[Senate Hearing 109-1119]
[From the U.S. Government Printing Office]
S. Hrg. 109-1119
REFORMING CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS
SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
MAY 9, 2006
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED NINTH CONGRESS
TED STEVENS, Alaska, Chairman
JOHN McCAIN, Arizona DANIEL K. INOUYE, Hawaii, Co-
CONRAD BURNS, Montana Chairman
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA J. SNOWE, Maine JOHN F. KERRY, Massachusetts
GORDON H. SMITH, Oregon BYRON L. DORGAN, North Dakota
JOHN ENSIGN, Nevada BARBARA BOXER, California
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire MARIA CANTWELL, Washington
JIM DeMINT, South Carolina FRANK R. LAUTENBERG, New Jersey
DAVID VITTER, Louisiana E. BENJAMIN NELSON, Nebraska
MARK PRYOR, Arkansas
Lisa J. Sutherland, Republican Staff Director
Christine Drager Kurth, Republican Deputy Staff Director
Kenneth R. Nahigian, Republican Chief Counsel
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Samuel E. Whitehorn, Democratic Deputy Staff Director and General
Lila Harper Helms, Democratic Policy Director
SUBCOMMITTEE ON SURFACE TRANSPORTATION AND MERCHANT MARINE
TRENT LOTT, Mississippi, Chairman
TED STEVENS, Alaska DANIEL K. INOUYE, Hawaii, Ranking
JOHN McCAIN, Arizona JOHN D. ROCKEFELLER IV, West
CONRAD BURNS, Montana Virginia
KAY BAILEY HUTCHISON, Texas BYRON L. DORGAN, North Dakota
OLYMPIA J. SNOWE, Maine BARBARA BOXER, California
GORDON H. SMITH, Oregon MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia FRANK R. LAUTENBERG, New Jersey
JOHN E. SUNUNU, New Hampshire E. BENJAMIN NELSON, Nebraska
DAVID VITTER, Louisiana MARK PRYOR, Arkansas
C O N T E N T S
Hearing held on May 9, 2006...................................... 1
Statement of Senator Boxer....................................... 16
Article, dated February 2, 2002, from the National Journal,
entitled Gas Mileage: Deal Maker or Breaker? by Margaret
Statement of Senator Cantwell.................................... 13
Statement of Senator Dorgan...................................... 25
Statement of Senator Lautenberg.................................. 9
Statement of Senator Lott........................................ 1
Prepared statement........................................... 1
Statement of Senator Pryor....................................... 21
Statement of Senator Smith....................................... 11
Prepared statement........................................... 12
Statement of Senator Snowe....................................... 23
Cabaniss, Jr., John M., Director, Environment and Energy,
Association of International Automobile Manufacturers, Inc..... 31
Prepared statement........................................... 32
Claybrook, Joan, President, Public Citizen....................... 52
Prepared statement........................................... 54
Friedman, David, Research Director/Senior Engineer, Clean
Vehicles Program, Union of Concerned Scientists................ 61
Prepared statement........................................... 63
Mineta, Hon. Norman Y., Secretary, Department of Transportation;
accompanied by Jeffrey Rosen, General Counsel, USDOT, and
Jacqueline Glassman, Deputy Administrator, NHTSA............... 2
Prepared statement........................................... 5
Letter, dated April 27, 2006, to Hon. Bill Frist............. 3
Reuther, Alan, Legislative Director, International Union, United
Automobile, Aerospace and Agricultural Implement Workers of
America (UAW).................................................. 69
Prepared statement........................................... 70
Sharp, Hon. Philip R., President, Resources for the Future (RFF). 35
Prepared statement........................................... 36
Webber, Frederick L., President and CEO, Alliance of Automobile
Prepared statement........................................... 28
Inouye, Hon. Daniel K., U.S. Senator from Hawaii, prepared
REFORMING CORPORATE AVERAGE FUEL ECONOMY (CAFE) STANDARDS
TUESDAY, MAY 9, 2006
Subcommittee on Surface Transportation and Merchant
Committee on Commerce, Science, and Transportation,
The Subcommittee met, pursuant to notice, at 10:30 a.m. in
room SD-562, Dirksen Senate Office Building, Hon. Trent Lott,
Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. TRENT LOTT,
U.S. SENATOR FROM MISSISSIPPI
Senator Lott. The Committee will come to order. I'm pleased
to convene this morning's hearing on reforming Corporate
Average Fuel Economy standards. Chairman Stevens had indicated
that he would like the Subcommittee to go forward with this
hearing despite the vote taking place on the floor a few
moments ago. And I'm delighted that the Chairman is here, and
that the other Senators are here, and some other Senators
indicated to me, on the floor of the Senate, they'd be coming
I do want to point out that we have many Senators that are
going to be here this morning, a number of very good witnesses,
including the Secretary of Transportation, our friend Norm
Mineta. And I, therefore, ask that all opening statements be
placed in the record at this point, and I'll do the same myself
and that we could go straight to the Secretary.
[The prepared statement of Senator Lott follows:]
Prepared Statement of Hon. Trent Lott, U.S. Senator from Mississippi
Since being introduced in the 1970s, Corporate Average Fuel Economy
(CAFE) standards have been controversial. There has been much debate
about their effectiveness and their effect on safety, consumer choice,
and the automobile industry.
CAFE became so controversial, that it effectively was frozen for
The stand-off over CAFE finally eased with Congress commissioning a
National Academy of Sciences review of the CAFE program that was
released in 2002. Although that study found that CAFE had in fact
reduced energy consumption, the Academy was critical of how the program
was structured and found that there was a negative impact on safety.
Just this spring, the Department of Transportation issued new
reformed CAFE rules for pickup trucks, vans, and SUVs. This rule is a
radical departure from prior CAFE rules in that it applies different
standards to different sized vehicles rather than a uniform standard
across the whole fleet. The Department's approach addresses many of the
criticisms in the Academy's study.
The recent rule did not, however, include new standards for cars.
Those standards have been the same since 1984 and there is considerable
legal ambiguity about the Secretary's ability to increase the
standards. It is clear that the law does not allow the Secretary to
``reform'' CAFE for cars, since that part of the statute is written
Secretary Mineta is here today to discuss his request that these
legal impediments be removed and that the Secretary of Transportation
be given the authority to ``reform'' CAFE for cars.
I believe his request should be carefully considered. The
Department has the technical and scientific expertise to develop a
``reformed'' standard for cars that carefully balances costs and
After this hearing, I hope to work with members of the Commerce
Committee from both sides of the aisle, as well as with other Senators
with an interest in this issue to see if there is enough common ground
to develop a legislative proposal that can be enacted. I am afraid that
if we get sucked into a debate about developing a single mileage
standard, this process will very quickly get bogged down. We should do
something constructive and update the existing cumbersome rule, which
has not been changed since 1984, thereby doing away with the many
worrisome attributes identified by the National Academy of Sciences.
Senator Lott. Mr. Chairman, would you be willing to go
forward on that basis?
The Chairman. That's fine.
Senator Lott. If my colleagues would be willing to do that,
we'll include our statements in the record.
Senator Cantwell. Well, Mr. Chairman, I do think it's an
important hearing, and we're glad that the Secretary of
Transportation is here, and we look forward to his comments. I
do have a statement, but happy to put that into the record and
proceed with the hearing.
Senator Lott. Thank you very much, Senator Cantwell.
Secretary Mineta, we're delighted to have you back before
the Committee, and we're very anxious to hear your thoughts on
this very important issue. Please proceed.
STATEMENT OF HON. NORMAN Y. MINETA, SECRETARY,
DEPARTMENT OF TRANSPORTATION; ACCOMPANIED BY
JEFFREY ROSEN, GENERAL COUNSEL, USDOT, AND
JACQUELINE GLASSMAN, DEPUTY ADMINISTRATOR, NHTSA
Secretary Mineta. Very well, thank you very much. Mr.
Chairman and members of the Committee, thank you very, very
much for the invitation to have this opportunity to discussing
reforming Corporate Average Fuel Economy standards for
Last week, at the President's request, I sent a letter to
Congressional leaders asking for the authority to reform the
structure of the current CAFE program for passenger cars. And I
ask, at this time, unanimous consent that my letter of April
27th to the majority leader be made a part of the hearing
Senator Lott. Without objection, it will be included in the
record at this point.
[The information previously referred to follows:]
U.S. Department of Transportation
Washington, DC, April 27, 2006
Hon. Bill Frist,
United States Senate,
At the President's request, I hereby ask that the Congress take
prompt action to authorize the U.S. Department of Transportation (DOT)
to reform fuel economy standards for passenger automobiles for the
first time. Along with other previously announced energy policies, the
President believes these actions are critical to promoting our Nation's
energy security and independence.
The Administration has already shown strong leadership on fuel
economy. The DOT raised the light truck and sport utility vehicle
standards twice in the last four years, including a recently announced
rulemaking that will save nearly 11 billion gallons of gasoline,
eliminate incentives to make lighter and therefore more dangerous
vehicles, and encourage all manufacturers, not just a few, to deploy
fuel saving technologies.
Our National Highway Traffic Safety Administration (NHTSA) has the
technical expertise to regulate fuel economy in a manner that is cost
effective, based on sound science and safeguards vehicle occupants.
Substantial increases in CAFE standards under the current single
standard approach would increase fatalities on America's highways,
raise healthcare costs and reduce employment. As a result, the
Administration would oppose any increase in passenger car CAFE
standards without corresponding reform.
In addition, it is imperative that CAFE standards be set through an
administrative process based on sound science and data. The
administrative process provides safety and other public interest
groups, the auto industry and the general public an opportunity to
develop and provide NHTSA with policy suggestions and detailed
technical, economic, and other relevant data necessary for reforming
the passenger car CAFE system and setting new CAFE standards.
I commend Congress for their strong interest in improving our
country's energy independence, and I look forward to working with you
to achieve this important objective.
An identical letter has been sent to the Minority Leader of the
Senate, the Speaker of the House of Representatives, and the Minority
Leader of the House of Representatives.
Norman Y. Mineta,
Secretary of Transportation.
Secretary Mineta. Mr. Chairman, this is an important step
toward reducing America's oil demand as passengers account for
some 43 percent of domestic oil consumption. Now, this
Administration has a good record on improving CAFE. Members may
recall that, in 2001, at my request, Congress ended the 6-year
freeze on CAFE rulemaking. Later that year, the National
Academy of Sciences issued a Congressionally-mandated study
that was critical of the CAFE program. Among the report's
criticisms was that CAFE had probably cost between 1,300 and
2,600 lives in one year alone, 1993, because it encouraged
automakers to build smaller vehicles. Paul Portney, the chair
of the committee which wrote the landmark study, said, upon its
release, ``No matter what Congress decides regarding specific
fuel economy targets, our committee is adamant that changes
should be made to shore up the deficiencies in the program.''
In response to this study, I directed NHTSA to begin
reforming CAFE for light trucks. On March 29 of this year, we
completed that reform by issuing a rulemaking that replaced the
single fuel economy standard with an innovative size-based
system. Allow me to explain why basing a fuel economy standard
on a vehicle's size is superior to the current one-size-fits-
First, a size-based system preserves vehicle choice.
Instead of forcing manufacturers to produce smaller vehicles to
comply with these regulations, this approach takes the
automaker's own product-mix projections and applies separate
fuel economy targets to each vehicle based on its footprint.
Under a size-based system, automakers will be able to build
cars that consumers want to buy, but those cars will have to be
more fuel efficient across the board.
Second, a size-based system eliminates the incentive for
automakers to produce smaller and, consequently, less safe
vehicles by encouraging manufacturers to add fuel-saving
technologies to boost fuel efficiency.
Third, a sized-based system ensures that all automakers are
encouraged to use fuel-saving technologies, not just the
manufacturers of larger vehicles.
Our new light-truck standards under the reformed CAFE will
save a record 10.7 billion gallons of fuel. All told, the
Administration has raised CAFE standards for light trucks for 7
consecutive years, from 2005 to 2011. Today, because of our
successful reform of the light-truck CAFE program, we have the
capacity to establish a far more precise, equitable, and safe
CAFE program for passenger cars. However, we currently lack the
legal authority to do so. The original CAFE standard for
passenger cars was set at 27.5 miles per gallon more than 30
years ago, back in 1975. Neither Congress nor the Department of
Transportation has ever increased this standard beyond the
level set in the original statute.
So, it's important that, if passenger car fuel economy
standards are raised, that we make the necessary structural
reforms to avoid compromising safety and causing job loss. If
given the authority to reform CAFE for passenger cars, we will
replace the one-size-fits-all system with a size-based system,
as we did with light trucks. Based on the automaker's
confidential product plans, our experts at NHTSA can
objectively measure how much fuel-saving technology we can
require before the cost outweighs the benefit.
Now, this method of formulating a fuel economy standard is
science-based, subject to review, and is free from the
deficiencies identified in the National Academy of Sciences
study. It's also far more likely to produce an optimal result
than if Congress were to prescribe a standard in a statute. For
this reason, we will not accept an arbitrary statutory increase
under the current passenger car system.
Mr. Chairman, the President does not ask for this authority
lightly. And I am aware that certain automakers are having a
rough time financially, and that thousands of hard-working
Americans have lost their jobs as a result. But this
Administration has also made great strides in improving fuel
economy for light trucks without harming the economy or
compromising safety. And so, I respectfully ask for the
authority to achieve similar gains for the passenger car fleet.
Mr. Chairman, I am ready to take questions.
[The prepared statement of Secretary Mineta follows:]
Prepared Statement of Hon. Norman Y. Mineta, Secretary,
Department of Transportation
Mr. Chairman, thank you for inviting me to appear before this
Committee today to discuss reforming corporate average fuel economy
(CAFE) standards for passenger cars.
On April 27, the President asked Congress for the authority to
reform the structure of the current CAFE program for passenger cars for
the first time in the program's 30-year history. This is an important
step to reduce America's dependence on foreign oil, and is consistent
with President Bush's call to replace more than 5 million barrels per
day of oil imports by the year 2025. Currently, passenger cars account
for 23 percent of domestic oil consumption.
Mr. Chairman, this Administration has a good record on improving
CAFE. Senators may recall that in 2001, at my request, Congress ended
the six-year freeze on CAFE rulemaking. In 2002, the National Academy
of Sciences (NAS) completed a study, at Congress's request, that was
highly critical of the current CAFE program. Among the criticisms
contained in the NAS report was the contention that the CAFE program
probably had cost between 1,300 and 2,600 lives in one calendar year
alone (1993) because it encourages automakers to build smaller vehicles
in order to ``average out'' fuel savings across their fleets. The chair
of the committee wrote, ``. . . no matter what Congress decides
regarding specific fuel economy targets, our committee is adamant that
changes should be made to shore up deficiencies in the program.'' To
correct these longstanding safety and other deficiencies in the CAFE
program, I directed the National Highway Traffic Safety Administration
(NHTSA) to begin reforming CAFE for light trucks based on the NAS
recommendations. Unlike with passenger cars, the Administration does
have the authority to reform CAFE for light trucks.
On March 29 of this year, NHTSA completed its reform of CAFE for
light trucks by replacing the one-size-fits-all system with an
innovative size-based system. Allow me to explain why this reformed
system that bases fuel economy standards on a vehicle's size is
superior to the current ``one-size-fits-all'' approach.
First, a size-based system preserves vehicle choice: Instead
of forcing manufacturers to produce smaller vehicles for
purposes of regulatory compliance, this approach takes the
manufacturers' own product mix projections and then applies
separate fuel economy targets to each vehicle based on its
dimensions. Under a size-based system, automakers will still be
able to build the cars consumers want, but those cars will have
to be more fuel efficient across the board.
Second, a size-based system eliminates the perverse
incentives for manufacturers to produce smaller and more
dangerous vehicles instead of introducing fuel-saving
Third, a size-based system ensures that all manufacturers
are introducing fuel-saving technologies, not only the
manufacturers of larger vehicles.
Our new light truck standards will lead to a safer, more efficient
CAFE program and will save a record 10.7 billion gallons of fuel. This
rule also included large sport utility vehicles (SUVs), such as the
Hummer H2, under CAFE for the first time. All told, this Administration
will have raised CAFE standards for light trucks for seven consecutive
years, from 2005 to 2011.
Today, following our successful overhaul of the light truck CAFE
program and consistent with the recommendations of the NAS, we have the
capacity to establish a far more precise, efficient, and safe CAFE
program for passenger cars, but we do not have the legal authority to
The passenger car fuel economy standard was set in law at 27.5
miles per gallon in the original 1975 CAFE statute. Some of the more
senior Senators may recall that the 27.5 miles per gallon standard was
arrived at by simply doubling what the average fuel economy was in
1975. The passenger car standard was not then, and certainly is not
now, based on sound science or economics.
The original statute did not authorize DOT to change the way the
standard applied to different size cars. Neither Congress nor DOT has
ever increased the passenger car standard beyond the level set in the
original statute. So it is important that if we embark on this course,
we do it right to avoid compromising safety and to avoid causing
economic damage and job loss.
If we are given the authority to reform the CAFE system for
passenger cars, we can improve fuel efficiency by requiring
manufacturers to apply fuel-saving technologies rather than giving them
an incentive to build smaller cars. Based on the automakers'
confidential product plans, our experts at NHTSA can objectively
measure how much fuel-saving technology we can require before the costs
outweigh the benefits. This method of formulating a fuel economy
standard is objective and subject to review during the rulemaking
process. It is also far more likely to produce an optimal result than
if Congress were to prescribe a standard in a statute.
The President and I are committed to improving fuel economy across
the board through an open regulatory process built upon sound science
and economics, but we will not accept an arbitrary statutory increase
under the current passenger car system.
Mr. Chairman, I know that whenever CAFE is debated, it can turn
divisive. When the original CAFE statute was debated, I was a freshman
Member of Congress. I recall well the debates of the 1970s on how best
to conserve fuel and what the impacts would be on the economy. I remind
Senators that CAFE reform will not be without cost. And I am aware that
certain automakers are having a rough time financially, and that
thousands of hard-working Americans have lost their jobs through no
fault of their own because of these financial difficulties.
Mr. Chairman, the President did not ask for this authority lightly.
But this Administration has already made great strides in improving
fuel economy for light trucks. We have the expertise and experience to
boost fuel economy responsibly without needlessly sacrificing safety or
American jobs. I now respectfully ask for the authority to achieve
similar gains for the passenger car fleet.
Senator Lott. Well, thank you, Secretary Mineta. And to my
Senate colleagues that are here, we'll go ahead and have an
opportunity to make a brief statement or ask questions of
Secretary Mineta, and then we'll go to the second panel. I
would ask, though, that you be as brief as you can.
Let me take the prerogative of the Chair just to ask the
first question, then yield to the Chairman of the full
In your letter to Congress and in your testimony here
today, it's clear that you not only want the authority to
increase the CAFE standard, but the authority to reform it.
What is it about the current system that makes you feel like we
need to effectively start over and realign it--or reform it--
for the passenger cars?
Secretary Mineta. Well, typically, the stringency of the
gas mileage efficiency standard is set at a certain amount. And
when the manufacturers have that, they then, in order to meet
that miles-per-gallon standard, generally tend to lower the
weight of the car in order to meet that fuel efficiency
standard. And unfortunately, once you lower the weight of the
car, then fatalities and serious injuries go up.
We feel that we have to reform the performance standards--
as we said in the light-truck rule--based on the footprint of
the vehicle, that would be the width of the vehicle times the
length of the wheelbase.
Senator Lott. It appears to me that you did a good job with
the light trucks. Passenger vehicles are different, obviously,
but based on your statement, you feel like you could come up
with changes that will be as effective or as widely accepted as
your light-truck decision?
Secretary Mineta. Yes, sir, we believe so, because, under
the law, there are four requirements that we have to look at.
One is the maximum feasible fuel efficiency/economy, the need
to conserve fuel, the requirement to save lives, and the fourth
one, in terms of preserving jobs, or the impact on the auto
Senator Lott. You may not have the answer to this, because
it'll depend, I guess, on, you know, the process and getting
the right result. How long, though, do you think this would
Secretary Mineta. Well, there are two parts to that answer,
Mr. Chairman. One is, we have to allow the manufacturers, under
statute, 18 months lead time. The model year is generally
October of a given year. We have to give them 18 months. And
so, that's April--18 months ahead of that model year.
Now, in order for us to come up with that study, in terms
of what would be the fuel efficiency standard, I would assume
that it would take a minimum of 1 year. So, even if we were to
start today, we would have to have the rule out by April 1,
2007, in order to be able to impact on model year 2009. So,
you're talking at least 2-and-a-half years between the 18-month
mandatory, under statute, plus at least 1 year for us to do our
studies. I should have introduced the folks at the table with
me. On my right is Jeff Rosen, our general counsel at the
Department, and on my left is Jackie Glassman, our deputy
administrator of NHTSA.
Ms. Glassman. Yes, as the Secretary mentioned, it would
take us about a year to collect the data from the
manufacturers, go through that data, go through a rulemaking
process, including notice, and then comment period and review
of the comments, in order to put out a final rule applicable to
passenger cars. So, in all likelihood, that would be model year
Senator Lott. Thank you all for being here.
Mr. Chairman, would you like to go with your questions now,
The Chairman. I don't quite get the 2010. I thought it was
going to be 2009.
Ms. Glassman. If we could get a final rule out by April 1,
2007, then that could be applicable to model year 2009.
Beginning now, in June of 2006, that would be a huge feat, to
be able to get the product plans from the manufacturers, review
them, put a notice out, give appropriate time for manufacturers
and others with an interest--public-interest groups--to comment
on the proposal, and come up with a final rule.
The Chairman. Is the cost of change any part of a factor in
these CAFE standards?
Ms. Glassman. Absolutely, sir. We look at the cost to
change. We look at lead-time considerations. We look at the
cost to the economy, the cost to jobs, the cost of lives, in
terms of safety. We look at the Nation's need to conserve
energy. And we balance all of those factors to reach the
maximum feasible level we can possibly set CAFE at, taking into
account the fact that we do not want to cost lives and we do
not want to cost jobs.
The Chairman. And in terms of the light trucks, have you
determined what the increase in cost to the consumer of the new
trucks would be because of your regulations?
Ms. Glassman. Yes, sir. The total cost of our light-truck
rule was about $6.7 billion. The cost to consumers, on average,
was about $200 a vehicle. And the payback period, in terms of
how long it would take people in the reduced cost of fueling up
their vehicles, was about 4-and-a-half years.
The Chairman. Is there any estimate on what the cost is
going to be to the consumer, of compliance with the change in
CAFE for passenger cars?
Ms. Glassman. No, sir, we haven't done that analysis yet.
That's what we would have to do if we were given the authority
to reform the program and raise the standards.
The Chairman. Do you have any standards that have been
adopted in foreign countries that you look at as you go forward
on these standards?
Ms. Glassman. We look at the product plans for the United
States in a number of foreign countries----
The Chairman. No, I mean the standards, as far as
construction and what will lead to the cost savings--I mean,
the fuel savings in CAFE.
Ms. Glassman. There are a number of different approaches in
different countries. In Europe, for example, they have 40
percent diesel vehicles. We don't have that kind of penetration
of diesels and hybrids yet in the United States. In China,
they're using a weight-based system. They have a very different
kind of product mix. So, we really focus more on the products
and consumer choices made in the United States.
The Chairman. Are the CAFE standards affected by the use of
Ms. Glassman. The CAFE standards themselves are not. That
is in law. There is a credit given for the production of dual-
fuel vehicles or vehicles that can run either on gasoline or
ethanol. But, by law, NHTSA is not allowed to consider those
credits when actually setting the CAFE standards.
The Chairman. But will CAFE standards vary for those
vehicles that are built to use a higher amount of ethanol?
Ms. Glassman. They don't vary by vehicle. There's one
standard for a manufacturer's entire fleet. But certainly the
increased use of ethanol will increase fuel economy and help
the overall balance of fuel economy in the United States.
The Chairman. Well, we were told at another hearing that it
is possible for the manufacturers to develop their motors so
that they could use a higher degree of nonfossil fuels. Put it
that way. Does that crank into your CAFE standards calculation?
Am I clear on what I'm saying?
Ms. Glassman. It does if they're being put into the
manufacturer's product plans. We look in the manufacturer's
product plans for whatever time period we're looking at, which,
for passenger cars, would be somewhere between 2009 or 2010
forward, for a few years, and if those kinds of vehicles are
being put into the marketplace in that time frame, then, yes,
we would absolutely be looking at them.
The Chairman. Well, I was told if the Department recognized
the change in the motors that could be made, in terms of CAFE
standards, that a great deal of the savings we want to achieve
could be done just by that alone. You're looking at the overall
construction of the vehicle, including the motor, isn't that
Ms. Glassman. We are. We look at the overall construction
of the vehicles. We look at safety and other emissions
equipment to see how much weight that adds. When we're setting
CAFE standards themselves, we're looking at more short-term
gains from the standard setting. But CAFE itself is a long-term
effort, as is the development of alternative fuel.
The Chairman. But what I'm saying is, we were told we could
move forward faster by just the motor's change. Is that
Ms. Glassman. If the motors are--if those kinds of changes
in the vehicles are being put into the product cycle, then we
would see greater changes, faster.
The Chairman. Thank you.
Senator Lott. Thank you, Mr. Chairman.
Senator Lautenberg, I understand perhaps I was supposed to
go to Senator Cantwell next, and I would be glad to recognize
Senator Cantwell. Well, Mr. Chairman, I understand that
Senator Lautenberg showed up early to try to get on first for
another obligation, so I'll defer to him, and let him ask his
Senator Lautenberg. That's very nice, but I'm not deferring
to anybody else.
Senator Lott. That was a----
Senator Lautenberg. Thanks, Mr. Chairman.
Senator Lott. Comedy is really good this morning. Thank
you, Frank. Go ahead.
STATEMENT OF HON. FRANK R. LAUTENBERG,
U.S. SENATOR FROM NEW JERSEY
Senator Lautenberg. So far, we're doing pretty good, Mr.
Chairman. And I thank you for calling this hearing.
I listened very carefully to the Secretary and the plans
that he'd like to see put into place, but I have a problem with
some of the supporting view. The reason we're doing this, I
understand, is because we've got this enormous pressure now in
the excessive fuel use at these ridiculous prices. I noted that
some are concerned about the crash-worthiness of smaller cars,
and that we might have increases in fatalities if we reform
CAFE. I think the number was 1,300 to 2,600 lives. But I would
wager that the fact that we don't fix our highway hazards, our
bridge deterioration, and our behavioral problems like drunk
driving--we don't do the things that make the roads safer--
causes death and injuries as well. I think people here are very
well aware of my interest in drunk driving and how by simply
raising the age for drinking legally we save a thousand lives a
So, not to diminish the concern about the loss of life, I'd
point out that alcohol-related fatalities increased 1.7
percent, from 16,694 to 16,972. That's over 1 year, from 2004
to 2005. And, frankly, I don't buy the argument that the
concern has got to be the fact that you run the risk. We don't
want to run risk with anybody, but what's the risk that's put
upon this country by this incredible cost for fuel? The average
family is going to spend $1,800 a year more for fuel. And there
are lots of people whose incomes aren't 10 times or 15 times
more than that.
On a different note, Mr. Secretary, there's something I'm
concerned about. There are three seats remaining unfilled on
the Amtrak board. If we could get people into trains--and we
can do it if we improve the ride and the service--we know these
seats can be occupied. The open seats are supposed to be filled
with Democratic nominees. Will the Administration consult with
the Senate Minority Leader to see that the President nominates
members to fill these seats? Let's see if we can make some
improvements there, even as--and I am pleased to see that there
is an interest in increasing CAFE standards, but an increased
passenger rail service is a place where we could really do
something at the same time to reduce our dependence on foreign
Secretary Mineta. Well, we have consulted with the Minority
Leader right now on a nominee for the board. And the name is
pending, I believe, at the White House right now.
Senator Lautenberg. There are three seats open, Mr.
Secretary Mineta. Yes, sir.
Senator Lautenberg. But if you have one name--and this is
not a new discussion, as you're aware. So, I urge you to--let's
get on with fixing parts as we can--as quickly as we can.
Early in the Administration, Vice President Cheney held
private meetings with energy industry executives regarding
policy in our country. Two-thirds of all of petroleum used in
our country is for the transportation sector. Were you involved
in these meetings when they took place, Mr. Secretary, with the
senior executives from the oil companies and the officials from
the Administration to try and develop that energy policy
package that was passed here?
Secretary Mineta. Yes. I was a member of that Energy Policy
Task Force. I was not privileged to sit in on any of the
meetings with the Vice President that you were referring to.
Senator Lautenberg. How about meetings with oil industry
Secretary Mineta. None directly.
Senator Lautenberg. You didn't----
Secretary Mineta. I did not have any.
Senator Lautenberg. Didn't have any. As you all know, cars
and trucks account for about 20 percent of the U.S. carbon
dioxide emissions. Since the Administration won't commit to
increasing CAFE standards for passenger vehicles, and it's
alleged that that needs Congressional approval, how do we
reduce the impact of global warming coming from cars, unless
there is leadership from the Administration?
Secretary Mineta. Well, we haven't said that we would not
raise the CAFE standard. What we're saying is that the
stringency of that CAFE standard alone is not going to fix the
problem. And what I am asking for is the reform of the
structure of the program. And I cannot restructure the program
without the legal authority to do that. It's not the
stringency, it's not the miles-per-gallon standard that----
Senator Lautenberg. Well, wouldn't that matter
substantially, Mr. Secretary?
Secretary Mineta. No, my point is that just setting the
miles-per-gallon standard alone does not take into
consideration the total picture that we have to look at under
the law. Under the law, we have to look at maximum feasible
fuel economy, the ability to save lives, the ability to
conserve energy, and the ability to save jobs or the impact on
the manufacturer. Now, those are the factors that we have to,
under statute, look at in order to establish the miles per
gallon. And so, that's why we have to have the authority to
reform the structure. We cannot just reform the structure
Senator Lott. Thank you very much.
Senator Lautenberg. Thank you.
Senator Lott. Senator Smith?
STATEMENT OF HON. GORDON H. SMITH,
U.S. SENATOR FROM OREGON
Senator Smith. Thank you, Mr. Chairman. And, Secretary
Mineta, it's nice to see you. Thank you for your service.
