Order Code IB90122
CRS Issue Brief for Congress
Received through the CRS Web
Automobile and Light Truck Fuel Economy:
The CAFE Standards
Updated April 29, 2005
Robert Bamberger
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Origins of CAFE
Past Role of CAFE Standards
NHTSA Rulemaking for MY2005-MY2007: Light Truck Fuel Economy
Advance Notice of Proposed Rulemaking: December 2003
CAFE in the 109th Congress: Omnibus Energy Legislation
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
Other Initiatives
LEGISLATION
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS


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Automobile and Light Truck Fuel Economy:
The CAFE Standards
SUMMARY
The House passed H.R. 6, the Energy
corporate average fuel economy standard
Policy Act of 2005, on April 21, 2005 (249-
(CAFE) is 27.5 miles per gallon (mpg) for
183). It includes provisions strongly similar to
passenger automobiles. On April 1, 2003,
language that appeared in the omnibus energy
NHTSA issued a final rule to boost the CAFE
legislation reported from conference during
of light-duty trucks by 1.5 mpg by 2007. The
the 108th Congress. The new legislation
rule set the interim standards at 21.0 mpg for
would authorize $2 million annually during
model year (MY)2005, 21.6 mpg for
FY2006-FY2010 for the National Highway
MY2006, and 22.2 for MY2007. It was the
Traffic and Safety Administration (NHTSA)
first increase in CAFE since MY1996. The
to carry out fuel economy rulemakings. It also
light-duty truck category includes sport utility
would expand the criteria that the agency
vehicles (SUVs). The standards are deter-
takes into account in setting maximum feasi-
mined by NHTSA, an agency within the the
ble fuel economy for cars and light trucks.
Department of Transportation.
One issue over the years has been the test
A National Academy of Sciences (NAS)
procedures that measure vehicle fuel econ-
study, released on July 30, 2001, concluded
omy. Consumers have noted that in-use fuel
that it was possible to achieve a more than
economy rarely meets rated fuel economy.
40% improvement in light truck and SUV fuel
One bill introduced in the 109th Congress, the
economy over a 10-15 year period at costs that
Fuel Efficiency Truth in Advertising Act of
would be recoverable over the lifetime of
2005 (H.R. 1103) would direct the Environ-
ownership.
mental Protection Agency (EPA) to revise its
test procedures, taking into account a number
Interest has continued in studying
of changes in vehicle characteristics and use
whether the CAFE standards and program
since the procedures were last changed. Dur-
should be restructured. Among the issues are
ing House debate on H.R. 6, an amendment
the definitions and regulations for passenger
that would require the fuel economy stickers
cars and light duty trucks. Critics argue that
on new cars to better reflect in-use fuel econ-
the current system encourages manufacturers
omy was passed (259-172), while an amend-
to nudge larger passenger vehicles into the
ment to raise the Corporate Average Fuel
light truck category and penalizes manufactur-
Economy (CAFE) standard to 33 miles per
ers who serve the market for the heavier
gallon by model year (MY) 2015 was rejected
vehicles in the light truck category. Basing
(177-254). On April 27, 2005, Senator
CAFE on vehicle attributes was offered as
Domenici, Chairman of the Senate Committee
another policy option. NHTSA has the latitude
on Energy and Natural Resources, indicated
to make changes in the CAFE program, but
that discussions about Senate legislation had
some alterations to the structure of the pro-
been initiated and were continuing.
gram might require congressional authoriza-
tion. One bill introduced in the House (H.R.
The Energy Policy and Conservation Act
70) would require that standards gradually
of 1975 (P.L. 94-163, EPCA) established new
apply to vehicles of up to 10,000 pounds gross
car fuel economy standards for passenger
vehicle weight (GVR).
automobiles and light-duty trucks. The current
Congressional Research Service ˜ The Library of Congress

