U.S. Energy Information Administration | Annual Energy Outlook 2011 25

Issues in focus

3. Increasing light-duty vehicle greenhouse gas and fuel economy standards for model years 2017 to 2025

EPA Notice of Intent to conduct a joint rulemaking

In September 2010, the EPA and NHTSA issued a Notice of Intent to issue a proposed rule that will set GHG emissions and fuel 

economy standards for LDVs for MY 2017 through MY 2025 [45]. The LDV standards cover both passenger cars and light trucks. 

The notice provides an initial GHG emissions assessment for several potential levels of stringency, representing decreases of 3, 4, 

5, and 6 percent per year in GHG emissions and corresponding increases in mpg equivalent fuel eUciency levels from the MY 2016 

fleetwide average of 250 grams per mile. For each level of stringency, four technological pathways were analyzed, corresponding 

to diYerent penetration mixes of advanced gasoline technologies, vehicle mass reductions, and advanced hybrid electric, plug-in 

hybrid electric, and plug-in electric vehicles.

The four technological pathways were not meant as requirements but were used to show that the potential levels of stringency 

examined by the EPA and NHTSA are technically feasible. Although the notice provided an initial evaluation of a potential range 

of increases in stringency, it recognized that much more technological and economic analysis would be needed before a specific 

standard could be released. The EPA and NHTSA expect to release a proposed rulemaking in September 2011 and to issue a final 

rulemaking by July 2012.

Sensitivity cases

Two sensitivity cases were used to analyze the impacts of more stringent GHG emissions and fuel economy standards on LDVs in 

MY 2017 through MY 2025. Fuel economy and GHG emissions standards for MY 2011 through MY 2016 have been promulgated 

already as final rulemakings, and are already represented in the Reference case; they were, therefore, not modified in these 

sensitivity cases.

The CAFE 3% Growth (CAFE3) case is a modified Reference case that assumes a 3-percent annual increase in fuel economy standards 

for MY 2017 through MY 2025 LDVs, starting from the levels for MY 2016 LDVs, with the subsequent post-MY 2025 standards 

held constant. In 2025, the combined LDV fuel economy standard, at 46.1 mpg, is 29 percent higher than the standard assumed in 

the AEO2011 Reference case. The CAFE 6% Growth (CAFE6) case assumes a 6-percent annual increase in fuel economy standards 

for new LDVs from MY 2016 levels for MY 2017 through MY 2025, with the subsequent standards held constant. In 2025, the LDV 

fuel economy standard, at 59.3 mpg, is 66 percent higher than the standard assumed in the Reference case (Figure 16). For new 

passenger cars, the fuel economy standard in 2025 is 40.4 mpg in the Reference case, 53.5 mpg in the CAFE3 case, and 75.4 mpg 

in the CAFE6 case. For new light-duty trucks, the fuel economy standard in 2025 is 29.7 mpg in the Reference case, 38.1 mpg in the 

CAFE3 case, and 45.5 mpg in the CAFE6 case.

The standards enacted for MY 2011 through 2016 are attribute-based, using vehicle footprint, and allow credits for alternative 

technologies and fuels to be applied toward compliance. The Notice of Intent for MY 2017 through 2025 does not address the 

type of attribute standard that would be employed or the structure of credits allowed toward compliance. The sensitivity cases 

examined here assume a continuation of the current footprint-based attribute standards, as well as credit banking.

Results

In view of the substantial rate of fuel economy improvement required, compliance with the more stringent CAFE standards cases 

would require a rapid increase in sales of unconventional vehicles (those that use diesel, alternative fuels, and/or hybrid electric 

systems) and significant improvement in the fuel economy of 

conventional vehicles that continue to rely solely on gasoline 

spark-ignited engines for motive power (Table 4). Such rapid 

changes are likely to challenge the financial, engineering, and 

production capabilities of the automotive industry. In addition, 

increased costs for vehicles that employ technologies 

unfamiliar to consumers could result in lower new vehicle 

sales relative to the Reference case.