It's hard to believe, but I've been in this chamber now for
10 years, and I have voted for CAFE standards, and I have voted
against some that went, I thought, too high. I have always
recognized, in voting for them, that this was a very blunt
instrument to try and incentivize a good thing, which is fuel
economy. I know Congress has always held onto this authority
that you're asking for, because the other competing values of
jobs and safety really do require our attention, as well. We
can't just dismiss those in the name of fuel economy. But I'm
also aware that other nations have tried programs, the fee-bate
program that I think you're asking for, something other than
just a quota for so many vehicles to be sold at certain mileage
levels. I understand Ontario, Canada, has such a fee-bate
program. In other words, the heavier, less-efficient vehicles,
they simply pay more; the lighter, more fuel efficient
vehicles, they actually get rebates. Is that the program that
Secretary Mineta. No. What we're doing is really basing it
on the size or the footprint of the vehicle, as we did with the
light trucks, so that we have a continuous curve based on the
size of the vehicle. And in order to do that kind of structural
reform under the CAFE program, we need that authority in law,
which I requested from Congress in 2001.
Senator Smith. And you feel it's worked for light trucks.
Secretary Mineta. It has, and that's why we would like--
because of the experience we've had with light trucks, we----
Senator Smith. Has the light-truck approach been
sufficient? Are we getting as much savings from it--in terms of
Secretary Mineta. Well----
Senator Smith.--as we could?
Secretary Mineta.--we think that for the model years that
we are now embarking under this new program--and it will be
mandatory for the model year 2011--we feel that that is a good
Senator Smith. The approach that you're asking for, have
any other nations tried it? And how has it worked for them? I
know individual states have looked at such things, and that
they have been discouraged from that, because of Federal pre-
Secretary Mineta. Let me ask Ms. Glassman that.
Ms. Glassman. As the Secretary indicated, the approach that
we're asking for is part and parcel of the current statutory
structure, but it would allow us to go further than the limits
that are imposed by the statute itself. Other countries have
taken a number of different kinds of approaches. There are also
a variety of ideas out there, market-based approaches, such as
fee-bates that you mentioned. And we would look at a national
fee-bate program, but we haven't yet done that.
Senator Smith. But you would do that if----
Ms. Glassman. We would----
Senator Smith.--we gave you that----
Ms. Glassman. We would----
Ms. Glassman.--study that. But that is a reform which is
beyond the kind of reform that we're specifically asking for
Senator Smith. Well, one of the problems we have here in
giving you the authority is that this doesn't break down in
terms of Republican or Democrat. So it's actually helpful, Mr.
Secretary, that you're a Democrat. I have noticed that there
are two schools of thought on this. One's all carrot, and the
other's all club. And somehow I think we've got to figure out
how to balance the competing interests of fuel economy, jobs,
and safety with some combination of incentives and regulation.
The problem we have, it seems to me, in giving you this
authority, is the fear of what the next Administration would do
with this. There is a fear CAFE standards will be arbitrarily
undertaken to do something that just simply is devastating to
the auto industry or devastating to safety, all in the name of
fuel efficiency. As a Democrat, sir, do you think that that's
probable? Are those fears unfounded? Should we trust the
Executive Branch of government with what is a very, very
important issue, on three counts?
Secretary Mineta. I see no reason why that cannot be done,
because Congress still has the oversight responsibility of what
happens in law. And so, Congress still has the ability to
change the law at that point, if it's not working. And so, I
see no problem with that approach at all.
Senator Smith. Thank you, Mr. Chairman.
Prepared Statement of Hon. Gordon H. Smith, U.S. Senator from Oregon
Mr. Chairman, I want to thank you for convening this hearing on
automobile fuel efficiency. I look forward to hearing from the
witnesses appearing before the Subcommittee today.
Since Hurricane Katrina, we have had numerous hearings in various
Senate committees about high gasoline prices. A few things have become
quite evident over the last nine months, as prices have remained at
historically high levels. First, the United States is heavily dependent
on oil imports and we are now competing with emerging economies such as
China and India for oil resources. Second, we rely on nations that are
politically volatile, such as Venezuela, Nigeria, and Iran, for much of
our imported oil. Third, our domestic production and refinery capacity
are heavily concentrated in the Gulf of Mexico--an area prone to
hurricanes. Fourth, as a Nation, we have made little progress in
vehicle fuel efficiency while the population is increasing and the
average American is driving more miles each year.
Even Congress can't repeal the laws of supply and demand. We know
that most of our oil is used in the transportation sector, and that
demand is increasing. We also know that supplies are fairly stagnant.
Over 70 percent of current production comes from oil fields that have
been in production for more than 30 years. There is currently less than
two percent surplus production capacity globally.
We know, intellectually, what it is going to take to solve our
dependence on foreign oil. Numerous studies have told us that we need
more efficient vehicles, and we need alternative fuels for those
vehicles. There is widespread agreement that those are the two most
important actions we could take. The challenge is that it requires some
major changes to the entire sector--from design and manufacturing of
vehicles to development of the infrastructure to support advanced
The United States is significantly more dependent on imported oil
today than it was in 1973, when the oil embargo was imposed. Back in
the 1970s, Congress recognized the importance of vehicle efficiency,
and we adopted CAFE standards that moved our vehicle fleet to
significantly higher efficiency levels by 1990. Unfortunately, that is
the last significant step we've taken. We've had numerous discussions
since then, and while I haven't been here for all those debates, I do
recall the Senate floor debate in connection with trying to pass an
energy bill in 2002. At that time, I had joined Senator Kerry and
several colleagues in sponsoring an amendment to increase CAFE
standards. Our amendment would have increased auto efficiency levels to
an average of 36 miles per gallon by 2015.
The amendment was ultimately withdrawn after arguments that
mandating increased fuel efficiency levels would hurt our domestic auto
industry, and that it would take choices away from Americans. Instead,
we passed an amendment that asked the NHTSA to study CAFE standards to
determine whether they should be increased. We failed to take action,
in part, because gasoline was significantly less expensive in 2002 than
it is today.
Four years later, gasoline is over $3 a gallon and prices are
expected to remain high into the foreseeable future. I want to focus
briefly on where we are now. I have a chart here that compares auto
efficiency levels for several countries. The message is clear. Of all
nations around the world, we have--by far--the lowest auto efficiency
levels. Our cars and light trucks have an average efficiency of less
than 25 miles per gallon, while China and Australia have average
efficiencies above 30 miles per gallon, and both the European Union and
Japan have average efficiencies above 40 miles per gallon. What's more,
these other regions have policies in place that are expected to move
their average efficiencies upward. Unless we also act, we'll fall even
We declined to act in 2002 at least in part because it was argued
that increasing CAFE would cost us jobs in our domestic auto industry.
Well, inaction certainly didn't help us on that front. Here's a graph
showing auto industry jobs since 1990. We've lost 215,000 jobs just
since 2000, and more job losses in the domestic auto industry are
projected for the next few years. I happen to believe that part of the
reason for auto job losses today is because our manufacturers aren't
making the right vehicles. The global market is now demanding more
efficient vehicles, and we don't have them to sell.
Let me make one final comparison. In 2002, we were spending $300
million per day on oil imports. Today that number is $800 million--
almost $1billion per day--for the oil we're importing.
We can no longer afford the status quo. As a first step, I am
working on a bill to encourage the investment in plants to manufacture
more efficient, alternative vehicles, as well as the fueling and
interconnection infrastructure that will be needed to provide
alternative fuels and re-charge plug-in hybrid vehicles. This bill will
also lift the cap on the number of alternative vehicles eligible for
tax credits as requested by President Bush last week. My bill will also
encourage such transportation alternatives as bicycling and
telecommuting by providing favorable tax treatment related to the costs
of those alternatives to commuting.
While these tax measures will make a difference, we must do more to
increase the efficiency of our highway fleets. We have several options.
We could mandate higher efficiencies, higher CAFE levels. as we did in
the 1970s. We should also study whether alternative regulatory
structures would be more effective than the current CAFE system.
Regulatory alternatives that have been discussed, and should be
examined, include fuel efficiency standards based on vehicle weight
classes or footprints, or a program that provides rebates on efficient
vehicles and imposes fees on less efficient vehicles.
The U.S. auto industry is at a crossroads: innovation or
obsolescence. I believe that we can use technology and American
ingenuity to create a new generation of advanced technology vehicles.
We can, and we must, have vehicles that are more efficient, while
preserving passenger safety features and customer choice. It is a tall
order, but American industry is up to the challenge.
Senator Lott. Senator Cantwell? Thank you for your courtesy
this morning, too.
STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Thank you, Mr. Chairman.
Mr. Secretary, I believe you were in Congress in 1975,
isn't that correct?
Secretary Mineta. I was.
Senator Cantwell. That was your first term. And that's the
year that Congress passed an energy bill with a CAFE standard
in it, which I think, at that time, proved to be one of the
least controversial aspects of that bill when it passed. And
the savings that we get today from that is nearly 3 million
barrels per day, than we would have had if we had not passed
that legislation. So, to me, it's been a great success.
Now, we've heard a lot about this light-truck----
Secretary Mineta. Senator Cantwell, could I comment on that
just a minute?
Senator Cantwell. Yes----
Secretary Mineta. That's all right. Go ahead. That's all
Senator Cantwell. Let me----
Secretary Mineta. That's all right. You go ahead.
Senator Cantwell. If I could, because we're----
Secretary Mineta. Sure.
Senator Cantwell.--only on 5-minute rounds here. You've
commented about the lightweight truck standards, and my
colleagues have also commented on that. I guess I have a little
bit different perspective, in that fact, you know, the
establishment of the vehicle classes and the use of the
footprint, rather than the weight, in the end result, to me,
has been, I would say, anemic. The new rule covers 240,000
large SUVs, or 2.8 percent of the 8.5 million light trucks sold
annually. In addition, the rule does not include trucks that
weigh between 8,500 and 10,000 pounds, such as the Hummer H2--
that is, until the 2011 date--and does not cover those that
weigh over 10,000 pounds. So, although the impact analysis done
by NHTSA found that the final rule for the light truck will
save 7.8 billion gallons of fuel, that's the study, not the 10
billion gallons previously advertised. So, maybe you could
comment on that. And, moreover, the analysis found that 2.9
billion gallons of the fuel savings would have come from
changes that the automakers would have made to their fleet due
to market forces anyway. So, that's my reading and analysis of
the lightweight truck scenario.
So, now if we're talking about restructuring, and we're
talking about a more aggressive ramp--because I would like you
to--I would like you to say if the Administration plans on
moving up the passenger car mileage standard from where it is
today. There has been several proposals here in the Senate to
move passenger cars up to 40, and I don't know whether the
Administration supports that or not--and trucks up to 27. But
what would be the--how could we be assured that the
Administration would have an aggressive ramp-up, given the
international situation that we're facing, given the economic
situation that we're facing? And how would you characterize
that bold step today? How would you measure that, as a bold
Secretary Mineta. Well, I think, first of all, what we did
in the light-truck rule was a bold step, in terms of where we
were previously, and we feel that the way we've formed the
program, and the results, is a bold step forward. Remember, for
some 6 or 7 years, Congress had a prohibition of our even
dealing with the whole light-truck rule at all. And that's why
I requested in 2001--in July of 2001, requested that I be given
the authority to deal with light trucks. In December 2001,
Congress gave us the authority to do that. So, with that
experience from the light truck, I feel we can do the same
thing as it relates to passenger cars.
Now, you mentioned the 10.7 billion gallons of gas that we
say that we will save from the light-truck rule, and that is
the 7.8 billion that we compute from our own rule, as well as
the 2.9 billion which the auto manufacturers are incorporating
into their light trucks, minivans, and SUVs because of the
rulemaking. And so, that's why we claim the 10.7 billion total
But, again, I feel that we can use the experience that we
have gained in the light-truck rule to do the same thing in
terms of the private passenger----
Senator Cantwell. So, in levels of boldness--if I could, in
levels of boldness, you're saying that the Administration's
policies would be similar to what they've done in lightweight
Secretary Mineta. I think that what we have done in light
trucks was a bold move. Again, it's not just a question of
establishing or determining what the level might be. Forty
miles per gallon may not be a level that is attainable without
losing jobs, impacting on the manufacturing capability, and--
even though we can conserve fuel--and it does give us a high
standard. But, again, we are obligated to look at four factors.
And someone just picking out of the air a figure--and we feel
that what we do is based on science and economic data and the
projection of the fleet from the manufacturers.
Senator Cantwell. Do you--given that the Administration--I
know my time is up, but if I could just----
Senator Lott. All right.
Senator Cantwell.--one more follow-up. I know that various
Members of the Cabinet have now called this an ``energy
crisis.'' And, given the fact that they have called it a
``crisis,'' do you think maybe a different, or a bolder
approach, given that you're saying you have various categories,
is for the Administration to set an actual goal savings by
barrels of oil?
Secretary Mineta. Well----
Senator Cantwell. Because if we look at CAFE, and we say
that we've saved, you know, 3 million barrels per day, maybe a
different approach would be for the Administration to say,
``Here's how much they want to save,'' given--and given the
last energy bill in which they opposed even a 1 million barrel
oil savings a day, maybe the Administration could better convey
their boldness by setting a goal for this particular reduction
Secretary Mineta. Well, I think the reference to the
``energy crisis'' was attributed to, as I recall, Secretary
Bodman. But when you look at the President's response, it's
really a four-point program that he has that is short-term,
mid-term, and long-term. I don't believe the Administration--
And I know I have not--advocated that the CAFE is a short-term
response to the energy crisis. This is really a long-term
response, in terms of the energy crisis. This is not a response
to $3.50 at the pump, because this will not deal with $3.50 at
the pump immediately. But it will impact on--in terms of fuel
savings over a long period of time, and in terms of one segment
of the energy consuming part of the economy, the automobile.
Senator Cantwell. Thank you, Mr. Secretary.
Senator Lott. Thank you, Mr. Secretary.
STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM CALIFORNIA
Senator Boxer. Thank you. And welcome, everybody.
I wanted to thank Senator Cantwell for her line of
questioning, because I know she's very expert in this area,
and, you know, her probing you on the boldness of your move is
something that I think a lot of Americans share. They can't
believe that you're calling it a bold move to go to the light
trucks and say there's going to be fuel economy increase by 1.8
miles per gallon over 4 years, when everyone knows the
technology is so far ahead of you. And I think one of the
reasons we're all suffering here from low ratings in the
Congress and in this Administration, abysmal ratings, is
because people are smart, and they see what they're paying, and
they know we've done nothing. And now you're asking us for more
authority. So--what? You can do 1.8 miles per gallon over 6
years? Four years? And I have to say, when I look at what you
use for your cost-benefit ratio, it's amazing, you left out the
entire area of greenhouse gases, and didn't even put it in as a
benefit, what we could benefit from. You say we pull a number
out of the air? Well, you ignored the air, even though you were
told to take a look at it. You had people who wrote you and
said, ``It's very important to include the benefits on air
quality,'' and that those benefits could be as great as $50
billion by 2020, yet those benefits were ignored in NHTSA's
final rule--in effect, really putting a thumb on the scale on
the side of lower standards.
So, the other thing is, you've got the price of oil
fluctuating. It's a moving target. Now, when you came up with
this, what was the price of oil then, when you came up with
your 1.8 improvement? What was the price of oil then?
Secretary Mineta. I would assume it was about $1.80.
Senator Boxer. All right. So, now you have a situation
where the cost----
Secretary Mineta. I----
Senator Boxer.--is so much----
Secretary Mineta. I don't recall the exact time, but--
Ms. Glassman. When we do the rulemaking, we use the long-
term price of oil that is put out by the Department of
Senator Boxer. And what was it?
Ms. Glassman.--EIA. For the----
Senator Boxer. What was it?
Ms. Glassman.--NPRM, it was $1.58. For the final rule, it
went up to $2. And they are looking at the price of oil over
the long term----
Senator Boxer. All right. Well----
Ms. Glassman.--and not at----
Senator Boxer.--may I say----
Senator Boxer.--something here? This proves the point,
that, you know, you relied on information that has proven to be
false. You should go back--based on the price of oil. I don't
think anyone's saying, now, that the price of gas at the pump
is going to go to $1.50. If you can find someone, that would be
swell. Now, maybe there are people out there. But, if anything,
we're looking at higher prices. So, you should go back with
Secretary Mineta. Senator, I think----
Secretary Mineta. But, Senator, if I might say, what we do
is like taking a picture at a certain point, and we take a
picture, and that camera reflects what is being taken at the
time. And so, at the time----
Senator Boxer. Fine, then take another picture. Throw out
the camera, get a new one, go get a picture. Go take a picture
of the oil prices and the----
Secretary Mineta. Senator----
Senator Boxer.--gas prices in California--some stations, 4
bucks a gallon----
Secretary Mineta. I----
Senator Boxer.--and then make a case for a 1.8 abysmal
increase in fuel economy over 4 years. It just doesn't fly with
the American people. They're smarter than that, Norm.
Secretary Mineta. I understand that, Senator. But under the
rules, we have to give notice to the manufacturers 18 months
ahead of the model year, so----
Senator Boxer. Ah, I----
Secretary Mineta.--I understand that great----
Senator Boxer. Well, go back--
Secretary Mineta.--prices have gone up to $3.57, whatever
they are today. But----
Senator Boxer. I need to take back my time----
Secretary Mineta. Absolutely.
Senator Boxer.--because I don't have much. And I'm trying
to make the point here that, as Maria Cantwell said, we're in a
crisis. Your own Administration says that. This is not the time
for business as usual. You might have to go back. Whoa, what a
shock. You might have to go back. There is a crisis. You've
come up with a number here that makes no sense. You've ignored
the new technologies. I mean, you think you're bold? Then I'm
sure you think that Ford, which is producing SUVs--part of
the--light truck category, that get 36 miles per gallon,
they're revolutionary. You are so far behind on what's even
happening in the marketplace.
And I guess my question is--you're asking us to give you
authority. You know what? If you had fought with us for better
fuel economy, I'd have a different attitude about it, because
I'm a little annoyed at this Congress. Democrats and
Republicans haven't risen to the occasion on this. But where
were you when various members of both parties had legislation?
Olympia Snowe is one of them. Were you helping her? Were you
helping us to get better fuel economy into the law? Did the
Administration take a position on that when we were fighting to
get higher fuel standards? Where were you?
Secretary Mineta. No, I'm sorry, I'm not familiar with the
legislation. But we have not taken a position on other
legislation that I can think of--
Senator Boxer. Well, if I might say, that's incorrect,
according to this article. And you might want to debate it. And
I will close with this and ask unanimous consent to put into
the record this article from the National Journal, February 2,
2002, the time when colleagues--we were all working hard to get
better fuel economy, ``The President has consistently opposed
increasing fuel economy standards for cars and SUVs. His
national energy strategy, which was released in May, largely
adopted in the House, pushes for greater oil and gas drilling
that would provide few incentives for energy conservation.''
[The information previously referred to follows:]
The National Journal, February 2, 2002
Gas Mileage: Deal Maker or Breaker?
By Margaret Kriz
Fifteen hundred members of the United Auto Workers descended on
Washington this week for their union's annual legislative conference,
thereby allowing the UAW to mount a massive in-person lobbying campaign
aimed at persuading the Senate to protect the interests of U.S.
automakers. As UAW members were swarming Capitol Hill, the majority
staff of the Senate Commerce, Science, and Transportation Committee was
attempting to hammer out an energy bill toughening fuel-efficiency
standards for cars and SUVs.
The UAW fears that stiffening those requirements, formally known as
corporate average fuel economy (CAFE) standards, would overburden U.S.
car manufacturers who are already feeling the pinch of the national
economic downturn. Ford Motor Co., for example, recently announced
plans to lay off 35,000 workers and close five plants.
But the recession is not the only issue reshaping the energy
debate, which shifted to the Senate after the House passed an energy
bill last year. Environmental lobbyists say that national security
fears triggered by September 11 are causing more lawmakers to look for
ways to cut oil imports from the Middle East and other unstable
regions. Even some Republicans who have long opposed toughening CAFE
standards are considering that approach as a way to curb American
gasoline consumption. U.S. oil imports ``aren't just looked at as a
vulnerability anymore,'' said David Hamilton, director of state and
Federal policy at the Alliance to Save Energy. ``Now they're a national
At the same time, however, the energy debate has taken on strong
new political overtones because Sen. John F. Kerry, D-Mass., who is a
potential Democratic presidential contender, is forcefully attacking
President Bush's pro-industry energy policies. Senate Majority Leader
Thomas A. Daschle, D-S.D., is also trying to play the energy card
The President has consistently opposed increasing fuel-economy
standards for cars and SUVs. His national energy strategy, which was
released in May and largely adopted by the House in August, pushes for
greater oil and gas drilling and would provide few incentives for
energy conservation. The House rejected higher CAFE standards. But many
lobbyists and Congressional staff members say that White House control
over the energy debate has been undercut by Enron Corp.'s growing
financial problems and by the public's growing concerns about
allegations that Vice President Dick Cheney allowed Enron and other
energy industry giants to essentially dictate much of the
Administration's energy strategy. In Congress, committee investigations
into Enron's collapse have eaten up staff time and forced the Senate
Commerce Committee to postpone a hearing on CAFE standards.
Despite growing support across party lines in the Senate for
stricter efficiency standards, continued opposition by the auto
industry and its Congressional supporters significantly reduces the
odds that Congress will actually pass an energy package this year.
Citing the CAFE dispute and standoffs over several other energy
proposals, many industry lobbyists and Capitol Hill staffers give the
legislation only a 50-50 chance of making it to the President's desk.
Environmentalists predict that opponents of higher CAFE standards
are likely to try to block Senate passage by filibustering.
Conservative Republican opponents of efficiency standards know they can
count on the votes of Democratic Senators from Michigan and other
Midwestern states where cars and car parts are manufactured.
Meanwhile, filibuster threats are also looming over the Republican
proposal to allow drilling in Alaska's Arctic National Wildlife Refuge.
Senators Kerry and Joe Lieberman, D-Conn., have vowed to block any
energy bill that includes drilling there. Sen. Ted Stevens, R-Alaska,
counters that he will filibuster any bill that doesn't allow drilling
in the refuge.
Even if the Senate passes legislation that includes increased CAFE
standards but bars drilling in the Alaska refuge, the energy package
would face tough going in a House-Senate conference committee. After
all, the House energy package excludes fuel-efficiency standards and
gives a green light to the Alaskan drilling provision.
``You'd have a very round peg coming out of the Senate trying to
fit into a very square hole in the House,'' said Daniel F. Becker,
director of the Sierra Club's global-warming and energy program. ``It
would be a real challenge to make the two fit.''
Currently, automakers are required to meet an average efficiency
standard of 27.5 miles per gallon for all the new cars they sell in the
United States and 20.7 mpg for light trucks. The latter category
includes SUVs, which now constitute half of the passenger vehicles sold
in the United States. U.S. auto companies regularly fail to meet the
CAFE standards, while American Honda Motor Co. and Toyota Motor Co.
usually exceed the fuel mandates because they sell mostly small cars
and are already using more efficient technologies. Because of
opposition from Detroit, CAFE standard haven't been increased since the
Lobbyists close to the Senate Commerce Committee's negotiations say
that Democrats recently floated the idea of raising fuel-efficiency
standards to between 30 mpg and 39 mpg over a 10- to 12-year span. A
July 2001 National Academy of Sciences report said such increases are
feasible using existing technology.
The Committee's present draft rejects a UAW fuel-efficiency plan
under which all car makers would be required to increase their fleet's
efficiency by the same percentage. That approach was opposed by
committee Republicans as unfair to Honda and Toyota, which already
exceed current CAFE requirements.
The UAW argues that Congress should give more weight to the needs
of the U.S. car companies, which employ UAW members, than to those of
Honda and Toyota, which run non-union shops. ``It's important that
these standards are economically feasible. And by that we mean
something that doesn't cause economic hardship,'' said Alan Reuther,
Legislative Director of the UAW.
Honda favors an across-the-board increase in the CAFE standards.
Ford, General Motors Corp., DaimlerChrysler Corp., and Toyota are part
of an industry alliance that opposes any increase in the fuel-
efficiency standards. The U.S. automakers assert that instead of hiking
CAFE standards, which would force car companies to invest more in
modernizing the current generation of internal combustion engines,
Congress should fund more-futuristic research projects, such as the
Bush Administration's hydrogen-powered fuel-cell car project, which was
announced by Energy Secretary Spencer Abraham in early January at the
Detroit auto show. But the industry's critics argue that although fuel
cells may have long-term promise, they can do nothing to immediately
lessen the Nation's growing appetite for oil.
The Big Three U.S. automakers now argue that fuel standards should
be set by the Transportation Department's National Highway Traffic
Safety Administration. However, during the Clinton Administration, they
successfully lobbied Congress to block funding that would have allowed
the NHTSA to draft new efficiency standards.
Under Bush, NHTSA has been reluctant to crack down on the auto
industry. The Administration recently announced that it would not raise
the fuel-efficiency requirements for SUVs and other light trucks built
in 2004. But Administration officials have hinted that they might be
willing to raise the standards for those made in 2005.
Meanwhile, other Administration officials--notably John Graham, who
heads the Office of Management and Budget's powerful Office of
Information and Regulatory Affairs--have suggested overhauling the CAFE
standards to allow automakers to trade fuel-efficiency ``credits,'' a
controversial move that would require Congressional approval.
Energy legislation became a top priority for Washington early in
Bush's first year, when he called for a national energy strategy to
help solve California's electricity crisis. Cheney's energy task force
developed a largely supply-side national energy strategy, which
recommended increasing U.S. oil and natural-gas drilling throughout the
United States, including in the Alaska wildlife refuge. The measure
rejected tougher CAFE standards but called for more reliance on nuclear
power. In August, the Republican-controlled House adopted the
Administration's energy package and added $34 billion in tax benefits--
$27 billion for the coal, oil, natural gas, and nuclear power
industries, and the other $7 billion earmarked for energy-efficiency
and conservation programs.
The Democratic-controlled Senate has started from scratch in
developing its national energy strategy. Released on December 5 by
Daschle and Senate Energy and Natural Resources Committee Chairman Jeff
Bingaman, D-NM, that bill would provide incentives for building a
natural-gas pipeline from northern Alaska to the lower 48 states but
would not allow oil development in the Alaskan wildlife refuge. It
would give the Federal Energy Regulatory Commission more power to
streamline state electricity deregulation and would push the White
House to develop a plan for curbing emissions of the greenhouse gases
linked to global warming.
Daschle has promised to bring energy legislation to the Senate
floor before the Senate break that begins on February 18. (The CAFE
provision, however, is being handled separately by the Senate Commerce
Committee and will be added to the Daschle package.) Daschle's bill
would also include tax breaks for industry but would provide more funds
than the House wants for alternative energy and energy-efficiency
projects. The Daschle tax breaks would likely total $10 billion to $15
billion. Like the CAFE provision, the tax breaks are set to be added to
the energy package on the Senate floor.
Supporters of the fuel-efficiency standards argue that increasing
them is one of the only ways of reducing U.S. gasoline use. ``CAFE has
been the single most effective energy policy this Nation has ever had
in saving gasoline,'' said Hal Harvey, president of the Energy
Foundation, which supports renewable energy projects. ``There is
literally no other policy that the United States can enact that would
have remotely the same impact as CAFE in the next decade or two, except
possibly [steep] European-level gasoline taxes. And the political
prospects of a gas tax are zero.''
The prospects of ratcheting up CAFE standards this year are not
zero. In fact, they are rising, but still are not high.
Secretary Mineta. Well, then, you know, on that count, let
me say that in 2001, I wrote a letter to Congress asking to be
given the authority to raise the fuel standards.
Senator Boxer. That's not my question. My question----
Secretary Mineta. You're asking----
Senator Boxer.--is, Did you----
Secretary Mineta.--whether or not----
Senator Boxer. No. I said, Did you help us or hurt us when
we, in the Congress, were trying to raise fuel economy
standards? Did you weigh in on the side of those of us who were
in favor of the legislation? The--
Secretary Mineta. At the----
Senator Boxer.--answer is no.
Secretary Mineta.--at the time, I did not.
Senator Boxer. You did not. You opposed it. Not you,
Secretary Mineta. I didn't oppose it.
Senator Boxer. The President----
Secretary Mineta. I did----
Senator Boxer.--opposed it.
Secretary Mineta.--not oppose it.
Senator Boxer. I'm not talking about you.
Secretary Mineta. No, you asked me if I did.
Senator Boxer. The Administration. I'm meaning the
Administration, not you, personally. According to this article,
the President consistently opposed it.
Secretary Mineta. I think on a single-number basis, we have
always, I guess, opposed.
Senator Boxer. Thank you.
Thank you, Mr. Chairman.
Senator Lott. On our early bird rule, I believe, Senator
Pryor, you would go next, and then Senator Snowe.
So, Senator Pryor?
Senator Pryor. Mr. Chairman, I think that Senator Snowe was
here before me. Senator Snowe, weren't you here?
Senator Snowe. Go ahead.
Senator Pryor. Are you sure? OK.
STATEMENT OF HON. MARK PRYOR,
U.S. SENATOR FROM ARKANSAS
Senator Pryor. Thank you, Mr. Chairman.
Let me ask, if I may, Mr. Secretary--I know that some of
the studies that we're looking at now, they've talked about
recalculating CAFE. I think CAFE's been around since 1975. Some
of these studies that we're referring to in this hearing and in
other contexts are--go back to 2002, 4 years ago. Why are we
just now coming to the point of you coming in and asking for a
change of approach with CAFE?
Secretary Mineta. Well, what prompted this latest round is
Senator Frist's bill--I believe it was introduced a week ago
last Wednesday--requesting--or authorizing me to go ahead and
increase the CAFE standard. And my response, when he dropped
that bill in, was to say that I would want to have not only the
authority to raise the CAFE standard, but to reform the
structure of the program----
Senator Pryor. OK. Let me ask----
Secretary Mineta.--for private passenger cars.
Senator Pryor. Right. Let me ask, on that, if I may, so I
can be very clear on this and make sure I completely understand
this. What you're asking for us to do is to give the
Administration, the Department of Transportation, total
discretion in rewriting the CAFE standards and the goals and
the targets? Is that what you're asking for?
