National Highway Traffic Safety Administration April 6, 2006 – Federal Register Recent Federal Regulation Documents

This final rule reforms the structure of the corporate average fuel economy (CAFE) program for light trucks and establishes higher CAFE standards for model year (MY) 2008-2011 light trucks. Reforming the CAFE program will enable it to achieve larger fuel savings, while enhancing safety and preventing adverse economic consequences. During a transition period of MYs 2008-2010, manufacturers may comply with CAFE standards established under the reformed structure (Reformed CAFE) or with standards established in the traditional way (Unreformed CAFE). This will permit manufacturers and the agency to gain experience with implementing the Reformed CAFE standards. In MY 2011, all manufacturers will be required to comply with a Reformed CAFE standard. Under Reformed CAFE, fuel economy standards are restructured so that they are based on a measure of vehicle size called ``footprint,'' the product of multiplying a vehicle's wheelbase by its track width. A target level of fuel economy is established for each increment in footprint. Smaller footprint light trucks have higher targets and larger ones, lower targets. A particular manufacturer's compliance obligation for a model year will be calculated as the harmonic average of the fuel economy targets for the manufacturer's vehicles, weighted by the distribution of manufacturer's production volumes among the footprint increments. Thus, each manufacturer will be required to comply with a single overall average fuel economy level for each model year of production. The Unreformed CAFE standards are: 22.5 miles per gallon (mpg) for MY 2008, 23.1 mpg for MY 2009, and 23.5 mpg for MY 2010. To aid the transition to Reformed CAFE, the Reformed CAFE standards for those years are set at levels intended to ensure that the industry-wide costs of the Reformed standards are roughly equivalent to the industry-wide costs of the Unreformed CAFE standards in those model years. For MY 2011, the Reformed CAFE standard is set at the level that maximizes net benefits. Net benefits includes the increase in light truck prices due to technology improvements, the decrease in fuel consumption, and a number of other factors viewed from a societal perspective. All of the standards have been set at the maximum feasible level, while accounting for technological feasibility, economic practicability and other relevant factors. Since a manufacturer's compliance obligation for a model year under Reformed CAFE depends in part on its actual production in that model year, its obligation cannot be calculated with absolute precision until the final production figures for that model year become known. However, a manufacturer can calculate its obligation with a reasonably high degree of accuracy in advance of that model year, based on its product plans for the year. Prior to and during the model year, the manufacturer will be able to track all of the key variables in the formula used for calculating its obligation (e.g., distribution of production and the fuel economy of each of its models). This final rule announces estimates of the compliance obligations, by manufacturer, for MYs 2008-2011 under Reformed CAFE, using the fuel economy targets established by NHTSA and the product plans submitted to NHTSA by the manufacturers in response to an August 2005 request for updated product plans. This rulemaking is mandated by the Energy Policy and Conservation Act (EPCA), which was enacted in the aftermath of the energy crisis created by the oil embargo of 1973-74. The concerns about reliance on petroleum imports, energy security, and the effects of energy prices and supply on national economic well-being that led to the enactment of EPCA remain very much alive today. America is still overly dependent on petroleum. Sustained growth in the demand for oil worldwide, coupled with tight crude oil supplies, are the driving forces behind the sharp price increases seen over the past several years and are expected to remain significant factors in the years ahead. Increasingly, the oil consumed in the U.S. originates in countries with political and economic situations that raise concerns about future oil supply and prices. In the long run, technological innovation will play an increasingly larger role in reducing our dependence on petroleum. We recognize that financial difficulties currently exist in the motor vehicle industry and that a substantial number of job reductions have been announced recently by large full-line manufacturers. Accordingly, we have carefully balanced the costs of the rule with the benefits of conservation. Compared to Unreformed CAFE, Reformed CAFE enhances overall fuel savings while providing vehicle manufacturers with the flexibility they need to respond to changing market conditions. Reformed CAFE will also provide a more equitable regulatory framework by creating a level-playing field for manufacturers, regardless of whether they are full-line or limited-line manufacturers. We are particularly encouraged that Reformed CAFE will reduce the adverse safety risks generated by the Unreformed CAFE program. The transition from the Unreformed CAFE to the Reformed CAFE system will begin soon, but ample lead time is provided before Reformed CAFE takes full effect in MY 2011.