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Pr
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On April 22, 2008, the National Highway Traffic Safety Administration (NHTSA) released a
Notice of Proposed Rulemaking (NOPR) that would establish fuel economy standards for model
year (MY) 2011-MY2015 passenger cars and light trucks. The rulemaking follows up on the
Energy Independence and Security Act of 2007 (EISA, P.L. 110-140), enacted in mid-December
2007, which restructured the automotive fuel economy program. It established a corporate
average fuel economy (CAFE) standard of 35 miles per gallon (mpg) by MY2020 for the
combined passenger automobile and light truck fleet. However, to meet the combined standard,
automakers will continue the practice of calculating the CAFE of their car and light truck fleets
separately. The proposed rule would establish passenger car fuel economy at 31.2 mpg in
MY2011, increasing to 35.7 mpg in MY2015. For trucks, the comparable goals for compliance
are 25.0 to 28.6 mpg. Lastly, the design of the program will be “attribute” based; every model of
new vehicle will have its own target, based on the vehicle’s size.
Manufacturers’ passenger car fleets will be required to come within 92% of the overall standard
for a given model year. Above that floor, manufacturers can earn credits for exceeding the
standards in one vehicle class and apply credits to boost the CAFE of a different vehicle class that
is short of compliance. Additionally, credits may be sold and bought among manufacturers. CAFE
credits for the manufacture of flexible-fueled vehicles (FFV) were retained by EISA, but will be
phased out by MY2020. Civil penalties assessed for non-compliance will be deposited to the
general fund of the U.S. Treasury to support future rulemaking and to provide grants to U.S.
manufacturers for R&D and retooling in support of increasing fuel efficiency. On January 26,
2009, President Obama directed NHTSA to finalize a rule for MY2011.
An important development bearing on CAFE was the denial in late December 2007 of a waiver to
the state of California by the Environmental Protection Agency (EPA) that would have permitted
California (and other interested states) to set vehicle greenhouse gas standards under the Clean
Air Act. Reducing fuel consumption could be one of the major tools for reducing vehicle
emissions. A waiver would allow these states to require more stringent fuel economy of vehicles
sold in those states than required by the new standards established by EISA. Some have suggested
that language in the NOPR pre-empting states from regulating tailpipe emissions would be
challenged in court if included in any final rule. On January 26, 2009, President Obama directed
EPA to revisit the Agency’s decision to deny the waiver. President Obama and members of his
Administration had previously expressed support for granting the waiver, allowing California’s
program to move forward. However, some court challenges to the program are ongoing, and their
resolution will bear on the implementation of any future program.
A November 15, 2007, decision by the U.S. Court of Appeals for the Ninth Circuit overturned a
final rule issued by NHTSA for MY2008-MY2011 light trucks. The Court ruled that NHTSA had
not conducted a sufficiently rigorous analysis to measure whether the standards would have a
beneficial effect in improving environmental quality through reduction of greenhouse gas
emissions. The analysis accompanying the NOPR for MY2011-MY2015 appears intended to
address the deficiencies identified by the Court in the earlier rulemaking.
This report supersedes CRS Report RL33413, Automobile and Light Truck Fuel Economy: The
CAFE Standards, by Brent D. Yacobucci and Robert Bamberger.

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Most Recent Developments............................................................................................................. 1
Current CAFE Standards................................................................................................................. 2
Major Issues in the CAFE Debate ................................................................................................... 4
How the Interim Rule for MY2011-MY2015 Would Work ........................................................... 6
Overview of the Rule ................................................................................................................ 6
Reformed Standards .................................................................................................................. 8
The Challenge to the MY2008-MY2011 Light Truck Rule and Court Decision..................... 9
CAFE and Reduction of Carbon Dioxide Emissions: Additional History and Discussion ........... 10
Overview of Congressional Interest in CAFE (1991-2005) ......................................................... 12
In-Use Fuel Economy Estimates ................................................................................................... 14
For Additional Reading ................................................................................................................. 14

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Figure 1. Passenger Car and Light Truck Fuel Economy Averages ................................................ 4
Figure 2. Proposed Passenger Car CAFE Standards ....................................................................... 9

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Table 1. Fuel Economy Standards for Passenger Cars and Light Trucks ........................................ 3
Table 2. NHTSA-Estimated Societal Benefits and Costs From Proposed CAFE Rule................... 7

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Author Contact Information .......................................................................................................... 15

