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SUMMARY One of the least
controversial provisions of the Energy Policy and Conservation Act of 1975
(P. L. 94-163) established corporate average fuel economy (CAFE) standards
for new passenger cars. As oil prices rose, there was little expectation that
manufacturers would have any difficulty complying with the standards.
However, oil prices softened and the demand for small cars diminished. In
response to petitions from manufacturers facing stiff civil penalties for
noncompliance, the National Highway Traffic Safety Administration (NHTSA)
relaxed the standard for model years 1986-1989. The current standard is
27.5 mpg for passenger automobiles and 20.7 mpg for light trucks, a
classification that also includes sport utility vehicles (SUVs). An attempt
in the 102 nd Congress to raise CAFE proved too controversial and was dropped
from omnibus energy policy legislation before it could pass (Energy Policy
Act of 1992, P. L. 102-486). The Clinton Administration supported greater
fuel efficiency, but indicated in 1993 that an increase in the CAFE standards
was not the option likeliest to be embraced first. In 1994, the National
Highway Traffic Safety Administration (NHTSA) issued a notice of proposed
rulemaking to explore raising the CAFE standard for light-duty trucks.
Congress included language in the FY1996-FY2001 DOT Appropriations (P. L.
104-50, P. L. 104-205, P. L. 105-66, P. L. 106- 69, and P. L. 106-346)
prohibiting the use of appropriated funds for any rulemaking on CAFE,
effectively freezing the standards. However, the Senate conferees to the
FY2001 appropriations insisted upon a study of CAFE by the National Academy
of Sciences (NAS). That study, released on
July 30, 2001, concluded that it was possible to achieve a more than 40%
improvement in light truck and SUV fuel economy over a 10-15 year period at
costs that would be recoverable over the lifetime of ownership. There are sharp differences
in the CAFE provisions between the House and Senate versions of comprehensive
energy legislation, H. R. 4. On July 12, 2001, the House Subcommittee on
Energy and Air Quality adopted an amendment in markup to H. R. 2587 that
called for a reduction of 5 billion gallons in light-duty truck fuel
consumption over the period of model years (MYs) 2004-2010. This proposal
came to the House floor on August 1, 2001 as part of H. R. 4. An amendment to
establish a combined passenger car and truck CAFE of 27.5 mpg by MY2007 was
defeated 160-269. The NAS study, released two days earlier, figured
prominently in the debate. The Senate began debate
on comprehensive energy legislation at the end of February 2002. Senators
Kerry and McCain reached a compromise to propose a combined fleetwide average
of 36 mpg by MY2015. However, on March 13, 2002, the Senate voted (62-38) for
an amendment to charge NHTSA with devel-opment of new CAFE standards. The
Senate then approved an amendment (56-44) to freeze "pickup trucks"
at the current light truck standard of 20.7 mpg. The Senate passed its energy
bill April 25 (88-11). On September 19, the conferees agreed to the
House-passed goal of saving 5 billion gallons, but shifted the window to
MY2006-MY2012. [See also CRS Report RL31427 for a side-by-side comparison].
MOST RECENT
DEVELOPMENTS There are sharp
differences in the Corporate Average Fuel Economy Standard (CAFE) provisions
between the House and Senate versions of comprehensive energy legislation, H.
R. 4. The House bill, passed on August 1, 2001, includes a provision calling
for a reduction of 5 billion gallons in light-duty truck fuel consumption
over the period of model years (MYs) 2004-2010. The provision would also
require National Highway Traffic Safety Administration (NHTSA) to develop a
weight-based system for establishing fuel-efficiency standards. The Senate
began debate on comprehensive energy legislation at the end of February 2002.
