were the Agency to be given the
authority to look very closely at the issues of improving fuel
economy, how manufacturers are likely to respond to increased
fuel economy, what kinds of strategies they will follow, and to
look at how, to the extent that there is downsizing and
downweighting, that would affect the final safety issues as
well as fuel economy.
Senator Smith. In your recommendations, did you weigh these
factors in applying technologies, safety, consumer preferences?
In making your recommendations, were those things that you
Dr. Lund. Well, I should let Dr. Portney probably speak
again for the Committee, but in my view, we have made no
recommendations for the level of fuel economy increases. We
have tried to set some, put forward some information about what
kind of fuel economy is available to be had without altering
the basic structure and function of vehicles and their
performance, and we captured that in the so-called break-even
We have also tried to review what might be the attendant
costs if fuel economy targets are raised and if they are raised
too rapidly, which may increase downsizing and downweighting
Senator Smith. I feel like we are being put in the position
of Solomon. We are being asked to choose a requirement that
bears on family economies and frankly, family safety, and
consumer preference, and this is a hard baby to split. Well,
baby, that is the wrong metaphor, but we are really making life
and death kinds of decisions here in the name of the
environment, but a lot of human lives could be affected.
And that is, frankly, why I am asking the question. While
we clearly have the authority to make law and set policy, I
wonder if NHTSA is in a better position to be making these
decisions administratively? And my question is: Do they have
the authority currently to do this and to keep pushing the
envelope on fuel economy without sacrificing human life?
Dr. Portney. If I could respond, I think all the members of
this Committee and all of the members of your respective
Committees here would love to live in a world where we can get
much better fuel economy, lower emissions, cheaper vehicles,
bigger vehicles, et cetera, et cetera. That's not the world
that the members of this Committee feel like we live in,
though, and that's why we felt like the best service we could
do for you is to give you some indication of what we thought
the trade-offs were.
And again, to go to something I said at the start, we have
never been elected, with the exception of Phil Sharp, a former
Congressman, the rest of the members of the Committee have
never been elected to anything, and I really feel like that's
why you fellows run for Congress and it's to make these
difficult decisions. You are the representatives of the people
and you are their voice when these kind of trade-offs have to
Senator Smith. I know my time is up, but did you find in
your evaluations anything that could be done to the cars
currently on the road that will probably be on the road for
another 20 or 30 years? Anything that we can do to increase
their mileage now? Are there any technological fixes out there
that we could get to in the short run?
Dr. Portney. Well, other than Senator Allen's favorite, the
gasoline tax, no. I mean, less facetiously, the kind of
inspections that they have to go through now that are part of
the annual emissions tests. I mean, if a car is in better tune,
which it sometimes has to be to pass the emissions tests, then
it's going to get better fuel economy, there is no question
So more frequent tune-ups, again, and recognizing our
naivete, I hope not ignorance, I hope our naivete, if gasoline
prices are higher, then people have an incentive to keep their
cars in better tune as well as to search for more fuel
efficient cars. But I mean, that's not a recommendation on our
part, it's just an observation.
Senator Kerry. Thank you, Senator Smith. I can see the
headlines tomorrow, ``Virginia Senator calls Europeans
ignorant,'' or maybe worse than that.
I wonder if we are making too much of this. Let me phrase
this very carefully. Safety is paramount. We are all concerned
about safety, and we need to make some judgments about it. But
we doubled the efficiency of our automobiles in going up to 27
miles per gallon and no one has made a judgment, as a whole,
that we are not safer. So I would say to my colleague that when
you are talking about closing the light truck loophole, and the
light trucks are already the heavier vehicles on the road which
are causing problems for the others that are moving to the
higher standard, it is hard to envision that you are going to
make the light trucks less safe than the other folks on the
road by asking them to meet the same standard. So a proposal
that suggests closing the loophole, it seems to me, is not
enough to bring you down in safety. Is that a fair judgment?
