<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:29389.wais]
A BILL TO AUTHORIZE THE
NATIONAL HIGHWAY TRAFFIC
SAFETY ADMINISTRATION (NHTSA)
TO SET PASSENGER CAR FUEL
ECONOMY STANDARDS
============================================================================
HEARING
BEFORE THE
COMMITTEE ON ENERGY AND
COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
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MAY 3, 2006
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Serial No. 109-95
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Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/house
-------
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COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida Ranking Member
Vice Chairman HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, JR., New Jersey
ED WHITFIELD, Kentucky SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia BART GORDON, Tennessee
BARBARA CUBIN, Wyoming BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING, Mississippi ALBERT R. WYNN, Maryland
Vice Chairman GENE GREEN, Texas
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DEGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida
MARY BONO, California JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon HILDA L. SOLIS, California
LEE TERRY, Nebraska CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey JAY INSLEE, Washington
MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
BUD ALBRIGHT, Staff Director
DAVID CAVICKE, General Counsel
REID P. F. STUNTZ, Minority Staff Director and Chief Counsel
CONTENTS
Page
Testimony of:
Boehlert, Hon. Sherwood, Member, U.S. House of Representatives 42
Mineta, Hon. Norman Y., Secretary, U.S. Department of
Transportation 48
Webber, Frederick L., President, Alliance of Automobile
Manufacturers 79
Sharp, Hon. Philip R., President, Resources for the Future 86
Pizer, William, A., Senior Fellow, Resources for the Future 98
Reuther, Alan, Legislative Director, International Union,
United Automobile, Aerospace and Agricultural Implement
Workers of America 113
Additional material submitted for the record:
Reuther, Alan, Legislative Director, International Union,
United Automobile, Aerospace and Agricultural Implement
Workers of America, response for the record 132
Sharp, Hon. Philip R., President, Resources for the Future,
response for the record 134
Pizer, William, A., Senior Fellow, Resources for the Future,
response for the record 135
Webber, Frederick L., President, Alliance of Automobile
Manufacturers, response for the record 138
Mineta, Hon. Norman Y., Secretary, U.S. Department of
Transportation, response for the record 140
Cohen, Edward B., Vice President, Government and Industry
Affairs, Honda North America, Inc.., submission for the
record 142
Association of International Automobile Manufacturers, Inc.,
submission for the record 144
A BILL TO AUTHORIZE THE NATIONAL
HIGHWAY TRAFFIC SAFETY
ADMINISTRATION (NHTSA) TO SET
PASSENGER CAR FUEL ECONOMY STANDARDS
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WEDNESDAY, MAY 3, 2006
HOUSE OF REPRESENTATIVES,
COMMITTEE ON ENERGY AND COMMERCE,
Washington, DC.
The committee met, pursuant to notice, at 10:04 a.m., in Room 2123
of the
Rayburn House Office Building, Hon. Joe Barton (chairman) presiding.
Present: Representatives Barton, Bilirakis, Upton, Stearns, Gillmor,
Cubin, Shimkus, Wilson, Bass, Pitts, Terry, Ferguson, Rogers, Myrick,
Sullivan,
Murphy, Burgess, Blackburn, Dingell, Waxman, Pallone, Brown, Rush, Eshoo,
Stupak, Engel, Wynn, Green, Strickland, DeGette, Capps, Allen, Schakowsky,
Solis, Gonzalez, Inslee, and Baldwin.
Staff Present: David McCarthy, Chief Counsel for Energy and
Environment;
Kelly Cole, Counsel; Peter Kielty, Legislative Clerk; and Jonathan Cordone,
Minority Counsel.
CHAIRMAN BARTON. The committee will come to order. If members will take
their
seats at the dais, the audience will find their seat. The Chair would
recognize himself for an opening statement.
Today, we are going to have a hearing on the committee print to
authorize
the National Highway Traffic Safety Administration to set passenger car fuel
economy standards. This committee print is the first of many steps that this
committee intends to take to foster the goal of minimizing dependence on
foreign
sources of energy, and over time, to make it possible for us to have energy
independence in the United States of America.
In the wake of the 1973-74 Arab oil embargo, Congress passed the
Energy
Policy Conservation Act, which established Corporate Average Fuel Efficiency,
which we know more commonly as CAFE standards, for passenger cars and light
trucks sold in the United States. Under the CAFE system, we have come a long
way with our light truck fleet. The Department of Transportation took a major
step forward in March, announcing a reformed CAFE program for light trucks.
This new program will save the United States nearly 11 billion gallons of fuel
over the lifetime of the vehicles sold between 2008 and 2011.
We cannot say the same thing for passenger cars. In 1975, Congress
set a
goal of doubling fuel economy for passenger cars, by 1985, to 27.5 miles per
gallon. According to my math, that was 31 years ago. Yet today, the fuel
economy mandate for passenger cars is unchanged. It continues to be 27.5
miles
a gallon. What makes this static fuel economy number even more striking is
that
under the new light truck rule, there are now SUVs required to meet stricter
CAFE standards than passenger cars. It really does appear that the time has
come to at least allow for the possibility of change in the passenger car
standard.
Today's committee print authorizes the Department of Transportation to
set
CAFE standards for passenger cars. Under current law, the DOT may modify the
system for light trucks, but it lacks clear, explicit authority to alter
requirements for passenger cars, since Congress sets that standard. The bill
would give the Department of Transportation clear authority.
We may need to go further. Aside from just giving the Department of
Transportation the authority to set passenger fuel economy standards, I would
like for the NHTSA to take a hard look at reforming the entire structure of
mileage estimates for passenger cars. The current outdated system hampers the
potential for energy savings, raises vehicle safety concerns, and fails to
treat
competitive players fairly. Without question, our constituents want us to
give
the Department of Transportation statutory authority to fully reform the
passenger car fuel economy program.
As Chairman of this committee, I plan to answer that need. This
hearing
is the first step in accomplishing that goal. I plan to ask each of our
witnesses how we can best craft language to revamp the current passenger car
system. How do we make the changes necessary to the passenger CAFE program to
ensure that it is safe, fair, and reliable? It would be nice if we could have
somebody explain what harmonic averaging really is.
I have no doubt that there will be calls by some in Congress to
dramatically raise the fuel economy of passenger cars. For Congress to
arbitrarily set a number, in my opinion, would be a mistake. As Secretary
Mineta can tell us, establishing fuel economy standards is a complex and
complicated process. If we get it wrong, it can create perverse incentives
that
result in more dangerous vehicles, reduced competition, and lost jobs. I do
not want that to happen.
In advance, I want to thank our witnesses here today. We are going to
have the Chairman of the Science Committee, Congressman Boehlert of New York;
a former Member of the House of Representatives, the Secretary of
Transportation,
Norman Mineta. Those are both excellent men and excellent witnesses. We look
forward to hearing their testimony.
[The prepared statement of Hon. Joe Barton follows:]
PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY AND
COMMERCE
This Committee Print is the first of many steps we plan to take toward
energy independence.
In the wake of the 1973-74 Arab oil embargo, Congress passed the Energy Policy
Conservation Act, which established corporate average fuel efficiency, known
as
``CAFE,'' standards for passenger cars and light trucks sold in the United
States.
Under the CAFE system, we've come a long way with our light truck
fleet. The
Department of Transportation (DOT) took a major step forward in March,
announcing a ``reformed'' CAFE program for light trucks. This new program
will
save the United States nearly 11 billion gallons of fuel over the lifetime of
the vehicles sold between 2008 and 2011.
Unfortunately, we can not say the same for passenger cars. In 1975,
Congress
set a 1985 goal of doubling fuel economy for passenger cars to 27.5 mpg.
According to my math, that was 31 years ago. And today, the fuel economy
mandate
for passenger cars is unchanged. It continues to be 27.5 mpg. What makes
this
static fuel economy number even more striking is under the new light truck
rule,
there are now SUVs required to meet stricter CAFE standards than passenger
cars. The time has come for a change.
Today's Committee Print authorizes the Department of Transportation
to set CAFE
standards for passenger cars. Under current law, the DOT may modify the
system
for light trucks but it lacks clear authority to alter requirements for
passenger cars, since Congress set that standard . This bill would give DOT
that clear authority.
But I want to go farther. Aside from just giving DOT the authority to
set
passenger fuel economy standards, I also want NHTSA to take a hard look at
reforming the entire structure of mileage estimates for passenger cars. The
current, outdated system hampers the potential for energy savings, raises
vehicle safety concerns, and fails to treat competitive players fairly.
Without question, our constituents want us to give DOT statutory
authority to
fully reform the passenger car fuel economy program. As Chairman of this
Committee, I plan to answer that need.
This hearing is the first step to accomplishing that goal. Today, I
plan to ask
each of our witnesses how we can best craft language to revamp the current
passenger car system. How do we make the changes necessary to the passenger
car CAFE program to ensure that it is safe, fair, and reliable?
I have no doubt there will be calls by some in Congress to
dramatically raise
the fuel economy of passenger cars. For Congress to arbitrarily set a number,
however, would be a mistake. As Secretary Mineta can tell us, establishing
fuel
economy standards is a complex and complicated process. And getting it wrong
can create perverse incentives that result in more dangerous vehicles, reduced
competition, and lost jobs. That will not happen on my watch.
In advance, I want to thank our witnesses here today, in particular,
Chairman of
the Science Committee, Rep. Boehlert, and a former member of the House of
Representatives, Secretary of Transportation Norman Mineta. Thank you all for
being here today. I look forward to hearing from all of our witnesses.
CHAIRMAN BARTON. Now, I would like to recognize the gentlelady from
California, Ms. Eshoo, for an opening statement. Three minutes, I think. Is
it three or one? I beg your pardon?
MS. ESHOO. I'm going to get closer to the microphone here. I am
sorry.
Good morning, Mr. Chairman, and is Secretary Mineta here? Not yet. I
was
going to say welcome back to the House. But it is good to have our colleague
that we respect so much, Mr. Boehlert, here this morning.
I think this is really quite a day for our committee, because we are
finally taking a cursory interest in fuel economy standards. Despite climbing
oil prices and oil imports, the truth of the matter is, is that the Republican
Congress and the Administration have done little to create more efficient
vehicles.
Consequently, the fuel economy of the new vehicle fleet that came onto
the
road in 2005 was worse, it was worse than the fleet produced in 1985, and
consumers are paying for this at the pump. The Administration has claimed
that
it wanted to reform the CAFE system for years. The truth is they have
actually
stood in the way of Congressional efforts to improve fuel economy, arguing
that those efforts were ``arbitrary."
In 2001, the Administration argued against Senate language to raise
fuel
economy standards. In 2005, they opposed legislation calling on the President
to enact policies to cut oil consumption by one million barrels of oil per day
because they said that might require an increase in fuel economy standards.
In the House, the Administration has never stood with Representatives Markey,
Boehlert, and myself in our efforts to raise fuel economy for cars and light
trucks.
Now, with the President in his sixth year of office, gas has soared
past
$3 a gallon. Suddenly, we are hearing an urgent appeal to give the National
Highway Transportation Safety Administration additional authority to raise
CAFE
standards for cars. So much time and so much has been squandered with the
time and the opportunity it presented.
In my view, the Administration has all the authority it needs. In the
1990s, the Republican leadership was so concerned that the Federal government
would raise fuel economy standards they actually passed appropriation riders
blocking new standards. If the Federal government didn't have the authority
to
promulgate any CAFE rules, why were appropriation riders needed to prevent the
Government from acting?
The Administration, sadly, has done little with the authority it clearly
has. It touts its recently announced revised fuel economy standards for light
trucks and SUVs as saving 10 billion gallons of gas. This sounds like a big
number, but the savings amount to less than a month's supply of fuel, and it
will take us 15 years to achieve the savings. We need a major increase in
fuel
economy standards if we are going to decrease dependence on foreign oil.
So I hope the Administration's rediscovered interest in this issue is
actually sincere. I am not so sure that it is, and I am afraid that based on
prior experience, this could be a high form of pandering at the pump.
I yield back.
[The prepared statement of Hon. Anna Eshoo follows:]
PREPARED STATEMENT OF THE HON. ANNA ESHOO, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF CALIFORNIA
Good morning, Mr. Chairman, and welcome back to the House, Secretary
Mineta.
This is quite a day for our Committee because we're finally taking a
cursory interest in fuel economy standards.
But let's be honest, today's Committee activity and the legislation on
House
floor are just exercises in political damage control not serious policymaking.
Despite climbing oil prices and oil imports, this Republican Congress
and this Administration have done little to create more efficient vehicles.
Consequently, the fuel economy of the new vehicle fleet that came onto
the road
in 2005 was worse than the fleet produced in 1985, and consumers are paying
for it at the pump.
The Administration has claimed that it wanted to reform the CAFE
system for
years. The truth is they've actually stood in the way of Congressional
efforts
to improve fuel economy, arguing that those efforts were ``arbitrary."
In 2001, they argued against Senate language to raise fuel economy
standards.
In 2005, they opposed legislation calling on the President to enact policies
to
cut oil consumption by 1 million barrels of oil per day, because, they said,
that might require an increase in fuel economy standards.
The Administration has never stood with Representatives Markey,
Boehlert, or
myself in our efforts to raise fuel economy for cars and light trucks.
Now, with the President in his sixth year of office, gas has soared
past $3.00 a
gallon. Suddenly, we're hearing an urgent appeal to give the National Highway
Transportation Safety Administration additional authority to raise CAFE
standards for cars.
The Administration has all the authority it needs. In the 1990's, the
Republican leadership was so concerned that the federal government would raise
fuel economy standards, they passed appropriations riders blocking new
standards.
If the federal government did not have the authority to promulgate any
CAFE
rules, why were appropriation riders needed to prevent the government from
acting?
The Administration has done little with the authority it clearly has.
It touts
its recently announced revised fuel economy standards for light trucks and
SUVs
as saving 10 billion gallons of gas. This sounds like a big number, but the
savings amounts to less than a month's supply of fuel - and it will take us 15
years to achieve this savings.
We need a major increase in fuel economy standards if we're going to
decrease dependence on foreign oil.
I hope the Administration's rediscovered interest in this issue is
sincere, but I'm afraid that based on prior experience, this is just a high
form of pandering at the pump.
CHAIRMAN BARTON. We thank the gentlelady. The gentleman from
Florida, Mr. Bilirakis, is recognized.
MR. BILIRAKIS. Thank you, Mr. Chairman. I do commend you for
scheduling this hearing.
As we know, Congress first established car fuel economy standards as
part
of the Energy Policy and Conservation Act of 1975, after the Arab oil embargo
led to the tripling of the price of oil in the early 1970s. And just as it
did in the early '70s, our Nation is facing a dramatic spike in oil, and
consequently, gasoline prices. Higher prices certainly have the attention of
all of our constituents, and like all Americans, we all painfully put gas into
our car, and suffer the painful awareness of the cost.
It is important, I think, Mr. Chairman, that Congress and the
Administration revisit this issue at a time when we are working to lessen our
dependence on foreign oil. For some time now, I have supported increasing
fuel
efficiency standards for vehicles. I think I should add in there that we do
it
in a responsible, accountable manner. In fact, I voted for several floor
amendments which would have raised CAFE standards in this country, and I am
pleased that we are reviewing legislation that will give NHTSA the authority
to raise those standards for passenger cars.
However, I am not certain that the draft bill goes far enough--and you
said as much, Mr. Chairman, and I agree with you--but as I understand it, the
committee print before us today is intended to be a discussion vehicle, and
modifications are expected as the bill moves through the legislative process.
And I would say, probably better sooner than later in that process, Mr.
Chairman.
I am withholding judgment on the committee print until all interested
parties have had an opportunity to weigh in on the proposal, and like you, I
am
anxious to hear from today's witnesses, and look forward to working with you
and with the others on this very important issue.
Thank you, Mr. Chairman.
[The prepared statement of Hon. Michael Bilirakis follows:]
PREPARED STATEMENT OF THE HON. MICHAEL BILIRAKIS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF FLORIDA
Thank you, Mr. Chairman.
I want to commend you for scheduling today's hearing on draft
legislation
pertaining to the setting of corporate average fuel economy standards (CAFE).
Congress first established car fuel economy standards as part of the Energy
Policy and Conservation Act of 1975 (EPCA) after the Arab oil embargo led to
the tripling of the price of oil in the early 1970s.
Just as it did in the early 1970s, our nation is facing a dramatic
spike in oil,
and consequently, gasoline prices. High gasoline prices certainly have the
attention of my constituents and the rest of the American public. Like all
Americans, I am painfully aware of rising gasoline prices every time I go to
fill my car's gas tank. Although NHTSA recently established new CAFE
standards for light trucks, the current passenger car standard of 27.5 miles
per gallon (mpg) was set in statute in 1990. Therefore, I think it is
important for Congress and the Administration to revisit the issue of CAFE
standards at a time when we are working to lessen our dependence on foreign
oil.
For some time now, I have supported increasing fuel efficiency
standards for
vehicles. In fact, I have voted for several floor amendments which would have
raised CAFE standards in this country. I am pleased that we are reviewing
legislation that will give NHTSA the authority to raise CAFE standards for
passenger cars. However, I am not certain that the draft bill goes far
enough,
but as I understand it, the Committee print before us today is intended to be
a
discussion vehicle and modifications are expected as the bill moves through
the
legislative process. Therefore, I am withholding judgment on the Committee
print until all interested parties have had an opportunity to weigh in on the
proposal.
Consequently, I am anxious to hear from today's witnesses, and I look
forward to working with my colleagues on this important issue.
Thank you, Mr. Chairman.
CHAIRMAN BARTON. Thank you, Mr. Bilirakis. We have our distinguished
Ranking Member, the Dean of the House from Michigan, Mr. Dingell, with us. He
is recognized for an opening statement.
MR. DINGELL. Mr. Chairman, thank you for those gracious comments, and
thank you for holding this hearing.
I would like to bid an especially warm welcome to our dear friend, Mr.
Mineta, the Secretary of Transportation. He is an outstanding public servant,
and a former member of this committee. Welcome, Mr. Secretary.
Mr. Chairman, thank you for holding the hearing, and I hope that this
is
the first in a series of hearings on a very complex issue that will thoroughly
examine the difficult issue of motor vehicle fuel economy. It is a matter of
national importance that affects our environment, the security of our Nation,
and our economic wellbeing. It must be addressed deliberately and with
extraordinary care.
The circumstances under which we receive testimony this morning,
however,
give rise to questions. It is my hope that our witnesses will shed light on
some of these matters throughout the morning.
First, the President has asked Congress to give him authority to
increase
passenger car fuel economy standards, yet that authority exists under current
law. The Departments of Justice and Transportation have continuously opined,
over a 20-year period, that the Supreme Court's decision in Chadha did not
invalidate that authority.
This committee, in which the underlying law originated, has conducted
hearings and received testimony from the Department of Transportation
maintaining the authority of that agency to increase standards, and as one of
those who has authored the Energy Bill of which CAFE is part, it is my
recollection, and a clear one indeed, that this was the intent of the
Congress,
that the President at later times, and the Administration, would have
authority
to increase the CAFE requirements on passenger automobiles.
The question, then, is why is it that the President requests such
authority? Second, the Secretary of Transportation, for whom I have great
respect and affection, has asked the Congress to allow his Department to
reform
the CAFE system. I am anxious to be of assistance, and it may well be that
this
is a good thing. But we need to learn how this reform will take place, and
what
effects it will have on safety, fuel consumption, and manufacturing, and is it
necessary to do this, and if it is done, how will it be done, and what impact
will it have upon American manufacturing, American jobs, and American workers?
So why, then, has the Administration not yet offered legislative
proposals
for us to examine? We have seen nothing of this kind, and to me, not having
legislation clearly before us at the time we begin to focus on questions of
this
kind is an invitation to serious danger and peril. We need to know what it is
the Administration wants, so that it can be properly tested, not only before
the
members of this committee, but also before the public at large, before the
industry, before the unions, and before others.
Changing our system of regulating fuel economy is not a simple
exercise.
Rather, it is very complicated. Even for the best-intentioned persons, there
are pitfalls and potential for mischief throughout the process of reform, and
of
course, the law of surprises and unintended consequences will work splendidly
here.
Details and nuances matter greatly, and we cannot sufficiently
evaluate
the merits of major changes without an adequate opportunity to examine the
legislative language line by line with extraordinary care. The Chairman did
circulate a draft bill on Friday of last week, and I thank you, Mr. Chairman,
for this. But I note that the three pages of text did not address the thorny
issue of reform. I note that the witnesses on the third panel have already
identified technical errors in the draft that was submitted on Friday which,
quite simply, sought to restate existing law. This should serve as a very
important cautionary note and warning to all concerned.
Fourth, I find it most curious that the committee addresses these
matters
in an apparent attempt to stem the tide of gasoline prices. Stated clearly,
increasing CAFE standards will not reduce gasoline prices, at least over the
next 6 to 10 to 15 years. New CAFE standards will not begin to improve fuel
economy of vehicles until the model year of 2010 or beyond. It would then
take
another 10 to 15 years for these more efficient vehicles to reduce the demand
for fuel, and any reduction of gas prices remains to be seen. If increased
fuel
economy standards have any effect on fuel price, it would be minimal, and as
much as 20 years in the offing.
I am troubled about the reform, and I would note that there is great
risk
here. The current situation is one in which we calculate these matters on a
fair, objective, and scientifically sound basis. To move to something new,
like
footprints or some other thing which is undefined, and perhaps unattached to
responsible science, may be a very dangerous matter. And I would--
CHAIRMAN BARTON. If the gentleman could--
MR. DINGELL. --extraordinary care. These are perilous times for
American
auto industries, workers, and the American consumers. I ask my colleagues on
the committee and the House to approach matters of CAFE with great care and
close attention to detail. Much depends on it.
Thank you, Mr. Chairman.
[The prepared statement of Hon. John D. Dingell follows:]
PREPARED STATEMENT OF THE HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MICHIGAN
Mr. Chairman, thank you for holding this hearing, which I hope is the
first in a
series of hearings that will thoroughly examine the complex issue of motor
vehicle fuel economy. It is a matter of national importance that affects our
environment, our security, and our economic well-being. It should be
addressed deliberately and with great care.
The circumstances under which we receive testimony this morning,
however, give
rise to some most curious questions. It is my hope that our witnesses will
shed light on some of these matters throughout the morning.
First, the President has asked Congress to give him authority to
increase
passenger car fuel economy standards, yet that authority exists under current
law. The Departments of Justice and Transportation have continuously opined
over a twenty-year period that the Supreme Court's decision in Chadha did not
invalidate that authority. This Committee, in which the underlying law
originated, has conducted hearings and received testimony that the Department
of
Transportation maintains its authority to increase standards. So why is the
President now requesting such authority?
Second, the Secretary of Transportation, for whom I have great respect
and
affection, has asked Congress to allow his Department to reform the CAFE
system.
I am anxious to be of assistance and to learn how this reform might take place
and what effects it may have on safety, fuel consumption, and manufacturing.
So
why has the Administration not yet offered legislative proposals for us to
examine?
Changing our system for regulating fuel economy is not a simple
exercise. Even
for the well-intentioned, there are pitfalls and potential for mischief
throughout the process of reform. Details and nuances matter greatly, and we
cannot sufficiently evaluate the merits of major changes without an adequate
opportunity to examine legislative language line by line.
The Chairman did circulate a draft bill on Friday of last week, but the three-
pages of text did not address this particularly thorny issue of reform. I
note
that witnesses on our third panel have already identified technical errors in
the Chairman's draft, which quite simply sought to restate existing law. This
should serve as a cautionary note to all concerned.
Third, I find it most curious that the Committee addresses these
matters in an
apparent attempt to stem the tide of rising gas prices. Stated plainly,
increasing CAFE standards will not reduce gas prices. New CAFE standards will
not begin to improve the fuel economy of vehicles until model year 2010 or
beyond. It would then take another 10 to 15 years for those more efficient
vehicles to reduce demand for fuel, and the significance of any reduction in
gas
prices remains to be seen. If increased fuel economy standards have an effect
on fuel prices, it could be minimal and as much as 20 years in the offing.
These are perilous times for the American automobile industry, the
American auto
worker, and the American consumer. The matters we consider today are serious.
I ask that my colleagues on the Committee and in the House approach changes to
CAFE with great care and with close attention to detail. Much depends on it.
CHAIRMAN BARTON. We thank the gentleman from Michigan.
Mr. Upton.
MR. UPTON. Mr. Chairman, I am going to defer and would like my
additional
time for panel two, as I get to see Mr. Boehlert all the time.
CHAIRMAN BARTON. All right. We will go to Mr. Ferguson, then since
Mr. Upton deferred.
MR. FERGUSON. Thanks very much, Mr. Chairman. Thank you, Mr. Upton,
for deferring.
Thanks for holding this important and timely hearing on passenger car
fuel
economy standards, as well as thanks to the witnesses for coming to testify on
this important topic.
In recent months, our country has reached a turning point in our
Nation's
approach to using our energy resources. We have never realized how crucial it
is to our energy security that we begin to work our way towards energy
independence in the upcoming years. The recent rise in gas prices has made
every American take notice of how our Nation uses its energy resources, and
we,
as leaders, must do all that we can to ensure that our Nation is using our
energy wisely, whether it is imported or domestic energy. We must realize
that
we can't drill our way to energy independence. It is essential that we not
only
devote an unprecedented amount of resources to alternative energy research and
development, but also that we ensure that we are conserving our natural
resources by using them in the most efficient manner.
I appreciate the committee's commitment to alternative energy and
diversifying our Nation's energy portfolio. It is important that we, as
Americans, begin to realize the potential these alternative fuels hold for
lowering energy bills for all Americans, and conserving our own resources.
Aside from increasing our commitment to alternative energy, we also have to
put
in place numerous provisions to help citizens and manufacturers efficiently
use our Nation's energy resources.
CAFE standards have done well to save fuel and protect the
environment.
Over the past two decades, manufacturers have nearly doubled the fuel
economies
of their car fleets. CAFE standards also slash urban smog by reducing
carcinogenic hydrocarbon emissions, a key ozone smog precursor. This is an
especially important issue in my home State of New Jersey, which struggles to
meet our clean air standards. I have a strong record of supporting stronger
CAFE standards in the past. I will continue to support responsible CAFE
reform
for the sake of our Nation's energy security. I am anxious to see what
reforms
the final legislation will contain, and hope that it will take steps to allow
our Nation to become more energy efficient.
Again, I would like to thank you, Mr. Chairman, for your work on this
issue, and I appreciate our witnesses for coming before the committee today.
I yield back.
MR. BILIRAKIS. [Presiding] The Chair thanks the gentleman. Mr.
Waxman?
MR. WAXMAN. Thank you, Mr. Chairman.
Gasoline prices have been skyrocketing throughout the country, from
Florida to California to Connecticut to Wisconsin. Consumers are now paying
more than $3 a gallon for gas, and as the prices rise, we are spending more
and
more of our Nation's wealth, sending it overseas to purchase foreign oil.
This
problem has been building for years under the Republican Congress and the Bush
Administration's energy policies. From day one, this Administration and the
Congress have bestowed on the big oil companies subsidies, exemptions,
loopholes, and tax breaks.
Upon taking office, Vice President Cheney convened an energy task
force
that secretly met with energy executives to develop the Nation's energy
policy.
He never even met with consumers and environmental groups. The result is a
national energy policy that fails to restrain energy prices, that fails to
plan
for the future, and fails to take into account our environmental and national
security.
Congress endorsed and expanded these misguided policies in the energy
bill
we passed last year. Five years later, we are reaping the fruit of the
Administration's energy policy. Gasoline prices have doubled, home heating
prices have soared, natural gas prices have risen to unprecedented levels.
Now,
with these consequences coming home to roost, the President plays to the
press,
and urges the Congress to give him the authority to raise CAFE standards for
passenger automobiles.
Well, Mr. Chairman, I would like to place in the record a letter from
David Vladeck, a professor of law at Georgetown University. Professor Vladeck
has 30 years of experience in complex Federal legislation, and at my request,
he
reviewed the CAFE law in light of the President's statement. After review of
the statute and its history, he concludes that the Department of
Transportation
already has the authority to revise fuel efficiency standards for passenger
automobiles.
The reality is that this Administration has exhibited no serious
interest
in reducing the Nation's dependence on oil. They opposed CAFE increases in
the
energy bill. They opposed oil savings provisions in the Energy Bill. They
adopted an increase in fuel efficiency standards for light duty trucks so
small
as to be negligible, and they worked to pass lopsided tax subsidies to promote
sales of the least efficient vehicles.
The Republican Congress took a similar approach. The Republican
Congress
repeatedly passed appropriation riders to ensure that when Clinton was
President, he did not use this power to increase fuel economy standards. We
have got to reduce our dependence on foreign oil. CAFE is the best tool we
have
for doing it. The Administration could have used authority under CAFE years
ago
to address this issue. Now, we ought to get on with it. The President ought
to
just do it, and it is hard to hear the Republicans say they want it when they
voted over and over and over again against raising the CAFE standards.
MR. BILIRAKIS. The gentleman's time has expired. Mr. Murphy, for an
opening statement?
MR. MURPHY. Thank you, Mr. Chairman. I appreciate the committee
taking
on this important issue, as this committee has done on so many things with
energy.
When it comes to dealing with the cost of gasoline and oil, there are
three things that this committee has, and there are differences between
different sides of the aisle, but I think the issue of conservation and
improving efficiency has to be an area that we come together, for unless we
reduce our consumption, we are going to continue to be dealing with that old
issue of supply and demand. And demand will go up, supplies can't meet it,
and
as we all know, we continue to be more and more dependent upon sources of
foreign oil.
But we must also continue our work on exploration, and that means we
have
abundant supplies of petroleum products here in the United States off our
Atlantic Coast, our Gulf Coast, our Pacific Coast, Alaska, and the Rocky
Mountain range, and many of those areas are already approved, but it is taking
so long for the permitting process. But as it is, unless we move forward with
getting some of our own oil out of our own land, we continue that dependence
upon foreign countries who oftentimes have their volatile politics, which
keeps the noose around our neck for the cost of gasoline.
And the third area, the diversification, which we have touched on
here--
and we are moving forward, as we do with the energy bill, and some things such
as using nuclear energy, clean coal technology, but unfortunately, we are also
in a situation with some of the renewables that although we may support them
in
word, when it comes to building windmills in someone's district, or
hydroelectric plants, et cetera, it usually becomes an issue that there used
to
be NIMBY, not in my back yard, and now, it is that term BANANA that is used,
build absolutely nothing anywhere near anybody, and that is not going to work
for us, either.
If we are going to be serious about reducing the cost of gasoline,
this
issue of conservation is important. I am told that if each citizen reduces
driving, and cuts as much as one gallon a day, or one gallon a week, the
savings
are so massive that the price of gasoline starts to go down at the pump,
because
now, we are meeting some of our needs, and so even though we are talking today
about improving efficiency in vehicles, and I would like to see us do that in
a
significant way, we have to recognize that the immediate thing we can do is
encourage citizens to be themselves the best conserver of energy, to look upon
how they can save gasoline, how they can reduce their own miles consumed, how
they can combine trips into such ways that they are driving less and wasting
less.
That is the immediate thing we can do, but the purpose of this hearing
hopefully will give us some information on those age-old questions, can we
have
safe cars and better mileage at the same time? Is this achievable with
gasoline
cars, or do we have to use hybrid engines or hydrogen-based engines, and can
we
do all this in a way that brings this to the marketplace fast and in
affordable
way for citizens?
These are questions that I will have today for the panel, and I look
forward to hearing their testimony on these, and as always, Mr. Chairman, I
appreciate your leadership on these issues.
I yield back.
MR. BILIRAKIS. The Chair thanks the gentleman. Mr. Markey, your
opening statement.
MR. MARKEY. Thank you, Mr. Chairman.
In 1961, President Kennedy challenged America to put a man on the Moon
within 8 years, by 1969, because the Soviet Union was threatening to control
outer space, the high frontier. The American people responded
technologically, so that we could leapfrog the Soviet Union and Communism.
Unfortunately, a new challenge that confronts us today has not seen a
similar response from a Republican President or a Republican Congress. Thus
far President Bush's claim that it is impossible, rocket science, President
Kennedy
was able to master, using the will and the skill of the American people, but
auto mechanics, President Bush and the Republican leadership have said, is not
possible to be conquered.
In 1975, in response to the first oil shock, President Ford and the
Congress passed a law which doubled the fuel economy standards of the American
automotive fleet over a 10-year period. It doubled it from 13 miles per
gallon
to 27 miles per gallon. It actually reduced, over that 10-year period, the
importation of oil from 36 percent of all of our oil down to 27 percent of all
of our oil. It was a powerful response to OPEC.
But since then through President Bush I, through the Newt Gingrich
Congress, which prohibited each year, legislatively, President Clinton from
acting to improve the fuel economy standards, prohibited President Clinton,
right through the entire Bush Administration, where they have refused to act on
fuel economy standards, we are now 60 percent dependent upon imported oil. We
have gone from 44 percent dependency on the day the Republican Congress took
over in '95 to 60 percent dependent today with no action by the Republican
President or by the Republican Congress.
Sherry Boehlert and I have made an amendment each year, each Congress, for
the last three Congresses. Last Congress, we received 177 votes. We started
with 160 in 2001; it went up to 162 in 2003. Now, it is 177 votes. At 33 miles
per gallon, which is what our amendment does, it backs out all of the oil from
the Persian Gulf, all 2.5 million barrels a day. This is the year to do it.
This is the year to vote for it. But we don't need that authority. The
President has it.
So I call on the President to use his authority and issue a challenge
to America. Tell us, Mr. President, what the number for the fuel economy
standard
should be. Pick a number, Mr. President. Don't duck. Don't pass the buck.
Pick a number. Because in the end, it is not a lack of authority that is
missing, it is a lack of leadership from President Bush. Pick a number. Is
it
33 miles per gallon, 35 miles per gallon, 40 miles per gallon? Until you name
a number, Mr. President, there will be no leadership--
MR. BILIRAKIS. The gentleman's time has expired.
Mr. Waxman has asked for unanimous consent that a letter from the
Institute for Public Representation at Georgetown University Law Center, dated
May the 2nd, 2006, be inserted as part of the record. Without any objection,
that will be the case.
[The information follows:]
<GRAPHICS NOT AVAILABLE IN TIFF FORMAT>
MR. BILIRAKIS. Mr. Bass for an opening statement. Mr. Bass is
passing. Ms.
Myrick for an opening statement. And you're passing? Mrs. Wilson, opening
statement.
MRS. WILSON. Thank you, Mr. Chairman, and thank you for holding this
hearing today.
I think all of us believe that we need a balanced long-term energy
policy
to make America more energy independent, and I look forward to this hearing
today. I have read some of the information from the Department of
Transportation, and the question seems to me here is, is there a smarter way
to
do the CAFE standards, so that we save fuel without compromising safety? And
the Department of Transportation approach to how they changed the light truck
standard using the footprint of the vehicle, which encourages people who make
light trucks to try to put fuel efficient technologies on the whole line, and
not just looking at the average in their fleet, seems to make a lot of sense
to me.
The question is whether we could do the same thing for passenger cars and
other kinds of vehicles, and gradually increase fuel economy for every kind of
vehicle, as opposed to just having somebody make more small cars to compensate
for the fact that they have big cars on the road. This kind of innovation and
looking, thinking outside the box, and trying to do something differently to
improve the fuel economy of the entire fleet of vehicles that is on our road
in
America seems to make a lot of common sense, and I look forward to hearing the
testimony today, the different ideas, and listening to the Department of
Transportation, and what you want to do, and how that will help us save fuel
without compromising safety.
And I really appreciate this hearing and the background work that went
into it. Thank you, Mr. Chairman.
MR. BILIRAKIS. The Chair thanks the gentlelady. Ms. Capps, for an
opening statement?
MS. CAPPS. Thank you, Mr. Chairman, and welcome to Transportation
Secretary and fellow Californian, Mr. Mineta, particularly to our esteemed
colleague for his testimony, Mr. Boehlert from New Yorker, and former Member,
Mr. Sharp, for being at this hearing today.
Nevertheless, I find this whole hearing rather strange, rather
bizarre.
First, as has been said, the Administration can already raise fuel efficiency
standards. It doesn't need any change in the law, and it is surprising to me
that the Administration cares about what we are going to be debating about
anyway. We have all read about the President's signing statements that give
his
rather unique interpretation of the laws he has just signed. For example, the
signing statement to the McCain anti-torture law, which allows him, actually,
to
ignore the law. Maybe it would be faster for the President to use a signing
statement to the next bill that crosses his desk. It could say he understands
that new law, whatever it happens to be, gives him the right to adjust CAFE
standards. It would save us a lot of time and debate.
And the history been stated, but I want to repeat it. The
Republican-led
Congress banned CAFE increases during the latter half of the '90s through
appropriation riders. Apparently, Representative DeLay and others believed
the
Clinton White House could and would raise CAFE standards. Miraculously, once
President Bush came into town, the concern vanished and the riders
disappeared.
And during the last 5 years, this Republican-led House has repeatedly voted down
CAFE increases, and the Bush Administration has supported that decision.
But now, with record gas prices and their oil company supporters
reporting
record profits and executive payouts, the Republicans are scrambling. Last
week, it was a $100 rebate. Quickly ridiculed for shameless pandering, the
Senate leaders have since reconsidered. And right about now the Republicans
are
putting on the floor, on the suspension calendar to keep debate limited, of
course, useless price gouging and refineries legislation.
And here we have a hearing on a bill to let the Administration do
something it can already do, but doesn't want to, and it is being pushed by
people who oppose what the bill would let the Administration do anyway. In
fact, the new House Majority Leader is quoted in today's Washington Post
dismissing the Administration's newfound religion on CAFE, saying ``the market
can handle this much better than some kind of government regulation.'' At
least
the Majority Leader is being up front about his views. I think he is wrong,
but at least he is being honest.
Mr. Chairman, over the last decade, Republican actions on energy have
been
without vision. They have continued to place faith in increasing supplies,
while paying only fleeting attention to demand reduction. They have shoveled
billions in taxpayer subsidies to industries awash in profits. Today, gas is
at
$3 a gallon and rising. Today's hearing, like the ill-fated $100 rebate, is
about nothing more than panic. Republicans want to look like they are doing
something, anything, to address a mess they have helped create. It would be
funny if the results weren't so tragic.
Americans are hurting from high prices. The economy may well stumble
over
them, and all we get are gimmicks. The American people deserve better. I
yield back.
MR. BILIRAKIS. The gentlelady's time has expired. Mr. Shimkus, for
an opening statement?
MR. SHIMKUS. Thank you, Mr. Chairman. Thanks for having this
hearing. I
was over on the other side, talking to my friend, Mr. Markey, and that is why
Washington is a great place to be, because what comes around goes around, and
we have had this debate numerous times.
As maybe we are latecomers to the debate on CAFE, I would hope my
colleagues and friends would start accepting some of the needs for new supply.
And maybe, new supply, with more CAFE standards, would help address Economics
101, which is a supply and demand issue. That is why, on the Energy
Committee,
we continue to talk, and we are going to have it on the floor today, an issue
on
coal to liquids, and here is a great idea, and I hope my friends join me:
taking
coal--we are the largest country to have large reserves of coal. We can take
that coal, mined hopefully in southern Illinois, put a refinery on top of it,
a
coal-to-liquid refinery, to produce fuel that is cleaner than any fuel that we
could refine today.
So I know they are welcoming us to this debate on CAFE standards. I
know
the Secretary of Transportation has already addressed this on the light trucks
concern. The Administration has asked us to look at that, to give the
Secretary
of Transportation additional authority. I think we are ready to do that, Mr.
Secretary, and we are really willing to address the demand side. I would hope
my colleagues on the other side of the aisle would also help us address the
real supply needs we have for this country.
And with that, Mr. Chairman, I yield back my time.
