Extension of Dual-Fuel Loophole to Increase Oil Consumption by 40-110 Million Barrels Over Next Four Years

February 18, 2004

Media Contact(s):

Wendy Koch, 202-507-4753, Senior Director, Marketing & Communications

WASHINGTON, D.C. — The Bush Administration today extended for four years a policy that increases U.S. oil consumption by allowing auto manufacturers to gain fuel economy credits for making vehicles that can run on ethanol, but rarely do. The American Council for an Energy-Efficient Economy (ACEEE) estimates that extension of the "dual-fueled vehicle" loophole in the federal fuel economy ("CAFE") program will cause the United States to consume an extra 40–110 million barrels of oil in 2005–2008.

"It's like putting an extra half-million new cars on the road each year," said Transportation Program Director Therese Langer. "This move helps to ensure that our reliance on oil imports will continue to rise."

The dual-fuel credit arose from efforts in the late 1980s to increase the use of alternative fuels by ensuring the existence of a vehicle population that could use these fuels. In 1999, production of vehicles that can run on either E85 (an 85% ethanol blend) or gasoline soared as automakers took advantage of the credit to meet their fuel economy targets. There are now over three million E85-capable vehicles on the road, but less than 1% of the fuel consumed by these vehicles is ethanol due to the fuel's high cost and limited availability. At the same time, the credits allow manufacturers to sell more inefficient vehicles, resulting in an overall increase in the amount of gasoline consumed. Every sale of an ethanol-capable Explorer, for instance, allows Ford to sell two additional Excursions without exceeding fuel economy standards.

"Offering no-strings-attached fuel economy credits for these vehicles does not promote alternative fuel use—it contributes to the image of ethanol as a boondoggle," said ACEEE Executive Director Steven Nadel. "The way to promote E85 use and save oil is to tie dual fuel credits to the use of ethanol."

In 2002, a joint DOT, DOE, and EPA report noted the increase in fuel consumption that the dual-fuel credit has brought about to-date and concluded that alternatives to the current credit system should be considered. The new rule ignores these findings.

For an ACEEE white paper on the dual-fuel vehicle loophole, see http://aceee.org/transportation/dualfuel.pdf.