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Corporate Average Fuel Economy (CAFE) standards are fleetwide fuel economy averages that
motor vehicle manufacturers must meet each model year (MY). On April 22, 2008, the National
Highway Traffic Safety Administration (NHTSA) released a Notice of Proposed Rulemaking
(NOPR) that would establish fuel economy standards for MY2011-MY2015 passenger cars and
light trucks. The rulemaking follows up on the Energy Independence and Security Act of 2007
(EISA, P.L. 110-140), enacted in mid-December 2007, which restructured the automotive fuel
economy program. It established a corporate average fuel economy (CAFE) standard of 35 miles
per gallon (mpg) by MY2020 for the combined passenger automobile and light truck fleet.
However, to meet the combined standard, automakers will continue the practice of calculating the
CAFE of their car and light truck fleets separately. The proposed rule would establish a passenger
car fuel economy target at 31.2 mpg in MY2011, increasing to 35.7 mpg in MY2015. For trucks,
the comparable goals for compliance are 25.0 to 28.6 mpg. Lastly, the design of the program will
be “attribute” based; every model of new vehicle will have its own target, based on the vehicle’s
size (“footprint”). The target fuel economy for a vehicle of a given footprint will increase over
time, and will be derived from application of a mathematical function that will relate vehicle size
to fuel economy levels. For each manufacturer, the required average for compliance is the
average of the manufacturer’s individual targets.1
Manufacturers’ passenger car fleets will be required to come within 92% of the overall standard
for a given model year. Above that floor, manufacturers can earn credits for exceeding the
standards in one vehicle class and apply credits to boost the CAFE of a different vehicle class that
is short of compliance. Additionally, credits may be banked for future use, or may be sold and
bought among manufacturers. CAFE credits for the manufacture of flexible-fueled vehicles
(FFV) were retained by EISA, but will be phased out by MY2020. Civil penalties assessed for
non-compliance will be deposited to the general fund of the U.S. Treasury to support future
rulemaking and to provide grants to U.S. manufacturers for research and development, and
retooling in support of increasing fuel efficiency. The law also requires the development of
standards for “work trucks” and commercial medium- and heavy-duty on-highway vehicles.
An important development having a bearing on CAFE was the denial in late December 2007 of a
waiver to the state of California by the Environmental Protection Agency that would have
permitted California (and other interested states) to set vehicle greenhouse gas standards under
the Clean Air Act. Reducing fuel consumption could be one of the major tools for reducing
vehicle emissions. A waiver would allow these states to require more stringent fuel economy of
vehicles sold in those states than required by the new standards established by EISA. Some have
suggested that language in the NOPR pre-empting states from regulating tailpipe emissions would
be challenged in court if included in any final rule. On January 26, 2009, President Obama
directed NHTSA to finalize new CAFE standards for MY2011 onward, and directed EPA to
revisit the Agency’s decision to deny the California waiver.2 Previously, President Obama and
members of his Administration have expressed support for granting the waiver—allowing

1 Thus, no specific vehicle must meet a specific fuel economy level. Instead, each manufacturer must meet an overall
average based on the attributes of the vehicles it sells.
2 William Branigin, Juliet Eilperin, and Steven Mufson, “Obama Announces New Energy, Environmental Policies,”
The Washington Post, January 26, 2009.
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California’s program to move forward—and may be unlikely to include the preemption language
in any final CAFE rule.
A November 15, 2007, decision by the U.S. Court of Appeals for the Ninth Circuit overturned a
final rule issued by NHTSA for MY2008-MY2011 for light trucks. The court ruled that NHTSA
had not conducted a sufficiently rigorous analysis to measure whether the standards would have a
beneficial effect in improving environmental quality through reduction of greenhouse gas
emissions. The analysis accompanying the NOPR for MY2011-MY2015 appears intended to
address the deficiencies identified by the court in the earlier rulemaking. Whether, if challenged,
the court would find it sufficient, is uncertain. At this point, there would be no reason for NHTSA
to resubmit its light truck rule for MY2008-MY2011.
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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, P.L. 94-163) 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.3 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 was set at 22.2 mpg for MY2007. The CAFE standards to MY2011 are
summarized in Table 1.
As noted, on April 6, 2006, NHTSA issued additional rules to further increase light truck fuel
economy through MY2011, a rule that was remanded to NHTSA. The MY2008-MY2011 light
truck fuel economy standards shown in the table below are included for informational purposes to
show the path of the interim standards that were proposed by NHTSA. Given the remanding of
the rule, the standard of 22.2 mpg for light duty trucks prevails until raised by a final (and
unchallenged) rule.

