Order Code RL33413
Automobile and Light Truck Fuel Economy:
The CAFE Standards
Updated December 3, 2007
Brent D. Yacobucci
Specialist in Energy Policy
Resources, Science, and Industry Division
Robert Bamberger
Specialist in Energy Policy
Resources, Science, and Industry Division

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Automobile and Light Truck Fuel Economy:
The CAFE Standards
Summary
High crude oil and gasoline prices and growing concern over greenhouse gas
emissions and climate change have heightened interest in reducing fossil fuel
consumption, especially U.S. gasoline consumption in the transportation sector. On
December 1, 2007, it was reported that a compromise had been reached among
Democrats on provisions to raise federal Corporate Average Fuel Economy (CAFE)
standards. CAFE standards are fleetwide fuel economy averages that motor vehicle
manufacturers must meet each model year. An energy bill including these (and other)
provisions may reach the House floor during the week of December 3.
The compromise includes some of the proposed changes to the CAFE program
included in legislation passed by the Senate on June 21, 2007, H.R. 6 (65-27). The
bill would establish a CAFE target of 35 miles per gallon (mpg) for the combined
fleet by model year (MY) 2020. Currently, separate CAFE standards are established
for passenger cars and light trucks (which include SUVs, vans, and pickups). The
Senate version of H.R. 6 proposed to combine the passenger car and light truck fleets
in MY2011. The compromise proposal would retain the distinction between the two
fleets, but the 35 mpg target would be an average of both fleets with a greater degree
of improvement called for from the passenger car fleet than the light truck class.
The House energy bill (H.R. 3221)(241-170) had not included CAFE provisions.
An effort to add CAFE language to the House legislation was defeated on June 28 in
a House Committee on Energy and Commerce markup (26-31). Nor were CAFE
amendments brought to and debated on the floor before the House passed energy
legislation on August 3, 2007.
Another important development having a bearing on CAFE was a November 15,
2007 decision by the U.S. Court of Appeals for the Ninth Circuit. The Energy Policy
and Conservation Act (EPCA) of 1975 allows the Secretary of Transportation more
latitude in setting CAFE standards for light-duty trucks than for passenger cars. On
April 6, 2006, the National Highway Traffic Safety Administration (NHTSA)
released a final rulemaking for sport utility vehicles (SUVs) and light-duty trucks
beginning with MY2008 that allows standards for light trucks to be set based upon
vehicle size, as opposed to having one average standard for all light trucks. Several
states and public interest groups challenged the rulemaking by petition. The Court
ruled that NHTSA had not conducted a sufficiently rigorous analysis to measure
whether the standards in the final rule would have a beneficial effect in improving
environmental quality through reduction of greenhouse gas emissions. The court
further ruled that the agency should conduct a full environmental impact statement
that monetizes the value of carbon emissions, and promulgate a new rule that
demonstrably sets the standards for light trucks and SUVs at the “maximum feasible
level” called for by EPCA. The court also ruled that the agency had fallen short by
not revising vehicle classifications. Some have argued that many larger vehicles built
on passenger car platforms are held to a lower standard, but that these vehicles are
not used any differently than are passenger automobiles.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A Compromise on CAFE Language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The U.S. Court of Appeals Overturns the MY2008-MY2011 Light
Truck Fuel Economy Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Major Issues in the CAFE Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Origins and Current Structure of the CAFE Program . . . . . . . . . . . . . . . . . . . . . . 7
NHTSA Rulemaking for MY2008-MY2011: Light Truck Fuel Economy . . . . . 11
Overview of the April 2006 Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Unreformed Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Reformed Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Medium-Duty Passenger Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Challenge to the Rule and Court Decision . . . . . . . . . . . . . . . . . . . . . . 14
CAFE in the 109th Congress: Omnibus Energy Legislation (P.L. 109-58) . . . . . 15
Feasibility Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
In-Use Fuel Economy Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
CAFE and Reduction of Carbon Dioxide Emissions . . . . . . . . . . . . . . . . . . . . . . 16
For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
List of Figures
Figure 1. Passenger Car and Light Truck Fuel Economy Averages for
Model Years 1978-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 2. Light Truck CAFE Standards for Various Model Years
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
List of Tables
Table 1. Fuel Economy Standards for Passenger Cars and Light Trucks:
Model Years 2000 Through 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Table 2. Estimated Costs and Benefits from the MY2008-MY2011
Reformed Light Truck CAFE Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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Automobile and Light Truck Fuel Economy:
The CAFE Standards
Most Recent Developments
Corporate Average Fuel Economy (CAFE) standards are fleetwide fuel economy
averages that motor vehicle manufacturers must meet each model year. The House
and Senate passed comprehensive energy legislation during the first session of the
110th Congress. However, the bills diverge greatly, with CAFE clearly one of the
most contentious issues in both Houses. Legislation passed by the Senate on June 21,
2007, H.R. 6 (65-27), included a section on CAFE, but House legislation (H.R.
3221)(241-170) passed on August 3, 2007, did not. Negotiations to reconcile several
of the policy initiatives in the two bills continued into the fall without resolution.
Reports indicated that one of the greatest challenges was reaching some sort of
agreement on CAFE that would draw the endorsement of Representative John
Dingell and survive any attempt at filibustering an energy bill in the Senate.
On December 1, 2007, it was reported that a compromise had been reached
among Democrats on provisions to raise the CAFE standards. An energy bill
including CAFE (and other) provisions may reach the House floor during the week
of December 3. However, some policymakers in both the House and Senate are
disturbed that no conference was held on the energy bills. The influence this may
have on final disposition of a comprehensive energy bill is unclear.1
A Compromise on CAFE Language
The compromise includes some of the proposed changes to the CAFE program
included in the Senate legislation. The Senate bill would establish a CAFE target of
35 miles per gallon (mpg) for the combined fleet by model year (MY) 2020.
Currently, separate CAFE standards are established for passenger cars and light
trucks (which include SUVs, vans, and pickups). The Senate version of H.R. 6
proposed to combine the passenger car and light truck fleets in MY2011. The
compromise proposal would retain the distinction between the two fleets, but the 35
mpg target would be an average of both fleets with a greater degree of improvement
called for from the passenger car fleet than the light truck class.
Another important point of compromise in the language to be included in the
bill addresses controversy over the relationship between fuel economy and the
1 See, for example, the statement of Senator Domenici, U.S. Senate Committee on Energy
and Natural Resources, “Domenici Statement on Energy Negotiations,” December 1, 2007,
[http://energy.senate.gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRele
ase_id=235405&Month=12&Year=2007].

