Vol. 7 | No. 2 | Fall 2008
Federal regulators are shortchanging U.S. drivers by making new fuel economy standards weaker than the law meant them to be. UCS is working to reverse this trend and give consumers the clean car choices they deserve.
By Jim Kliesch
Last December, Congress passed groundbreaking legislation that required automakers to increase the average fuel economy of new cars and trucks to a minimum of 35 miles per gallon (mpg) by 2020—the first congressional increase since 1975. This spring, however, the Bush administration quietly undermined this progress. The National Highway Traffic Safety Administration (NHTSA), the regulatory agency charged with implementing fuel economy standards, released proposed standards for model years 2011 to 2015 that show a respectable increase in fuel economy during the first few years but quickly taper off, resulting in a fuel economy trajectory that would just barely meet the 35 mpg-by-2020 minimum requirement.
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Closing the SUV Loophole Minivans and SUVs are not work vehicles. The U.S. government should stop pretending that they are. A separate “non-passenger vehicle” fuel economy standard was established in the 1970s for performance-oriented work vehicles used in agriculture, construction, and other industries. For years, NHTSA has classified light trucks such as SUVs, minivans, and pickups as non-passenger vehicles, which has allowed these passenger-carrying vehicles to meet less stringent fuel economy standards. Furthermore, this loophole has provided automakers the ability to make minor modifications to car and crossover vehicle designs to enable a non-passenger vehicle classification. NHTSA included this loophole (among other provisions) in a recent fuel economy rule covering model year 2008-2011 light trucks. But last November, the Ninth Circuit Court of Appeals ruled that NHTSA’s decision not to close the SUV loophole in its light truck rule was “arbitrary and capricious” and “runs counter to the evidence showing that SUVs, vans, and pickup trucks are manufactured primarily for the purpose of transporting passengers and are generally not used for off-highway operation.” The court called for NHTSA to address this, among other flaws, in the light truck rule. In defending its decision to allow the loophole to continue, NHTSA argued that because Congress did not close the loophole itself when setting fuel economy standards in last year’s energy bill, it “strongly suggests Congressional approval of the agency’s…approach to vehicle classification.” This is a flawed argument, however, given that Representative Edward Markey (D-MA), an author of the bill, specifically noted that the new fuel economy legislation was “not intended to reverse, supersede, overrule, or in any way limit” the Ninth Circuit decision. |
Given the high gasoline prices squeezing consumers at the pump, the need for swift and deep cuts in global warming pollution, and the importance of energy independence, NHTSA must do better. In our recent report Setting the Standard: How Cost-Effective Technology Can Increase Vehicle Fuel Economy, UCS examined the factors NHTSA considers when setting fuel economy standards and found that the agency’s current approach to this task is fundamentally flawed. A more aggressive yet realistic standard of 35 mpg by 2015 would ensure substantial energy savings in the short term, while setting the stage for even greater savings over the subsequent decade.
It’s All in the Numbers
In implementing interim fuel economy standards, the new fuel economy legislation requires NHTSA to set “maximum feasible” fuel economy targets for each year, defined as being both cost-effective and technologically achievable. NHTSA conducts cost-benefit analyses to determine what this “maximum feasible” level should be, weighing the cost of deploying fuel-saving technology into vehicles against the savings consumers reap through reduced gasoline consumption and other societal benefits such as reduced carbon dioxide (CO2) emissions.
The results of NHTSA’s analysis—and thus the fuel economy standards the agency feels are feasible—can vary greatly depending on how individual costs and benefits are valued. In the case of the 2011–2015 interim standards, NHTSA’s assumptions for a variety of factors were unrealistic, including:
Gasoline prices. Despite the fact that gas prices have more than doubled in the past four years and, in 2008, exceeded four dollars per gallon, NHTSA assumed that gasoline will cost roughly $2.50 per gallon (or lower) over the coming decades. By the Bush administration’s own analysis, this dramatic undervaluing of consumer savings robs the nation of a warranted 3 to 4 mpg boost in fuel economy.
Other government officials agree that this assumption is too low. Guy Caruso, who, until late August, led the Energy Information Administration (EIA)—the agency that publishes annual cost projections for gasoline and other fuels—has publicly recommended that NHTSA use EIA projections more consistent with today’s pump prices. At a June hearing of the House Select Committee on Energy Independence and Global Warming, Caruso stated, in direct reference to NHTSA’s rulemaking process, “We’re on the higher price path right now. If you were to ask me today what I would use, I would use the higher price.”
