Where:

N is the total number (sum) of light trucks produced by a manufacturer,

N_i is the number (sum) of the i^th model light truck produced by the manufacturer, and

MPG is actual economy of the i^th model light truck, rounded to the nearest hundredth:

If the Actual_Fuel_Economy_Level exceeds the Required_Fuel_Economy_Level, then the manufacturer is in compliance. Credits are calculated as in the past:

Credits = (Actual_Fuel_Economy_Level - Required_Fuel_Economy_Level) * 10 * N

If the manufacturer is not in compliance, then the discrepancy must either be made up in future or past credits, or a fine is due:

Fine = (Required_Fuel_Economy_Level -Actual_Fuel_Economy_Level) * 10 * N * $5.50

As an example, assume a hypothetical manufacturer (Manufacturer X) produces a fleet of light trucks in MY 2008 as follows:

Manufacturer X’s required corporate average fuel economy level would be calculated by first determining the projected fuel economy targets applicable to each vehicle as illustrated below:

Accordingly, vehicle models A, B, C, D, E, and F would be compared to fuel economy values of 26.2 mpg, 25.5 mpg, 24.8 mpg, 23.3 mpg, 21.7 mpg, and 20.3 mpg, respectively.  With the appropriate fuel economy targets calculated, Manufacturer X’s required fuel economy level would be calculated as illustrated below:

Since the actual average fuel economy of Manufacturer X’s fleet is 23.2 mpg, as compared to its required fuel economy level of 23.1 mpg, Manufacturer X complies with the Reformed CAFE standard.

Light trucks that exceed 8,500 lbs. gross vehicle weight rating (GVWR) do not have to comply with CAFE standards through MY 2010. These vehicles include some pickup trucks, sport utility vehicles and large vans.  Currently, large pickup trucks make up less than 3 percent of annual light duty vehicle sales.  These large pickup trucks are used for specialized work-related purposes such as towing, hauling cargo, farming, or other work-related uses and often are equipped with diesel engines.

NHTSA does not require manufacturers to provide data for trucks in the 8,500 – 10,000 lbs. GVWR category.  The agency has acquired data from external sources assumed to be an accurate accounting of theses types of vehicles. The table below lists a summary of these data by model year.   The 2001 model year is the latest model year with complete information available. In general, light trucks in the 8,500 – 10,000 lbs. GVWR category are a small, but growing proportion of the light truck fleet.  Fuel economy data for these vehicles is not available.

The most recent light truck rulemaking for model years 2008-2011 brought in large SUVs referred to “medium duty passenger vehicles” (MDPVs) in model year 2011 and beyond. These vehicles, weighing between 8,500 to 10,000 pounds gross vehicle weight rating make up about 20% of the vehicles in that weight category and are primarily used to haul passengers rather than cargo.

Corporate Average Fuel Economy (CAFE) is the sales weighted average fuel economy, expressed in miles per gallon (mpg), of a manufacturer’s fleet of passenger cars or light trucks with a gross vehicle weight rating (GVWR) of 8,500 lbs. or less, manufactured for sale in the United States, for any given model year. Fuel economy is defined as the average mileage traveled by an automobile per gallon of gasoline (or equivalent amount of other fuel) consumed as measured in accordance with the testing and evaluation protocol set forth by the Environmental Protection Agency (EPA).

For example, this calculation procedure turns a dual fuel vehicle that averages 25 mpg on gasoline or diesel into a 40 mpg vehicle for CAFE purposes. 

This assumes:

1. The vehicle operates on gasoline or diesel 50% of the time and on alternative fuel 50% of the time.
2. Fuel economy while operating on alternative fuel is 15 mpg (15/.15 = 100 mpg)
3. Fuel economy while operating on gas or diesel is 25 mpg

CAFE FE = 1/{0.5/(mpg gas) + 0.5/(mpg alt fuel)} = 1/{0.5/25 + 0.5/100) = 40 mpg

In the case of natural gas, the calculation is performed in a similar manner. The fuel economy is the weighted average while operating on natural gas and operating on gas or diesel. The Alternative Motor Fuels Act specifies that 100 cubic feet (ft³) of natural gas is equivalent to 0.823 gallons of gasoline. The gallon equivalency of natural gas is equal to 0.15 (same as alternative fuels).  Suppose:

1. A vehicle averages 25 miles per 100 ft³of natural gas.

CAFE FE = (25/100) * (100/.823)*(1/0.15) = 203 mpg

Several limitations are established for CAFE credits for dual fuel vehicles.  For MYs 1993-2010, the maximum CAFE increase attributable to dual fueled vehicles in a manufacturer’s passenger car or light truck fleet is 1.2 mpg. 