Secretary Mineta. Well, it would still be subject to
Senator Pryor. Review by?
Secretary Mineta. The Congress.
Senator Pryor. OK.
Secretary Mineta. And, again, it would go through our
normal rulemaking process, which would make it available for
Senator Pryor. The public----
Secretary Mineta.--the public.
Senator Pryor.--whoever that may be. But you do want total
discretion, in effect. You want discretion in order to rework
CAFE the way you want to do it.
Secretary Mineta. I--yes, I would say total discretion.
But, that's still subject to review.
Senator Pryor. What about if Congress had a requirement in
there that actually, as you promulgate new CAFE standards, that
you actually increase it by a minimum amount? I mean, let's
just pick a--figure out there--1 mile per gallon per vehicle,
or something minimum in every category. Would that be something
you'd object to?
Secretary Mineta. Well, I suppose it would depend upon what
the standard would be. If it were 1 mile per gallon, I would
not have any objections to it. I think if I were given the
authority to revise it with the requirement that it be set at
40 miles per gallon, I think--because, again, you know, we're
guided by what is in statute and by the National Academy of
Senator Pryor. All right, let me ask----
Secretary Mineta. So----
Senator Pryor. I don't want to interrupt----
Secretary Mineta. Yes.
Senator Pryor.--but my time is short, so let me ask this.
As I understand it, you've recently gone through, with light
trucks, a new series of CAFE standards. And something you have
there now is--I believe you called it a few moments ago--the
continuous curve. So basically, it's a continuum of standards,
depending on the vehicle, and it's very specific to width and
length of the vehicle, the size of the vehicle, et cetera. And
is that what you want to do for cars? Is that what you have in
mind for passenger cars?
Secretary Mineta. That's correct.
Senator Pryor. Would it be----
Secretary Mineta. Let me----
Senator Pryor.--would it be very, very similar to the light
trucks, maybe even identical to the approach you took in light
Secretary Mineta. I think it would be, but let me have Ms.
Glassman expand on the answer.
Ms. Glassman. Yes, sir, as the Secretary indicated, that
would definitely be the starting point for the analysis. The
idea would be to take our light-truck structure, apply it to
passenger car data, and make sure that it applies appropriately
to passenger cars, and make sure that we don't create any
unintended consequences by doing that. But it would be,
definitely, the starting point.
Senator Pryor. OK. In regard to the light trucks, I know
you talk about this continuous curve--how often will DOT or
NHTSA--how often will you revisit recalibrating those
standards? Do you do it annually, every 2 years, every 5 years?
How often do you revisit those standards?
Secretary Mineta. For the present light-truck rule, we go
out to 2011--I mean 20-----
Ms. Glassman. Eleven.
Secretary Mineta.--2011. So----
Senator Pryor. Right. I understand that. But then, are you
now starting the process again to go out beyond 2011, or to
maybe even making some adjustment in 2010, 2011, you know, and
that kind of thing?
Secretary Mineta. I don't believe we are. But let me ask
Ms. Glassman. Not----
Ms. Glassman.--historically, CAFE standards were set
annually. Beginning in 2003, we started to set standards in 3-
year time-frames. So, we put out a rule in 2003 for light
trucks applicable to model years 2005, 2006, and 2007. And in
this latest rule, we approached 4 years. We would need a rule
out, by 2010, beginning to cover 2012, and, in all likelihood,
that would again be a multi-year rule.
Senator Pryor. Mr. Chairman, I'm out of time. Thank you.
Senator Lott. Senator Snowe?
STATEMENT OF HON. OLYMPIA J. SNOWE,
U.S. SENATOR FROM MAINE
Senator Snowe. Thank you, Mr. Chairman. And thank you for
holding this hearing on this critically important topic.
And I want to welcome you, Mr. Secretary. Obviously, I
think you sense a great deal of frustration, because we're at a
point where we cannot grapple with this issue in an aggressive
way. I think America can do better than what we're doing right
now in fuel economy standards. It's one that we have struggled
with. Frankly, Congress hasn't been any better on this issue
than the Administration. But we're at a point in this country
where we really have to recognize that we have to address an
increase in CAFE standards very vigorously and aggressively.
Frankly, an unfortunate minimalist approach has been
embraced. I believe that just increasing the light truck
category by a little more than a mile per gallon--for SUVs, for
instance--is insufficient to where we stand in America today.
We're depending on the most volatile regions of the world for
our gasoline for the vehicles we drive. And other countries are
ahead of us on establishing increases for greater fuel
So, I just don't see why there is resistance and
reluctance. I mean, the National Academy of Sciences, back in
2001, issued a report and said we could increase 15 miles per
gallon in 15 years. And here we are today talking about how the
Administration has done it once for the light-truck category,
by increasing CAFE by a little more than a mile for the first
time since 1985. For passenger cars, we haven't had any changes
since 1975. So, there really hasn't been any effort to do that
even though we recognize there are problems with a stagnant
CAFE system. But shouldn't we be able to know now, with
specificity, where we should go on this issue? Senator Boxer
mentioned the initiatives that we have fought for. And, once
again, I'll be introducing legislation with Senator Feinstein
on this issue, creating a 10 in 10 bill--an increase of 10
miles in 10 years for the overall average for the fleet,
including passenger cars, light trucks, and SUVs. This is
something we ought to be able to do. We ought to be inventive.
We're at a point in time where we have arrived at a real
juncture. And I think it requires leadership on both of our
parts, the Administration, as well as the U.S. Congress, in
achieving that. We should go hand in hand. There should be no
question about that.
I am concerned because I think the real issue here is that
we're going to relinquish this authority, and in return, we're
just going to get a minimal approach rather than a very
aggressive one. We need to be far more far-reaching in
increasing CAFE standards than we are today.
We're not hearing any time lines from your DOT. We're not
hearing how much the Administration wants to increase
standards. We're not hearing anything. And here we are in the
midst of an energy crisis, frankly. This is certainly
abundantly clear. And we don't know what's ahead of us in the
months to come. We're back to the heating oil costs concerns
from last January in considering the winter months to come. The
prospects don't look very bright at this point and I have great
So, we ought to be doing all we can about oil savings and
reduced costs. And I don't hear that we are. And that's the
issue. We could really fix this. We have the technology. We
have the wherewithal. We have the knowhow. It will require
leadership, including the White House and here in the U.S.
Congress to get it done. And that's why I am reluctant to
abdicate the authority for CAFE standards for passenger cars,
because I don't think increases are going to happen. Look at
where we stand today. NHTSA has increased CAFE for SUVs a
little more than one mile per gallon, so if we give NHTSA
authority over passenger cars as well, we totally transfer--we
relinquish that authority, so then where are we?
Secretary Mineta. Well, first of all, there's no question
that there's an urgency about the issue. I guess my problem is
that establishing the CAFE standard is really part of the long-
term issue involving fuel. It doesn't have an immediate impact
on the price of gasoline at the pump. Fuel efficiency will be
able to conserve fuel, but it's not one that, again, impacts on
fuel costs or conservation immediately. It's one that has
impact over time. As I said, the urgency is there to get it
done, but, in terms of its impact, will not be immediate.
Now, in terms of the stringency of the standard, again, I
guess we're really being driven by the statutory requirements,
in terms of impact, again, on safety, jobs--and so, that's why
to me, it's much more difficult than to just establish some
mile-per-gallon standard and set that as a goal to attain
without going through the studies that NHTSA has to go through
in order to come to that conclusion. I just feel that we have
to allow the comment period, to be able to allow NHTSA the
ability to take into consideration product mix, impact on
safety, the ability to conserve fuel, and to save lives.
Senator Snowe. Well, a lot of the issues that you raise
have been issues ever thus. I mean, it's always been that way.
It's always been the case. And I can't believe, in America
today, in the 21st century, that we cannot reconcile ourselves
as to what the solutions are. The National Academy of Sciences
said it back in 2001, and we know we have the capabilities to
address all these competing interests for these issues. And,
frankly, we know there will be no immediate impact on the price
of gasoline. But, I hesitate to even think about where we would
be today if we had begun to implement a very aggressive
schedule for CAFE increases back in 2001.
I guess the point here is that it would send a very strong
message, and particularly to the transportation sector that has
imposed tremendous demands on our consumption of imported oil.
That is a huge issue, and that's what we need to address
Secretary Mineta. And probably the two questions I ask are,
one, relating to stringency, and the other in terms of timing.
And, again, in terms of timing, we're constricted by law. The
law says we have to give at least 18 months notice to the
manufacturers. But for us to give notice to the manufacturers,
it takes us about a minimum of a year. And as Jackie has
indicated, a minimum, they'd be hardpressed to come up with a
major rule on CAFE standards.
Senator Snowe. Thank you, Mr. Chairman.
Thank you, Mr. Secretary.
Senator Lott. All right.
Senator Dorgan, if you'd bear with us just 1 second, we do
have a very good panel that we want to hear from this morning,
but Senator Boxer had one last question would like----
Senator Boxer. Yes.
Senator Lott. OK, would you like to do that right quick
now, and then we'll go to Senator Dorgan? All right, good.
Senator Boxer. Mr. Secretary, the Federal Government
purchases 58,000 new vehicles for the Federal fleet every year.
Would you support a piece of legislation that says they should
buy, where feasible and where it makes sense, the most fuel-
efficient vehicles they can, to set a standard for the rest of
the country? Would you support that concept? As an individual.
Secretary Mineta. Yes.
Senator Boxer. I know you can't----
Secretary Mineta. Yes.
Senator Boxer.--you have to check with the other people,
but I'm asking you, personally, if that would make sense to
Secretary Mineta. Sure, that sounds----
Senator Boxer. Good. Well, I have such a bill. So, I'll be
Senator Boxer. And the only other point I'd make is, I'd
say, go back and redo your cost-benefit ratio, because it's way
off the mark. Gas is higher. We can give tax breaks to people
who buy these fuel-efficient cars. And you should include the
greenhouse gas benefits from a better fuel economy.
Senator Lott. Senator Dorgan, would you like to make a
Senator Dorgan. Well, Mr.----
Senator Lott.--statement or----
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan.--Mr. Chairman, first let me apologize. I
know--I've been elsewhere, and I've been delayed. I don't want
to take much time. But let me just, if I might, so that you can
get the second panel up, ask just one or two questions of
I have not been a big fan of CAFE standards. I've always
said, if the issue on energy is the debate between CAFE and
ANWR, we lose, because we have to be bolder and much more
decisive on a range of issues--hydrogen fuel cells in the
future, and so on. But I--you know, I looked at a car the other
day that was 10 years newer--a new car--than the previous same
model, and exactly the same rated mileage. I mean, it, on the
sticker, said--you know, you get the same mileage. Now, the
question is, Why, in 10 years, has nothing changed with respect
to that car? I don't understand it. So, I've--my own view is, I
don't think Congress has much choice but to be much bolder,
much more aggressive on CAFE standards and other issues.
And I guess my question for you is, we've had a number of
iterations--I think Senator Cantwell probably asked about
this--of how many barrels of oil we're going to save by a
certain time to establish goals. You know, there's this old
saying, ``If you don't care where you are, you're never going
to be lost.'' So, you set a goal. And if you set a goal, then
you aspire to reach that goal. What is your goal? What is our
goal? What's the Administration's goal at this point with
respect to efficiency of the vehicle fleet? What is the goal?
Do we have a goal?
Secretary Mineta. I'm not sure that I can give you an
answer in terms of miles per gallon.
Senator Dorgan. Well, then savings--saving the number of
barrels of oil by a certain time.
Secretary Mineta. Well, we don't start with, let's say,
saving 3 million barrels a day, and then come up with the miles
per gallon, because, again, in terms of determining what the
miles per gallon should be under CAFE, we look at the product
mix of what the manufacturers will be building in a given model
year. And maybe I can't explain it as well, but maybe I can
have Ms. Glassman explain it in terms of the process we go
through. As I said, if someone were to say, ``We've just come
up with a rule that comes over 37 miles per gallon,'' to me
that would be ready, fire, aim----
Senator Dorgan. Yes, but--
Secretary Mineta.--because I can't come to a conclusion
first on the miles per gallon or the fuel saved prior to making
the determination through the computations of a rulemaking as
to what the miles per gallon would be.
Senator Dorgan. But, Mr. Secretary, that reminds me of a
bumper sticker, ``Onward through the fog.'' You know, the fog
here is the uncertainty of what our goal is. It seems--I just
disagree completely with the notion that you can't set a goal
and then manage, with respect to policy, public policy, to how
you achieve that goal, whether it's incentives, whether it's
mandates, whether--no matter what it is. You've got to have a
goal. You've got to aspire to be someplace. And the question
I'm asking is, What's the goal with respect to vehicle
efficiency? And the reason I ask this question, Mr. Chairman--
as I understand it, the Chinese now have about 20 million cars.
By the year 2020, they're going to have 120 million vehicles.
So, we're going to add 100 million vehicles to the vehicle
fleet, just with China alone. And we suck 84 million barrels
out of this planet every day. We use one-fourth of it in this
country. We've got huge problems. And I'm just trying to figure
out, What's our goal? And the reason I use vehicles as the
catalyst here is, my first car was a 1924 Model T Ford that I
rehabilitated and sold when I was a little kid. I put gas in
the 1924 Model T exactly the same way I put gasoline in a 2006
Ford. Nothing has changed. Everything else about the car has
changed, but you still stick the hose in the tank, and you're
still pumping petroleum. And I know you can't give me the
answer at the moment, but I'm telling you, I think the
Administration, and I think the Congress, has to set goals,
establish goals, then develop the policy to meet those goals.
Senator Lott. Well, thank you very much, Senator Dorgan.
Thank you, Secretary Mineta.
We've got a very good panel now. We'd like to ask this
panel to take their seats as quickly as possible. It includes
Fred Webber, President, Alliance of Automobile Manufacturers,
of Washington, D.C.; Mr. John Cabaniss, Director of Environment
and Energy, Association of International Automobile
Manufacturers, from Arlington; the Honorable Philip R. Sharp,
former colleague from the House of Representatives, now
President, Resources for the Future; Ms. Joan Claybrook,
President, Public Citizen, Washington, D.C.; Mr. David
Friedman, Senior Analyst, Clean Vehicle Program, Union of
Concerned Scientists, of Washington, D.C.; and Mr. Alan
Reuther, Legislative Director, International Union, United
Automobile, Aerospace, and Agriculture Implement Workers of
I'd like to ask this panel, if you would submit your full
statement for the record. It will be included in its entirety.
Then if you could sum up your statement, hopefully limiting it
to 3 minutes--Senators, we couldn't do that, probably, but we'd
ask you to challenge yourself to try to keep it as brief as
possible, because we do have an excellent panel. We'd like to
get your basic point of view and have a little time left for,
hopefully, some questions and attempted answers.
Senator Dorgan. Mr. Chairman, can I have my opening
statement put in the record?
Senator Lott. Your statement will be included in the record
at the beginning of the hearing.
Mr. Webber, let's begin with you.
STATEMENT OF FREDERICK L. WEBBER, PRESIDENT AND CEO, ALLIANCE
OF AUTOMOBILE MANUFACTURERS
Mr. Webber. Well, thank you, Mr. Chairman. Good morning.
Thank you for giving me this opportunity--push it again. How is
that working? OK.
Senator Lott. Pull it up a little closer, Fred.
Mr. Webber. Thanks.
As you know, we represent--the Alliance represents nine
automobile manufacturers. We share the concerns of this panel,
of our customers, of the Congress, writ large, about gasoline
prices, certainly energy security, and we all need to take
steps together to solve the problem, to solve the challenge.
There's a great story out there in America today that's not
being told, and we're going to start telling it ourselves, and
that has to do with advanced technology. I know the focus is on
CAFE and the authority the Secretary's looking for to apply the
truck rule to automobiles. But, as he said, it's not a quick
fix. It's not going to solve the immediate problem or the
immediate challenge. It's a long, laborious process. It takes
In the meantime, this exciting industry that I represent is
moving rapidly toward advanced technology vehicles. We have
over 40 in the marketplace today. We're going to have another
40 in the next year or so. And what's happened here is that,
like safety--as you know, when safety became a competitive
issue, all kinds of great things happened in the automobile
industry, and today you and I drive trucks and cars that have
never been safer. That's what's happening in the advanced
technology arena. Advanced technology has become a competitive
issue, and we're off to the races. And our member companies and
others are really striving hard to develop these advanced
technology vehicles. We've made a lot of progress with E-85
engines that'll burn ethanol. We've made a tremendous amount of
progress with diesel, clean diesel, biodiesel. We are looking
down the road at hydrogen. We've got the Administration's
support on that, and the Congress's support on that. This is
the real story.
This is going to be the fix. This is going to enable us to
reduce consumption of gasoline from foreign sources, or, I
should say, oil. We're very excited about it. We're moving
forthrightly. And we would ask that people recognize it,
especially the Congress.
I want to say one other thing. In our car lots today we
have over 100 different models of vehicles that get over 30
miles to the gallon. The consumer has a choice. That's been the
objective all along in the history of the automobile industry.
Soon the consumer will have greater choices as we move forward
with advanced technology. I know many of you have interest in
ethanol. We've got infrastructure challenges there, but I think
they can be overcome.
So, again, this is an exciting time for our industry,
perhaps a turning point, and we are going to continue the
progress that we've made.
[The prepared statement of Mr. Webber follows:]
Prepared Statement of Frederick L. Webber, President and CEO,
Alliance of Automobile Manufacturers
The Alliance of Automobile Manufacturers (Alliance) is a trade
association of nine car and light truck manufacturers including BMW
Group, DaimlerChrysler, Ford Motor Company, General Motors, Mazda,
Mitsubishi Motors, Porsche, Toyota and Volkswagen. One out of every ten
jobs in the U.S. is dependent on the automotive industry.
Alliance members share the concerns of our customers and the
American public about high gasoline prices and support the President's
policy of reducing our consumption of petroleum. Member companies have
consistently improved the fuel efficiency of their products and
continue to offer ever-increasing numbers of advanced technology
vehicles--such as hybrids, clean diesels, alternative fuel vehicles,
and others--that reduce the automotive sector's consumption of
For example, since the 1970s, new vehicles have continued to become
more fuel-efficient. EPA data demonstrate that fuel efficiency has
increased steadily at nearly one to two percent per year on average
from 1975 for both cars and light trucks. Passenger car fuel economy
has more than doubled from 14.2 mpg in 1974 to 29.1 mpg in 2004 and
light truck fuel economy has increased by 60 percent since 1974. But as
we have noted on many previous occasions, the ultimate decisions about
what vehicles are purchased and how they are driven belong to American
And while consumers value fuel economy, they also want many other
attributes in today's vehicles, such as safety, passenger and cargo
room, performance, towing and hauling capacity. Our challenge is to
develop advanced technology vehicles that combine these attributes with
improved fuel efficiency. Of particular focus is maintaining safety
while improving fuel efficiency.
The auto industry leads the way when it comes to investing in
research and development. Automakers are committed to being first to
market with breakthrough technologies that can produce new generations
of autos with advanced powertrains and fuels. Automakers are competing
to bring these vehicles to market, as soon as the technology is
feasible, affordable and meets consumer expectations. Each year many
new advanced technology models are offered on dealer lots. In just five
years, the Alliance has seen the number of these vehicles grow to more
than 40 models on sale in dealer showrooms with an additional 35
models, that includes hybrids, clean diesels and alternative fuel
vehicles in showrooms soon. In addition, vehicles using liquid hydrogen
in internal combustion engines (ICE), fuel cells and electric vehicles
are in development. Today, eight million advanced technology and
alternative-fuel autos are on the road and automakers will continue to
increase volumes and new product offerings for years to come. This year
more than one million advanced technology and flexible fuel vehicles
will be sold. Automakers support incentives that can help put more of
these highly fuel-efficient autos on the road.
The result of all of this work is that today's drivers are learning
a new vocabulary. The following is a brief description of some of the
exciting advanced technologies and alternative fuel vehicles being sold
or currently in development.
Flexible Fuel Vehicles
An important provision of the Energy Policy Act of 2005 (EPACT
2005) is the increased promotion of renewable fuels in the
transportation sector. Since 1996, auto manufacturers have been
producing vehicles capable of using high concentration blends of
ethanol including E-85. There will be more than six million of these E-
85 capable vehicles on the road by the end of the year and nearly one
million more are being added each year. If fuel were available for all
of these E-85 capable vehicles to refuel using only E-85, the U.S.
would be able to reduce its gasoline consumption by nearly three
billion gallons per year.
EPACT 2005 will help in E-85 infrastructure development by raising
the requirement for the use of ethanol and other renewable fuels to 7.5
billion gallons per year by 2012 and providing tax incentives aimed at
making more E-85 pumps available to the driving public and helping to
reduce reliance on oil imports.
Hybrid-electric vehicles are being offered today and are already
saving fuel. The number of these vehicles will increase substantially
over the next several years. They offer significant improvements in
fuel economy--up to 50 percent and reduced emissions. These vehicles
utilize electric motors for propulsion, to reduce some of the burdens
on the traditional ICE. Hybrid-Electrics capture usable energy through
regenerative braking. It is estimated that by 2010, more than 50 hybrid
nameplates will be available in North America with volumes approaching
one million vehicles. Hybrid technology can also be applied to diesels,
alternative fuel and fuel cell vehicles.
Advanced Lean-Burn Engines
Vehicles that are powered by clean advanced lean-burn technology
such as lean burn gasoline engines and direct injection diesels offer
greater fuel economy and better performance than conventional gasoline-
powered engines. Diesel-powered vehicles are very popular in Europe--
where environmental standards and economic incentives have been
provided to enhance their appeal. These types of vehicles could provide
fuel economy gains of up to 30 percent compared to conventional
vehicles. In addition, most diesels are capable of running on good
quality biodiesel blends of up to five percent (B5) and many are
designed to use up to twenty percent or one hundred percent biodiesel
fuel (B20 or B100).
From a vehicle perspective, hydrogen-powered fuel cells offer the
greatest potential improvement in fuel efficiency and emissions
reductions. They also create a great opportunity for eliminating
dependency on petroleum. However, widespread commercialization of this
technology is some years away.
Hydrogen Internal Combustion Engines
Another promising and enabling technology is hydrogen-powered ICEs.
The concept of using hydrogen ICEs offers several advantages: near-zero
emissions, maintaining the utility, flexibility, and driving dynamic of
today's automobile, assisting in the development of hydrogen storage
technology, and developing hydrogen distribution channels and helping
to promote hydrogen refueling infrastructure.
All of these advanced technologies and alternative fuel vehicles
will help the U.S. address concerns about its over-reliance on imported
oil. But they will take time to be effective. Tomorrow's transportation
needs will be met by a diverse collection of technologies each offering
drivers a unique set of attributes to help move their families down the
For its part, the auto industry is committed to advancing the state
of technology and bringing new vehicles using these technologies to the
market as quickly as possible. Competition among automakers will drive
this process far better and with fewer disruptions to the marketplace
than any regulations that can be adopted. Furthermore, stimulating
consumer demand can help accelerate this process. Tax credit provisions
enacted as part of EPACT 2005 have helped to spur the purchase of these
highly fuel-efficient vehicles.
Today, automakers are providing consumers with a wide range of
fuel-efficient choices, but when gasoline prices rise, not all
consumers are in a position to purchase the highly fuel-efficient
models on sale today. There are over 200 million vehicles on U.S.
roads, and the quickest way to reduce gasoline usage is through
conservation. There are many simple, easy gas-saving tips for
consumers. American drivers can save gasoline immediately by keeping
their engines tuned and their tires properly inflated. Smooth
accelerations save gas, along with closing windows at higher speeds.
The U.S. Department of Energy provides excellent gas-saving tips to
drivers, and we urge the government to highlight this information as
the summer driving season begins. In addition, there are opportunities
for infrastructure improvement such as improved traffic light timing
that can help reduce fuel consumption.
Corporate Average Fuel Economy (CAFE)
For over 30 years, the CAFE program has been in place to provide
fuel economy requirements as to what each automaker's fleet of
passenger cars and light trucks must achieve. While vehicle fuel-
efficiency has improved, vehicles miles traveled has increased an
average of about 1.7 percent per year for the past 30 years with a net
result of little impact on energy conservation. Currently, CAFE
requires each automaker to meet an average fuel economy level of 27.5
mpg for all new passenger cars that it sells each year. For light
trucks, NHTSA recently announced an increase in the CAFE standards for
the 2008-2011 model years, marking seven straight years of fuel economy
increases (from MYs 2005-2011) and an increase of nearly 20 percent
over that period. Meeting these higher fuel economy standards will be a
challenge, even with all the new fuel-efficient technologies that
manufacturers are placing in vehicles today.
When setting new standards, NHTSA must consider many elements
including technological feasibility, economic practicability, the need
of the U.S. to conserve energy and the effect of other motor vehicle
standards, such as safety and emissions on fuel economy. It is in the
best interest of the public that we maintain a balance between improved
fuel economy, highway safety and employment.
While the law holds manufacturers responsible for meeting CAFE
standards, it is important to recognize that in reality, consumer
purchases actually determine whether a manufacturer meets, exceeds, or
falls short of the standards in any given year. Because of this, CAFE
compliance depends not only on what products are offered but also on
what products consumers purchase.
Proposed Changes in the Law
The Administration has requested new authority to permit reform of
the passenger car CAFE program. With the ink barely dry on the recent
light truck rule and no actual experience with the truck reform
proposal, it may be a bit premature to think of locking in this new
system for passenger cars at this time. Inclusion of some broad
guidance that CAFE reform, based on use of vehicle attributes and
classes, may be of some value to the agency when it does consider
increasing passenger car CAFE requirements.
The Alliance also believes that NHTSA should very carefully weigh
the timing of any increases in passenger car standards in view of the
current economic health of the industry. No one likes high gas prices,
but increasing passenger car standards--which takes time to effect and
then years to fully become phased into the overall fleet of vehicles on
the road--should not be viewed as a panacea to combat rising fuel
costs. Alliance members are only in the second year of seven years of
increasingly stringent light truck standards. In addition, the
passenger car fleet average already exceeds the current 27.5 mpg
standard--driven by consumer choices of the many very fuel-efficient
cars offered for sale.
If NHTSA is granted authority to reform the structure of the
passenger car standards, the agency should administer the new authority
in a nondiscriminatory manner among manufacturers.
The rulemaking for CAFE standards is a labor-intensive and
resource-intensive process both for NHTSA and for the manufacturers.
Therefore, NHTSA should have the authority to establish a standard that
could remain in effect for more than one year, as long as the agency
determined by rulemaking that the standard is ``maximum feasible'' for
that multiyear period covered by the standard.
The discussion of passenger car CAFE policy has also raised two
additional issues--credit trading and the so-called, two-fleet rule.
Credit trading is intended to provide flexibility options for
manufacturers as they pursue compliance with the CAFE program. Credit
trading has been examined numerous times in the past without agreement
as to its actual value. Department of Transportation recently
considered adding credit trading to the light truck rule and decided
not to do it.
As regards to the two-fleet rule, the CAFE statute requires
separation of the domestically-manufactured and non-domestically-
manufactured vehicles in the passenger car fleet, with separate
compliance required by each sub-fleet. The original policy
justification for the two-fleet rule was to discourage manufacturers
from shifting their production of smaller, more fuel efficient cars to
foreign factories. Recognizing that a fleet-wide average structure for
the fuel economy standards would effectively require manufacturers to
include smaller, more fuel-efficient cars in their fleets, Congress
wanted to avoid any inducement to increase the importation of foreign-
produced cars. If there are any proposed changes to the two-fleet rule
they should be carefully reviewed.
We believe the most effective approach to pursuing reductions in
U.S. gasoline consumption is to expand the availability of alternative
fuels such as ethanol and to help promote the sale of advanced
technology and alternative fuel vehicles that are currently gaining
traction in the market.
As previously stated, Alliance members are currently offering for
sale more than one million of these advanced technology and alternative
fuel autos, and more will be offered in the future. We are pleased that
Congress passed consumer tax incentives for the purchase of some of
these vehicles last year, and we urge Congress to focus on expanding
the production, infrastructure and distribution network for alternative
fuels. Getting more of the American-based renewable and biofuels into
the market and available to consumers will displace much more gasoline
than a new passenger car CAFE requirement.
However, if NHTSA does initiate a passenger car rulemaking, the
Alliance and its members will work closely with the agency in its
consideration and promulgation of a final rule. Setting CAFE standards
is a complicated, rigorous and arduous process. NHTSA considered over
45,000 comments and spent countless man-years in the consideration of
its light truck rule.
The automakers remain committed to populating America's roadways
with the latest innovative vehicle technologies. Competition among the
companies will drive much of this innovation. And the changing needs
and wants of American consumers also play a huge role in driving
Senator Lott. Thank you very much, Mr. Webber.
STATEMENT OF JOHN M. CABANISS, JR., DIRECTOR,
ENVIRONMENT AND ENERGY, ASSOCIATION OF
INTERNATIONAL AUTOMOBILE MANUFACTURERS, INC.
Mr. Cabaniss. Good morning, Mr. Chairman.
I represent the Association of International Automobile
Manufacturers. We have 14 automakers that account for over 40
percent of the cars sold here in the United States every year.
We support Secretary Mineta's request for authority to
restructure the program. We also stress the importance of
providing adequate lead time to comply with the standards,
encourage additional market-based incentives to spur the demand
for those vehicles, and, also, the elimination of the so-called
Senator Lott. Do you want to pull that microphone a little
Mr. Cabaniss. Certainly. Sorry.
Senator Lott. The elimination of?
Mr. Cabaniss. The two-fleet rule.
We believe there are three guiding principles that Congress
should follow when it addresses CAFE. First and foremost, any
approach must be competitively neutral. Second, the
requirements must be technologically feasible and economically
practical. And, third, we need that lead time that I mentioned.
Standards also should continue to be performance-based, not
trying to pick winners and losers, and not specifying or
favoring certain technologies over others. And those kinds of
performance standards also allow manufacturers the flexibility
that they need to set their own research priorities, build on
their strengths, and develop the products that meet consumer
needs and demands.
