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Friday, April 30, 2010

Automobile and Light Truck Fuel Economy: The CAFE Standards


Brent D. Yacobucci
Specialist in Energy and Environmental Policy

Robert Bamberger
Specialist in Energy Policy

On May 19, 2009, President Obama announced a plan to integrate Corporate Average Fuel Economy (CAFE) standards administered by the National Highway Traffic Safety Administration (NHTSA) with automotive greenhouse gas (GHG) emissions standards to be issued by the Environmental Protection Agency (EPA). On September 15, 2009, EPA and NHTSA issued proposed rules and finalized those rules on April 1, 2010. The new rules will apply to cars and light trucks (pickups, vans, and SUVs) for model year (MY) 2012 through MY2016. The Administration had stated that the proposal would require an increase in fuel economy standards to as much as 35.5 miles per gallon (mpg) by model year (MY) 2016, four years ahead of the deadline set in the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140). The Administration estimates that the total cost of complying with EISA and the new proposal will add about $950 to the cost of an average MY2016 vehicle (compared to MY2011), although the Administration expects that this additional purchase cost will be paid back through lifetime fuel savings. Whether or not the Obama Administration has understated these costs, as some have argued, they are in line with cost estimates for EISA implementation under the Bush Administration, and EPA and NHTSA maintain that they have the technical data to support their cost estimates.

The objective of the new greenhouse gas standards is to reach reduction levels similar to those adopted by the state of California, although some specifics of the final rule are different. While the rulemaking process was combined, in the joint rulemaking, EPA and NHTSA recognized that some parts of the GHG program do not translate to the CAFE program, and vice versa. Therefore, EPA and NHTSA expect that the achieved fuel economy will be somewhat lower than 35.5 mpg as automakers will use credits from changes in air conditioner refrigerants and other greenhouse gas reductions to comply with the program, but which have no bearing on fuel economy. Thus, NHTSA has set a CAFE target of 34.1 mpg for MY2016.

Many stakeholders were concerned about a potential "patchwork" of different federal and state standards if EPA, NHTSA, and California were to establish different standards at the intersection of fuel economy and GHG emissions. Therefore, the Administration has secured commitment letters from California, the Alliance of Automobile Manufacturers, and nine automakers to work together to establish a set of national standards. One of the key parts of the compromise is that California will abandon its requirement for class-based average emissions standards and will instead adopt NHTSA's footprint-based approach. Further, California will treat any vehicle meeting the new federal GHG standards as meeting California standards.

On March 27, 2009, NHTSA released a final rule establishing fuel economy standards for MY2011 passenger cars and light trucks. Previously, EISA had restructured the automotive fuel economy program, directing NHTSA to establish a corporate average fuel economy (CAFE) standard of 35 mpg by MY2020 for the combined passenger automobile and light truck fleet. A Notice of Proposed Rulemaking (NPRM), issued in March 2008 by the Bush Administration, covered MY2011-MY2015. To provide opportunity to conduct additional analysis to support the setting of standards for the later model years, the Obama Administration, on January 26, 2009, directed NHTSA to finalize a rule solely for MY2011. NHTSA expects that MY2011 rule will result in combined car and light truck fuel economy for MY2011 of 27.3 mpg. The standards are "attribute" based; every new vehicle will have its own target, based on its size.


Date of Report: April 23, 2010
Number of Pages: 15
Order Number: R40166
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Friday, April 16, 2010

Public Transit Program Funding Issues in Surface Transportation Reauthorization

William J. Mallett
Specialist in Transportation Policy

As enacted in the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA; P.L. 109-59), federal public transit assistance programs were authorized through September 2009. Congress has so far failed to enact a multi-year reauthorization; consequently, federal transit programs have been operating as a result of a series of short-term legislative extensions. Decisions about reauthorization will likely hinge on the amount of funds available from the Mass Transit Account of the Highway Trust Fund, the source of about 80% of federal transit funding. Without an increase in the federal fuels tax, the use of other dedicated revenue mechanisms, or more money from the general fund, federal funding available to support both highways and transit will slow in the short term, and may decline in the medium term. Because of the growth in authorized spending in SAFETEA and the spending down of unexpended balances over the last few years, the Congressional Budget Office (CBO) estimates that the transit account will have trouble meeting its obligations in a timely fashion in FY2013. This is about two years later than previously estimated because of an infusion of $4.8 billion from the General Fund of the U.S. Treasury enacted in the Hiring Incentives to Restore Employment (HIRE) Act (P.L. 111-147). 

CBO estimates that expenditures from the transit account will exceed revenues by about $3.1 billion in FY2011. To remedy this deficit, the fuels tax would need to be raised by approximately 5 to 10 cents per gallon overall to close the gap, with 20% of the increase (1 to 2 cents per gallon) dedicated to the transit account. This would allow for no growth in the program to deal with growing needs or inflation. The U.S. Department of Transportation (DOT), however, estimates that the country needs to spend an extra $1.0 billion annually over the next 20 years to maintain the current condition and performance of transit systems, and an extra $3.6 billion annually to make substantial improvements. At the current federal share of overall transit finances, this translates to an additional 3 cents per gallon in the federal fuels tax (0.6 cents for the transit account) to maintain the system and 10 cents per gallon (2 cents for the transit account) to improve the system. Two congressionally created commissions have estimated greater capital investment needs than DOT. 

