Corporate Average Fuel Economy

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The Corporate Average Fuel Economy (CAFE) regulations in the United States, first enacted by Congress in 1975, were federal regulations intended to improve the average fuel economy of cars and light trucks (trucks, vans and sport utility vehicles) sold in the US in the wake of the 1973 Arab Oil Embargo. It is the sales-weighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer's fleet of current model year passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8,500 pounds (3,856 kg) or less, manufactured for sale in the United States. Light trucks that exceed 8,500 lbs gross vehicle weight rating (GVWR) do not have to comply with CAFE standards. These vehicles include pickup trucks, sport utility vehicles and large vans. In 1999, over half a million vehicles exceeded the GVWR and the CAFE standard did not apply to them.[1]

The National Highway Traffic Safety Administration (NHTSA) and Environmental Protection Agency (EPA) regulate CAFE standards. If the average fuel economy of a manufacturer's annual fleet of car and/or truck production falls below the defined standard, the manufacturer must pay a penalty, currently $5.50 per 0.1 mpg under the standard, multiplied by the manufacturer's total production for the U.S. domestic market.

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[edit] Impact

CAFE advocates claim that most of the gains in fuel economy over the past 30 years can be attributed to standard itself[2], while others point to largely economic force for fuel economy gains, where higher fuel prices drove customers to seek more fuel efficient vehicles[3].

A plot of average overall vehicle fuel economy (CAFE) for new model year passenger cars, the required by law CAFE standard target fuel economy value (CAFE standard) for new model year passenger cars, and fuel prices, adjusted for inflation, shows that there has been little variation over the past 20 years. Within this period, there are three distinct periods of fuel economy change. (1) from 1979-1982 the fuel economy rose as the price of fuel rose dramatically (2) from 1984-1986 the fuel economy rose as the CAFE standard rose (3) from 1986-1988 the fuel economy rose even as the price of fuel fell and the CAFE standard is relaxed due to pressure from US automakers [4] before returning to 1986 levels in 1990. These are following by a period during which neither the passenger car CAFE standard, the observed average passenger car fuel economy, nor the price of gasoline changed much at all.

Simple economics alone would predict an increase in gasoline prices would lead to an increase in the average fuel economy of the US passenger car fleet, but would also predict that a fall in gasoline prices would be associated with a fall in the average fuel economy of the entire US fleet [5]. There is some evidence that this happened with an increase in market share of lower fuel economy light trucks and SUVs and decline in passenger car sales, as a percentage of total fleet sales, as car buying trends changed during the 1990s[6], the impact of which is not reflected in this chart. In the case of passenger cars, US average fuel economy did not fall as economic theory would predict (see graph), suggesting that CAFE standards maintained the higher fuel economy of the passenger car fleet during the long period from the end of the 1979 energy crisis to the rise of gasoline prices in the early 2000s.

It is important to note that the CAFE and CAFE standard shown here only regard new model passenger car fuel economy and target fuel economy rather than the overall US fuel economy average (which tends to be dominated by used vehicles manufactured in previous years), new model light truck CAFE standards, light truck CAFE averages, or aggregate data.[7]

[edit] Calculation

For the purposes of CAFE, a manufacturer's car output is divided into a domestic fleet (vehicles with more than 75% U.S., Canadian or (after the passage of NAFTA) Mexican content) and a foreign fleet (everything else). Each of these fleets must separately meet the requirements. The two-fleet requirement was developed by the United Automobile Workers (UAW) as a means to ensure job creation in the US. The UAW successfully lobbied Congress to write this provision into the enabling legislation. The UAW continues to advocate this position.[8] The two fleet rule for light trucks was removed in 1996.

Fuel economy calculation for alternative fuel vehicles multiplies the actual fuel used by a "Fuel Content" Factor of 0.15[9] as an incentive to develop alternative fuel vehicles.[10] This makes alternative fuel vehicles, such as E85 capable models, appear substantially more fuel efficient in CAFE calculations.

Manufacturers are also allowed to earn CAFE "credits" in any year they exceed CAFE requirements, which they may use to offset deficiencies in other years. CAFE credits can be applied to the three years previous or three years subsequent to the year in which they are earned. The reason for this requirement is so that manufacturers are not penalized for occasionally (due to market conditions, for example) failing the targets, but only for persistent failure to meet them.

[edit] Current standards

Cars and light trucks are considered separately for CAFE and are held to different standards. As of early 2004, the average for cars must exceed 27.5 mpg and the light truck average must exceed 20.7 mpg. Trucks under 8500 lb must average 22.5 mpg in 2008, 23.1 mpg in 2009, and 23.5 mpg in 2010. After this, new rules set varying targets based on truck size and class.

Overall fuel economy for both cars and light trucks in the U.S. market reached its highest level in 1987, when manufacturers managed 26.2 mpg (8.98 L/100 km). The average in 2004 was 24.6 mpg.[11] In that time, vehicles increased in size from an average of 3,220 pounds to 4,066 lb (1,461 kg to 1,844 kg).

A number of manufacturers choose to pay CAFE penalties rather than attempt to comply with the regulations. As of model year 2002, BMW, DaimlerChrysler (import fleet only), Ferrari, Lotus and Porsche failed the automobile CAFE requirement, while BMW and Volkswagen failed to meet the light truck requirement.

