To quote from the recent Union of Concerned Scientist's report on the issue (

"The dual-fuel loophole [in the Alternative Motor Fuels Act] allows manufacturers to produce, without penalty, fleets of cars and trucks that average as much as 1.2 mpg below the required CAFE standards. In return, they must sell dual-fuel vehicles - cars and trucks that can run on either gasoline or an alternative fuel. While this sounds good in theory, most of these vehicles never actually run on alternative fuel. As a result, this loophole will increase U.S. oil dependence by about 80,000 barrels per day in 2005 alone, while enabling automakers to avoid as much as $1.6 billion in CAFE fines to date. And now that this loophole has been extended through 2010 and possibly 2014, the total increase in oil dependence could reach 200,000 barrels per day in 2015.

"The problem with the program that created the dual-fuel loophole, the Alternative Motor Fuels Act, was the assumption that if vehicles were capable of running on an alternative fuel, a market would develop for that fuel. More than a decade after the program began, government data show that dual-fuel vehicles use an alternative fuel less than one percent of the time (automakers get credit for an alternative fuel being used half the time). This is hardly surprising considering that only about 400 of the nearly 200,000 gas stations in the United States carry the fuel that most dual-fuel vehicles could use: E85 (a blend of 85 percent ethanol and 15 percent gasoline) - and one-third of those are in Minnesota.

"Because of this loophole, a dual-fuel vehicle that gets 20 mpg running on gasoline receives credit as if it were achieving better than 30 mpg. The biggest abusers of this loophole - DaimlerChrysler, Ford, and GM - thereby save money they would otherwise have to spend on improvements to their vehicles' actual fuel efficiency, and avoid paying fines even though their fleets actually fall short of federal fuel economy targets."

In other words, in order to appease both the ethanol lobby and the auto industry, the U.S. government created a brilliant policy that sounds as if it is helping to encourage the use of a "clean" fuel, but which instead leads to even greater consumption of gasoline than had the CAFÉ standards been allowed to bite.