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 

MAY 3, 2006 

Serial No. 109-95 

Printed for the use of the Committee on Energy and Commerce 

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 2006 

For sale by the Superintendent of Documents, U.S. Government Printing Office 

Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 

Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 

29-389PDF 
COMMITTEE ON ENERGY AND COMMERCE 

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

 Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

 Vice Chairman

VITO FOSSELLA, New York 

ROY BLUNT, Missouri

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOHN D. DINGELL, Michigan 

 Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, General Counsel

REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

(II)
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 

(III) 

(1) 

A BILL TO AUTHORIZE THE NATIONAL 

HIGHWAY TRAFFIC SAFETY 

ADMINISTRATION (NHTSA) TO SET 

PASSENGER CAR FUEL ECONOMY 

STANDARDS 

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 
2

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 
3

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. 
4

 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 
5

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. 
6

 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. 
7

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 
8

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 
9

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 
10

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 
11

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 
12

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 
13

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. 
14

 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:] 
15
16
17
18
19

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 
20

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 Republicanled 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 
21

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 
22

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-toliquid 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 
23

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 
24

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. 
25

 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 
26

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 
27

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, 
28

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 fuelefficient 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 
29

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 
30

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 
31

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. 
32

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 
33

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 
34

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 
35

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 
36

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 
37

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 
38

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. 
39

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, 
40

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 
41

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 
42

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. 
43

 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 
44

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:] 
45
46

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. 
47

 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 
48

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 fuelsaving 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 
49

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 
50

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. 
51

 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. 
52

 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. 
53

 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? 
54

 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? 
55

 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 sizebased, 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. 
56

 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. 
57

 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? 
58

 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 
59

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 
60

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. 
61

 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 
62

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-- 
63

 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 
64

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 
65

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? 
66

 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. 
67

 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 
68

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 fuelefficient 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-- 
69

 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 
70

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. 
71

 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. 
72

 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? 
73

 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. 
74

 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 
75

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 
76

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 
77

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 
78

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 
79

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 fuelefficient. 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 
80

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 fuelefficient 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. 
81

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
82

 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 
83

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 
84

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. 
85

 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 
86

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. 
87

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 
88

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 
89

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 
90

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 shorterterm 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 
91

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 
92

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 lightduty 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 
93

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 
94

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 costeffectiveness 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 fueleconomy standard. 

The recommendations that follow nevertheless reflect the Commission’s conclusion 

that a combination of improved conventional gasoline technologies and advanced hybridelectric and diesel technologies presents an opportunity to significantly increase fuel 
95

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: 

• 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. 

• 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. 

• 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. 
96

 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. 
97

 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 undercomply. 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, 
98

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. 
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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 
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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 
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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 
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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 
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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 
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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 

 

*

 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). 
105

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 
106

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. 
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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 VIII10). 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 privatesector 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 benefitmaximizing 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 
108

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 
109

Table 2. Estimates of Required Fuel Economy Levels (in mpg) 

Source: NPR Table 7 

Table 3. Incremental Cost per Vehicle 

Source: PRIA Table 1 
110

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. 
111

 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 
112

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 antibacksliding 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 antibacksliding 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:] 
113

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 
114

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. 
115

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 
116

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 upsizing 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 
117

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? 
118

 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. 
119

 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 
120

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 
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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, plugin 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. 
122

 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 ethanolcapable, 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-- 
123

 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. 
124

 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 
125

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, 
126

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 twofleet 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 
127

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. 
128

 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 
129

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. 
130

 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. 
131

 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.] 
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RESPONSE FOR THE RECORD BY ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL 

UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF 

AMERICA

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. 
133

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. 
134

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 CAFÉ 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 CAFÉ 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. 
135

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

 

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. 
136

2. How have crossover vehicles, particularly in the SUV niche, affected the 

current CAFÉ 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 lightduty 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 lighttruck 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 CAFÉ, 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 CAFÉ, would not see 

 

5

1980-2004: 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. 
137

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 CAFÉ 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 CAFÉ 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, E85 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. 

 

 

7

 See http://www.E-85fuel.com/index.php.
138

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 ethanolcapable 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 governmentindustry 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 
139

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 twofor-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. 
140

RESPONSE FOR THE RECORD OF THE HON. NORMAN Y. MINETA, SECRETARY, U.S.

DEPARTMENT OF TRANSPORTATION

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 
141

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 

pick¬ups 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. 
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SUBMISSION FOR THE RECORD BY EDWARD B. COHEN, VICE PRESIDENT, GOVERNMENT AND 

INDUSTRY AFFAIRS, HONDA NORTH AMERICA, INC. 
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SUBMISSION FOR THE RECORD OF THE ASSOCIATION OF INTERNATIONAL AUTOMOBILE 

MANUFACTURERS, INC. 
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