GAO

United States General Accounting Office

Report to the Chairman, Committee on

Commerce, Science, and Transportation,

U.S. Senate

August 2000 AUTOMOBILE FUEL

ECONOMY

Potential Effects of

Increasing the

Corporate Average

Fuel Economy

Standards

GAO/RCED-00-194

Page 1 GAO/RCED-00-194 Fuel Economy Standards

Contents

Letter 3

Appendixes Appendix I: Scope and Methodology 22

Appendix II: Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA 24

Appendix III: Selected Bibliography 35

Tables Table 1: Selected Studies’ Estimates of Technologically

Feasible Fuel Economy Levels for Passenger Cars 14

Figures Figure 1: MPG by Model Year 7

Figure 2: U.S. Petroleum Consumption by Sector, 1997 9

Figure 3: U.S. Greenhouse Gas Emissions by Sector, 1997 10

Figure 4: Average Horsepower and Weight in New Vehicles,

1975-99 15

Figure 5: Projected Reduction in Gasoline Consumption Under

DOE’s Technology Scenarios Relative to the Baseline

Scenario 26

Figure 6: Projected Reduction in Greenhouse Gas Emissions

Under DOE’s Technology Scenarios Relative to the Baseline

Scenario 27

Figure 7: Projected Reduction in Gasoline Consumption Under

ACEEE’s Scenarios Relative to the Baseline Scenario 29

Figure 8: Projected Reduction in Greenhouse Gas Emissions Under

ACEEE’s Scenarios Relative to the Baseline Scenario 30

Figure 9: Projected Reduction in Gasoline Consumption Under

AISI’s Study 32

Figure 10: Projected Reduction in Greenhouse Gas Emissions Under

AISI’s Study 33

Abbreviations

ACEEE American Council for an Energy-Efficient Economy

AISI American Iron and Steel Institute

CAFE Corporate Average Fuel Economy

DOE Department of Energy
Contents

Page 2 GAO/RCED-00-194 Fuel Economy Standards

DOT Department of Transportation

EEA Energy and Environmental Analysis

EIA Energy Information Administration

EPA Environmental Protection Agency

mmbd million barrels per day

mmtc million metric tons of carbon

mpg miles per gallon

NHTSA National Highway Traffic Safety Administration

NRC National Research Council

OTA Office of Technology Assessment

PNGV Partnership for a New Generation of Vehicles

SUV sport utility vehicle

TRB Transportation Research Board
Page 3 GAO/RCED-00-194 Fuel Economy Standards

United States General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-284406 Letr

August 15, 2000

The Honorable John McCain

Chairman, Committee on Commerce,

Science, and Transportation

United States Senate

Dear Mr. Chairman:

In the wake of the 1973 oil crisis, the Congress passed the Energy Policy

and Conservation Act in 1975 as a means of reducing the country’s

dependence on foreign oil. The act established the Corporate Average Fuel

Economy (CAFE) program, which required automobile manufacturers to

increase the average fuel economy of passenger cars and light trucks—a

category that now includes minivans, pickups, and sport utility vehicles

(SUV)—sold in the United States. The act set standards for passenger cars,

which rose from 18 miles per gallon (mpg) in automobile model year 1978

to 27.5 mpg by model year 1985. As authorized by the act, the Department

of Transportation (DOT) set standards for light trucks for model years 1979

through 2002. The standards are currently 27.5 mpg for passenger cars and

20.7 mpg for light trucks. Provisions in DOT’s annual appropriations since

fiscal year 1996 have prohibited the agency from changing CAFE standards.
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Between 1981 and 1999, the average price of gasoline, adjusted for

inflation, declined more than 60 percent. During the same period, the U.S.

transportation sector’s consumption of oil rose from less than 10 million to

nearly 13 million barrels per day. However, recent gasoline price increases,

in some areas to more than $2.00 a gallon, have redirected attention to the

costs and benefits of improving passenger vehicle fuel economy. These

price increases have come at a time when light trucks have become much

more popular. As the proportion of light trucks has increased and other

shifts have occurred in the automotive fleet, the average fuel economy of

new passenger vehicles has fallen to 23.8 mpg—a weighted average of 28.1

mpg for cars and 20.3 mpg for light trucks1

—for model year 1999, the

lowest level since 1980 and 8 percent below the peak of 25.9 mpg for model

year 1988.

These overall fuel economy trends have prompted some energy

conservationists and environmentalists to call for increasing CAFE

standards. Those supporting an increase in the standards often cite energy

security and environmental benefits that would result from improved fuel

economy.2 However, others opposed to raising the standards often cite

decreased automobile safety, which they contend could result from

producing smaller, more fuel-efficient vehicles. As a result of these issues,

you asked us to review studies and interview experts to identify (1) the

impact of increasing CAFE standards on oil consumption, the environment,

and automobile safety in the United States and (2) other issues that affect

the CAFE discussion.

1

These fuel economy averages reflect the results of the Environmental Protection Agency’s

tests. The averages undergo a number of adjustments that can increase a manufacturer’s

effective fuel economy, which DOT uses to assess CAFE compliance. The averages are

adjusted to account for changes in testing procedures since the beginning of the CAFE

program. Other adjustments can include credits earned by manufacturers through the

production of alternative- or dual-fuel vehicles, or by exceeding the standards in prior years.

In addition, the averages are significantly higher than the values used on new car labels,

which are adjusted downward to estimate on-road fuel economy.

2

The environmental benefits cited relate mostly to reduced greenhouse gas emissions.

Improving fuel economy reduces greenhouse gas emissions because they are directly

related to the amount of fuel consumed—each gallon of gasoline consumed directly

produces about 20 pounds of carbon dioxide. In contrast, fuel economy is not directly

related to air pollutants from motor vehicle exhaust, such as nitrogen oxides, to the extent

that pollution control equipment limits these emissions to specific amounts regardless of

the amount of fuel consumed.
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To respond to your request, we reviewed studies and interviewed experts

from federal agencies, automobile manufacturers, and energy conservation

and environmental interest groups. Appendix I provides the details of our

scope and methodology. This report does not address whether CAFE

standards should be increased or whether some other policy measures

should be implemented to achieve national energy and environmental

goals. Ultimately, this is a policy choice that the Congress must make after

weighing the energy and environmental benefits and economic and other

costs, including the potential safety consequences, of various policy

alternatives.

