This is the third in a series of blog posts by RFF’s transportation team that addresses some of the key research questions for the midterm CAFE review.
The first two blog posts in this series introduced the midterm review of the corporate average fuel economy (CAFE) standards and discussed unresolved issues for this review about the fuel efficiency gap. In this post, we focus on issues raised by the shift to vehicle footprint–based standards. Until the changes to the CAFE rules in 2012, all passenger cars were held to the same fuel economy standard (27.5 miles per gallon [mpg] from 1990 to 2011) and all light-duty trucks were held to a weaker standard (between 20 and 23 mpg during the same period). But before the standards were tightened in 2012, federal legislation in the late 2000s required the ruling agencies to base the new standards on a vehicle attribute or attributes related to fuel economy (known as attribute-based standards). The US Environmental Protection Agency and National Highway Traffic Safety Administration (NHTSA) now base the standards on a vehicle’s footprint, defined as the area between the four wheels, and they also maintain the car–truck distinction. Vehicles with a smaller footprint must meet a tighter standard than those with a larger footprint, and light-duty trucks still have a less stringent overall footprint standard than cars.
Before making this decision, the agencies considered several attributes on which to base the standards. European, Japanese, and Chinese standards depend on vehicle weight, with heavier vehicles allowed to have more lenient standards. One argument for the footprint standard used in the United States over the weight-based standard is that it would provide incentives for manufacturers to improve fuel economy by using lighter-weight materials. A weight-based standard would not provide the same incentive, because lighter vehicles would face a tighter standard. The agencies also argued that a footprint standard would force more technology for improved fuel economy across all vehicle sizes, with less incentive to downsize to meet the standard. Whether based on size or weight, the attribute-based standard has political appeal because it will have costs that fall more evenly on all manufacturers compared to a mpg-based standard that would tend to favor manufacturers with a smaller or lighter vehicle fleet. An attribute-based standard was also especially appealing to NHTSA, who was particularly concerned that, with so many large vehicles on the roads, downsizing new vehicles would result in more fatalities.
But will the footprint standard work as expected? The effect of CAFE standards on traffic fatalities is highly controversial. Bigger and heavier vehicles are safer in single-vehicle accidents and are safer for their own occupants in multi-vehicle crashes. But drivers and passengers face greater risk in an accident with a larger or heavier vehicle than with a smaller or lighter one. Furthermore, NHTSA analysis recently concluded that reducing weight while holding footprint constant does not increase fatality risks; this is a major reason the agency favors the footprint-based standard.
Adding to the complications, research suggests that optimal vehicle weight is significantly smaller than the current average weight of vehicles on the road. Consumers believe that they are safer in heavier and larger vehicles but they don’t account for the fact that choosing larger and heavier vehicles increases fatality risks for people in other vehicles. Because of this safety externality, consumers choose vehicles that are larger and heavier than is socially optimal.
Will the new CAFE standards reduce or exacerbate this problem? The truth is, we don’t yet know. Because size and weight disparity matters, the effect of CAFE standards on fatalities depends on how the standards affect the entire distributions of size and weight. It also matters whether CAFE causes riskier drivers to buy different vehicles. Predicting these effects is essential to predicting how the standards will affect accident fatalities.
The effects on vehicle size and the mix of vehicles sold will also have an impact on the overall fuel savings and greenhouse gas emissions reductions achieved by the new standards. The agencies assume that there will be no change in vehicle size or sales mix, but rather that the effect of the standards will be to improve fuel economy uniformly across the fleet. It seems likely, however, that the sales mix and vehicle sizes could change in response to differences in the costs of improving fuel economy across different vehicle sizes and types, and to differences in consumer responses as new vehicles are introduced over time. But how large will these effects be, and what direction will they take?
Several studies have taken a first look at the effects of footprint standards on vehicle size and fleet sales mix. Researchers using data from earlier regulatory analyses and a combined economic–engineering model conclude that manufacturers are likely to increase vehicle size, particularly for larger vehicles. Further analysis of this type with more current data will be possible in the near future. Another study looks at the weight-based standards introduced in Japan, and finds evidence that some vehicles appear to have become heavier in response to the rules.
At a related workshop hosted at RFF, the footprint standard was an important topic of discussion among experts from academia, nonprofits, and industry, as well as from the key agencies. We have attempted here to identify research questions about the effects of this new approach to regulating fuel economy on key outcomes of the CAFE rules. They are as follows:
- Will the footprint standards affect the fleet mix as little as the agencies expect?
- How will the standards affect the footprint and weight of new vehicles sold?
- Would changes to the standards improve safety, oil use, and environmental outcomes?
We and other researchers have begun looking at these questions, but a lot of work remains to be done.