We support DOT's request to move ahead, as they have
already with the light trucks, to consider an attribute-based-
type program. The light truck rule, as Secretary Mineta
mentioned, is a good starting point. But we believe that, given
that we don't have experience with that program yet, we would
urge some caution be taken there, in terms of carefully looking
at how it applies. But under no circumstances should DOT rely
on using a company-specific uniform-percentage increase-type
We believe that the incentives are very important, in terms
of not just requiring that the vehicles be manufactured, but
also creating extra demands for consumers to purchase them.
Congress, of course, has considered various types of incentives
in the past, and we support those, and we support working with
you to develop even further ways to increase demand for these
The auto industry is not the same today as it was 30 years
ago. Since the time when the CAFE program was first
established, the AIAM companies, our companies, have invested
over $30 billion in U.S.-based manufacturing plants and
research facilities. Combined, the international automobile
manufacturers employ over 100,000 Americans and generate almost
2 million jobs in supplier and dealership facilities. And 60
percent of the cars and trucks that our members sell here in
the United States are now manufactured right here in the United
States. So, when we consider jobs, we need to consider the full
landscape of the industry.
[The prepared statement of Mr. Cabaniss follows:]
Prepared Statement of John M. Cabaniss, Jr., Director, Environment and
Energy, Association of International Automobile Manufacturers, Inc.
Good morning. My name is John Cabaniss, Director, Environment and
Energy for the Association of International Automobile Manufacturers,
AIAM is a trade association representing 14 international motor
vehicle manufacturers accounting for over 40 percent of passenger cars
and over 20 percent of light trucks sold in the United States
annually.\1\ AIAM appreciates the opportunity to offer its views
regarding the need to reform passenger automobile CAFE standards. AIAM
supports Transportation Secretary Mineta's request for additional legal
authority to revise the structure of the passenger car CAFE standards.
In addition to addressing this issue, we would like to stress the
importance of adequate lead-time in achieving compliance with any new
standards, suggest that supplemental market-based incentives would
strengthen a national effort to reduce fuel consumption, and recommend
the elimination of the ``two-fleet rule'' requiring the separation of a
manufacturer's import and domestic fleets.
\1\ AIAM members include Aston Martin, Ferrari, Honda, Hyundai,
Isuzu, Kia, Maserati, Mitsubishi, Nissan, Peugeot, Renault, Subaru,
Suzuki and Toyota. AIAM also represents original equipment suppliers
and other automotive-related trade associations.
AIAM members are important stakeholders in the debate over
passenger car fuel economy standards, representing 44 percent of all
sales in this market segment last year. In addition, AIAM member
companies have for many years been leaders in offering fuel-efficient
vehicles for the U.S. market. Historically, vehicles produced by our
member companies have headed EPA's annual list of most fuel-efficient
vehicles. Member companies have achieved this fuel-economy leadership
to a significant degree by pioneering the introduction of advanced
automotive technology into their vehicles. Our member companies
continue to introduce a variety of advanced technology models,
including hybrid electric vehicles, ethanol-capable flexible-fuel
vehicles, hydrogen fuel cells, clean diesel, as well as advances in
traditional gasoline vehicles.
AIAM believes that there are three guiding principles that Congress
should follow when it addresses CAFE matters. First and foremost, when
considering the form of the CAFE standards it is of the utmost
importance that the structure or underlying approach is competitively
neutral, and that all manufacturers are treated fairly and equitably
under the standards system. Second, under any structure, the specific
requirements of the standards must be technologically feasible and
economically practicable. Third, it is absolutely essential that
manufacturers are provided adequate lead-time to implement new
In addition, standards should continue to establish performance
requirements rather than specify or favor any particular technology.
Reducing U.S. dependence on petroleum is a complex undertaking, and the
greater the number of creative technologies that can be brought to
bear, the better. In addition, performance standards allow
manufacturers the flexibility to set their own research priorities
based on their individual strengths and to develop the most effective
and efficient approaches to meet consumer demand, while achieving the
broader societal goals for which the standards are intended.
I. Reform of the Structure of the Passenger Car CAFE Standards
An April 28, 2006, White House Fact Sheet states that the
Administration is requesting additional legal authority to enable DOT
to reform the passenger car CAFE standards ``consistent with the
approach taken with the light truck rule issued March 29.'' \2\ AIAM
supports authorizing DOT to establish attribute-based class standards
for passenger cars, as is currently authorized for light trucks. This
approach would be consistent with the recommendations of the National
Academy of Sciences and is generally consistent with the approach
adopted by NHTSA in its recent light truck CAFE rulemaking. DOT should
be given the flexibility to consider variations of the structure
adopted in its light truck rule. Given our lack of experience with the
new structure, it remains uncertain how the new structure will work in
practice. Under no circumstances should the Department be authorized to
adopt company standards based on past performance, such as uniform
percentage increase (UPI) standards. We urge Congress to provide
guidance to DOT by providing the underlying principles upon which the
new standards must be based, including the three guiding principles
\2\ See http://www.whitehouse.gov/news/releases/2006/04/20060428-
Over the years, AIAM has vehemently opposed any effort to authorize
fuel economy standards based on the UPI approach. Respected analysts
have consistently criticized the UPI approach, including the National
Academy of Sciences, in its 2001-2002 study, which states:
The UPI system would impose higher burdens on those
manufacturers who had already done the most to help reduce
energy consumption. The peer-reviewed literature on
environmental economics has consistently opposed this form of
regulation. It is generally the most costly way to meet an
environmental standard; it locks manufacturers into their
relative positions, thus inhibiting competition; it rewards
those who have been slow to comply with regulation; it punishes
those who have done the most to help the environment; and it
seems to convey a moral lesson that it is better to lag than to
lead. In addition to fairness issues, the change would not
eliminate the problems of the current CAFE system, but would
create new ones. Implementation of such rules provides strong
incentives for manufacturers to not exceed regulatory standards
for fear that improvements will lead to tighter regulations.
Thus, such rules tend to create beliefs counterproductive for
\3\ ``Effectiveness and Impact of Corporate Average Fuel Economy
Standards,'' National Research Council, 2002, pages 92-93.
In addition to these shortcomings, the UPI approach would have the
effect of locking manufacturers into their current model mix, leaving
them potentially unable to meet changing consumer demands.
We also believe that standards levels should be established by DOT
through rulemaking. The complex technical and economic analyses
necessary to set standards are better accomplished as part of an agency
rulemaking rather than through direct legislation. DOT has substantial
resources available to perform the required technology and economic
analyses required for standard setting, and the use of an open,
transparent, rulemaking process is needed to assure that the interests
of all parties are considered in reaching a decision on the standards.
The law provides that CAFE standards must be set at least 18 months
prior to the start of the affected model year. However, the 18-month
period is adequate to enable automakers to implement only the most
minor of design changes. For more substantial changes, greater lead-
time is necessary, not only to develop new technologies but also to
deploy existing technologies into the fleet through normal product
redesign cycles. It is instructive to note that the National Academy of
Sciences projected the need for up to 15 years lead-time to meet
significantly higher standards. It is also desirable to our planning
efforts to have standards set for multiple years in a single
rulemaking, as NHTSA did with the recent light truck rule. Automakers
generally plan major vehicle redesigns on a 5 to 8 year cycle, with
individual model changeovers staggered to allow the best use of limited
engineering resources. Significant changes in fuel economy require a
stable and predictable set of requirements that corresponds to this 5
to 8 year product cycle. We urge Congress and the Administration to
consider the need for lead-time beyond the statutory minimum in order
to implement new vehicle technology.
III. Market-Based Approaches to Facilitating Higher Levels of Fuel
CAFE standards mandate the production of more fuel efficient
vehicles but provide no incentive for consumers to purchase such
vehicles. The most direct market signal to encourage consumers to
demand fuel efficiency is an increase in the cost of driving. Recent
record-high gasoline price increases encourage consumers to value fuel
saving technologies. However, motorist interest in fuel savings often
dims when fuel prices decline. Therefore, other types of incentives may
be useful to maintain demand for fuel efficient vehicles when fuel
prices are lower or to reinforce the market signal provided by high
fuel prices. Such incentives include extending and expanding current
tax credits and tax deductions for the purchase of fuel efficient and
alternative fueled vehicles, access to preferential parking areas, and
mandates for government fleet purchases. These and other incentives
would further encourage manufacturers to develop and introduce advanced
technologies by enhancing the market for vehicles that use such
technologies. Advanced fuel-efficient technologies are frequently
costly, particularly in their first years of introduction, and such
incentives can facilitate the introduction of advanced technologies by
helping to bridge the price differential between these vehicles and
conventional vehicles. Congress has considered a variety of technology-
based incentives in recent years to encourage consumers to purchase
advanced technology vehicles. AIAM member companies have generally
supported these incentives and support the President's call to lift the
current manufacturer cap on tax credits for hybrids and diesels to
allow more consumers to be eligible for the full tax credit. Ideally,
we believe that such incentives should be performance-based and
technology-neutral, i.e., they should be designed to encourage the
production and sale of fuel-efficient vehicles, regardless of the
specific advanced technology selected by the manufacturer or where
vehicles are manufactured.
AIAM supports new authority for credit trading under the CAFE
program. Allowing credit trading would provide manufacturers with
increased compliance flexibility and encourage fuel economy
improvements. The 1992 \4\ and 2001 \5\ NAS CAFE committees suggested
this approach. Allowing such trading would also enhance the overall
efficiency of the CAFE system. We believe that the rulemaking should
examine credit trading among manufacturers and between a manufacturer's
passenger auto and light truck classes.
\4\ ``Automobile Fuel Economy, How Far Should We Go?'', National
Research Council, 1992, page 184.
\5\ ``Effectiveness and Impact of Corporate Average Fuel Economy
(CAFE) Standards,'' National Research Council, 2002, page 114.
IV. Domestic/Import Separate Fleet Requirement
The current law requires dividing a manufacturer's passenger car
fleet into domestic and import classes that must comply separately with
fuel economy standards. There is no similar requirement for light
trucks. This requirement was originally intended to encourage domestic
production of smaller vehicles by eliminating any compliance benefit
for U.S.-based manufacturers from simply importing foreign produced,
fuel efficient vehicles. Supporters of the ``two-fleet'' rule argue
that the rule prevents manufacturers from shutting down U.S. production
facilities for smaller, fuel efficient vehicles. In our view, the
current record-high fuel prices and growing demand for fuel efficient
vehicles indicates there is a strong incentive for maintaining or
increasing U.S. production of fuel efficient vehicles by all
manufacturers. Moreover, the ``two-fleet'' provision has created the
unintended consequence of providing a disincentive for foreign-based
companies to increase the U.S. content of their vehicles to levels
above 75 percent, since doing so would place the vehicles in a separate
compliance fleet. This disincentive is real, not theoretical, and has
cost U.S. jobs. There have even been cases where a company has
decreased the U.S. content of certain domestic vehicles to a level
below 75 percent to allow those vehicles to be averaged with the
manufacturer's more efficient import fleet adversely impacting U.S.
The 2001 National Academy of Sciences study of the CAFE program \6\
states that ``since the two-fleet rule increases costs to consumers,
the committee believes it is no longer justifiable and should be
eliminated.'' The 1992 NAS CAFE committee \7\ concluded that the
separate fleet requirement ``has no obvious or necessary connection to
the achievement of fuel economy'' and encouraged Congress to consider
its repeal. We strongly concur in these assessments.
\6\ Id., pages 89-90.
\7\ Id., pages 183-184.
The auto industry is not the same as 30 years ago when the CAFE
program was established. Since that time AIAM members have invested
over $33 billion in U.S.-based vehicle, engine and parts manufacturing
plants, and research and development facilities and developed a
production capacity of 3.7 million vehicles annually. Combined,
international automakers directly employ 103,000 Americans and generate
1.7 million U.S. jobs in dealerships and supplier industries
nationwide. Approximately 60 percent of all the cars and light trucks
sold each year in the U.S. by international automakers are made in the
Senator Lott. Thank you very much.
Congressman Sharp, good to see you again.
STATEMENT OF HON. PHILIP R. SHARP, PRESIDENT, RESOURCES FOR THE
Mr. Sharp. Thank you very much, Mr. Chairman. Thank you for
asking me to testify.
I'm here as president of Resources for the Future, but I
must quickly say the institution takes no position on public
policy issues, so these are my own remarks. They derive from my
experience, since leaving Congress, on two panels: the National
Academy of Sciences study that you folks have been referring to
all morning, and the National Commission on Energy Policy, a
private bipartisan effort to make some policy recommendations.
What is important, I believe, is that both of these panels have
recommended that we ought to significantly increase the CAFE
standards in this country, the fuel economy standards. Both
also recommended the system needed to be reformed.
Now, the reasons for taking action, some of which have been
articulated this morning, are, first and foremost, our growing
dependence on the global oil market, and the second, and very
importantly, is the need to reduce the growth of carbon dioxide
emissions here and around the world. Indeed, increasingly, many
people believe that we are entering an era of the carbon-
constrained economy, and it is very difficult to deal with
transportation in that economy.
But, third, it's very important to recognize, over the last
30 years, as a number of you on the panel have been involved in
these policy disputes, the fact that the world price of oil
goes up, and it goes down. We do not know where it is headed
now, and we misjudged where it was headed on any number of
occasions over the last 30 years. The result is that consumer
interest is on again, off again; investor interest is on again,
off again; government policy is on again, off again--in terms
of fuel economy or in terms of alternative fuels. So, it's
extremely important that the government have not a crash
program, but a consistent program that helps to push our
technology and push our marketplace.
Now, let me just briefly state that, the National Academy
of Sciences, as has been alluded to, identified current
technologies available that can be used now and could be cost-
effectively put into the system, and are coming into the
But let me close by simply saying that CAFE has been an
imperfect policy, no doubt about it, but it's been a very
important one. It has been identified as up to almost 3 million
barrels of oil per day we're not using that we would have been
using today, had we not had this policy. But it is really
important to understand that it's also not the be-all and end-
all solution to transportation problems and fuel economy in
this country. Indeed, many believe that if we don't have a
sustained price of gasoline, meaning a sustained gasoline tax,
we do not encourage efficient use of cars, nor the efficient
purchase of cars.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Sharp follows:]
Prepared Statement of Hon. Philip R. Sharp, President,
Resources for the Future (RFF)
Thank you for inviting me to testify. My name is Philip Sharp and I
am President of Resources for the Future (RFF), a nonpartisan, social
science think tank that has dealt with energy and resource issues for
more than 50 years. As an institution, however, RFF does not take
positions nor engage in advocacy, so the opinions expressed here are my
For the record, I have been involved with fuel economy issues in
During my service in Congress and on this Committee (1975-1995), I
participated in the creation of the Corporate Average Fuel Economy
(CAFE) policy and in the few legislative changes made since then.
More recently, I was a member of the CAFE review panel sponsored by
the National Research Council, an arm of the National Academy of
Sciences. Its 2002 report recommended the government take further
action to improve passenger-vehicle fuel economy and suggested possible
reforms in the CAFE policy. (See: Effectiveness and Impact of Corporate
Average Fuel Economy (CAFE) Standards at www.nap.edu.)
Currently, I am also a member of the National Commission on Energy
Policy, a private bipartisan panel funded by the Hewlett Foundation,
which in 2004 recommended a significant increase in CAFE standards
along with reforms to the current policy. (See: Ending the Energy
Stalemate: A Bipartisan Strategy to Meet America's Energy Challenges at
Both the Academy committee and the Energy Commission recommended
Federal action to improve fuel economy for the purpose of mitigating
two major concerns: oil security and growing carbon dioxide
Our growing consumption of oil, concentrated in the transportation
sector, entails major risks associated with our dependence on the
global oil market. And this consumption is a major contributor of
CO2 to the atmosphere and hence to global climate change.
Among oil-market concerns is the possibility of a serious supply
disruption caused by political turmoil or terrorism with severe
economic consequences; the pressure to compromise important U.S.
foreign policy goals for the sake of oil supply; the possibility that
oil production will peak and dramatically intensify global competition
for supplies; and other issues.
Among the uncertainties we face is where oil prices will go in the
years ahead. Just as the dramatic rise in oil and natural gas prices
over the last two years was not predicted, it is now unclear whether
oil prices will rise further, drop back in the $40-per-barrel range as
some have predicted, or take a real nose dive as they did in 1986 and
The history of price uncertainty has meant a history of on-again,
off-again interest by consumers, investors, and government in fuel
In the face of such uncertainty, many, including the bipartisan
commission, have concluded that it is prudent for the United States to
maintain policies that push markets to improve fuel efficiency, to
advance alternative fuels, and to expand public transit options in
order to mitigate against global market risks and to reduce CO2
Action now by Congress on fuel economy standards obviously will
have no immediate impact on gasoline prices. Indeed, it will take some
years for changes in the policy to have an impact at all.
But action now on fuel economy standards can help the United States
address our long-term national interests.
CAFE is currently getting a lot of attention because people are
looking for immediate relief from high prices at the pump, but there is
no fast or cheap way to escape the risks of oil dependence.
Undoubtedly, one of the most expedient ways to reduce dependence would
be to welcome higher oil and gasoline prices rather than decry them--an
unlikely prospect for today's consumers or leaders.
The Academy Report
Let me call your attention to a few of the findings and
recommendations of the Academy committee, which may be useful in your
consideration today. Attached, as Appendix A, is a portion of that
The study notes in Finding 5, ``technologies exist that if applied
to passenger cars and light duty trucks, would significantly reduce
fuel consumption within 15 years.''
It notes in Finding 6 that much of this could be accomplished with
the consumer breaking even--meaning that the savings in gasoline costs
would offset the added cost to a new vehicle. And that calculation was
made assuming gasoline only costs $1.50 per gallon. Furthermore, the
hybrid car has greatly advanced since the report; given its costs in
2001, the committee did not consider it a realistic near-term option.
The committee recommended several possible CAFE reforms
(Recommendation 2), such as trading fuel economy credits, which has
also been a recommendation of RFF researchers (see Fischer, Carolyn and
Paul R. Portney, 2004, ``Rewarding Automakers for Fuel Economy
Improvements,'' chapter 6 in New Approaches on Energy and the
Environment: Policy Advice for the President, RFF Press).
The committee cautioned that a major redesign (Recommendation 3)
required more study than the committee had been able to devote to it.
To avoid harmful effects on companies, on employment, and on
consumers, the committee suggested allowing plenty of time for the
industry to meet stiffer requirements.
And finally, the government should continue to fund research on
Delegation to NHTSA
Neither the National Academy committee nor the Energy Commission
was willing or able to agree on recommended numerical CAFE targets--in
part, because the task is a complex one and, in part, because the
targets represent tradeoffs among various societal values and therefore
are a political decision.
The commission, in fact, recommended delegation of that
responsibility: ``Congress should instruct NHTSA to significantly
strengthen Federal fuel economy standards . . . to take full advantage
of the efficiency opportunities provided by currently available
technologies and emerging hybrid and advanced diesel technologies''
(see Appendix B).
Given the considerable burden of legislating in this area, it seems
appropriate that setting the targets and redesigning the policy could
be delegated to the National Highway Safety Transportation Authority
with legislative guidance and strong Congressional oversight.
Possibilities for policy redesign were laid out before the House
Committee on Energy and Commerce last week by my colleague, Dr. William
Pizer (see Appendix C).
CAFE has been a very imperfect, but important, policy in dealing
with fuel consumption. The Academy concluded, in 2002, that our oil
imports would have been 2.8 million barrels a day higher had the policy
not existed. (See Finding 1 in the attached Appendix A).
Many experts believe that a more effective approach to reducing
fuel consumption--and a more cost-effective approach for the U.S.
economy--would be stronger gasoline tax or oil tax, either as an
alternative to CAFE or in conjunction with CAFE. The impact would not
only encourage consumers to purchase more efficient vehicles but also
encourage them to be more economical in their driving, a critical
component that CAFE does nothing to address. Indeed, such a tax would
have a more rapid impact on consumption than is possible through CAFE
alone. These experts, of course, are not subject to popular election.
Mr. Chairman, after 20 years of stalemate on fuel economy issues,
we finally have a moment where change is possible. Let's do it!
Appendix A--Effectiveness and Impact of Corporate Average Fuel Economy
Finding 1. 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 that
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 greater than it
is, or about 14 percent of today's consumption.
Finding 2. 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.\1\ 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, and reliability.
\1\ A dissent by committee members David Greene and Maryann Keller
on the impact of downweighting and downsizing is contained in Appendix
A. 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.
Finding 3. Certain aspects of the CAFE program have not functioned
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 (SUVs)
and cross-over vehicles. The car/truck distinction has been
stretched well beyond the original purpose.
The Committee could find no evidence that the two-fleet rule
distinguishing between domestic and foreign content has had any
perceptible effect on total employment in the U.S. automotive
The provision creating extra credits for multifuel 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.
Finding 4. 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, both 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
mph acceleration times became, on average, 25 percent faster.
Finding 5. 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 to $5/gal) have justified
their development. However, economic, regulatory, safety, and consumer-
preference-related issues will influence the extent to which these
technologies are 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 penetrate deeply into the U.S.
The Committee 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 SUVs, pickups,
and minivans. In addition, it 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.
Projections of both incremental costs and fuel consumption benefits are
very uncertain, and the actual results obtained in practice may be
significantly higher or lower than shown here. 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
Finding 6. 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 cost-
efficient 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 improve fuel economy up to the point
where further increases in fuel economy would not be reimbursed by fuel
savings. The 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 cost-efficient analysis.
These cost-efficient calculations depend critically on the
assumptions one makes about a variety of parameters. For the purpose of
calculation, the committee assumed as follows: (1) gasoline is priced
at $1.50/gal, (2) a car is driven 15,600 miles in its first year, after
which miles driven declines 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 cost-efficient
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
5 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, 3 years.
This latter view, of course, will affect the identification of cost-
efficient 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 midsize SUV. 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 22.7 mpg would represent the cost-efficient level. If, on
the other hand, consumers take the full 14-year average life of a
vehicle as their horizon, the cost-efficient 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 cost-
efficient fuel economy levels identified in Tables 4-2 and 4-3 in
Chapter 4 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 their money on other vehicle
amenities, such as greater acceleration or towing capacity, rather than
on the fuel economy cost-efficient technology packages.
Finding 7. 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
Finding 8. The committee identified externalities of about $0.30/
gal 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.
Finding 9. There are significant uncertainties surrounding the
societal costs and benefits of raising fuel economy standards for the
light-duty fleet. These uncertainties include the cost of implementing
existing technologies or developing new ones; the future price of
gasoline; the nature of consumer preferences for vehicle type,
performance, and other features; and the 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.
Finding 10. 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,\2\ higher fuel taxes, standards
based on vehicle attributes (for example, vehicle weight, size, or
payload), or some combination of these.
\2\ Feebates are taxes on vehicles achieving less than the average
fuel economy coupled with rebates to vehicles achieving better than
average fuel economy.
Finding 11. 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.
Finding 12. 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 although such a change is promising, it requires more
investigation than was possible in this study.
Finding 13. 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.
Finding 14. 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
California's 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.
Finding 15. 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 probably 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's fuel
consumption will require decades.
Recommendation 1. 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. The committee believes that these trade-offs rightfully
reside with elected officials.
Recommendation 2. 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.
Recommendation 3. 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
Recommendation 4. Under any system of fuel economy targets, the
two-fleet rule for domestic and foreign content should be eliminated.
Recommendation 5. CAFE credits for dual-fuel vehicles should be
eliminated, with a long enough lead time to limit adverse financial
impacts on the automotive industry.
Recommendation 6. To promote the development of longer-range,
breakthrough technologies, the government should continue to fund, in
cooperation with the automotive industry, precompetitive 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.
Recommendation 7. Because of its importance to the fuel economy
debate, the relationship between fuel economy and safety should be
clarified. 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
Appendix B--Ending the Energy Stalemate: A Bipartisan Strategy to
Meet America's Energy Challenges
Reduce U.S. Oil Consumption Through Increased Vehicle Efficiency and
Production of Alternative Fuels
Reducing U.S. oil consumption is a critical complement to the
measures described in previous sections for expanding and diversifying
global supplies of oil. A key to slowing continued growth in U.S. oil
consumption--which is otherwise projected to increase by more than 40
percent over the next two decades--is breaking the current political
stalemate on changing Corporate Average Fuel Economy (CAFE) standards
for new motor vehicles. Although recommendations in later chapters of
this report--notably those aimed at promoting the development of
alternative transportation fuels--will also help to reduce oil demand,
improving passenger vehicle fuel economy is by far the most significant
oil demand reduction measure proposed by the Commission.
The Commission's approach to vehicle efficiency builds on three
decades of experience with fuel economy regulation and a record of
impressive technological advances by the automobile manufacturing
industry. As a result of CAFE standards introduced in the 1970s and
high gasoline prices in the late 1970s and early 1980s, the average
fuel economy of new light-duty vehicles improved from 15 miles per
gallon (mpg) in 1975 to a peak of 26 mpg in 1987, a 73 percent increase
over a time period that also saw substantial progress in improved
vehicle performance and safety. The trend toward greater fuel economy,
however, did not continue. Passenger car CAFE standards peaked in 1985
at 27.5 mpg and have not changed since. Light-duty truck standards were
recently raised by 1.5 mpg to a new standard of 22.2 mpg which will go
into effect in 2005--prior to this increase they had remained
essentially unchanged since 1987. Thus, for most of the last two
decades overall fleet fuel economy has stagnated and continued
technology gains--such as port fuel injection, front-wheel drive, valve
technology, and transmission improvements--have been applied to
increase vehicle size and power, rather than fuel economy. In fact, at
24 mpg on average, new vehicle fuel economy is now no higher than it
was in 1981, but vehicle weight has increased by 24 percent and
horsepower has increased by 93 percent.
The Commission believes that three factors are largely responsible
for the current CAFE stalemate: (1) uncertainty over the future costs
of fuel-saving technologies; (2) fear that more stringent standards
will lead to smaller, lighter vehicles and increased traffic
fatalities; and (3) concerns that higher fuel economy standards will
put the U.S. auto industry and auto workers at a competitive
With respect to the first of these factors--cost and technology
potential--numerous recent analyses by the National Academy of Sciences
and others have concluded that significant improvements in the fuel
economy of conventional gasoline vehicles are achievable and cost-
effective, in the sense that fuel savings over the life of the vehicle
would more than offset incremental technology costs. Estimates of cost-
effectiveness do not, however, account for--and thus cannot by
themselves resolve--potential trade-offs in terms of vehicle
performance, safety, and impacts on jobs and competitiveness.
Given these complexities, the Commission was unable to agree on a
numerical fuel-economy standard.
The recommendations that follow nevertheless reflect the
Commission's conclusion that a combination of improved conventional
gasoline technologies and advanced hybrid-electric and diesel
technologies presents an opportunity to significantly increase fuel
economy without sacrificing size, power, safety, and other attributes
that consumers value. Note that the Commission defines ``advanced
diesel'' in this context as a diesel passenger vehicle that meets
stringent new Federal air pollution control requirements--or so-called
``Tier 2'' standards--that are being phased in from 2004 to 2008 (no
currently available passenger diesel vehicles meet these standards).
Ultimately, the Commission believes that a combination of higher
standards, CAFE reforms, and complementary incentive programs will
allow the Nation to capitalize on potentially ``game changing''
technologies such as hybrids and advanced diesels in a manner that
greatly enhances its ability to achieve oil security and environmental
goals, as well as its ability to sustain the future competitiveness of
the U.S. automobile industry.
Specifically, the Commission recommends:
Raising Passenger Vehicle Fuel Economy Standards--Congress
should instruct the National Highway Traffic Safety
Administration (NHTSA) to significantly strengthen Federal fuel
economy standards for passenger vehicles to take full advantage
of the efficiency opportunities provided by currently available
technologies and emerging hybrid and advanced diesel
technologies. Consistent with existing statutory requirements,
NHTSA should--in developing new standards--give due
consideration to vehicle performance, safety, job impacts, and
competitiveness concerns. To allow manufacturers sufficient
time to adjust, new standards should be phased-in over a five-
year period beginning no later than 2010.
Reforming CAFE--To facilitate compliance with higher
standards, Congress should modify CAFE to increase program
flexibility by allowing manufacturers to trade fuel economy
credits with each other and across the light truck and
passenger vehicle fleets. In addition, Congress should
authorize NHTSA to consider additional mechanisms that could
further simplify the program, increase flexibility, and reduce
compliance costs. One such mechanism is a compliance ``safety
valve'' that would permit manufacturers to purchase CAFE
credits from the government at a pre-determined price. Such a
mechanism would effectively cap costs to consumers and
manufacturers should fuel-saving technologies not mature as
expected or prove more expensive than anticipated.
Providing Economic Incentives for Hybrids and Advanced
Diesels--Congress should establish a five- to ten-year, $3
billion tax incentive program for manufacturers and consumers
to encourage the domestic production and purchase of hybrid-
electric and advanced diesel vehicles that achieve superior
Appendix C--Testimony on CAFE Program Reforms
Prepared by William A. Pizer
Thank you, Mr. Chairman, for the opportunity to offer testimony
before the Committee about the possibility of reforming the Corporate
Average Fuel Economy (CAFE) program, with particular reference to the
recently introduced reforms for light trucks. Over the past decade, I
have had the privilege of working on energy and environment issues for
organizations as diverse as the President's Council of Economic
Advisers and the National Commission on Energy Policy. Currently, I am
a senior fellow at Resources for the Future (RFF), a 54-year-old
research institution, headquartered here in Washington, D.C., which
focuses on energy, environmental, and natural resource issues.
RFF is both independent and nonpartisan, and shares the results of
its economic and policy analyses with members of both parties,
environmental and business advocates, academics, members of the press,
and interested citizens. RFF neither lobbies nor takes positions on
specific legislative or regulatory proposals, although individual
researchers are encouraged to express their individual opinions, which
may differ from those of other RFF scholars, officers, and directors. I
emphasize that the views I present today are mine alone.
