A. Rulemaking Considerations – Direct the Department of Transportation to increase standards for cars and light trucks based on consideration of the following:

• technological feasibility
• economic practicability
• the effect of other government motor vehicle standards on fuel economy
• the need to conserve energy
• the desirability of reducing U.S. dependence on foreign oil
• the effect on motor vehicle safety
• the effects of increased fuel economy on air quality
• the adverse effects of increased fuel economy standards on the relative competitiveness of manufacturers
• the effect on U.S. employment
• the cost and lead-time required for introduction of new technologies
• the potential for advanced technology vehicles (such as hybrid and fuel cell vehicles) to contribute to significant fuel usage savings
• the effect of near-term expenditures required to meet increased fuel economy standards on the resources available to develop advanced technology
• the report of the National Research Council entitled "Effectiveness and Impact of Corporate Average Fuel Economy Standards," issued in January 2002.

B. Timeline – The Department of Transportation shall complete the rulemaking for light trucks within 15 months of enactment and shall give automobile manufacturers sufficient lead-time to comply with the new standards. The rulemaking for passenger cars shall be initiated within 6 months of enactment and shall be completed within 24 months. Each rulemaking shall be multi-year for a period not to exceed 15 model years. If DOT fails to act within the required time frame, it will be in order for Congress to consider, under expedited procedures, legislation mandating an increase in fuel economy standards, consistent with the considerations set forth in I.A. above.

C. Extension of CAFE Credit for Dual-Fueled Vehicles – Extend existing 1.2 miles per gallon CAFE credit for dual-fueled vehicles until 2008, with a 0.9 miles per gallon credit available until 2012.

D. Funding – Authorize funding for NHTSA to ensure adequate resources to complete the rulemaking on a timely basis.

II. Federal Government Purchase of Advanced Technology Vehicles

A. Purchase Requirement – Direct that only hybrid vehicles be purchased or leased for light duty truck fleets beginning in 2005 for fleets not covered by the Energy Policy Act. A waiver of this requirement would be allowed under certain circumstances including limitations on commercial availability of vehicles, specific requirements for vehicle capabilities, national security purposes, or cost. For "covered" fleets, increase by five percent the number of light duty trucks that are alternative fuel or hybrid vehicles in 2005 and 2006; increase to 10 percent in 2007 and beyond. (1) The provision for covered fleets would be subject to existing exemptions for national security and emergency vehicles under EPAct.

B. Alternative Fuels in Federal Fleets – Require the federal government to phase in the actual use of alternative fuels in dual-fueled vehicles to reach 100 percent by 2009, provided that such alternative fuels are reasonably available within the geographic area where the fleet is operated.

III. Tax Incentives

A. Electric Vehicles – Increase existing electric vehicle tax credit up to a maximum of $6,000, for six years beginning in 2002 and ending in 2007. (2)

B. Fuel Cell Vehicles – establish tax credit up to a maximum of $11,000, for fuel cell vehicles for eight years beginning in 2004 and ending in 2011. (3)

C. Hybrid Electric Vehicles – establish tax credit up to a maximum of $5,000, for hybrid vehicles for six years beginning in 2004 and ending in 2009.

D. Equipment and Infrastructure for Alternative Fuels and Hydrogen

Deduction for equipment – extend tax deduction of up to $100,000 for purchase of alternative fuel distribution equipment, also called refueling equipment, such as pumps and storage tanks, and modify it to apply to hydrogen refueling equipment. The tax deduction allows expenses up to $100,000 to be deducted in the first year; any remaining expenses above that amount could be depreciated. The tax deduction would be available from 2002 through 2007, for hydrogen until 2011. (4)


Credit for labor and installation – establish tax credit of up to $30,000 for the cost of installation of alternative fuel and hydrogen distribution equipment, available beginning in 2002 and ending in 2007 for alternative fuels and in 2011 for hydrogen. This would build on the tax deduction in existing law that covers equipment but not the installation of labor costs. Installation and labor costs are not currently deductible but instead considered part of a depreciable asset (the refueling equipment). The combination of these two tax incentives would help in overcoming the costs to distributors to establish the necessary infrastructure for refueling these vehicles. (5)

IV. Research and Development Programs

A. DOE Research on Hybrid Electric and Fuel Cell Vehicles – Increase by 40 percent the funds provided for the FreedomCar initiative, including R&D in the areas of fuel cell development, hydrogen storage, high-temperature membranes, and fuel cell auxiliary power systems, as well as advanced engine and emission control systems, advanced batteries and power electronics, advanced fuels development, and advanced materials.

B. Diesel Research – Coordinate with the Secretary of Energy on an accelerated research and development program to improve diesel combustion and after treatment technologies. The program would be focused on developing and demonstrating diesel technology to meet Tier 2 emission standards by 2010.

C. DOD/DOE Fuel Cell Demonstration – Direct DOD and DOE to jointly develop a federal fuel cell technology demonstration program in cooperation with industry that builds upon the work done by DOE under the PNGV and Freedom Car programs and by DOD. This program would be cost-shared with industry and would be focused on the technology advances needed to accelerate the availability of fuel cell technology for both civilian and military use.