MR. BILIRAKIS. Mr. Allen.
MR. ALLEN. Thank you, Mr. Chairman, for holding this hearing, and
thank you to my friends, Chairman Boehlert, Secretary Mineta, and to the
distinguished
panel for joining us today, including three people I consider friends, Mr.
Webber, Mr. Sharp, and Mr. Reuther. If only the three of them could agree, we
would be well on our way.
I am pleased that the Administration has come to the conclusion that
we
need to do something about fuel economy standards. Better late than never, I
suppose. I am, however, surprised, Secretary Mineta, that you do not feel you
have the legal authority to raise CAFE standards. During the Clinton
Administration, the Majority inserted riders into transportation
appropriations
bills that prohibited your Department from raising CAFE standards, but under
the Administration's interpretation, the Clinton Administration couldn't have
raised CAFE standards even if it wanted to.
Mr. Secretary, I don't buy it. I am convinced that you could have
raised
CAFE standards at any time over the past 5 years. You just didn't want to do
it. And if you had raised CAFE when you first came into office, we might
today
be seeing the benefits. Certainly, if the Majority had not tied the hands of
the Clinton Administration, we would definitely have a more fuel-efficient
vehicle fleet today.
I am not opposed to a reasonable revision of CAFE standards, but for
years, the auto industry and the Bush Administration have preferred to do
nothing than to make difficult decisions, to the great disadvantage of this
country, and certainly, to the great disadvantage, ultimately, of the U.S. auto
industry. I believe raising CAFE standards is sound long-term energy policy,
and I am pleased the Majority is considering it, despite my concerns about
some aspects of the draft bill.
But let us be frank. We have waited far too long to deal with this
issue,
but now, let us do something that will have a significant long-term impact on
public health and fleet fuel efficiency. Those are public values that require
public policy decisions that cannot be left solely to individual consumer
choices. We in Congress can no longer ignore our responsibility to deal in a
serious way with our energy crisis, the cost of illness from auto pollution,
and the threat to the planet from climate change.
And Mr. Chairman, I yield back.
MR. BILIRAKIS. The Chair thanks the gentleman. Mr. Rogers, opening
statement?
MR. ROGERS. Thank you, Mr. Chairman.
Mr. Chairman, as you know, first of all, let me appreciate having this
hearing, but as you and many of the members of the committee know, I have long
had concerns with the CAFE system. It is old, it is arbitrary, and it has
proven time and time again that you really can't make a fat person skinny by
mandating smaller pants sizes.
If we could, it would be a great solution, and that is exactly what we are
talking about doing with this arbitrary CAFE system. It was instituted in the
1970s. The system was supposed to dramatically improve fuel efficiency, and
more importantly, wean America off foreign oil. Hasn't happened.
What CAFE has done is distort the marketplace, and provide some
companies
with an unfair advantage over others, thanks to arbitrary Federal guidelines.
The people in Michigan know all too well about unfair advantages or
disadvantages. Automakers, auto suppliers, and autoworkers in my district and
across Michigan are suffering, and I am exceptionally concerned with the
threat that any new, arbitrary CAFE standards may pose to the American auto
industry.
You know, CAFE has done more than cost jobs, Mr. Chairman. It has
also
cost lives. As several witnesses state in their written testimony today,
arbitrary CAFE standards have forced companies to down-weight cars, making
them
less safe. Thousands of Americans have died because politicians in Washington
want to be the ones who pick what that CAFE standard ought to look like, and
plug it into a very antiquated formula.
That said, in recent years, Congress has, in a bipartisan way, worked
to
improve and rationalize the CAFE program, while maintaining the original and
valid purpose of CAFE, to lessen America's dependence on foreign oil. Credits
for alternative fuel vehicles and fundamental reform of the light truck CAFE
system are two excellent examples of progress that Congress has made. I hope
we
are able to use this debate surrounding this draft legislation to identify
further improvements to the CAFE system.
I look forward to the hearing today. I look forward to hearing the
witnesses, and how Congress can lessen our dependence, help in lessening our
dependence on foreign oil, and rein in high gas prices through the use of more
fuel-efficient vehicles.
And with that, Mr. Chairman, I would yield back the remainder of my
time.
CHAIRMAN BARTON. We thank the gentleman from Michigan. The Chair
would
like to inquire on the Minority side; apparently, there is a difference of
opinion on the order of speaking.
I show Congresswoman DeGette, but my understanding is Congressman
Green indicates that he was here.
MS. DEGETTE. Mr. Chairman.
CHAIRMAN BARTON. Have you all worked that out?
MS. DEGETTE. There is a problem with the whole list, but one thing I
have learned in 10 years in Congress, always to defer to your elders. So I--
CHAIRMAN BARTON. What elders?
MR. GREEN. Mr. Chairman, you know, where we come from, we defer to
our
fair sex, which I know Diana would really--but I would be glad to defer. But
let me explain something. I think there is a problem with how these lists are
compiled, because this is not the first time, in the full committee or the
subcommittee, and I know it is based on seniority sometimes. Sometimes, it is
on who shows up, and so if our side is giving the wrong information, I need to
know that, but if it has changed somehow, we need to know, because as you can
see, members have a lot of schedules. Instead of sitting here for 40 minutes
to
do an opening statement, then going, doing your appointment, or whatever else.
So--
CHAIRMAN BARTON. I understand. That is why I am asking. We do--
MR. GREEN. I am going to defer to Ms. DeGette, but I would hope that
the
leadership on both sides would make sure who signs up is there, who shows up,
or whatever the rules are, we will comply with them.
CHAIRMAN BARTON. All right. Well--
MS. DEGETTE. All right.
CHAIRMAN BARTON. Mr. Engel, did you have something that you wanted to
add? You were raising your hand, too.
MR. ENGEL. Mr. Chairman, just wanted to let you know that I wanted to
make an opening statement as well.
CHAIRMAN BARTON. Oh, okay.
MR. ENGEL. Okay.
CHAIRMAN BARTON. Got you. We are going to go--
MS. DEGETTE. Mr. Chairman--
CHAIRMAN BARTON. --to Ms. DeGette.
MS. DEGETTE. I will just seize control here.
CHAIRMAN BARTON. You can always defer, and then we can get on to our
witnesses, you know.
MS. DEGETTE. Thank you, Mr. Chairman. I just want to say that I
appreciate having this hearing. I guess I appreciate some of my respected
Republican colleagues seeming to have a change of mind, although, when I look
at
the bill that we are talking about today, it doesn't really seem to do much to
actually increase CAFE standards.
I have been on this committee now for almost 10 years, and the energy
bill every year, last year, no exception, has been the low point of my
Congressional
year, because it has been a backward-looking piece of legislation. There has
been a group of us trying to increase CAFE standards every year, and every
year, we are shot down, both in the committee, and on the floor.
Now, I found it interesting that my colleague from Illinois, Mr.
Shimkus,
was passionately arguing for a bill increasing supply, because I thought that
is
what we did, in not one but just two energy bills last year, in which again,
this committee and the majority on the floor shot down increased CAFE
standards.
Increasing the fuel economy of our vehicles would be the quickest, cheapest,
and most efficient way to reduce our dependence on fossil fuels.
Now, if you look at the committee print that we are discussing today,
it doesn't do anything about gas prices. It doesn't do anything about the
reliance on foreign oil, and ironically, it does nothing about fuel economy.
Congress has the authority to increase CAFE standards. A group of us,
and
as Mr. Markey points out, an increasing numbered group, has the authority to
do
this. The President, by all of the legal opinions we have today, has the
authority to increase CAFE standards. So what is Congress doing? We are just
dinking around debating whether or not we should give the Department of
Transportation authority to look at this.
Even if we pass this legislation right away, which it doesn't look
like we
will, the Department of Transportation will spend more than a year developing
a
rule. The rule would likely mirror President Bush's recent light truck
regulations, which overhauled the system, but only made marginal increases in
fuel economy, and then the automakers would have a couple of years to comply,
meaning that even tiny little increases in fuel economy would still be 4 or 5
years away.
This is just not good enough. I think that Congress should take the
initiative hand in hand with the Administration, to increase CAFE standards,
to
really make this work, because several people on the other side were right.
It
will take a couple of years to make this really work. So let us start right
now. If we are so interested in CAFE standards, let us get it done. It
doesn't
take a legal mastermind to see the flaws in the draft legislation in front of
us.
The bill just simply gives the Administration authority. It doesn't
say
what the standards would be. It doesn't even say if the standards would be
higher or lower. So let us get together, let us do something meaningful, and
let us start chipping away at this problem of high gas prices and reliance on
foreign oil now.
Thank you, Mr. Chairman.
CHAIRMAN BARTON. Thank you, Ms. DeGette, and we go to Congresswoman
Blackburn.
MRS. BLACKBURN. Thank you, Mr. Chairman, and thank you to our
witnesses
for being here. We appreciate your time, and we appreciate also, Mr.
Chairman, that you would call the committee today.
Reauthorization of the way we develop our fuel economy standards is
another important step for our country in reaching a point where we can one
day
celebrate an energy independence day, and as all of you can hear, this is
going
to be a feisty little debate, and the focus today is on fuel economy, but I
think the real issue that we are here discussing is the high price of fuel.
And
while we address the legislation that is before us, I think it is critical
that
we not ignore the reasons for the fuel prices being as high as they are.
Worldwide demand for oil has increased, hurricanes in the Gulf have knocked
out
some of our refining capacity. Thirty years of environmental extremism has
brought domestic oil exploration to a virtual halt in its tracks.
If we want to see gas prices stabilized, then we need to build on our
achievements that we have included in the Energy Policy Act, and open up areas
like ANWR to oil exploration, and encourage refinery construction. We all
know
that there was a Presidential veto of drilling in ANWR in the mid-90s. I
think
today, many people would say that was an unfortunate occurrence. Prices
wouldn't be so volatile had we been exploring for oil on American soil, and
expanding our refining capacity as our population has grown, and as our needs
have increased. And I know that there are those across the aisle who like to
put the emphasis on environmental concerns. They blame us for putting the
emphasis on American drivers and the American economy, and it sounds like we
are
going to hear more of that today.
While we are considering giving authority to the Department of
Transportation to set CAFE standards, I think it is important to keep the big
picture in mind. Mrs. Wilson and Mr. Shimkus both made reference to the light
truck standards that have previously been used by the industry. It is a smart
move, and with Nissan North America and Saturn headquartered in my district in
Tennessee, I do understand how CAFE standards can have an impact on the
production line. I talk to those constituents of mine that run that
production line.
I also understand the need for a conservationist approach to fuel
economy,
and the importance of lowering emissions. And further, I think it is crucial
that we keep car passenger safety as a top priority. Mr. Chairman, as this
issue is debated, I think it is imperative that we look at sound scientific
data, and not political polls and rhetoric as we have in our discussion.
Thank you. I yield back.
CHAIRMAN BARTON. I thank the gentlelady. The gentleman from Texas,
Mr. Green.
MR. GREEN. Thank you, Mr. Chairman, and I want to thank you and our
ranking member for holding the hearing on the proposals to clarify NHTSAs
authority to increase CAFE standards for passenger cars.
I understand the sense of urgency to act to address fuel prices after
we
have seen rapid increases, especially over the last month. But I am concerned
about this proposal, may be shortsighted, that it would not decrease fuel
consumption for 10 or more years. Now, I understand we need to do something
about energy consumption, but there are two ways you can do it. You either
increase production, or you reduce demand, and frankly, I don't know if we are
doing either of them. The last energy bill that we had opened up very few
things for more exploration. There were some things in there, but nothing for
opening up newer areas, whether it be ANWR or even the Eastern Gulf of Mexico,
which is mostly gas, I assume, but may find oil.
But we also didn't do much for saving gas. This plan could also
American
jobs and compromise automobile safety. The committee defeated an amendment
last
summer, when we marked up H.R. 6, that would have mandated higher CAFE
standards
for both passenger cars and light trucks, and we should not hastily give
unlimited decision direction to the Administration on CAFE standards now, due
to
rising gas prices. We need a comprehensive approach, both increased
production, refining capacity, but also a reduction in demand.
Today's gas prices are hard on consumers. Many of my constituents
drive
larger cars and trucks that consume more fuel, that they work hard to make
their
car payments and their fuel payments, but this proposal will not reduce their
fuel costs, because it does nothing to effect current fuel consumption, and
will
not take effect on new cars until at least 36 months, until model year 2010.
One of the serious consequences of increased CAFE standards may be
loss of
American jobs at automakers like GM, Ford, and Chrysler, because their fleet
is
larger than competitors like Toyota, Honda, and others. In addition, heavier
cars are safer cars, and requiring lighter, more efficient fuel cars would
lead
to sacrificing passenger safety in an attempt to conserve fuel 10 years down
the road.
Both the United Auto Workers and the National Academy of Sciences both
stated before, when we addressed CAFE issues, that the more CAFE increases
sacrifice safety, and that is not a sacrifice many people are willing to make.
If they are, then there are already numerous smaller and lighter
fuel-efficient
cars to buy. If the Administration were serious about increasing CAFE
standards, if they were concerned about the lack of authority by NHTSA to do
so
this could have been addressed 6 years ago. But funding for NHTSA has
continually been cut by the Majority, first under President Clinton, so that
CAFE standards could not be increased. Despite Secretary Mineta's request for
the DOT authority in 2002, Congress has not taken this up.
Now that gas is $3 a gallon, people are already buying more
fuel-efficient
cars, so we should not rush to pass a bill without considering its impact on
American manufacturing and consumer safety. If we are going to use CAFE to
address fuel economy, we must ensure it is not to the detriment of the
manufacturing or the safety of Americans.
I yield back my time.
CHAIRMAN BARTON. The gentleman yields back. Mr. Stearns.
MR. STEARNS. There we go. Thank you, Mr. Chairman, and I appreciate
this hearing.
You know, this whole business about CAFE standards is almost targeting
the
wrong issue here. It is not Secretary Mineta's fault for not increasing CAFE
standards. It is not the fault of anybody. The consumer is king here.
Today,
in Florida, you can buy a Jetta TDI Diesel VW, and you can get almost 50 miles
per gallon on the highway. Now, please, tell me why we need CAFE standards
when you can get something going 50 miles a gallon.
The consumer is king here. The consumer decides whether to buy the
most
fuel-efficient hybrid car, which is ideal for stop and go driving, or a huge
sport utility. Now, I have a supporter who spent 30 years building a
business.
He sold his business, he made a little money. He is going to buy a large car
to
make himself feel good, SUV, or it might be a Hummer. He is not going to get
the VW Jetta TDI. It is a consumer decision, and perhaps he wants to tow his
boat, or perhaps he wants to do something else with it.
So in the end, Mr. Chairman, consumers decide the vehicles they drive,
the
number of annual miles they drive with, and how they drive those vehicles, so
you cannot go ahead and blame anybody for this. The consumer is deciding
this.
CAFE is dependent upon what vehicles consumers buy in the market, and
not
upon what the manufacturer produces. We are in a global economy. If it was
very important to have a very high mileage car, like a Jetta TDI in a large
vehicle, it would be done, but they can't do it. So the global economy is
dictating how these people are going to make money at the same time they can
bring in low gas mileage.
And the consumers can also make a decision to conserve, and frankly,
Mr.
Chairman, we could have a hearing just on the advanced technologies, like
hybrid
power trains, clean diesels, fuel cells, all require sort of an integrated
approach to conservation that could easily be embraced by our consumers today.
This integrated approach looks at how the existing transportation
infrastructure can be made more efficient, as well.
For example, hybrids and car poolers on HOV lanes can help us
conserve,
but not if they are trapped in traffic jams. Information technologies like
RFIDs, the radio frequency identification in products, the E-ZPass that
sometimes you use to get through the tolls can improve the efficiency of the
entire system by reducing congestion. The net effect is the same, and the
real
attraction here is that these technological advances that we put in the cars
will help improve not only the gas mileage, but the quality of life.
In conclusion, Mr. Chairman, I applaud NHTSA for their reforms to the
CAFE
standards for light trucks, an approach that will improve flexibility and
product planning and technology, and it gives greater credence to consumer
choice in the market. The consumer is the king.
Thank you, Mr. Chairman.
CHAIRMAN BARTON. And I thank the gentleman. The gentleman from
Washington, Mr. Inslee.
MR. INSLEE. Thank you.
This hearing does have a bit a Twilight Zone feeling about it. The
President has fought us tooth and tongue on virtually every fuel efficiency
thing we have had to do, tried to do for several years, but nonetheless, I
think
it is important to be magnanimous at this apparent epiphany, but it is also
important to be realistic, and that we need more than a rhetorical flourish of
a
bill such as this, to give the President, which he already has, which is
authority to do something here, but we also have to insist a number, and we
are
going to hear from Representative Boehlert, that he has a bill that will
actually give us a number, and will give us something in America that will
work, in H.R. 3762, a meaningful way to move ahead.
And I want to point out this is a replication of success America has
already had. We had success doing this from the mid-'70s to the early '80s.
I
want to point out if we had simply continued the course we were on in the late
'70s, we would be free of Middle Eastern oil today. If we simply had not
fallen
off the wagon of fuel efficiency, we would be free of that today. We would
not
have $3 a gallon gas today. I point this out, as we are really not inventing
a
new technology. We are simply going to use what our common sense that we were
using before, and we know that it will.
Now, let me point out that this is not the only game in town on fuel
efficiency. H.R. 2820, the New Apollo Energy Project, I have introduced with
others, to say we ought to have a new, aggressive fuel efficiency. Mr.
Kingston
and Mr. Engel have H.R. 4409, which will simply call for flex fuel vehicles,
which I hope this committee eventually will have a hearing on, because it is
not
just about squeezing out more mileage of gasoline. It is about creating what
Brazil has done, which now has energy independence, with 40 percent of their
transportation needs being met by biofuels, and I hope that we will have a
hearing on our ability to guarantee that Americans have flex fuel vehicles.
It
is about time Americans have the freedom to choose what fuel they are going to
use, and H.R. 4409 will do that. It is about H.R. 4370, a bill I have
introduced with a companion bill by Senator Obama, which will help our auto
industry with what they need with their legacy health care costs, in exchange
for giving us more fuel-efficient vehicles.
We know we have got some auto industries with some real legacy health
care
problems. In a real life, realistic, common sense approach for this Congress,
is to assure Americans have more fuel-efficient cars, and assure that we
continue to have a vibrant auto industry. By helping them through these
health
care costs, we will have a healthier environment. We will have a healthier
auto
industry, and we will have some healthier public policy if we adopt these
bills.
Thank you, Mr. Chairman.
CHAIRMAN BARTON. I thank the gentleman, and remind him we are going
to
have a vote this afternoon on a refinery bill that expedites permitting for
refineries, including biorefineries, which the gentleman supports. And we
encourage him to support that bill.
Mr. Burgess of Texas.
MR. BURGESS. Thank you, Mr. Chairman, and thank you for holding this
hearing today. I am anxious to hear from the witnesses, so I will be very
brief.
But I do think we need to address the supply side of this equation,
and
this morning, thankfully, we are also addressing the demand side. I am a big
believer in the hybrid technology. I have owned a hybrid car for about 2
years.
In my part of North Texas, I originally bought this vehicle because, or got in
line to buy a vehicle, because of air quality concerns, and then with the
miracle of redistricting, I was given a very long, narrow district. So I have
got to log a lot of miles across North Texas, and now, I look positively
brilliant for having a vehicle that gets in excess of 50 miles a gallon. And
of
course, that vehicle came to us without any additional change in the CAFE
standards, but we are here today to talk about the corporate average fuel
economy standards, and it is appropriate to do so.
The committee has issued a discussion draft of legislation that would
direct the National Highway Traffic Safety Administration to revise these
standards for passenger cars, and I am looking forward to hearing the panel's
recommendations on this draft.
I want to thank each of the witnesses before us today. Secretary
Mineta,
last term, I was on the Transportation Committee, and it was always good to
work
with you on that committee, and of course, Chairman Boehlert was my Chairman
on
the Science Committee during the 108th Congress, and certainly I'm interested
in what you have to tell us this morning.
So with that, Mr. Chairman, I will yield back.
[The prepared statement of Hon. Michael Burgess follows:]
PREPARED STATEMENT OF THE HON. MICHAEL BURGESS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TEXAS
Thank you, Mr. Chairman for holding this important hearing.
I think by now my fellow committee members know that I believe our
best bet to
decrease consumption of gasoline, at least in the short run, would be to
increase the number of hybrid cars on the road.
I've owned my Prius now for about 2 years. I've logged a lot of miles
across
North Texas during the course of that time and there's no telling how much
money I've saved on gasoline.
But we're here today to talk about CAFE standards.
The Committee has issued a discussion draft of legislation that would
direct the
National Highway Traffic Safety Administration to revise the CAFE standard for
passenger cars and I am looking forward to hearing the panel's comments on
this draft.
I'd like to thank each of the witnesses that will be testifying before
us today.
Secretary Mineta, it was always a pleasure to work with you while I served on
the Transportation and Infrastructure Committee, so I am please to welcome you
here in Energy & Commerce.
CHAIRMAN BARTON. I thank the gentleman, and we now go to the gentleman
from New York, Mr. Engel.
MR. ENGEL. Well, thank you, Mr. Chairman.
We all remember how Nero fiddled while Rome burned. Today, the
President
and the Congress are fiddling while the American people are paying more than
$3
per gallon of gasoline. Big Oil is making record profits. ExxonMobil just
gave
its departing CEO a $400 million golden parachute, and the American people are
angry and frustrated, and so are we.
The President needs to call the oil executives into the White House
and
bang some heads together, and say gentlemen, this really has to stop. Despite
decades of advancements in vehicle technologies, and the efforts of many
Members
of Congress and concerned citizens, passenger cars have had the same fuel
economy standard of 27.5 miles per gallon for over 20 years. It just doesn't
make sense.
As an article in the Washington Post noted today, about the
Administration
and Congressional leadership, the response so far has been ``profiles in
panic,''
to quote them. A New York Times editorial today calls it ``Foolishness on
Fuel.''
It certainly would explain the $100 gas rebate idea, which would barely touch
a family's monthly gas bill.
If the President really believes NHTSA doesn't have the authority to
increase passenger car CAFE standards, why did he wait 6 years into his
Administration to get around to asking for that authority? At this point, the
earliest that this new legislation could affect cars' fuel economy standards
is
model year 2010, which will be nearly 10 years after the President took
office. Talk about a waste of time.
Most everyone in this room recalls that throughout the '90s, the
Republican leadership annually attached riders to spending bills to prevent
NHTSA from increasing fuel economy standards, and we certainly had
opportunities
to improve CAFE standards in the Energy Policy Act passed in August, but all
attempts in this committee to change that were voted down.
Despite the claims of the Administration that it has already made
significant changes to the light truck CAFE standards, the prevailing view is
that these reforms are weak, at best, and likely dangerous. Yesterday, nine
states, including my State of New York, and New York City, sued the Bush
Administration on this rule, for promoting a system that ``creates incentives
to
build larger, less fuel-efficient models, which will jeopardize air quality
and
the climate, and for failing to meet Federal laws requiring the government to
determine the impact of the regulation on fuel conservation and the
environment.'' New York was proud to adopt California's landmark law
requiring
reductions in vehicle emissions that contribute to global warming, but the
Bush
CAFE standard also seeks to undermine these laws, once again moving in the
wrong direction.
American energy policies are at the crossroads, and our national
security
is being compromised daily by our dependence on foreign energy supplies. That
is why Jack Kingston and I have introduced the bipartisan Fuel Choices for
American Security Act, which enjoys wide bipartisan support in the Congress.
We
need to pass that. It encourages production and consumer purchase of
oil-saving
technologies and fuels nationwide, without adversely impacting air quality.
The
most effective means to achieve these goals is by providing incentives to
encourage manufacturers, distributors, and consumers to utilize domestic
resources, to bring to the market a full range of 21st Century vehicles and
fuels.
If the President is serious about this, Congress can reduce our
addiction
to oil through a comprehensive package of conservation policies, with a real
improvement in CAFE, and the rapid development and deployment of alternative
fuels. We have no more time to waste.
I look forward to hearing Secretary Mineta and Congressman Boehlert,
and I
want to just say about Congressman Boehlert, we are going to miss you greatly,
Sherry, when you retire, and we appreciate the wonderful work you have done
all
these years.
Thank you. Thank you, Mr. Chairman.
CHAIRMAN BARTON. The gentleman from Nebraska, Mr. Terry. Mr. Terry
waives. Let us see. Mr. Gillmor, do you wish to make an opening statement?
MR. GILLMOR. I waive, Mr. Chairman.
CHAIRMAN BARTON. All right. Does Ms. Myrick wish to make an opening
statement? So you have already waived? Has Mr. Murphy been given a chance?
Well, then we go to Ms. Schakowsky.
MS. SCHAKOWSKY. Thank you, Mr. Chairman, for holding today's hearing
on CAFE standards, which I have consistently supported raising.
We should have taken action 6 years ago, when the President took
office,
or even before, when President Clinton proposed it, but instead, the
Republican
Congress has rubber-stamped the Bush Administration's energy policies, which
has
helped the oil and gas companies earn record profits, even as they raise
gasoline prices to record levels.
I just came from Chicago, where my constituents are paying over $3 a
gallon for regular gasoline. It is no wonder that gasoline prices have gone
up.
This committee passed an energy bill that the Energy Information
Administration predicted would raise the prices, and it did.
The Bush Administration has now launched a PR campaign to distance
himself
from the energy crisis it created. In his more of the same campaign,
President
Bush recently announced a series of energy policies that were already
happening.
Twice last year, Congress directed the FTC to investigate price gouging. This
committee is expecting this report within the month. Ignoring that action,
last
week, President Bush directed his Administration to investigate for price
gouging. However, after issuing this directive on Tuesday, three days later,
the President said that his inclination and instincts assure him that there is
no ``rip-off taking place.'' Quick investigation.
Now, the Bush Administration is asking Congress to grant it authority
it
already has. If President Bush was willing, it could today raise fuel economy
standards for passenger cars. We should be debating how quickly and to what
level the Bush Administration should raise CAFE standards for passenger cars.
If the Administration raised CAFE standards to 33 miles per gallon, and helped
auto manufacturers reach that goal, over 2.5 million barrels of oil would be
saved each day, eliminating the need for all of the Persian Gulf oil right
now.
Today, we find that the Bush Administration did not believe it had the
authority
to raise CAFE standards for passenger cars, but it took 6 years to request the
authority to act.
President Bush is dragging his feet. There are several ways to keep
gas
prices down in the short term: holding individual oil and gas companies that
price gouge accountable, and ensuring that oil companies do not make windfall
profits off the backs of consumers. The American people shouldn't pay $400
million, $3 per every American household, to fund the golden parachute of oil
executives. These record gasoline prices go far beyond supply and demand.
Consumers are being exploited. After covering all their costs last
year,
oil companies took profits from consumers that amounted to nearly $1,000 from
every household in America. A comprehensive energy to reduce gasoline prices
must include efficiency and conservation.
President Bush has cut funding for major efficiency programs in his
fiscal
year 2007 budget, including weatherization, Energy Star, and the Clean Cities
program. The President's commitment to efficiency should be judged by his
deeds, not by his words.
Thank you, Mr. Chairman.
CHAIRMAN BARTON. Thank you. Mr. Pallone of New Jersey.
MR. PALLONE. Thank you, Mr. Chairman.
The problem that I see is that the Bush Administration and the
Republican
Majority simply talk about fuel efficiency when there is a crisis in gas
prices.
That is the only time they bring it up, and then they are all talk and no
action.
And I would ask initially, Mr. Chairman, why we need to pass this
legislation at all, when there is little legal reason to believe that the
Administration lacks the authority to raise passenger car standards. I also
wonder why, as Secretary Mineta will testify, the Republican Majority rebuffed
the Administration's 2002 request for this type of legislation. Again, the
Republicans wait until gas prices have gone through the roof to even talk
about
the issue, and even then they don't do anything about it. And I would be
remiss, I know my other Democratic colleagues have said it, but I will say it
again, and point out that since the committee print requires rulemaking within
1
year to create standards 18 months prior to the beginning of each model year,
it will simply punt CAFE increases for at least 4 years from now.
Mr. Chairman, I have to say I fail to understand why giving the
President
blanket authority to completely redo our CAFE system to change standards
several
years from now is a more prudent option than simply urging the Administration
to
take prompt action, using their existing authority. That is what we should
do.
The simple fact of the matter is that increasing fuel economy
standards
and reducing our oil consumption will go a long way towards addressing major
problems that face our country: volatile gas prices, our dependence on oil
imported from unfriendly countries, and the looming threat of global warming.
And while increasing CAFE will not bring down gas prices right now, it will
allow American families to buy the type of car they need, with fuel economy
they can afford.
So let us just do it. We don't need this legislation. We simply need
for
President Bush to take action. I am pessimistic that he will, but I would
certainly hope that we would all urge him to do so.
Thank you.
CHAIRMAN BARTON. We thank the gentleman from New Jersey. The floor is
about to bring up two of our energy bills, the Wilson price gouging bill, or
anti-price gouging bill, and the Barton-Bass refinery permitting process bill.
I am going to go start that debate, and try to be back before our first panel
of
witnesses comes forward, so that we can do that as expeditiously as possible.
Our next opening statement should be from Mr. Brown, who is not here.
Mr. Gonzalez?
MR. GONZALEZ. Waive opening.
CHAIRMAN BARTON. He waives. Mr. Strickland, who is not here. Ms.
Baldwin.
MS. BALDWIN. Thank you, Mr. Chairman.
Last year, Congress passed an energy bill that supporters proclaimed
was
the most comprehensive energy legislation in the history of Congress. It
would
solve our most pressing energy needs, they said. Yet, a year later, our
energy
situation is even worse. It is reaching crisis levels, as proclaimed by
Department of Energy Secretary Bodman, and we, again, are evaluating our
energy policies.
Today, rising gas prices are affecting city budgets, small businesses,
operating farms, and Wisconsin families. Average gas prices in my area have
reached $2.90, up almost $0.70 per gallon from this time last year. Clearly,
the energy bill did not go far enough to providing energy assistance for those
other than the big oil companies recording record profits.
I remain skeptical that passing a bill giving the Administration the
authority to change CAFE standards will bring real relief to family
pocketbooks.
First, as we have already heard this morning, arguments are made that the
Administration already has this authority. Second, rules will not be
available
for at least a year, and even then the cars are at least 18 months away from
showrooms. And third, I remain concerned that the standards set by this
Administration, without any input from Congress, will fall short on meeting
our most pressing energy needs.
This was evidenced just recently, as the Administration moved forward
with
what I considered meek and minimal changes to CAFE standards for light trucks.
They only increased fuel economy by 1.8 miles per gallon over a period of 4
years, and exempting pickup trucks. Technology exists to achieve a higher
standard, and I know we can do better.
As I said, I am skeptical, and I hope that the panelists will address
some
of the concerns today. I look forward to your testimony, and yield back the
remainder of my time, Mr. Chairman.
MR. ROGERS. [Presiding] Thank you. Mr. Pitts for an opening
statement.
MR. PITTS. Waives.
MR. ROGERS. Mr. Stupak. Mr. Wynn for an opening statement. Waives.
Ms. Solis, opening statement.
MS. SOLIS. Thank you, Mr. Chairman.
Mr. Chairman, thank you for holding this hearing today. It is a
pleasure
to have Secretary Mineta here with us, and other witnesses, to join us to
discuss fuel economy standards for passenger cars. Today, we will hear about
whether the Administration has or does not have the authority to raise fuel
economy standards.
In this regard, I hope that the Secretary will clarify a number of
issues
for us today. First, if the Administration believes it does not have the
authority to fuel economy standards for passenger vehicles, why has it not
already asked for it? This body has passed a number of energy bills it could
have been included in.
Second, if the Administration were to receive this authority, would it
increase fuel economy standards immediately? And over the last several years,
the Administration has consistently opposed increases in fuel economy
standards and oil-saving plans.
In its statement of Administration policy on H.R. 6, the Bush
Administration stated, and I quote, that it ``strongly opposed a proposal to
reduce U.S. demand for oil by one million barrels per day.'' This statement
of
Administration policy also stated it strongly opposed any amendment to
legislate
an increase in fuel economy standards. The Bush Administration and Republican
leadership has continuously failed to adequately respond to the growing impact
of gas prices on working families, and the energy security of our Nation.
The Administration's energy policy, 95 percent of which has been
implemented, has done nothing to reduce the prices for gas. In fact, the
Energy
Information Administration predicted last year's energy bill would actually
increase the costs of gasoline to its consumers. In my district, as you know,
gasoline prices have been well over $3 for the past six months.
Transportation
costs have increased by more than $1,400 per family, an increase of almost 75
percent since 2001.
This increase acts as a tax on our small businesses, which we know are
critical to America's economy, and also are impacting our local school
districts. The Los Angeles Unified School District, as a matter of fact, had
to
budget an additional $2 million for its fuel budget for busing and
after-school
activities. School districts across the country are being forced to choose
between fueling buses, funding construction, hiring new teachers, or taking
children on field trips.
These problems have existed for a while, yet time after time, this
body
has rejected increases in fuel economy standards. I strongly support
increased
fuel economy standards, and believe that this tactic is yet another attempt by
the Administration to defer attention from the lack of action on this
important
issue. It is past time now for this Administration and the Congress to take
real steps to protect our consumers, our families, our school districts, and
national security.
Secretary Mineta, I look forward to hearing from you, your responses
to my inquiries, and yield back the balance of my time.
[Additional statements submitted for the record follows:]
PREPARED STATEMENT OF THE HON. SHERROD BROWN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF OHIO
Thank you, Mr. Chairman.
I was glad to hear President Bush last week, talking about increasing
automotive fuel efficiency standards.
It's long overdue.
The Bush Administration's been in power for nearly 51/2 years. And
the White
House has just now realized that the gasoline price equation has a demand
side, as well as a supply side.
This is not news to anyone but the White House and the Republican-led
Congress.
I also welcome the President's newfound commitment to protect
consumers from
gasoline market manipulation. Democratic legislation that would give federal
regulators broad new power to identify and eliminate market manipulation has
languished in this House since November.
We could have had a cop on the beat by now, policing the gasoline
market. But
the White House is still trying to remember the phone number for 9-1-1.
And the President has finally realized that pumping oil into the
ground during
the summer driving season might drive up prices. Congresswoman Baldwin and I
offered an amendment to reform the Strategic Petroleum Reserve's fill policy a
year ago.
And Energy Secretary Sam Bodman testified over on the Senate side last
November
that the Bush Administration is considering gasoline reserves similar in
concept
to the SPR. That's a good idea too. And I've had a bill to do it for 3
years, now.
And the President and Republicans in Congress are falling all over
themselves to
call for repeal of the energy bill's billions of dollars in taxpayer subsidies
for Big Oil. I couldn't agree more. But wouldn't it have been better to have
voted - as I did - against creating those subsidies in the first place?
The facts are clear and simple. American consumers are hurting at the
pump
today, because Republican leadership rejected common-sense reforms that could
have protected consumers and strengthened our economy - in favor of an energy
policy written by - and for the benefit of - Big Oil.
I am glad President Bush has at least begun to talk about reform. And
I am glad we are here talking about it in Congress.
But talk is cheap, and gas is not. The American people need action.
PREPARED STATEMENT OF THE HON. MARY BONO, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF CALIFORNIA
Mr. Chairman, thank you for holding this hearing today.
I am pleased we are considering this legislation.
There is no single bill Congress can pass that will ease the pain at
the pump.
It needs to be a collective solution of encouraging more alternative fueled
vehicles, increasing the use of diesel, further developing renewable sources
of
energy, building new refineries and expanding our domestic exploration, to
name
just a handful of actions we can take. Increasing CAFE standards needs to be
in this mix and is integral in lowering our overall demand of gasoline.
We have made great strides in how gasoline burns - it is much cleaner
than
before. However, It is now time to challenge auto manufacturers to burn
gasoline more efficiently.
Many will take shots at the recently passed Energy Policy Act. But
this bill
was meant to look forward and its benefits will take a long time to be
completely realized. Even what we are discussing today, giving the President
the
authority to increase the CAFE standards on automobiles, will have a have an
impact in the new few years. But, just like with the Energy bill, we need to
look forward and take action now.
However, while government can play its role, consumers have choices to
make as
well. We can opt to use public transit more and purchase hybrid fueled
vehicles.
Eventually, it will be up to the American consumer to make that leap from gas
to
another source of energy. The government can certainly help, but the consumer
has to be willing to go along.
Again Mr. Chairman, thank you for holding this hearing today. I look
forward to
hearing from our witnesses and to moving head with this piece of legislation.
PREPARED STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WYOMING
Thank you, Mr. Chairman.
In today's climate of oil demand significantly exceeding our domestic
supply,
Congress needs to be aggressive in how we address our rising energy
consumption.
We need to provide incentives for new technology development and promote those
innovations already off the starting blocks. We need to encourage the
diversification of our nation's energy portfolio. We need to better conserve
the energy we have.
In late March of this year, the National Highway Traffic Safety
Administration
(NHTSA) reformed the corporate average fuel economy (CAFE) for light trucks,
which is forecast to save nearly 262 million barrels of oil over the lifetime
of
trucks sold between 2008-2011. These reforms were significant not only for
the
oil savings, however, but because of the structural changes the new rule made
to
the CAFE program, providing for a ``continuous curve'' standard based on a
vehicle's size.
Congress set the current CAFE standard for passenger cars in 1990 and
I do not
believe that an arbitrary increase in CAFE standards for these vehicles is the
right solution. Many of my constituents in Wyoming are often forced to drive
over rugged terrain in harsh weather conditions. The risks to human safety
that
would go along with setting an arbitrary CAFE increase is simply not worth
what
we could save in consumption.
Further, it is unclear if raising the CAFE standards would be an
effective way
to reduce emissions of carbon dioxide, another argument often heard in support
of raising CAFE. On one hand, improvements in fuel economy should enable the
same vehicle to burn less fuel to travel a given distance. However,
technologies to improve fuel economy will add cost to new vehicles, which may
cause consumers to retain older, less efficient vehicles.
The legislative draft before us today takes a different approach by
clarifying
NHTSA's authority to promulgate new CAFE rules based on a number of key
factors,
including technological and economic feasibility, as well as consumer safety.
I
hope today's hearing will help us learn if this is the right approach and I
look
forward to hearing the valuable testimony of the witnesses before us today.
Conservation is a goal we all share, but not at the cost of vehicle safety for
American consumers.
I thank the Chairman for holding this important and timely hearing
today and I yield back the balance of my time.
MR. ROGERS. Thank you very much.
We are going to go to our first panel, the Honorable Sherwood
Boehlert, from New York's 24th District. Mr. Boehlert, welcome.
STATEMENT OF HON SHERWOOD BOEHLERT, A REPRESENTATIVE IN CONGRESS FROM THE
STATE OF NEW YORK
MR. BOEHLERT. Thank you very much, Mr. Chairman. It has been
instructive
sitting through these opening statements, and I want to thank everyone for
them.
I only rarely seek to testify before committees, but I wanted to
appear
today because I think that raising fuel economy standards is the single most
important step the Congress can take to reduce what the President has
correctly identified as the U.S. addiction to oil.
Reducing that addiction is a national security imperative. We have to
look for our oil fix in some pretty dark and dangerous alleyways, and the
people
awaiting us there are not always our friends. Moreover, our dependence on
oil,
with its erratic but generally rising prices, puts our economy at risk, if not
today, then over the long haul as international demand continues to rise. Our
oil problems are only going to get worse. Our trade balance is only going to
get worse. So we have to slow the growth of U.S. oil consumption,
particularly imported oil consumption.
Over time, there is really only one way to do that, and that is to
limit
demand. Dealing with domestic supply can provide only very limited,
short-term
relief, often at a very high environmental cost. Demand is the primary
problem, and demand is where we must direct our solutions.