Senators Kerry and McCain reached a compromise to propose a combined
fleetwide average of 36 mpg by MY2015. However, on March 13, 2002, the Senate
voted (62-38) for an amendment offered by Senators Levin and Bond to charge
NHTSA with development of new CAFE standards. The Senate went on to approve
an amendment (56-44) from Senator Miller to freeze "pickup trucks"
(to be defined by the Secretary of Transportation) at the current light truck
standard of 20.7 mpg. This language was in the final version of the Senate
energy bill when it passed April 25, 2002 (88-11). On September 19, the conferees
agreed to the House-passed goal of achieving 5 billion gallons, but shifted
the window to MY2006-MY2012. BACKGROUND AND
ANALYSIS The Arab oil embargo of
1973-1974 and the tripling in the price of crude oil brought into sharp focus
the fuel inefficiency of U. S. automobiles. New car fleet fuel economy had
declined from 14.8 miles per gallon (mpg) in model year 1967 to 12.9 mpg in
1974. In the search for ways to reduce dependence on imported oil,
automobiles were an obvious target. The Energy Policy and Conservation Act
(P. L. 94-163) established corporate average fuel economy (CAFE) standards
for passenger cars for model years 1978-1980 and 1985 and thereafter. The
CAFE standards called for essentially a doubling in new car fleet fuel
economy, establishing a standard of 18 mpg in model year (MY) 1978 and rising
to 27.5 by MY1985. (Interim standards for model years 1981-1984 were
announced by the Secretary of Transportation in June of 1977.) EPCA also
established fuel economy standards for light duty trucks, beginning at 17.2
mpg in MY1979, and currently 20.7 mpg. Compliance with the
standards is measured by calculating a sales-weighted mean of the fuel
economies of a given manufacturer's product line, with domestically produced
and imported vehicles measured separately. As originally enacted, the penalty
for non-compliance was $5 for every 0.1 mpg below the standard, multiplied by
the number of cars in the manufacturer's new car fleet for that year. Civil
penalties collected from 1983-1998 totaled roughly $475 million. When oil prices rose
sharply in the early 1980s, smaller cars were selling well, and it was
expected that manufacturers would have no difficulty complying with the
standards. However, oil prices had declined by 1985. Sales of smaller cars
tapered off as consumers began to place less value on fuel economy and
gasoline cost as an input in the overall costs of vehicle ownership. In
response to petitions from manufacturers facing stiff civil penalties for
noncompliance, the National Highway Traffic Safety Administration (NHTSA)
relaxed the standard for model years 1986-1989, but it was restored to 27.5
in MY1990. The Persian Gulf War in 1990 caused a brief spike in oil prices,
but it also demonstrated that it was unlikely that the United States or many
of the producing nations would tolerate a prolonged disruption in
international petroleum commerce. As a consequence, U. S. dependence upon
imported petroleum, from a policy perspective, was considered less of a
vulnerability. It was also becoming
apparent that reducing U. S. dependence on imported oil would be extremely
difficult without imposing a large price increase on gasoline, or restricting
consumer choice in passenger vehicles. Many argued that the impacts of such
actions upon the economy or the automotive industry would be unacceptable.
Meanwhile, gasoline consumption, which fell to 6.5 million barrels per day
(mbd) in 1982, averaged nearly 8.4 mbd in 1999, and has been peaking at
roughly 9.0 mbd during the summer of 2002. There were highly
controversial attempts to significantly raise the CAFE standards on passenger
cars in the early 1990s. One proposal included in omnibus energy legislation
was so controversial that it contributed to the Senate's inability in 1991 to
bring the bill up for debate on the floor. NHTSA typically
established truck CAFE standards 18 months prior to the beginning of each
model year, as EPCA allows. However, such a narrow window permitted NHTSA to
do little more than ratify manufacturers' projections for the model year in
question. In April 1994, the agency proposed to abandon this practice and
issued an Advance Notice of Proposed Rulemaking inviting comment on what
level that standards might be established for trucks for MY1998-MY2006. The
following year, however, after a change in congressional leadership, Congress
included language in the FY1996 Department of Transportation Appropriations
to prohibit expenditures for any rulemaking that would make any adjustment to
the CAFE standards. Identical language was included in the appropriations and
spending bills for FY1997-FY2000. An effort to pass a sense of the Senate
amendment that conferees on the FY2000 DOT Appropriations should not agree to
the House-passed rider for FY2000 was defeated in the Senate on September 15,
1999 (55-40). The rider also appeared in the FY2001 DOT Appropriations (H. R.
4475) approved by the House Committee on Appropriations May 16, 2000, and
approved by the House May 19, 2000. However, as is detailed later, the
conferees reached a compromise to drop it. Refocusing on Fuel
Economy: SUVs, OPEC, and Kyoto Recent developments have focused fresh attention on the
CAFE standards and fuel economy in general. The sharp increase in crude oil
and gasoline prices that began in 1999 has brought into higher relief the
continuing loss of market share of passenger cars to the larger, multipurpose
sport utility vehicles (SUVs) that are subject to the less stringent
light-truck fuel economy standard. A 1996 study conducted for the Department
of Transportation found that consumers valued the larger vehicles for their
versatility and roominess, and the availability of four-wheel drive. The
increasing market share of these vehicles, combined with their lower average
fuel economy, has contributed to a lowering in overall average fuel economy
since the mid-1980s. Other pressures have had
less to do with energy security and more to do with environmental objectives.
