History and Background
The Corporate Average Fuel Economy (CAFE) program was intended to help reduce America’s dependence on foreign oil by producing more fuel efficient vehicles. The program requires each automaker to meet government-set mileage targets (CAFE standards) for its car and light truck fleets sold in the United States each year. The complex program requires automakers to calculate the fuel economy of all vehicles actually sold. It is not a calculation of what automakers offer for sale, but what consumers buy.
When the Arab oil embargo prompted crude oil prices to triple in the mid-1970’s Americans clamored for the relief at the pump and policymakers turned their attention to automobile fuel efficiency. In 1975, Congress passed the Energy Policy and Conservation Act, requiring automakers for the first time to build and sell vehicles that met fuel economy standards. It would quickly become one of the most far-reaching and complex regulations ever placed on the industry, affecting everything from product mix, design and safety to decisions about where to locate the plants that build them.
The CAFE standards took effect in 1978 with a requirement of 18 miles per gallon for cars. The standard increased each year until 1985, when it reached the current 27.5 mpg. Light truck standards took effect in the 1979 model year and are currently 20.7 mpg. The standard does not require each vehicle to achieve the standard, but rather requires the sales-weighted average fuel economy of the fleet of cars and trucks the manufacturer sells to achieve the standard.
CAFE is a 1970's solution to a 21st Century problem. Rather than make a shortsighted attempt at fuel efficiency reform, policy makers should look toward the future that alternative fuels can bring. This greenhouse gas and petroleum free future could drive the rest of America into a totally renewable, environmentally harmonious future.