Alliance member companies have more than 620,000 employees in the United States, with more than 250 manufacturing facilities in 35 states. Overall, a recent University of Michigan study found that the entire automobile industry creates more than 6.6 million direct and spin-off jobs in all 50 states and produces almost $243 billion in payroll compensation annually.
The Alliance member companies are proud of the record they have achieved in reducing tailpipe emissions of hydrocarbons, carbon monoxide, and nitrogen oxides from motor vehicles. Cars being sold today are 96% cleaner than uncontrolled vehicles from over 30 years ago. Compared to other emission sources:
Using a chain saw for one hour emits the same amount of hydrocarbons as driving 600 miles in a typical car the distance from Washington, D. C. to Atlanta.
Using a snowblower for one hour emits the same amount of carbon monoxide as driving a typical car 305 miles the distance from Phoenix to Las Vegas.
A Jet Ski emits more in only seven hours of use than a new car does in traveling 100,000 miles the average mileage accrued over a decade of driving.
With the adoption of EPA's Tier 2 rulemaking (65 FR 6698, February 10, 2000), which will begin to be phased in with the 2004 model year (the fall of 2003), emissions from cars and light trucks will be reduced another 80% from today's clean vehicles. While recognizing that it is a tough challenge for our engineers, the Alliance accepted this EPA rulemaking. This rulemaking requires that:
Cars and light trucks meet the same emission standards for the heaviest light trucks, this means that emissions of nitrogen oxides must be reduced from 1.53 grams per mile (gpm) to an average of 0.07 gpm.
All cars and light trucks must meet an increased useful life of 120,000 miles from today's requirement of 100,000 miles (this increases the durability of the emission control system).
Evaporative hydrocarbon emissions (from the fuel tank and lines) are cut in half over today's levels.
Diesel-powered vehicles will have to meet the same standards as gasoline-powered vehicles.
This rulemaking also reduces the amount of sulfur in gasoline from recent high levels up to 1000 parts per million (ppm) to a cap of 80 ppm in 2006. Cleaner fuel is a critical part of our ability to achieve these very stringent emission standards. Sulfur poisons the catalyst, and the newer catalysts that are being developed for Tier 2 vehicles are extremely sensitive to it. With the extremely low levels of emissions that are required under Tier 2, the catalyst must be extremely efficient for the entire useful life of the vehicle. Even cleaner gasoline than required by Tier 2 with sulfur approaching near-zero levels, capping the distillation index at 1200 and adopting other limits as recommended by the world's automakers in the World-Wide Fuel Charter is absolutely critical to ensure the lowest possible emissions in conventional vehicle technology and to enable new fuel efficient gasoline lean-burn technologies.
What is most impressive about removing sulfur from fuel is that all vehicles equipped with catalysts (which were first installed in 1975 models) will become cleaner due to this change in the fuel. This is because the catalysts in these vehicles will now function more efficiently than before. So the emission reductions due to the removal of sulfur from gasoline are huge.
While we support EPA's rulemaking, we also believe that more should be done to clean up motor vehicle fuel, including reducing sulfur levels even further. The Alliance supports the goals of the World Wide Fuel Charter, which calls for "near-zero" sulfur (levels below 5-10 ppm), capping the distillation index at 1200 F and other changes in motor vehicle fuel. We note that the European Union is well on its way toward making such cleaner fuel available.
The Alliance also strongly supports the EPA's recently finalized rulemaking to control the emissions of heavy-duty engines and diesel fuel sulfur. The reduction of sulfur levels in diesel fuel to a maximum of 15 ppm is critical for helping to enable tighter control of emissions for both heavy-duty engines and light-duty diesel applications. With advanced diesel engines and clean fuel, we believe that diesels will be able to meet the more stringent Tier 2 standards by using after treatment emission control devices for the first time. Diesel engines are one of the tools the industry has to achieve higher fuel efficiency along with other technologies that are mentioned later in my statement. The new, advanced technology diesel engines are nothing like the diesels from the past. These new engines are smooth and quiet and don't emit black smoke commonly associated with diesels. They are proving very popular today in Europe and are part Europe's strategy for reducing greenhouse gas emissions. And, if clean enough fuel is widely available, they will also be very clean, meeting the same Tier 2 emission standards that gasoline-powered vehicles have to meet.
There is also good news on air toxics. EPA finalized its motor vehicle air toxics rulemaking in March (66 FR 17230, March 29, 2001). EPA found that the emission reductions resulting from the Tier 2 rulemaking has the additional benefit of reducing toxic air emissions to a level such that no further control is needed.
Our efforts to reduce environmental pollutants also extends to our production facilities:
Automakers have reduced toxic chemical use, and reformulated paints and solvents for lower emissions at auto production facilities.
Automakers have developed effective waste reduction methods, such as reusable shipping containers for parts and recycling.