Dr. Portney. Well, with all due respect, let me repeat the
very first point I made about our Committee's recommendation,
because some Senators have come in since then and I want to be
very clear about this. These break-even fuel economy levels
that we have identified would be significant increases in the
fuel economies enjoyed now by the vehicles that we look at, and
we make it very clear that these are improvements that are
possible holding size, performance and weight constant.
Actually we have seen a little bit of increase in weight. So
that, it's technologically possible to get these significant
improvements in fuel economy in both the passenger fleet and
even more so in the light duty truck fleet, without downsizing
and downweighting. So it's a technological possibility, no
Senator Kerry. So we do not have to make the Solomon's
choice the Senator referred to in achieving that? Are you
saying yes, Dr. Sharp?
Dr. Sharp. I think you are absolutely correct. If you were
to go to the extreme and go through this aggressively fast,
then you would increase the risk of downsizing.
Senator Kerry. But if you do what we are currently talking
about, Dr. Greene, you agree to that?
Dr. Greene. Yes. I think there's nothing in our report that
Senator Kerry. Let me come back. Even if you accepted the
downsizing, I want you to do this not as a matter of what you
said before, but just follow with me in a different line of
thinking. It is the trucks and heavier vehicles that crash into
a lighter vehicle that has become the new motivation for people
to go out and buy larger vehicles. We have a counter-incentive
in the marketplace today, folks. We are driving people towards
buying heavier, more fuel-inefficient vehicles because they
feel threatened by the big ones and the theory is, well, I have
to have a big one too, so I feel safer.
Dr. Portney. That's correct.
Senator Kerry. Now if in fact we are requiring the light
truck vehicles, the trucks that have become passenger cars, to
act more like passenger cars, you are not going to be putting
those light passenger cars at risk. You are equalizing what
Dr. Greene. The Committee agrees with that principle.
Senator Kerry. I just want to establish this very clearly
for the record so I am not confused when approaching this
point. Let me go a step further.
Is there an analysis with respect to the European
experience and the Japanese experience, where they have both
smaller trucks and smaller vehicles, as to what the relative
safety is between them and us?
Dr. Lund. We have done no analysis for this particular
Senator Kerry. Don't you think it would be interesting to
understand? I mean, they seem to be doing pretty well with
smaller vehicles, lighter vehicles and with much greater fuel
efficiency available to them.
Dr. Lund. It is quite difficult to make comparisons across
different cultures, because there are many differences between
say the average German motorist and vehicle and the average
American. The fact is that when you have similar types of
roadways, say interstate and highways for comparison, we find
that the fatality rates in the United States are in fact lower
than they are in those countries.
If you try to compare without having some fairly standard
units, you run into problems with that group. Europeans don't
license their youngsters until they are older, 17, even 18. It
can be very expensive to get a license, which slows licensure
down even further. They have 95 percent belt use; we are
struggling to exceed 70 percent belt use.
So there are a lot of problems in making these kinds of
cross-cultural comparisons, but when we do look at them at
things that we think are comparable, we find that the United
States is doing a good job and our vehicles are safer.
Senator Kerry. Well, I just thought it was important to try
to understand where we are with respect to what information is
available to us in terms of safety issues. So yes indeed, if we
went too far too fast, I do not think we want to push that
envelope. But I think what we are talking about now remains
well within the realm of reasonableness.
In the July 17 New York Times, it reported the findings of
your draft report, and according to the Times, you then
suggested that it would be possible to raise fuel economy by 8
to 11 miles per gallon within 6 to 10 years, but the final
report then moves it back to 15 years, which was about a 33 to
50 percent longer time range. What was the basis for suddenly
expanding the time frame between the draft report and your
Dr. Portney. Actually, I'm glad you asked, because that's a
question that's come up a lot, as you know. The way I want to
explain this is the following. Imagine that you were working
with 12 other of your colleagues to draft something and it was
very important, and you farmed it out so that each of you were
going to do one-thirteenth of this report. And 2 weeks before
the big report was due, everybody came together and for the
first time had an opportunity to read what everybody else had
written, and at the same time you had comments from nine of
your other colleagues who wanted also to comment on this, and
then you had 2 weeks to put the final report into place.