3 Light-duty trucks include most sport utility vehicles (SUVs), vans, and pickup trucks.
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Table 1. Fuel Economy Standards for Passenger Cars and Light Trucks
Model Years 2000 Through 2011 (miles per gallon)
Model Year
Passenger Cars
Light Trucksa
2000
27.5b
20.7
2001 27.5
20.7
2002 27.5
20.7
2003 27.5
20.7
2004 27.5
20.7
2005 27.5
21.0
2006 27.5
21.6
2007 27.5
22.2
2008 27.5
22.2
(22.5)c
2009 27.5
22.2
(23.1)c
2010 27.5
22.2
(23.5)c
2011 27.5
22.2
(24.0)d
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 (remanded to NHTSA in
December 2007).
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
vehicles (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. These are standards that were part of the MY2008-MY2011 NHTSA rule that was remanded back to the
agency to be redone.
d. Average that was estimated by NHTSA in the remanded rule.
Compliance with the current 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 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 regardless of the existence of the
CAFE standards. Some studies suggested 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
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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 program may have contributed to placing 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
Model Years 1978 to 2007
35
30
on
ll
a
r G 25
pe
s
e
Mil
20
15
1978
1982
1986
1990
1994
1998
2002
2006
Model Year
Combined
Passenger Automobiles
Light Trucks

Source: U.S. Department of Transportation, National Highway Traffic Safety Administration, Summary of Fuel
Economy Performance, March 2007.
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Some of the arguments made on behalf of, or in opposition to, raising CAFE or making
significant changes in the program touched on long-standing themes that are also
complex. These issues include:
• What is the effect of combining the passenger automobile and light-duty
truck fleet for the purpose of calculating manufacturers’ average CAFE?
During the congressional debate, some contended that it should make no
difference whether the average is calculated across one entire fleet or weighted
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across two if an umbrella standard has to be met for the entire fleet. On the other
hand, had the classes been kept separate, there might be differential effects of the
standards on different vehicle classes. Opponents of eliminating the distinction
between the fleets referred to that policy as “backsliding.” Under the CAFE
program prior to the enactment of EISA, a manufacturer was required to meet the
CAFE standard separately for its fleet of passenger cars produced in the United
States and abroad. The CAFE of each could not be averaged across one another.
A manufacturer could not earn CAFE credits for one fleet that could be applied to
bring its other fleet into compliance, nor could manufacturers buy and sell credits
from one another. The two-fleet rule had been crafted originally to protect the
diversity of models manufactured in the United States. The United Auto Workers
(UAW) argued that eliminating the distinction between foreign and domestic
fleets could cost jobs in the industry domestically. The final bill retained the
distinction between the two vehicle classes. The presumption is that this will
place greater weight for fuel economy improvement on passenger cars than on
light trucks.
• Will higher CAFE standards bring about a loss in jobs? Some argued that
higher standards might compel manufacturers to make fewer vehicles that
consumers want; as a result, older, less efficient vehicles might be retained
longer. Others suggested that any impact on jobs in the industry would be
selective—that is, unionized jobs might be more vulnerable if higher standards
do affect demand for vehicles, since unionized plants have higher labor costs and
may be less able to absorb additional costs from higher standards.
• What might be the effects of allowing credit trading among manufacturers
and/or between passenger car and light trucks fleets? Under the previous
structure of the CAFE program, automakers could bank excess CAFE credits for
use in future years, but could not trade those credits with other automakers.
Manufacturers also could not trade credits between their passenger car and light
truck fleets—each fleet had to meet the standards independently. Under the fuel
economy program restructure by EISA, credit trading is allowed between a
manufacturer’s fleets and among manufacturers. Supporters of this approach
argued that it may improve the economic efficiency of the system and lower the
cost of compliance. Opponents raised the possibility that allowing credit trading
could lead to a competitive advantage for some manufacturers, and could affect
auto industry employment.
• Do 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 do attribute-based standards work, and what are the advantages and
disadvantages of them? Any system for regulating CAFE will have winners and
losers, whether an attribute-based system, or the previous straight-line average.
Additionally, the choice of which attribute or attributes on which to base CAFE
will also affect individual automakers differently. Under the new system, NHTSA
will set a fuel economy target calculated for each new car as a mathematical
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function of individual vehicle attributes. NHTSA’s proposed regulations, for
example, base standards 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, but 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 on “Reformed
Standards”.)
• Should CAFE standards reflect both CO2 emissions reductions as well as
reductions in petroleum consumption? One bill in the 110th Congress (H.R.
2927) included such a provision. Technically, CO2 emission rates are not
measures of fuel economy but of greenhouse gas emissions. However, CO2
emissions represent over 90% of vehicle greenhouse gas emissions, and there
may be few ways to reduce greenhouse emissions significantly other than
through increased fuel economy. Currently, states may establish emissions
standards under the Clean Air Act if EPA grants a waiver to California and other
states adopt identical standards. However, states are preempted from setting fuel
economy standards by the Energy Policy and Conservation Act (EPCA).
Amending EPCA to establish CAFE standards both in terms of miles per gallon
and grams per mile of CO2 could have a bearing on states’ authority to regulate
CO2. 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) decision
not to regulate greenhouse gas emissions from automobiles. The Supreme Court
decision upheld the petition and found that EPA has the authority to regulate CO2
emissions.4 A 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 CO2.
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On April 22, 2008, NHTSA released a Notice of Proposed Rulemaking (NOPR) that would
establish fuel economy standards for model year MY2011-MY2015 passenger cars and light
trucks. Under the rule, cars and light trucks would have a fuel economy “target” based on a
specific vehicle’s “footprint” (the product of wheelbase and track width), with higher targets for
smaller vehicles and lower targets for larger vehicles. For a given model year, the targets for a
manufacturer’s fleet would be averaged to calculate that manufacturer’s mandated fuel economy.

