[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
MIDTERM REVIEW AND UPDATE ON THE CORPORATE AVERAGE FUEL ECONOMY PROGRAM
AND GREENHOUSE GAS EMISSIONS STANDARDS FOR MOTOR VEHICLES
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE
AND THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 22, 2016
__________
Serial No. 114-171
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
23-411 PDF WASHINGTON : 2017
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey
Chairman Emeritus Ranking Member
JOHN SHIMKUS, Illinois BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania ANNA G. ESHOO, California
GREG WALDEN, Oregon ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
STEVE SCALISE, Louisiana JANICE D. SCHAKOWSKY, Illinois
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California
GREGG HARPER, Mississippi KATHY CASTOR, Florida
LEONARD LANCE, New Jersey JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky JERRY McNERNEY, California
PETE OLSON, Texas PETER WELCH, Vermont
DAVID B. McKINLEY, West Virginia BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas PAUL TONKO, New York
ADAM KINZINGER, Illinois JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia YVETTE D. CLARKE, New York
GUS M. BILIRAKIS, Florida DAVID LOEBSACK, Iowa
BILL JOHNSON, Ohio KURT SCHRADER, Oregon
BILLY LONG, Missouri JOSEPH P. KENNEDY, III,
RENEE L. ELLMERS, North Carolina Massachusetts
LARRY BUCSHON, Indiana TONY CARDENAS, California
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota
(ii)
Subcommittee on Commerce, Manufacturing, and Trade
MICHAEL C. BURGESS, Texas
Chairman
LEONARD LANCE, New Jersey JANICE D. SCHAKOWSKY, Illinois
Vice Chairman Ranking Member
MARSHA BLACKBURN, Tennessee YVETTE D. CLARKE, New York
GREGG HARPER, Mississippi JOSEPH P. KENNEDY, III,
BRETT GUTHRIE, Kentucky Massachusetts
PETE OLSON, Texas TONY CARDENAS, California
MIKE POMPEO, Kansas BOBBY L. RUSH, Illinois
ADAM KINZINGER, Illinois G.K. BUTTERFIELD, North Carolina
GUS M. BILIRAKIS, Florida PETER WELCH, Vermont
SUSAN W. BROOKS, Indiana FRANK PALLONE, Jr., New Jersey (ex
MARKWAYNE MULLIN, Oklahoma officio)
FRED UPTON, Michigan (ex officio)
------
Subcommittee on Energy and Power
VACANCY
Chairman
PETE OLSON, Texas BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
JOHN SHIMKUS, Illinois JERRY McNERNEY, California
JOSEPH R. PITTS, Pennsylvania PAUL TONKO, New York
ROBERT E. LATTA, Ohio ELIOT L. ENGEL, New York
GREGG HARPER, Mississippi GENE GREEN, Texas
DAVID B. McKINLEY, West Virginia LOIS CAPPS, California
MIKE POMPEO, Kansas MICHAEL F. DOYLE, Pennsylvania
ADAM KINZINGER, Illinois KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia JOHN P. SARBANES, Maryland
BILL JOHNSON, Ohio PETER WELCH, Vermont
BILLY LONG, Missouri JOHN A. YARMUTH, Kentucky
RENEE L. ELLMERS, North Carolina DAVID LOEBSACK, Iowa
BILL FLORES, Texas FRANK PALLONE, Jr., New Jersey (ex
MARKWAYNE MULLIN, Oklahoma officio)
RICHARD HUDSON, North Carolina
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
C O N T E N T S
----------
Page
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 2
Prepared statement........................................... 3
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 4
Hon. Pete Olson, a Representative in Congress from the State of
Texas, opening statement....................................... 5
Prepared statement........................................... 6
Hon. Jerry McNerney, a Representative in Congress from the State
of California, opening statement............................... 7
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 9
Prepared statement........................................... 10
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 10
Prepared statement........................................... 12
Witnesses
Janet McCabe, Acting Assistant Administrator, Office of Air and
Radiation, Environmental Protection Agency..................... 13
Prepared statement........................................... 16
Answers to submitted questions \1\........................... 193
Paul Hemmersbaugh, Chief Counsel, National Highway Traffic Safety
Administration................................................. 23
Prepared statement........................................... 25
Answers to submitted questions \1\........................... 194
Mitch Bainwol, President and CEO, Alliance of Automobile
Manufacturers.................................................. 56
Prepared statement........................................... 59
Answers to submitted questions............................... 217
Peter K. Welch, President, National Automobile Dealers
Association.................................................... 82
Prepared statement........................................... 84
Answers to submitted questions............................... 233
John D. Graham, Ph.D, Dean, School of Public and Environmental
Affairs, Indiana University.................................... 89
Prepared statement........................................... 91
Answers to submitted questions............................... 238
John German, Senior Fellow and Program Director, International
Council on Clean Transportation................................ 114
Prepared statement........................................... 116
Answers to submitted questions............................... 241
Mark Cooper, Ph.D., Director of Research, Consumer Federation of
America........................................................ 140
Prepared statement........................................... 142
Answers to submitted questions \2\........................... 245
John Bozzella, President and CEO, Association of Global
Automakers, Inc................................................ 156
Prepared statement........................................... 158
Answers to submitted questions............................... 246
----------
\1\ Ms. McCabe and Mr. Hemmersbaugh entered a joint response to
submitted questions for the record. It begins on page 195.
\2\ Dr. Cooper did not answer submitted questions for the record by the
time of printing.
Submitted Material
Statement of the American Chemistry Council, September 22, 2016,
submitted by Mr. Olson......................................... 188
MIDTERM REVIEW AND UPDATE ON THE CORPORATE AVERAGE FUEL ECONOMY PROGRAM
AND GREENHOUSE GAS EMISSIONS STANDARDS FOR MOTOR VEHICLES
----------
THURSDAY, SEPTEMBER 22, 2016
House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
joint with the
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittees met, pursuant to call, at 10:06 a.m. in
Room 210 of the Capitol Visitor Center, Hon. Michael Burgess
(chairman of the Subcommittee on Commerce, Manufacturing, and
Trade) presiding.
Members present: Representatives Burgess, Barton, Shimkus,
Blackburn, Latta, Harper, Lance, Guthrie, Olson, McKinley,
Griffith, Bilirakis, Johnson, Long, Flores, Brooks, Mullin,
Hudson, Upton (ex officio), Engel, Green, Schakowsky, Castor,
Sarbanes, McNerney, Welch, Tonko, Yarmuth, Loebsack, Kennedy,
and Pallone (ex officio).
Staff present: Gary Andres, Staff Director; Grace Appelbe,
Staff Assistant; Will Batson, Legislative Clerk, Energy and
Power; Elena Brennan, Staff Assistant; James Decker, Policy
Coordinator, Commerce, Manufacturing, and Trade; Graham
Dufault, Counsel, Commerce, Manufacturing, and Trade; Blair
Ellis, Digital Coordinator/Press Secretary; Melissa Froelich,
Counsel, Commerce, Manufacturing, and Trade; Giulia
Giannangeli, Legislative Clerk, Commerce, Manufacturing, and
Trade, and Environment and the Economy; Tom Hassenboehler,
Chief Counsel, Energy and Power; A.T. Johnston, Senior Policy
Advisor; Ben Lieberman, Counsel, Energy and Power; Brandon
Mooney, Professional Staff Member, Energy and Power; Paul
Nagle, Chief Counsel, Commerce, Manufacturing, and Trade;
Annelise Rickert, Legislative Associate; Chris Sarley, Policy
Coordinator, Environment and the Economy; Dan Schneider, Press
Secretary; Olivia Trusty, Professional Staff Member, Commerce,
Manufacturing, and Trade; Michelle Ash, Democratic Chief
Counsel, Commerce, Manufacturing, and Trade; Jeff Carroll,
Democratic Staff Director; Timia Crisp, Democratic AAAS Fellow;
Jean Fruci, Democratic Energy and Environment Policy Advisor.
Mr. Burgess. The Subcommittee on Commerce, Manufacturing,
and Trade will now come to order. I will recognize myself 5
minutes for the purpose of an opening statement.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Congress established the Corporate Average Fuel Economy
Program in 1975 to improve vehicle fuel economy, to reduce oil
consumption, and to secure the Nation's energy independence.
The National Highway Traffic Safety Administration was tasked
with overseeing the program and empowered to set fuel economy
standards for cars and trucks sold in the United States.
Since the establishment of the Corporate Average Fuel
Economy Program, it has undergone significant modifications and
revision. Some changes were driven by fluctuating economic
conditions and projected marketplace activity. Advancements in
automotive technology have also played a part, and still other
changes have been driven by political winds.
Layer on top of that the National Highway Traffic Safety
Administration and the Environmental Protection Agency and all
the States setting up their own programs, and you have one very
complicated regulatory scheme. As we gather today to discuss
CAFE greenhouse gas emissions and the midterm review, I want to
admit that I have serious concerns about the real-world impact
that the National Highway Traffic Safety Administration's
standards for model year 2022 to 2025, that are the standards
that they will have on vehicles on our economy. I worry about
the health of the auto industry and of course consumer welfare.
I believe in fuel efficiency, I believe in energy
independence, but I also believe in policy that is based upon
the real world, and I really believe in consumer choice and
consumer wisdom. In Texas we have big spaces and we like to get
around those big spaces in big cars with big air conditioners,
and technology and gas prices have allowed us to do that with a
great degree of facility.
I also believe strongly in the power of efficiency. Every
summer I hold an Energy Efficiency Summit in the district when
historically fuel and electricity prices are at their highest
in a State like Texas, where temperatures exceed 100 degrees
consistently through the summer.
However, as strongly as I feel about energy efficiency, I
feel equally as strongly that the Government should not be in
the business of telling consumers what they can use and what
they cannot purchase. The issue of a product's efficiency,
whether it be a lightbulb or motor vehicle, should be between
the manufacturer, the company that manufactures, and the
consumer.
For this reason I have introduced H.R. 4504, the Energy
Efficiency Free Market Act, to repeal the Department of
Energy's authority to mandate efficiency standards for all
consumer products. That is not to say that I don't believe in
purchasing the most efficient products available. I drive a
hybrid, a strong hybrid, in the vernacular of today's
witnesses. When I built my house I made certain the products we
used were the most energy efficient we could obtain in off-the-
shelf items.
But those were my choices. The Government wasn't and
shouldn't be part of those decisions. What I don't want to see
is the Government regulations and overly prescriptive mandates
taking away consumer choice and putting the big hurt on the
family budget.
The auto industry is one of the few bright spots in our
economy. It creates millions of jobs. It drives productivity.
It drives innovation. It drives economic growth. It also allows
for investments into lifesaving technologies that make our
roadways safer and more secure for the driving public.
I am deeply concerned that the planned fuel economy
standards for future model years will significantly stall that
progress and dramatically reduce consumer choice. I am
concerned that in some cases it could even push consumers into
less safe cars because they either have to buy a used car or
because they can't afford the newest CAFE technology, and
subsequently they do not avail themselves of the newest safety
technologies.
At a time of persistent economic uncertainty facing
hardworking American families, we have a responsibility to
ensure that this does not happen. In that vein, I look forward
to discussing the assumptions of both the Highway National
Traffic Safety Administration and the Environmental Protection
Agency and how they are looking at these assumptions as they
require ever-increasing fuel efficiency standards and how they
further the National Highway Traffic Safety Administration's
core mission in providing safe and secure vehicular travel for
the American people.
[The opening statement of Mr. Burgess follows:]
Prepared statement of Hon. Michael C. Burgess
Congress established the Corporate Average Fuel Economy
program in 1975 to improve vehicle fuel economy, reduce oil
consumption, and secure the Nation's energy independence. The
National Highway Traffic Safety Administration was tasked with
overseeing the program and empowered to set fuel economy
standards for cars and trucks sold in the United States.
Since the establishment of CAFE, the program has undergone
significant modifications and revisions. Some changes were
driven by fluctuating economic conditions and projected
marketplace activity. Advancements in automotive technology
have also played a part. And still other changes have been
driven by political winds. Layer on top of that NHTSA, EPA and
the States all setting up their own programs and you have one
very complicated regulatory scheme.
As we gather today to discuss CAFE, greenhouse gas
emissions, and the Midterm Review, I have serious concerns
about the real-world impact that NHTSA's augural standards for
model year 2022 to 2025 vehicles will have on the economy, the
health of the auto industry, and consumer welfare.
I believe in fuel efficiency, and energy independence. But
I also believe in policy that is based on real world data, and
consumer choice. In Texas, we have big spaces and we like to
get around those big spaces in our big cars. And technology and
gas prices let us do that pretty easily.
I believe so strongly in the power of efficiency, in fact,
that I hold an annual Energy Efficiency Summit in my district
every July, when historically fuel and electricity prices
skyrocket in a State like Texas, where temperatures exceed 100
degrees consistently through the summer.
However, as strongly as I feel about energy efficiency, I
feel equally as strongly that Government should not be in the
business of telling consumers what they can and cannot
purchase. The issue of a product's efficiency, whether it be a
lightbulb or a motor vehicle, should be solely between the
company and the customer. For this reason, I introduced H.R.
4504, the Energy Efficiency Free Market Act, to repeal the
Department of Energy's authority to mandate efficiency
standards of consumer products.
This is not to say I don't believe in purchasing the most
efficient products possible. I drive a hybrid. When I built my
house, I made sure the products we used were the most efficient
we could obtain. But those were my choices. The Government
wasn't and shouldn't have been part of those decisions.
What I don't want to see is Government regulations and
overly prescriptive mandates taking away consumer choice and
putting a real hurt on the family budget.
The auto industry is one of the few bright spots of our
economy. It creates millions of jobs and drives productivity,
innovation, and economic growth. It also allows for investments
into lifesaving technologies that make our roadways safer and
more secure for the driving public.
I am deeply concerned that the planned fuel economy
standards for future model years will significantly stall that
progress and dramatically reduce consumer choice. I am
concerned that in in some cases it could even push consumers
into less safe cars, either because they have to buy used or
because they can't afford the newest CAFE technology and the
newest safety technologies.
At a time of persistent economic uncertainty facing
hardworking American families, we have a responsibility to
ensure that does not happen. In that vein, I look forward to
discussing the assumptions that NHTSA and EPA are looking at as
they require ever increasing fuel efficiency standards and how
they further NHTSA's core mission in providing safe and secure
vehicular travel for the American people.
Mr. Burgess. That concludes my opening statement. I will
yield back my time and recognize the ranking member of the
Subcommittee on Commerce, Manufacturing, and Trade, Ms.
Schakowsky, 5 minutes for an opening statement, please.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you, Chairman Burgess. I am pleased
to join you and my colleagues for this joint hearing of the
Commerce, Manufacturing, and Trade and Energy and Power
subcommittees.
Over the past four decades, Corporate Average Fuel Economy,
or CAFE, standards have been an important tool in improving
fuel efficiency and reducing greenhouse gas emissions. Think
about how much cars have changed in that time. They became
lighter and more aerodynamic. Engines have gotten more
efficient. And we have seen the emergence of hybrid, which I
have, electric and alternative fuel vehicles.
These technological advancements were driven, in part, by
CAFE standards. CAFE standards were borne out of the energy
crisis in the 1970s. We now face a different and larger crisis,
the threat of global climate change. I am not here to debate
science. The argument is settled. We need to think about how
CAFE factors into our broader efforts to improve fuel economy
and decrease carbon emissions that contribute to global climate
change.
The work of the National Highway Transportation Safety
Administration and Environmental Protection Agency to set fuel
efficiency and greenhouse gas emission standards is critical. I
have heard the arguments that CAFE standards are ambitious,
push the line limit of technology; that is a good thing. We
must take meaningful steps to reduce fuel consumption, and
strong standards push the auto industry toward greater
efficiency and innovation.
Today we examine CAFE standards as NHTSA and the EPA work
to finalize their Technical Assessment Report, TAR, a step in
evaluating standards for model years 2022 through 2025.
Discussion of the TAR and the midterm review may seem technical
but the purpose is simple, to determine what standards are
feasible going forward. I want us to be ambitious but practical
as we consider these standards. Those of us serving on these
subcommittees have responsibility to reject hollow arguments
put forth to justify lower targets.
I want to clarify a few items from the start. NHTSA and EPA
do not set a single fuel economy standard. Since 2007, the
standards for each automaker have been customized to a
vehicle's wheelbase and track width, the vehicle's footprint.
That means that standards are already tailored to an
automaker's unique fleet.
Since 2008, vehicles have gotten bigger, meaning lower
standards apply. We need to think carefully before providing
further needless flexibility that allows for even lower fuel
efficiency than an automaker would otherwise need to achieve
On that note, I approach discussion of credits for meeting
CAFE standards with what I think is a healthy level of
skepticism. Should an eco-friendly sedan excuse a gas-guzzling
SUV? That seems hard to justify when other automakers have
manufactured an efficient SUV but a less efficient car. We
should expect progress across all classes of vehicles. I find
the proposal of credits for safety improvements especially
disingenuous, and I see that suggestion again in some of the
written testimony today.
As ranking member of the Commerce, Manufacturing, and Trade
Subcommittee, I am a strong advocate for auto safety. This is
one of the key consumer protection issues we work on. Safety
and fuel efficiency should not be presented as an either/or
scenario. The automakers should not get a pass on fuel economy
for making safety improvements that they have already committed
to making.
The argument for safety credits rests on a shaky premise
that safety technologies lead to lower energy consumption by
reducing congestion. The data shows otherwise. According to the
Department of Transportation, more than 75 percent of
congestion is caused by bottlenecks, construction zone, bad
weather, poor traffic signal timing, and special events, not
crashes.
Contrary to some of the arguments we will hear today,
safety technology will not help with this congestion, and will
not increase congestion and will not improve fuel economy.
Improving fuel economy is vital. I look forward to hearing from
our witnesses on what standards are feasible to achieve this
and how we can continue using CAFE standards to drive the
automotive industry forward. And I yield back.
Mr. Burgess. The gentlelady yields back. The Chair thanks
the gentlelady. The Chair now would like to recognize the
chairman of the Subcommittee on Energy and Power, Mr. Olson, 5
minutes for an opening statement, please.
OPENING STATEMENT OF HON. PETE OLSON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Olson. I thank my friend from Texas for taking the lead
in making this important joint hearing happen. This midterm
review of Federal CAFE standards and GHG emissions is exactly
what the American people expect from their Congress. It is
timely, because when this process began our world and our
economy were very different.
Gasoline prices were only going up from record highs and
interest rates were closer to ten percent instead of one
percent today. Now America is deemed number one producer of oil
and gas in the entire world which has lowered gasoline prices
significantly. The Federal Reserve does not budge in increasing
interest rates. As a result, certain assumptions have changed.
This is mostly good news for consumers, but it changes
their spending habits, their patterns. With this stagnant
economy consumers are looking for the best value when buying
new cars and looking long term, 5 to 10 years of ownership on
average. The new technology automakers are developing to meet
the CAFE and GHG standards cost more. Today we will look at how
consumer choices impact the ability to meet these goals.
The One National Program so far has been a good example of
cooperation between the public and private sectors. In these
situations, the public sector must speak with only one clear
voice. When two agencies have conflicts no one wins. I worked
hard to protect our Nation's electric grid by fixing a small
glitch in Federal law that forced electricity producers to
choose which Federal law they would violate due to competing
and conflicting Federal agencies.
The One National Program was designed to avoid this
situation for automakers. This midterm evaluation is the best
occasion to ensure that three different sets of rules do not
conflict with one another. In reviewing the requirements of
each program, there is a clear gap that can leave manufacturers
in compliance with one set of rules and out of compliance with
another set of rules. And that is just based on NHTSA and EPA's
regs. It does not include the zero-emission vehicle program
being developed by California.
I also want to hear from the EPA about the benefits of the
rulemakings. This is a very complex and expensive set of rules
and we need to start with a very strong foundation. This
midterm evaluation is a starting point where we can work
together to avoid conflicts before they become a big problem.
And it is not just automakers that suffer if we don't get
this right. The American people will greatly be impacted by a
patchwork system that increases costs while weakening the most
important force for growth in a free-market economy, consumer
choice. I hope that working together we can find a common
ground to harmonize these standards and develop the real vision
of the One National Program.
Thank you, Mr. Chairman. I yield back.
[The opening statement of Mr. Olson follows:]
Prepared statement of Hon. Pete Olson
This Midterm Review of the Corporate Average Fuel Economy
Program and Greenhouse Gas Emissions Standards is timely. When
this process began, America was in a different world than we
are today. Back then, gas prices were at a record high and
assumed to go higher.
Today America is the number one producer of oil and natural
gas, which has lowered gas prices significantly. As a result,
certain assumptions have changed considerably.
