Corporate Average Fuel Economy (CAFÉ) Standards

1. Corporate Average FuelEconomy (CAFÉ) Standards Anticipated Impacts on Future Revenues

2. Corporate Average Fuel Economy (CAFÉ) Standards History • First enacted by US Congress in 1975 to improve the economy of cars and light vans after the 1973 Arab Oil Embargo. • Based on a weighted average of a manufacturer’s current model year passenger cars or light trucks with a Gross Vehicle Weight under 8,500 pounds. • If the manufacturer exceeds the standard, a penalty is assessed. $5.50 X Manufacturer’s Total Production for the US Domestic Fleet 0.1 mpg under the standard

3. CAFÉ Standards • National Highway Traffic Safety Administration (NHTSA) regulates the CAFÉ standards • US Environmental Protection Agency measures vehicle fuel efficiency. • US Congress specifies that CAFÉ standards must be set at the “maximum feasible level” with consideration for: • Technological feasibility • Economic practicality • Effect of other standards on fuel economy • Need of the nation to conserve fuel • NHTSA must issue new standards eighteen (18) months in advance of model year production.

4. ProposedCAFÉ Standards • The new standards are presented not simply as passenger vehicles and light duty trucks. • Standards are now expressed in terms of the vehicle’s footprint • (Wheel Base X Average Track Width) • For passenger vehicles the two categories are: • 41 square feet or smaller (Honda Fit) • 55 square feet or bigger (Mercedes-Benz S-Class) • For light trucks the two categories are: • 41 square feet or smaller (Nissan Juke) • 75 square feet or bigger (Ford F-150)

5. ProposedCAFÉ Standards for Larger Passenger Vehicles

8. Factors Influencing Driving Habits • Distance to Destination • Presence of Passengers • Personal Value of Time • Comfort • Cargo/Freight Needs • Interim Stops / Destinations • Roadway Congestion • Safety • Cost of Fuel • Cost of Vehicle

9. Impacts of An Increase in CAFÉ Standards • Slight increase in vehicle miles traveled • Slight decrease in the gallons of gasoline consumed • Commensurate decrease in motor fuel revenues related to gasoline consumption at the State and National level • Increased costs to society in the form of additional crashes, fatalities, injuries, and property damage

13. Strategies to Offset the Fiscal Impacts of Increased CAFÉ Standards • Advocate revenue option other than Motor Fuel- based tax • Increase Motor Fuel taxes • Reduce expenditures • Cost Savings • Reduce System Miles • Accept lower pavement conditions as the norm • Allow more severe congestion along major corridors

14. Anticipated Implementation Schedule • Originally expected the proposed 2017-2025 standards to be officially released September 30, 2011. • Indication from the US DOT and US EPA that a proposal is expected no sooner than November 2011. • Delays are reportedly linked to preparing detailed of the official proposal to ensure it covers issues likely to be voiced during the comment period. • The administration is expected to remain on track to issue final guidance by July 2012.

15. Shrinking Highway Dollar

16. Shrinking Highway Dollar

17. Shrinking Highway Dollar

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