Reducing Oil Use and CO2

Emissions by Informing 

Consumers' Fuel Economy 

Decisions: The Role for Clean 

Cities

A Discussion Paper For Clean Cities Coalitions And 

Stakeholders To Develop Strategies For The Future 

David L. Greene

Oak Ridge National Laboratory

Robert Gibson, Janet L. Hopson

The University of Tennessee

August 2009
REDUCING OIL USE AND CO2 EMISSIONS BY INFORMING 

CONSUMERS' FUEL ECONOMY DECISIONS:

THE ROLE FOR CLEAN CITIES

David L. Greene

Oak Ridge National Laboratory

Robert Gibson

Janet L. Hopson

The University of Tennessee

August 2009

Prepared by

OAK RIDGE NATIONAL LABORATORY

Oak Ridge, Tennessee 37831-6283

managed by

UT-BATTELLE, LLC

for the

U.S. DEPARTMENT OF ENERGY
under contract DE-AC05-00OR22725

iii

CONTENTS

Page

LIST OF FIGURES (if five or more in document)....................................................................v

1. INTRODUCTION................................................................................................................1

2. ISSUES AND TRENDS IN MOTOR VEHICLE FUEL ECONOMY ...............................3

3. RECENT RESEARCH ON FUEL ECONOMY INFORMATION AND

CONSUMERS’ VEHICLE CHOICES................................................................................5

4. CURRENT STATUS OF FUEL ECONOMY INFORMATION........................................6

4.1 EPA FUEL ECONOMY RATINGS.............................................................................6

4.2 CHANGE IN EPA RATINGS......................................................................................7

4.3 UNBIASED BUT INACCURATE...............................................................................8

5. FEDERAL INCENTIVES ...................................................................................................9

5.1 CASH FOR CLUNKERS.............................................................................................9

5.2 ENERGY POLICY ACT OF 2005: ALTERNATIVE MOTOR VEHICLE 

 TAX CREDITS............................................................................................................10

5.3 PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE CREDIT...................................11

5.4 HIGH OCCUPANCY VEHICLE (HOV) WAIVER..................................................12

5.5 STATE AND LOCAL INCENTIVES........................................................................12

6. BENEFITS.........................................................................................................................12

7. REDUCING PETROLEUM DEPENDENCE...................................................................13

8. SUCCESSFUL STRATEGIES AND FUTURE CHALLENGES.....................................15

9. REFERENCES ..................................................................................................................18

v

LIST OF FIGURES

Figure Page

1 User sessions hosted by www.fueleconomy.gov by model year (Sept.-Oct.)..........2

2 Fuel economy of new light-duty vehicles as measured by the combined

federal tests ..............................................................................................................3

3 Trends in U.S. light-duty vehicle travel and fuel use...............................................4

4 “Your MPG” fuel economy estimates v. EPA adjusted MPG for 

conventional gasoline vehicles.................................................................................9

5 Fuel savings benefits of higher fuel economy for three midsize cars:

www.fueleconomy.gov ..........................................................................................13

6 Estimated impacts of future fuel economy standards ............................................14

7 Estimated fuel savings of fuel economy information project by year in which 

savings are realized ................................................................................................15

1

1. INTRODUCTION

Increasing the energy efficiency of motor vehicles is critical to achieving national energy goals of 

reduced petroleum dependence, protecting the global climate and promoting continued economic 

prosperity. Even in the presence of fuel economy and greenhouse gas emissions standards and 

various economic incentives for clean efficient vehicles, providing reliable and accurate fuel 

economy information to the public is important to the efficient functioning of the marketplace. 

This paper reviews the current status of fuel economy information and Clean Cities’ role in 

disseminating that information, and identifies challenges and opportunities for the future. 

The DOE Clean Cities Program fulfills the Department of Energy’s (DOE) statutory 

responsibility to provide fuel economy information to the public in collaboration with the 

Environmental Protection Agency (EPA) (49 USC 32908, 2006). Historically, this effort 

consisted solely of the compilation, publication and distribution to new car dealers of the Gas 

Mileage Guide (later renamed the Fuel Economy Guide). Dealers were required to prominently 

display the guides and to have copies available for customers to take away. Reviews of the 

program indicated that there were compliance issues and that in any case, awareness of the guide 

and its impact on new car purchase decisions was very limited (Larson and Hill, 1990). 

Consumers showed much greater awareness of fuel economy labels and MPG estimates used in 

manufacturers’ advertisements. From a peak publication of 15 million copies per year in the late 

1970s, distribution of the guide decreased to 3 million per year in the 1980s.

Recognizing the rapid changes in information technology, in 1999 the DOE and the EPA 

introduced a website, www.fueleconomy.gov as a new venue for disseminating fuel economy 

information. The website not only provides access to fuel economy estimates for new vehicles 

but for all used light-duty vehicles back to model year 1984. Methods of market research, chiefly 

focus groups, were used to guide the design and content of the website. The website quickly 

eclipsed the printed guide as a source of information for consumers. From 400 thousand user 

sessions1 in 1999, traffic exploded at an average annual rate of 50%, topping 30 million user 

sessions in 2008 (Figure 1). By contrast, the number of fuel economy guides distributed for 

model year 2009 included 250,000 printed copies plus and estimated 300,000 downloads of fuel 

economy guides from the website. The new information technology landscape was formally 

recognized by a change in the requirements for fuel economy information established in an EPA 

rulemaking in 2006 (U.S. EPA, 2006a). The new rules relaxed the requirements for dealerships 

to distribute hardcopies of the guide while emphasizing information dissemination via the 

internet.

