Order Code IB90122
CRS Issue Brief for Congress
Received through the CRS Web
Automobile and Light Truck Fuel Economy:
The CAFE Standards
Updated June 19, 2003
Robert Bamberger
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
CAFE in the 108th Congress: Omnibus and Other Energy Legislation
Origins of CAFE
Past Role of CAFE Standards
Refocusing on Fuel Economy: SUVs, OPEC, and Kyoto
Growth of Light-Duty Trucks and SUVs
The Kyoto Agreement
NHTSA Rulemaking for MY2005-2007 Light Truck Fuel Economy
Improving Fuel Economy: Other Policy Approaches
The Hydrogen Fuel Initiative, FreedomCAR and the Partnership for a New
Generation of Vehicles (PNGV) (1993-2003)
Price of Gasoline
CAFE and Reduction of Carbon Dioxide Emissions
CAFE in Congress (1990-2000)
CAFE and the 102nd Congress
The Freeze of the CAFE Standards (1994-2000)
A Summary of the CAFE Debate in the 107th Congress
LEGISLATION
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
List of Tables
Table 1. Fuel Economy Standards for Passenger Cars and Light Trucks: Model Years 1978
Through 2007
Table 2. Domestic and Import Passenger Car and Light Truck Fuel Economy Averages for
Model Years 1978-2001


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Automobile and Light Truck Fuel Economy:
The CAFE Standards
SUMMARY
One of the least controversial provisions
The rulemaking has not quelled interest
of the Energy Policy and Conservation Act of
in CAFE. H.R. 6, the omnibus energy bill
1975 (P.L. 94-163) established corporate
passed in the House on April 10, 2003, would
average fuel economy (CAFE) standards for
authorize appropriations to NHTSA to con-
new passenger cars. As oil prices rose, there
duct rulemakings and would require a study
was little expectation that manufacturers
on the feasibility and effects of reducing fuel
would have any difficulty complying with the
use by automobiles. During markup in the
standards. However, oil prices softened and
House Committee on Energy and Commerce,
the demand for small cars diminished. In
an amendment by Representative Markey to
response to petitions from manufacturers
require reductions of 5% in automotive fuel
facing stiff civil penalties for noncompliance,
usage by 2010 and an additional 5% by 2015
the National Highway Traffic Safety Adminis-
was defeated (14-38). An amendment offered
tration (NHTSA) relaxed the standard for
on the floor of the House to include only the
model years 1986-1989. The current standard
5% savings by 2010 was defeated (162-268)
is 27.5 miles per gallon (mpg) for passenger
as well.
automobiles and 20.7 mpg for light trucks, a
classification that also includes sport utility
While NHTSA has issued a rule boost-
vehicles (SUVs).
ing light truck CAFE, some policymakers
argue that more needs to be done. It is possi-
However, on April 1, 2003, NHTSA
ble that CAFE will be among the amendments
issued a final rule to boost the CAFE of
that reach the Senate floor when debate re-
light-duty trucks by 1.5 mpg by 2007. The rule
sumes on comprehensive energy legislation in
sets the interim standards at 21.0 mpg for
the Senate (S. 14) after the July 4 recess.
model year (MY)2005, 21.6 mpg for
However, some have hailed as an alternative
MY2006, and 22.2 for MY2007. It is the first
to tightening CAFE an amendment proposed
increase in CAFE since MY1996. Congress
by Senator Landrieu that was agreed to (99-1)
had included language in the FY1996-FY2001
by the Senate on June 9, 2003. The provision
DOT Appropriations prohibiting the use of
would require the Administration to develop
appropriated funds for any rulemaking on
a plan to reduce U.S. oil consumption by 1
CAFE, effectively freezing the standards.
million barrels by 2013 from projected con-
However, facing growing concern over the
sumption levels. The amendment does not
higher penetration of SUV sales as part of the
create any new authorities. Rather, it would
national fleet, the FY2001 appropriations
give the Administration the latitude to use
required a study of CAFE by the National
currently existing authorities, including
Academy of Sciences (NAS). That study,
CAFE. Opponents of an increase in CAFE
released on July 30, 2001, concluded that it
especially embraced the amendment because
was possible to achieve a more than 40%
it would require a significant reduction in
improvement in light truck and SUV fuel
petroleum consumption without necessarily
economy over a 10-15 year period at costs that
using CAFE as one of the levers.
would be recoverable over the lifetime of
ownership.
Congressional Research Service ˜ The Library of Congress

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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.
BACKGROUND AND ANALYSIS
CAFE in the 108th Congress: Omnibus and Other Energy
Legislation