Just a few weeks ago, the National Highway Traffic and Safety
Administration (NHTSA) released a final CAFE rule for the years 2008-
2011 that raises the standard from its 2007 level of 22.2 miles per
gallon (mpg), to 22.5 mpg in 2008, 23.1 mpg in 2009, and 23.5 mpg in
2010. But what should be of more interest to this Committee are two
major changes to the structure of the program included in the final
rule. First, the rule differentiated standards across manufacturers
based on the size of the vehicles they produce, and second, starting in
2011, the rule set these standards based on an explicit cost-benefit
analysis. Previously, there was a single standard for all light-truck
manufacturers and that standard was set, based on the ability of the
least capable manufacturer. In addition to these major structural
changes, the rule will also for the first time include medium-duty
passenger vehicles in the CAFE program starting in 2011. With the
inclusion of these heavier and naturally less fuel-efficient vehicles,
the estimated average fuel economy will be 24.0 mpg in 2011.
At the time the light-truck rule was proposed last Fall, I offered
my opinion--which I have appended to this statement--that the reforms
were a clear move toward a more efficient system, and perhaps even an
optimal one, given statutory constraints. I also indicated that, based
on an analysis of the underlying data from the recent National Research
Council (NRC) study, the 2011 fuel economy standard should be increased
based on the recent, dramatic increase in forecasted oil price and, in
turn, the dramatic increase in benefits from improved fuel economy.
What I would like to do today is first review my previous comments on
the design of the rule for light trucks and explain why they are
equally relevant for cars. I will then discuss additional reforms
possible in statute--the ability to trade CAFE credits across fleets,
firms, and time, as well as a cost-limiting safety valve that were not
possible in the light-truck rulemaking. I will briefly remark on the
fact that dramatically higher oil prices did not lead to an noticeable
increase in the 2011 fuel economy standard and finally offer a few
reflections on the overall desirability of CAFE from an economist's
Light-Truck CAFE Before the Recent Reforms
To understand the recent reforms to the light-truck CAFE program,
as well as the potential for further statutory reforms, it is useful to
consider how ``un-reformed'' or traditional CAFE works. There is a
single, one-size-fits-all fuel economy standard for light trucks that
must be met, on average, by each manufacturer. That is, each
manufacturer takes the fuel economy of each light-truck model they
produce, and then averages those numbers weighted by production volume.
That number must be at or above the mandated standard. If the
manufacturer beats the standard, the manufacturer collects CAFE credits
that can be used to make up any shortfall in the next three years. If
the manufacturer misses the standard and does not have any credits,
there is a penalty equal to $5.50 per 0.1 mpg per vehicle. The penalty
is routinely paid by European manufacturers, but has never been adopted
by domestic or Asian manufacturers, who have voiced concern about the
penalization notion surrounding the fee.
For light trucks, the level of the traditional standard is set with
an eye toward achieving the maximum possible fuel economy, but with
considerable deference given to the ability of each manufacturer to
meet that standard. The National Highway Traffic Safety Administration
(NHTSA) has typically tailored the standard to be economically
practicable for the least capable vehicle manufacturer while also
considering the Nation's need to conserve energy, technological
feasibility, and the impact of other motor vehicle standards on fuel
economy. The actual analysis is based on confidential manufacturer
product plans, data, and modeling.
One consequence of the traditional approach is that the single
standard for light trucks is tougher--that is, more expensive--for
manufacturers with a full line that includes large trucks with lower
fuel economy, and easier for manufacturers focused on small trucks with
higher fuel economy. For example, Honda has consistently beaten the
existing light-truck CAFE standard by 4-5 mpg, suggesting that it has
had no effect on their production decisions, while the major domestic
manufacturers that produce a broader range of trucks have hovered right
at the standard, suggesting a real impact.
The Reformed CAFE Rule
The recently finalized rule for light trucks makes two major
changes to the traditional approach. The first is a shift from a single
light-truck standard for all manufacturers to differentiated standards
for each manufacturer based on the size of the vehicles they produce.
The second is a shift to setting the standard based on an explicit and
careful cost-benefit analysis, involving the costs to manufacturers,
the value of fuel savings, and other consequences of gasoline and
Unlike the traditional CAFE rule for light trucks, the recently
finalized rule differentiates standards for each manufacturer based on
a continuous schedule of targets for different-sized vehicles. The size
of the vehicle, or footprint, is defined by multiplying the track width
(the distance between tires on the same axle) by the wheelbase (the
distance between centerlines on each axle). In 2011, the fuel economy
schedule ranges from 30.42 mpg for the smallest vehicle to 21.79 mpg
for the largest vehicle (Table 4 in the Final Rule). Among
manufacturers, this is forecast to result in a fleet standard ranging
from 23.2 mpg for General Motors (GM) to 27.1 mpg for Suzuki (Table
Differentiating manufacturers' standards based on the mix of large
and small light trucks that they produce--so that Suzuki faces a higher
standard than GM--has important distributional consequences. Unlike the
traditional light-truck CAFE rule, in which the single standard was
much harder for GM and other manufacturers of large trucks to meet, the
reformed rule allocates the overall burden more evenly by shifting some
of it away from manufacturers of large trucks and toward manufacturers
of small trucks.
This distributional change will also lower the cost of a given
improvement in fuel economy across all fleets (or increase the overall
improvement in fuel economy for a given total cost). By seeking larger
fuel savings from small truck manufacturers, who previously faced
little or no CAFE incentive to improve fuel economy, opportunities
exist to improve fuel economy that previously were not being captured.
Some of these efficiency improvements are cheaper than the ones
previously achieved through almost exclusive reliance on improvements
among manufacturers of large trucks. That is, the program achieves
lower cost and/or more fuel savings (estimated at 15-20 percent in the
Regulatory Impact Analysis, Table VII-1).
There is a third, important effect associated with differentiating
standards based on the size of vehicles: It substantially alters the
incentives to downsize. Downsizing is one way a manufacturer could
comply with the traditional light-truck CAFE rule. As noted, smaller
trucks naturally have higher fuel economy. Instead of using technology
to improve fuel economy, manufacturers could simply choose to make
smaller trucks. While some might applaud a shift to smaller vehicles,
this frequently raises concerns about safety.
By making the standard higher for smaller trucks, the incentive to
downsize to comply with the reformed CAFE rule is reduced if not
eliminated, thereby addressing these concerns about safety. Making
smaller trucks does not help a manufacturer meet their standard--the
natural improvement in fuel economy associated with the smaller vehicle
is offset by the reformed CAFE's requirement that smaller vehicles
achieve higher fuel economy.
The second major change in the reformed CAFE rule comes in 2011,
when fuel economy will be set, based on maximizing net benefits from
reduced petroleum consumption, including the reduced consequences of
oil-supply disruptions, the reduced market power of oil-exporting
countries, and environmental concerns, as well as effects of fuel
economy on congestion, accidents, and greater vehicle range. These
benefits are weighed against the costs of installing new technologies
to improve fuel economy. This sharply contrasts the previous approach,
which focused on the ability of the least capable manufacturer--that
is, the one making the largest trucks. In fact, with the shift to
differentiated standards, the notion of a least capable manufacturer
disappears; instead, each company faces a standard that is tailored to
be as difficult as any other. This latter change represents an
unambiguous move toward greater efficiency in the light-truck CAFE
program. While the traditional approach highlighted factors that should
be considered when setting the standard, it did not suggest how they
ought to be balanced, somewhat ironically using cost-benefit analysis
as part of the regulatory impact analysis after the standard was set.
The proposed reforms put the cost-benefit analysis front and center,
stipulating that those factors should be balanced based on the best
available valuations. By definition, such an approach is the most
efficient possible approach to setting CAFE standards once the
structure of the program is determined.
Applying the Light-Truck Reforms to Passenger Cars
Both of the reforms adopted in the recent light-truck rule--
differentiating manufacturers' standards based on their mix of large
and small vehicles, as well as setting the standards based on careful
cost-benefit analysis--provide similar opportunities to improve the
passenger car CAFE program. Unlike the light-truck program, however,
these changes must be made in statute. While NHTSA had the authority to
differentiate manufacturers' standards and to shift to a cost-benefit
approach for light trucks, the existing statute is much more specific
for passenger cars.
As was the case for light trucks, differentiating the passenger car
standard among manufacturers based on their mix of large and small cars
provides three advantages. First, it creates a more equitable burden.
Because large cars naturally have lower fuel economy than smaller cars,
a single standard for all manufacturers would put a disproportionate
burden on those who produce larger cars. In contrast, a differentiated
standard would shift that burden toward small car manufacturers.
Second, this shift in burden will also mean a shift from higher-cost
improvements in large cars to lower-cost improvements in small cars.
This will lower the cost of achieving a given overall level of fuel
economy, or allow a greater improvement in overall fuel economy at a
given total cost. Finally, by making the standard progressively higher
for smaller cars, the incentive to downsize passenger cars is reduced
if not eliminated. The natural fuel economy improvement associated with
downsizing is now penalized by a higher standard. This addresses past
concerns that CAFE produces smaller, less safe vehicles.
The use of a cost-benefit approach to set the passenger car
standard would, by definition, create a program that maximized
efficiency--that is, the net benefits to society--of the program, given
the design (for example, differentiated standards and fleet averaging).
Going Beyond the Light-Truck Reforms
There are at least four areas where light-truck reform was limited
by statute but where greater efficiency could be realized by changing
the structure of the program. Three relate to simply giving
manufacturers more flexibility to meet a given standard without
affecting the outcome in terms of overall oil savings. The fourth
addresses uncertainty about compliance costs, reducing the risk of high
costs at the expense of possibly achieving lower oil savings.
The first of these further reforms would allow manufacturers to
average fuel economy jointly over both cars and light-truck fleets.
Currently, manufacturers must meet each standard separately, even
though cheaper opportunities may exist in one fleet versus the other.
From a national perspective, Congress should not care whether fuel
savings are achieved in one fleet or the other. Allowing manufacturers
to trade off cheaper improvements in one fleet against more expensive
improvements in the other would lower overall costs without affecting
Second, Congress could also allow credit trading among
manufacturers. That is, when one manufacturer exceeds their standard,
they earn credits that could then be sold to other manufacturers
struggling to meet theirs. This reform reduces costs by shifting
improvements to manufacturers with lower costs and away from
manufacturers with higher costs. And like the first reform, this action
has no effect on overall oil savings.
It is useful to note that historically there has been opposition to
trading because it likely further exacerbates the disparity between
manufacturers of large and small vehicles. That is, even though trading
would generally benefit both buyers and sellers of CAFE credits, under
traditional CAFE, it would tend to provide larger benefits to sellers--
manufacturers of small cars who can easily if not effortlessly exceed
the standard. However, with size-based CAFE, the initial compliance
burden is more evenly distributed among manufacturers of both large and
small vehicles, erasing the likely larger benefit to manufacturers of
Third, Congress could allow companies who exceed the standard in
one year to bank credits for the indefinite future. Banking not only
leaves the total volume of reduced oil consumption unchanged, it moves
the savings forward in time--that is, we see the effects of energy
conservation sooner. Banking has easily been the most successful
element of the acid rain trading program used by electric utilities to
reduce sulfur dioxide emissions. In that case, firms reduced emissions
by twice as much as the law required to create flexibility for future
compliance. Currently, banking is allowed in the CAFE program--but for
only up to three years, after which time the banked credits expire,
thereby reducing the incentive to over-comply and to reduce oil
consumption earlier. New legislation could remove this restriction.
Finally, Congress could create a safety valve, whereby
manufacturers could opt to pay a specified fee if compliance costs end
up being unexpectedly high. This would allow manufacturers to avoid the
risk of high costs in exchange for the possibility that fuel economy--
and oil savings--might be lower if that turns out to be the case. As
noted earlier, the current program already has such a fee, defined as a
penalty, which is often used by European manufacturers but has been
avoided by domestic and Asian manufacturers. By ``decriminalizing the
fee, Congress could help allay manufacturer concerns and reduce the
central debate about how much technology really costs--perhaps allowing
higher standards to be introduced more quickly.
Transparency About Costs
The recent light-truck rule highlighted the fact that the cost
estimates used to set fuel economy standards remain something of a
mystery. Despite the fact that the benefits of improving fuel economy
increased by 50 percent between when the proposed and final rules were
published, due to dramatic increases in forecast oil prices, the
estimated aggregate fuel economy standard for 2011 increased by only
0.2 mpg, from 23.9 to 24.1 mpg (excluding medium-duty vehicles, which
were not included in the proposed rule). Yet, the standard is supposed
to represent a balancing of costs and benefits.
The final rule indicates that there were countervailing changes in
estimated costs--related to the costs of technologies and especially
the time required to phase in those technologies--but those changes are
difficult to judge because the underlying details of the cost model are
not spelled out clearly. Without any countervailing effects, my
comments last fall suggested that a 50 percent increase in benefits
might lead to a 4-5 mpg increase in the standard. Having reviewed other
cost analyses, I might adjust that downward, closer to 2 mpg. In any
case, a 0.2 mpg increase is surprisingly small despite the indicated
countervailing modeling changes.
It might be desirable, therefore, for the Department of
Transportation to be required to make public the cost modeling used in
any rulemaking to set fuel economy standards. In the past, such
disclosure would have been nearly impossible, as it entirely centered
on the capabilities of one manufacturer. Now, there is presumably
safety in numbers: Cost modeling for particular vehicle sizes can be
disclosed, on average, without necessarily revealing proprietary
information. Such a requirement would facilitate a more informed debate
in the rulemaking process.
Do Fuel Economy Standards Make Sense?
So far, the discussion has centered on how to improve CAFE through
statutory reform--that is, how to get more fuel savings at lower cost,
while addressing concerns about equity and safety. This is an extremely
important question, given the likelihood that the CAFE program will not
go away and will remain the main policy tool for addressing concerns
about petroleum use in the transportation sector. Nonetheless, it is
useful to ask whether CAFE makes sense compared to other choices, or
whether Congress should instead focus on an entirely different policy.
The underlying motivation for CAFE is the desire to reduce oil
demand because of concerns about costs, security, and the environment.
Given this underlying motivation, many people, especially economists,
often criticize CAFE policy for two related reasons: First, it does not
encourage consumers, once they buy a vehicle, to drive less; and
second, it implies that the government can do a better job of weighing
the costs and benefits of fuel-saving vehicle technologies than the
auto manufacturers and auto consumers who make and use those vehicles.
These critics typically conclude that the better policy is to tax
gasoline, where the tax rate reflects some or all of the additional
cost to society associated with oil use--for example, the negative
influence of oil supply disruptions on the economy, domestic and
international environmental impacts, and highway congestion.
One response is to agree with the CAFE critics on principle, but
note that political opposition to gasoline tax increases make them
impractical. However, we can also take issue with the second criticism
and argue that auto manufacturers and consumers are not really making
good decisions about fuel economy. Several explanations for this
failure stand out. The first is that consumers may not know,
understand, or believe differences exist in fuel economy among
vehicles. The recent controversy over the inaccuracy of EPA fuel
economy ratings on information labels underscores this point.
Second, even understanding that those differences exist and are
real, consumers may not rank fuel economy high enough to worry about
when shopping for a car. Cargo capacity, power, and styling may be more
important to consumers. Finally, even if consumers consider fuel
economy, they may find it does not make a big enough difference to sway
their choice of vehicle. Typical fuel economy decisions might represent
an annual net gain per vehicle of about $50-$500, depending on the
payback period a consumer requires. On a $20,000 new car, this is
analogous to an option for a fancy radio or improved styling.
Finally, consumers may not properly account for the full value of
future fuel savings from a more fuel-efficient car, considering, for
example, only the first few years of savings rather than the entire
If consumers are systematically undervaluing fuel economy, it makes
sense that vehicle manufacturers are not going to build more fuel-
efficient cars. Based on that observation--an observation with which I
tend to agree--fuel economy standards are a sensible policy and
Congress should focus on reforming CAFE to make it more efficient.
It is worth noting that one argument that cannot be used to support
CAFE is that stricter fuel economy standards will substantially lower
gasoline prices. Recent estimates by the Energy Information
Administration, for example, suggest that a 36 percent improvement in
CAFE (6-7 mpg) would lower gasoline prices by at most $0.08 by 2025.
More modest CAFE improvements, such as the recent 1.8 mpg increase in
light-truck standards, would lower gasoline prices even less (although
the impact is larger with reforms than without). However, CAFE will
lower expenditures on gasoline, as the quantity consumed will decline
even if the price remains relatively insensitive. More importantly, it
will reduce the vulnerability of the economy to future oil price shocks
by reducing the share of gasoline expenditures in overall economic
Following on the heels of recent regulatory reforms to the light-
truck CAFE program, Congressional action to similarly reform the CAFE
program for passenger cars--as well as to enact further reforms that
were not possible in the light-truck rulemaking--has a large potential
to improve program efficiency, to make the program more equitable, and
to do all of this without sacrificing safety. The light-truck rule
provides a model for two improvements: differentiating manufacturers'
standards based on their mix of large and small vehicles, and setting
the overall level of the standards based on an explicit and careful
cost-benefit analysis. Further reforms include trading between the
passenger car and light-truck fleets, trading among manufacturers,
unrestricted banking of CAFE credits earned by exceeding the standard,
and a cost-limiting safety valve.
It is surprising that the recent final rule for light-truck fuel
economy in 2011, based on balancing costs and benefits, demonstrated
remarkably little sensitivity to a 50 percent increase in the value of
fuel saving benefits. This surprise, along with other concerns about
how NHTSA would set the standards, has led to calls for Congress to
directly set the standard in statute. Nonetheless, I find the
complexity of the standard-setting process, as well as the need to
regularly revisit the level of the standard, to be more suitable for
agency rulemaking than Congressional action. Congress can instead
reform the structure of CAFE to increase efficiency, continue to give
NHTSA clear guidance on the key costs and benefits it should consider,
and perhaps require greater transparency with regard to the cost
Lastly, critics often argue that CAFE is not the right policy to
address petroleum use in the transportation sector, because it
improperly focuses on creating more fuel-efficient vehicles rather than
alternatively or additionally encouraging consumers to drive those
vehicles less. Such a criticism is based on an assumption that
consumers and manufacturers will make good decisions about fuel economy
based on technology and fuel costs. Yet, there are a variety of reasons
why this assumption might be false; based on my belief that these
reasons have credibility, a CAFE program continues to make sense.
In summary, Congress has a great opportunity to improve the
efficiency of an extremely significant program to reduce oil
consumption in the United States, namely by reforming the fuel economy
program for cars and light trucks. Such reforms will reduce the costs
of achieving a given standard and allow us to pursue greater fuel
economy without sacrificing safety. In contrast to other policies being
promoted to address concerns about higher fuel prices and oil
dependency, such improvements attack the problem directly by reducing
both our expenditures on oil and our vulnerability to future price
I thank you again for the opportunity to appear before this
Committee, and I would be pleased to answer any questions.
Appendix I--Understanding Proposed CAFE Reforms for Light Trucks
FR Doc. 05-17005
On August 23, 2005, the National Highway Traffic Safety
Administration (NHTSA) released a Notice of Proposed Rulemaking (NPR)
on corporate average fuel economy (CAFE) standards for light trucks
along with a Preliminary Regulatory Impact Analysis (PRIA) (NPRM:
Federal Register 05-17005, vol. 70, no. 167, August 30). Relative to
the existing 2007 standard of 22.2 miles per gallon (mpg), the proposed
changes include fuel economy standards of 22.5-23.5 mpg over 2008-2010
using the current program design.
More notable, however, are proposed changes to this design. Under
the proposed changes, each manufacturer would still need to meet a
single overall standard for their light truck fleet, but that standard
would differ across manufacturers based on their production of
different sized vehicles. Vehicles with different footprints (wheelbase
times track width) would have different fuel economy targets and a
manufacturer's overall standard would be based on these size-
differentiated targets averaged over their specific fleet. During 2008-
2010, manufacturers would have a choice of complying with either the
old (unreformed) or new (reformed) CAFE standards.
Importantly, the fuel economy standards starting in 2011 would be
set explicitly to maximize net benefits to society--including fuel
savings, safety, security, and environmental concerns. Among other
things, this shift implies that those standards will rise along with
the price of oil. While the proposed 2011 targets assume $25-30 per
barrel crude oil prices (based on available government forecasts) and
are estimated to achieve a 24 mpg fuel economy, we estimate that an
additional $20 per barrel (in line with recent long run private-sector
forecasts) would raise the proposed targets by perhaps 4-5 mpg.
The proposed reforms also erase the current disparity between
passenger automobile and light truck standards, as the smallest light
truck category would have a target exceeding the current 27.5 mpg for
passenger automobiles. This would remove the incentive for automakers
to effectively design passenger cars that can be categorized as a light
truck (by raising the height, making the seats removable, etc.) in
order to face an easier fuel economy standard.
From an economic perspective, these reforms represent a remarkable
shift toward a more efficient regulatory system. Still, potentially
valuable, further improvements remain--trading of CAFE credits across
manufacturers and between passenger cars and light trucks, for example.
The proposed reforms also fail to address the larger economic questions
of whether taxes or tradable permits (for gasoline usage) would be a
better policy than a CAFE performance standard, and whether consumers
and manufacturers are really making bad fuel economy decisions absent
government intervention. The latter question could also have
significant implications for whether technology costs and fuel economy
benefits are correctly valued in the CAFE analysis.
The remainder of this memorandum walks through essential elements
of the reform package, provides a quick economic analysis, and
summarizes the economist's perspective.
Existing CAFE regulations establish a single mileage standard that
must be met, on average, for every manufacturer's light truck fleet.
That is, each manufacturer takes the fuel economy of each light truck
model they produce, and then averages those numbers weighted by
production volume. That number must be at or above the mandated
standard. If the manufacturer beats the standard, the manufacturer
collects CAFE credits that can be used to make up any shortfall in the
next three years. If the manufacturer misses the standard and does not
have any credits, there is a penalty equal to $5.50 per 0.1 mpg per
vehicle. The penalty is routinely paid by European manufacturers but
has never been utilized by domestic or Asian manufacturers.
The level of the standard is set with an eye toward achieving the
maximum possible fuel economy, but with considerable deference given to
the ability of each manufacturer to meet that standard. In particular,
NHTSA has traditionally focused on the least capable vehicle
manufacturer and tailored the standard to be ``economically
practicable'' for that firm. The actual analysis is based on
confidential manufacturer data and modeling. This approach was used in
2003 to set the 2005-2007 standards. Prior to that, Congressional
riders prevented any changes to the CAFE levels for light trucks since
1996. The standard for passenger cars has remained unchanged since
One consequence of this approach is that the single standard for
light trucks is tougher--more expensive--for manufacturers with a full
line, including large trucks that have lower fuel economy, and easier
for manufacturers focused on small trucks that typically have higher
fuel economy. For example, Honda has consistently beaten the existing
light-truck CAFE standard by 4-5 mpg, suggesting it has had no effect
on their production decisions, while the major domestic manufacturers
that produce a broader range of trucks have hovered right at the
standard, suggesting a real impact.
The current NPR uses this approach to determine unreformed 22.5-
23.5 mpg standards for 2008-2010.
The proposed CAFE reforms involve two major changes. The first is a
shift from a single standard for all manufacturers to differentiated
standards for each manufacturer based on the composition of their
fleet. This shift arguably eliminates the notion of a least capable
manufacturer because standards are tailored to each manufacturer's
vehicle mix. The second is a shift to an explicit cost-benefit analysis
based on fuel savings and other consequences of gasoline and vehicle
usage. While previous standards have utilized cost-benefit analysis as
part of the regulatory impact analysis after the standard was set, the
proposed reforms put the cost-benefit analysis front and center.
The NPR proposes differentiating fuel economy standards for light
trucks using six discrete size categories, but requests comments on the
use of both alternative attributes and/or more size categories (or even
a continuous function). The size of a vehicle, or ``footprint,'' is
defined by multiplying the track width (distance between tires on the
same axle) multiplied by the wheelbase (distance between centerlines on
each axle). The proposed ranges for each footprint category, according
to NHTSA, were based on an effort to keep the majority of models in the
low end of each range; that is, to avoid creating significant
opportunities for firms to slightly increase the size of a vehicle and
have it move into the next higher range with a correspondingly lower
NHTSA then establishes the relative position of targets for each
category. That is, category 2 is 0.8 mpg lower than category 1;
category 3 is 3.4 mpg lower than category 2; etc. These relative
positions are determined based on the difficulty/cost of achieving fuel
economy levels in each category. The result is a schedule of fuel
economy targets for different size categories, but only defined
relative to each other.
Setting the Standards
The actual standards are determined by moving the absolute level of
this schedule up or down in order to meet one of two criteria. From
2008-2010, the criterion is that the total cost to industry under the
reformed regulation should equal the total cost to industry under the
unreformed regulation, described earlier. From 2011 onward, the
criterion is that benefits to society, minus costs, are maximized.
Table 1 summarizes the resulting standards in the NPR.
With the target for each category in hand, the standard for each
manufacturer is based on how many trucks the manufacturer produces in
each category. Based on current projections by NHTSA, that results in
the manufacturer-specific standards given in Table 2. Note that
manufacturers do not have to meet the target in any one category, but
underachievement in one category has to be offset by overachievement in
Several questions naturally arise when evaluating the proposed
reform package. Does it cost more or less than the unreformed policy?
Even if the cost is roughly the same, is the distribution of costs
different across manufacturers? Does it achieve more overall fuel
economy for a given cost? Are these cost-benefit estimates consistent
with other cost-benefit estimates? We briefly examine each question in
turn based on available data.
Does Reformed CAFE Cost More?
There are no direct comparisons of costs under the proposed, cost-
benefit approach to setting the standard versus costs based on the
existing, least-capable manufacturer approach. A footnote in Table 3
highlights this fact--costs are similar in each year where both
reformed and unreformed CAFE costs are reported by design.
However, looking at those same cost estimates in Table 3 across
years, we do not see a dramatic difference moving from 2010 to 2011,
when the new metric of maximizing net benefits is applied for the first
time, versus moving from 2007 to 2008, 2008 to 2009, or 2009 to 2010,
when the overall cost to industry is set based on unreformed CAFE.
Costs per vehicle rise by $89 from 2010 to 2011, but they rise by $88
from 2008 to 2009. That suggests, at the very least, that any increase
in costs from the reformed approach is in line with the spending trend
for fuel economy improvements over time under the unreformed program.
Is the Distribution of Costs Different Across Manufacturers?
Unreformed CAFE sets a common standard for all manufacturers,
whereas reformed CAFE will set differentiated standards based on each
manufacturer's product line--higher standards for manufacturers
specializing in smaller trucks. Other things equal, this suggests a
shift in costs away from manufacturers of larger trucks and toward
those which only manufacture smaller light trucks. Table 4 quantifies
this shift using historical data on CAFE credits: Under both reformed
and unreformed CAFE, manufacturers can earn credits equal to the amount
by which their fleet exceeds the standard, expressed in tenths of a
mile-per-gallon, per vehicle. These credits can then be used in future
years to make up a deficit if they fail to meet the standard.
Based on historic manufacturing data for 2002-2004, Table 4 shows
the change in manufacturers' net CAFE credits position under the
reformed versus unreformed program; positive numbers reflect a better
outcome under reformed CAFE. What we see is that three manufacturers,
Hyundai, Isuzu, and Suzuki, do noticeably worse, facing a deficit of
perhaps 30 credits per vehicle absent changes. Meanwhile, GM, to a
lesser extent Ford, and eventually Nissan, all see an improvement of 2-
6 credits per vehicle. If we look at the underlying production data
available in Tables III-3 through III-5 of the PRIA, the three
manufacturers who face the greatest deficit are the ones whose trucks
fall entirely in the smallest two of the six reformed CAFE categories.
Meanwhile, GM, Ford, and Nissan have the largest share--more than one-
third--in the largest two categories by 2004 (only 20 percent of
DaimlerChrysler vehicles fell in those two categories in that year).
Does Reformed CAFE Achieve More Fuel Economy for a Given Cost?
Given that the costs of reformed CAFE are similar to the costs of
unreformed CAFE, the delivered value of the proposed reforms turns on
whether benefits are higher. Table 5 compares estimates of the fuel
economy, gallons saved, and dollar benefits under the two programs. For
all three metrics, we see reformed CAFE improvements that are 12-15
percent higher in 2008, 19-20 percent higher in 2009, and 6-7 percent
higher in 2010. No comparison is possible in 2011, because only
reformed CAFE estimates were provided.
Are the Cost Estimates Consistent With Other Studies?
In an effort to benchmark the cost analysis in the NPR and PRIA, we
used the data contained in the 2001 National Academy of Sciences (NAS)
CAFE study to estimate cost curves for fuel economy improvements for
different classes of light trucks (SUVs, trucks, and minivans). We
compare these costs to the benefits from fuel savings in the NPR,
ignoring all of the additions and subtractions for various
externalities the PRIA considers that have a net effect of lowering
benefits 2-4 percent (see PRIA Tables VIII-4 through VIII-10). We then
estimate the net benefit maximizing level of fuel economy.
Despite the fact that our data is now five years old and that we
could not replicate the size-based categories in the NPR, our results
suggest a benefit-maximizing fuel economy squarely in the range of the
22.6-24.0 mpg levels forecast under the proposed rule. However, it is
important to highlight that this estimate uses the NPR and PRIA oil
price forecast of $25-30 from the Annual Energy Outlook 2005. More
recent private sector forecasts suggest an increase of perhaps $20 per
barrel, adding an additional $0.50 per gallon to the fuel economy
savings and raising our estimate of the benefit-maximizing fuel economy
by 4-5 mpg.
From an economist's perspective, the proposed reforms represent a
clear move toward greater efficiency, perhaps even an optimum given
current statutory constraints. Moving beyond this constraint, however,
the efficiency of the CAFE program could still be improved by allowing
trades among manufacturers and between cars and trucks. Because the
benefit per gallon is now the metric for setting the standard, one
could also ask whether this value ought to be used to cap the cost of
any compliance efforts by allowing manufacturers to pay that value (or
some multiple) if they miss the standard. One might even want to back
up and ask whether CAFE itself--that is a performance standard for
vehicles rather than fuel taxes or emissions trading--is what we really
want. Many economists argue that consumers and manufacturers already
make the desired fuel economy decisions without regulation, excluding
concerns over the environment, security, and safety. If so, the fuel
economy savings and technology cost ought to balance at the margin,
suggesting they have been incorrectly valued in this analysis.