Results in Brief According to the studies we reviewed and the experts we interviewed,

raising fuel economy standards would reduce future fuel consumption and

greenhouse gas emissions; however, the impact of raising standards on

vehicle safety is less certain. Three recent studies project that improving

the fuel economy of new vehicles would reduce the annual fuel

consumption and greenhouse gas emissions of cars and light trucks by

between 6 and 37 percent over a 15- to 18-year period. The wide variation

among these forecasts results from different assumptions about items such

as the costs and effectiveness of new fuel-saving technologies and the rate

at which new technologies penetrate the marketplace. The effect of

increasing CAFE standards on vehicle safety is harder to quantify because

it depends on many variables, such as the amount of lead time given to

manufacturers, the size of the CAFE increase, and the strategies

manufacturers use to achieve fuel economy gains. In addition, there is little

current research linking CAFE increases and vehicle safety. The major

concern about safety is that manufacturers might produce smaller, lighter

vehicles to meet more stringent CAFE standards and thus sacrifice some

level of protection for occupants. Ultimately, how auto manufacturers

improve fuel economy will depend on the relative costs and benefits of the

options and time available to them. We found consensus among safety

experts and auto manufacturers that as long as there is sufficient lead time

to meet higher CAFE levels, auto manufacturers could use fuel-saving

technologies (such as continuously variable transmissions or lean-burn

engines) instead of simply building smaller, lighter cars, thereby minimizing

any negative impact on safety.

We also identified a number of other issues associated with raising CAFE

standards. First, automobile manufacturers have had little incentive to

improve fuel economy because, over the past decade, gas prices have been

low and consumers have consistently purchased larger, more powerful
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vehicles that emphasize performance over fuel economy. Second, the

Environmental Protection Agency’s (EPA) new, more stringent tailpipe

emission standards may inhibit the use of certain technologies, such as

diesel engines, that have great potential for improving fuel economy but

may not meet these standards. Third, EPA and DOT are concerned that

vehicle classification regulations may be outdated, reducing the incentive

for manufacturers to increase the fuel economy of their light trucks.

Fourth, it is possible that technology-driven fuel economy increases could

occur without increasing CAFE standards. For example, the Partnership

for a New Generation of Vehicles (PNGV) program has a goal of producing

a prototype family sedan that achieves 80 mpg, and it is developing

technologies to achieve this goal. Although it is unlikely that such vehicles

can be cost-effectively produced and sold in the near future, it is possible

that some of the technologies being developed through PNGV could lead to

improvements in fuel economy without increases in CAFE standards.

Finally, some analysts contend that increasing CAFE standards is not as

cost-effective as other policy measures, such as increasing gasoline taxes,

for reducing fuel consumption and greenhouse gas emissions, because

CAFE standards do not affect older vehicles and may not result in reduced

driving.

Background Between model years 1975 and 1988, the average weight of new cars and

light trucks fell by nearly 800 pounds—cars by over 1,000 pounds and light

trucks by approximately 230 pounds. At the same time, their combined

average fuel economy rose substantially, from 15 mpg to 26 mpg (see fig. 1).

However, since 1988, fuel economy gains have leveled off, and overall new

passenger vehicle fuel economy (combining cars and light trucks) has been

declining as the market share of light trucks has increased. Sales of light

trucks now constitute nearly 50 percent of total new vehicle sales, which is

more than double their proportion in 1975—19 percent.
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Figure 1: MPG by Model Year

Source: GAO’s presentation of data from EPA.

In recent years, federal efforts to improve fuel economy have shifted away

from regulation and have instead moved toward funding research and

development on advanced vehicles. Each year, beginning in fiscal year

1996, the Congress has included a rider to DOT’s annual appropriations act

that prohibits the National Highway Traffic Safety Administration (NHTSA)

from expending any funds to change CAFE standards. This rider stems, in

part, from concerns that increasing CAFE standards could restrict the

types of vehicles that manufacturers would produce and negatively affect

automobile safety. However, during this period, various federal agencies

and the U.S. automobile industry have been engaged in a cooperative

research program known as the Partnership for a New Generation of

Vehicles, which has a goal to develop vehicles that can achieve up to three

times the fuel efficiency of comparable 1994 family sedans, or

approximately 80 mpg by 2004.

10

15

5

0

20

25

30

Combined

Trucks

Cars

Average MPG

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Model year
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Increasing CAFE

Standards Would

Reduce Fuel

Consumption and

Greenhouse Gas

Emissions, but Its

Impact on Safety Is

Less Certain

On the basis of the studies we reviewed and the experts we interviewed, we

conclude that improving the fuel economy of passenger vehicles could help

the U.S. transportation sector reduce its reliance on petroleum products

and its emissions of greenhouse gases, such as carbon dioxide, which have

been linked to global warming. The studies estimated that increasing CAFE

standards could improve the average fuel economy of new passenger

vehicles and could thus reduce future fuel consumption and greenhouse

gas emissions.3 The amount of these forecasted reductions varies widely

among studies and depends on key assumptions used to generate the

forecasts. The effect of increasing CAFE standards on vehicle safety is

harder to quantify because safety is affected by numerous variables,

including whether manufacturers downsize vehicles or use fuel-saving

technologies to improve fuel economy. In addition, there is little research

linking CAFE increases and vehicle safety. Ultimately, the strategies that

manufacturers choose depend on their relative costs and benefits.

However, we found consensus among safety experts and auto

manufacturers that as long as there is sufficient lead time to meet higher

CAFE levels, auto manufacturers could use fuel-saving technologies

instead of building smaller cars and thus minimize any negative impact on

safety.