The conferees on omnibus energy legislation (H.R. 4) in the 107th Congress agreed to
House language that would have required a reduction in light truck fuel consumption of 5
billion gallons during the period, MY2006-MY2012. The 107th Congress adjourned without
taking final action on the bill. However, a final role issued by the National Highway Traffic
Safety Administration (NHTSA) on April 1, 2003, requires a boost in light truck fuel
economy to 22.2 miles per gallon (mpg) by model year (MY) 2007.
This 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.
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Comprehensive energy legislation in the Senate, S. 14, has been debated on the floor;
debate on the bill is scheduled to resume after the July 4 recess. The Senate bill would:
! require that, in determining “maximum feasible average fuel economy,”
NHTSA consider technological feasibility and economic practicability, the
effect of other standards – such as emissions – on fuel economy, the
relationship between fuel economy and vehicle safety, the effect of higher
fuel economy standards on employment, and the nation’s need to conserve
energy;
! require that NHTSA provide an environmental assessment of the effects of
any boost in CAFE standards;
! extend the CAFE credit for dual-fueled vehicles;
! require that federal agencies increase the fuel economy of their fleets by 3
mpg above a baseline of the fleet average for vehicles purchased in 1999;
and
! authorize $5 million for carrying out the provisions of the section during
MYs2004-2008.
On June 9, 2003, the Senate agreed (99-1) to an amendment proposed by Senator
Landrieu that 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.
Some policymakers argue that more needs to be done. Currently, light truck fuel
economy standards do not apply to vehicles above 8,500 pounds gross vehicle weight
(GVW). Senator Feinstein has introduced legislation (S. 255) that, among other provisions,
would expand the applicability of fuel economy standards to vehicles up to 10,000 pounds
GVW. The Fuel Economy Improvements Act (S. 794), introduced by Senator Durbin, would
raise passenger car CAFE to 40 mpg by 2015. A companion measure, the Tax Incentives for
Fuel Efficient Vehicles Act (S. 795), would establish a new tax credit for purchases of
vehicles that exceed the current CAFE standards by at least 5 mpg and would modify the gas
guzzler tax to include SUVs and some larger vehicles not currently subject to the tax.
Opponents of measures like these argue that the automotive industry should not be further
burdened at this time by higher CAFE requirements; however, it is possible that some sort
of CAFE amendments will be debated when the Senate resumes consideration of S. 14.
Origins of CAFE
The Arab oil embargo of 1973-1974 and the tripling in the price of crude oil brought
into sharp focus the fuel inefficiency of U.S. automobiles. New car fleet fuel economy had
declined from 14.8 miles per gallon (mpg) in model year 1967 to 12.9 mpg in 1974. In the
search for ways to reduce dependence on imported oil, automobiles were an obvious target.
The Energy Policy and Conservation Act (P.L. 94-163) established corporate average fuel
economy (CAFE) standards for passenger cars for model years 1978-1980 and 1985 and
thereafter. The CAFE standards called for essentially a doubling in new car fleet fuel
economy, establishing a standard of 18 mpg in model year (MY) 1978 and rising to 27.5 by
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MY1985. (Interim standards for model years 1981-1984 were announced by the Secretary
of Transportation in June of 1977.) EPCA also established fuel economy standards for light
duty trucks, beginning at 17.2 mpg in MY1979, and currently 20.7 mpg. However, on April
1, 2003, NHTSA issued a final rule that will boost light truck fuel economy to 22.2 mpg in
MY2007 – an increase of 1.5 mpg. (The CAFE standards to FY2003 are summarized in
Table 1.)
Compliance with the standards is measured by calculating a sales-weighted mean of the
fuel economies of a given manufacturer’s product line, with domestically produced and
imported vehicles measured separately. As originally enacted, the penalty for non-
compliance was $5 for every 0.1 mpg below the standard, multiplied by the number of cars
in the manufacturer’s new car fleet for that year. Civil penalties collected from 1983-1999
totaled roughly $500 million.
Table 1. Fuel Economy Standards for Passenger Cars and Light
Trucks: Model Years 1978 Through 2007
(miles-per-gallon)
Light trucks1
Passenger
Model year
Four-
cars
Two-wheel
wheel
Combined2,
drive
3
drive
1978
418.0



1979
419.0
17.2
15.8

1980
420.0
16.0
14.0
(5)
1981
2.0
616.7
15.0
(5)
1982
24.0
18.0
16.0
17.5
1983
26.0
19.5
17.5
19.0
1984
27.0
20.3
18.5
20.0
1985
427.5
719.7
718.9
719.5
1986
826.0
20.5
19.5
20.0
1987
926.0
21.5
19.5
20.5
1988
26.0
21.0
19.5
20.5
1989
1026.5
21.5
19.0
20.0
1990
427.5
20.5
19.0
20.2
1991
427.5
20.7
19.1
20.2
1992
427.5