And if we are going to address demand, transportation is the place to
look
for savings. About 60 percent of the oil consumed daily by Americans is used
for transportation, and about 45 percent is used for passenger cars and light
trucks.
There is no way--no way--the U.S. can limit future demand unless we
limit how much fuel we use for transportation.
So what can we do? Clearly, relying on the marketplace isn't working,
and
it won't be sufficient even at current prices. That is because while, as a
society, we all want to limit fuel consumption significantly, as individual
car
buyers, we also want our vehicles to have other attributes. So if I want an
SUV, and automakers choose not to put a fuel efficient one on the market,
there
is nothing I can do, as an individual consumer, to signal my disappointment.
This is a classic market failure. The Government has to act.
And the Government has two tools, taxes and regulations. I don't
sense a
groundswell of people willing to raise gas taxes. That leaves fuel economy
standards as the only effective tool we have as a Nation to make a dent in our
dangerous and ever growing consumption of oil.
I have been pointing this out for years, and I am pleased to see that
the
message is finally getting through, now that gasoline prices are at
near-record
highs. Better late than never. I think it is real progress that the
Administration is now seeking, and that this committee is now considering,
legislation. We ought to remove any doubt about whether the Administration
can increase CAFE standards for passenger cars.
But we ought to do far more than that. Congress should set new CAFE
standards right now. We have already waited too long.
If we just give the Administration authority, we know what will
happen. We will get a long rulemaking process that likely would produce
tepid results.
Our politically appealing call for strong and immediate action will be met
with
the faint echo of weak results over a protracted time period. That is what
happened in the recent rulemaking for light trucks.
I would urge this committee to support our bipartisan bill, H.R. 3762,
which is fully consistent with the recommendations of the National Academy of
Sciences. It would raise fuel economy standards to 33 miles per gallon by
2015.
It would get rid of the baseless distinction between passenger cars and light
trucks. It would permit reform of the CAFE system by allowing size
classifications and credit trading in a way that would prevent backsliding.
Such a bill is really the minimum step Congress should take right now,
if
we are serious about addressing fuel consumption. At current prices, the
Academy recommendations would actually suggest that we could press for even
greater fuel economy.
It is equally important to point out what the bill would not do. It
would not lead to a reduction of safety. The National Academy report makes it
clear,
as you will hear today, that written properly, fuel economy standards can be
tightened, and I quote directly from the report, ``without degradation of
safety.'' And our bill does not assume that we will make some grand
technological breakthrough. The technologies needed to meet the standards our
bill sets already exist. They are on the shelf gathering dust. Indeed, some
of
them have already been surpassed since the report from the Academy was issued
in 2002.
So we in the Congress have a very clear choice. We can take largely
symbolic action, and sit back and fiddle while Americans burn more gasoline,
or
we can pass concrete, effective legislation that will save consumers money
while
significantly reducing U.S. oil consumption. We have all the information, all
the studies, all the technology we need to take that step. We just need the
political will.
Simply giving authority to the Administration is the bare minimum we
can
do. Are we prepared to tell the American people that we are just doing the
bare minimum with gasoline at $3 a gallon?
Mr. Chairman, I look forward to working with you and the committee as
you
decide how to proceed, and I will continue to press the House to take real
action to address our most serious national security threat, our oil
addiction.
Finally, in closing, I have sat through all of the opening statements,
and
I have listened to the principal argument, that in order to get fuel
efficiency,
you have to sacrifice safety. Those arguments are clever. Those arguments
are
interesting. Those arguments sometimes have been amusing. But they are all
wrong. We live in a town where everybody likes to say they are for science-
based decision-making, until the overwhelming scientific consensus leads to a
politically inconvenient conclusion. Then they want to go to Plan B. Stick
with Plan A.
Thank you very much, Mr. Chairman.
[The prepared statement of Hon. Sherwood Boehlert follows:]
PREPARED STATEMENT OF THE HON. SHERWOOD BOEHLERT, MEMBER, U.S. HOUSE OF
REPRESENTATIVES
Mr. Chairman, Ranking Member Dingell, and Members of the Committee,
I appreciate the opportunity to testify before you this morning. I
only
rarely seek to testify before Committees, but I wanted to appear today because
I
think that raising fuel economy standards is the single most important step
the
Congress can take to reduce what the President has correctly identified as the
U.S. ``addiction'' to oil.
Reducing that ``addiction'' is a national security imperative. We
have to look
for our oil ``fix'' in some pretty dark and dangerous alleyways and the people
awaiting us there are not always our friends. Moreover, our dependence on
oil,
with its erratic but generally rising prices, puts our economy at risk, if not
today, then over the long haul as international demand continues to rise. Our
oil problems are only going to get worse. Our trade balance is only going to
get worse. So we have to slow the growth of U.S. oil consumption,
particularly imported oil consumption.
Over time, there's really only one way to do that, and that's to limit
demand.
Dealing with domestic supply can provide only very limited, short-term relief,
often at a very high environmental cost. Demand is the primary problem and
demand is where we must direct our solutions.
And if we're going to address demand, transportation is the place to
look for
savings. About 60 percent of the oil consumed daily by Americans is used for
transportation, and about 45 percent is used for passenger cars and light
trucks.
There is no way - no way - the U.S. can limit future demand unless we limit
how much fuel we use for transportation.
So what can we do? Clearly, relying on the marketplace isn't working,
and it
won't be sufficient even at current prices. That's because while, as a society,
we all want to limit fuel consumption significantly, as individual car buyers,
we also want our vehicles to have other attributes. So if I want an SUV - and
I
drive one - if I want an SUV and automakers choose not to put a fuel efficient
one on the market, there's nothing I can do as an individual consumer to
signal
my disappointment. This is a classic market failure. The government has to
act.
And the government has two tools - taxes and regulation. I don't see
a
groundswell of people willing to raise gas taxes right now. That leaves fuel
economy standards as the only effective tool we have as a nation to make a
dent in our dangerous and ever growing consumption of oil.
I have been pointing out all of this for years, and I'm pleased to see
that that
message is finally getting through now that gasoline prices are at new
heights.
Better late than never. I think it is real progress that the Administration
is
now seeking and that this Committee is now considering legislation. We ought
to
remove any doubt about whether an Administration can increase CAFE standards
for passenger cars.
But we ought to do far more than that. Congress should set new CAFE
standards right now. We have already waited too long.
If we just give the Administration authority, we know what will happen. We
will
get a long rulemaking process that produces tepid results. Our politically
appealing call for strong and immediate action will be met with the faint echo
of weak results over a protracted time period. That's what happened in the
recent rulemaking for light trucks.
I would urge this Committee instead to support our bipartisan bill,
H.R.
3762, which is fully consistent with the recommendations of the National
Academy
of Sciences. It would raise fuel economy standards to 33 miles per gallon by
2015. It would get rid of the baseless distinction between passenger cars and
light trucks. It would permit reform of the CAFE system by allowing size
classifications and credit trading in a way that would prevent backsliding.
Such a bill is really the minimum step Congress should take right now
if we're
serious about addressing fuel consumption. At current prices, the Academy
recommendations would actually suggest that we could press for even greater fuel
economy.
It's equally important to point out what our bill would not do. It would
not lead to a reduction of safety. The National Academy report makes it clear,
as you will hear today, that written properly, fuel economy standards can be
tightened (and I quote) ``without degradation of safety.'' And our bill does not
assume that we will make some grand technological breakthrough. The
technologies needed to meet the standards our bill sets already exist; indeed,
some of them have already been surpassed since the report was issued in 2002.
So we in Congress have a very clear choice. We can take largely symbolic
action and sit back and fiddle while Americans burn more gasoline. Or we can
pass concrete, effective legislation that will save consumers money while
significantly reducing U.S. oil consumption. We have all the information, all
the studies, all the technology we need to take that step. We just need the
political will.
Simply giving authority to the Administration is the bare minimum we
can
do. Are we prepared to tell the American people that we're just doing the
bare minimum with gasoline at $3 a gallon?
I look forward to working with this Committee as you decide how to
proceed. And I will continue to press the House to take real action to
address
our most serious national security threat, our oil addiction. Thank you.
MR. ROGERS. Thank you, Mr. Boehlert. I understand you have a
committee to get to, so we will--
MR. BOEHLERT. And I am over on the floor trying to help you get some
legislation passed.
MR. ROGERS. All right. We will hurry up.
MR. BOEHLERT. Thank you.
MR. ROGERS. In that case, you could have left about 8 minutes ago.
It would have been okay with me. But I--
MR. MARKEY. And in that case, Mr. Boehlert, I have about a hundred
questions to ask you.
MR. ROGERS. Actually, we are not going to take questions for Mr.
Boehlert. We are going to get right to the next panel. We do understand that
you have another commitment, and--
MR. BOEHLERT. You are the Chairman.
MR. ROGERS. --in keeping with tradition, I think we are going to do
that, and get with the Secretary.
MR. MARKEY. Can I just throw out--I just wanted to thank you, Sherry,
for
your leadership over the years, and I echo your hope that they allow the
Boehlert-Markey amendment onto the House floor this year, so that a number can
be established, that America can have a goal.
MR. BOEHLERT. Thank you very much. It was a great Golden Oldie by
Ruby and the Romantics. Our day has come.
MR. ROGERS. That was--not only was it bad singing, it was off-key as
well. Our
next panel, the Honorable Norman Mineta. Mr. Secretary, thank you for your
patience, and we will engage as soon as you are ready, sir.
STATEMENT OF HON. NORMAN Y. MINETA, SECRETARY, UNITED STATES DEPARTMENT OF
TRANSPORTATION
SECRETARY MINETA. Mr. Chairman and Congressman Dingell, and to the
members of the committee, let me thank you all for inviting me to discuss
reforming the corporate average fuel economy standards for passenger
automobiles.
Last week, at the President's request, I sent a letter to
Congressional
leaders asking for the authority to reform the structure of the current CAFE
program for passenger cars, and Mr. Chairman, at this time, I would like to
ask
unanimous consent that the letter that I addressed to Speaker Hastert be made
a part of the record.
MR. ROGERS. Without objection, so ordered.
[The information follows:]
<GRAPHICS NOT AVAILABLE IN TIFF FORMAT>
SECRETARY MINETA. This is an important step toward reducing America's
oil
demand, since passenger cars account for some 23 percent of domestic oil
consumption, and this Administration has a good record on improving CAFE.
Members may recall that in the year 2001, at my request, Congress ended the 6
year freeze on CAFE rulemaking, and later that year, the National Academy of
Sciences issued a Congressionally mandated study that was critical of the CAFE
program. Among the report's criticism was that CAFE had probably cost between
1,300 and 2,600 lives in one year alone, namely 1993, because it encouraged
automakers to build smaller vehicles.
Paul Portney, the chair of the committee which wrote this landmark
study,
said upon its release, and I quote: ``No matter what Congress decides
regarding
specific fuel economy targets, our committee is adamant that changes should be
made to shore up the deficiencies in the program.''
To help correct these deficiencies, I sent a letter to Congress in
February of 2002, urging passage of legislation to provide the Department of
Transportation with the statutory authority to reform CAFE. However, absent
Congressional action, I did direct NHTSA to begin reforming CAFE for light
trucks.
On March 29 of this year, we completed a rulemaking that replaced the
single fuel economy standard with an innovative size-based system, and allow
me
to explain why basing a fuel economy standard on a vehicle's size is
important, and superior to the current one size fits all approach.
First, a size-based system preserves vehicle choice. Instead of
forcing
manufacturers to produce smaller vehicles to comply with regulations, this
approach takes the automakers' own product mix projections, and applies
separate
fuel economy targets to each vehicle, based on its footprint. Under a size-
based system, automakers will still be able to build cars that consumers want
to buy, but those cars will have to be more fuel-efficient across the board.
Secondly, a size-based system eliminated the incentive for automakers
to produce smaller, and consequently, less safe vehicles, by encouraging
manufacturers to add fuel-saving technologies to boost fuel efficiency. And
thirdly, a size-based system ensures all automakers are encouraged to use
fuel-saving technologies, and not just the manufacturers of larger vehicles.
Now, our new light truck standards, under the reformed CAFE, will save
a record 10.7 billion gallons of fuel. All told, the Administration has
raised
CAFE standards for light trucks for 7 consecutive years, from the year 2005 to
2011.
And today, because of our successful reform of the light truck CAFE
program, we have the capacity to establish a far more precise, equitable, and
safe CAFE program for passenger cars. However, we currently lack the legal
authority to do so.
The original CAFE standard for passenger cars was set at 27.5 miles
per
gallon more than 30 years, back in 1975. Neither Congress nor the Department
of
Transportation has ever increased this standard beyond the level set in the
original standard and statute as it relates to passenger vehicles. So it is
important that if passenger car fuel economy standards are raised, that we
make
the necessary structural reforms to avoid compromising safety and causing job
loss.
If given the authority to reform CAFE for passenger cars, we will
replace
the one size fits all system with a size-based system, as we did with light
trucks. Based on the automakers' confidential product plans, our experts at
NHTSA can objectively measure how much fuel-saving technology we can require
because the cost outweighs the benefit. This method of formulating a fuel
economy standard is science-based, subject to review, and is free from the
deficiencies that were identified in the National Academy of Sciences study. It
is also far more likely to produce an optimal result, than if Congress were to
prescribe a standard in a statute, and for this reason, we will not accept an
arbitrary statutory increase under the current passenger car system.
Mr. Chairman, the President does not ask for this authority lightly,
and I
am aware that certain automakers are having a rough time financially and that
thousands of hardworking Americans have lost their jobs as a result, but this
Administration has already made great strides in improving fuel economy for
light trucks without harming the economy or compromising safety. And so I
respectfully ask for the authority to achieve similar gains to the passenger
car fleet.
Thank you very much, Mr. Chairman, and I am now willing to go ahead
and proceed with the Q&A period.
[The prepared statement of Hon. Norman Y. Mineta follows:]
PREPARED STATEMENT OF THE HON. NORMAN Y. MINETA, SECRETARY, U.S. DEPARTMENT OF
TRANSPORTATION
Mr. Chairman, thank you for inviting me to appear before this
committee today to
discuss reforming corporate average fuel economy (CAFE) standards for
passenger cars.
Last week, the President asked Congress for the authority to reform
the
structure of the current CAFE program for passenger cars for the first time in
the program's 30-year history. This is an important step to reduce America's
dependence on foreign oil, and is consistent with President Bush's call to
replace more than 5 million barrels per day of oil imports by the year 2025.
Currently, passenger cars account for 23 percent of domestic oil consumption.
Mr. Chairman, this Administration has a good record on improving CAFE.
Members
may recall that in 2001, at my request, Congress ended the six-year freeze on
CAFE rulemaking. Later that year, the National Academy of Sciences (NAS)
completed a report, at Congress's request, that was highly critical of the
current CAFE program. Among the criticisms contained in the NAS report was
the
contention that the CAFE program probably had cost between 1,300 and 2,600 lives
in one calendar year alone (1993) because it encourages automakers to build
smaller vehicles in order to ``average out'' fuel savings across their fleets.
The chair of the committee wrote, ``...no matter what Congress decides
regarding
specific fuel economy targets, our committee is adamant that changes should be
made to shore up deficiencies in the program.'' To correct these longstanding
safety and other deficiencies in the CAFE program, I sent a letter to Congress
in February 2002 urging passage of legislation to provide the U.S. Department
of
Transportation (DOT) with the statutory authority to reform the CAFE program.
On March 29, DOT completed its second light truck CAFE rulemaking in
the
past four years by replacing the one-size-fits-all system with an innovative
size-based system. Allow me to explain why this reformed system that bases
fuel
economy standards on a vehicle's size is superior to the current
``one-size-fits-all'' approach.
* First, a size-based system preserves vehicle choice: Instead of
forcing
manufacturers to produce smaller vehicles for purposes of regulatory
compliance,
this approach takes the manufacturers' own product mix projections and then
applies separate fuel economy targets to each vehicle based on its dimensions.
Under a size-based system, automakers will still be able to build the cars
consumers want, but those cars will have to be more fuel efficient across the
board.
* Second, a size-based system eliminates the perverse incentives for
manufacturers to produce smaller and more dangerous vehicles instead of
introducing fuel-saving technologies.
* Third, a size-based system ensures that all manufacturers are
introducing
fuel-saving technologies, not only the manufacturers of larger vehicles.
These new light truck standards will lead to a safer, more efficient CAFE
program and will save a record 10.7 billion gallons of fuel. This rule also
included large sport utility vehicles (SUVs), such as the Hummer H2, under
CAFE
for the first time. All told, this Administration will have raised CAFE
standards for light trucks for seven consecutive years, from 2005 to 2011.
Today, following our successful overhaul of the light truck CAFE
program
and consistent with the recommendations of the NAS, we have the capacity to
establish a far more precise, efficient, and safe CAFE program for passenger
cars, but we do not have the legal authority to do it.
The passenger car fuel economy standard was set in law at 27.5 miles
per
gallon in the original 1975 CAFE statute. Some of the more senior Members may
recall that the 27.5 miles per gallon standard was arrived at by simply
doubling
what the average fuel economy was in 1975. The passenger car standard was not
then, and certainly is not now, based on sound science or economics.
The original statute did not authorize DOT to change the way the standard
applied to different size cars. Neither Congress nor DOT has ever increased
the
passenger car standard beyond the level set in the original statute. So it is
important that if we embark on this course, we do it right to avoid
compromising safety and to avoid causing economic damage and job loss.
If we are given the authority to reform the CAFE system for passenger
cars, we can improve fuel efficiency by requiring manufacturers to apply fuel
saving technologies rather than giving them an incentive to build smaller
cars.
Based on the automakers' confidential product plans, our experts at the
National
Highway Traffic Safety Administration (NHTSA) can objectively measure how much
fuel saving technology we can require before the costs outweigh the benefits.
This method of formulating a fuel economy standard is objective and subject to
review during the rulemaking process. It is also far more likely to produce
an
optimal result than if Congress were to prescribe a standard in a statute.
The President and I are committed to improving fuel economy across the
board through an open regulatory process built upon sound science and
economics,
but we will not accept an arbitrary statutory increase under the current
passenger car system.
Mr. Chairman, I know that whenever CAFE is debated, it can turn
divisive. When
the original CAFE statute was debated, I was a freshman Member of Congress. I
recall well the debates of the 1970s on how best to conserve fuel and what the
impacts would be on the economy. I remind Members that CAFE reform will not
be
without cost. And I am aware that certain automakers are having a rough time
financially, and that thousands of hard-working Americans have lost their jobs
through no fault of their own because of these financial difficulties.
Mr. Chairman, the President did not ask lightly for this authority.
But this
Administration has already made great strides in improving fuel economy for
light trucks. We have the expertise and experience to boost fuel economy
responsibly without needlessly sacrificing safety or American jobs. I now
respectfully ask for the authority to achieve similar gains for the passenger
car fleet.
MR. ROGERS. Thank you, Mr. Secretary. I am going to yield to the
Chairman of the Energy and Commerce Committee, Mr. Barton.
CHAIRMAN BARTON. Thank you, Mr. Chairman. It is good to have you in
the
chair. Thank you, Mr. Secretary, for being here. We need to set the clock on
5 minutes so that I don't expand my time. Hit the repeat and then the start
button. There you go. You've got Chairman potential right there. It is
working, though? It worked.
My first question, Mr. Secretary, I want to put to bed this issue that
you
already have the authority to set the standard, and so why haven't you done
it.
There was a court case on the situation of the one-House veto that says it is
debatable now. Is that not true?
SECRETARY MINETA. Well, Mr. Chairman, there is little question that
we
have the authority to set the stringency of the CAFE standard, in other
words,
the miles per gallon. But our fear is that by setting that in terms of
without
a reform in the structure of the program, that we will then go to a statutory,
or go to a miles per gallon target. And the way to then get to that would be
to
lighten the vehicle, and generally, when you lighten the vehicle, then
fatalities and serious injuries go up.
So what we are saying is we believe we have the authority to set the
stringency of the miles per gallon, but that is not the complete picture.
What
we need with it is the statutory ability to reform the structure of the program.
And we did that with the light truck program, but we don't have that same
capability on the passenger car side, since Congress has reserved that for its
own.
CHAIRMAN BARTON. You are certainly, and the President is very
supportive
of this, the draft bill, that clarifies that you have the authority in the
totality.
SECRETARY MINETA. That is correct, sir.
CHAIRMAN BARTON. Very supportive of that?
SECRETARY MINETA. That is correct.
CHAIRMAN BARTON. Now, it is my understanding that the President and
yourself and others in the Administration are contemplating putting forward a
major CAFE reform legislative proposal. Is that true?
SECRETARY MINETA. That is correct.
CHAIRMAN BARTON. Do you have any timetable when it might be presented
to the committee?
SECRETARY MINETA. Well, there are statutory timetables, in terms of,
for
instance, in order for us to give lead time to the manufacturers; we have to
give them 18 months. So that means that by April of a given year, we have to
come out with the rule that would impact them in October, 18 months later.
And
so we can't just say do it now, because the manufacturers have to have that
time period. So we are basically facing an 18-month period.
Now, in order for us, by April, let us say, of '07, to come up with
the
rule, we have to get from the manufacturers their projected product production
run, we have to have a great deal of data that goes into this, and so whether
or
not, let us say, on the third of May, 2006, we can get a rule out by the first
of April, 2007, frankly, would be very problematical. And in fact, let me
introduce our General Counsel at the Department of Transportation, Mr. Jeff
Rosen, and Jackie Glassman, our Deputy Administration of NHTSA. Possibly
Jackie or Jeff would be in a better position to lay out that time.
But I do know that we have the 18 month statutory period for the model
year impact, and then we have to have the time period to study this issue.
Now, whether we can do it from May 5 and have a final rule in place by 1 April
2007--
CHAIRMAN BARTON. Now, when do you think, Mr. Secretary, you will have
your legislative proposal to the Congress?
SECRETARY MINETA. We are doing that right now. We are in the process
of having the Department put together our legislative package.
Mr. Rosen, maybe you could give me a better timetable as to when that
would be ready.
CHAIRMAN BARTON. Within a week?
MR. ROSEN. In very short order, yes, sir.
CHAIRMAN BARTON. Okay.
SECRETARY MINETA. And then we would have to submit it to OMB, of
course, and then they go through their interagency--
CHAIRMAN BARTON. I am going to see the President this afternoon at
1:30, and I may encourage him to encourage the OMB to expedite the review.
SECRETARY MINETA. And I will be at that meeting with you, sir, and--
CHAIRMAN BARTON. The sooner we get your proposal, the sooner we can
dissect it, and in all probability, perfect it, so that we can have it--
SECRETARY MINETA. We are open to all suggestions.
CHAIRMAN BARTON. --we can have it on the floor.
My time has expired. I just want to comment on one thing you said.
You
talked about the need to give the industry time to react, and to change their
engineering and their modeling, and I don't want us to lose sight of that,
because I have a GM assembly plant in Arlington, Texas, with 2,000 direct
employees. The majority of those are UAW union workers. The last thing we
want to do is take another hit on a U.S. manufacturing capability.
Now, we want to increase CAFE, if at all possible, and if we can do it
in
a way that saves gasoline, I am all for that, but in doing that, we don't want
to drive the U.S. manufacturing for automobile industry out of business, and
that is one of the components in the current CAFE standard that you have to
look at that. Is that not correct?
SECRETARY MINETA. It is correct. There are four factors that we look
at, and maximum feasibility of the fuel efficiency standard, the technical
feasibility, safety, economic practicability, and--
CHAIRMAN BARTON. I think that is it. Very good. Thank you, Mr.
Chairman, and thank you, Mr. Secretary, for coming before this committee.
SECRETARY MINETA. Thank you very much.
CHAIRMAN BARTON. It is good to have the Secretary of Transportation
back
before the Energy and Commerce Committee, and we will see if we can't get some
jurisdiction back to get you back more frequently.
SECRETARY MINETA. Thank you, Mr. Chairman.
CHAIRMAN BARTON. Thank you.
MR. ROGERS. Thank you, Mr. Chairman, Mr. Secretary. Mr. Dingell, the
distinguished Member from the great State of Michigan.
MR. DINGELL. Thank you, Mr. Chairman. Mr. Secretary, welcome. It is
a
privilege to have you before the committee. You are an old friend, and have
served here with distinction, and also, in two administrations. We are proud
to have you here.
Mr. Secretary, I note your testimony focuses on reforming CAFE, and
not
your authority to increase passenger car standards. It is my recollection,
and
I think that the law says, that you have authority to increase passenger car
standards above 27.5 miles a gallon.
Do you agree with that statement?
SECRETARY MINETA. Mr. Dingell, let me have our General Counsel--
MR. DINGELL. Okay.
SECRETARY MINETA. --Mr. Rosen, address that, please.
MR. DINGELL. If you would, sir, please, briefly. Yes or no?
MR. ROSEN. Yes. Yes, Congressman. The statute had provided that--
MR. DINGELL. Turn the microphone on, so we can hear you.
MR. ROSEN. Sorry. Is that on now? The statute had provided that the
Department could do that, subject to a legislative veto, and the Supreme
Court--
MR. DINGELL. Of course, that legislative veto was thrown out, but the
authority--
MR. ROSEN. That is right.
MR. DINGELL. --to do this was not thrown out.
MR. ROSEN. And that is why we think it would be desirable, though, to
clarify in the statute that Congress is explicitly saying--
MR. DINGELL. Right.
MR. ROSEN. --it is not subject to any limitation--
MR. DINGELL. Well--
MR. ROSEN. --that the authority would exist.
MR. DINGELL. I think there are two questions here, Mr. Secretary.
Increasing CAFE will not reduce gas prices. Do you agree or disagree with
that statement?
SECRETARY MINETA. This will not have a direct impact on it.
MR. DINGELL. Right. And indeed, until the time it goes into effect,
it will not significantly change oil or petroleum or gasoline use inside the
United States. Is that correct?
SECRETARY MINETA. That is correct, and when we look--
MR. DINGELL. All right.
SECRETARY MINETA. And when we look at the President's program, it is
really a four-part program, with short-term, mid-term, and long-term
implications, and this CAFE issue is not a short-term solution to the price of
gas at the pump.
MR. DINGELL. Thank you. Now, Mr. Secretary, you appear to be having
some
early success with your new structure for light trucks. It may not, however,
be
as simple as transferring the structure of that rule onto passenger cars. Has
NHTSA studied how a similar system might be applied to cars?
SECRETARY MINETA. No, we haven't gotten that far, in terms of saying
that the bin or, let us say, continuous sort of system--
MR. DINGELL. So this leaves us, then Mr. Secretary, in the awkward
position of not knowing exactly how you would do it, or the impact of that.
Now, has NHTSA--
SECRETARY MINETA. It would still be subject to review.
MR. DINGELL. --examined how a new structure would work with existing
requirements that manufacturers satisfy car CAFE for both foreign and domestic
fleets?
SECRETARY MINETA. The two-fleet rule would still be in place, in
terms of
domestic and the import cars. Maybe I will have Ms. Glassman expand on that,
but we would not change that at all.
MR. DINGELL. It would be your intention to not change it, but can we
be sure that it will not be affected by the change?
SECRETARY MINETA. Without really--and that is why we are asking for
this
authority, so that we would be able to study all of the effects, but I don't
believe--
MR. DINGELL. Mr. Secretary, I have no objection to a study, but I
want to
be sure that what you do isn't going to have an adverse impact upon the
industry or production or jobs in this country. Now--
SECRETARY MINETA. We were very sensitive on that, as it related to
the
light truck rule, and in terms of the impact on job loss and safety, and the
other considerations under the law.
MR. DINGELL. Now, Mr. Secretary, have you considered how this
rulemaking
might preserve domestic production of small automobiles? Has that been the
subject of any discussion or inquiry inside the Department?
SECRETARY MINETA. Let me turn to Ms. Glassman on that. We have had
some
discussion, but I can't be really definitive on what those conclusions might
be.
MR. DINGELL. Would you please submit that then for the record, if you
please?
SECRETARY MINETA. We will submit--
MR. DINGELL. Now, Congress should proceed cautiously and deliberately
with legislation to reform CAFE. You have testified, Mr. Secretary, that
increasing fuel economy standards is best suited to the regulatory process.
There is, however, an important role for the Congress to play, to define
parameters within which the numbers are established, is there not?
SECRETARY MINETA. There is--
MR. DINGELL. Now, Mr. Secretary--
SECRETARY MINETA. --suggests, subject to review.
MR. DINGELL. Now, Mr. Secretary, I am going to submit to you a
letter,
because we are running out of time here, asking how the Department will do
this,
and try to get some appreciation of what it is you have in your mind, with
regard to how this new system of reformed CAFE will be accomplished, and I ask
unanimous consent, Mr. Chairman, that that letter be, and the response, to the
Secretary be placed in the record.
MR. ROGERS. Without objection.
MR. DINGELL. Now, Mr. Secretary, I would note that at least one witness will
testify that the draft given out on Friday will leave us with the CAFE
standards--or without a CAFE standard on cars for a period of several years.
Is that true, and if it is true, is that the intention of the
Department,
or is this just a typographical error, or what is the problem here?
SECRETARY MINETA. No. There would still be the regulation that is in
place from the, I believe 1990, 1990 regulation would still be in place, and
that would still preserve that at 27.5 miles per gallon.
MR. DINGELL. Thank you, Mr. Secretary.
MR. ROGERS. Thank you.
MR. DINGELL. Mr. Chairman, thank you.
MR. ROGERS. Thank you, Mr. Dingell. Mr. Bilirakis, from Florida.
MR. BILIRAKIS. Thank you, Mr. Chairman. Mr. Secretary, I, too, welcome
you. It is always nice to see you. You were a very efficient and popular and
fine Member of Congress.
Mr. Secretary, if we were to pass this bill today, does the technology
exist to increase the fuel economy to a level greater than it is now? That
technology does exist, do we know that it exists?
SECRETARY MINETA. Well, the statutory amount is 27.5 miles per
gallon.
MR. BILIRAKIS. Yeah. Okay.
SECRETARY MINETA. What exists right now in the industry is 30 miles
per gallon, so already, where the industry is is already ahead of where the
statutory provision sets the mile per gallon--
MR. BILIRAKIS. But they haven't used that being ahead.
SECRETARY MINETA. And I think there are other technologies that can
still
be utilized, in order to increase the miles per gallon, but again, that is
something that we have got to study, and be able to take a look at. That is
the last--
MR. BILIRAKIS. Okay. But the only thing that we know about, though,
is the increase to the 30 miles per gallon.
SECRETARY MINETA. That is correct.
MR. BILIRAKIS. Okay, now, you indicated, at least I understood you to
say, that basically this can be done without necessarily reducing the size of
the passenger cars to possibly an unsafe standard. Is that right?
SECRETARY MINETA. That is correct.
MR. BILIRAKIS. Okay. And so it is the use of this technology that
you need the statutory authority for.
SECRETARY MINETA. That is right. We would be going to a size-based,
rather than a weight-based system, based on the footprint, and experiment with
that, to see whether or not that would give us the ability to improve the
miles
per gallon without impacting on safety, loss of jobs, other factors, that we
are required to look at.
MR. BILIRAKIS. All right. Yeah. But this has not taken place up to
now.
I mean, you haven't been able to sit around the table with the automobile
industry, and the manufacturers, and to discuss--
SECRETARY MINETA. Not as it relates to private passenger cars.
MR. BILIRAKIS. All right. You didn't have the authority to do it,
but were you prevented from doing it, would you say?
SECRETARY MINETA. That had always been reserved for private passenger
cars, had been reserved by Congress as their bailiwick, and so we didn't touch
it at all.
MR. BILIRAKIS. Well, I realize that you would have had the rulemaking
authority and the opportunities for the industry, for their inputs during that
period of time, et cetera, et cetera, but even before you get to that point,
would you, if you were given the authority, which apparently, you must need,
be able to sit down with these people, and to discuss with them that you are
concerned, of course, with the economy, with potential job losses, and further
financial stress, and all that?
SECRETARY MINETA. Absolutely.
MR. BILIRAKIS. But at the same time, the need to do something
regarding CAFE.
SECRETARY MINETA. That is correct.
MR. BILIRAKIS. You would do that. And you can't do that until we
pass this legislation.
SECRETARY MINETA. Well, it is that we wouldn't be able to go into any
kind of a regulatory process.
MR. BILIRAKIS. No, I appreciate that. That is your feeling, but you
could still lead up to it.
SECRETARY MINETA. Yes, sir.
MR. BILIRAKIS. Whatever you come up with, you would contemplate that
would be based on, it would be a size-based system, using basically, going
back
to your testimony, so the auto manufacturer would be required to apply a
certain standard that would tie into a certain model size.
SECRETARY MINETA. It would be based on what we consider the
footprint, as the size of--
MR. BILIRAKIS. So they wouldn't be one size fits all, I guess, is
what I am saying, right?
SECRETARY MINETA. It would not be a one size fits all.
MR. BILIRAKIS. It would not be a one size fits all.
SECRETARY MINETA. That is correct.
MR. BILIRAKIS. Well, Mr. Secretary, you have been up here for many,
many
years, and I mean, you realize, of course, the pressure that we are under, and
unfortunately, these pressures, when there are gas shortages or oil shortages
and whatnot, or problems are there in the world that result in all that, that
is
when we sort of want to put out the fire. I guess my time is up, but you
would
consider that this be necessary at this point time, even if we didn't have the
$3 per gallon problems that we have today, but that we would still have the
dependence upon this foreign oil?
SECRETARY MINETA. Yes, sir. We would still be seeking this statutory
authority, because this is really not a short-term solution to the immediacy
of
the problem facing consumers, because of the gasoline prices at the pump.
MR. BILIRAKIS. Thank you very much, Mr. Secretary. Thank you, Mr.
Chairman.
MR. ROGERS. Thank you, Mr. Bilirakis. Mr. Markey from Massachusetts.
MR. MARKEY. Thank you. Mr. Secretary, welcome back.
SECRETARY MINETA. Thank you.
MR. MARKEY. You and Phil Sharp in one day.
Mr. Secretary, in your opening statement, you noted that on February
1,
2002, you asked Congress for legislation to reform the CAFE program. When did
the Administration submit its bill to make the changes you called for in 2002?
SECRETARY MINETA. What I asked for at that point was a legislative
response by the Congress to provide the statutory--
MR. MARKEY. But when did the Administration send the language up for
Congress to act on? When did you send your bill up to Congress?
SECRETARY MINETA. Well, I am not sure that we had--I don't think we
did it by legislation.
MR. MARKEY. No, the Administration never sent a bill to Congress--
SECRETARY MINETA. No, I didn't.
MR. MARKEY. --to deal with the issue.
SECRETARY MINETA. But I did send a letter to the Congress--
MR. MARKEY. No, what I am saying is the Congress never received a
bill from the Bush Administration to deal with these issue.
SECRETARY MINETA. No, we never sent a bill. I just requested that
Congress pass the legislation--
MR. MARKEY. But my point is that it was a low priority for the Bush
Administration, if they never sent a bill to Congress on these issues. So--
SECRETARY MINETA. Well, many times, when we do make a request, that
is the initiation of the give and take in coming up with legislation.
MR. MARKEY. My point is that it was never a high priority for
President
Bush to obtain this authority, even though his Secretary of Energy today is
calling it, this whole energy situation, a crisis, the President never sent up
legislation that deals with the fact that 70 percent of all oil goes into
gasoline tanks, which is the transportation sector.
So if you had the authority, Mr. Secretary, what specific CAFE
standard would be the goal for the Bush Administration?
SECRETARY MINETA. Well, I wouldn't be able to pick--if you are
looking
for a number, I wouldn't be able to pick that out of the air, in terms of what
that--
MR. MARKEY. Was it wrong for the Congress in 1975 to pick 27.5 miles
as the goal for a 10-year period? Was it wrong for Congress to do that?
SECRETARY MINETA. Well, I was here at the time, and as I recall--
MR. MARKEY. Was that a mistake?
SECRETARY MINETA. Pardon?
MR. MARKEY. Was that a mistake on Congress' part?
SECRETARY MINETA. No, but I--
MR. MARKEY. On President Ford's part?
SECRETARY MINETA. Again, that was a product of this committee, and I
assume that this committee gave it the careful consideration, to come to that
27.5 mile per gallon statutory requirement.
MR. MARKEY. Okay. Now, the Cheney Energy Task Force told you back in
May
of 2001 to base a new CAFE standard on the National Academy recommendations,
which said 33 miles per gallon was feasible for the combined fleet of cars and
SUVs, based on existing technologies, and without reducing vehicle safety.
Can you recommend 33 miles per gallon as a baseline standard? That
was what the Cheney Energy Task Force told you to look at in 2001.
SECRETARY MINETA. Well, first of all, I am not sure that the NAS
study makes the contention that 33 miles per gallon is the--
MR. MARKEY. Yes, it does. That is what the 2001 National Academy of
Sciences study says, that using 2001 technologies, that the fuel economy
average
can be increased to 33 miles per gallon without compromising safety. That was
the specific conclusion.
SECRETARY MINETA. Well, then I would have to have you submit to me,
then the 2001 study, because--
MR. MARKEY. So what is the number that you would use--
SECRETARY MINETA. Mr. Markey, the one that we would base our work on
is
``The Effectiveness and Impact of Corporate Average Economy Standards,'' and I
believe that is a 2002 study, not 2001, and so we are basing our work on the
NAS study of--
MR. MARKEY. That is the same study we are using, and it says 33 miles per
gallon, using existing technology, without compromising safety.
SECRETARY MINETA. Well, then I would like to have you or your staff cite
to me where it says 33 miles per gallon economy.
MR. MARKEY. What is the number that you would use, Mr. Secretary?
SECRETARY MINETA. I don't know what the number would be.
MR. MARKEY. It is 6 years after that report came out in 2001, and the
Bush Administration has yet to decide what the number should be, using that
NAS report--
SECRETARY MINETA. That is correct.
MR. MARKEY. --from 2001.
SECRETARY MINETA. There is a study in here that shows the
distribution of
automobiles on page 45, by weight class, and it shows average fuel economy
miles
per gallon for path one, path two, path three, or subcompact, compact,
midsized,
large, small SUV, mid SUV, large SUV, minivan, pickup, small, pickup, large.
This table outlines all of the miles per gallon for the various
classifications
of cars. There is nothing in this study that says 33 miles per gallon ought
to be the attainable goal of the automobile manufacturers.
MR. MARKEY. Let me rephrase the question, then. Mr. Boehlert and I
have
an amendment in a bill that we intend on having a vote on the House floor, if
the leadership allows it to happen, which would give you all the flexibility
you
want, and selects 33 miles per gallon, which is the equivalent of all of the
oil
that we import from the Persian Gulf, over a 10-year period. That is what 33
miles per gallon does; it backs out all the Persian Gulf oil.
Would you, Mr. Secretary, recommend to the President that he pick a
goal,
as the Congress and Gerald Ford in 1975, that the public can understand, that
the oil futures marketplace speculators can understand, so that it will
depress
the speculation on the barrel of oil, so that it will all of this hype out of
the marketplace, so the price of oil can go down, because OPEC and the oil
industry will know that President Bush is serious about picking a target and
having America meet it? Will you recommend that the President announce the
number he will meet, and the timeframe to back out all of the Persian Gulf
oil?
SECRETARY MINETA. It seems to me that that approach is a ready, fire,
aim.
MR. MARKEY. No, the goal is Persian Gulf oil. The National Academy
of
Sciences says you can meet the goal. What is lacking is President Bush's
leadership on the issue.
SECRETARY MINETA. No, but if you say we are going to give you all the
flexibility and authority, but we also want you to use 33 miles per gallon.
To
me, that has already established something that we are seeking right now, and
that is, the broad authority to reform CAFE for passenger cars.
MR. MARKEY. It is almost unbelievable to believe that no study in 6
years--
MR. ROGERS. Your time is up, sir.
