New NHTSA CAFE Standards |
EISA2007 requires the National Highway Traffic Safety Administration (NHTSA) to raise the CAFE standards for passenger cars and light trucks to ensure that the average tested fuel economy of the combined fleet of all new passenger cars and light trucks sold in the United States in model year (MY) 2020 equals or exceeds 35 mpg, 34 percent above the current fleet average of 26.4 mpg [7]. Pursuant to this legislation, NHTSA recently proposed revised CAFE standards that substantially increase the minimum fuel economy requirements for passenger cars and light trucks for MY 2011 through MY 2015 [8]. The new CAFE proposal builds on NHTSA’s 2006 decision to use an attribute-based methodology to determine a vehicle’s minimum fuel economy standard based on vehicle footprint [9]. The attribute-based CAFE standard uses a mathematical function that provides a unique fuel economy target for each vehicle footprint and is the same across manufacturers. Fuel economy targets are revised upward in subsequent model years to ensure improvement over time (Figures 4 and 5). Separate continuous mathematical functions are established for passenger cars and light trucks, reflecting their different design capabilities, and their combined fuel economy levels are required to reach 35 mpg by 2020. Individual manufacturers will be required to comply with unique fuel economy levels for their car and light truck fleets, based on the distribution of their vehicle production by footprint in each model year. Individual manufacturers face different required CAFE levels only to the extent that their production distributions differ. NHTSA has estimated the impact of the new CAFE standard on the fuel economy of new LDVs and has projected that the proposed standards represent a 4.5-percent average annual increase in fuel economy between MY 2010 and MY 2015 (Table 1) [10]. Because the exact sales mix of different vehicle classes for a given manufacturer cannot be known until after the model year, NHTSA projects industry-wide average fuel economies for passenger cars and light trucks based on the manufacturers’ production plans. From a fuel economy average of 31.6 mpg in MY 2015, the average annual increase from MY 2015 to MY 2020 would need to be only 2 percent to reach the EISA2007 mandate of 35 mpg by 2020. Thus, NHTSA’s latest proposal is heavily front-loaded, in that it requires greater gains in the first 5-year period than in the second. Because AEO2009 uses NHTSA’s proposed CAFE standards to represent the implementation path for the fuel economy standard required by EISA2007, the average fuel economy for LDVs in the early years of the projection is higher than projected in AEO2008 (Figure 6). In the AEO2009 reference case, the combined fuel economy of new LDVs from MY 2011 through MY 2015 slightly exceeds NHTSA’s estimated values, because AEO2009 allows shifting of sales between cars and light trucks and among various size classes, whereas NHTSA’s estimates are based on manufacturers’ production plans. NHTSA’s proposal also seeks to provide added flexibility for manufacturers to meet the new CAFE standards by: (1) allowing trading of credits between manufacturers who exceed their standards and those who do not; (2) allowing credit transfers between different vehicle classes for a single manufacturer; (3) increasing from 3 to 5 the number of years during which a manufacturer can “carry forward” credits earned from exceeding the CAFE standards in earlier model years, while leaving in place the 3-year limit for manufacturers to “carry back” credits earned in later years to meet shortfalls from previous model years; and (4) extending through 2014 the ability of manufacturers to earn a maximum 1.2 mpg of CAFE credit by producing alternative-fuel vehicles, then phasing out the “carry-back” credits between 2015 and 2019. NHTSA’s flexibility provisions do not, however, allow manufacturers to miss their annual targets grossly and then make them up by using any or all of the four provisions listed above. NHTSA retains a required minimum (92 percent of the applicable CAFE standard). Before any credit can be applied by a manufacturer, its fleet of LDVs for the model year must meet an average fuel economy standard—either 27.5 mpg or 92 percent of the CAFE for the industry-wide combined fleet of domestic and non-domestic passenger cars for that model year, whichever is higher. It is important to note that NHTSA’s proposed CAFE standards are subject to change in future rulemakings.
Contact: Nicholas Chase/John Maples
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