Six common misconceptions about CAFE policy

The media have been abuzz over fuel efficiency since the Trump administration reopened a review of regulations that improve the fuel efficiency and greenhouse gas emissions of light-duty vehicles.

Since then, industry associations and environmental and consumer groups have weighed in on what relaxing or strengthening the standards would mean for consumers and the types of vehicles produced.

On July 25, the U.S. Department of Transportation announced that it may revise auto fuel efficiency requirements and freeze fuel economy targets. Much of the media narrative surrounding the announcement and fuel efficiency as a whole is based on widely held but false beliefs, resulting in a national conversation about fuel efficiency based more in myth than science.

The current fuel economy standards have flexibilities to respond to consumer preferences and gasoline prices, so the prevailing claim that standards should be frozen because gasoline prices are low and because consumers prefer SUVs to more efficient vehicles is a false narrative. There are six common misconceptions in these discussions, which can be cleared up by understanding six key points about the policy.

In fact, the standards do not mandate any fixed fuel economy level for any year. The level depends on the types of vehicles produced. If more large vehicles are made one year, the standards relax; if vehicles get smaller, the standards get stricter. The EPA and DOT originally estimated the 54.5 mpg figure based on a projected future mix of vehicles in 2012 when gasoline prices were high. It has since been revised to 46.3 mpg now that gasoline prices have declined and demand for larger vehicles has increased. Furthermore, this number is determined from EPA's test condition fuel economy, which is significantly higher than the on-road fuel economy that drivers experience. Achieving 46.3 mpg under the test conditions is equivalent to about 36 mpg on the road. Fueleconomy.gov lists 60 vehicles that get at least this fuel economy today.

The policy was designed to reduce any incentive for automakers to make vehicles smaller by creating a sliding scale of fuel economy targets that depend on the sizes of vehicles produced. Consequently, an automaker selling larger vehicles has a lower fuel economy target than one selling smaller vehicles. Research has shown that the policy likely creates an incentive to produce larger vehicles because that makes the regulations less stringent.

Automakers have largely used conventional gasoline vehicle technologies to meet the standards thus far, such as turbocharging and higher speed transmissions that allow engines to run more efficiently. While some automakers such as Tesla and Toyota may produce significant numbers of battery electric and plug-in vehicles, there are many options to achieve 36 mpg that do not rely on these technologies. The EPA and DOT project that such vehicles will remain a small percentage of total vehicle sales even with the standards.

Because the standards set an average level of fuel economy for each automaker, getting consumers to buy vehicles that have higher efficiency than other vehicles of the same size will help to satisfy the regulations. This creates an incentive for automakers to adjust the prices of their vehicles to shift demand, lowering the price of those vehicles that exceed their fuel economy target and raising the prices of vehicles that fall short. Consumers who buy vehicles with higher fuel economy for their size may actually pay less for the vehicle than they would without the regulations. For example, the basic package of the 2017 Subaru Outback has 28.2 mpg and is priced at $28,570, which is $1,390 cheaper (accounting for inflation) than the 2006 version that got only 25 mpg.

Fuel economy regulations aim to reduce fuel consumption indirectly through the efficiency of new vehicles only. A carbon tax or higher gasoline taxes (and ideally ones that are regularly adjusted to changing conditions) would be more cost-effective because they make use of all possible avenues of reducing emissions and oil dependence.

The policy can be made cheaper and more effective. Ensuring stiff penalties for violating the regulations is one important improvement. Companies that cheat steal market share from others, which has the effect of raising the regulatory costs for automakers that achieve the standards. Another improvement involves the trading of "credits" between automakers to help equalize regulatory costs across companies. If it's easier for one automaker to cut emissions, it can reduce more than its share in exchange for selling credits to another automaker struggling to reduce its emissions.

Currently, each pair of automakers negotiates credit trading agreements individually, which increases costs. Creating a more transparent market to trade these credits would help to achieve the target emission reductions at lower costs.

As the conversation around fuel economy continues, it is important that scientists continue to speak out so that policymakers can learn to recognize common misconceptions, safeguarding scientific facts from becoming overshadowed by misleading information and myths.