USA: Light-Duty Vehicles: GHG Emissions & Fuel Economy

Regulatory Background

The United States has two sets of parallel standards: (1) the corporate average fuel economy (CAFE) standards adopted by the National Highway Traffic Safety Administration (NHTSA), an agency within the Department of Transportation (DOT) and (2) greenhouse gas emission standards adopted by the US Environmental Protection Agency (EPA). The first CAFE standards were adopted in the 1970s, in response to the Arab oil embargo. The first GHG emission standards became effective in model year 2012.

The following are some of the important regulatory developments in the history of regulation of fuel economy and GHG emissions from light-duty vehicles:

• The Energy Policy Conservation Act of 1975 established the first CAFE standards for light-duty vehicles. Separate sets of standards were adopted for cars and for light trucks. For cars, the standards aimed to double the fleet average fuel economy from 13.6 miles per gallon (mpg) in 1974 to 27.5 mpg by 1985. Vehicle manufacturers almost met this target, reaching 27.0 mpg by 1985. While the CAFE program remained in force for a number of years, its fuel economy target for cars stagnated at 27.5 mpg through 2010. More details on this program are provided in the CAFE Fuel Economy article.
• In 2007, the stage was set for more progressive fuel economy and GHG emission regulations. The Energy Independence and Security Act (EISA) of 2007 mandated a 40% increase in fuel economy by 2020. Tougher fuel economy standards were to be set starting with MY 2011, until the standards achieve a combined average fuel economy of 35 mpg for MY 2020. In a parallel development, also in 2007, the US Supreme Court ruled [2533] that CO₂ is a pollutant under the Clean Air Act (CAA) and, as such, must be regulated by the EPA.
• In April 2010, NHTSA and EPA finalized new, harmonized CAFE and GHG emission rules for MY 2012-2016 light-duty vehicles. These rules have been designed to result in an average CAFE fuel economy of 34.1 mpg (6.9 L/100 km) and CO₂ emissions of 250 g/mile in MY 2016 vehicles.
• In August 2012, EPA and NHTSA issued a joint final rulemaking to extend the harmonized GHG and fuel economy standards to MY 2017-2025 vehicles. The EPA GHG standards were projected to require, on average, 163 g/mile of CO₂ for the combined cars & trucks category in MY 2025. The estimated CAFE standards were between 48.7 and 49.7 mpg (before CAFE credits and flexibilities).
• In March 2020, EPA and NHTSA finalized The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule [4754], which relaxed the GHG emissions and CAFE standards for MY 2021-2026 vehicles. The 2020 rule increases the stringency of CAFE and CO₂ emission standards by 1.5% each year through model year 2026, while the CO₂ standards issued in 2012 would have required increases of almost 5% per year. Under the relaxed rule, the estimated GHG and CAFE requirements for cars and trucks combined reach 202 g/mile of CO₂ and 40.4 mpg, respectively, in MY 2026.
• In December 2021, the EPA issued a final rule setting GHG emission standards for MY 2023-2026 passenger cars and light trucks [5365], which reversed the provisions of the SAFE rule and tightened MY 2026 standards to levels more stringent than those under the 2012 rule. NHTSA issued a corresponding CAFE rule in March 2022. The agencies had been directed to review the SAFE rule by presidential Executive Order 13990, issued in January 2021.

At the time of the introduction of CAFE standards, the CAFE test results provided a reasonable representation of vehicles’ fuel efficiency in real world driving. This is no longer the case—under current driving conditions, CAFE figures overestimate the real world fuel economy and different test methods are used for the determination of CAFE compliance and for the EPA on-road fuel economy ratings that are used for consumer information.

Under the CAFE program, manufacturers could pay fines in lieu of meeting fuel economy standards. In contrast, under the Clean Air Act manufacturers must comply with the CO₂ emission standards and cannot pay noncompliance fines. In the MY 2012-2016 rule, the EPA has established a Temporary Lead-time Allowance Alternative Standards (TLAAS) program that provided additional lead time for meeting the standards for manufacturers with limited product lines who have traditionally paid CAFE fines to the NHTSA.

2012-2016 Standards

The 2012-2016 standards [2232] are based on CO₂ emissions-footprint curves, where each vehicle has a different CO₂ emissions compliance target depending on its “footprint” value, related to the size of the vehicle—an approach first introduced in the reformed CAFE (2008-2011) standards for light trucks. Generally, the larger the vehicle footprint, the higher the corresponding vehicle CO₂ emissions target. As a result, each manufacturer will have its own fleet-wide standard which reflects the vehicles it chooses it produce. Table 1 shows the projected fleet-wide CO₂ emission and fuel economy requirements. The EPA CO₂-equivalent fuel economy figures are different from the CAFE figures because the EPA allows additional CO₂ credits for air conditioning improvements.

The standards are applicable to the fleet of passenger cars, light-duty trucks, and medium-duty passenger vehicles (MDPV) with GVWR ≤ 10,000 lbs sold by a manufacturer within the United States. CO₂ emissions are tested over the EPA 2-cycle test (FTP-75 + HWFET).