The Alternative Motor Fuels Act (AMFA) directed the Secretary of Transportation, in consultation with the EPA Administrator and the Secretary of Energy, to conduct a study and submit a report to Congress evaluating the success of the policy decision to offer CAFE credit calculation incentives for dual-fuel and gaseous dual-fuel vehicles.  The report was transmitted to Congress in March 2002.

Congress established the Alternative Motor Fuels Act (AMFA) in 1988 with the provision that the Secretary of Transportation decide whether to continue the incentive program for the model years 2005 through 2008 at a maximum of 0.9 mpg.  In 2004, NHTSA extended the alternative fuel credits provision in AMFA for the model years 2005 through 2008.  A year later, the Energy Policy Act of 2005, superseded NHTSA’s rule and extended AMFA until 2010 at the full 1.2 mpg credit ceiling.  The Act also stipulated that the Secretary of Transportation decide whether to continue the incentive program for model years 2011 through 2014 at a maximum of 0.9 mpg.

      Since 1983, manufacturers have paid more than $675 million in CAFE civil penalties.  Most European manufacturers regularly pay CAFE civil penalties ranging from less than $1 million to more than $20 million annually.  Asian and most of the big domestic manufacturers have never paid a civil penalty.                       

        When NHTSA finds that a manufacturer is not in compliance, it notifies the manufacturer. Surplus credits generated from the three previous years can be used to make up the deficit. Using the example from above, the manufacturer may use credits from any of the previous three model years (2003, 2004, or 2005). Credits generated in the furthest model year (2003) would be used first, followed by any credits generated in MY 2004 and finally MY 2005.  If there are no (or not enough) credits available, then the manufacturer can either pay the fine, or submit a carry back plan to the agency.  In the example, the hypothetical manufacturer’s CAFE was 21.31 mpg for model year 2006.  In that year, the light truck CAFE standard was 21.6 mpg. The fine is calculated as:

(21.6 - Average Fuel Economy)*10.0 * $5.50* Production Volume = Total Fine

(21.6- 21.31) *10.0* $5.50 * 350,000 = $5,582,500

If the manufacturer decides to offset the difference in the following three years instead, they must file a carry back plan with NHTSA.  A carry back plan describes what the manufacturer plans to do in the following three model years (2007, 2008, and 2009) to make up for the deficit credits.  NHTSA must examine and approve the plan.  The total number of credits that must be made up are:

(21.6 – Average Fuel Economy)*10.0 * Production Volume = Total Credits

(21.6 – 21.31) *10.0* 350,000 = 1,015,000

The manufacturer can make up for deficit credits by producing a fleet of vehicles that exceeds the standard at that time. For example, suppose the manufacturer submits plans to build the following light trucks in 2007:

Model             MPG               GVWR           Production Volume

Vehicle A        22                    3000                100,000

Vehicle B        20                    3500                80,000

Vehicle D        10                    8900                55,000

Vehicle E        25                    2800                150,000

In this model year, the manufacturer has quit producing one model (Vehicle C) and introduced a new model (Vehicle E). Because Vehicle D has a GVWR in excess of 8,500 lbs, it is excluded from the calculation. Therefore, the manufacturer’s CAFE is calculated as:

= Average Fuel Economy

Since the light truck standard is 22.2 mpg in 2007, the manufacturer has exceeded the standard and generated excess credits:

(Average Fuel Economy –22.2) *10.0* Production Volume = Total Excess Credits

(22.69-22.2) *10.0* 330,000 = 1,617,000

These excess credits generated in 2007 cover the deficit from the 2006 model year with a surplus of 602,000 that can be used in later model years.