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CRS-2
regulation of CO emissions. Under current law, states are pre-empted from
2
establishing their own CAFE standards but are permitted to set clean air
requirements. However, on April 2, 2007, the Supreme Court issued its ruling in a
case (Commonwealth of Massachusetts v. EPA) brought by 12 states and the District
of Columbia that challenged the Environmental Protection Agency’s (EPA’s)
decision not to regulate greenhouse gas emissions from automobiles. The petitioners
argued that EPA has the responsibility to set greenhouse gas standards for passenger
vehicles. Under the decision, EPA is required to establish greenhouse gas standards
for automobiles or explicitly justify why such standards are not feasible.
Representative Dingell was seeking language that would reserve regulation of fuel
economy strictly to the National Highway Traffic Safety Administration (NHTSA),
which, by extension, would have weakened considerably the latitude of the states
and the District of Columbia to regulate CO emissions. This language was dropped,
2
in part because current provisions in the CAFE program that give automotive
manufacturers a credit for the manufacture of flexible fueled vehicles (FFV) will be
retained. That credit was set to expire in 2008. Many have opposed it, arguing that
FFVs may have the capacity to burn a higher proportion of ethanol to gasoline, but
that the vehicles are generally fueled with gasoline, capturing no real savings. Under
the compromise, the credit will be maintained until 2014, after which it will decline
and end entirely in 2020.
As already noted, the House energy bill (H.R. 3221) had not included CAFE
provisions. An effort to add CAFE language to the House legislation was defeated
on June 28 in a House Committee on Energy and Commerce markup (26-31). Nor
were CAFE amendments brought to and debated on the floor before the House
passed energy legislation on August 3, 2007.
The U.S. Court of Appeals Overturns the MY2008-MY2011
Light Truck Fuel Economy Rule
The legislative action is unfolding against the backdrop of a significant
development — the overturning of the Model Year 2008-11 light truck CAFE
standards that were promulgated by final rule in April of 2006. On November 15,
2007, the U.S. Court of Appeals for the Ninth Circuit ruled that NHTSA had not
conducted a sufficiently rigorous analysis to measure whether the standards in the
final rule would have a beneficial effect in improving environmental quality through
reduction of greenhouse gas emissions. The court ruled that the agency should
conduct a full environmental impact statement, and promulgate a new rule that
demonstrably sets the standards for light trucks and SUVs at the “maximum feasible
level” called for by EPCA. Particulars of the court decision are described in greater
detail elsewhere in this report.
Legislative Proposals in the 110th Congress
As noted previously, the Senate legislation includes CAFE provisions wile the
House energy bill does not. An effort to add CAFE language to House energy
legislation had been defeated on June 28 in a House Committee on Energy and
Commerce markup (26-31). Some argued at the markup that it would strengthen