Although this analysis does not address those potential 

issues, it does project the levels of market penetration by 

unconventional vehicles and advanced technologies that would 

be needed for compliance with the more stringent standards, 

and it estimates the costs of compliance given Reference 

case assumptions for technology eUciency improvement and 

cost. The resulting impacts on new LDV sales, stocks, energy 

demand, and CO2 emissions are discussed below.

Sales of unconventional vehicles, which will be critical to 

achieving the required fuel economy improvements, are 

projected to grow to 70 percent of total new LDV sales in 2025 

Reference

CAFE3

CAFE6

0

20

40

60

80

2005 2010 2015 2020 2025 2030 2035

Figure 16. Combined CAFE standards for light-duty 

vehicles in three cases, 2005-2035 (miles per gallon)
26 U.S. Energy Information Administration | Annual Energy Outlook 2011

Issues in focus

in the CAFE3 case and nearly 90 percent in the CAFE6 case, as compared with 40 percent in the Reference case. In the CAFE3 

case, the largest increases in new sales market shares are among hybrid electric, diesel, and micro hybrid systems in conventional 

gasoline vehicles (Figure 17), all of which are more fuel eUcient than their conventional gasoline counterparts. The increase in hybrid 

and diesel vehicle sales displaces sales of both conventional gasoline and flex-fuel vehicles. The more stringent standards in the 

CAFE6 case cause an even greater reduction in conventional gasoline and flex-fuel vehicle sales, significantly expanding the market 

adoption of plug-in hybrid and all-electric vehicles, which are more fuel eUcient than their unconventional counterparts, and even 

greater sales share for hybrid electric and diesel vehicles.

While declining as a share of total new vehicle sales, sales of conventional gasoline vehicles without micro hybrid systems still 

account for a significant percentage (30 percent) of new vehicles in the CAFE3 case and a less, but still important share (11 percent) 

in the CAFE6 case. Conventional gasoline vehicle fuel economy increases in both cases through the introduction of new fueleUcient technologies and improved vehicle designs. In order to meet the increased fuel economy requirements, conventional 

vehicle subsystems (engine, transmission, aerodynamics, vehicle weight, and horsepower) would have to be modified to ensure 

compliance. Included in conventional gasoline vehicle technologies but counted separately in the discussion above are micro 

hybrid systems, which are present in 36 percent of conventional gasoline vehicles in the CAFE3 case and 58 percent in the CAFE6 

case in 2025, compared with 12 percent in the Reference case.

The market adoption of unconventional vehicles and inclusion of additional technologies that improve the fuel economy 

of conventional gasoline vehicles results in higher average prices for new LDVs compared to the Reference case. As a result, 

while vehicle operating costs would fall (see below), consumers would need to purchase more expensive vehicles (Figure 18). A 

distribution of vehicle sales by price in 2010, derived from Ward’s Automotive data [46], shows that 31 percent of the new vehicles 

purchased by consumers were within a price range of $10,000 to $25,000, 49 percent within $25,000 to $35,000, and 19 percent 

at prices above $35,000. In the CAFE3 case, the distribution in 2025 shifts to 15 percent within $10,000 to $25,000, 61 percent 

within $25,000 to $35,000, and 24 percent above $35,000 (all 2009 dollars). The sales distribution in 2025 shifts even more 

in the CAFE6 case, with 9 percent within $10,000 to $25,000, 56 percent within $25,000 to $35,000, and 35 percent above 

$35,000 (all 2009 dollars).

The cases estimate a demand response for new vehicle sales as a result of changes in average new vehicle price by employing 

a price elasticity of demand of -1. While this measure attempts to quantify the potential impact of the increase in vehicle price 

on sales, it is not intended to be inclusive of all the potential factors that could aYect new vehicle purchase decisions made by 

consumers. As a result of higher vehicle prices, total new LDV sales in 2025 are 8 percent lower in the CAFE3 case and 14 percent 

lower in the CAFE6 case than in the Reference case.

