CAFE and CO2 Standards
Corporate Average Fuel Economy (CAFE) standards strive to achieve reduced greenhouse gas emissions through a reduction in the amount of fuel new vehicles burn. Manufacturers are given a fuel economy rating, measured in miles per gallon (mpg), that their fleet as a whole must average in a given model year. Congress passed a law in 1973 directing the EPA to set CAFE standards, making these standards a tool exclusively wielded by the federal government. The federal government finalized new fuel-economy standards as well as a national carbon dioxide (CO2) emissions tailpipe standard in April 2009. The two issues are related, since CO2 is released in direct proportion to the amount of carbon-based fuel that is burned. Under the new rules, the National Highway Traffic Safety Administration (NHTSA) has set CAFE standards for model year 2012-2016 vehicles, and the EPA has established corresponding CO2 emissions standards. The combined action would match CO2 emission standards previously adopted by California and 13 other states.

The CAFE rating will be 35.5 mpg in 2016, based on a combined 39 mpg rating for passenger cars and 30 mpg for light trucks. The EPA's CO2 emissions standard is 250 grams per mile for vehicles sold in 2016, roughly the equivalent of 35.5 mpg. The automakers supported and helped formulate the rules since they provide a reasonable national approach to regulating CO2 emissions rather than a patchwork of state rules.

NHTSA will use an attribute-based system, which sets CAFE standards for individual fleets of vehicles based on size, taking into account the differences between cars and light trucks (SUVs, pickups, and vans). Individual car companies will have flexibility on how to achieve the rules, whether placing more emphasis on hybrids or reducing vehicle size and weight. Nevertheless, a standard based on each vehicle's footprint should force automakers to increase the efficiency of every vehicle rather than downsizing some vehicles in order to offset the sale of bigger cars.

While the new CAFE and CO2 standards for 2016 are reasonable, the Obama Administration announced plans to put in place stronger rules for 2017 and beyond. In May, President Obama directed the EPA to also reduce emissions of conventional pollutants, such as nitrogen oxides. The president also instructed regulators to establish fuel economy and CO2 standards for medium- and heavy-duty trucks for the first time beginning in model year 2014. Since the government is to regulate CO2 emissions from automobiles, it should do so through the CAFE standards and not allow any individual state to set overly harsh standards.

The California Air Resources Board (CARB) is also pursuing CO2 standards for model year 2017-25 cars and trucks. CARB intends to coordinate its action with the EPA and NHTSA, along with the automakers and other stakeholders, with the goal of setting a single national standard. Federal regulators intend to issue a "game plan" for model year 2017-25 light-duty vehicles by September 2010, and adopt a final rule by mid 2012, while CARB officials want to complete action on the CO2 standards by the end of 2010.

While we're all for ensuring everyone has clean air to breathe, drastically increased CAFE potentially limits consumer choice if manufacturers are forced to make smaller, less powerful and less useful cars and light-duty vehicles in order to meet government fuel economy demands. Market-based solutions must be employed, which allow the consumer to participate in and respond to national energy policies.