Public Policy and Fuel Efficiency

Alex Hess

SMA 521

11/27/11

Climate change mitigation policy is often viewed in the United States as a costly enterprise with low returns. However, governments at all levels recognize that climate change is a problem. As a result, mitigation policy is often framed by politicians as something else. Increasing fuel efficiency in vehicles is a strong emissions mitigation step that can be sold to the public as an environmental policy, a cost-savings both at the household level and in public fleets, and as a defense policy in that it increases US resilience to price shocks in petroleum markets.

In addition, improving technology on the supply side and a reduction in household disposable income, due to a weak economy, has increased demand for fuel efficient vehicles in the US. As a result, public policy does not need to change public behavior; it simply seeks to amplify market signals. This can be seen in at the federal level with CAFE standards, the Cash for Clunkers program, and a robust public information campaign under the EPA. At the State level, governments also actively encourage adoption of fuel efficient vehicles. Also at the state and local level, governments are incorporating fuel saving technologies into their fleets. Although an in depth exploration of all fuel savings programs is beyond the scope of this paper, representative examples will be presented below.

The Corporate Average Fuel Economy (CAFE) standards were created by Congress in 1975 in the Energy Policy and Conservation Act in the aftermath of the 1973 OAPEC fuel embargo in order to increase vehicle fuel efficiency and reduce effective demand for petroleum in the US. (NHTSA, 2011) The program is administered by the National Highway Traffic Safety Administration – NHTSA – who sets the fleet average fuel economy that producers must meet. The Environmental Protection Agency – EPA – compiles all relevant fuel economy data for the program and communicates that information to the public. (NHTSA, 2011)

Currently, manufacturers are meeting the standards. For manufacturing year 2011, the CAFE standards are 30.1mpg for passenger cars and 24.2mpg for light trucks; the actual fleet-wide averages for vehicles sold in the US in 2011 were 29.6mpg overall with passenger vehicles averaging 33.8mpg and light trucks at 24.5mpg (NHTSA, 2011).Pacala and Socolow calculate that an average of 60 mpg in 2 billion vehicles by 2050 would accomplish one “stabilization wedge” (Pacala, 2004). NHTSA has issued a Notice of Proposed Rulemaking for the period 2017-2025 for ambitious new CAFE standards. The proposed standard would require an average industry-wide fleet average of 49.6 mpg by 2025 consisting of a requirement of 56 mpg for passenger cars and 40.3 mpg for light trucks. (NHTSA, 2011)

In addition to setting regulatory standards, the federal government conducts a major public information campaign to inform consumer decision making under the auspices of the EPA and Department of Energy. The official website at describes the costs and benefits of a wide variety of available technologies including hybrid, electric, diesel and CNG vehicles. It also has a full data sheet on every model of vehicle commonly sold in the US.

Another type of program is direct government subsidy. One example is the 2009 Car Allowance Rebate System (CARS) commonly known as the “Cash for Clunkers” program. This was a one-off subsidy which helped finance new car purchases if people turned in old vehicles that were then removed from the resale market. The average fuel efficiency for trade-in vehicles was 15.8 mpg while the average for the replacement vehicles was 24.9 mpg, a 58% increase. A total of 677,081 vehicles were replaced under the program. (CARS, 2009)The program had clear emissions benefits but was mainly promoted as an economic stimulus package during the height of the last recession. Although the funding streams are often blurred with federal projects, state and local governments have a plethora of programs to increase average fuel economy in their jurisdictions.

One example at the state level is the California Energy Commission’s DRIVE program which provides $100 million per year in grants to increase adoption of electric, bio-fuel and other efficient vehicle technologies in private, academic and public fleets within the state(California Energy Commission, 2011). One sample project is an $840,750 grant to the Southern California Regional Collaborative (SCRC), a partnership between 12 cities, 2 counties, 7 academic institutions and a number of public agencies which will match the funds and seek to install a large network of plug in stations for electric vehicles across the region(California Energy Commission, 2011).

Many governments at the county, municipal and utility district level are adopting fuel-efficient technologies to save costs and as part of broader climate change mitigation plans. These programs range from fleet replacement to allowing efficient vehicles to drive in HOV lanes, installation of charging stations and so on. One good example is the San Pedro Bay Ports Clean Trucks Program. The program phases out old polluting drayage trucks and mandates that vehicles meet 2007 emissions standards, an 80% emissions reduction over the fleet before the program(Port of Long Beach, 2010). The program is a series of incentives and penalties with the overall goal of reducing fuel consumption and dramatically cutting emissions in one of the world’s busiest ports.

Overall, strong progress is being made in the United States towards increasing fuel efficiency in the aggregate fleet. Local governments, coalitions, and state institutions are promoting ambitious programs to increase fuel efficiency within their jurisdictions. The federal government is supporting those efforts through funding, public information, and industry regulation. Action at the federal level makes sure that the baseline fuel-economy improves across all jurisdictions, reducing the risk of business flight from jurisdictions with stringent environmental standards. Increasing fuel efficiency vehicles is effective, technological feasible and politically popular in the United States. As such, it will likely continue to be a major component of the overall energy policy of the United States.

Works Cited

California Energy Commission. (2011). DRIVE Program Overview. Retrieved 11 27, 2011, from The California Energy Commission:

California Energy Commission. (2011). Southern California Regional Collaborative Plub-In Electric Vehicle Charging Installation and Upgrade Socal EV Ready Project. Retrieved 11 27, 2011, from DRIVE Projects. California Energy Commission.:

CARS. (2009, 10 23). CARS Program Statistics. Retrieved 11 27, 2011, from Car Allowance Rebate System:

NHTSA. (2011). Fuel Economy. Retrieved 11 27, 2011, from National Highway Traffic Safety Administration.:

NHTSA. (2011). NHTSA and EPA Propose to Extend the National Program to Improve Fuel Economy and Greenhouse Gases for Passenger Cars and Light Trucks. Retrieved 11 27, 2011, from Fuel Economy:

NHTSA. (2011). Summary of Fuel Economy Performance. Washington, DC: US Department of Transportation.

Pacala, S. a. (2004). Stabilization Wedges: Solving the Climate Problem for the Net 50 Years with Current Technologies. Science, p 969.

Port of Long Beach. (2010, 1 27). Clean Trucks Program Fact Sheet. Retrieved 11 27, 2011, from Port of Long Beach: