The Bond-Levin CAFE Amendment

Madam President, I am speaking this afternoon in support of the pending Bond-Levin amendment relative to fuel efficiency in our automobiles and how we achieve that fuel efficiency.

Our amendment will increase fuel economy in automobiles. It will protect the environment. It will decrease our dependence on foreign oil. But it will do this in a way that will not harm the U.S. economy or put hard-working Americans out of work.

Our amendment achieves the goal of better fuel economy with greater reliance on positive incentives to advance leap-ahead technologies such as hybrids and fuel cells. That includes promoting these technologies with greater increases in joint research and development and government purchases.

Our amendment requires the Department of Transportation to increase the CAFE standard. It is a mandate, but the key difference between our amendment and some of the alternatives is that our mandated increase will be left up to the Department of Transportation and will not be just an arbitrarily determined number on the part of the Senate.

Let me go through some of the goals and how we achieve those goals in the Bond-Levin amendment.

First, we need to improve fuel economy. We can, and we should, do it in a way that protects the environment, that diminishes our dependence on imported oil, and that allows the U.S. economy and our domestic manufacturing industry to thrive.

Those goals are not in conflict with each other. We can improve fuel economy, but we can do it in a way that does not harm domestic manufacturing and the U.S. economy if we do it right. And that is a big ``if.'' If we do it wrong, we could have a very negative effect on jobs and the American economy. And, as a matter of fact, if we do it wrong, we not only can damage the American economy, but we could see little improvement in the environment, given the way in which the current structure of fuel economy mandates is set up.

It is a discriminatory structure that has discriminated against domestics in ways that were probably unforeseen when this structure was adopted 30 years or so ago, but nonetheless it has had that effect.

What we do is ensure that fuel economy will be improved. But we do not set an arbitrary standard. We require the agency that has the expertise and the experience to set an increased fuel economy standard for both trucks and for light vehicles.

This is not the place, on the Senate floor, to make a complex decision that should involve a whole host of factors: What is achievable technologically, what is the cost, what are the safety impacts, what are the impacts on American jobs, and a whole host of other factors that need to be considered before a new fuel economy standard is set. That should not just be seized out of the air arbitrarily and put into law on the Senate floor. That ought to be done by an agency that has the expertise and experience to do it, that looks at all of the factors that should go into the decision, and then does it in an usual, regulatory way with notice and comment.

The second part of our three-part policy is to increase funding for research, development, and demonstration of new, advanced, clean and fuel-efficient vehicles. We provide $50 million. We would authorize that in funds for the Department of Energy to develop advanced hybrid vehicles. And that would be a significant increase.

Hybrids run on both gasoline and electricity and are far more fuel efficient than conventional vehicles. We would provide an increase in funds for the Department of Energy to work collaboratively with industry to do some research and develop clean diesel technologies. It would be a significant increase in what is otherwise provided.

Because diesel engines are much more fuel efficient than gasoline engines, furthering clean diesel will help reduce gasoline consumption. And because diesel vehicles must meet very stringent emissions standards in the very near future, this will not be detrimental to the environment. Again, diesel vehicles are subject to the new clean air standards. These emissions standards must be met by diesels. If we can advance clean diesel technology, we will be saving gasoline because they are more fuel efficient than gasoline.

The third part of our policy harnesses the purchasing power of the Federal Government. In order to try to get the vehicles we are talking about--including hybrids and fuel cell vehicles--commercially adopted onto the roads, we have to use the purchasing power of the Federal Government. So we would require the Federal Government, when it is purchasing vehicles, to purchase hybrid trucks for its fleets of light trucks that are otherwise not covered by the Energy Policy Act.

Using hybrid trucks in Federal fleets will improve the fuel efficiency of the Federal fleet because hybrids are far more fuel efficient than conventional gasoline vehicles. And, at the same time, we would be creating a significant and reliable market for hybrid trucks. This is not buying vehicles that are otherwise not needed. This would be a requirement to purchase vehicles that the Federal Government is buying but to require that we buy the hybrids so we can help create the market that is so essential for the auto industry in order to have confidence that the vehicles will be purchased when they produce them. In a related amendment, not part of the Bond-Levin amendment--I will be offering an amendment to the energy tax amendment which will come from the Finance Committee--we will be providing tax incentives to help advance the purchase of clean vehicles and clean fuel.

Our tax amendment--again, this is not part of Bond-Levin; it will be offered as an amendment to what is offered by the Finance Committee--would increase the tax credit available to consumers who purchase hybrid vehicles and provide a new tax credit for fuel-efficient lean-burn vehicles, to help push these vehicles into the marketplace. We would also extend the period of time for tax incentives for fuel cell vehicles for 3 additional years, from 2011 to 2014.