4 See additional discussion later in this report, “CAFE and Reduction of Carbon Dioxide Emissions.”
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The agency’s estimate of costs, benefits and net benefits from the proposed rule are shown in
Table 2. The agency estimates that the total benefits of the proposed passenger car rule would be
roughly $31 billion over the lifetime of the 5 model years. “Societal benefits,” the agency notes,
includes “direct impacts from lower fuel consumption as well as externalities such as reduction of
air pollutants and greenhouse gases.”5 After netting out the $15.8 billion cost of the rule, the net
societal benefit is estimated at $15.1 billion from the improvement in passenger car fuel economy.
For the proposed light truck standard, the table shows $57.3 billion in gross benefits, nearly $31
billion in costs, and a net societal benefit of $26.4 billion. For both classes of vehicles, the
greatest percentage of benefits—an estimated 84-85% percent—is projected to accrue to
consumers. The 15-16% balance of benefits is attributed to environmental benefits, and a
reduction in oil imports.
However, it’s important to note that the agency calculations assume a lower gasoline price—of
$2.26 to $2.51 per gallon—than was being observed when the NOPR was released.6 However,
those prices are above the national average for gasoline at the beginning of 2009.7
Table 2. NHTSA-Estimated Societal Benefits and Costs From Proposed CAFE Rule
$ Millions
Passenger Cars

Model Year
Total

2011 2012 2013 2014 2015
2011-2015
Benefits 2,596 4,933 6,148 7,889 9,420 30,986
Costs 1,884 2,373 2,879 3,798 4,862 15,796
Net
Benefits
712 2,560 3,269 4,091 4,558 15,190
Light Trucks

Model Year
Total

2011 2012 2013 2014 2015
2011-2015
Benefits 3,909 8,779 13,560 14,915 16,192 57,355
Costs 1,649 4,986 7,394 8,160 8,761 30,949
Net
Benefits
2,260 3,793 6,166 6,755 7,431 26,406
Source: U.S. Department of Transportation, National Highway Traffic Safety Administration, Average Fuel
Economy Standards: Passenger Cars and Light Trucks – Model Years 2011-2015, p. 292. [Docket No. NHTSA-2008-
0089]

