The Origins of CAFE
Allan R. Hoffman
The Corporate Average Fuel Economy (CAFE) performance standards, enacted into law in 1975 (Title V, Energy Policy Conservation Act), have governed the fuel economy of new passenger automobile fleets in the U.S. for the past 32 years. They were a response to the oil embargo imposed by OPEC in late 1973. Much has been written about the CAFE standards in the intervening years, and they are again in the news as Congress considers increases in the standards in response to higher fuel costs, global climate change, and national security concerns related to oil imports. This article adds to this literature by providing a first-hand account of CAFE’s origins.
Two weeks after President Nixon resigned in August 1974, and at a point where the U.S. Congress was beginning to focus on a response to the Arab Oil Embargo that had cut off roughly a third of U.S. oil imports, I arrived in Washington, DC as a Congressional Fellow of the American Physical Society. The impact of the Embargo had been significant, especially on transportation which accounted for two thirds of total U.S. oil consumption. It restricted public access to gasoline, produced higher gasoline prices, and caused occasional fist fights at the pumps.
After orientation to the rules, practices and vagaries of the U.S. Congress provided to new Fellows by the American Association for the Advancement of Science over a period of several weeks, my assignment as Staff Scientist with the Senate Committee on Commerce began on October 1, 1974. At that time there were very few scientists working on the Hill as Congressional staff members. In response, several professional societies had established a Congressional Fellowship Program in 1973 to bring Ph.D. scientists to Washington at their expense for a year to help Congress with its increasingly scientific and technological responsibilities. The initial class in 1973 had seven Fellows – my class had twelve.
The Commerce Committee was chaired by Senator Warren Magnuson, and Mike Pertschuk and Lynn Sutcliffe served as Staff Director and General Counsel. Both were dedicated civil servants and contributed much to my legislative education that Fellowship year. I am also indebted to Mike Brownlee, with whom I shared an office and who provided invaluable guidance to the new kid on the block.
My first assignments from Mike and Lynn were to think about how to reduce oil imports into the United States , and to learn as much as I could about setting up a gasoline rationing system for the U.S. I worked on this latter task by contacting people who had worked on various kinds of rationing during World War II in the Office of Price Administration. It is not widely known, but the Federal Energy Administration (FEA) even printed rationing coupons for this purpose. Nevertheless, it quickly became clear that rationing was not a politically acceptable solution to our oil consumption problems.
The obvious target for reducing fuel consumption was the passenger automobile fleet, the primary user of petroleum products. Bob Hemphill, a senior FEA official, and two members of his staff worked with me closely in these early days. We quickly honed in on the three factors that determined the total fuel consumption of the fleet - the number of cars on the road, the average vehicle miles traveled (VMT) per car, and the average fuel economy of the fleet:
Annual Fuel Consumption = (#cars) x (annual miles driven per car) x (gallons of gasoline consumed per mile driven).
This latter factor is the inverse of what we refer to as fuel economy – i.e., miles per gallon (mpg). If we were to influence total automobile fuel consumption we would have to create changes in one or more of these three factors.
Over the next several weeks it became clear that limiting the number of cars on the road was politically unacceptable (“unAmerican” is the term I’ve used), and that to limit VMTs it would be necessary to raise the price of gasoline. This would have been my choice, incrementally and predictably raising the price over a period of years. The Congress was unwilling to do this, as exemplified by a series of votes in the U.S. House of Representatives in early 1975 on a proposal to raise the federal gasoline tax. The initial proposal was to raise the tax by 3.5 cents, and this was voted down. Subsequent proposals were at 3.0 cents, 2.5 cents, 2.0 cents, 1.5 cents, 1.0 cents, and 0.5 cents, and all were voted down. After observing this from the House Gallery, I walked back to my office in the Senate, realizing that the only factor we might affect with legislation was the fleet average fuel economy. This was the origin of the CAFE legislation that eventually emerged.