MR. MARKEY. I am done.
MR. ROGERS. I appreciate your questioning. Thank you, Mr. Secretary.
Mrs. Cubin.
MRS. CUBIN. Thank you, Mr. Chairman. Welcome, Secretary Mineta. It
is good to see you again.
If Congress does, indeed, give the authority to your Department to
promulgate new CAFE standards for passenger cars, what assurances do we have
in
Congress that adequate attention will be given to the safety of our
constituents, and what I am speaking about, in particular, is that you stated
in
your testimony that ``experts at the National Highway Traffic Safety
Administration can objectively measure how much fuel-saving technology we can
require before the costs outweigh the benefits,'' and then that is a quote. And
what I am specifically interested in is what weight regional safety concerns,
like the rugged terrain that we have in Wyoming, and the inclement weather
that
we have, you know, bad storms, which require heavier vehicles for safety for
the constituents in my state.
So how much will that be taken into account?
SECRETARY MINETA. Well, that would be taken into account, in terms of
our
establishing the corporate average fuel economy. Again, you know, maximum
feasible average fuel economy, the technical capabilities, feasibility,
economic
practicability, safety. All of these are taken into account, and so safety,
whether it be in terms of the size of the vehicle, the technology that is in
the
vehicle, under what driving conditions these are subjected to, that is all
taken
into consideration, as we do the underpinning for determining what the CAFE
standard ought to be.
MRS. CUBIN. Good. And then what about the use of the vehicle, for
example? You know, some pickup trucks are like the small pickup trucks, and
then some pickup trucks, that we use in ranching, for example, really do have
heavy duty work, and a lot of--not just ranching, but construction and mining
and all those things that we have in Wyoming that require more sturdy
vehicles,
will the use be taken into consideration as well? Because these are passenger
vehicles, as well as work vehicles.
SECRETARY MINETA. Well, if they go over 10,000 pounds, then we would
not
be considering those vehicles for the application of the CAFE standard. So to
the extent that they are over 10,000 pounds, and they are used on the ranch,
they are used for construction, used for mining, whatever it might be, we
would not be including those size vehicles as part of the determination--
MRS. CUBIN. Right.
SECRETARY MINETA. --for CAFE standards.
MRS. CUBIN. I don't have any idea what size, or how much, like a
Suburban
would weigh, or a pickup truck with six wheels with a dualie, the two wheels
in
the back. Do you have any idea what those weigh, if those would be included?
SECRETARY MINETA. Those, I think, are in the 8,500 to 10,000 pounds.
MRS. CUBIN. Okay, so those are the ones that I am specifically
concerned about.
SECRETARY MINETA. Let me have Ms. Glassman, our Deputy Administrator
and NHTSA, address that issue.
MS. GLASSMAN. Yes, thank you, Congresswoman.
In our last light truck rule, which we issued in late March, we
included
within the CAFE regulation certain vehicles within the 8,500 to 10,000 weight
class, but certain other ones, we did not. The vehicles that were included
are
passenger SUVs, the larger SUVs that are used to carry people around. We did
not include those vehicles that are used principally for agricultural or
commercial use. Those vehicles are not subject to CAFE, because they are, in
fact, needed for utilitarian purposes.
MRS. CUBIN. Well, I am someone who is concerned about the weight of
vehicles, should there be an accident. You know, with the slick roads we
have,
and the vast distances that we have, and the truck traffic that delivers the
goods across the country, we have interstates that folks here would be
absolutely amazed if they were to drive across I-80, and see the number of
trucks, and so I just want to know that if there is a slide if you are going
to
be in an accident, and you are sliding on the ice, that you have the best
chance
possible to survive that accident, and I really don't want any standards to
compromise the safety of the people that are in the vehicles.
Thank you, Mr. Secretary.
MR. ROGERS. Thank you. Ms. Eshoo, from California.
MS. ESHOO. Thank you, Mr. Chairman. It is always good to see you,
Mr. Secretary. I attempted to say Norm, but we are--
SECRETARY MINETA. Of course.
MS. ESHOO. --in the very formal setting, so it is
Mr. Secretary, and to those of you that are here from the Department, thank
you for your testimony.
We have always been very up front with one another, and I am going to
be
really forthright today. I think the Department and the Administration are on
the wrong side of history here. Today's hearing is about what we can do long
term. I think that was raised earlier. Maybe Mr. Dingell asked that, or made
that point.
I think that Mr. Boehlert's statement to the committee was an eloquent
one. We are not going to be able to drill our way to independence of Middle
East oil. We know that. We know that we have to do something about the
demand. That is not punishing Americans. That is being very smart, in terms
of policy.
I think that what is being presented today is summarized pretty well
in
today's New York Times editorial, ``Foolishness on Fuel.'' It really takes
the
Administration's ``policy,'' and takes it apart. I think, Mr. Secretary, with
all
due respect, when we get into these quibbles about what is going to be saved,
in
terms of fuel and CAFE standards, relative to a study, and what you are
putting
forth on a size-based approach versus of a fleet average, I think on the one
hand, what you are approaching can--because it is so complex it can be
manipulated--and I think a fleet-wide approach is a much better way to go.
Obviously, the Administration doesn't think so.
But you know, we need to take this debate into context. Look where we
are
in this country. Look where we are. I paid $3.65 for regular in Menlo Park on
Sunday, so if this doesn't spell urgency, while you are all saying study, I
don't think that is the right side of history. Now, you wouldn't go on record
as saying the 33 miles, in terms of the CAFE standard. What I would like to
know is in terms of your proposal, when are you actually going to produce?
What
will this policy initiative of the Administration produce? How much oil will
it
save, and over what period of time? Because on your SUVs, that the
Administration just put into place, the mileage rules covering SUVs, minivans,
and pickup trucks, I think you heard my opening statement, I mean it is really
miniscule. It is miniscule. It is almost laughable, were it not so serious,
in terms of where this country is.
This great country, our great economy, everything that we are, is
really
at a tipping point now. So the old debate about study and whatever, so tell
us
what the size-based approach that you described today, and what the
Administration would like to put in place, what are the fuel savings there,
and
over what period of time? I think that that is an important way to measure
it.
I also want to bring to your attention that Ford has produced a hybrid
SUV
that gets about 40 miles per gallon. Now, is this vehicle not safe? Oh, you
are doing weight. You have to tell me, when we encourage people to buy
these--what are they called? They look like Army--the Humvees.
SECRETARY MINETA. Hummer.
MS. ESHOO. When I see a Humvee at a gas station, when I am filling up
my
small car, and they are filling that up, and I see the pain on their face, I
think what the heck are we doing in terms of policy to encourage that? In
fact,
in the tax code, we reward business to buy them. I mean, our policies are
standing on their heads. My grandmother used to say always remember, when you
are sticking your head in the ground, what is left sticking up in the air.
We are not paying attention. Our policies are not what they should be
today for America's future. In fact, we have squandered.
MR. ROGERS. That would be--for the record.
MS. ESHOO. Tell me what the fuel savings will be for the policy that
you are proposing, and over what period of time?
SECRETARY MINETA. Well, again, it seems to me that that is, again,
what I
would say is the ready, fire, aim. I don't know--
MS. ESHOO. Norm, what does that mean? We better be ready to fire and
aim.
SECRETARY MINETA. I don't know how--
MS. ESHOO. Because this--
SECRETARY MINETA. --you can--
MS. ESHOO. --country is held hostage today.
SECRETARY MINETA. No, but how do you--
MS. ESHOO. Everywhere in the country--
MR. ROGERS. The gentlelady is over her time, and I would let the
Secretary answer the question.
MS. ESHOO. No, I want to hear the answer, but--
MR. ROGERS. Well, I would like you to let him--
MS. ESHOO. --a bit infuriating, to say ready, fire, aim.
SECRETARY MINETA. How--
MS. ESHOO. We should be ready to fire and aim.
SECRETARY MINETA. But how do I know--
MS. ESHOO. It is your policy.
MR. ROGERS. Ma'am, if you would let him answer the question. We have
run over your time.
SECRETARY MINETA. We can't establish the rule of fuel standards,
because
you don't know what the product plan of the manufacturers are. You don't know
what the mix of their vehicles that they will be building in model year, let
us say, '08, and that is the basis for determining the CAFE standards.
MS. ESHOO. So we just don't know.
SECRETARY MINETA. I cannot give you a definitive answer, as to
whether it
is going to be 38 miles to the gallon, 33 miles to the gallon, or whether it
is
going to be 10 billion gallons saved, or 40 billion gallons saved. That is
not something that at this point, we can give you.
MS. ESHOO. And when will you know that?
MR. ROGERS. The gentlelady's time has expired.
MS. ESHOO. Mr. Chairman, others have gone over at least a minute.
Can we just know this? If we are going to shape a policy--
MR. ROGERS. I understand.
MS. ESHOO. --for something that is as serious as what America is
facing
today, how long will it be until we know what the Administration's--what the
outcomes are going to be to the policy that is being proposed? I think it is
a legitimate question.
MR. ROGERS. Last question. You can answer the question, and then we
will move on from there.
SECRETARY MINETA. First of all, again, in terms of how long it will
take, we are saddled with 18 months to begin with, just in terms of what model
year it
affects, and it requires 18 months notification, and we are always doing that
in April of a given calendar year for the model year 18 months later.
MS. ESHOO. Well.
SECRETARY MINETA. By statute, it is already in statute. October of
the
model year is, for the notification period, but that has to start 18 months
before that, so that would be the April before. So we are saddled with 18
months to begin with. And then to make this study, I think to even do it in
one
year, I think, is a very, very tight schedule. You tell us to do it in that
one-year period, you know, we are going to be responding, but it will be a
very difficult time.
As I said earlier to Mr. Dingell's question, our response on the CAFE
standard is not a short-term response, in terms of what is happening with fuel
prices. What we deal with in CAFE is always, whether it was in 1975 or in
2006, always has been--
MS. ESHOO. It is long term. I understand.
SECRETARY MINETA. --a long-term response.
MS. ESHOO. So it is a long-term--
MR. ROGERS. Thank you, Mr. Secretary. The gentlelady's time has
expired. Thank you.
MS. ESHOO. Thank you.
MR. ROGERS. Mr. Secretary, since the debate today is a little bit
interesting for me, you know, the wrong side of history, did they send a bill,
did they send a letter. You know, going for a fleet approach. When CAFE was
introduced, cars still had carburetors. General Motors controlled 50 percent
of
the domestic market. I mean, it was a different time. And now, there is much
more competition in America from all over the world with automakers. The
automobile industry in America is actually doing well. The Big Three are
struggling to find their right place, and their niche in the market.
A fleet approach would actually mean, in some cases, given the
calculation, that some car companies would have to stop production of a
certain
vehicle. And we went through this before. That is really a lousy way to make
policy, other than us saying well, we are going to mandate that everybody
drive
a Mini Cooper. I think your approach here is novel, and I have been very
vocal
in the past about why CAFE is broken: it is old. It is antiquated. It
doesn't
work. It is a formula. Just because you say 33 miles a gallon doesn't mean
everybody just gets up to 33 miles a gallon with no penalty. People, real
people, working and struggling to take care of their families may, in fact,
lose their jobs.
So there is a balance here, and you going from a weight and size issue
to
a footprint is pretty innovative, and it takes time to apply that science. I
am
really curious. You talked about fuel-saving technology, and how you apply
that
to the vehicle. If we are going to get down from foreign dependence on oil,
you
may only go up a half a mile per gallon, but you may reduce the percentage of
oil used in that vehicle. Wouldn't that be a great outcome for America?
SECRETARY MINETA. Absolutely, and they are just--it is not only in
terms
of how to establish the corporate average fuel economy, but it is also a
reflection of what is the state of the economy. As you said, at this point,
we
had carburetors. Today, we have fuel injection. We use, as an example, the
engine, to power steering. If we went to a battery-powered steering, we would
be saving on the fuel economy, because we would take away from the use of the
engine to power the steering, and there are a number of these things. The
continuous variable transmission. But there are a number of things that the
automobile industry would be able to do, and it would also vary on the size of
the car and the price of the car. Because if you had, I don't know, a 2,800
pound car, but it is going to cost $40,000, I am not sure there would be much
of
a market for that car, but on the other hand, if you have a $35,000 car, you
can
put technology that might cost $1,800, $2,000 per car, to improve the fuel
efficiency of that heavier car.
MR. ROGERS. You know, there were some mandates in California about
the
zero emission cars. General Motors invested billions in something called the
EV1, of which nobody in California wanted to buy. I mean, government mandates
are not a good idea when it comes to that solution. I think you agree.
And that is why I think it is so important that you do have the
ability to
look at a savings-based, take the CAFE formula, rip it up, start over, and say
we are going to do it on an individual car basis, and apply the technology
that
we have. There is technology to buy the E-85 vehicles, is there not, on the
market today? I think the Big Three are probably somewhere around a million
vehicles, E-85 capable. Will that not, in fact, help our dependence on
foreign oil? Simple answer.
SECRETARY MINETA. Right.
MR. ROGERS. Yes, it will. Displacement, cylinder displacement, all done
by the automobile industry, trying to reduce fuel usage at certain times, the
demand on the engine. Will that, in fact, provide some fuel savings, and
reduce our dependence on foreign oil? It will?
SECRETARY MINETA. It will.
MR. ROGERS. Hybrid vehicles? We have SUVs, I know the gentleman from
the
24th District in New York said I can't go out and buy an SUV that is fuel
efficient, but are there, in fact, not SUVs on the market that have hybrid
technology in them today, that you can buy? I know there are. You know, they
don't happen to be from the car companies that I represent, but there are some
folks other than Ford, Ford has got a great Ford Escape SUV. So that
technology is there, is it not?
SECRETARY MINETA. Right.
MR. ROGERS. So doesn't this allow you to take all the research and
development that has been done, and they spend billions of dollars doing this,
and come up with a system that works for our independence, keeps cars safe, is
sensitive to the fact that there is a UAW family right now hoping that we do
this thing right? I mean, if we give you this flexibility, isn't that what
that
means, really, for America, versus the wrong side of history, or how you
submitted your bill?
SECRETARY MINETA. Yes, that is correct. And what we are looking for
in this authority that we would hope we would get at the Department of
Transportation is that it would be a standards approach, rather than a
specifications approach, because when you end up with specifications, you
usually end up with a much more costly response mechanism, and so again, in
this
instance, I think we are looking, really, more at that broad authority to be
able to reform CAFE, and be able to do this kind of what is the best
technology
that is available, to be able to produce these increased CAFE requirements.
MR. ROGERS. If we tell them to do it in a short period of time, Mr.
Secretary, they are just going to try to take weight out of the vehicle.
Isn't
that the engineering standard? I mean, we have just got to remove weight from
a vehicle.
SECRETARY MINETA. That is correct.
MR. ROGERS. That is the quickest way.
SECRETARY MINETA. That would be the quickest and the cheapest way to
do it.
MR. ROGERS. But not necessarily the safest way to do it.
SECRETARY MINETA. And it would not be the safest.
MR. ROGERS. And so your approach also protects safety, as it applies
this new technology to future vehicles.
SECRETARY MINETA. That is correct.
MR. ROGERS. I am excited about where you are going with that. Mr.
Wynn.
MR. WYNN. Thank you, Mr. Chairman. Mr. Secretary, always good to
you. Thank you for coming.
A couple of just quick questions that I would like to ask. Just on
the subject of weight, you don't have any authority to regulate vehicle
weight, do you?
SECRETARY MINETA. I am sorry, to regulate--
MR. WYNN. Vehicle weight. To mandate specific weights. So if the
market
were to move toward lighter vehicle cars, I mean lighter weight cars, as an
effort to be more competitive, there really wouldn't be anything you could do.
Is that correct?
SECRETARY MINETA. Let me have Ms. Glassman respond on that.
MS. GLASSMAN. Now, we don't have the authority to mandate that
vehicles
are of a particular weight. What we do have authority to do is to set a fuel
economy standard.
MR. WYNN. Right. Okay.
MS. GLASSMAN. And weight is one aspect of achieving that.
MR. WYNN. Okay. Just quickly. So if the market goes toward lighter
cars, there is really nothing you can do about it, right?
MS. GLASSMAN. If there is a trend in the market towards lighter
cars--
MR. WYNN. There is nothing you can do about it.
MS. GLASSMAN. --the market will drive that.
MR. WYNN. Okay. Thank you. With regard to the conservation, the
savings, that would be accrued through this CAFE standard, that--does--how
does
the world market affect that, the world oil market? Because if we use less,
but the Chinese use more, is that going to bring down price?
SECRETARY MINETA. Well, it wouldn't--no, what happens on the world
market would not impact on what we are doing on the CAFE standards.
MR. WYNN. Well, ultimately, we are here talking about gas prices.
If the
world market is what is really controlling gas prices, isn't it somewhat
illusory to think that CAFE standards are going to reduce gas prices at the
pump?
SECRETARY MINETA. Well, no, I don't think we are making that as a
contention at all.
MR. WYNN. Okay, so I just want to be clear. So this isn't about, in
any
form or fashion, reducing the $3.65 that somebody is paying, or $3.25 that I
paid this morning. Okay. All right.
Having said that, if it is not going to reduce the price at the pump,
you
also, I believe, said that the 27 miles per gallon is behind the 30 that the
industry is accomplishing right now.
SECRETARY MINETA. That is correct.
MR. WYNN. Why can't the industry just do this? I mean, last night,
I saw
a commercial for a Toyota car that is going to be 40 miles a gallon. It seems
to me we don't need Federal regulations to do this. The market is going to do
it. Either the market is going to do it, or we are not going to have an
automotive industry.
Why are we doing this?
SECRETARY MINETA. Part of it, I believe, is to have a floor, so that
you
don't have a regression below which the standard or threshold is being set.
MR. WYNN. If I could just jump in, isn't that somewhat contradictory
from
the standpoint, anybody who is going backwards and increasing or decreasing
their fuel economy would seem to be working their way out of business. All
the
people were concerned about the employees. So there really isn't any market
force that would take us backward. All the market forces seem to be taking us
forward. Isn't that true?
SECRETARY MINETA. Yeah. I believe that is the case. Jackie?
MS. GLASSMAN. Yes. Market forces currently are working in that
direction, and the price that people are paying at the pump often drives their
decisions on whether to buy more or less fuel-efficient vehicles. But
certainly, the market today is being driven towards more fuel-efficient
vehicles, and not less fuel-efficient vehicles.
MR. WYNN. Right. That being the case, and the fact that you said what we
are doing with CAFE is not going to affect the price at the pump, isn't it
likely that the market is the appropriate force to resolve this issue, rather
than engaging in government regulations, and the expense associated with it,
to do something 18 months behind the cycle anyway?
MS. GLASSMAN. The market is an important piece of this, and in
defining
the regulations, we are careful not to disrupt market forces, so that consumer
choice can continue to play a significant role.
What we are looking for is the authority to have a program that can
get the most fuel savings possible, without affecting safety, without losing
jobs--
MR. WYNN. But the market could probably get more.
MS. GLASSMAN. --and in allowing people to continue to have consumer
choice.
MR. WYNN. Okay, but the market could probably get more.
MS. GLASSMAN. The market will continue to move the direction.
MR. WYNN. Okay. If the market moves toward lighter cars, in a
drastic
attempt to offset the high price of gas, and compete with foreign cars, would
you anticipate any type of attempt to impose safety regulations relating to
weight?
SECRETARY MINETA. Well, I think we always look at safety of the
vehicle
regardless of weight, so that if it is a very heavy car, vehicle, let us say
it
has a roll tendency, we would look at that as a safety issue, even if it--
MR. WYNN. But not weight per se.
SECRETARY MINETA. And we would be looking at a lightweight car, if it
is disproportionately causing a large number of deaths, and--
MR. WYNN. Okay. My last question. The European countries all have
much
lighter, much smaller cars. Has there been any analysis of their accident,
death rates, in relation to what we are experiencing over here?
SECRETARY MINETA. Let me have Ms. Glassman--
MS. GLASSMAN. We have different fatality rates. We have very
different
driving conditions in the U.S. and in Europe. Many of the small mini-cars in
Europe would not meet the full plethora of our safety standards. So every
vehicle sold in the United States would have to, whether it is a small or a
larger vehicle, would have to meet every one of our safety standards.
MR. WYNN. Okay. All right. Thank you.
MR. ROGERS. Thank you. Mr. Gonzalez.
MR. GONZALEZ. Thank you very much, Mr. Chairman. Welcome, Secretary
Mineta, our Democrat in the White House. That is not exactly what we had in
mind in November of 2004, but we will settle at this point. But thank you so
much.
I didn't want to lose something that Representative Boehlert had
pointed
out in your discussion, in the question and answer with my good friend
Congressman Wynn. We really aren't talking about the price at the pump
presently, but we definitely are looking prospectively. We can't do anything
about supply, to be real honest with you. We can drill all over the United
States, ANWR, East Coast, Florida, West Coast, and we are not going to have
enough oil. Can't do anything about India. Can't do anything about China,
right? And we can't do anything about the oil speculators, or at least we are
not going to do anything regarding that particular market, as far as
regulation.
What Congressman Boehlert is talking about is we can do something
about
demand. And so that in the years to come, if you think $3 or $3.40 is a lot,
you haven't seen anything yet. So my first question will go to what you are
already doing, and then we will get into what you are seeking in the way of
reforming the law, and I am going to refer to a March 30 Washington Post
article, because it was of some concern that what you are doing with the non-
passenger side, which you have the authority to do, and I commend you, I do
commend you, but this is what it basically said. ``Mineta's announcement
comes
as gasoline prices are nearing their six month high, with a gallon of regular
averaging $2.50 per gallon.'' This was on March 30. Little did I know those
were the good old days. ``Or $0.35 more than it cost a year ago, according to
the U.S. Department of Energy. At the same time, General Motors is staking
its
turnaround in profits this year on a new batch of large SUVs. Mineta said the
new rule is being phased in over the next 5 years to lessen the impact on the
fragile U.S. auto industry, hit by declining market share and huge financial
losses.'' And just since that time, we know, cutting back 60,000 jobs at GM
and
Ford, reorganizing, restructuring, getting rid of certain parts of their
enterprise, and you are saying that what you are doing regarding the non-
passenger, the trucks and such side of the equation, over 5 years, will not
adversely impact what is going on with the domestic automakers to the extent
that could, it really could hurry or even cause their demise.
Is that what you are saying, the 5 year plan?
SECRETARY MINETA. Well, what we are trying to do is to minimize what
the
impact of our regulations would be on job loss, and so to that extent, as we
are
doing our rulemaking, we do look at the various factors under the law that
prescribe how we come to the CAFE standard. And again, impact on
manufacturers is a factor.
MR. GONZALEZ. Which is going to lead me to what you seek in the way
of
reform, but if what you are doing on that side of the equation, non-passenger
vehicles, in setting the miles per gallon that you just went through in this
past month, is any indication of what you might do if given the authority to
move forward on passenger, then that is what my question is really about. And
it is not an easy one, and I understand the position that you are in, that you
have to take into account economic feasibility of our domestic automakers,
because we all have a stake in their wellbeing. There is no doubt about that.
But to what extent do you defer to their future plans? Because you
were
just saying well, we are doing that with the trucks, what we just did, we are
going to phase things in over 5 years to accommodate them. Now, if you give
us
the authority to move forward on the passenger side, we are going to take
their
long-term plan, confidential and all that as it may be, they share it with us,
how far do you defer to those plans? Because if I am the manufacturer, and I
am
having a really hard time making these changes, and I am surviving, I may not
be
as accommodating as you wish me to be, so where does that balance come in? I
am just curious.
SECRETARY MINETA. Well, let me have, again, Jackie get into the--on
how that is done within our bureaucracy.
MS. GLASSMAN. The manufacturers' confidential plans are our baseline.
They are the starting point. We receive these plans from each manufacturer.
We
look at them. We look at the technology they are using. We look at the
technology they are using within the company, and see if there are other
places
that technology that is being used in one model might be able to be used in
another model.
We also look at what other companies are using, and we see if that
technology can be applied in places where it is not currently being applied.
And when we put out a rulemaking, we lay this all out. We don't lay out the
confidential parts in public documents, but we do lay out how we go through
the
analysis, and what technologies we are using to apply. So we start with our
product plans, we look at the baseline. Then we see how much more technology
we
can add, and this is not something they have to do, but it is our assessment
of what they can do.
And then we arrive at a corporate average fuel economy standard that
pushes that technology application as far as it can go, to get as much fuel
savings as possible, subject to not either causing safety problems, or job
losses, and substantial economic hardship.
MR. GONZALEZ. Okay. Thank you. And Mr. Chairman, if you will
indulge me
one second. I just have one last question, because this has been a burning
question.
How do you really arrive at whether these vehicles are accomplishing
and
attaining these standards? My understanding, I have heard this, I don't know
if it is true, that the way the test is conducted, for instance, miles per
gallon,
highway miles, you get a vehicle, you run it at 48 miles an hour for I don't
know how many miles, and that is it. Now, that is totally unrealistic. I
don't
know how you arrive at the in city miles, but can you shed some light on how
that actually is conducted?
MS. GLASSMAN. That is actually done by EPA, and it is done pursuant
to a
test procedure that is in the statute, and they conduct the test, they give
the
results to NHTSA, and we calculate the company's corporate average fuel
economy,
compare it to the standard, and see if they are above it or below it, and if
they are below it, we impose a fine.
MR. GONZALEZ. So if we have a flawed method of ascertaining what--it
wouldn't matter what we set it at, 33, 27, it doesn't matter, because they are
probably not getting that anyway. Have you all ever looked at the EPA's
method
of--and I don't know if they have changed it, but that is what I was told some
time ago. But I know that the test is conducted, it is totally unrelated to
the
real world driving conditions, and maybe all of you would maybe get back to
me, and see if, in fact, your understanding is the same as I just outlined.
And thanks again, and it is good seeing you, Mr. Secretary.
SECRETARY MINETA. Well, EPA has a different standard, and they are
going through, I believe, a reevaluation of their own test mechanism, and we
did have a discussion about that recently. Maybe, Jackie, you could--
MS. GLASSMAN. There are two different tests. There is a test for
compliance with CAFE standards, and then EPA takes that test, applies
adjustment
factors to arrive at the numbers that should be on each vehicle's label. That
is on the Monroney label when the vehicle is first sold. EPA is currently in
rulemaking to reconsider the adjustment factors that go on the label, so that
when people go to buy a car, they will know exactly how much fuel economy that
car can attain.
MR. GONZALEZ. Thank you very much. Thank you, Mr. Chairman.
MR. ROGERS. Thank you, Mr. Gonzalez. Mr. Burgess, the doctor from
Texas.
MR. BURGESS. Thank you, Mr. Chairman. Mr. Secretary, I wonder if
Hell
has frozen over. We have the gentleman from Michigan presiding over a hearing
on CAFE standards. It seems so bizarre to me, but--
MR. ROGERS. It is just the way we like it, by the way.
MR. BURGESS. Well, the light truck rulemaking that will result in
fuel
savings of 11 billion gallons over the life of those vehicles manufactured
between '08 and '11, what kind of fuel savings do you think would result from
an increase in passenger car fuel economy standards?
SECRETARY MINETA. Again, that would be very hard for me to estimate
right
now, in terms of the number of gallons that would be saved over the life of
the
vehicles that would be impacted by the, let us say, in model year '08--or are we
talking about '09-'08. And it goes back to the question that Congresswoman
Eshoo was asking me, and I would not be able to estimate how much the savings
would be right now, or even to try the other goal of say establishing, I don't
know, let us say 25 million gallons of gas saved during the life of these
vehicle, from model year '08 through--let us see if we go-'08, that would be
2012, and those 5 year periods. It would be very difficult, at least for me
right now, to be able to predict what the gallons saved would be.
MR. BURGESS. How significant is working on the demand side of the
equation? How does it affect, or what is your opinion about how it affects
price, if consumers are to reduce their consumption of refined gasoline
product? Would that make a difference in bringing the price down?
SECRETARY MINETA. Yeah, I am not enough of an expert on the energy
field
to be able to say how much is really attributable to the demand side, and how
much to the supply side. But it seems to me, just from just off the top of
the
head reaction, I would think the bigger impact on the price would be from the
supply side, rather than what we could do to be leveraging on the demand side.
MR. BURGESS. Well, that is totally, just not even a SWAG for me, this
is
just a WAG. And I would agree with you. I would concentrate on the supply
side
as well. Of course, being from Texas, that is easy to be on the supply side.
There was an article in one of my local papers just this past week, where a
professor, an economist at Southern Methodist University, said that if
consumers
would save as little as one gallon a week, there could be a $0.50 or $0.60
savings, or gasoline price reduction. That seemed like an enormous amount of
price drop for a little bit of savings, and I just wondered if anyone has any
data on that, that would support that hypothesis?
SECRETARY MINETA. I am not familiar with that study or--I don't know
if Jackie or Jeff, anyone else?
MR. BURGESS. Well, certainly, there are some that believe that
setting a
specific mile per gallon number in statute is the best way to force fuel
economy upwards. Is it your opinion that that is a wise course?
SECRETARY MINETA. Absolutely, because again, this is the kind of a
puzzle
where every little bit is going to be contributing to the overall picture of
savings of fuel. Pardon? I am sorry. Oh, I am sorry. No, no. I am sorry.
No, I would have to go back to my original point, that I would not be able to
pick a figure. Either again, whether it is mpg or total fuel saved.
MR. BURGESS. And would that also be gallon of fossil, or would that
include fuel that has been extended, say, with ethanol, the E-85 fuels, when
you
talk about those fuel standards. It seems to me, if you can get a hybrid car
with a bigger battery, and flex fuel option, out of one gallon of fossil
fuels,
you could drive that little car maybe 100 miles with an improved, and with
supplementing with ethanol. So is that fuel economy going to be based on that
one gallon of fossil fuel, or the number of gallons of E-85 that are burned,
the
battery life? I mean, how else are you going to be able to figure that?
SECRETARY MINETA. I am going to have to turn to Jackie on that one.
MS. GLASSMAN. That is not based on the kind of fuel that is put into
the
vehicle. It is based on how the vehicle can go on a gallon of fuel. There
are
incentives within the statute to encourage the development of alternative
fuels,
such as E-85, and as E-85 use increases, we should see fuel economy as a whole
increase as well.
MR. BURGESS. But from a corporation standpoint, that is producing a
fleet
of cars, if you have got one hybrid with a big, big battery, and burning E-85,
that one gallon of fossil fuel, I mean, if you could apply that to your
average
fleet fuel burning, it might negate the whole premise, because you would get
such a savings out of that one vehicle that the larger vehicles and the larger
engines would then be able to still be sold, because that is my understanding
of
CAFE standards, it is applied across the entire fleet. Is that correct?
MS. GLASSMAN. That is right, and our new program, however, for the
light
trucks, will take more fuel-saving technologies into account, so that what we
do
we look at the fuel savings for a particular size of vehicles, and then put
the
product mixes into that, so it reduces the effect of the average, so that we
can encourage more technology.
CHAIRMAN BARTON. The gentleman's time has expired.
MR. BURGESS. Thank you, Mr. Chairman.
CHAIRMAN BARTON. Our last questioner for the Secretary is
Congresswoman Schakowsky of Chicago.
MS. SCHAKOWSKY. Thank you, Mr. Chairman. I know that you were a good
friend of my predecessor, Sidney Yates, and I am glad to see you here today.
I just have a few comments, really. I want to, first of all, fully
associate myself with the comments of Ms. Eshoo from California. And when she
used the phrase being on the wrong side of history, it sounds kind of like
maybe
a hyperbole of sorts, but I have to think that for so many reasons, that when
my
grandchildren, the oldest of which is now 8 years old, looks back, perhaps, on
this debate today, and her contemporaries as an adult, her contemporaries, I
think, will be stunned by a lack of urgency about dealing with this issue.
And
I think that, for so many reasons, that we have to get so much more serious
about addressing the problem, and perhaps, in some ways, the least of these is
what Secretary Bodman called the crisis, referring to the cost of energy. And
hopefully, in the long term, we are dealing with that issue, as we reduce our
consumption.
But if we just take the issue of national security, and consider that
if
we were under Representative Boehlert's bill, their calculation is that
raising
the fleet-wide average to 33 miles per gallon would reduce our consumption by
2.6 million barrels of oil a day by 2025, which would eliminate the need, at
least the current need, for Persian Gulf oil. So there are energy security
issues.
But most of all, we are dealing with an issue of the future of human
life
and other life, polar bears, et cetera, but human life on this planet right
now.
And how anyone at this date could be diddling over small numbers of, to reduce
our consumption of fossil fuels, which of course, we are also running out of,
and we have got to deal with that, but the global warming, I think everyone
now,
including the Administration, has acknowledged it as a fact, and time is
really running out on that front.
And so I am alarmed somewhat that we are so casually, perhaps
intellectually, in talking about all these numbers, discussing yet again this
issue of fuel efficiency, of reducing the amount of gas that each one of our
cars uses. And the notion was posited that well, consumers are buying them,
and
yes, while some may be buying Humvees, I would say that most consumers are
looking for an opportunity to buy, at their neighborhood dealer, a car that is
more fuel efficient. And I am not an expert on the auto industry, and I know
we
will have some on the next panel, but I can't imagine that we have done the
auto
industry itself and the United States any favors by not encouraging that cars
be
made more fuel efficient. That would increase their competitiveness.
So what it says in today's ``Foolishness on Fuel,'' the New York Times
editorial, it talks about the Boehlert bill, and then it says: ``If that
sounds
radically ambitious, consider this bit of history. In 1990, two
Senators--Slade
Gorton, a conservative Republican, and Richard Bryan, a liberal Democrat--
proposed raising fuel economy standards to 40 miles a gallon over 10 years.''
Of
course, we would have long passed those 10 years. ``They actually got 57
votes
for their proposal, which lost to a filibuster. Had it passed, we would
probably be consuming half the gasoline we now use, and be in better shape to
deal with today's price squeeze.'' And today's environmental concerns, too, I
might add. ``There is still time to prepare for the next one,'' this
editorial says.
So all I would say is that let us get real. Let us get serious. Let
us
have a sense of urgency about dealing with this. Yes, car auto safety is
important, but everything pales in terms of are human beings going to be able
to
survive on this planet? And I thank you for listening to me, and being so
patient all morning. And in dealing with it.
SECRETARY MINETA. Chairman, if I might.
It is not that we are lacking in urgency. We are urgently asking for
Congress for this authority to proceed, so that we can restructure the
program, and yet, in restructuring the program, it will take time.
It would be like President Kennedy's call, as Mr. Markey indicated,
for us
to get to the Moon. The urgency was to start today, but it still took 10
years
to get to the Moon. Well, we are in the same position. It is still going to
take us 18 months, minimum, plus a year, to reform CAFE. So the urgency is
for
us to be given the authority to start, even though it will take time to get
there. And at the same time, the urgency is on doing the right thing, whether
it be on safety, or whether it be on the impact on the industry itself, and
the impact on the environment.
So all of these things, we take into consideration, and it is not that
we
are shying away from urgency. Urgency still is a very big part of what we
want
you to grant to us, in terms of this authority, so that we can get started on
this as soon as possible.
Thank you very much, Mr. Chairman.
MR. BILIRAKIS. Just one question.
CHAIRMAN BARTON. Thank you, Mr. Secretary. That is all the members who
have got questions for you.
MR. BILIRAKIS. Mr. Chairman, I wondered, could I ask one question?
CHAIRMAN BARTON. All right.
MR. BILIRAKIS. Very quickly, a quick question, quick answer?
CHAIRMAN BARTON. Mr. Bilirakis is recognized for one question.
MR. BILIRAKIS. I am stuck to take over the Chair when you leave, so I
have the prerogative.
The 18 months that you refer to, plus one year, et cetera, and we are
all
concerned, Mr. Secretary, that haste not make waste, and we are, you know, we
always worry about unintended consequences of our acts, and things of that
nature, but is that 18 months then 1 year necessary? I mean, is there any way
to speed up this process, even if it might take legislation on our part? We
realize that we are talking about years, now, before--this certainly is not a
quick fix. But it is a fix that you have already indicated, and we have said
for many years needs to be made. I mean, we can't continue to be dependent on
this foreign oil the way that we are, and the only time we address it,
obviously, when we have an emergency like this.
But what do you have to say about that, very quickly?
SECRETARY MINETA. In terms of shortening that time period, I would
assume
that it would require statutory change on that 18-month piece of it. There is
no statutory provision on how long it takes us to study it. That is just a
question of how many people do we have, the time it takes to get the
information, and--
MR. BILIRAKIS. You have still got to give Detroit time to do the
engineering.
SECRETARY MINETA. But that is the part of it that is statutory.
MR. BILIRAKIS. Yeah.
CHAIRMAN BARTON. What we could do is just have a ban on any car that
gets
less than 40 miles to the gallon being sold. Now, let us just have a show of
hands right now, of the people that are in this room, how many of you drive
something that gets more than 40 miles to the gallon? Raise your hand. The
Chair counts four people out of approximately 100.
All right. Let us see a show of hands of how many people would like a
ban
on any vehicle that gets less than 40 miles to the gallon, including work
vehicles, being sold to the American public beginning next week? How many are
for that? Raise your hand. An absolute ban. Let the record show nobody
raised their hand. Nobody raised their hand.
Thank you, Mr. Secretary. I will see you at the White House in about
35 minutes.
We would like to call our next panel. We would like to welcome our
second, our third panel actually. We have Mr. Fred Webber, who is the
President
of the Alliance of Automobile Manufacturers. We have the Honorable Phil
Sharp,
who is President of Resources for the Future, and a past member of this
committee, and a past Chairman of the Subcommittee on Energy and Power, which I
served under him when he was in the Congress. We have Dr. William Pizer. Is
it Pizer?
DR. PIZER. Pizer.
CHAIRMAN BARTON. Pizer. Senior Fellow for Resources for the Future,
and
Mr. Alan Reuther, who is the Legislative Director for the International Union,
United Automobile, Aerospace, and Agricultural Implement Workers of America.
Mr. Reuther, are you kin to Walter Reuther?
MR. REUTHER. He was my uncle.
CHAIRMAN BARTON. Your uncle?
MR. REUTHER. Yes.
CHAIRMAN BARTON. Famous, very famous man in American history. So we are
glad to have all four of you gentlemen. We are going to start with you, Mr.
Webber. We will give you 5 minutes to summarize your testimony, and then we
will have some questions.
Welcome to the committee.
STATEMENTS OF FREDERICK L. WEBBER, PRESIDENT, ALLIANCE OF AUTOMOBILE
MANUFACTURERS; HON. PHILIP R. SHARP, PRESIDENT, RESOURCES FOR THE FUTURE;
WILLIAM A. PIZER, SENIOR FELLOW, RESOURCES FOR THE FUTURE; AND ALAN REUTHER,
LEGISLATIVE DIRECTOR, INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE, AND
AGRICULTURAL IMPLEMENT WORKERS OF AMERICA
MR. WEBBER. Thank you, Mr. Chairman, and thank you for this
invitation.
The Alliance represents nine automakers, including BMW, Daimler-Chrysler,
Ford, GM, Mazda, Mitsubishi, Porsche, Toyota, and Volkswagen.
The Alliance members share the concerns of our customers and of this
committee about gasoline prices, energy security, and the steps we need to
take
together to ensure diverse fuel supplies for the advanced technology vehicles
on
sale today. There is a lot going on in the automobile industry. Automobile
makers are selling more than one hundred models that achieve more than 30
miles per gallon on the highway.
Every model is available with some fuel-efficient technology, like
cylinder deactivation, where you can have the fuel economy you want on the
highway, and still have the power you need when merging on a busy road. In
every State, automakers are selling advanced technology vehicles like hybrids,
clean diesel, and ethanol-capable autos. In just 5 years, we have made a lot
of
progress. There are now more than 40 models of advanced technology vehicles
on
sale in dealer showrooms, and there are another 35 models in development.
