Chrysler's LaSorda: Time to Tax Demand
Mr. Chairman and Members of the Committee, thank you for inviting me to testify before you on the subject of climate change. DaimlerChrysler is committed to developing new, advanced technologies, which minimize the effects our products and processes have on global climate and the environment in general. We recognize that climate change and national security are serious concerns that require all of us—individuals, industry and government—to take actions to help reduce our dependence on oil and emissions of CO2. And, we have already taken actions to do so.
DaimlerChrysler has long been committed to reducing petroleum consumption and emissions of greenhouse gases of its motor vehicles.
[Editor's note: Mr. LaSorda enumerated some of measures his company is taking to improve fuel efficiency and offer vehicles powered by alternative fuels like E85 and biodiesel.]
I've focused on what we are doing, from a technology perspective, to reduce petroleum consumption—and, since they are directly related, greenhouse gases. But I need to mention one more item in this vein. For those who advocate 4 percent annual CAFE increases over the next 10 years—which translates to a 50 percent fuel economy increase—we know how to do that, too.
In fact, we already do it…in Europe. The U.S. combined fleet averages 24-25 mpg, and in Europe the fleet averages 36 mpg. That's a 50 percent difference.
Why is there a huge disparity between our fleets there and here? After all, we are the same companies in Europe that we are in the U.S., with access to similar technologies. The difference is the European approach to energy and greenhouse gas policies. They've made some tough political choices. They've highly taxed gasoline, making the price three times higher than in the U.S., and they have incentives on diesel fuel [emphasis ours]. As a result of these policies, fuel economy is always high on a customer's list, and not just when there's a spike in fuel prices.
Through policies which affect consumer demand, the mix of vehicles sold in Europe is radically different than here—about 60 percent compacts or smaller, compared to about 15 percent here; and about 50 percent of passenger vehicles are diesel powered.
There's no magic at work here. A gas-engine mid-size car in Europe gets the same mileage as a gas-engine mid-size car in the U.S. It's just that customers demand a very different mix of vehicles in Europe.
The European model, while far from perfect, is based on policies that leverage demand and market forces, not on policies that fight them.
However, in the U.S., our policies have historically addressed the supply side—light-duty vehicle fuel-economy standards. But, consider how a 50-percent fuel-economy improvement relates to new vehicle technology alone. If all the new vehicles sold in the U.S. 10 years from now were hybrids or diesels—something that no one really believes is feasible—fuel economy would improve by only 25-30 percent.
U.S. policymakers must adopt a new and unique formula that fits here. DaimlerChrysler supports a three-pronged, comprehensive approach to climate change and energy security; one that includes a combination of:
- Vehicle efficiency improvements;
- The expanded use of alternative fuels, such as ethanol and biodiesel; and,
- The harnessing of market forces to help drive consumer demand.
We all need to be very clear on one point—new vehicle efficiency improvements alone will never result in the overall decline in petroleum consumption and greenhouse gas emissions we need. The demand for fuel will continue to grow, as more drivers enter the market and vehicles are driven longer distances.
There are more than 230 million light-duty vehicles currently in use today in the U.S. which travel nearly 3 trillion miles. That is nearly 13,000 miles traveled by each vehicle, each year—an increase of about 30 percent since 1985. Thus, greenhouse gases and the demand for petroleum will not be offset by only addressing efficiency improvements among the 16-17 million new vehicles that enter the U.S. market each year. In order to decrease total greenhouse gas emissions and petroleum consumption, we need to accelerate the adoption of alternative fuels such as E85 and bio-diesel, which will affect a greater proportion of the population of light duty vehicles.
And by the way, while travel is growing in the U.S., it will grow exponentially as China and India increase the global automotive market dramatically. The combined Indian and Chinese existing car fleet will almost triple during the next 10 years to about 90 million vehicles, while the U.S. fleet is forecast to grow 25 percent.
To address this increase in demand, we need a comprehensive approach that addresses energy use and greenhouse gas emissions from all sectors of the U.S. economy, and encourages the most efficient reductions in energy use. Our approach should not just address the supply of energy-efficient products, but also spur demand for them, while establishing reasonable time-tables for compliance and realistic levels of reductions.
Although it should go without saying, I'll say it anyway: This effort needs to be national in scope. We need to avoid an unacceptable and inefficient patchwork of inconsistent federal, state, and local approaches. In fact, to truly be effective in curbing greenhouse gases, we need a global solution.
On the vehicle efficiency side, we at DaimlerChrysler recognize the need for action. And we're taking it. Every day, our engineers are working to reduce greenhouse gases and petroleum consumption. We absolutely will be part of the solution and we will accelerate our efforts. We also support reforming the CAFE program to base it on vehicle attributes and pledge to continue to work with NHTSA (National Highway Traffic Safety Administration) to establish maximum feasible levels of fuel economy—levels that are based on sound science and that recognize the limits of technology, cost, and consumer demand.
But again, if we intend to make meaningful progress in reducing petroleum consumption in this country, in addition to vehicle technology improvements, we look to the Federal Government to establish policies that address consumer demand and bend the bias of transportation fuels toward lower carbon alternatives.
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