With American motorists paying $3 a gallon or more to fill up their cars, it might be comforting to know that new laws are brewing to improve fuel efficiency. But a loophole in the legislation could mean greater fuel efficiency is still a long way off.
A bill approved by a Senate committee this month would require automakers to ensure their passenger vehicle fleets — cars, minivans, pickups and sport utility vehicles — achieve an average fuel consumption rating of 35 miles per gallon by 2020, up from 27.5 mpg currently. The measure also would require carmakers to boost fuel efficiency by 4 percent each year after 2020.
The bill sounds like a step forward, but it was amended shortly before the panel’s vote to allow a reduced standard if the Secretary of Transportation finds "clear and convincing evidence" that achieving Congress' target would not be "cost effective" for the affected automakers.
That could render the final law meaningless, observers argue, as it gives the White House wide latitude to set lower fuel-economy targets.
The shift could still leave “drivers paying too much at the pump,” said Kevin Curtis, senior vice president of the National Environmental Trust, an environmental group. In a statement issued after the vote, the group called on the Senate to improve the bill and deliver improvements "that are long overdue.”
In his State of the Union address this year, President Bush called for an annual, 4 percent improvement in fuel economy, while the National Academy of Sciences has found a mandatory, 35 mpg standard in fuel efficiency to be achievable, safe and cost-effective, Curtis noted.
“The Senate shouldn’t settle for anything less,” he said.
Karen Steuer, vice president for government affairs at the group, noted that the bill has a long way to go before it becomes law. “So we are concerned, not panicked,” she said.
She said she was optimistic that a bill could be passed by the Senate and sent on to the House by June.
President Bush, who has not weighed in on the debate over fuel efficiency standards, ordered federal agencies last week to find a way to begin regulating vehicle emissions by the time he leaves office. He was responding to a Supreme Court ruling last month that declared carbon dioxide and other greenhouse gases are air pollutants and thus can be regulated by the Environmental Protection Agency.
Bush also has set a goal of reducing gas consumption by 20 percent over 10 years, partly by increasing the use of alternative fuels.
Corporate average fuel economy (or “CAFE”) standards have remained virtually unchanged for more than 30 years, in part because of opposition to any change by the Big Three U.S. automakers.
Despite rising concern about global warming, the high cost of gas and dependence on imported oil, the industry remains opposed to the increase sought by the Senate bill.
“[We] support increasing fuel economy standards to the maximum feasible level, but we don’t believe that the standards, as proposed in this legislation, are attainable, nor are they technologically feasible,” said Charles Territo, spokesman for the Alliance of Automobile Manufacturers, which represents the Big Three as well as Japanese heavyweight Toyota.
Territo argues that not only will the proposed rise in fuel economy standards increase the cost of vehicles, but it potentially will have a "devastating" economic impact on carmakers. There are already more than 200 vehicle models available that offer fuel economy ratings of 30 mpg or more, he argued.
The Bush administration has calculated that increases in fuel economy requirements will cost the industry $114 billion by 2017.
“Manufacturers have to weigh a number of different factors when they make cars, because consumers want cars that are safe, affordable, reliable, fuel efficient and have new technologies, like navigation systems,” Territo said. “They have to create a vehicle that offers all that to a consumer and at an affordable price.”
The National Environmental Trust’s Steuer said she sees some validity in the industry’s economic arguments but notes that the cost of developing more efficient cars could be subsidized through tax breaks or help with high health care costs.
“The U.S. auto industry said that mandating seat belts would break them, and they also said that airbags would break them financially, but what’s breaking them is they have made dreadful management decisions over the last 10 to 15 years,” she said.
“Americans are buying large, inefficient pickup trucks and SUVs because the automotive industry has convinced them that if mileage requirements go up, they’ll be sacrificing power and their safety,” she said. “But safety in smaller cars has improved, so if we can get the auto industry to stop spinning things based on their profitability we could perhaps get consumers to change their minds.”
Territo sees an environmental movement trying to dictate what vehicles Americans drive.
“Some of the proponents of this legislation are not happy with the types of vehicles American consumers favor,” Territo said. He noted that even with record gas prices, more than half of new passenger vehicles sold are minivans, SUVs or pickup trucks.
For years, Americans have favored larger vehicles including SUVs and trucks that tend to be less fuel efficient than sedans. Mandating stricter fuel economy standards will effectively force manufacturers to make less-profitable smaller cars, taking many of the more popular larger vehicles off the road, says Aaron Bragman, a research analyst at consulting firm Global Insight.
“Consumer preference and demand cannot be legislated through mandates,” he wrote in a research note. Despite rising gas prices, "the demand for large vehicles in the U.S. market does not look to significantly abate, regardless of congressional mandate,” he said.