Bipartisan Bill to Reduce Gasoline Consumption by Half a Trillion Gallons

Legislation flips the current debate about increasing fuel economy standards on its head, from a debate about whether standards will be raised to presumption that they will be raised.

Last week U.S. Senators Barack Obama, D-Ill., Richard G. Lugar, R-Ind., Joseph Biden, D-Del., Gordon Smith, R-Ore., Jeff Bingaman, D-N.M., Tom Harkin, D-Iowa, Norm Coleman, R-Minn., and Dick Durbin, D-Ill., introduced legislation that would reduce U.S. gasoline consumption by nearly half a trillion gallons by 2028 and decrease dependence on foreign oil.

The Fuel Economy Reform Act of 2006 seeks to break the decades-long logjam on increasing fuel economy standards by taking a new, more flexible approach. The bill charges the National Highway Transportation Safety Administration to create regular annual increases in fuel economy with a target of 1 mile per gallon each year. The experts at NHTSA will base these standards on attributes of a vehicle such as size and weight, and will be able to revise the annual increase if they conclude that the target cannot be reached with current technology or without compromising the safety of the entire fleet, or is not cost-effective when compared to the economic and geopolitical value of a gallon of gasoline saved.

This legislation flips the current debate about increasing fuel economy standards on its head, from a debate about whether standards will be raised to presumption that they will be raised.

In order to enable domestic manufacturers to develop more fuel-efficient vehicles, the legislation also provides generous tax incentives for companies to retool parts and assembly plants. This would strengthen the U.S. auto industry by allowing them to compete with foreign hybrid, E-85 and other fuel-efficient vehicles. The bill would also allow more Americans to benefit from a tax credit for the purchase of fuel-efficient vehicles by lifting the current cap that only makes eligible the first 60,000 buyers per manufacturer each year.

If this 4% per year improvement is maintained for 20 years, this bill would reduce gasoline consumption by 549 billion gallons. If gasoline were just $2.50 per gallon that means consumers would save $1.372 trillion at the pump by 2028.

The Fuel Economy Reform Act would also provide fairness and flexibility to domestic automakers by establishing different standards for different types of cars. Currently, manufacturers have to meet broad standards over their whole fleet of cars. This disadvantages companies like Ford and General Motors that produce full lines of small and large cars and trucks rather than manufacturers that only sell small cars.

"If it was not clear before, it is now. Domestic energy policy is at the center of our foreign policy," says Biden. "For our national security we have to begin the transition to alternative fuels. We can't do that without making progress on fuel economy by upgrading to a better system that combines protection for U.S. automobile manufacturing jobs with predictable increases in fuel efficiency standards for cars, SUVs and light trucks. "

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