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CRE White Paper
NHTSA Rulemaking Is The Preferred Process For Assessing Any Change In
Corporate Average Fuel Economy Standards
I. Introduction
Whether to increase the
Corporate Average Fuel Economy (CAFE) standards for passenger cars and light trucks is a key part
of the current national energy policy debate.
Setting CAFE standards
requires careful consideration of numerous complex, often interrelated issues, including consideration
of statutory criteria that inherently involve policy, technical, and economic "trade-offs".
Therefore, CRE strongly believes that the process for considering any
change in the CAFE standards must ensure that any resulting decision on CAFE is based on sound
science and careful assessment of the best available information addressing the statutory criteria.
CRE recommends that Congress:
1. Not raise the CAFE standards by legislative
action; and instead
2. Allow the National Highway Traffic Safety Administration
(NHTSA) to conduct a rulemaking (in accordance with the Administrative
Procedure Act and allowing all interested parties to participate) to determine,
in accordance with existing statutory criteria, whether -- and if yes,
by how much and on what schedule -- to increase the CAFE standards.
II. CAFE Standard-Setting Involves Complex,
Interrelated Issues
The current public debate over
whether CAFE standards should be changed (meaning, raised) unfortunately tends to gloss over the
complexity of the issues involved.
The July 2001 report of the
National Academy of Sciences’ National Research Council (NAS) concluded that automobile manufacturers
could significantly improve the fuel economy of passenger cars and particularly light trucks -- over
the next 10 to 15 years -- by phasing in certain technologies that are now coming into use.
In the press release announcing the
report, the NAS committee Chairman Paul Portney (President of Resources for the Future) made clear that:
"There are pros and cons to tightening fuel economy standards, involving a range of trade-offs".
The CAFE standards decisionmaker
must understand both the "pros" and the "cons" of that "range of trade-offs". Key
issues include:
Engineering feasibility;
Production phase-in;
Safety considerations;
Initial
costs and downstream economic benefits (for example, whether the cost
of new technologies raising the vehicle purchase price will be recouped
through fuel savings under real-world driving conditions);
Consumer acceptance;
Actual nationwide fuel savings.
At least four interrelated issues deserve careful evaluation, and where possible
quantification, to determine the extent to which such "trade-offs"
could adversely affect national concerns such as occupant safety, impact on
competitiveness of U.S. industry, and cost to consumers.
1. Timeframe Needed to Introduce New Technologies to the Vehicle Fleet
Different
energy-saving technologies are in different stages of development and/or market
penetration.
All major automobile manufacturers are working hard to develop
and introduce new technologies, such as:
Variable valve timing and other features to
make engines more efficient;
Advanced diesel engines;
Integrated starter-generators
More efficient powertrains, including continuously
variable or five-speed automatic transmissions; and
Hybrid gasoline-electric vehicles.
Manufacturers have publicly committed to introduce such new or improved technologies
more widely in the next few model years, but there are technical and production-related
limits to how quickly the technologies can be proven and produced in new vehicles
-- at any reasonable price.
The NAS report cautioned against simply raising
CAFE standards without appropriate appreciation for the manufacturers’ need
to develop and phase in more efficient technology over time. Potential adverse
consequences include technical effectiveness of the technologies, reliability,
safety (addressed in point 2 below), and cost or cost-effectiveness (addressed
in point 3 below).
Indeed, the cumulative effectiveness of certain technologies
that would be introduced simultaneously in future vehicles became an issue in
the context of the NAS report. The automobile industry submitted a technical
critique of certain aspects of the July 2001 NAS report. The NAS issued a follow-up
"letter report" on January 16, 2002 that made minor modifications
to the report.
CRE has no criticism of the NAS panel. In fact, CRE commends
the NAS panel for its willingness to, in effect, re-open the report and to hold
a pubic meeting to consider industry’s critique. This incident simply highlights
the difficulty -- even for a panel of very knowledgeable people -- of determining
which are the "true facts" to consider when determining whether to
increase CAFE standards, with respect to both: (a) attainability of a specific
increased CAFE standard; and (b) possible collateral consequences of an increased
standard.
As a practical matter, Congress has no process or forum to receive
and evaluate information about such technical, research-and-development, and
production-phase-in issues in a rational manner. CRE believes that a rulemaking
to be conducted by NHTSA is a far better process/forum for addressing such difficult
technical issues than is the legislative process in Congress.
2. Adverse Safety Consequences Possible from Too-rapid Increase in CAFE
The large majority of the NAS panel was specifically concerned that if CAFE standards
are raised without allowing manufacturers sufficient time to phase in more energy
efficient technology, then manufacturers may be forced to improve vehicle miles-per-gallon
by simply reducing the weight of new vehicles ("downsizing").
