Vehicle Fuel Economy and Greenhouse Gas Standards



Updated March 22, 2021
Vehicle Fuel Economy and Greenhouse Gas Standards
On January 20, 2021, President Biden issued Executive
both public health and welfare and that GHG emissions
Order 13990, “Protecting Public Health and the
from new motor vehicles contribute to that endangerment.
Environment and Restoring Science to Tackle the Climate
Crisis,” which directs federal agencies to review regulations
The National Program
and other agency actions from the Trump Administration,
In 2010, the Obama Administration brokered an agreement
including the federal standards that regulate fuel economy
between 13 auto manufacturers, the State of California, the
and greenhouse gas (GHG) emissions from new passenger
United Auto Workers union, and other interested parties to
cars and light trucks. These standards include the Corporate
develop and implement vehicle GHG emission standards.
Average Fuel Economy (CAFE) standards promulgated by
Because carbon dioxide (CO2) from vehicle fuel
the National Highway Traffic Safety Administration
combustion is a major source of GHG emissions, EPA
(NHTSA) and the Light-Duty Vehicle GHG Emission
aligned its standards with NHTSA’s CAFE program.
Standards promulgated by the U.S. Environmental
Protection Agency (EPA). NHTSA and EPA have not
EPCA and the CAA generally preempt states from adopting
released a proposal for a new set of standards at this time.
their own fuel economy and emission standards for new
motor vehicles. However, CAA Section 209(b) allows the
CAFE Standards
State of California to request a preemption waiver for its
The origin of federal fuel economy standards dates to the
motor vehicle emission standards provided that they are at
mid-1970s. The oil embargo of 1973-1974 imposed by
least as stringent as federal standards and, among other
Arab members of the Organization of the Petroleum
things, are necessary to meet “compelling and extraordinary
Exporting Countries and the subsequent tripling in the price
conditions.” In 2009, EPA granted California a waiver for
of crude oil brought the fuel economy of U.S. automobiles
its GHG standards, and EPA and NHTSA aligned the
into sharp focus. In an effort to reduce dependence on
federal GHG and fuel economy standards with those
imported oil, the Energy Policy and Conservation Act
developed by California. The agencies referred to the joint
(EPCA; P.L. 94-163) established CAFE standards for
standards as the National Program. The agencies finalized
passenger cars beginning in model year (MY) 1978 and for
joint rulemakings for MY 2012-2016 light-duty motor
light trucks beginning in MY 1979. The standards required
vehicles in 2010 (Phase 1) and for MYs 2017-2025 vehicles
each auto manufacturer to meet a target for the sales-
in 2012 (Phase 2). Under Phase 2, the manufacturers agreed
weighted fuel economy of its entire fleet of vehicles sold in
to reduce GHG emissions from their MY 2025 fleet by
the United States in each model year. Under EPCA, CAFE
about 50% compared to MY 2010.
standards and new vehicle fuel economy rose steadily
through the late 1970s and early 1980s. After 1985,
The agencies’ fuel economy and GHG standards apply to
Congress did not revise the legislated standard for
the new fleet of passenger cars and light trucks—including
passenger cars for several decades, and it remained at 27.5
most sport utility vehicles, vans, and pickup trucks—sold
miles per gallon (mpg) until 2011. The light truck standard
by a manufacturer within the United States during a given
was increased to 20.7 mpg in 1996, where it remained until
model year. In both the Phase 1 and Phase 2 standards, the
2005. NHTSA promulgated two sets of standards in the
agencies used the concept of a vehicle’s “footprint” to set
mid-2000s for MYs 2005-2007 and MYs 2008-2011,
differing targets for different-sized vehicles. Generally, the
increasing the light truck standard to 24.0 mpg. In 2007,
larger the vehicle footprint, the lower the corresponding
Congress enacted the Energy Independence and Security
vehicle fuel economy target and the higher the CO2-
Act (P.L. 110-140), mandating a phase-in of higher CAFE
equivalent emissions target. These “attribute-based
standards reaching 35 mpg by 2020. This was the last
standards” allow auto manufacturers to produce a full range
legislation to set fuel economy goals.
of vehicle sizes. This concept differs from the original
CAFE standards, which grouped domestic passenger cars,
GHG Standards
imported passenger cars, and light trucks into three broad
In the April 2007 decision Massachusetts v. EPA, the
categories. The “attribute-based standards” enable
Supreme Court held that EPA has the authority to regulate
manufacturers to produce a full range of vehicle sizes rather
GHGs from new motor vehicles as “air pollutants” under
than designing a lighter and smaller vehicle fleet overall to
the Clean Air Act (CAA). In the 5-4 decision, the Court’s
meet the categorical targets.
majority concluded that EPA must decide whether GHG
emissions from new motor vehicles contribute to air
Under the regulations, manufacturers must report the
pollution that may reasonably be anticipated to endanger
characteristics of the vehicles they sell in each model year.
public health or welfare or provide a reasonable explanation
This information allows EPA and NHTSA to calculate each
why it cannot or will not make that decision. On December
manufacturer’s CAFE and GHG targets under the standards
15, 2009, EPA promulgated findings that GHGs endanger
given the specific pattern of sales. The agencies compare
the calculated targets against the vehicles’ fuel economy
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Vehicle Fuel Economy and Greenhouse Gas Standards
and emissions results from EPA-approved test cycles to
The agencies finalized the second part of the SAFE
determine each manufacturer’s compliance with the
Vehicles Rule on March 31, 2020. The agencies projected
applicable standards.
that the new rule would increase the average fuel economy
of vehicles sold by 1.5% each year from MY 2021 to MY
To facilitate compliance, the agencies provide
2026. This compares to an approximate 5% increase each
manufacturers various flexibilities under the standards. A
year under the 2012 Phase 2 standards. The new rule
manufacturer’s fleet-wide performance (as measured on the
retained many of the flexibilities of the Phase 2 standards,
test cycles) can be adjusted through the use of flex-fuel
including the credit system and the adjustments for air
vehicles, air conditioning efficiency improvements, and
conditioning improvements, methane and nitrous oxide
“off-cycle” technologies (e.g., active aerodynamics, thermal
emission reductions, and off-cycle technologies. Figure 1
controls, and idle reduction). Further, manufacturers can
compares CAFE standards to the U.S. fleets’ adjusted
generate credits for over-compliance with the standards in a
performance data, as reported by NHTSA, for passenger
given year. They can bank, borrow, and transfer these
cars and light trucks.
credits within their own fleets or trade them with other
manufacturers to achieve compliance.
Figure 1. CAFE Standards and Achieved Fuel Economy
Midterm Evaluation and Vehicle Market
As part of the Phase 2 rulemaking, EPA and NHTSA
committed to conduct a midterm evaluation of the standards
that would apply in MYs 2022-2025. Through the
evaluation, EPA was to determine whether the standards
were still appropriate given the latest available data and
information. In the last days of the Obama Administration,
EPA issued a final determination stating that the MY 2022-
2025 standards remained appropriate and that a rulemaking
to change them was not warranted. However, on March 15,
2017, after President Trump took office, EPA and NHTSA
announced their joint intention to reconsider the Obama
Administration’s final determination. EPA released a

