Corporate Average Fuel Economy (CAFE) Standards

In an effort to improve the fuel efficiency of popular light trucks, SUVs, minivans and pickups, the National Highway Traffic Safety Administration recently announced stricter fuel economy standards to start in 2008. Steve Kratzke will discuss the new Corporate Average Fuel Economy (CAFE) standards, and how 10.7 billion gallons of fuel.

Mr. Kratzke is the associate administrator of rulemaking for the National Highway Traffic Safety Administration. He has been with NHTSA for nearly 30 years, and oversees vehicle regulatory actions, as well as the government's crash test and rollover rating program.

The transcript follows.

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Stephen R. Kratzke: Hi, this is Stephen. I'm looking forward to talking about this subject with you. I hope an hour is long enough to answer most of your questions.

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Laurel, Md.: As I understand it, the CAFE requirements apply to the average fuel economy of all cars sold by a manufacturer.

What's to stop them from selling extremely cheap and light two-seaters that get 65 mpg and only last for a couple years, in order to cover them selling many more SUVs that get 18 mpg?

And would CAFE regulations change when the EPA changes its methods for evaluating gas mileage?

Stephen R. Kratzke: The new light truck CAFE standards published last month include a reform to the system that prevents manufacturers from doing exactly what you describe. In the past, manufacturers could comply with the regulation by selling smaller, less safe vehicles to average out the mileage of larger SUVs and pickups. The reformed CAFE system uses a mathematical relationship between vehicle size and fuel economy that will make all manufacturers improve the vehicles they sell. The new system discourages vehicle downsizing, which is also better for safety.

The proposed EPA rulemaking would not change the test procedure used for fuel economy regulation. It would only modify the numbers that appear on the window sticker.

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Washington, D.C.: Hello, Mr. Kratzke. I've tried to get this question answered the past few times the Post has had someone on to discuss automobile fuel efficiency, but I've had trouble even getting my question answered. I'm hoping you can break my streak. Back when hybrids first started gaining popularity I saw a couple of financial studies that showed, even with the fuel savings and tax credits, it would take on average 7-10 years to break even compared with if you bought an equivalent non-hybrid. However, those studies were done when gas was under $2.00/gallon. Do you know of any updated studies that examine this question? Obviously, if gas rises to a certain price, hybrids will become make more sense economically, but what is that price?

Stephen R. Kratzke: Generally, the benefit of hybrid technology depends on your driving. The primary increase in efficiency for hybrids is in city-type driving. The higher prices for gas mean the time to recover the increased hybrid purchase cost will be shorter. I do not have specific estimates for hybrids alone but, in our new light truck fuel economy standards in 2008-2011, we estimate the average vehicle price will go up just over $250, and the typical driver will recover that cost in four years of driving.

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Washington, D.C.: How is the NHTSA connected to the White House? Is there a cabinet-level position, are there politically appointed positions? I just don't know much about your office.

Stephen R. Kratzke: NHTSA is part of the Department of Transportation. The Secretary of Transportation is a cabinet member. NHTSA's Administrator is also nominated by the President and confirmed by the Senate. Congress gave NHTSA the authority to set fuel economy standards.

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Bethesda, Md.: During which century were the last increases in CAFE standards instituted? Thanks, and welcome back to civilization. You were greatly missed.

Stephen R. Kratzke: CAFE was created in the 1970s by Congress. NHTSA was asked to set standards for light trucks (including pickups, SUVs and minivans). However, in 1996 Congress instituted a freeze on NHTSA's ability to set CAFE standards. This freeze lasted until 2001 when Secretary Mineta, who heads the U.S. Department of Transportation, requested that it be lifted. Since lifting the freeze, NHTSA has set two new standards for fuel economy in light trucks. This is more than had been done in the prior 20 years. The most recent rulemaking included a reform that will save fuel without negative safety or economic consequences.

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Vienna, Va.: Do the fuel standards already exist in Canada, Europe and/or Australia? Are we marching into a new tech frontier with this?

Stephen R. Kratzke: There are no fuel economy standards in Europe, Canada or Australia.

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Washington, D.C.: Since I can't afford a new hybrid, I'm already planning to not use the AC in my car this year. But what else can I do to squeeze a couple more mpg from a tank of gas?