Under those kind of circumstances, I'm sure you could
understand that some mistakes would be made. People saw for the
first time what other parts of the report looked like, and it
was literally the day that that story leaked in the New York
Times that we came together for the first time having all read
what was in that report, and having had the benefit of nine
outside anonymous reviewers' comments. And so under that set of
circumstances, I think it's understandable that things were
changed from the draft that got leaked in a number of respects,
and that's the reason why.
Frankly, there were mistakes in there because we were
rushing to finish under a lot of pressure, hurry up and get
Senator Kerry. There were no telephone calls from any
industry or their representatives specifically weighing in?
Let me just say also, so I establish the rules here for
myself and others, there is a vote that just started, they have
two votes now, and I think we should try to get through the
second round of questions, and then probably because of the
interference of the voting, wrap it up. So if you can just
quickly answer it and then I will close.
Dr. Sharp. Senator, just to indicate, there was no dispute
in the Committee about the change in the report on that.
Several people in different groups met and agreed that it was a
mistake the way it was originally made, and that is a summary
statement that is not reflected in the final report.
Senator Kerry. That is fine, I accept that. I was just
curious and wanted to clear it up and I appreciate the answer.
Senator Bingaman. I just have one other question. There is
a chart you have in here, Figure 2-4, on page 2-6 of your
report. It is entitled Passenger and Light Truck Fuel Economy,
1965 through 2000. Now as I read that, it has the two top lines
there, one for new cars, one for new light trucks, and those
lines go up substantially between the period 1978 through about
1989 or '88, something like that and then they level off, the
way I read this chart.
I would conclude just from the little I know about this
subject, that fuel economy in passenger and new cars and new
light trucks during that period was improving, because we had
mandated improvements, and that as soon as the mandates for
improvements stopped and the Federal law on the issue froze,
improvements quit. Is that a fair reading of that chart?
Dr. Portney. With one amendment. During that same early
period where you see the line going up from left to right most
steeply, remember that not only did you have CAFE standards in
place for the first time, but you had very very significant
gasoline price increases, and that clearly was providing a
market signal to get better fuel economy.
But the Committee I think was pretty unanimous in saying
that subsequent to that, when the real price of gasoline began
its long dramatic slide, we think, although there is not proof
for this, but we are pretty confident that fuel economy would
have sunk below the level of the standards had the CAFE program
not been put into place.
Senator Bingaman. Thank you very much.
Senator Kerry. Senator Feinstein.
Senator Feinstein. Thanks very much. Gentlemen, you did not
quite answer Senator Kerry's question. He asked if there had
been any phone calls about the initial draft report.
Dr. Portney. Sure, and again, I will let my fellow
Committee members speak to that. I got phone calls from people
in the auto industry, I got phone calls from the people in the
environmental advocacy community, I got phone calls from
academics who had studied this and written about it. And not
one of those phone calls, Senator Feinstein, was of the nature:
``you have to change this or you better do that.'' It was first
of all: ``Paul, you told us that we wouldn't be reading about
this in the paper until the Committee had concluded its
report,'' and two, ``Did the report that Keith Brashear
published in the New York Times accurately reflect the status
of the executive summary at that time?'' It was purely
I think you will recall that that table was not exactly
self explanatory. All the calls I got were: ``Help me
understand this, what is this break-even analysis,'' or ``What
does cost effectiveness analysis mean?''
Senator Feinstein. Let me just ask about one sentence that
was deleted that was in the draft report, again carried in the
New York Times. And the quote is: ``Significant fuel economy
gains in all vehicles can be achieved with minimal or no weight
reduction and therefore minimal negative safety implications.''