The Kyoto Agreement would have required the United States to achieve a 7%
reduction from1990 levels of carbon dioxide emissions, which implied a
significant reduction in gasoline consumption, among other elements.
Preferring to forestall any state or federal regulation, General Motors,
Ford, Chrysler and Toyota announced on February 4, 1998, that they would
produce cars in MY1999 with engine and catalytic converter technologies that
would achieve lower emissions. In early November 1998, the California Air
Resources Board (CARB) voted to reclassify SUVs 8500 pounds or less as
passenger cars and hold those vehicles to California emission standards
beginning in MY2004. Ford Motor announced in late July 2000 that it would
improve the fuel economy of its SUV model line by 25% over a five-year
period. Other manufacturers echoed similar intentions. During the Clinton
Administration, the Congress was chary of committing the United States to the
Kyoto Agreement, pending further decisions about the participation of
developing nations, and how the agreement would be enforced. However, on
March 27, 2001, Environmental Protection Agency Administrator Christine Todd
Whitman indicated that the Bush Administration had "no interest" in
any further negotiations on implementing the Kyoto Protocol. On February 14,
2002, the President proposed his own plan to reduce the growth in emissions.
CAFE in Congress
(1994-2000): Freezing the Standard Months prior to the midterm elections in 1994, NHTSA
published a notice of possible adjustment to the fuel economy standards for
trucks before the end of the decade. The following year, however, the
House-passed version of H. R. 2002, the FY1996 Department of Transportation
Appropriation, prohibited the use of appropriated funds to promulgate any
CAFE rules; the Senate version did not include the language, but it was
restored in conference. The House and Senate approved the conference report,
and the bill became law (P. L. 104-50) on Nov. 15, 1995. Much the same
scenario occurred in the second session of the 104 th and the first session
of the 105 th : A similar rider was passed by the House and not by the
Senate, but included by the conferees and enacted. This scenario occurred
again in the second session. The prohibition was included in the version of
the FY1999 appropriations passed by the House (H. R. 4328) in July 1998, but
not in the Senate version (S. 2307); it was finally included in the omnibus
spending bill at the end of the 105 th Congress (P. L. 105-277). The
prohibition was reported from the House Appropriations Committee in the
FY2000 DOT Appropriations (H. R. 2084) and passed by the House on June 23,
1999. However, the growth in gasoline consumption and the size of the
light-duty truck fleet were concerns cited behind introduction in the Senate
of an amendment to the bill expressing the sense of the Senate that the
conferees should not agree to the House-passed rider for FY2000. The
amendment, sponsored by Senators Gorton and Feinstein was defeated in the
Senate on September 15, 1999 (55-40) and the prohibition was once again
enacted into law (P. L. 106- 69). On May 16, 2000, the
House Committee on Appropriations voted to include the rider in the FY2001
DOT Appropriations (H. R. 4475). An effort to strip the language was expected
when the bill reached the House floor; however, there was none, and the bill,
with the rider, passed the House on May 19, 2000 (395-13). Following its
passage in the Senate, Senator Gorton introduced a motion to instruct the
Senate conferees to not accept the House rider. After debate, the motion was
altered to instruct the conferees to accept the House rider in return for
agreement to authorize a study by the National Academy of Sciences (NAS), in
conjunction with DOT, "to recommend, but not to promulgate without
approval by a Joint Resolution of Congress, appropriate corporate average
fuel efficiency standards." In addition to the factors required by
statute to be weighed in determining maximum feasible CAFE levels, the motion
was to require the study to consider the impacts of any proposed CAFE
standard on vehicle safety and on effects on employment in the automotive
sector and to analyze potentially disparate effects of revised standards
across the sector. The motion was agreed to, followed by clarification, it
applied only to the FY2001 appropriation. The conferees were successful, and
the language was included in the appropriations bill signed into law on
October 23, 2000 (P. L. 106-346). Legislation was
introduced in the 104th Congress (H. R. 2200), the 105 th Congress (S. 286,
H. R. 880), and the 106 th Congress (S. 147) that would freeze the current
CAFE standards. Unlike the annual prohibition on rulemaking that has been
included in the FY1996-FY2001 appropriations, these bills would have