The U.S. Transportation

Sector Depends on

Petroleum and Emits

Substantial Amounts of

Greenhouse Gases

The United States is the largest consumer of petroleum in the world, and

the transportation sector accounts for the greatest portion of total U.S.

consumption. According to the Department of Energy (DOE), the United

States accounted for 26 percent of total worldwide petroleum consumption

in 1997—19 million of the 73 million barrels per day consumed. In addition,

as figure 2 shows, the transportation sector accounted for the largest

portion of total U.S. consumption.

3

Because CAFE standards apply only to new vehicles, their ability to reduce fuel

consumption and greenhouse gas emissions is dependent, in part, on the rate new vehicles

penetrate the overall automobile fleet.
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Page 9 GAO/RCED-00-194 Fuel Economy Standards

Figure 2: U.S. Petroleum Consumption by Sector, 1997

Source: GAO’s presentation of data from DOE.

Of the transportation sector’s share, cars and light trucks accounted for 60

percent, or about 40 percent of total U.S. petroleum use. Furthermore, the

U.S. transportation sector relies on petroleum products for 97 percent of its

energy needs.

Similarly, the United States is the largest emitter of greenhouse gases in the

world and, according to EPA, the United States accounted for 25 percent of

worldwide greenhouse gas emissions in 1997.4 As figure 3 shows, the

transportation sector accounted for a substantial portion of total U.S.

greenhouse gas emissions, and cars and light trucks generated the largest

share of the transportation sector’s greenhouse gas emissions.

4

According to many scientists, when added to the atmosphere, greenhouse gases, which

include carbon dioxide and methane, increase the effectiveness of the earth’s atmospheric

blanket, warming the earth’s surface and potentially leading to changes in climate. This

phenomenon is commonly known as the “greenhouse effect.”

2%

6%

26%

66%

Electric utility

Residential

and commercial

Industrial

Transportation
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Page 10 GAO/RCED-00-194 Fuel Economy Standards

Figure 3: U.S. Greenhouse Gas Emissions by Sector, 1997

Source: GAO’s presentation of data from EPA.

Emissions from cars and light trucks in the United States accounted for 291

million metric tons of carbon (a measure of greenhouse gas emissions) in

1997. This amount exceeds the total greenhouse gas emissions of all but a

few countries. In addition, according to EPA, the transportation sector is

the fastest-growing U.S. sector in terms of greenhouse gas emissions.

Studies Link Improvements

in Fuel Economy With

Reductions in Fuel

Consumption and

Greenhouse Gas Emissions,

but Projections Vary Widely

When policymakers debate whether to strengthen CAFE standards, one

critical question is the extent to which increasing the standards would

reduce fuel consumption and greenhouse gas emissions. Interest in

reducing greenhouse gas emissions has grown because these gases have

been linked to global warming. Of the studies we reviewed, three recent

ones provided quantitative estimates of the extent to which increases in

fuel economy would affect fuel consumption and greenhouse gas emissions

(see app. II for further details on the studies). These studies all forecast

future reductions in fuel consumption and greenhouse gas emissions;

however, their results vary widely because they use different assumptions.

Other 

44%

Transportation

26%

Electric utilities

30%

Cars and 

light trucks

62%

Other

transportation

38%
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Page 11 GAO/RCED-00-194 Fuel Economy Standards

Two studies forecast substantial reductions in gasoline consumption and

greenhouse gas emissions resulting from the introduction of new fuelsaving technologies (e.g., variable valve timing and continuously variable

transmissions).5 These studies were completed by DOE and the American

Council for an Energy-Efficient Economy (ACEEE)6 in 1997. They estimate

future gasoline consumption and greenhouse gas emissions under

scenarios ranging from no change in fuel economy to substantially higher

levels of fuel economy—up to 51 mpg for new cars and 38 mpg for new

light trucks in 2015. Under the studies’ scenarios, the United States could

reduce gasoline consumption and greenhouse gas emissions from cars and

light trucks by between 18 and 37 percent annually by 2015. A key

assumption underlying both of these studies is that fuel-saving

technologies are cost-effective—the value of fuel savings to the consumer

exceeds the increase in the retail price of the automobile through the use of

the new technologies.

In contrast to DOE’s and ACEEE’s studies, a 1995 study done by Charles

River Associates, Inc.,7 for the American Iron and Steel Institute projects

smaller reductions in fuel consumption and greenhouse gas emissions. The

study estimates future gasoline consumption and greenhouse gas

emissions under scenarios ranging from a modest improvement in fuel

economy occurring with no regulatory intervention to substantially higher

levels of fuel economy imposed by CAFE —36 mpg for new cars and 27

mpg for new light trucks in 2005. Under the study’s scenarios, the United

States could reduce gasoline consumption and greenhouse gas emissions

from cars and light trucks by between 6 and 11 percent annually by 2010.

These savings are substantially lower than either DOE’s or ACEEE’s

primarily because this study assumes that much lower levels of fuel

economy improvements are feasible and that implementing fuel-saving

technologies is not nearly as cost-effective. As a result, the study concludes

5

Variable valve timing increases engine efficiency by reducing the amount of air pressure

lost while a vehicle engine is burning fuel. Continuously variable transmissions increase

vehicle efficiency by allowing a vehicle to operate continuously at the most efficient gear

and speed.

6

ACEEE is a nonprofit organization dedicated to advancing energy efficiency as a means of

promoting economic prosperity and environmental protection. Based in Washington, D.C.,

ACEEE works closely with DOE, EPA, and other federal agencies.

7

Charles River Associates, Inc., is an economics, finance, and business consulting firm that

has completed thousands of projects for law firms, corporations, and government agencies

worldwide.
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Page 12 GAO/RCED-00-194 Fuel Economy Standards

that the price of cars and light trucks would increase so substantially that

many consumers would decide to hold onto their older, less fuel-efficient

vehicles longer, thus limiting the market penetration of more fuel-efficient

vehicles and overall improvements in the automotive fleet’s fuel economy.