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04-29-05
MOST RECENT DEVELOPMENTS
The House passed H.R. 6, the Energy Policy Act of 2005, on April 21, 2005 (249-183).
It includes provisions strongly similar to language that appeared in the omnibus energy
legislation reported from conference during the 108th Congress. The new legislation would
authorize $2 million annually during FY2006-FY2010 for the National Highway Traffic
Safety Administration (NHTSA) to carry out fuel economy rulemakings. It also would
expand the criteria that the agency takes into account in setting maximum feasible fuel
economy for cars and light trucks.
One issue over the years has been the test procedures that measure vehicle fuel
economy. During House debate on H.R. 6, an amendment that would require the fuel
economy stickers on new cars to better reflect in-use fuel economy was passed (259-172),
while an amendment to raise the Corporate Average Fuel Economy (CAFE) standard to 33
miles per gallon by model year (MY) 2015 was rejected (177-254). On April 27, 2005,
Senator Domenici, Chairman of the Senate Committee on Energy and Natural Resources,
indicated that discussions about Senate legislation had been initiated and were continuing.

Some policymakers also argue that the CAFE standards and program should be
restructured. Among the issues here are the definitions and regulations for passenger cars
and light duty trucks, and whether CAFE requirements should apply to a larger universe of
vehicles. One bill introduced in the House (H.R. 705) would require that CAFE standards
gradually apply to vehicles of up to 10,000 pounds gross vehicle weight (GVW).
BACKGROUND AND ANALYSIS
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 (MY)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 MY1978-MY1980 and 1985 and
thereafter. The CAFE standards called for a doubling in new car fleet fuel economy,
establishing a standard of 18 mpg in MY1978 and rising to 27.5 by 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. The penalty for non-compliance is $5.50 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 to 2002 totaled slightly more than
$600 million.
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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 in April 2005, had reached roughly 9.0 mbd despite prices exceeding year-
earlier levels by more than $.40/gallon.
Past Role of CAFE Standards. The effectiveness of the CAFE standards
themselves has been controversial. Since 1974, domestic new car fuel economy has roughly
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.
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Table 1. Fuel Economy Standards for Passenger Cars and Light
Trucks: Model Years 1978 Through 2007
(miles per gallon)
Light trucksa
Passenger
Model year
Two-wheel
Four-wheel
cars
Combinedb,c
drive
drive
1978
d18.0



1979
d19.0
17.2
15.8

1980
d20.0
16.0
14.0
(e)
1981
2.0
f16.7
15.0
(e)
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
d27.5
g19.7
g18.9
g19.5
1986
h26.0
20.5
19.5
20.0
1987
i26.0
21.5
19.5
20.5
1988
26.0
21.0
19.5
20.5
1989
j26.5
21.5
19.0
20.0
1990
d27.5
20.5
19.0
20.2
1991
d27.5
20.7
19.1
20.2
1992
d27.5


20.2
1993
d27.5


20.4
1994
d27.5


20.5
1995
d27.5


20.6
1996
d27.5


20.7
1997
d27.5


20.7
1998
d27.5


20.7
1999
d27.5


20.7
2000
d27.5


20.7
2001
d27.5


20.7
2002
d27.5


20.7
2003
d27.5


20.7
2004
d27.5


20.7
2005
d27.5


21.0
2006
d27.5


21.6
2007
d27.5


22.2
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].
aStandards for MY1979 light trucks were established for vehicles with a gross vehicle weight rating (GVWR) of 6,000
pounds or less. Standards for MY1980 and beyond are for light trucks with a GVWR of 8,500 pounds or less.
bFor MY1979, 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.
cFor 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.
dEstablished by Congress in Title V of the act.
eA 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.
fRevised in June 1979 from 18.0 mpg.
gRevised in October 1984 from 21.6 mpg for two-wheel drive, 19.0 mpg for four-wheel drive, and 21.0 mpg for combined.
hRevised in October 1985 from 27.5 mpg.
iRevised in October 1986 from 27.5 mpg.
jRevised in September 1988 from 27.5 mpg.
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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.
Current fleet fuel economy averages are shown in the following table.
Table 2. Domestic and Import Passenger Car and Light Truck Fuel
Economy Averages for Model Years 1978-2002
(in MPG)
Domestic
Import
Model
All
All light
Total
Year
Light
Com-
Lighta
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
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
24.8
2001
28.7