While this is good news for consumers, it also changes
their priorities. A stagnant economy and low gas prices have
consumers looking for the best value when buying a car. The new
technology auto makers are developing to meet the CAFE and GHG
standards cost more. Today, we will look at how consumer
choices impact the ability to meet these goals.
Another important issue this committee has looked at
closely is the ability of industries to meet goals set by
Federal agencies. When two agencies have conflicting
priorities, no one wins. I worked hard to protect our Nation's
electric grid reliability by helping fix a critical glitch in
Federal law that forced electricity producers to choose which
Federal law they would violate due to competing priorities.
The One National Program was designed to avoid a similar
situation for auto makers. This Midterm Evaluation is the best
occasion to ensure that three different sets of rules do not
conflict with one another. In reviewing the requirements of
each program, there is a clear gap that can leave manufacturers
in compliance with one set of rules and not another.
And that is just based on NHTSA and EPA's regs--it does not
include the Zero Emission Vehicle program being developed by
California.
I am also interested to hear from EPA about the benefits of
their rulemakings. This is a complex and expensive set of
rules, and we need to start with a strong foundation.
This Midterm Evaluation is a starting point where we can
work together to avoid a similar situation to the one
electricity producers faced--BEFORE it becomes a problem. It's
not just auto makers who suffer if we don't get this right. The
American people will be greatly impacted by a patchwork system
that increases costs, when it could have been avoided.
I hope that working together, we can find the common ground
to harmonize these standards and develop the real vision of One
National Program.
Mr. Burgess. The Chair asks if you would be willing to
yield Mrs. Blackburn the remainder of your time.
Mr. Olson. Absolutely. You have my time, the gentlelady
from Tennessee, Mrs. Blackburn.
Mrs. Blackburn. Thank you, Mr. Chairman. I want to welcome
all of our witnesses because it is so appropriate that we do
take the time to go over the CAFE standards and to remember why
these came about, and we have talked a little bit about that
this morning. The '70s were a very different time, and there
was a lot of emphasis on our vulnerabilities. You had the gas
shortages of the '70s that brought that about. People paid
attention to that. This past weekend we had gas shortages in
Tennessee and people recalled those gas lines of the '70s.
But CAFE came out of that, and it was set up to reduce our
dependence on foreign oil, a worthy goal. But what we have to
do is realize that we have these differences between EPA and
NHTSA and we do need to move to harmonization for these
standards in order for them to be effective.
I have got a big presence of auto industry in my district.
We have Nissan. We have GM. We have the Toyota Bodine plant.
And everyone talks about the dilemma that this presents and the
need to make certain that you are in compliance with each of
these. One stop makes it easier, because on top of that then
you have things like the California CARB program that you are
also dealing with. Safety, security is important to us in these
vehicles as well as looking at the environmental issues. We
welcome you, look forward to the discussion. Yield back.
Mr. Burgess. The gentlelady yields back. The gentleman's
time has expired. The Chair now recognizes the gentleman from
California, Mr. McNerney, 5 minutes for an opening statement,
please.
OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. McNerney. Well, I thank the chairman. I thank the
witnesses for coming out here this morning. I am looking
forward to your testimony. It is great to have this joint
hearing today to receive an update from the agencies and
industry stakeholders regarding the CAFE standards. It is an
important subject and one in which I have a great deal of
interest, both because it relates to our overall consumption of
fossil fuels and our dependence on imported oil and because it
has a significant impact on climate change.
To date, the automotive industry and Government have worked
together to reduce emissions and create safer and more
efficient vehicles. This is a win-win for consumers and the
environment, and I own a Camry hybrid so I personally know the
benefits of these vehicles.
CAFE standards have proven moderately effective, but there
are factors beyond CAFE that are impacting the marketplace, the
brokered agreement on greenhouse gas emissions, the lowering
cost of gasoline, consumer preferences, and improving fuel
efficiency of automobiles, and State emissions initiatives such
as the Zero Emission Vehicle program in California that
requires automakers to sell electric cars and trucks in
California.
California's EV penetration is about three percent compared
to the national average of one percent. And Californians have
22 different types of EVs to choose from. The market is there
and California has shown that it can work. California has been
a leader in programs that reduce emissions for both stationary
and mobile sources.
Mobile sources account for more than half of the emissions
that contribute to ozone and particulate matter and nearly 40
percent of the greenhouse gas emissions in our State. As a
result of the improving technology and consumer choice,
Californians continue to purchase zero-emission vehicles.
Some regions of our State, including my own, will greatly
benefit from the reduced emissions of low carbon vehicles, and
EVs will have a significant impact on the Nation's electric
grid. California's electric grid utilities recognize the
importance of EVs to the 21st century grid infrastructure and
are making the appropriate investments. This will help lead and
transform the rest of the Nation.
Now regions do differ in energy use patterns. However,
reducing emissions is a national goal and increasing zero or
low emission vehicles is good for our Nation. California is the
leader in hybrid zero-emission vehicles and its EV program
technology innovation is paramount. It leads to efficiency and
it can lower costs for consumers and manufacturers and it is
good for investment. We have in California by 2010 over $800
million was invested in EV research and development. That was
nearly three-quarters of the global investment at that time, so
our policies are having an impact.
We cannot discuss zero-emission vehicles without talking
about their impact on the electric grid. EVs will play a
tremendous role in the future of our grid from utility through
end user. EVs play a role in storage and allow users to feed
back to the grid or use stored power outside. These are things
that the elements of a transforming grid and our Nation's
future of distribution of energy.
Thank you, Mr. Chairman. I yield back.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back. The Chair recognizes the chairman of the full
committee, Mr. Upton, 5 minutes for an opening statement,
please.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, thank you, Mr. Chairman. You know, you
don't have to come from Michigan to be concerned about the
administration's motor vehicle fuel economy and greenhouse gas
emission standards, because these provisions if they are done
wrong would hurt car owners as well as car makers, big time.
The good news is that the 2012 standards wisely included a
do-over provision in the form of a midterm evaluation that does
allow the EPA and NHTSA to adjust the future stringency of the
standards in light of changed circumstances. And as I recall
that was a revision that Carl Levin and John Dingell and myself
worked very hard to include as part of those provisions so that
we would have this opportunity, bipartisan.
And circumstances certainly have changed. In particular,
EPA and NHTSA assumed that gas prices would be headed towards 4
and maybe even $5 a gallon by now, but instead they are
actually somewhat stable at $2 a gallon at the moment. And at
these prices, the added cost of hybrids or other highly
efficient vehicles may never be earned back in the form of
energy savings, and the sticker shock is far from trivial. EPA
estimates a cumulative impact on vehicle prices of nearly
$3,000 per vehicle by 2025, and some analysts believe that the
actual cost is considerably higher.
No question that improved vehicle fuel efficiency is a
worthy goal, no question about it, but not if it reached in a
way that harms consumers particularly the most vulnerable. And
with the average cost of a new car at $34,000 and rising, we
don't need any unnecessarily costly DC mandates, and we have
got to be particularly sensitive to low-income households who
may be getting priced out of the new car market altogether.
So for Michigan I also worry about the impact that these
standards could have on the long-term health of the auto
sector. The industry is doing pretty well right now, thanks in
large part to pent-up demand after the last recession and very
low interest rates that make financing about as cheap as it has
ever been. But these two temporary factors are not always going
to last, and the industry will be stuck with these costly
standards that perhaps will increase every single year.
That is why I hope that EPA and NHTSA use this opportunity
to adjust the targets for model years 2022 to 2025 to more
reasonable and achievable levels. There are also more immediate
problems that have to be addressed. This administration
promised the auto industry one set of uniform national
standards rather than a patchwork of inconsistent requirements.
Several years into the program, it is clear that the two
Federal agencies involved, EPA and NHTSA, are not always on the
same page.
So we need to make some changes including legislation if
necessary to ensure that there is one set of rules for
automakers to follow. Motor vehicles are getting more efficient
and they are going to continue to do so, and that is a good
thing. But we need to make certain that it happens in a way
that maximize benefits for consumers and preserves the health
of the automotive industry.
But I know that today's hearing is going to help set us on
that course, and I yield back. Thank you, Mr. Chairman.
[The opening statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
You don't have to come from Michigan to be concerned about
the Obama administration's motor vehicle fuel economy and
greenhouse gas emission standards, because these provisions, if
done wrong, would hurt car owners as well as car makers.
The good news is that these 2012 standards wisely included
a ``do-over'' provision in the form of a Mid- Term Evaluation
that allows EPA and NHTSA to adjust the future stringency of
the standards in light of changed circumstances.
And circumstances certainly have changed. In particular,
EPA and NHTSA assumed that gasoline prices would be headed
toward $4.00 a gallon by now, but instead they have continued
to trend toward $2 a gallon. At these prices, the added cost of
hybrids or other highly efficient vehicles may never be earned
back in the form of energy savings. And the sticker shock is
far from trivial--EPA estimates a cumulative impact on vehicle
prices of nearly $3,000 per vehicle by 2025 and some analysts
believe the actual cost is considerably higher.
There is no question that improved vehicle fuel efficiency
is a worthy goal, but not if it is reached in a way that harms
consumers. With the average cost of a new car at $34,000 and
rising, we don't need any unnecessarily costly Washington
mandates. And we must be particularly sensitive to low income
households who may be getting priced out of the new car market
entirely.
Being from Michigan, I also worry about the impact these
standards could have on the long-term health of the auto
sector. The industry is doing well now, thanks in large part to
pent-up demand after the last recession and very low interest
rates that make financing about as cheap as it has ever been.
But these two temporary factors will not last, and the industry
will be stuck with these costly standards that increase every
year. That is why I hope EPA and NHTSA use this opportunity to
adjust the targets for model years 2022 to 2025 to more
reasonable and achievable levels.
There are also more immediate problems that need to be
addressed. The Obama administration promised the auto industry
one set of uniform national standards rather than a patchwork
of inconsistent requirements. But several years into the
program, it is clear that the two Federal agencies involved,
EPA and NHTSA, are not always on the same page. We need to make
changes, including legislation if necessary, to ensure that
there is one set of rules for automakers to follow.
Motor vehicles are getting more efficient and will continue
to do so, but we need to make certain that it happens in a way
that maximizes benefits for consumers and preserves the health
of the automotive industry. I hope today's hearing helps set us
on that course.
Mr. Burgess. The Chair thanks the gentleman. The gentleman
yields back. The Chair recognizes the ranking member of the
full committee, Mr. Pallone of New Jersey, 5 minutes for an
opening statement, please.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman. I am not saying this
about Mr. Upton or the Michigan members, but I think that
unlike the symbol of the Republican Party, the elephant, which
has a long memory, many of my GOP colleagues have very short
memories. Because I remember when the President was out there,
you know, really trying to play up the need for a bailout for
the auto industry and there were many Republicans including
those in the leadership who didn't want to do it.
So it is very nice for everybody to say that, you know,
they want to help the auto industry, but that certainly wasn't
the case.
Mr. Upton. If the gentleman will yield momentarily.
Mr. Pallone. It is not true for you, Mr. Chairman. I am not
suggesting that for you.
Mr. Upton. We like to use the word ``rescue plan'' versus
``bailout'' because it was paid back. It was paid back.
Mr. Pallone. Oh, rescue plan, OK. And anyway, I like
elephants, but many of you don't live up to the elephant. But
in any case, not true for you.
Thank you for holding this hearing on the midterm review of
the Federal greenhouse gas and fuel economy standards for
light-duty vehicles. It has been some time since our committee
held a hearing to examine the Corporate Average Fuel Economy,
or CAFE, program. We have an excellent panel of witnesses here
today. I particularly want to thank Assistant Administrator
McCabe and Chief Counsel Hemmersbaugh for appearing before us
today.
There is no scientific doubt that the climate is indeed
changing and we need to be more aggressive about controlling
greenhouse gas emissions. Today the transportation sector is
second only to the electricity sector in the production of
greenhouse gas emissions. The vehicles regulated under the CAFE
program account for 60 percent of the total emissions from the
transportation sector, and these harmful emissions effect more
than our climate. They also directly impact air quality and
public health.
The coordinated standards for greenhouse gas emissions set
by the EPA and fuel economy set by NHTSA are a vital part of
the effort to control harmful emissions. These standards will
deliver multiple benefits including significant savings in fuel
costs to consumers, improved air quality, and greater energy
security. Compliance with these Federal standards will also
ensure that automakers are in compliance with the greenhouse
gas emission standards issued by California.
Gasoline prices have come down. That is great. Lower fuel
prices keeps more money in people's pockets. But we also know
from past experience that prices can rise quickly, and when
they do improved fuel economy provides an effective buffer from
price spikes.
In 2007, there were two major events that changed the
regulatory landscape for vehicles. First, the Supreme Court
ruled in Massachusetts v. EPA that the Clean Air Act required
EPA to regulate greenhouse gas emissions. Second, Congress
amended the Energy Policy and Conservation Act to provide
automakers a more flexible regulatory program.
The targets set by EPA and NHTSA are aggressive. The
purpose of the midterm review is to answer two key questions.
Can automakers meet the standards and can they meet them at a
reasonable cost? And the extensive analysis presented in the
Technical Assessment Report done by EPA, NHTSA, and California
Air Resources Board indicates the answer to both of these
questions is yes.
Innovation is and always has been the driver for these
advancements. We recognized that air pollution from auto
emissions was a serious problem in Southern California as early
as 1959, and at that time there were no pollution control
devices for cars. Auto manufacturers said pollutants could not
be controlled; that the technology didn't exist; and they
claimed that even if it were possible it would be far too
expensive to deploy the technology.
Well, California passed laws requiring pollution control
anyway. We all know the rest of the story. It was not
impossible. It was not too expensive. We enacted the Clean Air
Act and fuel efficiency standards, and of course people still
bought cars. Not only did they buy cars, but today we have
cleaner, more efficient cars than ever, and we also have much
cleaner air thanks to regulation pushing technology forward.
So the last phase of the coordinated regulations maintain
the necessary pressure for further improvement, and I have no
doubt that our auto industry can and will rise to the occasion.
I would like to yield the remainder of my time to Mr. Tonko.
[The opening statement of Mr. Pallone follows:]
Prepared statement of Hon. Frank Pallone, Jr.
Good morning. Thank you for holding this hearing on the
mid-term review of the Federal greenhouse gas and fuel economy
standards for light duty vehicles. It has been some time since
our committee held a hearing to examine the Corporate Average
Fuel Economy--or CAFE Program. We have excellent panels of
witnesses here today and I particularly want to thank Assistant
Administrator McCabe and Chief Counsel Hemmersbaugh for
appearing before us today.
There is no scientific doubt that the climate is indeed
changing, and we need to be more aggressive about controlling
greenhouse gas emissions. Today, the transportation sector is
second only to the electricity sector in the production of
greenhouse gas emissions.
The vehicles regulated under the CAFE program account for
60 percent of the total emissions from the transportation
sector. And, these harmful emissions affect more than our
climate, they also directly impact air quality and public
health.
The coordinated standards for greenhouse gas emissions set
by the Environmental Protection Agency (EPA) and fuel economy
set by the National Highway and Traffic Safety Administration
(NHTSA) are a vital part of the effort to control harmful
emissions. These standards will deliver multiple benefits
including: significant savings in fuel costs to consumers;
improved air quality; and greater energy security. Compliance
with these Federal standards will also ensure that automakers
are in compliance with the greenhouse gas emission standards
issued by California.
Gasoline prices have come down. That's great. Lower fuel
prices keeps more money in people's pockets. But we also know
from past experience that prices can rise quickly, and when
they do, improved fuel economy provides an effective buffer
from price spikes.
In 2007, there were two major events that changed the
regulatory landscape for vehicles. First, the Supreme Court
ruled in Massachusetts v. EPA that the Clean Air Act required
EPA to regulate greenhouse gas emissions. Second, Congress
amended the Energy Policy and Conservation Act (EPCA) to
provide automakers a more flexible regulatory program.
The targets set by EPA and NHTSA are aggressive. The
purpose of the midterm review is to answer two key questions:
Can automakers meet the standards? And, can they meet them at a
reasonable cost? The extensive analysis presented in the
Technical Assessment Report--or TAR--done by EPA, NHTSA, and
California's Air Resources Board indicates the answer to both
of these questions is ``yes.''
Innovation is and always has been the driver for these
advancements. We recognized that air pollution from automobile
emissions was a serious problem in southern California as early
as 1959. At that time, there were no pollution control devices
for cars. Auto manufacturers said pollutants couldn't be
controlled--the technology didn't exist. And, they claimed that
even if it were possible, it would be far too expensive to
deploy the technology.
Well, California passed laws requiring pollution control
anyway. We all know the rest of the story. It was not
impossible. It was not too expensive. We enacted the Clean Air
Act and fuel efficiency standards and, of course, people still
bought cars. Not only did they buy cars, but today we have
cleaner, more efficient cars than ever. We also have much
cleaner air thanks to regulation pushing technology forward.
The last phase of the coordinated regulations maintain the
necessary pressure for further improvement, and I have no doubt
that our auto industry can and will rise to the occasion.
Mr. Tonko. I thank the gentleman for yielding. Let's be
clear. These standards protect consumers and reduce greenhouse
gas emissions. This year, transportation surpassed the
electricity sector as the largest source of greenhouse gas
emissions in our country.
Throughout her history America has engaged a pioneer
spirit. That pioneer spirit was about meeting challenges. CAFE
standards meet challenges and are an important aspect to
reaching our emissions goals, and by so doing we are also
saving consumers a lot of money at the pump. Consumers support
more fuel efficient cars regardless of their feelings on
climate change. I think that is important to note.
And I would certainly offer caution to those who would seek
to roll back standards because of today's gas prices. Even
though gas prices may have been reduced, they won't stay that
way forever and it is important for us to go forward with our
stewardship of the environment to pass on to the next
generation and even improved environment. With that I yield
back.
Mr. Burgess. The gentleman yields back. The gentleman's
time has expired. That concludes Member opening statements. I
do want to remind Members that, pursuant to committee rules,
all Members' opening statements will be made part of the
record.
We do want to thank our witnesses for being here today, for
taking the time to testify before the subcommittee. Today's
hearing will consistent of two panels. Each panel of witnesses
will have the opportunity to give an opening statement followed
by a round of questions from members. Once we conclude with the
questions of the first panel, we will take a very brief,
underscore brief, recess to set up for the second panel.
Our first panel of witnesses for today's hearing includes
Dr. Paul Hemmersbaugh, the chief counsel, National Highway
Traffic Safety Administration, and Ms. Janet McCabe, acting
Assistant Administrator for the Office of Air and Radiation,
Environmental Protection Agency. We appreciate both of you
being here today. We will begin the panel, I guess, with you,
Ms. McCabe. You are recognized for 5 minutes for an opening
statement, please.
STATEMENTS OF JANET McCABE, ACTING ASSISTANT ADMINISTRATOR,
OFFICE OF AIR AND RADIATION, ENVIRONMENTAL PROTECTION AGENCY;
AND PAUL HEMMERSBAUGH, CHIEF COUNSEL, NATIONAL HIGHWAY TRAFFIC
SAFETY ADMINISTRATION
STATEMENT OF JANET McCABE
Ms. McCabe. Thank you very much, Chairman Burgess, Chairman
Upton, Vice Chairman Olson, Ranking Members Schakowsky and
Pallone, and other members of the subcommittees. I very much
appreciate the opportunity to testify on the Environmental
Protection Agency's greenhouse gas standards for light-duty
vehicles and what we call the midterm evaluation process.
A little over 3 years ago, President Obama announced his
climate action plan. That plan called on the Federal Government
to do everything possible to combat the urgent threat of
climate change using our current laws and authority, and EPA
has responded to that call. EPA has adopted several rules under
our Clean Air Act authority to reduce greenhouse gas emissions
including the focus of today's hearing, our rules that will
significantly reduce GHG emissions from light-duty cars and
trucks.
The National Program for light-duty cars and trucks is the
product of successful collaboration among EPA, NHTSA and
California. The program was established with broad support and
extensive input from the auto industry, and it is already
driving substantial greenhouse gas reductions, oil savings, and
savings for consumers.
In the 2012 rule that established GHG and fuel economy
standards for model years 2017 through 2025, the agency
committed to conduct what we call the midterm evaluation
through which EPA will determine whether the greenhouse gas
standards for model years 2022 through 2025 are still
appropriate.
The first step in the midterm evaluation process was the
preparation of a draft Technical Assessment Report, or TAR,
which EPA, NHTSA, and California wrote jointly and released in
July. The draft TAR is a comprehensive and robust technical
analysis that delivers on our commitment to examine a wide
range of factors relevant to the '22 through '25 standards.