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CRS-3
House negotiations with the Senate in conference if the House bill also included
CAFE provisions.
Two CAFE proposals (H.R. 1506, H.R. 2927) were circulated later in the
summer of 2007 as possible amendments that might be brought to the House floor.
While these proposals may not figure in debate on CAFE provisions in a final
comprehensive energy bill, they help provide context for whatever CAFE provisions
may be enacted.
H.R. 1506 would require an average fuel economy of 35 mpg across the entire
fleet of passenger automobiles and light-duty trucks by MY2018. H.R. 2927 would
require an average fuel economy not less than 32 mpg and not more than 35 mpg in
MY2022. This bill, however, would not combine the passenger car and light-duty
truck fleets. There were some reports that the CAFE targets in H.R. 2927 might
figure in the crafting of a compromise on CAFE, were a conference to be held on the
House and Senate legislation. The Administration was also reported to have
expressed its support for those targets in a communication sent to the House
leadership.2
H.R. 2927 would also require that the CAFE standard be expressed in grams per
mile of carbon dioxide (CO ) emissions, a proposal raising one of the issues
2
addressed in the compromise announced on December 1, 2007. As noted earlier,
under current law, states are pre-empted from establishing their own CAFE standards
but are permitted to set clean air requirements. Some suggested that the new
requirement in H.R. 2927 to report fuel economy as a function of CO emissions was
2
intended to have some bearing on the differing treatment of the states between CAFE
and emissions standards. However, discussions among the House leadership and
members before the House floor debate during the late summer of 2007 led to
agreement that neither amendment would be offered during the floor debate.
The CAFE standards during the interim years (MY2011-MY2019) would be
required to be 4% higher than the previous model year. Other provisions include the
requirement that a percentage of automakers’ new vehicles be alternative fuel-
capable starting in 2012, and that CAFE fines be used to develop alternative fuel
infrastructure. Standards set by the Secretary of Transportation during MY2011-
MY2019 to achieve the 35 mpg target by MY2020 would be required to be at
“maximum feasible fuel economy standards.” (Language that would have required
a 4% annual increase in the CAFE target from the previous model year during the
period of MY2021-MY2030 was dropped.)
H.R. 6 also would require that the Secretary of Transportation, 18 months after
enactment, initiate a study that could lead to the establishment of fuel economy
standards, or other policies, to improve the fuel efficiency of medium- and heavy-
duty on-highway trucks. The exploration would include determining appropriate test
procedures and methods for measuring the fuel efficiency of heavy vehicles that
would balance the nature of the work these vehicles perform with other vehicle
2 Congressional Quarterly. Palmer, Avery. “Fuel Economy Standards Shape Up as Sticking
Point for Energy Bill Conference.” October 19, 2007.

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CRS-4
characteristics. Within two years of the completion of the study, the Secretary would
be required to issue a rulemaking on how to implement a fuel efficiency
improvement program for these vehicles. Any program would provide a lead time of
4 model years and would make no changes in any targets at less than three-year
intervals. No comparable provisions are in the House proposals.
The House proposals, H.R. 1506 and H.R. 2927, would also require that interim
standards be set at “maximum feasible” levels. However, all three proposals include
language providing for standards to be set at lower levels if they do not satisfy
requirements that they be “cost-effective” or that the national benefits of the
standards exceed their costs. The parameters for measuring this vary from bill to bill.
H.R. 6, for example, requires that the Secretary of Transportation consider
“economic practicability” and the need of the nation to conserve energy. Standards
must be “technologically achievable,” may not compromise vehicle safety, and must
be “cost-effective.” Under the provisions of H.R. 6, the Secretary and the National
Highway Traffic Safety Administration (NHTSA) would be required to assess
cost-effectiveness against several criteria, including economic security, national
security, foreign policy, and the impact of oil use on various other national policy
concerns.
All three proposals would extend authority to the Secretary of Transportation
to alter the structure of the CAFE program for passenger cars. The Energy Policy and
Conservation Act (EPCA) of 19753 grants NHTSA the authority to alter the light
truck CAFE program’s structure, but several features of the passenger car program
cannot be altered by NHTSA under EPCA. For example, the President must submit
a proposal to increase the passenger car CAFE standard to Congress, which can then
act to disapprove; otherwise, the proposal goes into effect.
Under EPCA, the Secretary of Transportation has the discretion to adjust the
passenger car standard only within a range of 26.0 to 27.5 mpg. If NHTSA amends
the standard above 27.5 mpg or below 26.0 mpg, that amendment must be submitted
to Congress. If either House of Congress disapproves of the amendment within 60
days, it does not take effect. However, the use of this “one-house veto” would likely
be judged unconstitutional, so the likelihood of Congress stopping an amendment to
CAFE in this manner is questionable.4 Further, NHTSA lacks the authority to alter
the structure of the passenger car program.
In contrast, EPCA grants NHTSA the authority to alter the light truck program’s
structure. On April 6, 2006, NHTSA released a final rulemaking for sport utility
vehicles (SUVs) and light-duty trucks beginning with MY2008 that allows standards
for light trucks to be set based upon vehicle size, as opposed to having one average
3 P.L. 94-163.
4 For more discussion on the constitutionality of one-house vetoes, see CRS Report
RS22132, Legislative Vetoes After Chada, by Louis Fisher.

