Transcript Corporate Average Fuel Economy (CAFE) Standards Jennifer Alexander Spring 2008

Corporate Average Fuel
Economy (CAFE) Standards
Jennifer Alexander
Spring 2008
Outline
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Energy Policy Conservation Act of 1975
CAFE Program and how it is administered
How standards are calculated
Light Truck program
New Light truck standards
Energy Independence and Security Act of
2007
Energy Policy Conservation Act
49 USC 329
-Passed in 1975, in response to Arab oil embargo
-In 1974, average passenger car fuel economy was 12.9
mpg
-Title V: “Improving Automotive Efficiency”
- Established CAFE standards for passenger cars for model year
(”MY”) 1978-MY1980 and 1985 and beyond, and for light trucks
beginning in MY1979.
-Standards in 1978 were to be 18 mpg, 19 mpg in 1979, 20 mpg in
1980 and 27.5 in 1985, which has remained constant until today
-Secretary of Transportation (DOT) set standards for interim years of 81-84
-Goal was to double new car fuel efficiency by 1985
Who Administers the Program?
• EPCA granted National Highway Transportation
Safety Administration (NHTSA), part of the
Department of Transportation, the authority to
administer the CAFE program.
• EPCA (Congress) set standards for passenger
cars.
• NHTSA has the authority to set standards for other
classes of vehicles, including light trucks.
 After 1985, Secretary of Transportation has
discretion to adjust passenger car standard within
range of 26.0 and 27.5mpg. An increase above or
below requires Secretary to issue amendment
which is in force until Congress disapproves.
 Secretary has much broader discretion with
regards to light trucks. Congress set no specific
standards, and left it up to DOT
 NHTSA also does things such as: establishes and
amends standards, promulgates regulations
regarding CAFE procedures, enforces standards,
considers petitions for exemptions, collects
manufacturers reports, and more.
 EPA has responsibility for calculating fuel economy
for each manufacturer
“Maximum Feasible Fuel Economy
Standards”
EPCA dictates that DOT’s determination to
change standards must be made in
consideration of 4 factors:
1) Technological Feasibility
2) Economic Practicability
3) Effect of other standards on fuel economy;
and
4) Need of the nation to conserve energy
49 USC 32902(a)
 Cafe Standard is:
– “a performance standard specifying a minimum level of average
fuel economy applicable to a manufacturer in a model year”
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49 USC 32901(a)(6)
 Automobile is defined:
– “A four wheeled vehicle that is propelled by fuel, or by alternative
fuel, manufactured primarily for use on public streets, roads, and
highways…and rated at –
 Not more than 6,000 lbs gross vehicle weight, or
 More than 6,000 pounds GVW, if the secretary decides by
regulation that– An average fuel economy standard under this chapter is feasible,
and
– […] the vehicle is substantially used for the same purposes as a
vehicle rated at not more than 6,000 lbs GVR”
 49 USC 32901(a)(3)
 Passenger Automobile:
– “Automobile that the Secretary decides by regulation is manufactured
primarily for transporting not more than 10 individuals, but does not include
an automobile capable of off-highway operation that the Secretary decides
by regulation Has a significant feature (except 4-wheel drive) designed for offhighway operation; and
 Is a 4-wheel drive automobile or is rated at more than 6,000 pounds
GVWR”
49 USC 32901(a)(16)
 Light truck: (set out in regulations, not EPCA)
– Automobile other than a passenger automobile which is either designed for
off-highway operation, or
– Is rated at more than 6,000 lbs GVW; and
– That has at least four of the following characteristics [affecting off road
capability relating to approach angle, breakover angle, departure angle,
running clearance, and front and rear axle clearance]
CAFE Calculation
“Two-Fleet Rule”: Domestic and foreign produced cars
measured separately, each must meet standard
 No such two-fleet rule for light trucks
 Fleet average is a sales weighted mean
 Compliance is measured by using harmonic mean
calculation
Fleet’s
Fuel
Economy
=
How is fuel economy determined?