Those factors include things like developments in different
CO2-reducing technologies and their penetration into
the marketplace, whether there is consumer acceptance of new
efficient technologies, trends in the vehicle fleet and many
others. Significant analysis from EPA, NHTSA and California
went into developing the draft TAR from state-of-the-art
benchmarking testing of actual vehicles at EPA's lab to full
vehicle computer simulations that look at how new technologies
work together to reduce emissions.
Throughout this process we have made it a priority to share
information with stakeholders in real time, including the
publication of numerous peer-reviewed technical reports. The
draft TAR was also heavily informed by what we learned from
extensive outreach to a wide range of stakeholders including
automakers and technology suppliers.
I would like to note a handful of the key initial findings
from the TAR. First, the draft report shows that automakers are
adopting CO2-reducing technologies very rapidly. The
innovation we have seen means there are over 100 car, SUV, and
pickup versions on the market today from many manufacturers
that already meet 2020 or later standards.
For consumers, this means that vehicles are getting cleaner
and using less gas. Every single vehicle category from
subcompacts to pickup trucks offers more fuel efficient, lower-
emitting choices for consumers now than in years past.
Furthermore, the initial finding in the draft TAR is that car
makers can meet the standards at similar or lower costs than we
had anticipated in our 2012 analysis.
Second, the agency's vehicle standards are working. The
draft TAR briefly summarizes information showing how the
industry has overcomplied with the GHG standards for each of
the first 3 years of the program, and in 2014 they outperformed
the standards by about 1.4 miles per gallon.
Third, our draft analysis is consistent with a key finding
from the 2012 rule, namely that the 2022 through 2025 standards
can be met largely with more efficient gasoline powered cars.
Automakers have a wide range of technology pathways from which
to choose, but it appears that advanced gasoline technologies
will continue to be the predominant technologies with modest
levels of what we call strong hybrids and very low levels of
full electrification needed to meet the standards.
We believe that the analysis presented in the draft TAR
underscores that the auto industry is well positioned to meet
their customers' expectations while reaching significant new
levels of environmental performance. As the comment period
closes next week, we look forward to reviewing the public's
input.
EPA's next step will be to develop and make available a
proposed determination which will provide another opportunity
for public review and comment. After consideration of any
additional information and input and as required by EPA's
regulations, EPA will issue a final determination as to whether
the model years 2022 through '25 standards are still
appropriate no later than April 2018.
Again, I thank you for the opportunity to serve as a
witness at this hearing and look forward to your questions and
the discussion. Thank you, Mr. Chairman.
[The prepared statement of Ms. McCabe follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentlelady. Mr.
Hemmersbaugh, you are recognized for 5 minutes for an opening
statement, please.
STATEMENT OF PAUL HEMMERSBAUGH
Mr. Hemmersbaugh. Thank you, Mr. Chairman. Mr. Chairman and
members of the committee, my name is Paul Hemmersbaugh. I am
the chief counsel of the National Highway Traffic Safety
Administration which Congress has charged with setting
Corporate Average Fuel Economy, or CAFE standards. Thank you
for the opportunity to testify.
Today I would like to update you on the status of NHTSA's
work on the midterm evaluation and answer any questions you may
have. At the outset, I would like to emphasize a few points
about two primary topics of this hearing--the midterm
evaluation and the draft Technical Assessment Report, or TAR.
First, the TAR is the initial step in the midterm
evaluation process for CAFE and greenhouse gas standards for
2022 to 2025. The TAR will be used to inform future decisions
about the standards for those years. The TAR is not a decision
document. It does not change the standards that are currently
in place.
Second, the administration's vehicle standards are working
and consumers are accepting more efficient vehicles. While the
TAR focuses on model years 2022 to '25, the stringency of the
standards has been increasing steadily since model year 2012
and manufacturers have been meeting those standards. At the
same time, the automotive industry has seen 6 consecutive years
of sales increases with a new all-time sales record in 2015.
This means that consumers are buying and benefiting from more
efficient vehicles with lower greenhouse gas emissions while
saving money on fuel costs.
Third, our analysis indicates that the standards can be met
largely with more efficient gasoline powered cars and with
modest levels of what we call strong hybrids, like a Prius, and
very low levels of full electrification. While it is up to
automakers what technologies they choose to use, advanced
gasoline technologies can continue to predominate if that is
what the market demands.
As background, the Energy Independence and Security Act of
2007, or EISA, directed NHTSA to set attribute-based fuel
economy standards for both cars and trucks rather than the
previous flat standards that prescribed a single miles per
gallon value. This approach allows the CAFE program to be more
responsive to changes in consumer demand.
If a manufacturer builds larger vehicles because gasoline
prices are low and U.S. consumers then thereby demand bigger
cars and trucks, then that manufacturer's compliance obligation
will be lower reflecting the footprints of the vehicles it
builds. Fuel economy overall should continue to improve year
after year because the footprint standards continue to increase
in stringency every year.
NHTSA and EPA issued a final rule in 2012, representing the
second phase of what the agencies refer to as the coordinated
National Program. The National Program refers to the way that
NHTSA, EPA and the California Air Resources Board work together
to create and coordinate standards and to accomplish the goals
of energy conservation and emissions reduction.
The midterm evaluation is an integral step to informing
NHTSA's CAFE rulemaking process, and the TAR is the first step
in that process, the TAR's comprehensive and robust report
informed by extensive stakeholder outreach and substantial
technical work by the agencies over the past several years.
Public comment and input on the TAR will be used to inform
and develop NHTSA's proposal for its de novo rulemaking for
model years 2022 to '25 standards. NHTSA's subsequent
rulemaking will consider all relevant information and conduct a
fresh balancing of statutory factors in order to determine the
maximum feasible CAFE standards for model years 2022 to '25.
I would like to highlight a few additional key results of
the TAR analysis. The TAR shows that automakers are adopting
fuel economy technologies at unprecedented rates. These
technologies are helping manufacturers meet, and in many cases
exceed, applicable standards. In fact, many of today's vehicle
models are already meeting future fuel targets.
The TAR also includes a comprehensive update of the
compliance costs of the program including a review of the
numerous possible technologies that automakers may use to meet
the standards. EPA and NHTSA modeling were done largely
independently using different technology inputs and different
modeling tools. This is a strength of the TAR. The independent
and parallel analyses provide complementary and analytically
robust results.
NHTSA's assessment shows that the costs of meeting the
augural standards for model years 2022 to '25 are comparable to
what we found they would be in 2012 at approximately $1,200 per
vehicle. At the same time, the average model year 2025 vehicle
will save over 1,900 in fuel costs over its lifetime. In sum,
the TAR delivers on the agencies' commitment to examine a wide
range of factors that affect model years 2022 to '25 standards.
The next step is reviewing the comments we receive on the
TAR. NHTSA will continue to work with Congress and stakeholders
as it seeks to meet its statutory requirements while
implementing the National Program. Thank you again for the
opportunity to testify today. I look forward to your questions.
[The prepared statement of Mr. Hemmersbaugh follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman. I thank you
both for your testimony, and we will move on to the question-
and-answer portion of the hearing. I will recognize myself 5
minutes to begin that questioning.
Mr. Hemmersbaugh, one of the things I like so much when
Administrator Rosekind comes before our subcommittee, he always
brings the graph of how automobile fatalities have declined
under the, really, the past 4 or 5 decades. But it does seem
that there has been a little bit of a plateau or a break in
that steady reduction, and it does raise the question what are
the factors that are responsible for that.
Can you just speak briefly to the balance between the
investment that automobile manufacturers are going to have to
make in meeting the new Corporate Average Fuel Economy
standards and the investment in additional safety features in
the automobiles that we buy?
Mr. Hemmersbaugh. In the first instance I would like to
emphasize that we are open to comments on our program on the
augural standards that the--this is the first part, and so we
are really gratified to have an opportunity to go through a
transparent process whereby all different issues including
safety issues are raised with respect to the CAFE standards.
The CAFE standards currently take into account, in fact one
of the 13 chapters of the TAR is dedicated to safety
considerations. And we very much are concerned as a safety
agency, safety is our middle name. We are very interested in
preserving safety and not sacrificing safety in order to make
fuel economy gains.
So our models have built into them limitations on weight,
what they call mass reduction, and we always consider safety,
and we believe that manufacturers as well as responsible
public, private agencies will take that into account as well.
And so we don't think that there is a conflict between safety
and fuel economy.
Mr. Burgess. You know, last week we had a hearing on
advanced robotics and it was a very interesting hearing. One of
Chairman Upton's constituents, Dean Kamen, at the end of the
hearing we talked a little bit about autonomous vehicles, and
of course we are asking automobile manufacturers to work with
your agency and work with the Congress on developing that
technology.
And Mr. Kamen had just a very interesting observation at
the end of his testimony. He said there will be a time when we
look back on this time and wonder why we didn't already have
autonomous vehicles. And he referenced the fact that so many of
us are too sleepy or whatever, impaired behind the wheel or
texting or distracted, and really we ought to leave the driving
to the robots and not to the driver.
So it was an interesting philosophical approach. And that
is one of the great things about this subcommittee is we do--
someone told me the other day, sometimes they look at this
subcommittee as kind of being the think tank for the Energy and
Commerce Committee in the future of commerce, manufacturing,
and trade.
But I really am concerned and I just want to stress that we
do need to balance the investments that need to be made in
future automotive safety.
Golly, we lost two mothers and two daughters in a head-on
collision back in my district a few months ago. A mom and her
daughter were driving in one car; a mom and her daughter
driving in the other car. Apparently a distracted driving
situation where someone left their lane and went into the
oncoming lane of traffic. And had a community that was
devastated; two schools that were devastated. If there is
technology that is just over the horizon that can prevent this
type of accident from occurring, I mean, I am all for it. I
want to see that day coming.
I remember buying my first cars for my children, which now
is many years ago, and philosophically I wanted to get the
cheapest jalopy I could get for them because I was cheap,
tight. And someone pointed out, you really don't want to put a
teenager in a car without anti-lock brakes. And I think that
same philosophy now fast-forwarded to whatever 3 decades, 4
decades, and putting a teenager in a car without a lane
departure warning or autonomous automatic braking will seem
like something no thinking parent would do.
So I mean, I recognize that the future is very involved as
far as auto safety. We are going to hear from our manufacturers
later. I mean, I want them to be developing the technologies
that are going to keep the driving public safe. Of course, that
is your agency's charge. So I just hope we are careful about
balancing these two things as we go forward. I will listen to
your observations on that if there are anything further you
would like to add.
Mr. Hemmersbaugh. Well, thank you. And we are indeed have
safety uppermost in our mind in nearly everything we do at the
agency. As you may have seen, we just earlier this week
introduced an automated vehicle policy and we are very bullish
on the safety prospects of that technology and we are doing
what we can to encourage the development and to encourage the
safe and responsible deployment of automated vehicles
technology.
And that is something that we are, as I said, really
excited about the prospects for safety as well as increased
mobility for people with disabilities. We just think there is a
whole panoply of potential benefits. And if we can get this
right and that is a big if, but if we can facilitate the safe
deployment of these automated vehicles, I think we will have
tremendous safety benefits and perhaps largely eliminate auto
crashes as a source of loss of life in the United States.
Mr. Burgess. The Chair thanks the gentleman, and the Chair
recognizes Ms. Schakowsky of Illinois, 5 minutes for your
questions, please.
Ms. Schakowsky. First, I just wanted to comment that
fortunately I think we have made great advances in auto safety
as well as fuel efficiency, and that the two do not cancel out
each other in any way, and all the evidence is in to say that.
I wanted to ask Ms. McCabe a question. In 2009, EPA issued
the finding that elevated concentrations of greenhouse gases in
the atmosphere endangered human health and welfare. And since
then, the climate has continued to change with new records
being set for a number of climate indicators such as average
temperature, vanishing arctic sea ice, carbon dioxide
concentrations, and sea levels.
So Ms. McCabe, the draft TAR, Technical Assessment Report,
examined recent scientific literature related to climate change
and the impact of increasing greenhouse gas emissions. What are
some of the climate impacts discussed in the report?
Ms. McCabe. Yes, thank you, Congresswoman, for that
question. We do discuss that at great length in the TAR. There
are also a number of other documents that the Federal
Government has put out recently addressing these sorts of
issues that maybe are a little bit more accessible to people in
terms of the things that scientists are observing.
One of the most accessible, I think, is temperature. So
2015 was the warmest year on record. The last decade has been
the warmest decade on record. 2016 is gearing up to set another
record as well. So in terms of temperatures, in terms of
increased droughts, storm severity, loss of ice in the arctic,
rising sea levels, increased coastal flooding, those are a
number of the kinds of impacts that scientists are seeing in
the climate.
Ms. Schakowsky. Thank you. Understanding the impact our
emissions have on the atmosphere is particularly important for
today's hearing since the transportation sector accounts for
roughly a third of total greenhouse gas emissions in the U.S.
with light-duty vehicles making up more than 60 percent of the
emissions in that sector.
So how have the light-duty standards helped curb greenhouse
gas emissions in the United States and what level of emissions
reductions can we expect to see when these standards are fully
implemented?
Ms. McCabe. This is a critical element of any program to
mitigate greenhouse gases. As you acknowledge, this is a
significant portion of the inventory. We predicted in 2012 that
over the lifetime of this program that there would be about a
six billion ton reduction in emissions from these vehicles. And
the TAR that we have just completed, while it focuses in on the
2022 through 2025 period we are in the same area of reductions
over the lifetime of the program and in that last 3 to 4 years
of the program it is about 540 million tons.
These are substantial. I think we say a lot that it is
going to take many, many things in order to address greenhouse
gases because they come from a lot of sources, but when you can
find a category that contributes this much and you can find
cost effective ways of reducing those emissions it is really
important to do that.
Ms. Schakowsky. I really appreciate that focus. And
finally, Ms. McCabe, what role do the light-duty standards play
in meeting our Nation's climate goals, if you could reiterate
that?
Ms. McCabe. Yes. Well, we have been charged under the Clean
Air Act to address air pollution that endangers the public
health and welfare. It is clear that CO2 is one of
those air pollutants. And so a major source of activity of ours
under the Clean Air Act for 40 years has been reducing air
pollution from the auto sector. And so these particular rules
are a major element of our target, of our plan to reduce
greenhouse gases as much as can reasonably and cost effectively
and safely be done.
Ms. Schakowsky. Thank you. I said that was the last but I
have one more. We have heard the argument that in order to meet
the next round of standards, automakers will have to add a
large number of plug-in electric, plug-in electric hybrid and
other zero-emission vehicles to their fleet.
I support efforts to increase the number of electric and
alternative fuel vehicles, but that is not really the issue
here. This is about the National Program which aligns
greenhouse gas standards with CAFE standards. And since these
standards are based on each vehicle's footprint and not a
universal average, this talk of requiring electric cars appears
to miss the point.
And I am wondering, Ms. McCabe, can you explain how each
automaker is given a unique fleet average based on the
individual footprint of the vehicles they sell, and would it
therefore be possible for a manufacturer to produce exclusively
light trucks, SUV, and crossover vehicles and still be in
compliance with the upcoming light-duty standards?
Ms. McCabe. Yes, absolutely. The standards, I wasn't around
when these standards were initially designed so I can
compliment them without complimenting myself. I just think they
are very ingeniously designed in order to provide as much
flexibility for the automakers and as much choice for the
consumers as possible. So as you say, we don't set one
expectation across the entire fleet. Every automaker, depending
on the vehicles they produce, will have its own calculated
target for what it should achieve.
And going to your question about electric vehicles, what we
found in the draft TAR is that due to the innovation and
pioneering spirit as was said before, the automakers are just
moving along like gangbusters in developing technologies that
apply to gasoline engines.
So what we found is that in order to achieve those
standards, while electric cars and other zero-emitting vehicles
are certainly welcome in the program they are not largely
necessary to get each automaker to where they need to be. And
as I say, each one will have a target tailored specifically for
them based on the cars that they produce, which is based on
what they believe they will be able to sell to the American
public.
Ms. Schakowsky. Right. Thank you so much. I yield back.
Mr. Burgess. The Chair thanks the gentlelady. The
gentlelady yields back. I now recognize the chairman of the
Energy and Power Subcommittee, Mr. Olson from Texas, 5 minutes
for questions, please.
Mr. Olson. I thank the Chair. Welcome, Dr. Hemmersbaugh and
Ms. McCabe. Ms. McCabe, it is great to have you here, because I
know you are here for what I imagine is very difficult personal
times. You spent some time in Boston as has your boss,
Administrator McCarthy. You are probably fond of the New
England Patriots. Now as you all know, my Houston Texans are
going up there tonight, 7:25 kickoff, to crush the Patriots.
But enough on--let's get serious.
Mr. Tonko. May I have a point of order on that one?
Mr. Olson. If I had more time. But being serious, the
regulatory impact assessment of 2012, final rule, EPA
ballparked that these vehicles standards reduced temperatures
by 0.0074 to 0.0176 degrees Celsius by the year 2100, 84 years
from now. You also said this reduces sea level rise by as
little as 0.71 centimeters. We are looking at amounts too small
to even verify.
Given that the overall program has a very modest effect on
global warming, wouldn't you agree that adjustments to the
program like revising targets in the out years or harmonizing
the training program would also have a modest impact on the
environment? Would you agree with that?
Ms. McCabe. Well, Congressman, first, while I cheer for any
team that my boss is in favor of, I have to confess that I live
in Indianapolis. So I am not sure when your team is going to
play the Colts, but we can----
Mr. Olson. Your quarterback came from Houston, Texas, by
the way.
Ms. McCabe. OK. Well, you have just exceeded my knowledge
on football.
To answer your question, sir--and we have had this
conversation before--I think the fact is that climate change is
a global problem and there are sources that are contributing
from a wide variety of types of activities. And no one single
activity is going to be what we need in order to address the
threat of climate change. It is going to take the cumulative
accomplishments of a number of different strategies from not
only the U.S. but from countries around the world in order to
make the difference that we need to see in the climate. And
this is an important part of that strategy.
Mr. Olson. So you agree that this is a modest environmental
impact. So given that fact and the fact that these rules will
cost over $200 billion, and that 2017 through 2025 standards
alone come in at $157 billion making it the most expensive
automobile regulations in history, are these modest gains worth
the cost?
Ms. McCabe. Well, Congressman, I wouldn't actually refer to
this as a modest impact. I would refer to this as a significant
impact given the significance of this sector. And I think that
I would--we are welcoming all comments on the cost and the
benefits of this program as people give us comments on the
draft TAR and all that information is laid out. But what this
TAR has found is that the costs are that we predict now for the
out years of the program are in line with the costs that we
predicted back in 2012 and there has been exhaustive research
and updating of our information in order to reach that
technical conclusion. But we welcome everybody's views on those
points.
Mr. Olson. Well, it is clear we disagree on the fact that
the facts are the reduction of the temperatures, 0.0074 to
0.016 degrees Celsius is not something significant in my humble
opinion.
But moving on, this is for Dr. Hemmersbaugh. In EPA's
testimony they commented that these standards are achievable
without, quote, significant use, unquote, of electric cars.
That of course means consumers in a low gasoline price world
want smaller and lighter vehicles. The automakers in Panel 2
have some serious concerns about whether these assumptions are
accurate. Can you talk about consumer acceptance and demand for
super-efficient or electric cars and what trends you are seeing
in that market in the real world?
Mr. Hemmersbaugh. Initially, I would like to lay a little
groundwork as to the way these standards work. And these
standards as you know are footprint-based standards. So each
different footprint of a vehicle has a different target fuel
consumption, and it is the average over all the vehicles, all
the fleet from the smallest to the largest truck that result in
the Corporate Average Fuel Economy target or standard that each
manufacturer has to meet.
Manufacturers have great flexibility in determining what
sorts of cars they choose to produce in order to meet those
standards. Similarly, consumers have, consumer choice is
preserved by these footprint standards that we didn't have
before 2007. But when Congress amended the statute, you wisely
provided a process and a standard and a framework that
accommodates consumer choice.
While I understand that the automakers have estimated that
they may have to produce large numbers of hybrids in order to
meet the standards in the years 2022 to 2025, which again as
far as NHTSA is concerned there are no standards. We have to do
an entirely new rulemaking before we make those standards, so
we just have what we call augural standards. It is sort of a
hypothetical projection of what those standards would be based
on what we knew in 2012.
All that said, the manufacturers are able to produce
whatever mix of vehicles they wish in order to comply with the
greenhouse gas standards and the fuel economy standards as
well. So it is really up to what the consumer choice and what
the manufacturer choice is as to what mix of vehicles they will
build and sell.
Mr. Olson. I am out of time. Go Texans. I yield back.
Mr. Burgess. The Chair thanks the gentleman. The
gentleman's time has expired. The Chair recognizes the
gentleman from California, Mr. McNerney, 5 minutes.
Mr. McNerney. Well, I thank the Chair. I don't really need
to brag about California teams, so I won't do that.