As vehicle attributes change to meet more stringent CAFE standards, such as decreased average vehicle horsepower and weight, 

some consumers switch from passenger cars to light-duty trucks, which in the CAFE3 case have average fuel economies in 2025 

comparable to those for passenger cars in 2016. The share of total new LDV sales made up by light-duty trucks is 40 percent in 

the CAFE3 case and 41 percent in the CAFE6 case in 2025, up from 38 percent in the Reference case, but still far lower than their 

share (more than 50 percent) in 2005. Note, however, that consumer incentives to switch from cars to light trucks are sensitive to 

the assumed relative stringency of cars versus light truck CAFE.

Although the CAFE sensitivity cases allow for fluctuation in new LDV sales and switching between purchases of passenger cars 

and light-duty trucks, additional impacts on fuel demand would be associated with the continued use of existing vehicle stocks. As 

consumers defer new vehicle purchases, the utilization of older, less fuel-eUcient vehicles increases relative to the Reference case. 

Table 4. Unconventional light-duty vehicle types

Unconventional vehicle type Description

Micro hybrid Vehicles with gasoline engines, larger batteries, and electrically powered auxiliary 

systems that allow the engine to be turned oY when the vehicle is coasting or idle 

and then quickly restarted. Regenerative braking recharges the batteries but does not 

provide power to the wheels for traction.

Hybrid electric (gasoline or diesel) Vehicles that combine internal combustion and electric propulsion but have limited allelectric range and batteries that cannot be recharged using grid power.

Diesel Vehicles that use diesel fuel in a compression-ignition internal combustion engine.

Plug-in hybrid electric (10- and 40-mile allelectric range)Vehicles that use battery power to drive for some distance, until a minimum level of 

battery power is reached, at which point they operate on a mixture of battery and 

internal combustion power. Plug-in hybrids also can be engineered to run in a “blended 

mode,” where an onboard computer determines the most eUcient use of battery and 

internal combustion power. The batteries can be recharged from the grid by plugging a 

power cord into an electrical outlet.

Plug-in electric (100- and 200-mile range) Vehicles that operate by electric propulsion from batteries that are recharged either 

from the grid exclusively or through regenerative breaking.

Flex-fuel Vehicles that run on gasoline or any gasoline-ethanol blend up to 85 percent ethanol.
U.S. Energy Information Administration | Annual Energy Outlook 2011 27

Issues in focus

The demand for mobility and the stock of vehicles available in the Reference case are maintained over the projection period in the 

CAFE cases, but the two CAFE cases assume longer vehicle survival rates and more intensive use of older vehicles.

The United States currently has a total LDV stock of around 230 million vehicles. That number grows to over 300 million vehicles 

by 2035 in the Reference and CAFE cases. Although the introduction of more stringent fuel economy standards in the CAFE cases 

stimulates sales of more fuel-eUcient new vehicles, it takes time for the new vehicles to penetrate the vehicle fleet in significant 

numbers to aYect the average of fuel economy of the entire LDV stock. In the CAFE cases, the trend is even slower, as a result of 

reduced scrappage and increased travel of older vehicles. Consequently, the average on-road fuel economy of the LDV stock, which 

represents the fuel economy realized by all vehicles in use, increases from 22.4 mpg in 2016 to 28.6 mpg in 2025 in the CAFE3 case 

and 30.2 mpg in the CAFE6 case, as compared with 25.7 mpg in the Reference case. In 2035, the average on-road fuel economy 

of the LDV stock increases to 34.0 mpg in the CAFE3 case and 39.4 mpg in the CAFE6 case, 22 percent and 41 percent higher, 

respectively, than the Reference case average of 27.9 mpg (Figure 19).

