CAFE standards took effect in 1978. The fuel efficiency of the average passenger car sold in the United States in 1975 was approximately 13.5 miles per gallon.[*] “Passenger cars” includes vehicles such as sedans, station wagons and sports cars. When they were first created, the regulations required an automaker’s new passenger car fleet to average a minimum of 18 mpg by 1978. This requirement was gradually increased to 27.5 mpg by 1985. In 1979, a separate standard was created for light trucks, which include minivans, pickups and SUVs. Two-wheel-drive light trucks had to meet a minimum standard of 17.2 mpg, while four-wheel-drive ones needed to average at least 15.8 mpg. A combined light truck standard for two- and four-wheel-drive trucks was created in 1982 at 17.5 mpg, which was increased to 20.5 mpg in 1987.[2]
The 1975 law called for CAFE standards for passenger cars to increase every year from 1978 until 1986. In 1986, the standard was lowered from 27.5 mpg to 26 mpg but raised to 26.5 mpg in 1989 and then to 27.5 mpg in 1990, where it remained until 2011. A similar pattern followed for light trucks: The standards increased annually after the original law was passed, but they remained about the same from the late 1980s until 2004.[†]
Not every vehicle an automaker makes needs to meet the CAFE standards on its own. Instead, it is the manufacturer’s fleet that must meet the standard.[‡] Average fleet mileage is calculated separately for an automaker’s domestic and imported fleet and for its passenger cars and light trucks. “Domestic fleet” is defined as vehicles containing over 75% domestic content, defined as parts originating in the United States.[3]
Automakers that fail to meet CAFE standards are subject to a penalty of $55 for every one mpg under the standard for each car they sell.[4] A 2016 rule increased this penalty to $14 for every 1/10th of a mile under the standards, or $140 per mile. But under the Trump administration, the National Highway Transportation Safety Administration first delayed then sought to roll back the increase. A coalition of states and environmental groups, led by the state of New York, objected to the rollback, filed suit. New York prevailed at the U.S. Circuit Court for the 2nd Circuit, effectively reversing the rollback.[5]
Automakers can bank the miles by which they exceed one year’s standard and apply them to deficiencies in the previous three years, or up to five years in the future.[6] The Energy Independence and Security Act of 2007 also establishes a provision by which automakers that exceed the requirement in a given year are credited with miles they can bank for future years or sell to automakers who fall short.[7] This gives automakers such as Toyota and Honda an incentive to continue to improve their fleet’s fuel economy, even though they historically exceed CAFE standards, as they can sell their surplus credits to automakers that fall short.[8] A credit-trading program also reduces the cost of complying with the standards, as automakers that can improve their vehicle mileage at a low cost can bank credits and trade them to automakers that can only improve vehicle mileage at a higher cost.[9]
After 2010, the National Highway Traffic Safety Administration changed the standard for passenger cars and light trucks from a single one to variable standards based on a vehicle’s “footprint.” A footprint is defined as the area of the rectangle made by a vehicle’s four tires, when they are touching the ground, measured in square feet.[10] As the vehicle’s footprint increases, the mileage standard the vehicle must meet decreases, and vice versa, with the mileage standard for all footprints increasing over time. The CAFE standard for a vehicle is determined with a mathematical formula based on vehicle footprints.[§] The goal behind the footprint-based CAFE standards is to prevent automakers from meeting the mileage requirement by reducing vehicle size and weight, and thereby, reducing vehicle safety.