The Impact of CAFE

Increases on Automobile

Safety Is Complex and

Depends on Many Factors

Determining the impact of increasing CAFE standards on automobile

safety is complicated by many factors, among them the size and weight of a

vehicle, the behavior of individual drivers, and the presence or absence of

car-specific safety features, such as airbags or side impact protection. In

addition, most of the research we reviewed focused primarily on how

vehicle weight reduction, rather than fuel economy increases, affects

safety. Experts we spoke with said that the safety impact of increasing

CAFE standards depends on the amount of lead time given to

manufacturers, the size of the CAFE increase, and the strategies

manufacturers use to achieve fuel economy gains. These experts also said

that increasing CAFE standards would have a negative effect on

automobile safety to the extent that the increase, in combination with other

benefits and costs, encouraged manufacturers to build smaller, lighter, less

crashworthy vehicles.

During our review, we found that although some studies address the

relationship between automobile weight and safety, there is limited recent

research that directly assesses the safety effects of raising CAFE standards.

NHTSA recently conducted some research on how changes in vehicle

weight and size affect vehicle safety. A 1997 NHTSA study estimated that

reducing the weight of passenger cars by 100 pounds (while keeping the

weight of all other vehicles constant) would result in approximately 300

additional fatalities each year (see app. II for further details on the study).

The same study estimated that, conversely, reducing the weight of light

trucks by 100 pounds (and keeping the weight of passenger cars constant)

might have no effect or even result in a modest reduction in fatalities. The

reduction could occur because reducing the weight of heavier vehicles on

the road would cause those vehicles to do less damage to lighter vehicles in

collisions. However, the Transportation Research Board (TRB) reviewed

the study and expressed doubt about the precision of these numbers,

suggesting they could be “substantially less, or possibly greater.” Both

NHTSA and TRB agree that drivers’ behavior complicates this analysis.

Furthermore, it is unlikely that estimates from past studies are applicable

to today’s vehicle fleet, since even the most recent studies include data for

automobiles no later than model-year 1993. The automotive fleet has

changed since that time with the introduction of additional safety
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technologies and the dramatic increase in the proportion of light trucks on

the road.

While auto manufacturers have downsized vehicles to increase fuel

economy in the past, whether they would pursue this strategy in the future

would depend on the economic costs and benefits of doing so. Instead, they

may choose to use fuel-saving technologies as a means of increasing fuel

economy. During our review, safety experts and auto manufacturer

representatives said that giving auto manufacturers a longer lead time to

meet new standards would give them time to implement fuel-saving

technologies and help minimize the chance of a size and weight reduction.8

Lead time is important because auto manufacturers set their product plans

a number of years in advance, and making technological changes on short

notice is difficult and costly. Automotive experts we spoke with said that

providing auto manufacturers with 6 to 10 years’ lead time should be

sufficient to minimize negative safety effects.

Although experts generally agree that providing sufficient lead time can

help manufacturers use fuel-saving technologies rather than downsize

vehicles, there is no consensus on the potential of fuel-saving technologies

to increase fuel economy over that period. Therefore, determining the level

of CAFE standards achievable without affecting safety is difficult. A

number of older studies indicate existing technologies are readily available

that could increase fuel economy without reducing vehicle size and weight.

Some of these technologies, such as variable valve timing, involve direct

improvements to vehicle engines, while others, such as continuously

variable transmissions, involve improvements to other vehicle features. As

table 1 shows, these studies have estimated that the average fuel economy

of passenger cars could be increased by 5.4 mpg to 8 mpg in approximately

10 years, primarily by introducing these technologies.

8

While automobile manufacturers agreed that a long lead time would help avert any negative

safety effects from increased CAFE standards, they did not indicate that they would favor

increased CAFE standards if they were imposed with a long lead time.
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Page 14 GAO/RCED-00-194 Fuel Economy Standards

Table 1: Selected Studies’ Estimates of Technologically Feasible Fuel Economy

Levels for Passenger Cars

Note: These estimates rely on a small amount of vehicle weight reduction.

Source: GAO’s analysis of data from OTA, NRC, and EEA.

Many auto manufacturers contend that these studies overstate the

potential benefits of existing technologies and underestimate their costs.

NHTSA officials said that because the annual appropriations rider prohibits

them from studying the issue, they do not have current information on the

technological feasibility or cost-effectiveness of potential fuel-saving

technologies. The officials also said they would have to study the

effectiveness of these technologies and their potential impact on safety

before they could set any new CAFE standards.

Other Issues

Associated With the

CAFE Discussion

During our review, we identified a number of other issues that should be

considered when deciding whether to increase CAFE standards.

• Over the past 15 years, auto manufacturers have had little incentive to

improve the fuel economy of new vehicles because, in a period of

substantially declining real gasoline prices, U.S. consumers have

preferred larger, more powerful vehicles. While automakers have

introduced more efficient technologies that could have been used to

improve fuel economy, they have instead applied these technologies to

increase new vehicles’ average weight and horsepower (attributes that

consumers prefer). As figure 4 shows, the average weight and

horsepower of new vehicles have increased in the past decade.

Automakers contend that increasing CAFE standards runs counter to

consumers’ preferences and would require them to produce vehicles

with attributes that consumers may not desire. While gasoline prices

have recently risen substantially, it is too early to tell what effect these

Category

1991 Office of

Technology

Assessment (OTA)

1992 National

Research Council

(NRC)

1994 Energy and

Environmental

Analysis (EEA)

Lead time assumed 10 years 9 years 11 years

Predicted mpg

feasible

35.5 mpg 33.0 mpg 36.0 mpg

Increase from actual

mpg at date of study

7.5 mpg 5.4 mpg 8.0 mpg
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Page 15 GAO/RCED-00-194 Fuel Economy Standards

increases will have on consumers’ preferences for large, more powerful

vehicles.

Figure 4: Average Horsepower and Weight in New Vehicles, 1975-99

Source: GAO’s presentation of data from EPA.