 3 sets of calculations: NHTSA’s figures, EPA’s unadjusted
dynamometer values, and EPA’s adjusted on-road values.
 EPA does laboratory tests that measure emissions, and
based on amount of carbon emitted during the test they
determine the fuel economy.
 Adjusted values are the ones currently listed on new car
labels, they are adjusted for a number of factors.
 EPA used to perform tests in 75* weather, with acceleration
and speeds lower than average driver uses, and without
accessories turned on (AC, radio).
Ann Arbor, MI
Chevy Silverado being tested
in dynamometer
EPA’s new fuel economy stickers
 New test methods (appearing on MY2008 stickers) will
bring estimates closer to actual fuel economy by factoring
in 1) high speeds and quicker accelerations, 2) air
conditioning use, 3) and driving in cold temperatures, as
well as road conditions, tire pressure, load, and different
fuels.
 Beginning in 2011, labels will be required on certain
vehicles up to 10,000 lbs GVWR
 Labels are redesigned to make it easier for consumers to
compare vehicles
 In 2011, more vehicle specific testing to be done, for
vehicles most sensitive to the 3 new adjustments
Penalties
If average fuel economy of a manufacturer’s fleet falls
below the standard, manufacturer must pay penalty of
$5.50 per 0.1 mpg below the standard, times the total
number of vehicles in fleet for that model year in violation
 Since 1983, over $675M in penalties paid
 Most European manufacturers regularly pay, Asian and the
big domestic companies have never paid fines.
 In 2006, Maserati, BMW, Porsche, Volkswagen, and
DaimlerChrysler ($30M) all paid fines in excess of $1M
(and Ferrari paid $850K)
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Offsets
 Manufacturers can earn credits for any year they exceed
the standard for that fleet
 Credits can be “banked” for up to three years
 Offsets can be used to cover penalties up to three years
 The amount of credit a manufacturer earns is determined
by multiplying the tenths of a mile per gallon that the
manufacturer exceeded the CAFE standard in that model
year by the amount of vehicles they manufactured in that
model year
 “Carry Back Plan” – can be used to avoid penalties when
manufacturer is in violation and has no credits. Must
submit plan to NHTSA detailing what manufacturer plans to
do in the next 3 years to make up the current deficit
Alternative Fuel Vehicles
 49 USC 32905- Manufacturing incentives for
alternative fuel automobiles
 Dual fuel calculation used as incentive to
develop alternative fuel vehicles.
 Dual fuel vehicles can take advantage of
this credit, even though less than 1% of the
fuel used in E85 capable vehicles is E85.
Alternative Fuel Vehicles
- For vehicles that use only an alternative fuel,
fuel economy is calculated by dividing its fuel
economy in equivalent miles per gallon of
gasoline or diesel fuel by 0.15. So a Car that gets
15 mpg alternative fuel is equal to 100 mpg gas
- Dual Fuel Vehicles – average of fuel
economy on gasoline/diesel with fuel economy on alternative fuel,
divided by 0.15. 1/{0.5/(mpg gas) + 0.5/(mpg alt fuel)} = 1/{0.5/25 +
0.5/100) = fuel economy for duel fuel vehicle
 Natural gas vehicles - weighted average on using natural gas and
gasoline/diesel. Alternative Motor Fuels Act says that 1003 ft of
natural gas is equal to 0.823 gallons of gasoline. Same 0.15
equivalency to gasoline for natural gas. For a car that gets 25 mpg
for natural gas:
– CAFE FE = (25/100) * (100/.823)*(1/0.15) = 203 mpg
Light Trucks
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Originally light trucks were up to
6,000 lbs gross vehicle weight
rating (GVWR).
As of 1980 light truck standards are
for trucks up to 8,500 lbs GVWR
Before 1992, there was a “two-fleet
rule” for LDTs – 4-wheel drive and
2-wheel drive LDTs measured
seperately.