But industry usually squawks when emissions or safety
standards are issued that the costs are going to go through the
roof; that the sky is going to fall. But American innovation
has proven established industry wrong time and time again. I
don't think I even need to give examples.
But now as I went over in my opening statement and as you
all confirmed in your statements, American innovation is
exploding again here. I was struck by the positive tone of both
of your opening statements.
So Mr. Hemmersbaugh, you mentioned that automakers are
adapting at a great rate to the new regulations. I know that in
California we are creating jobs. Tesla is there, battery
manufacturing, and other manufacturing related to automobile
are creating thousands of jobs. So how are these standards
affecting employment in the rest of the country?
Mr. Hemmersbaugh. I don't have a good answer for that or
good data for that. I would be happy to bring it back to you if
you want to submit a question for the record, or we can just
send it back to you. But the employment impacts is not
something that we closely track. We do consider economic
effects overall in setting the standards, setting the maximum
feasible standards, but we have not to my knowledge closely
looked at specific employment, and certainly not specific
regional employment effects.
But as I said, we will be happy to respond to that when I
am back at the office and can get my fingers on----
Mr. McNerney. Well, that might be a good thing to include
in your analysis. And you mentioned that the EPA and NHTSA's
modeling were done independently. Could you describe the model
a little bit, what is involved in it, how it works. Is it a
computer model?
Mr. Hemmersbaugh. They are computer models. They are
extremely complex. The NHTSA's model starts out with modeling
of technological effectiveness rates from a model developed and
used by the Argonne National Laboratory, which is also by the
way the model that most of the auto industry uses.
That develops certain further inputs that are then input to
the NHTSA CAFE model, or we sometimes call it the Volpe model
because those are at the Volpe Center, the people who run that
model for us. And then from that we generate the numbers and
the analyses that we then slice and dice and figure out
different effects and different costs.
Mr. McNerney. And some of this is peer reviewed in papers,
in academic papers and so on?
Mr. Hemmersbaugh. Yes. Yes. The models have been peer
reviewed. The Argonne Lab standard, I think, is pretty much the
gold standard for this kind of modeling and it is something
that we have used over time. Our CAFE standard is structured
around our statute. The CAFE model is built to fit the
statutory requirements and so forth, so it is a particularly,
we believe, well fitting, tight fitted model that has benefited
from not only peer review but a lot of stakeholder input over
time.
Mr. McNerney. Thank you.
Ms. McCabe, again very positive. Automakers are adapting
rapidly. They are meeting standards at lower costs than
expected. They are outperforming standards and the auto
industry is well positioned. Those are some of the statements
you made. Could you expand on the statement that they are
meeting standards at lower costs than expected?
Ms. McCabe. Well, sure. And before I do I just want to note
in response to a question you asked earlier, there is a
discussion of employment impacts in the draft TAR, and we
predict fairly modest employment increases related to the
development of new technologies. But I also point out that
there are record car sales for the last couple of years, and so
things are going well in the industry.
So what we did in developing the TAR was to gather as much
information as we could about the technologies that automakers
are using, expect to be using, and based on some of our own
work of where we actually have vehicles in our lab and take
them apart and put them back together and try different things
out.
So we were able to discern that some of the technologies
that we expected not until later in the program are already
being implemented in these early years, and that the cost of
the vehicles are in line with what we expected out in the later
years of the program at about between 900 and $1,100 per car
when you get out to the end. So the technologies are clearly
moving ahead more quickly than anybody anticipated.
Mr. McNerney. And the savings in terms of gasoline or fuel
consumption is greater than the initial cost?
Ms. McCabe. Well, to the extent that there are more choices
of cars that are beating where we expected the standards to be,
every additional mile per gallon is money saved for that
motorist.
Mr. McNerney. Thank you, Mr. Chairman.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman. The Chair recognizes the gentleman from West
Virginia, Mr. McKinley, 5 minutes for questions, please.
Mr. McKinley. Thank you, Mr. Chairman. There are certainly
a lot of issues we could go in this direction. I have heard
some people speaking first about the global climate change and
the impact, and I think we all realize that through the CAFE
standards it is going to have virtually no impact on the global
climate change. You and I both know that.
And I think having the CAFE standards, the interesting part
is that the thing apparently we are willing to do is ignore the
cost of life and injuries that have occurred as a result of our
efforts in America to reduce our consumption. That they have
said in this report that 46,000 people have died in crashes in
cars--if they had simply been driving a heavier car in that
time. But people are trying.
So in a feel-good mood to try to get our CAFE standard, get
our less consumption, we are going to smaller, lighter cars. We
know that 23 percent of the weight of a car has been reduced
over the numbers of years. That has increased the number of
rollovers and increased the number of deaths.
So this feel-good attitude that I hear in Congress and
through this administration of trying to enhance this, it is
not going to affect the environment--we know that--and it is
also putting the lives of people at risk. And I think we all,
even from the National Highway, your own report has come out
and said that for each 100 pounds that you reduce you are going
to increase the accident or the death rate one percent of
people driving cars.
I don't accept all of that. I know it is fact like that but
I am not accepting that that is the direction we should be
going in. But we are going to lose that argument, we
understand. The feel-good attitude from this administration and
some folks here want to have us continue in that direction.
What I am more, equally as concerned about are people in
rural America that this cost that you are imposing on us is
going to be passed on to the consumer. And we are seeing from,
I guess it is from the National Highway, someone has come up or
said that it is going to increase the price of cars somewhere
in the neighborhood of $2,000 to $3,000 to make this
achievement.
But having said that how do we justify increasing that cost
to people in low-income States like West Virginia or Arkansas
or Mississippi, because we have to buy those cars too. It is
one thing if you want to promote the car in Connecticut or
Maryland, where there are $70,000 median family incomes, but in
rural America it is in poorer States at $38,000, $39,000 or
$40,000, that is a big discrepancy.
But yet we are trying to buy the same car, and because of
this feel-good attitude that we are having with it that this
report that I have been given says that we are going to reduce,
with this increase of the vehicles we are going to reduce,
three to four million people aren't going to be able to buy a
new car. And we are going to remove 5.8 to 6.8 million people,
licensed drivers, to be able to buy a new car and we are
forcing them to buy an older car. I am troubled with this.
So how all would you respond? Do you think these reports
are wrong from the insurance groups or the other entities that
have put out reports about safety and cost? Who can answer
that?
Mr. Hemmersbaugh. I will start. With respect to the cost
and the concern about pricing people out of the ability to buy
cars, I want to give you a few numbers. The overall cost we
estimate in the TAR, the overall cost of this rule by 2025 if
we kept the same standards, which again we are going to revisit
those standards, but if we kept the standards it would $87
billion. At the same time, the overall benefits we estimate are
$175 billion, so essentially----
Mr. McKinley. Am I supposed to feel good in West Virginia,
then? I can't buy a car, but health benefits are going to
improve around the country? I want to get back to specifics.
Don't talk at 30,000 feet to me. Get down to what, if that
cost, the increase of that cost is going to be a car of $3,700,
how is someone with a $36,000 median family income going to be
able to afford a new car?
Mr. Hemmersbaugh. I have a couple thoughts on that. One is
let's bring it down to an average per car. We estimate in the
TAR, we, NHTSA, estimates in the TAR that the average cost
increase for a car by 2025 will be approximately $1,200. That
$1,200 is more than completely offset by an estimated $1,900 in
savings, in fuel savings, and that is just fuel alone. That
doesn't take into account the climate benefits and the things
about which some disagreement has been expressed.
Mr. McKinley. I am sorry. My time is expired, but if I
could reclaim it. It says based on the National Highway Traffic
Safety it is $2,937, not 800-and-some dollars, sir.
Ms. McCabe. Congressman, if I could clarify just a couple
of things. I want to make clear that everybody understands
that, given the design of the program, nobody is required to
buy any particular car. The automakers in fact are and will be
able to offer a wide range of cars going from very modestly
priced cars as they do now to higher-end cars as they do now.
And so there will be cars available for people in every income
level, and they will save money immediately because of paying
less for gas.
I also wanted to clarify that the first comments you made
before--and Mr. Hemmersbaugh may want to add to it as well--in
terms of lightweight cars, the whole design of this footprint-
based approach to the cars is to make sure that we are not
sacrificing safety for this environmental and fuel economy
benefit. This program does not require cars to be made lighter.
It allows the automakers to provide a range of cars so that
they can fully take into account all of those considerations.
Mr. Burgess. The gentleman's time has expired, so I thank
the gentleman. The Chair recognizes the gentleman from New
York, Mr. Tonko, 5 minutes for questions.
Mr. Tonko. Thank you, Mr. Chair. Ms. McCabe and Dr.
Hemmersbaugh, welcome, and thank you for your work, very
important to our environment.
Is it accurate that for each size or footprint of vehicle
there is an individual fuel economy target set?
Mr. Hemmersbaugh. Yes. That is correct.
Mr. Tonko. And is it accurate that, instead of a uniform
CAFE standard, each manufacturer now has a unique CAFE
standard?
Mr. Hemmersbaugh. Yes, each manufacturer has a Corporate
Average Fuel Economy standard.
Mr. Tonko. And that is based on what? Is it the vehicles
that they manufacture and sell or----
Mr. Hemmersbaugh. So as you rightly stated at the start,
there are based on the footprint of each vehicle, or that is
essentially the area defined by a square under the wheels of
the car, for each footprint for area occupied by a car there is
a different standard.
So depending on the manufacturer's mix of vehicles, you
average the target fuel economy into a single thing for each
manufacturer's fleet which comes up to an average, or the
Corporate Average Fuel Economy. So a manufacturer who chooses
to build, for example, primarily larger vehicles, cars and
trucks that are larger and heavier weight, will have a lower
Corporate Average Fuel Economy estimate and similarly a
higher--Ms. McCabe can speak to this--but similarly a higher
carbon dioxide emissions.
Mr. Tonko. Thank you for expanding upon that because I know
it was talked about a little earlier. But I think it is fair to
say today's CAFE system is much more flexible than it was in
the 1970s and it is not the case that all vehicles must meet a
set standard. The standard will adjust based on market trends
and other factors.
Can you explain how this flexibility helps both automakers
and consumers?
Mr. Hemmersbaugh. Well, the flexibility means that
automakers can produce and consumers can demand or purchase
vehicles of the size and other parameters that they want when,
if we go back in contrast to how it was before 2007, there was
a single flat average. And so if you built more larger vehicles
there would have to be, the manufacturer would have to
compensate on the other side by building more smaller vehicles
that got better gas mileage.
Today there are individual standards for each footprint of
a vehicle, so that really advances consumer choice and
manufacturer choice while at the same time ensuring that we
have increasing stringency in the fuel economy standards year
over year over year.
Mr. Tonko. Thank you. So if I am understanding this
correctly, this will ensure that all models will get more
efficient over time and that automakers can comply even if
consumers are opting for larger cars or trucks.
Ms. McCabe, your testimony states that automakers are
already ahead of schedule to meet standards for upcoming model
years, and they are rapidly adopting technologies for
greenhouse gas reductions. Did the TAR find that the targets
for later model years can be met by mostly efficiency
improvements to gas-powered engines?
Ms. McCabe. Yes, it did. That there are technologies that
are applied to advanced gasoline engines that will be the
predominant pathways for automakers should they choose to go
that way.
Mr. Tonko. OK. And, you know, one of the more encouraging
findings of the draft TAR was that technological innovation has
moved the whole process with our automakers. As automakers
continue to innovate does new technology give them more
flexibility in how they meet the standards?
Ms. McCabe. Oh, it certainly does. And this has been the
triumph of the auto industry over decades in this country is
that they continue to innovate and find new things and these
standards go out 9 years ahead. And as the chairman mentioned
before in talking about autonomous vehicles, we really don't
know what everybody is going to invent between now and then,
but we know they will because they always have.
Mr. Tonko. Right. So with challenges continuing, with
certain technology outperforming the agencies' expectations, is
it possible that some current model year vehicles may already
be compliant with projected standards for model year 2020 and
beyond?
Ms. McCabe. Oh yes, there are a number of model vehicles
out there already complying with the 2020 year standards.
Mr. Tonko. Then, so what do you think this says about the
automakers' ability to meet the standards with currently
available technology?
Ms. McCabe. We think it is quite achievable based on the
information that we have in the draft TAR. And as I have said,
you know, we welcome everybody's views on that. But based on
our information which is driven in a large part from our
conversations with the automakers, because of course we have to
be in very close communication with them, it is very
encouraging.
Mr. Tonko. Well, I thank you. As I said earlier in my
comments, America has always stepped up to challenges, and with
the intellectual capacity that we bear as a nation I think we
are up for challenges and we respond well with our pioneer
spirit. With that I thank you and yield back.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman and the Chair recognizes the gentleman from
Illinois, Mr. Shimkus, 5 minutes for questions, please.
Mr. Shimkus. Thank you very much, Mr. Chairman. I am over
here. It is good to have you. You have already been probably
told there are competing hearings, so we are bouncing back and
forth. And it was easier when we are in the same building, but
when we are in different buildings it takes a little bit
longer.
So Ms. McCabe, I want to follow up on actually some of the
questions. In your testimony you were talking about the hundred
cars, SUV, pickup versions that meet 2020. Can you provide us
three pieces of information to follow up? Data is important.
And it is not adversarial, it is just to help us analyze.
What percentage of vehicle sales do those hundred cars,
SUVs, and trucks represent so to get an idea of, you know, the
market acceptance and those totals. What is the price
differential versus the similarly situated cars, SUVs, and
trucks because there is going to be a debate about how costly
are cars and what is affordable.
How many of the hundred also meet EPA and NHTSA
requirements by 2025? So we have got 2020 which you have
addressed, but does any of these hundred meet 2025? And that
would be helpful for us if you can provide us with that. And I
know Mr. Hemmersbaugh is taking notes too, so however you can
work on those.
Let me ask, has the EPA assembled any vehicles with the
various technologies outlined in the draft Technical Assessment
Report to see how they actually function in real-world driving
conditions?
Ms. McCabe. Well, we do have the ability to test out these
technologies both by getting cars from manufacturers that have
the technologies on them and then also working to build them in
our lab as well. And part of the research that the automakers
certainly do is to make sure that those technologies will be
reliable, will last for many, many thousands of miles; that
that is part of the routine QA and product development that the
automakers do.
Mr. Shimkus. So you are getting that information from the
automobile dealers. You are not doing any of that research on
your own? So a lot of us, I remember driving in Colorado and
stopping at a convenience stop and there was this pickup truck.
It was dark. It was black. It was kind of covered up in fabric
and they were driving it all over doing real-world testing.
Ms. McCabe. Yes. Yes.
Mr. Shimkus. Which was then of course logos, no logos, all
this top secret stuff----
Ms. McCabe. Right, right.
Mr. Shimkus [continuing]. To get real-world conditions. So
what we are trying to just ascertain is, is that information
just coming from the industry, or are you all doing based on
what you perceive to accomplish in the technical review are you
testing real-world standards?
Ms. McCabe. We do do testing, confirmatory testing
ourselves to check the performance of these vehicles.
Mr. Shimkus. Because we found out our country is big and
large and diverse and there is very, very cold and there is
very, very hot and----
Ms. McCabe. Absolutely. That is why our lab is in Michigan.
Mr. Shimkus. That is right. Ms. McCabe, while the CAFE and
the greenhouse gas standards are affecting cars and light
trucks, the renewable fuel standard is transforming motor
fuels. Are there potential conflicts between these two
programs, and if there are how can they be addressed?
Ms. McCabe. I am sorry. Conflicts between----
Mr. Shimkus. The RFS which is kind of transforming the fuel
mix----
Ms. McCabe. Oh, the RFS. Sure.
Mr. Shimkus [continuing]. And you have greenhouse gas and
you have CAFE, so we have got these different programs. Are
there conflicts?
Ms. McCabe. No, not at all. Not at all. The RFS was
established by Congress to encourage the use of non-fossil
fuels which are good for the climate, and this program
encourages the more efficient and better fuel economy which
will reduce greenhouse gas emissions. And in fact if automakers
are building flexible fuel cars that can use renewable fuels,
there is a provision in the greenhouse gas program to give
credit for that. So they are complementary.
Mr. Shimkus. Right. So then, Mr. Hemmersbaugh, obviously
one of the points of discussion will be how does a national
program, how are you going to harmonize the agency standards
when NHTSA and EPA have different credit-trading, credit
transfer caps, and penalties for noncompliance? Are you all
talking about this and trying to figure out how we are going to
do this?
Mr. Hemmersbaugh. Absolutely. We have worked very closely
with NHTSA and EPA as well as with the CARB to try to harmonize
the standards to the best of our ability within our separate
statutory commands. And NHTSA has some statutory requirements
that we don't have flexibility to change, but we have worked
hard to have a single set of standards that a manufacturer can
meet by designing a single fleet that will comply with all the
standards. And I misspoke. I didn't mean a single set of
standards, I mean a harmonized set of standards.
Mr. Shimkus. Right. And I think--if I can just jump in, my
time is running out--is that so there is a point being that to
try to harmonize these there may be a need for some legislative
change to help ensure that we actually have one set of
standards that can harmonize, because it is our impression that
you are handcuffed a little bit based upon current law. You
have to do these certain things and you would need a
legislative change to maybe be a little more flexible?
Mr. Hemmersbaugh. We absolutely would be happy to look at
any proposed legislation, provide technical assistance,
whatever we can do.
Mr. Slavitt. Great, thank you. I yield back, Mr. Chairman.
Mr. Olson [presiding]. The gentleman's time is expired. The
Chair calls upon another Houston Texans fan, Mr. Green, for 5
minutes.
Mr. Green. Thank you, Mr. Chairman. And since we are
talking about vehicles, both my truck and my cars have our
Texas license plates on them. But I appreciate--and hopefully
they will do very well tonight. And I am sorry my colleague
from Massachusetts, Mr. Kennedy, is not here so we could have
some fun.
I want to thank you for holding this hearing, because this
is one of the first that we have had for a number of years and
because we are in toward the end of the public comment period
for the technical assistance. And I want to thank our witnesses
before us today in providing the many perspectives we need to
understand how this policy affects consumers, manufacturers,
and the environment.
The program affords manufacturers significant flexibility
in how to meet the standards. It also is important to make sure
consumers have choices to get a vehicle that meets our needs.
For example, on my every day in Houston, Texas, I use a Malibu
that gets decent mileage, but sometimes we do have a little
flooding in there so I use a Tahoe that probably gets ten miles
less per gallon. So consumers need that choice too. Typically
in Texas we have, I used to hear the Suburban was the national
truck of Texas.
But one of the questions I have is that several witnesses
on the second panel point out that EPA and NHTSA use different
models to assess the technological feasibility and costs
associated with these rules. My first question, does this
hamper your ability to align the standards for these programs
if the two agencies use different vehicles, different models?
Ms. McCabe. Well, I will start and if Mr. Hemmersbaugh
wants to add he certainly can. We actually think that the two
agency using somewhat different models is a strength of the
program, and as the TAR reflects our results are right in line
with one another for the most part. And it makes sense that the
two agencies would have different tools that they would use,
different methodologies that they would use.
All of this is information and material that we discuss
widely with the industry and look forward to people's
additional comments on it. But we think it actually strengthens
the record for the findings that the agency will ultimately
make.
Mr. Green. That is interesting because, you know, it seems
like we would want to, both agencies would want to use, you
know, the same model so they could, because they have different
requirements for each agency to look at. But anyway, do the
conclusions of your analysis differ widely?
Ms. McCabe. No, they don't. Well, one way in which they do
differ is the choices that each model makes about the least-
cost ways for the automakers to be able to comply. And again I
think that is a strength because it emphasizes that there are
multiple pathways that automakers can choose. But when it comes
to the ultimate conclusions about whether the technologies are
available and the expected costs, the two analyses are quite
well in line with one another.
Mr. Green. Before I get to my last question before my
colleague from Illinois, Mr. Shimkus, leaves, I am not so sure
the RFS is good for the climate, but that is the subject for a
different hearing we will have to have sometime.
Mr. Shimkus. Well, ask the Administrator.
Mr. Green. My last question is, does the use of independent
analysis strengthen your confidence in the information and
assumptions of the underlying rules?
Ms. McCabe. I certainly think it does.
Mr. Hemmersbaugh. I do too. And just getting back to your
earlier question just to frame it slightly differently than Ms.
McCabe, we believe that these two analyses are both robust and
they are complementary and they allow for more comment on the
different range of options. And that is what we are about right
here in this midterm evaluation is putting out a lot of
technical information and some different compliance options for
the regulated community and other members of the public to
comment on. So we think that is really a strength of the
program.
Mr. Green. Well, and like I said, whether I am driving a
Malibu or a Tahoe, over the years I have done that, and both
vehicles have improved their gas mileage.