Automakers are also working with suppliers to minimize the environmental impact of operation and production, such as award-winning Brownfields redevelopment.
Moreover, the Alliance supports efforts to create an effective energy policy based on broad, market-oriented principles. Policies that promote research and development and help deploy advanced technologies by providing customer based incentives to accelerate demand of these advanced technologies, set the foundation. This focus on bringing advanced technologies to market leverages the intense competition of the automobile manufacturers worldwide. Incentives will help consumers overcome the initial cost barriers of advanced technologies during early market introduction and increase demand, bringing more energy efficient vehicles into the marketplace.
Congress needs to consider new approaches for the 21st century. The Alliance and its 13 member companies believe that the best approach for improved fuel efficiency is to aggressively promote the development of advanced technologies through cooperative, public/private research programs and competitive development and incentives to help pull the technologies into the marketplace as rapidly as possible. We know that advanced technologies with the potential for major fuel economy gains are possible. As a nation, we need to get these technologies on the road as soon as possible in an effort to reach the national energy goals as fast and as efficiently as we can.
Senate legislation that has been crafted to spur the sale of advanced technology fuel-efficient vehicles is included in S. 389, introduced by Senator Murkowski. This legislation would (1) provide tax credits for the purchase of alternative fuel and hybrid vehicles, (2) modify the existing tax credit for electric vehicles, (3) extend the dual fuel CAFE credit, (4) provide a business tax credit for alternative fuels sold at retail, (5) extend for three years the tax deduction for alternative fuel refueling property and add a new deduction for this property, (6) allow states to open HOV lanes to alternative fuel vehicles, (7) allow DOE to provide equivalent alternative fuel vehicle credits to fleets or persons that invest in alternative fuel refueling infrastructure, (8) establish a federal grant program for local governments addressing the incremental cots of qualified alternative fuel vehicles, and (9) require federal agencies to increase the fuel efficiency of newly purchased federal vehicles.
Many of the provisions in S. 389 are included in S. 760 introduced by Senator Hatch, Senator Jeffords and others. The Alliance is in general support of S. 760, but would like to see some minor, technical changes made to the hybrid-electric vehicle section of the bill and would also support the inclusion of tax credits for advanced lean burn technology. The Alliance believes that the overall concepts and provisions found in S. 760 are the right approach and would benefit American consumers.
The bill would ensure that advanced technology is used to improve fuel economy. Performance incentives, tied to improved fuel economy, are incorporated into the legislation in order for a vehicle to be eligible for the tax credits. These performance incentives are added to a base credit that is provided for introducing the technologies into the marketplace.
Specifically, S. 760 has a number of important provisions addressing various types of advanced technologies. These include:
Fuel Cell Vehicles
The most promising long-term technology offers breakthrough fuel economy improvements and zero emissions. Over the very long term, it may enable a shift away from petroleum-based fuels, assuming alternative fuel infrastructures can be developed. A $4,000 base credit is included along with performance based fuel economy incentives of up to an additional $4,000. The credit is available for 10 years to accelerate introduction extremely low volume production is expected to begin in the 2005-2007 timeframe.
Hybrid Vehicles
Electronics that integrate electric drive with an internal combustion engine offer near term improvements in fuel economy. A credit of up to $1,000 for the amount of electric drive power is included along with up to $3,000 depending upon fuel economy performance. The credit is available for 6 years to accelerate consumer demand as these vehicles become available in the market and set the stage for sustainable growth. To be eligible for the credit, hybrid vehicles must meet or beat the average emission level for light duty vehicles.
Dedicated Alternative Fuel Vehicles
Vehicles capable of running solely on alternative fuels, such as natural gas, LPG, and LNG, promote energy diversity. Many alternative fuel technologies also offer reduced emissions compared to conventional vehicle technology. A base credit of up to $2,500 is included with an additional $1,500 for vehicles certified to "Super Ultra Low Emission Vehicle" standards (SULEV).
Battery Electric Vehicles
Vehicles that utilize stored energy from "plug-in" rechargeable batteries offer zero emissions. A base credit of $4,000 is included (similar to the fuel cell -- both have full electric drive systems) and an incremental $2,000 is available for vehicles with extended range or payload capabilities.
Alternative Fuel Infrastructure Incentives
Alternative fuels such as natural gas, LNG, LPG, hydrogen, B100 (biomass) and methanol are primarily used in alternative fueled vehicles and fuel cell vehicles. To encourage the installation of distribution points to support these vehicle applications, a credit of $0.50 for every gallon of gas equivalent is provided to the retail distributor. This credit is available for 6 years and will support the distribution of these fuels as vehicle volume grows and may be passed on to the consumer by the retail outlet. Note that ethanol is not included in these provisions due to the existing ethanol credit.