Importantly, by raising the target for small trucks above the
standard for passenger vehicles the proposed reforms eliminate the
incentive to redesign what is essentially a passenger vehicle in order
to be classified as a light truck and to face a lighter CAFE standard.
Under the current program, such redesigns are often cited as a
significant, adverse, and unintended consequence of the wide gap in
standards between cars and trucks.
Finally, our calculations, showing that recent increases in long-
run oil prices raise the desired fuel economy by 4-5 mpg, highlight the
importance of assumptions about these prices. While it is unclear what
role oil prices played in setting standards under the unreformed
program, they drive the standards set by benefit maximization under the
Tables and Figures
Table 1. Proposed Targets (in mpg)
Category 1 2 3 4 5 6
Range of vehicle footprint (sq. ft.) 43.0 >43.0-47.0 >47.0-52.0 >52.0-56.5 >56.5-65.0 >65.0
MY 2008 Targets 26.8 25.6 22.3 22.2 20.7 20.4
MY 2009 Targets 27.4 26.4 23.5 22.7 21.0 21.0
MY 2010 Targets 27.8 26.4 24.0 22.9 21.6 20.8
MY 2011 Targets 28.4 27.1 24.5 23.3 21.9 21.3
Source: NPR Table 6.
Table 2. Estimates of Required Fuel Economy Levels (in mpg)
Manufacturer MY 2008 MY 2009 MY 2010 MY 2011
BMW 23.8 24.8 25.1 25.7
Suzuki 26.0 26.7 26.8 27.5
Volkswagen 22.7 23.9 24.3 24.8
General Motors 22.2 22.8 23.2 23.7
Ford 22.4 22.9 23.1 23.6
DaimlerChrysler 22.8 23.5 23.7 24.2
Honda 23.1 24.0 24.2 24.8
Hyundai 24.2 25.9 25.7 26.3
Nissan 22.1 22.8 23.2 23.7
Toyota 23.2 24.1 24.5 25.0
Fuji (Subaru) 24.8 25.6 25.8 26.4
Porsche 22.3 23.5 24.0 24.5
Isuzu 22.3 22.9 23.2 23.7
Source: NPR Table 7.
Table 3. Incremental Cost per Vehicle
MY 2008 MY 2009 MY 2010 MY 2011
Unreformed CAFE in 2008-2010 56 130 185 N/A
Reformed CAFE in 2008-2011 54* 142* 186* 275
*By policy design, the proposed mpg levels under Reformed CAFE are set
so that the industry-wide costs of Reformed CAFE are roughly equal to
the industry-wide costs of Unreformed CAFE for MY 2008-2010.
Source: PRIA Table I.
Table 4. Effect of Reformed CAFE, Relative to Unreformed CAFE, on
Manufacturer's CAFE Credit Position Using Historic Data
[change in credits per vehicle]
Manufacturer share 2002 2003 2004
BMW 0.01 -4.29 -0.92 -16.23
DaimlerChrysler 0.19 -3.03 -6.00 -7.25
Ford 0.23 2.80 -1.00 3.01
GM 0.29 7.87 6.00 5.63
Honda 0.06 -3.51 -11.00 -9.91
Hyundai 0.02 -13.64 -30.05 -27.15
Isuzu 0.00 -14.32 -29.76 -27.21
Nissan 0.06 -9.89 -16.02 2.18
Suzuki 0.00 -16.71 -29.90 -29.40
Toyota 0.13 -4.50 -5.01 -7.99
Volkswagen 0.01 -8.53 -15.12 -8.14
Source: PRIA Tables III-3 through III-5.
Table 5. Benefit Estimates, Reformed and Unreformed CAFE
2008 2009 2010 2011
Fuel economy improvement versus baseline (mpg)
unreformed 0.26 0.59 0.87
reformed 0.29 0.71 0.88 1.34
Gallons saved over vehicle lifetime versus baseline (millions,
unreformed 826 1860 2715
reformed 942 2218 2892 4110
Benefits versus baseline ($millions, net present value at 7 percent over
vehicle life for each model year)
unreformed 605 1366 2007
reformed 694 1633 2144 3069
Source: PRIA Tables VI-1b, VI-2, VI-3 (Fuel Economy), PRIA Table 5
(Gallons), PRIA Table 3 (Benefits).
Senator Lott. Thank you, Congressman.
And Ms. Joan Claybrook, good to see you again.
STATEMENT OF JOAN CLAYBROOK, PRESIDENT,
Ms. Claybrook. Thank you so much, Mr. Chairman. It's a
pleasure to be here.
I'd like to point out that I issued the first, and only,
car fuel economy standards for this Nation in 1977, setting the
final standard in 1985, which was mandated by the Congress in
the Energy Policy Act of 1975. We set the standard at 27.5--
based not on just product plans, which is what the current DOT
Secretary talks about, but product capability. This issue
reveals the great deficiency in the way that they have
addressed this. You have some awesome women on this panel, Mr.
Chairman, and they have----
Senator Lautenberg. Can you move the mike up a little
Ms. Claybrook. You have some awesome women on this panel,
Mr. Chairman, and they have dissected this rule already. But I
would like to add one piece to that, dealing with the sliding
scale for the light-truck rule, which the Secretary's asking
authority to have for the car standards, and that is that it's
left to the discretion of the manufacturer as to how much fuel
is going to be saved, because it's a sliding scale. And so, if
a manufacturer wants to increase the weight of their vehicle
just a little bit more, they will have less fuel economy to
meet. That is, the whole concept of this rule is that the
bigger the vehicle--the bigger the footprint of the vehicle--
the less fuel economy you have to achieve. So, the larger they
make their vehicles, the less fuel economy they have to
achieve. So, I believe it's a mirage about how much fuel
savings is actually going to occur under that rule. And I would
certainly oppose that for the car standards.
This restructuring that they're asking for, I think, is a
terrible mistake. And it's certainly not needed for cars in the
same way they've tried to justify it for trucks, as there's so
much less differential between the smallest car and the largest
passenger car. So, you really don't need it in the same way
that you might be able to assert that it's needed for trucks.
The suggestion that we have is that the Congress set a
long-term goal. We haven't given a number, but we would support
the bill that Senator Snowe has suggested. And we would
definitely say that you should set a standard for 2008 and 2009
in the statute, because the agency is not going to be able to
get, as they have said today, their rulemaking done by that
time. And so, you're not going to have any activity, really,
In response to the fuel economy standards that I set in
1977, because there was a long-term goal of 1985, the auto
industry immediately started changing its product plans. In
fact, they boasted--General Motors boasted that they weren't
going to meet 27 and a half, they were going to meet 30 by
1985, at one point. And then, when the Administration changed,
unfortunately the standard was lowered to 26 temporarily. And
so, all of that fuel economy advancement left the product
So, we would definitely suggest, for 2008, a 31 mpg--the
Secretary said, on average, that they're now at 30--and 32.5
In addition, I would just like to address safety for a
second. I know my time is up, but if I could just take 1 minute
to do that. The National Academy of Sciences based a conclusion
that 2,500 deaths would be lost with an increase in fuel
economy, based on a study by the Department of Transportation,
authored by a gentleman named Kahane. His study was totally
deficient, because it made an assumption, a theoretical
statistical assumption, that you would reduce the weight of
every vehicle by 100 pounds. And that has never happened nor
would it. When the auto manufacturers reduce weight, they take
it out of the behemoths. They take it out of the great big guys
because that's the most cost-effective and efficient way for
them to do it. It's what they did in the period between 1975
and 1985. They never reduced the weight of the smaller
vehicles. In fact, if you look in the back page of my
testimony, it shows what's happened with cars. Cars used to
vary from 5,500 pounds to 2,000 pounds. And after the 1977
standards were issued, the fleet homogenized. And today, there
are no 2,000-pound cars on the highway, and there are no 5,500-
pound cars on the highway. They're now between 2,500 and 4,000.
So, there is much more homogenization of the size/weight of
cars today on the highway. And that's the opposite of what the
current DOT did for the light-truck standard. They said, ``The
bigger it is, the less fuel economy you have to meet.'' So,
there isn't going to be any homogenization of the size of these
big vehicles. And they don't even deal with the ones over 8,500
pounds. So, you're going to have these very huge, dangerous
vehicles on the highway still hitting smaller vehicles. And if
there's one thing that this Committee could do for safety, it
would be to command the Department of Transportation to issue a
compatibility standard. Since now they're going to have these
big behemoths out there, require them at least to make these
vehicles compatible when they hit other vehicles, and that
would save more lives than anything else.
And it's a total myth that safety is harmed by improving
fuel economy. In fact, safety is improved by design. If you
design a car right, it's safe.
Thank you so much, Mr. Chairman.
[The prepared statement of Ms. Claybrook follows:]
Prepared Statement of Joan Claybrook, President, Public Citizen
Thank you, Mr. Chairman and members of the Committee, for the
opportunity to be here today. My name is Joan Claybrook and I am the
President of Public Citizen, a public interest organization with
130,000 members nationwide. I was the Administrator of the National
Highway Traffic Safety Administration (NHTSA) from 1977 to 1981, and as
Administrator, I issued the first fuel economy standards for cars and
light trucks. In total, I have worked to improve motor vehicle safety
and fuel economy for more than 40 years.
The fuel economy standard for passenger cars has not been raised
since I issued the 27.5 miles-per-gallon (mpg) standard in 1977 under
the Energy Policy and Conservation Act (EPCA) of 1975. The standard has
not changed since 1990, when it was revised back to 27.5 after being
lowered in 1986. The current standard is still 27.5 mpg and was first
achieved in 1985 as the law required; more than twenty years of lost
opportunities to increase fuel economy have been squandered by
inaction. If the car standard were an extremely reasonable 35 mpg
today, we would save approximately 1.1 million barrels of oil each and
every day. If the standard was an achievable fleet-wide average of 40
mpg, we would save approximately 3.4 million barrels of oil a day.\1\
Over the course of a year, these savings would total approximately 1.24
billion barrels, a quantity almost one-and-a-half times greater than
our current annual imports from the Persian Gulf.
\1\ Analysis by Therese Langer, Transportation Program Director,
American Council for an Energy-Efficient Economy.
Increasing the fuel economy of passenger vehicles would lower gas
prices within a few years by reducing demand substantially. It would
also bolster national security, improve safety, conserve natural
resources, reduce pollution and help slow the effects of global
warming. It is critical that Congress act to ensure an increase in fuel
economy standards for passenger cars, which account for approximately
25 percent of our total oil consumption.\2\
I would like to urge Congress to take the following actions to
improve car fuel economy:
1. Congress should clarify whether NHTSA has the authority to
raise the fuel economy standards for passenger vehicles in the
absence of the Congressional veto, which the Supreme Court
declared unconstitutional in Public Citizen's lawsuit, INS v.
Chadha in 1983.\3\
\3\ See INS v. Chadha, 462 U.S. 919 (1983).
2. Congress should require an increase in passenger car fuel
3. To assure immediate improvements in fuel savings, Congress
should statutorily set the fuel economy standard at 31 mpg for
2008 cars and 32.5 mpg for 2009 cars and direct NHTSA to set
higher standards for later model year passenger vehicles
4. Congress should direct NHTSA to promulgate a single mpg
requirement rather than a sliding-scale standard, like the
light truck fuel economy standard the agency just issued on
April 6, 2006. I will make the case that, contrary to arguments
otherwise, increases in the single mpg fuel economy standard
for cars would improve, not harm, safety, and a sliding-scale
system for car fuel economy is not needed to ensure fair
competition among manufacturers.
5. Congress should lock in the minimum miles per gallon at 27.5
through a backstop measure that increases the minimum miles per
gallon as the fuel economy standard is increased.
One of the hotly debated issues regarding the car fuel economy
standard is whether clarification of NHTSA's authority to increase the
standard is needed for the agency to act. While some legal experts say
that it is not necessary, others say it is likely required. To avoid
almost-certain litigation over this issue, Congress should clarify
NHTSA's legal obligation to raise fuel economy standards for passenger
cars given the removal of the Congressional veto.
Such a clarification should also provide a mandate to act. The
current law states only that the Secretary ``may'' raise fuel economy
standards.\4\ Any reasonable clarification of this standard would
require that the Secretary ``shall'' raise fuel economy standards for
cars by a certain date consistent with achievement of the maximum
feasible average as defined in the current law. This would provide a
new mechanism for agency accountability should NHTSA fail to act.
\4\ See 49 U.S.C. Sec. 32902(c)(1).
NHTSA agrees that clarification of its authority would be useful.
The position of NHTSA, as articulated by Department of Transportation
(DOT) General Counsel Jeffrey Rosen at a hearing by the House of
Representatives' Energy and Commerce Committee on May 3, 2006, was that
``the statute had provided the authority subject to a legislative veto
and that's why it would be good to clarify'' it. In its rulemaking
notices, NHTSA has stated only that it has authority to ``change'' the
standards on the right showing of need under the statute. However, the
only ``change'' NHTSA has ever made to the 27.5 mpg standard was to
lower it in 1986 to 26 mpg, which is consistent with the agency's
citation of case law concerning NHTSA's authority to lower the standard
under the current statute.\5\ The standard subsequently returned in
1990 to 27.5 mpg where it has stagnated for the past 16 years.
\5\ See CEI v. NHTSA, 901 F.2d 107 (1990); CEI v. NHTSA, 956 F.2d
312 (1992); CEI v. NHTSA, 45 F.3d 481 (1995).
Because of the urgent need to address high fuel prices, Congress
should also avoid needless delay in payoff from increased car fuel
economy by statutorily setting the standard for model years 2008 and
2009. This would provide the necessary lead-time for rulemaking by
allowing NHTSA to set higher standards for later model year passenger
vehicles. Under the current law, NHTSA must provide 18 months of lead
time prior to a model year to allow automakers to form or adjust
product plans. The light truck standard beginning in model year 2008
was just issued by NHTSA on April 6, 2006--18 months prior to the start
of that model year. If Congress were to act quickly, it would provide
virtually 18 months notice for automakers regarding the passenger
vehicle standard for model year 2008 and substantially more notice for
model year 2009. However, the agency should be encouraged to issue
future standards with greater lead time to allow companies to meet more
According to data from the Environmental Protection Agency, which
files an annual report tracking trends in vehicle fuel economy,
automakers experience, on average, fuel efficiency gains of 1.9 mpg in
each model year. These are the result of innovation and progress in
vehicle and technology design and manufacturing.\6\ In the absence of
meaningful fuel economy requirements, most of this added efficiency in
cars and light trucks has been used for bulking up vehicle weight,
acceleration and torque.
\6\ U.S. Environmental Protection Agency, ``Light-Duty Automotive
Technology and Fuel Economy Trends: 1975 Through 2003,'' EPA420-R03-
006, April 2003.
It has been over twenty years since automakers have been told to
use this increase for fuel economy purposes. Last week, the Department
of Transportation (DOT) admitted that the average car fleet fuel
economy today is about 30 mpg, but some manufacturers are still below
the 1985 standard.\7\ Many existing cost-effective fuel-saving
technologies, such as six-speed transmissions, have been allowed to
molder on the shelf. Based on the existing standard, an increase of 1.9
mpg per year consistent with EPA's calculated fuel efficiency increases
would predict achievable fuel economy of at least 30.3 mpg in 2008 and
32.2 mpg in 2009. Given the use of hybrid and other advanced
technologies, manufacturers could easily meet fuel economy standards of
31 mpg for 2008 model year cars and 32.5 mpg for 2009 model year cars.
Congress should mandate these increases to avoid rulemaking delays
while allowing NHTSA to set the standard through notice-and-comment
rulemaking for model year 2010 and later.
\7\ See Juliet Eilperin, ``Resistant Lawmakers Now Back Higher Gas
Mileage Standards,'' Washington Post, May 4, 2006 and Matthew Wald,
``Plan to Reshape Mileage Standards Could Buoy Detroit,'' New York
Times, May 7, 2006.
Congress should also specify that the car standard be a single
standard rather than a sliding-scale system. Congress could do this by
adding the phrase ``a single standard'' to the mandate. There is no
need for the passenger car standard to incorporate a restructuring of
the current system. The agency's stated concerns about the safety
effects of down-weighting in response to a single standard are
unfounded. Another common argument for a sliding-scale system is that
it may help to assure there is fair competition among manufacturers.
This argument was used by NHTSA in support of the new light truck
fuel economy standards for model years 2008 through 2011, which is
based on a sliding scale that requires larger vehicles to comply with
less stringent standards. The measure used by the agency is vehicle
``footprint,'' or the space occupied by the vehicle on the highway--
essentially, the length times the width of the vehicle between tires,
or wheelbase. This system is intended to insulate full-line
manufacturers from a disadvantage in competing with manufacturers that
make smaller light trucks and can therefore more easily meet fuel
This circumstance does not apply to the car marketplace, as most
manufacturers now make a full line of vehicles. For instance, using
EPA's four car classes--subcompact, compact, midsize and large--seven
of eleven major manufacturers produce a large sedan and nine of eleven
produce a subcompact. Moreover, relative differences in fuel economy
between light and heavy cars are not nearly as great as they are
In contrast, any restructured system that creates a sliding scale,
such as the recent light truck and SUV fuel economy standards, raises
serious concerns that oil savings will erode, or even evaporate, over
time due to the risk that manufacturers will up-size vehicles to
qualify for less stringent standards. Figure A, below, examines
manufacturers' product plans, as submitted to NHTSA, for the light
truck fleet at the time the light truck fuel economy standard was
proposed and compares them with manufacturers' plans at the time the
final rule was issued. The chart shows a significant reduction in the
number of vehicles with the smallest footprint classification, or Bin 1
in the chart, and a significant increase in the number of vehicles with
the largest footprint classification in just the brief period of time
between the issuance of the advanced notice of proposed rulemaking
(ANPRM) on August 30, 2005, and issuance of the final rule on April 6,
2006. This shows that automakers will, as they confessed to Automotive
News, alter product plans and the footprint of vehicles in response to
fuel economy-related incentives from NHTSA.\8\
\8\ See Harry Stoffer, ``New CAFE Rules Could Backfire,''
Automotive News, April 3, 2006.
* Source: NHTSA, ``Average Fuel Economy Standards for Light Trucks
Model Years 2008-2011,'' Federal Register, Vol. 71, No. 66, April 6,
2006, Figures 9 and 10.
** Bin 1 encompasses vehicles with footprints ranging from 34 to 43
square feet. Bin 2 encompasses vehicles with footprints ranging from 44
to 47 square feet. Bin 3 encompasses vehicles with footprints ranging
from 48 to 51 square feet. Bin 4 encompasses vehicles with footprints
ranging from 52 to 56 square feet. Bin 5 encompasses vehicles with
footprints ranging from 57 to 64 square feet. Bin 6 encompasses
vehicles with footprints ranging from 65 to 79 square feet.
Indeed, NHTSA's recent light truck fuel economy final rule projects
only oil savings ``estimates'' due to the unpredictability of potential
changes in manufacturers' future product plans for model years 2008
through 2011. Without a backstop or ratchet mechanism that would be
triggered when oil savings fail to materialize, a sliding-scale
passenger car standard would leave the Nation's level of oil savings at
the mercy of profit-driven decisions by automakers, which may choose to
``game'' the car standard in the same way they are evidently now
responding to the light truck rule. The incentive to upsize that comes
with a sliding-scale system may also lead to larger and more aggressive
vehicles, reducing overall safety.
NHTSA's rather blithe assurances in this regard cannot be relied
upon. While the agency claimed that oil savings from the rule would
total 10.7 billion gallons over the lifetime of model year 2008-2011
vehicles, its public statements failed to note that it never modeled
the automakers' likely choices regarding the various options available
under the rule. Instead, the agency counted oil savings for ``best
case'' compliance scenarios not actually required by the rule.
Moreover, the agency's oil savings estimate of 10.7 billion gallons
included gains from changes in automakers' product plans made long
before issuance of the agency's final rule. In sum, the oil savings
numbers from NHTSA were fictional.
Congress should include a ``no backsliding'' measure locking in the
minimum miles per gallon for the car fleet at 27.5 mpg, or for model
years 2008 and 2009, the Congressionally-mandated new standard. The
measure would require a fleet-wide fuel economy average for each
manufacturer so that overall fuel economy gains are not lost because
vehicles qualify for a less stringent based on their footprints. A ``no
backsliding'' measure would ensure a base level of oil savings,
reducing the risk of fleet erosion and incentive for gaming, and remove
some manufacturer caprice from the equation. The minimum miles per
gallon in the ``no backsliding'' measure should also be increased with
each future increase in the fuel economy standard for cars.
Finally, I would like to emphasize that both car and light truck
fuel economy can be improved without sacrificing safety. A common
concern promoted by auto manufacturers is that fuel economy
improvements result in down-weighting and thus affect safety. However,
the large number of fuel-saving technologies gathering dust on the
shelf means that Congress need not fear any safety risks from vehicle
down-weighting in response to higher fuel economy standards.
Historically, manufacturers have relied primarily on fuel-saving
technologies, not changes in weight, to improve vehicle fuel economy.
In fact, after the passenger car CAFE standard were issued in 1977,
according to the Department of Energy, 85 percent of fuel economy gains
came from gas-saving technologies and not from reducing vehicle weight.
For the other 15 percent, automakers decreased the weight of only the
heaviest vehicles, as investing in redesign of those vehicles paid the
largest dividends in fuel savings.
For lighter vehicles, the payoff for removing weight is minimal and
requires an expensive vehicle redesign. It is not, as some have wrongly
asserted, cheap to accomplish. Therefore, weight changes are reserved
as a fuel economy tool for only the heaviest vehicles in a
In addition, since 1985, when the 1977 fuel economy standard fully
took effect at 27.5 mpg, auto companies have vastly increased the
weight and engine power of automobiles, using fuel-saving technologies
not to improve fuel economy, but to offset the increases in vehicle
weight and engine power and maintain compliance with the 1985 standard.
As I mentioned earlier, data from the Environmental Protection Agency
show that automakers experience, on average, fuel efficiency gains of
1.9 mpg in each model year. But such gains have been used to make
vehicles bigger and faster, not to improve fuel economy. Significant
fuel economy savings could be easily achieved through installation of
sensible engines and some accompanying down-weighting in the largest
and heaviest vehicles.
In sum, given the current availability of fuel-saving technologies,
as in the 1970s, any weight changes in response to a more stringent
fuel economy standard would be concentrated, for economic reasons, in
the heaviest part of the car fleet. Reducing weight in this segment of
the vehicle fleet is both productive for fuel economy and beneficial in
terms of safety for others on the road. No such reduction occurred.
NHTSA's Kahane study, which is the basis for the National Academy
of Sciences (NAS) study on the relationship between fuel economy and
safety, posits a negative safety impact as a result of fuel economy
increases. The study, however, wrongly assumes that fuel economy
standards cause an across-the-board reduction in vehicle weights of 100
lbs. removed from each vehicle.
Additionally, the NAS report estimating that CAFE caused thousands
of additional deaths in 1993 was wrong. That estimate was hotly
disputed in a written dissent by two of the NAS panel members. In
Figure B, below, the numbers for 1993 vehicle weights show that there
was no across-the-board reduction by 100 pounds of vehicle weight.
Instead the impact of CAFE had long been absorbed and the vehicle fleet
Even in earlier years, there was no down-weighting of vehicles on
the lightest end of the vehicle fleet and no explosion of tiny
vehicles. For example, between 1976 and 2003, the market share for
heavier new cars weighing 3,000-3,500 lbs. nearly doubled, rising from
15 percent to a 37 percent total market share in 2003. Meanwhile, at
just over 10 percent in 2003, the market share of lighter new cars
weighing 2,000-2,750 lbs. is half what it was in 1976. The largest
cars, weighing more than 4,000 lbs, all but disappeared and only
reappeared in the most recent years.
Thus, there has been a homogenization of automobiles in terms of
weight, which the GAO reported in the 1990s is an asset for safety
because the behemoths of the 1970s were a hazard to others on the
highway. An across-the-board 100 lbs. reduction in vehicle weight did
not happen after the CAFE standards were issued in 1977, and will not
happen in the future for the cost-effectiveness reasons explained
Comparing historical fact with Kahane's 100 lb. assumption
demonstrates why the NAS's use of Kahane's results has produced a
widespread and unfortunate misunderstanding concerning safety and fuel
In addition, the most important factor for safety is good vehicle
design. Vehicle structure, crashworthiness and interior protections, as
well as compatibility with other vehicles on the road, are all
critical. The most significant step Congress could take to increase
vehicle compatibility would be to require the agency to issue a
compatibility safety standard in upcoming legislation. The 2001 and
2002 models of Honda Civics, for instance, have a far lower driver
death rate than many much heavier cars.\9\ Moreover, longitudinal
studies by Clarence Ditlow of the Center for Auto Safety, shown below
in Figure C, of particular vehicles affected by the 1970s CAFE rules
show through matched-pairs analysis that vehicles were brought into
compliance with CAFE rules at the same time that they were made safer.
\9\ Source: Insurance Institute for Highway Safety, ``Risk of Dying
in One Vehicle Versus Another,'' Status Report, Vol. 40, No. 3, March
19, 2005. Available at http://www.iihs.org/news/2005/
In summary, Congress should take the following steps to improve car
1. Congress should clarify NHTSA's authority to raise the fuel
economy standard for passenger cars with a single corporate
average fuel economy by providing a mandate to do so consistent
with the agency's obligation to achieve maximum feasible fuel
economy, as defined in current law.
2. Congress should require an increase in passenger car fuel
3. Congress should statutorily set the fuel economy standard at
31 mpg for 2008 cars and 32.5 mpg for 2009 cars and direct
NHTSA to set higher standards for later model year passenger
vehicles through 2015.
4. Congress should direct NHTSA to promulgate a single mpg
requirement rather than a sliding-scale standard.
5. Congress should lock in the minimum miles per gallon at 27.5
through a backstop measure that increases the minimum miles per
gallon as the fuel economy standard is increased.
Congress should also address several other issues critical to
improving vehicle fuel economy. Congress should provide increased
funding to the CAFE program to ensure its effectiveness. The program
should receive at minimum $30,000,000--approximately the inflation-
adjusted equivalent of the amount of $10 million that the CAFE program
received to implement the first standards in 1977--and twenty staff
members. Only with sufficient resources can the agency adequately
research and support its decisions.
Congress should also consider eliminating the CAFE credits for
production of flex-fuel vehicles, which only undermine fuel economy
achievements, and instead substitute a mandate for production of flex-
fuel vehicles capable of running on ethanol and other alternative
fuels. And lastly, Congress should revise the statutory definition of
passenger and non-passenger vehicles to reflect changes in the vehicle
fleet since 1975 when EPCA was enacted. SUVs and minivans are currently
classified as non-passenger vehicles despite their use to primarily
transport people. The definitions should be updated to reflect current
As the former Administrator of NHTSA charged with issuing the
nation's first fuel economy standards in the 1970s, I urge the Congress
to act to improve car fuel economy.
Senator Lott. Thank you, Ms. Claybrook.
STATEMENT OF DAVID FRIEDMAN, RESEARCH DIRECTOR/
SENIOR ENGINEER, CLEAN VEHICLES PROGRAM, UNION OF CONCERNED
Mr. Friedman. Thank you, Mr. Chairman and members of the
I'm the Research Director for the Union of Concerned
Scientists, and a Senior Engineer. UCS has been working at the
intersection of science and policy for over 30 years. And
that's exactly what the issues are, facing us today.
The President could not have been more correct when he told
the Nation that we are addicted to oil. We import over 60
percent of our oil and other petroleum products. Every minute,
$500,000 that could have been spent creating U.S. jobs and
strengthening our economy, instead leaves this country to
support our import habit.
The cost of our addiction, however, does not end there.
Only the entire economies of the United States, China, and
Russia exceed the global warming pollution resulting from U.S.
cars and trucks alone. We are already seeing the impacts.
Nineteen of the 20 hottest years on record have occurred since
One of the reasons for this problem is that the average
fuel economy of the fleet of new cars and trucks sold in the
United States in 2005 was lower than it was in 1985. And while
automakers always note the number of models on the market that
get more than 30 miles per gallon on the highway, they fail to
mention that most are mid-size or compact cars, and that
consumers spend most of their time driving in congested city
The answer to high gas prices, in the long run, our always
addiction, and our warming planet is not limiting fuel economy
choices, as automakers have done, but, rather, giving
consumers, who need vehicles of all shapes and sizes, safe and
high-fuel-economy options. There's a lot of focus on silver-
bullet solutions these days, whether it's a new fuel or a new
extremely advanced technology that is not going to help us for
another 20 or 30 years. The answer is not long-term silver
bullets. The answer is ``eating right and getting more
exercise.'' And that's what fuel economy can give you.
Mr. Friedman. What we have lacking in the showrooms is the
41-mile-per-gallon family car, the 37-mile-per-gallon minivan,
the 34-mile-per-gallon mid-size SUV, and the 30-mile-per-gallon
pickup. These are the vehicles that the National Academies
report, requested by Congress, shows are possible with existing
technology. Together, these vehicles, in a fleet with the
makeup of what the National Academies studied, would average 37
miles per gallon and would save consumers a net of $2,500 over
I fear, however, that if left up to the President,
consumers are not likely to get relief from high gasoline
prices. The President's recent rulemaking on light trucks will
save less than 2 weeks' worth of gasoline each year for the
next two decades.
Furthermore, the President's rulemaking applied to--applied
size-based standards in a way that will lead to the erosion of
even this small amount by encouraging automakers to market
larger, lower fuel economy vehicles, and even allowing them to
abandon some sectors of the market.
Congress can ensure that this erosion does not happen by
requiring a fleet-wide fuel economy backstop of 37 miles per
gallon when giving the President the authority to set size-
based standards for passenger and nonpassenger automobiles.
This target is based on the guidance requested by, and received
from--requested by Congress and received from the National
Academy of Sciences, and would cut oil dependence by 3.5
million barrels per day.