0

20

40

60

80

100

120

140

160

180

200

Model Year

Horsepower

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Weight (lbs)

Horsepower

Weight

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

19951996

1997

1998

1999
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Page 16 GAO/RCED-00-194 Fuel Economy Standards

• EPA recently issued new, more stringent air quality standards for

controlling pollution from motor vehicle exhaust. For example, the

standards will require a 77- to 95-percent reduction in emissions of

nitrogen oxides by 2009. Some experts whom we contacted expressed

concern that these standards may inhibit the use of certain technologies

with great potential for improving fuel economy. This is because some

of these technologies, which include lean-burn and diesel engines, while

increasing fuel economy by as much as 30 percent over conventional

gasoline engines, can result in increased emissions of some pollutants,

such as nitrogen oxides, to levels higher than would be allowed under

EPA’s new standards. However, EPA believes the combination of

regulatory flexibility within the standards and proposed lower sulfur

diesel fuel requirements will permit auto manufacturers to develop

future diesel engines that are clean, efficient, and in compliance with the

new tailpipe emission standards.9

• Because there are separate CAFE standards for cars and light trucks,

automakers must classify their vehicles as cars or trucks. To make these

classification decisions, automakers follow rules established by DOT in

1978. The rules allow vehicles to be classified as light trucks if they have

attributes such as back seats that can be easily removed to create a flat

cargo area, off-highway capabilities, or other trucklike features.

Minivans, SUVs, and pickup trucks are all classified as light trucks.

However, auto manufacturers are now producing “crossover vehicles,”

which handle like cars but have expanded cargo capacity, and are

classifying these vehicles as light trucks. EPA and DOT officials have

expressed concern that the classification rules are outdated and allow

manufacturers to meet the CAFE standard for light trucks without

improving the fuel economy of their new SUVs, minivans, and pickup

trucks. In addition, some environmental groups are concerned that

certain vehicles—those with a gross vehicle weight rating (the

maximum allowable weight of the fully loaded vehicle with passengers

and cargo) of more than 8,500 pounds—are not subject to CAFE

standards.

9

According to EPA, the new standards give auto manufacturers ample time—up to 9 years—

to develop better diesel emission control technologies. The standards also allow for

fleetwide averaging, which means that manufacturers can produce some vehicles that emit

higher levels of nitrogen oxides and some vehicles that emit lower levels so long as they

meet an overall average.
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Page 17 GAO/RCED-00-194 Fuel Economy Standards

• It is possible that technology-driven fuel economy increases could occur

without increasing CAFE standards. For example, as we reported in

March 2000,10 the federal government and the automotive industry are

jointly funding an advanced vehicle program known as PNGV. A goal of

the PNGV program is to create an 80-mpg prototype family sedan by

2004, without sacrificing emission or safety standards, performance,

utility, or affordability. Some believe that if 80-mpg vehicles are massproduced and popular, the United States can achieve fuel economy goals

without increasing CAFE standards. However, PNGV researchers must

obtain significant cost savings before 80-mpg vehicles can be massproduced and successfully marketed. To help offset the higher costs and

launch the first generation of PNGV vehicles, the administration has

proposed federal income tax credits for consumers who purchase

advanced vehicles. Some automobile experts believe that, even without

higher CAFE standards, technologies developed through PNGV will be

incorporated gradually into existing product lines, thus improving fuel

economy. Those who support CAFE argue that higher CAFE standards

are needed to pull PNGV technologies into the marketplace and help

ensure that these technologies are used to increase fuel economy rather

than vehicle size and horsepower.

• Some research indicates that increasing CAFE standards is not as costeffective as other policy measures for reducing fuel consumption and

greenhouse gas emissions. Some studies we reviewed indicated that

increasing gasoline taxes or further supporting the development of

alternative fuels might achieve similar energy conservation and

environmental goals, but at a lower cost.11 For example, studies contend

that the impact of CAFE standards is limited because they affect only

new vehicles, do not reduce vehicle miles traveled, and may even

encourage increased travel by reducing the marginal cost of driving.

These studies also contend that because increasing gasoline taxes could

affect all vehicles on the road and could possibly reduce the number of

10Cooperative Research: Results of U.S.--Industry Partnership to Develop a New Generation

of Vehicles (GAO/RCED-00-81, Mar. 2000).

11The Alternative Motor Fuels Act of 1988 amended the CAFE program by allowing auto

manufacturers to increase their fleetwide fuel economy averages by earning credits for

producing vehicles that are capable of operating on alternative fuels such as ethanol or

natural gas. This credit provision was seen as a way to encourage the development and use

of alternative transportation fuels and vehicles. Because these credits enable manufacturers

to produce other vehicles with lower fuel economy and still meet CAFE standards, EPA

believes that the alternative fuel credits have resulted in a net reduction in fleetwide fuel

economy and net increases in fuel consumption and greenhouse gas emissions.
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vehicle miles traveled, it would be a more effective means of achieving

energy conservation and environmental goals. Currently, there appears

to be little national support for increasing gasoline taxes to meet energy

conservation or environmental goals.

• The 2001 DOT appropriations bill passed by the House continued the

prohibition against DOT’s expending any funds to prepare new fuel

economy standards. However, the Senate passed a motion instructing its

conferees to DOT’s appropriations conference to seek a final version of

the bill that would authorize DOT, pursuant to a National Academy of

Sciences study on the benefits and economic impact of CAFE standards,

to recommend new standards if appropriate, but not to promulgate them

without congressional approval.

Conclusion Increasing the fuel economy of passenger motor vehicles was a key

component of U.S energy policy during the 1970s and 1980s, and the

average fuel economy of new vehicles rose from 15 mpg to more than 25

mpg during the same period. The CAFE standards program was seen as one

of the key elements in realizing this goal. Clearly, increasing CAFE

standards could reduce the forecasted growth in oil consumption and

reduce greenhouse gas emissions; however, there is little consensus about

the level of these benefits and the costs to achieve them. Despite potential

safety concerns associated with a rapid increase in CAFE standards, there

is general agreement that any negative safety effects of higher CAFE

standards could be mitigated with appropriate automotive design, adequate

time, and technical changes. With concerns growing about global warming

and higher fuel prices, the Congress is once again confronted with key

policy questions: Should government take additional steps to improve the

fuel economy of passenger vehicles, and is the CAFE program the best

mechanism to achieve this goal? Answering these questions involves

difficult trade-offs and is further complicated by the lack of definitive

research that addresses the interaction among all of these issues in the

context of a 21st century automotive fleet.

