After months of wrangling Democrat lawmakers wrapped up a deal on fuel efficiency standards Friday.Significantly the deal has been approved by John D. Dingell the auto industry's Congressional ally.As per the final version of the Bill the new auto fleet has to achieve average fuel efficiency of 35 miles per gallon by 2020, about 40% higher than current averages.At Dingell's insistence it has tougher standards for cars than light trucks. Fuel efficiency standards, known as corporate average fuel economy standards or CAFE were adopted in 1975 following the Arab oil embargo of 1974 and had set an efficiency standard of 27.5 mpg which has remained unchanged so far.
Democrats plan to make these proposals a part of the wider energy bill that the House of Representatives is expected to take up next week.The Bill is expected to contain a provision that would require the country's major utilities to generate at least 15% of their electricity from renewable sources like wind and solar power. This measure looks set to be opposed by the utilities who say this will cause a sharp increase in power prices in some parts of the country. The Bill also seeks to provide subsidies for biofuel production, a move opposed by the oil industry.
In a statement Saturday, Alliance of Automobile Manufacturers chief Dave Mc Curdy said 'Upon adoption of this legislation, Congress will have established aggressive, nationwide fuel economy requirements, concluding a long standing debate.' The Alliance is the voice in Washington for the top automakers including Toyota.
Rick Wagoner CEO of General Motors said the new rules would ' Pose a significant technical and economic challenge to the industry.' He said GM would tackle the changes ' with an array of engineering, research and development resources.'
The bill is expected to boost plans by automakers to adopt more fuel efficient technologies for conventional engines and alternatives such as gas-electric hybrids and vehicles running on biofuels. Manufacturers are set to receive credits for vehicles running on biofuels for the first time.
Interestingly a bill containing similar standards approved in June by the Senate was opposed by automakers who said that it would restrict the choice of vehicles, threaten jobs and push up costs. The companies had suggested a standard of 32 mpg by 2022 instead. Chrysler had estimated that it could add $ 6,700 to the cost of each Chrysler vehicle.
But the new plan gives the industry more flexibility to plan new vehicles. It contains separate standards for cars and trucks, extends credits for producing vehicles running on biofuels, and allows automakers to receive separate credits for exceeding the standards which can be applied to other model years.
Dingell also secured extension of the 1.2 mpg credit for the production of each flexi-fuel vehicle which can run on ethanol blends of 15% gasoline and 85% ethanol till 2020. They were due to expire by 2010.
The deal is expected to keep the United Auto Workers union happy as well because it discourages the shifting of production of small cars overseas as the fuel economy credits could be applied to larger, less efficient models.
The flexibility provided in the Bill seeks to set at rest concerns about safety standards as it was feared that rigid efficiency standards would not only restrict the choice of vehicles but also compromise safety, as automakers shifted to lighter materials in an attempt to maintain fuel economy.
Environmental groups estimate the new standards would save 1.2 million barrels of oil per day by 2020 besides reducing pressure on gasoline prices. It seems to be a win-win situation for everybody if it goes through.