We would also provide tax credits for consumers who buy heavy-duty diesel vehicles that are significantly cleaner than what is required by law.

Finally, we would provide producers with tax credits for purchasing ultra-low-sulfur diesel fuel which the next generation of diesel vehicles would need to meet the upcoming round of extremely low emission standards.

I want to spend a few more minutes discussing the fuel economy part of our amendment. Clearly, we all want to improve fuel economy. That is a goal all of us share. But how we increase it is absolutely critical. Our amendment increases it by requiring the Department of Transportation to increase CAFE . However, rather than setting an arbitrary number for fuel economy on the floor of the Senate, we require the National Highway Traffic Safety Administration, NHTSA, to conduct a rulemaking process to increase fuel efficiency. The resulting rules will apply to both passenger cars and light trucks. Pickup trucks, minivans, and SUVs are included in the definition of light trucks.

But rather than legislating an arbitrary number, what the Bond-Levin amendment does is to tell NHTSA--the agency designed to do this--to rationally take into account a number of important considerations when setting a new standard: safety; consumer choice; the need for oil independence; the need for fuel savings; any unfair or competitive disadvantage that is created or continued by use of the CAFE system; impact on jobs; and a number of other factors. If NHTSA fails to act in the required timeframe under our amendment, Congress can consider legislation under expedited procedures to mandate an increase in fuel economy standards.

If we fail to set fuel economy standards in a deliberate manner, if we just do it arbitrarily by adopting a number in the Senate floor, we create a further competitive disadvantage to domestic manufacturers.

From its inception, CAFE has given an unfair competitive advantage to foreign manufacturers, not because they have more fuel efficient technologies; they do not. I emphasize that because there are folks who do believe that foreign cars are more fuel efficient than domestic cars. In the same category of cars, the same weight classifications, they are not. American-made cars are at least comparable in terms of fuel efficiency, and in many cases they have superior fuel efficiency to foreign-made models in that same weight class, the ones with which they compete.

It is because foreign manufacturers have historically focused more on smaller cars and smaller trucks than American manufacturers that they have that advantage. It is not because their vehicles are more technologically advanced or more fuel efficient in the same weight class. The reason this has worked this way is that the CAFE system, when it was designed, gave an advantage to manufacturers by looking at the entire fleet of cars rather than dividing the fleet into comparable size vehicles or comparable weight vehicles. Any automaker that built primarily small cars found it easy to meet the CAFE standard, while the manufacturers that built the full line of cars, including five-and six-passenger cars that American families have traditionally bought, found it much more difficult to meet the fleet average requirement of CAFE . So the fleet average does not reflect the efficiency of comparably sized vehicles.

In looking at the fleets as a whole, there is a built-in bias against domestic manufacturers although, again, domestically built vehicles are at least equally fuel efficient, pound for pound, in the same weight classification, as are the imported vehicles.

Foreign car manufacturers have been able to expand their production of larger cars and pickup trucks, minivans, and SUVs under the fleet average methodology that is called CAFE.

CAFE did not constrain them. The historic focus of those manufacturers on small vehicles gave them the headroom to sell large numbers of larger vehicles while still meeting the CAFE requirements for the fleet average; again, not because they are more fuel efficient. So CAFE has had an unfair discriminatory impact against U.S. jobs because of how it was designed. I hope that was an inadvertent design and not an intended consequence when CAFE was designed many decades ago, but it has been the consequence. It is utterly amazing that we would tolerate the continuation, much less the expansion, of that consequence without considering the impact of all the factors that go into CAFE.

The proposals that have been supported by some in the Senate to provide an arbitrary increase in CAFE standards do not solve the problem of unfair competitive disadvantage. Instead, that arbitrary selection of a number would make it worse. Manufacturers who have traditionally produced smaller vehicles would have considerably less difficulty meeting the new standards than domestic manufacturers would.

The National Academy of Sciences recognizes this in its 2001 report. In talking about the current CAFE system, the National Academy of Sciences said the following:

... one concept of equity among manufacturers requires equal treatment of equivalent vehicles made by different manufacturers. The current CAFE standards fail this test.

The National Academy went on to say the following:

A policy decision to simply increase the standard for light-duty trucks to the same level as for passenger cars would operate in this inequitable manner. .....those manufacturers whose production was concentrated in light-duty trucks [that is SUVs, minivans, and pickups] would be financially penalized relative to those manufacturers whose production was concentrated in cars.

Well, domestic manufacturers have a high concentration in light truck production, and they will be unfairly disadvantaged by this approach. Yet that is the approach advocated by some of our colleagues.

The competitive disadvantage of increased CAFE standards on domestic manufacturers is an important factor, but it is ignored in CAFE amendments that just set arbitrary standards. This competitive disadvantage for domestic manufacturers is not some abstract issue, this is an American jobs issue.

