By Heesun Wee
Given the growing debate about gasoline and energy prices, it was only a matter of time before policymakers began focusing on more fuel-efficient cars. On May 1, Senators Dianne Feinstein (D-Calif.) and Olympia Snowe (R-Me.) introduced legislation to raise fuel-efficiency standards for light-duty trucks to meet those for passenger cars -- now 27.5 miles per gallon. The existing standard for small trucks and vans is only 20.7 mpg.
It's about time someone took up this cause again. When the "corporate average fuel economy" (CAFE) standards debuted in 1975, the auto makers howled that they would never be able to make fuel-efficient cars at a profit. But when the government held the car companies' feet to the fire, they cut out excess weight, developed more efficient engines and drivetrains, and took other steps to boost mileage. Result: The average mileage of cars in the U.S. market improved, from 12 mpg a quarter century ago to 27 now. And a lot of those fuel-efficient models do indeed turn a profit.
NEW ECONOMIC CASE.
Now, with another energy crunch looming, environmentalists and other supporters of tougher CAFE rules argue that stricter standards for light trucks -- including sport-utility vehicles, vans, and small pickups -– should be included. "What's new is that the strong economic case for greener cars is now being made by our energy supply and prices," says Jason Mark, director of the Clean Vehicles Program for the Union of Concerned Scientists, a nonprofit environmental group.
Alas, the Bush Administration, which would prefer to rely on increased oil and gas exploration to meet the nation's energy needs, will probably listen to the auto makers and make it difficult for the Feinstein-Snowe bill to pass. Big mistake. The history of CAFE standards shows that Detroit will never make big gains in fuel efficiency unless the government pushes it to do so. Putting the clamp on gas-guzzling trucks is going to be one of the most effective tools the government has for cutting the nation's energy use.
Less-stringent CAFE rules for trucks made sense back in the 1970s, when they were used mainly for commercial purposes. Giving trucks a break also gave Ford, GM, and Chrysler (now DaimlerChrysler) a leg up in their battle with the Japanese and other foreign rivals. Back then, the domestic-car companies dominated the truck market. Today, however, Toyota, Honda, and other foreign companies are coming out with dozens of new SUVs, vans, and pickups.
And these days, "trucks" see far more service shuffling soccer kids around than they do hauling tools and plumbing supplies. "Now that the class of [light trucks] is used for passenger cars, why treat them differently?" argues Jim Hock, a spokesman for Feinstein.
The carmakers already know how to manufacture more fuel-efficient cars, such as the hybrid gas-electric models on the market that fetch up to 70 miles per gallon. That technology could easily be adapted to light trucks, as Detroit is demonstrating with its plans to introduce a raft of hybrid electric SUVs, in which a gasoline engine is augmented by an electric motor (see BW Online, 5/15/01, "Teaching SUVs to Sip, Not Suck, Gas"). Fuel-cell technology could be adapted, too.
The Feinstein-Snowe legislation is far from radical. It would phase in higher fuel-economy standards for light trucks -- 22.5 mpg by 2002, 25 by 2005, and 27.5 by 2007. The bill goes a step further and mandates that vehicles weighing up to 10,000 pounds comply with CAFE, up from the current top end of 8,500 pounds. That would broaden the reach of CAFE to the new breed of mammoth SUVs like the Ford Excursion. "We're fixing an obvious shortcoming of the standards," says Dan Sperling, director of the Institute of Transportation Studies at the University of California at Davis. And how many people really need such a huge vehicle to shop for groceries and haul the kids around?
Not surprisingly, the auto industry strongly opposes the legislation. Trying to lump passenger cars and SUVs under one standard is like "trying to categorize a horse as a poodle," says Eron Shosteck, a spokesman for the Alliance of Automobile Manufacturers. "They're different and designed for a variety of purposes," says Diane Steed, president of the Coalition for Vehicle Choice. Expanding CAFE rules for heavier vehicles would hurt businesses, including farmers and contractors, Steed adds.
Instead, auto-industry members prefer tax incentives to entice consumers to buy more fuel-efficient cars. And as the big carmakers like to point out, stricter CAFE rules would limit their ability to make what consumers still really want -- big, hulking vehicles, especially SUVs. "Our business is not that complex. We build and sell what people want to buy," says Greg Martin, a GM spokesman.
But those arguments don't hold water. CAFE is an averaged requirement that says only that companies must increase fuel efficiency across all their product lines. That gives auto makers plenty of wiggle room to offer consumers behemoth SUVs if anyone still wants to carry the hefty cost after gas prices shoot up. If the government wants to augment more demanding CAFE standards with tax incentives for fuel-efficient vehicles, all the better.
The last energy crisis proved Detroit can't turn on a dime. The U.S. companies lost billions because they couldn't shift to higher-mileage vehicles fast enough. The Feinstein-Snowe bill would make sure they have a head start this time. And it would ensure that the companies make evolutionary improvements -- such as reducing weight, refining engines, and improving transmissions -- to more quickly boost the mileage of SUVs and other trucks as they did in the past with cars.
It would also ensure that the basic high-mileage technologies, from fuel cells to hybrid electrics, have a chance to gain a foothold in the marketplace. It's hard to see how Ford and GM would be at a disadvantage if the same rules applied to all auto companies, foreign and domestic. Ford sure shouldn't have a gripe. It has already said it will raise the average fuel economy of its SUVs by 25% by 2005. The legislation would just help the company along toward its goal.
What may finally tip the scale in favor of this legislation are pump prices. "Three-dollar gas would have a lot of symbolic value," says Cary Coglianese, an associate professor of public policy at Harvard University. For now, the Feinstein-Snowe bill has been referred to the Senate Commerce Committee. Vice-President Dick Cheney and others don't want it to go forward until they read a National Academy of Sciences study on fuel-efficiency standards, expected to be finished this summer.
But if pump prices keep soaring, consumers will be screaming for the government to do something. And Bush, Cheney & Co. may have to recognize that conservation, along with more energy production, is the only way to fill the gap. Passing this legislation is one of the first steps they could and should take.
Wee is a staff reporter for BusinessWeek Online
Edited by Thane Peterson