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CRS-5
standard for all light trucks. Both H.R. 1506 and H.R. 2927 would authorize
attribute-based standards; H.R. 6 requires them.5
In a submission of draft legislation on February 6, 2007, to the House Energy
and Commerce Committee, NHTSA requested broader authority to modify the CAFE
program for passenger cars. As part of the Administration proposal, NHTSA also
requested the authority to allow credit trading among different manufacturers;
currently, manufacturers may bank credits for future years but may not trade them to
other manufacturers.
For background and a comparison of the various CAFE bills, see CRS Report
RL33982, Corporate Average Fuel Economy (CAFE): A Comparison of Selected
Legislation in the 110th Congress, by Brent D. Yacobucci and Robert Bamberger.
Major Issues in the CAFE Debate
Some of the arguments made on behalf of, or in opposition to, raising CAFE or
making significant changes in the program touch on old themes, some of which have
become more complicated to assess because the mechanics of the program would be
established by regulation following enactment of any new CAFE legislation. These
issues include
! What would be the effect of combining the passenger automobile
and light-duty truck fleet for the purpose of calculating
manufacturers’ average CAFE? Some contend that it should
make no difference whether the average is calculated across one
entire fleet or weighted across two if an umbrella standard has to be
met for the entire fleet. On the other hand, there may be differential
effects of the standards on different vehicle classes that could be
addressed by keeping the classes separate. Opponents of eliminating
the distinction between the fleets refer to that policy as
“backsliding.” Currently, a manufacturer must meet the CAFE
standard separately for its fleet of passenger cars produced in the
United States and abroad. The CAFE of each cannot be averaged
across one another. A manufacturer cannot earn CAFE credits for
one fleet that can be applied to bring its other fleet into compliance,
nor can manufacturers buy and sell credits from one another. The
two-fleet rule was crafted originally to protect the diversity of
models manufactured in the United States. The United Auto
Workers (UAW) argues that eliminating the distinction between
foreign and domestic fleets could cost jobs in the industry
domestically. The compromise announced on December 1, 2007,
would retain the distinction between the two vehicle classes, but
5 For a more detailed discussion of the different treatment of passenger car and light truck
CAFE under EPCA, see the section, “Authority to Amend CAFE Standards,” below.

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CRS-6
would call for a greater improvement in passenger fuel economy
than in light truck fuel economy.

! Would higher CAFE standards bring about a loss in jobs? Some
argue that, to the extent that higher standards might compel
manufacturers to make fewer vehicles that consumers want, older,
less efficient vehicles may be retained longer. Others suggest that
any impact on jobs in the industry would be selective — that is,
unionized jobs might be more vulnerable if higher standards affect
demand for vehicles.
! What would be the effects of allowing credit trading among
manufacturers and/or between passenger car and light trucks
fleets? Currently, automakers may bank excess CAFE credits for
use in future years, but may not trade those credits with other
automakers. Further, automakers may not trade credits between their
passenger car and light truck fleets — each fleet must meet the
standards independently. Allowing credit trading could improve the
economic efficiency of the system and lower the cost of compliance.
However, allowing credit trading could lead to a competitive
advantage for some manufacturers, and could affect auto industry
employment.
! Would higher CAFE standards have an effect on gasoline price?
There are many external and often short-term and cyclical variables
that can affect gasoline prices. If higher standards do reduce overall
oil demand from a baseline projection, world oil prices may be less
volatile when an incident or sequence of events raises uncertainty
about the adequacy and security of world supply. However, it is
impossible to make any reliable projections given such a large
universe of possible scenarios.
! How would attribute-based standards work, and what are the
advantages and disadvantages of restructuring the system this
way? Instead of establishing a single, annual CAFE standard across
a large population of vehicles of varying sizes and purposes, a fuel
economy target could be calculated for individual vehicles as a
mathematical function of individual vehicle attributes. Standards, for
example, could be based on vehicle size — or footprint. Under that
scenario — and visualized on a graph — each year’s standard would
no longer be represented by a single line, but appear instead as a
curve that would peg a desirable fuel economy target for vehicles
based upon their footprint. In successive model years, the curve
would be replotted, with the intention of reaching a designated
CAFE fleetwide average in some future model year. No individual
vehicle would be required to meet a specific fuel economy standard,
bu the average of the fleet would need to meet or exceed the average
of the individual vehicles’ size-based targets. (See Figure 2 in the
detailed discussion below of the overturned FY2008-FY2011 light
truck standards for a depiction of how this approach to CAFE would

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operate.) Any system for regulating CAFE will have winners and
losers, and those winners and losers will likely change if an
attribute-based system is chosen over a straight-line average.
Further, the choice of which attribute or attributes to regulate will
also affect individual automakers differently.
! Are there arguments to be made for and against designating
CAFE standards as an expression of both miles per gallon and
as grams per mile of CO emissions? One bill, H.R. 2927, includes
2
such a provision. Technically, CO emission rates are not measures
2
of fuel economy but of greenhouse gas emissions. However, there
may be few ways to reduce emissions other than increased fuel
economy. Currently, states may establish emissions standards under
the Clean Air Act, but are preempted from setting fuel economy
standards by EPCA. Amending EPCA to establish CAFE standards
both in terms of miles per gallon and grams per mile of CO could
2
have bearing on states’ authority to regulate CO . However, on April
2
2, 2007, the Supreme Court issued its ruling in a case
(Commonwealth of Massachusetts v. EPA) brought by 12 states and
the District of Columbia that challenged EPA’s decision not to
regulate greenhouse gas emissions from automobiles. The Supreme
Court decision upheld the petition and requires EPA to regulate CO2
emissions.6 The ruling of the U.S. Court of Appeals for the Ninth
Circuit overturning the final rule promulgated in April 2006 setting
light truck fuel economy standards for MY2008-MY2011 was based,
in part, on a determination that NHTSA failed to thoroughly analyze
the effect of the final rule on CO .
2
Origins and Current Structure of the CAFE Program
The Arab oil embargo of 1973-1974 and the subsequent 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 mpg in MY1967 to 12.9 mpg in MY1974.
In the search for ways to reduce dependence on imported oil, automobiles were an
obvious target. The Energy Policy and Conservation Act (EPCA) established CAFE
standards for passenger cars for MY1978. The CAFE standards called for an eventual
doubling in new car fleet fuel economy. EPCA also granted NHTSA the authority
to establish CAFE standards for other classes of vehicles, including light-duty
trucks.7 NHTSA established fuel economy standards for light trucks, beginning in
MY1979. For passenger cars, the current standard is 27.5 mpg. For light trucks, the
standard is 22.2 mpg for MY2007. On April 6, 2006, NHTSA issued additional rules
to further increase light truck fuel economy through MY2011. (The CAFE standards
to MY2011 are summarized in Table 1.)
6 See additional discussion later in this report, “CAFE and Reduction of Carbon Dioxide
Emissions.”
7 Light-duty trucks include most sport utility vehicles (SUVs), vans, and pickup trucks.