maintained the CAFE standards at the level in force at the time of enactment unless
superseded by a subsequent act of Congress. None of these bills received
further congressional attention. The Freeze Is Thawed:
CAFE in the 107 th Congress A second summer of high gasoline prices, coupled with a
heightened awareness that the nation is experiencing problems with many fuels
and on many fronts, has built support for reconsideration of the CAFE
standards in the 107 th Congress. For the first time since FY1996, the FY2001
House DOT appropriations did not include a rider prohibiting expenditures on
CAFE rules, and legislation (H. R. 2587) reported out of committee in July
2001 that would require the automotive industry and NHTSA to achieve fuel
savings. Past Role of CAFE
Standards. The
effectiveness of the CAFE standards themselves has been controversial. Since
1974, domestic new car fuel economy has roughly doubled; the fuel economy of
imports has increased by roughly one-third. Some argue that these
improvements would have happened as a consequence of rising oil prices during
the 1970s and 1980s. Some studies suggest that the majority of the gains in
passenger car fuel economy during the 1970s and 1980s were technical
achievements, rather than the consequence of consumers' favoring smaller
cars. Between 1976 and 1989, roughly 70% of the improvement in fuel economy
was the result of weight reduction, improvements in transmissions and
aerodynamics, wider use of front-wheel drive, and use of fuel-injection. The
fact that overall passenger car fleet fuel economy remained comparatively
flat during a period of declining real prices for gasoline also suggested
that the CAFE regulations have contributed to placing some sort of floor
under new-car fuel economy. General criticisms of
raising the CAFE standards have been that, owing to the significant lead
times manufacturers need to change model lines and because of the time needed
for the vehicle fleet to turn over, increasing CAFE is a slow and inefficient
means of achieving reductions in fuel consumption. Further, it is argued that
the standards risk interfering with consumer choice and jeopardizing the
health of a recovered domestic automotive industry. Opponents of raising CAFE
usually cite fears that higher efficiency will likely be obtained by
downsizing vehicle size and weight, raising concerns about safety. Proponents of a CAFE
increase have argued that boosting the standards might bring about the
introduction of technological improvements that do not compromise features
that consumers value, but which would otherwise not be added because these
improvements do add to the cost of a new vehicle. Growth of Light-Duty
Trucks and SUVs. What
has spurred a new focus on CAFE in the 107 th Congress is the growing
percentage of the fleet made up of light-duty trucks and sport utility
vehicles (SUVs), which are subject to a less stringent CAFE standard than are
passenger automobiles. In 1988, light trucks constituted roughly 30% of the
vehicle fleet. By 1994, this figure had grown to slightly more than 40% and
reached an estimated 45% by 2000. The change is attributable to the
burgeoning popularity of mini-vans and SUVs. The share of gasoline
consumption by light duty trucks grew at an annual rate of 4.5% from 1985 to
1995 while automobile fuel consumption fell fractionally during the same
period. (See also CRS Report RS20298, Sport Utility Vehicles, Mini-Vans
and Light Trucks: An Overview of Fuel Economy and Emissions Standards.) On May 1, 2001, Senator
Feinstein, joined by three co-sponsors, introduced S. 804. The legislation
would raise the CAFE standard for light duty trucks and SUVs to 27.5 mpg –
the same standard as for passenger automobiles – by MY2007. Applicability of
the standards would also be raised from 8,500 pounds gross vehicle weight
(GVW) to include vehicles up to 10,000 GVW. The legislation would also
require that the fuel economy of new vehicles acquired by the federal
government exceed the baseline for a particular vehicle class by 3 mpg at the
end of FY2003, and 6 mpg by the end of FY2005. Once fully implemented
and depending upon the growth in the size of the light truck fleet, it is
possible that requiring these vehicles to meet the higher standard could save
roughly 1.0 million barrels of oil daily. However, these savings could take
nearly 20 years to fully capture; once the 27.5 standard were in effect for
MY2007, it would still take an additional 10 years or more before the fleet
of older, less efficient trucks and SUVs would be retired. On July 12, 2001, the
House Subcommittee on Energy and Air Quality adopted an amendment in markup
on an energy conservation bill (H. R. 2587) that calls for a reduction of 5
billion gallons in light-duty truck fuel consumption over the period of MYs
2004-2010. The provision would also require NHTSA to develop a weight-based