20.2
1993
427.5


20.4
1994
427.5


20.5
1995
427.5


20.6
1996
427.5


20.7
1997
427.5


20.7
1998
427.5


20.7
1999
427.5


20.7
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2000
427.5


20.7
2001
427.5


20.7
2002
427.5


20.7
2003
427.5


20.7
2004
427.5


20.7
2005
427.5


21.0
2006
427.5


21.6
2007
427.5


22.2
1Standards for MY 1979 light trucks were established for vehicles with a gross vehicle weight rating (GVWR) of 6,000
pounds or less. Standards for MY 1980 and beyond are for light trucks with a GVWR of 8,500 pounds or less.
2For MY 1979, light truck manufacturers could comply separately with standards for four-wheel drive, general utility
vehicles and all other light trucks, or combine their trucks into a single fleet and comply with the standard of 17.2
mpg.
3For MYs 1982-1991, manufacturers could comply with the two-wheel and four-wheel drive standards or could combine
all light trucks and comply with the combined standard.
4Established by Congress in Title V of the Act.
5A manufacturer whose light truck fleet was powered exclusively by basic engines which were not also used in passenger
cars could meet standards of 14 mpg and 14.5 mpg in MYs 1980 and 1981, respectively.
6Revised in June 1979 from 18.0 mpg.
7Revised in October 1984 from 21.6 mpg for two-wheel drive, 19.0 mpg for four-wheel drive, and 21.0 mpg for combined.
8Revised in October 1985 from 27.5 mpg.
9Revised in October 1986 from 27.5 mpg.
10Revised in September 1988 from 27.5 mpg.
Source: Automotive Fuel Economy Program, Annual Update, Calendar Year 2001, appearing in full at:
[http://www.nhtsa.dot.gov/cars/problems/studies/fuelecon/index.html#TOC]; and U.S. Department of Transportation.
National Highway Traffic Safety Administration. Light Truck Average Fuel Economy Standard, Model Year 2004. Final
Rule. [http://www.nhtsa.dot.gov/cars/rules/rulings/Cafe/LightTruck/NPRM-final.htm]
When oil prices rose sharply in the early 1980s, smaller cars were selling well, and it
was expected that manufacturers would have no difficulty complying with the standards.
However, oil prices had declined by 1985. Sales of smaller cars tapered off as consumers
began to place less value on fuel economy and gasoline cost as an input in the overall costs
of vehicle ownership. 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, but it was restored to 27.5 in MY1990. The Persian
Gulf War in 1990 caused a brief spike in oil prices, but it also demonstrated that it was
unlikely that the United States or many of the producing nations would tolerate a prolonged
disruption in international petroleum commerce. As a consequence, U.S. dependence upon
imported petroleum, from a policy perspective, was considered less of a vulnerability.
It was also becoming apparent that reducing U.S. dependence on imported oil would be
extremely difficult without imposing a large price increase on gasoline, or restricting
consumer choice in passenger vehicles. Many argued that the impacts of such actions upon
the economy or the automotive industry would be unacceptable. Meanwhile, gasoline
consumption, which fell to 6.5 million barrels per day (mbd) in 1982, averaged nearly 8.4
mbd in 1999, and peaked at roughly 9.0 mbd during the summer of 2002. Gasoline demand
averaged about 8.6 mbd during the first four months of 2003.
Past Role of CAFE Standards. The effectiveness of the CAFE standards
themselves has been controversial. Since 1974, domestic new car fuel economy has roughly
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doubled; the fuel economy of imports has increased by roughly one-third. Some argue that
these improvements would have happened as a consequence of rising oil prices during the
1970s and 1980s. Some studies suggest that the majority of the gains in passenger car fuel
economy during the 1970s and 1980s were technical achievements, rather than the
consequence of consumers’ favoring smaller cars. Between 1976 and 1989, roughly 70% of
the improvement in fuel economy was the result of weight reduction, improvements in
transmissions and aerodynamics, wider use of front-wheel drive, and use of fuel-injection.
The fact that overall passenger car fleet fuel economy remained comparatively flat during a
period of declining real prices for gasoline also suggested that the CAFE regulations have
contributed to placing some sort of floor under new-car fuel economy.
General criticisms of raising the CAFE standards have been that, owing to the
significant lead times manufacturers need to change model lines and because of the time
needed for the vehicle fleet to turn over, increasing CAFE is a slow and inefficient means of
achieving reductions in fuel consumption. Further, it is argued that the standards risk
interfering with consumer choice and jeopardize the economic well-being of the automotive
industry. Opponents of raising CAFE usually cite fears that higher efficiency will likely be
obtained by downsizing vehicle size and weight, raising concerns about safety.
Proponents of CAFE increases have argued that boosting the standards might bring
about the introduction of technological improvements that do not compromise features that
consumers value, but which would otherwise not be added because these improvements do
add to the cost of a new vehicle.
There were highly controversial attempts to significantly raise the CAFE standards on
passenger cars in the early 1990s. One proposal included in omnibus energy legislation was
so controversial that it contributed to the Senate’s inability in 1991 to bring the bill up for
debate on the floor.
NHTSA typically established truck CAFE standards 18 months prior to the beginning
of each model year, as EPCA allows. However, such a narrow window permitted NHTSA
to do little more than ratify manufacturers’ projections for the model year in question. In
April 1994, the agency proposed to abandon this practice and issued an Advance Notice of
Proposed Rulemaking inviting comment on what level that standards might be established
for trucks for MY1998-MY2006. The following year, however, after a change in
congressional leadership, Congress included language in the FY1996 Department of
Transportation (DOT) Appropriations to prohibit expenditures for any rulemaking that would
make any adjustment to the CAFE standards. Identical language was included in the
appropriations and spending bills for FY1997-FY2000. An effort to pass a sense of the
Senate amendment that conferees on the FY2000 DOT Appropriations should not agree to
the House-passed rider for FY2000 was defeated in the Senate on September 15, 1999 (55-
40). The rider also appeared in the FY2001 DOT Appropriations (H.R. 4475) approved by
the House Committee on Appropriations May 16, 2000, and approved by the House May 19,
2000. However, the Senate insisted that the language be dropped in conference, opening the
way for NHTSA to initiate rulemakings once again. The conferees also agreed to authorize
a study of CAFE by the National Academy of Sciences (NAS) in conjunction with DOT.
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Refocusing on Fuel Economy: SUVs, OPEC, and Kyoto
The sharp increase in crude oil and gasoline prices that began in 1999 brought into
higher relief the continuing loss of market share of passenger cars to the larger, multi-
purpose sport utility vehicles (SUVs) that are subject to the less stringent light-truck fuel
economy standard.
Growth of Light-Duty Trucks and SUVs. What has spurred a new focus on CAFE
in recent years has been the growing percentage of the fleet made up of light-duty trucks and
sport utility vehicles (SUVs), which are subject to a less stringent CAFE standard than are
passenger automobiles. In 1976, light trucks constituted roughly 19.8% of new vehicle sales.
By 2001, this figure had grown to 50.5%. The change is attributable to the burgeoning
popularity of mini-vans and SUVs. In 1985, passenger cars were responsible for more than
70% of annual highway vehicle miles traveled while light trucks accounted for about 22%.
By 2000, cars had fallen to 58.3 % while light trucks had grown to 33.6% of annual highway
vehicle miles traveled.1 (See also CRS Report RS20298, Sport Utility Vehicles, Mini-Vans
and Light Trucks: An Overview of Fuel Economy and Emissions Standards
.)
A 1996 study conducted for the Department of Transportation found that consumers
valued the larger vehicles for their versatility and roominess, and the availability of four-
wheel drive. The increasing market share of these vehicles, combined with their lower
average fuel economy, has contributed to a lowering in overall average fuel economy since
the mid-1980s.
It takes several years after any increase in CAFE for the savings to be fully realized.
This is because it takes several years before older, less efficient cars, trucks and SUVs are
retired. The average age of automobiles and trucks in use is 8-9 years; the median age of
automobiles is 16.9 years, and 15.5 years for light trucks.2
Table 2. Domestic and Import Passenger Car and Light Truck Fuel
Economy Averages for Model Years 1978-2001
(in MPG)
Domestic
Import
Model
All
All light
Total
Year
Light
Com-
Light1
Com-
cars
trucks
fleet
Car
Car
Truck
bined
truck
bined
1978
18.7