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CRS-8
Table 1. Fuel Economy Standards for Passenger Cars and
Light Trucks: Model Years 2000 Through 2011
(miles per gallon)
Passenger
Light
Model year
cars
trucksa
2000
b27.5
20.7
2001
b27.5
20.7
2002
b27.5
20.7
2003
b27.5
20.7
2004
b27.5
20.7
2005
b27.5
21.0
2006
b27.5
21.6
2007
b27.5
22.2
2008
b27.5
c22.5
2009
b27.5
c23.1
2010
b27.5
c23.5
2011
b27.5
d24.0
Source: Automotive Fuel Economy Program, Annual Update, Calendar Year 2001; U.S. Department
of Transportation. National Highway Traffic Safety Administration, Light Truck Average Fuel
Economy Standard, Model Year 2004, Final Rule; and U.S. Department of Transportation, National
Highway Traffic Safety Administration. Average Fuel Economy Standards for Light Trucks Model
Years 2008-2011, Final Rule.
a. Standards for MY1979 light trucks were established for vehicles with a gross vehicle weight rating
(GVWR) of 6,000 pounds or less. Standards for MY1980 to MY2000 are for light trucks with
a GVWR of 8,500 pounds or less. Starting in MY2011, the light truck CAFE program will
include medium duty passenger vehicle (MDPVs), trucks with a GVWR between 8,500 and
10,000 pounds that primarily transport passengers (e.g., large SUVs, passenger vans)
b. Established by Congress in Title V of the act.
c. Unreformed CAFE standard.
d. Estimated average based on MY2011 reformed standard.
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 cars 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 2003 totaled slightly more than $600 million. However, these penalties have been
paid mostly by small and speciality European manufacturers, not by the major U.S.
or Japanese automotive manufacturers.
The effectiveness of CAFE standards since inception has been controversial.
Since 1974, domestic new car fuel economy has roughly doubled; the fuel economy
of imports increased by roughly one-third. Some argue that these improvements
would have happened as a consequence of rising oil prices during the 1970s and

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CRS-9
1980s regardless of the existence of the CAFE standards. 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 one achievement of the CAFE
program has been to place some sort of floor under new-car fuel economy. Recent
and historic fleet fuel economy averages are shown in Figure 1.
Figure 1. Passenger Car and Light Truck Fuel Economy
Averages for Model Years 1978-2005
30
28
26
24
22
20
18
16
1978
1983
1988
1993
1998
2003
Automobiles
Light Trucks
Combined
Source: U.S. Department of Transportation, National Highway Traffic Safety Administration,
Summary of Fuel Economy Performance, March 2005.

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. 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 roughly ten years it generally takes 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 decreasing 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

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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.
Language in the FY1996-FY2000 Department of Transportation (DOT)
Appropriations prohibited expenditures for any rulemaking that would make any
adjustment to the CAFE standards. In conference on the FY2001 appropriations, the
Senate insisted that the language be dropped, 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,
Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards,
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 vehicle ownership. A study released
in December 2004 by the National Commission on Energy Policy, Ending the Energy
Stalemate: A Bipartisan Strategy to Meet America’s Energy Challenges, 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 fuel economy credits earned by
exceeding the standards.
A draft report from the National Petroleum Council, “Facing the Hard Truths
About Energy: A Comprehensive Review to 2030 of Global Oil and Gas,” released
in late July 2007 argues that vehicle fuel efficiency could be doubled by 2030
“through the use of existing and anticipated technologies,” and “assuming vehicle
performance and other attributes remains the same as today.” The draft report notes
that technologies to improve fuel efficiency have been used to compensate for the
addition of horsepower and other “amenities” to current vehicles. The Council
estimated that doubling fuel economy could achieve a savings of 3-5 million barrels
a day by 2030.8
The recent and sustained rise in crude oil and gasoline prices has underscored
how inelastic gasoline demand is with respect to price. In lieu of achieving
significant improvements in vehicle fuel efficiency, reducing U.S. dependence on
imported oil could be extremely difficult without imposing a large price increase on
gasoline, or restricting consumer choice in passenger vehicles. Many have argued
(and still do) that the impacts of such actions upon the economy or the automotive
industry would be severe or, from a public policy standpoint, unacceptable.
Meanwhile, U.S. gasoline consumption averaged 6.5 million barrels per day (mbd)
in 1982, increased to nearly 8.4 mbd in 1999, and was roughly 9.3 mbd in the winter
of 2007 after peaking at 9.6 mbd during the summer of 2006. Gasoline demand has
been at comparable levels during the summer of 2007.
8 National Petroleum Council. Facing the Hard Truths about Energy, p. 86-87. The text of
the report is currently available at [http://www.npc.org].

