President Short-Sells the First Fuel in the Race for Energy Security

January 24, 2007

Media Contact(s):

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

WASHINGTON, D.C. — The American Council for an Energy-Efficient Economy (ACEEE) issued a critical assessment of the President's State of the Union "Twenty in Ten" proposal for increasing America's energy security, finding it needlessly weak on fuel economy and over-dependent on ill-defined alternative fuel sources.

"The President sets extremely ambitious goals for alternative fuels, while making tepid promises on fuel economy," said Acting Executive Director Bill Prindle. "While we need new clean fuels, energy efficiency is the first fuel in the race for energy security. Congress should set a stronger CAFE standard that would save at least 12 billion gallons of gasoline in 2017 and 50 billion in 2030."

The Twenty in Ten proposal for fuel economy sets a goal of saving 8.5 billion gallons of gasoline in 2017, which is about 554,000 barrels per day, or about 5% of projected 2017 gasoline usage. This would be achieved through federal fuel economy rules achieving about a 4% annual increase in fuel economy after 2010. ACEEE's assessment is that CAFE standards using known, cost-effective technologies could save at least 50% more gasoline than the Twenty in Ten goal.

In ACEEE's assessment, the prospect of bringing 35 billion gallons of alternative fuels to market in 2017, as proposed by Twenty in Ten, will be difficult and expensive. The plan recognizes this by vaguely broadening the definition of eligible fuels, and by including price safety valves. But the plan does not address the enormous amounts of energy, water, capital, land, and other resources that would be needed for a U.S. biofuels industry of such magnitude. Twenty in Ten includes import allowances in recognition of this fact—but increasing energy imports runs counter to the plan's intent.

By contrast, increasing fuel economy can be achieved with greater certainty, at lower cost, using known, U.S.-based technologies. The regulatory and engineering mechanics of increased fuel economy are well-known. By using lighter materials, better power electronics, leaner fuel mixes, cylinder deactivation, advanced transmissions, hybrid-electric drives, and other known technologies, fuel economy can be increased substantially at modest cost with no safety risks. Research by ACEEE and other organizations, including the National Academy of Sciences, has provided ample documentation of these options.

"The Administration's record on increasing fuel economy does not breed confidence in reaching the Twenty in Ten goal," said Transportation Director Therese Langer. "Their 2006 light truck rule achieved only a 2% annual mileage improvement. Congress needs to set a higher target, and also fix the dual-fuel and test-procedure weaknesses in the CAFE law."

The dual-fuel loophole in the current CAFE law, which gives CAFE credit for vehicles that burn ethanol fuels, regardless of whether they actually use such fuels, threatens to squander as much fuel as the Twenty in Ten fuel economy goal would save in 2017. As currently written, this loophole could reduce fleet fuel economy by up to 5%. Moreover, simply applying the Administration's new fuel economy test procedure, which goes on mileage stickers beginning with the 2008 model year, to CAFE standards would have the effect of raising fuel economy by about 20%.

The President's plan also called for expanding the Strategic Petroleum Reserve at a cost of $65 billion. ACEEE recommends that half of those funds be used for RD&D, tax incentives, and other measures to improve energy security. "While increasing the reserve is a laudable goal, using part of the funds to reduce oil demand gives us a better-balanced hedge against supply disruptions and against high and volatile prices," said Prindle.

ACEEE also noted that the President's plan does not address America's broader energy challenges. "While it would take steps toward solving our oil problems, the President's speech does nothing to loosen the straitjacket that hobbles our electricity and natural gas markets," said Prindle. ACEEE's research shows that the interconnectedness of our energy markets constrains new supply options of all kinds, and that energy efficiency should be used more aggressively as the lead element of a sound energy policy. "Congress should take a much broader view of America's energy security by setting savings targets for electricity and natural gas as well as oil."