27.3


19.9


1979
19.3
17.7
19.1
26.1
20.8
25.5
20.3
18.2
20.1
1980
22.6
16.8
21.4
29.6
24.3
28.6
24.3
18.5
23.1
1981
24.2
18.3
22.9
31.5
27.4
30.7
25.9
20.1
24.6
1982
25.0
19.2
23.5
31.1
27.0
30.4
26.6
20.5
25.1
1983
24.4
19.6
23.0
32.4
27.1
31.5
26.4
20.7
24.8
1984
25.5
19.3
23.6
32.0
26.7
30.6
26.9
20.6
25.0
1985
26.3
19.6
24.0
31.5
26.5
30.3
27.6
20.7
25.4
1 Oak Ridge National Laboratory. Center for transportation Analysis. Transportation Energy
Data Book: Edition 22–2002: p. 6-1, 7-1.
2 Ibid., p. 6-1.
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1986
26.9
20.0
24.4
31.6
25.9
29.8
28.2
21.5
25.9
1987
27.0
20.5
24.6
31.2
25.2
29.6
28.5
21.7
26.2
1988
27.4
20.6
24.5
31.5
24.6
30.0
28.8
21.3
26.0
1989
27.2
20.4
24.2
30.8
23.5
29.2
28.4
20.9
25.6
1990
26.9
20.3
23.9
29.9
23.0
28.5
28.0
20.8
25.4
1991
27.3
20.9
24.4
30.1
23.0
28.4
28.4
21.3
25.6
1992
27.0
20.5
23.8
29.2
22.7
27.9
27.9
20.8
25.1
1993
27.8
20.7
24.2
29.6
22.8
28.1
28.4
21.0
25.2
1994
27.5
20.5
23.5
29.6
22.0
27.8
28.3
20.7
24.7
1995
27.7
20.3
23.8
30.3
21.5
27.9
28.6
20.5
24.9
1996
28.1
20.5
24.1
29.6
22.2
27.7
28.5
20.8
24.9
1997
27.8
20.2
23.3
30.1
22.1
27.5
28.7
20.6
24.6
1998
28.6
20.5
23.3
29.2
22.9
27.6
28.8
21.1
24.7
1999
28.0
–-
–-
29.0
–-
–-
28.3
20.9
24.5
2000
28.7
–-
–-
28.3
–-
–-
28.5
21.2
24.7
2001
28.8
–-
–-
28.4
–-
–-
28.6
20.9
24.4
1Light trucks from foreign-based manufacturers.
NOTE: Beginning with MY1999, the agency ceased categorizing the total light truck fleet by either domestic
or import fleets.
The Kyoto Agreement. Other pressures have had less to do with energy security and
more to do with environmental objectives. The Kyoto Agreement would have required the
United States to achieve a 7% reduction from1990 levels of carbon dioxide emissions, which
implied a significant reduction in gasoline consumption, among other elements. Preferring
to forestall any state or federal regulation, General Motors, Ford, Chrysler and Toyota
announced on February 4, 1998, that they would produce cars in MY1999 with engine and
catalytic converter technologies that would achieve lower emissions. In early November
1998, the California Air Resources Board (CARB) voted to reclassify SUVs 8500 pounds
or less as passenger cars and hold those vehicles to California emission standards beginning
in MY2004. Ford Motor announced in late July 2000 that it would improve the fuel
economy of its SUV model line by 25% over a five-year period. Other manufacturers echoed
similar intentions.
During the Clinton Administration, the Congress was chary of committing the United
States to the Kyoto Agreement, pending further decisions about the participation of
developing nations, and how the agreement would be enforced. However, on March 27,
2001, Environmental Protection Agency Administrator Christine Todd Whitman indicated
that the Bush Administration had “no interest” in any further negotiations on implementing
the Kyoto Protocol. On February 14, 2002, the President proposed his own plan to reduce
the growth in emissions.
NHTSA Rulemaking for MY2005-2007 Light Truck Fuel
Economy
In late November 2002, it was reported that the Administration was reviewing a draft
proposal by the National Highway Traffic Safety Administration (NHTSA) to boost the
Corporate Average Fuel Economy Standard CAFE for light duty trucks by 0.5 miles per
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gallon (mpg) for each of MYs 2005-2007 – a total of 1.5 mpg by MY2007. On December
16, 2002, NHTSA issued the proposed rule, calling for an increase in light-duty truck CAFE
to 21.0 mpg in MY2005, 21.6 mpg in MY2006, and 22.2 mpg in MY2007. Noting the target
of a 5 billion gallon savings between MY2006 and MY2012 called for in the conference bill,
NHTSA indicates that the proposed increases for MY2006-2007 would save more than 3
billion gallons and, if the standard remained at 22.2 mpg through MY2012, approximately
8 billion gallons of gasoline would be saved during the period of MY2006-2012. On April
1, 2003, NHTSA announced its adoption of the proposed rule.
In the December 2002 proposal, NHTSA expressed its belief that “some manufacturers
may be able to achieve CAFE performance better than they currently project.” The agency’s
analysis assumed that compliance would be achieved by improvements in technology, and
not by lightening vehicles and jeopardizing vehicle safety. NHTSA also indicates that it has
“tentatively concluded that it is unnecessary for any manufacturer to restrict the utility of
their products to meet our proposed CAFE standards.”
NHTSA’s calculation of the net benefits of the proposed boost to SUV CAFE is shown
below. The estimate of the net benefits is significantly higher in the second and third years
because the first increment of improvement is only 0.3 mpg, while it is 0.6 mpg in the second
and third years. The “societal benefits” are calculated on an assumption of $0.083 per gallon
over the lifetime of the vehicle. This assumes a benefit of $0.048 for the effect on the world
market price for gasoline owing to lower U.S. demand, and $0.035 for the reduction in threat
from oil supply disruption.
Total Costs
Total Societal Benefits
Net Benefits
(million)
(million)
(million)
MY2005
$108
$219
$111
MY2006
221
513
292
MY2007
373
794
421
Though NHTSA announced a boost of 1.5 mpg in light truck fuel economy in its final
rule issued April 1, 2003, some will likely argue that more steps should be taken. Senator
Feinstein has introduced legislation (S. 255) that, among other provisions, would expand the
applicability of fuel economy standards to vehicles up to 10,000 pounds GVW. While
NHTSA has issued a rule boosting light truck CAFE, some policymakers believe an increase
in passenger automobile CAFE is also in order. Others argue that the automotive industry
should not be further burdened at this time by higher CAFE requirements.