5 U.S. Department of Transportation. National Highway Traffic Safety Administration.
Average Fuel Economy Standards Passenger Cars and Light Trucks Model Years 2011-2015. [Docket No. NHTSA-
2008 -0089], p. 289.
6 Ibid., p. 290.
7 $1.85 per gallon for regular gasoline and $1.90 per gallon for all grades. U.S. Department of Energy, Energy
Information Administration, Weekly Retail Gasoline and Diesel Prices, Washington, DC, January 21, 2009,
http://tonto.eia.doe.gov/dnav/pet/pet_pri_gnd_dcus_nus_w.htm.
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To date, the CAFE standards have not applied to vehicles over 8,500 pounds GVW. Vehicles
between 8,500-10,000 pounds GVW, which are categorized as medium-duty passenger vehicles
(MDPV) would be included under the proposed rule, beginning in MY2011. 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.
Under the proposed rule, work trucks (such as long-bed pickups and cargo vans), and trucks
described as “multi-stage,” (built in stages by more than one manufacturer) would be excepted
from regulation.8 Work trucks may subsequently come under CAFE regulation, but EISA directed
first that the National Academy of Sciences conduct a study on the feasibility of including work
trucks, with NHTSA to conduct a subsequent evaluation of its own.
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Prior to the passage of EISA, one of the key criticisms of the CAFE structure was that increased
CAFE standards promoted smaller, lighter vehicles because fuel economy tends to decrease as
vehicles get heavier. The concern was that fuel economy standards would be met to a great degree
by decreasing vehicle weight. Because larger vehicles tend to offer greater passenger protection
in accidents, and tend to be heavier, a fuel economy program structure that does not factor vehicle
size into the setting of CAFE standards could promote the use of smaller, less safe vehicles. A
corollary and further criticism of the program was that it favored producers of smaller vehicles
that would tend to be more fuel efficient. Some proponents of higher CAFE standards responded
by arguing that, through the use of new technology, vehicle efficiency can be improved without
affecting size or performance.
Under the proposed rule, fuel economy targets vary with vehicle size, with smaller vehicles
required to achieve higher fuel economy than larger vehicles. Under the system in the proposed
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 the 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. The proposed size-based CAFE functions
for MY2011 and MY2015 are shown in Figure 2.

8 Under the provisions of EPCA, NHTSA has had the authority to regulate the fuel economy of vehicles up to a gross
vehicle weight (GVW) of 10,000 pounds if, after study, it was determined that it was feasible to set standards for these
vehicles, and if there was evidence that the vehicles were used for the same purposes as passenger automobiles, and
that including them under CAFE regulation would save a significant amount of fuel. In EISA, Congress directed that
vehicles up to 10,000 pounds be subject to CAFE standards, eliminating the need for any administrative determination
that there were grounds to include them.
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Figure 2. Proposed Passenger Car CAFE Standards
Fuel Economy Targets Based on Vehicle Footprint
45
40
n 35
o
Gall 30
s per
ile 25
M
20
15
30
35
40
45
50
55
60
Footprint (square feet)
Unreformed - MY2010
Reformed - MY2011
Reformed - MY2015