Weeks and months were then spent on researching the U.S. automobile fleet (the 1974 fleet average was approximately 14 mpg) and current and emerging automotive technologies. Considerable time was also spent talking with experts in government, academia and the automotive industry as well as others knowledgeable of the industry. During this period I began to work closely with Senator Fritz Hollings of South Carolina, a member of the Senate Commerce Committee and an unsung hero of the CAFE story. In Hill staff parlance he was “the horse that carried the water” for moving legislation forward in the Committee and later on the Senate floor. I also began to work more closely with Lynn Sutcliffe, who provided political expertise and guidance throughout the following months.
These efforts led to a proposal to draft legislation that would double each manufacturer’s new fleet average fuel economy to 28 mpg within 10 years. This goal was set as a “stretch but doable” goal for the industry, and recognized that the industry needed time to reach the goal and that the federal government should not be telling the industry how to do so. The proposal was discussed extensively by the members of the Commerce Committee in a closed meeting and eventually accepted by a majority of the Committee. Senator Hollings was the leading advocate for the proposal, which split the two senators from Michigan – Senator Hart supporting the proposal and Senator Griffin opposing it. An initial version of the proposed legislation was then drafted and shared with three staff members who would help move the legislation through the House legislative process - Charlie Curtis and Bob Nordhaus, who worked for Representative John Dingell, Chairman of the House Energy and Commerce Committee, and Shelley Fidler, legislative director for Representative Phil Sharp, a member of the House Committee. They, along with Lynn Sutcliffe and Mike Pertschuk, are some of the finest public servants I have ever worked with, contributed much to my education, and all are still productive members of the Washington policy community.
The next several months were spent in hearings in the House and Senate on the draft legislation, and in revising the legislation based on these hearings and other information that became available. The House version that emerged, while still quite similar to the Senate version, did diverge in some details, including setting the 1985 10-year goal for the new fleet average at 27.5 mpg. This was also a time when the U.S. automobile industry was beginning to lose market share to Japanese car companies.
As expected, the hearings produced a wide range of opinions. The U.S. automobile industry strongly opposed the legislation, arguing that fuel economy could not be increased to the proposed level at the same time that automobile emissions were being regulated by the Clean Air Act. Other witnesses did not agree, and several of those intimately familiar with the industry argued strongly that the industry on its own would never significantly increase their fuel economies because the profit margin on big cars was so much larger than that of smaller, more fuel efficient cars, given the small difference in manufacturing costs between small and large cars. The industry also argued that the proposed legislation would restrict the number of cars that would be available to pull recreational vehicles, but calculations quickly revealed that this argument was unsuppportable and the issue went away.
Another issue that arose was how to deal with luxury car fleets that were unlikely to meet the standards. Some quick calculations determined that the amount of gasoline at stake was small, and I recommended that we let the luxury car purchasers pay the civil penalty for non-compliance and leave it at that, recognizing that we couldn’t fix all the problems in one bill. Of course, we were subjected to considerable lobbying on all sides of the fuel economy issue, including one day when Lynn and I met with supporters of the legislation in the morning and strong opponents of the legislation in the afternoon. Our end-of-day conclusion was that we must be doing something right.
The House version of the legislation reached the floor in June, while the Senate version was scheduled for debate in July. I sat in the House Gallery the day of the debate, next to a colleague who worked for the National Automobile Dealers’ Association. He was someone I had become friendly with during the intervening months. To my great surprise he was rooting for the bill to pass by a 4 to1 margin. I remember turning to him and saying: “What’s wrong with you? You work for the automobile industry and they are strongly opposed to this legislation. Why are you rooting for it to pass?” His answer: “I’ve told the industry that this bill is going to pass and they don’t believe it. They don’t think the Congress has the “…..” to pass it.” Well, he was right and they were wrong – the bill passed by a margin of three and a half to one.