These advanced technology vehicles can help America achieve greater
energy
security. Flexible fuel vehicles can run on up to 85 percent ethanol. There
are now six million flex fuel vehicles on our roads, and if they all used E-85
fuel, the U.S. would reduce gas consumption by nearly three billion gallons a
year. Hybrid electric vehicles can improve fuel economy by up to 50 percent,
while also reducing emissions. By 2010, we expect more than 50 hybrid models
to
be on sale in North America, with sales approaching one million hybrids a
year.
Clean diesel autos provide fuel economy gains of up to 30 percent,
which
is why Europe is supporting environmental standards and economic incentives to
enhance diesel sales. Many diesels are also capable of running on biodiesel
blends. Hydrogen-powered autos offer great promise. Hydrogen can power
internal combustion engines or fuel cells, producing zero or near zero
emissions and greater fuel economy.
Today, eight million advanced technology and alternative fuel autos
are on
the road, and automakers will continue to increase volumes and new product
offerings for years to come. This year alone, automakers are working to sell
one million of these vehicles, and we support incentives that can help put
more of these highly fuel-efficient autos on the road.
The 2005 energy bill helped by providing consumer tax incentives for
advanced technology vehicles. The energy bill also helped by raising the
requirements for use of ethanol and other renewable fuels to 7.5 billion
gallons
a year by 2012, and by providing tax incentives that help make more pumps
available to the driving public. Today, the focus is on proposed legislation
that clarifies NHTSA has authority to set new passenger car standards, and
calls upon NHTSA to begin a rulemaking within the year.
The Alliance believes that NHTSA should weigh very carefully the
timing of
any increase in passenger car standards for the following reasons. First, the
passenger car fleet average today already exceeds the current 27.5 miles per
gallon standards, thanks to consumer purchasing the many fuel-efficient cars
on sale today.
Second, automakers are already adjusting to challenges. Automakers
are in
the second year of 7 years of increasingly stringent light truck standards.
Meeting these high standards is even more challenging, given the current
economic state of the industry.
Finally, we believe the most effective approach to reducing U.S.
gasoline
consumption is to expand the availability of alternative fuels, such as
ethanol,
and to help promote the sale of advanced technology vehicles that are now
gaining traction in the market.
However, if NHTSA does initiate a passenger car rulemaking, the
Alliance
will work closely with the agency in its consideration and promulgation of a
final rule.
Also under consideration is new authority to permit reform of a car
CAFE
program similar to the light truck reform finalized in March. We recommend
that
Congress and NHTSA carefully consider any CAFE passenger car reform. A lot of
ideas have been discussed here today, and they are continuing to be discussed.
It is a complex issue.
With the ink barely dry on the light truck reform rule, no one has
actual
experience with a new system yet. It may indeed be premature to lock in this
new system for passenger cars at this time.
In conclusion, Alliance members are working to sell one million
advanced
technology alternative fuel autos this year, and more will be offered in the
future. We are pleased that Congress passed consumer tax incentives for the
purchase of some of these vehicles last year, and we urge Congress to focus on
expanding the production, infrastructure, and distribution network for
alternative fuels.
Getting more American-based renewable fuels and biofuels to consumers
will displace much more gasoline than a new passenger car CAFE requirement.
Thank you, Mr. Chairman.
[The prepared statement of Frederick L. Webber follows:]
PREPARED STATEMENT OF FREDERICK L. WEBBER, PRESIDENT, ALLIANCE OF AUTOMOBILE
MANUFACTURERS
The Alliance of Automobile Manufacturers (Alliance) is a trade
association of
nine car and light truck manufacturers including BMW Group, DaimlerChrysler,
Ford Motor Company, General Motors, Mazda, Mitsubishi Motors, Porsche, Toyota
and Volkswagen. One out of every ten jobs in the U.S. is dependent on the
automotive industry.
Alliance members share the concerns of our customers and the American
public
about high gasoline prices and support the President's policy of reducing our
consumption of petroleum. Member companies have consistently improved the
fuel
efficiency of their products and continue to offer ever-increasing numbers of
advanced technology vehicles-such as hybrids, clean diesels, alternative fuel
vehicles, and others-that reduce the automotive sector's consumption of
petroleum.
For example, since the 1970s, new vehicles have continued to become
more fuel-
efficient. EPA data demonstrate that fuel efficiency has increased steadily
at
nearly one to two percent per year on average from 1975 for both cars and
light
trucks. Passenger car fuel economy has more than doubled from 14.2 mpg in
1974
to 29.1 mpg in 2004 and light truck fuel economy has increased by 60 percent
since 1974. But as we have noted on many previous occasions, the ultimate
decisions about what vehicles are purchased and how they are driven belong to
American consumers.
And while consumers value fuel economy, they also want many other
attributes in
today's vehicles, such as safety, passenger and cargo room, performance,
towing
and hauling capacity and more. Our challenge is to develop advanced
technology
vehicles that combine these attributes with improved fuel efficiency. Of
particular focus is maintaining safety while improving fuel efficiency.
The auto industry leads the way when it comes to research and
development
investments. Automakers are committed to being first to market with
breakthrough technologies that can produce new generations of autos with
advanced powertrains and fuels. Automakers are competing to bring these
vehicles to market, as soon as the technology is feasible, affordable and
meets
consumer expectations. Each year many new advanced technology models are
offered on dealer lots. In just five years, the Alliance has seen the number
of
these vehicles grow to more than 40 models on sale in dealer showrooms with an
additional 35 models, including hybrids, clean diesels and alternative fuel
vehicles. In addition, vehicles using liquid hydrogen in internal combustion
engines (ICE), fuel cells and electric vehicles are in development. Today,
eight million advanced technology and alternative-fuel autos are on the road
and
automakers will continue to increase volumes and new product offerings for
years
to come. This year more than one million advance technology and flexible fuel
vehicles will be sold. Automakers support incentives that can help put more
of these highly fuel-efficient autos on the road.
The result of all of this work is that today's drivers are learning a
new
vocabulary. The following is a brief description of some of the exciting
advanced technologies and alternative fuel vehicles being sold or currently in
development.
Flexible Fuel Vehicles
An important provision of the new energy law is the increased
promotion of
renewable fuels in the transportation sector. Since 1996, auto manufacturers
have been producing vehicles capable of using high concentration blends of
ethanol. There will be more than six million of these E-85 capable vehicles
on
the road by the end of the year and nearly one million more are being added
each
year. If fuel were available for all of these E-85 capable vehicles to refuel
using only E-85, the U.S. would be able to reduce its gasoline consumption by
nearly three billion gallons per year.
The recently passed energy bill will help in E-85 infrastructure
development by raising the requirement for the use of ethanol and other
renewable fuels to 7.5 billion gallons per year by 2012 and providing tax
incentives aimed at making more E-85 pumps available to the driving public and
helping to reduce reliance on oil imports.
Hybrid-electric vehicles
Hybrid-electric vehicles are being offered today and are saving fuel
today
and will increase substantially in number over the next several years. They
offer significant improvements in fuel economy - up to 50 percent and reduced
emissions. These products use electric motors to propel the vehicle or reduce
some of the burdens on the traditional internal combustion engine and they
capture usable energy through regenerative braking. It is estimated that by
2010, more than 50 hybrid nameplates will be available in North America with
volumes approaching one million vehicles. Hybrid technology can also be
applied to diesels, alternative fuel and fuel cell vehicles.
Advanced lean-burn engines
Vehicles that are powered by clean advanced lean-burn technology such
as
lean burn gasoline engines and direct injection diesels offer greater fuel
economy and better performance than conventional gasoline-powered engines.
Diesel-powered vehicles are very popular in Europe - where environmental
standards and economic incentives have been provided to enhance their appeal.
These types of vehicles could provide fuel economy gains of up to 30 percent
compared to conventional vehicles. In addition, most diesels are capable of
running on good quality biodiesel blends of up to five percent (B5): many are
designed to use up to twenty percent or one hundred percent biodiesel fuel
(B20 or B100).
Fuel Cells
From a vehicle perspective, hydrogen-powered fuel cells offer the
greatest
potential improvement in fuel efficiency and emissions reductions. It also
creates a great opportunity for eliminating dependency on petroleum. However,
widespread commercialization of this technology is farther into the future.
Hydrogen Internal Combustion Engines
Another promising and enabling technology is hydrogen-powered ICEs.
The
concept of using hydrogen in internal combustion engines offers several
advantages: near-zero emissions, maintaining the utility, flexibility, and
driving dynamic of today's automobile, assisting in the development of
hydrogen
storage technology, and developing hydrogen distribution channels and helping
to
promote hydrogen refueling infrastructure.
All of these advanced technologies and alternative fuel vehicles will
help the
U.S. address concerns about over-reliance on imported oil. But they will take
time to be effective. Tomorrow's transportation needs will be met by a
diverse
collection of technologies each offering drivers a unique set of attributes to
help move their families down the road.
For its part, the auto industry is committed to advancing the state of
technology and bringing new vehicles using these technologies to the market as
quickly as possible. Competition among the automakers will drive this process
far better and with fewer disruptions to the marketplace than any regulations
that can be adopted. Furthermore, stimulating consumer demand can help
accelerate this process. Tax credit provisions enacted as part of the Energy
Policy Act of 2005 have helped to spur the purchase of these highly fuel-
efficient vehicles.
Today, automakers are offering broader vehicle offerings to provide
consumers
with a wide range of fuel-efficient choices, but when gasoline prices rise,
not
all consumers are in a position to purchase the highly fuel-efficient models
on
sale today. There are over 200 million vehicles on U.S. roads, and the
quickest
way to reduce gasoline usage is through conservation. There are many simple,
easy gas-saving tips for consumers. American drivers can save gasoline
immediately by keeping their engines tuned and their tires properly inflated.
Smooth accelerations save gas, along with closing windows at higher speeds.
The
U.S. Department of Energy provides excellent gas-saving tips to drivers, and
we
urge the government to highlight this information as the summer driving season
begins. In addition, there are opportunities for infrastructure improvement
such as improved traffic light timing that can help reduce fuel consumption.
Corporate Average Fuel Economy (CAFE)
For over 30 years the CAFE program has been in place to provide
requirements as
to what each automaker's fleet of passenger cars and light trucks must
achieve.
While vehicle fuel-efficiency has improved, vehicles miles traveled has
increased an average of about 1.7 percent per year for the past 30 years with
a
net result of little impact on energy conservation. Currently, CAFE requires
each automaker to meet an average fuel economy level of 27.5 mpg for all new
passenger cars that it sells each year. For light trucks, NHTSA recently
announced an increase in the CAFE standards for the 2008 -2011 model years,
marking seven straight years of fuel economy increases (from MY 2005-2011) and
an increase of nearly 20 percent over that period. Meeting these higher fuel
economy standards will be a challenge, even with all the new fuel-efficient
technologies that manufacturers are placing in vehicles today.
When setting new standards, NHTSA must consider many elements
including
technological feasibility, economic practicability, the need of the U.S. to
conserve energy and the effect of other motor vehicle standards, such as
safety
and emissions on fuel economy. It is in the best interest of the public that
we
maintain a balance between improved fuel economy, highway safety and
employment.
While the law holds manufacturers responsible for meeting CAFE standards, it is
important to recognize that in reality, consumer purchases actually determine
whether a manufacturer meets, exceeds, or falls short of the standards in any
given year. Because of this, CAFE compliance depends not only on what
products are offered but also on what products consumers purchase.
Proposed Legislation
The proposed legislation would clarify that NHTSA has the authority to
set
new passenger car standards and calls upon NHTSA to begin a rulemaking for
passenger cars within a year. Also under consideration is new authority to
permit reform of the car CAFE program. With the ink barely dry on the recent
light truck rule and no actual experience with the truck reform proposal, it
may
be a bit premature to think of locking in this new system for passenger cars
at
this time. Inclusion of some broad guidance that CAFE reform, based on use of
vehicle attributes and classes, can be considered, may be of some value to the
agency when it does consider increasing car CAFE requirements.
The Alliance also believes that NHTSA should very carefully weigh, the
timing of any increases in passenger car standards in view of the current
economic health of the industry. No one likes high gas prices, but increasing
passenger car standards - which takes time to effect and then years to fully
become phased into the overall fleet of vehicles on the road - should not be
viewed as a panacea to combat rising fuel costs. Alliance members are only in
the second year of seven years of increasingly stringent light truck
standards.
In addition, the passenger car fleet average already exceeds the current 27.5-
mpg standard - driven by consumer choices of the many very fuel-efficient cars
offered for sale.
The proposed legislation raises several issues concerning the
authority NHTSA
will have to establish new passenger automobile standards. For instance, the
bill repeals the current 27.5 maximum standard immediately, requiring NHTSA to
commence rulemaking to set new standards within a year of enactment. This
would
create a gap of at least several years in which there would be no standard for
passenger automobiles. We would recommend that the legislation maintain the
current 27.5 mpg standard (subject to NHTSA's current authority to amend the
standard in certain circumstances) for any time up until a new standard is set
and for any period in which there is no standard in place.
If NHTSA is granted authority to reform the structure of the passenger car
standards, the agency should administer the new authority in a
nondiscriminatory manner among manufacturers.
The rulemaking for CAFE standards is a labor-intensive and
resource-intensive
process both for NHTSA and for the manufacturers. Therefore, NHTSA should
have
the authority to establish a standard that could remain in effect for more
than
one year, as long as the agency determined by rulemaking that the standard is
"maximum feasible'' for that multiyear period covered by the standard.
The discussion of car CAFE policy has also raised two additional
issues--credit
trading and the so-called, two fleet rule. Credit trading is intended to
provide flexibility options for manufacturers as they pursue compliance with
the
CAFE program. Credit trading has been examined numerous times in the past
without agreement as to its actual value. Department of Transportation
recently
considered adding credit trading to the light truck rule and decided not to do
it.
As regards to the two fleet provision, the CAFE statute requires
separation of
the domestically-manufactured and non-domestically manufactured vehicles in
the
passenger car fleet, with separate compliance required by each sub-fleet. The
original policy justification for the two fleet rule was to discourage
manufacturers from shifting their production of smaller, more fuel efficient
cars to foreign factories. Recognizing that a fleet-wide average structure
for
the fuel economy standards would effectively require manufacturers to include
smaller, more fuel-efficient cars in their fleets, Congress wanted to avoid
any
inducement to increase the importation of foreign-produced cars. If there are
any proposed changes to the two fleet requirement they should be carefully
reviewed.
Conclusion
We believe the most effective approach to pursuing reductions in U.S.
gasoline
consumption is to expand the availability of alternative fuels such as ethanol
and to help promote the sale of advanced technology and alternative fuel
vehicles that are currently gaining traction in the market.
As previously stated, Alliance members are currently offering for sale
more than
one million of these advanced technology and alternative fuel autos, and more
will be offered in the future. We are pleased that Congress passed consumer
tax
incentives for the purchase of some of these vehicles last year, and we urge
Congress to focus on expanding the production, infrastructure and distribution
network for alternative fuels. Getting more of the American based renewable
and
biofuels into the market and available to consumers will displace much more
gasoline than a new passenger car CAFE requirement.
However, if NHTSA does initiate a passenger car rulemaking, the Alliance and
its
members will work closely with the agency in its consideration and
promulgation
of a final rule. Setting CAFE standards is a complicated, rigorous and
arduous
process. NHTSA considered over 45,000 comments and spent countless man-years
in the consideration of its light truck rule.
The automakers remain committed to populating America's roadways with
the
latest innovative vehicle technologies. Competition among the companies will
drive much of this innovation. And the changing needs and wants of American
consumers also play a huge role in driving automaker decisions.
CHAIRMAN BARTON. Thank you, Mr. Webber. We now want to recognize the
former Chairman of the Energy and Power Subcommittee, the Honorable Phil
Sharp. It is good to have you with us.
MR. SHARP. Thank you very much, Mr. Chairman, and thank you so much
for inviting me to testify, I think. These hearings require great patience on
your part, I understand, and you do it with considerable skill.
But let me quickly, I have to indicate for the record that I am
President
of Resources for the Future, a nonpartisan think tank which does not take
positions on public policy, so the remarks here are those of my own.
But obviously, I speak from some experience, having been involved in
CAFE
since its creation in 1975, when I was a member of the committee here, and
from
recently being a part of the National Academy of Sciences study that has been
referred to multiple times this year, that reported in 2002 that we ought to
reform CAFE, and we ought to increase the standards.
Additionally, I have been a part of the National Commission on Energy
Policy, a bipartisan, private effort, funded by the Hewlett Foundation, that
likewise recommended increasing significantly CAFE, and also, reforming the
system. In the case of both the Academy study and the Commission, the
fundamental reasons given for urging these kinds of policies, is to try to
help
the country deal over the long term with oil security issues, and also deal
with
the troubling issue of carbon dioxide emissions, which are on the rise, from
the
auto sector, as well as throughout our economy, and this obviously affects
climate change.
But also, the concern has been as to why not leave it to the
marketplace,
that we have 30 years of experience with the oil market, and the prices
simply,
as one would expect, rise and they fall, and indeed, we are at a painful
moment
when they have risen in this country, with intense interest on alternative
fuels, as we heard this morning, an intense interest on fuel economy. Not
mentioned, but great concern ought to be on public transit as well, and other
kinds of issues.
And yet, what we have is a long history of experience with this on
again,
off again interest, as these prices rise and fall. The consumer has on again,
off again interest in whether to buy a fuel-efficient car, investors whether
to
invest in alternative fuels, and the Government whether to pursue policies
that help encourage these kinds of developments.
So this history of price uncertainty is one of the reasons for trying
to
have a more consistent government policy. Let me quickly turn to some of the
key findings from the National Academy's report, which answers some of the
questions that were raised, including yours, Mr. Bilirakis, and my long-term
friend and colleague, through many fights and wonderful collaborations in this
committee. First and foremost, the committee identified, it had, you will be
glad to know, many nonpolitical people on it that were engineers, and it
identified technologies that are available in the marketplace, many of them in
some vehicle or other at this point, which are eligible and could be, if they
are used more broadly within the fleet, lead to fuel economy improvements.
That was the fundamental thrust, that technologies clearly are
available.
Some additional ones are on the drawing board, and are close. Therefore,
there
is clear prospect of being able to do a number of things technologically to
upgrade the fleet over a time period of something like 10 to 15 years.
Secondly, in trying to assess the costs, and this is a very difficult
thing to do, on which there are many differences of opinion about the costs of
how you put these pieces of technology together, the committee outlined ways
in
which they thought the consumer could come out at least even, that is, there
was
an additional cost to the vehicle that the consumer could save over the life
of
the vehicle, in terms of the gasoline savings, and so they identified a range
of how far you might be able to go.
Third, and I think very important to remember, is that in order to
avoid
the harmful effects that some members of the committee raised, in terms of the
waste of capital, the unemployment in the industry, the dislocation of the
American domestic auto manufacturers in particular, it was recommended that
you
allow sufficient lead times for technology, and not try to cram the system,
because frankly, you will get very little improvement anyway, social benefit,
and you get it at an unnecessarily high cost. That is not to say that one
should not move forward, it is simply to say pace it.
And finally, it should be recognized the committee strongly endorsed a
strong Federal research and development program, in conjunction with the
industry as we have had under the past several Administrations, to try to look
toward long-term technologies.
Let me turn very quickly to a couple of the issues that are before
you.
One is whether or not the Congress ought to set the numbers, and the other is
what kind of delegation of authority. I am not going to comment much on
these,
except to say that in the case of the National Academy and of the commission,
in
neither case were the collective groups able to come to an agreement on what
the
numbers actually ought to be, because they all agree this is a complex
decision,
and it is a political tradeoff on a variety of social concerns, whether it is
safety, employment, and particularly, fuel economy.
Secondly, the commission itself did actually say delegate this to
NHTSA,
and urged the Congress to do so. My own view, from 20 years of experience
here
is that the Congress should give legislative guidance to the agency. That can
include deadlines, and the Congress can give throughout that process very
strong
Congressional oversight. It seems to me that may be a wise way to go. Others
may have other opinions.
Let me just conclude by saying that I think both these, the committee
and
the commission, and many other people have looked at this, and believe that
CAFE
is a very imperfect policy, has a number of flaws to it, but it has had a
major
impact on the marketplace, and the Academy of Sciences has said that we would
probably be using about 2.8 million barrels of oil a day more today had we not
had this policy in place. Others may dispute those figures, but at least, I
think it is fair to say it has clearly had an impact.
But I do think it is important for us to recognize as Americans, as
some
of the members of the committee pointed out, that the task before us is huge,
and that the fact is that many experts believe that the most effective
approach
to reducing fuel consumption, if that is what our goal is, and it seems to me
it
ought to be one of our goals, would be a stronger gasoline tax, or a
broad-based
oil tax. I realize the popularity of this, because this would not only
encourage how we would purchase vehicles, which is a major decision that
impacts
through fuel economy, but how and whether we drive, and whether we use
alternative means of transportation.
CAFE has no positive impact on how much driving occurs in this
country.
Indeed, it can be argued that by reducing the cost of driving, assuming there
is
a high cost of gasoline, it probably encourages some additional driving, and
this is one of our problems, how to get control over the continual growth of
vehicle miles traveled in this country, which is a major driver to how much
gasoline we consume, and how much carbon emissions we put into the air.
I realize that many of these experts, of course, are not subject to
popular election.
[The prepared statement of Hon. Philip R. Sharp follows:]
PREPARED STATEMENT OF THE HON. PHILIP R. SHARP, PRESIDENT, RESOURCES FOR THE
FUTURE
Mr. Chairman, thank you for inviting me to testify. My name is Philip
Sharp and
I am president of Resources for the Future (RFF), a nonpartisan, social
science
think tank, which has dealt with energy and resource issues for more than 50
years. As an institution, however, RFF does not take positions nor engage in
advocacy, so the opinions expressed here are my own.
For the record, I have been involved with fuel economy issues in
several ways.
During my service in Congress and on this committee (1975-1995), I
participated
in the creation of the Corporate Average Fuel Economy (CAFE) policy and in the
few legislative changes made since then.
In 1975, the full House was presented with a choice between two
dramatically
different alternatives for dealing with fuel economy: CAFE from the Commerce
Committee and a gas-guzzler tax from the Ways and Means Committee. As Chairman
of the Energy and Power Subcommittee at that time, Mr. Dingell was a major
force in the outcome.
More recently, I was a member of the CAFE review panel sponsored by the National
Research Council, an arm of the National Academy of Sciences. Its 2002 report
recommended that the government take further action to improve passenger
vehicle
fuel economy and suggested possible reforms in the CAFE policy. (See:
Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards at
www.nap.edu)
Currently, I am also a member of the National Commission on Energy
Policy, a
private bipartisan panel funded by the Hewlett Foundation, which in 2004
recommended a significant increase in CAFE standards along with reforms to the
current policy.
(See: Ending the Energy Stalemate: A Bipartisan Strategy to Meet America's
Energy Challenges at www.energycommission.org.)
Both the Academy committee and the Commission recommended federal
action to
improve fuel economy for the purpose of mitigating two major concerns: oil
security and growing carbon dioxide (CO2) emissions.
Our growing consumption of oil, concentrated in the transportation
sector,
entails major risks associated with our dependence on the global oil market.
And
this consumption is a major contributor of CO2 to the atmosphere and hence to
global climate change.
Among oil-market concerns is the possibility of a serious supply
disruption
caused by political turmoil or terrorism with severe economic consequences;
the
pressure to compromise important U.S. foreign policy goals for the sake of oil
supply; the possibility that oil production will peak and dramatically
intensify global competition for supplies; and others.
Among the uncertainties we face is where oil prices will go in the
years ahead.
Just as the dramatic rise in oil and natural gas prices over the last two
years
was not predicted, it is now unclear whether oil prices will rise further, or
drop back in the $40-per-barrel range as some have predicted, or take a real
nose dive as they did in 1986 and 1999.
The history of price uncertainty has meant a history of on-again,
off-again
interest by consumers, investors, and government in fuel efficiency and in
alternative fuels.
In the face of such uncertainty, many have concluded, including the
Bipartisan
Commission, that it is prudent for the United States to maintain policies that
push markets to improve fuel efficiency, to advance alternative fuels, and to
expand public transit options, in order to mitigate against global market
risks and to reduce CO2 emissions growth.
Action now by Congress on fuel economy standards obviously will have
no
immediate impact on gasoline prices. Indeed, it will take some years for
changes in the policy to have an impact at all.
But action now on fuel economy standards can help the United States
address important concerns over the longer term.
I trust we all recognize that there is no fast or cheap way to escape
the risks
of oil dependence. Undoubtedly, one of the expedient ways to reduce dependence
would be to welcome higher oil and gasoline prices rather than decry them-an
unlikely prospect for today's consumers or leaders.
The Academy Report
Let me call your attention to a few of the findings and
recommendations of the
Academy committee, which may be useful in your consideration today. Attached,
as Appendix A, is a portion of that report.
The study notes, in Finding 5, ``technologies exist that if applied to
passenger
cars and light duty trucks, would significantly reduce fuel consumption within
15 years.''
It notes in Finding 6 that much of this could be accomplished with the
consumer
breaking even - meaning that the savings in gasoline costs would offset the
added cost to a new vehicle. And that calculation was made assuming gasoline
only costs $1.50 per gallon. Furthermore, the hybrid car possibility has greatly
advanced since the report; given its costs in 2001, the committee did not
consider it a realistic near-term option.
The committee recommended several possible reforms (Recommendation 2)
such as
trading fuel economy credits, which has also been a recommendation of RFF
researchers (see Fischer, Carolyn and Paul R. Portney, 2004, ``Rewarding
Automakers for Fuel Economy Improvements,'' chapter 6 in New Approaches on Energy
and the Environment: Policy Advice for the President, RFF Press).
The committee cautioned that a major redesign (Recommendation 3)
required more study than the committee had been able to devote to it.
To avoid harmful effects on companies, on employment, and on
consumers, the
committee suggested allowing plenty of time for industry to meet stiffer
requirements.
And finally, the government should continue to fund research on
breakthrough technologies.
Delegation to NHTSA
Neither the National Academy committee nor the Commission was willing
or able to
agree on recommended numerical CAFE targets - in part, because the task is a
complex one and, in part, because the targets represent tradeoffs among
various
societal values and therefore is a political decision, as the Academy
committee report states.
The Commission, in fact, recommended delegation of that
responsibility: ``
Congress should instruct NHTSA to significantly strengthen federal fuel
economy
standards...to take full advantage of the efficiency opportunities provided by
currently available technologies and emerging hybrid and advanced diesel
technologies.'' (Appendix B is attached)
Given the considerable burden of legislating in this area, it seems
appropriate
that setting the targets and redesigning the policy could be delegated to the
National Highway Safety Transportation Authority with legislative guidance and
strong congressional oversight.
Conclusion
CAFE has been a very imperfect, but important, policy in dealing with
fuel
consumption. The Academy concluded, in 2002, that our oil imports would have
been 2.8 million barrels a day higher had the policy not existed. (See Finding
l in Appendix A).
Many experts believe that a more effective approach to reducing fuel
consumption
- and a more cost-effective approach for the U.S. economy - would be stronger
gasoline tax or oil tax that would not only encourage consumers to purchase
more
efficient vehicles but also encourage them to be more economical in their
driving, a critical component that CAFE does nothing to address. Indeed, such
a tax would have a more rapid impact on consumption than is possible through
CAFE. These experts, of course, are not subject to popular election.
APPENDIX A
Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards
Committee on the Effectiveness and Impact of Corporate
Average Fuel Economy Standards (CAFE)
Board on Energy and Environmental Systems
Division on Engineering and Physical Sciences
Transportation Research Board
National Research Council
2002
National Academy Press
2101 Constitution Avenue, NW
Box 285
Washington, DC 20055
202-334-3313
www.nap.edu
Excerpted from the
EXECUTIVE SUMMARY
FINDINGS
Finding 1. The CAFE program has clearly contributed to increased fuel economy
of
the nation's light-duty vehicle fleet during the past 22 years. During the
1970s, high fuel prices and a desire on the part of automakers to reduce costs
by reducing the weight of vehicles contributed to improved fuel economy. CAFE
standards reinforced that effect. Moreover, the CAFE program has been
particularly effective in keeping fuel economy above the levels to which it
might have fallen when real gasoline prices began their long decline in the
early 1980s. Improved fuel economy has reduced dependence on imported oil,
improved the nation's terms of trade, and reduced emissions of carbon dioxide,
a
principal greenhouse gas, relative to what they otherwise would have been. If
fuel economy had not improved, gasoline consumption (and crude oil imports)
would be about 2.8 million barrels per day greater than it is, or about 14
percent of today's consumption.
Finding 2. Past improvements in the overall fuel economy of the nation's
light-duty vehicle fleet have entailed very real, albeit indirect, costs. In
particular, all but two members of the committee concluded that the
downweighting and downsizing that occurred in the late 1970s and early 1980s,
some of which was due to CAFE standards, probably resulted in an additional
1,300 to 2,600 traffic fatalities in 1993. 2 In addition, the diversion of
carmakers' efforts to improve fuel economy deprived new-car buyers of some
amenities they clearly value, such as faster acceleration, greater carrying or
towing capacity, and reliability.
Finding 3. Certain aspects of the CAFE program have not functioned as
intended:
* The distinction between a car for personal use and a truck for work
use/cargo
transport has broken down, initially with minivans and more recently with
sport
utility vehicles (SUVs) and cross-over vehicles. The car/truck distinction has
been stretched well beyond the original purpose.
* The committee could find no evidence that the two-fleet rule
distinguishing
between domestic and foreign content has had any perceptible effect on total
employment in the U.S. automotive industry.
* The provision creating extra credits for multifuel vehicles has had,
if any, a
negative effect on fuel economy, petroleum consumption, greenhouse gas
emissions, and cost. These vehicles seldom use any fuel other than gasoline
yet enable automakers to increase their production of less fuel efficient
vehicles.
Finding 4. In the period since 1975, manufacturers have made considerable
improvements in the basic efficiency of engines, drive trains, and vehicle
aerodynamics. These improvements could have been used to improve fuel economy
and/or performance. Looking at the entire light-duty fleet, both cars and
trucks, between 1975 and 1984, the technology improvements were concentrated
on
fuel economy: It improved by 62 percent without any loss of performance as
measured by 0-60 mph acceleration times. By 1985, lightduty vehicles had
improved enough to meet CAFE standards. Thereafter, technology improvements
were
concentrated principally on performance and other vehicle attributes
(including
improved occupant protection). Fuel economy remained essentially unchanged
while
vehicles became 20 percent heavier and 0-60 mph acceleration times became, on
average, 25 percent faster.
Finding 5. Technologies exist that, if applied to passenger cars and
light-duty
trucks, would significantly reduce fuel consumption within 15 years. Auto
manufacturers are already offering or introducing many of these technologies
in
other markets (Europe and Japan, for example), where much higher fuel prices
($4
to $5/gal) have justified their development. However, economic, regulatory,
safety, and consumer-preference-related issues will influence the extent to
which these technologies are applied in the United States.
Several new technologies such as advanced lean exhaust gas
aftertreatment
systems for high-speed diesels and direct-injection gasoline engines, which
are
currently under development, are expected to offer even greater potential for
reductions in fuel consumption. However, their development cycles as well as
future regulatory requirements will influence if and when these technologies
penetrate deeply into the U.S. market.
The committee conducted a detailed assessment of the technological
potential for
improving the fuel efficiency of 10 different classes of vehicles, ranging
from
subcompact and compact cars to SUVs, pickups, and minivans. In addition, it
estimated the range in incremental costs to the consumer that would be
attributable to the application of these engine, transmission, and vehicle-
related technologies.
Chapter 3 presents the results of these analyses as curves that
represent the
incremental benefit in fuel consumption versus the incremental cost increase
over a defined baseline vehicle technology. Projections of both incremental
costs and fuel consumption benefits are very uncertain, and the actual results
obtained in practice may be significantly higher or lower than shown here.
Three
potential development paths are chosen as examples of possible product
improvement approaches, which illustrate the trade-offs auto manufacturers may
consider in future efforts to improve fuel efficiency.
Assessment of currently offered product technologies suggests that light-duty
trucks, including SUVs, pickups, and minivans, offer the greatest potential to
reduce fuel consumption on a total-gallons-saved basis.
Finding 6. In an attempt to evaluate the economic trade-offs associated with
the
introduction of existing and emerging technologies to improve fuel economy,
the
committee conducted what it called cost-efficient analysis. That is, the
committee identified packages of existing and emerging technologies that could
be introduced over the next 10 to 15 years that would improve fuel economy up
to
the point where further increases in fuel economy would not be reimbursed by
fuel savings. The size, weight, and performance characteristics of the
vehicles
were held constant. The technologies, fuel consumption estimates, and cost
projections described in Chapter 3 were used as inputs to this cost-efficient
analysis.
These cost-efficient calculations depend critically on the assumptions
one makes
about a variety of parameters. For the purpose of calculation, the committee
assumed as follows: (1) gasoline is priced at $1.50/gal, (2) a car is driven
15,600 miles in its first year, after which miles driven declines at 4.5
percent
annually, (3) on-the-road fuel economy is 15 percent less than the
Environmental
Protection Agency's test rating, and (4) the added weight of equipment
required
for future safety and emission regulations will exact a 3.5 percent fuel
economy penalty.
One other assumption is required to ascertain cost-efficient
technology
packages-the horizon over which fuel economy gains ought to be counted. Under
one view, car purchasers consider fuel economy over the entire life of a new
vehicle; even if they intend to sell it after 5 years, say, they care about
fuel
economy because it will affect the price they will receive for their used car.
Alternatively, consumers may take a shorter-term perspective, not looking
beyond, say, 3 years. This latter view, of course, will affect the
identification of cost-efficient packages because there will be many fewer
years
of fuel economy savings to offset the initial purchase price.
The full results of this analysis are presented in Chapter 4. To
provide one
illustration, however, consider a midsize SUV. The current sales-weighted
fleet
fuel economy average for this class of vehicle is 21 mpg. If consumers
consider
only a 3-year payback period, fuel economy of 22.7 mpg would represent the
cost-
efficient level. If, on the other hand, consumers take the full 14-year
average
life of a vehicle as their horizon, the cost-efficient level increases to 28
mpg
(with fuel savings discounted at 12 percent). The longer the consumer's
planning
horizon, in other words, the greater are the fuel economy savings against
which
to balance the higher initial costs of fuel-saving technologies.
The committee cannot emphasize strongly enough that the cost-efficient
fuel
economy levels identified in Tables 4-2 and 4-3 in Chapter 4 are not
recommended
fuel economy goals. Rather, they are reflections of technological
possibilities,
economic realities, and assumptions about parameter values and consumer
behavior. Given the choice, consumers might well spend their money on other
vehicle amenities, such as greater acceleration or towing capacity, rather
than
on the fuel economy cost-efficient technology packages.
Finding 7. There is a marked inconsistency between pressing automotive
manufacturers for improved fuel economy from new vehicles on the one hand and
insisting on low real gasoline prices on the other. Higher real prices for
gasoline-for instance, through increased gasoline taxes-would create both a
demand for fuel-efficient new vehicles and an incentive for owners of existing
vehicles to drive them less.
Finding 8. The committee identified externalities of about $0.30/gal of
gasoline
associated with the combined impacts of fuel consumption on greenhouse gas
emissions and on world oil market conditions. These externalities are not
necessarily taken into account when consumers purchase new vehicles. Other
analysts might produce lower or higher estimates of externalities.
Finding 9. There are significant uncertainties surrounding the societal costs
and benefits of raising fuel economy standards for the light-duty fleet. These
uncertainties include the cost of implementing existing technologies or
developing new ones; the future price of gasoline; the nature of consumer
preferences for vehicle type, performance, and other features; and the
potential
safety consequences of altered standards. The higher the target for average
fuel
economy, the greater the uncertainty about the cost of reaching that target.
Finding 10. Raising CAFE standards would reduce future fuel consumption below
what it otherwise would be; however, other policies could accomplish the same
end at lower cost, provide more flexibility to manufacturers, or address
inequities arising from the present system. Possible alternatives that appear
to
the committee to be superior to the current CAFE structure include tradable
credits for fuel economy improvements, feebates, 3 higher fuel taxes,
standards
based on vehicle attributes (for example, vehicle weight, size, or payload),
or some combination of these.
Finding 11. Changing the current CAFE system to one featuring tradable fuel
economy credits and a cap on the price of these credits appears to be
particularly attractive. It would provide incentives for all manufacturers,
including those that exceed the fuel economy targets, to continually increase
fuel economy, while allowing manufacturers flexibility to meet consumer
preferences. Such a system would also limit costs imposed on manufacturers and
consumers if standards turn out to be more difficult to meet than expected. It
would also reveal information about the costs of fuel economy improvements and
thus promote better-informed policy decisions.
Finding 12. The CAFE program might be improved significantly by converting it
to
a system in which fuel economy targets depend on vehicle attributes. One such
system would make the fuel economy target dependent on vehicle weight, with
lower fuel consumption targets set for lighter vehicles and higher targets for
heavier vehicles, up to some maximum weight, above which the target would be
weight-independent. Such a system would create incentives to reduce the
variance
in vehicle weights between large and small vehicles, thus providing for
overall
vehicle safety. It has the potential to increase fuel economy with fewer
negative effects on both safety and consumer choice. Above the maximum weight,
vehicles would need additional advanced fuel economy technology to meet the
targets. The committee believes that although such a change is promising, it
requires more investigation than was possible in this study.
Finding 13. If an increase in fuel economy is effected by a system that
encourages either downweighting or the production and sale of more small cars,
some additional traffic fatalities would be expected. However, the actual
effects would be uncertain, and any adverse safety impact could be minimized,
or
even reversed, if weight and size reductions were limited to heavier vehicles
(particularly those over 4,000 lb). Larger vehicles would then be less
damaging
(aggressive) in crashes with all other vehicles and thus pose less risk to
other drivers on the road.
Finding 14. Advanced technologies-including direct-injection, lean-burn
gasoline
engines; direct-injection compression-ignition (diesel) engines; and hybrid
electric vehicles-have the potential to improve vehicle fuel economy by 20 to
40
percent or more, although at a significantly higher cost. However, lean-burn
gasoline engines and diesel engines, the latter of which are already producing
large fuel economy gains in Europe, face significant technical challenges to
meet the Tier 2 emission standards established by the Environmental Protection
Agency under the 1990 amendments to the Clean Air Act and California's low-
emission-vehicle (LEV II) standards. The major problems are the Tier 2
emissions standards for nitrogen oxides and particulates and the requirement
that emission
control systems be certified for a 120,000-mile lifetime. If direct-injection
gasoline and diesel engines are to be used extensively to improve light-duty
vehicle fuel economy, significant technical developments concerning emissions
control will have to occur or some adjustments to the Tier 2 emissions
standards
will have to be made. Hybrid electric vehicles face significant cost hurdles,
and fuel-cell vehicles face significant technological, economic, and fueling
infrastructure barriers.
Finding 15. Technology changes require very long lead times to be introduced
into the manufacturers' product lines. Any policy that is implemented too
aggressively (that is, in too short a period of time) has the potential to
adversely affect manufacturers, their suppliers, their employees, and consumers.
Little can be done to improve the fuel economy of the new vehicle fleet for
several years because production plans already are in place. The widespread
penetration of even existing technologies will probably require 4 to 8 years.
For emerging technologies that require additional research and development,
this
time lag can be considerably longer. In addition, considerably more time is
required to replace the existing vehicle fleet (on the order of 200 million
vehicles) with new, more efficient vehicles. Thus, while there would be
incremental gains each year as improved vehicles enter the fleet, major
changes in the transportation sector's fuel consumption will require decades.