Why was that sentence deleted?
Dr. Portney. I can't for the life of me tell you. Jeff, do
Dr. Wise. That was because we believed it could be done but
we didn't know whether manufacturers would do it. In other
words, if it was--we believed based on our data that it's
possible technically to do it, and it would be the most cost
effective way to do it. But we can't guarantee that if you
raise the fuel economy standards that manufacturers will
necessarily do it that way.
Senator Feinstein. That is not what the draft report said.
It said that the economy gains can be achieved, it does not say
that the automobile companies will do that, it is just a
scientific statement that based on the science these gains can
Dr. Sharp. I think whether the sentence is the same or not,
the content is the same and the content is exactly as you
stated, it is quite possible for them to do this with the
technology without downsizing and downweighting. CAFE does not
guarantee what strategy they might take, that was the concern
of some members, that that would be confused, but the content
was very very clear, significant gains could be made with
current technologies without downweighting or downsizing, given
Senator Kerry. How much is enough time?
Dr. Portney. 10 to 15 years in the view of the Committee.
Some things are achievable before then, but to implement the
whole suite of technologies that would make possible the fuel
economy gains at the cost we identified, within 15 years.
Senator Feinstein. And if I may, that is what has changed.
I mean, the original report said that this was all possible in
6 or 10 years and then the final report deleted that fuel
economy gains with minimal or no downweighting, and changed the
length of time up to 10 to 15 years from 6 to 10 years. So, to
me, in reading the report, what that said is oh, somebody got
to them and said we cannot do it in this time, or we are not
going to do it in this time, and you yielded to that. I am not
saying you did, I am saying that was just the implication.
Dr. Greene. I think there was a problem we discussed, and
although I didn't agree personally with the other changes, I do
agree with the 6 to 10-year change.
Senator Kerry. We just have one minute for our vote. We
have a little grace period, but as you know, it is not that
long, if they will hold it.
Senator Feinstein. Thank you very much. I will conclude and
I just want to thank you very much.
Senator Kerry. On the table currently are discussions about
bringing light truck vehicles up to the 27.5 miles per gallon
standard applicable to passenger cars. You have indicated you
think that is achievable. There is also discussion of taking
passenger vehicles up to anywhere from 30, 35 or 40 mpg--40 is
I think the highest number. Is 40 mpg achievable reasonably? Is
35 achievable? I know you have not recommended a level, but I
am asking you if that is within the realm of possibility in the
judgment of the Committee.
Dr. Portney. Well, I would say anything is within the realm
of the technical, or technologically achievable. 40 miles per
gallon is 100 percent increase in fuel economy for SUVs and a
45 percent for cars, and there is certainly nothing in our
report that would suggest that that's possible even within a
15-year period, and I think we would all agree that that's
overly ambitious in the time frame that we looked at.
Senator Kerry. Fair enough.
Dr. Greene. We don't consider all the technologies, so
there may be new technologies coming in to speed that up.
Senator Kerry. Agreed. I opened the hearing up very clearly
saying that until you push the curve, you may not know how fast
you can achieve it. I would rather be in the position as a
Senator--if I'm still here in 10 years--of making the judgment,
recognizing if we are not able to make it, perhaps rolling it
back. But we at least must set a target and try, rather than
folding our hand early, and it seems to me that we must try to
push the curve. We have seen what has happened in almost every
other field when we have done that.
I want to thank you. The last thing you need are some of
these headaches. Your public service is much appreciated, and
we are very grateful to you for this. We are going to digest
it, work through it. Our Committee, the Commerce Committee
hopes to proceed forward and mark something up in September
when we get back, and so we may even get back to you
I intend to leave the record open for a week in order to
allow colleagues to submit any questions they may have or for
any further inquiries of staff.
Thank you very much. We stand adjourned.
[Whereupon, at 4:21 p.m., the hearing was adjourned.]