Agency Comments We provided DOT, EPA, and DOE with a draft of this report for review and

comment. We met with officials from DOT and EPA, including the Chief,

Consumers Program Division, and Assistant Chief Counsel, NHTSA; and

the Leader, Climate Change Policy Team, National Vehicle and Fuel

Emissions Laboratory, EPA, to discuss their comments on the report.

Overall, DOT officials stated that the report accurately presented the
B-284406

Page 19 GAO/RCED-00-194 Fuel Economy Standards

results of NHTSA’s prior studies on vehicle weight and safety, and EPA

officials stated that the report was accurate and presented a balanced view

of a complex and controversial issue. DOT officials stated that the

Department had tried in 1994 to pursue a long lead time approach to

increasing CAFE standards, but that the auto industry had opposed the

increases regardless of lead time. We indicated that our report did not

attempt to address whether the auto industry would accept such long-term

increases in CAFE standards. Instead, it was limited to a discussion of how

providing sufficient lead time could help mitigate any potential adverse

effects on safety of future increases in CAFE standards. We added language

to the report to clarify this point.

EPA officials also provided some specific comments. First, they stated that,

in their opinion, the new tailpipe emission standards would not inhibit

automobile manufacturers’ ability to use diesel engines in the future. They

stressed that the combination of regulatory flexibility designed into the

standards program and proposed lower sulfur diesel fuel requirements

would allow for future clean diesel engines. In response to this comment,

we added information to the report to clarify EPA’s position. Second, they

suggested that we highlight an unintended consequence of the alternative

fuels credit program—that auto manufacturers use credits to offset other

low-fuel-economy vehicles and still maintain CAFE compliance. The result

of this practice, they stated, has been to lower fleetwide fuel economy and

increase fuel consumption and greenhouse gas emissions. We added

information in the report to reflect EPA’s concerns. Finally, EPA suggested

that we include information about tax credits proposed by the

administration to encourage the development of advanced vehicles. We

included this information in the report.

Finally, officials from DOT, EPA, and DOE provided additional technical

and editorial comments that we incorporated throughout the report, where

appropriate.

As arranged with your office, unless you publicly release its contents

earlier, we plan no further distribution of this report until 10 days after the

date of this letter. At that time, we will send copies to the Senate and House

Committees with jurisdiction and oversight of energy, commerce, and

transportation issues; the Honorable Rodney Slater, Secretary of

Transportation; the Honorable Bill Richardson, Secretary of Energy; and

the Honorable Carol M. Browner, Administrator, Environmental Protection

Agency. We will also make copies available to others on request.
B-284406

Page 20 GAO/RCED-00-194 Fuel Economy Standards

If you have any questions about this report, please call me at (202) 512-

2834. Key contributors to this assignment were David Lichtenfeld, Gail

Marnik, Raymond Sendejas, and Robert White.

Sincerely yours,

John H. Anderson, Jr.

Director, Transportation Issues
Page 21 GAO/RCED-00-194 Fuel Economy Standards
Page 22 GAO/RCED-00-194 Fuel Economy Standards

Appendix I

Scope and Methodology ApApenednxidexiIs

To determine the impact of changes in Corporate Average Fuel Economy

(CAFE) standards on oil consumption, the environment, and automobile

safety, we relied on two main sources of information. First, to gain a

general understanding about how improving fuel economy relates to these

three areas, we obtained and reviewed 68 studies. (See app. III for a list of

these studies.) We compiled the list of studies using recommendations

from transportation, environment, and energy experts, as well as the

results of a library literature search. Of these 68 studies, we identified 3

recent ones that quantified the potential impact of improving fuel economy

on oil consumption and the environment, and we relied extensively on

these studies. These studies used computer models to project future fuel

economy gains and the subsequent impact on oil consumption and

greenhouse gas emissions. We did not attempt to verify the accuracy of the

models’ assumptions or results.

During our review, we found that little recent research directly assesses the

safety effects of raising CAFE standards. However, we identified studies

that evaluated the impact of automobile weight reduction on highway

safety and focused on one study in particular that used a regression

analysis to quantify the safety effects of vehicle weight reduction. (See app.

II for a description of each study.) We did not attempt to verify the accuracy

of this analysis.

Second, we supplemented our literature review with interviews of

transportation experts who specialize in energy, environmental, and

automobile safety issues. These experts included officials from the

Department of Energy (DOE), the Department of Transportation (DOT),

the Energy Information Administration (EIA), the Environmental

Protection Agency (EPA), and Oak Ridge National Laboratory. These

officials provided current information about the possible effects of raising

fuel economy standards. We also spoke with automobile industry

representatives at the Alliance of Automobile Manufacturers, a trade group

that represents the three major U.S. automobile manufacturers and a

number of foreign manufacturers, as well as with regulatory managers

from the American Honda Motor Company about automakers’ potential

responses to CAFE increases. Furthermore, we interviewed

representatives from organizations concerned with the environment and

energy use, including the Sierra Club and the American Council for an

Energy-Efficient Economy (ACEEE), to discuss the relationship among

fuel economy, oil consumption, and greenhouse gas emissions. Finally, we

interviewed safety experts, including representatives from the Insurance
Appendix I

Scope and Methodology

Page 23 GAO/RCED-00-194 Fuel Economy Standards

Institute for Highway Safety and the Center for Auto Safety, to discuss the

relationship between fuel economy and automobile safety.

To identify other issues that might affect the CAFE discussion, we also

solicited input from these experts. They raised a number of issues that they

indicated were relevant to the CAFE discussion, and we included those

issues that were within the scope of our review.

We conducted our review from December 1999 through August 2000 in

accordance with generally accepted government auditing standards.
Page 24 GAO/RCED-00-194 Fuel Economy Standards

Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA ApendxiI

This appendix summarizes studies by DOE; ACEEE; Charles River

Associates, Incorporated, for the American Iron and Steel Institute (AISI);

and the National Highway Traffic Safety Administration (NHTSA).