29.0


28.8
20.9
24.6
2002
29.0


28.7


28.9
21.3
24.6
Note: Beginning with MY1999, the agency ceased categorizing the total light truck fleet by either domestic or
import fleets.
aLight trucks from foreign-based manufacturers.
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
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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. That study, released on July 30, 2001, concluded
that it was possible to achieve more than a 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. A study released in December 2004 by a National Commission on Energy Policy
established by foundation money recommended that Congress instruct NHTSA to raise
CAFE standards over a five-year period beginning not later than 2010. The commission
recommended that manufacturers be able to trade the fuel economy credits earned by
exceeding the standards. Additionally, should technologies not advance as quickly as
anticipated, the government should also sell credits at some pre-specified price for the
purpose of placing a cap on compliance costs. Lastly, the commission suggested an
aggressive tax incentive program to encourage production and purchase of hybrid and
advanced diesel vehicles. The commission report, Ending the Energy Stalemate: A
Bipartisan Strategy to Meet America’s Energy Challenges
, is available online at
[http://64.70.252.93/O82F4682.pdf].
NHTSA Rulemaking for MY2005-MY2007:
Light Truck Fuel Economy

Today, light trucks are a larger portion of the total vehicle population, and travel more
annual vehicle miles, than in the past. For example, in 1980, light trucks composed 19.9%
of the U.S. new automobile market. By 2001, this figure had increased to 50.8%; SUVs alone
accounted for 23.1% of the new vehicle market in 1999, while mini-vans accounted for
5.8%. However, a comparison of market share underestimates this growth and its
consequences. While the number of passenger cars sold each year in the United States has
decreased somewhat since 1980, the number of light trucks sold has more than tripled, from
2.2 million in 1980 to 8.7 million in 2001. In 2001, SUV sales alone (4.0 million) nearly
doubled total light truck sales for 1980. As a result, the total fuel usage attributable to these
vehicles has increased.
On December 16, 2002, NHTSA issued a 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 energy bill, NHTSA indicated that the proposed increases for MY2006-
MY2007 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-MY2012. On April 1, 2003, NHTSA announced its adoption of the
proposed rule.
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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 argue that more steps should be taken. Some policymakers
believe an increase in passenger automobile CAFE is also in order. Another idea has been
to require efficiency improvements in the operation of heavy trucks. In the 108th Congress,
Senator Feinstein introduced legislation (S. 255) that, among other provisions, would have
expanded the applicability of fuel economy standards to vehicles up to 10,000 pounds GVW.
Others argue that the automotive industry should not be further burdened at this time by
higher CAFE requirements.
Advance Notice of Proposed Rulemaking:
December 2003

On December 22, 2003, NHTSA issued an Advance Notice of Proposed Rulemaking
inviting comments not on the appropriate stringency of CAFE standards but on the structure
of the program. The agency noted four broad criticisms of the program, and areas in which
it invited comment:
! Vehicle classifications. Some argue that the considerable difference in
passenger car and light truck fuel economy standards presents an incentive
for manufacturers to produce vehicles that can be classified in the light truck
category. Similarly, the applicability of CAFE standards to vehicles less than
8,500 pounds Gross Vehicle Weight (GVW) encourages manufacturers to
offer vehicles that exceed this weight. Among many issues, the agency
invited comment on whether or not the CAFE program should be extended
to encompass vehicles of less than 10,000 pounds GVW. Legislation to
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make vehicles rated at this weight subject to CAFE standards has been
introduced in the 109th Congress (H.R. 705).

