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Higher Standards May Hurt Industry

The United States needs a comprehensive energy policy that promotes conservation, reduces our dependence on foreign oil and reduces the emission of greenhouse gases that threaten our environment. The bipartisan Bond-Levin amendment adopted by the Senate requiring the Transportation Department to increase fuel efficiency will accomplish these goals in a way that will not harm the U.S. economy or put hard-working Americans out of work.

Other proposals put forth during the Senate debate on the energy bill would arbitrarily increase our fuel economy standards and perpetuate a system that has unfairly impacted American auto

manufacturers since its inception. By contrast, the Bond-Levin amendment aims at improving fuel economy by directing the agency with expertise — the National Highway Traffic Safety Administration — to take a deliberate approach and look at all of the factors that should be considered in adopting new standards, including safety, cost and competitiveness. Our amendment also ensures that increased fuel economy standards will be accompanied by positive incentives to encourage the use of advanced vehicle technologies that are cleaner and more fuel-efficient.

There are inherent discriminatory features in the Corporate Average Fuel Economy system that have given an unfair competitive advantage to foreign manufacturers. The CAFE system is built around the notion of the average fuel economy of a manufacturer’s total fleet of cars or light trucks. American manufacturers, because they historically offered a full range of small, medium- and full-sized vehicles, typically have lower fleet-wide average fuel economy than their foreign competitors. Even when individual American models have fuel economy performance equal (often superior) to comparably sized foreign models, the “product mix” of the American manufacturers produces a lower “fleet average” and ultimately restrains the U.S. production of the larger vehicles, while foreign manufacturers are unconstrained, even though their vehicles are no more fuel efficient.

Under the perverse logic of the CAFE system, an American manufacturer of a full-size pickup truck, such as a Ford F-150, that gets 17 miles to the gallon faces unfair competitive disadvantages. The American manufacturer is constrained in how many of these pickup trucks it can sell and still meet the overall CAFE fleet average requirement of 20.7 miles per gallon. At the same time, CAFE allows foreign manufacturers to sell hundreds of thousands more comparably sized pickup trucks than their American counterparts, even though the foreign vehicle may get only 16 miles to the gallon. This is because the foreign manufacturer sells more smaller vehicles in its fleet. In essence, the foreign manufacturer has more “headroom” to increase its market share of full-size pickup trucks, without any requirement to increase the fuel economy of these vehicles. Under the existing CAFE system, therefore, we get fewer fuel-efficient vehicles on our roads and fewer jobs in our manufacturing plants. Put simply, there is no environmental gain, just plenty of economic pain.

The proposals put forth in the Senate to arbitrarily increase CAFE standards would only amplify the inequities inherent in the system. Manufacturers that have traditionally produced smaller, lighter vehicles would have considerably less difficulty in meeting such stringent standards than our American manufacturers would. New and overly stringent fuel economy standards will not stop Americans from buying the cars and light trucks they want, they would only limit American production of these vehicles.

Fortunately, there is a better way to achieve higher fuel economy, one that will protect both our environment and our manufacturing jobs. We can achieve our shared goals of decreasing our dependence on foreign oil and reducing carbon dioxide emissions by developing innovative new technologies that will reduce the use of fossil fuels in vehicles.

We must put a stronger emphasis on joint research and development between the government and the private sector, focusing additional attention and resources on key technological areas that will lead us to expanded use of hybrid electric, fuel cell and clean diesel technologies. We also need to expand the requirements in existing law for the federal government to purchase advanced technology vehicles for fleet use, so that the purchasing power of the federal government can be used as a positive force to provide a market for advanced technologies. Federal government investment is essential not only in research and development but also as a mechanism to push the market toward greater use and acceptance of advanced technology.

We also must do much more in the area of tax incentives for advanced technologies than has been proposed by the Bush administration or included in either the House or Senate energy bills. We need to provide more generous tax credits for advanced technology vehicles, such as hybrid, fuel cell and clean diesel vehicles — credits that will be adequate to cover the additional cost of these vehicles and encourage consumers to make the investment in these technologies. We also need to provide adequate tax credits and deductions for the purchase and installation of hydrogen refueling equipment so that investments will be made in the hydrogen infrastructure that will be required for widespread acceptance and use of fuel cell vehicles.

If we put the pieces in place today that will lead to revolutionary breakthroughs in automotive technology tomorrow, we will do far more to make this nation less dependent on foreign oil and far more to reduce our emissions of greenhouse gases than we will ever accomplish with arbitrary increases in CAFE standards, which are not only unfairly discriminatory to U.S. manufacturers but also soak up resources needed to develop leap-ahead technologies, applying them instead to short-term incremental gains.

Sen. Carl Levin (D-Mich.) is ranking member of the Armed Services Committee and a member of the Small Business and Entrepreneurship Committee.

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