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By Sam Kazman [ [link removed] ]
The federal government’s new-car fuel economy standards were created 50 years ago; since then, they’ve racked up quite a record. The regulatory program, known as CAFE (for Corporate Average Fuel Economy), was enacted by Congress in response to the 1973-74 oil shocks, but it soon became other things as well: a fight between domestic and foreign carmakers, a threat to unionized autoworkers and yet another regulatory battle in the climate wars. It also forced carmakers to manufacture smaller, lighter cars, which resulted in thousands of traffic deaths.
That last outcome caused major problems for the agency that oversees CAFE standards, the National Highway Traffic Safety Administration (NHTSA), a unit of the U.S. Department of Transportation. Any government agency would have difficulty handling a program that has such lethal consequences, but that difficulty becomes especially acute when the agency’s middle name is safety.
The Birth of a New Program
Congress created CAFE in its 1975 Energy Policy and Conservation Act [ [link removed] ]. It mandated minimum miles-per-gallon (mpg) standards for each model year starting in 1978. Every carmaker had to meet these standards in terms of the weighted mpg of the vehicles it produced in that model year. Congress set the standards for the first three years, starting with 18.0 mpg for passenger cars in the first year. (By comparison, average new car fuel economy before CAFE’s enactment was about 14 mpg.) A manufacturer’s failure to meet CAFE standards would result in significant financial penalties.
For model years after 1980, the job of setting CAFE standards fell to the Secretary of Transportation, who was to establish yearly standards based on such factors as feasibility and the need to conserve energy. Congress initially capped future standards at 27.5 mpg, but it later removed that cap in the 2007 Energy Independence and Security Act [ [link removed] ]. The standards remained relatively stable through the 1990s but became slowly more stringent until the Obama administration put them on a steeply accelerating course. The first Trump administration attempted to halt that trend, President Biden reinstated it, and now President Trump is once again targeting the CAFE program.
Things Get Complicated
The CAFE standards are complex in both their structure and their operation. There are separate standards for cars and for light trucks. There is a “reform CAFE” alternative that allows carmakers to meet a variable standard based on vehicle width and length. There are CAFE credits that carmakers can earn by exceeding the standards and that can be carried forward, carried back and traded between manufacturers. There are petroleum-equivalency factors for calculating mpg equivalents for electric cars.
For carmakers, this would be complicated enough in a steady-state world. But manufacturers need to sell the vehicles they produce. Changes in oil prices can produce huge shifts in consumer demand for fuel-efficient cars. When gas prices drop, CAFE standards effectively become more restrictive, even if their numerical values don’t change, because consumers are less willing to trade off passenger space, cargo capacity and horsepower for fuel economy.
Electric vehicles (EVs), which are also subject to CAFE, are viewed by some as the key to reducing oil consumption, but that prospect has become much more doubtful lately. Demand for electric vehicles is dropping, exacerbated by such widely reported EV problems [ [link removed] ] as those during the exceptionally cold Chicago winter of 2024, for example. And more recently, Trump pledged to eliminate [ [link removed] ] pro-EV government subsidies and policies.
One indicator of CAFE’s complexity arose when it was first drafted. The United Auto Workers had been concerned that domestic jobs would be jeopardized because of foreign carmakers’ advantage in producing smaller cars. The union successfully pushed for a separate, more stringent foreign-car standard, but at least initially the overseas producers still found compliance easier. This gave rise to the claim, only half in jest, that CAFE really stood for “create Asian full employment.”
Rube Goldberg Couldn’t Have Done It Better
A more basic problem is CAFE’s convoluted attempt to make fuel efficiency the overriding factor in the design and sale of automobiles. If reduced fuel consumption was the goal of CAFE, then from the outset there was a much simpler and easier way to achieve it: Increase the federal gas tax. A gas tax increase would have immediately affected the use of every vehicle on the road, rather than slowly working its way through the fleet one model year at a time.
It would have eliminated carmakers’ gamesmanship in designing some models so that they qualified for the more lenient light truck standards rather than the stricter passenger car standards. The development of SUVs, for example, was spurred by the fact that they qualify as light trucks and thus don’t have to meet the more stringent passenger car standards; traditional station wagons, on the other hand, enjoy no such advantage and as a result are relatively rare these days.
Most importantly, a gas tax increase would have been far more honest than CAFE, because its costs and effects would have been direct and visible. But it was for this very reason that Congress rejected this approach. Rather than engage in the highly unpopular act of raising the gas tax, voting for CAFE allowed politicians to hide behind the smokescreen of delayed, indirect effects and the notion that new efficiency-enhancing technologies would appear with the waving of a political wand.
Ironically, about 15 years ago, several top auto executives called for increased gas taxes [ [link removed] ] as a means of helping the industry comply with higher CAFE standards. The fact that CAFE led these industry leaders to advocate for higher-priced fuel for their customers illustrates its perverse incentives.
One of CAFE’s clearest effects, especially in its early years, was its downsizing and weight-saving impact on new vehicle designs. Those effects have continued to play out even after the easiest downsizing measures were taken. For example, many new cars don’t come equipped with spare tires; instead they carry tire repair kits, which save weight but in many cases are useless. Carmakers have also turned to using thinner, lighter brake rotors, which means they often can’t be resurfaced and instead must be replaced.