system for establishing fuel-efficiency standards. The amendment, introduced
by Chairman Barton and Representative Burr, passed by a vote of 29-3. An
amendment by Representative Markey that would have established a CAFE of 37.5
for passenger cars and 29.0 mpg for light-duty trucks by MY2011 was
withdrawn. Some members of the
subcommittee criticized the provision that was adopted as saving very little
fuel; however, Representative Dingell suggested that it was as stringent as
he could support, and Chairman Barton emphasized the importance of achieving
consensus within the committee on the language. The Chairman referred to the
amendment as an "excellent first step." Critics of the proposal
suggested it would require a relatively insignificant improvement in fuel
efficiency to achieve these savings, with estimates ranging between 1-3 mpg
over the period. The fuel economy
provisions of H. R. 2587 were included in H. R. 4, debated by the House on
August 1, 2001. An amendment to establish a combined CAFE fleet standard of
27.5 mpg by MY2007 was defeated, 160-269. The NAS study, released
on July 30, 2001, was cited by opponents as well as supporters of the House
proposal. The study concludes that it is possible to achieve a more than 40%
improvement in light truck and SUV fuel economy over a 10-15 year period at
costs that would be recoverable over the lifetime of ownership. The study
does suggest that there may be safety consequences if manufacturers opt to
meet higher standards by reduced vehicle weight. However, this position is
disputed by some, who argue that heavier vehicles may be safer for their
occupants, but may be responsible for fatalities when they strike lighter
vehicles; and that a lightening of vehicles could reduce fatalities in
certain incidents. The study also recommends that any redesign of the CAFE
program include a program for trading fuel economy credits among
manufacturers, and that CAFE standards should be based on vehicle
"attributes," such as weight, rather than basing CAFE standards on
whether a vehicle is a car or a truck. The congressionally
mandated NAS study on fuel economy also recommends eliminating the CAFE
credits that accrue to manufacturers of dual-fueled vehicles. These vehicles
are rarely operated on anything but conventional gasoline, but allow their
manufacturers to sell less efficient vehicles overall while still remaining
in compliance with the CAFE requirements. Some estimate that the dual-fueled
vehicle credit has resulted in an overall reduction of five-tenths to
nine-tenths of a gallon in the average efficiency of vehicles sold. H. R. 4,
as passed by the House, would extend the credit through MY2008. The bill also
includes provisions requiring federal purchase of alternative-fueled vehicles
and hybrids, and would require an additional study by the NAS on the
"feasibility and effects" of reducing "by a significant
percentage" fuel use by automobiles by MY2010. (The current NAS study
may be read online at [http:// books. nap.edu/html/ cafe/].) In the wake of the
terrorist attacks on September 11, 2001, Senate Republicans pressed the
Democratic leadership to bring a Senate version of omnibus energy legislation
to the floor as soon as possible, arguing for the soonest possible action on
legislation that they asserted would enhance U. S. energy security. Debate on
a revised version of a bill originally introduced by Senator Bingaman, S.
517, began in late February 2002. An amendment to that bill
proposed to include the language of the National Fuel Savings and Security
Act of 2002 (S. 1926) introduced on February 8, 2002, by Senator Kerry, the
chair of the Senate Commerce Committee. Major provisions of this legislation
relating to CAFE include:
A somewhat similar bill
(S. 1923), introduced by Senator McCain, would delay the establishment of
higher standards until MY2007, but would require a combined CAFE of 36 mpg by
MY2016. It would introduce combined standards for cars and trucks in MY2007
and limit the credits that could be traded or purchased. This legislation
would also eliminate the credit for dual-fueled vehicles. As debate on the
Daschle amendment to S. 517 commenced in late February, it was reported that
Senators McCain and Kerry had reached agreement to seek a combined CAFE of 36
mpg by MY2015. However, on March 13, 2002, the Senate voted (62-38) for an
amendment offered by Senators Levin and Bond to charge NHTSA with development
of new CAFE standards. The Senate went on to approve an amendment (56- 44)
from Senator Miller to freeze "pickup trucks"– to be defined by the
Secretary of Transportation – at the current light truck standard of 20.7
mpg. Proponents of the amendment argued that subjecting pickup trucks to
higher CAFE standards would render these vehicles inadequately powered for
farmers and laborers who use these vehicles to haul loads and perform work.