Stephen R. Kratzke: There are a number of inexpensive things you can do to the car that you own to improve your fuel economy. Simple things such as keeping tires properly inflated and keeping up on regularly scheduled maintenance will help considerably.

There is a great web site that provides advice on how you can reduce gas consumption: www.fueleconomy.gov.

Finally, you might consider transportation alternatives available to us in the Washington, D.C. area, including public transit and carpooling.

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Rockville, Md.: Why did the administration fight against increasing these CAFE standards five years ago, and why is it supporting these changes now? Crisis management?

Stephen R. Kratzke: I think you are mistaken. It was this administration, led by Transportation Secretary Norman Mineta, that went to Congress in 2001 to obtain the authority to overhaul fuel economy standards. The first increases in light truck fuel economy actually began with the 2005 model year.

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Washington, D.C.: Could you explain about how downsizing is unsafe, it seems to me that all Americans should be considering just this, smaller cars.

Stephen R. Kratzke: Downsizing is less safe because of the physics in a crash. People riding in smaller lighter vehicles are more likely to get seriously hurt in a crash. The National Academy of Sciences, comparing the larger vehicles of 1976 to the smaller fleet in 1993, estimated that downsizing resulted in 1,300 to 2,600 more deaths annually.

Our new approach to light truck fuel economy focuses on getting fuel economy by means of advanced technology on the truck, instead of just making the vehicle smaller.

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Bethesda, Md.: What is the likelihood that these changes in regulations will quicken the arrival of hybrid minivans?

Parents of three or more young children have little choice but to purchase minivans or mid-size SUVs. To date there have been a few hybrid SUVs but no minivans. Toyota's Hybrid Sienna has been delayed for several years. My last minivan gave out last year and I had to settle for a non-hybrid minivan (or could've purchased an SUV that I didn't want).

Is there sign of progress on this front, preferably among two or more manufacturers?

Stephen R. Kratzke: This new structure frees manufacturers to produce vehicles that customers really want and need, such as hybrids. We believe there is greater likelihood that hybrid minivans will be produced under the new system.

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Washington, D.C.: How do you set your standards and how much influence does the industry have in this process. I have observed in other big industries that whatever regulations, the government sets, companies will usually, eventually meet the standards. This, of course, after much complaining and excuses about economic hardships (OMB pet phrase).

Will the industry meet whatever target you give them for fuel efficiency? Why don't you set higher standards? Is there good scientific reasons or is it a matter of not wanting to force the industry into spending more $$$$ on R&D.

Stephen R. Kratzke: CAFE standards are based on research and scientific data. We use technology cost and effectiveness numbers from the National Academy of Sciences. We also used a computer model developed by the DOT Volpe center in Cambridge, Mass. This model has been in development for several years and has been peer reviewed by independent academic sources. The model determines the most cost effective way for each manufacturer to comply with a given standard.

CAFE standards are set at the maximum feasible level. Setting standards at this level includes weighing costs, benefits, impacts on safety, and jobs.

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Washington, D.C.: What kind of car do you drive? Is it a light truck, or a more efficient vehicle?

Stephen R. Kratzke: I drive a minivan and a passenger car.

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Glasgow, Scotland: To be fair, it is widely noted that the Bush Administration was not in support of implementing the Kyoto Protocol, which many perceive as tied to CAFE, so one could reasonably interpret the unfreezing of DOT powers you reference as directly related.

I apologize for not reading up on this in advance, but what is the anticipated financial impact on the American Auto Industry from these regulations? Does that economic prediction take into account its current financial issues? And, how did DOT quantify the impact of these regulations on American automotive competitiveness?

Stephen R. Kratzke: This regulation will cost the automotive industry an estimated $6 billion. We have to set fuel economy standards at the maximum feasible level while balancing technical feasibility and the economic and safety impact.

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Washington, DC: How much is gas is going to be saved total?

Stephen R. Kratzke: NHTSA's 2008-2011 light truck standards will save 10.7 billion gallons of gas.

Thanks for all your questions. We're out of time now, but this was a lively discussion that I hope we can do again soon.

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