The bill reached the Senate floor about a month later, and I assisted Senator Hollings while he managed the 6-hour floor debate. He had prepared himself well, not only rereading the bill the night before, but also reading the full report accompanying the bill to the floor which he subsequently sent to every automobile dealer in the state of South Carolina. It was also my first time on the Senate floor. The final vote in the Senate that day in favor of the CAFE legislation was 63 to 21.
The next several months were spent in conference with the House, to resolve the differences between the two versions of the Energy Policy Conservation Act that had emerged from the floor actions. At the staff level this effort on the Senate side was led by Lynn, while Charlie and Bob led the House effort. CAFE was only one of many titles that were proposed as new energy policies for the U.S. , and it took until December 1975 to resolve the differences and bring a conference report (the bill agreed to in conference by the House and Senate negotiators) to a vote in both Houses. It was quickly passed just before Christmas and signed into law by President Ford. The signing was followed by a brief celebration at the Hawk and Dove restaurant among House and Senate staff members who had been most involved in the negotiations, accompanied by Representative Dingell who had been a consistent supporter of the legislation. He even offered to pay for the drinks, a kind offer that was appreciated but refused.
There are many enjoyable memories of those days and nights in conference:
- Senator Bumpers’ advocacy of legislation that would cut down on idling time and fuel consumption at street corners.As a result of his successful efforts he became known to the conference staff as “Right-Turn-On-Red Bumpers.”
- working with the talented and fun-loving House legislative drafting staff
- escorting female Senate staff members back through the tunnels between the House and Senate late at night, to make sure they got to their cars safely. This was always interesting, as certain tunnel creatures only came out at night when human activity was minimal.
One final conference anecdote about why the final 1985 standard was set at 27.5 mpg. This number derives from the House version of the legislation, whereas the Senate bill called for 28 mpg.
Midway through the conference deliberations Lynn approached me and asked what our position should be: 28 or 27.5? Doing a few quick calculations revealed that the House method of calculating the average was slightly more stringent than the Senate method, and would lead to slightly greater fuel savings. My advice to Lynn, which he accepted, was to accede to the House position, the House would be pleased that we’d accepted their version of the legislation and gain us some bargaining leverage in other conference negotiations, and the country would benefit from a slightly more stringent standard. Thus, 27.5.
Several months after CAFE became law, an oversight hearing on its implementation was held by Senator Adlai Stevenson, Chairman of the Senate Commerce Committee’s Science Subcommittee. It was a difficult hearing, during which senior representatives of the U.S. automobile industry continued to insist that they couldn’t achieve the mandated 1985 and intermediate standards while reducing exhaust emissions. Having been told by others that the industry would resist strongly in its testimony but not violate a law of the U.S. , I quietly passed a note to the Senator asking him to put each of the executives on the record: Will your company meet the standards? They all testified yes.
A final piece of history: about a year after the legislation was signed into law, I ran into the chief lobbyist for one of the automobile companies in the U.S. Capitol. He pulled me aside, told me he would never say this publicly, and expressed his opinion that the legislation had “saved his industry.” That may or may not be true (many in the industry would strongly disagree with his statement), but those of us who worked on CAFE can take pride in helping the country move forward after the oil embargo. The legislation achieved its goal of improving new car fuel efficiency, but, unfortunately, by reducing the cost of driving it stimulated VMT increases which partially offset the possible fuel savings. This is a lesson for the future.
Recently, the New York Times, in an editorial entitled “Crunch Time on Energy” (June 19, 2007), stated that “The most effective energy efficiency policy ever adopted by the federal government is the Corporate Average Fuel Economy requirement of 1975.” More than 30 years have passed since CAFE was enacted, a period during which oil imports and oil prices have increased dramatically, and climate change has been recognized as a serious global challenge. It is clearly time to implement new policies that address these issues and save even more energy in the future.
Dr. Allan R. Hoffman
Office of Energy Efficiency & Renewable Energy
U.S. Department of Energy
1000 Independence Avenue, SW
Washington, DC 20585