Reducing the Need for Oil in the Transportation Sector

1. Reducing the Need for Oil in the Transportation Sector Improving the Fuel Efficiency of Cars: The New Hybrid Cars

2. Current Issues Regarding Fuel Consumption by Transportation (1) • Transportation Sector Consumes Over 2/3 of Petroleum in the U.S. • Public Transportation is Not Widely Used by the General Public • It’s “uncool” • It’s unavailable

3. Issues (2) • Decrease in Oil Supplies will Increase Cost of Gasoline. • Increase of Gasoline Costs Will Directly Affect the Consumer • Passenger Cars do not Currently Meet Fuel Efficiency Standards Set by Congress; SUVs Have a Lower Standard which Lowers Overall Fuel Efficiency Even More

4. Easier to Change the Car Than to Change the Person!! • Sport Utility Vehicles are a Status Symbol • Only 10-30% of people who own SUVs actually use them for off-road activities • 38% of the cars on the road are SUVs • With Hybrid technology, people can keep their “big” cars while using less fuel. • Ford Escape, 2004 • Dodge Durango SUV, uncertain release date

5. Top 5 Contributors to Greenhouse Gases Around the World • United States • China • Russia • Japan • United States’ Automobiles

6. Law Of Supply and Demand • A decrease in oil supply will cause an increase in gas prices • Gas Prices are currently (in Chicago) $1.72 / gallon • Average U.S. price = $1.67 • Imagine Fuel Costs if Gas Prices Continued to Rise

7. Electric Cars Are Not the Answer • While electric vehicles qualify as Zero Emission Vehicles, they are impractical • Electric vehicles are ideal for short trips around town, but not so good for cross-country trips • This is where Hybrid technology becomes key.

8. Improving the Fuel Efficiency of Cars Is the Answer 43% of U.S. petroleum use and 11% of world petroleum use is due to consumption of gasoline

9. Improving Fuel Efficiency to 40 mpg would save 2 million barrels of oil per day

10. CAFE Standards • Currently set at 20.7 for light trucks • 27.5 for cars • Standards were set in 1978 • Current standards have not changed since 1990, despite various attempts to change them legislatively • Between 1997 and 2001, average fuel efficiency dropped from 22.1 (peaking) to 20.4 (lowest in 20 years)

12. Factors Behind Setting CAFE • When CAFE standards were designed, light trucks were predominantly work and cargo vehicles • Comprised less than 20% of new car market • Today, light trucks comprise nearly 50% of new car market and are mostly used for personal transport

13. Limits on CAFE • Vehicles that weigh over 8500 pounds are exempt from CAFE requirements • This Includes: • Ford Excursion • Hummer H2 • Chevrolet Suburban 2500 • Automakers can change the car to make it look like a truck • i.e. PT Cruiser can’t tow anything and can only transport 4 passengers is a light truck because it has a removable backseat

14. Credits for Fuel Efficiency • Credits for producing alternative fuel vehicles • Credits for exceeding CAFE standards in a given year • Credits may be carried backward or forward three years

15. CAFE Fines • Producers must pay a penalty if the average fuel efficiency of their individual fleets is below CAFE standards • Domestic Car Fleet (at 75% of car manufactured in U.S.) • Imported Car Fleet • Light Trucks • $5.50 for every 0.1 MPG that average falls below relevant standard

16. Concerns with Relying on CAFEto Reduce Oil Consumption • Possibly encourage more driving instead of changing personal driving habits • Will automakers really respond? • Agree to pay fines? • Produce cars that fall into the light truck category so as to avoid complying with the more stringent car CAFE requirements • Reduction in Safety with Lighter Cars

17. Will Hybrid Cars “Fix” These Problems? • Hybrid Cars are One of the Best Short Term Solutions to the Overuse of Petroleum by the Transportation Sector • Without a widespread belief that public transportation is the “Cool” thing to do, fuel efficient cars will allow people to drive just as much as they do now, while significantly decreasing use of oil by autos.

