CAFE Standards: Corporate Average Fuel Economy

CAFE Standards: Corporate Average Fuel Economy

Table of Contents

1. Introduction3

2. Background of CAFE5

3. Review of literature on CAFE impacts8

4. Discussions15

5. Conclusions20

CAFE Standards: Corporate Average Fuel Economy

1. Introduction

Fuel economy continues to be a major area of public and policy interest for several reasons. Passenger vehicles account for almost 40 percent of the United States oil consumption, so increasing our energy efficiency can help reduce the amount we import. It also helps conserve our fossil resources for future generations. Passenger vehicles also cause approximately 20 percent of all United States carbon dioxide emissions, so increasing our fuel efficiency will help to reduce greenhouse gas emissions. Finally, the more miles a car gets per gallon of gasoline, the more money the owner can save on fuel costs.

Corporate Average Fuel Economy (CAFE) is the required average fuel economy for a vehicle manufacturer's entire fleet of passenger cars and light trucks for each model year. It applies to passenger cars and light trucks with a gross vehicle weight rating (GVWR) of 8,500 pounds or less. CAFE values are obtained using test data generated by the fuel economy tests, but the test results are not adjusted to account for real-world conditions. Instead, the results from the city and highway tests are combined. EPA administers the testing program which generates the fuel economy data and determines the procedures for calculating the fuel economy values for CAFE. The National Highway Traffic and Safety Administration (NHTSA) is responsible for establishing and amending the CAFE standards for trucks. Congress sets the CAFE standards for cars. EPA reports the CAFE results for each manufacturer to NHTSA annually, and NHTSA determines if the manufacturers comply with the CAFE standards. Basically, the NHTSA regulates CAFE standards and the EPA measures vehicle fuel efficiency.

When persons propel vehicles, they develop contradictory externalities that influence humanity, encompassing jamming, nationwide security significances, and ecological influence for example greenhouse gas (GHG) emissions that assist to international heating (Porter, 1999). While economists usually support Pigovian levies to effectively correct these contradictory externalities ([Lesser et al., 1997] and [Kolstad, 2000]), the huge most of the US public and lawmakers object to expanded petrol levies ([Uri and Boyd, 1989], [Chernick and Reschovsky, 1997], [Hammar et al., 2004] and [Decker and Wohar, 2007]), and the government has rather than relied on mandated limits for the mean characteristics of vehicles traded by automakers. Among such principles are (1) the Corporate Average Fuel Economy (CAFE) measures in the US, which penalize automakers whose sales-weighted mean of fleet fuel finances lets fall underneath a government-determined benchmark and (2) alike principles in California and in Europe that set measures on mean fleet carbon dioxide (CO2) emissions per mile.

For years, automakers have cited studies contending that thousands of people die annually because fuel economy regulations force the companies to make cars that are not heavy enough.

Larger vehicles, the argument goes, may guzzle more gas but they offer more protection, whether one hits a tree or another car. The argument has been a central one ...