Vehicle Fuel Economy and Greenhouse Gas Standards

Updated April 17, 2020
Vehicle Fuel Economy and Greenhouse Gas Standards
On March 31, 2020, the Trump Administration finalized
or will not make that decision. On December 15, 2009,
amendments to the federal standards that regulate fuel
EPA promulgated findings that GHGs endanger both public
economy and greenhouse gas (GHG) emissions from new
health and welfare and that GHG emissions from new
passenger cars and light trucks. These standards include the
motor vehicles contribute to that endangerment.
Corporate Average Fuel Economy (CAFE) standards
promulgated by the National Highway Traffic Safety
The One National Program: Phase 1
Administration (NHTSA), and the Light-Duty Vehicle
Based on EPA’s 2009 findings, and amidst a global
GHG Emission Standards promulgated by the U.S.
economic recession, the Obama Administration brokered an
Environmental Protection Agency (EPA).
agreement among major stakeholders in the automotive and
truck industries, the states, and other interested parties to
CAFE Standards
develop and implement vehicle GHG emission standards.
The origin of federal fuel economy standards dates to the
Because carbon dioxide (CO2) from vehicle fuel
mid-1970s. The oil embargo of 1973-1974 imposed by
combustion is a major source of GHG emissions, President
Arab members of the Organization of the Petroleum
Obama directed EPA to work with NHTSA to align the
Exporting Countries and the subsequent tripling in the price
GHG standards with the CAFE standards.
of crude oil brought the fuel economy of U.S. automobiles
into sharp focus. The fleet-wide fuel economy of new
EPCA and CAA generally preempt states from adopting
passenger cars had declined from 15.9 miles per gallon
their own fuel economy and emission standards for new
(mpg) in model year (MY) 1965 to 13.0 mpg in MY 1973.
motor vehicles. However, CAA Section 209(b) allows the
In an effort to reduce dependence on imported oil, the
State of California to request a preemption waiver for its
Energy Policy and Conservation Act (EPCA; P.L. 94-163)
motor vehicle emission standards provided that they are at
established CAFE standards for passenger cars beginning in
least as stringent as federal standards and, among other
MY 1978 and for light trucks beginning in MY 1979. The
things, are necessary to meet “compelling and extraordinary
standards required each auto manufacturer to meet a target
conditions.” EPA granted California a waiver for its state’s
for the sales-weighted fuel economy for its entire fleet of
inaugural GHG standards in July 2009, and President
vehicles sold in the United States in each model year.
Obama directed EPA and NHTSA to align the federal GHG
CAFE standards, and new vehicle fuel economy, rose
and fuel economy standards with those developed by
steadily through the late 1970s and early 1980s. After 1985,
California. The agencies finalized a joint rulemaking for
Congress did not revise the legislated standards for
MY 2012-2016 light-duty motor vehicles on April 1, 2010
passenger cars for several decades, and they remained at
(Phase 1 standards). The Obama Administration referred to
27.5 mpg until 2011. The light truck standards were
the coordinated effort as the One National Program.
increased to 20.7 mpg in 1996, where they remained until
2005. NHTSA promulgated two sets of standards in the
The One National Program: Phase 2
mid-2000s for MYs 2005-2007 and MYs 2008-2011,
EPA and NHTSA promulgated a second phase of CAFE
increasing light truck standards to 24.0 mpg. In 2007,
and GHG emission standards for vehicle MYs 2017-2025
Congress enacted the Energy Independence and Security
on October 15, 2012 (Phase 2 standards). As with the Phase
Act (P.L. 110-140), mandating a phase-in of increased
1 rulemaking, the Phase 2 standards were preceded by a
CAFE standards reaching 35 mpg by 2020. This mandate
multiparty agreement, brokered by the Obama
was incorporated into the design of the One National
Administration, including the State of California, 13 auto
Program (see below).
manufacturers, and the United Auto Workers union. The
manufacturers agreed to reduce GHG emissions from their
GHG Standards
fleets by about 50% by 2025 compared to 2010, with fleet-
Whether and how EPA could regulate GHGs through
wide fuel economy rising to nearly 50 mpg.
existing Clean Air Act (CAA) authority was debated for
more than a decade before the agency took action. In the
The agencies’ fuel economy and GHG standards apply to
April 2007 decision Massachusetts v. EPA, the Supreme
the new fleet of passenger cars and light trucks—including
Court held that EPA has the authority to regulate GHGs
most sport utility vehicles, vans, and pickup trucks—sold
from new motor vehicles as “air pollutants” under the CAA.
by a manufacturer within the United States during a given
In the 5-4 decision, the Court determined that GHGs fit
model year. In both the Phase 1 and Phase 2 standards, the
within the CAA’s “unambiguous” and “sweeping
agencies used the concept of a vehicle’s “footprint” to set
definition” of air pollutant. The Court’s majority concluded
differing targets for different-sized vehicles. These
that EPA must, therefore, decide whether GHG emissions
“attribute-based” standards differ structurally from the
from new motor vehicles contribute to air pollution that
original CAFE standards, which grouped domestic
may reasonably be anticipated to endanger public health or
passenger cars, imported passenger cars, and light trucks
welfare or provide a reasonable explanation why it cannot
into three broad categories. Generally, the larger the vehicle