Deployment of advanced technologies. In its assessment of technology costs and deployment, NHTSA assumed that hybrid vehicles would not enter the market until 2014—despite the fact that there are more than one million hybrids on the road today, including the Toyota Prius, currently the 9th best-selling car in America. Additionally, NHTSA assumed that when hybrid technology does “begin” to penetrate the market, it will take more than 33 years for the technology to reach full adoption.
Global warming pollution reduction costs. Climate change has real and quantifiable economic consequences (such as increased costs for air conditioning and repairing coastal structures damaged from rising sea levels and storm surges), so reducing emissions has financial value. NHTSA’s analysis assumed a benefit of just $7 for each ton of CO2-equivalent emissions reduced, which is very low compared with the value of emissions in Europe’s carbon-constrained market, currently trading around $45 per ton.
Room for Improvement
Reaching the congressional minimum of 35 mpg by 2020 will save approximately 1.1 million barrels of oil per day in 2020, about half of what the United States currently imports from the Persian Gulf. However, this represents only a minimum standard for our vehicle fleet to achieve; as we demonstrate in Setting the Standard, automakers can—and should—go beyond this minimum requirement.
Vehicle technologies have, over the years, been largely applied to boosting vehicle power (see box). Yet today, in the face of record gasoline prices and greater awareness of climate change, there is a strong and growing demand for fuel-efficient vehicles. We found that automakers can cost-effectively use conventional and advanced technologies to boost the average fuel economy of the U.S. car and light truck fleet to approximately 42 mpg by 2020, and to more than 50 mpg by 2030. This fuel economy increase would nearly double the amount of oil saved each day in 2020, and would save consumers tens of billions of dollars in gasoline costs—even after the vehicle technologies are paid for.
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Fuel Economy Takes a Back Seat If you’re longing for the good ol’ days of “muscle” cars, look no further than the family car in your driveway. Many of today’s most popular sedans offer better performance than even the archetypal muscle cars of the late 1960s and early 1970s. Take the 1968 Pontiac GTO and 2007 Toyota Camry V6, for example. Despite the fact that the Camry’s engine is roughly half the size of the GTO’s, the Camry weighs about the same as the GTO, and has faster acceleration and standing quarter-mile times. In one respect, this can be viewed as a testament to the technical prowess of today’s automotive engineers. Yet it is also an unfortunate commentary on decision making within the automotive industry over the past few decades. Rather than focusing engineering achievements on ways to improve overall vehicle fuel economy, the industry chose to focus on power and speed while holding fuel economy constant. Compared with 20 years ago, today’s average passenger car is 550 pounds heavier, has 78 percent more horsepower, and has 27 percent better acceleration (a 3.5-second shorter zero-to-sixty time, on average). | |
For these reasons and more, it is imperative that NHTSA revise its proposed standards for model years 2011 to 2015 and put the nation’s vehicle fleet on track to meeting the highest possible fuel economy standards. At a minimum, UCS recommends that NHTSA use more realistic assumptions in its cost-benefit analysis (including those described above) to better inform fuel economy decision making.
We also urge NHTSA to stop classifying light trucks such as SUVs, minivans, and vans as “non-passenger” vehicles—a loophole that allows these vehicles to meet lower fuel economy standards than other vehicles that carry passengers. A federal court has ordered NHTSA to close this loophole but the agency has failed to do so (see the sidebar), depriving consumers of savings at the pump.
There are other ways in which NHTSA can promote the strongest possible fuel economy standards as well. One is to increase the financial penalty imposed on automakers for failing to meet the standards, currently set at $5.50 for each 0.1 mpg difference between an automaker’s fleet average and the required standard, multiplied by the number of vehicles manufactured in the fleet that year. However, this fine has changed very little over the years and has not kept up with inflation. Increasing the noncompliance penalty would help discourage automakers from buying their way out of fuel economy improvements in their fleets. UCS recommends that the penalty be increased to $10 per 0.1 mpg.
When the agency publishes its final rule later this year, it must set fuel economy standards that make meaningful strides toward reducing the environmental, economic, and security challenges posed by our nation’s dependence on oil. A fleet average standard of 35 mpg by 2015 would yield significant energy savings over the congressionally mandated minimum and, further, set the stage for even more substantial improvements in the coming years. The consequences associated with inaction are simply too severe for NHTSA to squander this important opportunity.
Jim Kliesch is a senior engineer in the Clean Vehicles Program.