In the two CAFE cases, more stringent fuel economy standards lead to reductions in total delivered energy consumption, 

including all fuels. Fuel bills fall by a similar amount. Total cumulative delivered energy consumption by LDVs from 2017 to 2035 

is 10 percent lower in the CAFE3 case than in the Reference case and 13 percent lower in the CAFE6 case. In 2025, total delivered 

energy consumption by LDVs is 19 percent lower in the CAFE3 case and 27 percent lower in the CAFE6 case than in the Reference 

case. Total liquids fuel consumption in 2035 is 1.9 million barrels per day lower in the CAFE3 case and 2.8 million barrels per day 

lower in the CAFE6 case than in the Reference case (Figure 20). Reductions in total delivered energy consumption and liquids fuel 

0

5

10

15

20

2005 2010 2015 2020 2025 2030 2035

Reference

CAFE3

CAFE6

Figure 20. Total liquid fuels consumption 

by light-duty vehicles in three cases, 2005-2035 

(million barrels per day)

Flex-fuel

Plug-in electric

Plug-in hybrid electric

Diesel

Hybrid electric

Micro hybrid

Conventional gasoline

0 25 50 75

CAFE6

CAFE3

Reference

Figure 17. Model year 2025 light-duty vehicle 

market shares by technology type in three cases 

(percent of total sales)

0 10 20 30 40

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2025: CAFE3

2025: CAFE6

Figure 18. Distribution of new light-duty vehicle sales 

by vehicle price (2009 dollars) in 2025 in the CAFE3 and 

CAFE6 cases (percent of total sales compared to 2010)

0

10

20

30

40

2005 2010 2015 2020 2025 2030 2035

Reference

CAFE3

CAFE6

Figure 19. On-road fuel economy of the light-duty 

vehicle stock in three cases, 2005-2035 (miles per gallon)
28 U.S. Energy Information Administration | Annual Energy Outlook 2011

Issues in focus

consumption are more pronounced later in the projection period, when a greater percentage of the total vehicle stock consists 

of vehicles with higher fuel economy.

The declines in total LDV energy demand in the CAFE cases lead to large reductions in motor gasoline consumption—from 98 percent 

of total LDV energy use in 2016 to 84 percent in 2025 and 77 percent in 2035 in the CAFE3 case, as compared with 91 percent in 2025 

and 89 percent in 2035 in the Reference case. The more stringent fuel economy standards called for in the CAFE6 case lead to even 

greater reductions in motor gasoline consumption, to 83 percent of total LDV energy use in 2025 and 69 percent in 2035.

Despite the overall decline in energy consumption by LDVs, the changing composition of the fleet by vehicle fuel type leads to 

increased consumption of some fuels. Lower demand for motor gasoline reduces the amount of ethanol that can be blended into 

the motor gasoline pool as either E10 or E15. As a consequence, more fuel containing up to 85 percent ethanol (E85) is sold to 

meet the RFS. E85 accounts for 11 percent of total LDV energy use in 2035 in the CAFE3 case and 14 percent in the CAFE6 case, 

compared with 7 percent in the Reference case. Diesel fuel consumption increases to 11 percent and 15 percent of total LDV energy 

use in 2035 in the CAFE3 and CAFE6 cases, respectively, compared with 4 percent in the Reference case. Electricity use by LDVs 

remains less than 1 percent of total LDV energy use in both the Reference and CAFE3 cases but reaches 3 percent of the total in 

the CAFE6 case, where sales of plug-in vehicles and all-electric vehicles expand.

Reductions in LDV delivered energy consumption lead to lower GHG emissions from the transportation sector. Cumulative CO2

emissions from transportation over the period from 2009 through 2035 are 2.2 billion metric tons lower in the CAFE3 case and 

2.6 billion metric tons lower in the CAFE6 case than in the Reference case, reductions of 6 percent and 7 percent, respectively. 

CO2 emissions decline from 1,927 million metric tons in 2016 to 1,826 million metric tons in 2025 in the CAFE3 case and to 1,815 

million metric tons in the CAFE6 case, as compared with 1,940 million metric tons in the Reference case. In 2035, CO2 emissions 

from transportation fuel use total 1,859 million metric tons in the CAFE3 case and 1,788 million metric tons in the CAFE6 case, 

compared with 2,080 million metric tons in the Reference case (Figure 21).