The “Energy Policy Conservation Act,” enacted into law by Congress in 1975, added Title V, “Improving Automotive Efficiency,” to the Motor Vehicle Information and Cost Savings Act and established CAFE standards for passenger cars and light trucks. The Act was passed in response to the 1973-74 Arab oil embargo. The near-term goal was to double new car fuel economy by model year 1985.

The Secretary of Transportation has delegated authority to establish CAFE standards to the Administrator of the National Highway Traffic Safety Administration (NHTSA). NHTSA is responsible for establishing and amending the CAFE standards; promulgating regulations concerning CAFE procedures, definitions and reports; considering petitions for exemption from standards for low volume manufacturers and establishing unique standards for them; enforcing fuel economy standards and regulations; responding to petitions concerning domestic production by foreign manufacturers and all other aspects of CAFE, including the classification of vehicle lines as either cars or trucks; collecting, recording and cataloging Pre- and Mid-model year reports; adjudicating carry back credit plans; and providing program incentives such as credits for alternative fueled vehicle lines.

EPA is responsible for calculating the average fuel economy for each manufacturer. CAFE certification is done either one of two ways: 1) The manufacturer provides its own fuel economy test data, or 2) the EPA will obtain a vehicle and test it in its Office of Transportation & Air Quality facility in Ann Arbor, MI. EPA will do actual tests on typically about 30% of the existing vehicle lines, using the same laboratory test that they use to measure exhaust emissions. The entire certification test procedure, including the vehicle test preparation, the actual running of the test on the dynamometer, the recording of the data, etc., is specified in Title 40 of the Code of Federal Regulations.

Three different sets of fuel economy values- NHTSA’s CAFE values, EPA’s unadjusted dynamometer values, and EPA’s adjusted on-road values exist. NHTSA’s CAFE values are used to determine manufacturers’ compliance with the applicable average fuel economy standards and to develop its annual report, the Automotive Fuel Economy Program Annual Update. The EPA’s unadjusted dynamometer values are calculated from the emissions generated during the testing using a carbon balance equation. EPA knows the amount of carbon in the fuel, so by measuring the carbon compounds expelled in the exhaust they can calculate the fuel economy. EPA’s adjusted on-road values are those values listed in the Fuel Economy Guide and on new vehicle labels, adjusted to account for the in-use shortfall of EPA dynamometer test values.

Congress specified that CAFE standards must be set at the “maximum feasible level.” Congress provided that the Department’s determinations of maximum feasible level be made in consideration of four factors:

(1) Technological feasibility;
(2) Economic practicability;
(3) Effect of other standards on fuel economy; and
(4) Need of the nation to conserve energy

Congress did not specify a target for the improvement of light truck fuel economy. Instead, it provided that light truck standards be set at the maximum feasible level for model year 1979 and each model year thereafter. Unlike for the passenger car fleet, there is no default standard established for light trucks. NHTSA must set the standard for each model future model year. Light truck fuel economy standards have been established by NHTSA for MY 1979 through MY 2007.

Light truck fuel economy requirements were first established for MY 1979 (17.2 mpg for 2-wheel drive models; 15.8 mpg for 4-wheel drive). Standards for MY 1979 light trucks were established for vehicles with a gross vehicle weight rating (GVWR) of 6,000 pounds or less. Standards for MY 1980 and beyond are for light trucks with a GVWR of 8,500 pounds or less. The light truck standard progressively increased from MY 1979 to 20.7 mpg and 19.1 mpg, respectively, by MY 1991. From MY 1982 through 1991, manufacturers were allowed to comply by either combining 2- and 4-wheel drive fleets or calculating their fuel economy separately. In MY 1992, the 2- and 4-wheel drive fleet distinction was eliminated, and fleets were required to meet a standard of 20.2 mpg. The standard progressively increased until 1996, when the Appropriations prohibition froze the requirement at 20.7 mpg. The freeze was lifted by Congress on December 18, 2001. On March 31, 2003, NHTSA issued new light truck standards, setting a standard of 21.0 mpg for MY 2005, 21.6 mpg for MY 2006, and 22.2 mpg for MY 2007.