Improving Fuel Economy: Other Policy Approaches
Two possible approaches to reduce gasoline consumption involve (1) raising the price
of gasoline through taxation, or other means, to a level that induces some conservation; and
(2) increasing the efficiency of the automobile fleet in use. Of course, a combination of these
two broad approaches can be used as well.
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The Hydrogen Fuel Initiative, FreedomCAR and the Partnership for a New
Generation of Vehicles (PNGV) (1993-2003). In his State of the Union Address on
January 28, 2003, President Bush announced a new $720 million research and development
(R&D) initiative for hydrogen as a transportation fuel. The President’s Hydrogen Fuel
Initiative is intended to complement a January 2002 Bush initiative to push for development
of fuel cells. Called FreedomCAR, the Bush program was intended to replace a government
and industry program established by President Clinton in September 1993 – Partnership for
a New Generation of Vehicles (PNGV). Research on fuel cells has been a focus of PNGV;
of the $127 million provided to the program in FY2002, roughly $40 million was provided
for fuel cell research and an additional $20 million for hydrogen R&D. Although the
Administration promised that the new initiative, called FreedomCAR, would be more
aggressive, others expected it would largely operate along the lines of PNGV. FreedomCAR
focuses on cooperative vehicle research between the federal government, universities, and
private industry.
The earlier PNGV program had among its goals development of an environmentally
friendly “Supercar” that would achieve 80 mpg without sacrificing performance,
affordability, and safety. The PNGV was an effort to combine the resources and expertise
of federal agencies and laboratories with the private sector to reduce U.S. dependence on oil
and maintain competitiveness without intervening to alter the market price of fuel. Research
and development was to be focused on hybrid electric vehicles, direct-injection engines, fuel
cells, and greater use of lightweight materials. Production prototypes of the Supercar were
projected to be ready by 2004, a deadline that was appearing unlikely to be met.
(For additional information, see CRS Report RS21442, Hydrogen and Fuel Cell Vehicle
R&D: FreedomCAR and the President’s Hydrogen Fuel Initiative.)
Price of Gasoline. Owing to higher taxation of gasoline in other nations, Americans
enjoy one of the lowest prices for gasoline. As a consequence, the higher prices since 1999
– especially during the summer driving seasons – are experienced in the United States as a
much greater increase, in percentage terms, than elsewhere.
Past proposals to raise the price of gasoline to leverage consumers into more efficient
vehicles have garnered little support. Owing to the relative price inelasticity of gasoline
demand, many believe that the size of the price increase it would take to curb gasoline
consumption to any degree would have a damaging effect on the economy of several times
greater magnitude. Indeed, analysis of recent research (Plotkin, Greene, 1997, cited in
References) suggested that an increase in gasoline taxes would be one-third as effective in
achieving a reduction in demand as studies of the 1980s once projected. This is a significant
reflection of the place that personal transportation and inexpensive gasoline has assumed in
our economy and value system.
Price, however, could be used to at least keep some floor under the cost of gasoline to
motorists. For example, some argued during past episodes of high prices that, when prices
softened again, the federal government should step in and capture the difference as a tax, and
possibly devote the proceeds to developing public transportation infrastructure and
incentives. This tax could be adjusted periodically to see that gasoline would not become
less expensive than a certain level in real (inflation adjusted) dollars.
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Owing to the unpopularity of raising gasoline prices, raising the CAFE standard is more
comfortable for some; however, it is a long-term response. Depending upon the magnitude
of an increase in gasoline prices, no matter what the cause, a price-induced conservation
response is nearly immediate and may grow as consumers initially drive less, and eventually
seek out more efficient vehicles.

CAFE and Reduction of Carbon Dioxide Emissions. Vehicles account for one-
fifth of U.S. production of CO emissions.
Some argue that raising the CAFE standards
2
would be an ineffective or marginal way to reduce emissions of carbon dioxide. On one
hand, improvements in fuel economy should enable the same vehicle to burn less fuel to
travel a given distance. However, to the extent that technologies to improve fuel economy
add cost to new vehicles, it has been argued that consumers will tend to retain older, less
efficient cars longer. It has also been suggested that there is a correlation between improved
fuel economy and an increase in miles driven and vehicle emissions. However, vehicle miles
traveled have continued to increase in recent years when fuel economy improved only
slightly, suggesting that the broader factor is the overall cost of driving, which is tied as well
to the price of gasoline. The relationship between where people live and where they work
is also a factor.
The Clinton Administration proposed a five-year, $6.3 billion package of tax credits,
and reliance on voluntary efforts by individuals and industry, to meet the proposed targets
of the Kyoto agreement. Many believed that the Clinton Administration plan would fall well
short, largely because carbon emissions are forecast by the Department of Energy to be 34%
above 1990 levels by the year 2010. Some urged that Congress disapprove the treaty and
sought renegotiation of the targets, arguing that meeting the proposed targets would require
possibly crippling taxes and regulations. Others suggested that a significant increase in
CAFE requirements would help meet the Kyoto targets and that an increase in CAFE should
not wait final dispensation of the agreement. However, as noted earlier, the Bush
Administration has removed the U.S. from the Kyoto process in favor of, for example,
voluntary commitments on the part of industry.
One interesting development is legislation enacted in July 2002 in California
authorizing the California Air Resources Board (CARB) to establish regulations reducing
greenhouse emissions from cars, light trucks and non-commercial vehicles. These would
apply to MY2009 vehicles. The legislation, which makes California the first state to regulate
carbon dioxide emissions, may be challenged. Though the legislation neither sets target
reductions nor specifies how they are to be achieved, the assumption is that these reductions
could only be achieved by higher efficiency. Consequently, the automobile industry argues
that the law infringes on the authority of the federal government to set fuel economy
standards.
To provide additional context for the current debate, a summary of earlier Congressional
debate on CAFE follows.
CAFE in Congress (1990-2000)

