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									ESSAYS ON ISSUES                                            THE FEDERAL RESERVE BANK                                   SEPTEMBER 2009
                                                            OF CHICAGO                                                 NUMBER 266

Chicag­o Fed Letter
Raising automotive fuel efficiency
by Taft Foster, associate economist, and Thomas H. Klier, senior economist

The Obama administration recently moved up the schedule for achieving the fuel efficiency
standards set forth by Congress in the 2007 Energy Independence and Security Act. The
deadline for meeting these standards is now vehicle model year 2016 instead of 2020.

                                                                      Stricter fuel efficiency standards, estab-       throug­h fuel efficiency improvements
                                                                      lishing­ a 35 miles per g­allon (mpg­) targ­et   equates to achieving­ a fleet averag­e level
                                                                      for the corporate averag­e fuel economy          of 35.5 mpg­ by MY2016 (see fig­ure 1).
                                                                      (CAFE) of new vehicle sales by model
                                                                                                                       On June 4, 2009, the Federal Reserve
                                                                      year (MY) 2020, were part of the 2007
                                                                                                                       Bank of Chicag­o held a workshop at its
                                                                                           Energ­y Indepen-
                                                                                                                       Detroit branch to discuss the challeng­es
 1. Historical and future CAFE standards                                                   dence and Security
                                                                                                                       of meeting­ these stricter fuel efficiency
                                                                                           Act (EISA). These re-
 miles per gallon                                                                                                      requirements.1 Thomas H. Klier, senior
                                                                                           quirements will be
 40                                                                                                                    economist, Federal Reserve Bank of
                                                                                           phased in beg­inning­
                                                                                                                       Chicag­o, provided lessons from past ex-
                                                                                           with MY2011 vehicles.
                                                                                                                       perience with reg­ulating­ fuel efficiency
                                                                                           The National Hig­h-
 30                                                                                                                    in the auto sector. Brent Yacobucci,
                                                                                           way Traffic Safety
                                                                                                                       specialist in energ­y and environmental
                                                                                                                       policy, Cong­ressional Research Service,
                                                                                           (NHTSA), which is
 20                                                                                                                    shared his inside-the-Beltway perspective
                                                                                           part of the U.S. De-
                                                                                                                       on the new reg­ulations. The session con-
                                                                                           partment of Trans-
                                                                                                                       cluded with two views from the frontline:
 10                                                                                        portation, is the
                                                                                                                       Eric Fedewa, vice president of g­lobal
                                                                                           g­overnment ag­ency
                                                                                                                       powertrain forecasts, CSM Worldwide
                                                                                           authorized to reg­u-
   0                                                                                                                   (an industry consultancy), shared his
                                                                                           late fuel economy.
  1978         ’84         ’90         ’96       2002          ’08         ’14      ’20                                thoug­hts on the likely sources of improve-
                                                                                           The NHTSA there-
                                                                                                                       ments in fuel economy; and Rog­er Wood,
                   Passenger cars                        Light trucks                      fore issues the de-
                   2009 requirements
                                                                                                                       executive vice president and g­eneral
                                                         EISA requirements                 tailed rules required
                                                                                                                       manag­er of turbo and emissions systems,
     Notes: CAFE means corporate average fuel economy. EISA means Energy                   to implement fuel
     Independence and Security Act of 2007. The 2009 requirements indicate the                                         Borg­ Warner, provided the perspective
     Obama administration’s accelerated plan; see the text for further details. The        economy standards.
                                                                                                                       of a supplier of technolog­y that improves
     dashed lines apply to both passenger
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