Vehicle Fuel Economy and Greenhouse Gas Standards

Vehicle Fuel Economy and Greenhouse Gas Standards

Updated May 9, 2022
Vehicle Fuel Economy and Greenhouse Gas Standards
On August 5, 2021, the Biden Administration proposed
majority concluded that EPA must decide whether GHG
amendments to the federal standards that regulate fuel
emissions from new motor vehicles contribute to air
economy and greenhouse gas (GHG) emissions from new
pollution that may reasonably be anticipated to endanger
light-duty vehicles—a category that includes passenger cars
public health or welfare or provide a reasonable explanation
and most sports utility vehicles, vans, and pickup trucks.
why it cannot or will not make that decision. In December
These standards include the Corporate Average Fuel
2009, EPA promulgated findings that GHGs endanger both
Economy (CAFE) standards promulgated by the National
public health and welfare and that GHG emissions from
Highway Traffic Safety Administration (NHTSA) and the
new motor vehicles contribute to that endangerment. With
Light-Duty Vehicle GHG emission standards promulgated
these findings, the CAA required the agency to establish
by the U.S. Environmental Protection Agency (EPA). EPA
standards for emissions of the pollutants.
finalized its amendments on December 30, 2021; NHTSA
finalized its amendments on May 2, 2022.
The National Program: Rulemakings
In 2010, the Obama Administration brokered an agreement
President Biden also signed Executive Order 14037,
between 13 auto manufacturers, the State of California, the
“Strengthening American Leadership in Clean Cars and
United Auto Workers union, and other parties to develop
Trucks” (86 Federal Register 43583), which (1) requires
and implement vehicle GHG emission standards. Because
EPA and NHTSA to begin work on future rulemakings for
carbon dioxide (CO2) from vehicle fuel combustion is a
multipollutant and fuel efficiency standards for both light-
major source of GHG emissions, EPA aligned its standards
duty vehicles and heavy-duty vehicles and engines that
with NHTSA’s CAFE program.
would take effect beginning in model year (MY) 2027, and
(2) sets a nonbinding electrification goal that “50 percent of
EPCA and the CAA generally preempt states from adopting
all new passenger cars and light trucks sold in 2030 be
their own fuel economy and emission standards for new
zero-emission vehicles, including battery electric, plug-in
motor vehicles. However, CAA Section 209(b) allows the
hybrid electric, or fuel cell electric vehicles.” Some
State of California to request a preemption waiver for its
policymakers see these pending rulemakings as an
vehicle emission standards provided that they are at least as
opportunity to re-envision the goals and structures of the
stringent as federal standards and, among other things, are
federal vehicle fuel economy and GHG emission program.
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 MY1978 and for light trucks beginning in
joint rulemakings for MY2012-2016 light-duty vehicles in
MY1979. The standards required each auto manufacturer to
2010 (Phase 1) and for MY2017-2025 vehicles in 2012
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 MY2025 fleet by about
model year. Under EPCA, CAFE standards and new vehicle
50% compared to MY2010.
fuel economy rose steadily through the late 1970s and early
1980s. After 1985, Congress did not revise the legislated
The Trump Administration revised the MY2022-2025
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 MY2005-2007 and
Safer, Affordable, Fuel-Efficient (SAFE) Vehicles Rule,
MY2008-2011, 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 MY2017-2025.
GHG Standards
In the April 2007 decision Massachusetts v. EPA, the
The agencies finalized the second part of the SAFE
Supreme Court held that EPA has the authority to regulate
Vehicles Rule in March 2020. They projected that the new
GHGs from new motor vehicles as “air pollutants” under
rule would increase the average fuel economy of vehicles
the Clean Air Act (CAA). In the 5-4 decision, the Court’s
sold by 1.5% each year from MY2021 to MY2026. This
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Vehicle Fuel Economy and Greenhouse Gas Standards
compared to an approximate 5% increase each year under
MY2024, 6.6% in MY2025, and 10% in MY2026. This
the 2012 Phase 2 standards.
would achieve a projected fleet-wide, sales-weighted, fuel
economy equivalent of 55 mpg in 2026. Figure 2 compares
The National Program: Attributes
EPA’s GHG compliance targets with those finalized under
The agencies’ fuel economy and GHG standards apply to
the 2012 Phase 2 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 newer, “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 vehicles 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
Figure 2. EPA Fleet-Wide CO2 Compliance Targets,
model year. These data allow EPA and NHTSA to calculate
MY2020-2026
each manufacturer’s CAFE and GHG targets under the
standards given the specific pattern of sales. The agencies
then 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

manufacturers to achieve compliance.
Source: CRS, from EPA.
The 2021/2022 Proposed and Final Rules
Many of the agencies’ program incentives and compliance
The August 2021 proposals and their final rules were not a
flexibilities are retained in the final rule, and others that
joint rulemaking. EPA and NHTSA proposed and finalized
were removed under the SAFE Vehicles rule were restored.
their standards separately, with different MY requirements,
These include a restoration of the advanced technology
target stringencies, and compliance flexibilities. NHTSA
vehicle multiplier credits for electric vehicles, fuel cell
pointed to a difference in statutory authorities between the
vehicles, and plug-in hybrids; a restoration of the full-size
agencies as the reason for the uncoupling. NHTSA’s final
pickup truck incentives for strong hybrids; and an increase
rule revises the current CAFE standards finalized under the
in the credits for “off-cycle” technologies.
Trump Administration beginning in MY2024 (87 Federal
Register 25710). The final standards increase in stringency
Further, in December 2021, NHTSA repealed the SAFE
for both passenger cars and light trucks by 8% per year over
Vehicles Rule, Part One, regarding EPCA’s preemption of
MY2024-2025, and 10% in MY2026. NHTSA projected
state GHG standards (86 Federal Register 74236). In
that the final standards would require, on an average
March 2022, EPA reinstated California’s waiver authority
industry fleet-wide basis, roughly 49 mpg in MY2026.
under the CAA to implement its own GHG emission
Figure 1 compares CAFE standards to the U.S. fleets’
standards (87 Federal Register 14332). As of May 2022, 17
adjusted performance data.
other states and the District of Columbia have adopted
California’s GHG emission standards under the provisions
EPA’s final rule revises the current vehicle GHG standards
of Section 177 of the CAA; the states account for
beginning in MY2023 and increases in stringency each year
approximately 40% of all U.S. new vehicle sales.
through MY2026 (86 Federal Register 74434). The
Richard K. Lattanzio, Specialist in Environmental Policy
increase is about 10% in the first year, followed by 5% in
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Vehicle Fuel Economy and Greenhouse Gas Standards

IF10871
Bill Canis, Specialist in Industrial Organization and
Business

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