In MY1979, first year of LDT
standards, standard was 17.2 for 2wheel and 15.8 for 4-wheel drive.
Standard progressively increased to
20.7 in 1996, when DOT
Appropriations included a
prohibition against making any
adjustments past 20.7mpg
Change in LDT standard
 In conference on 2001 DOT appropriations bill, Senate
insisted the freeze on LDT CAFE standard be dropped
 This opened the way for NHTSA to begin rulemaking to
increase LDT standard again
 In December 2002, believing that “some manufacturers
may be able to achieve higher CAFE performance than
they currently project”1, NHTSA proposed a rule increasing
LDT CAFE to 21.0 mpg in MY2005, 21.6 mpg in MY2006,
and 22.2 mpg in MY2007.
 On April 3, 2003, NHTSA adopted this proposed rule.
New Light Truck Rules (MY2008-2011)
 In April 2006, NHTSA issued a Final Rule
increasing stringency of LDT program standards,
and restructuring the way the standards are
calculated – “Reformed Standards”
 First phase of new rules was to be MY2008-2011.
 Before 2011, manufacturers can choose to use
reformed or unreformed standards to calculate
compliance. Unreformed standards use current
system of single average mandated for entire fleet.
 For the first time, medium-duty passenger
vehicles, vehicles between 8,500 GVW and
10,000 GVW will be subject to CAFE standards.
Unreformed CAFE standards up to 2011
Reformed Standards for LDT’s
 Fuel Economy standard no longer one uniform number, but
based on “footprint” of car- product of vehicle’s wheelbase
(distance between the centers of the axels) and its track
width (distance between center line of the tired)
 Using continuous mathematical formula, in which a target
fuel economy would be set for each increment in footprint
Incremental fuel economy
standard in final rule
 Smaller footprint trucks had higher targets, larger
footprint trucks had lower fuel economy targets
 Manufacturer’s mandated fuel economy is
calculated based on sales weighted average of
targets for each vehicle line.
 Manufacturers who make more small trucks would
have to meet a higher standard, and those who
make primarily large trucks would have to meet a
lower overall standard
 No particular overall standard a manufacturer had
to meet. No specific vehicle is required to meet
specific fuel economy, only required that average
meets standard that is based on the overall fleet
mix
Proposed Reformed CAFE Standards (miles per gallon)
(from Notice of Proposed Rulemaking, but not actually adopted.)
Category
1
2
3
4
5
6
Range of vehicle footprint (in
square feet)
<=4
3.0
>43.07–
47.0
>47.0–
52.0
>52.0–
56.5
>56.5–
65.0
>65
.0
MY 2008 targets
26.8
25.6
22.3
22.2
20.7
20.
4
MY 2009 targets
27.4
25.6
23.5
22.7
21.0
21.
0
MY 2010 targets
27.8
26.4
24.0
22.9
21.6
20.
8
MY 2011 targets
28.4
27.0
24.5
23.3
21.7
21.
2
Source: National Highway Traffic Safety Administration, Notice of Proposed Rulemaking, "Average Fuel Economy Standards for Light
Trucks Model Years 2008-2011," 49 CFR Parts 523, 533 and 537, Docket no. 2005-RIN2127-AJ61.
Challenge to NHTSA Final Rule
 11 states, DC, NYC, and four public interest organizations
filed petition for review of final rule for LDT MY2008MY2011, in Center for Biological Diversity v. NHTSA, 508
F.3d 508 (9th Cir. 2007).
 Challenged final rule under EPCA and NEPA.
 EPCA Arguments:
– Arbitrary and capricious and contrary to EPCA
– Agency did not set CAFE standards at “maximum feasible” levels.
– Cost-benefit analysis done by NHTSA gave no benefit to reducing
CO2 emissions,
– Using vehicle attributes to set fuel economy standard means there
is no “backstop”, or floor fuel economy to meet for a given year.
