Attribute-Based CAFE Standards: A Primer

 Several current legislative proposals for increasing car and light truck fuel economy requirements call for changing the structure of the policy to one based on "vehicle attributes." What exactly does that mean?

In 2006, NHTSA finalized a rule for light trucks in which the fuel economy requirements of automakers will be determined by a particular attribute of the vehicles they produce, namely the "footprint," i.e., the surface area between the vehicle's wheels. A mathematical formula for determining a "target" fuel economy for each vehicle was set so that vehicles with larger footprints were held to less-stringent fuel economy levels. An individual vehicle model need not achieve the target fuel economy, but each manufacturer's vehicles must achieve the appropriate targets on average.

This scheme leads to an average fuel economy requirement for each manufacturer that is determined by the size mix of the vehicles it sells. The requirement therefore varies from manufacturer to manufacturer. This approach was developed to respond to the domestic manufacturers' complaint that the earlier light truck standards imposed a heavier burden on those whose vehicle mix included many big pickups and SUVs.

Bills in Congress. Current proposals on Capitol Hill, such as the Senate energy bill, call for a similar approach to fuel economy standards for all vehicles, including cars, although the vehicle attribute to be used (e.g., footprint, in the case of light trucks) has not yet been specified. Unfortunately, many negative comments on the legislative proposal fail to acknowledge this fact. Claims that the Senate's CAFE provision would force U.S. manufacturers to shift their production mix to small cars are patently false.

Current System. Under the current CAFE system for passenger cars, automakers can sell vehicles with a wide range of fuel economies, as long as the sales-weighted average of those fuel economies is equal to or higher than the specified fuel economy standard of that year (e.g., 27.5 miles per gallon in 2007).

Attribute-Based System. Under an attribute-based system, target fuel economies are set based on a particular vehicle attribute. For example, if the attribute were footprint, a curve similar to the one shown below might be used. The curve will always be an "elongated-S" shape, though its specific shape will be determined by set parameters (e.g., the highest and lowest target fuel economies). For illustrative purposes, a sample target fuel economy chart using one mathematical formula has been generated below. As shown in the graph, a vehicle with a footprint of 50 square feet would have a target fuel economy of approximately 25 miles per gallon. It is important to note that the automaker can produce vehicles that fall below (or exceed) their target fuel economies.

The CAFE standard to which an automaker is bound is the sales-weighted average of each of its target fuel economies. Thus, an automaker's fuel economy standard will be determined by the distribution of the vehicles it sells with respect to the given attribute. An automaker that primarily sells vehicles with large footprints will be required to meet a lower CAFE standard than an automaker who primarily sells vehicles with small footprints.