Automakers may have to sell 4x more EVs under new proposed CAFE rules

Today, the US Department of Energy published a notice of proposed rulemaking that would change the way the government calculates the energy efficiency of electric vehicles. If adopted, the changes will substantially downgrade the fuel-efficiency ratings given to EVs and be used to determine corporate average fuel economy (better known as CAFE). That might have serious implications for automakers, but don’t worry—the consumer-facing MPGe and kWh/100 miles numbers you see on Monroney window stickers and at the US Environmental Protection Agency’s fueleconomy.gov site won’t change.

They call it CAFE, but you can’t drink it

Congress enacted CAFE in 1975 in the wake of the country’s first serious energy crisis. It gives an average fuel efficiency number that each automaker must achieve to not be sanctioned by the government, and the standards and penalties are enforced by the National Highway Traffic Safety Administration.

But the fuel efficiency numbers that NHTSA calculates are much higher than the actual efficiency you or I might experience, or the numbers posted by the EPA for consumers to make buying decisions.

The advent of electric cars complicated the process even more. Although the Secretary of Transportation is responsible for determining CAFE standards through NHTSA, since 1979, the Secretary of Energy and the Department of Energy have been responsible for calculating “the equivalent petroleum-based fuel economy” of those EVs.

Specifically, the DOE has to review the data each year and decide if revisions are necessary based on several factors: the approximate electrical efficiency of the vehicle, taking into account the kind of vehicle and its intended use; the national average electrical generation and transmission efficiencies; the US need to conserve energy; and the specific patterns of EV use versus gasoline- or diesel-powered vehicles.

To begin with, the DOE started a seven-year evaluation program to determine the “petroleum-equivalency factor” and proposed a rule for a permanent PEF in 1994. Several years of discussion with stakeholders followed before a new rule was proposed in 1999 and adopted in 2000. And it’s one that allows automakers to offset a lot of thirsty gas guzzlers for each EV they sell:

The calculation procedure converts the measured electrical energy consumption of an electric vehicle into a raw gasoline-equivalent fuel economy value and then divides this value by 0.15 to arrive at a final petroleum-equivalent fuel economy value which may then be included in the calculation of the manufacturer’s corporate average fuel economy.

That generosity did not go unnoticed. In 2021, the Natural Resources Defense Council and the Sierra Club petitioned the DOE to update its calculations, and the DOE agreed.

The actual testing of cars won’t change

The DOE won’t change the way it calculates an EV’s efficiency (in Wh/mile), which is determined by the EPA’s Highway Fuel Economy Driving Schedule (HFEDS) and Urban Dynamometer Driving Schedule (UDDS) test cycles.

However, it does agree with the NRDC and Sierra Club that the data for electricity generation and transmission efficiencies must be updated from the values arrived at in 2000 and should incorporate projections of where the energy in our electrical grid comes from.

With regard to energy conservation, the DOE says it “recognizes the need of the nation to conserve all forms of energy, and more specifically, finite resources such as fossil fuels, including petroleum consumed by ICE vehicles.”

On the other hand, it also notes that “current and future sources of electricity generation are and will be in relative abundance,” particularly since the passage of the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. But by not changing the PEF, the DOE thinks the current CAFE regulations could actually lead to increased gasoline consumption.

A concrete example may be useful at this point to illustrate just how generous the current CAFE regulations are for automakers who build EVs. The DOE offers the example of the Kia Niro EV, which for CAFE purposes is calculated at 394.3 MPGe. If we were to look at the consumer-facing data on fueleconomy.gov, we’d see that the EPA rates it at a combined 113 MPGe.