18. Will Hybrid Cars Actually Encourage More Driving? • Hard to say • The U.S. is already a mobile society • Easy to determine that the car is “clean” and therefore justify driving more • People who buy hybrid cars are those who are interested in conservation, and likely, that would stay the same for a large percentage of hybrid buyers • Regardless, Hybrid cars are just a part of the solution—maybe the biggest part of the solution, but nevertheless, just one part

19. Will Automakers Respond Appropriately? • Eliminating differences in CAFE between light trucks and passenger cars will prevent automakers from shifting production • Increasing the fine, or adding incentives for improving fuel efficiency will help prevent the willing paying of fines

20. What about Safety Concerns? • The Honda Civic Hybrid actually weighs 100 pounds more than the Honda Civic EX • Effectively, by using Hybrid technology, fuel efficiency can be increased without sacrificing the weight of the car • Other equipment has been added to cars to improve safety such as air bags; fatality rates have declined significantly since enacting CAFE in 1978

21. Average Car 27.5 mpg = 436 gallons of gas per year T.C. = $728 / year Average SUV 20.7 mpg = 579 gallons of gas per year T.C. = $967 / year Honda Civic Hybrid 48 mpg = 250 gallons of gas per year T.C. = $417 / year Ford Escape Hybrid 30 mpg = 400 gallons of gas per year T.C. = $668 / year Saving Money at the Pump (Using Current Gas Price of $1.67 and driving 12,000 miles / year)

22. Are the Differences Enough to Re-Coup the Cost of the Car? • At current gas prices, an owner would have to keep a car for 8 years to recoup the difference in price between a hybrid and a “normal” car. • But, if gas prices increase (as expected would happen if current oil suppliers decreased oil supply by 25%), recoup in price would be noticed earlier.

23. Eight Years With One Car? • Concern that the battery-operated engine would not last 8 years and batteries cost $2000-$3000 to replace • Honda & Toyota both offer 10 year warranties on the electric motor. • Additionally, tax incentive for buying a hybrid vehicle. (Currently $2000 adjustment to gross income)

24. Hybrid Cars Are Cool • Cameron Diaz Drove a Toyota Prius to the Oscars • Ed Begley, Jr. drove a Prius across the country • Leonardo DiCaprio’s family owns 4 Priuses • Carole King, Billy Joel, David Duchovny, & Bill Maher also own a Prius

25. Incentives • CAFE not effective in that automakers have chosen to pay fines in many cases • Loophole that allows SUVs to be treated differently by CAFE, even though most of the car-buying public buys them to use as passenger cars • Congress should act to fix these problems

26. Proposed Legislation #1 Senators Diane Feinstein & Olympia Snowe

27. Components of the Feinstein Proposal • Require SUVs to meet the same standards as passenger cars by 2011 • Aimed at bringing SUVs to the same requirements as currently required by CAFE for passenger cars (27.5 mpg). • No Change for passenger cars

28. Critique of Feinstein’s Proposal • Doesn’t improve fuel efficiency of passenger cars • While SUVs are gaining market share and it’s important to close the loophole, we need to continue to increase fuel efficiency standards for our passenger cars, especially considering the technology exists. • However, does prevent automakers from shifting production to light trucks to avoid fuel efficiency standards

29. Proposed Legislation #2 Senator Durbin’s Proposed New Efficiency Legislation

30. Components of Durbin’s Legislation • Light Truck exception would only include true trucks and vans—not SUVs or minivans • Raise the fuel economy of passenger automobiles to 40 miles per gallon by 2015 with the first increase required in model year 2006. • Update civil penalties for violating CAFE laws to account for inflation

31. Advantages of Durbin’s Leg. • Increasing CAFE to 40 mpg would realize a cumulative savings of 123 billion gallons of gasoline by 2015 – a number 10 times the amount projected to be realized from drilling in the Arctic National Wildlife Refuge

32. Durbin’s Other Legislation • Fuel Efficient Vehicles Tax Incentives Act • Would Create a tax break for purchasers of cars that exceed CAFE standards by more than 5 mpg