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Vehicle Fuel Economy and Greenhouse Gas Standards
footprint, the lower the corresponding vehicle fuel economy
therefore, should be revised.” As a result, on August 24,
target and the higher the CO2-equivalent emissions target.
2018, EPA and NHTSA proposed amendments to the
This allows auto manufacturers to produce a full range of
CAFE and GHG emission standards for MY 2021-2026.
vehicle sizes as opposed to focusing on making the entire
fleet lighter and smaller to meet categorical targets.
The SAFE Vehicles Rule
The agencies issued their revisions to the CAFE and GHG
Manufacturers comply with the standards by reporting to
emissions standards in two parts. On September 27, 2019,
the agencies annually with information regarding their MY
the agencies finalized the Safer, Affordable, Fuel-Efficient
fleet production and sales numbers, their MY fleet
(SAFE) Vehicles Rule, Part One: One National Program,
characteristics, and the fuel economy and emissions results
wherein NHTSA clarified its statutory authority to set
from the EPA-approved test cycles. This information allows
nationally applicable fuel economy standards under EPCA,
the agencies to calculate each manufacturer’s CAFE and
which preempts state and local GHG standards because
GHG standards given their specific fleets. The agencies
they are “related to” fuel economy standards. Further, EPA
compare the calculated standards against the manufacturer’s
withdrew the CAA preemption waiver it granted to
fleet-wide adjusted test results to determine compliance.
California in January 2013 as it relates to the state’s GHG
and Zero Emission Vehicle programs. The waiver
To facilitate compliance, the agencies provide
withdrawal also affects the 14 CAA Section 177 states and
manufacturers various flexibilities under the standards. A
the District of Columbia that adopted California’s GHG
manufacturer’s fleet-wide performance (as measured on the
emission standards.
test cycles) can be adjusted through the use of flex-fuel
vehicles, air conditioning efficiency improvements, and
The agencies finalized the second part of the SAFE
“off-cycle” technologies (e.g., active aerodynamics, thermal
Vehicles Rule on March 31, 2020. The new rule requires a
controls, and idle reduction). Further, manufacturers can
1.5% increase in fuel economy each year from MY 2021 to
generate credits for over-compliance with the standards in a
MY 2026, attaining a projected fleet-wide fuel economy
given year. They can bank, borrow, trade, and transfer these
target of 40.4 mpg in MY 2026. (This compares to an
credits both within their own fleets and among other
approximate 5% increase each year under the Phase 2
manufacturers. Figure 1 compares CAFE standards for
standards.) The new rule retains many of the flexibilities of
both passenger cars and light trucks against the U.S. fleets’
the Phase 2 standards, including the credit system and the
adjusted performance data as reported by NHTSA.
adjustments for air conditioning improvements, methane
and nitrous oxide emission reductions, and off-cycle
Figure 1. CAFE Standards and Achieved Fuel Economy
technologies. The new rule phases out the GHG credit
multiplier for electric vehicles in MY 2022 (as did the
Phase 2 standards). However, it extends the multiplier for
natural gas vehicles through MY 2026.
In their regulatory impact analysis, NHTSA and EPA
estimate the changes attributable to the SAFE Vehicles
Rule over the lifetime of the vehicles projected to be sold
through MY 2029 in comparison to the Phase 2 standards.
The agencies estimate that the SAFE Vehicles Rule will
reduce total costs by $200 billion (including a $100 billion
reduction in automakers’ compliance costs), reduce the
average price of a new vehicle by $1,000, reduce highway
fatalities by 3,300, and increase new vehicle sales by 2.7

million. However, the agencies project that vehicles will
Source: CRS, from EPA and NHTSA.
consume an additional 2 billion barrels of oil, emit an
additional 867-923 million metric tons of GHG, and cause
Midterm Evaluation
an additional 440-1,000 premature deaths due to air
As part of the Phase 2 rulemaking, EPA and NHTSA
pollution. Further, the agencies estimate that the SAFE
committed to conduct a midterm evaluation of the standards
Vehicles Rule would reduce auto sector jobs by 10,000-
that would apply in MYs 2022-2025. Through the
20,000 job-years annually through MY 2030 due to the
evaluation, EPA was to determine whether these standards
reduced focus on fuel-saving technologies. In summary,
were still appropriate given the latest available data and
NHTSA and EPA estimate that the cumulative effects to
information. The Obama Administration’s EPA issued a
society of the SAFE Vehicles Rule could range from a net
final determination on January 12, 2017, stating that the
benefit of $16.1 billion to a net cost of $22.0 billion,
MY 2022-2025 standards remained appropriate and that a
dependent upon the program specifics, input assumptions,
rulemaking to change them was not warranted. However,
and discount rate modeled.
on March 15, 2017, after President Trump took office, EPA
and NHTSA announced their joint intention to reconsider
Richard K. Lattanzio, Specialist in Environmental Policy
the Obama Administration’s final determination. After
Linda Tsang, Legislative Attorney
receiving more than 290,000 comments, EPA released a
Bill Canis, Specialist in Industrial Organization and
revised final determination on April 2, 2018, stating that the
MY 2022-2025 standards were “not appropriate and,

Vehicle Fuel Economy and Greenhouse Gas Standards


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