US: Light-duty: Fuel Economy and GHG

Overview

 * Standard type: Fuel economy standards and GHG emission limits
 * Regulating bodies: US Environmental Protection Agency (EPA) and National Highway Traffic and Safety Administration (NHTSA) under the US Department of Transportation (DOT)
 * Current standard: 2012-2016 CAFE/GHG rule
 * Future standard: 2017-2025 CAFE/GHG rule
 * Applicability: The total fleet of passenger and non-passenger vehicles manufactured for sale in the United States, up to a GVWR of 10,000 lbs.

History
The United States has been regulating fuel economy for light-duty vehicles since the 1970s. In 1975, standards were initially defined as Corporate Average Fuel Economy (CAFE) standards, but were expanded in 2009 to include greenhouse gas (GHG) emissions limits for model years (MY) 2012-2016. Fuel economy and GHG standards are set at the federal level, though California was granted unique authority to set CO2 standards in 2009. Federal authority to set CAFE standards for passenger vehicles and light trucks lies with the National Highway Traffic and Safety Administration (NHTSA), while the US Environmental Protection Agency (EPA) has responsibility for administering and reporting fuel economy test procedures and setting GHG emissions standards. These agencies derive their authority from the National Energy Conservation Policy Act of 1975 and the Clean Air Act (CAA), respectively. The EPA's specific authority to set GHG emission standards derives from a 2007 US Supreme Court ruling that ruled CO2 is considered a "pollutant" under the CAA.

In the 1970s, the United States was a global pioneer in establishing vehicle fuel economy standards. However, from the mid-1980s until recently, the US lagged behind other developed nations in passenger vehicle fuel economy standards and GHG emissions regulations. The American vehicle fleet was historically among the largest and heaviest in the world, with higher levels of CO2 emissions per kilometer traveled, higher average fuel consumption, and lower average fuel economy. In addition to stagnating standards, the changing fleet composition in the US also contributed to the lack of progress on improving fuel economy. From the late 1980s through the early 2000s, the US market share of sport utility vehicles (SUVs) – vehicles with the essential functionality of large passenger cars, but classified as light-trucks for CAFE standards purposes – grew quickly; the trend contributed to a 7% decrease in fuel economy from 1988 to 2004. In 2003, the US began updating fuel economy standards for light-duty trucks, with changes effective beginning in 2005. Since 2009 the US has adopted aggressive legislation for light-duty vehicles that could eventually make the country a global leader in fuel efficiency and GHG emissions control.

Some important legislative and regulatory milestones in the US' efforts to regulate light-duty vehicle fuel economy and GHG emissions are as follows:

 1975 Energy Policy Conservation Act 

The US adopted the Energy Policy Conservation Act of 1975 as part of a broad energy policy package in the wake of the 1973-1974 Arab oil embargo. The Act established the world’s first CAFE standards for cars and light trucks. For cars specifically, the standards aimed to double fuel economy from 13.6 miles per gallon (mpg) in 1974 to 27.5 mpg by 1985. Separate standards for light trucks were set by NHTSA. The explicit goal of the new standards was to reduce US dependence on foreign oil, not to address environmental or public health concerns.

1980 "Gas-guzzler" Tax followed by period of stagnation

To further promote fuel efficiency, the Energy Tax Act of 1978 introduced a special tax on “gas-guzzler” passenger cars. Beginning in 1980, passenger vehicles that failed to reach a minimum fuel economy requirement of 15 mpg qualified for the gas-guzzler tax; in 1991 the minimum was increased to 22.5 mpg, and has remained at that level for over two decades. It is important to note, however, that light trucks, vans, and SUVs are exempt from gas-guzzler tax penalties, despite widespread use as passenger vehicles.