CAFE and the 102nd Congress. Prior to the 107th Congress, legislation to boost the
CAFE standards last received major attention in the 102nd Congress. One proposal (S. 279)
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would have abandoned uniform standards but otherwise left the historic infrastructure of the
CAFE standards intact. Under S. 279, each manufacturer would have been required to
achieve a 20% improvement in passenger car fuel economy by 1996 and 40% by 2001 over
its 1988 baseline. The same standard of improvement would have been required of light
trucks.
In that same Congress, legislation was being developed to open up the Arctic National
Wildlife Refuge (ANWR) for exploration. Proponents of higher CAFE standards predicted
that there would be no support for exploration of ANWR without some increase in CAFE.
S. 341, omnibus energy legislation reported from the Senate Committee on Energy and
Natural Resources in May 1991, would have extended discretion to the Department of
Transportation to set “maximum feasible” CAFE targets for each manufacturer for MY1996
and MY2002. The DOT would have taken into account application of known fuel-saving
technologies, MY1990 as a baseline for performance, sales mix, vehicle interior size, and
safety standards. Credits earned could have been traded or held by the manufacturer. When
it appeared that the ANWR provisions would almost certainly not survive unless the CAFE
provisions were strengthened, Senator Johnston proposed an amendment in markup that
would have had the effect of embracing the goals of S. 279, but over a longer time frame.
The amendment was defeated in markup, as was an attempt to append to the omnibus bill the
specific targets in S. 279.
The proposal appeared to fail at the combined hands of those who either thought they
went too far or not far enough. But the omnibus bill failed to reach the floor; a cloture vote
on whether to proceed with it (it became S. 1220) was defeated November 1, 1991. Both
CAFE and ANWR provisions were stripped from modified legislation introduced in the
second session of the 102nd Congress. With the exception of the riders attached to the DOT
Appropriations during the period of FY1996-FY2000, there was no further major legislative
focus on CAFE until the 107th Congress.

