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White House Proposal on Fuel Economy Would Cheat Consumers Out of Real Improvement

Feb. 7, 2007  

White House Proposal on Fuel Economy Would Cheat Consumers Out of Real Improvement

Statement of Joan Claybrook, President of Public Citizen*

The president has quickly made good on his promise in this year’s State of the Union address to propose fuel economy legislation. Unfortunately, the proposal talks a good game but would cheat consumers out of needed policy improvements that would save consumers at the pump and reduce our dependence on foreign oil.

There are many problems with the White House proposal, but I want to focus on four that would be especially detrimental:

First, the bill would give the Bush administration new power to eliminate the fair, across-the-board fleetwide average for vehicle fuel economy with a complex sliding scale that would apply a range of standards, with the effect that bigger vehicles would be held to a lower standard than others.

Congress should ignore this counterproductive approach and stick with a plan that works: raising the fuel economy standard by statute, as it did during the oil crisis in 1975. The United States imports about 10 million barrels of oil a day. At $50 a barrel, that’s $5 billion spent on imported oil every day. By raising Corporate Average Fuel Economy (CAFE) requirements to 40 miles per gallon, we would save 1.3 million barrels of oil, or roughly $65 million each day.

Second, the White House proposal would hold fuel economy improvements hostage to cost/benefit analysis, a rigged game that is notoriously biased. Cost estimates are routinely overestimated, often wildly so, in large part because industry provides those estimates. Meanwhile, benefits are tough to pin down with a number, especially such benefits as increased national security from a decreased reliance on foreign oil or a reduction in global warming. And the benefits that we all enjoy in the future are downplayed by White House economic formulas that discount future benefits to the present value, as though freedom from dependence on foreign oil can be calculated like money invested in a bank.

Third, the White House proposal actively seeks to undermine future improvements by forbidding the Department of Transportation from demanding clear and simple percentage CAFE increases above what manufacturers have managed to achieve in a prior year. In other words, the Bush administration wants to take away its ability to set clear goals for manufacturers to achieve. This isn’t an improvement – it’s mush.

Fourth, the Bush administration wants to eliminate the simple, elegant standard we have in current policy and replace it with a market-based free-for-all. The White House bill calls for a cap-and-trade system, which would allow manufacturers that produce gas guzzlers and fail to achieve CAFE standards to buy credits from the companies that exceed CAFE standards.   Aside from the political impossibility of creating a system in which Detroit automakers pay their Japanese competitors, this idea just wouldn’t work the way anti-regulatory zealots claim. Credit trading schemes reduce the incentives for innovation. After decades of increasing reliance on foreign oil, innovation is exactly what we need to pull us out of the current crisis.

It’s long past time for the Bush administration to stop playing games with consumers and the environment and start putting us on a path to cleaner, more fuel efficient vehicles.

* Joan Claybrook was administrator of NHTSA from 1977-1981.