RECOMMENDATIONS
Recommendation 1. Because of concerns about greenhouse gas emissions and the
level of oil imports, it is appropriate for the federal government to ensure
fuel economy levels beyond those expected to result from market forces alone.
Selection of fuel economy targets will require uncertain and difficult trade-
offs among environmental benefits, vehicle safety, cost, oil import
dependence,
and consumer preferences. The committee believes that these trade-offs
rightfully reside with elected officials.
Recommendation 2. The CAFE system, or any alternative regulatory system,
should
include broad trading of fuel economy credits. The committee believes a
trading
system would be less costly than the current CAFE system; provide more
flexibility and options to the automotive companies; give better information
on
the cost of fuel economy changes to the private sector, public interest
groups,
and regulators; and provide incentives to all manufacturers to improve fuel
economy. Importantly, trading of fuel economy credits would allow for more
ambitious fuel economy goals than exist under the current CAFE system, while
simultaneously reducing the economic cost of the program.
Recommendation 3. Consideration should be given to designing and evaluating an
approach with fuel economy targets that are dependent on vehicle attributes,
such as vehicle weight, that inherently influence fuel use. Any such system
should be designed to have minimal adverse safety consequences.
Recommendation 4. Under any system of fuel economy targets, the two-fleet rule
for domestic and foreign content should be eliminated.
Recommendation 5. CAFE credits for dual-fuel vehicles should be eliminated,
with
a long enough lead time to limit adverse financial impacts on the automotive
industry.
Recommendation 6. To promote the development of longer-range, breakthrough
technologies, the government should continue to fund, in cooperation with the
automotive industry, precompetitive research aimed at technologies to improve
vehicle fuel economy, safety, and emissions. It is only through such
breakthrough technologies that dramatic increases in fuel economy will become
possible.
Recommendation 7. Because of its importance to the fuel economy debate, the
relationship between fuel economy and safety should be clarified. The
committee
urges the National Highway Traffic Safety Administration to undertake
additional
research on this subject, including (but not limited to) a replication, using
current field data, of its 1997 analysis of the relationship between vehicle
size and fatality risk.
NOTES
1 Conference Report on H.R. 4475, Department of Transportation and
Related
Agencies Appropriations Act, 2001. Report 106-940, as published in the
Congressional Record, October 5, 2000, pp. H8892-H9004.
2 A dissent by committee members David Greene and Maryann Keller on the
impact of downweighting and downsizing is contained in Appendix A. They
believe
that the level of uncertainty is much higher than stated and that the change
in
the fatality rate due to efforts to improve fuel economy may have been zero.
Their dissent is limited to the safety issue alone.
3 Feebates are taxes on vehicles achieving less than the average fuel
economy coupled with rebates to vehicles achieving better than average fuel
economy.
APPENDIX B
Ending the Energy Stalemate
A Bipartisan Strategy to meet America's Energy Challenges
The National Commission on Energy Policy
2004
National Commission on Energy Policy
1616 H Street, NW
Sixth floor
Washington, DC 20006
202-637-0400
www.energycommission.org
POLICY RECOMMENDATIONS
2. Reduce U.S. Oil Consumption through Increased Vehicle Efficiency and
Production of Alternative Fuels
Reducing U.S. oil consumption is a critical complement to the measures
described
in previous sections for expanding and diversifying global supplies of oil. A
key to slowing continued growth in U.S. oil consumption - which is otherwise
projected to increase by more than 40 percent over the next two decades - is
breaking the current political stalemate on changing Corporate Average Fuel
Economy (CAFE) standards for new motor vehicles. Although recommendations in
later chapters of this report - notably those aimed at promoting the
development
of alternative transportation fuels - will also help to reduce oil demand,
improving passenger vehicle fuel economy is by far the most significant oil
demand reduction measure proposed by the Commission.
The Commission's approach to vehicle efficiency builds on three
decades of
experience with fuel economy regulation and a record of impressive
technological
advances by the automobile manufacturing industry. As a result of CAFE
standards
introduced in the 1970s and high gasoline prices in the late 1970s and early
1980s, the average fuel economy of new lightduty vehicles improved from 15
miles
per gallon (mpg) in 1975 to a peak of 26 mpg in 1987, a 73 percent increase
over
a time period that also saw substantial progress in improved vehicle
performance
and safety. The trend toward greater fuel economy, however, did not continue.
Passenger car CAFE standards peaked in 1985 at 27.5 mpg and have not changed
since. Light-duty truck standards were recently raised by 1.5 mpg to a new
standard of 22.2 mpg which will go into effect in 2005 - prior to this
increase
they had remained essentially unchanged since 1987. Thus, for most of the last
two decades overall fleet fuel economy has stagnated and continued technology
gains - such as port fuel injection, front-wheel drive, valve technology, and
transmission improvements - have been applied to increase vehicle size and
power, rather than fuel economy. In fact, at 24 mpg on average, new vehicle
fuel
economy is now no higher than it was in 1981, but vehicle weight has increased
by 24 percent and horsepower has increased by 93 percent.
The Commission believes that three factors are largely responsible for
the
current CAFE stalemate: (1) uncertainty over the future costs of fuel-saving
technologies; (2) fear that more stringent standards will lead to smaller,
lighter vehicles and increased traffic fatalities; and (3) concerns that
higher
fuel-economy standards will put the U.S. auto industry and auto workers at a
competitive disadvantage.
With respect to the first of these factors - cost and technology
potential -
numerous recent analyses by the National Academy of Sciences and others have
concluded that significant improvements in the fuel economy of conventional
gasoline vehicles are achievable and cost-effective, in the sense that fuel
savings over the life of the vehicle would more than offset incremental
technology costs. Estimates of cost-effectiveness do not, however, account for
- and thus cannot by themselves resolve - potential trade-offs in terms of
vehicle
performance, safety, and impacts on jobs and competitiveness.
Given these complexities, the Commission was unable to agree on a
numerical fuel-economy standard.
The recommendations that follow nevertheless reflect the Commission's
conclusion
that a combination of improved conventional gasoline technologies and advanced
hybrid-electric and diesel technologies presents an opportunity to
significantly
increase fuel economy without sacrificing size, power, safety, and other
attributes that consumers value. Note that the Commission defines ``advanced
diesel'' in this context as a diesel passenger vehicle that meets stringent
new
federal air polution control requirements - or so-called ``Tier 2'' standards
-
that are being phased in from 2004 to 2008 (no currently available passenger
diesel vehicles meet these standards). Ultimately, the Commission believes
that
a combination of higher standards, CAFE reforms, and complementary incentive
programs will allow the nation to capitalize on potentially ``gamechanging''
technologies such as hybrids and advanced diesels in a manner that greatly
enhances its ability to achieve oil security and environmental goals, as well
as its ability to sustain the future competitiveness of the U.S. automobile
industry.
Specifically, the Commission recommends:
<bullet> Raising Passenger Vehicle Fuel Economy Standards26-
Congress should instruct
the National Highway Traffic Safety Administration (NHTSA) to significantly
strengthen federal fuel economy standards for passenger vehicles to take full
advantage of the efficiency opportunities provided by currently available
technologies and emerging hybrid and advanced diesel technologies. Consistent
with existing statutory requirements, NHTSA should - in developing new
standards - give due consideration to vehicle performance, safety, job
impacts, and
competitiveness concerns. To allow manufacturers sufficient time to adjust,
new standards should be phased-in over a five-year period beginning no later
than 2010.
<bullet> Reforming CAFE - To facilitate compliance with higher
standards, Congress should modify CAFE to increase program flexibility by
allowing manufacturers to
trade fuel economy credits with each other and across the light truck and
passenger vehicle fleets. In addition, Congress should authorize NHTSA to
consider additional mechanisms that could further simplify the program,
increase
flexibility, and reduce compliance costs. One such mechanism is a compliance
``safety valve'' that would permit manufacturers to purchase CAFE credits from
the
government at a pre-determined price. Such a mechanism would effectively cap
costs to consumers and manufacturers should fuel-saving technologies not
mature as expected or prove more expensive than anticipated.
<bullet> Providing Economic Incentives for Hybrids and Advanced
Diesels - Congress
should establish a five- to ten-year, $3 billion tax incentive program for
manufacturers and consumers to encourage the domestic production and purchase
of hybrid-electric and advanced diesel vehicles that achieve superior fuel
economy.
CHAIRMAN BARTON. Dr. Pizer is the Senior Fellow for Resources for the
Future. You are recognized for 5 minutes, sir.
DR. PIZER. Thank you very much, Mr. Chairman, for the opportunity to talk to
the committee about the possibility of reforming CAFE.
As you said, I am the Senior Fellow of Resources for the Future, which
is
where Phil Sharp is now, our esteemed President. We are happy to have him
there, but as he mentioned, the organization does not take positions on
matters
of public policy. So again, my comments are really just my own opinions.
Five weeks ago, as many people have noted, NHTSA released a final rule
for
light trucks, and that rule met with a lot of criticism and concern, mainly
over
the level of the standards. People felt like it wasn't enough, given our
concern over prices and over oil security. I am not really going to talk
about
that.
What I really want to focus on is the structural changes that were in
that
reform package that Secretary Mineta talked a little bit about, and I also
want
to talk about some reforms that were not in the package that this committee
could consider, or at least giving the authority to NHTSA to consider.
First of all, in the package, a very important change is that
manufacturers would now face differentiated standards, based on the size of
the
vehicles they produce. So historically, if you were GM or if you were Suzuki,
you faced exactly the same standard. Now, if you think about that for a
second,
it doesn't make a lot of sense, given Suzuki produces much smaller trucks that
are naturally more fuel-efficient. So historically, Suzuki didn't have to do
anything, and GM had to do a lot.
So right off the bat, by reforming CAFE, so that Suzuki would have a
higher standard, based on the size of its trucks than GM, you solve some of
the
inequalities that exist in the old program. For example, in 2011, according
to
the NHTSA forecast, GM would face a standard of around 23.2 mpg, and Suzuki
would face a 27 mpg standard. So you have already improved on the old
program, by creating a slightly more equitable program.
A second thing that happens when you differentiate the standards is
you
actually get reductions in oil usage at lower costs. Why is that? Well, by
not
requiring Suzuki to do anything, you weren't taking advantage of some low cost
opportunities that existed at that manufacturer. So not only do you spread
the
distribution of the costs out, you achieve lower costs in terms of achieving
greater fuel economy.
The third thing that happens when you differentiate the standards
across
manufacturers based on size is you reduce the incentives to downsize, and a
lot
of people have already talked this morning about how downsizing creates safety
concerns, so in the old version, if you wanted to comply with CAFE, you could
either install technologies or make smaller cars. Now, if you make smaller
cars, you face a tighter standard, and that doesn't really help you as much.
The second thing that was in the reform package, that Secretary Mineta
didn't focus on quite as much, is the fact that now, the standard is going to
be
set based on an explicit balancing of costs and benefits. Historically, had
the
concerns laid out that it had to weigh when it set the standard, but it wasn't
very explicit about how it was going to weigh those. Now, basically what they
have to do is they set out the costs, they set out the benefits. They include
all kinds of benefits, from environment and externalities in oil markets, and
things like that. They add them up, and they set the standard to maximize the
benefits to society. And to me, that is what we ought to be trying to do, and
I think that is a vast improvement in the way the agency sets the standard.
So those were in the reform package. What else can we think about
doing?
Several things have already been alluded to, and I think ought to be part of
the
debate on reforming CAFE. Four things. First of all, averaging across
fleets.
Right now, there are separate standards that have to be met based on domestic
and imported vehicles, as well as light trucks and cars. Presumably, there
may
be cheaper opportunities in some of these fleets than others, and we ought to
investigate how much the savings would be if we allowed trading. So I am not
saying automatically allow trading, but at least, we ought to know how much we
are paying for having those fleets separately set, the standards separately
set.
The second thing is we could allow trading across firms. Right now,
each
manufacturer has to meet the standards separately, even though some
manufacturers may be able to meet it more cheaply than others. We have
already
seen highly successful trading programs in the lead phase down program for
gasoline, as well as the acid rain program, that regulates electric utilities.
We should investigate how much gain could be had from allowing trading among
manufacturers.
Third, we could allow unrestricted banking of credits. Basically,
what
banking says is if I over-comply this year, I can save the credits for over-
complying, and use them in some future year, when I under-comply. The
advantage
of this is that it doesn't change the total amount of oil savings, but it
brings
it forward in time. Now, I think all of us would like to see whatever oil
savings we can achieve earlier, rather than later.
The last possible change is a little more controversial, and that
would be
allowing manufacturers to pay a fee if they want to exceed the standard. If
they find it too expensive to meet the standard as it is set. I would just
note
that all of the problems we have had in setting a standard with CAFE have been
disagreements over the costs and the impacts. Manufacturers say it is going
to
be very expensive. Advocates say it is going to be very cheap. Well, we
could
get around a lot of that debate if we just said okay, we are going to set a
strong standard, but if it turns out to be really expensive, allow
manufacturers
to pay a fee. Currently, there is such a fee, and Europeans use it all the
time, but it has certain criminal, not criminal, but penalty aspects
associated
with it, that if it were decriminalized, would be appealing to other
manufacturers.
So just to summarize very quickly, six possible things that could be
considered in reforming CAFE. Differentiating standards across manufacturers,
based on the size of the vehicles they produce, explicitly and carefully using
cost-benefit analysis to set the standard; allowing averaging across fleets;
allowing trading among manufacturers; allowing unrestricted banking of credits
that manufacturers earn; and finally, considering a way the standard could be
set, but if it turned out to be too expensive, allow firms to pay a price,
instead of having to meet an arbitrarily expensive standard.
Thank you, and I am looking forward to questions.
[The prepared statement of William A. Pizer follows:]
PREPARED STATEMENT OF WILLIAM A PIZER, SENIOR FELLOW, RESOURCES FOR THE FUTURE
Thank you, Mr. Chairman, for the opportunity to offer testimony before
the
committee about the possibility of reforming the Corporate Average Fuel
Economy
(CAFE) program, with particular reference to the recently introduced reforms
for
light trucks. Over the past decade, I have had the privilege of working on
energy and environment issues for organizations as diverse as the President's
Council of Economic Advisers and the National Commission on Energy Policy.
Currently, I am a senior fellow at Resources for the Future (RFF), a
54-year-old
research institution, headquartered here in Washington, DC, which focuses on
energy, environmental, and natural resource issues.
RFF is both independent and nonpartisan, and shares the results of its
economic
and policy analyses with members of both parties, environmental and business
advocates, academics, members of the press, and interested citizens. RFF
neither
lobbies nor takes positions on specific legislative or regulatory proposals,
although individual researchers are encouraged to express their individual
opinions, which may differ from those of other RFF scholars, officers, and
directors. I emphasize that the views I present today are mine alone.
Just a few weeks ago, the National Highway Traffic and Safety
Administration
(NHTSA) released a final CAFE rule for the years 2008-2011 that raises the
standard from its 2007 level of 22.2 miles per gallon (mpg), to 22.5 mpg in
2008, 23.1 mpg in 2009, and 23.5 mpg in 2010. But what should be of more
interest to this committee are two major changes to the structure of the
program
included in the final rule. First, the rule differentiated standards across
manufacturers based on the size of the vehicles they produce, and second,
starting in 2011, the rule set these standards based on an explicit
cost-benefit
analysis. Previously, there was a single standard for all light-truck
manufacturers and that standard was set, based on the ability of the least
capable manufacturer. In addition to these major structural changes, the rule
will also for the first time include medium-duty passenger vehicles in the
CAFE
program starting in 2011. With the inclusion of these heavier and naturally
less
fuel-efficient vehicles, the estimated average fuel economy will be 24.0 mpg
in 2011.
At the time the light-truck rule was proposed last fall, I offered my
opinion -
which I have appended to this statement - that the reforms were a clear move
toward a more efficient system, and perhaps even an optimal one, given
statutory
constraints. I also indicated that, based on an analysis of the underlying
data
from the recent National Research Council (NRC) study, the 2011 fuel economy
standard should be increased based on the recent, dramatic increase in
forecasted oil price and, in turn, the dramatic increase in benefits from
improved fuel economy. What I would like to do today is first review my
previous
comments on the design of the rule for light trucks and explain why they are
equally relevant for cars. I will then discuss additional reforms possible in
statute - the ability to trade CAFE credits across fleets, firms, and time, as
well as a cost-limiting safety valve that were not possible in the light-truck
rulemaking. I will briefly remark on the fact that dramatically higher oil
prices did not lead to an noticeable increase in the 2011 fuel economy
standard
and finally offer a few reflections on the overall desirability of CAFE from
an economist's perspective.
Light-truck CAFE before the recent reforms
To understand the recent reforms to the light-truck CAFE program, as
well as the
potential for further statutory reforms, it is useful to consider how ``un-
reformed'' or traditional CAFE works. There is a single, one-size-fits-all
fuel
economy standard for light trucks that must be met, on average, by each
manufacturer. That is, each manufacturer takes the fuel economy of each light-
truck model they produce, and then averages those numbers weighted by
production
volume. That number must be at or above the mandated standard. If the
manufacturer beats the standard, the manufacturer collects CAFE credits that
can
be used to make up any shortfall in the next three years. If the manufacturer
misses the standard and does not have any credits, there is a penalty equal to
$5.50 per 0.1 mpg per vehicle. The penalty is routinely paid by European
manufacturers, but has never been adopted by domestic or Asian manufacturers,
who have voiced concern about the penalization notion surrounding the fee.
For light trucks, the level of the traditional standard is set with an
eye
toward achieving the maximum possible fuel economy, but with considerable
deference given to the ability of each manufacturer to meet that standard. The
National Highway Traffic Safety Administration (NHTSA) has typically tailored
the standard to be economically practicable for the least-capable vehicle
manufacturer while also considering the nation's need to conserve energy,
technological feasibility, and the impact of other motor vehicle standards on
fuel economy. The actual analysis is based on confidential manufacturer
product plans, data, and modeling.
One consequence of the traditional approach is that the single
standard for
light trucks is tougher-that is, more expensive-for manufacturers with a full
line that includes large trucks with lower fuel economy, and easier for
manufacturers focused on small trucks with higher fuel economy. For example,
Honda has consistently beaten the existing light-truck CAFE standard by 4-5
mpg,
suggesting that it has had no effect on their production decisions, while the
major domestic manufacturers that produce a broader range of trucks have
hovered
right at the standard, suggesting a real impact.
The reformed CAFE rule
The recently finalized rule for light trucks makes two major changes
to the
traditional approach. The first is a shift from a single light-truck standard
for all manufacturers to differentiated standards for each manufacturer based
on
the size of the vehicles they produce. The second is a shift to setting the
standard based on an explicit and careful cost-benefit analysis, involving the
costs to manufacturers, the value of fuel savings, and other consequences of
gasoline and vehicle usage.
Unlike the traditional CAFE rule for light trucks, the recently
finalized rule
differentiates standards for each manufacturer based on a continuous schedule
of
targets for different-sized vehicles. The size of the vehicle, or footprint, is
defined by multiplying the track width (the distance between tires on the same
axel) by the wheelbase (the distance between centerlines on each axel). In
2011,
the fuel economy schedule ranges from 30.42 mpg for the smallest vehicle to
21.79 mpg for the largest vehicle (Table 4 in the Final Rule). Among
manufacturers, this is forecast to result in a fleet standard ranging from
23.2
mpg for General Motors (GM) to 27.1 mpg for Suzuki (Table 13).
Differentiating manufacturers' standards based on the mix of large and
small
light trucks that they produce - so that Suzuki faces a higher standard than
GM
- has important distributional consequences. Unlike the traditional light-truck
CAFE rule, in which the single standard was much harder for GM and other
manufacturers of large trucks to meet, the reformed rule allocates the overall
burden more evenly by shifting some of it away from manufacturers of large
trucks and toward manufacturers of small trucks.
This distributional change will also lower the cost of a given
improvement in
fuel economy across all fleets (or increase the overall improvement in fuel
economy for a given total cost). By seeking larger fuel savings from small
truck
manufacturers, who previously faced little or no CAFE incentive to improve
fuel
economy, opportunities exist to improve fuel economy that previously were not
being captured. Some of these efficiency improvements are cheaper than the
ones
previously achieved through almost exclusive reliance on improvements among
manufacturers of large trucks. That is, the program achieves lower cost and/or
more fuel savings (estimated at 15-20% in the Regulatory Impact Analysis,
Table VII-1).
There is a third, important effect associated with differentiating
standards
based on the size of vehicles: It substantially alters the incentives to
downsize. Downsizing is one way a manufacturer could comply with the
traditional
light-truck CAFE rule. As noted, smaller trucks naturally have higher fuel
economy. Instead of using technology to improve fuel economy, manufacturers
could simply choose to make smaller trucks. While some might applaud a shift
to smaller vehicles, this frequently raises concerns about safety.
By making the standard higher for smaller trucks, the incentive to
downsize to
comply with the reformed CAFE rule is reduced if not eliminated, thereby
addressing these concerns about safety. Making smaller trucks does not help a
manufacturer meet their standard - the natural improvement in fuel economy
associated with the smaller vehicle is offset by the reformed CAFE's
requirement that smaller vehicles achieve higher fuel economy.
The second major change in the reformed CAFE rule comes in 2011, when
fuel
economy will be set, based on maximizing net benefits from reduced petroleum
consumption, including the reduced consequences of oil-supply disruptions, the
reduced market power of oil-exporting countries, and environmental concerns,
as
well as effects of fuel economy on congestion, accidents, and greater vehicle
range. These benefits are weighed against the costs of installing new
technologies to improve fuel economy. This is sharply contrasts the previous
approach, which focused on the ability of the least-capable manufacturer -
that
is, the one making the largest trucks. In fact, with the shift to
differentiated
standards, the notion of a least-capable manufacturer disappears; instead,
each
company faces a standard that is tailored to be as difficult as any other.
This
latter change represents an unambiguous move toward greater efficiency in the
light-truck CAFE program. While the traditional approach highlighted factors
that should be considered when setting the standard, it did not suggest how
they
ought to be balanced, somewhat ironically using cost-benefit analysis as part
of
the regulatory impact analysis after the standard was set. The proposed
reforms
put the cost-benefit analysis front and center, stipulating that those factors
should be balanced based on the best available valuations. By definition, such
an approach is the most efficient possible approach to setting CAFE standards
once the structure of the program is determined.
Applying the light-truck reforms to passenger cars
Both of the reforms adopted in the recent light-truck rule -
differentiating
manufacturer's standards based on their mix of large and small vehicles, as
well
as setting the standards based on careful cost-benefit analysis - provide
similar opportunities to improve the passenger car CAFE program. Unlike the
light-truck program, however, these changes must be made in statute. While
NHTSA
had the authority to differentiate manufacturer's standards and to shift to a
cost-benefit approach for light trucks, the existing statute is much more
specific for passenger cars.
As was the case for light trucks, differentiating the passenger car
standard
among manufacturers based on their mix of large and small cars provides three
advantages. First, it creates a more equitable burden. Because large cars
naturally have lower fuel economy than smaller cars, a single standard for all
manufacturers would put a disproportionate burden on those who produce larger
cars. In contrast, a differentiated standard would shift that burden toward
small car manufacturers. Second, this shift in burden will also mean a shift
from higher-cost improvements in large cars to lower-cost improvements in
small
cars. This will lower the cost of achieving a given overall level of fuel
economy, or allow a greater improvement in overall fuel economy at a given
total
cost. Finally, by making the standard progressively higher for smaller cars,
the
incentive to downsize passenger cars is reduced if not eliminated. The natural
fuel economy improvement associated with downsizing is now penalized by a
higher
standard. This addresses past concerns that CAFE produces smaller, less safe
vehicles.
The use of a cost-benefit approach to set the passenger car standard
would, by
definition, create a program that maximized efficiency - that is, the net
benefits to society - of the program, given the design (for example,
differentiated standards and fleet averaging).
Going beyond the light-truck reforms
There are at least four areas where light-truck reform was limited by
statute
but where greater efficiency could be realized by changing the structure of
the
program. Three relate to simply giving manufacturers more flexibility to meet
a
given standard without affecting the outcome in terms of overall oil savings.
The fourth addresses uncertainty about compliance costs, reducing the risk of
high costs at the expense of possibly achieving lower oil savings.
The first of these further reforms would allow manufacturers to
average fuel
economy jointly over both cars and light-truck fleets. Currently,
manufacturers
must meet each standard separately, even though cheaper opportunities may
exist
in one fleet versus the other. From a national perspective, Congress should
not
care whether fuel savings are achieved in one fleet or the other. Allowing
manufacturers to trade off cheaper improvements in one fleet against more
expensive improvements in the other would lower overall costs without
affecting oil savings.
Second, Congress could also allow credit trading among manufacturers.
That is,
when one manufacturer exceeds their standard, they earn credits that could
then
be sold to other manufacturers struggling to meet theirs. This reform reduces
costs by shifting improvements to manufacturers with lower costs and away from
manufacturers with higher costs. And like the first reform, this action has no
effect on overall oil savings.
It is useful to note that historically there has been opposition to
trading
because it likely further exacerbates the disparity between manufacturers of
large and small vehicles. That is, even though trading would generally benefit
both buyers and sellers of CAFE credits, under traditional CAFE, it would tend
to provide larger benefits to sellers - manufacturers of small cars who can
easily if not effortlessly exceed the standard. However, with size-based CAFE,
the initial compliance burden is more evenly distributed among manufacturers
of
both large and small vehicles, erasing the likely larger benefit to
manufacturers of small vehicles.
Third, Congress could allow companies who exceed the standard in one
year to
bank credits for the indefinite future. Banking not only leaves the total
volume
of reduced oil consumption unchanged, it moves the savings forward in time -
that is, we see the effects of energy conservation sooner. Banking has easily
been the most successful element of the acid rain trading program used by
electric utilities to reduce sulfur dioxide emissions. In that case, firms
reduced emissions by twice as much as the law required to create flexibility
for
future compliance. Currently, banking is allowed in the CAFE program - but for
only up to three years, after which time the banked credits expire, thereby
reducing the incentive to over-comply and to reduce oil consumption earlier.
New legislation could remove this restriction.
Finally, Congress could create a safety valve, whereby manufacturers
could opt
to pay a specified fee if compliance costs end up being unexpectedly high.
This
would allow manufacturers to avoid the risk of high costs in exchange for the
possibility that fuel economy - and oil savings - might be lower if that turns
out to be the case. As noted earlier, the current program already has such a
fee, defined as a penalty, which is often used by European manufacturers but
has
been avoided by domestic and Asian manufacturers. By ``decriminalizing'' the
fee,
Congress could help allay manufacturer concerns and reduce the central debate
about how much technology really costs - perhaps allowing higher standards to
be introduced more quickly.
Transparency about costs
The recent light-truck rule highlighted the fact that the cost
estimates used to
set fuel economy standards remain something of a mystery. Despite the fact
that
the benefits of improving fuel economy increased by 50 percent between when
the
proposed and final rules were published, due to dramatic increases in forecast
oil prices, the estimated aggregate fuel economy standard for 2011 increased
by
only 0.2 mpg, from 23.9 to 24.1 mpg (excluding medium-duty vehicles, which
were
not included in the proposed rule). Yet, the standard is supposed to represent
a balancing of costs and benefits.
The final rule indicates that there were countervailing changes in
estimated
costs - related to the costs of technologies and especially the time required
to
phase in those technologies - but those changes are difficult to judge because
the underlying details of the cost model are not spelled out clearly. Without
any countervailing effects, my comments last fall suggested that a 50-percent
increase in benefits might lead to a 4-5 mpg increase in the standard. Having
reviewed other cost analyses, I might adjust that downward, closer to 2 mpg.
In
any case, a 0.2-mpg increase is surprisingly small despite the indicated
countervailing modeling changes.
It might be desirable, therefore, for the Department of Transportation
to be
required to make public the cost modeling used in any rulemaking to set fuel
economy standards. In the past, such disclosure would have been nearly
impossible, as it entirely centered on the capabilities of one manufacturer.
Now, there is presumably safety in numbers: Cost modeling for particular
vehicle
sizes can be disclosed, on average, without necessarily revealing proprietary
information. Such a requirement would facilitate a more informed debate in the
rulemaking process.
Do fuel economy standards make sense?
So far the discussion has centered on how to improve CAFE through
statutory
reform - that is, how to get more fuel savings at lower cost, while addressing
concerns about equity and safety. This is an extremely important question,
given
the likelihood that the CAFE program will not go away and will remain the main
policy tool for addressing concerns about petroleum use in the transportation
sector. Nonetheless, it is useful to ask whether CAFE makes sense compared to
other choices, or whether Congress should instead focus on an entirely
different policy.
The underlying motivation for CAFE is the desire to reduce oil demand
because of
concerns about costs, security, and the environment. Given this underlying
motivation, many people, especially economists, often criticize CAFE policy
for
two related reasons: First, it does not encourage consumers, once they buy a
vehicle, to drive less; and second, it implies that the government can do a
better job of weighing the costs and benefits of fuel-saving vehicle
technologies than the auto manufacturers and auto consumers who make and use
those vehicles. These critics typically conclude that the better policy is to
tax gasoline, where the tax rate reflects some or all of the additional cost
to
society associated with oil use - for example, the negative influence of oil
supply disruptions on the economy, domestic and international environmental
impacts, and highway congestion.
One response is to agree with the CAFE critics on principle, but note
that
political opposition to gasoline tax increases make them impractical. However,
we can also take issue with the second criticism and argue that auto
manufacturers and consumers are not really making good decisions about fuel
economy. Several explanations for this failure stand out. The first is that
consumers may not know, understand, or believe differences exist in fuel
economy
among vehicles. The recent controversy over the inaccuracy of EPA fuel economy
ratings on information labels underscores this point.
Second, even understanding that those differences exist and are real,
consumers
may not rank fuel economy high enough to worry about when shopping for a car.
Cargo capacity, power, and styling may be more important to consumers.
Finally,
even if consumers consider fuel economy, they may find it does not make a big
enough difference to sway their choice of vehicle. Typical fuel economy
decisions might represent an annual net gain per vehicle of about $50-500,
depending on the payback period a consumer requires. On a $20,000 new car,
this
is analogous to an option for a fancy radio or improved styling.
Finally, consumers may not properly account for the full value of
future fuel
savings from a more fuel-efficient car, considering, for example, only the
first
few years of savings rather than the entire vehicle lifetime.
If consumers are systematically undervaluing fuel economy, it makes
sense that
vehicle manufacturers are not going to build more fuel-efficient cars. Based
on
that observation - an observation with which I tend to agree - fuel economy
standards are a sensible policy and Congress should focus on reforming CAFE to
make it more efficient.
It is worth noting that one argument that cannot be used to support
CAFE is that
stricter fuel economy standards will substantially lower gasoline prices.
Recent
estimates by the Energy Information Administration, for example, suggest that
a
36-percent improvement in CAFE (6-7 mpg) would lower gasoline prices by at
most
$0.08 by 2025. More modest CAFE improvements, such as the recent 1.8-mpg
increase in light-truck standards, would lower gasoline prices even less
(although the impact is larger with reforms than without). However, CAFE will
lower expenditures on gasoline, as the quantity consumed will decline even if
the price remains relatively insensitive. More importantly, it will reduce the
vulnerability of the economy to future oil price shocks by reducing the share
of gasoline expenditures in overall economic activity.
Overall conclusions
Following on the heels of recent regulatory reforms to the light-truck
CAFE
program, Congressional action to similarly reform the CAFE program for
passenger
cars - as well as to enact further reforms that were not possible in the
light-
truck rulemaking - has a large potential to improve program efficiency, to
make
the program more equitable, and to do all of this without sacrificing safety.
The light-truck rule provides a model for two improvements: differentiating
manufacturers' standards based on their mix of large and small vehicles, and
setting the overall level of the standards based on an explicit and careful
cost-benefit analysis. Further reforms include trading between the passenger
car
and light-truck fleets, trading among manufacturers, unrestricted banking of
CAFE credits earned by exceeding the standard, and a cost-limiting safety
valve.
It is surprising that the recent final rule for light-truck fuel
economy in
2011, based on balancing costs and benefits, demonstrated remarkably little
sensitivity to a 50-percent increase in the value of fuel saving benefits.
This
surprise, along with other concerns about how NHTSA would set the standards,
has
led to calls for Congress to directly set the standard in statute.
Nonetheless,
I find the complexity of the standard-setting process, as well as the need to
regularly revisit the level of the standard, to be more suitable for agency
rulemaking than Congressional action. Congress can instead reform the
structure
of CAFE to increase efficiency, continue to give NHTSA clear guidance on the
key costs and benefits it should consider, and perhaps require greater
transparency with regard to the cost modeling.
Lastly, critics often argue that CAFE is not the right policy to
address
petroleum use in the transportation sector, because it improperly focuses on
creating more fuel-efficient vehicles rather than alternatively or
additionally
encouraging consumers to drive those vehicles less. Such a criticism is based
on
an assumption that consumers and manufacturers will make good decisions about
fuel economy based on technology and fuel costs. Yet, there are a variety of
reasons why this assumption might be false; based on my belief that these
reasons have credibility, a CAFE program continues to make sense.
In summary, Congress has a great opportunity to improve the efficiency
of an
extremely significant program to reduce oil consumption in the United States,
namely by reforming the fuel economy program for cars and light trucks. Such
reforms will reduce the costs of achieving a given standard and allow us to
pursue greater fuel economy without sacrificing safety. In contrast to other
policies being promoted to address concerns about higher fuel prices and oil
dependency, such improvements attack the problem directly by reducing both our
expenditures on oil and our vulnerability to future price increases.
I thank you again for the opportunity to appear before this committee,
and I would be pleased to answer any questions.
Appendix I. Understanding Proposed CAFE Reforms for Light Trucks
FR Doc. 05-17005
By William A. Pizer and Madeleine Baker,* Resources for the Future
Summary
On August 23, 2005, the National Highway Traffic Safety Administration
(NHTSA) released a Notice of Proposed Rulemaking (NPR) on corporate average
fuel economy
(CAFE) standards for light trucks along with a Preliminary Regulatory Impact
Analysis (PRIA) (NPRM: Federal Register 05-17005, vol. 70, no. 167, August
30).
Relative to the existing 2007 standard of 22.2 miles per gallon (mpg), the
proposed changes include fuel economy standards of 22.5-23.5 mpg over
2008-2010 using the current program design.
More notable, however, are proposed changes to this design. Under the
proposed
changes, each manufacturer would still need to meet a single overall standard
for their light truck fleet, but that standard would differ across
manufacturers
based on their production of different sized vehicles. Vehicles with
different
footprints (wheelbase times track width) would have different fuel economy
targets and a manufacturer's overall standard would be based on these size-
differentiated targets averaged over their specific fleet. During 2008-2010,
manufacturers would have a choice of complying with either the old
(unreformed) or new (reformed) CAFE standards.
Importantly, the fuel economy standards starting in 2011 would be set
explicitly
to maximize net benefits to society-including fuel savings, safety, security,
and environmental concerns. Among other things, this shift implies that those
standards will rise along with the price of oil. While the proposed 2011
targets assume $25-30 per barrel crude oil prices (based on available
government
forecasts) and are estimated to achieve a 24-mpg fuel economy, we estimate
that
an additional $20 per barrel (in line with recent long run private-sector
forecasts) would raise the proposed targets by perhaps 4-5 mpg.
The proposed reforms also erase the current disparity between
passenger
automobile and light truck standards, as the smallest light truck category
would
have a target exceeding the current 27.5 mpg for passenger automobiles. This
would remove the incentive for automakers to effectively design passenger cars
that can be categorized as a light truck (by raising the height, making the
seats removable, etc.) in order to face an easier fuel economy standard.
From an economic perspective, these reforms represent a remarkable
shift toward
a more efficient regulatory system. Still, potentially valuable, further
improvements remain-trading of CAFE credits across manufacturers and between
passenger cars and light trucks, for example. The proposed reforms also fail
to
address the larger economic questions of whether taxes or tradable permits
(for
gasoline usage) would be a better policy than a CAFE performance standard, and
whether consumers and manufacturers are really making bad fuel economy
decisions
absent government intervention. The latter question could also have
significant
implications for whether technology costs and fuel economy benefits are
correctly valued in the CAFE analysis.
The remainder of this memorandum walks through essential elements of
the reform
package, provides a quick economic analysis, and summarizes the economist's
perspective.
Unreformed CAFE
Existing CAFE regulations establish a single mileage standard that
must be met,
on average, for every manufacturer's light truck fleet. That is, each
manufacturer takes the fuel economy of each light truck model they produce,
and
then averages those numbers weighted by production volume. That number must
be
at or above the mandated standard. If the manufacturer beats the standard,
the
manufacturer collects CAFE credits that can be used to make up any shortfall
in
the next three years. If the manufacturer misses the standard and does not
have
any credits, there is a penalty equal to $5.50 per 0.1 mpg per vehicle. The
penalty is routinely paid by European manufacturers but has never been
utilized
by domestic or Asian manufacturers.
The level of the standard is set with an eye toward achieving the
maximum
possible fuel economy, but with considerable deference given to the ability of
each manufacturer to meet that standard. In particular, NHTSA has
traditionally
focused on the least capable vehicle manufacturer and tailored the standard to
be ``economically practicable'' for that firm. The actual analysis is based
on
confidential manufacturer data and modeling. This approach was used in 2003
to
set the 2005-2007 standards. Prior to that, Congressional riders prevented
any
changes to the CAFE levels for light trucks since 1996. The standard for
passenger cars has remained unchanged since 1990.
One consequence of this approach is that the single standard for light
trucks is
tougher-more expensive-for manufacturers with a full line, including large
trucks that have lower fuel economy, and easier for manufacturers focused on
small trucks that typically have higher fuel economy. For example, Honda has
consistently beaten the existing light-truck CAFE standard by 4-5 mpg,
suggesting it has had no effect on their production decisions, while the major
domestic manufacturers that produce a broader range of trucks have hovered
right
at the standard, suggesting a real impact.
The current NPR uses this approach to determine unreformed 22.5-23.5
mpg standards for 2008-2010.
Reformed CAFE
The proposed CAFE reforms involve two major changes. The first is a
shift from
a single standard for all manufacturers to differentiated standards for each
manufacturer based on the composition of their fleet. This shift arguably
eliminates the notion of a least capable manufacturer because standards are
tailored to each manufacturer's vehicle mix. The second is a shift to an
explicit cost-benefit analysis based on fuel savings and other consequences of
gasoline and vehicle usage. While previous standards have utilized
cost-benefit
analysis as part of the regulatory impact analysis after the standard was set,
the proposed reforms put the cost-benefit analysis front and center.
Differentiated Standards
The NPR proposes differentiating fuel economy standards for light
trucks using
six discrete size categories, but requests comments on the use of both
alternative attributes and/or more size categories (or even a continuous
function). The size of a vehicle, or ``footprint,'' is defined by multiplying
the
track width (distance between tires on the same axel) multiplied by the
wheelbase (distance between centerlines on each axel). The proposed ranges
for
each footprint category, according to NHTSA, were based on an effort to keep
the
majority of models in the low end of each range; that is, to avoid creating
significant opportunities for firms to slightly increase the size of a vehicle
and have it move into the next higher range with a correspondingly lower
standard.
NHTSA then establishes the relative position of targets for each
category. That
is, category 2 is 0.8 mpg lower than category 1; category 3 is 3.4 mpg lower
than category 2; etc. These relative positions are determined based on the
difficulty / cost of achieving fuel economy levels in each category. The
result
is a schedule of fuel economy targets for different size categories, but only
defined relative to each other.
Setting the Standards
The actual standards are determined by moving the absolute level of
this
schedule up or down in order to meet one of two criteria. From 2008-2010, the
criterion is that the total cost to industry under the reformed regulation
should equal the total cost to industry under the unreformed regulation,
described earlier. From 2011 onward, the criterion is that benefits to
society,
minus costs, are maximized. Table 1 summarizes the resulting standards in the
NPR.