A Traffic Safety Agency Ducks Traffic Safety
One of the most important but least visible of CAFE’s downsizing effects was reduced vehicle crashworthiness. All else being equal, smaller, lighter cars are generally more fuel efficient than larger, heavier ones, but they are also less crashworthy. This difference in occupant protection applies to practically every type of accident, from single-vehicle crashes to multi-car collisions. In larger cars, the increased weight means there’s more energy-absorbing material to protect occupants; the larger interior space means more time for an occupant to “ride down” the force of a crash before striking the car’s interior. In the words [ [link removed] ] of the Insurance Institute for Highway Safety, all other things being equal, “a bigger, heavier vehicle provides better crash protection than a smaller, lighter one.”
This had been recognized by NHTSA long before CAFE was enacted, and the agency could have candidly addressed the tradeoff between fuel economy and traffic deaths at the outset of the program. Instead, it chose to avoid the matter. When I was general counsel at the Competitive Enterprise Institute, we and Consumer Alert sued NHTSA over this issue, arguing that its failure to consider CAFE’s lethal effects meant that its standards were arbitrarily stringent.
In 1992 a federal appeals court agreed with us, holding that in setting the model year 1990 standard, NHTSA had illegally engaged in “decisional evasion” of the issue. In the court’s words, NHTSA had used “statistical legerdemain,” “lame claim[s]” and “specious arguments” to pretend that its actions “had no safety cost at all.” The court concluded [ [link removed] ]:
When the government regulates in a way that prices many of its citizens out of access to large-car safety, it owes them reasonable candor. If it provides that, the affected citizens at least know that the government has faced up to the meaning of its choice. The requirement of reasoned decision-making ensures this result and prevents officials from cowering behind bureaucratic mumbo-jumbo.
A number of outside researchers at the time attempted to quantify CAFE’s lethal toll. A 1989 Harvard-Brookings study [ [link removed] ] concluded that CAFE’s downsizing effect resulted in 2,200 to 3,900 additional car occupant deaths per year. A 2002 National Research Council report [ [link removed] ] put the figure at 1,300 to 2,600 deaths and 10 times that many serious injuries for one representative year (1993).
The safety benefits of larger cars were confirmed by such auto safety proponents as Ralph Nader, Joan Claybrook and the Center for Auto Safety. Nader and the center actually published a book [ [link removed] ] in 1972 titled “Small—On Safety: The Designed-In Dangers of the Volkswagen,” which extensively described the inherent risks of smaller cars. But despite their recognition [ [link removed] ] of the relationship between size and safety, they actively supported more stringent CAFE standards. Their support for CAFE played a major role in the push to make it even tighter and deadlier. For example, in 1992 the Sierra Club [ [link removed] ] touted higher CAFE standards as “the biggest single step to curbing global warming and saving oil,” and the club dismissed the safety issue by citing the endorsement of these figures.
How to explain this? For Nader and his colleagues, promoting auto safety had long meant advocating more government regulation. With CAFE, however, they faced an either/or choice—either more safety or more regulation. They chose the latter.
One argument made by CAFE’s proponents was that safety technologies such as air bags and seatbelt pretensioners could offset the risks of downsizing. While this is true, it ignores the fact that a 3,000-lb. car equipped with these features is still safer than a similarly equipped 2,500-lb. car. Auto safety expert Leonard Evans, former president of the International Traffic Medicine Association, once analogized this argument [ [link removed] ] to “a tobacco executive claiming that smoking isn’t risky because exercise and good diet can make smokers healthier.” Of course they can, but if you stop smoking and you exercise and eat well, you’ll be even healthier than before. There’s still a tradeoff between smoking and health, and there’s still one between fuel efficiency and safety.
When we won our court case, we naively thought it would spell the end of CAFE. After all, if a private company had been found guilty of concealing the deadly nature of its products, it would quickly face some severe consequences. But CAFE is a political creation. The court’s ruling helped keep CAFE standards from getting even more stringent for a while, but this reprieve was temporary. In 2011, the Obama administration set a CAFE target of 54.5 mpg [ [link removed] ] by model year 2025. (This 2025 target covered the entire fleet of cars and light trucks, so it was more than twice as stringent as the 27.5 mpg cap chosen by Congress in 1975.) That target was rolled back under the first Trump administration and then largely reinstated under Biden.
At this point, whether CAFE standards will continue to be tightened is an open question. For the immediate future, the answer is almost certainly no; if anything, they are likely to be eased or totally eliminated. Trump has committed to protecting consumer choice [ [link removed] ] in vehicles, and his transportation secretary, Sean Duffy, has stated that the administration’s new plans to reexamine climate change policies will facilitate his agency’s efforts to deregulate CAFE [ [link removed] ]. But while the tradeoff between safety and fuel economy is based on the laws of physics, CAFE’s future is based on the laws of politics—the first of which being that there’s no telling what the future holds.
Sam Kazman is former general counsel of the Competitive Enterprise Institute [ [link removed] ], a free-market public interest organization in Washington, D.C.

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