CAFE (fuel economy) Standards in the USA

CAFE stands for Corporate Average Fuel Economy (CAFE). It is the sales weighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer’s fleet of passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8,500 lbs. or less, manufactured for sale in the United States, for any given model year. Fuel economy is defined as the average mileage traveled by an automobile per gallon of gasoline (or equivalent amount of other fuel) consumed as measured in accordance with the testing and evaluation protocol set forth by the Environmental Protection Agency (EPA).

CAFE was enacted in 1975, and there is a long winded equation of sorts that essentially spits out a CAFE number based on the kinds of cars in the fleet of an automobile manufacturer and there fuel economy performance over a test driving cycle (which itself is quite unrealistic by today’s standards). CAFE standards have recently become the joke of the town. Not least because the standards haven’t changed, and hence fleet averages really haven’t improved at all despite 30+ years lot of progress in technology (see chart). CAFE standards were put in place to mandate car makers to offer better fuel economy vehicles, but car makers have conveniently side-stepped the issue with interesting fixes. Flex fuel cars were given a much better fuel economy rating by EPA only because they consume less gasoline (and more ethanol), even though the impact on CO2 emissions is not that different. American car makers kept pumping out flex fuel cars that were only driven on gasoline and hence even though cars were registered as 33mpg vehicles under CAFE, in reality they only gave 15 mpg or so on road. [By the way: the sticker mpg on your car is completely disjointed from CAFE values of your car. It is an even more absurd value. I am sure I ma not th eonly one who has never been able to reach the fuel economy that my car-maker tells me I should reach. Its not a surprise that when an EPA administrator did not reach the high mpg advertised by her Prius, she set about a personal goal to make sure stickers read fuel economy averages closer to reality. More on that some other time.]

Anyways, a piece of news caught my eye and prompted me to write on this issue here:

Senate Majority Leader Harry M. Reid (D-Nev.) said after a speech to the Center for American Progress yesterday that the increase in auto-fuel efficiency requirements, known as the corporate average fuel efficiency (CAFE) standards, would be the most controversial part of the Senate package. It orders auto companies to hit a 35-mile-per-gallon target by 2020 and improve mileage 4 percent a year after that.

“I know that the auto industry is still wavering on this issue,” Reid said. “I met with the CEOs of the big three automakers last week, and here is what I told them: The debate on raising CAFE standards should be over. It will happen. And perhaps if they had joined us instead of fighting us these last 20 years, they might not be in the financial mess they’re in today.”

I personally think using CAFE to somehow force automakers, and then consumers, to buy more fuel efficient cars is the wrong (and round about) way to go about it. A better way would be to sell oil at gas stations at the price that truly reflects its true cost. It is estimated that government might be subsidizing fuel at a cost of roughly $3-10 per gallon. The real price of oil in the US, without the subsidies, would not much different than the $6 per gallon that it is in Europe. The gas price has quickly changed consumer preferences in EU, and now more than 50% of the cars being sold there are diesel, which not only give a 20-30% improvement in fuel economy, but also allows the states to reach better CO2 emission levels from mobile transportation sector.

That said, even though raising the CAFE levels for automokers is still better than not doing anything. Yes, it is true that there is demand for SUVs and Trucks but it is so because of at least two reasons: (a) excessive advertising of those vehicles by the automakers because they make more money on such vehicles, and (b) low prices of gas. If changing gas prices is going to be politically plausible in the short term, then why not change the CAFE standard and force automakers to raise prices on their least fuel-efficient cars so consumers areattracted to the more fuel efficient cars. One way or the other, using a total cost of ownership calculation, we need to make it more attractive for consumers to use fuel efficient vehicles. If that is not done, we will continue to fill up our highways with V8 5 liter engines with fuel economies in the low teens.

tsk tsk….

More info on CAFE:


One Response to CAFE (fuel economy) Standards in the USA

  1. Bilal Zuberi says:

    Senate passes energy bill to raise CAFE standards from 22.7 mpg to 35 mpg. Standards also apply to SUVs and must be met by 2020.

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