The Clean Cities Fuel Economy Information Project strives for continuous improvement and 

innovation to serve consumers and help achieve national energy goals. Based on web traffic 

 1 One user session consists of a single a visit to the site by an individual. One user session will typically 

generate dozens to hundreds of hits. The average length of a user session on fueleconomy.gov has remained very 

nearly constant over time at about 10 minutes.
2

attracted, the four most successful innovations have been the following:

• Find-a-car – a feature that allows consumers to quickly and easily compare up to four 

alternative vehicles side-by-side in terms of their fuel economy, fuel cost, greenhouse gas 

emissions and energy security.

• Your MPG – a feature that allows users to share their real-world MPG experience with 

others.

• Driving and Maintenance Tips – an authoritative source of information on safe and costeffective measures motorists can take to maximize real world fuel economy.

• MotorWeek Fuel Economy Features – public television programming to provide 

consumers information about fuel economy and alternative fuel vehicles in an appealing, 

accessible format.

Mobile internet-connected devices are becoming an increasingly important information source. 

In 2007, a mobile version of fueleconomy.gov, www.fueleconomy.gov/m, was introduced to 

provide fuel economy information to the mobile internet market. 

FIGURE 1. User sessions hosted by www.fueleconomy.gov by model year (Sept.-Oct.).

The future poses new challenges. With rising incomes and increasing fuel economy levels, each 

additional mile per gallon becomes less valuable to motorists. At the same time, world oil 

markets continue to tighten (as evidenced by oil prices above $70/barrel during the current global 

recession) and the need to reduce greenhouse gas emissions grows more urgent. Recent research 

suggests that a key reason consumers appear to undervalue fuel economy improvements is 

uncertainty about the value of future fuel savings (Greene, German and Delucchi, 2009). Perhaps

the most significant factor, even greater than uncertainty about future fuel prices, is uncertainty 

about the fuel economy a vehicle will achieve in real-world use. The challenge of providing 
3

consumers with fuel economy estimates that are more accurate for each individual, as opposed to 

unbiased in general is perhaps the greatest challenge for the future.

2. ISSUES AND TRENDS IN MOTOR VEHICLE FUEL ECONOMY

After two decades of stagnation, new vehicle fuel economy is rising again (Figure 2). A 

rulemaking by the Department of Transportation (DOT) set higher standards for light trucks in 

2003 and again in 2006 (U.S. DOT/NHTSA, 2006). The new rulemaking will, for the first time, 

subject heavier light trucks – those with a gross vehicle weight between 8,500 and 10,000 lbs. –

to fuel economy standards and labeling requirements beginning in 2011 (71 FR 77872). In 

December of 2007, Congress enacted the Energy Independence and Security Act, establishing a 

fuel economy target of 35 MPG for 2020. An agreement between the DOT, the EPA, the State of 

California and the Automobile Industry in 2009 will lead to a joint standard for greenhouse gas 

(GHG) emissions and fuel economy equivalent to approximately 35 MPG for passenger cars and 

light trucks by 2016 (The White House, 2009).2 This new agreement recognizes the authority of 

both the EPA and the State of California to set greenhouse gas emissions standards for motor 

vehicles and attempts to coordinate governments’ efforts to regulate fuel economy and 

greenhouse gas emissions. 

Figure 2. Fuel economy of new light-duty vehicles as measured by the combined federal tests

(Source: U.S. EPA, 2008, table 1).

Fuel economy improvement has a proven track record of reducing oil dependence while saving 

 2 The new standard will allow credits for improvements to air conditioning systems and other factors that 

will result in an effective fuel economy requirement of approximately 33 MPG by 2016.
4

consumers money. The improvements in fuel economy over 1975 levels now save U.S. 

motorists in excess of 80 billion gallons of gasoline each year, more than $200 billion dollars at 

today’s gasoline prices ($2.50/gallon) (Figure 3). U.S. petroleum consumption today is more 

than 5 million barrels per day lower than it would have been at 1975 fuel economy levels. The 

savings from improved fuel economy are equal to our entire domestic petroleum production. In 

2008 the United States produced just under 5 million barrels per day of crude oil.

Figure 3. Trends in U.S. light-duty vehicle travel and fuel use (Source: U.S. DOT/FHWA, 2007, 

table VM-1).

In December 2006 the EPA established new procedures for estimating the fuel economy numbers 

reported to the public on new car fuel economy labels and in the Fuel Economy Guide (71 FR 

77872). The new procedures do not affect the measurement of fuel economy for purposes of 

determining manufacturers’ compliance with fuel economy standards. The new procedures are 

based on five test cycles rather than two, and add cycles that reflect (1) more aggressive and 

higher speed driving, (2) use of air conditioners, and (3) engine warm-up during cold 

temperatures. The new numbers lowered previously reported fuel economy estimates by 

approximately 10-15%, on average. At the time the rule was implemented relatively few 

vehicles were tested on all five cycles. A temporary correction procedure based on the original 

(city and highway) tests was used derive new fuel economy estimates for most vehicles. The 

fueleconomy.gov website played a key role in explaining the new system to the public and the 

media. Providing information via an on-line electronic data base allowed the correction 

procedures to be applied to all vehicles, new and used, simultaneously, insuring consistency in 

the publicly available data and thereby avoiding much of the confusion that would otherwise 

have occurred in comparing the fuel economy new and used vehicles.
5

3. RECENT RESEARCH ON FUEL ECONOMY INFORMATION AND 

CONSUMERS’ VEHICLE CHOICES

Despite the importance of fuel economy to the nation’s energy security and greenhouse gas 

mitigation, there is relatively little published research on the market for fuel economy and how 

consumers use fuel economy information in their vehicle purchase decisions. The Clean Cities 

Fuel Economy Information project has conducted market research and sponsored university 

research that has produced significant breakthroughs in our understanding of the market for fuel 

economy.

