It will also require 15 percent of electricity to come from renewable sources like wind, solar, and biomass; mandate a substantial increase in America' s production of homegrown biofuels; and will provide billions in funds for clean energy.
The legislation still faces formal votes in the House and Senate but the agreement between Dingell (D.-Mich.) and Speaker of the House Nancy Pelosi (D.-Calif.) appears to set the stage for passage of the legislation before Congress' Christmas holiday later this month.
David McCurdy, president of the Alliance For Automobile Manufacturers, said the carmakers were willing to go along with the compromise, which was reached only after some difficult negotiations. He also noted the industry had gotten some concessions from legislators, which will ease the industry through the transition.
"As we understand the agreement, these tough, national mileage standards merge provisions of both the Senate and House CAFE proposals. The agreement includes a number of necessary measures to help make the overall regulatory program more realistic and reasonable. Automakers are pleased that Congressional negotiators ultimately accepted the need for practical provisions like separate car and light-truck standards and incentives for building more autos that run on non-petroleum-based fuels. The bill also provides mechanisms that help automakers balance the natural ups and downs of the product cycle," he said.
"Importantly, this agreement establishes nationwide fuel economy requirements for the next twelve years and beyond. Upon adoption of this legislation, Congress will have established aggressive, nationwide fuel economy requirements, concluding a longstanding debate,” he said.
Meanwhile, GM chairman Richard Wagoner said the industry faces a difficult challenge in meeting the new standards, which have been fixed at current levels since the late 1980s. Only last week, GM vice chairman Robert Lutz had said in a radio interview the only realistic way to meet the standards is to make vehicles smaller -- substantially smaller.
Nevertheless, the automakers had little choice but to go along with the legislation. With the price of oil from the Middle East hovering near $90 per barrel and the U.S. dollar taking a beating on global markets, the fuel economy standards had become linked to national security.
Democratic Presidential candidates such as Hillary Clinton and Barack Obama have called for tougher standards and Republican candidates also have been calling for better fuel economy.
In addition, the image, already tarnished, of Detroit's Big Three automakers was undermined by the long fight against the tougher standards, industry officials have acknowledged privately.
Toyota, for example, has been able to seize the label of being most technologically advanced car company in the world because it offers hybrid vehicles, Lutz noted recently.
Dingell, who has done the auto industry's bidding on House floor for more than half a century, also was under pressure to go along with Pelosi's desire to deliver an energy bill to President Bush before Christmas.
Pelosi had made her position plain last month when she hailed a new report from the UN on global warming.
Environmentalists, meanwhile, hailed the pending legislation, which ended nearly two decades of efforts by America's green activists to raise fuel economy standards.
"After two decades of being stuck in neutral and with oil prices in overdrive, Congress is finally on the verge of raising fuel economy standards. We applaud our leaders in Congress for taking on polluters, special interests, an army of cynical industry lobbyists, and the most hardened foes of clean energy to forge this historic agreement," noted Carl Pope, Sierra Club Executive Director.
-- Joseph Szczesny