This is going to be an abridged view of the policy known as CAFE. It is abridged simply because like many Government sourced policies, it can twist and turn based on where the votes are – and get changed through its life!
The policy was born out of the 1973 Fuel Crisis when OPEC (the Organisation of Petroleum Exporting Countries) announced an embargo on countries who supported Israel in the Yom Kippur War. The price of a barrel of oil skyrocketed (although not to the levels seen in 2008) which put further economic pressure on many countries already experiencing their own problems. One effect of the crisis was to increase the pump prices and another was to cause many low volume manufacturers to go out of business because their models were now too thirsty for the market.
The CAFE policy was formulated by the US Government in an effort to gradually increase the fuel economy of cars within the fleet that a manufacturer builds. As you might expect from a Government policy, it wasn’t as simple as taking the average economy figures from a range of passenger cars. The policy also included the volume of production per model and whether the fleet was built from 75% or more domestic input or from a foreign source.
What the Government was trying to do was to measure each car by driving them a fixed distance and measuring the fuel used rather than using a single gallon and seeing how far the vehicle travels. The vehicle averages were then collated into another average which was then tested against the prevailing policy figure. This meant that the true economy of a car could be wildly different from the CAFE figure! With the US Government realising that light trucks and SUVs were becoming popular, they added CAFE rules to that segment as well.
The policy came into effect in 1978 at 18 mpg for passenger cars and slowly increased each year to be 30 mpg by 2011. As you can also imagine, along with the policy came a punishment if the manufacturer couldn’t meet the average for their fleet and many of the luxury European marques rolled over and dipped into their pockets to pay fines.
Then a credit trading system was implemented such that a manufacturer could move a credit between passenger vehicle and light truck fleet figures thus negating the fine that would have been imposed! The manufacturers could also sell these credits to another manufacturer. It seems from many reports that I have read that the big 3 Japanese manufacturers: Toyota, Nissan and Honda, along with many non-US manufacturers got the most benefit from this scheme and ultimately robbed the US Treasury of billions of dollars.
From 2012, the figures got more complicated – the size of the vehicle was also factored in, giving two ranges for passenger vehicles starting at 28 mpg and rising to 60 mpg by 2025 for the smaller of the two ranges.
At the same time, Governments across the world created policy that limited emissions and the manufacturers now had to find common ground between the policies. Now you can see why so many manufacturers in the VW Group, Mitsubishi and others worked hard to create systems that gave the answer that the Governments wanted – they were trying to please all departments. The difficulty here was that a vehicle could be classified as a passenger car for emissions and as a light truck for fuel economy, making it very hard for a manufacturer to comply with all regulations and make a product that the market wanted! Subsequently many cars left the factory with a lower performance level than the vehicle could actually deliver – great news for aftermarket tuners!
The CAFE policy had a great foundation, in that it was designed to reduce the amount of oil that was being consumed and to protect the larger markets from OPEC, who are a classic cartel setting a group price per barrel and subsequently influencing the market in their favour.
There would always be critics of the policy – the oddest being that CAFE contributed to many more road deaths than would have been expected. Several reports highlighted the research that there was an increase of several thousand US motorists dying each year and the authors put that down to the CAFE policy. Why? The assumption used was that because the fuel economy was higher, motorists could now travel further and more often, which meant that their chance of having a big accident rose.
I’m not fully convinced of that argument because there are so many factors involved. One factor that appears to be overlooked is the increase in the volume of cars with respect to the increase in the population. More vehicles on the road would mean more deaths and injuries without any influence of the fuel economy of the cars driven.
I just don’t believe that the average person drives more because they can get higher fuel economy. I think they drive the same amount, however do not need to fill up as often. Clearly there is an assumption in that statement because I’m not factoring in lifestyle changes due to jobs, children, health etc that could influence the miles needed to travel regularly. I certainly don’t know anyone who has changed a job because they could get more miles out of a tank of fuel – rather it is the increase in the price of the fuel and/or road tolls that can influence someone getting a job closer to home.
What is clear is that any manufacturer who wants to sell in the US needs to meet the CAFE figures, so this has an impact on motorists the world over with so many vehicles being shared across different markets. With several Governments banning petrol and diesel cars by 2040 and focusing on electric vehicles, will we start to see a similar program to increase the range of these cars? It wouldn’t make sense to allow electric cars to burn large amounts of energy whilst limiting fossil fuel cars because the electricity has to be generated in the first place – and with energy pricing also on the rise, we could see more confused Government policy being approved.
I have covered this before in another article – I think the ban on petrol and diesel will change before it is implemented – bio diesels are far more ecological and could still be mapped to a CAFE style policy. Economics and pressure from the oil producing countries will sway the Governments in power at the time the ban is supposed to be implemented as well. Remember Governments need taxes to pay for all the functions they offer society – and tax revenue will fall off a cliff when the ban takes place.
The theory behind CAFE was sound: encourage manufacturers to design better technology and reduce the consumption of their cars in normal circumstances. What we got was a mess of policy, loopholes and arguments that meant that the original plan wasn’t as effective as it could be.
With the desire for electrification, it would be great to see CAFE or it’s replacement be implemented with a stricter focus, closing the loopholes and encouraging the market to make it work by allowing consumer dollars to go where the benefits are.