• Focus group research revealed a wide variety of views about the importance of fuel 

economy in car purchase decisions and confirmed that those who do consider fuel 

economy do so chiefly for private economic rather than environmental or energy security 

concerns (Nye et al., 2003).

• In-depth survey research carried out by the University of California at Davis revealed that 

consumers do not, in general, make quantitative assessments of the value of improved 

fuel economy as economic theory would suggest (Turrentine and Kurani, 2007). 

Although most households have estimates of their own vehicles’ miles per gallon and 

know the cost of a tank of gasoline, few know how much they spend on fuel in a year. 

None of the households in the study had ever estimated lifetime fuel savings due to MPG 

differences when comparing vehicles they were considering purchasing.

• An analysis of in-use fuel economy data for a sample of over 3,000 vehicles indicated that 

the EPA combined city/highway fuel economy estimates, adjusted for the shortfall 

between test procedure values and real world experience, were very nearly unbiased 

estimators of fuel economy estimates reported by individuals for over 3,000 vehicles 

(Greene et al., 2006). The accuracy of the EPA adjusted fuel economy estimates for any 

particular vehicle was poor, however, with a 95% confidence interval of +/- 7 MPG. 

Taking into account an individual’s own distribution of stop-and-go versus highway 

driving improved the accuracy of the adjusted combined estimator by 15%.

• Researchers at Duke University showed that consumers are confused about the 

relationship between fuel economy (miles per gallon) and fuel consumption (gallons per 

mile), and that this contributes to inaccurate assessments of the value of fuel economy 

(Larrick and Soll, 2008).

• Application of the Nobel Prize winning theory of loss aversion to the market for fuel 

economy demonstrated that uncertainty about the value of future fuel savings combined 

with typical loss averse behavior was sufficient to explain consumers’ apparent 

undervaluing of fuel economy (Greene, 2009). This phenomenon can lead to an 

undervaluing of future fuel savings by a factor of two or more. The most significant 

source of uncertainty was not future fuel prices but rather the accuracy of official fuel 

economy estimates in predicting the actual fuel economy an individual would experience.

Recent research suggests that it is highly unlikely that the market for fuel economy is efficient. 

The inference that due to uncertainty and loss aversion consumers are likely to significantly 

undervalue future fuel savings relative to their expected value is entirely consistent with 
6

unofficial statements by automobile manufacturers and with independent survey evidence 

indicating that consumers require short payback periods on the order of 2-4 years for investments 

in better fuel economy (Greene, German and Delucchi, 2009). This theory can also explain 

Turrentine and Kurani’s (2003) findings that consumers, in general, do not quantitatively 

evaluate the value of fuel savings when making vehicle purchase decisions. Manufacturers, on 

the other hand, must invest billions of dollars in the kinds of changes to engines, transmissions, 

accessories, materials, aerodynamics and rolling resistance that can achieve significant fuel 

economy improvements. Given consumer indifference, there is little reason for manufacturers to 

make such large capital investments or even to invest fully in research and development. The 

key lesson for fuel economy information is that providing consumers with information that can 

reduce their uncertainty about future fuel savings is likely to improve market performance. In 

this respect, consumers would benefit more from fuel economy estimates that are more accurate 

for individuals than from estimates that are less biased for the population as a whole. Previous 

research on this question and past rulemakings have focused on bias rather than accuracy.

The recent research should not be interpreted to imply that consumers do not respond to higher 

fuel prices by choosing more efficient vehicles. There is substantial econometric evidence that 

when fuel prices rise car buyers downsize, trade off performance for fuel economy and generally 

pay greater attention to fuel economy in their purchase decisions (e.g., Espey and Nair, 2005; 

Allcott and Wozny, 2009; Langer and Miller, 2008). The econometric evidence, however, is 

contradictory with some studies indicating that consumers fully value future fuel savings and 

others supporting the theory of uncertainty and loss aversion and the empirical evidence from 

surveys and focus groups. If the market for fuel economy is inefficient, as the balance of 

evidence indicates, the market will still respond to higher fuel prices but the response will be 

significantly attenuated. In addition to policies such as fuel economy standards and feebates, 

better information about the value of fuel economy for individual consumers can make a 

significant contribution to improving the efficiency of the market for fuel economy.

4. CURRENT STATUS OF FUEL ECONOMY INFORMATION

Today, fuel economy information is available to consumers from a variety of sources:

• www.fueleconomy.gov

• www.fueleconomy.gov/m (mobile site)

• Other online automotive information sites such as Edmunds and Kelley Blue Book

• Newpapers and magazines such as Consumer Reports

• TV advertisements and programs

• New car fuel economy labels

4.1 EPA FUEL ECONOMY RATINGS

The predominant source for fuel economy estimates is the EPA’s certification tests. The official 

EPA estimates are not only used on new car labels but in the Fuel Economy Guide, 
7

www.fueleconomy.gov, nearly all online automobile information websites, in manufacturers’ TV 

ads, and in the printed media. The only other widely available alternative estimates are Consumer 

Reports’ own mileage ratings and the publicly supplied estimates contained in 

fueleconomy.gov’s “Your MPG” data base. The EPA data are available for many more vehicles 

than either Consumer Reports or Your MPG, and are made available in a timely manner at the 

beginning of each model year. As a consequence they are by far the most widely used source of 

fuel economy information.

