In 1975, largely in response to OPEC's oil embargo against the United States, Congress enacted a new energy law that included provisions to increase "Corporate Average Fuel Economy." These CAFE standards, as they're known, led to a remarkable jump in the fuel efficiency for the U.S. auto fleet, with a near doubling of fuel economy and a 50 percent jump for light trucks in just a decade. But federal policymakers coddled the auto industry in the 1970s, and by the 1980s the fuel-efficiency curve had plateaued.
Then, in 2008, oil prices went really crazy—breaking the unheard-of level of $140 per barrel. In the run-up, a Democratic Congress passed and President Bush signed into law the historic Energy Independence and Security Act of 2007, which required the fleetwide CAFE standard be increased to at least 35 miles per gallon by 2020. The Environmental Protection Agency and the U.S. Department of Transportation developed new standards for emissions and fuel economy, issuing a series of landmark rules culminating in the 2012 requirement that the standard ramp up to 54.5 mpg by 2025.
So fuel economy continues on its upward trajectory after 20 years of stagnation, as you can see from the EPA graph below:
The social benefits of these standards mean the CAFE policy has staying power. First, consumers save a lot of money. As early as 2012, according to University of Michigan transportation expert Michael Sivak and his team, higher fuel-efficiency since 2007 was saving drivers about $8 billion a year. Moving forward, cost savings are projected to total an amazing $1.7 trillion by 2030, with an average 2025 vehicle lifetime net savings of about $8,000 (compared to 2010 cars).
Of course, the environment will benefit, too. Vehicles on American roads guzzle nearly 9 million barrels of oil a day (a barrel is about 42 gallons). According to DOT and EPA, the new CAFE standard will save about 3.1 million barrels daily by 2030. It will cut carbon pollution by 570 million metric tons, or the equivalent of 140 coal-fired power plants. Small wonder that a friend from the Sierra Club referred repeatedly to increasing the CAFE standard as the single biggest step we can take to tackle global warming.
One line of criticism often leveled at fuel-economy standards involves the rebound or snapback effect. Cost-conscious consumers benefiting from more efficient technology end up using it more than before, which leads to greater energy use. In 1865 economist William Stanley Jevons framed this fact as a "paradox," claiming that greater efficiency would actually drive up energy use. Others have taken up this charge more recently, including Peter Huber of the Manhattan Institute and New Yorker writer David Owen.
That certainly sounds like a terrible unintended consequence of fuel-efficiency policies. Fortunately, it's mostly wrong. Yes, there is a real and substantial rebound effect. But, as a recent review of the literature and a study of the long-term data found, with vehicle fuel-efficiency the effect is less than 30 percent in the long run.
There's also some concern about harming the nation's Highway Trust Fund, which supports tens of billions of dollars in transportation investments annually thanks to federal gas tax receipts. But hand-wringing about this effect is out of sync with reality, too. The biggest reason trust fund solvency is an issue is simple labor and materials cost inflation. With Congress unable to muster the courage to boost it, the gas tax hasn't changed since 1993, when Sleepless in Seattle was in theaters and Ford's Taurus was the best-selling passenger car. Increasing fuel-efficiency is a comparatively minor factor for at least the next decade, and it can easily be trumped by increasing the tax and indexing it to inflation.
We've turned a corner when it comes to energy use and emissions from light-duty vehicles. As a friend in the oil industry put it to me (somewhat ruefully) when examining long-term projections, there's increasing efficiency "as far as the eye can see." And many have noted, the same might well be true of vehicle miles traveled, which have been at least in a holding pattern. This could be a structural change thanks to several factors, including demographics, economics, and new shared-used mobility options now proliferating in cities. Department of Energy projections show that VMT decline, which could reach as much as one trillion miles a year by 2030, will cut into oil consumption considerably.
The bottom line is that fuel-economy developments over the past decade offer reasons for optimism. Thanks to policy advances from 2007 forward, average vehicle efficiency is on the rise again. That coupled with driving per capita and aggregate traffic levels that are growing slowly, if at all, signifies a break from decades of driving trends. One way to continue this advance is to deliver more non-solo-driving mobility choices such as rail, bus rapid transit, and shared-use vehicles to U.S. travelers, so that our transportation and our vehicles policies are aligned with energy security and climate goals. This would be a worthy sequel to the remarkable advances in fuel-economy performance, and serve as a shining example for other nations as well.