! Safety. The trade-off between vehicle weight and safety continues to be
controversial. Some argue that the increase in light truck fleet fuel economy
to 22.2 mpg by 2007 will be achieved, in part, by reducing the weight of
vehicles and possibly raising the risk to passengers and drivers. However,
it is also noted that weight reduction of the heaviest vehicles in this category
might achieve some savings without penalty to safety. Complicating any
analysis is the fact that reductions in vehicle weight raise the odds of
survival for occupants of other vehicles involved in an accident. There are
a number of other factors governing safety; it is a complex issue.
! Economic impacts. Increases in mandated fuel economy have economic
consequences. Analysis by the Energy Information Administration suggests
that a “sustained gradual increase” in light truck fuel economy of 0.6 mpg
from 2007 to 2025 would incur a loss of $84 billion in real GDP over the
period. Additionally, the structure of the light truck standards favors
manufacturers who produce a line of models that includes some of the
smaller vehicles in the light truck class. For example, two manufacturers
could produce a vehicle of similar weight. However, the manufacturer of
the less efficient of these two vehicles could still have a lower overall truck
fleet fuel economy average if its product mix includes more smaller trucks
than the other manufacturer.
! Vehicle attributes. The agency invited comment on whether or not the
definitions and classifications of light trucks need to be amended in light of
the considerable change in the vehicle feet and consumer demand since the
CAFE program went into effect in 1977. Options that have been proposed
include keying vehicle CAFE to vehicle “attributes,” which could include
vehicle weight or vehicle size, and the establishment of multiple
classifications. Some argue that this will still encourage “upsizing,” or
“vehicle creep,” to place a vehicle in a less stringent CAFE category.
Classification of vehicles with “flat floors” as light trucks — that is, the
capability of removing seats to create a flat load floor — has enabled
manufacturers to incorporate flat floor design into vehicles that might have
otherwise been classified as passenger automobiles. The PT Cruiser is cited
as an example of this. Inclusion of cargo beds of any size may also allow
classification of a vehicle as a light truck.
Legislation introduced in the 109th Congress would also address the test cycle used by
the Environmental Protection Agency (EPA) to measure vehicle fuel economy for
determining whether a manufacturer’s fleet of new cars is in compliance with the CAFE
standard. Consumers have found that in-use fuel economy falls short of the published
measurements that also appear posted on the windows of new cars for sale. Advocates of
changes argue that the current test cycle is not consistent with current vehicle characteristics
and the way light-duty vehicles are used. For example, the estimated average length of
vehicle trips is shorter than the length assumed in the test cycle and would not reflect the
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typical number of engine cold starts. The test cycle does not include the operation of air
conditioning.
The fuel economy of individual vehicles is calculated by running vehicles through a test
on a dynamometer intended to simulate a driving cycle that assumes 11 miles driven in an
urban setting and 10 miles on open highway. To bring this calculation more into line with
in-use fuel economy experienced by drivers, the EPA makes a downward adjustment of 10%
for the city portion of the cycle and 22% for the highway portion. However, many argue that
this is an insufficient adjustment and that in-use fuel economy is still less than the estimate
provided to drivers on a sticker posted to the windows of new cars.
An amendment was brought to the House floor during the debate on H.R. 6 to require
EPA to make adjustments to bring the posted information on in-use fuel economy further in
conformity with drivers’ actual on-road experience. Without specifying a second test for the
purpose of providing an estimate of in-use fuel economy, opponents of the amendment were
fearful that the effect of the amendment as drafted would be to lower manufacturers’
calculated annual CAFE by as much as 10%-20% and make compliance with the CAFE
standards significantly more difficult. A “perfecting” amendment was approved (259-172)
that would essentially require that EPA make further adjustment in deriving the adjusted, in-
use fuel economy that is posted to new vehicle windows in the showroom.
CAFE in the 109th Congress: Omnibus Energy Legislation
The House passed H.R. 6, the Energy Policy Act of 2005, on April 21, 2005 (249-183).
With one exception noted above, the bill includes provisions strongly similar to language that
appeared in the omnibus energy legislation reported from conference during the 108th
Congress. The new legislation would authorize $2 million annually during FY2006-FY2010
for NHTSA to carry out fuel economy rulemakings. It also would expand the criteria that the
agency takes into account in setting maximum feasible fuel economy for cars and light
trucks, including the effects on automotive industry employment. As noted above, H.R. 6
was amended on the House floor to require that fuel economy information posted on new
cars would more closely approximate in-use fuel economy (259-172). An amendment to raise
the CAFE standard to 33 miles per gallon by MY2015 was rejected (177-254).
On April 27, 2005, Senator Domenici, Chairman of the Senate Committee on Energy
and Natural Resources, indicated that discussions about Senate legislation had been initiated
and were continuing.