The NAS press release announcing the report says:
But one risk of downsizing is that smaller cars involved in crashes
with larger vehicles tend to have higher numbers of fatalities. The
committee estimated that the downsizing of automobiles in the 1970s
and 1980s – whether a result of CAFE standards or other market-driven
needs – may have contributed an additional 1,300 to 2,600 fatalities
in 1993.
Two members of the committee dissented from that conclusion, believing "that
the relationship between fuel economy and safety is not yet fully understood,
and a reduction in vehicle weight need not adversely affect safety."
The NAS press release continues: "The committee feels more analysis in this
area is warranted and calls on the National Highway Traffic Safety Administration
to conduct further research."
CRE agrees that NHTSA should do more research on the relationship between fuel
economy and safety -- before any change is made in CAFE standards.
In fact, NHTSA is already working on it. NHTSA Administrator
Jeffrey W. Runge testified to the Senate Committee on Commerce, Science, and
Transportation on December 6, 2001, that:
The [NAS report’s finding that downweighting and downsizing probably
resulted in additional traffic fatalities] was based primarily on research
conducted by NHTSA in the mid-1990’s, which we are updating in a study
that we expect to complete next spring. The National Academy of Sciences’
report went on to observe ‘that the likelihood of similar response to
further increases in fuel economy must be taken seriously.’ I want to
assure you that we will consider vehicle safety in any rulemaking that
we undertake on CAFE, consistent with our obligations to meet the statutory
criteria governing the CAFE program. As an agency whose primary mission
is safety, NHTSA is completely committed to the safety of Americans
on the nation’s highways.
CRE believes that for Congress to statutorily specify increased CAFE standards
and the timeframe for meeting the new standards, absent much better information
about potential resultant occupant injuries and loss of life, would be both
quite arbitrary and quite difficult to defend as a matter of national safety
policy.
3. Other Costs
The NAS report concludes generally that
the additional up-front costs of advanced fuel-saving technologies will be recovered
by consumers over time via reduced expenses for fuel. However, it is not clear
which technologies will result in energy efficiency and conservation measures
that are attainable in a cost-effective manner within a reasonable pay-back
timeframe.
Hybrid gasoline-electric vehicles now being marketed are reportedly
subsidized by the manufacturers (up to about $17,000 per vehicle), in order
to keep the purchase price at approximately $20,000. Although the amount of
the per-vehicle subsidy is expected to drop as production volumes rise and the
companies refine the technology, these technological developments are not free.
If manufacturers are not able indefinitely to absorb/subsidize the costs of
new technology to meet increased CAFE standards, the consequences could include:
(a) financial distress for manufacturers who try to absorb the subsidy or who
must heavily discount end-of-model-year prices on unsold cars that were priced
above what consumers would pay; and (b) downsized cars that meet CAFE but reduce
safety relative to other possible vehicle designs.
Cost-related issues need
additional expert consideration, because they do or may implicate the technical
feasibility and economic practicability of meeting increased CAFE standards,
the rate of market penetration, and occupant safety.
4. Consumer Acceptance
In the real world, vehicle manufacturers must consider what "attributes"
consumers want in the vehicles they purchase. In consumer surveys -- and in
vehicle sales totals -- it is clear that consumers value attributes such as
reliability, durability, safety, roominess and cargo capacity, and power and
acceleration, much more highly than they value fuel economy (even with significantly
higher gasoline prices as occurred in much of 2001).
U.S. automobile fleet sales facts:
1. Light trucks (mini-vans, pick-up trucks, and SUVs) comprise
50% of today’s U.S. automobile market.
2. About 48 models of vehicles marketed in the U.S. get over 30 MPG; however, the top 10 models with
the best fuel economy comprise only 2% of total sales.
This is not because automobile manufacturers are giving SUVs and mini-vans away,
but because these models have the attributes that a great many people in the
U.S. want in their vehicles. Many consumers will buy a vehicle that meets their
"highest use", even though that may be an infrequent use for the vehicle.
That is, people want a vehicle that can haul half a soccer team to games or
haul the whole family and belongings to the beach, even though those may account
for relatively few vehicle trips. Many consumers also prefer a larger vehicle
if they can afford it, due to the fact that, other factors being more or less
equal, there is "safety in size".
Manufacturers will need time and perhaps some engineering advances to make vehicles that have greater fuel economy
yet do not sacrifice attributes that consumers value highly. Many people will
keep their current vehicle longer rather than give it up for a vehicle that
has better fuel economy but otherwise fails to meet the consumer’s needs.
