Democratic News

Aug 06 2009

S. 1620, The Efficient Vehicle Leadership Act

Sens. Snowe, Lugar and Kerry are Original Co-sponsors

The top business story this week has been the popularity and success of “Cash for Clunkers.”   Given the short-term nature of ‘Clunkers,’ Sens. Jeff Bingaman (D-NM) and Olympia Snowe (R-ME) have crafted the natural follow-on to that program – The Efficient Vehicle Leadership Act of 2009 (S. 1620).  The new bill, introduced today, takes a longer view in spurring auto sales by rationalizing incentives to buy fuel efficient vehicles.  Sens. Richard Lugar (R-IN) and John Kerry (D-MA) are also additional original co-sponsors.
 
The Efficient Vehicle Leadership Act creates a program that rewards consumers who buy cars and trucks that get better gas mileage than the average overall fuel economy required for its class.  Motorists who buy models which exceed that CAFE standard will receive a “fuel performance rebate” (claimed on their tax return or paid instantly by the dealer, whichever the buyer prefers), an amount tied to the fuel savings over and above the relevant CAFE standard.  The savings can range from several hundred to several thousand dollars, depending on the vehicle’s fuel economy relative to other models of the same size.  Conversely, for inefficient, gas-gulping vehicles, manufacturers will be assessed a fuel performance fee to pay for the program.
 
Sen. Bingaman:  “The incentives in this bill will benefit American consumers, American automakers and the American economy. It will give manufacturers another good reason to increase the efficiency of its vehicle fleets, so that customers can get a rebate.  By exceeding the CAFE requirements, automakers and dealers can gain a competitive sales advantage, and consumers will save money both on the vehicle purchase price as well as lower gasoline costs.  Plus, our environment would benefit through reduced greenhouse gas emissions.
 
“Detroit automakers have made a historic promise to the President to advance fuel efficiency technologies, from clean diesels to hybrids to electric vehicles.  This bill will help stimulate demand in the showroom for these advanced American vehicles when they arrive at auto dealerships across the country.”
 
Sen. Snowe:  “With the United States consuming 9 million barrels of gasoline per day, we must develop bold policies that dramatically reduce our demand for foreign oil.  As leading sponsor of the Ten-in-Ten Fuel Economy Act with Senator Feinstein, I have long called for increasing vehicle efficiency and this bill will complement the CAFE program and the aggressive fuel economy standards established by the Administration.  As we have witnessed from the Cash-for-Clunkers program, households respond to incentives to purchase advanced vehicles and the Efficient Vehicle Leadership Act will build a long-term policy to assist families to purchase fuel efficient vehicles that strengthen our energy security, reduce greenhouse gas emissions, and save money at the pump.” 
 
Brief summary of the Bingaman-Snowe proposal:
 
ü  Rebates begin next year (model year 2011), fees begin in model year 2013: Implementing the rebates as soon as possible will provide additional stimulus to the auto industry, as a logical successor to Cash for Clunkers. It also encourages an immediate increase in overall fuel efficiency. Delaying the onset of the fees allows manufacturers needed time to adjust their product plans to incorporate the new incentive system.
 
ü  Rebate and fee amounts: The rebates and fees will be calculated by multiplying the difference between the vehicle’s fuel economy and the applicable CAFE standard by a prescribed amount.  Higher multipliers are used for vehicles that are 50 percent and 75 percent more or less efficient than CAFE.  This three-tiered structure creates an enhanced incentive for the most fuel-efficient vehicles that mirrors current incentives for hybrids and electric vehicles, and increased penalties for those with the worst fuel efficiency.  Estimated rebates show that relatively fuel efficient vehicles such as the Honda Civic and Ford Focus receiving rebates of about $1,000 under full program implementation.  The Ford Escape Hybrid would be eligible for a rebate of around $2,500, while purchasers of the highly-efficient Toyota Prius would receive about $4,000.  At its rated mileage of 100-mpg, a Chevy Volt rebate would be nearly $8,000, while a Hummer H3 would be assessed a fee of about $2,500.
 
ü  In time, the rebates will replace existing vehicle efficiency incentives and taxes: Existing incentives for fuel-efficient vehicles are allowed to sunset upon their current-law expiration date, and purchasers are allowed to choose which of the applicable incentives (the rebate or tax credit) yields them the greatest benefit.  When the fees take effect, the bill will eliminate the “gas-guzzler tax” that currently is in place.  The rebate system eliminates the patchwork of vehicle tax credits and fees with a predictable, tech-neutral incentive system.
 
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