This will encourage manufacturers to make bigger vehicles.
– Did not address “SUV loophole”- allows these vehicles to meet
lower CAFE standard even though many are built on car platforms
and serve same function as passenger cars.
 Argued under NEPA that the final rule failed
to take a “hard look” at the GHG implications
of its rulemaking and they failed to look at
rule’s cumulative impact.
 NHTSA must prepare EIS, not just EA
th
9
Circuit overturns NHTSA rules
 Court found rules “arbitrary
and capricious” and
contrary to EPCA
 Court agreed with
possibility of having no
backstop on truck size
would continue to permit
upsizing, and failed to
prevent trucks from
emitting more CO2 than in
previous years
 The decision not to
address the “SUV
loophole” was arbitrary
and capricious, it was
contrary to the language of
 NHTSA incorrectly set value of
$0 to global warming damage
caused by truck usage
 NHTSA rules also failed to promulgate fuel economy
standards for vehicles weighing 8,500-10,000 lb GVW, nor
did they show that there was a “validly reasoned basis” for
not doing so.
 Environmental Assessment done was inadequate
 These rules may in fact have a significant impact on the
environment
 9th Circuit returned the rules to NHTSA, saying that they
must make new standards as “expeditiously as possible”
and fully evaluate the impacts of these standards on the
environment
Energy Independence and Security
Act of 2007
 P.L. 110-1040
 Omnibus energy policy
law aimed as
increasing energy
efficiency and
renewable energy
availability.
 Titles I-XVI
.
 President Bush signed
EISA into law
December 19, 2007
Highlights of EISA
 Title I- Energy Security Through Improved Vehicle Fuel
Economy
 Title II – Biofuels
 Title III - Standards for appliances and lighting
 Title VI – Research and Development
 Title VII – Carbon Capture and Sequestration
 Title X – Green Jobs
 Title XI – Energy Transportation and Infrastructure
 Title XII – Small Business Energy Programs
Title I – Fuel Economy
 Statute sets a 35 mpg standard for both
passenger cars and light duty trucks by
2020
 Although cars and trucks must meet the
same standard, they are still measured
separately.
 Can use attribute-based standards, which
Bush administration says will ensure
increased fuel economy doesn’t come at the
expense of safety
April 22 Update
(Earth Day…coincidence?)
 Administration announced interim standards for 2015 of
31.5 mpg (combined)
 Will force auto makers to speed up their development of
more fuel efficient vehicles.
 4.5 percent increase per year from 2011-2015
 Would be a 25 percent increase by 2015 (EISA requires
40% by 2020)
 DOT took carbon dioxide into account in its costs and
benefits analysis
 Manufacturer standard would be based on type of vehicles
they sell, based on vehicle “attributes”
 Manufacturers can sell credits
Conclusions and Implications for
Future
 Do regulations affect consumer choice? Or do gas prices?
 Will better fuel economy mean more driving, possibly
negating advances in fuel economy?
 How much will auto industry to do prevent further
increases, since they make more money off larger cars?
 Safety Impacts? Are smaller cars really inherently less
safe? Or do lower fuel economy standards for trucks just
allow automakers to make heavier cars, making it less safe
for drivers of small cars? Will increased standards help
move towards evening out auto weights across fleet lines?
Implications and thoughts (cont’d.)
 Should the timetable set have been shorter? Are auto
manufacturers given too much time to comply?
 Will a uniform standard for passenger cars and light trucks
mean the end of SUVs and minivans? These cars were
created in response to CAFE standards, because
standards for light duty truck were lower and these autos
could fit into this new category.
 Is it possible that rather than causing all the “doomsday”
situations opponents of tighter standards predict, that these
standards will finally force automakers to increase the
technology of engines, something many say should have
been done years ago, and actually effectively effectuate
Congress’s goals?