Critics of the amendment pointed to the inconsistency of the Senate's
maintaining, on the one hand, that the body lacked the expertise to set CAFE
standards, but then turning around to freeze pickup trucks at 20.7 mpg. It is
not apparent how "pickup trucks" was to be defined. If enacted, the
provision could well result in a third category of vehicles, differentiated
both from passenger automobiles, and the sort of SUVs and passenger vans that
are currently categorized as "light duty trucks." Reaction in the hours
after these votes focused upon the Levin amendment as a defeat for pro-CAFE
forces – which it was, in a sense, although the resumption of a role for
NHTSA in establishing fuel economy targets could be significant. However, the
ramifications of the Miller amendment could prove a potent offset to NHTSA
rulemakings, depending upon how much of the light truck fleet comes to be exempted
from higher CAFE requirements. The Senate passed S. 517 (88-11) on April 25,
2002, substituting the bill's language for H. R. 4. Shortly before final
passage, the Senate voted 57-42 to table an amendment offered by Senators
Carper and Specter to require a reduction of 1 million b/ d (barrels/ day) in
transportation sector fuel consumption. The amendment and its proposed
reduction in fuel use was perceived by some as an arbitrary target and an
indirect way of securing a significant increase in CAFE. Opponents argued
that the Senate had already voted for NHTSA to conduct a rulemaking, and that
the Senate had, in the Levin amendment, rejected setting specific targets,
whether it be CAFE standards or specific reductions in fuel consumption.
The conference committee
instructed staff to see whether a compromise could be worked out by August
30, 2002. On September 19, the conferees agreed to the House-passed savings
of 5 billion gallons in light-truck fuel consumption, but it shifted the
applicable window to MY2006-MY2012. Both the House and Senate versions of the
bill proposed to extend the CAFE credit to manufacturers of dual-fueled
vehicles. The maximum annual credit of 1.2 mpg applies to vehicles
manufactured through MY2008; that maximum drops to 0.9 mpg during
MY2009-MY2012. A Senate-proposed list of expanded criteria to be taken into
consideration in setting maximum feasible fuel economy levels was dropped.
Also dropped was House language requiring a study of the "feasibility
and effects" of reducing fuel use by automobiles "by a significant
percentage." The Senate floor amendment capping "pickup truck"
CAFE at 20.7 mpg also was not included in any of the House and Senate offers
tendered to the conference committee. Conference Committee Chairman Tauzin, in
response to criticism that the 5 billion gallon savings was negligible,
pointed out that this target was a floor, not a ceiling, and that NHTSA could
set future CAFE at levels that would achieve greater savings. Improving Fuel
Economy: Other Policy Approaches Two possible approaches to reduce gasoline consumption
involve (1) raising the price of gasoline through taxation, or other means,
to a level that induces some conservation; and (2) increasing the efficiency
of the automobile fleet in use. Of course, a combination of these two broad
approaches can be used as well. Freedom CAR and the
Partnership for a New Generation of Vehicles (PNGV)( 1993-2002). In late September 1993, President
Clinton announced establishment of a government and industry research
program, the Partnership for a New Generation of Vehicles (PNGV), that had
among its goals development of an environmentally friendly
"Supercar" that would achieve 80 mpg without sacrificing
performance, affordability, and safety. The PNGV was an effort to combine the
resources and expertise of federal agencies and laboratories with the private
sector to reduce U. S. dependence on oil and maintain competitiveness without
intervening to alter the market price of fuel. Research and development was
to be focused on hybrid electric vehicles, direct-injection engines, fuel
cells, and greater use of lightweight materials. Production prototypes of the
Supercar were projected to be ready by 2004, a deadline that was appearing
unlikely to be met. On January 9, 2002, the
Bush Administration indicated that it would abandon the PNGV in favor of a
new initiative to push for development of fuel cells. Research on fuel cells
has been a focus of PNGV; of the $127 million provided to the program in
FY2002, roughly $40 million was provided for fuel cell research and an
additional $20 for hydrogen R& D. Although the Administration promises
that the new initiative, called Freedom CAR, will be more aggressive, others
expect it may largely operate along the lines of PNGV. However, where PNGV
was directed by the Commerce Department, Freedom CAR will be administered by
DOE. Price of Gasoline. Owing to higher taxation of
gasoline in other nations, Americans enjoy one of the lowest prices for
gasoline. As a consequence, the higher prices since 1999 – especially during