The Freeze of the CAFE Standards (1994-2000). Months prior to the midterm
elections in 1994, NHTSA published a notice of possible adjustment to the fuel economy
standards for trucks before the end of the decade. The following year, however, the House-
passed version of H.R. 2002, the FY1996 Department of Transportation Appropriation,
prohibited the use of appropriated funds to promulgate any CAFE rules; the Senate version
did not include the language, but it was restored in conference. The House and Senate
approved the conference report, and the bill became law (P.L. 104-50) on November 15,
1995. Much the same scenario occurred in the second session of the 104th and the first
session of the 105th: A similar rider was passed by the House and not by the Senate, but
included by the conferees and enacted. This scenario occurred again in the second session.
The prohibition was included in the version of the FY1999 appropriations passed by the
House (H.R. 4328) in July 1998, but not in the Senate version (S. 2307); it was finally
included in the omnibus spending bill at the end of the 105th Congress (P.L. 105-277). The
prohibition was reported from the House Appropriations Committee in the FY2000 DOT
Appropriations (H.R. 2084) and passed by the House on June 23, 1999. However, the
growth in gasoline consumption and the size of the light-duty truck fleet were concerns cited
behind introduction in the Senate of an amendment to the bill expressing the sense of the
Senate that the conferees should not agree to the House-passed rider for FY2000. The
amendment, sponsored by Senators Gorton and Feinstein was defeated in the Senate on
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September 15, 1999 (55-40) and the prohibition was once again enacted into law (P.L. 106-69).
On May 16, 2000, the House Committee on Appropriations voted to include the rider
in the FY2001 DOT Appropriations (H.R. 4475). An effort to strip the language was
expected when the bill reached the House floor; however, there was none, and the bill, with
the rider, passed the House on May 19, 2000 (395-13). Following its passage in the Senate,
Senator Gorton introduced a motion to instruct the Senate conferees to not accept the House
rider. After debate, the motion was altered to instruct the conferees to accept the House rider
in return for agreement to authorize a study by the National Academy of Sciences (NAS), in
conjunction with DOT, “to recommend, but not to promulgate without approval by a Joint
Resolution of Congress, appropriate corporate average fuel efficiency standards.” In addition
to the factors required by statute to be weighed in determining maximum feasible CAFE
levels, the motion was to require the study to consider the impacts of any proposed CAFE
standard on vehicle safety and on effects on employment in the automotive sector and to
analyze potentially disparate effects of revised standards across the sector. The motion was
agreed to, followed by clarification, it applied only to the FY2001 appropriation. The
conferees were successful, and the language was included in the appropriations bill signed
into law on October 23, 2000 (P.L. 106-346).
Legislation was introduced in the 104th Congress (H.R. 2200), the 105th Congress (S.
286, H.R. 880), and the 106th Congress (S. 147) that would freeze the current CAFE
standards. Unlike the annual prohibition on rulemaking that has been included in the
FY1996-FY2001 appropriations, these bills would have maintained the CAFE standards at
the level in force at the time of enactment unless superseded by a subsequent act of Congress.
None of these bills received further congressional attention.
A Summary of the CAFE Debate in the 107th Congress
A second summer of high gasoline prices, coupled with a heightened awareness that the
nation is experiencing problems with many fuels and on many fronts, built support for
reconsideration of the CAFE standards in the 107th Congress. For the first time since
FY1996, the FY2002 House DOT appropriations did not include a rider prohibiting
expenditures on CAFE rules, and legislation (H.R. 2587) reported out of committee in July
2001 would have required the automotive industry and NHTSA to achieve fuel savings.
There was no attempt to include such a rider in the FY2003 appropriations, clearing the way
for NHTSA to conduct rulemakings, such as the one announced April 1, 2003, to boost light
truck CAFE from 20.7 mpg to 22.2 mpg in MY2007.
The CAFE proposal that received the greatest attention in the 107th Congress was a
proposal that came out of the House Subcommittee on Energy and Air Quality, included in
an energy conservation bill (H.R. 2587), that called for a reduction of 5 billion gallons in
light-duty truck fuel consumption over the period of MYs 2004-2010. Some members of the
subcommittee criticized the provision for saving very little fuel; however, Representative
Dingell suggested that it was as stringent as he could support, and Chairman Barton
emphasized the importance of achieving consensus within the committee on the language.
The Chairman referred to the amendment as an “excellent first step.” Critics of the proposal
suggested it would require a relatively insignificant improvement in fuel efficiency to achieve
these savings, with estimates ranging between 1-3 mpg over the period.
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The fuel economy provisions of H.R. 2587 were included in H.R. 4, debated by the
House on August 1, 2001. An amendment to establish a combined CAFE fleet standard of
27.5 mpg by MY2007 was defeated, 160-269.
A study by the National Academy of Science (NAS), released on July 30, 2001, was
cited by opponents as well as supporters of the House proposal. The study concluded that it
would be 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 study did suggest that there might be safety consequences if manufacturers
opted to meet higher standards by reduced vehicle weight. However, this position was
disputed by some, who argued that heavier vehicles might be safer for their occupants, but
might also be responsible for fatalities when they strike lighter vehicles; and that a lightening
of vehicles could reduce fatalities in certain incidents. The study also recommended that any
redesign of the CAFE program include a program for trading fuel economy credits among
manufacturers, and that CAFE standards should be based on vehicle “attributes,” such as
weight, rather than on whether a vehicle is a car or a truck.
The congressionally mandated NAS study on fuel economy also recommended
eliminating the CAFE credits that accrue to manufacturers of dual-fueled vehicles. These
vehicles are rarely operated on anything but conventional gasoline, but allow their
manufacturers to sell less efficient vehicles overall while still remaining in compliance with
the CAFE requirements. Some estimate that the dual-fueled vehicle credit has resulted in an
overall reduction of five-tenths to nine-tenths of a gallon in the average efficiency of vehicles
sold. H.R. 4, as passed by the House, would have extended the credit through MY2008. The
bill also included provisions requiring federal purchase of alternative-fueled vehicles and
hybrids, and would have required an additional study by the NAS on the “feasibility and
effects” of reducing “by a significant percentage” fuel use by automobiles by MY2010. (The
current NAS study may be read online at [http://books.nap.edu/html/cafe/].)
In the wake of the terrorist attacks on September 11, 2001, Senate Republicans pressed
the Democratic leadership to bring a Senate version of omnibus energy legislation to the
floor as soon as possible, arguing for the soonest possible action on legislation that they
asserted would enhance U.S. energy security. Debate on a revised version of a bill originally
introduced by Senator Bingaman, S. 517, began in late February 2002.
An amendment to that bill proposed to include the language of the National Fuel
Savings and Security Act of 2002 (S. 1926) introduced on February 8, 2002, by Senator
Kerry, the chair of the Senate Commerce Committee. That proposal would have required
standards beginning in MY2005 that would achieve a combined CAFE for passenger
automobiles and light duty trucks of 35 mpg for MY2013. A somewhat similar bill (S.
1923), was introduced by Senator McCain, and would have delayed the establishment of