Without new revenue, Congress may have to modify transit program priorities or, alternatively, may want to reexamine the federal role in the financing of transit systems. Some of the options that may be considered include reducing the federal matching share, encouraging more private sector involvement, including the use of public-private partnerships and innovative financing, encouraging improvements in transit system productivity, and the broad restructuring of current federal transit programs. 

The report outlines several ways of restructuring federal public transit programs, each an alternative to the possibility of leaving the existing system unchanged. First, Congress might decide to focus more resources on major capital expenses for the rehabilitation and expansion of transit service in places that are best served by this mode, primarily the densely populated parts of large cities that are often severely congested. Second, Congress might focus on supporting and rehabilitating existing services rather than major capital expansion. Third, Congress might eliminate the capital improvement programs altogether, to be replaced with a simple "block grant" that could be distributed based on transit ridership or population. This would allow state and local governments to decide how best to allocate transit funding support among existing and new services.


Date of Report: April 9 2010
Number of Pages: 24
Order Number: RL34183
Price: $29.95

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Wednesday, April 7, 2010

Federal Aviation Administration (FAA) Reauthorization: An Overview of Legislative Action in the 111th Congress

Bart Elias, Coordinator
Specialist in Aviation Policy

Funding authorization for aviation programs set forth in Vision 100—Century of Aviation Reauthorization Act (P.L. 108-176) and authorization for taxes and fees that provide revenue for the aviation trust fund expired at the end of FY2007. While Federal Aviation Administration (FAA) reauthorization legislation was considered during the 110th Congress, the only related legislation enacted consisted of several short-term extensions for aviation trust fund revenue collections and aviation program authority, thus carrying the issue of FAA reauthorization over to the 111th Congress. While FAA reauthorization debate has continued during the 111th Congress, additional short-term extensions have been passed to extend the authorization of aviation programs, funding, and aviation trust fund revenue collections. 

On February 11, 2009, Representative Oberstar introduced the FAA Reauthorization Act of 2009 (H.R. 915). The bill is similar to FAA reauthorization legislation passed by the House during the 110th Congress (see H.R. 2881, 110th Congress). H.R. 915, as amended, was passed by the House on May 21, 2009. H.R. 915 would authorize almost $54 billion for FAA programs over three years spanning from FY2010 through FY2012. The financing title of the bill would raise fuel taxes for corporate jets and other general aviation aircraft, but would keep fuel taxes paid by the airlines and passengers' taxes at their current rates. The bill would also allow airports to increase passenger facility charges (PFCs), raising the maximum from $4.50 to $7 per passenger. The bill would increase authorized spending for facilities and equipment to support development of Next Generation (NextGen) air traffic modernization initiatives, and would authorize increased funding for airport infrastructure improvement grants. The bill seeks modifications in FAA management and oversight of NextGen air traffic modernization projects, and includes provisions addressing system capacity, aviation safety, environmental issues, and airline industry issues, including airline passenger rights issues. The House also passed the Airline Safety and Pilot Training Improvement Act of 2009 (H.R. 3371) on October 14, 2009, a bill containing numerous provisions related to airline safety. 

On July 14, 2009, Senator Rockefeller introduced the FAA Air Transportation Modernization and Safety Improvement Act (S. 1451), containing a two-year FAA reauthorization proposal. The bill would authorize $34.56 billion over a two-year span covering FY2010 and FY2011. Unlike the Aviation Investment and Modernization Act of 2007 (S. 1300, 110th Congress), S. 1451 does not contain any proposal for aviation system user fees. Rather, it focuses on accelerating the deployment of NextGen air traffic technologies and a number of safety issues, including the safety of air ambulance operations, unmanned aircraft, commuter airlines, and FAA oversight of airlines and aircraft repair stations. The bill seeks to streamline the PFC approval process, but does not seek any increase to maximum PFC levels. The bill also seeks to improve airline consumer service through enhanced disclosure requirements and contingencies for flights that are substantially delayed, and it seeks an increase in funding for Essential Air Service (EAS) subsidies and small community air service grants. On March 22, 2010, the Senate passed H.R. 1586 as amended, which is similar to S. 1451 and includes an aviation trust fund revenue title. Subsequently, on March 25, 2010, the House passed its amended version of H.R. 1586, titling it the Aviation Safety and Investment Act of 2010, which incorporates the text of H.R. 915 and H.R. 3371. A conference to resolve the differences on H.R. 1586 is pending.

