AMFA's provisions allow for special treatment of CAFE calculations for "dedicated" and "dual- fuel" methanol, ethanol and natural gas alternative fuel vehicles. To afford these incentives, AMFA amended the automotive fuel efficiency provisions of Title V of the Motor Vehicle Information and Cost Savings Act by the addition of a new section that contains incentives for the manufacturer of vehicles designed to operate either exclusively or flexibly on methanol, ethanol or natural gas. Vehicles that operate exclusively on an 85 percent or greater methanol or ethanol concentration, or only on compressed or liquefied natural gas are recognized by AMFA to be "dedicated" alternative fuel vehicles. Those that have the capability to operate on either conventional gasoline or diesel fuel, or a mixture of the fuel and gasoline or diesel fuel, or only on the alternative fuel, without modification to the vehicle, are considered to be "dual-fuel" or "flexible-fuel" vehicles. A manufacturer producing alternative fuel vehicles that meet specific energy efficiency and minimum driving range requirements (at least 200 miles) may be able to raise their overall fleet fuel economy performance by manufacturing these vehicles. A description of the vehicles eligible for the credits is presented below.

Description of Alternative Fuels/Vehicles Eligible for CAFE Credit

Ethanol: Ethanol (C2H5OH) is a liquid alcohol fuel (sometimes referred to as grain alcohol) currently made from corn. Like methanol, ethanol can be used to make a gasoline additive (ETBE), and is used in an 85 percent blend with gasoline to power flexible-fuel vehicles. Currently, the primary use of ethanol is as a gasoline blending component in gasohol, reformulated gas, and in wintertime oxygenated fuels.

Changes to ethanol flexible-fuel vehicles relative to gasoline vehicles consist mostly of a sensor which will detect the type of fuel being pumped to the engine, and sets of engine maps to ensure that the vehicle operates on ethanol in a manner consistent with its operation on gasoline. Additionally, since higher flow-rate fuel injectors are used to accommodate the lower energy density of ethanol relative to gasoline, software changes relative to injector control (injector duration, etc.) may be necessary to ensure proper operation of the fuel injection system.

Ethanol is corrosive to some metals, although less so than methanol. Metals recommended for use with ethanol include carbon steel, stainless steel, and aluminum (if suitably protected from corrosion). Ethanol is less prone to attack elastomeric materials, so many common elastomers can be used with ethanol without risk of deterioration. No special manufacturing techniques are needed for ethanol fuel systems for flexible-fuel vehicles.

Unlike with methanol, manufacturers are offering a number of vehicle models as ethanol flexible-fuel vehicles at no extra cost. More than 600,000 of these ethanol flexible-fuel vehicles were made available in MY 2000.

Methanol: Methanol (CH3OH) is a liquid alcohol fuel (sometimes referred to as wood alcohol) produced from natural gas. Methanol is used as a fuel for racing vehicles at the Indianapolis 500, and was first used as a vehicle fuel in the 1930's. It is currently being used to make MTBE, a gasoline additive; however, the use of MTBE is being phased out due to water quality concerns.

Methanol sold for light-duty dual-fuel (also called "flexible-fuel") vehicles is actually M85 (a blend of 85 percent methanol and 15 percent unleaded gasoline). Changes to methanol flexible-fuel vehicles relative to gasoline vehicles consist mostly of a sensor which will detect the type of fuel being pumped to the engine, and sets of engine maps to ensure that the vehicle operates on methanol in a manner consistent with its operation on gasoline. Additionally, since higher flow-rate fuel injectors are used to accommodate the lower energy density of methanol relative to gasoline, software changes relative to injector control (injector duration, etc.) may be necessary to ensure proper operation of the fuel injection system.

Methanol will attack and corrode certain metals, such as magnesium and aluminum. Additionally, the corrosion products of aluminum and methanol will precipitate out of the liquid fuel and clog filters and fuel injectors. For this reason, it is recommended that metals such as stainless steel and carbon steel be used in methanol fuel systems and fuel delivery systems. Methanol will also attack many common elastomeric materials, like rubber, polyurethane, and most plastics. Elastomers with high fluorine content and Teflon have been proven to be compatible with methanol. No special fabrication techniques are necessary to produce methanol fuel systems for flexible-fuel vehicles, although new techniques would probably be necessary to produce methanol reformers for methanol-fueled fuel cell vehicles.