[edit] Future

The CAFE rules for trucks were officially amended at the end of March, 2006. These changes would segment truck fleets by vehicle size and class as of 2011. All SUVs and passenger vans up to 10,000 pounds GVWR[12] now have to comply with CAFE standards regardless of size, but pickup trucks and cargo vans over 8500 pounds gross vehicle weight rating (GVWR) would remain exempt.

The fuel economy for trucks will be dictated by its "footprint" — the product of its wheelbase and track. Some critics point out that this may have the unintended consequence of pushing manufacturers to make ever-larger vehicles to avoid strict economy standards.[13] However, the equation used to calculate the fuel economy target has a built in mechanism that provides an incentive to reduce vehicle size to about 52 square feet (the approximate midpoint of the current light truck fleet.)

[edit] Criticism

The CAFE standards have come under attack by conservative think tanks such as the Heritage Foundation[14] and the Competitive Enterprise Institute,[15] primarily on the basis that the cheapest way for automotive manufacturers to increase mileage is to reduce vehicle weight, which leads to weight disparities in the vehicle population and thus increased danger for occupants of lighter vehicles. Both groups cite a correlation between increased CAFE standards and increased highway deaths, as well as independent studies which attest that there are "7,700 deaths for every mile per gallon gained in fuel economy standards."[16] Proponents argue that the number of overall traffic-related deaths (which includes all highway and non-highway deaths) decreased by 16.2% from 1979 to 2002 according to the National Highway Traffic Safety Administration. The critics of CAFE standards acknowledge that technology has improved the safety of automobiles, and point out that reduction in traffic-related deaths would have been even greater if not for CAFE standards. Some argue that these costs will be more than offset by savings on a global scale, because increased CAFE standards reduce reliance on increasingly expensive and unreliable sources of imported petroleum[17] and the probability of catastrophic global climate change by reducing US emissions of carbon dioxide, and that automobile-purchasing decisions that have global effects should not be left entirely up to individuals operating in a free market.[18]

The definitions for cars and trucks are not the same for fuel economy and emission purposes. For example, a PT Cruiser is defined as a car for emission purposes and a truck for fuel economy purposes. Under the current light truck fuel economy rules, the PT Cruiser will have a higher fuel economy target (28.05 mpg beginning in 2011) than it would if it were classified as a passenger car.

Eron Shosteck, a spokesman at the Alliance of Automobile Manufacturers, claimed automakers produce more than 30 models that are rated at 30 mpg, and they are poor sellers. CAFE also does not offer incentives for customers to choose fuel efficient vehicles, nor does it affect fuel prices. Statistically, the consumers do not pick the weak-performing vehicle when given a choice of engines.[19]

[edit] See also

[edit] External links

[edit] References

  1. ^ CAFE Overview. NHTSAy. Retrieved on March 9, 2007.
  2. ^ Questions and Answers on Fuel Economy. Retrieved on March 12, 2007.
  3. ^ One Third of Consumers Looking at More Fuel-Efficient Cars. Retrieved on March 12, 2007.
  4. ^ Kara Kockelman (January 2000). "To LDT or Not to LDT: An Assessment of the Principal Impacts of Light-Duty Trucks". Transportation Research Board.
  5. ^ Paul R. Portney, Ian W.H. Parry, Howard K. Gruenspecht, and Winston Harrington (November 2003). "The Economics of Fuel Economy Standards". Resources For The Future. Retrieved on March 12, 2007.
  6. ^ CAFE (Fuel Efficiency) Standards for Passenger Cars and Light Trucks. Retrieved on March 9, 2007.
  7. ^ [1] and [2]
  8. ^ Alan Reuther (May 3 2006). "Testimony Before The U. S. House Of Representatives Committee On Energy And Commerce". Retrieved on March 9, 2007.
  9. ^ U.S. Congress (June 2006). "49 USC 39205(a),(b),(c),(d)". U.S. Department of Transportation National Highway Traffic Safety Administration Office of the Chief Counsel.
  10. ^ U.S. Congress (June 2006). "49 USC 39204(a)(2)(B)(iii)". U.S. Department of Transportation National Highway Traffic Safety Administration Office of the Chief Counsel.
  11. ^ Automotive Fuel Economy Program. Retrieved on March 9, 2006.
  12. ^ National Highway Traffic Safety Administration. "Average Fuel Economy Standards For Light Trucks, Model Year 2008-2011, Final Rule". U.S. Department of Transportation. Retrieved on March 9, 2007.
  13. ^ Compliance Question: Will automakers build bigger trucks to get around new CAFE regulations?. AutoWeek. Retrieved on April 7, 2006.
  14. ^ Why the Government's CAFE Standards for Fuel Efficiency Should Be Repealed, not Increased. Heritage Foundation. Retrieved on July 11, 2001.
  15. ^ CEI’s CAFE Litigation: Case 2. Competitive Enterprise Institute. Retrieved on January 29, 2002.
  16. ^ CAFE Standards Kill: Congress' Regulatory Solution to Foreign Oil Dependence Comes at a Steep Price. National Policy Analysis. Retrieved on Error: invalid time.
  17. ^ Ronald R. Cooke (September 28, 2006). Oil Shortages? It's Happened Before and It Will Happen Again. EnergyPulse. Retrieved on March 9, 2007.
  18. ^ Board On Energy and Environmental Systems (2002). "Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards (2002)". The National Academies. Retrieved on March 9, 2007.
  19. ^ John DeGaspari (April 4, 2004). Retooling Cafe. Mechanical Engineering Magazine. Retrieved on March 9, 2007.
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