With the target for each category in hand, the standard for each
manufacturer is
based on how many trucks the manufacturer produces in each category. Based on
current projections by NHTSA, that results in the manufacturer-specific
standards given in Table 2. Note that manufacturers do not have to meet the
target in any one category, but underachievement in one category has to be
offset by overachievement in another.
Analysis
Several questions naturally arise when evaluating the proposed reform
package.
Does it cost more or less than the unreformed policy? Even if the cost is
roughly the same, is the distribution of costs different across manufacturers?
Does it achieve more overall fuel economy for a given cost? Are these cost-
benefit estimates consistent with other cost-benefit estimates? We briefly
examine each question in turn based on available data.
Does Reformed CAFE Cost More?
There are no direct comparisons of costs under the proposed,
cost-benefit
approach to setting the standard versus costs based on the existing, least-
capable manufacturer approach. A footnote in Table 3 highlights this
fact-costs
are similar in each year where both reformed and unreformed CAFE costs are
reported by design.
However, looking at those same cost estimates in Table 3 across years,
we do not
see a dramatic difference moving from 2010 to 2011, when the new metric of
maximizing net benefits is applied for the first time, versus moving from 2007
to 2008, 2008 to 2009, or 2009 to 2010, when the overall cost to industry is
set
based on unreformed CAFE. Costs per vehicle rise by $89 from 2010 to 2011,
but
they rise by $88 from 2008 to 2009. That suggests, at the very least, that
any
increase in costs from the reformed approach is in line with the spending
trend
for fuel economy improvements over time under the unreformed program.
Is the distribution of costs different across manufacturers?
Unreformed CAFE sets a common standard for all manufacturers, whereas
reformed
CAFE will set differentiated standards based on each manufacturer's product
line-higher standards for manufacturers specializing in smaller trucks. Other
things equal, this suggests a shift in costs away from manufacturers of larger
trucks and toward those which only manufacture smaller light trucks. Table 4
quantifies this shift using historical data on CAFE credits: Under both
reformed and unreformed CAFE, manufacturers can earn credits equal to the
amount
by which their fleet exceeds the standard, expressed in tenths of a mile-per-
gallon, per vehicle. These credits can then be used in future years to make
up
a deficit if they fail to meet the standard.
Based on historic manufacturing data for 2002-2004, Table 4 shows the
change in
manufacturers' net CAFE credits position under the reformed versus unreformed
program; positive numbers reflect a better outcome under reformed CAFE. What
we
see is that three manufacturers, Hyundai, Isuzu, and Suzuki, do noticeably
worse, facing a deficit of perhaps 30 credits per vehicle absent changes.
Meanwhile, GM, to a lesser extent Ford, and eventually Nissan, all see an
improvement of 2-6 credits per vehicle. If we look at the underlying
production
data available in Tables III-3 through III-5 of the PRIA, the three
manufacturers who face the greatest deficit are the ones whose trucks fall
entirely in the smallest two of the six reformed CAFE categories. Meanwhile,
GM, Ford, and Nissan have the largest share-more than one-third-in the largest
two categories by 2004 (only 20 percent of DaimlerChrysler vehicles fell in
those two categories in that year).
Does reformed CAFE achieve more fuel economy for a given cost?
Given that the costs of reformed CAFE are similar to the costs of
unreformed
CAFE, the delivered value of the proposed reforms turns on whether benefits
are
higher. Table 5 compares estimates of the fuel economy, gallons saved, and
dollar benefits under the two programs. For all three metrics, we see
reformed
CAFE improvements that are 12-15 percent higher in 2008, 19-20 percent higher
in
2009, and 6-7 percent higher in 2010. No comparison is possible in 2011,
because only reformed CAFE estimates were provided.
Are the cost estimates consistent with other studies?
In an effort to benchmark the cost analysis in the NPR and PRIA, we
used the
data contained in the 2001 National Academy of Science (NAS) CAFE study to
estimate cost curves for fuel economy improvements for different classes of
light trucks (SUVs, trucks, and minivans). We compare these costs to the
benefits from fuel savings in the NPR, ignoring all of the additions and
subtractions for various externalities the PRIA considers that have a net
effect
of lowering benefits 2-4% (see PRIA Tables VIII-4 through VIII-10). We then
estimate the net benefit maximizing level of fuel economy.
Despite the fact that our data is now five years old and that we could
not
replicate the size-based categories in the NPR, our results suggest a benefit-
maximizing fuel economy squarely in the range of the 22.6-24.0 mpg levels
forecast under the proposed rule. However, it is important to highlight that
this estimate uses the NPR and PRIA oil price forecast of $25-30 from the
Annual
Energy Outlook 2005. More recent private-sector forecasts suggest an increase
of perhaps $20 per barrel, adding an additional $0.50 per gallon to the fuel
economy savings and raising our estimate of the benefit-maximizing fuel
economy by 4-5 mpg.
Perspective
From an economist's perspective, the proposed reforms represent a
clear move
toward greater efficiency, perhaps even an optimum given current statutory
constraints. Moving beyond this constraint, however, the efficiency of the
CAFE
program could still be improved by allowing trades among manufacturers and
between cars and trucks. Because the benefit per gallon is now the metric for
setting the standard, one could also ask whether this value ought to be used
to
cap the cost of any compliance efforts by allowing manufacturers to pay that
value (or some multiple) if they miss the standard. One might even want to
back
up and ask whether CAFE itself-that is a performance standard for vehicles
rather than fuel taxes or emissions trading-is what we really want. Many
economists argue that consumers and manufacturers already make the desired
fuel
economy decisions without regulation, excluding concerns over the environment,
security, and safety. If so, the fuel economy savings and technology cost
ought
to balance at the margin, suggesting they have been incorrectly valued in this
analysis.
Importantly, by raising the target for small trucks above the standard
for
passenger vehicles the proposed reforms eliminate the incentive to redesign
what
is essentially a passenger vehicle in order to be classified as a light truck
and to face a lighter CAFE standard. Under the current program, such
redesigns
are often cited as a significant, adverse, and unintended consequence of the
wide gap in standards between cars and trucks.
Finally, our calculations, showing that recent increases in long-run
oil prices
raise the desired fuel economy by 4-5 mpg, highlight the importance of
assumptions about these prices. While it is unclear what role oil prices
played
in setting standards under the unreformed program, they drive the standards
set by benefit maximization under the reformed program.
Tables and Figures
Table 1. Proposed Targets (in mpg)
Source: NPR Table 6
Table 2. Estimates of Required Fuel Economy Levels (in mpg)
Source: NPR Table 7
Table 3. Incremental Cost per Vehicle
Source: PRIA Table 1
Table 4. Effect of Reformed CAFE, Relative to Unreformed CAFE, on
Manufacturer's CAFE Credit Position using Historic Data
(change in credits per vehicle)
Manufacturer
Market share (2004)
2002
2003
2004
BMW
0.01
-4.29
-0.92
-16.23
DaimlerChrysler
0.19
-3.03
-6.00
-7.25
Ford
0.23
2.80
-1.00
3.01
GM
0.29
7.87
6.00
5.63
Honda
0.06
-3.51
-11.00
-9.91
Hyundai
0.02
-13.64
-30.05
-27.15
Isuzu
0.00
-14.32
-29.76
-27.21
Nissan
0.06
-9.89
-16.02
2.18
Suzuki
0.00
-16.71
-29.90
-29.40
Toyota
0.13
-4.50
-5.01
-7.99
Volkswagen
0.01
-8.53
-15.12
-8.14
Source: PRIA Tables III-3 through III-5
Table 5. Benefit Estimates, Reformed and Unreformed CAFE
2008
2009
2010
2011
Fuel economy improvement versus baseline (mpg)
unreformed
0.26
0.59
0.87
reformed
0.29
0.71
0.88
1.34
Gallons saved over vehicle lifetime versus baseline (millions, undiscounted)
unreformed
826
1860
2715
reformed
942
2218
2892
4110
Benefits versus baseline
($millions, net present value at 7% over vehicle life for each model year)
unreformed
605
1366
2007
reformed
694
1633
2144
3069
Source: PRIA Tables VI-1b, VI-2, VI-3 (Fuel Economy), PRIA Table 5 (Gallons),
PRIA Table 3 (benefits)
MR. BILIRAKIS. Thank you, Dr. Pizer. Mr. Reuther.
MR. REUTHER. Thank you, Mr. Chairman. My name is Alan Reuther. I am the
Legislative Director for the UAW. We appreciate the opportunity to testify
before this committee on the draft legislation authorizing NHTSA to set new
passenger car fuel economy standards.
The UAW has repeatedly emphasized two important points about the CAFE
program. First, we have urged that the structure of the program be modified
to
eliminate discrimination against full line producers, based on their product
mix. In our view, all companies should be required to make similar efforts to
improve fuel economy across their entire line of vehicles.
Second, we have consistently emphasized the importance of retaining
both
the fleet-wide averaging and the two fleet, domestic and foreign components of
the passenger car CAFE structure. These two requirements ensure that full
line
auto manufacturers must maintain small car production in North America. This
is
because the production of smaller, more fuel-efficient vehicles is needed to
offset the production of larger, less fuel-efficient vehicles.
As a matter of national energy policy, we believe it is important for
the
U.S. to retain domestic production of smaller, more fuel-efficient passenger
cars. Furthermore, currently, over 17,000 American workers are employed in
seven U.S. assembly plants that produce small passenger cars. This includes
GM,
Ford, Daimler-Chrysler, Mitsubishi, and NUMMI plants in Lordstown, Ohio;
Wilmington, Delaware; Spring Hill, Tennessee; Wayne, Michigan; Belvidere and
Bloomington, Illinois; and Fremont, California. In addition, almost 50,000
American workers produce parts for these vehicles. The jobs of these workers
would be directly threatened by any CAFE proposals that undermine fleet-wide
averaging and/or the two-fleet rule for passenger cars.
NHTSA recently released final rules establishing a size-based CAFE
system
for light trucks. UAW supported these rules for several reasons. We were
pleased that the size-based system eliminated the discriminatory impact on
full
line producers. At the same time, because the new rules only dealt with light
trucks, not passenger cars, there was no threat to small car production and
jobs
in this country.
The UAW believes that NHTSA already has the authority to raise the
flat
mpg requirement in the current CAFE standards for passenger cars, but NHTSA
does
not have the authority to change the structure of the passenger car CAFE
system
to an attribute-based system. We recognize that establishing an
attribute-based
CAFE system for passenger cars, similar to the new light truck system, would
have the benefit of eliminating the current discrimination against full line
producers, but it would also have the major downside of undermining fleet-wide
averaging and the two-fleet rule, and thus would enable auto manufacturers to
offshore all of their small car production and jobs.
And I would like to note, Secretary Mineta, in his comments, suggested
that they might retain the two-fleet rule. Only doing that would not protect
the small car production and jobs. You also have to protect the fleet-wide
averaging.
Some commentators have tried to dismiss these concerns about small car
production by arguing that companies will simply substitute large car
production
at these facilities. This ignores the harsh reality that there is currently
significant overcapacity in the auto industry. The UAW submits that the real
world impact is that certain companies would take advantage of the change in
the
CAFE rules to further downsize their operations. The net result is that small
car facilities would be closed, and tens of thousands of automotive jobs would
be lost.
Fortunately, the UAW believes there is an easy way to obtain the
benefits
of moving to an attribute-based CAFE system for passenger cars, while avoiding
the downside of losing our small car production and jobs. Specifically, we
urge
Congress to impose an anti-backsliding requirement on any new CAFE rules that
NHTSA would be authorized to promulgate for passenger cars. This requirement
should specify that both the domestic and foreign passenger car fleets for
each
auto manufacturer would still have to meet or exceed the CAFE standard under
the
current system, the 27.5 mpg fleet-wide standard. This anti-backsliding
benchmark should be increased, in line with the overall fuel economy
improvements required under any attribute-based system.
The adoption of this type of anti-backsliding requirement would
prevent
companies from offshoring their small car production and jobs. It would also
ensure that the auto manufacturers cannot subvert the objective of any new
CAFE
system by up-weighting or upsizing many of their vehicles, resulting in worse
overall fuel economy.
The UAW would support legislation authorizing NHTSA to establish an
attribute CAFE system for passenger cars similar to the truck system, provided
this is coupled with an anti-backsliding requirement that protects the small
car
production and jobs. If this type of anti-backsliding requirement is not
included, we would have to oppose the legislation.
The UAW firmly believes that our Nation can make substantial progress
in
improving fuel economy and reducing our Nation's dependence on foreign oil,
and
at the same time, make sure that we keep and expand automotive jobs in this
country. In addition to changes in the CAFE system, we urge Congress to
provide
incentives to encourage the domestic production of advanced technology and
flexible fuel vehicles, and their key components.
We look forward to working with the committee as you consider these
proposals. Thank you.
[The prepared statement of Alan Reuther follows:]
PREPARED STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL UNION,
UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA
SUMMARY STATEMENT OF
ALAN REUTHER, UAW LEGISLATIVE DIRECTOR
The UAW has repeatedly emphasized two points about the CAFE program.
First, we
have urged that the structure of the CAFE program be modified to eliminate
discrimination against full line producers based on their product mix.
Second,
we have emphasized the importance of retaining both the fleet wide averaging
and
the two-fleet (domestic and foreign) components of the passenger care CAFE
structure. The combination of these two provisions ensures that full-line
auto
manufacturers must maintain small car production in North American. This
protects the jobs of over 17,000 American workers who are currently employed
in
U.S. assembly plants that produce small passenger cars, and almost 50,000
workers who produce parts for these vehicles.
The UAW supported the rules that NHTSA recently promulgated
establishing a new
attribute based CAFE system for light trucks. Because these rules only dealt
with light trucks, not passenger cars, there was no threat to small car
production and jobs in this country.
The UAW believes that NHTSA already has the authority to raise the
flat MPG
requirement in the current CAFE standards for passenger cars. But it does not
have the authority to change the structure of the passenger car CAFE system to
an attribute-based system.
The UAW recognizes that establishing an attribute-based CAFE system
for
passenger cars similar to the new light truck system would have the benefit of
eliminating the current discrimination against full line producers. But it
would also have the major down side of enabling auto manufacturers to offshore
all of their small car production and jobs.
The UAW strongly urges Congress to impose an ``anti-backsliding''
requirement on
any new CAFE rules that NHTSA would be authorized to promulgate for passenger
cars. This would allow us to obtain the benefits of moving to an attribute-
based CAFE system for passenger cars, while avoiding the down side of losing
our
small car production and jobs. It would also prevent the companies from up-
sizing or up-weighting their passenger cars, resulting in worse overall fuel
economy. The UAW would strongly oppose any legislation authorizing NHTSA to
establish an attribute-based CAFE system for passenger cars, unless it
contains this type of ``anti-backsliding'' provision.
The UAW also urges Congress to specify that new passenger CAFE rules
should only
take effect in 2012 or later, after the new light truck CAFE rules have been
implemented. We oppose the adoption of any credit trading system in the CAFE
program, since this could also jeopardize the continuation of small car
production and jobs in the United States.
Mr. Chairman, my name is Alan Reuther. I am the Legislative Director
for the
International Union, United Automobile, Aerospace & Agricultural Implement
Workers of America (UAW). The UAW appreciates the opportunity to testify
before
this Committee on the draft legislation authorizing the National Highway
Traffic
Safety Administration (NHTSA) to set new passenger car fuel economy standards.
The UAW represents 1.1 million active and retired workers across the
country,
many of whom work or receive retirement benefits from auto manufacturers or
auto
parts companies. We were deeply involved in the original enactment of the
Corporate Average Fuel Economy (CAFE) program, and continue to have a very
strong interest in this program because of its major impact on automotive
production and employment in this country and the jobs and benefits of our
members.
The UAW strongly supported the establishment of the CAFE program, and
we support
continuation of this program as an essential mechanism for improving fuel
economy and reducing our dependence on foreign oil. We have previously
stated,
and continue to believe, that modest increases in the CAFE standards over time
are technologically and economical feasible.
However, the UAW has repeatedly emphasized two critically important
points about
the CAFE program. First, we have urged that the structure of the CAFE program
be modified to eliminate discrimination against full line producers based on
their product mix. In our view, all companies should be required to make
similar efforts to improve fuel economy across their entire line of vehicles.
Because of this, we have strongly opposed legislative proposals that would
have
a discriminatory impact on full line producers, and therefore jeopardize the
jobs and benefits of tens of thousands of active and retired workers.
Second, we have consistently emphasized the importance of retaining
both the
fleet wide averaging and the two-fleet (domestic and foreign) components of
the
passenger car CAFE structure. The fleet wide averaging requirement provides
important flexibility to automotive manufacturers, while ensuring that the
CAFE
standards produce an overall improvement in fuel economy. Furthermore, the
combination of fleet wide averaging and the two-fleet requirement ensures that
full-line auto manufacturers must maintain small car production in North
America. This is because the production of smaller, more fuel efficient
vehicles is needed to offset the production of larger, less fuel efficient
vehicles.
As a matter of national energy policy, we believe it is vital that the
U.S.
retain domestic production of smaller, more fuel efficient passenger cars. As
we have all witnessed, sharp increases in gas prices can lead to shifts in
consumer demand towards smaller, more fuel efficient vehicles. Unless we
retain
domestic production of such vehicles, consumers interested in this segment of
the market could be forced to purchase foreign-made vehicles.
Over 17,000 American workers are currently employed in seven U.S.
assembly
plants that produce small passenger cars. This includes GM, Ford, DCX,
Mitsubishi and NUMMI plants in Lordstown (Ohio), Wilmington (Delaware), Spring
Hill (Tennessee), Wayne (Michigan), Belvidere (Illinois), Bloomington
(Indiana)
and Fremont (California). Almost 50,000 American workers produce parts for
these vehicles. The jobs of these workers would be directly threatened by any
CAFE proposals that undermine fleet wide averaging and/or the two-fleet rule
for
passenger cars. In addition, the loss of these jobs would inevitably have a
negative ripple effect on the rest of the economy.
NHTSA recently released final rules establishing new CAFE standards
for light
trucks. These rules require modest improvements in light truck fuel economy,
and also establish a sized-based CAFE system for light trucks. The UAW
supported these rules for several reasons. We believed the magnitude and
timing
of the proposed increases in light truck fuel economy were feasible. We were
also very pleased that the size-based CAFE system eliminated the
discriminatory
impact on full line producers. At the same time, because the old light truck
CAFE standards did not contain any two-fleet rule, there was no threat to the
continuation of small truck production and jobs in the United States.
Furthermore, because the new rules only dealt with light trucks, not passenger
cars, and did not change the definitions of what is a ``passenger car'' and
what
is a 'light truck", there was no threat to small car production and jobs in
this country.
The draft legislation that is the subject of this hearing would
authorize NHTSA
to set new CAFE standards for passenger cars. The UAW believes that NHTSA
already has the authority to raise the flat MPG requirement in the current
standards, and that legislation is not needed to enable it to go forward in
this manner.
However, in his recent letters to Congress, Secretary Mineta made it
clear that
the Department of Transportation also wants Congress to give NHTSA the
authority
to change the structure of the passenger car CAFE system to an attribute-based
system similar to the new structure that has been implemented for light
trucks.
There is general agreement among the various stakeholders in the fuel economy
issue that NHTSA does not currently have this authority, and that authorizing
legislation would be required before such structural changes in the passenger
car CAFE program could be adopted.
The UAW recognizes that establishing an attribute-based CAFE system
for
passenger cars similar to the new light truck system would have the benefit of
eliminating the current discrimination against full line producers. We would
strongly applaud this development.
However, it would also have the major down side of enabling auto
manufacturers
to offshore all of their small car production and jobs. This would happen due
to the elimination of the two-fleet rule. But even if this rule was retained,
the companies would still be able to offshore their small car production and
jobs due to the shift from a uniform, flat MPG fleet wide requirement for all
companies to a pure attribute-based system.
Some commentators have tried to dismiss concerns about the loss of
small car
production by arguing that the companies will simply substitute large car
production at these facilities, leaving the overall production and employment
levels unchanged. This ignores the harsh reality that there currently is
significant over capacity in the auto industry. The UAW submits that the real
world impact is that certain companies would take advantage of the change in
the
CAFE rules to further downsize their operations. The net result is that small
car facilities would be closed, and tens of thousands of automotive jobs would
be lost, without any compensating replacements with large vehicle production
and jobs.
Fortunately, the UAW believes there is an easy way to obtain the
benefits of
moving to an attribute-based CAFE system for passenger cars, while avoiding
the
down side of losing our small car production and jobs. Specifically, the UAW
urges Congress to impose an ``anti-backsliding'' requirement on any new CAFE
rules
that NHTSA would be authorized to promulgate for passenger cars. This
requirement should specify that both the domestic and foreign passenger car
fleets for each auto manufacturer would still have to meet or exceed the CAFE
standard under the current system (i.e. the 27.5 flat MPG fleet wide
standard).
This ``anti-backsliding'' benchmark should be increased in line with the
overall
fuel economy improvements required under any attribute-based passenger car
CAFE system.
The adoption of this type of ``anti-backsliding'' requirement would
prevent
companies from offshoring all of their small car production and jobs. This
would help protect the jobs of tens of thousands of American workers. It
would
also guarantee that we continue to maintain domestic production capacity for
smaller, more fuel efficient vehicles.
This type of ``anti-backsliding'' requirement also would ensure that
the auto
manufacturers cannot subvert the objective of any new CAFE system by ``up-
weighting'' or ``up-sizing'' many of their vehicles, resulting in worse
overall
fuel economy. It would guarantee that the companies will actually improve
fuel
economy across the entire range of their passenger cars, and that consumers
and
our nation will indeed receive the benefits of more fuel efficient vehicles.
The imposition of this type of an ``anti-backsliding'' requirement
would not be
burdensome for the auto manufacturers. If the companies are genuinely taking
steps to improve fuel economy across their entire range of passenger vehicles,
and if they do not shift small car production overseas, they should easily be
able to meet this requirement.
Thus, the UAW would support legislation that authorizes NHTSA to
establish an
attribute-based CAFE system for passenger cars similar to the recently
promulgated rule for light trucks, provided this is coupled with an ``anti-
backsliding'' requirement that protects small car production and jobs in this
country and prevents up-weighting or up-sizing of cars. If this type of
``anti-
backsliding'' requirement is not included, then we would vigorously oppose
such legislation.
In addition to imposing an ``anti-backsliding'' requirement on any new
passenger
car CAFE rules, the UAW urges Congress to specify that such rules should only
take effect in 2012 or later, after the new light truck CAFE rules have been
implemented. In light of the serious economic difficulties currently facing
certain auto manufacturers, we believe it is important to avoid placing undue
regulatory burdens on the industry. The auto companies will have to make
significant investments to meet the challenges posed by the new light truck
CAFE
rules. In our judgment, these burdens should not be compounded by
simultaneously requiring changes in passenger car CAFE rules. By delaying the
effective date of any new CAFE rules for passenger cars, NHTSA can gain the
benefit of valuable experience in the implementation of the size-based CAFE
system for light trucks. This will also ease the financial burdens on the
auto manufacturers.
The UAW recognizes that there are other important issues associated
with any
shift to an attribute-based system of CAFE rules for passenger cars. This
includes whether this type of a system should be based on weight, size or some
combination of factors. We believe that resolution of these complex issues
can best be resolved through the administrative rulemaking process.
We understand that some persons have also called for the adoption of a
``credit
trading'' system that would allow auto manufacturers to buy and sell CAFE
credits
for passenger cars and/or trucks. The UAW strongly opposes such proposals,
and
urges Congress not to give NHTSA any authority to establish this type of a
credit trading system. A system for trading CAFE credits would inevitably
have
the effect of undermining the two fleet rule and/or fleet wide averaging, and
would therefore jeopardize the continuation of small car production and jobs
in
the United States. It could also aggravate the uneven playing field that
currently exists between foreign and domestic auto manufacturers.
The UAW believes it is important for Congress to recognize that
changing the
CAFE standards for passenger cars, by itself, will not solve either the
immediate problem of high gas prices or the larger problems of energy security
and environmental protection. Because of the long lead time needed to
implement
any changes in CAFE, there clearly will not be any impact whatsoever on
current
gas prices. Furthermore, light duty vehicles (passenger cars and light
trucks)
only account for 40 percent of oil demand in 2006. Passenger cars account for
less than half of light-duty vehicle sales, and new passenger cars sold each
year represent a very small percentage of the total vehicle stock on the road.
Thus, changing the CAFE standard for passenger cars would, over five years,
only
moderate demand from a source comprising less than 10 percent of our nation's
oil use. In order to significantly reduce our oil usage and our dependence on
foreign oil, clearly there is a need for broader national energy policies.
The UAW submits that these critically important energy security
objectives do
not have to be at odds with the goal of protecting and creating jobs for
American workers. Indeed, we firmly believe our nation can make substantial
progress in improving fuel economy and reducing our nation's dependence on
foreign oil, and at the same time help make sure that we keep and expand
automotive jobs in this country.
The UAW urges this Committee, the entire Congress and the Bush
administration to
support energy initiatives that further both of these important objectives.
Specifically, we urge Congress and the Bush administration to move forward
with
proposals to encourage the domestic production of advanced technology vehicles
and their key components. We believe great strides can be made in improving
fuel economy and reducing our dependence on foreign oil by accelerating the
introduction of such vehicles. But, as was demonstrated by a November, 2004
study conducted by the Office for the Study of Automotive Transportation
(OSAT)
of the University of Michigan Transportation Research Institute, and
commissioned by the bipartisan National Commission on Energy Policy, the
United
States will lose tens of thousands of automotive jobs unless steps are taken
to
encourage the domestic production of these vehicles and their components.
Currently, most of the advanced technology vehicles are assembled overseas,
and
almost all of the key components for the hybrid and diesel vehicles are built
overseas. As these vehicles gain a larger share of the market, we will
inevitably lose automotive jobs unless we make sure that these vehicles are
assembled in the U.S. and the main components are also built here.
We are very pleased that proposals along these lines have already been
introduced by Members on both sides of the aisle, including the Kingston-Engel
(H.R. 4409), Inslee (H.R. 4370) and other bills. The UAW submits that the
types
of manufacturer's incentives in these bills can help to create thousands of
automotive jobs for American workers, while at the same time improving fuel
economy, reducing global warming and our dependence on foreign oil.
The UAW also urges Congress and the Bush administration to move
forward with
proposals to aggressively promote the production, sale and use of alternative
fuel vehicles. Several automakers are already producing vehicles that can run
on a blend of 85 percent ethanol, 15 percent gas. This technology is
relatively
inexpensive - about $150 per vehicle. But production and sales of flex fuel
vehicles represent only a small fraction of the market. And the actual use of
alternative fuels has been hampered by bottlenecks in processing and, more
importantly, the lack of a distribution network. The UAW believes these
problems can be overcome by mandating that a certain percentage of all
vehicles
sold in the U.S. by each automaker must be flex-fuel capable by a specified
date. Indeed, there's no reason why automakers can't make 100 percent of
their
vehicles fuel capable within a reasonable time frame. We also believe that
there should be additional incentives to encourage the creation of more
processing plants to increase the supply of alternative fuels, and to
encourage
the conversion of existing filling stations so they have the capability to
distribute alternative fuels. In our judgment, this combination of flex fuel
policies offers the best opportunity to make progress in the near term on
reducing oil consumption and our dependence on foreign oil.
In conclusion, the UAW looks forward to working with this Committee as
you
consider proposals to improve fuel economy. Thank you for considering our
views on these important issues.
MR. BILIRAKIS. [Presiding] Thank you very much, sir. I am sorry if
I caused you to speed it up there at the end.
First of all, I want to welcome Mr. Sharp, who is a good friend. He
was a
very effective Congressman, a very effective member of this committee, and we
are sorry to have lost you, Phil, even though you have gone on to bigger and
better things.
Second of all, I want to apologize to all four of you, you sat there
through so many opening statements, if you will, and the other two panels, and
then when you come up, there are only three or four of us here to listen to
you. But the record is being kept, and of course, the television is on, and
hopefully, your words are going to be seriously taken, and be helpful.
Mr. Webber, I was asked by Mr. Joe Barton to ask you this question.
Would
you support an increase, a new increase in the fines for those manufacturers
who do not meet the standard, the CAFE standard?
MR. WEBBER. You put me in a very difficult position, Mr. Chairman.
MR. BILIRAKIS. Yeah, that is probably why he wanted me to ask you.
MR. WEBBER. You know who I represent. I would say that this has not
been
discussed, and I would like to defer my answer, but I think there are better
ways to skin the car.
MR. BILIRAKIS. Well, that is really what concerns me here, is we
forget
too easily, we Americans, we have already forgotten, almost, 9/11 and whatnot.
And when we have our problems at the pump, our gas problems at the pump, with
the long lines, that has taken place over the years and whatnot, we get all
shook up, and we think we can maybe come up with something. And then when the
problem sort of goes away, we relax again, and I honestly feel that is what is
going to happen this time around, if we don't soon do something. That is why
it
is critical, I think, that now that we have the door sort of open a little
bit,
that we address ways to try to solve the problem. The problem is not $3 a
gallon of gasoline. The problem is our dependency on foreign oil.
So, with that in mind, I asked Mr. Mineta if they have gotten around,
sat
around a table, with the auto manufacturers, and I didn't bring up the unions,
but certainly, the unions would be very, very significant in that regard, and
sit down and say, hey, there is a problem here, and we may not have the legal
authority to change the CAFE standard, particularly, as Mr. Reuther has
already
indicated, and the other side kept insisting the authority was there, and this
is, what we are doing here today is not necessary. But you know, why can't
people sit around a table and discuss these problems, and try, maybe have a
give
and a take and whatnot, and not basically require almost Congress to do it, in
this ivory tower of ours. We ordinarily, sometimes, will cause more problems
and more harm than good.
Let me ask you, and I will ask all four of you that.
MR. WEBBER. Well, I will lead off. We do from time to time sit
down--
MR. BILIRAKIS. Yeah, I would like to have you answer, and then Mr.
Reuther after that, because I do want to hear that viewpoint. Go ahead, sir.
MR. WEBBER. We do, from time to time, sit down and talk through these
problems, and participate in panels, and come up with ideas, but I would just
repeat what I said in my summary statement a few minutes ago. We acknowledge
the challenge. The good news is advanced technology has become a competitive
issue. My industry, the manufacturers I represent, are moving on several
fronts to gain the marketplace share, because of advanced technology.
You know, when safety became a competitive issue, all kinds of good
things
happened. And today, you and I drive vehicles that have never been safer.
The
same is true today with advanced technology. It indeed is a competitive
issue. And I think that bodes well for our future.
MR. BILIRAKIS. Well, and you pointed those out in a very good manner
in your statement. Mr. Reuther.
MR. REUTHER. The UAW does not believe that we can solve our energy
security issues just by CAFE alone. That is why--
MR. BILIRAKIS. I would agree.
MR. REUTHER. --we have called for policies to aggressively promote
both the hybrid and advanced diesel, and the flex fuel vehicles.
MR. BILIRAKIS. How would you do that?
MR. REUTHER. We would like to see incentives to the manufacturers to
encourage domestic production of these vehicles, in terms of the hybrids and
diesels. Those cost benefits would flow through to the consumers, but in
addition, it would ensure that we retain domestic production. That would also
be good for jobs. We don't think there has to be this tension between jobs
and promoting energy security. We think we can move forward on both.
On flex fuel, we have the technology already. It is very inexpensive.
We
would even support a mandate that by a certain date, there has to be a much
higher percentage of flex fuel vehicles produced in this country. The
challenge
there is providing the incentives so that we have the distribution and
processing of the flex fuels, and we would support policies along those lines.
MR. BILIRAKIS. Thank you, sir. Phil, very quickly, if you have maybe
a real quick response.
MR. SHARP. Well, I just would go back to the proposition that right
now,
we have this intense interest, understandably, from everybody, consumers
alike,
in fuel economy. But what happens to us is if these oil prices decline again,
as they might, they might not. But if they do, as the past patterns have
been, then we lose that as consumers. Naturally, the industry has to adjust
to consumer issues.
So the difficulty is how to sustain a proposition, and that is why I
think
the Government, in one way or another, unfortunately needs to be in the act.
MR. BILIRAKIS. Yeah. Okay, thank you, gentlemen.
Ms. Schakowsky has walked out. Mr. Inslee.
MR. INSLEE. Thank you. I am just following up Mr. Sharp's comment
that
price is not the only reason, there are a variety of reasons, this is a
trifecta. It is good for price, it is good for our national security, so that
we stop funding our enemies. We are sending billions and billions of dollars
to
the Mideast, funding our enemies. It is a security issue, and climate change
is
something we have got to come to grips with, and today, another agency of the
Federal Government issued another report categorically saying that essentially
the debate is over, that the science is in, and we have got to deal with this
issue. I just pointed out this solves a lot of our problems, some economic,
some security, some environmental.
I want to thank Mr. Sharp for your work on the commission that came up
with really broad-based suggestions, not just on CAFE, but on a whole host of
issues, and I want to point out that a lot of the commission's reports are
found
in a bill I have introduced, called the New Apollo Energy Act, which really
takes a holistic approach to dealing with this, and this is just one part of
it, and I just want to thank your efforts on that.
Mr. Reuther, I wanted to ask you about the flex fuel issue. I really
appreciate the UAW's leadership, saying that you are even willing to consider
Congress demanding, essentially, some percentage of our vehicles to be using
this existing technology, but we also are sensitive to the financial condition
of our auto industry, and it is something we have got to be aware of, too, and
some of us have suggested a variety of ways to assist in that regard. Senator
Obama has introduced a bill. I have introduced one here, to help with the
legacy healthcare costs of the industry, as they go through this transition
period.
I just wondered what your observations are. What should we be
thinking
about in that regard? What is the most effective thing to do, as far as
incentives, from your observation, that actually works?
MR. REUTHER. We believe the important thing is to make sure that all
companies in the industry are able to utilize the incentives, and because of
the different tax situations, financial situations of the companies, simply
providing, for example, an investment tax credit might not be equally
beneficial to all companies.
So in order to have a level playing field, we want all companies to be
making investments here in these advanced technology vehicles, flex fuel
vehicles. We think mechanisms have to be found, so that all companies get the
same incentives. One way to do that would be, as you have suggested in your
bill, to give companies the ability to get relief on legacy healthcare costs,
perhaps giving companies the alternative, either the tax benefit, or the
healthcare benefit. There may be other mechanisms, but the notion should be a
level playing field, all companies given the same incentives.
MR. INSLEE. Appreciate that. You know, the flex fuel, one of the
reasons
I am excited about this prospect, it is an existing technology. In your
testimony, I think, you said it costs maybe $150 a vehicle, which is peanuts
relative to what you are going to save, if we can keep these prices down by
introducing a competitor to oil and gas. If we can get bio-fuels to be a
competitive element, to help reduce, to essentially get another alternative
source, we think that can have a very beneficial impact on costs. So there
are savings actually over the long run.
Do all the industry have the capacity, do all the companies have the
capacity to provide us these flex fuel vehicles today? Is there any
particular
advantage in one or the other? Is there any sort of domestic, non-domestic
concern here, or is everybody on the same wavelength?
MR. REUTHER. My understanding is that the Big Three companies may be
slightly ahead in producing the flex fuel vehicles, but the technology is very
simple and inexpensive. If there is direction from the Government to move
forward in that direction, we think all auto companies can easily do it. We
believe this holds the best prospect for near-term significant oil savings,
and that is why we call on the Government to aggressively promote flex fuel
vehicles, and the domestic production.
MR. INSLEE. Some of us would rather send our money to Midwestern
farmers
and Middle Eastern sheikhs, and I don't think that is too parochial to say
that.
I will ask you kind of a rhetorical question. There are suggestions that we
continue our research into advanced fuels, hydrogen vehicles. I support that,
but I hate to think of that as a cover for inaction, to use the technologies
today. Today, we can drive hybrid vehicles. I drive one. It gets over 50
miles a gallon. I am 6'2", 205 pounds, and I am very comfortable and safe in
it. Today, we can drive flex fuel vehicles that can grow this demand for bio-
fuels. Hopefully, we will have cellulosic ethanol at some point.
Would you counsel us against using research as a cover for inaction?
I guest that is a rhetorical question, but I will ask it anyway.
MR. REUTHER. I don't think it is an either/or situation. Obviously,
additional research is needed, and would be helpful on, you know, plug-in
batteries, hybrids, fuel cells, et cetera, but we think we can move forward,
in
terms of encouraging domestic production of the advanced technology vehicles,
and in encouraging flex fuel vehicles, and move forward on CAFE, as we have
said in our testimony.
MR. INSLEE. Thank you.
MR. BILIRAKIS. Thank you. The gentleman's time has expired. Dr.
Burgess
to inquire.
MR. BURGESS. Thank you, Mr. Chairman. Mr. Webber, there is a
question
that I have just got to ask you. It is really a little bit off the subject of
CAFE standards, but I have heard this for years, that ethanol was harmful to
some of the parts in the engines of automobiles. Is that just an urban myth,
or is that true? I hear that mostly from my Corvette guys.
MR. WEBBER. I don't think the companies that have committed to
ethanol
would have done so had they not solved that problem, or had they not believed
that they could solve that problem. Whereas that might have been a problem in
the past, it is my understanding that the ethanol-capable, the E-85-capable
vehicles that are in the marketplace today, and I think we have got about five
million on the American road today, and we are going to have another million
before the year is out, you are not going to see any harm to the engines.
That is my clear understanding.
But I do want to raise one issue, and I go back to the Congressman
from
Washington's comments on ethanol. To me, the real challenge with ethanol has
to
do with infrastructure. We have 180,000 plus gas stations in the United
States.
Only 500 will give you ethanol, or what I would call E-85.
MR. BURGESS. Yeah. Let me reclaim my time, so the gentleman from
Washington doesn't use it. Being from Texas, I am not sure I am liking the
direction that is going.
We have heard, of course, today, about innovation and taxation and
regulation, so we have got the whole gamut ahead of us. Mr. Webber, let me
stay with you on that line of questioning. Do you think an increase in the
corporate
average fuel economy standards would substantially increase the number of
hybrids offered by American manufacturers?
MR. WEBBER. Your questions are very easy, Dr. Burgess, or not easy, I
should say.
I don't know the answer to that question. I do know that by
increasing
CAFE, and it will take time. It is a complex issue, especially if you go the
reform route that they did with light trucks. It is going to take time, and
so
it is not an immediate fix. It is not a silver bullet. If you are looking
for
immediate answers, they are probably not there. We will have, as my testimony
explained, a million hybrids on the road by the year 2010. I think that is
fairly impressive. I drive one. The mileage is very, very impressive, even
though I drive an SUV hybrid. I am very impressed. It is double what I would
probably normally get in a standard SUV.
MR. BURGESS. Yeah.
MR. WEBBER. So I think hybrid technology is here to stay. I think
you
are going to see more and more companies getting involved in it, and I think
it
is one of the answers. But there are several answers. That, indeed, clearly
is one of them.
MR. BURGESS. Let me ask Mr. Reuther, are we going to see those
hybrids from American manufacturers?
MR. REUTHER. Well, there already are hybrids from the manufacturers.
The Ford Escape--
MR. BURGESS. Mr. Reuther, with all due respect, I waited 5 years for
a Ford Escape before I broke down and bought a Toyota. I desperately wanted
an American-made hybrid. Now, I like the hybrid, and I like the fuel economy.
I like the feeling of moral superiority, but I would really like to be able to
know that I wasn't outsourcing a job in driving that hybrid vehicle. So what
can we do to encourage American manufacturers along those lines?