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.
The Hydrogen Fuel Initiative, FreedomCAR and the Partnership for a New
Generation of Vehicles (PNGV) (1993-2003). Over five years, the Administration is
seeking a total funding increase of $720 million. These initiatives would fund research on
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hydrogen fuel and fuel cells for transportation and stationary applications. The 108th
Congress for FY2004 appropriated approximately $50 million for the initiatives ($20 million
less than the Administration request) above the FY2003 level, and for FY2005 an additional
$25 million above the FY2004 level. The Energy Policy Act of 2005 (H.R. 6) would
authorize $4 billion during the period FY2006-FY2010. The comprehensive legislation in
the 108th Congress would have set goals for the production of hydrogen-fueled passenger
vehicles. No goals are included in H.R. 6.

Critics of the Administration initiative have suggested that the hydrogen program was
intended to forestall attempts to significantly raise vehicle CAFE standards, and that it
relieves the automotive industry of assuming more initiative in pursuing technological
innovations. In addition, critics argue that hydrogen-fueled vehicles may ultimately be
infeasible, and that attention and funding should be focused on other research areas. On the
other hand, supporters argue that it is appropriate for government to become involved in the
development of technologies that are too costly to draw private sector investment. At issue
for these policymakers will be whether the federal initiative and level of funding is
aggressive enough. (For additional information, see CRS Report RS21442, Hydrogen and
Fuel Cell 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. The price of gasoline has increased significantly,
although, adjusted into real dollars, current prices are still well short of any historic high.
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 the 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.
Some have 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.
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 could be nearly immediate, and may grow as consumers initially drive less and
eventually seek out more efficient vehicles. However, U.S. gasoline consumption has held
relatively steady despite the sharp increase in gasoline prices through the spring of 2005. It
is possible that gasoline demand during the summer will be lower than it might otherwise be
were prices lower, but this may prove difficult to measure and remains to be seen.
CAFE and Reduction of Carbon Dioxide Emissions. Motor vehicles are a
major source of key air pollutants. Vehicles account for one-fifth of U.S. production of CO2
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emissions. There is some debate over whether raising the CAFE standards 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. Vehicle miles traveled have
continued to increase in recent years when fuel economy improved only slightly.
Perhaps the most significant current issue regarding automotive fuel economy is the
decision by the state of California to require carbon dioxide emissions standards for
passenger cars and light trucks. Enacted in 2002, A.B. 1498 requires the state to promulgate
regulations to achieve the maximum feasible and cost-effective reduction of greenhouse
gases from cars and trucks. The regulations, adopted by the California Air Resources Board
on September 24, 2004, require a reduction of greenhouse gas emissions of 30% by 2016.
The regulation covers passenger vehicles, but would not affect heavier vehicles such as
commercial trucks or buses.
Under the Clean Air Act, California is permitted to establish its own emissions
standards for automobiles, as long as those standards are at least as stringent as the federal
standard. However, there is no current federal standard for greenhouse gas emissions; federal
standards focus on pollutants with direct effects on air quality and health, including ground-
level ozone (smog) and carbon monoxide. Critics challenge that greenhouse gases are not
pollutants, and that the greenhouse gas standard is a de facto fuel economy standard, since
reducing emissions of carbon dioxide — the key greenhouse gas — requires reductions in
fuel consumption. Under CAFE, states do not have the authority to set their own standards;
authority remains solely with the federal government.
Several auto manufacturers and dealers have challenged the California auto greenhouse
gas standard in court. The plaintiffs argue that California lacks the authority to set a fuel
economy standard under CAFE, and that greenhouse gases are not a pollutant under the
Clean Air Act. California officials maintain that they have the authority under the Clean Air
Act to regulate vehicle greenhouse gas emissions.
The outcome of this case will likely have major effects on the U.S. auto industry. If
the standards are upheld, New York will adopt California’s standards, and other states are
likely to follow suit. The state of California estimates that complying with the standard
could cost $1,000 per vehicle by 2016, while opponents argue that costs could be as much
as $3,000 per vehicle. While reducing greenhouse gas emissions and fuel consumption, the
new standards would likely increase purchase costs and potentially diminish the new car
market. Further, it is likely that the standards would have varying effects on automakers who
sell more or less efficient products. (For additional background, see CRS Report RS20298,
Sport Utility Vehicles, Mini-Vans, and Light Trucks: An Overview of Fuel Economy and
Emissions Standards
, and CRS Report RL32764, Global Warming: The Litigation Heats
Up
.)