The EPA tests, developed in the 1970s, measure fuel economy under controlled conditions in a 

laboratory using a standardized test procedure specified by federal law. Manufacturers test their 

own vehicles—usually pre-production prototypes—and report the results to EPA. EPA reviews 

the results and confirms about 10-15 percent of them through their own tests at the National 

Vehicles and Fuel Emissions Laboratory. In the laboratory, the vehicle's drive wheels are placed 

on a machine called a dynamometer that simulates the driving environment—much like an 

exercise bike simulates cycling. The energy required to move the rollers can be adjusted to 

account for wind resistance and the vehicle's weight. On the dynamometer, a professional driver 

runs the vehicle through a standardized driving routine, or schedule, which simulates “typical” 

trips in the city or on the highway. Each schedule specifies the speed the vehicle must travel 

during each second in the test. A hose is connected to the tailpipe to collect the engine exhaust. 

The carbon in the exhaust is measured to calculate the amount of fuel burned during the test, 

which is more accurate than using a fuel gauge.

By 1982, researchers had determined that the fuel economy numbers vehicles were achieving on 

the road were substantially lower than the test values (McNutt et al., 1982). After extensive data 

collection and statistical analysis, the EPA published official on-road correction factors: 

(Hellman and Murrell, 1984). These factors reduced the city cycle fuel economy estimates by 

10% and the highway cycle estimates by 22%, for an overall downward adjustment of 15% on 

average. 

4.2 CHANGE IN EPA RATINGS

In its 2008 fuel economy rulemaking the EPA also established new requirements for new car 

dealers to display and provide fuel economy guides to the public (40 CFR 600.405-08). The new 

rules allowed dealers to provide either printed copies of the Gas Mileage Guide or to provide 

access to www.fueleconomy.gov via an on-site computer available to the public.

The EPA also developed new test procedures to better represent the driving conditions 

consumers experience today. The old tests, originally developed in the 1970s, used lower speeds 

and acceleration rates than are commonly seen on today’s roads. The highway test, for example, 

had a top speed of 60 mph and an average speed of 48 mph. The tests were also conducted under 

mild climate conditions (75° F) and without the use of accessories, such as air conditioning.

The new testing methodology combines the original city and highway tests with three new 

driving cycles:
8

1. A high-speed test that includes faster speeds and acceleration rates. The new test has a 

maximum speed of 80 mph and a maximum acceleration of 8.46 mph/sec, compared to 

3.2 mph/sec in the original highway test.

2. A test that accounts for air conditioning use under hot outside conditions (95° F sun load)

3. A cold-temperature test that measures the effects of colder outside temperatures (20° F ) 

on cold-start driving in stop-and-go traffic 

The results from these new tests are used to adjust the estimates from the original city and 

highway tests.

EPA estimates that, for conventional vehicles, the new tests result in an average drop of about 

10-20 percent for city mpg ratings and 5-15 percent for highway ratings. For hybrids, the new test 

methods should result in a 20-30 percent mpg drop compared to the old method, while highway 

ratings should drop by an amount similar to that for conventional vehicles (U.S. EPA, 2006b). 

4.3 UNBIASED BUT INACCURATE

In December of 2006 the EPA introduced new official fuel economy estimates. On average, the 

new estimates are 10-20% lower than previous estimates for the city cycle and 5-15% lower for 

the highway cycle. In developing the new method the EPA was responding to criticism from 

media sources and to a request from the Congress to develop new, more representative estimates. 

Data provided by users of www.fueleconomy.gov’s Your MPG feature, however, indicate that 

the previous EPA combined adjusted MPG numbers were unbiased estimators of the in-use MPG 

obtained by the typical motorist (Figure 4). A regression analysis of reported in-use MPG as a 

function of the combined adjusted MPG based on EPA’s previous methods indicates that in-use 

MPG is approximately 2% higher than the EPA adjusted estimate and has an intercept of very 

nearly zero. If the EPA estimates were perfectly unbiased, they would fall symmetrically around 

a straight line passing through the origin with slope of 1, as illustrated by the blue line in 

Figure 4. In fact, the fitted regression line is very close to the hypothetical blue line, indicating 

that the old estimates were remarkably unbiased predictors of the fuel economy real consumers 

achieved on the road. 

On the other hand, there is enormous scatter about the regression line. The scatter implies that 

the estimates based on the old method EPA are inaccurate, albeit unbiased, predictors of what 

individuals will achieve on the road. These data shed new light on consumers’ dissatisfaction 

with the official EPA numbers. About half of the public will get worse MPG than the official 

numbers predict and a large fraction will get much worse MPG. It is unlikely that much of the 

deviation is due to differences in the manufacture of vehicles. Nearly all of it is likely due to 

how, where and under what conditions vehicles are operated. This suggests that the route to 

improving MPG information lies in developing individualized estimates that take into account as 

many of these factors as possible.
9

Figure 4. “Your MPG” fuel economy estimates v. EPA adjusted MPG for conventional gasoline 

vehicles.

5. FEDERAL INCENTIVES

The U.S. government is currently promoting light-duty vehicle fuel economy through several 

federal incentives that reward consumers for making fuel efficient choices when purchasing a 

new vehicle.