Source: CRS Analysis of U.S. Department of Transportation. National Highway Traffic Safety Administration.
Average Fuel Economy Standards. Passenger Cars and Light Trucks Model Years 2011-2015, p. 277. [Docket No.
NHTSA-2008 -0089]
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As noted earlier, a November 15, 2007, decision by the U.S. Court of Appeals for the Ninth
Circuit overturned a final rule issued by NHTSA in April 2006 establishing fuel economy
standards for light trucks, MY2008-MY2011. The court ruled that NHTSA had not conducted a
sufficiently rigorous analysis to measure whether the standards would have a beneficial effect in
improving environmental quality through reduction of greenhouse gas emissions.
Eleven states, the District of Columbia, New York City, and four public interest organizations had
petitioned for review of the final rule governing light truck fuel economy for MY2008-MY2011.
In its decision, the court ruled that NHTSA would have to promulgate a new rule that, among
other elements, assessed the costs and benefits from different levels of standards in reducing
carbon dioxide (CO2) emissions. Among the petitioners’ arguments were that the cost-benefit
analysis performed by NHTSA assigned no benefit to reducing CO2 emissions, and that the rule
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did not establish a floor fuel economy that an individual manufacturer had to achieve in a given
model year.
At this point, there would be no reason for NHTSA to resubmit its rule for MY2008-MY2011
because there is insufficient advance notice to the manufacturers, whose product lines are planned
well in advance of their introduction. The analysis accompanying the NOPR for MY2011-
MY2015 appears intended to address the deficiencies identified by the Court in the earlier
rulemaking. Whether, if challenged, the court would find it sufficient is uncertain.
However, there is some prospect of a challenge should NHTSA issue a final rule that maintains,
as is expressed in the NOPR, that any state regulation that affects fuel economy, including any
state regulation governing tailpipe emissions, is forbidden by EPCA. The text of the NOPR
observes (with emphasis added):
For those rulemaking actions undertaken at an agency’s discretion, agencies [are instructed]
to closely examine their statutory authority supporting any action that would limit the
policymaking discretion of the States and assess the necessity for such action. This is not
such a rulemaking action. NHTSA has no discretion not to issue the CAFE standards
proposed in this document. EPCA mandates that [sic.] the issuance of CAFE standards for
passenger cars and light trucks for model years 2011-2015. Given that a State regulation for
tailpipe emissions of CO2 is the functional equivalent of a CAFE standard, there is no way
that NHTSA can tailor a fuel economy standard so as to avoid preemption. Further, EPCA
itself precludes a State from adopting or enforcing a law or regulation related to fuel
economy (49 U.S.C. 32919(a)).9
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Carbon dioxide emissions clearly figured into the challenge and ruling on the NHTSA MY2008-
MY2011 light truck fuel economy rulemaking. Mobile sources are a key source of greenhouse
gas (GHG) emissions in the United States. Transportation accounts for roughly one-third of all
U.S. carbon dioxide (CO2) emissions. Passenger vehicles alone represent roughly 60% of
transportation emissions, or roughly 20% of total U.S. CO2 emissions. Because passenger
vehicles play such a significant role in U.S. GHG emissions, there is growing interest in reducing
their emissions as part of a strategy to address climate change concerns.
In general, there are four ways to reduce vehicle greenhouse gas emissions. These choices are to:
(1) reduce vehicle miles traveled (through strategies such as carpooling, transit, or teleworking);
(2) reduce vehicle per-mile fuel consumption (through improved fuel economy) and per-mile
non-carbon emissions10 (through improvements in vehicle systems); (3) convert to lower-carbon
transportation fuels; and (4) reduce emissions from non CO2 greenhouse gases (e.g., using
different air conditioner refrigerants, reducing tailpipe methane emissions). As a consequence,
there is likelihood that any program to reduce GHG emissions will likely raise fuel economy.
Conversely, any program to increase fuel economy will lower GHG emissions.

9 U.S. Department of Transportation. National Highway Traffic Safety Administration. Average Fuel Economy
Standards. Passenger Cars and Light Trucks Model Years 2011-2015, pp. 378-379. [Docket No. NHTSA-2008 -0089]
10 E.g., fluorinated gas emissions from air conditioner systems.
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There is some debate 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. Further, improving fuel economy
lowers the per-mile cost of driving. To the extent that fuel savings are reduced by additional
driving, the reduction in greenhouse gas emissions will also be offset some. This is what is
referred to as the “rebound effect.”
Perhaps the most significant current issue regarding automotive fuel economy has its origins in
the 2002 decision by the state of California to require carbon dioxide emissions standards for
passenger cars and light trucks. Legislation passed by the state legislature that year, A.B. 1493,
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.
Although states do not have authority to regulate fuel economy, under the Clean Air Act
California solely may be granted an exemption from restrictions on setting vehicle pollutant
emissions standards—subject to the state filing a petition with the Environmental Protection
Agency (EPA) and being granted a waiver by that agency. Any state-established standards must
be at least as stringent as the federal standards, as long as they are needed to meet “compelling
and extraordinary conditions.”11 While only California can petition for a waiver, other states may
adopt any California standards that are put into place following the granting of the waiver.
Several auto manufacturers and dealers 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 argued that California lacks the authority to establish standards
that are almost certain to bear on vehicle fuel economy requirements, 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 state
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. Depending upon the cost of
compliance, the new standards could reduce demand for new vehicles. The impact of the
standards on manufacturers would likely vary depending upon the mix of vehicles they offer. In
early 2007, the Court indicated that it would withhold a decision, pending resolution by the
Supreme Court of a case that might bear on the one before the district court.
On April 2, 2007, the Supreme Court issued its ruling on that related case (Commonwealth of
Massachusetts v. EPA). In that case, 12 states and the District of Columbia challenged 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 state why such

