Fuel Economy Fraud Closing the Loopholes That Increase U.S. Oil Dependence AUTHORS DON M ACKENZIE LOUISE BEDSWORTH DAVID FRIEDMAN Union of Concerned Scientists August 2005 II U NIONOF C ONCERNED S CIENTISTS © 2005 Union of Concerned Scientists All rights reserved Don MacKenzie is a vehicles engineer in the Union of Concerned Scientists Clean Vehicles Program. Louise Bedsworth is a senior vehicles analyst in the Union of Concerned Scientists Clean Vehicles Program. David Friedman is research director for the Union of Concerned Scientists Clean Vehicles Program. The Union of Concerned Scientists is a nonprofit partnership of scientists and citizens combining rigorous scientific analysis, innovative policy development, and effective citizen advocacy to achieve practical environmental solutions. The Union of Concerned Scientists Clean Vehicles Program develops and promotes strategies to reduce the adverse environmental impact of the U.S. transportation system. More information about the Union of Concerned Scientists is available on the UCS website at www.ucsusa.org. The full text of this report is available on the UCS website or may be obtained from UCS Publications 2 Brattle Square Cambridge, MA 02238-9105 Or email [email protected] or call 617-547-5552. Fuel Economy Fraud III CONTENTS Figures and Tables ......................................................................................................................... iv Acknowledgements......................................................................................................................... v Executive Summary........................................................................................................................ 1 Non-Passenger Vehicle Loophole................................................................................................... 9 Two Different Standards............................................................................................................. 9 Automakers Shift Production to “Non-passenger” Automobiles ............................................... 9 Costs of the Loophole ............................................................................................................... 12 The Potential to Increase Fuel Economy .................................................................................. 12 Methods for Closing the Loophole ........................................................................................... 14 Savings From Closing the Loophole......................................................................................... 16 The 8,500 lb Loophole.................................................................................................................. 18 Background............................................................................................................................... 18 Costs of the Loophole ............................................................................................................... 19 Closing the Loophole................................................................................................................ 19 Savings from Closing the Loophole ......................................................................................... 20 Dual-Fuel Loophole ...................................................................................................................... 22 Background............................................................................................................................... 22 Costs of the Loophole ............................................................................................................... 23 Fixing the Problem.................................................................................................................... 24 The Luxury SUV Tax Loophole................................................................................................... 28 Background............................................................................................................................... 28 Expoiting the Loophole............................................................................................................. 30 Closing the Loophole................................................................................................................ 32 Gas Guzzler Loophole .................................................................................................................. 35 Background............................................................................................................................... 35 Closing the Loophole................................................................................................................ 37 The Next Loophole? ..................................................................................................................... 40 Attribute-based CAFE Standards.............................................................................................. 40 Problems with Attribute-based Standards................................................................................. 40 Guarding Against New Loopholes............................................................................................ 43 Appendix: Vehicle Lists ............................................................................................................... 45 IV U NIONOF C ONCERNED S CIENTISTS FIGURES AND TABLES Figures Figure 1: Sales Distribution Since 1975 ................................................................................. 11 Figure 2: Average Fuel Economy of Cars and Light Trucks, 1975-2004 .............................. 11 Figure 3: “Light Truck” Gasoline Demand ............................................................................ 16 Figure 4: Consumer Savings Due to Closing Light Truck Loophole by MY2011................. 17 Figure 5: Fuel Demand from Trucks Less than 10,000 lbs GVWR ....................................... 21 Figure 6: Net Consumer Cash Flow Savings Due to Closing the Class 2b Loophole............ 21 Figure 7: Distribution of FFV Sales and E85 Fueling Stations .............................................. 25 Figure 8: Gas Guzzler Tax versus Fuel Consumption............................................................ 36 Figure 9: Projected Shift in Light Truck Sales ....................................................................... 42 Figure 10: Trends in Pickup Truck Sales................................................................................ 44 Figure 11: Trends in SUV Sales ............................................................................................. 44 Tables Table ES-1: Savings from Closing Loopholes in Current Fuel Economy Standards…............2 Table ES-2: Savings from Increasing Light-Truck Fuel Economy to 27.5 mpg by 2011….....3 Table ES-3: Savings from Increasing Commercial Light Truck Fuel Economy…...................4 Table ES-4: Proposed Gas Guzzler Tax Schedule for Non-Passenger Automobiles…...….....7 Table 1: CAFE Standards, 1985 - Present .............................................................................. 10 Table 2: Impacts of Non-Passenger Loophole........................................................................ 12 Table 3: Average Characteristics of Pickups, SUVs, and Vans ............................................ 13 Table 4: Fuel Economy Potential of Pickups, SUVs, and Minivans in 2010 and 2014 ......... 13 Table 5: Savings from Raising Light Truck Fuel Economy to 27.5 mpg by 2011................. 16 Table 6: Savings due to Increasing CLDT Fuel Economy to 27.5 mpg by 2011 ................... 20 Table 7: CAFE Test vs. Credited Fuel Economy Values for Selected FFVs ......................... 22 Table 8: Fines Avoided Using AMFA Credits ....................................................................... 24 Table 9: Current and Proposed Dual Fuel Vehicle Credit Systems........................................ 26 Table 10: Fraction of Purchase Cost Deducted by Year of Service ....................................... 28 Table 11: Depreciation Limits for Cars and Trucks < 6,000 lbs GVWR ............................... 29 Table 12: Maximum Deductions in Year of Purchase by Vehicle Type and Price ................ 31 Table 13: Minimum Number of Years Needed to Fully Depreciate a Vehicle ...................... 31 Table 14: Comparison of Costs for a Crossover Utility Vehicle and a Pickup ...................... 32 Table 15: Comparison of Costs for a Luxury Car and a Luxury SUV ................................... 32 Table 16: Possible Depreciation Limits.................................................................................. 33 Table 17: Cost Comparison of for a CUV and Pickup Under Revised Depreciation Limits . 33 Table 18: Cost Comparison for a Luxury Car vs. SUV Under Revised Depreciation Limits 34 Table 19: Gas Guzzler Tax Amounts and Lifetime Excess Gasoline Consumption .............. 35 Table 20: Estimated Gas Guzzler Taxes................................................................................. 36 Table 21: Proposed Gas Guzzler Tax Rates for Non-passenger Automobiles ....................... 38 Table 22: Gas Guzzler Taxes Applied to Non-passenger Automobiles ................................. 38 Table 23: Fuel Economy Loss Due to Upweighting............................................................... 42 Fuel Economy Fraud V ACKNOWLEDGEMENTS Support for this work was provided by The Energy