2005-2007 and 2008-2011 CAFE reform for light trucks

The first updates to the US' CAFE standards in three decades were two revisions of the CAFE standards for light-trucks. First, in 2003 NHTSA issued a new regulation to gradually raise the average fuel economy of light trucks over the model years 2005-2007, reaching 22.2 mpg in 2007. Second, a more dramatic revision took effect over model years 2008-2011. This second revision broadened the categories of vehicles covered by the standards to include the heaviest SUVs, improved the CAFE stringency for these vehicles, and established vehicle footprint as a compliance metric. Prior to this, all light trucks were treated equally.

2012-2016 CAFE/GHG Standards

Following an announcement by President Obama in May 2009, the US adopted an aggressive approach to reduce GHG emissions. For the first time, regulation jointly set GHG emissions and CAFE standards in response to a 2007 US Supreme Court ruling that CO2 is considered a "pollutant" under the CAA. It was also the first time GHG emissions were regulated at the federal level. The authority to regulate GHG emissions fell under EPA, while NHTSA retained control over CAFE standards. The average light duty vehicle GHG emission rate is reduced from the average model year 2009 level of 337 gCO2e/mile to 250 gCO2e/mile for model year 2016, a 26% reduction. The estimated improvement in fuel economy by model year 2016 is 29%, from an average 2009 level of 26.4 mpg to 34.1 mpg. Annually, this is a 4.2% reduction per model year in the average GHG emissions, and 3.7% increase per model year in miles-per-gallon fuel economy.

2017-2025 CAFE/GHG Standards

Following the successful adoption of a National Program for GHG and fuel economy standards for MYs 2012-2016 vehicles, President Obama requested the agencies to continue their efforts to develop a second phase of the National Program, with standards for MYs 2017-2025 light-duty vehicles. In August 2012, EPA & NHTSA jointly issued GHG emissions and fuel economy standards to cover model years 2017 to 2025. The average light-duty vehicle GHG emission rate is reduced from the MY 2016 level of 250 gCO2e/mile to 163 gCO2e/mile for MY 2025, a 35% reduction. Combined fuel economy for passenger cars, light-duty trucks, and SUVs is estimated to increase from an average MY 2016 level of 34.1 mpg to 49.6 mpg in 2025, an increase of 45%. This results in an annual reduction of 4.6% per model year in the average GHG emissions, and a 4.25% increase per model year in miles-per-gallon fuel economy.

1978-2004 CAFE standards
NHTSA regulates CAFE standards. CAFE standards began in 1978 and were significantly reformed in 2010. Mile-per-gallon standards for 1978-2004 for passenger vehicles and light-duty trucks are listed below.

2005-2007 CAFE standards for light trucks
In May 2003, NHTSA established CAFE standards for light trucks for MYs 2005-2007. CAFE standards were increased for light trucks but remained the same for passenger vehicles.

2008-2011 CAFE reform for light trucks
In 2006, reforms to the CAFE standards for light trucks were adopted, and took effect in 2011. During a transition period from 2008-2010, manufacturers had the choice of complying either with the unreformed CAFE standards or with the reformed CAFE rules.

Under the reformed CAFE, each manufacturer's required level of CAFE was based on target levels set according to vehicle size. The targets were assigned according to a vehicle's footprint: the product of the average track width (the distance between the centerline of the tires) and wheelbase (the distance between the centers of the axles). Each vehicle footprint value was assigned a target specific to that footprint value. Compliance was determined by comparing a manufacturer&rsquo;s fleet average fuel economy in a model year with a required fuel economy level calculated using the manufacturer's actual production levels and the category targets.

The target values were determined from the following continuous mathematical equation, based on the vehicle footprint and four parameters (a ... d) which are adopted for each model year. T = [1/a + (1/b - 1/a) e(x-c)/d/(1 + e(x-c)/d)]-1 where:

T - fuel economy target, mpg

a - maximum fuel economy target, mpg

b - minimum fuel economy target, mpg

c - footprint value at which the fuel economy target is midway between a and b, ft2

d - parameter defining the rate at which the value of targets decline from the largest to smallest values, ft2

e = 2.718

x - footprint of the vehicle model, ft2

The resulting CAFE target curve was an elongated S-shape, with fuel economy targets decreasing from a to b as the footprint increases.

