Democrats set milestone with automotive deal

Roland Jones Business news editor • Profile • E-mail

An agreement among congressional Democrats to support a 40 percent increase in U.S. vehicle fuel efficiency by 2020 has been hailed as an historic step by both environmentalists and the automotive industry. But while the compromise seems to please both sides, it still faces substantial political hurdles.

For years, the environmental lobby has pushed for higher fuel economy standards to reduce greenhouse gas emissions and the nation’s dependence on foreign oil. But the powerful automotive industry has resisted change, saying the higher standards would increase costs and have a “devastating” economic impact on automakers.

As a result, average fuel economy for passenger cars has remained stuck at 27.5 miles per gallon since 1989, while pickup trucks and sport utility vehicles are held to a less rigorous standard of about 22 miles per gallon.

The longstanding standoff apparently was resolved Friday when House Speaker Nancy Pelosi and Rep. John Dingell, D-Mich., a longtime protector of the automotive industry and chairman of the House Energy and Commerce Committee, agreed on new, higher standards. Their proposal would require automakers to meet an industrywide average of 35 miles per gallon for cars, light trucks and SUVs, by 2020.

The fuel-economy plan is the centerpiece of a larger energy bill that is expected to come before the House for a vote this week. While Democrats have agreed on the fuel-economy measure, other aspects of the bill remain unresolved.

What’s more, the Senate, which has seen significant Republican opposition to higher standards, may not give the fuel-economy measure a warm reception, said Aaron Bragman, an industry  analyst at consultancy Global Insight.

Although the bill’s backers hope the plan will reach President Bush's desk by the end of the year, the White House generally has been hostile to energy legislation proposed by Democrats. If Bush were to veto the bill, Democrats probably would be unable to override it, meaning fuel economy reform would likely have to wait until a new administration takes over in 2009, Bragman wrote in a research note.

Further complicating the issue is the state of California, which has brought suit against the federal Environmental Protection Agency for failing to rule on whether the state can set its own standards for emissions and fuel economy, he added, noting that 11 other states representing nearly one-third of the U.S. market, could follow suit with stricter standards than those mandated by the federal government.

“The compromise has by no means finalized the CAFE standards,” Bragman said, referring to the regulations for corporate average fuel economy. The compromise bill, if adopted, would represent Congress' first increase in CAFE standards since the program was adopted in 1975.

With the backing of lawmakers who long have opposed increased standards, including Dingell and Sen. Carl Levin, D-Mich., there is reason to be optimistic, said Phyllis Cuttino, director Pew Campaign for Fuel Efficiency, which advocates a significant increase in the fuel efficiency standards.

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