Many commentators have credited CAFE standards with having improved fuel efficiency from 19.9 mpg (11.8 litres/100 km) in 1978 to 28.8 mpg (8.2 litres/l00 km) in 1988. However, in the years prior to 1981, it has been shown that fleet fuel efficiency improved as a result of market demand, as consumers reacted to higher gasoline prices following the first oil shock of 1974, and the expectation that fuel prices would remain high.“After 1981, manufacturers did respond to CAFE standards as gasoline prices in the United States fell to the post-World War 2 levels that persist today. It has been estimated that fuel efficiency gains from CAFE offset the increases in vkt caused by the drop in fuel prices in the years following 1981. It has also been established that manufacturers did raise prices of larger vehicles and lower those of smaller vehicles in this period as a strategy for compliance with CAFE.‘I In the 1983 to 1993 period, analysis has shown that the price charged for additional weight doubled after 1983 and the price for acceleration more than tripled. There is some controversy about the relationship between how fast manufacturers apply new technology and real and expected changes in fuel prices. Some argue that CAFE seems not to have been a major factor in the fuel efficiency technology decisions of the car makers. Crandall and Nivola state that “the decided slowdown in technical progress in achieving efficiency, evident in the 1990’s, is strongly correlated with declining (fuel) prices (in the U.S.) over the 1980’s. Apparently vehicle producers are unwilling to commit to expensive new technology to save fuel in an environment of falling gasoline prices.“16 The counter-argument is that “there have been very significant technological changes to cars in the past decade in spite of falling fuel prices, and these changes have essentially allowed fuel economy to stay flat as consumers have shifted to larger, more luxurious vehicles.“” In summary, it appears that CAFEKAFC standards affect the weight of vehicles sold, while fuel efficiency technology application is more sensitive to fuel price. CAFEKAFC standards have a number of other characteristics that affect their ‘overall effectiveness: *
In a period of stable or falling gasoline prices there is a take-back effect, in which &sumers respond to lower gasoline costs by driving more. This effect is estimated to be in the range of 15% to 30%, meaning that a 1% improvement in fuel efficiency results in increased vkt of 0.15% to 0.30%.
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As vehicle manufacturers reduce the price of smaller vehicles under CAFEKAFC, some analysts suggest that the number of new vehicles sold increases. Others argue that raising prices of new vehicles to meet CAFEKAFC regulations causes some consumers to delay replacing older, less fuel efficient vehicles, thus further undermining the intent of the regulation.
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The experience of CAFE/CAFC in the 1980s has generated strong opposition to new or extended standards by the Big Three’automobile manufacturers and U.S. autoworker unions. The reason for this opposition is straightforward, The products of North American automobile companies have historically been larger and less fuel efficient than those of Japanese competitors. Under CAFE, each manufacturer was required to meet the same standard for each major class of light-duty vehicle in a given model year. This had a negative effect on the competitiveness of