the summer driving seasons – are experienced in the United States as a much
greater increase, in percentage terms, than elsewhere. Past proposals to raise
the price of gasoline to leverage consumers into more efficient vehicles have
garnered little support. Owing to the relative price inelasticity of gasoline
demand, many believe that the size of the price increase it would take to
curb gasoline consumption to any degree would have a damaging effect on the
economy of several times greater magnitude. Indeed, analysis of recent
research (Plotkin, Greene, 1997, cited in References) suggested that an
increase in gasoline taxes would be one-third as effective in achieving a
reduction in demand as studies of the 1980s once projected. This is a
significant reflection of the place that personal transportation and
inexpensive gasoline has assumed in our economy and value system. Price, however, could be
used to at least keep some floor under the cost of gasoline to motorists. For
example, some argued during past episodes of high prices that, when prices
softened again, the federal government should step in and capture the
difference as a tax, and possibly devote the proceeds to developing public
transportation infrastructure and incentives. This tax could be adjusted
periodically to see that gasoline would not become less expensive than a
certain level in real (inflation adjusted) dollars. Owing to the unpopularity
of raising gasoline prices, raising the CAFE standard is more comfortable for
some; however, it is a long-term response. Depending upon the magnitude of an
increase in gasoline prices, no matter what the cause, a price-induced
conservation response is nearly immediate and may grow as consumers initially
drive less, and eventually seek out more efficient vehicles. CAFE and Reduction of
Carbon Dioxide Emissions. Vehicles account for one-fifth of U. S. production of CO2
emissions. Some argue that raising the CAFE standards would be an ineffective
or marginal way to reduce emissions of carbon dioxide. On one hand,
improvements in fuel economy should enable the same vehicle to burn less fuel
to travel a given distance. However, to the extent that technologies to
improve fuel economy add cost to new vehicles, it has been argued that
consumers will tend to retain older, less efficient cars longer. It has also
been suggested that there is a correlation between improved fuel economy and
an increase in miles driven and vehicle emissions. However, vehicle miles
traveled have continued to increase in recent years when fuel economy
improved only slightly, suggesting that the broader factor is the overall
cost of driving, which is tied as well to the price of gasoline. The
relationship between where people live and where they work is also a factor.
The Clinton
Administration proposed a five-year, $6.3 billion package of tax credits, and
reliance on voluntary efforts by individuals and industry, to meet the
proposed targets of the Kyoto agreement. Many believed that the Clinton
Administration plan would fall well short, largely because carbon emissions
are forecast by the Department of Energy to be 34% above 1990 levels by the
year 2010. Some urged that Congress disapprove the treaty and sought
renegotiation of the targets, arguing that meeting the proposed targets would
require possibly crippling taxes and regulations. Others suggested that a
significant increase in CAFE requirements would help meet the Kyoto targets
and that an increase in CAFE should not wait final dispensation of the agreement.
However, as noted earlier, the Bush Administration has removed the U. S. from
the Kyoto process in favor of, for example, voluntary commitments on the part
of industry. One interesting
development is legislation enacted in July 2002 in California authorizing the
California Air Resources Board (CARB) to establish regulations reducing
greenhouse emissions from cars, light trucks and non-commercial vehicles.
These would apply to MY2009 vehicles. The legislation, which makes California
the first state to regulate carbon dioxide emissions, may be challenged.
Though the legislation neither sets target reductions nor specifies how they
are to be achieved, the assumption is that these reductions could only be
achieved by higher efficiency. Consequently, the automobile industry argues
that the law infringes on the authority of the federal government to set fuel
economy standards. Historical Note on the
CAFE Debate in the 102 nd Congress. As an historical note, legislation to boost the CAFE
standards last received major attention in the 102nd Congress. One proposal
(S. 279) would have abandoned uniform standards but otherwise left the
historic infrastructure of the CAFE standards intact. Under S. 279, each
manufacturer would have been required to achieve a 20% improvement in
passenger car fuel economy by 1996 and 40% by 2001 over its 1988 baseline.
The same standard of improvement would have been required of light trucks.