Complementary to the credit for the fuel itself, the existing $100,000 tax deduction for infrastructure is extended for 10 years and a credit for actual costs up to $30,000 for the installation cost of alternative fuel sites available to the public is included. One of the key hurdles to overcome in commercializing alternative fuel vehicles is the lack of fueling infrastructure. For nearly a century, infrastructure has focused primarily on gasoline and diesel products. These proposed infrastructure and fuel incentives will help the distributors overcome the costs to establish the alternative fuel outlets, especially during initial lower sales volumes, before the number of alternative fuel vehicles increases to commercially sustainable levels.
To reiterate, the way to improve vehicle and fleet fuel economy, one that is in tune with consumer preferences, is to encourage the development and purchase of advanced technology vehicles (ATVs). Consumers are in the driver's seat and most independent surveys show that Americans place a high priority on performance, safety, space and other issues with fuel economy ranking much lower even with today's gas prices. ATVs hold great promise for increases in fuel efficiency without sacrificing the other vehicle attributes consumers desire. Just as important, the technology is transparent to the customer.
Member companies of the Alliance have invested billions of dollars in research and development of cleaner, more fuel-efficient vehicles. Automobile companies around the globe have dedicated substantial resources to bringing cutting-edge technologies electric, fuel cell, and hybrid electric vehicles as well as alternative fuel vehicles and powertrain improvements to the marketplace. These investments will play a huge role in meeting our nation's energy and environmental goals.
These advanced technology vehicles are more expensive than their gasoline counterparts during early market introduction, and they may also face psychological barriers to widespread introduction. As I mentioned earlier, the Alliance is supportive of Congressional legislation that would provide for personal and business end-user tax incentives for the purchase of advanced technology and alternative fuel vehicles. Make no mistake: across the board, tax credits will not completely cover the incremental costs of new advanced technology. However, they will make consumers more comfortable with accepting the technology enough to change purchasing behavior. In short, tax credits will help bridge the gap towards winning broad acceptance among the public leading to greater volume and sales figures throughout the entire vehicle fleet. This type of incentive will help "jump start" market penetration and support broad energy efficiency and diversity goals.
Some of the discussion today has centered on the vehicles of the automobile manufacturers. But it is important not to forget about a vital component for any vehicle the fuel upon which it operates. As automakers looking at the competing regulatory challenges for our products -- fuel efficiency, safety and emissions -- and attempting to move forward with advanced technologies, we must have the best possible and cleanest fuels. EPA has begun to address gasoline quality but it needs to get even cleaner. This is important because gasoline will remain the prevalent fuel for years to come and may eventually be used for fuel cell technology.
Beyond gasoline, the auto industry is working with a variety of suppliers of alternative fuels. In fact, the industry already offers more than 25 vehicles powered by alternative fuels. More than 1 million of these vehicles are on the road today and more are coming. Today, we find vehicles that use:
Natural gas, which reduces carbon monoxide emissions by 65 to 90 percent; Ethanol, which produces fewer organic and toxic emissions than gasoline with the longer term potential to substantially reduce greenhouse gases; Liquefied petroleum gas (propane), the most prevalent of the alternative fuels, which saves about 60% VOC emissions; and For the future, hydrogen, which has the potential to emit nearly zero pollutants.
The Alliance has submitted comments to the DOT in support of an extension of the dual fuel vehicle incentives through 2008. Current law provides CAFE credits up to 1.2 mpg for manufacturers that produce vehicles with dual fuel capability. These vehicles can operate on either gasoline or domestically produced alternative and renewable fuels, such as ethanol. However, the dual fuel credits end in model year 2004 unless extended via rulemaking by the National Highway Traffic Safety Administration. The Alliance believes an extension is important so that these vehicles continue to be produced in high volume to help encourage the expansion of the refueling infrastructure and giving consumers an alternative to gasoline.
In addition to alternative fuels, companies are constantly evaluating fuel-efficient technologies used in other countries to see if they can be made to comply with regulatory requirements in the United States. One such technology is diesel engines, using lean-burn technology, which have gained wide acceptance in Europe and other countries. Automakers have been developing a new generation of highly fuel-efficient clean diesel vehicles using turbocharged direct injection engines as a way to significantly increase fuel economy and reduce greenhouse gas emissions. However, their use in the U.S. must be enabled by significantly cleaner diesel fuel.
As you can tell, the automobile companies from the top executives to the lab engineers are constantly competing for the next breakthrough innovation. If I can leave one message with the Committee today, it is to stress that all manufacturers have advanced technology programs to improve vehicle fuel efficiency, lower emissions, and increase motor vehicle safety. These are not "pie in the sky" concepts on a drawing board. In fact, many companies have advanced technology vehicles in the marketplace right now or have announced production plans for the near future.
Thank you for the opportunity to testify before the Committee today. I would be happy to answer any questions you may have.