CAFE standards create profit incentive for larger vehicles

December 8, 2011 By Nicole Casal Moore, University of Michigan

( -- The current Corporate Average Fuel Economy standards create a financial incentive for auto companies to make bigger vehicles that are allowed to meet lower targets, according to a new University of Michigan study.

Over their lifetimes, these larger vehicles would generate between three and ten 1,000-megawatt coal-fired power plants' worth of excess . A 1,000-megawatt plant could provide power for more than half a million people.

"This study illustrates that there may be a substantial financial incentive to produce larger vehicles, and that it can undermine the goals of the policy," said Kate Whitefoot, who conducted the research as a U-M design science doctoral student and is now a senior program officer at the National Academy of Engineering.

"The results show that the policy can be adjusted to reduce these unintended incentives by making it harder to lower the targets by producing larger vehicles."

The study is published online in .

The loophole is the formula for setting mile-per-gallon targets. The standards, which actually depend on the sizes of vehicles automakers produce, are expected to require that firms boost average fuel economy to 35.5 mpg by 2016 and 54.5 mpg by 2025. Those oft-cited numbers are averages. In reality, each car company must meet a different standard each year determined by the literal "footprints" of the vehicles it makes. A vehicle's footprint is its track width times its wheelbase.

According to the study, the sales-weighted average vehicle size in 2014 could increase by 1 to 16 square feet, undermining fuel economy improvements between 1 and 4 mpg. That means the industry as a whole would not achieve that year's fuel economy goal.

"We know it's a broad range, but we looked at a large range of possible for vehicle attributes and the answer is probably somewhere in the middle," said Steven Skerlos, an associate professor in the U-M Department of Mechanical Engineering.

"Will cars get bigger? Very possibly. Will that lead to more pollution? Yes. And there wasn't an emphasis in the rulemaking process that this could happen."

The impetus for the footprint-based formula back in 2006 was to prevent an influx of smaller vehicles, though not necessarily to do the opposite. Critics worried that the previous one-size-fits-all standard unfairly and perhaps dangerously rewarded production of slimmer, lighter vehicles that could put the domestic industry at a disadvantage and drivers at greater risk. The researchers believe the correction overshot its target.

They found that light trucks would grow even more than cars, which could yet lead to traffic safety concerns. They call on the National Highway Traffic Safety Administration to revise the formula.

This study was more than just an economic analysis. Whitefoot built a first-of-its-kind model that considered supply and demand but also incorporated engineering tradeoffs that carmakers consider as well as a wide range of possible consumer preferences.

They conducted simulations with 473 different vehicles. In the simulations, auto firms could adjust the size of their vehicles, add fuel-saving technologies, balance acceleration performance with fuel economy, and adjust vehicle prices. The result, Skerlos says, is an exciting new framework where economists, environmentalists, engineers and policymakers can work together.

"Sustainability is about tradeoffs," Skerlos said. "On the one hand, there's a concern about vehicle size largely driven by safety and the effect on domestic . The adjustment to the CAFE standard tries to achieve high fuel economy while not compromising vehicle size, and the idea here is these things intersect and you have an equivalent of three to 10 coal-fired power plants hidden in that tradeoff."

The research is funded by the Michigan Memorial Phoenix Energy Institute and the National Science Foundation. The paper is titled "Design Incentives to Increase Size Created from the U.S. Footprint-Based ."

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2 / 5 (4) Dec 08, 2011
propoganda always utilizes half truths.

it is no mistake the us is the only western nation with absurdly low gas taxes, the most gazguzzlers per capita, and the most fuel consumotion both per capita and in total.

CAFE has been such a miserable failure, it is arguable that the major improvement in feul economy resulted from domestic mfgs being forced to compete with toyota, not any regulation.
why? because some consumers actually do want fuel efficiency.
raise gas taxes and eliminate payroll taxes and raise the standard deduction to 15 k per person
3 / 5 (2) Dec 08, 2011
I don't necessarily agree that CAFE is the problem. If there were no market for big honkin' vehicles, Detroit would not make them.

One of the larger reasons that people buy big honkin' vehicles is because it makes them feel safer even though there have been studies that show that they are, at best, no safer than smaller vehicles and may even be less safe.

Another reason people buy them is that they are status symbols.

While I agree that if the gas tax were much higher in the US that the cost of gas would deincentivize the purchase of such vehicles, many people who want safety and that status symbol may still consider buying such vehicles at any cost.

Personally, I think that Detroit and other manufacturers should stop complaining about the high cost of light-weight materials and manufacturing technologies such as sandwich construction and start using them in all vehicles. Fuel savings would likely be tremendous.

And, a meaningful gas tax should be implemented anyway, IMHO.
not rated yet Dec 08, 2011
Having different standards for passenger cars, SUVs and trucks amounts to an unlevel playing field.
An examination of the history of gasoline prices versus consumption in the US reveals that people will still buy gas whatever the cost. Higher fuel costs simply stifles discretionary travel, to the detriment of tourism.
European-level taxation and prices in the US simply won't work the same because Americans generally live much farther from where they work than Europeans. Brits commute an average of 8.5 miles; Americans average 16 miles. Most American cities are spread too thinly for effective urban mass transit.
Don't over-milk the fuel tax cow.
not rated yet Dec 08, 2011
When California cut property taxes,it increased building permit costs so it would get their money up front instead of waiting for the revenues to roll in over time.
Those promoting CAFE standards forget the states want larger vehicles and so do the dealers. The margins are larger and the taxes and registration fees are far more expensive for the consumer.
The banks enjoy these larger loans as well,since most buyers will have to finance these much heavier payment schedules.
Presently the manufacturers claim the premium for hybrid vehicles needs to be very high.This claim might hold up the first year of production,but it is on thin ice as time goes on.A Prius in production for five years costs far less to produce than the initial offering.
The differential between the gas savings vs. the price is still too great to impact the normal driving public.

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