In the past, methanol has been used in a blend with 15 percent gasoline in methanol flexible-fuel vehicles; however, at the present time, no manufacturer is offering a methanol flexible-fuel vehicle. When they were being offered, the cost of methanol flexible-fuel vehicles were about the same as their gasoline-fueled counterparts. Currently, interest in methanol is centered around its use in fuel cell vehicles.

Natural gas: Natural gas is made up mostly of methane (CH4), and is one of the world's most abundant fossil fuels. In the U.S., natural gas is commonly used for space heating and electricity generation. The United States has a large domestic supply of natural gas and an extensive pipeline system to provide natural gas throughout the country. Natural gas is a popular alternative fuel for transportation use due to its low cost and widespread availability. Usually, natural gas is used in a vehicle as a compressed gas (CNG), but it can also be used as a cryogenic liquid (LNG).

There are two types of light-duty CNG vehicles or fuel systems currently being produced: dedicated vehicles which operate exclusively on natural gas and dual-fuel or bi-fuel vehicles which have fuel systems for both natural gas and gasoline. Vehicle fuel systems for flex-fuel and dedicated natural gas vehicles are very similar. The main difference is that the gasoline fuel system is left intact on the dual-fuel or bi-fuel vehicle. Both dual-fuel or bi-fuel and dedicated CNG vehicles are equipped with high pressure storage cylinders. Electronic software and hardware changes for natural gas vehicles include any additional sensors and controls to operate the natural gas fuel system, and engine control maps may be changed relative to a comparable gasoline vehicle to improve performance on natural gas (especially with dedicated natural gas vehicles).

By itself, natural gas is benign and does not cause many materials compatibility problems. However, natural gas can contain two contaminants, water vapor and hydrogen sulfide gas, which can result in corrosion of natural gas fuel system components. Natural gas dryers have been developed to remove sufficient water vapor from the fuel to prevent corrosion from the water vapor and the hydrogen sulfide, which is corrosive in the presence of water vapor. Compressed natural gas tanks themselves can be made either of steel, aluminum, composite materials or some combination of the materials. Current Federal Motor Vehicle Safety Standard 304 addresses the safety concerns of CNG tanks in motor vehicles.

Vehicle range for CNG and LNG depends on fuel storage capacity, but generally it is less than that of comparable gasoline-fueled vehicles. Power, acceleration, and cruise speed are comparable with those of an equivalent gasoline-fueled engine. Cylinder location and number may displace some of the payload capacity.

In terms of maintenance and reliability, the high-pressure tanks in CNG vehicles require inspection and certification. Some fleets have reported two to three years longer service life and extended time between required maintenance. However, manufacturers recommend conventional maintenance intervals.

A few light-duty CNG vehicles are currently being produced by the auto manufacturers. Production and sales of light-duty CNG vehicles are low because they cost between $1,500 and $6,000 more than their gasoline counterparts.

Description of Other Alternative Fuels/Vehicles - Not Eligible for Credits

Electricity: Electricity is unique among alternative fuels in that mechanical power is derived directly from it, rather than from the release of stored chemical energy through combustion to provide mechanical power. Electricity is produced in power plants powered by coal, natural gas, water (hydroelectric), or nuclear energy, and is available throughout the country. Electricity is being used in vehicles through the use of storage batteries and an electric motor, although fuel cells are also being explored to provide electricity to the electric motor through the conversion of chemical energy to electricity.

Relative to conventional gasoline vehicles, electric vehicles require a very different set of electronic controls and electronic hardware to operate. This includes motor controllers, inverters, and any battery management software.

Electric vehicles do not have materials compatibility issues in the same sense that other alternative fuel vehicles do. Issues that arise related to materials will involve the materials used to make the batteries themselves, such as lithium, lead, and cadmium. Many battery technologies involve the use of materials that can be harmful to humans (such as acid in a lead-acid battery), or can cause environmental harm if disposed of improperly.

