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19 Oct 08
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13 Apr 08
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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.
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“Energy Policy Conservation Act,” enacted into law by Congress in 1975, added Title V, “Improving Automotive Efficiency,
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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
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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.
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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.
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The penalty for failing to meet CAFE standards recently increased from $5.00 to $5.50 per tenth of a mile per gallon for each tenth under the target value times the total volume of those vehicles manufactured for a given model year.
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Most European manufacturers regularly pay CAFE civil penalties ranging from less than $1 million to more than $20 million annually. Asian and domestic manufacturers have never paid a civil penalty.
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The CAFE law provides for special treatment of vehicle fuel economy calculations for dedicated alternative fuel vehicles and dual-fuel vehicles. The fuel economy of a dedicated alternative fuel vehicle is determined by dividing its fuel economy in equivalent miles per gallon of gasoline or diesel fuel by 0.15. Thus a 15 mpg dedicated alternative fuel vehicle would be rated as 100 mpg. For dual-fuel vehicles (vehicles that can use the alternative fuel and gasoline or diesel interchangeably), the rating is the average of the fuel economy on gasoline or diesel and the fuel economy on the alternative fuel vehicle divided by .15.
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A manufacturer’s CAFE is the fleet wide average fuel economy. Separate CAFE calculations are made for up to three potential fleets: domestic passenger cars, imported passenger cars and light trucks. The averaging method used is referred to as a “harmonic mean”. The regulatory language describes the calculation as: “the number of passenger automobiles manufactured by the manufacturer in a model year; divided by the sum of the fractions obtained by dividing the number of passenger automobiles of each model manufactured by the manufacturer in that model year by the fuel economy measured for that model.” The numerical example below illustrates the process. Assume that a hypothetical manufacturer produces four light truck models in 2004, where MPG means miles per gallon and GVWR means gross vehicle weight rating measured in lbs:
Model MPG GVWR Production Volume Vehicle A223000130,000Vehicle B203500120,000Vehicle C164000100,000Vehicle D10890040,000Because the Vehicle D exceeds 8,500 GVWR, it is excluded from the calculation. Therefore, the manufacturer’s light truck CAFE is calculated as:
=Average Light Truck Fleet Fuel Economy
The 2004 model year light truck CAFE standard is 20.7 mpg therefore the manufacturer is not in compliance.
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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 (2001, 2002, or 2003). Credits generated in the furthest out model year (2001) would be used first, followed by any generated in 2002 and finally 2003. 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 19.27 mpg for model year 2004. In that year, the standard was 20.7 mpg. The fine is calculated as:
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