U.S. Ends Car Plan on Gas Efficiency; Looks to Fuel Cells

By NEELA BANERJEE with DANNY HAKIM The New York Times

The Bush administration is walking away from a project to develop high-mileage gasoline-fueled vehicles and will support a plan to develop hydrogen-based fuel cells.

The Bush administration is walking away from a $1.5 billion eight- year government-subsidized project to develop high-mileage gasoline- fueled vehicles. Instead it is throwing its support behind a plan that the Energy Department and the auto industry have devised to develop hydrogen-based fuel cells to power the cars of the future, administration and industry officials said yesterday.

The new effort, to be announced in Detroit today by Energy Secretary Spencer Abraham, aims at the eventual replacement of the internal combustion engine. Fuel cells use stored hydrogen and oxygen from the air to create electricity, and the only emission from engines they power is water vapor.

Environmentalists and some energy experts favor the research. But critics said that the new program would let Washington and Detroit focus on vague, long-term aims while avoiding the more difficult task of improving the mileage of existing cars and sport utility vehicles in the short term. Experts say that commercial production of cars with fuel- cell engines is 10 to 20 years away.

With hearings scheduled in the Senate next month on a Democratic alternative to President Bush's energy program, it has been unclear how either party will address fuel economy standards, which are equally unpopular with carmakers and organized labor.

Yesterday, an administration official speaking on the condition of anonymity said that the Transportation Department would offer a proposal later this year on tightening those standards. But he added that since any changes would be years in the making, the fuel-cell project could make them "a nonissue."

The original program, begun in 1993, aimed to develop affordable cars that got 80 miles to a gallon of gasoline. Vice President Al Gore, its most vocal backer in the Clinton administration, likened the project, known as the Partnership for a New Generation of Vehicles, to the Apollo space program in its technological complexity. In addition to about $1.5 billion in government subsidies, the Big Three automakers General Motors, Ford Motor and DaimlerChrysler together spent about $1 billion a year on related technologies.

The carmakers all developed prototype vehicles that got at least 70 miles a gallon, and the project nurtured advances in aerodynamics and lighter composite materials now used in auto manufacturing.

But none of the Big Three came close to commercial production of an 80-mile-a-gallon car. The average fuel economy of cars and trucks for sale in the United States has, meanwhile, steadily dropped, so that this year's fleet with its growing proportion of sport utility vehicles gets the worst gas mileage in 21 years, according to the government.

The new program, called Freedom Car, will not require the automakers to produce a fuel-cell powered vehicle, according to the Energy Department. Energy experts expressed concern yesterday that without such clear targets, it too would do little to alleviate the country's growing dependence on oil.

"I think fuel cells are a useful long- term goal," said Steven Nadel, executive director of the American Council for an Energy Efficient Economy, a research and advocacy group in Washington. "But the big problem I have is that the Bush administration proposal doesn't seem to address anything for the next 10 years. There's a lot of technology that can go into cars in 2006 or 2007."

The new initiative was disclosed yesterday by The Detroit News. The administration said it would not discuss its proposed spending on the project until President Bush's 2003 budget proposal was released in February, but the program it replaces was to receive $127 million in federal funds this year.

Although gasoline prices are now low, the conflict in Afghanistan has thrown a spotlight once more on America's enormous appetite for fuel and has renewed calls for reducing American dependence on foreign oil. The United States, with only 5 percent of the world's population, consumes 25 percent of its oil, mostly in the form of gasoline.

Mr. Abraham, in remarks prepared for delivery today at the North American International Auto Show in Detroit, said the new project was "rooted in President Bush's call, issued last May in our National Energy Plan, to reduce American reliance on foreign oil." He added, "The eventual goal of this research are technologies that aim to solve many of the problems associated with our nation's reliance on petroleum to power our cars and trucks."

While the Clinton administration program focused on developing high- mileage family sedans vehicles that fell out of favor with consumers as the research progressed Mr. Abraham said the new project would give automakers the flexibility to use the fuel-cell engines in a range of vehicles.

"We should be developing energy- efficient components that can be adapted for use in several models throughout our fleet," he said.

The stocks of several companies that are developing fuel cells surged yesterday on news of the administration initiative. Shares in Ballard Power Systems, probably the best known of these companies, jumped 15 percent, to $34.96. FuelCell Energy rose 22 percent, to $21.85; Plug Power was up 39 percent, to close at $12.04.

The Big Three automakers are expected to introduce so-called hybrid vehicles, using gasoline-electric engines, by 2004. Toyota and Honda which did not share in the Clinton-era program's subsidies already have hybrids getting at least 40 miles a gallon.

The auto industry has steadily resisted government-mandated increases in fuel economy, with some carmakers arguing that such requirements would divert investment from fuel-cell research. Government standards, unchanged for more than a decade, require each automaker's cars to average 27.5 miles a gallon and light trucks including pickups, minivans and sport utility vehicles to average 20.7 miles a gallon.

Kara Saul Rinaldi, the deputy policy director for the Alliance to Save Energy, a bipartisan advocacy group in Washington, said that she welcomed the investment in fuel cells but hoped the administration would explore improvements in fuel-economy standards. "We're looking at long-term technology when we haven't made the first step," she said. "Raising fuel-economy standards is the first step."