5.1 CASH FOR CLUNKERS

The most widely publicized federal incentive was the Car Allowance Rebate System (CARS) 

program, also known as “Cash for Clunkers.” CARS was a $3 billion program, established by the 

Consumer Assistance to Recycle and Save Act of 2009 (P.L. 111-32), with the combined goals of

helping the struggling automotive industry and improving fuel economy. The program offered 

rebates of $3,500 and $4,500 for consumers that traded-in their current, inefficient vehicle for a 

new more-efficient one.

Most trade-in vehicles were required to have an EPA combined fuel economy rating of 18 mpg 

or less, and new vehicles were required to have a combined rating of 22 mpg or better for 

passenger cars and 15 to 18 mpg or better for light trucks. Trade-in requirements for larger 

trucks, vans, and SUVs were based on age and gross vehicle weight rating (GVWR), since 

official EPA fuel economy ratings for these vehicles do not exist. The average MPG of the 

700,000 vehicles traded in under the program was 15.8 MPG while the average MPG of new 

vehicles purchased was 24.9, a 58% increase (U.S. DOT, 2009). Given this difference in fuel 
10

economy, if each vehicle were driven 10,000 miles per year, a single year’s fuel savings would 

amount to over 150 million gallons.

The program lasted only from July 24 to August 24, 2009. However, it was wildly popular with 

consumers, who ran through the first $1 billion in funding in just under a week. It is still too early 

to know the full impact of the program, but a few preliminary statistics are available.

The Clean Cities Fuel Economy Information Program played a key role in the Cash for Clunkers 

program by providing the official web functionality and database used by consumers to 

determine whether their trade-in and intended purchase qualified for a CARS incentive and, if so, 

how much. The data base was also used by NHTSA staff to validate the Cash for Clunkers deals 

submitted by car dealers. The official CARS website linked directly to a www.fueleconomy.gov

site that was designed to have the identical look and feel of the NHTSA CARS site. Unless 

consumers and dealers noted the change in URL they would be unaware they were working on 

fueleconomy.gov. Millions of additional users took advantage of this capability in the month 

leading up to the CARS program and in the month during which the program was in effect.

5.2 ENERGY POLICY ACT OF 2005: ALTERNATIVE MOTOR VEHICLE TAX 

CREDITS

The Energy Policy Act of 2005 (P.L. 109-58) provides federal income tax credits for consumers 

who purchase new hybrid-electric vehicles (HEVs), fuel cell vehicles (FCVs), alternative fuel 

vehicles (AFVs), and vehicles using advanced lean-burn technology (such as diesels) beginning 

January 1, 2006. This incentive is aimed at helping advanced fuel-efficient and alternative fuel 

technologies gain acceptance in the marketplace by helping offset the increased cost of these 

technologies to consumers. These credits replaced earlier federal tax deductions that ended 

December 31, 2005.

Hybrid Tax Credit. The hybrid credit allows up to $3,400 for the purchase of a qualifying new 

hybrid vehicle up to 8,500 lbs. GVWR. The amount varies among hybrid models depending upon 

two variables:

1. The vehicle’s fuel economy improvement relative to 2002 model year city fuel economy 

for the vehicle’s inertia weight class ($400 to $2,400 credit)

2. It’s projected lifetime fuel savings ($250 to $1,000 credit)

These credits are to be phased out for each manufacturer after it sells 60,000 hybrids, tabulated 

from January 1, 2006.

As of August 25, 2009, about 51 hybrid models from seven manufacturers have been certified by 

IRS for hybrid vehicle credits. Credits for two manufacturers, Toyota and Honda, have already 

phased out. Credits for Ford hybrids began phase-out on April 1, 2009, and will end April 1, 

2010. This tax credit will end for all manufacturers as of December 31, 2010. 
11

Lean Burn (Diesel) Tax Credit. The lean-burn credit is almost identical to the one for hybrids. It 

allows a credit of up to $3,400 based on the same fuel economy and conservation criteria, and it 

has the same phase-out provisions.

Manufacturers have been much slower to introduce vehicles that qualify for this credit due to the 

difficulty of designing diesel engines capable of meeting stringent Bin 5 Tier II emissions 

standards. No vehicles were certified for this credit by IRS until the 2009 model year. As of 

August 25, 2009, nine vehicles from three manufacturers have been certified by IRS for this 

credit. To date, no manufacturer has sold enough lean burn vehicles to begin credit phase out.

New Qualified Alternative Fuel Motor Vehicle Credit. The AFV credit is not based on fuel 

economy improvement, but rather the incremental cost of the technology over a similar 

conventional vehicle, up to a maximum of $5,000 for vehicles with a GVWR of 8,500 lbs. or 

less. For this credit, “alternative fuel” means compressed natural gas (CNG), liquefied natural gas

(LNG), liquefied petroleum gas (LPG), hydrogen, or any liquid that is at least 85 percent 

methanol by volume.

Like the hybrid and lean burn credits, the AFV credits apply to vehicles placed in service from 

January 1, 2006 to December 31, 2010. However, the AFV credits do not phase out based on 

manufacturer sales.

Thus far, only one vehicle model has been certified by IRS for this credit, the Honda Civic GX, 

which was approved for model years 2005 through 2009.

New Qualified Fuel Cell Motor Vehicle Credit. This legislation allows a total credit of up to 

$12,000 for qualifying fuel cell vehicles with a GVWR of 8,500 lbs. or less placed into service 

after December 31, 2005. This credit is composed of two parts: a fixed credit of $8,000 ($4,000 

if the vehicle is purchased after December 31, 2009) plus an additional $1,000 to $4,000 for fuel 

economy improvements of 150 to 300 percent over 2002 model year city fuel economy for the 

vehicle’s inertia weight class. Qualifying vehicles must meet stringent Bin 5 Tier II emissions 

standards. Although this credit is available for vehicles placed in service from January 1, 2006 to 

December 31, 2014, IRS has not certified any such vehicles for this credit to date.