DOE’s Five-Lab Study DOE’s report Scenarios of U.S. Carbon Reductions (informally referred to

as the Five-Lab study) presents the results of a study conducted by five

DOE national laboratories that quantifies the potential for energy-efficient

and low-carbon technologies to reduce carbon emissions in the Unites

States.1 The study documents in detail how four key sectors of the

economy—buildings, transportation, industry, and electric utilities—could

respond to directed programs and policies to expand the adoption of

energy-efficient and low-carbon technologies. Of particular interest to us

was the analysis of the transportation sector’s response—for passenger

vehicles, in particular—to energy-efficient and low-carbon technologies.

1

Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy Technologies by 2010

and Beyond, Interlaboratory Working Group (Lawrence Berkeley and Oak Ridge National

Laboratories, LBNL-40533 and ORNL-444, Sept. 1997).
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 25 GAO/RCED-00-194 Fuel Economy Standards

In its analysis of the transportation sector, DOE forecasts gasoline savings

resulting from increases in fuel economy attributable to research and

development. The study assumes that significant increases in governmentsponsored research and development, coupled with government policies

such as higher CAFE standards, lead to the implementation of advanced

fuel economy technologies in new automobiles. The study also assumes

that the technologies are cost-effective—that the value of fuel savings to

the consumer exceeds the increase in the retail price of the automobile.

Furthermore, the study takes into account the fact that fuel economy

improvements can lead to increased driving, which offsets some of the

overall fuel savings. Known as the “rebound effect,” this phenomenon

occurs because fuel economy improvements reduce the fuel cost per mile

of travel and thus lead to increases in the miles driven. The study contrasts

a “business-as-usual” scenario, which assumes a flat fuel economy, with

more optimistic scenarios that assume greater use of available advanced

fuel-saving technologies and the introduction of breakthrough

technologies. The study does point out, however, that the results of its most

optimistic scenario are less likely and require a certain degree of luck

because it relies on breakthrough technologies. As we reported in

September 1998, many questions surround the reasonableness of some key

assumptions and the accuracy of the study’s results.2

Under what we have termed the “low technology” scenario, which assumes

greater use of readily available advanced fuel-saving technologies, the

study projects that the United States could reduce gasoline consumption by

1.8 million barrels per day (mmbd) and greenhouse gas emissions by 66

million metric tons of carbon (mmtc) in 2015. Under the even more

optimistic “high technology” scenario, in which technologies significantly

improve fuel economy, the study indicates that the United States could

reduce gasoline consumption by 2.6 mmbd and save 97 mmtc annually by

2015. These reductions represent a 27-percent reduction over the estimates

of car and light truck gasoline consumption and greenhouse gas emissions

in 2015 under the business-as-usual scenario. In this scenario, fuel economy

rises to 50 mpg for new cars and to 38 mpg for new light trucks in 2015. See

figures 5 and 6.

2

Climate Change: Information on Limitations and Assumptions of DOE’s Five-Lab Study

(GAO/RCED-98-239, Sept. 8, 1998).
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 26 GAO/RCED-00-194 Fuel Economy Standards

Figure 5: Projected Reduction in Gasoline Consumption Under DOE’s Technology

Scenarios Relative to the Baseline Scenario

Source: GAO’s presentation of data from DOE.

Millions of barrels per day

Low technology

High technology

2010 2015

Year of projection

0

1

2

3

4
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 27 GAO/RCED-00-194 Fuel Economy Standards

Figure 6: Projected Reduction in Greenhouse Gas Emissions Under DOE’s

Technology Scenarios Relative to the Baseline Scenario

Source: GAO’s presentation of data from DOE.

The ACEEE Study We reviewed a 1997 study completed by ACEEE that forecasted gasoline

and greenhouse gas emissions savings due to CAFE-driven increases in fuel

economy.3 The study contrasts a baseline scenario, which assumes a flat

Metric tons of carbon in millions

Year of forecast

2010 2015

Low technology

High technology

160

140

120

100

80

60

40

20

0

3

John DeCicco and Lee Lynd, “Combining Vehicle Efficiency and Renewable Biofuels to

Reduce Light-Vehicle Oil Use and CO2Emissions,” Transportation, Energy, and

Environment: How Far Can Technology Take Us? (ACEEE, 1997), pp. 75-108.
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 28 GAO/RCED-00-194 Fuel Economy Standards

fuel economy, with scenarios involving incremental improvements in fuel

economy from a base of 25 mpg. These improvements begin in 1998 and

continue linearly at various rates of up to 6 percent per year. Our review

focused on two of the study’s scenarios—the 2-percent scenario, which

assumes modest fuel economy improvements of 0.5 mpg annually (2

percent of 25 mpg), and the 6-percent scenario, which assumes more

optimistic fuel economy improvements of 1.5 mpg annually (6 percent of 25

mpg). Like the DOE study, this study assumes that fuel-saving technologies

are available and cost-effective and takes into account the reduction in fuel

savings due to the rebound effect.

As indicated in figures 7 and 8, the study projects that, compared with a

base case scenario of no fuel economy changes, fuel economy

improvements of 2 percent annually could reduce fuel consumption by

nearly 2 mmbd and greenhouse gas emissions by 72 mmtc annually in

2015.4 Fuel economy improvements of 6 percent annually could save nearly

4 mmbd and 145 mmtc annually in 2015. Reductions in gasoline

consumption and greenhouse gas emissions from cars and light trucks

under the 6-percent scenario represent a 37-percent reduction, as

compared with the baseline, in 2015. Increasing fuel economy 6 percent

each year results in new cars reaching 51 mpg and new light trucks

achieving 38 mpg in 2015.

4

The ACEEE study included greenhouse gases emitted directly by vehicles as well as those

emitted during the production and distribution of motor fuels—“upstream emissions.”

Accounting for upstream emissions adds about 25 percent to total car and light-truck

emissions under baseline and fuel economy improvement scenarios. To make the ACEEE

study’s results comparable with those of the other two studies, which account only for

direct emissions, we adjusted the results to include only direct emissions.
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 29 GAO/RCED-00-194 Fuel Economy Standards

Figure 7: Projected Reduction in Gasoline Consumption Under ACEEE’s Scenarios

Relative to the Baseline Scenario

Source: GAO’s presentation of data from ACEEE.

