Updated August 19, 2021
Vehicle Fuel Economy and Greenhouse Gas Standards
On August 5, 2021, the Biden Administration proposed
15, 2009, EPA promulgated findings that GHGs endanger
amendments to the federal standards that regulate fuel
both public health and welfare and that GHG emissions
economy and greenhouse gas (GHG) emissions from new
from new motor vehicles contribute to that endangerment.
light-duty vehicles—a category that includes passenger cars
With these findings, the CAA required the agency to
and most sports utility vehicles, vans, and pickup trucks.
establish standards for emissions of the pollutants.
These standards include the Corporate Average Fuel
Economy (CAFE) standards promulgated by the National
The National Program: Rulemakings
Highway Traffic Safety Administration (NHTSA) and the
In 2010, the Obama Administration brokered an agreement
Light-Duty Vehicle GHG emission standards promulgated
between 13 auto manufacturers, the State of California, the
by the U.S. Environmental Protection Agency (EPA).
United Auto Workers union, and other parties to develop
and implement vehicle GHG emission standards. Because
President Biden also signed Executive Order 14037,
carbon dioxide (CO2) from vehicle fuel combustion is a
“Strengthening American Leadership in Clean Cars and
major source of GHG emissions, EPA aligned its standards
Trucks,” which (1) requires EPA and NHTSA to begin
with NHTSA’s CAFE program.
work on future rulemakings for multipollutant and fuel
efficiency standards for both light-duty vehicles and heavy-
EPCA and the CAA generally preempt states from adopting
duty vehicles and engines that would take effect beginning
their own fuel economy and emission standards for new
in model year (MY) 2027, and (2) sets a nonbinding
motor vehicles. However, CAA Section 209(b) allows the
electrification goal that “50 percent of all new passenger
State of California to request a preemption waiver for its
cars and light trucks sold in 2030 be zero-emission vehicles,
vehicle emission standards provided that they are at least as
including battery electric, plug-in hybrid electric, or fuel
stringent as federal standards and, among other things, are
cell electric vehicles.”
necessary to meet “compelling and extraordinary
conditions.” In 2009, EPA granted California a waiver for
CAFE Standards
its GHG standards, and EPA and NHTSA aligned the
In an effort to reduce dependence on imported oil, the
federal GHG and fuel economy standards with those
Energy Policy and Conservation Act of 1975 (EPCA; P.L.
developed by California. The agencies referred to the joint
94-163) established CAFE standards for passenger cars
standards as the National Program. The agencies finalized
beginning in MY 1978 and for light trucks beginning in
joint rulemakings for MY 2012-2016 light-duty vehicles in
MY 1979. The standards required each auto manufacturer
2010 (Phase 1) and for MY 2017-2025 vehicles in 2012
to meet a target for the sales-weighted fuel economy of its
(Phase 2). Under Phase 2, the manufacturers agreed to
entire fleet of vehicles sold in the United States in each
reduce GHG emissions from their MY 2025 fleet by about
model year. Under EPCA, CAFE standards and new vehicle
50% compared to MY 2010.
fuel economy rose steadily through the late 1970s and early
1980s. After 1985, Congress did not revise the legislated
The Trump Administration revised the MY 2022-2025
standard for passenger cars for several decades, and it
standards, asserting that key assumptions in the Obama-era
remained at 27.5 miles per gallon (mpg) until 2011. The
rulemakings—including gasoline prices, technology costs,
light truck standard was increased to 20.7 mpg in 1996,
and consumer acceptance—“were optimistic or have
where it remained until 2005. NHTSA promulgated two
significantly changed.” In 2019, the agencies finalized the
sets of standards in the mid-2000s for MY 2005-2007 and
Safer, Affordable, Fuel-Efficient (SAFE) Vehicles Rule,
MY 2008-2011, increasing the light truck standard to 24.0
Part One: One National Program, wherein NHTSA asserted
mpg. In 2007, Congress enacted the Energy Independence
that EPCA preempts state and local GHG standards because
and Security Act (P.L. 110-140), mandating a phase-in of
they are “related to” fuel economy standards. Further, EPA
higher CAFE standards reaching 35 mpg by 2020. This was
withdrew the CAA preemption waiver it had granted to
the last legislation to set fuel economy goals.
California in January 2013 as it relates to the state’s GHG
and Zero Emission Vehicle programs for MY 2017-2025
GHG Standards
vehicles. The waiver withdrawal affected 14 other states
In the April 2007 decision Massachusetts v. EPA, the
and the District of Columbia, which have adopted
Supreme Court held that EPA has the authority to regulate
California’s GHG emission standards; those states account
GHGs from new motor vehicles as “air pollutants” under
for more than a third of all U.S. new vehicle sales.
the Clean Air Act (CAA). In the 5-4 decision, the Court’s
majority concluded that EPA must decide whether GHG
The agencies finalized the second part of the SAFE
emissions from new motor vehicles contribute to air
Vehicles Rule on March 31, 2020. They projected that the
pollution that may reasonably be anticipated to endanger
new rule would increase the average fuel economy of
public health or welfare or provide a reasonable explanation
vehicles sold by 1.5% each year from MY 2021 to MY
why it cannot or will not make that decision. On December
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Vehicle Fuel Economy and Greenhouse Gas Standards
2026. This compared to an approximate 5% increase each
would achieve a projected fleet-wide, sales-weighted fuel
year under the 2012 Phase 2 standards.
economy equivalent of 52 mpg in 2026. Figure 2 compares
EPA’s proposed GHG emission targets, projected through
The National Program: Attributes
MY 2026, with the projected targets under the 2012 Phase 2
The agencies’ fuel economy and GHG standards apply to
and 2020 SAFE Vehicles rules.
the new fleet of passenger cars and light trucks sold by a
manufacturer within the United States during a given model
Figure 1. CAFE Standards and Achieved Fuel Economy
year. Starting with the 2010 Phase 1 standards, the agencies
have used the concept of a vehicle’s “footprint” to set
differing targets for different-sized vehicles. Generally, the
larger the vehicle footprint, the lower the corresponding
vehicle fuel economy target and the higher the CO2-
equivalent emissions target. This concept differs from the
original CAFE standards, which grouped domestic
passenger cars, imported passenger cars, and light trucks
into three broad categories. The “attribute-based standards”
enable manufacturers to produce a range of vehicle sizes
rather than designing a lighter and smaller vehicle fleet
overall to meet categorical targets. About 70% of vehicles
sold domestically are sport utility and pickup trucks; less
than 30% are smaller, more fuel-efficient sedans.