Other Initiatives. During Senate debate on comprehensive energy legislation in the
108th Congress, the Senate agreed (99-1) on June 9, 2003, to an amendment proposed by
Senator Landrieu that would have required the Administration to develop a plan to reduce
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U.S. oil consumption by 1 million barrels daily by 2013 from projected consumption levels.
The amendment would not have created any new authorities. Rather, it would have given
the Administration the latitude to use currently existing authorities, including CAFE.
Opponents of an increase in CAFE especially embraced the amendment because it would
have required a significant reduction in petroleum consumption without necessarily using
CAFE as one of the levers. A similar provision was rejected as an amendment to the
committee print marked up by the House Energy and Commerce Committee in mid-April
2005.
Some policymakers argue that more needs to be done to reduce vehicle fuel
consumption. 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 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.
LEGISLATION
H.R. 6 (Barton)
Energy Policy Act of 2005. Introduced April 18, 2005. Among other provisions, would
authorize $2 million annually during FY2006-FY2010 for the National Highway Traffic and
Safety Administration (NHTSA) to carry out fuel economy rulemakings. It also would
expand the criteria that the agency takes into account in setting maximum feasible fuel
economy for cars and light trucks, and require that EPA make further adjustments in deriving
in-use fuel economy predictions that are posted on the window of new cars. Passed by the
House on April 21, 2005 (249-183).
H.R. 705 (Gilchrist)
Automobile Fuel Economy Act of 2005. To amend Title 49, United States Code, to
require phased increases in the fuel efficiency standards applicable to light trucks; to require
fuel economy standards for automobiles of up to 10,000 pounds gross vehicle weight; to
increase the fuel economy of the federal fleet of vehicles, and for other purposes. Introduced
February 9, 2005, and referred to House Subcommittee on Energy and Air Quality.
H.R. 1103 (Johnson)
Fuel Efficiency Truth in Advertising Act of 2005. Would direct EPA to update its test
procedures for light-duty vehicles for the purpose of calculating vehicle fuel economy.
Introduced March 3, 2005, and referred to House Committee on Energy and Commerce.
H.R. 6 (Tauzin) (108th Congress)
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. Senate version passed (84-14) July
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31, 2003. Reported from conference, November 17, 2003. Passed House (246-180)
November 19, 2003. Motion to invoke cloture failed in the Senate (57-40), November 21,
2003.
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 pp.
Plotkin, Steve. Greene, David. “Prospects for Improving the Fuel Economy of Light Duty
Vehicles.” Energy Policy, vol. 25, no. 14-15. December 1997. Pp. 1179-1188.
U.S. Department of Transportation. National Highway Traffic Safety Administration.
Reforming the Fuel Economy Standards Program. [http://www.nhtsa.dot.gov/cars/rules/
CAFE/Rulemaking/CAFEReformdata.pdf].
U.S. Department of Transportation. National Highway Traffic Safety Administration. Light
Truck Average Fuel Economy Standards, Model Years 2005-2007. 68 FR 16867; April
7, 2003.
U.S. Department of Transportation. National Highway Traffic Safety Administration.
Automotive Fuel Economy Program. Annual Update, Calendar Year 2002, appearing
in full at [http://www.nhtsa.dot.gov/cars/problems/studies/fuelecon/index.html].
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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