I'm sorry, one quick statement. I know my time is up, but I
just wanted to point out that while the NAS study clearly
states that fuel economy can be increased with no impact on
safety of our cars and trucks, critics of fuel economy
standards often make claims to the contrary. But these claims
do not stand the test of the light when compared with three
recent reports that have come out since the National Academy of
Sciences study was released. They demonstrate that fuel economy
is not linked with increased fatalities. Large vehicles do not
have lower fatality rates compared to smaller vehicles. And
increased weight is actually associated with increased
At the end of the day, investing in fuel economy and
efficiency to cut oil use is the best policy that we can apply
to get savings over the next two decades. Congress should not
defer its regulatory authority to the Administration, and it
need not, as it can base fuel economy targets on the scientific
research it requested. Congress can be confident that this is
technically feasible, cost effective, and safe.
[The prepared statement of Mr. Friedman follows:]
Prepared Statement of David Friedman, Research Director/Senior
Engineer, Clean Vehicles Program, Union of Concerned Scientists
Thank you, Mr. Chairman and members of the Committee, for the
opportunity to testify before you today. My name is David Friedman. I
am the research director and a senior engineer with the Union of
Concerned Scientists' (UCS) Clean Vehicles Program. UCS is a nonprofit
partnership of scientists and citizens that has been working at the
intersection of science and policy for over 30 years.
The President could not have been more correct when he told the
Nation that we are addicted to oil. Data from the Energy Information
Administration indicates that we import over sixty percent of our oil
and other petroleum products. Last year the cost of our oil and
petroleum imports was equivalent to almost one-third of the United
States trade deficit. At today's oil prices, we are sending more than
$500,000 to other countries every minute just to purchase that oil and
other petroleum products. In other words, every minute over one half of
a million dollars that could have been spent creating U.S. jobs and
strengthening our economy leaves this country. Forty percent of the oil
dependence responsible for this is due to the 220 million cars, SUVs,
minivans and pickup trucks we drive every day.
The cost of our addiction, however, does not end there. For each
mile our cars, SUVs, minivans and pickups drive each year, another
pound of global warming pollution (carbon dioxide equivalent) is
released from the tailpipe. That means each vehicle produces six tons
of global warming pollution from its tailpipe every year and the fleet
of automobiles produces over 1,300 tons. Including the global warming
pollution emitted in making the fuel required for these vehicles, the
total impact represents about 1,700 tons of global warming pollution,
more than most countries produce from their entire economies. Only the
entire economies of the United States, China, and Russia exceed the
global warming pollution resulting from our cars and trucks alone.
Since the time when Model T was first mass-produced, global warming
pollution from cars and many other sectors throughout the world has
increased carbon dioxide levels in the atmosphere to levels higher than
the globe has experienced for the past 650,000 years. We are already
seeing the impacts. Nineteen of the twenty hottest years on record
(since 1880) have occurred since 1980. Five of the six hottest years
have occurred just since 2000. As the problem accelerates, we will be
forced to rename Glacier National Park as the glaciers disappear and
dramatic impacts will be felt in lives and economies throughout the
country and the world.
Ending the Addiction
As long as the United States is tied to oil, American's pocket
books will be susceptible to instability in the Persian Gulf and other
regions of the world. Rising oil consumption in China and other
developing nations will only make matters worse. And as long as the
United States is tied to fossil fuels, we will be contributing to many
significant environmental problems that impact our health and our
economy, especially the reality of global warming.
These facts make the destination clear--in the next fifty years, we
must switch to clean, renewable fuels to power our cars and trucks--but
the reality is that there are no silver bullets to tap into overnight.
We will continue to be dependent on oil as a transportation fuel for
decades to come. Yet we have the ability to dramatically lessen the
addiction. There is reason for optimism if we put policies in place
that ask both consumers and automakers to take the necessary steps to
increase fuel economy and reduce travel. Both of these steps will also
ensure that renewable fuels work in the long run, because if we keep
increasing the amount of fuel we use, the alternatives will take up too
much land, be too expensive, and may just lead to imports of
alternatives from countries that are just as unfriendly towards U.S.
interests as most oil producers are today.
Consumers can and must do their part by keeping their tires pumped
up, getting regular vehicle maintenance, reducing travel through
carpooling, taking transit when available, walking or biking if it is
safe, combining trips, and purchasing the highest fuel economy car or
truck that meets their needs. But the last step is very difficult in
today's market. The average fuel economy of the fleet of new cars and
trucks sold in the U.S. in 2005 was lower than it was in 1985.
Automakers note the number of models on the market that get more than
30 miles per gallon on the highway, but they fail to mention that most
of those are mid-size or compact cars and that consumers spend more of
their time driving in congested urban conditions. The answer to high
gas prices, our oil addiction, and our warming planet is not limiting
fuel economy choices as automakers have done, but rather giving
consumers who do need vehicles of all shapes and sizes the safe, high
fuel economy options they need to be able to find in the showrooms.
In the past, fuel economy standards have ensured that consumers
could have higher fuel economy vehicles and not have to give up
options. Just as we see today, automakers were not ready for the
gasoline shortages and the price spikes that occurred in the early
1970s. As a result consumers jumped on the only option they had at the
time, relatively poorly designed smaller cars. However, as fuel economy
standards were fully phased in automakers switched from giving
consumers poor choices to putting technology in all cars and trucks so
consumers could have options in the showroom with 70 percent higher
fuel economy than they had in 1975 (2005 EPA Fuel Economy Trends
Today, consumers have vehicles that are larger and faster than they
had in 1975, but they get higher fuel economy due to Corporate Average
Fuel Economy Standards. If the fuel economy of today's cars and trucks
was at the level the fleet experienced in 1975 instead of today's 25
miles per gallon, we would be using an additional 60 billion gallons of
gasoline on top of the 140 billion gallons we will use this year. At
$2.50 per gallon, that represents $150 billion saved. That number could
have been much higher, however, if fuel economy standards had not
remained essentially unchanged for the past two decades.
The fact that fuel economy standards have remained stagnant has yet
again allowed automakers to set up consumers for a fall. With regular
gasoline hovering around $3.00 per gallon, consumers have few good
choices in the marketplace. Hybrids are now on the market and their
sales are growing, but manufacturer production capabilities are very
limited and will be slow to grow while the hybrids carry a higher price
premium. What is lacking from the market is the over 40 mpg family car,
the 37 mpg minivan, the 34 mpg mid-sized SUV, and the 30 mpg pickup.
These are the vehicles that the National Academies report, requested by
Congress, shows are possible with existing technology (Effectiveness
and Impact of Corporate Average Fuel Economy (CAFE) Standards, page
38). Together in a fleet of the same make-up as the NAS analyzed, these
vehicles would average 37 mpg. Over the life of these vehicles,
consumers would more than pay for the cost of the technologies, saving
a net of $2,500, essentially paying consumers to help cut our oil
dependence and global warming pollution.
All that is possible without hybrids, diesels, or high-strength
materials, as the NAS study did not include these in their detailed
technology evaluations. In fact, as noted in a February 9, 2005 press
release from Resources For the Future regarding the former RFF
President's statement before the House Science Committee, ``[Paul]
Portney, Chair of the National Research Council's Committee on
Effectiveness and Impact of CAFE Standards, noted that, upon
reflection, the Committee's 2001 report may have been too conservative
in its fuel economy recommendations . . . `It might be possible to meet
more stringent fuel economy standards at lower costs than the Committee
foresaw in 2001.' ''
Union of Concerned Scientists' analysis of conventional technology,
which included the NAS technologies as well as high-strength materials,
indicates that such a fleet could go even farther. Examples of some of
these technologies are shown in Figure 1 at the end of this document. A
fleet that put these technologies to work could reach 40 mpg over the
next ten years while providing the same size, acceleration and even
improved performance compared to today's vehicles. Tapping hybrid and
diesel technology could bring the fleet to more than 50 mpg by 2025.
Setting Standards and Presidential Authority
With the NAS study as its foundation, Congress can and should set a
fleet-wide fuel economy target for all new cars, SUVs, minivans, and
pickups at 37 miles per gallon within the next ten years. Congress
should not defer its regulatory authority to the Administration and it
need not as it can base such standards on the scientific research it
requested. Congress can be confident that this is both technically
feasible, cost effective, and safe. The engineers, scientists and other
experts on the NAS CAFE panel noted that, ``. . . it is technically
feasible and potentially economical to improve fuel economy without
reducing vehicle weight or size, and, therefore, without significantly
affecting the safety of motor vehicle travel.''
This committee has the opportunity to ensure that savings like
these are realized in our near future. If Congress does not exercise
this authority, consumers are likely to receive little relief from high
gasoline prices. The president's recent rulemaking on light trucks will
save less than two weeks of gasoline each year for the next two
decades. Such a small amount will not make a significant dent in our
oil addiction. Furthermore, the president's rulemaking applied size-
based standards in a way that will lead to erosion of even this small
amount. Improperly designed, size-based standards encourage automakers
to market larger, lower fuel economy vehicles, and allow them to
abandon some sectors of the market. In the 1990s we saw the impact of
improperly designed class-based standards as automakers took advantage
of the loophole allowing a lower standard for minivans and SUVs despite
the fact that they are passenger vehicles and should have been included
in that category instead of with pickups and cargo vans in the non-
passenger category established by Congress. The result has been a
decline in fleet-wide fuel economy from its peak of nearly 26 mpg in
1987 to 24.6 mpg in 2005 (EPA Fuel Economy Trends Report).
Congress can ensure that this erosion does not happen again by
requiring a fleet-wide fuel economy backstop when giving the President
the authority to set size-based standards for passenger and non-
passenger automobiles. If Congress does only the latter, however, the
benefits will be small to non-existent given the Administration's
actions on minivans, SUVs and pick-ups.
Based on the guidance requested and received from the NAS, Congress
should ask that the President put in place regulations to ensure that
the average fuel economy of the fleet of new cars, SUVs, mininvans and
pickups sold ten years from now be at least 37 miles per gallon. By
doing this, Congress would be fulfilling its regulatory role by setting
a fleet-wide fuel economy target that will cut oil dependence by 3.5
million barrels per day in 2025. In addition, setting a fleet-wide fuel
economy target within the context of size-based standards would create
a backstop that would ensure both that the oil savings are realized and
that consumers will get the choices they will need in a world marked by
continuing high and unstable gasoline prices and growing impacts of
Economic and Jobs Impacts of Setting Fuel Economy Targets
Contrary to claims by the auto industry, investments in fuel
economy technology, just like other investments, will lead to
prosperity. In order to quantify the benefits of actions to increase
future fuel economy, UCS estimated the effect of moving existing
technologies into cars and trucks over the next 10 years to reach an
average of 40 miles per gallon (mpg) by 2015. Slowing down the timeline
or reducing the fuel economy target would reduce the benefits, but for
40 mpg we found that:
In 2015, the benefits resulting from investments in fuel
economy would lead to 161,000 more jobs throughout the country,
with California, Michigan, New York, Florida, Ohio, and
Illinois topping the list.
In the automotive sector, projected jobs would grow by
40,800 in 2015.
For consumers, the cost of the new technology would more
than pay for itself, saving a net $23 billion in 2015 alone.
Getting technologies like these into the fleet over the next ten
years and then tapping into the growing potential of hybrid cars and
trucks could get us to the point of saving five to six million barrels
of oil per day by 2025 (Figure 2). That would be enough of a reduction
in oil use to stop the current growth in oil demand and hold us where
we are today while we wait for the breakthroughs that are needed for
clean and renewable alternatives to oil. The new jobs would be created
both because of investments in new technologies by the automakers and
because consumers would shift spending away from gasoline to more
productive products and services.
Requiring all automakers to improve fuel economy will increase the
health of the industry. Companies like Ford and General Motors are
currently in junk-bond status due to poor management decisions, not
fuel economy standards, which have been stagnant for the past two
decades. Those poor decisions have put them in a place where, just as
in the 1970s, they do not have the products consumers need at a time of
high gasoline prices, and they are continuing the slide in market share
that began the first time they made this mistake.
In contrast to automaker claims, it is actually high gasoline
prices, not technology investment, which will undermine the health of
the domestic automobile industry. According to a recent study by the
University of Michigan and the NRDC, a sustained gasoline price of
$2.86 per gallon would lead Detroit's Big 3 automakers' profits to
shrink by $7 billion as they absorb 75 percent of the lost vehicle
sales as consumer budgets are squeezed compared to a scenario with
gasoline at $1.96 per gallon. This would put nearly 300,000 people out
of work in states like Indiana, Michigan, Ohio, Oklahoma, Texas and
By requiring Ford, GM, and all automakers give consumers the
choices they need, Congress can ensure automaker jobs stay in the U.S.
and models like the Ford Explorer and Chevrolet Tahoe are still on the
market ten years from now but they will go farther on a gallon of gas.
Safety Impacts of Setting Fuel Economy Targets
While the NAS study clearly states that fuel economy can be
increased with no impact on the safety of our cars and trucks, critics
of fuel economy standards often point to the chapter, which takes a
retrospective look at safety. Despite the fact that this chapter did
not represent a consensus of the committee (a dissenting opinion was
included in the appendices) and the fact that three major analyses have
since shown that fuel economy and safety are not inherently linked,
claims are still made to the contrary.
First, David Greene (one of the NAS panel members) produced a
report with Sanjana Ahmad in 2004 (The Effect of Fuel Economy on
Automobile Safety: A Reexamination), which demonstrates that fuel
economy is not linked with increased fatalities. In fact, the report
notes that, ``higher mpg is significantly correlated with fewer
fatalities.'' In other words, a thorough analysis of data from 1966 to
2002 indicates that Congress can likely increase fuel economy without
harming safety if the past is precept.
Second, Marc Ross and Tom Wenzel produced a report in 2002 (An
Analysis of Traffic Deaths by Vehicle Type and Model), which
demonstrates that large vehicles do not have lower fatality rates when
compared to smaller vehicles. Ross and Wenzel analyzed Federal accident
data between 1995 and 1999 and showed that, for example, the Honda
Civic and VW Jetta both had lower fatality rates for the driver than
the Ford Explorer, the Dodge Ram, or the Toyota 4Runner. Even the
largest vehicles, the Chevrolet Tahoe and Suburban had fatality rates
that were no better than the VW Jetta or the Nissan Maxima. In other
words, a well-designed compact car can be safer than an SUV or a
pickup. Design, rather than weight, is the key to safe vehicles.
Finally, a study by Van Auken and Zellner in 2003 (A Further
Assessment of the Effects of Vehicle Weight and Size Parameters on
Fatality Risk In Model Year 1985-98 Passenger Cars and 1985-97 Light
Trucks) indicates that increased weight is associated with increased
fatalities, while increased size is associated with decreased
fatalities. While this study was not able to bring in the impacts of
design as well as size, it helped inform NHTSA as they rejected weight-
based standards in favor of size-based standards based on the vehicle
These studies further back up Congress's ability to set fuel
economy targets of 37 mpg for the fleet in the next ten years without
impacting highway safety.
Setting a fleet-wide target of 37 mpg in 10 years while giving the
President the authority to reach that target through size-based
standards will save consumers money, stimulate the economy, create and
protect jobs and preserve the safety of our vehicles. All of these
benefits will come in addition to cutting our oil dependence and
emissions of global warming pollutants from our cars and trucks.
Investing in efficiency to cut oil use, the equivalent of eating
right and getting more exercise, has been overlooked for the past two
decades. Fuel economy technology has gone to double the power of our
car engines and increase weight by 25 percent. Consumers are clearly
happy with the size and acceleration of their vehicles today. We don't
have to change that. But consumers are clearly unhappy with the cost of
high gasoline prices and our economy and our environment cannot sustain
the impacts of our oil addiction.
Congress has the opportunity to ensure that automakers spend the
next 20 years using technology to curb our oil addiction. It should not
be surprising that Congress is needed to play this role, the Federal
Government has helped drive every major transportation revolution this
country has seen, whether it was trains, planes, or automobiles. The
next transition will be no different.
In addition to setting a fleet-wide fuel economy target of 37 mpg
over the next 10 years, there are several different mechanisms the
government could also put to work to help reduce oil usage. Among the
viable options are:
Enforceable, national oil savings targets
Performance-based incentives for suppliers and manufacturers
to produce higher fuel economy vehicles
Eliminating the 60,000 vehicle cap on consumer incentives
Incentives to increase alternative fuel production,
including production targets, research and development, and
Incentives and requirements to increase efficiency of oil
usage in the heavy duty transportation and industrial sectors
Closure of existing loopholes in fuel economy regulations
and tax laws
None of these options is a silver bullet. And some, if not all of
them, are politically challenging. But by adopting a reasonable package
that includes several of these measures now, we can reduce the trade
deficit and create hundreds of thousands of new jobs, while steadily
reducing our oil usage. And that's something I hope we can all support.
Thank you for the opportunity to testify today. I would be happy to
answer any questions you may have.
Senator Lott. Thank you, Mr. Friedman.
STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL
UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT
WORKERS OF AMERICA (UAW)
Mr. Reuther. Thank you, Mr. Chairman.
The UAW appreciates the opportunity to testify before this
Committee on the subject of reforming the CAFE standards. We
have repeatedly emphasized two important points about the CAFE
program. First, we have urged that the structure of the program
be modified to eliminate discrimination against full-line
producers based on their product mix. In our view, all
companies should be required to make similar efforts to improve
fuel economy across their entire line of vehicles. Second, we
have consistently emphasized the importance of retaining both
the fleet-wide averaging and the two-fleet, the domestic and
foreign, components of the passenger car CAFE structure. These
two requirements ensure that full-line auto manufacturers must
maintain small-car production in North America.
As a matter of national energy policy, we believe it is
important for the U.S. to retain domestic production of
smaller, more fuel efficient passenger cars. Furthermore, over
17,000 American workers are currently employed in seven U.S.
assembly plants that produce small passenger cars. Almost
50,000 American workers produce parts for these vehicles. The
jobs of these workers would be directly threatened by any CAFE
proposals that undermine fleet-wide averaging and/or the two-
fleet rule for passenger cars.
UAW recognizes that establishing an attribute-based CAFE
system for passenger cars similar to the new light-truck system
would have the benefit of eliminating the current
discrimination against full-line producers. But it would also
have the major down side of undermining fleet-wide averaging
and the two-fleet rule, and, thus, would enable auto
manufacturers to offshore all of their small car production and
Fortunately, the UAW believes there is an easy way to
obtain the benefits of moving to an attribute-based CAFE system
for passenger cars while avoiding the down side of losing our
small-car production and jobs. Specifically, we urge Congress
to impose an anti-backsliding requirement on any new CAFE rules
that NHTSA would be authorized to promulgate for passenger
cars. This requirement should specify that both domestic and
foreign passenger car fleets for each auto manufacturer would
still have to meet or exceed the CAFE standard under the
current system. This anti-backsliding benchmark should be
increased in line with overall fuel economy improvements. The
adoption of this type of anti-backsliding requirement would
prevent companies from offshoring their small-car production
and jobs. It would also ensure that the auto manufacturers
cannot subvert the objective of any new CAFE system by
upweighting or upsizing many of their vehicles, resulting in
worse overall fuel economy.
In conclusion, we look forward to working with this
Committee as you consider proposals to improve fuel economy.
[The prepared statement of Mr. Reuther follows:]
Prepared Statement of Alan Reuther, Legislative Director, International
Union, United Automobile, Aerospace and Agricultural Implement
Workers of America (UAW)
Mr. Chairman, my name is Alan Reuther. I am the Legislative
Director for the International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America (UAW). The UAW appreciates
the opportunity to testify before this Subcommittee on Reforming
Corporate Average Fuel Economy (CAFE) standards.
The UAW represents 1.1 million active and retired workers across
the country, many of whom work or receive retirement benefits from auto
manufacturers or auto parts companies. We were deeply involved in the
original enactment of the CAFE program, and continue to have a very
strong interest in this program because of its major impact on
automotive production and employment in this country and the jobs and
benefits of our members.
The UAW strongly supported the establishment of the CAFE program,
and we support continuation of this program as an essential mechanism
for improving fuel economy and reducing our dependence on foreign oil.
We have previously stated, and continue to believe, that modest
increases in the CAFE standards over time are technologically and
However, the UAW has repeatedly emphasized two critically important
points about the CAFE program. First, we have urged that the structure
of the CAFE program be modified to eliminate discrimination against
full-line producers based on their product mix. In our view, all
companies should be required to make similar efforts to improve fuel
economy across their entire line of vehicles. Because of this, we have
strongly opposed legislative proposals that would have a discriminatory
impact on full-line producers, and therefore jeopardize the jobs and
benefits of tens of thousands of active and retired workers.
Second, we have consistently emphasized the importance of retaining
both the fleet-wide averaging and the two-fleet (domestic and foreign)
components of the passenger car CAFE structure. The fleet-wide
averaging requirement provides important flexibility to automotive
manufacturers, while ensuring that the CAFE standards produce an
overall improvement in fuel economy. Furthermore, the combination of
fleet-wide averaging and the two-fleet requirement ensures that full-
line auto manufacturers must maintain small car production in North
America. This is because the production of smaller, more fuel efficient
vehicles is needed to offset the production of larger, less fuel
As a matter of national energy policy, we believe it is vital that
the U.S. retain domestic production of smaller, more fuel efficient
passenger cars. As we have all witnessed, sharp increases in gas prices
can lead to shifts in consumer demand towards smaller, more fuel
efficient vehicles. Unless we retain domestic production of such
vehicles, consumers interested in this segment of the market could be
forced to purchase foreign-made vehicles.
Over 17,000 American workers are currently employed in seven U.S.
assembly plants that produce small passenger cars. This includes GM,
Ford, DCX, Mitsubishi and NUMMI plants in Lordstown (Ohio), Wilmington
(Delaware), Spring Hill (Tennessee), Wayne (Michigan), Belvidere
(Illinois), Bloomington (Illinois) and Fremont (California). Almost
50,000 American workers produce parts for these vehicles. The jobs of
these workers would be directly threatened by any CAFE proposals that
undermine fleet-wide averaging and/or the two-fleet rule for passenger
cars. In addition, the loss of these jobs would inevitably have a
negative ripple effect on the rest of the economy.
NHTSA recently released final rules establishing new CAFE standards
for light trucks. These rules require modest improvements in light
truck fuel economy, and also establish a sized-based CAFE system for
light trucks. The UAW supported these rules for several reasons. We
believed the magnitude and timing of the proposed increases in light
truck fuel economy were feasible. We were also very pleased that the
size-based CAFE system eliminated the discriminatory impact on full-
line producers. At the same time, because the old light truck CAFE
standards did not contain any two-fleet rule, there was no threat to
the continuation of small truck production and jobs in the United
States. Furthermore, because the new rules only dealt with light
trucks, not passenger cars, and did not change the definitions of what
is a ``passenger car'' and what is a ``light truck,'' there was no
threat to small car production and jobs in this country.
The UAW believes that NHTSA already has the authority to raise the
flat MPG requirement in the current CAFE standards for passenger cars,
and that legislation is not needed to enable it to go forward in this
manner. However, in his recent letters to Congress, Secretary Mineta
made it clear that the Department of Transportation also wants Congress
to give NHTSA the authority to change the structure of the passenger
car CAFE system to an attribute-based system similar to the new
structure that has been implemented for light trucks. There is general
agreement among the various stakeholders in the fuel economy issue that
NHTSA does not currently have this authority, and that authorizing
legislation would be required before such structural changes in the
passenger car CAFE program could be adopted.
The UAW recognizes that establishing an attribute-based CAFE system
for passenger cars similar to the new light truck system would have the
benefit of eliminating the current discrimination against full-line
producers. We would strongly applaud this development.
However, it would also have the major down side of enabling auto
manufacturers to offshore all of their small car production and jobs.
This would happen due to the elimination of the two-fleet rule. But
even if this rule was retained, the companies would still be able to
offshore their small car production and jobs due to the shift from a
uniform, flat MPG fleet-wide requirement for all companies to a pure
Some commentators have tried to dismiss concerns about the loss of
small car production by arguing that the companies will simply
substitute large car production at these facilities, leaving the
overall production and employment levels unchanged. This ignores the
harsh reality that there currently is significant over capacity in the
auto industry. The UAW submits that the real world impact is that
certain companies would take advantage of the change in the CAFE rules
to further downsize their operations. The net result is that small car
facilities would be closed, and tens of thousands of automotive jobs
would be lost, without any compensating replacements with large vehicle
production and jobs.
Fortunately, the UAW believes there is an easy way to obtain the
benefits of moving to an attribute-based CAFE system for passenger
cars, while avoiding the down side of losing our small car production
and jobs. Specifically, the UAW urges Congress to impose an ``anti-
backsliding'' requirement on any new CAFE rules that NHTSA would be
authorized to promulgate for passenger cars. This requirement should
specify that both the domestic and foreign passenger car fleets for
each auto manufacturer would still have to meet or exceed the CAFE
standard under the current system (i.e. the 27.5 flat MPG fleet-wide
standard). This ``anti-backsliding'' benchmark should be increased in
line with the overall fuel economy improvements required under any
attribute-based passenger car CAFE system.
The adoption of this type of ``anti-backsliding'' requirement would
prevent companies from offshoring all of their small car production and
jobs. This would help protect the jobs of tens of thousands of American
workers. It would also guarantee that we continue to maintain domestic
production capacity for smaller, more fuel efficient vehicles.
This type of ``anti-backsliding'' requirement also would ensure
that the auto manufacturers cannot subvert the objective of any new
CAFE system by ``up-weighting'' or ``up-sizing'' many of their
vehicles, resulting in worse overall fuel economy. It would guarantee
that the companies will actually improve fuel economy across the entire
range of their passenger cars, and that consumers and our Nation will
indeed receive the benefits of more fuel efficient vehicles.
The imposition of this type of an ``anti-backsliding'' requirement
would not be burdensome for the auto manufacturers. If the companies
are genuinely taking steps to improve fuel economy across their entire
range of passenger vehicles, and if they do not shift small car
production overseas, they should easily be able to meet this
Thus, the UAW would support legislation that authorizes NHTSA to
establish an attribute-based CAFE system for passenger cars similar to
the recently promulgated rule for light trucks, provided this is
coupled with an ``anti-backsliding'' requirement that protects small
car production and jobs in this country and prevents up-weighting or
up-sizing of cars. If this type of ``anti-backsliding'' requirement is
not included, then we would vigorously oppose such legislation.
In addition to imposing an ``anti-backsliding'' requirement on any
new passenger car CAFE rules, the UAW urges Congress to specify that
such rules should only take effect in 2012 or later, after the new
light truck CAFE rules have been implemented. In light of the serious
economic difficulties currently facing certain auto manufacturers, we
believe it is important to avoid placing undue regulatory burdens on
the industry. The auto companies will have to make significant
investments to meet the challenges posed by the new light truck CAFE
rules. In our judgment, these burdens should not be compounded by
simultaneously requiring changes in passenger car CAFE rules. By
delaying the effective date of any new CAFE rules for passenger cars,
NHTSA can gain the benefit of valuable experience in the implementation
of the size-based CAFE system for light trucks. This will also ease the
financial burdens on the auto manufacturers.
The UAW recognizes that there are other important issues associated
with any shift to an attribute-based system of CAFE rules for passenger
cars. This includes whether this type of a system should be based on
weight, size or some combination of factors. We believe that resolution
of these complex issues can best be resolved through the administrative
We understand that some persons have also called for the adoption
of a ``credit trading'' system that would allow auto manufacturers to
buy and sell CAFE credits for passenger cars and/or trucks. The UAW
strongly opposes such proposals, and urges Congress not to give NHTSA
any authority to establish this type of a credit trading system. A
system for trading CAFE credits would inevitably have the effect of
undermining the two-fleet rule and/or fleet-wide averaging, and would
therefore jeopardize the continuation of small car production and jobs
in the United States. It could also aggravate the uneven playing field
that currently exists between foreign and domestic auto manufacturers.
The UAW believes it is important for Congress to recognize that
changing the CAFE standards for passenger cars, by itself, will not
solve either the immediate problem of high gas prices or the larger
problems of energy security and environmental protection. Because of
the long lead time needed to implement any changes in CAFE, there
clearly will not be any impact whatsoever on current gas prices.
Furthermore, light duty vehicles (passenger cars and light trucks) only
account for 40 percent of oil demand in 2006. Passenger cars account
for less than half of light-duty vehicle sales, and new passenger cars
sold each year represent a very small percentage of the total vehicle
stock on the road. Thus, changing the CAFE standard for passenger cars
would, over five years, only moderate demand from a source comprising
less than 10 percent of our Nation's oil use. In order to significantly
reduce our oil usage and our dependence on foreign oil, clearly there
is a need for broader national energy policies.
The UAW submits that these critically important energy security
objectives do not have to be at odds with the goal of protecting and
creating jobs for American workers. Indeed, we firmly believe our
Nation can make substantial progress in improving fuel economy and
reducing our Nation's dependence on foreign oil, and at the same time
help make sure that we keep and expand automotive jobs in this country.
The UAW urges this Subcommittee, the entire Congress and the Bush
Administration to support energy initiatives that further both of these
important objectives. Specifically, we urge Congress and the Bush
Administration to move forward with proposals to encourage the domestic
production of advanced technology vehicles and their key components. We
believe great strides can be made in improving fuel economy and
reducing our dependence on foreign oil by accelerating the introduction
of such vehicles. But, as was demonstrated by a November 2004 study
conducted by the Office for the Study of Automotive Transportation
(OSAT) of the University of Michigan Transportation Research Institute,
and commissioned by the bipartisan National Commission on Energy
Policy, the United States will lose tens of thousands of automotive
jobs unless steps are taken to encourage the domestic production of
these vehicles and their components. Currently, most of the advanced
technology vehicles are assembled overseas, and almost all of the key
components for the hybrid and diesel vehicles are built overseas. As
these vehicles gain a larger share of the market, we will inevitably
lose automotive jobs unless we make sure that these vehicles are
assembled in the U.S. and the main components are also built here.
We are very pleased that proposals along these lines have already
been introduced by Members on both sides of the aisle, including the
Bayh-Lieberman-Brownback-Lugar (S. 2025); Obama (S. 2045); Conrad (S.
2571) and other bills. The UAW submits that the types of manufacturer's
incentives in these bills can help to create thousands of automotive
jobs for American workers, while at the same time improving fuel
economy, reducing global warming and our dependence on foreign oil.
