President Obama recently announced a new rule to raise the Corporate Average Fuel Economy (CAFE) standards to require vehicles to reach 54.5 mpg by 2025. Currently, new vehicles model year 2011 get an average of 28.6 mpg. This amounts to a 90.6% increase in fuel efficiency in 14 years.

CAFE standards were introduced in the 1970s in the wake of the OPEC oil embargo. Their intent was to reduce dependence on foreign oil. The Energy Policy and Conservation Act of 1976 authorized fuel efficiency standards for new vehicles. CAFE standards distinguish between foreign and domestic made cars and also between cars and light trucks. With the exception of a temporary decrease in CAFE standards in 1986, no changes were made to the standards until 2007. In 2007, Congress passed the Energy Independence and Security Act, which created a new CAFE standard of 35 mpg by 2020. In 2009, the standard was raised to require 34 mpg by 2016.

Since 1980, new vehicle fuel efficiency has gone from 24.3 mpg (passenger car) and 18.5 (light truck) to 33.9 (passenger car) and 25.2 (light truck) in 2010. This equates to an increase of 9.6 mpg (39.5%) and 6.7 mpg (36.2%) respectively in 30 years. Comparatively, the new CAFE requirements are quite stringent.

One of the drawbacks to CAFE standards is the relative lightening of vehicles on the road. Generally, heavier vehicles are safer than lighter vehicles. One 2002 study, Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) standards, estimated that CAFE standards probably increased car fatalities in 1993 by 1300 to 2,600 through the downsizing of the fleet.

The study recommended that under any system of fuel economy targets, the two-fleet rule for domestic and foreign content should be eliminated. It “could not find any evidence that the two fleet rule distinctions between domestic and foreign content had any perceptible effect on total employment in the U.S. automotive industry.”

The study also recommended that “CAFE credits for dual-fuel vehicles should be eliminated, with a long enough lead time to limit adverse financial impacts on the automotive industry.” Vehicles that are capable of using biofuels receive credit under CAFE rules. However, these vehicles usually end up using standard gasoline due to the relative unavailability of alternative fuels. The study found that “the provision creating extra credits for multi-fuel vehicles has had, if any, a negative effect on fuel economy, petroleum consumption, greenhouse gas emissions and cost.”

One GAO study found that the 2009 requirements for government owned vehicle fleets to incorporate alternative fuel vehicles actually corresponded with increased gasoline use of 3% compared to the previous year. This is partly due to certain alternative fuel vehicles getting lower mpg than their conventional counterparts, and the common usage of regular gasoline in them.

Additional Resources

National Highway Traffic Safety Administration Obama Administration Finalizes Historic 54.5 mpg Fuel Efficiency Standards: http://www.nhtsa.gov/About+NHTSA/Press+Releases/2012/Obama+Administration+Finalizes+Historic+54.5+mpg+Fuel+Efficiency+Standards

The Wall Street Journal Final Auto Mileage Standards Set: http://www.nhtsa.gov/About+NHTSA/Press+Releases/2012/Obama+Administration+Finalizes+Historic+54.5+mpg+Fuel+Efficiency+Standards

Institute for 21^st Century Energy Motor Vehicle Average Miles per Gallon: http://www.energyxxi.org/sites/default/files/MetricoftheMonth-NOV11MotorVehicleMPG.pdf

RITA Average Fuel Efficiency of U.S. Light Duty Vehicles: http://www.bts.gov/publications/national_transportation_statistics/html/table_04_23.html

The Truth About Cars GAO: Government Ethanol Rules Actually Increase Gasoline Use: http://www.thetruthaboutcars.com/2011/05/gao-government-ethanol-rules-actually-increase-gasoline-use/?print=1

Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) standards: http://www.nap.edu/openbook.php?isbn=0309076013

CBS News Electric Vehicles Fall Drastically Short of Obama’s 1 Million Goal: http://www.cbsnews.com/8301-18563_162-57445738/electric-vehicles-fall-drastically-short-of-obamas-1-million-goal/

Cars.com Corporate Average Fuel Economy: http://www.cars.com/go/advice/Story.jsp?section=fuel&story=cafe&subject=fuelList

Open Fuel Standard Act Fact Sheet: http://www.energyvictory.net/images/Summary_of_the_Open_Fuel_Standard_Act.PDF

Congressional Research Service Automobile and Light Truck Fuel Economy: The CAFE Standards: http://assets.opencrs.com/rpts/R40166_20100423.pdf

Edmunds.com FAQ: New Corporate Average Fuel Economy Standards: http://www.edmunds.com/fuel-economy/faq-new-corporate-average-fuel-economy-standards.html