NAS report calls for reform of CAFE program

31 July 2001

The US National Academies’ National Research Council released today its long expected report on the US Corporate Average Fuel Economy (CAFE) standards. The report concludes that, although the CAFE program has helped reduce US dependence on imported oil and lower emissions of greenhouse gases, changes to the program could further cut the nation’s petroleum dependence and provide more flexibility to carmakers. It is believed the Bush administration will propose changes to the CAFE program, based to a large degree on the recommendations of the report.

The CAFE standards dictate the average miles per gallon (mpg) that passenger cars and light-duty trucks sold in the United States must attain. Established by the Energy Policy and Conservation Act in 1975, the standards were designed largely to reduce US dependence on foreign oil. Each year, automakers are required to achieve an average of 27.5 mpg (8.55 l/100km) for their fleet of new passenger cars, and 20.7 mpg (11.36 l/100km) for their fleet of new light-duty trucks. Light-duty trucks initially represented pickups and cargo vans, but now include minivans and sport utility vehicles (SUVs).

With the nation’s overall fuel economy slipping for more than a decade, Congress asked the National Academies to study the effects that CAFE standards have had over the past 25 years, as well as effects that potential changes to the program might have. The CAFE program has had some unintended consequences, the report said. As consumers have begun buying more and more minivans, SUVs, and pickup trucks, the overall average fuel economy of new vehicles has dropped because the larger, heavier vehicles have less stringent standards to meet than passenger cars. In 2001, sales of minivans, SUVs, and pickups are expected to exceed sales of passenger cars for the first time ever.

To improve a car’s fuel economy, one of two things must happen: The efficiency of the powertrain must be increased through new technologies, or the amount of work required by the engine to move the car must be lowered, usually by lessening wind resistance or by reducing the car’s size and weight. But one risk of downsizing is that smaller cars involved in crashes with larger vehicles tend to have higher numbers of fatalities. However, this area is quite controversial among analysts and the report includes a dissenting opinion written by two committee members.

Among a number of other findings, the report says that advanced technologies - including direct-injection (DI) lean-burn gasoline engines, DI diesel engines, and hybrid electric vehicles - have the potential to improve vehicle fuel economy by 20 to 40% or more. However, lean-burn gasoline engines and diesel engines, the latter of which are already producing large fuel economy gains in Europe, face significant technical challenges to meet the Tier 2 emission standards established by the Environmental Protection Agency, and the California LEV II standards. The major problems are the Tier 2 emissions standards for nitrogen oxides and particulates and the requirement that emission control systems be certified for a 120,000-mile lifetime. If DI gasoline and diesel engines are to be used extensively to improve light-duty vehicle fuel economy, significant technical developments concerning emissions control will have to occur or some adjustments to the Tier 2 emissions standards will have to be made, says the report. Hybrid electric vehicles face significant cost hurdles, and fuel-cell vehicles face significant technological, economic, and fueling infrastructure barriers.

The report provides a number of recommendations for policy-makers, as follows:

• Adopt tradable fuel economy credits—Current CAFE guidelines allow an automaker to accumulate fuel economy credits if its fleet of cars or trucks exceeds the standard. These credits can be bankrolled and used to offset future CAFE deficits. This system should be expanded so that credits can be sold to other automakers or bought from the government to bring their fleets into compliance.
• Consider switching to attribute-based standards—Instead of setting fuel economy standards on the basis of whether a vehicle is a car or a truck, standards could be matched with certain attributes, such as vehicle weight.
• Eliminate the two-fleet rule—Current CAFE standards require that the average fuel efficiency for domestic and imported fleets be calculated separately.
• Eliminate dual-fuel vehicle credits—Current CAFE provides fuel economy credits to dual-fuel vehicles, which can burn ethanol as well as gasoline.
• Pursue government-industry research and development—The government should continue funding research and development of new fuel-efficiency technologies in cooperation with the automotive industry. Those that warrant further study include hybrid vehicles, advanced engines and emission-control systems, and fuel cells.

The committee also noted that there is a marked inconsistency between pressing automobile manufacturers for improved fuel economy from new vehicles on the one hand, and insisting on low gasoline prices on the other. Higher gas prices would create a demand for more fuel-efficient vehicles and an incentive for owners of existing vehicles to drive them less.

The study was sponsored by the US Department of Transportation.

Source: National Research Council