Three Tools under the CAA
The EPA has three sets of tools that can be brought to bear on GHGs under the CAA, as
illustrated in Figure 1.
Vehicle Fuel Economy Standards
First, the agency has extensive powers to regulate the transportation sector by setting rules
for new vehicles. The agency began this process in March 2010 by setting GHG emissions
standards for new cars and trucks. These standards effectively tighten previous CAFE standards
and allow limited trading across vehicle types both within and among firms. The new
regulations took effect January 2, 2011, affecting vehicles introduced in the 2012 model year
and covering the 2012–2016 period. The standards impose annual improvements in fuel efficiency
of 5 percent a year or more, raising the fleet average fuel efficiency for light trucks and
SUVs to 30 miles per gallon (mpg) by 2016, and to 39 mpg for cars, resulting in a combined
fleet average of 35.5 mpg. These standards are expected to reduce light vehicle emissions by 21
percent by 2030, making them among the most stringent standards in the world (Wolff and
Perry, 2010). Even stricter standards, which could require a fuel efficiency improvement of
an additional 40 percent, are under development and could take effect between 2017 and
2023.