The UAW also urges Congress and the Bush Administration to move
forward with proposals to aggressively promote the production, sale and
use of alternative fuel vehicles. Several automakers are already
producing vehicles that can run on a blend of 85 percent ethanol, 15
percent gas. This technology is relatively inexpensive--about $150 per
vehicle. But production and sales of flex-fuel vehicles represent only
a small fraction of the market. And the actual use of alternative fuels
has been hampered by bottlenecks in processing and, more importantly,
the lack of a distribution network. The UAW believes these problems can
be overcome by mandating that a certain percentage of all vehicles sold
in the U.S. by each automaker must be flex-fuel capable by a specified
date. Indeed, there's no reason why automakers can't make 100 percent
of their vehicles flex-fuel capable within a reasonable time frame. We
also believe that there should be additional incentives to encourage
the creation of more processing plants to increase the supply of
alternative fuels, and to encourage the conversion of existing filling
stations so they have the capability to distribute alternative fuels.
In our judgment, this combination of flex fuel policies offers the best
opportunity to make progress in the near term on reducing oil
consumption and our dependence on foreign oil.
In conclusion, the UAW looks forward to working with this
Subcommittee as you consider proposals to improve fuel economy. Thank
you for considering our views on these important issues.
Senator Lott. Well, thank you very much, panel. And we will
have some time for questions now. I hope you all can stay with
us another 15 minutes, at least, or so.
Senator Cantwell. Thank you, Mr. Chairman.
Mr. Friedman, you used a ``60 percent dependent on foreign
sources'' number. I thought our number was 50 percent. So, if
you could just tell me where you got that.
Mr. Friedman. Well, that's based on February imports and
total consumption from the Energy Information Administration.
Senator Cantwell. OK. And can you comment on this? My
colleague Chairman Lott and I worked on this EPA accuracy-of-
labels issue. In fact, maybe Ms. Claybrook wants to comment on
that, as well. But Consumer Reports have been conducting
mileage tests for years. And what happens is, consumers go out,
and they think they're buying a car that is more fuel
efficient--for example, EPA says that the Chrysler 4-wheel-
drive diesel version of the Jeep Liberty gets 22 miles per
gallon, and yet, in Consumer Reports, it only got 11. The Chevy
TrailBlazer was supposed to get 15 miles; it only gets 9. And
there are various examples of that. So, how do we--and we were
successful in getting EPA to say that they were going to update
this test, which hasn't been updated since, I think, the
1970s--how do we marry that with CAFE so that we're getting an
Mr. Friedman. Well, right now the way the regulations--the
way the law is written, the fuel economy standards are based on
the tests that were used in 1975. And clearly we know those
tests do not work anymore. Consumers know it. The average
acceleration on those tests is the equivalent of going from
zero to 60 in 18 seconds. So, those tests are clearly broken.
And EPA does look to be finding ways to fix that for the window
stickers. But the way the regulations are written, that fix
cannot legally be applied to the fuel economy standards. That
statute would have to change in order for the fuel economy
standards to also be based on what consumers are actually
getting in the marketplace.
Senator Cantwell. And I'm assuming you think we should do
Mr. Friedman. Well, it only makes sense for both consumers
and the Government and automakers to be judging their vehicles
based on the real fuel economy they get, rather than what's--
incorrect tests would produce. Definitely.
Senator Cantwell. Ms. Claybrook, did you want to comment on
Ms. Claybrook. I completely agree. I think it's very
confusing to have two different sets of numbers. And, I think
that if you adjusted the standard numbers to reflect reality,
without increasing them in the course of doing that, so they
adjust for the equivalent of what they are today, but they're
real numbers, then that wouldn't have any adverse impact, in
terms of what the auto manufacturers would be concerned about.
And then, from there you make your calculations about how much
of an increase you could get. I know we're all wedded to the 40
miles per gallon in 10 years, and the 27 and a half, we'll just
have to learn again and readjust. But I think it should be
Senator Cantwell. Thank you.
Mr. Webber, I see your finger poised for the button there,
but if I could ask you to also comment on your infrastructure
comment and the fact that we have an infrastructure issue as it
relates to alternative fuel products. And if you have any
recommendations on that.
Mr. Webber. First, on labeling, we supported your effort to
reform the system. And I'm glad it's underway. It needs reform.
The consumer deserves to know.
Senator Cantwell. But you--do you--but what about--as----
Mr. Webber. On infrastructure----
Senator Cantwell. No, creating--the gap between the
labeling and the fact that it can't be used for CAFE. Do you
support changing that, so that they're the same?
Mr. Webber. I would like to study that. We haven't taken a
position on that particular aspect of it.
Senator Cantwell. OK.
Mr. Webber. But we do know that the present system is
Senator Cantwell. OK.
Mr. Webber. On infrastructure--and I am focusing now on
ethanol, and I'll just give you some statistics--if we have
over 180,000 gasoline stations out there today, only about 650
will offer you E-85 ethanol fuel. We have 5 million vehicles on
the road today--we'll have 6 million by the end of the year--
that can burn E-85. So, that's a big gap, and that has to be
made up. And it's part of our shared responsibility theory,
that, in order to get that done, we're going to need a lot of
help from the fuel industry, from the government at all levels.
That's got to change.
Senator Cantwell. And do you have any specifics there that
you--that your association supports today?
Mr. Webber. No specifics. We've identified the problem.
We've talked, in general terms, about how it might be fixed. I
met with a group of lieutenant Governors recently, and, when I
quoted those numbers to them, they said, ``We've got to fix it.
We think there's a role in it for State government.'' But we
have yet to really get down to the basics on it. But it's a
And, in the meantime, our companies--many of our companies
are moving out rather smartly and producing E-85-capable
Senator Cantwell. Thank you.
Mr. Reuther, on that point, on the E-85 vehicles that have
already been in the marketplace, and obviously being
successfully used in other countries like Brazil, what is
technically required, and how much does that cost, to actually
add that ability for cars manufactured in the United States to
run on either ethanol or on fossil fuels?
Mr. Reuther. It costs about $150 per vehicle. It's a very
modest cost. The technology is known. This is something that's
easily doable. And we feel that moving ahead aggressively with
flex-fuel vehicles is probably the best short-term thing we
could do to save and reduce oil consumption.
Senator Cantwell. And so, auto manufacturers are ready to
go on that, or they need--or are you recommending something to
help that acceleration?
Mr. Reuther. Well, the companies are moving ahead with
that. We would support a mandate, by a date certain, requiring
that a certain percentage of vehicles sold have to be flex-fuel
vehicles, since it is a modest cost and since the technology is
known. We think the bigger challenge is making sure that the
distribution network is there, and we would support additional
incentives to encourage that to happen.
Senator Cantwell. Thank you very much.
Ms. Claybrook. Could I comment on that, just briefly?
Senator Lott. Briefly.
Ms. Claybrook. Very briefly.
Right now, in the law there is a credit to the
manufacturers to encourage them to manufacture the flex-fuel
vehicles. And I think that maybe that was appropriate
initially, but it hasn't really made any difference, in terms
of use of alternative fuels or oil savings because of the
ethanol distribution system. And it does seem to me that a
mandate is far preferable to this willy-nilly system of getting
credits. And, also, the credits undermine the amount of fuel
economy that the manufacturers actually produce for each such
Senator Lott. Senator Lautenberg?
Senator Lautenberg. Thanks very much, Mr. Chairman. This
has been a very instructive panel, as I heard it, and including
discussion with the Secretary of Transportation, before.
It seems that we're pretty much at odds with whether you
can or you can't. Is it--what is--what would deter Congress
from setting a fuel efficiency mark for the industry and
saying, ``Meet that standard''? Is there anything in law--I
understand what you said, Ms. Claybrook, about reforming the
whole system--or one of you did--but there's nothing, as I see
it, that would prevent the--NHTSA from saying, ``Here's what
you've got to do.'' Am I wrong?
Ms. Claybrook. Well, no, the issue here, and the reason
that the President came forward, is that under the existing
statute it says that the agency can set a standard above 27 and
a half miles per gallon with a Congressional veto. Public
Citizen got the Congressional veto overruled in the Supreme
Court in 1983. So, there is no longer a Congressional veto. The
legal question is: ``Is there still authority to raise the
Our view is that we're not sure. We don't know what the
Court might say. But we think that it would be preferable to
have the authority vested in the agency, so there wouldn't be
any more lawsuits on this issue, and so that the agency would
have authority to set higher standards.
There's no reason that they couldn't set a standard out
some distance so that the industry has long-term notice, you
know, 8 or 10 years. But I don't think that the agency's going
to do that. And so, that's the reason that we, and the
environmental groups and a number of other organizations, favor
a longer-term standard that's very reasonable, based on what
EPA has predicted is feasible, and set a standard so that
there's a goal----
Senator Lautenberg. Thank you.
Ms. Claybrook.--that would be achieved.
Senator Lautenberg. Mr. Friedman, does the union support
lifting of the tariffs on the imports of ethanol, like the
Brazilian formulation, at least until we can supply the--supply
Mr. Friedman. Well, we currently do not have a position on
tariffs relative to ethanol. Part of the reason for that is
that the largest impact that we can have over the next 20 years
in cutting our oil dependence is clearly fuel economy. We did
an analysis where we looked at what would happen if we put the
pedal to the metal on both fuel economy and ethanol. And what
we found is, over the next 20 years, 70 to 80 percent of the
reductions in oil dependence would come from ``eating right and
getting more exercise''; 20 to 30 percent would come from
``eating better foods and getting new fuel''----
Senator Lautenberg. You're not talking about the weight in
the car, right? Are you? You say reduce passenger weight, and
that'll save us?
Mr. Friedman. Exactly. We're talking about ``eating right
and getting more exercise,'' in terms of putting----
Senator Lautenberg. Right, but----
Mr. Friedman.--the technology that the----
Senator Lautenberg.--we can't----
Mr. Friedman.--automakers already have.
Senator Lautenberg.--solve that problem here.
Mr. Friedman. Right.
Senator Lautenberg. I, personally, tried that.
Mr. Friedman. You should be commended for that.
Senator Lautenberg. Are you concerned that the potential
for ethanol plants might be built with coal-firing?
Mr. Friedman. Well----
Senator Lautenberg. And could that cancel out some of the
benefits that we'd be getting?
Mr. Friedman. That's the tricky thing with silver bullets.
There are smart ways to do alternatives, there are smart ways
to do ethanol, and there are poor ways to do ethanol. Studies
show that if you base your ethanol production from corn heavily
on fossil fuel production to make that ethanol, you could
actually increase global warming pollution and potentially even
increase oil dependence. But if you make ethanol right, from
corn, for example, you could cut greenhouse gas emissions by on
the order of 10 percent. If you make ethanol from grasses, wood
chips, other cellulosic products, you could actually cut your
global warming pollution by 80 percent. But it's all about
making sure you do it the right way, not the wrong way, which
is why we would support regulations that would require--if E-85
is going to be on the market, that we need to have a growing
percentage of that fuel coming from the cleanest sources out
there. We need performance-based standards for fuels, as well
as for vehicles.
Senator Lautenberg. Without starting a firestorm here,
sitting next to my colleague from Arkansas and various other
center-country states, what about--is there a major difference
in the efficiency of the ethanol that's produced, as we're
reading a lot about now, in Brazil from sugarcane, and that
which is grown from corn or produced from corn?
Mr. Friedman. Well, sugarcane does have some added
benefits, in terms of global warming pollution. It's somewhere
in between corn and switchgrass and other woody products. I
think the reality here is, we do need to tap into all the
alternatives that we can, but alternative fuels, while very
promising, are still going to take 20, 30, potentially,
depending on the fuel, even 40 years before they're going to
have a major impact. We can't afford to wait that long. Fuel
economy can actually be a buffer so that we can figure out the
technologies, so that we can get the best fuels out there for
Senator Lautenberg. I'm determined to wait until that's
Thank you very much.
Senator Lott. Thank you very much, Senator Lautenberg.
Let me ask a couple of questions here, if I could. Mr.
Webber, do you have a position on including CAFE credits in a
future CAFE program for passenger cars?
Mr. Webber. Yes, sir. We think that that ought to be
studied, and not ought to be part of the request, or whatever
you decide to grant the Administration, in terms of
restructuring authority for CAFE. On the surface, it looks like
an easy solution, but it's more complicated than that. We
think, though, it does warrant study. And who knows what the
future will hold for it?
Senator Lott. Well, I think you need to study it, and you
need to be prepared to take some positions on it as we----
Mr. Webber. And we will.
Senator Lott.--go forward.
Mr. Webber. Yes, sir.
Senator Lott. Mr. Reuther, now. I'm sorry, I had to leave
the room, and I missed part of your testimony, but I want to
make sure you do advocate, on behalf of your union, that this
authority should be given to the Secretary, and we should move
forward with the changes, including the reform. Is that
Mr. Reuther. Only if there's a requirement that they must
include an anti-backsliding provision in any new standard. If
that is not included, then we would oppose giving the authority
to the Administration to move forward with an attribute-based
Senator Lott. All right, sir.
Mr. Cabaniss, now, your testimony indicates that the two-
fleet rule may actually have cost jobs in the United States. Do
you want to make any comment on the two-fleet rule?
Mr. Cabaniss. Yes, sir. The point there is, that the two-
fleet rule has actually had the unintended consequence of
creating disincentives for foreign-based manufacturers to
increase the content of the vehicles they manufacture here in
the United States. And, as I mentioned earlier, today we have
approximately a 4-million-vehicles-per-year capacity in the
United States. We believe there's every incentive--especially
with the need to conserve fuel, the need to address greenhouse
gases, and so on--there's every reason to believe that we need
to have as much production here in the United States for all
manufacturers for fuel-efficient vehicle options. And so, it's
counterproductive to have that kind of disincentive in the Act.
There have even been cases where vehicle content of
domestically produced vehicles has been reduced in order to
deal with this accounting of having vehicles in the import side
versus the domestic side. And those kinds of de-contenting
decisions take away jobs, and not only direct jobs, but also
have supplier impacts, as well.
Senator Lott. Congressman----
Mr. Sharp. Mr. Chairman?
Senator Lott.--Congressman Sharp, if I could go to you,
thank you for the time you've spent with these outside groups
since you left the Congress. I'd like to get your view about
the CAFE regulation for light trucks. Was this a positive move?
Did it work well? Is it going to work well, in your opinion?
Mr. Sharp. Well, first of all, we don't have----
Senator Lott. It's been panned a good bit here.
Mr. Sharp.--real experience with it yet. It's----
Senator Lott. Yes.
Mr. Sharp. It hasn't actually taken effect, in terms of----
Senator Lott. Yes.
Mr. Sharp.--the choice that the manufacturer makes between
the old style and the new style. One of our economists at our
Resources for the Future, however, did look at it, and I have
attached to my testimony some of the favorable propositions
that he identified about this redesign. It does pattern after a
redesign possibility that was in the National Academy of
Sciences proposal where it suggested a weight-based standard
phased in a similar way. There is one element of the National
Academies study that I think it would be wise for your staff to
go back and look at, and that was a design feature that would,
in a sense, cap off how bad it could get if you allowed this to
go to the degree that Joan Claybrook is concerned it will. And
so, there are some other features that can help solve that.
I think there are a lot of questions out there as to how
aggressive they, in fact, were in the numbers that they picked.
And I think, given, especially, the fact that the price of
gasoline is up, that one might have made a different calculus,
and, therefore, come up with higher requirements.
Senator Lott. Do you think, though, that the approach taken
in that rule, perhaps with some strengthening, could be applied
to passenger cars?
Mr. Sharp. I think that's possible, but I'm not the expert
Senator Lott. OK. Right. Well, just in conclusion, because
my time's running out, too, and we'll want to go to Senator
Pryor, I want to thank this panel. It's been a very interesting
presentation. You know, two or three observations. One, there's
always a desire--well, you can do--should do more, could do
more--here's my point. We should have done more. A long time
ago, across the board, in a whole lot of areas. But that's no
reason why we shouldn't act now. Whatever we might want to do
in the future, if we don't get started now, we're not going to
be there. And on ANWR, if we had not vetoed it 10 years ago--we
would be getting oil or gas from ANWR. If we want to get some
better fuel efficiency standards, let's start now. It may not
be as much as you'd like for it to be, but I'd like to think
about getting as much as we can.
I was in a rural State this past weekend, on Sunday
afternoon, and the road was just jammed with cars. And no
trucks. This was Sunday afternoon. And I'm thinking, ``What the
heck is going on here?'' People are mad about gas prices. And
yet, they were all out there in their cars, in the rain. It
wasn't Sunday afternoon driving to see the scenery in Kentucky.
They weren't going to a ball game. It was too early to be going
to church. They weren't taking the kids to school. They weren't
going to work. What in the heck were they doing?
So, one of the things I always say in my remarks now, while
we're always pointing fingers at each other, whether it's
Republicans or Democrats, Executive Branch, the oil companies,
automobile--hey, we've met the enemy, and it is us. We, the
people. And one of the things I think I miss in some of these
comments here--we're talking about, OK, look, here's our view,
and here we are in the Congress. We're going to impose our view
on the people. Somebody better give some thought to what are
the people going to demand? You're not going to make the people
drive a Mini Cooper. They may choose to drive a big old truck.
We can impose our judgment, but the American people don't have
to necessarily comply with that. So, I just hope that we keep
touch with reality. Can we push the envelope? Can we lead the
people in a responsible way? Hopefully. But I think we've got a
lot of work to do, in terms of bringing the people along to
where we maybe need to be in 10 years. And I don't think we've
made much progress there. And that's why I did my column last
week, basically saying, ``Hey folks, you can't have cheap gas,
big hog automobiles, and not want a refinery in your
neighborhood, don't want any more nuclear plants, don't want
hydro plants. You don't want anything. You just want cheap gas.
You can't have it all, all three of those simultaneously.'' So,
we've got to start making some choices here. Of course, I
prefer the latter option. I want more refineries. I want LNG
plants. I want more hydro plants. I want nuclear plants. I want
more production. Now, my concession to those with a different
point of view is, ``Hey, I think we ought to have conservation.
I think we ought to have alternative fuels. I think we need to
look for all kinds of options.'' And so, I want the whole
package. I don't think it's all production or all conservation.
I don't think CAFE's going to solve all the problems of the
world, but, let's do it all, in a responsible way.
Now, those words, ``responsible way,'' is the kicker. It's
in the eye of the beholder. And I think we need to try to look
for that sweet spot. And we haven't found it for 30 years. But
the chickens are going to come home to roost on all of us. And
if we don't find some answers soon, I dread the thought of
what's going to happen.
Thanks for allowing me to make a speech here.
Senator Cantwell. Mr. Chairman, what kind of car was that,
that the American people don't want to drive?
Senator Lott. A Mini Cooper--which, by the way, I have one.
Senator Lautenberg. Mr. Chairman, could it have been the
Kentucky Derby that people were coming home from after----
Senator Lott. Actually, my son and grandchildren live in
Kentucky, so--was there--what event was that?
Senator Pryor. Thank you, Mr. Chairman.
Mr. Reuther, let me start with you, if I may. And you said
something a few moments ago that was intriguing, and that is
your ``anti-backsliding requirement.'' Could you explain that a
little further to the Committee?
Mr. Reuther. We think that if there is going to be a shift
to a size-based system for cars, there should be a requirement
that the foreign and domestic fleets of each company cannot
slip back below what the current standard is. There would be
two benefits to that. It would guard against the companies
generally upweighting or upsizing all of their vehicles, and,
as a result, they would wind up with worse overall fuel
economy. From our perspective, the other key benefit would be
it would prevent the full-line auto manufacturers from
offshoring all of their small car production, which would have
a huge negative jobs impact on this country.
And I would disagree with the statements that were made
earlier about how that would actually add jobs. The major
impact of getting rid of the two-fleet rule would be that we
would see the loss of small car production in this country.
Senator Pryor. OK, thank you.
Mr. Friedman, let me ask you about the idea of an anti-
backsliding provision. Do you like that concept?
Mr. Friedman. Well, I think if you're going to put in place
size-based standards, you have to have an anti-backsliding
system. In fact, what you should really do----
Senator Pryor. And, by the way, as I understand it, you do
not like size-based.
Mr. Friedman. A size-based system can work if you have an
overall fleet-wide target, which would take the form of
something like an anti-backsliding system. I think we shouldn't
look to the past, of where we have been. I think we should look
to the future, on where we can go with technology, and set that
anti-backsliding level, that fleet-wide goal, at a level that
we could reach in the future. If you do that, then Ford, GM,
all the automakers can give consumers the choices they need,
but Congress will be ensuring that in the end we save the oil
that we have to save if we're going to reduce the impact of our
Senator Pryor. Ms. Claybrook, do you have any views on the
anti-backsliding provision? I know you had some reservations
about the size-based, as well.
Ms. Claybrook. Well, we think that if you're going to
restructure the system, which we see no reason to do for the
car fleet, that it's absolutely essential to have an anti-
backsliding requirement. And one of the key questions is what's
that going to be.
Senator Pryor. Right.
Ms. Claybrook. So, that's another issue, that adds yet
another complexity to it. I think that restructuring with a
sliding scale and the addition of an anti-backsliding
requirement is complex and unnecessary for cars.
Senator Pryor. OK, thank you.
Mr. Webber, let me ask you a question. Secretary Mineta,
earlier in this hearing, talked about one of the factors they
look at as they have set standards in the light-truck world is
the impact on manufacturers. But it seems to me that if you
look at the Big Three--the so-called Big Three U.S. automakers,
they've been losing market share fairly steadily over the last
two or three decades. And it seems to me that one of the things
that the American consumer looks at when they're purchasing a
new vehicle is the gas mileage of the vehicle. And so, I would
think that if we did have more stringent fuel efficiency and
fuel economy requirements in the U.S., it might actually help
the Big Three automakers. Do you have any comments on that?
Mr. Webber. I do, Senator. And let me just say that, as I
look at this list of alternative fuel autos on sale today, the
Big Three is well represented. As I look at the very serious
commitment the old Big Three have made to research and
development, it is, indeed, very impressive. In fact, the
automobile industry, generally, spends more money, almost $15
billion a year, in research and development and this is more
than the pharmaceutical industry spends. And so, we're Number 1
in this country when it comes to R&D spending. And most of it
is going to advanced technology vehicles.
What are these advanced technology vehicles achieving?
Better mileage and lower emissions. All you have to do is look
at the dozen models of hybrids, many of which are manufactured
by the Big Three, and you can see the results. The same goes
with diesels and biodiesels and ethanol, and even natural gas.
I think it's advanced technology and alternative fuels. To me,
that's the twofold answer to the crisis we're in today, if,
indeed, it really is a crisis, as Secretary Bodman insists. As
I said earlier, CAFE is a long-term proposition. The gentleman
from the Union of Concerned Scientists feels that advanced
technology is a long way off. That is not true. It's here.
Senator Pryor. Mr. Webber, let me ask one final question.
This is really, I guess, for Mr. Webber and Mr. Friedman. And
that is an issue that's very important to this Committee,
certainly very important to me, and that's safety. We don't
want to sacrifice safety. But we do know that the NAS, for
example, examined safety when they looked at CAFE standards, et
cetera, and all the ramifications that they may have for the
consumer. As I understand what the NAS said, they said that the
fuel economy in new vehicles, especially in SUVs and trucks,
could be raised by as much as 8 to 11 miles per gallon. It
would be more expensive, apparently, per vehicle, but that cost
would be offset over time through economy in fuel prices. In
addition, there would be no, or very little, change in the
vehicle's size or performance, and there might even be a slight
increase in weight. And so, I heard the Secretary earlier
talking about that again, that being one of the factors that
they look at, of safety. But it seems to me that based on the
NAS study and other things that I'm aware of--it seems to me
that you can make cars more energy efficient and not lose
anything on the safety front. Could I have your comments on
that? And then Mr. Friedman, as well?
Mr. Webber. I'll defer to Mr. Friedman.
Senator Pryor. OK.
Mr. Webber. First. And I'll--then I'll----
Senator Pryor. OK, great.
Senator Pryor. You want to close on that, OK.
Mr. Friedman. Well, you can--you're speaking exactly what
the National Academy findings say. And, in fact, reading from
the report, it says, ``Cost-efficient fuel-economy increases
occur without degradation of safety. In fact, they should
provide enhanced levels of occupant protection, because both
the increased level of safety technology and the increased
weight of that technology.''
Senator Pryor. And you agree with that.
Mr. Friedman. It is clear that the technology is out there
to increase fuel economy with either having no impact on safety
or making vehicles significantly safer. When you look back to
1988-1989, by that point, on the order of 80 percent of the
improvements in fuel economy were due to technologies that had
no impact on safety. The only way we're going to have safety
problems is if the auto industry does not put safe vehicles out
there. This is the auto industry who fought seatbelts, who
fought airbags. They don't have a lot of credibility on safety.
And that's why the Government has had to require them to put--
whether it's safety technology or fuel-economy technology into
those vehicles. That's the only way we're going to move forward
safely and efficiently.
Senator Pryor. Mr. Webber?
Mr. Webber. Glad I deferred. I am happy to have the last
word. Our vehicles, as I said earlier in my testimony, have
never been safer. Safety is a competitive issue. We're doing
things that are not required of us. Many of these things are
standard safety issues, or, I should say, features that are
standard on automobiles and trucks today. Some are options. But
they have never been safer.
The other point I would make is that safety has to be a
consideration when you're addressing CAFE. I think NHTSA,
generally speaking, has done a fairly good job in considering
safety issues over the years. But I do want to quote from the
Wall Street Journal editorial. This is today's editorial. I
hesitate to use the caption, but it--they did say ``Not so
Grand CAFE.'' You can draw your own conclusions on that. But
they do address the safety issue. And here is the quote, ``The
National Academy of Sciences once focused on the impact of CAFE
standards in a single year, 1993, and estimated that they
resulted in as many as 2,600 additional deaths. Average car and
light-truck weight rose a bit in the 1990s, and in 2002 the
Academy wrote that this increase, though detrimental to fuel
economy, had saved lives in return.''
So, there is a tradeoff. There is always a tradeoff. We
have to take those tradeoffs into consideration as we address
CAFE. And NHTSA is mandated to do that.
Senator Lott. Yes. And I think they should. Another
personal point of reference. My son and my son-in-law, thank
goodness, both bought recent new vehicles, and the primary, if
not the only consideration, was safety, carrying my four
grandchildren. Now, unfortunately--or fortunately--they picked
vehicles that were highly safe in their ratings, but did not
get very good fuel efficiency. Not that they're necessarily,
you know, not compatible. But clearly, safety is a big issue
with the buying public, more so than the fuel efficiency.
I believe, Senator Cantwell, you had one follow-up
Senator Cantwell. Yes. But, on that subject, I just want to
point out, I think that some of the analysis in studies--
because there are others that show that they're--in fact,
Dynamic Research Institute showed that there was no impact on
safety with decreasing the weight across a fleet, but there are
issues of whether airbags were used appropriately in those
studies. So, I think we should get the information on that so
that we can compare accurate assessments. I think it's great
that many of these vehicles now not just have one or two
airbags, but sometimes as many as six airbags in the car.
But I wanted to ask Mr. Reuther about just the--Mr.
Friedman was talking about the nature of change, and,
obviously, the length of time for that change. And one of the
things that's been impressive about what other countries have
done with American cars is that they have successfully
accelerated this transition to alternative fuels. How quickly
do you think that we could get to the point of producing over a
major of percent of U.S. cars in the United States with that
Mr. Reuther. I don't have an exact year for you, but, you
know, we think over the next decade it's easily achievable to
make our auto fleets flex-fuel capable. At the same time, we
think we should be moving forward aggressively in expanding the
introduction of advanced technologies--the hybrids, the
advanced diesels--and making sure that the vehicles and the
components are built in this country. And we would like to see
Government become more of a partner in encouraging that
Senator Cantwell. But you think within a 10-year period of
time, we could get to over 50 percent? Is that what you were--
Mr. Reuther. Certainly. Yes.
Senator Cantwell. Thank you.
Well, Mr. Chairman, thank you for conducting this hearing.
And, given your remarks earlier, I certainly believe that we
need to look forward, and we need to look forward in the most
expeditious fashion. I think this country is just one hurricane
or one international incident away from really having our
economy greatly impacted by this. And so, as quickly as we can
consider legislation and get it moved through the Senate and to
the House and on to the President's desk, the better. So, I
thank you for conducting this hearing.
Senator Lott. Thank you, Senator Cantwell and Senator Pryor
and to our panel. It was a very interesting panel this morning.
Thank you for your time.
This hearing is adjourned.
[Whereupon, at 12:35 p.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii
It is unfortunate that it has taken record high gas prices to
prompt interest in new corporate average fuel economy (CAFE) standards.
Nonetheless, I am pleased that we are moving forward on this issue.
This Committee can state with great pride that it helped to
establish the nation's first CAFE standards in 1975, following the oil
crisis of the early 1970s. The standards were largely credited with
decreasing the nation's oil demand in the 1980s, but they have not been
updated since. Thirty years later, it is time to do more, and this
Committee must take the lead.
We know from experience that CAFE works. A National Academy of
Sciences study demonstrated that CAFE standards achieved a 75 percent
increase in fuel efficiency over the time period they were implemented,
improved efficiency without affecting vehicle performance, and did both
affordably. These improvements resulted in billions of gallons of oil
saved, and relief at the pump for all Americans.
We also know from experience that our Nation's insatiable demand
for oil is one of our greatest economic vulnerabilities, but we have
the capacity to do something about it. New CAFE standards are one of
the most immediate and effective steps we can take to remedy our
dependence on oil. Technology that would double our fuel efficiency is
already available; automakers just need to adopt it. That step alone
would reduce our national oil dependence and reduce fuel costs for
While I am encouraged by Ford Motor Company's recent, concerted
emphasis on flexible fuel vehicles and hybrid technology, I would like
to see our automobile industry, as a whole, take a more aggressive
leadership role in addressing fuel economy. We do not expect any of
these companies to put themselves out of business, but we do expect
them to be innovators and leaders in the effort to help create a
sustainable and profitable energy future for our country.
I would like to see this Committee update the CAFE standards in a
way that better reflects the times in which we live. These standards
can have a profound impact on our oil demand, and given that they are
squarely in this Committee's jurisdiction, I believe we have a
responsibility to advance them. I know that many Members on this
Committee are deeply interested in this subject, and I would like to
work with each of you as we advance a proposal in the weeks to come.