The reformed CAFE regulation also applied to medium duty passenger vehicles (MDPVs) of GVWR up to 10,000 lbs as part of the MY 2011 regulated light truck fleet. Thus, the regulation captured nearly all larger size passenger vans and SUVs which were excluded from previous CAFE standards. (The weight limit for cargo vans and pickup trucks remained at 8,500 lbs.) The US Department of Transportation (DOT) estimated that the average light truck target required of manufacturers under the reformed CAFE rule in MY 2011 would be 24.0 mpg.

2012-2016 CAFE/GHG
In May 2010, EPA and NHTSA issued a joint final rule applicable to passenger vehicles and light trucks covering model years 2012-2016. The regulation mandated a reduction in GHG emissions and a combined CAFE standard of 34.1 mpg by 2016 under the US CAFE combined driving test cycle. Combined with improvement of vehicle A/C systems and use of flexible-fuel vehicles, fuel economy is expected to result in improvement levels equivalent to 35.5 mpg (250 gCO2e/mile). The final rule provisions are largely unchanged from the proposed rule issued on September 15, 2009. In addition, EPA granted a waiver to California to implement its GHG standard for MYs 2009-2011 vehicles. California also agreed to forgo its own 2012-2016 program and comply with the new federal program for 2012-2016 vehicles.

Key Elements


 * Applicability - EPA will regulate GHG emissions from passenger vehicles up to 8,500 lbs. GVWR (plus medium-duty SUVs and passenger vans up to 10,000 pounds).
 * CO2 Testing - The program sets standards for CO2 emissions on the combined US federal test procedure (FTP) and highway cycles.
 * Additional GHGs - There are additional provisions for the non-CO2 GHG emissions of hydrofluorocarbons (HFCs) from vehicle air conditioning systems and per-vehicle emission caps set for nitrous oxide (N2O) and methane (CH4) emissions. EPA did not consider the global warming potential of other emissions (e.g., black carbon).
 * Stringency - The average light duty vehicle GHG emission rate is reduced from the average MY 2009 level of 337 gCO2e/mile to 250 gCO2e/mile for MY 2016, a 26% reduction. The estimated improvement in fuel economy by MY 2016 is 29%, from an average MY 2009 level of 26.4 mpg to 34.1 mpg. Annually, this is a 4.2% reduction per model year in the average GHG emissions, and 3.7% increase per model year in miles-per-gallon fuel economy.
 * Regulatory design - The standards use a vehicle size-based standard for two vehicle categories, following the current NHTSA fuel economy standard framework. The program sets separate numerical standards for vehicle size or “footprint” (i.e., the area defined by the wheelbase and average track width) for passenger cars and for light trucks. In contrast to previous federal regulation, which employ an S-shaped constrained logistical curve, the new system uses “piecewise linear” functions between vehicle footprint and the test-cycle GHG emission rate. This general shape allows for different-size vehicles to have different standards in the sloped portion, but constrains the largest vehicles at the upper bend and incentivizes vehicles below the lower bend. The changes in the final rule from the proposal are slight.

Because there are two categories, car and truck, and the standards are based on the footprint attributes of future year vehicle sales, the exact GHG and fuel economy outcomes are unknown and subject to the sales mix of vehicles sold from 2012 to 2016.

The footprint-based system means that selling more small vehicles does not necessarily help manufacturers meet the standards. Smaller vehicles are subject to more stringent requirements, such that a manufacturer of smaller vehicles has a lower CO2 standard while a manufacturer of larger vehicles has a higher CO2 standard. Footprint systems encourage improvements in efficiency, regardless of vehicles size, and have relatively little impact on vehicle size mix. Unlike a weight-based standard, a footprint-based standard encourages use of lightweight materials while maintaining the vehicle size, without subjecting the manufacturers to a higher CO2 requirement. Each auto manufacturer will ultimately have a different footprint-based standard for 2012 to 2016 based on its sales mix of vehicles at each vehicle size. See ICCT's analysis for an in-depth write-up of the 2012-2016 standards.