So Mr. Chairman, I will yield back. Thank you.
Mr. Olson. The gentleman yields back. The Chair calls upon
the gentleman from Texas, Mr. Barton, for 5 minutes, former
chairman.
Mr. Barton. Thank you, Mr. Chairman. I thank our two
witnesses for being here this morning. I want to make a brief
statement since I didn't make an opening statement, then I will
ask a question or two.
I personally think we could repeal the CAFE standards in
their entirety. If there was a reason to have them back in the
'70s and the '80s and the '90s, with gasoline prices where they
are today I think the market could do it. So that is a subject
for an entirely different hearing and we obviously need a new
President. But you can make a good intellectual case to just
repeal CAFE and let the market operate.
But since we have it we obviously have this mish-mash going
on. We have got California's standards and EPA's standards and
National Highway Transportation Administration standards, but
theoretically they are all supposed to be working together and
we are supposed to have what is called One National Program. I
will ask each of you briefly, what is the status of this One
National Program?
Ms. McCabe. I will start. We have one national program. The
goal of the One National Program was that automakers would be
able to build one fleet of vehicles that could be sold anywhere
in the country, and they can. And the agencies work very, very
closely together and we have and we will continue to do so, so
that our programs are harmonized to the greatest extent
feasible. And in fact they are harmonized to a very great
degree, things like compliance testing and much of the
obligations or flexibilities with respect to credits and that
sort of thing are harmonized.
Mr. Barton. The manufacturers don't agree that they are
harmonized.
Ms. McCabe. Well, they have identified a handful of issues
that they brought to us in a petition which we are considering,
both agencies are considering them. And if there are other
opportunities for us to improve the way the programs work
together we certainly want to----
Mr. Barton. What is NHTSA's take? Do you agree with EPA or
do you have a little different opinion?
Mr. Hemmersbaugh. No, we generally agree with EPA that we
are working hard to harmonize and to the greatest extent they
can be harmonized we have done that. I can't comment on the
pending petition right now, but I would except to note that
automakers have presented a variety of different options for
changing credits.
Mr. Barton. Well, let me give you an example. These
credits, both EPA and NHTSA use a credit program, right?
Mr. Hemmersbaugh. Correct.
Mr. Barton. OK. The EPA credits last how long?
Mr. Hemmersbaugh. The EPA--well----
Ms. McCabe. Five years. Five years except for credits
earned in the first phase of the program we extended their
life.
Mr. Barton. Well, I am told that NHTSA's credits last 5
years and the EPA credits last 11 years.
Ms. McCabe. Well, right. Our----
Mr. Barton. So that doesn't look like harmonization to me.
Ms. McCabe. We had a one-time, as we transitioned from
phase 1 of this program to phase 2 of this program we extended
the length of credits earned during the first phase so that
they last 11 years. But credits earned during the phase 2 of
the program under EPA's rules last for 5 years. Does that
clarify it?
Mr. Hemmersbaugh. So beginning in 2016----
Mr. Barton. If I was listening exactly, I am sure it would
clarify it. I kind of got lost in a daydream there. But do we
agree that we at least ought to harmonize how long the credits
last? Is that, or maybe you all agree that they are harmonized.
Mr. Hemmersbaugh. Yes, Mr.----
Mr. Barton. Yes. Yes.
Mr. Hemmersbaugh [continuing]. Barton. They are harmonized
beginning in 2016.
Mr. Barton. OK. Well, the last question on that particular
thing: Shouldn't the credits, whether they are harmonized or
not, be used by both programs?
Ms. McCabe. Well, we think it is important that both
programs have a crediting system, which they do.
Mr. Barton. OK. But the credit system is a little
different. I am just saying, if we are going to have a program
and you are going to try to harmonize it, let's call it apples
and apples and have it comparable. That is all.
Mr. Hemmersbaugh. And we increasingly are harmonizing. We
are getting to the point where most of the differences between
the two programs are statutory and are things that we are not
able to change without a change to the statute.
Mr. Barton. So you are saying that there may be some things
the Congress has to change the statute?
Mr. Hemmersbaugh. You could evaluate and determine whether
that made sense, yes.
Mr. Barton. Well, see, I want to repeal the whole program,
so that makes the most sense to me. But we probably don't have
the--you know, Ms. Schakowsky is rolling her eyes over there.
If Mr. Trump is President, Ms. Schakowsky, we will be back.
With that I yield back, Mr. Chairman.
Mr. Olson. The gentleman yields back. The Chair calls upon
the gentlelady from Florida, Ms. Castor, for 5 minutes.
Ms. Castor. Well, thank you, Mr. Chairman. First of all, I
want to thank the National Highway Traffic Safety
Administration. This summer you all came to Tampa. In fact, Dr.
Mark Rosekind, the administrator, came himself and helped with
outreach on child safety seats for many of my neighbors. He set
up a whole section, a whole facility to make sure that folks
know how to buckle in their kids and secure their seats, and
highlighted the airbag recalls where it is especially important
in a steamy, humid area like mine in the Tampa Bay area. So I
really appreciate you doing that and highlighting the
safercar.com Web site where people if they have questions about
airbag recall they can go to get more information.
And I appreciate you calling this hearing. I think it is
overdue. But CAFE standards are a great example of American
ingenuity and innovation. They are really paying off for
American families and businesses of folks we represent back
home. And fuel economy and greenhouse gas emissions controls
now are vital at a time when we must tackle the increasing
costs of the changing climate, so we can't lose sight of that.
And I also appreciate all of the automakers, States, all of
the environmental advocates coming together to make progress.
And here at the end of the Obama administration, I want to say
thank you to President Obama and everyone in the administration
who has done a fabulous job for consumers when it comes to fuel
economy.
Ms. McCabe, how much have American consumers saved since,
over the lifetime of the CAFE standards program which was
originally adopted in 1975?
Ms. McCabe. Oh boy, I don't actually have that number for
you, Congresswoman, but we can certainly see if we can come up
with that. I mean it is clear that cars across the range of
big, little, in between, are much more fuel efficient than they
were 10 years ago, 20 years ago, 30 years ago. Just absolutely
no question.
Ms. Castor. OK. Yes, please get that. And I bet a lot of
the automakers and the advocates out there will have their
estimates maybe on the next panel as well.
You have recently released a Technical Assessment Report
and asked for comments. In what we know so far is automakers
have exceeded expectations on the miles per gallon and fuel
economy. Over the history of the program goals have been very
important, they have helped everyone focus on higher mileage
standards. So what do you think at this point? If they have
exceeded expectations will you press for higher standards?
Ms. McCabe. Well, of course we have not put out any sort of
proposal with respect to the regulatory decision that we have
to make. The stage we are at right now is putting out the
technical information. So we won't opine on that until we issue
a proposed determination after we have seen everybody's
comments.
But I will say that the results to date are encouraging,
and I would agree with you that goals are important to set. And
I think when these standards were issued in 2012 with support
from the industry, everybody recognized that they were
challenging and that these were big challenges that we have to
rise up to in this country and that people were up to doing it.
But that is why we have this midterm review so that people can
weigh in again.
Ms. Castor. And one of the remarkable developments lately
is the fact that gas prices are so low. I never thought that we
would see prices, in the Tampa Bay area prices have been
hovering just above $2 per gallon for many, many months. How
does the fact that we have had these sustained low gas prices,
how does that impact the technical review and the National
Program for fuel economy?
Ms. McCabe. Yes, it is clearly an issue of great interest
in it, and as you say the prices, nobody expected them to be
this low and we don't know what they will be 2 years from now,
4 years from now. Nobody knows, given the way they have gone up
and down. So we want a system that is robust and anticipates
all of those eventualities.
But it is the case that when gasoline prices go down people
may choose larger cars because they are not feeling the cost of
gasoline so much. However, no matter what car you buy and no
matter what gas costs it is still better to pay less for it.
And so a fuel efficient car even in a time of low gas prices is
something that we know consumers care about.
Ms. Castor. Thank you very much, and I yield back.
Mr. Olson. The biggest fan of the Houston Cougars in
Florida yields back. The Chair calls upon the gentleman from
Ohio, Mr. Latta, for 5 minutes.
Mr. Latta. Thank you, Mr. Chairman, and thanks for our
panel for being here. I appreciate it. And I think the
gentleman from Illinois said a little bit ago we have two
different hearings going on, so we are kind of shuffling back
and forth, so I am sorry I missed your opening statements.
But if I could, Administrator, if I could start with my
questions with you. When the EPA finalized the rule it granted
multiplier incentives for electric vehicles, fuel cell
vehicles, and natural gas vehicles. These incentives are useful
to automakers in meeting the standards and encourages the
production of these alternative fueled vehicles.
However, it did not extend these multiplier incentives to
propane powered vehicles. This exclusion puts propane vehicles
at a regulatory disadvantage compared to those from the other
alternative fuels. Could you explain why the propane vehicles
weren't given the equitable treatment by the EPA when the rule
was finalized?
Ms. McCabe. You know, Congressman, I wasn't intimately
involved in the development of the 2012 rule, so I would like,
if I could, to get back to you with a specific answer to that
question.
Mr. Latta. Yes, if you could, because that is important.
And kind of following up with that, with the midterm evaluation
underway will the EPA continue to examine the application of
the multiplier incentives or other compliance incentives at
this time?
Ms. McCabe. Well, the charge in our rule is to look at the
standards themselves in 2022 through 2025 and determine whether
they are still appropriate or whether they should be made less
stringent or more stringent. We will see what comment we get
from people on the draft TAR, and of course carefully consider
any input that we get as we make that particular regulatory
recommendation.
Mr. Latta. OK, because that is kind of following up on the
second point. I just want to make sure then, because you would
be willing then to reconsider the exclusion of the propane from
the current incentives in order to bring parity to the
alternative fuel marketplace?
Ms. McCabe. Well, I can't speak to it specifically today,
Congressman, but certainly will take your concern back to my
team.
Mr. Latta. OK. But if I could hear back from you I would
appreciate that.
Ms. McCabe. Sure.
Mr. Latta. Mr. Hemmersbaugh, the NHTSA just released the
proposed guidelines for autonomous vehicles earlier this week.
In making the announcement, the secretary said that your agency
would be conducting a number of public meetings around the
country, which I support. I think that that kind of
transparency and public engagement is important.
And one thing that would be tremendously helpful here would
be if the NHTSA and the EPA would be willing to hold similar
public workshops to review the Technical Assessment Report
methodologies with technical experts. Especially given the
significance of TAR, would the agencies be willing to commit to
holding a public workshop or a series of workshops?
Mr. Hemmersbaugh. As you may know, prior to publishing the
TAR, we had a technical workshop, which we went through with
all the experts and sort of walked through the technical
concerns and features of the TAR. But we are--going forward, we
are committed to getting as much public input as we can. We
have, as you know, a comment period, but we are going to
continue to take data and information in any way we can get it
that we can reasonably accommodate it until we get to the
proposed rulemaking for the NHTSA standard.
So I can't say today that we necessarily will do X and Y
field hearings or anything like that, but it is certainly
something that we are open to and will consider.
Mr. Latta. Well, maybe we can communicate on that again
because I think it is very, very important that that occurs.
Let me follow up. Throughout the TAR, the EPA and NHTSA use
different inputs and assumptions. For example, the percentage
of higher compression ratio naturally aspirated gasoline engine
automakers are expected to deploy to meet the model year 2025
standards differs by about 43 percent. Similarly, the percent
of the turbo-charge in downsized gasoline engines differs by
about 21 percent and the percent of the stop-start technology
differs by 18 percent. Can you explain how we have such a
discrepancy in all the different percentages there that have
come out?
Mr. Hemmersbaugh. I think no single reason explains, but
there are several different reasons. One is that we use
different models and those different models are each structured
to the demands, the different demands of our statute. Another
is that we use different inputs. As I was saying earlier, we
use, we NHTSA, use the Argonne Labs' technology effectiveness
model that then the outputs of that are the inputs to our CAFE
model. EPA uses different models.
So there are inherent differences both in the inputs and in
the way that the models treat those inputs for purposes of
meeting our slightly different statutory obligations. Another
reason I think that maybe have some, account for some of the
difference is that NHTSA used a different baseline year than
EPA did. We used a 2015 baseline year and EPA used a 2014
baseline year. So that accounts for some of the differences as
well.
But the main thing I would like to emphasize is that this
provides a range of different options that people can look at,
that commenters and look at and tell us where we are getting it
right, where we are getting it wrong and what adjustments can
be made. So this sort of, you know, array of different options
is really a benefit to the commenting community.
Mr. Latta. Well, thank you very much, Mr. Chair. My time is
expired and I yield back.
Mr. Olson. The gentleman's time is expired. The Chair calls
upon the gentleman from New York, Mr. Engel, for 5 minutes.
Mr. Engel. Thank you, Mr. Chairman. I want to thank the
witnesses. You can see there is a lot of interest here. We have
had a lot of members here. I have a few questions I am going to
try to move on fast.
Implementation of CAFE standards has been happening
alongside the recovery of the auto industry. In 5 years into
this implementation new vehicles are significantly more fuel
efficient, consumers are buying automobiles at a record pace,
and U.S. automakers have made a dramatic return to
profitability. So aren't the standards working as proposed,
even though my friend Mr. Barton wants to repeal the whole
program? Aren't these working as proposed?
Ms. McCabe. Well, we think they are, given the number of
additional models that are available for customers to buy that
get increasing fuel economy.
Mr. Hemmersbaugh. Yes, we at the Department of
Transportation and NHTSA believe they are working well and as
intended.
Mr. Engel. Thank you. In the past few years we have seen
substantial new technologies come to market including advanced
engines, improved transmission systems, light weighting of
vehicles and more efficient tires. Do you think that the
relaxation of CAFE standards would stifle additional
advancements?
Ms. McCabe. Well, I think that the standards do provide a
goal and a challenge to the manufacturers, and I think that
that kind of goal and expectation has been helpful to drive
innovation over years in the auto industry as well as other
industries. So I think it is important to have reasonable and
achievable but ambitious standards given the stakes here, which
is fuel economy, consumer choice, cost and the impact that
greenhouse gases are having on our environment.
Mr. Engel. Mr. Hemmersbaugh, do you agree?
Mr. Hemmersbaugh. I agree.
Mr. Engel. I agree. OK. I have been an advocate for many
years of increased production of flex-fuel and alternative fuel
vehicles. When car makers sell flex-fuel vehicles that are
built to run on either gasoline or E85, they earn credits that
help them to comply with the CAFE requirements.
Can you explain how that works and share your thoughts on
whether we should continue these credits, because only about
two percent, I am told, of gas stations in the U.S. sell E85 so
most flex-fuel cars run on gasoline and don't generate the
intended benefits because they can't get it. Can we remedy
that? Should we, and if so, how?
Ms. McCabe. Yes. So there is a provision in the rule as you
identify for flex-fuel vehicles to get credit in the
calculation of fuel economy, and EPA keeps a watch on the very
issue that you identify which is how often are those vehicles
actually driving on E85. And we have the ability to adjust the
credit that is currently in the rule to reflect real-world
conditions.
As we discussed earlier, we have this complementary
program, the Renewable Fuel Standard, the major purpose of
which is to try to increase the availability of renewable fuels
including E85. And so there are significant efforts that not
only EPA but USDA and others are putting into that effort. The
more that that is successful, the more we will see these flex-
fuel vehicles actually operating on E85 and the CAFE standards
and the GHG standards can accommodate that.
Mr. Engel. Thanks so much. Let me see, in 2012 it was
widely reported that about 60 percent of vehicle sales would be
cars and 40 percent would be trucks and these numbers seem to
have flipped, so it is now 60/40 the other way. Does that
consumer choice impact industry's ability to meet their CAFE
standards?
Mr. Hemmersbaugh. No. Because the standards are designed
based on the footprint of the vehicle, every size of vehicle
has its own fuel economy target. So the manufacturers' mix of
vehicles--and say that they are as you suggest. Our numbers
suggest more like 50/50, light vehicles and, or trucks and
light cars, but whatever the percentage is, the beauty of the
standards is that each size of vehicle has its own fuel economy
standard, so there is no need to have some corresponding offset
in high fuel economy for small vehicle if they are building
more larger vehicles.
So that is really an important, and as Ms. McCabe said,
ingenious innovation of the 2007 EISA statute to provide that
we use these footprint standards.
Mr. Engel. Thank you. My last question is that CAFE
standards are often linked to the 54.5 mile per gallon
projection, but that is not even close to the miles per gallon
estimates that will be pasted on the windows of new cars in
showrooms, let alone the fuel economy that drivers would
experience on the road. Instead, the calculations take into
account adjustments and credits for things like electric cars,
flex-fuel vehicles, energy-efficient air conditioning, and
rooftop solar panels. So the result is the 54.5 mile projection
is the equivalent of about 37 to 40 MPGs on the sticker.
So I am hearing arguments that additional CAFE credits
should be awarded to the auto industry for safety improvements
such as autonomous braking which in theory will prevent
accidents, reduce congestion, and thus save energy and
emissions. What are your thoughts on that?
Ms. McCabe. This is an issue that we are certainly hearing
about. I don't think we feel like the data are sufficiently
robust to make decisions on this right now, but encourage and
invite everybody to continue to look at that.
Mr. Hemmersbaugh. I would just add that with respect to any
proposals to change a program we would keep in mind our
overarching goal of fuel conservation, and we would view with
some skepticism any credit system or other changes to the
program that could undermine the gains that we have had in fuel
economy.
Mr. Engel. Thank you. Thank you, Mr. Chairman.
Mr. Olson. The gentleman's time has expired. The Chair
calls upon the gentleman from the Commonwealth of Virginia, Mr.
Griffith, for 5 minutes.
Mr. Griffith. Thank you very much, Mr. Chairman. I
appreciate you all being here today. Acting Administrator
McCabe, my constituents tell me that the joint EPA-NHTSA
rulemaking published in August imposes the compliance burden on
the manufacturers of truck trailers to achieve reductions in
greenhouse gases. Is that correct?
Ms. McCabe. So you are speaking of the heavy-duty rule that
we published this summer.
Mr. Griffith. Yes, ma'am.
Ms. McCabe. And it does address a variety of aspects of
trucks that can contribute to lower greenhouse gases, including
trailers.
Mr. Griffith. OK. And so that brings my first question. The
legal authority defines, that gives you all the right to do
this on motor vehicles, defines motor vehicles to mean, and I
am going to read from 42 USC 7550 paragraph 2. The term motor
vehicle means any self-propelled vehicle designed for
transporting persons or property on a street or highway.
So recognizing that trailers are not self-propelled, they
are not a part of the heavy truck; they are added to the heavy
truck after the manufacture of the heavy truck, from whence
comes your legal authority to regulate trailers?
Ms. McCabe. Well, Congressman, we lay out our response to
those comments and our legal analysis at great length in the
rule, but I will tell you that without a trailer a truck is not
transporting goods. And so we see the trailer as an integral
part of the vehicle that is covered in the Clean Air Act.
Mr. Griffith. And you and I are going to have these
disagreements for years because we just see things differently
and I recognize that. But in all due respect, one of the
principles of law, and I understand that you are not an
attorney and I am not----
Ms. McCabe. I am, actually.
Mr. Griffith. Oh, you are an attorney. OK. Well, there you
go. One of the principles is--I was giving you credit. One of
the principles is, is you go with the plain meaning of the
words when Congress writes a statute. ``Motor vehicle'' means
any self-propelled vehicle designed for transporting persons or
property on a street or a highway.
It would be my opinion, and I think based in well-settled
law, that if you wanted to include trailers, you should have
asked for an amendment to the code section as opposed to
deciding on your own at the EPA, well, we see the truck can't
be used without a trailer to haul goods, therefore we are going
to make a determination. That is our job. And respectfully, you
are not elected by folks. That is our job to make that
decision.
And maybe it is the right decision, but it is something
that we should have decided as opposed to the EPA just deciding
to rewrite the words in the code section. And so I find it very
difficult to rectify. And while you may have a very lengthy
clarification on how you get to that point, the plain meaning
of the words are motor vehicle means any self-propelled vehicle
designed for transporting persons or property on a street or
highway. A trailer doesn't do anything.
Furthermore, the manufacturers of those trailers are not in
most cases, I don't know of any but maybe there are some, they
are not the truck manufacturers. So they are completely
different entities across the board. And I am not talking about
wholly owned subsidiaries or anything like that. They are
completely different companies. And so a person can go out and
buy their truck from one of the manufacturers and then they can
go buy their trailer from any number of manufacturers. And so I
am having a hard time figuring out how you all came to that
conclusion.
