CAFE stands for Corporate Average Fuel Economy and was first enacted in the U.S. by Congress in 1975. CAFE was proposed in the wake of the 1973 Arab oil embargo to regulate and improve the fuel economy of cars and light trucks sold in the U.S.
Fuel economy is defined as the average mileage traveled by an automobile per gallon of gasoline (or equivalent of any other fuel).
CAFE is the sales-weighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer’s fleet of passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8,500 pounds or less manufactured for sale in the United States for any given model year. Current standards require an average of 27.2 miles per gallon (mpg) for cars and 21.6 mpg for light trucks.
The National Highway Traffic Safety Administration (NHTSA) is responsible for establishing and amending CAFE standards. They set the fuel economy standards for cars and light trucks sold in the U.S., including those imported from foreign manufacturers.
The Environmental Protection Agency (EPA) calculates the average fuel economy for each manufacturer. CAFE certification is done in either one of two ways: 1) the manufacturer provides its own fuel economy test data; or 2) the EPA will obtain a vehicle and test it in its Office of Transportation & Air Quality facility in Ann Arbor, Michigan. EPA will do actual tests on about 30 percent of the existing vehicle lines, using the same laboratory test that they use to measure exhaust emissions.
The penalty for failing to meet CAFE standards recently increased from $5.00 to $5.50 per tenth of a mile per gallon for each tenth under the target value times the total volume of those vehicles manufactured for a given model year. Since 1983, manufacturers have paid more than $500 million in civil penalties. Most European manufacturers regularly pay CAFE civil penalties ranging from less than $1 million to more than $20 million annually. Asian and domestic manufacturers have never paid a civil penalty.
CAFE standards benefit U.S. energy users by reducing dependence on oil imports. The U.S. consumes 44 percent of total global daily gasoline consumption, and 80 percent of American consumers agree that America needs to reduce oil imports. Current fuel economy standards save approximately 55 billion barrels of fuel annually. By raising current CAFE standards by five percent annually until 2012 and three percent annually thereafter, 1.5 million barrels of oil could be saved annually by 2010 with a total of 4.5 million barrels of oil saved by 2020. At that rate, approximately 67 billion barrels of oil could be saved during the next 40 years.
Further, increased efficiency in vehicles reduces harmful environmental impacts. Without the current CAFE standards in place, carbon dioxide emission levels would have been a ten percent higher.
In May of 2007, President Bush issued an Executive Order directing the EPA and other federal agencies, including the Department of Energy, to implement a new CAFE policy with increased standards. This order was followed by a Senate bill passed in June of 2007 that proposed to increase CAFE standards for cars and light trucks to 35 mpg by 2020.
Sources: National Highway Traffic Safety Administration, U.S. Environmental Protection Agency, Alliance to Save Energy, U.S. Senate, The National Center for Public Policy Research, American Council for an Energy-Efficient Economy, Wikipedia