2017-2025 CAFE/GHG
In August 2012, EPA and NHTSA issued a joint final rulemaking for GHG emission and fuel economy standards for MYs 2017-2025 light-duty vehicles, including passenger cars, light-duty trucks and medium-duty passenger vehicles. The adopted rule follows the proposal released in November 2011. For additional information, see the EPA's Fact Sheet and the final rule.

The EPA GHG standards are projected to require, on an average industry fleet-wide basis, 163 g/mile of CO2 in MY 2025, which is equivalent to 54.5 mpg (4.3 L/100km) if this level were achieved solely through improvements in fuel efficiency. However, it is expected that a portion of the GHG emission reduction will be made through improvements in air conditioning leakage and through use of alternative refrigerants, which does not contribute to fuel economy.

For more information, see the full text of ICCT's analysis. Summary highlights are below and are contained in the EPA's Fact Sheet of 2017-2025 Standards

Key Elements of the Program


 * GHG Reductions - The average light-duty vehicle GHG emission rate was reduced from the 2016 level of 250 gCO2e/mile to 163 gCO2e/mile for MY 2025, a 35% reduction. Passenger vehicle fuel economy is estimated to increase from an average MY 2016 level of 34.1 to 49.6 mpg in 2025, an increase of 45%. Annually, this is a 4.6% reduction per model year in the average GHG emissions, and 4.25% increase per model year in miles-per-gallon fuel economy.


 * Credit Provisions - Emission reduction compliance credits include air-conditioning system technology, flexible fuel vehicle deployment, off-cycle technologies, incentives for electric vehicles, and “game-changing” technologies installed on pickup trucks. Of these credits, only the air-conditioning credits and some off cycle technology credits reflect real-world emission reductions that are not included on the compliance test cycles. The others reduce the overall stringency of the standards, without corresponding reductions in real-world emissions.


 * Regulatory design - The rules use a vehicle size-based standard for two vehicle categories, following the current 2012–2016 standard framework. Separate numerical standards for vehicle size or “footprint” are used for passenger cars and for light trucks. Because there are two categories, car and truck, and the standards are based on the footprint attributes of future year vehicle sales, the exact GHG and fuel economy outcome from the program is somewhat unknown and subject to the sales mix of vehicles sold in the future. Each auto manufacturer will ultimately have a different footprint-based standard based on its sales mix of vehicles at each vehicle size and its car and light truck sales mix.


 * Consistent improvements - The 2022–2025 standards set consistent improvements for all cars and light trucks, with annual CAFE increases of 4.7% per year and annual CO2 reductions of 5.0% per year. Both EPA and NHTSA set a lower annual rate of improvement for light-trucks in the early years of the program. EPA set an annual CO2 reduction for cars of 5%, but only 3.5% for light trucks. Similarly, NHTSA set an annual fuel economy increase of 4.3% for cars, but only 2.9% for light trucks. The required reductions for light trucks are also tilted, such that the smallest light trucks have larger increases (but still less than cars), while the larger light trucks have smaller increases. The annual fuel economy increase from 2016 to 2025 for cars is almost flat and ranges from 4.4% to 4.5%. The annual fuel economy increase for light trucks starts at 4.3% for the smallest trucks, drops to 3.4% for larger SUVs, and falls off to only 2.2% for the largest pickup trucks.

International context - The U.S. agreement for 250 gCO2/mile is equivalent to about 172 gCO2e/km when miles are converted to kilometers and adjusted to the European driving cycle. The 2025 standard of 163 gCO2e/mile is similarly equivalent to 107 gCO2e/km. Note that the US light-duty standard is composed of passenger cars as well as light-duty trucks. When passenger cars alone are taken in to account, the 2025 standard is equivalent to 91 gCO2e/km when adjusted for European driving cycle. For more information on European standards, see the European Light-duty GHG page.