11 For more information on the Clean Air Act waiver process, see CRS Report RL34099, California’s Waiver Request
Under the Clean Air Act to Control Greenhouse Gases From Motor Vehicles, by James E. McCarthy and Robert Meltz.
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standards are not “justified.” The decision in that case will likely affect the outcome of the case
against California.12
On December 11, 2007, the United States District Court for the Eastern District of California
ruled that both EPA and California, through the waiver process, are “equally empowered” to
regulate GHG, and that preemption of state laws regulating fuel economy did not preempt the
proposed California standard to reduce GHG. Then, on December 19, 2007, EPA Administrator
Stephen Johnson sent a letter to California Governor Arnold Schwarzenegger informing him of
EPA’s plan to deny California’s waiver request. Without this waiver, California’s program cannot
move forward.
EPA’s rationale appeared to consist of two arguments: first, that California has not shown that its
regulations are needed to meet compelling and extraordinary conditions, as required by the Clean
Air Act; and second, that the Administration and Congress are addressing climate change through
national standards. Specific reference was made to the newly enacted CAFE standards in EISA as
addressing vehicle emissions. The December 19 letter was followed by a formal decision
document that appeared in the March 6, 2009 Federal Register. The decision document
maintained that the waiver authority was intended to address local and regional problems. Since
greenhouse gas concentrations are essentially uniform across the globe, they are not connected to
causal factors in California and the state cannot be said to need its own standards to meet the
compelling and extraordinary conditions that greenhouse gases may cause.13 Officials in
California were not satisfied by the agency explanation for its decision. On May 5, 2008,
California (along with 18 other states) filed a suit against EPA in the U.S. Court of Appeals for
the D.C. Circuit, challenging EPA’s rejection of the petition.
On January 26, 2009, President Obama directed EPA to revisit the Agency’s decision to deny the
waiver. Previously, President Obama and members of his Administration have expressed support
for granting the waiver, allowing California’s program to move forward. However, some court
challenges to the program are ongoing, and their resolution will bear on the implementation of
any future program.
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Significant efforts to raise CAFE began in the early 1990s and were highly controversial. One
proposal included in omnibus energy legislation was so controversial that it contributed to an
insufficient number of votes in the Senate in 1991 to bring the bill up for debate on the floor. A
general criticism of raising the CAFE standards was 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 was argued that the standards risked interfering with
consumer choice and jeopardizing the economic well-being of the automotive industry.

12 For additional background, see CRS Report RL32764, Climate Change Litigation: A Growing Phenomenon, by
Robert Meltz.
13 See CRS Report RL34099, California’s Waiver Request Under the Clean Air Act to Control Greenhouse Gases
From Motor Vehicles, by James E. McCarthy and Robert Meltz
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Opponents of raising CAFE have often cited a concern that higher efficiency will likely be
obtained by decreasing vehicle size and weight, jeopardizing vehicle safety. Proponents of CAFE
increases have argued that boosting the standards could bring about the introduction of
technological improvements that would not compromise features that consumers value, but which
would otherwise not be added because of the increase in vehicle cost stemming from these
improvements.
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- to 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 report from the National Petroleum Council, Facing the Hard Truths About Energy: A
Comprehensive Review to 2030 of Global Oil and Gas, released in 2007 argued that vehicle fuel
efficiency could be doubled by 2030 “through the use of existing and anticipated technologies,
assuming vehicle performance and other attributes remains the same as today.” 14 The draft report
noted that technologies to improve fuel efficiency had 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 2030.15
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.
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.

14 National Petroleum Council. Facing the Hard Truths about Energy, Washington, 2007, pp. 14-15. The text of the
report is currently available at [http://www.npc.org].
15 Ibid. pp. 85-86.
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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 required 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 reflect the results of these tests
from MY2008 onward.16 The change affects only the estimation of in-use fuel economy. It does
not affect the CAFE calculation for purposes of determining manufacturers’ compliance with the
CAFE standard.
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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. Average
Fuel Economy Standard, Passenger Cars and Light Trucks Model Years 2011-2015, p. 378-
379. [Docket No. NHTSA-2008-0089]

16 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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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. Department of Transportation. National Highway Traffic Safety Administration. Summary of
Fuel Economy Performance. November 25, 2008. http://www.nhtsa.gov/portal/
nhtsa_static_file_downloader.jsp?file=/staticfiles/DOT/NHTSA/Rulemaking/Articles/
Associated%20Files/Nov2008_CAFE_Performance.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 14. 2007. Filed November
15, 2007. See [http://www.altlaw.org/v1/cases/218574.pdf].

ȱȱȱ

Brent D. Yacobucci
Robert Bamberger
Specialist in Energy and Environmental Policy
Specialist in Energy Policy
byacobucci@crs.loc.gov, 7-9662
rbamberger@crs.loc.gov, 7-7240

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