33. Advantages of Durbin’s Other” Legislation • Encourages the Customer to buy a fuel efficient car—but it doesn’t necessarily apply to hybrid cars as there is already a tax deduction available for hybrid car purchasers • Encourages Automakers to produce cars that customers will buy

34. Proposed Changes ala Patti • Close Loophole for SUVs and Light Trucks that are used as passenger vehicles • Encourage Automakers to produce more fuel efficient cars beyond CAFE requirements • Improve CAFE requirements • Encourage Consumers to purchase Fuel Efficient Cars

35. Closing the Loophole • Single Standard for all Passenger Vehicles requires defining “passenger vehicle” • Phasing the new standard in over time

36. Light Truck • Sold primarily to commercial entities (and not to soccer moms) • Require dealers to keep track of sales • Has the ability to tow other vehicles or trailers beyond the smallest U-Haul-type trailers • Seats more than 4 people • Other Requirements?

37. Passenger Car • Seats 4 people or less • Can’t tow most trailers or other cars • Bought primarily by families and private individuals • Other requirements

38. New Unified Standard • Adopt portions of Senators Feinstein’s and Durbin’s proposals to eliminate the differences. • Give manufacturers 3-5 years to bring SUVs and minivans to the current 27.5

39. Also Apply to Passenger Cars that Exceed 8500 pounds • Require large passenger cars (such as the Ford Excursion) to meet fuel efficiency standards; otherwise, auto manufacturers may just switch to making super large cars to avoid compliance

40. Improving CAFE • While bringing SUVs and minivans into compliance with current CAFE standards, also gradually increase CAFE standards • Gradually, over 7-9 years to 40 mpg • Effectively, in 9 years, fleet averages for all automobile makes used primarily for personal transportation should meet 40 mpg standard

41. Encourage Manufacturers to Produce • Increase Fines for failure to meet standards to a more “harmful” level • Currently, many fines are merely built into the price of an SUV rather than the manufacturer paying for them out of pocket • Make fines high enough such that if incorporated into sales price, will discourage average joe from buying or if not incorporated, will significantly punish the manufacturer

42. Remove Credit System • Allowing manufacturers to incorporate credits both forward and backward three years makes for difficult enforcement—can’t enforce a fine until 3 years after the failure to meet the goal, by which point, manufacturers may have made enough money on the inefficient vehicle to more than cover the fine

43. Or Leave Credit System In With Modifications • Allow manufacturers to trade credits amongst selves in same year—in other words, Ford can sell emissions credits to GM. If Ford’s average fuel efficiency is 44, and GM’s average fuel efficiency is 38, then Ford can sell to GM (under regulated conditions) 2 mpg.

44. Encourage Consumers to Buy • Continue Tax Break for Fuel Efficient Cars • Don’t phase out the HEV tax credit until Hybrid cars are more established. • Incorporate tax credits for consumers who trade in an older, less efficient car, for a more efficient vehicle. • Encourages people who can’t afford new cars to buy a new car • Many less efficient cars stay on the road because consumers can’t afford a new, more efficient one

45. How Should Manufacturers Comply? • Hybrid Cars • Eliminates risk of lighter cars • Technology is already available • Lighter, GEO Metro type cars • Not popular with people who buy cars as a status symbol • Safety Risk

46. Hybrid Cars: How do we get there from here?

47. http://www.ta.doc.gov/PNGV-Archive/AboutPNGV/intro.htm Project description • Hybrid Emission Vehicle (HEV) Program commenced in 1993 • Partnership between the US DOE and “Big Three” automakers (5 year plan)

48. GOALS of Program • Decrease emissions • Improve mileage (twice the fuel economy) • Comparable performance, costs, and safety

49. PNGV and DOE • Goals of program began to mesh with that of PNGV (Partnership for a new generation of vehicles) • To develop technologies for a new generation of vehicles

50. FreedomCAR • FY 2003: Re-focusing of PGNV into FreedomCAR (Cooperative Automotive Research) Program within DOE)