Model             MPG               GVWR           Production Volume

Vehicle A        24                    3000                130,000

Vehicle B        22                    3500                120,000

Vehicle C        18                    4000                100,000

Vehicle D        10                    8900                40,000

Because Vehicle D exceeds 8,500 GVWR, it is excluded from the calculation. Therefore, the manufacturer’s light truck CAFE is calculated as:

The 2006 model year light truck CAFE standard is 21.6 mpg; therefore the manufacturer is not in compliance.

 Manufacturers can earn CAFE “credits” to offset deficiencies in their CAFE performances. Specifically, when the average fuel economy of either the passenger car or light truck fleet for a particular model year exceeds the established standard, the manufacturer earns credits. The amount of credit a manufacturer earns is determined by multiplying the tenths of a mile per gallon that the manufacturer exceeded the CAFE standard in that model year by the amount of vehicles they manufactured in that model year. These credits can be applied to any three consecutive model years immediately prior to or subsequent to the model year in which the credits are earned. The credits earned and applied to the model years prior to the model year for which the credits are earned are termed “carry back” credits, while those applied to model years subsequent to the model year in which the credits are earned are known as “carry forward” credits. Failure to exercise carry forward credits within the three years immediately following the year in which they are earned will result in the forfeiture of those credits. Credits cannot be passed between manufacturers or between fleets, e.g., from domestic passenger cars to light trucks.

A medium duty passenger vehicle means a vehicle which would satisfy the criteria in 49 CFR Part 523.5 (relating to light truck) but for its gross vehicle weight rating or its curb weight, which is rated at more than 8,500 lbs GVWR or has a vehicle curb weight of more than 6,000 pounds or has a basic vehicle frontal area in excess of 45 square feet, and which is designed primarily to transport passengers, but does not include a vehicle that:

1. Passenger Car – any 4-wheel vehicle not designed for off-road use that is manufactured primarily for use in transporting 10 people or less.
2. Truck – A vehicle can be classified as a truck if it meets one of the following criteria:
   1. It is 4-wheel drive or it is rated at 6,000 pounds gross vehicle weight AND has at least four of the following characteristics:
   1. 1. Approach angle of not less than 28 degrees
      2. Breakover angle of not less than 14 degrees
      3. Departure angle of not less than 20 degrees
      4. Running clearance of not less than 20 centimeters
      5. Front and read axle clearances of not less than 18 centimeters each
   2. It can perform at least one of the following functions: (1) transport more than 10 people; (2) provide temporary living quarters; (3) transport property in an open bed; (4) permit greater cargo-carrying capacity than passenger-carrying volume; or (5) can be converted to an open bed vehicle by removal of rear seats to form a flat continuous floor with the use of simple tools.

Where:

N is the total number (sum) of light trucks produced by a manufacturer,

N_i is the number (sum) of the i^th model light truck produced by the manufacturer, and

T_i is fuel economy target of the i^th model light truck (in mpg), which is determined according to the following formula, rounded to the nearest hundredth:

a =       the maximum fuel economy target (in mpg)

b =       the minimum fuel economy target (in mpg)

c =       the footprint value (in square feet) at which the fuel economy target is midway between a and b

d =       the parameter (in square feet) defining the rate at which the value of targets decline from the largest to smallest values

e =       2.718

x =       footprint (in square feet, rounded to the nearest tenth) of the vehicle model

Calibrated Parameter Values for Target

The following is a representative sample of footprint values for MY 2005 light trucks and their associated projected targets for MY 2011:

Beginning in 1980, light trucks were administratively subjected to a similar two-fleet rule.  However, given changes in market conditions (the “captive import” sector of the fleet had become insignificant), NHTSA eliminated the two-fleet rule for light trucks beginning with MY 1996.  Therefore, there are no fleet distinctions, and trucks are simply counted and CAFE calculated as one distinct fleet of a given manufacturer.  

 It should be noted that, unlike with light trucks, the agency does not have the statutory authority to eliminate the two-fleet rule for passenger cars.