CO2 emissions from the electric power and refinery sectors also are aYected by increased electricity use for plug-in vehicles. 

Cumulative emissions from the electric power sector over the period from 2017 to 2035 are 118 million metric tons higher in 

the CAFE3 case and 416 million metric tons higher in the CAFE6 case than in the Reference case—increases that are equal to 

0.3 percent and 0.9 percent of total CO2 emissions from electricity generation, respectively, over the same period. More stringent 

fuel economy standards reduce motor gasoline demand by more than they increase demand for diesel and E85 fuels. As a result, 

cumulative CO2 emissions from refineries between 2017 and 2035 decline by 359 million metric tons in the CAFE3 case and 471 

million metric tons in the CAFE6 case from the Reference case level—declines of 8.8 percent and 11.6 percent, respectively.

Issues

Setting LDV fuel economy standards 6 to 14 years into the future is a diUcult undertaking, given the uncertainties associated 

with technology availability and cost, consumer acceptance and willingness to pay for unfamiliar technology, and fuel prices. The 

availability and cost of advanced vehicle technologies are critical in determining the ability of manufacturers to meet more stringent 

standards, but there is a high degree of uncertainty regarding the cost and availability of key technologies so far into the future.

For example, battery technologies used in plug-in vehicles are important in meeting more stringent standards in the CAFE3 case and 

are critical to compliance in the CAFE6 case. The future cost and performance of battery technologies in 2025 cannot be known with 

confidence. If there are limited breakthroughs in the cost, safety, or life of batteries, then the ability to meet, for example, the levels 

of stringency called for in the CAFE6 case, which will very likely 

necessitate plug-in vehicles, will be extremely challenging. 

On the other hand, a breakthrough in battery technology 

or another known technology, or the introduction of a new 

unforeseen technology, could dramatically lessen the burden 

on manufacturers of meeting more stringent CAFE standards in 

terms of both cost and availability.

When manufacturers bring an advanced vehicle technology 

to market, consumers must be willing to buy it. There is a 

high level of uncertainty about consumer willingness to pay 

significantly higher prices for more fuel-eUcient vehicles. In 

recent history, consumers have tended to value upgrades in 

performance, vehicle size, and other attributes at the expense 

of fuel economy. 

For example, assuming an annual vehicle use of 14,000 miles 

per year, a fuel price of $4 per gallon, and no discount rate, a 

consumer would save 117 gallons of fuel worth $467 each year 

by driving a vehicle with a fuel economy of 40 mpg instead 

of 30  mpg. However, purchasing a vehicle that gets 70 mpg 0

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2005 2010 2015 2020 2025 2030 2035

Reference

CAFE3

CAFE6

Figure 21. Total transportation carbon dioxide emissions 

(million metric tons carbon dioxide equivalent)
U.S. Energy Information Administration | Annual Energy Outlook 2011 29

Issues in focus

instead of 60 mpg would save only 33 gallons, worth $133 (Figure 22). This is important, because the cost of adding technology to an 

already fuel-eUcient vehicle tends to get increasingly expensive (for example, changing a conventional gasoline vehicle to a plug-in 

hybrid electric vehicle). As manufacturers strive to improve fuel economy, the least costly technologies that reduce fuel consumption 

will be incorporated first. Employing additional technology to increase fuel economy further will require the use of more expensive 

technologies.

Consumer willingness to pay for improved fuel economy changes dramatically with diYerent potential fuel prices, which are highly 

uncertain. If the price of fuel in 14 years is significantly higher than today’s prices, a cost-conscious consumer may be willing to pay 

much more for a vehicle with higher fuel economy, perhaps even without increases in CAFE and GHG standards. Conversely, if fuel 

prices in the future are relatively low, it may be diUcult to convince consumers to pay for fuel economy improvements if the savings 

from improving fuel economy have only a small impact on their annual fuel expenditures. The willingness of consumers to purchase 

vehicles with higher fuel economy could also aYect both new vehicle sales and scrappage rates.