higher standards until MY2007, but would have required a combined CAFE of 36 mpg by
MY2016. It would have introduced combined standards for cars and trucks in MY2007 and
limited the credits that could be traded or purchased. This legislation would also have
eliminated the credit for dual-fueled vehicles.
As debate on the Daschle amendment to S. 517 commenced in late February, it was
reported that Senators McCain and Kerry had reached agreement to seek a combined CAFE
of 36 mpg by MY2015. However, on March 13, 2002, the Senate voted (62-38) for an
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amendment offered by Senators Levin and Bond to charge NHTSA with development of new
CAFE standards. The Senate went on to approve an amendment (56-44) from Senator Miller
to freeze “pickup trucks”– to be defined by the Secretary of Transportation – at the current
light truck standard of 20.7 mpg. Proponents of the amendment argued that subjecting
pickup trucks to higher CAFE standards would render these vehicles inadequately powered
for farmers and laborers who use these vehicles to haul loads and perform work. Critics of
the amendment pointed to the inconsistency of the Senate’s maintaining, on the one hand,
that the body lacked the expertise to set CAFE standards, but then turning around to freeze
pickup trucks at 20.7 mpg. It was not apparent how the term “pickup trucks” was to be
defined. If enacted, the provision could have resulted in a third category of vehicles,
differentiated both from passenger automobiles, and the sort of SUVs and passenger vans
that are currently categorized as “light duty trucks.”
Reaction in the hours after these votes focused upon the Levin amendment as a defeat
for pro-CAFE forces – which it was, in a sense, although the resumption of a role for
NHTSA in establishing fuel economy targets was thought by many to be significant and
worthwhile. The Senate passed S. 517 (88-11) on April 25, 2002, substituting the bill’s
language for H.R. 4. Shortly before final passage, the Senate voted 57-42 to table an
amendment offered by Senators Carper and Specter to require a reduction of 1 million b/d
(barrels/day) in transportation sector fuel consumption. The amendment and its proposed
reduction in fuel use was perceived by some as an arbitrary target and an indirect way of
securing a significant increase in CAFE. Opponents argued that the Senate had already voted
for NHTSA to conduct a rulemaking, and that the Senate had, in the Levin amendment,
rejected setting specific targets, whether it be CAFE standards or specific reductions in fuel
consumption.
The conference committee instructed staff to see whether a compromise could be
worked out by August 30, 2002. On September 19, the conferees agreed to the House-passed
savings of 5 billion gallons in light-truck fuel consumption, but it shifted the applicable
window to MY2006-MY2012. Both the House and Senate versions of the bill proposed to
extend the CAFE credit to manufacturers of dual-fueled vehicles. The maximum annual
credit of 1.2 mpg applies to vehicles manufactured through MY2008; that maximum drops
to 0.9 mpg during MY2009-MY2012. A Senate-proposed list of expanded criteria to be
taken into consideration in setting maximum feasible fuel economy levels was dropped.
Also dropped was House language requiring a study of the “feasibility and effects”of
reducing fuel use by automobiles “by a significant percentage.” The Senate floor amendment
capping “pickup truck” CAFE at 20.7 mpg also was not included in any of the House and
Senate offers tendered to the conference committee. Conference Committee Chairman
Tauzin, in response to criticism that the 5 billion gallon savings was negligible, pointed out
that this target was a floor, not a ceiling, and that NHTSA could set future CAFE at levels
that would achieve greater savings.
The 107th Congress adjourned without taking final action on the bill.
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LEGISLATION
H.R. 6 (Tauzin)
Enhances energy conservation and research and development, provides for security and
diversity in the energy supply for the American people, and for other purposes. Introduced
April 7, 2003. Passed House (247-175) April 11, 2003.
S. 14 (Domenici)
Enhances the energy security of the United States, and for other purposes. Introduced
April 30, 2003; reported May 6, S.Rept. 108-43. For technical reasons, the Senate report
reads to accompany S. 1005; however, the debate will refer only to S. 14.
S. 255 (Feinstein)
Amends title 49, United States Code, to require phased increases in the fuel efficiency
standards applicable to light trucks; requires fuel economy standards for automobiles up to
10,000 pounds gross vehicle weight; increases the fuel economy of the Federal fleet of
vehicles; and for other purposes. Introduced January 30, 2003; referred to Committee on
Commerce, Science, and Transportation.
S. 794 (Durbin)
Fuel Economy Improvement Act. Among other provisions, raises the CAFE of
passenger automobiles to 40 MPG by 2015. Introduced April 7, 2003; referred to
Committee on Commerce, Science, and Transportation.
S. 795 (Durbin)
Tax Incentives for Fuel Efficient Vehicles Act. Among other provisions, establishes
a tax credit for the purchase of vehicles exceeding the current CAFE standard by at least 5
mpg. Introduced April 7, 2003; referred to Committee on Finance.
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
National Research Council. Committee on the Effectiveness and Impact of Corporate
Average Fuel Economy Standards. Effectiveness and Impact of Corporate Average
Fuel Economy (CAFE) Standards. Washington, D.C., National Academy Press, 2001.
166 p.
National Research Council. Committee on Fuel Economy of Automobiles and Light Trucks.
Automotive Fuel Economy: How Far Should We Go? Washington, D.C.: National
Academy Press, 1992. 254 p.
Plotkin, Steve. Greene, David. “Prospects for Improving the Fuel Economy of Light Duty
Vehicles.” Energy Policy, vol. 25, no. 14-15. December 1997. P. 1179-1188.
U.S. Congress. House. Committee on Commerce. Implementation of Corporate Average
Fuel Economy Standards. Hearing, 104th Congress, 1st session. July 24, 1995.
Washington, U.S. Govt. Print. Off., 1996. iii+59 p.
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U.S. Congress. House. Committee on Energy and Commerce. National Energy Policy:
Conservation and Energy Efficiency. Hearing, 107st Congress, 1st session. June 22,
2001. Washington, U.S. Govt. Print. Off., 2001. iii + 137 p.
U.S. Congress. Senate. Committee on Commerce, Science and Transportation. Motor
Vehicle Fuel Efficiency Act. Hearing on S. 279. February 21, 1991. Washington, U.S.
Govt., Print. Off., 1991. 175 p. S.Hrng. 102-19
—— Motor Vehicle Fuel Efficiency Act; Report to Accompany S. 279. (102nd Congress, 1st
session. S.Rept. 102-48: 39 p.)
——Motor Vehicle Fuel Efficiency Act of 1990; Report on S. 1224. June 11, 1990.
Washington, U.S. Govt. Print. Off., 1990. 29 p. (101st Congress, 2nd session. S.Rept.
101-329.)
U.S. Congress. Senate. Committee on Commerce, Science and Transportation.
Subcommittee on the Consumer. Motor Vehicle Fuel Efficiency Act of 1989. Hearing
on S. 1224. 101st Congress, 1st session. September 7, 1989. Washington, U.S. Govt.
Print. Off., 1989. 341 p. S.Hrng. 101-347
U.S. Congress. Senate. Committee on Energy and Natural Resources. Subcommittee on
Energy Regulation and Conservation. Automobile Fuel Efficiency Standards. Hearing,
101st Congress, 1st session. April 4, 1989. Washington, U.S. Govt. Print. Off., 1989.
352 p. S.Hrng. 101-44
U.S. Department of Transportation. National Highway Traffic Safety Administration.
Automotive Fuel Economy Program. Annual Update, Calendar Year 2001, appearing
in full at:[http://www.nhtsa.dot.gov/cars/problems/studies/fuelecon/index.html]
U.S. Department of Transportation. National Highway Traffic Safety Administration. Light
Truck Average Fuel Economy Standard, Model Year 2004. Final Rule.
[http://www.nhtsa.dot.gov/cars/rules/rulings/Cafe/LightTruck/NPRM-final.htm]
U.S. Federal Register. Department of Transportation., National Highway Traffic Safety
Administration. Light Truck Fuel Economy Standards, Model Years 1998-2006.
Advance Notice of Proposed Rulemaking (ANPRM). Vol. 59, No. 66. Wednesday,
April 6, 1994, p. 16324-16332.
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