Nitrous Oxide & Methane Standards. In addition to the fleet-average CO₂ emission targets, the rule also includes emission caps for tailpipe nitrous oxide and methane emissions (FTP-75):

• N₂O: 0.010 g/mile
• CH₄: 0.030 g/mile

The above standards have been set above the respective emission levels from current technology vehicles. They are intended to prevent the possibility of increased N₂O and CH₄ emissions in future vehicles.

N₂O emission measurement, however, is not mandatory through the 2016 model year [2912]—manufacturers may use N₂O compliance statements with a default emission value of 0.010 g/mile.

In lieu of complying with the N₂O and CH₄ cap standards, manufacturers may choose to comply with a CO₂-equivalent standard, where the N₂O and CH₄ emissions are added to the CO₂ emissions using a CO₂ equivalence factor of 298 for N₂O and of 25 for CH₄.

Flexibilities. The regulation also include a system of averaging, banking, and trading (ABT) of credits, based on a manufacturer’s fleet average CO₂ performance. Credit trading is allowed among all vehicles a manufacturer produces, both cars and light trucks, as well as between companies.

Further program flexibilities include:

• Air Conditioning Improvement Credits: Manufacturers can generate CO₂-equivalent credits for improvements in air conditioning (A/C) systems, such as for reduced refrigerant leakage through better components and through the use of alternative refrigerants with lower global warming potential.
• Advanced Technology Credits: A temporary incentive program to encourage the early commercialization of advanced GHG/fuel economy control technologies, such as electric vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles. Manufacturers who produce advanced technology vehicles will be able to assign a 0 g/mi CO₂ emission value to the first 200,000 vehicles sold in model years 2012-2016, or 300,000 vehicles for manufacturers that sell 25,000 vehicles or more in model year 2012.
• Off-Cycle Innovative Technology Credits: Emission credits for new and innovative technologies that reduce vehicle CO₂ emissions, when the emission benefits are not captured over the regulatory test cycle.
• Early Credits: A program allowing manufacturers to generate early credits in model years 2009-2011.
• Flex-fuel and Alternative Fuel Vehicle Credits: Flex-Fuel Vehicles (FFV) receive credits during model years 2012 to 2015, in line with the 2007 EISA provisions.

2017-2026 Standards

MY 2017-2025/2026 standards have been repeatedly modified, reflecting the evolution of political goals under sequential US administrations. The original rule was issued in 2012 by the Obama administration [2912], it was revised in 2020 under Trump administration [4754], and revised again in 2021 under Biden administration [5365]. All of these regulations have a similar structure to the 2012-2016 standards—they are based on CO₂ emissions-footprint curves, where each vehicle has a different CO₂ emission and fuel economy standards. The standards are also applicable to the same vehicle categories and use the same emission and fuel consumption testing procedures.

Table 2 shows the projected fleet-wide CO₂ emission and fuel economy compliance levels under the original 2012 rule. The CAFE figures shown in the table are average estimated “achieved” levels that account for manufacturers flexibilities, such as credits or penalty payments. The estimated “required” CAFE compliance levels—not reflecting flexibilities—increase from 35.4-35.1 mpg in MY 2017 to 49.7-48.7 mpg in MY 2025 for the combined cars & trucks category.

The NHTSA CAFE standards in Table 2 represent final standards for MY 2017-2021 and “augural standards”—representing the agency’s best estimate of the future standards—for MY 2022-2025. This approach reflected a statutory requirement that NHTSA set CAFE standards for not more than 5 model years at a time.

EPA and NHTSA were under an obligation to complete a midterm evaluation of the MY 2022-2025 standards by April 2018. The EPA completed such midterm evaluation in January 2017, in the final days of the Obama administration, and determined that the 2025 GHG and fuel economy standards should be kept unchanged. However, the EPA under the Trump administration—prompted by a petition from US automakers—reopened the midterm evaluation process and arrived at a final determination that the 2025 standards were too stringent and should be revised. As a result, a new final rule was issued that relaxed the GHG and CAFE standards for MY 2021-2026 vehicles [4754]. Table 3 shows the estimated fleet-wide CO₂ emission and fuel economy standards under the 2020 SAFE rule.

The most recent and currently binding version of the rule was issued in 2021 [5365]. The standards were tightened, and require even deeper emission reductions than the 2012 regulation. The projected fleet-wide emission levels and annual emission reduction rates are shown in Table 4.

The corresponding CAFE standards issued in 2022 require an industry-wide fleet average of approximately 49 mpg for passenger cars and light trucks in MY 2026. The standards increase fuel efficiency 8% annually for MY 2024-2025 and 10% annually for MY 2026.

The projected emission effects of the three versions of the regulation are compared in Table 5.

The range of technologies available for automakers to meet the MY 2026 standards, as projected by the 2021 GHG rule, includes advanced high-efficiency engine technology (59%), 8-speed and other advanced transmissions (71%), mild hybrids (5%), strong hybrids (7%), and electric vehicles (BEV+PHEV) (17%).

