Vehicle Fuel Economy

Concerns over national security, environmental stresses, and high fuel prices have raised interest in reducing oil consumption. Through the Corporate Average Fuel Economy (CAFE) program, the National Highway Traffic Safety Administration (NHTSA) requires cars and light trucks to meet certain fuel economy standards. As requested, the author discusses (1) how CAFE standards are designed to reduce fuel consumption, (2) strengths and weaknesses of the CAFE program and NHTSA's capabilities, and (3) market-based policies that could complement or replace CAFE. This is an excerpted and edited version.

Preface; Results in Brief; Background; The CAFE Program Is Designed to Reduce Oil Consumption by Cars and Light Trucks and Has Been Restructured for Light Trucks but Not for Cars; Several Weaknesses in the CAFE Program Exist; Some Market-Based Policy Options Could Complement the CAFE Program; Conclusions; Matters for Congressional Consideration; Recommendations for Executive Action.