4. Fuel consumption and greenhouse gas emissions standards for heavy-duty vehicles

The proposed rulemaking

The EPA and NHTSA in November 2010 jointly issued a proposed rulemaking that would, for the first time, establish 

greenhouse gas emissions and fuel consumption standards for heavy-duty vehicles (HDVs) [47].The proposed standards 

separately address three discrete vehicle categories: combination tractors, heavy-duty pickup trucks and vans, and 

vocational vehicles (Table 5). The final regulations are scheduled to be issued by July 2011.

For combination tractors, standards are proposed by cab type, roof type, and engine type. For heavy-duty pickups and vans, the 

proposed standards are categorized by diesel or gasoline engine and are set as total vehicle gallons per 100 miles, or grams 

per mile, based on a vehicle’s “work factor”—a weighted average of payload and towing capacity. For vocational vehicles, the 

standards are proposed for diYerent chassis types, according to gross vehicle weight rating (GVWR) and engine type. Standards 

for combination tractor cabs and vocational vehicles are set as gallons per 1,000 ton-miles or grams per ton-mile, and engine 

standards are set as gallons per 100 brake horsepower-hours [48] or grams per horsepower-hour.

Heavy-duty vehicle fuel economy standards

AEO2011 includes a sensitivity case that analyzes the estimated impacts of the proposed fuel consumption and GHG emissions 

standards for heavy-duty trucks. However, because of data and modeling limitations, impacts of the standards for specific 

truck types or engines could not be represented. Instead, the HDV Fuel Economy Standards case approximates the proposed fuel 

consumption and GHG emissions standards by increasing the on-road fuel economy of new heavy-duty trucks by approximately 

8.5 percent in MY 2017 from MY 2010 levels.

The increase in on-road fuel economy for heavy-duty trucks in MY 2017 in the sensitivity case is based on estimates developed from the 

U.S. Census Bureau’s 2002 Vehicle Inventory and Use Survey (VIUS) [49] and from Ward’s Auto [50], which together provide data on 

vehicle body type, tractor cab type, and engine type by GVWR classification. The estimated vehicle distributions were combined with 

the EPA and NHTSA estimates of reductions in fuel consumption in MY 2017 for combination tractors and vocational vehicles and in 

MY 2018 for heavy-duty pickups and vans, compared to a MY 2010 baseline [51].

Using data from VIUS and Ward’s Automotive, fuel 

consumption reductions provided by EPA and NHTSA were 

combined and aggregated into the reported categorization 

of heavy-duty trucks used in AEO2011: medium heavy-duty 

trucks (includes Class 3 through Class 6 trucks with GVWR 

10,001 to 26,000 pounds) and heavy heavy-duty trucks (Class 

7 and Class 8 trucks with GVWR greater than 26,001 pounds), 

regardless of vehicle body or engine type. This weighting and 

aggregation showed an approximately 10 percent reduction in 

fuel consumption for both categories of heavy-duty trucks in 

MY 2017 from MY 2010 levels, relative to a simulated fuel 

economy estimate. The reduction in fuel consumption was 

modeled as an increase in on-road new vehicle fuel economy 

to account for the potential variation of simulation-tested 

fuel economy from expected on-road performance. Increases 

in fuel economy begin in MY 2014, the first year that GHG 

emissions standards are binding (Figure 23).

Between MY 2014 and MY 2017, the new heavy-duty truck 

standards lead to the adoption of technologies to improve 

fuel economy that otherwise would not have been purchased. 

Miles per gallon

Annual fuel expenditures Gallons of fuel consumed

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20 30 40 50 60 70 80

100

200

300

400

500

600

700

800

Figure 22. Total annual fuel consumption (gallons) 

for consumers driving 14,000 miles per year and 

annual fuel expenditures at a $4.00 per gallon fuel 

price (2009 dollars)