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CRS-11
NHTSA Rulemaking for MY2008-MY2011:
Light Truck Fuel Economy
On April 6, 2006, NHTSA released a final rulemaking for sport utility vehicles
(SUVs) and light-duty trucks beginning with MY2008 that allows standards for light
trucks to be set based upon vehicle size, as opposed to having one average standard
for all light trucks. On November 15, 2007, the U.S. Court of Appeals for the Ninth
Circuit overturned the rule, remanding it to NHTSA for development of a new rule
and requiring that NHTSA conduct a full environmental impact analysis to
demonstrate that any final rule would benefit the environment by reducing
greenhouse gas emissions. Because some of the bills proposing changes in the CAFE
program for passenger cars would adopt features of the April 2006 rule, it’s useful
to look at it in greater detail and describe how such a system would operate.
Overview of the April 2006 Rule
Today, light trucks — which include most SUVs and vans — 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 20% of the U.S. new
automobile market. By 2006, this figure had increased to 55%; SUVs alone
accounted for 27% of the new vehicle market in 2005, while mini-vans accounted for
6.6%. 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 nearly
quadrupled, from 2.2 million in 1980 to 9.2 million in 2005. As a result, the total
fuel usage attributable to these vehicles has increased.
On April 6, 2006, NHTSA issued a Final Rule increasing the stringency of the
light truck fuel economy program, as well as restructuring the program to incorporate
size-based standards. Under the new “reformed” system, each light truck would have
a fuel economy “target” based on its footprint (the product of wheelbase and track
width), with higher targets for smaller vehicles and lower targets for larger vehicles.
Under the reformed system, in a given model year the targets for a manufacturer’s
fleet would be averaged to calculate that manufacturer’s mandated fuel economy. To
provide flexibility for manufacturers, between MY2008 and MY2010, manufacturers
were going to be extended an option to adopt either the reformed or unreformed
systems. Starting in MY2011, all manufacturers would have been subject to the
reformed system. Further, starting in MY2011, medium-duty passenger vehicles
(MDPVs) — vehicles between 8,500 pounds and 10,000 pounds gross vehicle weight
that primarily transport passengers — would have become subject to CAFE standards
for the first time. This class of vehicles included large SUVs and passenger vans, but
did not include vehicles such as pickup trucks or panel trucks. NHTSA estimated
that the reformed system would lead to a light truck average fuel economy of 24.0
mpg in MY2011, compared with a 22.2 mpg standard in MY2007 and an estimated
fuel economy of 21.8 mpg in MY2005. NHTSA estimated that these changes would
save 4.4 billion gallons over the life of the vehicles produced between MY2008 and
MY2011.

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CRS-12
Unreformed Standards
Between MY2008 and MY2010, manufacturers were to be allowed to opt for
either the reformed or unreformed standards. The unreformed standards were to
employ the existing system of a single mandated average for all light trucks in a
manufacturer’s fleet. From the MY2007 standard of 22.2 mpg, the unreformed
standards would increase to 22.5 mpg in 2008, 23.1 mpg in 2009, and 23.5 in 2010.
During this period, NHTSA estimated that under the unreformed standards, the
average incremental cost increase would be $64 in MY2008 and $195 in MY2010.
Reformed Standards
One of the key criticisms of the existing CAFE structure is that increased CAFE
standards promote smaller, lighter vehicles. Because fuel economy tends to decrease
as vehicles get heavier, a simple way to increase fuel economy is to decrease vehicle
weight. However, larger vehicles tend to offer greater passenger protection in
accidents, and larger vehicles tend to be heavier. Therefore, a fuel economy standard
that does not take vehicle size into account may promote the use of smaller, less safe
vehicles. A further criticism of the existing structure is that it favors producers of
smaller vehicles — vehicles that tend to have higher fuel economy. However, some
proponents of higher CAFE argue that through the use of new technology, vehicle
efficiency can be improved without affecting size or performance.
To address concerns over vehicle safety, NHTSA developed a new CAFE
structure that would base fuel economy on vehicle size, with smaller vehicles
required to achieve higher fuel economy than larger vehicles. Under the new system
that was part of the MY2008-MY2011 light truck CAFE rule, each vehicle would be
assigned a fuel economy “target” based on its footprint, which is the product of a
vehicle’s track width (the horizontal distance between the tires) and its wheelbase
(the distance from the front to the rear axles). The average of the targets for a
manufacturer’s fleet is the CAFE average that manufacturer must achieve in a given
model year. In this way, no specific vehicle is required to meet a specific fuel
economy, but the average fuel economy required will vary from manufacturer to
manufacturer. Manufacturers producing smaller trucks would face higher CAFE
requirements for those vehicles; those producing larger trucks would face lower
CAFE requirements for the larger vehicles. Figure 2 shows the targets under the rule
for MY2011, as compared to the unreformed MY2010 standard, and the MY2007
standard for all light trucks.

