Corporate Average Fuel Economy (CAFE) standards are federal regulations aimed at improving the fuel efficiency of cars and trucks on U.S. roads. These standards, which have been in place since 1978, require automakers to meet specific fuel economy targets across their vehicle fleet. As President-elect Donald Trump prepares to take office again, there is speculation that he may seek to weaken these standards, continuing a long history of fluctuating fuel efficiency policies. The CAFE standards have played a significant role in shaping the types of vehicles on the road and influencing environmental and economic outcomes in the U.S.
The Origins of CAFE Standards
The foundation of CAFE standards can be traced back to the 1973 oil crisis when OPEC countries imposed an oil embargo on the U.S., leading to rising fuel prices and long lines at gas stations. To address this energy crisis and reduce dependence on foreign oil, Congress introduced the CAFE standards. Initially, vehicles averaged just 13 miles per gallon, and the new regulations mandated automakers to improve fuel efficiency. The primary goal was to mitigate the impact of oil availability shocks and encourage more sustainable fuel consumption, a vision that has shaped the standards ever since.
Over the decades, CAFE standards have been a recurring topic in U.S. political debates. For example, in the 1992 presidential election, President George H.W. Bush opposed Democratic candidate Bill Clinton’s proposal to raise the fuel efficiency standard to 40 miles per gallon, arguing that it would devastate the auto industry. Despite these political challenges, the standards have gradually improved over time, with the Environmental Protection Agency reporting an increase to an average of 27 miles per gallon by 2023, more than double the fuel economy of the 1970s. Nevertheless, the standards remain a political football, with different administrations adjusting them in line with their priorities.
The Impact and Unintended Effects of the Standards
While the CAFE standards have successfully improved fuel efficiency, they have also had some unintended consequences. One major issue is the “average” aspect of the regulations, which allows automakers to sell a range of vehicles, some of which may exceed fuel economy targets while others fall short. For example, the introduction of the Chevrolet Volt, a plug-in hybrid, allowed GM to balance out the sales of less efficient vehicles like larger trucks and SUVs. Additionally, the “light truck loophole” created in the 1980s allowed manufacturers to meet lower fuel efficiency standards for SUVs, which led to the increased production of these larger, less efficient vehicles, raising concerns about safety and the strain on infrastructure.
The CAFE standards have undergone significant shifts under different administrations. Under President Obama, the standards were set to nearly double by 2025, reaching 55 miles per gallon. However, when Trump took office in 2017, he sought to roll back these standards, arguing that they were hindering the U.S. auto industry. In contrast, President Biden’s administration has made efforts to raise the standards once again, with a target of 50.4 miles per gallon by 2031. The back-and-forth adjustments to these regulations create uncertainty for automakers, making it challenging for them to plan for the long term. As Trump returns to office, it remains to be seen whether he will continue to weaken the standards or if further changes will occur in the next few years.