Furthermore, and for many of my colleagues who may not be
aware of it, there is a SmartWay program where you all
encourage folks to do things on trailers and the SmartWay is
currently voluntary, but appears from this new ruling that has
come out that you all are making the SmartWay program
mandatory. The problem that I have with that, Acting Secretary,
is that helps on trucks that are going to be hauling across the
highways, but it does not help in those situations where, which
I am told about half of the trucks that are out there hauling
things are in local traffic, sometimes congested areas, these
additional costs and extra weight added to the truck by the
SmartWay program which appears to now going to be basically
mandatory, they don't give you any fuel efficiency for those
trucks that are hauling things in a local setting.
Now if you are on the interstate highway they clearly give
you benefits and the SmartWay program is beneficial to the
truckers. What do you say to that? Why does it have to apply to
every trailer that is sold out there when you have got a lot of
folks who don't want it to go that direction because it is not
going to save them any fuel efficiency or give them any
benefit?
Ms. McCabe. Well, Congressman, of course I am not sure
where you have concluded that the rule made the SmartWay
program mandatory because it certainly doesn't. The rule sets
expectations and standards for a large range of different kinds
of trucks and it is very detailed and diverse based on the
kinds of trucks. And we looked exactly at that question.
Different standards are appropriate for vehicles that are on
the highway operating at high speed, most of the time driving
many, many miles, and other standards and other technologies
are appropriate for vehicles that are used in urban settings
and on smaller roads and stop and start and that sort of thing.
So I think you will find, and I think the manufacturers
find that we have been very responsive to exactly those sorts
of things and have not made the SmartWay program mandatory.
Mr. Griffith. OK. That is not what I am hearing. My time is
up. I would say though that if you are talking about the
averaging features that that doesn't kick in for years and a
lot of the smaller manufacturers feel like they are going to
have some real difficulties.
With that Mr. Chairman, because time is up and
notwithstanding lots of other questions, I yield back.
Mr. Burgess [presiding]. The gentleman yields back. The
Chair thanks the gentleman for his questions and recognizes the
gentleman from Texas, Mr. Flores, 5 minutes for questions,
please.
Mr. Flores. Thank you, Mr. Chairman, and I appreciate the
witnesses joining us today. We talk about One National Program,
and we have had questions regarding the harmonization efforts
that we have talked about. And as I have listened to the
testimony and reviewed the briefing documents, it seems to me
like there are four principal differences that keep us from
absolute harmonization.
So the first principal is with respect to the credit
carryovers--5 years for NHTSA, 11 years for the EPA. The second
one is the carryover transfer cap which allows a manufacturer
to transfer part of their credits from one fleet to another,
for instance, cars to light trucks and vice versa. For NHTSA
there is a cap of 2 miles per gallon per year. EPA has no such
cap.
Then the third one has to do with off-cycle technologies,
for instance start-stop technology, engine start-stop
technology, louvers and things like that which are all pretty
innovative. The EPA allows credits beginning in model year
2014, however, NHTSA is not going to start recognizing those
until 2017. And then the fourth difference is that the
California Air Resources Board is requiring that 15 percent
market penetration of zero-emissions vehicles by 2025, and
there is no such standard for Federal.
Do you all agree with those four principal impediments to
harmonization, complete harmonization? I know you were writing
real quickly.
Ms. McCabe. Yes. Let me address the last one that you
mentioned.
Mr. Flores. And I need really quick answers.
Ms. McCabe. Yes. So there is no disharmonization there.
California has independent authority and has had a ZEV program
for many, many years because of their air quality problems in
California. But vehicles sold in California can absolutely
satisfy requirements under the EPA and the NHTSA program.
Mr. Flores. OK. So do both of you agree then the other
three standards prevent Federal harmonization? Does that make
sense?
Mr. Hemmersbaugh. I would like to qualify that a little
bit.
Mr. Flores. OK.
Mr. Hemmersbaugh. The credit lives as of 2016 for both EPA
and NHTSA are 5 years.
Mr. Flores. OK.
Mr. Hemmersbaugh. It was only sort of a catch-up in the
start that EPA had 10- and 11-year credits. Those will all
expire by 2020.
Mr. Flores. OK. But there is no statute that requires EPA
to limit theirs to 5 years, right?
Ms. McCabe. No. That is a regulatory matter, but they are
the same age now.
Mr. Flores. OK. OK, NHTSA's are 5 years by statute. EPA has
no statute, correct? OK, so to the extent that Congress wants
to harmonize, Congress needs to come up with a statute on that
issue. The second one has to do with the carryover transfer
cap. NHTSA's, by statute yours is two miles per gallon per
year, right?
Mr. Hemmersbaugh. Correct.
Mr. Flores. OK. And EPA no cap, correct?
Ms. McCabe. Across vehicles?
Mr. Flores. Correct.
Ms. McCabe. Correct.
Mr. Flores. Across fleets.
Ms. McCabe. Yes.
Mr. Flores. Or from one fleet to another.
Ms. McCabe. Right. That is right.
Mr. Flores. OK. So if we want to harmonize that that is
going to require legislative action and an update to the
statute. And then lastly, on the off-cycle technologies, I
don't gather that there is any statute that regulates that,
that addresses this issue, right?
Mr. Hemmersbaugh. My understanding of off-cycles is that
they are things that the tests don't measure, the treadmill
tests that we test for don't measure.
Mr. Flores. Right.
Mr. Hemmersbaugh. But do contribute to fuel economy and
greenhouse gas reductions. So my understanding is there are,
the statute, the NHTSA statute anyway is silent on that.
Mr. Flores. Right.
Mr. Hemmersbaugh. And we had previously----
Mr. Flores. Which means there is no statute.
Mr. Hemmersbaugh. Yes. Well, but we had previously
interpreted that as meaning we weren't authorized to do it. We
subsequently changed our interpretation such that now starting
in 2017 we will consider off-cycle credits.
Mr. Flores. All right. Ms. McCabe.
Ms. McCabe. Yes. So our statute requires a two-cycle test,
but it does not preclude the use of off-cycle credits.
Mr. Flores. OK. So to entirely harmonize these we would
need legislative action. All right. So I think we know what our
job is now in terms of Congress coming up with a legislative
fix for these three principal areas of harmonization.
I have a quick question. You talked about E85 vehicles a
minute ago. E85 fuel has fewer BTUs of energy per gallon and
therefore the vehicles that are burning E85 get about a third
lower miles per gallon. So what is the emissions impact? I know
that some people claim ethanol has a lower emissions profile
than vis-a-vis gasoline, but how much of that is offset by the
fact that you are getting one third less miles per gallon?
Ms. McCabe. When it comes to greenhouse gases, the research
that the agency has done to date on this program shows that
there is a benefit. There is a carbon benefit in using E85.
Mr. Flores. So if you are burning 20 gallons of ethanol you
have a lower greenhouse gas output than 12 1A\1/2\ gallons of
gasoline. Is that what you are telling me?
Ms. McCabe. I believe that is right, Congressman. We will
double----
Mr. Flores. Can you supplementally answer that?
Ms. McCabe. Absolutely.
Mr. Flores. And some of the statistics, too. I want to see
the test.
Ms. McCabe. Sure. Yes.
Mr. Flores. And I have used up too much of my time, so I am
going to stop. Thank you.
Mr. Burgess. The gentleman yields back. The Chair thanks
the gentleman. Seeing no further members wishing to ask
questions of the first panel, I do want to thank our witnesses
for being here today. This will conclude our first panel, and
we will take a very, very brief recess to set up for the second
panel. Thank you for being here today.
[Recess.]
Mr. Burgess. We will call the committee back to order. We
may still be waiting on one witness to join us, but in the
interest of everyone's time, why don't we go ahead and restart.
I do want to thank everyone for their patience in being here
today.
Moving into the second panel for today's hearing, we will
follow the same format for the first panel. Each witness will
be given 5 minutes for an opening statement followed by a round
of questions from members. For our second panel we have the
following witnesses. You reversed order on me.
We have Mr. Mitch Bainwol, the President and CEO of the
Alliance of Automobile Manufacturers; Mr. Peter Welch,
President of the National Automobile Dealers Association; Dr.
John Graham, Dean of the School of Public and Environmental
Affairs for Indiana University; Mr. John German, Senior Fellow,
U.S. Co-Lead, the International Council on Clean
Transportation; Dr. Mark Cooper, Director of Research from the
Consumer Federation of America; and Mr. John Bozzella,
President and CEO of the Global Automakers.
We will go in reverse order. We will start with you, Mr.
Bainwol, 5 minutes for questions.
STATEMENTS OF MITCH BAINWOL, PRESIDENT AND CEO, ALLIANCE OF
AUTOMOBILE MANUFACTURERS; PETER K. WELCH, PRESIDENT, NATIONAL
AUTOMOBILE DEALERS ASSOCIATION; JOHN D. GRAHAM, PH.D., DEAN,
SCHOOL OF PUBLIC AND ENVIRONMENTAL AFFAIRS, INDIANA UNIVERSITY;
JOHN GERMAN, SENIOR FELLOW AND PROGRAM DIRECTOR, INTERNATIONAL
COUNCIL ON CLEAN TRANSPORTATION; MARK COOPER, PH.D., DIRECTOR
OF RESEARCH, CONSUMER FEDERATION OF AMERICA; AND JOHN BOZZELLA,
PRESIDENT AND CEO, ASSOCIATION OF GLOBAL AUTOMAKERS, INC.
STATEMENT OF MITCH BAINWOL
Mr. Bainwol. Chairman Burgess, Ranking Member Schakowsky,
and members of the committee, thank you for this opportunity to
testify today on behalf of 12 iconic OEMs from the U.S., from
Europe, from Japan, who together represent about 75 percent of
the domestic market. Automakers are investing a staggering $100
billion a year--that is $100 billion with a B--to make today's
cars the cleanest, safest, the most fuel efficient ever.
Let me start by stipulating that we support the goals of
increased CAFE and GHG standards and believe they will be
achieved and ultimately surpassed. The question isn't yes or
no, but rather how, when and at what cost to your constituents.
OEMs strongly embrace two cornerstones of the 2012 joint rule.
First, we supported the common sense idea of a midterm review
to ensure that the underlying assumptions remain valid, and
that is critical given the time horizon involved.
Second, we embrace the administration's commitment to One
National Program to minimize compliance costs and thereby help
your constituents buy new cars. Now this is the TAR, this
double binder is double-sided. It is obviously very long and
very dense. This is the portion of the TAR that addresses
consumer acceptance. It is short and, as you can see, not very
dense, and that is a concern for us.
The most critical fact about CAFE that it is effectively a
mandate on consumption. It doesn't matter what we put into the
showrooms, it matters what your constituents take out of those
showrooms. Critically, CAFE was launched with an expectation of
higher gas prices and it is being played out in a world of
structural lower gas prices. That impacts consumer choice and
is a game-changer.
This first graph that I think you can see on the screens
illustrates the materiality of the gap. You can see the gap is
consistent over time and very large, so that in 2025 in 2010
dollars the expectation was 3.87 and now the expectation is
2.76. This next graph shows what happens to the purchase of
alternative powertrains when gas prices fall. It kind of looks
like synchronized swimming.
And you see in the third graph that the market share of
alternative powertrains is therefore sliding down. The
regulators in Washington and in California want consumers to
optimize. They want them to optimize fuel efficiency and carbon
reduction, but consumers are making decisions that reflect a
range of other priorities that are right for their families.
So this next slide shows where fuel efficiency ranks, and
there you go. And it is kind of hard to see, but it is item
number 26 in the strategic vision assessment of 2016. Consumers
are not saying the fuel efficiency isn't good or desirable,
they like it. They are saying instead that they care about a
range of attributes. And your constituents are not wrong. They
are doing what is right for them, but they are not doing what
planners want them to do.
Now let's turn to One National Program. The short story is
that it doesn't exist. There are now two separate consumption
mandates, CAFE and ZEV. ZEVs run out of California and nine
other States follow it. By 2025, the ZEV mandate effectively
places a $356 tax on every car sold in America. This is
important. It means California policy is raising the cost of
every car your constituents buy in all of your districts.
And the Federal program contrary to assurances is not
harmonized. Complying with the more stringent EPA requirements
does not equal compliance with NHTSA, thus counterproductively
adding regulatory costs making cars less affordable and that
especially hurts lower income Americans. It needs to be fixed
sooner rather than later.
To close, getting all this right really matters. If we jam
standards that are inconsistent with consumer behavior we risk
jeopardizing the health of this key industry leading to
thousands of job losses, if not more, diminishing environmental
gains and safety outcomes. We have to keep cars affordable to
protect these social goals.
Now I want to make one other point here since I have a
little bit more time. The Center for Automotive Research
released a study yesterday and it was significant in terms of
it demonstrates that there is a risk to getting this equation
wrong. As I understand it, the EPA and NHTSA analysis of the
TAR analysis did not do a sensitivity analysis.
What CAR did was they looked at nine different scenarios,
three different gas prices, and three different costs estimates
of the technology, and they ran the nine different scenarios.
And they looked at what happens in terms of employment, sales,
production, and it is kind of striking.
Let me take a second and run through the range. Unit sales
could rise by 410,000 or fall by as much as 3.7 million.
Production could rise by 240,000 or fall by as much as 2.1
million units. Auto employment could rise by 16,000 or fall by
138,000, and with the multiplier in employment, employment
could rise by 144,000 or fall by over a million jobs. That is
in Michigan, it is Ohio, it is Texas, it is California, it is
Illinois.
This is profoundly important because it demonstrates that
if we get this equation wrong, the implications for the economy
are truly profound. Thank you and I look forward to answering
questions.
[The prepared statement of Mr. Bainwol follows:]
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Mr. Burgess. The Chair thanks the gentleman. Mr. Peter
Welch, you are recognized for 5 minutes for an opening
statement, please.
STATEMENT OF PETER K. WELCH
Mr. Welch. Chairman Burgess, Ranking Member Schakowsky,
thanks for inviting me. I am Peter Welch--I am the other Peter
Welch--the President of the National Auto Dealers Association.
NADA represents more than 16,500 franchised new car and truck
dealer members who sell new and used cars and trucks, arrange
auto financing, perform routine repairs, warranty and recall
work on millions of vehicles annually. Local dealerships
collectively employ over 1.1 million Americans in good paying
jobs and are located in every congressional district.
In America motor vehicles are not luxury goods. Affordable
transportation is critical to personal mobility and freedom,
essential to economic empowerment and a key driver of national
productivity. Cars and trucks open up employment and housing
opportunities that many Americans would not otherwise enjoy.
When it comes to decisions that affect the environment,
local dealerships are providing their customers with
unparalleled choices. In addition to incredibly efficient
internal combustion engines, franchise dealers currently have
on their lots over 75 different models of hybrid, plug-in
electric and battery electric vehicles. Toyota dealers are even
now selling fuel cell cars.
Local dealerships consistently educate buyers on the value
of these technologies and how to use these vehicles and how
they can fit into their lifestyles. The number one priority at
every new car dealership is to serve its customers by providing
them with the choices they want and at prices they can afford.
Every one of our customers deserves to be able to purchase a
vehicle that is right for them.
This means that during the midterm review careful thought
needs to be given to keeping the cost of vehicles reasonable
and to ensuring that people can still afford to buy a cleaner,
greener, safer car or truck they really need or want.
Washington should not make personal mobility so expensive that
it is no longer available to the average American.
Consumers finance more than 90 percent of all new vehicle
purchases. When regulations drive up the price of vehicles,
fewer of our customers will be able to qualify for a car loan.
The average price of a new car is at an all-time high, $34,250,
with an average monthly payment of $510. This is with
historically low interest rates. Right now they are at like
average 4.2 percent, but the terms keep getting longer and
longer. They are stretched out to 68 months now, on average.
Since 2005, the percentage of personal income necessary to
purchase a new vehicle has risen from 9.5 percent to 12.4
percent today. It is taking a bigger chunk out of the wallet.
This already puts new vehicle purchases beyond the reach of
millions of Americans. That is why affordability is everything.
We need to ensure that people can buy the cars they want or
need, and make it possible for average Americans to afford
cleaner new cars and trucks.
If moves here in Washington force our customers out of new
cars because the technology needed to attain the 2022 to 2025
regulatory targets raise loan payments by $50 or $60 a month,
many of our customers will be forced to drive less safe, less
efficient, dirtier used cars, and the CAFE greenhouse gas
regulations will become counterproductive.
Let me be clear about one thing. America's new car dealers
are not on opposite sides of this debate. Dealers are in favor
of national policies to reduce greenhouse gas emissions,
increase fuel efficiency, and promote energy independence. What
we are standing for is affordability and to make sure our
customers, your constituents, are put first.
An approach that enables more customers to purchase
affordable new cars and trucks will produce a winning scenario
for everyone--dealers, manufacturers and the driving public. If
we work together we have a perfect opportunity in the midterm
assessment to ensure that our customers have access to clean,
efficient new vehicles at affordable prices. Thank you.
[The prepared statement of Mr. Welch follows:]
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Mr. Burgess. The Chair thanks the gentleman. The Chair
recognizes Dr. Graham, 5 minutes to summarize your opening
statement, please.
STATEMENT OF JOHN D. GRAHAM
Dr. Graham. Thank you, Mr. Chairman. The theme of my
testimony is that a new issue should be added to the midterm
review, the need to coordinate the California Zero Emission
Vehicle program with the Federal regulations. Specifically, I
recommend that the Congress commission an independent, cost-
benefit study of the California regulation and compare it to
the Federal regulations and look for harmonization options.
My recommendation is based on three concerns. One, from a
technology perspective, regulators in Washington, DC, and in
Sacramento, California, are pushing the automakers in
conflicting directions. The Federal regulators expect
automakers to accelerate their investments in greener versions
of the gasoline internal combustion engine.
The regulators in California expect automakers in the same
time frame to replace the gasoline engine with plug-in electric
vehicles or fuel cell vehicles. Please note that when I refer
to California, I include the nine other States mostly in the
Northeast that have joined the California Zero Emission
Program. In total, these 10 States account for about 30 percent
of all new vehicle sales in the country.
My second concern is that it has proven much more difficult
to sell plug-in electric vehicles than many of us thought in
2002 when this regulation was developed. California expects
automakers to achieve an 18 percent penetration rate of plug-in
electric vehicles by 2025, updated from a previous estimate of
15 percent. But the sales of such vehicles actually declined in
2015 compared to 2014. The sales raise now about 3 percent in
California, and less than one percent in much of the country.
In an excellent 2015 report, the National Research Council
documented the numerous barriers to commercialization of plug-
in electric vehicles, but I would like to highlight three of
them that are new today compared to when California adopted the
regulation in 2012. First, gas prices as everybody has noted
are much lower. Instead of $4 per gallon and going higher, they
are projected to be under $3 a gallon all the way through 2025.
Second of all, the Federal regulations are discouraging a
consumer from purchasing a plug-in electric vehicle and that is
because if there are plenty of gasoline vehicles on the market
getting 40 to 60 miles per gallon, how can a dealer persuade a
consumer to pay extra for a plug-in electric vehicle? So the
Federal regulations are actually undercutting the California
program.
Third, the incentives offered by the Government are
inadequate to spur commercialization of plug-in electric
vehicles. The generous $7,500 Federal income tax credit is
forecasted to expire before 2025 at least for several
manufacturers. Some States such as Colorado and Connecticut
have recently added incentives to purchase plug-in electric
vehicles, but other States--Georgia, Illinois, and California--
have scaled back or eliminated entirely their cash incentives
for electric vehicles.
In fact, some States have added new taxes on electric
vehicles because owners do not pay any gasoline tax to fund
road repairs. Why should a consumer pay extra for an electric
vehicle if the Government is going to turn around and add an
extra tax on electric vehicles? This is not a single national
program that is well coordinated, let me assure you of that.
My faculty colleagues at Indiana University have recently
issued a report on the many constructive policies that can be
enacted to spur commercialization of plug-in electric vehicles,
but if governments do not get serious about helping dealers
sell electric vehicles, the California regulation which covers
almost a third of the country is going to prove to be a very
onerous regulation.
I conclude with two questions that I pose to my students
when we discuss this issue in class. One, if California
regulators are right, why not eliminate the Federal regulations
and convert the California Zero Emission Vehicle program into a
national regulation; or two, if the Federal regulators are
right, why not preempt the California regulations and let the
marketplace determine what the most cost effective technologies
are to comply with the regulation?
In conclusion, I recommend during the midterm review that
Congress commission an independent, cost-benefit study of the
California regulations compared to the Federal regulations, and
address this as soon as possible. Thank you very much for your
time.
[The prepared statement of Dr. Graham follows:]
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Mr. Burgess. The Chair thanks the gentleman. The Chair
recognizes Mr. German, 5 minutes to summarize your opening
statement, please.
STATEMENT OF JOHN GERMAN
Mr. German. Mr. Chairman, good morning. My name is John
German. I am a senior fellow at the International Council on
Clean Transportation with primary responsibility for
technology, innovation and U.S. policy development. Thank you
for the opportunity to appear before the committee, present our
views on vehicles and technology and how they relate to the
midterm review of the CAFE and greenhouse gas standards.