MR. REUTHER. Well, that is why we specifically urge that there be
incentives for the domestic production of the hybrids, and especially, the
components. A lot of people often think of just the final assembly, but it is
actually the components, the hybrid electric motors, the diesel engines, where
there are thousands and thousands of jobs, and you know, unfortunately, right
now, none of those key components are built in this country. We think with
the
proper incentives, we could get those built here, create jobs, and at the same
time, accelerate the introduction of these fuel-saving vehicles.
MR. BURGESS. Isn't the success story of the Toyota, though, isn't
that
enough incentive for the industry? I mean, I had to wait 6 months to get one.
MR. REUTHER. But there is a difference between--
MR. BURGESS. That is paying full price.
MR. REUTHER. --producing it and producing it in this country, and we
want
to make sure the jobs are created for American workers, not over in China or
Japan.
MR. BURGESS. And I agree with that. Mr. Sharp, let me just ask
you--of
course, you made a statement that I probably don't agree with fundamentally,
but
about the vehicle miles driven, and that leading to the tax increase. I asked
the question of Mr. Mineta, but I asked it so clumsily, I don't know if he
really understood it. If you have one of Mr. Reuther's American-produced
hybrid
vehicles, now, that is getting 50 miles to the gallon, and it has got a
plug-in
battery that you run off a solar cell, so that you are really only using one
gallon of fossil fuel for every hundred miles driven, would you just tax the
fossil fuel, or would you tax the ethanol that goes into the E-85 at the same
rate that you are--do you really care if those vehicle miles driven are that
great, unless you are burning fossil fuel? Is it the question of fossil fuel,
or the vehicle miles?
MR. SHARP. I actually never thought of that question, and I don't
have an
answer for you. Although I would quickly say when we get to that point, that
they have so many on the road, then the Ways and Means Committee can consider
relieving us of the gasoline tax. I think the risk of our getting to that
point is nowhere on the horizon.
MR. BURGESS. Mr. Sharp, nothing has changed since you were here.
Once we
get a tax, we never undo it. At least, that has been my experience.
MR. BILIRAKIS. The gentleman's time--
MR. SHARP. Or an ethanol subsidy, I might think.
MR. BILIRAKIS. The gentleman's time has expired. Ms. Baldwin.
MS. BALDWIN. Thank you, Mr. Chairman. In November of last year, I
and 12
colleagues sent a letter to Secretary Mineta voicing concerns about the
Department's proposed rule with regard to light trucks and specifically, I was
asking the Administration to consider increasing the fleet-wide fuel economies
by more than 1.8 miles per gallon, and including standards for vehicles
between
8,500 and 10,000 pounds gross vehicle weight. I was pleased that the
Department
was moving forward, but I felt that this was something that could be a little
bit more ambitious.
Now, I know, Dr. Pizer, in your remarks, you--thank you, by the way,
for
providing us with some new, creative ideas to be thinking about, but you
avoided
addressing the substance of the light truck rule. I am hoping I can coax you
to
do that. I know your caveat, that your views being expressed are your own,
but
as a Senior Fellow, who has looked very closely at this, I just--your
comments,
and do you agree that it would not have caused manufacturers undue hardship to
include pickup trucks, or to have created a standard higher, even just
slightly higher, than a 1.8 miles per gallon over four years?
DR. PIZER. The main comment I had about the level of the standard was
when NHTSA put out the proposed rule. It was based on a forecast of oil
prices
that was outdated by the time the proposed rule was even printed. By the time
the rule went final, the forecasts were about $20 per barrel higher, over the
long run, or about $0.50 per gallon higher. By my reckoning, that would have
raised the benefits from the fuel economy standard by about 50 percent. And I
was very surprised when they had that 50 percent increase in benefits, and
they
are doing a cost/benefit analysis, that it didn't alter the standard very
much.
The difference between the proposed rule and the final rule was 0.2 mpg, and
there were some countervailing reasons mentioned in the rule, more lead time,
and changes on the cost side, but it was still surprising to me that there
wasn't a larger increase. If we have these much higher oil prices that are
forecast to continue, we would expect, I think, to see a stronger response on
the CAFE standard, and that was very surprising to me.
MS. BALDWIN. Thank you, Dr. Pizer. Congressman, I thank you for your
testimony here today. In your testimony, you were urging strong Congressional
oversight and involvement, if the Department is going to be creating CAFE
standards for passenger cars. One thing I am curious to know is,
specifically,
do you believe that the committee print that we are looking at today, that we
are considering, needs to be strengthened in that regard, or are you talking
specifically about just the general oversight of this committee, and our
relevant Senate committees, with regard to the Department taking over this
responsibility?
MR. SHARP. Well, two things--
MS. BALDWIN. Exercising it, I should say.
MR. SHARP. I used the word, not an artful word, but legislative
guidance,
which is what I consider what you put in the legislation. It does seem to me
that you could put more guidance in the legislation, as to what you expect, or
the factors to be considered. Although, as I understand it, the legislation
is
reverting back to the four provisions that were discussed earlier today.
But secondly, I think you can follow up as the process is going on,
since
it will and it should take some time for them to redesign this, through
hearings, through other ways that Congress has traditionally exercised
oversight. And historically, from time to time, Congress has done a very good
job of that, and sometimes not, and there is an opportunity here to do some
serious work, because these are not casual questions, as many of you have
indicated. What is at stake here are large in terms of employment, are large
in
terms of our economy, are large in terms of the environment, and on the energy
front as well.
MS. BALDWIN. Thank you.
MR. BURGESS. Mrs. Blackburn.
MRS. BLACKBURN. Thank you, Mr. Chairman, and I thank all of you for
being with us, and for your patience today.
Dr. Pizer, I think I want to come to you first, and I enjoyed reading
your
testimony, and appreciate what you had to say. When you were looking in your
testimony, talking about fuel efficiency and considering how to best develop
new
technologies to meet the environmental needs, and the demands that consumers
have, that drivers have--and I would just like a concise answer from you, as
we
go through this process of deciding what the right balance is going to be--and
looking at CAFE standards, and looking at what the impact of government ought
to
be, and looking at the consequences of more governmental action, and then
looking at the free market and consumers, and what they want, and what we hear
from our consumers.
Do you think that we should just have the Highway Traffic Safety
Administration, the Administration develop the standards, and then allow the
manufacturers just to compete with what the best technologies are going to be?
As Dr. Burgess has pointed out, some of the concerns his constituents had, and
then we hear from different constituents. They like this, they don't like
that,
they can get this at just the normal competition, the market. And this, in
conjunction with that, do you think, what is your advice to us in being
careful
that policies we make aren't inadvertently promoting one technology over the
other, instead of just preparing a playing field, a level playing field, and
letting people, letting companies go to it, and so I would love your response.
DR. PIZER. I agree with you completely. You want to have a policy
that
sets a goal very clearly, and then allows the private sector to achieve that
policy goal as cheaply and as efficiently as possible, also recognizing
whatever
competing concerns there might be, like about safety, about jobs, and things
like that. I think a CAFE program suitably reformed, can achieve that. I am
not sure, I would be happy to hear other people comment. I think a CAFE
program
does not favor one particular technology, in terms of how you are going to
achieve the fuel economy savings.
Now, there are some other things that were mentioned that would be
complementary policies, for example, alternative fuels, that would be very
important. But in terms of the technology for achieving fuel economy, I think
a
fuel economy standard is probably the most appropriate policy, if it is well
designed.
MRS. BLACKBURN. So set it and move it. That is what you are saying.
DR. PIZER. Well, reform it, so it is as efficient as possible, and it
gives manufacturers as much flexibility as possible.
MRS. BLACKBURN. Yeah. Mr. Webber, do you want to add something to
that? I saw you look up.
MR. WEBBER. No.
MRS. BLACKBURN. Okay.
MR. WEBBER. I am fine.
MRS. BLACKBURN. All right. Great. Mr. Reuther, in your testimony,
you
mentioned the importance of the two-fleet rule, and this is something that I
found interesting, and I had hoped to be back while Secretary Mineta was still
here, because I wanted to talk with him about that, and Academy of Sciences
study, that basically said that the two-fleet rule did not seem to protect or
grow domestic jobs. And I would like for you to talk for just a second as to
why you disagree with that, and then what I would like to know whatever type
evidence you have to substantiate whatever type quantifiable data you have to
substantiate your position, and if you would like to submit that to me.
MR. REUTHER. The NAS study's conclusion was based on the assumption
that
the companies would simply substitute other production for the small car
production, and we think that is not a real world assumption. We think it
ignores the fact that there is significant overcapacity in the industry, and
that if given the opportunity, the companies would like to close additional
facilities. Our evidence is that the companies talk about that they are not
making the profits in the small vehicles--discussions with the companies,
and--
MRS. BLACKBURN. So it is anecdotal, basically.
MR. REUTHER. Well, we believe--
MRS. BLACKBURN. Let me--
MR. REUTHER. --based on what would actually happen--
MRS. BLACKBURN. Okay, and let me ask you something else. You
mentioned
in your testimony the 17,000 American workers who are currently employed at
U.S.
assembly plants, and I appreciate that you did mention the Saturn Spring Hill
plant, which is at the edge of my district, right outside my district. You
didn't mention the Smyrna, Tennessee plant that has 6,000 workers. That is on
the other side of my district, and they build the Nissan Altima that is there.
And was there a specific reason that you left the Smyrna location off your
list?
MR. REUTHER. We were focused on plants that have UAW members.
MRS. BLACKBURN. Just UAW members. Okay. All right. Thank you so
much.
MR. BURGESS. The gentleman from Massachusetts is recognized for 5
minutes.
MR. MARKEY. Thank you so much, and I am going to go in the Wayback
Machine and explain to people why fuel economy standards set by Congress were
the single most important thing that has ever happened in the history of our
energy dependence.
As you can see, in the '60s and the '70s, there was a continued rise
in
the amount of dependence upon imported oil, just continued to rise. Then
Congress, in 1975, passed a law, which mandated that over a 10 year period,
the
fuel economy average for the United States had to be 27.5 miles per gallon.
After a couple of years, what you saw is a ramping up of the efficiency, in
this
green line, and a plummeting of the amount of imported oil from OPEC, just a
plummeting over that 10 year period, until we reach the point where imported
oil
had dropped from--down to only 27 percent of the oil we consumed, from 35
percent, just as we reached the peak of where the fuel economy standards had
reached.
But then as we know, President Bush took over, the first President
Bush.
No additional changes were made. The number actually stagnated and declined
after that point, and so we saw a reemergence of the historic trend, higher
and
higher. And each time Sherry Boehlert and I asked for the imposition of the
NAS, the National Academy of Sciences standards, the Republican Congress voted
no, no, no, and we never saw, actually, a request from the Administration, in
the form of legislation, to act in this area.
So this is a devastating historical reality. Okay. Congress acting,
fuel
economy standards going into place, plummeting of imported oil, and then once
the pressure was relieved, it once again started to escalate. So the NAS, in
2001, they actually assumed in their analysis three technology paths, and they
assumed $1.50 a gallon of gasoline, that the cost of the technologies at the
time, they took that as the assumption, and they all assumed that 5 percent
weight increase, as a result of the addition of new CAFE or safety technology.
And so clearly, the assumptions are outdated, since there is now a much higher
cost of gasoline, which would imply that the technologies are now more
affordable than they were in 2001.
So there were three assumptions. We selected the middle assumption,
Sherry Boehlert and I, the mid path, and what they did in their report, on
pages
35 to 39, the National Academy of Sciences in 2001, was they took 13
technologies, and they used the existing state of those technologies, if they
were incorporated into the automotive fleet. So nothing new, you don't have
to
invent a single thing. Hybrid technology is not included. And what they do
is
they take engine friction and other mechanical, hydrodynamic loss reduction
that
would be a one to five percent fuel economy improvement. Application of
advanced low friction lubricants, multi-valve, overhead camshaft valve trains,
variable valve timing, variable valve lifting and timing. So they just went
through, using these you know, Ph.D.s and summa cum laudes from Harvard and
Cal
Tech and MIT, to figure out what it would be if they included it, if the
automotive industry used over the counter, available technologies, and they
assumed that there would be a 65 percent increase, a 34 to 65 percent increase
in fuel economy standards.
But what Mr. Boehlert and I do, for the purposes of our amendment, is
we
picked the low number. We picked the 34 percent number, the one-third
improvement that the NAS determined was possible, using off the shelf
technologies, not the 65 percent.
So here we are now, 6 years later. The Secretary of Transportation is
saying they have yet to really evaluate this report. They have been waiting
for
authority, apparently, to study something that the Secretary of Energy says is
a crisis, because 70 percent of the oil goes into gasoline tanks.
So I guess my question to the panel, maybe you--my good friend and
mentor,
Phil Sharp, on energy issues--maybe you could give us some historical
commentary
on this NAS report, the findings that they made on page 35 to 39, and whether
or not, you know, they were and still are implementable?
MR. SHARP. Well, if anything, you are correct that they are more
implementable today than they were in 2000. There is the issue over here,
2001
and 2002, as it was reported in 2001, but not printed until 2002, so you and
the
Secretary got into an issue over that, but there is no question that the price
of gasoline used was $1.50 in these calculations, and so there should be more
benefit.
The one thing that I don't know in your proposal is the timetable that
you allow for. That is critical to this issue of how costly it becomes.
MR. MARKEY. We used 10 years, which is the same that NAS used, so it
was 10 years.
MR. SHARP. Well, I believe the NAS said 10 to 15 years, but I am not
sure
at what point we are talking about in the report. But the point is, is that
is a key factor on the cost thing.
But also, to add to your argument in part--
MR. MARKEY. Even if it is 15, since 5 years has elapsed, if we gave
them 10 more years that would have given them 15 years.
MR. SHARP. Well, they might not see it that way.
MR. MARKEY. Well, I know they are not going to see it that way,
because they don't want to do it, but--
MR. SHARP. But let me say more significantly, the NAS study simply
did
not consider the possibility of significant increase in hybrids, which we are
seeing.
MR. MARKEY. Exactly.
MR. SHARP. Because at the time, they could not foresee what the
actual
costs would be, and what the consumer response would be, so it left that out,
so in fact, that has made it somewhat easier to do.
Now, I must say, on behalf of the National Academy report--which I was
a
part of--that they refused vehemently, over and over, to actually say what
number they recommend. They simply said these are possibilities at certain
cost levels, and gave options.
MR. MARKEY. No, what they did in the report was they said two plus
two,
we are not going to tell you what the number is. You pick the number that two
plus two equals. So they took very simple analysis, and they said this will
improve it by two percent, that will improve it by 2.5 percent. That will
improve it by four percent. And then they left the math to you, to take home
and add up, which is what we did. And no one in six years at the NAS has ever
contested that that isn't the result, 34 to 65 percent increase.
MR. SHARP. The NAS committee does not exist any more. It does not
respond, except as individuals, to questions, so there would be no response
from the National Academy.
MR. MARKEY. Well, let me ask just one final question, if I may, Mr.
Chairman.
Do you agree that 33 miles per gallon CAFE improvement is consistent
with
the lower end of the range of what the NAS concluded was achievable using
existing technology?
MR. SHARP. Mr. Markey, you may be right. I don't know. I have not
tried
to calculate and add that up. You were combining both, obviously the two
fleets together.
MR. MARKEY. Right.
MR. SHARP. The light duty truck and the other.
MR. MARKEY. Exactly. Exactly.
MR. SHARP. You may well be correct. I simply can't authoritatively
say absolutely you are.
MR. MARKEY. Does anyone down there dispute it?
MR. REUTHER. Well, I would like to add that besides the magnitude of
any increase, there is the question of the structure. Simply mandating a
significant flat mpg increase has a very disparate impact on different
companies, depending on their product mix.
MR. MARKEY. No, I agree with that, but look at the impact on America.
Okay, look at how much less dependent we were upon Middle Eastern Persian Gulf
oil, so that is also something that should be factored in. Yes.
MR. WEBBER. Congressman Markey, if I may respond to that chart. For
the
record, fuel economy since 1978, of cars and trucks, has gone up one to two
percent a year, but what you have seen is a change in purchasing. Now, we are
selling more light trucks, for example, than automobiles. That is one factor.
The real challenge for this country, though, is the proverbial VMT, vehicle
miles traveled. If you look at the EIA charts--and I have studied them until
I am blue in the face--that is a straight up line, a diagonal line. Vehicle
miles traveled.
MR. MARKEY. You are going to have to explain this away, Mr. Webber,
and I
don't think you can do it, with all your VMTs. You can't explain away '75 to
'86.
MR. WEBBER. You have a VMT challenge, you have more people driving
more, you have more vehicles on the road.
MR. MARKEY. Is this aberrational, Mr. Webber? What happened there?
MR. WEBBER. Well, I think it is aberrational.
MR. MARKEY. I don't think so Mr. Webber.
MR. WEBBER. And I know that we can have a friendly disagreement on
that.
The other thing I would like to point out is that production from U.S. oil
sources has gone down appreciably, and that is one of the reasons why oil
imports have risen.
MR. BURGESS. The gentleman's time has expired.
MR. MARKEY. We are only down one million barrels of production, but
we are up to 13 million that we import, so we are up 6.5 million that we
import--
MR. BURGESS. The gentleman's time has expired.
MR. WEBBER. But U.S. production is down.
MR. BURGESS. Now, we do have another hearing coming into this room,
but I
was going to give Mr. Inslee one last question. He wasn't here, so Mr. Markey
took it. Taking the Chairman's prerogative, I want to have the last word.
Dr. Pizer, I had asked the question about that gallon of fossil into
the
hypothetical hybrid vehicle, but also burning ethanol. Would that be eligible
for those, to bank those credits that you talked about? Would you be able
to--
are those credits only applicable to fossil fuel burned, or would the fact
that
it was burning gallons of E-85 ethanol make it ineligible for those credits?
Could the credit just apply to the fossil fuel burned?
DR. PIZER. Well, I am not sure quite how it works under the current
system. I mean, presumably, you don't know what kind of fuel a vehicle is
going
to burn when you sell it. It can burn either. So that is something that
would
really have to be addressed in the rules you are making. But as a general
rule,
I think all of the problems that we have identified, well, I shouldn't say
that.
A lot of the problems we identified really have to do with the oil usage, and
I
think that you would probably want to think about oil a little bit differently
than you would want to think about ethanol.
But as Mr. Sharp suggested, it would really require a little bit of
study,
to think about exactly what all the differences are, and how many are common
across ethanol and oil, and how many different. Obviously, the security ones
are very different, but maybe some of the other ones are similar. I don't
know.
MR. BURGESS. Very well.
Our time is up, and our hearing is adjourned. Thank everyone on the
panel very much for their perseverance.
[Whereupon, at 2:02 p.m., the committee was adjourned.]
RESPONSE FOR THE RECORD BY ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL
UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF
AMERICA
<GRAPHICS NOT AVAILABLE IN TIFF FORMAT>
UAW RESPONSE TO QUESTIONS POSED BY
REPRESENTATIVE STEARNS
1. QUESTION: ``Wouldn't you agree that the two fleet rule has created the
incentive of forcing vehicle manufacturers to de-content their domestically-
produced vehicles to make them apply to their import fleets, or vice versa
thereby reducing their procurement of American-made supplier components?
UAW ANSWER: No, we do not agree with this assertion. The primary impact
of the
two-fleet and fleet wide averaging rules has been to require full line
automakers to keep small car production in the United States. This has helped
to keep tens of thousands of assembly and parts jobs in this country. As is
apparent from the self-contradictory nature of the question, any ``incentive''
that auto companies might have to lower the domestic content of higher-mileage
vehicles to keep them in their foreign fleets is counterbalanced by an
``incentive'' to raise the domestic content of other vehicles to meet the CAFE
standard for their domestic fleets. Thus, these ``incentives'' cancel each
other
out. Overall, the two-fleet rule has a positive impact on automotive jobs in
the United States because it keeps small car production in this country.
2. QUESTION: ``Hasn't the ability to produce in the NAFTA region eliminated
any benefit from the two fleet in forcing small car production to stay in the
United States because manufacturers can produce small cars in non-UAW plants
in Mexico that can be included in their domestic fleet?''
UAW ANSWER: Again, we do not agree with this assertion. One of the main
impacts
of NAFTA was the elimination of the 25% U.S. tariff on imported pickup trucks
from Mexico. As a result, auto companies have established pickup truck
production in Mexico, along with the production of cars. It is not likely
that
the companies would disrupt their production of pickup trucks in Mexico by
shifting more small car production from the U.S. to Mexico. Furthermore, it
is
worth noting that vehicles produced in Mexico have significantly higher
percentages of U.S. content than vehicles produced outside of North America.
However, if the two-fleet rule and/or fleet wide averaging were eliminated,
there is a very real danger that full line auto producers would decide to
shift
small car production from the U.S. to places where small cars make up a much
larger share of the market. This could include shifting small car production
to
Southeast Asia, Europe, and/or Brazil. This would translate into a
significant
loss of both assembly and parts jobs, since vehicles produced in these
locations have much lower levels of U.S. content.
RESPONSE FOR THE RECORD BY THE HON. PHILIP R. SHARP, PRESIDENT, RESOURCES FOR
THE FUTURE
RESPONSE TO: Questions from The Honorable Cliff Stearns
FROM: Phil Sharp, President, Resources for the Future
June 7, 2006
QUESTION: How far are we from significant fuel cell penetration in the
passenger vehicle market - say 10%? What will be required of our
infrastructure to sustain
that penetration? And aren't there problems in the ``wells to wheels'' energy
analysis depending on the feed stocks used for hydrogen production - like
natural gas versus water and hydrolysis?
ANSWER: This is beyond my technical expertise, and therefore I have no basis
upon which to predict this.
QUESTION: How have crossover vehicles, particularly in the SUV niche, affected
the current CAFE system? Why can't we simply eliminate the passenger car and
light truck classification distinction and deal with vehicles purely with an
attribute based approach?
ANSWER: The attribute-based approach certainly provides, over time, the
opportunity to eliminate the distinction between light-duty trucks and
passenger cars.
QUESTION: Isn't it a bit ridiculous that while the production of flexible fuel
vehicles generates CAF� credits for manufacturers the vast majority of these
vehicles are never run on flexible fuels like ethanol? Can we ever get away
from the ``chicken or the egg'' argument about enabling infrastructure and
technology as we get more involved with ethanol and biodiesel?
ANSWER: When CAF� credits for flexible fuel vehicles were adopted, it was
presumed that other government incentives were needed and would be adopted to
make sure an infrastructure was built. However, given the fact that gas prices
have remained for many years quite low, neither market incentives nor
incentives by government to sustain policies for infrastructure ever happened.
RESPONSE FOR THE RECORD BY WILLIAM A PIZER, SENIOR FELLOW, RESOURCES FOR THE
FUTURE
RESPONSE TO: Questions from the Honorable Cliff Stearns
FROM: William Pizer, Senior Fellow, Resources for the Future
June 19, 2006
1. How far are we from significant fuel cell penetration in the passenger
vehicle market - say 10%? What will be required of our infrastructure to
sustain that penetration? And aren't there problems in the ``well-to-wheels''
energy analysis depending on the feed stocks used for hydrogen production -
like natural gas versus water and hydrolysis?
It is hard to imagine significant fuel cell penetration for several decades.
The production, distribution, storage, and use of hydrogen all face
significant cost disadvantages that are several times that of competitive
alternatives. For
example, production of hydrogen through electrolysis is about seven times more
expensive per unit of energy than gasoline; production via natural gas is
about
two to four times more expensive. Meanwhile, the current cost of power from a
fuel-cell engine is about 100 times the cost from an internal combustion
engine;
estimates of the cost of a fuel cell vehicle are on the order of $1 million.
Given it took 20 years for wind and solar power to see tenfold decreases in
costs, it will take some time for these costs to come down.1
Even after a fuel cell vehicle becomes competitive in price with ordinary
vehicles, the penetration of such vehicles will take time. Current estimates
suggest that hybrid electric vehicles will reach 10% of the passenger vehicle
market by the end of the decade - ten years after such cars were first
available.2
A key element of fuel cell vehicle penetration will be the widespread
availability of hydrogen fuel, requiring significant changes in the existing
infrastructure delivering gasoline, diesel and ethanol. Distributed
generation
of hydrogen, where filling stations would produce hydrogen by reforming
natural
gas, would require considerably less infrastructure, but would not provide as
signficant climate benefits or take advantage of economies of scale in
production. In the long term, a recent National Research Council report
predicts large-scale centralized generation with pipeline distribution.3
As the preceding comment suggests, the source of the hydrogen matters greatly
for the net climate consequences of fuel cell vehicles. A recent presentation
of work at Argonne National Labs highlighted that while a fuel cell vehicle
using hydrogen made by reforming natural gas would have about half the
emissions
(well-to-wheel) of a conventional vehicle, that same vehicle using hydrogen
made
from electrolysis powered off the current U.S. electricity grid would have
higher emissions than a conventional vehicle. Meanwhile, electrolysis powered
by non-emitting electricity - nuclear or renewables -- would have zero
emissions.4
2. How have crossover vehicles, particularly in the SUV niche, affected the
current CAF� system? Why can't we simply eliminate the passenger car and
light truck classification distinction and deal with vehicles purely with an
attribute based approach?
Light trucks now make up more than half of the light-duty fleet. This is due,
in large part, to the introduction of crossover vehicles, which went from 2%
of
light-duty vehicles in 1980 to more than 25% in the last few years, as shown
in the table below.5
Sales of Light Trucks (SUV + vans + pickups)
Sales of SUVs
Sales of Passenger Cars
1975
187,000
7,274,000
1980
2,217,000
244,000
9,095,000
1985
4,235,000
707,000
10,969,000
1990
4,515,000
930,000
9,224,000
1995
5,934,000
1,736,000
8,725,000
2000
8,307,000
3,625,000
8,978,000
2002
8,673,000
4,187,000
8,336,000
2004
9,360,000
4,648,000
7,505,000
2005
4,442,000
7,870,000
Until the recent reforms to light-truck CAFE, there was a significant
incentive
to build cars that could be classified as light trucks (SUV). The same
vehicle,
if it were classified as a light truck rather than a passenger car, would face
an almost 7 mpg easier standard (declining to 4.5 mpg in 2007). Under the new
program, small light trucks will actually face a standard that is more
stringent
than the current passenger car standard in 2011. In this way, using a size-
based system and setting car and light-truck standards consistently, many of
the existing problems with the two classification system are reduced.
Nonetheless, the original distinction between the fleets - for work/cargo
versus
personal use - has clearly broken down and the argument for supporting a two-
class system is unclear. The recent NRC CAFE report suggests a fully tradable
system, with consideration for an attribute-based system.6
At this point, the main concern about removing the distinction (or allowing
companies to trade across fleets) is how it would affect the distribution of
burden across manufacturers. Some companies might see a benefit if they are
currently constrained by CAFE in one fleet, but not in the other - for
example,
if company ``A'' finds it difficult to meet its truck CAFE but easy to meet
the
car CAF�, they may benefit from merging the standards as they are able to
trade
off less effort on trucks for more effort on cars (something they currently
cannot do). Meanwhile company ``B", who has equal difficulty meeting both the
car and truck CAF�, would not see any benefit from this added flexibility. In
this case, company ``B'' might oppose the standard based on the benefit (or
even perceived benefit) to ``A".
Importantly, moving to an attribute-based approach tends to equalize the
burden
across manufacturers in each fleet even when the standards are separate for
cars
and trucks. This diminishes the noted distributional effects and should make
it easier to merge the standards.
3. Isn't it a bit ridiculous that while the production of flexible fuel
vehicles
generates CAF� credits for manufacturers, the vast majority of these vehicles
are never run on flexible fuels like ethanol? Can we ever get away from the
``chicken or the egg'' argument about enabling infrastructure and technology
as we get more involved with ethanol and bio-diesel?
Currently, about 2% of vehicles on the road are flexible fuel vehicles. They
use alternate fuels about 1% of the time but receive CAFE credit as if they
use alternate fuel 50% of the time.7
From the vantage point of reducing oil use, this does not make sense. As the
NRC report notes, this has lead to less oil savings from CAFE than would occur
without the flexible fuel provision. They recommend removing the CAF� credits
for flexible fuel vehicles. However, from the perspective of creating
flexibility in the vehicle fleet, it might make some sense - that is, if we
value the flexibility as well as the fuel savings. For example, the ability
to switch to ethanol could reduce oil price volatility by providing the
flexibility
to switch to an alternate fuel when oil prices are high. Reduced volatility,
in turn, has economic benefits.
Unfortunately, the flexibility in the fleet has little value if ethanol is
unavailable when you need it. Currently, there are only 637 E-85 stations out
of about 180,000 nationwide. Of course, with only 2% of vehicles on the road
able to use E-85 (and 1% using it), perhaps it is not surprising that only
0.3%
of stations provide it. Hence what might appear to be a chicken and egg
problem.
However, until recently, the underlying cost of ethanol did not allow it to be
cost competitive with gasoline. And even now, because of current supply
constraints, E-85 has not been priced in a way that made it an attractive
alternative to gasoline at the pump. Before considering fuel distribution and
vehicle use to be a chicken and egg problem, therefore, it may be useful to
see how markets adjust over time to higher gasoline prices.
RESPONSE FO THE RECORD BY FREDERICK L. WEBBER, PRESIDENT, ALLIANCE OF
AUTOMOBILE MANUFACTURERS
Responses to written questions from the May3, 2006 legislative hearing on H.R.
___, a bill to authorize the National Highway Traffic Safety Administration
(NHTSA) to set passenger car fuel economy standards
The Honorable Cliff Stearns
Has the Alliance seen the manufacturer fleet fuel economy figures rise with
gasoline prices? If so, isn't that the most efficient, market-based way to
improve CAFE averages, or more specifically, conservation?
As gasoline prices have risen in recent months, consumers have started looking
more toward cars and trucks that use less fuel. And, over the past few years,
consumer surveys show that fuel economy has become a much higher priority for
those purchasing a new vehicle. In fact, in 2000, fuel economy ranked 25th on
a list of consumer priorities when purchasing a new vehicle. In 2005, fuel
economy moved up to 7th place in the list of vehicle purchase priorities.
Automakers are manufacturing cars and trucks that meet this consumer
demand. Currently, over 100 models are available that have EPA-estimated
highway ratings
of 30-miles per gallon or more. Forty-six models are available with advanced
technologies like hybrids, flex-fuel vehicles, and clean-diesel. These models
will add to the existing 8 million advanced technology vehicles on the road
today. These technologies are improving fuel economy and helping our nation
move toward energy independence. Furthermore, as shown in the Model Year 2006
Fuel Economy Guide published by EPA and DOE, nearly every model has a
combination of engines and transmissions that typically affect fuel economy by
2-3 mpg but as much as 5 mpg, providing consumers with fuel economy choices
with today's gasoline engine technologies.
Dramatic increases in gasoline prices and incentives for consumers to
purchase
advanced technology vehicles are shifting the marketplace. According to R.L.
Polk & Co., there were more than 280,000 hybrids, 3.6 million diesel, and 3.8
million ethanol-capable vehicles on U.S. roads at the end of 2005.
The continued growth of advanced technology automobiles powered by a
diverse mix
of fuels is a proven market-based solution that will continue to reduce the
amount of gasoline we use. Furthermore, this is the best path forward as CAFE
compliance is based on what consumers actually purchase - not what automakers
manufacture. Market-based incentives coupled with new fuel saving
technologies are more reasonable than dramatic increases in CAFE standards.
Do other mature economies use a command and control CAFE-like approach to
achieve conservation in the auto sector? Europe? Japan? How do their
domestic
fleet averages compare with the U.S.? If they are different, why?
The U.S. CAFE system is unique in terms of the level of command and
control.
Other systems in mature economies take different forms than the U.S.' mandated
fleet average approach and are typically voluntary. For example, the Canadian
system and E.U. systems are voluntary. Moreover, the EU is primarily focused
on reductions in carbon dioxide emissions.
Other mature economies are working with stakeholders through
government-industry
agreements to achieve specific targets on certain emissions. North of our
border, automakers entered into an agreement with the Canadian government to
reduce the growth of greenhouse gas emissions from cars and light trucks by
5.3
megatonnes by 2010. Across the Atlantic, the EU has a government-industry
agreement focused on reductions in carbon dioxide emissions.
European Union
A closer comparison of the United States and the next largest mature
economy
(The European Union) shows some dramatic differences. High taxes on gasoline
are the primary method of spurring conservation across Europe. These taxes
have
historically made gasoline in Europe two to three times more expensive than
prices here in the U.S. In addition, taxes are different between gasoline and
diesel, encouraging the use of diesel fuel. Pickup trucks and sport utility
vehicles are not a significant part of the European fleet, while they account
for roughly half of all automobile sales here in the United States. As for
fuel
mix, the proliferation of diesel is about 50% in Europe compared to only about
2% in the U.S. As diesel generally offers as much as 30% better fuel economy
over gasoline, European diesel models often get better mileage over similar
U.S.
gasoline-powered models. Additionally, vehicle miles traveled are much lower
in
Europe compared to the U.S. and transit usage is much higher in the older,
European cities than in typical U.S. cities.
These key differences help us understand why domestic fleet averages
in Europe are higher than the United States.
Japan
Japan is another modern, mature economy with significant
transportation
challenges. It is an island nation slightly smaller than California and has a
population of 127 million people. However, given the rugged, mountainous
terrain less than 40 percent of the land is habitable. To understand this
impact on their transportation system, imagine about 44 percent of the U.S.
population and economic activity concentrated in the state of Michigan. Thus,
Japan's highly concentrated population relies heavily on mass transportation.
More than 80 percent of Japan's car market consists of small cars powered by
engines smaller than 2000cc. In 2004, Japan had approximately 72 million cars
and trucks in use.
The Japanese government uses a simple weight-based standard to reduce
fuel
consumption in its transportation sector. There are eight weight classes in
the
Japanese system, covering both cars and light trucks. Average fuel economy
targets are set within each weight class, and the targets are more stringent
for
the lighter weight classes and less stringent for the heavier weight classes.
The targets for gasoline-powered passenger vehicles were set for 2010 and
represent about a 23% improvement in fuel economy compared to the 1995
baseline.
Fuel economy targets are selected by a ``top runner'' method, whereby the
targets
for each weight class are established in part based on the best performing
vehicle in that weight class. The original system was established without any
opportunity for a multi-class manufacturer to average compliance across
classes.
However, the Japanese system was more recently modified to allow ``offsets''
on a
two-for-one basis: credits earned by a better-than-required fuel economy
performance in one weight class are discounted by 50% when applied to
compensate
for worse-than-required performance in another weight class. Originally,
Japan's system was somewhat troubling for companies importing automobiles into
their market but recent refinements have helped address this issue.
RESPONSE FOR THE RECORD OF THE HON. NORMAN Y. MINETA, SECRETARY, U.S. DEPARTMENT
OF TRANSPORTATION
<GRAPHICS NOT AVAILABLE IN TIFF FORMAT>
OUESTIONS FOR THE RECORD FROM THE HONORABLE CLIFF STEARNS
1. How does the reformed CAFE program for light trucks prevent size creep in
models to lower fuel economy requirements?
Answer
The National Highway Traffic Safety Administration (NHTSA) has structured the
reformed CAFE program to minimize the regulatory incentives to make vehicles
larger.
First, under the reformed program, NHTSA has based the fuel economy
target for vehicles on their ``footprints.'' To change the vehicle footprint,
manufacturers
would have to change the vehicle platform. Changes to the vehicle platform
typically require redesign and retooling for the various models that share the
platform, and making such changes requires substantial time and money. Given
the
costs associated with platform changes, vehicle manufacturers are unlikely to
change a vehicle footprint solely, or even primarily, in response to the
reformed CAFE program.
Second, the reformed CAFE program sets fuel economy targets at a level
for each
footprint that requires substantial use of fuel-saving technology for every
size
vehicle footprint. Even if a manufacturer makes its vehicles larger, it still
must make substantial use of available fuel-saving technologies to enhance the
fuel economy of the larger vehicles. Under the reformed CAFE program, it is
not
technically easier or less expensive to achieve the fuel economy targets in
the next-larger vehicle category.
Third, the new rule will set challenging targets for all models. This
will
encourage manufacturers to improve fuel economy without downsizing in a way
that can impair safety.
Lastly, the incentive to upsize is virtually nonexistent for vehicles
larger
than 65 sq. ft. The continuous function is essentially flat once size exceeds
65
sq. ft., which means there is a minimal, if any, effect of upsizing on a
vehicle's fuel economy target
2. Even though I believe the light truck reformed CAFE program is a step in
the right direction, won't the next level of gaming be to design your
over-8500-
pound light trucks to qualify as pick-ups because over-8500-pound pick-ups are
not covered by the new CAFE rules? Didn't we see much of this with cross-over
vehicles like the PT Cruiser that qualify for CAFE as light trucks but meet
car emissions standards?
Answer
Vehicle manufacturers have had the ability to make vehicles heavier
and escape
the truck CAFE standards since the beginning of the program. However, for the
first time in the history of the CAFE program, the reformed CAFE program
extends
the fuel economy standards to SUVs and other vehicles between 8,500 and 10,000
pounds gross vehicle weight rating that are regulated as medium duty passenger
vehicles, or MDPVs, by the EPA.
The MDPV category established by EPA excludes only those vehicles
between 8,500
and 10,000 pounds that are typically designed for work-oriented functions,
such
as high-capacity vans and pick-up trucks with a separate cargo area 6-feet or
more long. Redesigning a pick-up to increase its gross vehicle weight rating
and
extending the length of its cargo bed would be expensive and change how the
vehicle could be marketed. Furthermore, MDPVs are used to carry 7 or more
passengers. We believe that redesigning them to qualify as pick-up trucks
would greatly diminish this attribute and is therefore unlikely.
Cross-over vehicles such as the PT Cruiser qualify as light trucks by
having
removable seats so as to provide a cargo area. Designing seats so that they
are
removable is inexpensive and simple compared to the changes needed to a
pick-up
to make it a work-oriented vehicle. Also, the reformed CAFE program has
eliminated the provision that permits PT Cruisers to be classified as a light
truck.
Unlike MDPVs that have come into production only in the last decade,
large
pickups have been produced before the enactment of the CAFE program and always
have been produced in small numbers. Currently, large pick-ups make up less
than
3 percent of annual light duty vehicle sales. These large pick-ups are used
for
specialized work-related purposes such as towing, hauling cargo, farming or
other work-related uses and often are equipped with diesel engines.
SUBMISSION FOR THE RECORD BY EDWARD B. COHEN, VICE PRESIDENT, GOVERNMENT AND
INDUSTRY AFFAIRS, HONDA NORTH AMERICA, INC.
<GRAPHICS NOT AVAILABLE IN TIFF FORMAT>
SUBMISSION FOR THE RECORD OF THE ASSOCIATION OF INTERNATIONAL AUTOMOBILE
MANUFACTURERS, INC.
<GRAPHICS NOT AVAILABLE IN TIFF FORMAT>
* William A. Pizer, an RFF fellow and a senior economist with the National
Commission on Energy Policy, has published widely on the cost of environmental
regulation (email: pizer@rff.og). Madeleine Baker is an intern at RFF (email:
baker@rff.org).
1 See R. Newell (2005), ``The Hydrogen Economy,'' Resources 156.
2 See http://www.hybridcars.com/blogs/brain/how-fast.
3 See NRC (2004), The Hydrogen Economy: Opportunities, Costs, Barriers, and
R&D Needs, National Academy Press.
4 See M. Wang (2003), www.transportation.anl.gov/pdfs/TA/281.pdf.
51980-2004: Bureau of Transportation Statistics,
http://www.bts.gov/publications/national_transportation_statistics/pdf/entire.
pdf (Tables I-17, I-19, I-20); 1975 and 2005: EPA,
http://www.epa.gov/otaq/cert/mpg/fetrends/420r05001e.pdf (Tables E-1 and E-5)
6 NRC (2004), Effectiveness and Impact of Corporate Average Fuel Economy
(CAFE) Standards, National Academy Press.
7 See http://www.E-85fuel.com/index.php.