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Research Control the Consumption of Fuel

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Both the United States and the European Union have embraced public policy measures that seek to curb and/or control the consumption of fuel by passenger car and light duty truck owners. These long-term policy measures, heightened in the public debate during times of high oil costs, shortages (i.e., oil embargo of 1974), and political turmoil in the Middle East, take radically different approaches to achieve the same stated objective:

* In the US, Corporate Average Fuel Economy (CAFE) mandates manufacturers sell a mix of vehicles whose weighted average fuel economy meets specified annual targets

 Cars and light trucks are evaluated independently

 Incentives for alternative fuels are in place

 Failure to comply with this Federal regulation is unlawful

* In the EU, there are no Federal or national limits on fuel consumption of vehicles manufactured and sold in Europe. Fuel is instead taxed at relatively high levels (compared to the US) to encourage consumers to purchase and operate vehicles with acceptable fuel economy

This white paper compares and contrasts the US vs. EU public policy measures on a range of individual attributes and provides conclusions on which approach is superior in delivering the desired outcome.

CAFE was enacted into law in 1975 in response to the formation of OPEC, which caused world oil prices to skyrocket by enforcing production limits on member states. Against a backdrop of national security, CAFE was instituted to decrease US dependence on imported oil by mandating an increase in fuel efficiency of all cars and light trucks sold by a manufacturer on a weighted average basis.

* Congress sets the annual fuel economy standards

* CAFE regulations and compliance are administered by the Department of Transportation and NHTSA

* The law includes a system of credits that can be applied to years where a manufacturer falls short of the required fleet average fuel economy

* Although failure to comply is unlawful, manufacturers can choose to pay fines in lieu of meeting the standard in any given model year

 GM, Ford and Chrysler have never paid a fine for non compliance

 Other manufacturers have routinely paid fines over the history of the CAFE standard

The core original objective of CAFE - reduced dependency on foreign oil - remains at the center of the current 2002 public debate on CAFE. Additional supporting arguments in favor of increasing the CAFE standard include:

 Vehicles with increased fuel efficiency save consumers money

 Increased



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