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Bill Seeks To Raise Fuel Economy

Aggressive Senate proposal calls for 35 mpg by 2017;
meanwhile, Big 3 pushing ethanol, flex fuels.

June 20, 2006

WASHINGTON -- The political battle over whether U.S. automakers will have to dramatically improve the fuel economy of the nation's cars and trucks is heating up.

Today, four U.S. senators -- two Democrats and two Republicans -- plan to introduce a bill dubbed "10 by 10" -- which would force automakers to raise the average fuel economy of all vehicles from 25.4 miles per gallon to 35 mpg by the 2017 model year. The bill is the most aggressive call to increase fuel economy in recent years.

At the same time, the auto industry's top lobbying group will release a 12-page report touting the industry's progress in offering fuel-efficient vehicles and cars that run on alternative fuels.

The House Energy and Commerce Committee will hold a hearing today on a bill sponsored by U.S. Rep. Mike Rogers, R-Brighton, that would offer incentives to increase the distribution of
E85, an alternative fuel made of 85 percent ethanol. The House is likely to consider a fuel economy bill during the Republican leadership's "Energy Week" that starts Monday -- but some Republicans have expressed concern that it doesn't have the support to pass.

For more than a decade, the auto industy has successfully beat back efforts to mandate increases in fuel economy that they say distort the market by forcing them to offer incentives
on smaller cars to meet arbitrary standards. The current 27.5 mpg standard for passenger cars hasn't been increased in two decades.

The Senate proposal from Dianne Feinstein, D-Calif; Olympia Snowe, R-Maine; Richard Durbin,
D-Ill.; and Lincoln Chafee, R-R.I. would require Detroit automakers to spend billions of dollars to comply.

It also calls for a "credit trading" system. For example, if Toyota Motor Corp. and Honda Motor Co. -- which have the highest average fleetwide fuel economy average -- surpassed the new regulations, they could "sell" its credits to General Motors Corp. or Ford Motor Co., which might be forced to give its profitable competitors millions of dollars in order not to break the law.

The auto industry supports giving the Bush administration the authority to raise passenger car standards through a review by the National Highway Traffic Safety Administration.

"Any increase must be based on sound science," said Eron Shosteck of the Alliance of Automotive Manufacturers, which represents GM, Ford, DaimlerChysler AG and Toyota among other auto companies.

The Big Three have embraced ethanol and flexible-fuel vehicles, repeatedly suggesting that more of both is a quicker and better solution than new fuel economy rules.

The CEOs of GM, Ford and Chrysler Group will make an announcement touting their commitment to E85 at a meeting with President Bush at the White House -- expected to take place next week.

One reason is the massive expense in complying with new fuel economy rules. GM will spend an estimated $1.17 billion between model year 2008 and 2011 to comply with new light truck rules issued in March, according to a recent government report. Ford will spend $564 million over the same period, and DaimlerChrysler $206 million. Toyota and Honda won't have to pay anything to meet the new standards.

In 1975, Congress passed the fuel economy law at the time of the Arab Oil Embargo when the fleetwide average was 13.5 miles per gallon. It required the automakers to raise fuel economy levels to 27.5 miles per gallon for passenger cars by 1985.

In March, federal regulators outlined new rules that will increase the standard for light trucks -- pickups, minivans and SUVs -- to 24 miles per gallon, and also regulate heavier SUVs for the
first time, which will eventually save 10.7 billion gallons when fully implemented in 2011.

"We can do better. We have the technology to raise the average fuel efficiency of all vehicles to 35 miles per gallon by model year 2017. It's up to Congress to ensure that the standards are there to prompt the auto industry to build a cleaner fleet," Feinstein said last month.

A 2001 National Academy of Sciences report said fuel economy standards led to an estimated 1,300 to 2,600 traffic deaths in 1993, because of lighter cars. But the same study also said automakers have the technology to safely raise average fuel economy rates to 33 miles per gallon.

The Senate bill will "ensure that improvements to fuel economy standards do not degrade the safety of automobiles manufactured by a manufacturer" -- though its sponsors haven't explained how.

To read the government's report on the costs and benefits of the new light truck fuel rules, go here. To see the industry progress report, go to www.DiscoverAlternatives.com.

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