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CRS-13
Figure 2. Light Truck CAFE Standards for
Various Model Years
35
30
llon
a
r G 25
pe
s
ile
M 20
15
20
30
40
50
60
70
80
Footprint (square feet)
Reformed - MY2011
Unreformed - MY2010
Unreformed - MY2007
Source: CRS Analysis of 71 Federal Register 17566-17679, April 6, 2006.
NHTSA estimated that the reformed standards would add $66 to the cost of a
new vehicle in MY2008 and $271 in MY2011. Total incremental costs were
estimated at approximately $550 million for MY2008, and $2,500 million for
MY2011. Further, the agency estimated the total benefits from reduced fuel
consumption to be roughly $780 million and $3,000 million in MY2008 and
MY2011, respectively. NHTSA’s estimates are shown in Table 2. It should be
noted, however, that the benefits from the rule were based on gasoline prices between
$1.96 and $2.39 per gallon. Higher fuel prices would increase the benefits from fuel
savings, while lower fuel prices would decrease the benefit.
Table 2. Estimated Costs and Benefits from the MY2008-
MY2011 Reformed Light Truck CAFE Standards
($ millions)
MY2008
MY2009
MY2010
MY2011
Total Incremental Cost
$553
$1,724
$1,903
$2,531
Total Incremental Benefit
$782
$2,015
$2,336
$2,992
Source: 71 Federal Register 17566-17679, April 6, 2006.

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CRS-14
Medium-Duty Passenger Vehicles
Starting in MY2011, medium-duty passenger vehicles (MDPVs) would be
subject to the same fuel economy standards as light trucks. MDPVs are vehicles
between 8,500 and 10,000 pounds gross vehicle weight that are designed primarily
to transport passengers. Covered vehicles include most SUVs and passenger vans
not covered by the “light truck” definition; pickup trucks and panel trucks are
excluded from the requirements. Under previous CAFE rulemakings, it had never
been proposed that MDPVs be subject to CAFE standards. Before MY2004, these
vehicles were considered heavy-duty vehicles for both fuel economy and emissions
purposes. For the purposes of emissions standards, starting in MY2004, the
Environmental Protection Agency (EPA) first defined MDPVs and included them in
the “Tier 2” emissions standards for passenger cars and light trucks. The justification
at the time was that these vehicles are used primarily as passenger vehicles, and
should be regulated as such. NHTSA reached a similar conclusion, adding that fuel
economy standards for MDPVs were feasible, and that standards would save
additional fuel — approximately 250 million gallons over the operating life of
MY2011 MDPVs.
The Challenge to the Rule and Court Decision
Eleven states, the District of Columbia, New York City, and four public interest
organizations petitioned for review of the final rule governing light truck fuel
economy for MY2008-MY2011. On November 15, 2007, the U.S. Court of Appeals
for the Ninth Circuit overturned the rule, requiring NHTSA to promulgate a new rule
that, among other elements, assessed the costs and benefits from different levels of
standards in reducing carbon dioxide (CO ) emissions.
2
Among the petitioners’ arguments were that:
! The cost-benefit analysis performed by NHTSA assigned no benefit
to reducing CO emissions. The environmental assessment
2
conducted by NHTSA failed “to take a ‘hard look’ at the greenhouse
gas implications of its rulemaking and [failed] to analyze a
reasonable range of alternatives or examine the rule’s cumulative
impact”9 and did not give “due consideration” to the needs of the
nation to conserve energy.
! While the rule included a specified CAFE goal to be achieved,
correlating a manufacturer’s CAFE to vehicle attributes in its fleet
meant that there was no “backstop,” or floor fuel economy that an
individual manufacturer had to achieve in a given model year. The
Court agreed that this left open the possibility “that a floating fleet-
mix-based standard would continue to permit upsizing — which is
9 Unless indicated otherwise, passages appearing in quotation marks are drawn from the text
of the court’s opinion, available at [http://www.altlaw.org/v1/cases/218574.pdf]. For this
particular discussion, see p. 14906.

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CRS-15
not just a function of consumer demand, but also a function of
manufacturers’ own design and marketing decisions.”10
! The rule did not address the so-called “SUV loophole” that permits
these vehicles to meet a lower CAFE despite the fact that many of
these vehicles are built on passenger car platforms and are used not
for the purposes for which light trucks were used historically, but to
serve the same functions as passenger automobiles. The Court ruled
that the decision not to address this issue in the rule was “arbitrary
and capricious” on the part of NHTSA and contradictory to language
in the law and statements by the agency.11
! The petitioners argued that NHTSA should also regulate the fuel
economy of heavy-duty trucks between 8,500-10,000 pounds Gross
Vehicle Weight (GVW) because it would be feasible to do so and
would achieve significant fuel savings. The Court agreed, ruling that
NHTSA should promulgate regulations addressing the fuel
efficiency of vehicles in this weight class, or demonstrate “a validly
reasoned basis” for excluding them.12
CAFE in the 109th Congress:
Omnibus Energy Legislation (P.L. 109-58)
The Energy Policy Act of 2005 (P.L. 109-58) authorized $3.5 million annually
during FY2006-FY2010 for NHTSA to carry out fuel economy rulemakings. It also
required a study (submitted to Congress in August 2006) to explore the feasibility
and effects of a significant reduction in fuel consumption by 2014, and required that
the estimated in-use fuel economy posted to the window of new vehicles more
closely approximate owners’ experience.
Feasibility Report
In response to the requirements of the Energy Policy Act of 2005, in August
2006, NHTSA issued to Congress the report “Study of Feasibility and Effects of
Reducing Use of Fuel for Automobiles.” The report concluded that NHTSA’s light
truck rulemaking will lead to significant reductions in fuel consumption, and that
granting NHTSA the authority to establish similar rules for passenger cars would lead
to even greater reductions.
10 Ibid., p. 14889.
11 Ibid., p. 14894.
12 Ibid., p. 14901.