Carnegie Mellon University engineering professor Kate S. Whitefoot and University of Michigan engineering professor Steven J. Skerlos find that the footprint-based CAFE standard gives automakers an incentive to increase vehicle size and weight. They estimate that this increases vehicle size between 2% and 32% and decreases fuel efficiency by 1% to 4%. This incentive is larger for light trucks than for passenger cars, which increases the safety risk for the latter because they are more vulnerable in accidents involving light trucks. University of California-San Diego and National Bureau of Economic Research economist Mark R. Jacobsen points out that the footprint-based standard increases the cost of the CAFE standards program. The reason is that automakers can no longer meet the mileage standard by reducing vehicle size and weight, which may be the low-cost way to meet the standard. Instead, automakers must meet the standard by investing in new mileage-improving technology at higher cost.[11]
Another potential goal of shifting to a footprint-based standard is to offset the competitive advantage that CAFE standards give foreign automakers, such as Toyota and Honda. These automakers were already producing smaller, more fuel-efficient vehicles than the Big Three, which allowed them to meet CAFE standards at a lower cost. The footprint-based standard provides the Big Three an opportunity to meet the standards even with their larger, less fuel-efficient vehicles.[12]
The mileage standard in the new vehicle market for any given year depends on how many vehicles are manufactured at a given footprint. The goal of the Energy Independence and Security Act of 2007 was to increase the average projected new vehicle mileage across passenger cars and light trucks to 35 mpg by 2020, meaning the mileage standards for each footprint increases over time, as Graphics 1 and 2 illustrate.[13]
Graphic 1: Footprint-Based CAFE Targets, Passenger Cars, Model Years 2012-16
Graphic 2: Footprint-Based CAFE Targets, Light Trucks, Model Years 2012-16
President Barack Obama announced in 2011 that CAFE standards would be increased to a projected average of 54.5 mpg across passenger cars and light trucks by 2025, following the same footprint-based system.[14] The Trump Administration rolled this back to 43 mpg, but this rollback was undone by the Biden administration.[15] Rules enacted in late 2021 will raise the standard to 55 mpg by the 2026 model year.[16] Graphics 3 and 4 illustrate.[**]
Graphic 3: Footprint-Based CAFE Targets, Passenger Cars, Model Years 2017-26
Graphic 4: Footprint-Based CAFE Targets, Light Trucks, Model Years 2017-26
The final CAFE standards rule provides some examples of vehicles at various footprints, which Graphic 5 illustrates.[††]
Graphic 5: Vehicle Types, Footprints and Model Year 2025 Fuel Standards
[*] A “passenger automobile,” according to the definition in federal regulations, is a vehicle “manufactured primarily for use in the transportation of not more than 10 individuals.” “Non-passenger automobiles” are vehicles designed to carry more than 10 people, provide more space for carrying cargo than passengers, or have four-wheel drive. U.S. 49 CFR §§ 23.4-5.
[†] The reason for the momentary drop in standards is that General Motors and Ford were falling short of CAFE standards and thus would be subject to a substantial fine. For GM, the fine was estimated to be $400 million, or 10% of its 1985 profit. For information on the fine, see Robert W. Crandall “Why Should We Regulate Fuel Economy at All?” The Brookings Review, 3, no. 3 (1985): 3-7, https://perma.cc/FLY2-6Y7A. General Motor’s profit in the mid-to-late 1980s can be found at John Holusha, “G.M. Profit Fell 26.1% Last Year (The New York Times, Feb. 6, 1987), https://perma.cc/99CR-8SE6.
[‡] The fleet average is the production-weighted harmonic mean. The formula for CAFE standards is: Σwi / (Σwi/fi) where wi is the number of vehicles i, produced, while fi is the measured fuel economy of that vehicle. Σ is the summation symbol, which is a call to add up production and fuel economies for all vehicles in the manufacturer’s fleet. For example, suppose a manufacturer has two vehicles, a and b, with vehicle a getting 25 mpg and vehicle b getting 30 mpg. Suppose the manufacturer produces 2 units of a and 3 units of b. The harmonic mean would be (2+3)/(2/25+3/30)=27.8, which would then be compared to the CAFE standard. For more information on a harmonic mean, see “What is a Harmonic Mean?” (Investopedia.com), https://perma.cc/V7Z6-JUL5.
[§] The formula for the mileage standard is: 1⁄min[max((c*footprint)+d,1⁄a),1⁄b] where a is the upper limit in mpg, b is the lower limit in mpg, c is the slope of the linear function relating mileage to footprint (in other words, how the mileage standard increases as footprint decreases), while d is the intercept of the linear function. Both c and d are in gallons per mile. Parameters a, b, c and d are set by the Department of Transportation and the Environmental Protection Agency, in consultation with automakers, for each year. The formula and parameters for years 2012-16 for cars and light trucks are available in the Federal Register (see pages 1049, 1053, and 1061). It is available in draft form here on page 107: https://perma.cc/UNF7-PX8D.
[**] Parameters a, b, c and d for the formula given in the previous footnote for model years 2017-26 can be found on pp. 63190-63191 of the Federal Register: https://perma.cc/4256-FWFP. The formula for light trucks for model years 2017-26 changed to:
where parameters a, b, c, d, e, f and g (along with the formula) for 2017-19 can be found on page 63195 of the Federal Register: https://perma.cc/4PUM-R4RE. The a, b, c and d parameters for 2021-23 can be found on page 24189 of the Federal Register at https://perma.cc/J77D-KN52, while those parameters for 2024-26 can be found on pages 664-668 at: https://perma.cc/CEV8-E9PK. The parameters for 2024-26 are from “Alternative 2.5” which is the “Preferred Alternative.”[††] Table I-6, page 62648 of Volume 77, Number 199 of the Federal Register (October 12, 2012) gives the specific vehicles and their footprints, with mileage presented in Graphics 3 and 4, https://perma.cc/TLC9-XYZ7.