CAFE Debate Heats Up

CAFE Debate Heats Up

Congress Skeptical of Bush Plan to Increase Fuel Economy 33%

In his January State of the Union address, President Bush dropped a bombshell for the auto industry by calling for a 20% cut in gasoline consumption over 10 years which would require a 33% increase in fuel economy and significantly higher corporate average fuel economy standards (CAFE). Now the debate has begun in Congress, and the devil is truly in the details.

In a recent hearing before the House and Senate, NHTSA Administrator Nicole Nason met with much skepticism as she laid out the presidentês plan to boost fuel economy standards an average of 4% annually beginning in 2009, with a target average of 34 mpg by 2017. The proposed –attribute-based” system for cars, which is similar to the current light-truck fuel efficiency rule, would give NHTSA the authority to rewrite fuel economy rules and increase standards, without approval from Congress, based on confidential future product plans NHTSA receives from automakers. The new rules are estimated to increase the price of new cars by $600 to $1,800.

But members on both sides of the aisle of the House Energy and Commerce, Energy and Air Subcommittee criticized the plan for allowing automakers to trade fuel efficiency credits, much as electric utilities trade sulfur dioxide credits in the EPA’s acid rain program.

In a Senate Commerce Committee hearing, no senator from either party endorsed NHTSA’s approach. The main criticism was that the administration’s proposal does not set a hard-and-fast requirement for automakers to improve vehicle fuel economy to a specific level. Many lawmakers would like to see a 35 or 40 mpg on average.

Seven senators four Republicans and three Democrats including presidential candidate Barack Obama reintroduced a proposal that never got a vote in the last Congress, but has a better chance this time around, because it would allow federal regulators to approve smaller annual increases if they found a 4% boost wasn’t feasible due to technology or cost.

That would please automakers who have said the 4% annual target was overly aggressive. The administration revealed that the proposal would cost the industry $114 billion, with Detroit automakers carrying $85 billion of the burden.

In the coming months, both the House and Senate will continue to hold numerous hearings on climate change and fuel efficiency, with the heads of GM, Ford, Chrysler, Toyota and the UAW all expected to testify.

NADA says it is currently working to identify consumer-driven alternatives to meet the objectives of increasing fuel efficiency and energy independence.