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CRS-16
In-Use Fuel Economy Estimates
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 argued in the past that this adjustment was no
longer sufficient, and that the gap between estimated fuel economy and actual in-use
fuel economy had widened significantly.
EPACT requires a revision of the adjustment factor applied against tested
vehicle fuel economy to estimate consumer in-use fuel economy. On December 11,
2006, EPA finalized a rule to incorporate the effect of factors such as higher speed
limits, faster acceleration, differences in the ratio between city and highway driving,
and use of air conditioning on in-use fuel economy. The in-use fuel economy
stickers posted to the windows of new cars will reflect the results of these tests
beginning in MY2008.13 This change will affect only the estimation of in-use fuel
economy. It will not affect the CAFE calculation for purposes of determining
manufacturers’ compliance with the CAFE standard.
CAFE and Reduction of Carbon Dioxide Emissions
Passenger vehicles account for one-fifth of U.S. production of CO emissions.
2
There is some debate over whether raising the CAFE standards would be an effective
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.
13 For more information, see U.S. Environmental Protection Agency (EPA), Regulatory Fact
Sheet: EPA Issues New Test Methods for Fuel Economy Window Stickers, December 2006.

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CRS-17
Under the Clean Air Act, California is permitted to establish its own pollutant
emissions standards for automobiles, as long as those standards are at least as
stringent as the federal standard.14 Once California has established its own emissions
standard, other states may choose to adopt the California standards. 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 the assertion that greenhouse
gases are pollutants and contend that the greenhouse gas standard is a de facto fuel
economy standard, because 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. California has countered that carbon dioxide is a pollutant, and
that there are considerable health effects from global warming.
Several auto manufacturers and dealers have challenged the California auto
greenhouse gas standard in court. (Central Valley Chrysler-Jeep, Inc., vs.
Witherspoon, No. 1:04-CV-06663, E.D. Cal., filed December 7, 2004.) 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 (and other states) 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.
On April 2, 2007, the Supreme Court issued its ruling on a related case
(Commonwealth of Massachusetts v. EPA). In that case, 12 states and the District of
Columbia challenged the Environmental Protection Agency’s (EPA’s) decision not
to regulate greenhouse gas emissions from automobiles, arguing that EPA has the
responsibility to set greenhouse gas standards for passenger vehicles. Under that
decision, EPA is required to establish greenhouse gas standards for automobiles or
explicitly justify why such standards are not feasible. The decision in that case will
likely affect the outcome of the case against California.15
14 For more information, see CRS Report RL34099, California’s Waiver Request to Control
Greenhouse Gases Under the Clean Air Act, by James E. McCarthy.
15 For additional background, see CRS Report RL32764, Climate Change Litigation:
A Growing Phenomenon, by Robert Meltz.

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CRS-18
For Additional Reading
National Petroleum Council. Facing the Hard Truths about Energy (2007).
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.
Greene, D.L., P.D. Patterson, M. Sing and J. Li. (2004). “Feebates, Rebates and
Gas-Guzzler Taxes: A Study of Incentives for Increased Fuel Economy,”
Energy Policy, vol. 33, no. 6, pp. 721-827, June 2004.
U.S. Congressional Budget Office. Reducing Gasoline Consumption: Three Policy
Options. November 2002. 36 p.
U.S. Congressional Budget Office. The Economic Costs of Fuel Economy Standards
Versus A Gasoline Tax. December 2003. 37 p.
U.S. Environmental Protection Agency. Fuel Economy Labeling of Motor Vehicles:
Revisions To Improve Calculation of Fuel Economy Estimates. 71 Federal
Register 77871. December 27, 2006.
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 2004. [http://www.nhtsa.dot.gov/staticfiles/DOT/
NHTSA/Vehicle%20Safety/CAFE/2004_Fuel_Economy_Program.pdf]
U.S. Federal Register. Department of Transportation. National Highway Traffic
Safety Administration. Average Fuel Economy Standards for Light Trucks
Model Years 2008-2011. Final Rule. Vol. 71, No. 66. Thursday, April 6, 2006,
pp. 17566-17679. [http://www.nhtsa.dot.gov/staticfiles/DOT/NHTSA/
Rulemaking/Rules/Associated%20Files/2006FinalRule.pdf]
United States Court of Appeals, Ninth Circuit. Center for Biological Diversity vs.
National Highway Traffic Safety Administration. Argued and Submitted August
1 4 , 2 0 0 7 . F i l e d N o v e m b e r 1 5 , 2 0 0 7 .
[http://www.altlaw.org/v1/cases/218574.pdf]

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