Miles per Gallon Illusions and Corporate Average Fuel Economy Distortions

Abstract

Correctly interpreting the fuel consumption implications of improvements in vehicle fuel economy is important for the optimal selection of policies to achieve greenhouse gas reductions and energy independence. The findings of two surveys of transportation professionals are reported. It was found that transportation professionals—those individuals charged with the design and implementation of transportation policy—correctly interpreted fuel savings of vehicle replacement policies more often when fuel economy was presented in gallons per 100 mi than when it was presented in miles per gallon. By means of a discrete choice model, it was shown that transportation experts were more likely to calculate fuel savings with a linear approach when given fuel economy in miles per gallon. One important implication of this finding can be seen in how the standard fuel economy metrics have resulted in distorted incentives in U.S. corporate average fuel economy (CAFE) standards. It was found that CAFE standards did not directly motivate fuel savings in determining penalties, credit transfers between model years, and maximum allowable adjustments for both flex-fueled vehicles and credit transfers for different vehicle classes. The most notable result is an overemphasis on incentives for improvements in fuel economy to passenger vehicles and an under-emphasis on improvements for light trucks. These effects are distinct from well-known distortions associated with setting different standards for each vehicle class. Further, they might have been avoided had standards been written for gallons per mile. These findings point to the importance of understanding how people process information to improve policies targeting fuel savings.