In that same Congress,
legislation was being developed to open up the Arctic National Wildlife
Refuge (ANWR) for exploration. Proponents of higher CAFE standards predicted
that there would be no support for exploration of ANWR without some increase
in CAFE. S. 341, omnibus energy legislation reported from the Senate
Committee on Energy and Natural Resources in May 1991, would have extended
discretion to the Department of Transportation (DOT) to set "maximum
feasible" CAFE targets for each manufacturer for MY1996 and MY2002. The
DOT would have taken into account application of known fuel-saving
technologies, MY1990 as a baseline for performance, sales mix, vehicle
interior size, and safety standards. Credits earned could have been traded or
held by the manufacturer. When it appeared that the ANWR provisions would
almost certainly not survive unless the CAFE provisions were strengthened,
Senator Johnston proposed an amendment in markup that would have had the
effect of embracing the goals of S. 279, but over a longer time frame. The
amendment was defeated in markup, as was an attempt to append to the omnibus
bill the specific targets in S. 279. The proposal appeared to
fail at the combined hands of those who either thought they went too far or
not far enough. But the omnibus bill failed to reach the floor; a cloture
vote on whether to proceed with it (it became S. 1220) was defeated Nov. 1,
1991. Both CAFE and ANWR provisions were stripped from modified legislation
introduced in the second session of the 102 nd Congress. With the exception
of the riders attached to the DOT Appropriations during the period of
FY1996-FY2000, there has been no major legislative focus on CAFE until the
107 th Congress. CONGRESSIONAL
HEARINGS, REPORTS, AND DOCUMENTS National Research
Council. Committee on the Effectiveness and Impact of Corporate Average Fuel
Economy Standards. Effectiveness and Impact of Corporate Average Fuel Economy
(CAFE) Standards. Washington, D. C., National Academy Press, 2001. 166 p.
National Research
Council. Committee on Fuel Economy of Automobiles and Light Trucks. Automotive
Fuel Economy: How Far Should We Go? Washington, D. C.: National Academy
Press, 1992. 254 p. Plotkin, Steve. Greene,
David. "Prospects for Improving the Fuel Economy of Light Duty
Vehicles." Energy Policy, vol. 25, no. 14-15. December 1997. P.
1179-1188. U. S. Congress. House.
Committee on Commerce. Implementation of Corporate Average Fuel Economy
Standards. Hearing, 104 th Congress, 1st session. July 24, 1995. Washington,
U. S. Govt. Print. Off., 1996. iii+ 59 p. U. S. Congress. House.
Committee on Energy and Commerce. National Energy Policy: Conservation and
Energy Efficiency. Hearing, 107st Congress, 1st session. June 22, 2001.
Washington, U. S. Govt. Print. Off., 2001. iii + 137 p. U. S. Congress. Senate.
Committee on Commerce, Science and Transportation. Motor Vehicle Fuel
Efficiency Act. Hearing on S. 279. February 21, 1991. Washington, U. S.
Govt., Print. Off., 1991. 175 p. S. Hrng. 102-19 —— Motor Vehicle Fuel
Efficiency Act; Report to Accompany S. 279. (102nd Congress, 1st session.
S. Rept. 102-48: 39 p.) —— Motor Vehicle Fuel
Efficiency Act of 1990; Report on S. 1224. June 11, 1990. Washington, U.
S. Govt. Print. Off., 1990. 29 p. (101st Congress, 2nd session. S. Rept.
101-329.) U. S. Congress. Senate.
Committee on Commerce, Science and Transportation. Subcommittee on the
Consumer. Motor Vehicle Fuel Efficiency Act of 1989. Hearing on S.
1224. 101st Congress, 1st session. September 7, 1989. Washington, U. S. Govt.
Print. Off., 1989. 341 p. S. Hrng. 101-347 U. S. Congress. Senate.
Committee on Energy and Natural Resources. Subcommittee on Energy Regulation
and Conservation. Automobile Fuel Efficiency Standards. Hearing, 101st
Congress, 1st session. April 4, 1989. Washington, U. S. Govt. Print. Off.,
1989. 352 p. S. Hrng. 101-44 U. S. Department of
Transportation. National Highway Traffic Safety Administration. Automotive
Fuel Economy Program. Annual Update, Calendar Year 2000, appearing in full
at: http://www.nhtsa. dot.gov/ cars/ problems/ studies/fuelecon/index.
html U. S. Federal Register.
Department of Transportation., National Highway Traffic Safety
Administration. Light Truck Fuel Economy Standards, Model Years 1998-2006.
Advance Notice of Proposed Rulemaking (ANPRM). Vol. 59, No. 66.
Wednesday, April 6, 1994, p. 16324-16332. Department of
Transportation. National Highway Traffic Safety Administration. Light
Truck Average Fuel Economy Standard, Model Year 2004. Notice of Proposed
Rulemaking. http://www.nhtsa. dot.gov/ cars/ rules/ rulings/
Cafe/LightTruck/NPRM-final. htm |
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