For additional resources see: http://pennyhill.net/?p=226


 

Date of Report: March 30, 2010
Number of Pages: 92
Order Number: R40410
Price: $29.95

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Sunday, April 4, 2010

The U.S. Motor Vehicle Industry: Confronting a New Dynamic in the Global Economy

Bill Canis
Specialist in Industrial Organization and Business

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

This report provides an in-depth analysis of the 2009 crisis in the U.S. auto industry and its prospects for regaining domestic and global competitiveness. It also analyzes business and policy issues arising from the unprecedented restructurings that occurred within the industry. The starting point for this analysis is June-July 2009, with General Motors Company (GM or new GM) and Chrysler Group LLC (or new Chrysler) incorporated as new companies, having selectively acquired many, but not all, assets from their predecessor companies. 

The year 2009 was marked by recession and a crisis in global credit markets; the bankruptcy of General Motors Corporation and Chrysler LLC; the incorporation of successor companies under the auspices of the U.S. Treasury; hundreds of parts supplier bankruptcies; plant closings and worker buyouts; the cash-for-clunkers program; and increasing production and sales at year's end. This report also examines the relative successes of the Ford Motor Company and the increasing presence of foreign-owned original equipment manufacturers (OEMs), foreign-owned parts manufacturers, competition from imported vehicles, and a serious buildup of global overcapacity that potentially threatens the recovery of the major U.S. domestic producers. This report, which establishes a context for examining the industry and analyzes a unique but highly specific period in the U.S. automobile industry's history, will not be updated.


Date of Report: March 26, 2010
Number of Pages: 72
Order Number: R41154
Price: $29.95

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Federal Aviation Administration (FAA) Reauthorization: An Overview of Legislative Action in the 111th Congress

Bart Elias, Coordinator
Specialist in Aviation Policy

Funding authorization for aviation programs set forth in Vision 100—Century of Aviation Reauthorization Act (P.L. 108-176) and authorization for taxes and fees that provide revenue for the aviation trust fund expired at the end of FY2007. While Federal Aviation Administration (FAA) reauthorization legislation was considered during the 110th Congress, the only related legislation enacted consisted of several short-term extensions for aviation trust fund revenue collections and aviation program authority. The Federal Aviation Administration Extension Act, Part II (P.L. 110-330) extended these authorizations until March 31, 2009, thus carrying the issue of FAA reauthorization over to the 111th Congress. On March 30, 2009, the Federal Aviation Administration Extension Act of 2009 (P.L. 111-12) was enacted, further extending revenue collections and aviation program authority through the end of FY2009, and on October 1, 2009, the Fiscal Year 2010 Federal Aviation Administration Extension Act (P.L. 111-69) was enacted, further extending this authority through the end of calendar year 2009. On December 16, 2009, the Fiscal Year 2010 Federal Aviation Administration Extension Act, Part II (P.L. 111-116) was enacted further extending the existing authority until March 31, 2010. 

On February 11, 2009, Representative Oberstar introduced the FAA Reauthorization Act of 2009 (H.R. 915). The bill is similar to FAA reauthorization legislation passed by the House during the 110th Congress (see H.R. 2881, 110th Congress). H.R. 915, as amended was passed by the House on May 21, 2009. H.R. 915 would authorize almost $54 billion for FAA programs over three years spanning from FY2010 through FY2012. The financing title of the bill would raise fuel taxes for corporate jets and other general aviation aircraft, but would keep fuel taxes paid by the airlines and passengers' taxes at their current rates. The bill would also allow airports to increase passenger facility charges (PFCs), raising the maximum from $4.50 to $7 per passenger. The bill would increase authorized spending for facilities and equipment to support development of Next Generation (NextGen) air traffic modernization initiatives, and would authorize increased funding for airport infrastructure improvement grants. The bill seeks modifications in FAA management and oversight of NextGen air traffic modernization projects, and includes provisions addressing system capacity, aviation safety, environmental issues, and airline industry issues, including airline passenger rights issues. The House also passed the Airline Safety and Pilot Training Improvement Act of 2009 (H.R. 3371) on October 14, 2009. The bill contains numerous provisions related to airline safety that may be considered in the broader context of FAA reauthorization. 

On July 14, 2009, Senator Rockefeller introduced the FAA Air Transportation Modernization and Safety Improvement Act (S. 1451), containing a two-year FAA reauthorization proposal. The bill would authorize $34.56 billion over a two-year span covering FY2010 and FY2011. Unlike the Aviation Investment and Modernization Act of 2007 (S. 1300, 110th Congress), S. 1451 does not contain any proposal for aviation system user fees. Rather, it focuses on accelerating the deployment of NextGen air traffic technologies and a number of safety issues, including the safety of air ambulance operations, unmanned aircraft, commuter airlines, and FAA oversight of airlines and aircraft repair stations. The bill seeks to streamline the PFC approval process, but does not seek any increase to maximum PFC levels. The bill also seeks to improve airline consumer service through enhanced disclosure requirements and contingencies for flights that are substantially delayed, and it seeks an increase in funding for Essential Air Service (EAS) subsidies and small community air service grants. On March 10, 2010, the Senate began consideration of S.Amdt. 3452, which is similar to S. 1451 and also includes an aviation trust fund revenue title.


Date of Report: March 22, 2010
Number of Pages: 82
Order Number: R40410
Price: $29.95

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