It is difficult to overestimate the importance of the automotive sector to the American economy. The automotive manufacturing sector alone is directly responsible for over 2 million jobs, and there are about 10 million people who are employed in fields directly related to motor vehicles.

Advocates of setting an arbitrary higher CAFE standard assert that the economic impact of CAFE will be minimal.

They claim that lost auto industry jobs will be offset by jobs created elsewhere. If they are wrong--and I believe they are--the potential negative impacts are massive. According to the National Academy of Sciences report on the impacts of the CAFE program, union membership has fallen from 1.4 million members in 1980 to only 670,000 by the year 2000. U.S. automakers are losing jobs and market share partly due to the arbitrary CAFE program. In the last 20 years, this hemorrhaging of over 700,000 U.S. jobs was countered by the creation of only 35,000 jobs in assembly plants built in the United States by foreign-owned manufacturers. That is a National Academy of Sciences finding from their report.

Over the last 4 years alone, the big three have lost 34,000 jobs. That is an 11-percent loss of jobs in just 4 years. There is a better way than just an arbitrary increase by the Senate in the CAFE number. We can achieve our shared goals of decreasing our dependence on foreign oil and reducing carbon dioxide emissions by developing innovative, new technologies that will, hopefully, ultimately eliminate or significantly reduce the use of fossil fuels that create those emissions.

Our approach, the Bond-Levin amendment, and a separate tax amendment that will be offered, would require an increase in fuel economy by NHTSA but require consideration of all the factors relevant to any increase and not simply derive an arbitrary figure on the floor of the Senate. We would ramp up public-private cooperative investment in research and development of advanced vehicle technologies. We will use the purchasing power of Government to speed up the commercial production of these technologies. And, again, in a separate amendment, we would use tax credits to provide powerful incentives for the purchase of advanced clean technology vehicles.

I have been a supporter for a long time of developing fuel cell vehicles. The Administration's FreedomCAR and FreedomFuel programs are a good step but they are not sufficient to move us forward quickly to a hydrogen future. So we offered an amendment in last year's Energy bill that pushed the development of hydrogen vehicles and infrastructure.

This year, provisions such as these are already incorporated in the underlying bill. The amendment that will be offered separately to the tax section of the bill would extend the fuel cell vehicle credits provided in the finance package from 2011 to 2014. We must lay the groundwork for the development of a hydrogen future. We also need to focus on the immediate future and provide incentives for efficient hybrid vehicles and clean diesel vehicles. Hybrid vehicles, which draw power from both electric motor and an internal combustion engine, can be up to 100 percent more efficient than conventional vehicles. Clean diesel vehicles, which new regulations make just as clean vehicles running on gasoline, also provide important efficiency gains that are important, especially in light and heavy-duty trucks.

The Department of Energy has calculated that if diesel were used in only 30 percent of potential light truck applications by the year 2020, it would reduce U.S. crude oil imports by 700,000 barrels per day. Clean diesel increases fuel economy by 20 to 40 percent and decreases current engines' carbon dioxide emissions by that same percentage. We must put the pieces in place today that will lead to revolutionary breakthroughs in automotive technology tomorrow. If we take this approach, we will do far more to make this Nation less dependent on foreign oil and far more to reduce our emissions of greenhouse gases than we will ever accomplish with increased CAFE standards. The incremental gains are so costly to achieve and but use the resources that otherwise would be used for leap-ahead technologies that would achieve so much more. Currently, auto companies around the world are working on longer term, breakthrough technologies that will provide potentially dramatic increases in vehicle fuel economy. This research work--on projects such as fuel cells, advanced batteries, and hybrid technologies--requires substantial resources.

These resources should be invested in leap-ahead technologies. The more we spend on the very marginal increases in technology, which would be at great cost required, we are going to be misusing the resources this Nation should be placing on the leap-ahead technologies.

Technology changes require very long times to be introduced into the manufacturer's product lines. Any policy that is implemented too quickly and too aggressively has the potential to adversely affect manufacturers, their suppliers, their employees, and consumers. If the automakers are required to focus so much on dramatic near-term improvements in vehicle fuel economy, resources will have to be diverted from those promising longer term projects and from providing the amenities desired by American families.

The Bond-Levin approach preserves the appropriate balance between development of near-term technologies for fuel economy improvement and the development of promising longer term projects. We use greater incentives; we use partnerships; we rely less and less on these arbitrary mandates. Where a mandate is appropriate, the agency with expertise, the agency with experience, the agency that would use all of the relevant factors in the determination of that new mandate would be the one that would be given the responsibility to increase those fuel standards. That is our approach. It is a positive approach toward greater energy efficiency, and it does so in a way which does not cost jobs--important jobs, manufacturing jobs in this country.