5.3 PLUG-IN ELECTRIC DRIVE MOTOR VEHICLE CREDIT

Section 205 of the Emergency Economic Stabilization Act of 2008 (P.L. 110-59) established a 

tax credit for plug-in electric drive motor vehicles. The incentive is a tax credit of $2,500 plus 

$417 for each kilowatt hour of traction battery capacity in excess of 4 kilowatt hours. The total 

credit cannot exceed $7,500 for a vehicle with GVWR of 10,000 lbs. or less. This credit applies 

to qualifying vehicles purchased after December 31, 2008, and begins to phase out after a total of 

250,000 such vehicles have been sold in the United States to date, no such vehicles have been 

certified for the credit by IRS.
12

5.4 HIGH OCCUPANCY VEHICLE (HOV) WAIVER

Section 1121 of the Safe, Accountable, Flexible, Efficient Transportation Equity Act of 2005

(P.L. 109-59) and subsequent guidance from EPA (U.S. EPA, 2007) allow states the discretion 

to open up their HOV lanes to fuel-efficient and low-emissions vehicles regardless of the 

number of passengers as long as the vehicle is:

 A dedicated alternative fuel vehicle, or

 A hybrid vehicle achieving 50 percent or better in-city fuel economy or 25 percent or 

better in combined city/highway fuel economy compared to a similar gasoline fueled 

vehicle. 

To be eligible, the vehicles must also meet Bin 5 Tier II federal emissions standards or 

California LEV II standards. States can opt to toughen EPA's criteria but may not reduce them. 

Currently, eleven states (including DC) allow HOV lane access for energy efficient and/or 

alternative fuel vehicles (U.S. DOE, 2009).

3

5.5 STATE AND LOCAL INCENTIVES

The provision expires September 30, 2009.

In addition to federal incentives, many states and local governments offer incentives to 

encourage consumers to purchase fuel-efficient vehicles. State incentives include access to HOV 

lanes, state tax credits, exemptions from vehicle excise taxes, and exemptions from mandatory 

emissions testing. Local incentives include such perks as free parking at designated locations 

and free or reduced-rate charging for electric vehicles.

6. BENEFITS

Improved fuel economy saves consumers money, reduces the nation’s dependence on petroleum 

and benefits the environment by reducing emissions of carbon dioxide, the most important 

greenhouse gas. Even for similar vehicles of the same size class, the money saved by choosing a 

more efficient vehicle can be substantial. For example, comparing model year 2010 midsize 

sedans using fueleconomy.gov’s “Find-a-Car” feature, one finds that a 4-cylinder Mazda 6 with 

automatic transmission averages 24 miles per gallon (Figure 5). If gasoline costs $2.50 per 

gallon, the cost of fuel to drive 25 miles would be $2.60, and total annual fuel costs for 15,000 

miles of typical driving would cost $1,563. A Ford Fusion Hybrid getting 39 miles per gallon 

would cost only $1.60 in fuel to drive 25 miles and would run up an annual fuel bill of $962 for 

15,000 miles of travel. The Toyota Prius Hybrid rated at 50 miles per gallon requires only $1.25 

in gasoline to go 25 miles and would require only $750 in gasoline for 15,000 miles of driving, 

less than half the fuel bill of the Mazda 6. 

 3 U.S. Department of Energy, Alternative Fuels & Advanced Vehicles Data Center. 

(http://www.afdc.energy.gov/afdc/progs/in_matrx.php). Viewed 26 August 2009.
13

Figure 5. Fuel savings benefits of higher fuel economy for three midsize cars: 

www.fueleconomy.gov

7. REDUCING PETROLEUM DEPENDENCE

Just as past fuel economy improvements have saved enormous quantities of petroleum, the 

standards recently agreed upon through 2011 will reduce U.S. petroleum demand significantly. 

Figure 6 compares two projections by the Energy Information Administration, one developed in 

2007 and the other in 2009 reflecting the impacts of fuel economy standards and higher fuel 

prices. The 2009 projection which includes the impacts of higher fuel economy standards and 

the market response to higher fuel prices reduces light-duty vehicle fuel use by an estimated 2.9 

million barrels per day in 2030 (44 billion gallons per year). 
14

Figure 6. Estimated impacts of future fuel economy standards (Source: U.S. DOE/EIA, 2007 & 

2009, table 7).

The Clean Cities Fuel Economy Information Project has developed estimates of its own impact 

on petroleum consumption in the United States. The method begins with hard data on the 

number of visitors to the www.fueleconomy.gov website, the number of Gas Mileage Guides 

distributed, and incomplete information on media coverage of the website by TV, radio, other 

websites and printed media. Whenever possible, published estimates of the impacts of such 

information on consumer behavior are used to translate the transmission of information into 

changed consumer behavior or the operating efficiency of vehicles. In other cases conservative 

assumptions about impacts are used link information dissemination to outcomes. In general, 

much of the information necessary to rigorously link project activities to real world fuel 

consumption is lacking or out of date. Nonetheless, using the best information available, it is 

estimated that the Clean Cities Fuel Economy Information Project helped consumers save over 

400 million gallons of petroleum in 2008 (Figure 7).
15

Figure 7. Estimated fuel savings of fuel economy information project by year in which savings 

are realized.

The over 400 million gallons of gasoline saved represents approximately 4 million metric tons of 

carbon dioxide emissions avoided.