NHTSA Administrator Runge testified:
To achieve a specified CAFE level, a manufacturer must produce fuel
efficient vehicles that the public will buy. If cost-effective measures
can be devised to increase consumer demand for fuel-efficient vehicles
without compromising passenger safety, those measures should be examined.
CRE agrees. CRE believes the best forum to evaluate whether such measures can
be devised is in an APA rulemaking at NHTSA, not legislation.
III. Alternative Decision Processes: Congressional Action vs. NHTSA Rulemaking
1. Congress Could Change CAFE Via Legislative Action
"Pro": Congress theoretically could act to change CAFE more quickly than could NHTSA
via a rulemaking.
However, consider two facts:
1. The Boehlert amendment to raise the CAFE for light trucks
from 20.7 mpg to 27.5 mpg (to make it the same as for passenger cars)
failed on the House Floor in July 2001, by a vote of 269 - 160; and
2. The Democratic leadership in the Senate has shown little or no
interest in agreeing to the House’s decision in H.R. 4 to address CAFE
by requiring manufacturers to save 5 billion gallons of fuel per year
(which would be, in effect, a CAFE increase of about 1 MPG).
CRE believes it is not at all clear whether Congress has the political will
to increase CAFE. Any efforts to address CAFE could result in stalemate.
"Con": As noted above, Congress has no good mechanism or forum for addressing complex
technical and other issues that abound in the context of CAFE. Thus, if Congress
raises CAFE standards legislatively, Congress would be making major policy decisions
in the absence of important facts or analytical information with respect to
technical, safety, cost, and consumer-acceptance issues.
2. NHTSA Could Change CAFE Via APA Rulemaking
"Pro": NHTSA Administrator Jeffrey W. Runge testified to the Senate
Committee on Commerce, Science, and Transportation on December 6, 2001, that:
The Department [of Transportation] welcomes lifting the restrictions
on CAFE rulemaking Congress has imposed since FY 1996, to permit the
Department to once again engage in rulemaking that will set fuel economy
standards for the light truck fleet.
It is clear that NHTSA is willing to undertake the challenge of addressing CAFE.
In CRE’s view, a rulemaking process by NHTSA presents a clearly superior procedural
alternative for addressing the complex issues described above than does any
approach under which Congress would legislate a statutory change to the CAFE
standards.
A rulemaking pursuant to the Administrative Procedure Act provides
opportunity for all interested parties to participate (most likely including
one or more public hearings), submit data and information, and comment on or
rebut information provided by other parties. NHTSA has a legal obligation pursuant
to the APA to consider all available information and to base its decision on
sound evidence in the administrative record.
"Con": Administrator
Runge stated in his testimony that NHTSA will need information and analysis
to support the statutorily-required determination that a specific CAFE level
is the "maximum feasible average fuel economy level", considering
"technological feasibility, economic practicability, the effect of other
motor vehicle standards of the Government on fuel economy, and the need of the
United States to conserve energy." Mr. Runge noted that in recent years
Congress significantly hampered NHTSA’s ability to conduct relevant analyses
by imposing a legislative limitation in the Department of Transportation Appropriations
Acts.
However, it is clear that NHTSA is willing to get up to speed as promptly
as possible. Mr. Runge said:
We want to assure the Committee that the Department will carry out
its responsibilities under the CAFE law to the best of its ability,
with the goal of improving fleet fuel economy without sacrificing passenger
safety, thereby producing benefits to the economy, our national energy
security, and our nation’s traveling public.
Mr. Runge also acknowledged the major contributions made by the NAS report in
addressing the complex CAFE issues:
[O]ur work will be aided by the July 2001 report on the CAFE program
prepared by a committee of the National Academy of Sciences. The report
contains a number of findings and recommendations that bear on the future
of the CAFE program.
While the report supports a Federal program to ensure fuel economy
levels beyond those expected to result from market forces alone, it
cautions that selecting fuel economy targets will require "uncertain
and difficult trade-offs among environmental benefits, vehicle safety,
cost, oil import dependence, and consumer preferences . . ."
It is clear that NHTSA would utilize the July 2001 NAS report in many ways as
a starting point for the agency’s analysis. With both the NAS report and active
participation in a rulemaking by interested parties, NHTSA should be able to
quickly overcome any lack of information or analysis caused by the legislative
limitations in recent appropriations Acts.
IV. CRE Recommendation
Congress should not raise CAFE standards by legislative action, for the reasons
set forth above.
Congress should allow NHTSA to
conduct a rulemaking (in accordance with the Administrative
Procedure Act and allowing all interested parties to participate) to
determine, in accordance with existing statutory criteria, whether --
and if yes, by how much and on what schedule -- to increase the CAFE
standards.
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