Search Penny Hill Press

Friday, April 30, 2010

Automobile and Light Truck Fuel Economy: The CAFE Standards

Brent D. Yacobucci
Specialist in Energy and Environmental Policy

Robert Bamberger
Specialist in Energy Policy

On May 19, 2009, President Obama announced a plan to integrate Corporate Average Fuel Economy (CAFE) standards administered by the National Highway Traffic Safety Administration (NHTSA) with automotive greenhouse gas (GHG) emissions standards to be issued by the Environmental Protection Agency (EPA). On September 15, 2009, EPA and NHTSA issued proposed rules and finalized those rules on April 1, 2010. The new rules will apply to cars and light trucks (pickups, vans, and SUVs) for model year (MY) 2012 through MY2016. The Administration had stated that the proposal would require an increase in fuel economy standards to as much as 35.5 miles per gallon (mpg) by model year (MY) 2016, four years ahead of the deadline set in the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140). The Administration estimates that the total cost of complying with EISA and the new proposal will add about $950 to the cost of an average MY2016 vehicle (compared to MY2011), although the Administration expects that this additional purchase cost will be paid back through lifetime fuel savings. Whether or not the Obama Administration has understated these costs, as some have argued, they are in line with cost estimates for EISA implementation under the Bush Administration, and EPA and NHTSA maintain that they have the technical data to support their cost estimates.

The objective of the new greenhouse gas standards is to reach reduction levels similar to those adopted by the state of California, although some specifics of the final rule are different. While the rulemaking process was combined, in the joint rulemaking, EPA and NHTSA recognized that some parts of the GHG program do not translate to the CAFE program, and vice versa. Therefore, EPA and NHTSA expect that the achieved fuel economy will be somewhat lower than 35.5 mpg as automakers will use credits from changes in air conditioner refrigerants and other greenhouse gas reductions to comply with the program, but which have no bearing on fuel economy. Thus, NHTSA has set a CAFE target of 34.1 mpg for MY2016.

Many stakeholders were concerned about a potential "patchwork" of different federal and state standards if EPA, NHTSA, and California were to establish different standards at the intersection of fuel economy and GHG emissions. Therefore, the Administration has secured commitment letters from California, the Alliance of Automobile Manufacturers, and nine automakers to work together to establish a set of national standards. One of the key parts of the compromise is that California will abandon its requirement for class-based average emissions standards and will instead adopt NHTSA's footprint-based approach. Further, California will treat any vehicle meeting the new federal GHG standards as meeting California standards.

On March 27, 2009, NHTSA released a final rule establishing fuel economy standards for MY2011 passenger cars and light trucks. Previously, EISA had restructured the automotive fuel economy program, directing NHTSA to establish a corporate average fuel economy (CAFE) standard of 35 mpg by MY2020 for the combined passenger automobile and light truck fleet. A Notice of Proposed Rulemaking (NPRM), issued in March 2008 by the Bush Administration, covered MY2011-MY2015. To provide opportunity to conduct additional analysis to support the setting of standards for the later model years, the Obama Administration, on January 26, 2009, directed NHTSA to finalize a rule solely for MY2011. NHTSA expects that MY2011 rule will result in combined car and light truck fuel economy for MY2011 of 27.3 mpg. The standards are "attribute" based; every new vehicle will have its own target, based on its size.

Date of Report: April 23, 2010
Number of Pages: 15
Order Number: R40166
Price: $29.95
Follow us on TWITTER at or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.