Testing
CAFE fuel economy testing is done over the Federal Test Procedure 75 (FTP-75) weighted with the highway cycle to determine compliance. CAFE certification is typically done based on fuel economy data provided by the manufacturers. In some cases, 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 EPA/Department of Energy (DOE) in the Fuel Economy Guide report and on new vehicle labels. There are two sets of fuel economy figures:


 * EPA's unadjusted dynamometer values, which are equal to NHTSA's CAFE values
 * EPA's adjusted on-road values

The unadjusted EPA values are calculated based on a carbon balance equation measured over the dynamometer test. These values are also used directly for compliance with NHTSA's CAFE standards. In 2008, additional test cycles were included only for the calculation of EPA's adjusted onroad values, to better reflect true driving conditions: US06 for high-speed driving and SC03 for using air conditioning while driving.

The CAFE values - used to determine manufacturer's compliance with the average fuel economy standards - are significantly higher than the EPA on-road values. Furthermore, the following caveats apply to the CAFE values:
 * 1) The unreformed CAFE standards (before MY 2011) did not apply to vehicles above 8,500 lbs GVWR. Many pickup trucks which belong to this category were, and still are, excluded from CAFE data. Some of the largest SUVs and passenger vans (GVWR 8,500 - 10,000) are included.
 * 2) Credits are provided for alternative fuel vehicles. The CAFE fuel economy of an alternative fueled vehicle is calculated by dividing its real fuel economy by a factor of 0.15. For instance, a 15 mpg natural gas vehicle will be rated as a 100 mpg gasoline vehicle. For bi-fuel vehicles, this calculation is applied to the expected percentage of alternative fuel use.
 * 3) Manufacturers who exceed the standards earn CAFE credits, which can be applied to any three consecutive model years immediately prior or subsequent to the model year in which the credit was earned.

Additional resources include the FTP75 Test Procedures page and the EPA Test Schedule website.

Compliance and Enforcement
CAFE fuel economy figures achieved for the total US market fleet of cars, light trucks, and the combined cars and LDTs since 2000 are listed below (in mpg and in the metric units of liters per 100 km).

Manufacturers whose fleets fail to meet CAFE standards are liable for a civil penalty of $5.50 per each tenth of a mpg under the target value times the total volume of vehicles manufactured for a given model year. From 1983 to 2004, manufacturers paid more than $618 million in civil penalties. Most European manufacturers regularly pay CAFE civil penalties ranging from less than $1 million to more than $27 million annually. Asian and US manufacturers have never paid a civil penalty.

Data Collection and Verification
The US’ fuel economy data collection and verification system is highly developed in comparison to other countries. EPA has extensive requirements defining all aspects of testing. Additional details can be found on the EPA's Testing and Measuring Emissions website. Key steps in fuel economy data collection and verification under the US CAFE system are:
 * 1) Manufacturers test 90 percent of vehicle sales by configuration and report the data to EPA.
 * 2) EPA reviews and judges the acceptability of manufacturer reported data.
 * 3) In addition to reviewing manufacturer data, EPA conducts confirmatory test for 10-15 percent of fuel economy data vehicles and determines the fuel economy of test vehicles based on comparison of its own results and the data from manufacturers.
 * 4) After manufacturers submit the actual production data of a model year, EPA calculates and verifies the average fuel economy of the manufacturers.
 * 5) EPA has the authority to confirm the manufacturer's road load determination, used to properly reflect in-use loads on the vehicle while driving.
 * 6) EPA requires in-use verification testing of vehicles in-use.

Regulatory Documents
40 CFR Part 86 - Control of Emissions from New and In-use Highway Vehicles and Engines, Part 1 (Volume 15) Part II (Volume 16)
 * 2012-2016 Final Rule Official Text
 * 2017-2025 Standards Final Rule
 * 2017-2025 Standards Fact Sheet

Regulatory agencies
 * NHSTA CAFE
 * EPA Office of Transportation and Air Quality climate