8. SUCCESSFUL STRATEGIES AND FUTURE CHALLENGES

Four guiding principles have shaped the activities of the Clean Cities Fuel Economy Information 

Project:

• The primary objective is to serve new and used car buyers and all motorists, to help them 

make fuel economy decisions in their best interests. This requires input from our 

customers in the form of focus groups, online surveys and other market research. It also 

requires intentional promotion of the website through all relevant media.

• The website, gas mileage guide and all our products must be continuously improved.

• Innovation is essential.

• To enhance our effectiveness we must collaborate with the automotive industry, the 

media, academia, NGOs and other government agencies, most especially the 

Environmental Protection Agency.

These principles have served to keep the project focused on delivering the best possible service 

to the public, and they will continue to guide its activities in the future.

The future poses new and challenging opportunities. Research conducted over the past decade 
16

suggests that consumers would give greater value to fuel economy if the uncertainty about future 

energy savings could be reduced. A key source of uncertainty is lack of confidence in official 

fuel economy estimates. The problem appears to be that the estimates are inaccurate for many 

individuals even though they may be unbiased for the population as a whole. This fact indicates 

that there would be value in developing methods for creating individualized fuel economy 

estimates. Over the past two years, the Your MPG feature has allowed consumers to identify 

their driving style, in addition to providing their own estimates of the amount of stop-and-go 

versus highway driving they do. Most participants also identify the state in which they live. The 

Fuel Economy Information Program is preparing to carry out a statistical analysis of the over 

25,000 Your MPG records submitted to date in order to quantify relationships between easily 

identifiable factors (city/highway driving, driving style, state of residence, method of 

measurement, vehicle drivetrain technology) and real-world fuel economy. By taking these 

factors into account, it may be possible to produce more accurate, individualized fuel economy 

estimates. If this can be done it should reduce the uncertainty of future fuel savings, thereby 

increasing their value to typically loss-averse consumers.

Another apparent source of confusion is a consequence of reporting fuel economy in miles per 

gallon rather than fuel consumption in gallons per 100 miles. Research has shown that many 

consumers perceive the value of an increase in 10 MPG from 40 to 50 MPG to be equal to a 10 

MPG increase from 20 to 30 MPG. In fact, the increase from 40 to 50 MPG reduces fuel 

consumption by 0.50 gallons per 100 miles while an increase from 20 to 30 reduces fuel 

consumption by 1.67 gallons per 100 miles. For a vehicle traveling 10,000 miles and gasoline at 

$2.50 per gallon, the difference in annual fuel savings is almost $300. The fueleconomy.gov 

website provides the option to view fuel economy estimates in terms of miles per gallon, gallons 

per 100 miles or liters per 100 kilometers. However, this facility is little used by visitors to the 

website. Additional market research may lead to better strategies for helping consumers 

understand this important distinction.

In future years, plug-in hybrid vehicles, battery electric vehicles and hydrogen fuel cell vehicles 

are likely to enter the marketplace, each with a different method of measuring fuel economy. The

Clean Cities Fuel Economy Information project can play a key role in helping consumers and the 

media understand and interpret fuel economy estimates for these new technologies.

As national policy focuses more intensely on protecting the global climate, informing consumers 

about the consequences of their vehicle choices for greenhouse gas emissions will become 

increasingly important. EPA and DOT have already begun formulating coordinated policies for 

regulating motor vehicle fuel economy and greenhouse gas emissions. The Clean Cities Fuel 

Economy Information Project can contribute to informing the public about the relationships 

among fuel economy, low carbon fuels, and domestically produced non-petroleum fuels, and how

each relates to our national energy goals.

As vehicle technologies evolve, the effects of driver behavior and vehicle maintenance on fuel 

economy will change. In 2008, the Clean Cities Fuel Economy Information Project initiated 

research to update the state of knowledge about fuel economy driving and maintenance tips. A 

key issue is whether in-vehicle fuel economy monitoring devices that provide feedback to drivers 
17

on real-world fuel economy performance actually help improve fuel economy and, if so, how 

they can be designed and used to best effect. There is some evidence that advanced technologies 

like hybrid and plug-in hybrid vehicles will be even more sensitive to driving style than 

conventional vehicles. There is a need to continue and expand support for research in these areas 

and to develop effective means of informing the public about how to get the best mileage with 

the smallest impacts on the environment and national energy security.
18

9. REFERENCES

Allcott, H. and N. Wozny. (2009). “Gasoline Prices, Inattentive Consumers, and the Energy 

Paradox,” working paper, Harvard Energy Technology Innovation Policy Group and Harvard 

University Center for the Environment, July 19, 2009.

(CFR) Code of Federal Regulations. (2008). “Dealer Availability of Fuel Economy 

Information,” Code of Federal Regulations Title 40, pt. 600, 2008 ed.

Espey, M., and S. Nair. (2005). “Automobile Fuel Economy: What is it Worth?” Contemporary 

Economic Policy, vol. 23, no. 3, pp 317-323.

Greene, D.L. (2009). “Uncertainty, Loss Aversion and Markets for Energy Efficiency,” 

presented at the Workshop on the Economics of Technologies to Combat Global Climate 

Change, Energy Modeling Forum, Stanford University, August 2-3, Snowmass, Colorado.

Greene, D.L., J. German and M.A. Delucchi. (2009). “Fuel Economy: the Case for Market 

Failure,” ch. 11, in D. Sperling and J. Cannon, eds., Reducing Climate Impacts in the 

Transportation Sector, Springer Science+Business Media.

