Bush Proposes Auto Fuel Economy Standards Reform

AAEA supports President Bush's April 27th proposal for Congress to give the U.S. Department of Transportation the authority to reform the Corporate Average Fuel Economy (CAFE) Standards program. Under the current system, passenger car fuel standards are set in law at 27.5 miles per gallon. Innovative as ever, President Bush wants CAFE credits to be tradable, as they are in a similar market-based system that works effectively for power plants and many other regulated industries. Manufacturers should be able to trade fuel economy credits to ensure fuel savings are achieved at the lowest possible cost to consumers and automakers. If a manufacturer surpasses its CAFE standard, that company should receive credits they can sell to other manufacturers that find it more expensive to meet the standards.

Some lawmakers have proposed setting a standard of at least 33 miles per gallon. The administration will not accept an arbitrary statutory increase. So Congress may grant DOT authority to revise the CAFE standards but not mandate a particular miles per gallon standard.

DOT used innovative reforms to address these problems in its recent light truck rule, but does not have the legal authority to apply those reforms to passenger cars. President has asked Congress for the authority to reform car CAFE standards consistent with the approach taken with the light truck rule issued March 29.

CAFE is the average fuel economy, expressed in miles per gallon, of a manufacturer's fleet of passenger cars or light trucks made in America. The 'Energy Policy Conservation Act,' enacted into law by Congress in 1975 and creating CAFE, was passed in response to the 1973-74 Arab oil embargo More Information On CAFE: http://www.nhtsa.dot.gov/cars/rules/cafe/overview.htm