I have been actively involved with vehicle technology and
efficiency for 40 years, half of that time working for auto
manufacturers Chrysler and Honda, the remainder with EPA and
ICCT. Over the course of my career I have seen initial cost
estimates for complying with emissions and efficiency
requirements consistently overstated. Not some of the time or
even most of the time, but all of the time.
The reason, technology innovation that is left out of the
forecast, in part because the direction, pace and cost of
innovation is hard to predict, and in part because there is so
much at stake that everyone involved has an incentive to focus
on what is already known. In my experience, the single most
important factor in the accuracy of cost-benefit projections is
the use of the latest technology data. Using older data or
implicitly assuming no further innovation will occur guarantees
that the cost in meeting the standard will be overstated. This
is even more true now because the pace of technology
development is accelerating, driven by rapid advances in
computer-aided design, computer simulations and onboard
computer controls.
In collaboration with engineers and analysts from major
automotive suppliers, ICCT is producing a series of papers
assessing technology development since the analyses for the
2017 to 2025 standards were conducted 4 to 5 years ago. These
assessments cover new and improved designs, cost of production,
and consumer acceptance.
The improvement in vehicle efficiency technology over the
last 5 years has been astonishing. Significant technologies
that were not included in the 2025 rule, but which automakers
already have in production or have production plans for include
naturally aspirated engines with higher efficiency Atkinson
cycle and high compression ratios, dynamic cylinder
deactivation that can deactivate each cylinder every other
stroke, higher efficiency Miller cycle for turbo-charged
engines, variable compression ratio, electric compressors to
assist turbo-charged engines or eBoost, less expensive 48-volt
hybrid systems, continuously variable transmission
improvements, and major advancements in lightweight materials
and part optimization. These developments will make it easier
and cheaper to meet the standards that was projected in the
rulemaking.
The agencies extensively updated their technology analyses
for the draft Technical Assessment Report released this past
July. They also expanded their use of rigorous peer-reviewed
teardown cost studies which is the method specifically endorsed
in the 2015 National Academies of Science report. Still,
despite all the updates the agencies did not include all of the
technology improvements that are already happening in the
market. Thus, the cost estimates in the TAR while much improved
over the rulemaking are still somewhat overstated.
The Novation Analytics study prepared for the vehicle
manufacturers associations is an example of a study that
implicitly assumes there will be no more innovation. While this
is an excellent study of 2014 technology, evaluated only
technologies included in the rulemaking 5 years ago, and it
also assumed that the average vehicles in 2025 would be similar
to the best vehicles in production in 2014.
The older technologies that were considered by Novation
ignores recent innovations and artificially restricts the
improvements available from conventional technology, forcing
additional hybrids and plug-in vehicles to make up the
shortfall. Simply put, ICCT's analysis of advanced conditional
technologies shows that automakers will not need to rely on
hybrids and plug-ins to meet the 2025 standards. Moreover, the
fuel savings from these conventional technologies will produce
a net monthly gain for most consumers in the low gas price
scenarios.
And they come with other benefits that consumers value.
Turbo-charged engines deliver more torque and better
acceleration at low engine speeds, more transmission gears
improve launch and are quieter on the highway, weight reduction
improves acceleration, ride, handling, braking, and payload and
tow capacity. This isn't merely theoretical. Ford's F-150
buyers aren't being forced to take the V-6 EcoBoost engine over
the V-8. Almost half of F-150 buyers willingly pay an extra
$600 for it.
To sum up, the agencies' technology forecast for the 2025
rule have proved to be careful, prudent, and like all
technology forecasts I have seen over the last 40 years a bit
too conservative. The TAR though improved will most likely turn
out the same. Thank you again for inviting me to testify here.
I will be happy to answer any questions.
[The prepared statement of Mr. German follows:]
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Mr. Burgess. The Chair thanks the gentleman for his
testimony. Dr. Cooper, you are recognized for 5 minutes.
STATEMENT OF MARK COOPER
Dr. Cooper. Thank you, Mr. Chairman and members of the
committee. The Consumer Federation of America has participated
in hundreds of efficiency rulemakings and regulatory
negotiations and legislative hearings involving large and small
energy devices from automobiles to heavy trucks to computers to
light bulbs. We participate in every round of comments on the
light-duty standards since the passage of the Energy
Independence and Security Act.
Our technical expertise is not in the design and
construction of products, but in the design and construction of
minimum efficiency standards. We believe that learning how to
build a good standard is as important to success as knowing how
to build a good product. We do look at the technological
assessments, economic analyses, and examine market behavior to
make sure we understand what kind of program will be in the
consumer's interest.
I will briefly discuss seven points that I outline in my
testimony and will do so before the agency. Under the base
case, consumers are the big winners with total benefits in our
view over five times the cost. Three-fifths of those benefits
are direct consumer pocketbook benefits because the total cost
of driving goes down.
Second, low-income consumers benefit more than the average
consumer because operating costs of vehicles are much more
important in their total cost of driving than ownership cost.
They buy used vehicles. And those used vehicles, it turns out,
get a disproportionate share of the benefits of fuel savings
because they are not fully captured in the resale price. They
get the benefit of the second half of the life of the vehicle.
And third, let's be clear. Low-income people suffer the
most from environmental and pollution harm that results when we
drive dirty cars. They suffer the most. They benefit the most
from the indirect effects.
Now the National Program is still strong in spite of
dramatic reduction in the cost of gasoline for a simple reason,
because the minimum efficiency standards were well designed,
well written by Congress, a law signed by George Bush, I remind
you, and implemented effectively by the Obama administration.
We call these command but not control regulations. I am
going to patent that--command but not control. Because what
these regulations do is they address many market imperfections,
but they harness the power of capitalism and the market to
deliver the benefits at the lowest possible cost. They give
producers the freedom to meet the standard in the best way
possible to meet their interests. And just look at the array of
options. There are hundreds of options available and consumers
get the vehicles they want.
Automakers have done a magnificent job in using their
freedoms. They are overcomplying, the costs are coming down,
innovation is raging, so the economics of the capitalist
automakers are meeting these standards. Of course their
political arms come to Capitol Hill and complain. But that is
what they always do. They overestimate costs by a factor of
three or four. It is not $50 a month, it is closer to 15 and
that makes a big difference.
If you look at the agencies, they have listened,
identifying a dozen things that people said they should do and
they have done it. They considered scenarios, dozens of
scenarios to look at the impact, and they have concluded that
this is a positive program that is working tremendously.
Finally, you hear a lot about differences between them.
Let's be clear, they agree this is the right direction. They
are having a healthy debate about cost, but their debate is at
a half or a quarter of what the industry says, and history
shows the industry always overestimates the cost.
Let me make a final point on the ZEV program which is not
greatly implicated here. The chairman bubbled about the fact
that he drives a strong hybrid. Hats off to you, sir. The
single largest reason that you had that vehicle available was
the California Low Emission Vehicle program. It was California
that told the automakers you must find these vehicles. And they
stood their ground and we now have hybrids because California
came first. It is a perfect example of American federalism at
its best.
So before you mess with the leadership role that the clean
car States--and it is the Northeast and the West. There were 30
in the LEV program, there are eight in the ZEV program. They
are the fifth-largest auto market in the world. Before you
squash that leadership and that creativity, think hard about
the benefits of having a leader and others to follow. Thank
you.
[The prepared statement of Dr. Cooper follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman for his
testimony. Mr. Bozzella, you are recognized for 5 minutes,
please.
STATEMENT OF JOHN BOZZELLA
Mr. Bozzella. Thank you, Chairman Burgess, Ranking Member
Schakowsky. Thanks for the opportunity to testify today. I am
here on behalf of the Association of Global Automakers. I want
to thank you for holding this hearing today and for the
opportunity to be here as a representative of international
automakers that design, build, and sell cars and light trucks
in the United States.
In 2009 and again in 2012, the auto industry, Federal
Government, and the State of California committed to a unified
program for fuel economy and greenhouse gas emissions. These
goals are very important and we support them. But since this
program set standards for vehicles more than a decade into the
future, regulators are now beginning a midterm evaluation to
assess the assumptions made in 2012 and to reexamine the path
toward 2025.
To get to the point, the question on everyone's minds at
this hearing is this. Are the standards for 2022 to 2025 that
were set almost 5 years ago too high, too low, or just right?
The reality, the really only truthful, albeit unsatisfying,
answer to that question is it depends. It depends on a number
of factors. It depends on what customers want, and by want I am
not talking about what is expressed in public opinion surveys.
I am talking about what customers want as expressed by their
actual purchases by the votes they cast with their wallets.
Do they want electric vehicles, minivans, sedans, pickups,
and how much are they willing or able to pay for what they
want? It depends on price of fuel, because the price of
gasoline has a direct impact on customer behavior. Gas has been
cheap for the last few years and customers have reacted by
buying trucks and SUVs which now account for more than half of
U.S. vehicle sales. They have reacted by not buying hybrids or
electric vehicles, sales of which compared to conventional
vehicles have dropped despite the fact that customers have more
and better hybrid and electric vehicles to choose from than
ever before.
And it depends on a regulatory program that recognizes this
reality that we have to find a way to reconcile what the
customer wants with our public policy goals. That is because
when we are talking about a number, whether it is 54.5, 50.8,
the fuel economy numbers that we achieve aren't solely
determined by manufacturers or regulators or legislators. They
are ultimately determined by the customer.
In my written testimony I have described in greater detail
our initial analysis of the Technical Assessment Report, and I
don't want to use this time to go over that ground. Instead, I
would like to emphasize a few points. First, if every American
went out today and purchased a hybrid or electric vehicle and
nothing but hybrids and electric vehicles, meeting or beating a
target of 54.5 miles per gallon would be no big deal. But it is
not that simple.
Second, achieving our fuel economy and greenhouse gas
emissions targets is not just about engineering and ingenuity,
it is also about economics and politics. There are more highly
efficient vehicles on the market today than ever, but we have
two or three, actually, different regulatory schemes that
manufacturers have to comply with. That creates inefficiencies
and inconsistencies that needlessly waste resources and drive
us to high cost and high price solutions.
And third, we ought to be doing everything we can to
encourage support and reward innovation. As we look to 2025 and
beyond, we need to expand our options and choices. We are
lagging woefully in building the infrastructure to support
electric vehicles. Efforts to deploy connected vehicles that
will be able to reduce congestion and save thousands of lives
annually are being delayed by a fight over the spectrum
dedicated to safety.
We need to examine new models of mobility that could help
us achieve our policy goals. Our concern at Global Automakers
is that if we get locked into a discussion about what the
numbers should be, a discussion that is, to be kind, a bit
stale, we may miss opportunities that provide more effective
and faster paths to our goals.
For our part, we are ready and eager to have these
discussions. We need to work together to get this right. Thank
you again for the opportunity to testify. I welcome your
questions.
[The prepared statement of Mr. Bozzella follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Burgess. The Chair thanks the gentleman. And that
concludes the testimony, so we will move on to the question and
answer portion of the hearing. I recognize myself for 5 minutes
for questions.
And Mr. Bainwol and Mr. Bozzella, perhaps I could start
with you. We have heard a lot this morning on this panel and it
has been a pretty informative, has been a very informative
panel. But as you hear the testimony today and the testimony
from our previous panel, what are some of the biggest errors in
the assumptions that both the Environmental Protection Agency
and National Highway Traffic Safety Administration make in
doing their technical assessment, the draft Technical
Assessment Review?
We will start with you, Mr. Bainwol, and then we will go
back to Mr. Bozzella.
Mr. Bainwol. Sure. I will be submitting our TAR response to
the agency. I think it is due next Monday, and that will be a
more full response. There are several concerns we have got. One
is that there was not a sensitivity analysis done. That is one.
Two is that in contrast to what Mr. German had to say, we
believe that the technology yields are not going to be what EPA
and NHTSA suggest they will be, and we think they will be at
higher cost. This, at the end of the day is an intellectual
debate and only time will prove the answer, but I will give you
a few examples.
The TAR assumes that minivans in 2025 will be as
aerodynamic as 2014 Ferraris. As a father of three, I wish I
had one of those vans when I was a few years ago. The TAR
assumes that the adoption of Atkinson engines will be, I think,
at 43 percent in 2025 and we don't think that is practical. The
TAR assumes that the low-hanging fruit which allowed us to
overcomply, and much of the panel discussion at the beginning
was how we are overcomplying and in fact we are, was on the
basis of the low-hanging fruit, and we don't believe that it is
a given that that low-hanging fruit will regenerate.
So there are a lot of challenges here. And as I closed with
my testimony with, the downside risk of being wrong is
enormous. And so we have got make sure we do this right. We
have got to work together, but the implications are definitely
profound.
Mr. Burgess. Thank you.
Mr. Bozzella.
Mr. Bozzella. Yes, Mr. Chairman. I agree with much of what
Mitch said. I want to step back a second. I think the agencies
worked very hard, and you heard about different models and
different baselines, and it is a very complex analysis. And so,
look, we appreciate the attention they are giving to it. We are
working through the analysis. We also will file comments
Monday, but we are going to keep that analysis going. We think
that there is more work to be done and we appreciate a fact-
based and scientific analysis. We have to make sure. This is
the point. This is their reality check to make sure we get it
right.
I think there are a couple of areas where we really need to
understand the regulators' assumptions. I think the
technologies required are an important set of assumptions to
probe. There is not a single conventional fueled vehicle in the
market today that meets the 2025 standards in any footprint,
not a single one. So we have a lot of work to do.
I am bullish on the industry's ingenuity. I have bet my
family's security on it for 15 years or more, so I believe in
it. But we have a task. Not a single gasoline, not a single
conventional vehicle meets those standards today. Strong
hybrids do, electric vehicles do, so there is a question. Is it
true that we can meet this mostly with conventional
powertrains? Obviously we are innovating in both places. Lots
of innovation with regard to conventional powertrains and lots
of innovations with regard to advanced technologies.
But that is a really important question for the customer,
right, because these technologies may require differences in
driver behavior. And so this is, the customer needs to be at
the center of this discussion.
Mr. Burgess. Thank you. And just a personal observation, I
mean, I do drive a strong hybrid. I got on the waiting list to
buy that vehicle in 2003, long before the 2007 energy bill
passed. It took awhile to get it, so I didn't actually take
delivery until 2004.
But my principal reason for buying was because I thought
the technology was cool. I had heard about it in a Science
Committee hearing in 2003, and I thought what a great idea. So
when I put my brake on, it charges the battery that then I can
then use to start the car, and when I stop in the drive-in
window in Jack in the Box, my engine is not running while the
clerk fills the order.
So I respect very much what you said about the consumer.
And my comments at the beginning, we ignore the consumer at our
own peril both as a legislative body, sort of the regulators
that were on the panel before, and you of course as the
manufacturers and people who are supplying consumers what they
want to buy. It is a powerful force, and we must not ignore it.
I am going to yield to the gentlelady from Illinois, 5
minutes for questions, please.
Ms. Schakowsky. Thank you, Mr. Chairman.
Dr. Graham, a quick question. Isn't it true in your
supplemental testimony that you indicated that your program is
funded by the automotive industry?
Dr. Graham. Yes. We have a grant from the Alliance of
Automakers.
Ms. Schakowsky. Thank you.
I wanted to ask Mr. German a question: Can you address how
allowing for too many credits could undermine the goals of the
CAFE standards? Put on your microphone, please.
Mr. German. Yes. Let me specifically talk about off-cycle
credits just to illustrate, and these are technologies that
improve efficiency in the real world that do not appear on the
official test cycles. And in theory it is a great idea and it
is a concept that ICCT supports.
But the devil is in how you do the calculations and how you
award the credits. It is very easy to double count the credits
so that some of the credits that occur on the cycle you also
award them off-cycle. It is also very difficult to assess the
amount of off-cycle credits that actually occur in the real
world.
And the reason for this is that we don't have any real-
world data on how consumers drive. We have it for isolated
areas. EPA has some data from Kansas City. But if you want to
give credits, you want to do this over the Nation, year-round
basis, data doesn't exist. We are recommending that the agency
cooperate with DOT and the manufacturers to do a program
specifically to gather this data. This would also allow the
off-cycle credits to be standardized. The manufacturers have
petitioned for the off-cycle credits to be streamlined. This
would be a great way to do it is get a national data set
everybody can use and have the same credits for all.
Ms. Schakowsky. Thank you.
I wanted to move now to Mr. Cooper. Several witnesses in
this second panel have discussed the impact of differing
payback methods, payback periods rather, for fuel economy on
consumers' choice of vehicle models and options. Regardless of
the length of this period, consumers are indeed getting a
payback; isn't that correct?
Dr. Cooper. Sorry. I usually don't need a mike, I speak so
loudly. Consumers actually say they accept the 5-year payback
given this debate about how long the payback period should be.
But the fundamental point is that EPA and NHTSA have both
concluded that the payback is less than half the life of the
asset, and we like to use that as the absolute bottom line. If
there is that much savings, it means that people are likely to
make money.
Second of all, you have heard that most consumers would
love to walk into the auto dealership and get paid back in 3
years. That is not the world they live in. Ninety percent of
them you heard finance them and so it is a cash flow world for
the average consumer. And if you look at the cash flow impact
even at the EPA and NHTSA standards, you will discover that
under most assumptions, 75 percent of those assumptions, they
are cash flow positive in the first year. That is because they
lower the total cost of driving, and that is what these folks
keep ignoring. They ignore it and they make it go away by
assuming costs that are through the roof, two to five times as
much as EPA and NHTSA.
So now the difference comes down to do you believe their
costs or do you believe the agencies' and history which has
always shown that the capitalists do a good job? They are not
dumb. They don't stand still. They put the least-cost things in
the vehicles. So these are cash flow positive in the first
year. They have a payback period of less than half the life of
the vehicle, and that means they are good for consumers. It
turns out they are especially good for low-income consumers who
are driven by operating costs.
Ms. Schakowsky. I think that is a really important point.
Vehicle costs are rising due to many changes in new vehicles,
not just fuel economy--enhanced performance, greater safety
features, greater comfort, and other amenities. While all of
these things have costs which can be estimated, only one has
the benefit that is easily converted to a dollar value and
directly results in monetary benefits to the person who bought
the vehicle, and that is fuel economy.
A consumer may be willing to pay for any or all of the
other features, but none of them result in a direct payback to
the consumer. Have the agencies received comments to indicate
public support for strengthening the CAFE and greenhouse gas
standards in accordance with these rules?
Dr. Cooper. We have been surveying on these, the question
of standards for 12 years. Prices are as high as 4.50 and as
low as $2. Eighty percent of the respondents to our survey
support standards. They understand that it is good for them.
They hate the volatility. They hate high prices. But they also
hate not knowing whether it is going to be $4 or $2. So we find
consistent, strong support for the standards program.
Ms. Schakowsky. Thank you. I yield back.
Mr. Olson [presiding]. The gentlelady yields back. The
Chair calls himself for 5 minutes for questioning. First of
all, a warm welcome to all six witnesses and a special warm
welcome to a fellow Rice University alumni, Mr. Bainwol. Owls
always support Owls. It is good to have all of you here this
afternoon.
My first question is for you, Mr. Welch. Your opening
statement expresses concerns that these rules will force
dealers into a position where they won't be able to provide the
cars and trucks that people want to buy at the prices they can
afford. For example, a dealer back home, he has electric cars
on his lot. They take up spaces, parking spaces on his lot.
They sell for days, maybe weeks. Meanwhile, he is exploding
with sales of pickup trucks and SUVs, but these sales are
curtailed because he doesn't have the space on his lot because
of these electric vehicles.
So my question is, Do you think that is the exception or
the rule going forward, Mr. Welch?
Mr. Welch. I actually think it is the exception. There is a
big misconception. Dealers actually buy the cars from the
manufacturers. They pay for them on the railhead, and they put
them in their inventory. Dealers are merchants. They stock,
sell, and service what their consuming public want to buy, own,
and drive. So it is a big misconception that we are going to
buy a vehicle and put it in our inventory that isn't going to
sell, because we are paying flooring on it on a monthly basis.
So the dealers control, by and large, and they are required
under their franchise agreements to stock representative
vehicles for demonstration purposes and whatnot. But I think
what a lot of people miss is that the buying process has
changed so dramatically in the past several years.
You know, there is a purchase funnel and, you know, we seem
to get sort of a bad rap that we are not pushing electric cars
and so on, when the fact of the matter is, is everybody is
shopping on the Internet these days. The average car shopper
spends 13 1A\1/4\ hours researching cars. That is for new cars.
