Power and Efficiency

Efficiency is typically the most cost-effective strategy for addressing major energy issues because the savings achieved from the reduction in energy consumption can offset some or all of the increase in cost of the efficient technology. Energy efficiency strategies often have a positive net present value or short payback. Alternative fuels typically have high costs-for the fuel, the vehicle, and the infrastructure-which undermines their cost effectiveness and practicality.

The fuel efficiency approach is the one this country used so successfully from the mid-1970s to mid -1980s, when we doubled the fuel efficiency of our fleet while making our cars safer, mandating that new cars have a fuel efficiency of 27.5 miles per gallon (mpg). In a 2002 report to President Bush, the National Academy of Sciences concluded that automobile fuel economy could be further increased by 12 percent for small cars and up to 42 percent for large SUVs with technologies that would pay for themselves in fuel savings.12 That study did not even consider the greater use of diesels and hybrids.

Studies by the national laboratories for DOE, by the Massachusetts Institute of Technology, and by the Pew Center on Global Climate Change have concluded that even greater savings could be cost-effective while maintaining or improving passenger safety.13 The Europeans have a voluntary agreement with automakers that will reduce carbon dioxide emitted per mile by 25% between 1995 and 2008-2009 for the average light-duty vehicle, which equates to a vehicle fuel efficiency of almost 40 mpg. Japan has a mandatory target with similar goals.14

Efforts to raise fuel economy standards have been stuck in political limbo for years. Because of this inaction, the fuel economy of the average vehicle on American roads is at its lowest level in two decades.15 The fuel economy laws have a loop-hole allowing sport utility vehicles (SUVs) and light trucks to average 20.7 mpg, 25% lower than the new car standard. This has allowed overall vehicle efficiency to drop as the SUV share of new vehicle sales has grown. Ford, for instance, has backed off a voluntary commitment to increase SUV fuel efficiency, and, in fact, its 2003 model year SUVs were less fuel-efficient than the previous year.16

The two most potent arguments against raising fuel economy standards have centered around safety and jobs. The argument has been that fuel economy standards will inevitably push people into smaller and lighter vehicles. Such vehicles are supposedly less safe-a claim with little analytical support but tremendous political potency. The matching argument has been that Detroit makes most of its profit on bigger vehicles, and a move to smaller vehicles would inevitably come at the expense of profit and hence the jobs of autoworkers.