What are vehicle greenhouse gas and fuel economy standards?
Fuel economy standards require automakers to improve the fuel economy (expressed in miles per gallon) of the vehicles they sell.
Greenhouse gas vehicle emission standards require automakers to reduce the greenhouse gas (GHG) emissions (often expressed in grams per mile) of the vehicles they sell.
Typically, the goal of fuel economy standards is to increase fuel efficiency and reduce oil use, whereas the goal of GHG standards is to reduce GHG emissions. Both objectives can be met through increasing vehicle efficiency, although there are additional options (e.g., changing the GHG-emitting chemicals used in vehicle air conditioning systems) for reducing GHG emissions. Both types of standards are typically specified for each vehicle model year and increase ambition over time.
How do vehicle greenhouse gas and fuel economy standards work?
By requiring automakers to reduce the GHG emissions and improve the fuel economy of the vehicles they sell, these standards motivate auto manufacturers to innovate and invest in fuel efficiency and other emissions-reducing technologies. Vehicle standards can offer various forms of tailoring and flexibility to minimize manufacturers’ compliance costs. The potential to improve efficiency often differs by vehicle type. For example, generally heavier vehicles have both lower fuel economy and higher emissions than lighter ones. Vehicle standards can provide automakers with flexibility to invest differently in different types of vehicles, and to help address lead time challenges in meeting standards across their entire fleets.
Flexibility can be achieved in the way the standards are set or in how compliance is determined. For example, different types of vehicles can be subject to different types of standards, or standards can be set on a fleetwide basis. “Averaging” allows manufacturers to over comply in one portion of their fleet to offset undercompliance in another. Market-based trading of credits allows manufacturers that outperform the standards to generate credits in a given year that they can bank for their own future use, or sell to other manufacturers.
Since the standards are typically based on sales, to the extent compliance is measured on a fleetwide basis, they also provide some motivation to companies to encourage consumers to purchase more efficient vehicles. Thus, fuel economy labeling and vehicle pricing are important to compliance with fleetwide targets.
Key Design Considerations
What types of vehicles should be covered by the standards? Should standards be applied uniformly across the vehicle fleet or differentiated based on vehicle category (e.g., cars vs light trucks) or footprint (i.e., vehicle size)? Should fuel economy standards and GHG emission standards be harmonized through joint rulemaking?
At what level should fuel economy and GHG targets be set and by what date must they be met? How ambitious should targets be to incentivize the development of new technologies?
Should standards include mechanisms, such as tradable credits, to help control costs? How can flexibility, such as the use of emissions and fuel economy averaging, or the ability to generate credits, enable the accelerated deployment of zero-emission vehicles (e.g., electric vehicles)? Should extra crediting be provided to manufacturers for zero-emission vehicles?
How should federal vehicle fuel economy and GHG standards interact with state standards? Should these standards be similar? What are the implications if state vehicle GHG standards are more ambitious than federal standards?
U.S. experience with greenhouse gas and fuel economy vehicle standards
In the United States, efforts to reduce greenhouse gas (GHG) emissions in transportation have focused on fuel economy and vehicle emission standards. The first U.S. vehicle GHG standards were adopted in 2010, and are implemented by the U.S. Environmental Protection Agency (EPA). Under the federal Clean Air Act, California has the authority to set its own vehicle GHG standards if it receives a waiver from the federal EPA. Other states can’t set their own standards, but can choose to follow either the federal or California standards.
CAFE and vehicle GHG standards are based on vehicle footprints, determined by multiplying a vehicle’s wheelbase by its track width. A manufacturer’s fleetwide compliance obligation is based on the mix of the footprints of the vehicles they sell. Manufacturers can meet that fleetwide compliance obligation through averaging, credit trading, and credit banking.
Most recently, the Trump administration issued new and revised standards for passenger cars and light-duty vehicles. The administration is considering revising standards for medium- and heavy-duty trucks. Because these standards depend on vehicle fleet type, it is best to consider the U.S. experience through this lens.
Passenger Cars/Light-Duty Trucks
In 2010, the federal government finalized the first harmonized set of CAFE standards and GHG emissions standards for light-duty vehicles from model years (MY) 2012 to 2016. In 2009, EPA granted California a waiver to set its own vehicle GHG emission standards, and 13 other states chose to adopt California’s standards. EPA and NHTSA worked with California to develop the National Program, a harmonized set of CAFE, federal GHG and California GHG standards. The National Program eased compliance for automakers, and aligned compliance and administrative requirements while respecting each agency’s respective essential authorities and implementation practices.
In 2012, the federal government finalized a second set of standards for light-duty vehicles for MY 2022–2025, requiring automakers to improve fuel efficiency 5 percent annually. In March 2020, the federal government finalized revised standards for light-duty vehicles, requiring automakers to improve fuel efficiency 1.5 percent annually from MY 2020 through 2026, instead of the 5 percent in the 2012 rule. In addition, the federal government issued a final action that withdrew California’s waiver allowing it to set its own vehicle GHG standards. In response, California and other states have sued in federal court to challenge the final action on the withdrawal of California’s waiver.
Medium- and Heavy-Duty Vehicles
In 2011, the U.S. federal government finalized the world’s first harmonized fuel economy standards and GHG standards for heavy-duty vehicles for MY 2014–2018. These “Phase 1” standards applied to combination tractors, heavy-duty pickup trucks and vans, and vocational vehicles. In 2016, the federal government finalized new standards for medium- and heavy-duty vehicles. These “Phase 2” standards currently apply to semi-trucks, large pickup trucks, vans, and buses and work trucks of MY 2021–2027.
Additional Resources
- A Transportation Toolkit
- Decarbonizing U.S. Transportation
- RFF The Role of State Policies under Federal Light-Duty Vehicle Greenhouse Gas Emissions Standards
- C2ES Federal Vehicle Standards
- ICCT US passenger vehicle CAFE and GHG regulations: The basics
- California Greenhouse Gas Standards for Medium- and Heavy-Duty Engines and Vehicles
- EPA Safer Affordable Fuel-Efficient Vehicle Rule
- NHTSA SAFE Rule
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