Public Citizen | Auto Safety Group | Auto Safety - Comments of Public Citizen Regarding: Automotive Fuel Economy Manufacturing Incentives for Alternative Fuel Vehicles

DOT Docket No. NHTSA 2001-10774
Docket Management
U.S. Department of Transportation
Room PL-401
400 Seventh Street, SW
Washington, DC 20590

Comments of Public Citizen Regarding: Automotive Fuel Economy Manufacturing Incentives for Alternative Fuel Vehicles

Public Citizen disagrees with the National Highway Traffic Administration’s (NHTSA) decision to extend the availability of incentives for the production of alternative-fueled vehicles. The available evidence demonstrates that this program has failed to accomplish its goals. NHTSA makes an excellent case for ending the program in its Notice of Proposed Rulemaking (NPRM) published in the Federal Register on March 11, 2002 (67 FR 10873), but then concludes by deciding to extend the program. This decision by the agency is illogical given all of the arguments and observations NHTSA makes about the negative effects this program has had on oil consumption and environmental stability.

Congress gave NHTSA the authority to determine whether to extend the alternative fueled vehicles (AFV) credit program, codified at 49 USC 32906. The program will expire following the 2004 model year if NHTSA or Congress does not take action to extend it. Manufacturers are currently able to earn a maximum credit of 1.2 miles per gallon toward their fleetwide corporate average fuel economy (CAFE) by producing vehicles that are capable of running on an alternative fuel. NHTSA has chosen to recommend extending the availability of these credits through the 2008 model year.

NHTSA’s analysis focuses most of its attention on the reasons why the AFV program has not accomplished its objectives. Like the NAS study released in July 2001, NHTSA concludes that the AFV program has not lead to a reduction in the amount of gasoline consumed by the American vehicle fleet, primarily because automakers have used the CAFE credits granted by the program to produce a fleet of vehicles that would not otherwise meet CAFE standards. Moreover, very few of the alternative-fueled vehicles produced ever run on an alternative fuel. Though "nearly all" of the 1.2 million alternative-fueled vehicles on the road could use E85 (ethanol) in place of gasoline, there are just 121 locations nationwide where a vehicle could actually be filled with this fuel. This amounts to just .07 percent of the 176,000 refueling locations in the United States.

NHTSA concedes that the AFV program has both "resulted in…an increase in petroleum consumption…and greenhouse gas emissions," yet they still favor the extension of the program. NHTSA’s reasons for holding this position do not logically follow from the evidence.

NHTSA states that "conducting an assessment of the energy and environmental impacts of the dual-fuel vehicle credit incentive is complicated by uncertainty regarding automobile manufacturers’ behavior." NHTSA implies that without the CAFE credits granted by the AFV program, the fleet composition of manufacturers might not change. Consequently, fuel consumption would be unchanged from today’s levels and manufacturers would pay penalties rather than comply with the standard.

This outcome is extremely unlikely given that NHTSA’s records show that no domestic manufacturer or major Japanese manufacturer has paid a penalty under the CAFE system since 1983. These are the manufacturers who take advantage of the CAFE credits and they never choose to pay these fines. Under a tougher CAFE standard there is no reason to think that they would not comply with the law as they have in the past. There is certainly no reason to believe that they would be unable to comply with a slightly higher standard, since fuel efficiency has increased an average of 1.5 percent each year since 1985.

NHTSA’s other argument for retaining the standard is that one goal of the AFV program was to increase the number of alternative fueled vehicles in America’s fleet. They state that "domestic energy security is more important than ever…[there is] potential value to domestic energy security of having a fleet of vehicles that can be operated on non-petroleum fuels."

There might be value to having such a fleet if it were at all reasonable to think that they would ever be operated on alternative fuels. Even in a worst-case oil crisis, only a tiny portion of the AFV fleet would even be able to find a different source of fuel, so the mitigating effect of having such a fleet would be negligible. The infrastructure and market incentives that would be needed for owners of these vehicles to actually fill their tanks with something other than gasoline is simply not in place. Thus, having vehicles with this capability is not in and of itself a worthy reason for extending this program.

NHTSA cites several challenges to making the AVM program effective in accomplishing its primary purpose – reducing the amount of gasoline consumed by American motor vehicles each year:

Despite all of these challenges to the program, and despite the fact that it has had the opposite effect to what Congress intended, NHTSA still maintains that the program should be extended for four more years on the basis of a national security argument. We fail to see how a program that has increased fuel consumption could be justified on this basis.

The National Academy of Sciences (NAS) agrees with us. In their report, "Effectiveness and Impact of Corporate Average Fuel Economy Standards," published in 2002, they state unequivocally that "CAFE credits for dual-fuel vehicles should be eliminated." The NAS found that

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.

NHTSA is aware of this finding, agrees with the quantitative analysis that drove it, and still believes that the AFV program should be retained.

Public Citizen can not understand how NHTSA has come to this conclusion. The challenges surrounding an developing and sustaining an effective alternative-fuel fleet are enormous – beginning with the total lack of infrastructure required to sustain such a fleet. At a time when vehicle manufacturers are experimenting with gas-powered hybrids that achieve fuel efficiencies in the 60 mpg range, we should be focusing on using the current infrastructure as much as possible rather than investing in an entirely new one. NHTSA estimates in their report to congress that outfitting a single gas station with the equipment required to dispense E85 would cost

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