Greene, D.L., R. Goeltz, J. Hopson and E. Tworek. (2006). “Analysis of In-Use fuel Economy 

Shortfall by Means of Voluntarily Reported Fuel Economy Estimates,” Transportation 

Research Record 1983, Transportation Research Board of the National Academies, pp. 99-

105.

Hellman, K. and J.D. Murrell. (1984). Development of Adjustment Factors for the EPA City and 

Highway MPG Values, SAE Technical Paper Series 840496, Society of Automotive 

Engineers, Warrendale, PA.

Langer, A., N. Miller. (2008). “Automobile Prices, Gasoline Prices, and Consumer Demand for 

Fuel Economy,” Economic Analysis Group Discussion Paper, Department of Economics, 

University of California, Berkeley.

Larrick, R.P. and J.B. Soll. (2008). “The MPG Illusion,” Science, vol. 320, pp. 1593-1594.

Larson, R.P. and N.W. Hill. (1990). “Gas Mileage Guide Assessment: Federal Fuel Economy 

Information Program Phase I Findings,” presented at the 69th Annual Meeting of the 

Transportation Research Board, Washington, DC, Center for Transportation Research, 

Argonne National Laboratory, Argonne, Illinois.

McNutt, B.D., R. Dulla, R. Crawford, H.T. McAdams and N. Morse. (1982). 1982 Comparison 

of EPA and On-Road Fuel Economy: Analysis, Approaches, Trends and Impacts, SAE 

Technical Paper Series 820788, Society of Automotive Engineers, Warrendale, PA.
19

Nye, R., D. Greene, J. Hopson and J. Saulsbury. (2003). Providing Consumers with Web-Based 

Information on the Environmental Effects of Automobiles, ORNL/TM-2003/166, Oak Ridge 

National Laboratory, Oak Ridge, TN, June.

(P.L.) Public Law. (2005). “ Energy Policy Act of 2005,” Public Law 109-58, 119 Stat. 1038. 

August 5. 

(P.L.) Public Law. (2005). “Safe, Accountable, Flexible, Efficient Transportation Equity Act of 

2005: A Legacy for Users,” Public Law 109-59, 119 Stat. 1192. August 10.

(P.L.) Public Law. (2008). “Emergency Economic Stabilization Act of 2008,” Public Law 110-

59, 122 Stat. 3835. October 3.

(P.L.) Public Law. (2009). “Consumer Assistance to Recycle and Save Act of 2009,” Public 

Law 111-32, 123 Stat. 1909. June 24.

Turrentine, T.S. and K.S. Kurani. (2007). “Car Buyers and Fuel Economy,” Energy Policy, vol. 

35, pp. 1213-1223.

(USC) U.S. Code. (2006). “Automobile Fuel Economy: Fuel Economy Information,” Title 49 

U.S. Code, Sec. 32908, 2006 ed., pp. 618-619 (49 USC 32908, 2006).

(U.S. DOE) U.S. Department of Energy. (2009). “Incentive Type Table,” Alternative Fuels & 

Advanced Vehicles Data Center, (http://www.afdc.energy.gov/afdc/progs/in_matrx.php), 

viewed August 26, 2009.

(U.S. DOE/EIA) U.S. Department of Energy, Energy Information Administration. (2007). 

Annual Energy Outlook, Washington, DC, http://www.eia.doe.gov/oiaf/aeo/index.html.

(U.S. DOE/EIA) U.S. Department of Energy, Energy Information Administration. (2009). 

Annual Energy Outlook, Washington, DC, http://www.eia.doe.gov/oiaf/aeo/index.html.

(U.S. DOT/FHWA) U.S. Department of Transportation, Federal Highway Administration. 

(2007). Highway Statistics, 1965-2007, Washington DC.

(U.S. DOT/NHTSA) U.S. Department of Transportation, National Highway Traffic Safety 

Administration. (2006). “Average Fuel Economy Standards for Light Trucks: Model Years 

2008-2011,” Final Rule, 49 CFR Parts 523, 533 and 537, Docket No. 2006-24306, RIN 2127-

AJ61, Washington, DC.

(U.S. EPA) U.S. Environmental Protection Agency. (2008). Light-duty automotive Technology 

and Fuel Economy Trends: 1975 Through 2008, EPA420-R-08-015, Office of Transportation 

and Air Quality, Ann Arbor, Michigan, September. 

(U.S. EPA) U.S. Environmental Protection Agency. (2007). With New Guidelines for HOV 

Exemptions, EPA Puts Clean and Efficient Technologies in the Fast Lane. Press release, 17 

May 2007. 
20

(http://yosemite.epa.gov/opa/admpress.nsf/8822edaadaba0243852572a000656841/649ef12b8

763f5e4852572de0050f59d!OpenDocument) 

(U.S. EPA) U.S. Environmental Protection Agency. (2006a). “Fuel Economy Labeling of Motor 

Vehicles: Revisions to Improve Calculation of Fuel Economy Estimates,” Federal Register 71

(27 December 2006): 77872-77969.

(U.S. EPA) U.S. Environmental Protection Agency. (2006b). EPA Proposes New Test Methods 

for Fuel Economy Window Stickers. EPA420-F-06-009. Washington, DC, January. 

http://www.epa.gov/fueleconomy/420f06009.pdf, viewed 27 August 2008.

The White House, Office of the Press Secretary, 2009. “President Obama Announces National 

Fuel Efficiency Policy,” May 19, 2009, 

http://www.whitehouse.gov/the_press_office/President-Obama-Announces-National-FuelEfficiency-Policy.