It is over 15 hours for used cars. A recent Autotrader study
indicated that 72 percent of customers that come into the
dealership have already decided which vehicle they are going to
buy regardless of how good of salespeople we, quite frankly,
retain on our lot.
So to get back to your question, yes, we will have as many
electric vehicles on stock as we anticipate. A dealer typically
keeps a 60-day supply, is the general rule of the thumb, and
whatever their 60-day supply of pickup trucks is going to be
different than their 60-day supply of electric vehicles. Other
than California, as it was pointed out here, the actual number
of pure electric battery vehicles that we sell this year is
only 0.4 percent on a national basis.
Mr. Olson. The next question is for Mr. Bozzella and Mr.
Bainwol. The industry was promised explicitly a uniform and
harmonized set of national standards affecting fuel economy and
greenhouse gas emissions, not a patchwork of conflicting
requirements. Which one did you get?
Mr. Bozzella. Well, certainly it was an aspirational goal,
and we have not achieved that aspiration yet.
Mr. Olson. So the patchwork. Mr. Bainwol.
Mr. Bainwol. I will confirm that, and if I can take one
second to----
Mr. Olson. You bet.
Mr. Bainwol [continuing]. Augment something Mr. Cooper
said. We too found that 80 percent of the public supports the
standards. The next question, though, is the one that I think
is the essential crux of the challenge. We then asked how much
would you pay in order to reach those standards? Fifty-three
percent of the public said under a thousand dollars; 12 percent
of the public said over $2,500. The delta is that or more. That
is the fundamental math problem.
There may be more value for the consumer, but that is not
their perception. And at the end of the day, it is the customer
who is making the choice, and this shows that the economics are
really challenging for them.
Mr. Olson. Yes. So a follow-up to what are some of the
differences between EPA credit trading programs and NHTSA's
program, and why this difference is a problem. Mr. Bozzella.
Mr. Bainwol.
Mr. Bainwol. There are differences in when they kick in,
there is differences when they expire, and there are
differences in how they get traded. And it is a problem,
because at the end of the day when you comply with two
different programs, and in this case you are complying with a
more stringent EPA program, you still have additional costs to
comply with a program that is not met. And that produces costs
that get built into the vehicle and makes it harder for
consumers to buy the product.
Mr. Bozzella. Yes. And the only thing I would add to that,
Congressman Olson, is that the point of these credits is to
reward innovation and to encourage overcompliance. And so to
the extent that we take our eyes off the ball and instead of
having one streamlined set of rules for good competition and
good racing and great results for the customer, we have to
spend more time trying to understand how to move things around
to comply. And so I think it has an impact on innovation.
Mr. Olson. One final question. I am over time, but who can
best fix this problem, either the midterm evaluation or
Congress? And who is the best to fix this problem, because it
is there it sounds like.
Mr. Bainwol. I think it takes all parties. Congress will
have to fix the harmonization piece, then everybody working
together will have to make sure that the stringency is
consistent with consumer behavior.
Mr. Bozzella. I would agree with that.
Dr. Cooper. Is that an open question for everybody?
Mr. Olson. Yes, Dr. Cooper.
Dr. Cooper. Well, look, you know, Congress could do it.
Although I worked on EISA and so forth, the question is who is
going to get it done faster and better? And it is not entirely
clear that Congress is the best entity. If you look back at the
acid rain program, we would have been better off if the agency
had been allowed to raise the standard because the industries
did such a good job of hitting the target by Congress. So it is
debatable who will get it done faster and who will get it done
better. And it is perfectly all right for everybody to talk
about it, but EPA and NHTSA under the current law are going to
have to do something in the time frame of the midterm review.
Congress might.
Mr. Olson. So industry first, Congress second is the
preferred route.
Dr. Cooper. I said let's have a good debate, but remember,
EPA and NHTSA have to do something. And if you can produce a
better solution here in that time frame then you will, and EPA
can't stop you from doing that.
Mr. Olson. You bet.
Dr. Cooper. And so then that is fine. It is a good debate.
But they have to do something because they have to write a new
rule for the next round under the law.
Mr. Olson. Thank you, Dr. Cooper, and I am out of time. I
yield to the gentleman from New York, Mr. Tonko, for 5 minutes.
Mr. Tonko. Thank you, Mr. Chair, and gentlemen, welcome. So
Mr. Bozzella and Mr. Bainwol, what is the lead time for on
designing your vehicles, and for instance when will plans be
finalized for model year 2025?
Mr. Bozzella. The lead time for vehicles is years, right.
So, you know, this is why this discussion is really important,
why we have to make sure that the assumptions built into the
Technical Assessment Report about advanced technologies are
accurate, because we are looking at technologies now, certainly
in the case of electrification that do exist, but in the cases
of internal combustion engines that don't necessarily exist in
the marketplace yet. So we have a lot of work ahead of us.
Mr. Tonko. Mr. Bainwol.
Mr. Bainwol. Somewhere between 3 and 7 depending on car and
truck and what is going on in life, but it is a long product
cycle.
Mr. Tonko. Is there a shorter period for the time for a
car?
Mr. Bainwol. I believe it is shorter for cars.
Mr. Tonko. OK. And Mr. German, you mentioned a number of
innovations being developed and deployed. In your opinion, what
are the biggest technology advancements that have allowed
manufacturers to exceed targets thus far?
Mr. German. The study we focused and the technologies I
mentioned were actually technologies that are just starting to
hit the market now. And so they are going to provide additional
benefits beyond those that were forecasted in the rulemaking 5
years ago.
As far as what is in the market now, certainly the biggest
technology has been Mazda's SKYACTIV engine which is 10 to 15
percent more efficient than naturally aspirated engines were
previously. And so Mr. Bainwol referred to the 43 percent
penetration for Atkinson cycle engines in the TAR, it was zero
in the rulemaking because they didn't think naturally aspirated
engines could compete. It has completely changed the whole way
that EPA and NHTSA are viewing technology.
And I will also point out that it shows that there is a lot
of different ways to comply, so manufacturers will go naturally
aspirated, some will go turbo-charged, some will choose other
routes.
Dr. Cooper. Can I make a point here about this 43 percent?
Because I believe, I was very impressed to notice that NHTSA
only has it at 18 and they still comply. And that is exactly
the point. Now I need to check that. But, so EPA at 43, NHTSA
18, and under both you comply. That is the flexibility of the
act. Subject to check I want to put that in the record.
Mr. Tonko. OK. Thank you for placing that in the record.
Now back to Mr. German. That efficiency effort, the technology
gains have been moving at a rather robust pace. Can we expect,
do you expect that that pace will continue?
Mr. German. Yes. I don't think there is any question about
it, and it is because computers are actually the revolutionary
technology. Computer simulations, computer-aided design is
allowing things to occur in the development of all technologies
that was never possible before. And it is particularly
important for lightweight materials, because the simulations
are getting to the point where the manufacturer can
simultaneously optimize the shape, the size and the material of
every part simultaneously. It has never been possible before.
Mr. Tonko. And do you believe that these CAFE goals can be
met with improvements primarily to the conventional internal
combustion engine, or will electric vehicles and hybrids for
instance need to become a much bigger part of our fleet mix?
Mr. German. Well, one of the new trends that is happening
is lower cost 48-volt hybrid systems. This stays below the 60-
volt lethal threshold which has some additional cost savings,
and everything I am seeing from a lot of suppliers says that
you can get over half the benefits of a full hybrid at only
about a third the cost.
So I do include 48-volt hybrids into conventional
technology, but as long as we are willing to stipulate that
some of these 48 volts are happening, then yes, with all the
other technologies that are coming that are hitting production
now that were not anticipated that is all that is going to be
needed for the large majority of manufacturers to comply.
Mr. Tonko. And these technologies that you mentioned, will
they be available for the manufacturers for their final design
time frame?
Mr. German. Yes. I mean all of them I mentioned are in
production now. Miller cycle just hit production, e-Boost just
hit production. Mazda's engine has been in production for 2
years now. And the other technologies I have talked about will,
at least one manufacturer has announced production intent
already. So yes, they will be readily available to all
manufacturers by 2025.
Mr. Tonko. I thank you. With that Mr. Chair, I yield back.
Mr. Olson. The gentleman's time is expired. The Chair calls
on the gentlelady from Tennessee, Mrs. Blackburn, for 5
minutes.
Mrs. Blackburn. Thank you, Mr. Chairman, and thank you all
for your patience with our hearing today. I know you are fully
aware we have got another hearing going on and it is over in
the Rayburn Building, so we are having to jump back and forth
while our hearing room, our main hearing room is remodeled and
updated. But Chairman Upton says, don't worry, the room will
still be Michigan green. That that part of the decor is going
to change.
I had appreciated the first panel and the opportunity to
talk with them just a little bit about harmonization and
looking at this program. And Mr. Bainwol, I think I want to
come to you on this. When you look at the harmonization gaps
between the National Program and, say, California's program,
tell me how you think we go about addressing that. How do you
fill in those gaps? What is the best way to kind of plug that
in?
And then I am going to come to you all in a consumer choice
question too, so let me hear from you on that.
Mr. Bainwol. Sure. The harmonization piece with California
is really complex. California is able to do what it does under
a waiver from EPA, and it is not clear to me whether Congress
would choose to adjust that or not and we are not in a position
where we are advocating that.
What I would say is that the existence of two different
consumption mandates produces some serious challenges. You have
CAFE which requires fuel efficiency and carbon reduction, and
you have ZEV in California and the other States that requires
essentially electrification. And so there is an investment
going in both in R&D for electrification and an investment
going in to subsidize the moving of the metal for electrified
products because they are not selling that well. And that is
investment that could go into complying with CAFE.
So the existence of two programs absolutely produces
challenges and regulatory friction. And I would note that we
talk a lot about not needing electrification and hybrids in
order to comply with CAFE, but we have to produce electrics to
comply with ZEV. So that is an academic point. We have to
produce those to comply with ZEV, which means those costs are
there. Those costs are not in the TAR.
Chairman Olson, you asked about what was missing in the
TAR. That is one of the challenges with the TAR, they didn't
embrace or accept or talk about the cost of ZEV. That is a
serious challenge.
Mrs. Blackburn. OK. So all of this regulation, how much
cost does it add to the price of an average vehicle?
Mr. Bainwol. We don't have a locked in number yet. The TAR
has been out obviously since July. We did not get an extension
on the period to respond, but we are doing analysis. There is a
range of estimates that go anywhere from, you know, $1,500 to
over $6,000, but the critical point is that car prices are
being moved not just by CAFE and not just by ZEV.
ZEV as I said is $356 per car. It is also being moved by
other very well intended and meaningful social objectives in
the safety zone and elsewhere, in fuel quality. So the car
price question is really critical because we want to make sure
as Peter stressed that affordability remains paramount.
Mrs. Blackburn. Yes. In my district in Tennessee with the
presence of the auto industry and with the presence of many who
have moved from California to Nashville that are connected to
the auto industry, one of the things that comes up in our
meetings regularly, town hall meetings or just discussions at
civic clubs and things, is looking at the CAFE standards and
looking at what that does to safety of the car, the changing of
materials, going for lighter weight materials, and consumer
choice comes into play in that.
And I just think about the auto dealers who have to buy a
certain amount of product, and yet it may be a product that the
consumer does not like or does not want. And I wonder when we
are going to hit that threshold on the efficiency issue and
what the consumer likes or wants.
And you mentioned consumer choice in your testimony, and I
have got just a couple of seconds. I would like to hear just
one little statement from you on it. Yes, go ahead. Mr. Welch.
Mr. Welch. We have literally hundreds of models. And as I
mentioned before, under our franchise agreements we stock every
line, make and model so that we can have them for demonstration
purposes. But the real issue is what do we reorder, OK. And
virtually, as I mentioned again before, we are merchants. We
are not much different than the hardware store. We have got
bins of widgets and if they sell we restock them and what not.
So it is complex. The issue really goes back to the
affordability issue. We are so fortunate in our country that we
have such a wide array of different options that we provide
consumers based on the consumer, and every single sale is
different. Every different person has a different budget
constraint. They have a different utilitarian need for the
vehicle. They have got different commute patterns. And we have
got product, it is amazing the product of the manufacturers and
we just take it for granted, quite frankly.
But the fact of the matter is as manufacturers are
effectively forced under these regulations, even though there
is flexibility to add certain types of technologies, and once
they make that decision 3 to 7 years in advance they have got
to go through the manufacturing process. And, you know, if the
demand and the consumer preferences are different 3 or 4 years
from now and it may be based on a safety attribute, it may be
based on a fuel economy attribute, but, you know, we are not
clairvoyants when it comes to that.
But it is the cost, it is the cost, it is the cost, the
affordability and the utility that is offered to the consumer.
Mrs. Blackburn. Thank you. I yield back.
Mr. Olson. The gentlelady's time is expired. The Chair
calls upon the gentleman from Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman, and again thank our
panel for their patience. Dr. Cooper, according to the 2015
American Community Survey, nearly 60 percent of our district
qualifies as a low income. How does this program impact low-
income households?
Dr. Cooper. Well, as we have explained in testimony and we
explained in 2012, and EPA has followed up on that low income
are much less likely to be in the new car market. They are in
the used car market. And if you look at their expenditure
pattern, their total cost of driving, the biggest component,
the much bigger component is operating costs. Higher fuel
economy lowers the operating cost so they get the benefit of
that.
It turns out when you buy a used car people will hold their
cars the life of their loan, 5 years. They sell the car, it is
going to last another 5 years. It is going to save gasoline for
another 5 years. Does that savings get reflected in the resale
price? Actually, only part of it does. So low-income consumers
get a disproportionate share of the second 5 years. Low-income
consumers also are the beneficiaries, as I say, of these
indirect effects, environmental and public health, so they will
be significant beneficiaries of that.
The interesting thing is if you go to year 2022, which is
what we are talking about now, almost every used car sold in
2022 will have been subject to the rebooted CAFE standard. 10-
year life, the average car, they have all been covered by
standards, and that means low-income consumers are benefiting
from the reboot of the CAFE program. This is one of the great
myths. Low-income people benefit because they benefit from
lower operating costs, and this program is helping them as a
class.
Mr. Green. Well, I have to admit, and I have some older
cars, but the older your car the more maintenance you have to
do. And also if they keep it, then the CAFE standards are of a
different generation than what may happen on the newer cars.
Dr. Cooper. That is absolutely the case. But on the other
hand, those cars were required to be more fuel efficient by the
new standard and that is the remarkable thing by 2022.
Mr. Green. In your testimony you point out that the
industry has found lower-cost ways of complying with the
standards than originally thought. What are some of the ways
that this was accomplished?
Dr. Cooper. Well, the most obvious one is the Atkinson
engine. It wasn't even considered. The second of all, what
happens is that when people are given a 10-year time frame they
ain't dumb, they took a look at it and say what am I best at;
what else will I be changing? And so what the regulators
thought the cost would be is always too high. What the industry
political arms said the cost would be is way too high. We have
got dozens of studies of that.
And so the natural process of capitalist markets, they
bring the costs down, they learn the learning curve is very,
very steep in the beginning, and so you can find specific
technologies that came along like this aspirated engine. You
can find the general process. But this has happened dozens and
dozens of times over the last 3 decades as we have dealt with
the issue of improving fuel economy.
Mr. Green. Mr. German, the initial costs for estimates
complying like what Mr. Cooper said is actually much lower than
the manufacturers or even the agencies. In regards to this
program, have compliance costs been overstated, and what is the
primary factor in overstating this compliance?
Mr. German. Yes. No, it is just innovation. I have only
talked in my testimony about the major improvements you can put
a name to, but in the series of reports that we are doing in
cooperation with suppliers we have all kinds of small things
that have happened that were not anticipated. Variable geometry
turbo-charger from a diesel engine which is highly efficient,
it doesn't work on a conventional gasoline turbo-charge, but it
does if you add Miller cycle.
So there are all kinds of little secondary benefits that
the suppliers, and I am sure the manufacturers as well, are
figuring out that taking little steps to improve efficiency and
reduce cost and the cumulative effect of these things is quite
large.
Mr. Green. OK. And how should we project for the new
technologies given the rate of new development and adoption? I
mean do we have a crystal ball?
Mr. German. Yes. I mean that is the single biggest problem
with innovation. You can't project it. And that is why what I
really try to push is the concept that the least you can do is
to use the latest data possible and get as close you can,
because if you are using older data you are guaranteed to be
wrong. You are guaranteed to be missing innovation.
Mr. Green. OK. Thank you, Mr. Chairman. I yield back.
Mr. Olson. The gentleman yields back. The Chair now calls
upon the gentleman from the Commonwealth of Virginia, Mr.
Griffith, for 5 minutes.
Mr. Griffith. Thank you very much, Mr. Chairman. I guess I
am going to look first to Mr. Welch and Mr. Bainwol. Your
responses, do you think the industry can get me a cheap car for
my five-member family? And as you can tell by looking at me I
am not small and my children probably aren't going to be small
either. Can you get me a car that is $22-23,000 that I can fit
them all into that is going to have all these technological
advantages and get it to me at $23-24,000?
Mr. Welch. For a new car, stripped models which most people
want more accoutrements on, but----
Mr. Griffith. Well, I am a stripped-model guy, but OK.
Mr. Welch. Well, that is fine. But, you know, our least
expensive car I believe that we have on the lots right now is
the Nissan Versa that is just under $13,000, and of course they
go all the way up.
Mr. Griffith. I understand that. But can I get all five of
those people in there comfortably? I don't think I can.
Mr. Welch. No.
Mr. Griffith. I have spent more hours, and somebody gave
the statistic people spending 13 hours on the Internet. I have
already spent more than that anticipating when I trade in my
Volkswagen diesel and the deal gets approved.
But I do think both of you made the point that price makes
a difference, and it does make a difference. Because I looked
any number of times when I was driving my older vehicle, the
one that I traded in for the Volkswagen diesel, and I drove
that for 376,000 miles before the axle broke and my wife said
you have got to get rid it. I am tired of no hubcaps and the
windows being held up with duct tape. So I am that cheapskate,
but the price does matter.
And I noticed, Mr. Welch, in your testimony you said even
on a monthly basis, because I think it was Dr. Cooper who
testified it is about the cost of maintaining the vehicle and
so forth which includes the loan value or the loan cost that
even $20 to $30 that your dealers would say that makes a
difference on what car they are going to buy, or in the case of
somebody like me whether or not I buy.
And then Mr. Bainwol, you indicated--and you can correct me
and jump in anywhere on this--but you indicated that TAR was
going to add anywhere, in an average in talking with the
gentlelady from Tennessee, 1,500 to 6,000. So I quickly pulled
out the Internet loan calculator and figured 1,500 at 3
percent, which I think would be fairly reasonable in the middle
if there is not some special deal, and that hits your number,
26. It comes back at 2,695 and that is right smack dab in the
middle of the number where people start deciding they are going
to get a different car or not buy at all.
Am I accurate in those assessments that I have made that
some people are going to walk away completely from the new car
and some people are going to downsize?
Mr. Bainwol. I would say that the fundamental point you are
making is that you have to do a whole-car cost analysis. And we
have a tendency in this town to look at policy from a silo, so
today we are talking about CAFE and we have kind of brought in
ZEV because that introduces more cost and it is related.
But we also talk about things like V to V, and an issue
that Congressman Schakowsky talked about, the rear visibility.
There is lots of things that go into the price of a car that
are great technologies that serve important social purposes,
but at the end of the day they cost money. And when you load
them all up and you do the whole-car cost analysis you are
creating a world in which it becomes harder and harder to
purchase a new car.
And with all due respect to my friends on the panel, that
disproportionately hurts and locks out of new cars low-income
Americans who then do not get the benefits of the safety
technologies that have been introduced in the last 5 to 10
years.
Mr. Griffith. Well, and let's face it, and I am going to
ask you a question at the end of this, I could afford the more
expensive car. But if it is so much more expensive that I walk
away from the market, I am never selling the used car that Dr.
Cooper wants me to sell to some low-income person at the end of
5 years or 6 years or 8 years or even if I were able and could
in my conscience spend that much money on a car and buy it, I
am likely to drive it longer than the 5-year lifespan because I
am getting good service or good mileage out of it and it is
never going to be available, at least not mine. I understand I
may not be typical, but it is never going to be available for
the low-income person until the axle breaks and it is all
falling apart and it is time to take it to the graveyard. I
yield back.
Mr. Olson. The gentleman yields back. And that is all for
the members and their questions. On behalf of the Commerce,
Manufacturing, and Trade and Energy and Power Subcommittees and
this committee, thank you, thank you, thank you to our
witnesses.
I would like to ask unanimous consent to enter into the
record a letter from the American Chemistry Council about this
hearing. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
I remind all Members you have 5--you have 10 legislative
days for questions for the record. Without objection, this
hearing is adjourned.
[Whereupon, at 1:24 p.m., the subcommittees were
adjourned.]
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