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Chicago Fed Letter, No. 266, September 2009
Raising Automotive Fuel Efficiency

Stricter fuel efficiency standards, establishing a 35 miles per gallon (mpg) target for the corporate average fuel economy (CAFE) of new vehicle sales by model year (MY) 2020, were part of the 2007 Energy Independence and Security Act (EISA). These requirements will be phased in beginning with MY2011 vehicles. The National Highway Traffic Safety Administration (NHTSA), which is part of the U.S. Department of Transportation, is the government agency authorized to regulate fuel economy. The NHTSA therefore issues the detailed rules required to implement fuel economy standards. During spring of this year, the Obama administration moved up the deadline by which the new requirements have to be met from MY2020 to MY2016. In addition, it instructed the U.S. Environmental Protection Agency (EPA) to regulate automobile emissions of greenhouse gases (GHG). Assuming the requirements for carbon emissions will be met entirely through fuel efficiency improvements equates to achieving a fleet average level of 35.5 mpg by MY2016.

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