Source: CRS, from EPA and NHTSA.
Manufacturers must report vehicle characteristics sold each
model year. These data allow EPA and NHTSA to calculate
Figure 2. EPA Proposed Average Fleet-Wide, Sales-
each manufacturer’s CAFE and GHG targets under the
Weighted CO2 Compliance Targets, MYs 2020-2026
standards given the specific pattern of sales. The agencies
compare the calculated targets against the vehicles’ fuel
economy and emissions results from EPA-approved test
cycles to determine compliance.
To facilitate compliance, the agencies provide
manufacturers various flexibilities under the standards. A
manufacturer’s fleet-wide performance (as measured on the
test cycles) can be adjusted through the use of alternative
fuel vehicles, air conditioning efficiency improvements, and
“off-cycle” technologies (e.g., active aerodynamics, thermal
controls, and idle reduction). Further, manufacturers can
generate credits for over-compliance with the standards in a
given year. They can bank, borrow, and transfer these

credits within their own fleets or trade them with other
Source: CRS, from EPA.
manufacturers to achieve compliance.
Many of the program incentives and compliance
The 2021 Proposed Rules
flexibilities are retained by both proposals, and others that
were removed under the SAFE Vehicles rule would be
The August 2021 proposal is not a joint rulemaking. EPA
restored. These include a restoration of the advanced
and NHTSA released their proposals separately, with
technology vehicle multiplier credits for electric vehicles,
different MY requirements, target stringencies, and
fuel cell vehicles, and plug-in hybrids; a restoration of the
compliance flexibilities. NHTSA points to a difference in
full-size pickup truck incentives for strong hybrids; and an
statutory authorities between the agencies as the reason for
increase in the credits for “off-cycle” technologies. EPA
the uncoupling. NHTSA’s proposal would revise the
estimates that the proposal would result in 2.2 billion tons
current CAFE standards finalized under the Trump
of avoided CO2 emissions, save $120 to $250 billion in fuel
Administration beginning in MY 2024. The proposed
costs, and provide $86 and $140 billion in net benefits
standards would increase in stringency for both passenger
through 2050. The agency estimates that on average, the
cars and light trucks by 8% per year over MYs 2024-2026.
cost to auto manufacturers to comply with the standards
NHTSA projected that the proposed standards would
would be about $1,000 per vehicle in MY 2026.
require, on an average industry fleet-wide basis, roughly 48
mpg in MY 2026. Figure 1 compares CAFE standards to
Further, in April 2021, NHTSA proposed to fully repeal the
the U.S. fleets’ adjusted performance data.
SAFE Vehicles Rule, Part One: One National Program.
EPA has also announced that it is reconsidering the 2019
EPA’s proposal would revise the current vehicle GHG
withdrawal of the CAA preemption waiver.
standards beginning in MY 2023. The standards would
increase in stringency each year through MY 2026. The
Richard K. Lattanzio, Specialist in Environmental Policy
increase would be about 10% in the first year, followed by a
Linda Tsang, Legislative Attorney
nearly 5% increase annually from MYs 2024-2026. This
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Vehicle Fuel Economy and Greenhouse Gas Standards

IF10871
Bill Canis, Specialist in Industrial Organization and
Business


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https://crsreports.congress.gov | IF10871 · VERSION 8 · UPDATED

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