Source: CRS, from EPA and NHTSA.
revised final determination on April 2, 2018, stating that the
MY 2022-2025 standards were “not appropriate and,
therefore, should be revised.”
In their regulatory impact analysis, NHTSA and EPA
estimated the changes attributable to the SAFE Vehicles
Historically, shifts in the price of gasoline and the
Rule over the lifetime of the vehicles projected to be sold
composition of the new vehicle market have affected the
through MY 2029 in comparison to the Phase 2 standards.
way an administration approaches the standards. In 2012, at
The agencies estimated that the SAFE Vehicles Rule would
the beginning of Phase 1, gasoline prices were high and
reduce total costs by $200 billion (including a $100 billion
smaller sedans and larger sport-utility vehicles and pickup
reduction in automakers’ compliance costs), reduce the
trucks each held 50% of the market. By 2019, during the
average price of a new vehicle by $1,000, reduce highway
Trump Administration, gasoline prices were low and the
fatalities by 3,300, and increase new vehicle sales by 2.7
share of sedans had dropped to 28% while larger vehicles
million. However, the agencies projected that vehicles will
increased to 72%. While these shifts do not necessarily
consume an additional 2 billion barrels of oil, emit an
affect manufacturer compliance under the regulations, they
additional 867-923 million metric tons of GHG, and cause
can influence the overall ambitiousness and design of a
an additional 440-1,000 premature deaths due to air
national fuel economy and vehicle GHG emission program.
pollution. Further, the agencies estimated that the rule
would reduce auto sector jobs by 10,000-20,000 job-years
The SAFE Vehicles Rule
annually through MY 2030 due to the reduced focus on
The agencies issued their revisions to the CAFE and GHG
fuel-saving technologies. NHTSA and EPA estimated that
emissions standards in two parts. On September 27, 2019,
the cumulative effects to society of the SAFE Vehicles Rule
the agencies finalized the Safer, Affordable, Fuel-Efficient
could range from a net benefit of $16.1 billion to a net cost
(SAFE) Vehicles Rule, Part One: One National Program,
of $22.0 billion, dependent upon the program specifics,
wherein NHTSA asserted its statutory authority to set
input assumptions, and discount rate modeled.
nationally applicable fuel economy standards under EPCA,
which preempts state and local GHG standards because
Various states, local governments, and environmental and
they are “related to” fuel economy standards. Further, EPA
consumer organizations filed petitions for review in the
withdrew the CAA preemption waiver it had granted to
U.S. Court of Appeals for the D.C. Circuit challenging the
California in January 2013 as it relates to the state’s GHG
SAFE Vehicles Rules. On February 8, 2021, the D.C.
and Zero Emission Vehicle programs for MYs 2017-2025
Circuit granted the agencies’ request to pause (hold in
vehicles. The waiver withdrawal also affects 13 other states
abeyance) the litigation challenging the SAFE Vehicles
and the District of Columbia, which had adopted
Rule, Part One, pending the conclusion of the agencies’
California’s GHG emission standards; those states comprise
review and potential revision of the National Program.
more than a third of all U.S new vehicles sales.
Richard K. Lattanzio, Specialist in Environmental Policy
https://crsreports.congress.gov

Vehicle Fuel Economy and Greenhouse Gas Standards

Bill Canis, Specialist in Industrial Organization and
Linda Tsang, Legislative Attorney
Business
IF10871


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