Automobile and Light Truck Fuel Economy: The CAFE Standards (pdf)

Update: June 19, 2003

MOST RECENT DEVELOPMENTS

On April 1, 2003, the National Highway Traffic Safety Administration (NHTSA) issued a final rule to boost the corporate average fuel economy (CAFE) of light-duty trucks by 1.5 mpg by 2007. The rule sets the interim standards at 21.0 mpg for model year (MY)2005, 21.6mpg for MY2006, and 22.2 for MY2007. It is the first increase in CAFE since MY1996. However, the rulemaking has not quelled interest in CAFE. H.R. 6, the omnibus energy bill passed in the House on April 11, 2003, would authorize appropriations to NHTSA to conduct rulemakings and would require a study on the feasibility and effects of reducing fuel use by automobiles. During markup in the House Committee on Energy and Commerce, an amendment by Representative Markey to require reductions of 5% in automotive fuel usage by 2010 and an additional 5% by 2015 was defeated (14-38). An amendment offered on the floor of the House to include only the 5% savings by 2010 was defeated (162-268) as well.

The Senate began debating its own comprehensive energy bill, S.14, in June 2003. It is possible that CAFE will be among the amendments that reach the Senate floor when debate resumes after the July 4 recess. However, some have hailed as an alternative to tightening CAFE an amendment proposed by Senator Landrieu that was agreed to (99-1) by the Senate on June 9, 2003. The provision would require the Administration to develop a plan to reduce U.S. oil consumption by 1 million barrels by 2013 from projected consumption levels. The amendment does not create any new authorities. Rather, it would give the Administration the latitude to use currently existing authorities, including CAFE. Opponents of an increase in CAFE especially embraced the amendment because it would require a significant reduction in petroleum consumption without necessarily using CAFE as one of the levers.

Abstract: One of the least controversial provisions of the Energy Policy and Conservation Act of 1975 (P.L. 94-163) established corporate average fuel economy (CAFE) standards for new passenger cars. As oil prices rose, there was little expectation that manufacturers would have any difficulty complying with the standards. However, oil prices softened and the demand for small cars diminished. In response to petitions from manufacturers facing stiff civil penalties for noncompliance, the National Highway Traffic Safety Administration (NHTSA) relaxed the standard for model years 1986-1989. The current standard is 27.5 miles per gallon (mpg) for passenger automobiles and 20.7 mpg for light trucks, a classification that also includes sport utility vehicles (SUVs).

However, on April 1, 2003, NHTSA issued a final rule to boost the CAFE of light-duty trucks by 1.5 mpg by 2007. The rule sets the interim standards at 21.0 mpg for model year (MY)2005, 21.6 mpg for MY2006, and 22.2 for MY2007. It is the first increase in CAFE since MY1996. Congress had included language in the FY1996-FY2001 DOT Appropriations prohibiting the use of appropriated funds for any rulemaking on CAFE, effectively freezing the standards. However, facing growing concern over the higher penetration of SUV sales as part of the national fleet, the FY2001 appropriations required a study of CAFE by the National Academy of Sciences (NAS). That study, released on July 30, 2001, concluded that it was possible to achieve a more than 40% improvement in light truck and SUV fuel economy over a 10-15 year period at costs that would be recoverable over the lifetime of ownership.

The rulemaking has not quelled interest in CAFE. H.R. 6, the omnibus energy bill passed in the House on April 10, 2003, would authorize appropriations to NHTSA to conduct rulemakings and would require a study on the feasibility and effects of reducing fuel use by automobiles. During markup in the House Committee on Energy and Commerce, an amendment by Representative Markey to require reductions of 5% in automotive fuel usage by 2010 and an additional 5% by 2015 was defeated (14-38). An amendment offered on the floor of the House to include only the 5% savings by 2010 was defeated (162-268) as well.

While NHTSA has issued a rule boosting light truck CAFE, some policymakers argue that more needs to be done. It is possible that CAFE will be among the amendments that reach the Senate floor when debate resumes on comprehensive energy legislation in the Senate (S. 14) after the July 4 recess. However, some have hailed as an alternative to tightening CAFE an amendment proposed by Senator Landrieu that was agreed to (99-1) by the Senate on June 9, 2003. The provision would require the Administration to develop a plan to reduce U.S. oil consumption by 1 million barrels by 2013 from projected consumption levels. The amendment does not create any new authorities. Rather, it would give the Administration the latitude to use currently existing authorities, including CAFE. Opponents of an increase in CAFE especially embraced the amendment because it would require a significant reduction in petroleum consumption without necessarily using CAFE as one of the levers. [read report]