Tax Incentives, Not 'Flawed' Cafe, Can Boost Mpg: Autos

Diesel Fuel News, Oct 15, 2001 by Jack Peckham

Washington, DC -- "The best way to reduce fuel consumption is consumer tax incentives for advanced technology vehicles," Alliance of Automobile Manufacturers president Josephine Cooper told the Hart World Fuels Conference here.

Calling automaker corporate average fuel economy (CAFE) standards a "flawed regulatory program," Cooper said that the U.S. Congress instead should enact tax breaks to help consumers buy higher-efficiency, but costlier technologies, such as hybrid-electrics.

"We've become a light truck/SUV country," she said, pointing to growing North American consumer demand for larger vehicles capable of hauling more people and performing multiple tasks. "People want more from their vehicles, and federal fuel economy mandates are not consistent with market demand."

So far, "at least half of Congress agrees with us, and now our task is in the Senate, where it's not as friendly as it once was," she added.

Because of the new terrorist crisis in the U.S., it seems doubtful that Congress will enact a broad energy bill including CAFE, or enact advanced-vehicle tax credits this year, she predicted. But meantime, the National Highway Traffic Safety Administration (NHTSA) is starting a rulemaking this month on what do about CAFE, and depending upon its findings, "the Senate may not need to act," she said.

Asked whether automakers likewise could support new tax incentives for steep desulfurization of motor fuels, Cooper was more cautious, citing possible "market distoritions" that could result. "I don't know where Congress will come down on that," she said.

Meantime, automakers also want a lower cap on diesel sulfur (below 10 ppm, rather than EPA's 15 ppm sulfur cap) along with higher cetane and lower polyaromatics, to help make high-efficiency, Tier 2-compliant diesel light vehicles more feasible, she said.

Given that stance, U.S. Department of Energy policy analyst Barry McNutt asked whether "AAM is prepared to reconsider ULSD - or even lower-sulfur fuel - in return for a more effective phase-in," featuring a much smaller initial percentage of ULSD fuel production (as opposed to EPA's 2006 80% ULSD mandate), along with a retail supply mandate.

"If the oil industry gets an implementation schedule shift, there's no way EPA is going to loosen the requirements on the vehicles," Cooper responded.

"But do we need 30 billion gallons of ULSD in 2006? Would you negotiate this?" McNutt asked.

"This phase-in question has been addressed before - there are very serious disadvantages," as AAM environmental affairs official Ellen Shapiro responded. "Will vehicles have access to the fuel? [The government is] not prepared to mandate availability, and petroleum marketers are opposed" because of double-storage costs, she pointed out.