Nitrous Oxide & Methane Standards. The standards maintain the CH₄ and N₂O emission caps introduced for MY 2011-2016, as well as the flexibility for the manufacturers to use CO₂ credits on a CO₂-equivalent basis to comply with the CH₄ / N₂O requirements. N₂O emission testing becomes mandatory in MY 2017. However, the continued use of compliance statements was allowed in MY 2017–2018 in cases where manufacturers are not conducting new emissions testing for a test group, but rather carrying over certification data from a previous year.

Flexibilities. The regulations include averaging, banking, and trading (ABT) of fleet average CO₂ credits and the air conditioning improvement credits, both programs carried over from the 2012-2016 rule. The regulations also includes targeted incentives to encourage early introduction of advanced technologies, including:

• Incentives for electric vehicles, plug-in hybrid electric vehicles, and fuel cells vehicles;
• Incentives for hybrid technologies for large pickups and for other technologies that achieve high fuel economy levels on large pickups;
• Incentives for natural gas vehicles;
• Credits for technologies with potential to achieve real-world greenhouse gas reductions and fuel economy improvements that are not captured by the standards test procedures.

An important change from the 2012-2016 program was the elimination of the FFV credit. For FFV vehicles MY 2012-2015, the regulatory calculation method did not account for the actual alternative fuel usage and the calculated CO₂ emissions were significantly lower than would otherwise occur. This calculation—typically referred to as an FFV credit—created a strong incentive to make and sell FFV vehicles. For MY 2016-2026, the FFV credit is eliminated and CO₂ emissions from the ethanol and gasoline portions of the fuel in FFV vehicles are weighted based on actual alternative fuel usage.

Fuel Economy Testing

CAFE fuel economy and GHG emission testing is performed over two EPA laboratory test cycles: FTP-75 and HWFET. The two test cycles are weighted at 55% and 45%, respectively. This procedure is sometimes referred to as the EPA 2-cycle test. CAFE and GHG emission certification is typically done based on fuel economy and emission data provided by the manufacturers. In some cases, the EPA performs the testing in its laboratory in Ann Arbor, MI.

The CAFE fuel economy figures can be significantly different from the vehicle fuel economy data published by the EPA/DOE in the Fuel Economy Guide report and on new vehicle labels. There are three sets of fuel economy figures:

• Unadjusted dynamometer values,
• NHTSA’s CAFE values, and
• EPA’s on-road values (fuel efficiency labels).

Unadjusted Values. The unadjusted fuel economy values are calculated based on CO₂ emissions measured over the respective dynamometer tests, using a carbon balance equation. The CAFE fuel economy and GHG emissions are determined based on the FTP-75 and HWFET test results. Since MY 2008, fuel economy results from the supplemental FTP (SFTP) tests and a cold temperature FTP-75 are additionally included in the calculation of the EPA fuel efficiency label values.

CAFE Fuel Economy. The CAFE values—used to determine manufacturers’ compliance with the average fuel economy standards—are significantly higher than the typical fuel efficiency in real world operation or the EPA on-road values. This discrepancy reflects the fact that the EPA 2-cycle test is not representative of today’s vehicle operation patterns and technology. Furthermore, several caveats apply to the CAFE values:

1. CAFE credits can be carried over to vehicles of other model years (later or earlier) under the CAFE ABT program, and penalties can be paid in lieu of meeting CAFE fuel economy standards.
2. CAFE figures can include other credits and flexibilities, for example credits for alternative fuel vehicles.
3. The former CAFE standards, before MY 2011, did not apply to vehicles above 8,500 lbs GVWR. Many pickup trucks and some of the largest SUVs which belong to this category were excluded from CAFE data.

EPA On-Road Values. The EPA on-road fuel economy values are provided to consumers on new vehicle labels, in the EPA/DOE Fuel Economy Guide, and in EPA’s Green Vehicle Guide. In the 1970s, after the introduction of the CAFE program, the vehicle fuel efficiency values provided to consumers were determined using the CAFE 2-cycle testing, with the unadjusted FTP-75 result representing the “city” and the HWET the “highway” fuel economy rating.

With time, the results of the 2-cycle test increasingly overestimated the real world vehicle fuel economy, due to changes in vehicle technology and the patterns of vehicle usage (speed, acceleration, air conditioning and heater usage, etc.). Fuel economy figures determined through CAFE testing are currently about 20-30% higher than the fuel efficiency in real world driving. To correct this discrepancy, the EPA had introduced “adjusted” fuel economy values for consumer information. In the 2007 and earlier MY vehicles, the 2-cycle fuel economy results were adjusted downward by a factor of 15% to make the data more representative of the real world driving conditions.

Beginning with MY 2008, the EPA has changed the on-road fuel economy test method. The fuel efficiency ratings are calculated based on results of five tests: (1) FTP-75, (2) HWFET, (3) SFTP US06, (4) SFTP SC03, and (5) cold temperature FTP-75 performed at a lab temperature of 20°F (-6.7°C). This new method is referred to as the EPA 5-cycle test. The additional cycles were previously used for emission testing, but not for fuel economy. The EPA adopted formulas to calculate the “city” and “highway” ratings that are based on the fuel economy results from all five tests.