Higher Fuel Efficiency Standards Approved by House

Published December 7, 2007

The U.S. House of Representatives approved the Energy Independence and Security Act, a comprehensive bill that includes historic changes to corporate average fuel economy (CAFE) regulations. The bill now goes to the U.S. Senate where passage is not certain. And then, if it clears the Senate, it could face a Presidential veto.

Ironically, given the heated public debate over CAFE this year, the remaining controversy is about other issues. The auto industry, the UAW, and their champions in the Congress now support the compromise reached.

The CAFE changes are sweeping. By 2020 the new vehicle fleet will need to attain 35 miles per gallon, 40 percent higher than the standard is today—the first significant increase in over 20 years. For the first time the standards for both cars and light trucks will be coordinated and set by one agency (NHTSA with input from EPA and Energy).

Several key provisions were key to UAW and the auto industry support. The UAW successfully lobbied for continuing to protect small-car production in the U.S. by applying the car CAFE standard separately to import and domestic cars. The flex-fuel credit for E85-capable vehicles was extended for several years and expanded to include bio-diesel.

Most importantly, the distinction between cars and light trucks will be maintained, with separate standards for each. NHTSA will be responsible for coordinating the two standards to ensure that the combined average fuel economy reaches 35 miles per gallon in 2020. In addition, an automaker can use credits for exceeding the target in one fleet to make up a shortfall in the other fleet. Effectively this makes the new CAFE a two-function-one-standard system. The ability to transfer credits from one fleet to the other gives automakers greater flexibility than they have under the old CAFE system.

Under the old system, NHTSA set the standard for light trucks but not cars, and also had the authority to determine which new vehicle models were light trucks. Not quite like the fox getting to decide which hens share the henhouse with the fox-friendly door, but close. The new system, by giving NHTSA authority over both cars and light trucks, reduces the temptation for NHTSA to continue to expand the definition of “light truck.” However, the automakers will continue to benefit from expanding the definition of “light truck,” so the expansion may be slowed but probably not stopped.