0

1

2

3

4

Year of projection

2005 2015

2-percent annual increase in fuel economy

6-percent annual increase in fuel economy

Millions of barrels per day
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 30 GAO/RCED-00-194 Fuel Economy Standards

Figure 8: Projected Reduction in Greenhouse Gas Emissions Under ACEEE’s

Scenarios Relative to the Baseline Scenario

Source: GAO’s presentation of data from ACEEE.

The AISI Study In 1995, Charles River Associates, Inc., completed a report evaluating the

impact of raising CAFE standards for AISI.5 The study assessed how the

automotive industry could respond to changes in CAFE standards and

Year of projection

2005 2015

2-percent annual increase in fuel economy

6-percent annual increase in fuel economy

Metric tons of carbon in millions

160

140

120

100

80

60

40

20

0

5

The Impact of Raising Corporate Average Fuel Economy (CAFE) Standards, final report,

prepared for AISI by Charles River Associates, Inc. (July 1995).
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 31 GAO/RCED-00-194 Fuel Economy Standards

made assumptions about how these reactions would affect the affordability

of new cars and light trucks and what impact they would have on fuel

consumption and emissions. The study presents a baseline scenario, in

which fuel economy increases slightly while CAFE standards remain

constant through 2005, and two scenarios in which CAFE standards

increase by 20 and 30 percent, respectively, by 2005. The study assumes

much lower levels of feasible fuel economy improvements as compared

with either DOE’s or ACEEE’s study and finds that although fuel-saving

technologies are readily available, their implementation may not be costeffective. The study also takes into account the reduction in fuel savings

due to the rebound effect.

Under the 20-percent scenario, as indicated in figures 9 and 10, the study

projects fuel savings of roughly 0.5 mmbd and greenhouse gas emissions

savings of about 17 mmtc per year by 2010 as compared with the baseline

scenario. Under the 30-percent scenario, the study projects fuel savings of

roughly 0.8 mmbd and greenhouse gas emissions savings of roughly 31

mmtc per year by 2010. These savings represent an 11-percent reduction, as

compared with the baseline, for cars and light trucks by 2010. Increasing

fuel economy 30 percent results in fuel economies of 36 mpg for new cars

and of 27 mpg for new light trucks in 2005.
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 32 GAO/RCED-00-194 Fuel Economy Standards

Figure 9: Projected Reduction in Gasoline Consumption Under AISI’s Study

Source: GAO’s presentation of data from AISI.

0

1

2

3

4

Year of projection

2005 2010

20-percent increase in fuel economy

30-percent increase in fuel economy

Millions of barrels per day
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 33 GAO/RCED-00-194 Fuel Economy Standards

Figure 10: Projected Reduction in Greenhouse Gas Emissions Under AISI’s Study

Source: GAO’s presentation of data from AISI.

The NHTSA Study Finally, we reviewed a 1997 NHTSA study that estimated the change in

highway fatalities if vehicle weights were reduced by 100 pounds.6 The

study uses crash data compiled from 11 states and the national Fatality

160

140

120

100

80

60

40

20

0

Metric tons of carbon in millions

Year of projection

2005 2010

20-percent increase in fuel economy

30-percent increase in fuel economy

6

Charles J. Kahane, Relationships Between Vehicle Size and Fatality Risk in Model Year

1985-93: Passenger Cars and Light Trucks (Washington, D.C.: National Highway Traffic

Safety Administration, Jan. 1997).
Appendix II

Summaries of Studies by DOE, ACEEE, AISI,

and NHTSA

Page 34 GAO/RCED-00-194 Fuel Economy Standards

Analysis Reporting System database to perform a regression analysis

estimating the relationship between vehicle weight and fatality risk. The

study uses vehicle and crash data from model years 1985 to 1993. The study

attempts to control for confounding factors such as drivers’ age and

gender.

The study estimated that reducing the weight of passenger cars by 100

pounds, in the absence of any improvements in safety technology, could

lead to approximately 300 additional fatalities per year. In performing this

analysis, NHTSA assumes that light truck weights are kept constant and

automakers maintain historical relationships between vehicle weight and

parameters such as track width, center of gravity, and structural strength.

Conversely, NHTSA modeled the effect of a 100-pound reduction in light

truck weight while holding passenger car weight constant. The study found

that although this scenario would result in approximately 80 fewer

fatalities in car/light truck collisions, its overall effect across collisions of

all types of vehicles was not statistically significant.
Page 35 GAO/RCED-00-194 Fuel Economy Standards

Appendix III

Selected Bibliography ApendxiI

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Bradbrook, Adrian J. Alternative Legal Measures to Improve the Fuel

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Charles River Associates, Inc. The Impact of Raising Corporate Average

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Congressional Budget Office. Rethinking Emergency Energy Policy.

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Crandall, Robert W. and John D. Graham. “The Effect of Fuel Economy

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Crandall, Robert W., Howard K. Gruenspecht, Theodore E. Keeler, and

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DeCicco, John M. Developing a Market Creation Program to Promote

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——— Projected Fuel Savings and Emissions Reductions from LightVehicle Fuel Economy Standards. Washington, D.C.: American Council for

an Energy-Efficient Economy, 1995.

DeCicco, John and Mark Delucchi, eds. Transportation, Energy, and

Environment: How Far Can Technology Take Us? Washington, D.C.:

American Council for an Energy-Efficient Economy, 1997.
Appendix III

Selected Bibliography

Page 36 GAO/RCED-00-194 Fuel Economy Standards

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Appendix III

Selected Bibliography

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Appendix III

Selected Bibliography

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Kahane, Charles J. Relationships Between Vehicle Size and Fatality Risk in

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Appendix III

Selected Bibliography

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Selected Bibliography

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———Energy Policy: Options to Reduce Environmental and Other Costs of

Gasoline Consumption. GAO/RCED-92-260. Washington, D.C.: September

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———Energy Security and Policy: Analysis of the Pricing of Crude Oil and

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———Highway Safety: Causes of Injury in Automobile Crashes.

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———Highway Safety: Have Automobile Weight Reductions Increased

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