Currently, electric vehicles cost more than their gasoline-fueled vehicles. However, there are conflicting estimates on the eventual cost to buy and operate an electric vehicle. Bringing down the cost of battery packs has become a recent focus. Less expensive battery technology is critical to making electric vehicles more affordable to the average consumer.

Although there are hybrid-electric vehicles (HEV) on the market that employ the dual-fuel concept, they have been ruled by NHTSA as gasoline powered vehicles because the electricity used to drive the motors is all generated by burning gasoline or diesel fuel on board. They do not have the ability to draw electric power from an electric grid by plugging into a power source and cannot operate on electric power for the minimum range.

Liquefied Petroleum Gas (LPG): LPG includes several light hydrocarbons which become liquids under modest pressures (up to 300 psi). For vehicle use, LPG consists mostly of propane (C3H8) and thus is most often called propane. Propane has been used as a motor fuel for more than 60 years in the U.S. and is the most commonly used alternative fuel. Propane is widely used in barbecue grills and for space heating, and is widely available throughout the U.S.

The majority of LPG vehicles are gasoline engines. There are both dedicated and dual-fuel LPG engines. The majority of LPG-fueled engines are specially manufactured converted gasoline engines. Electronic software and hardware changes for LPG vehicles include additional sensors and controls necessary to operate the LPG fuel system.

LPG is primarily propane, which is fairly benign and does not cause many materials compatibility problems. LPG tanks are usually made from steel or from aluminum, and are made to conform to DOT and ASME regulations. Care should be taken in choosing elastomeric materials, as butyl rubber is not compatible with propane and hoses made from this material will swell and leak. Some materials compatibility problems may arise from water and/or residues left behind when propane is evaporated, including corrosion and deterioration of hoses and pipes.

LPG is currently used to fuel more light-duty vehicles than all other alternative fuels combined. Approximately 300,000 vehicles in the U.S. are fueled with LPG. Most of these vehicles are in fleets.

Biodiesel: Biodiesel refers to a diesel fuel produced by reacting vegetable oils with methanol or ethanol. Biodiesel is commonly used in a blend with 80% standard diesel fuel, a blend known as B20. Biodiesel can be used in compression-ignition engines with little or no modification.

Biodiesel is physically very similar to regular diesel fuel, and there has been no indication that any materials compatibility issues have arisen with metals used in the distribution, storage, dispensing, or onboard use of biodiesel. Some reports have been provided that biodiesel may cause problems with certain types of elastomeric materials. No special manufacturing techniques are needed for fuel systems for biodiesel vehicles, since biodiesel can be used in most diesel vehicles without making any modifications to the vehicle at all.

No electronic software or hardware changes are necessary to operate a vehicle on biodiesel. In colder climates, fuel heaters may be installed to prevent the biodiesel from gelling.

The biggest drawback to biodiesel is cost. The cost of fuel is determined by the feedstock being used, and the fuel price is estimated at $2.50 a gallon or more due to small-scale production and feedstock costs. Research activities are underway in the U.S. to use biodiesel, especially for urban transit.

Commercial/Merchandising Issues

Fleet vs. Public Sales: Data are not readily available to provide a quantitative accounting of how alternative fuel vehicle sales are being distributed between fleets and public users; however, some qualitative statements can be made. CNG, LNG, and propane vehicles are being sold primarily to fleet operators because the economics of these vehicles can be favorable, depending on the annual average fuel use of the fleet. DaimlerChrysler stated in their response to the Federal Register notice, that except for their E85 minivan program, almost every alternative fuel vehicle has been sold in the fleet market. Electric vehicles are being sold both to fleet users and to the public, with models such as the Toyota RAV4 EV being offered solely to fleet operators, and models such as the GM EV1 being offered predominantly to the public. The vast majority of ethanol flexible-fuel vehicles are being sold to the general public, because of the manufacturers' strategy of offering ethanol flexible-fuel capability in the entire production run of certain vehicle/powertrain combinations.

Marketing Strategies: Manufacturers are pursuing a variety of strategies to market alternative fuel vehicles to fleet buyers. These include the production of flyers and brochures targeted at specific areas of the fleet market, the production of Internet websites designed to highlight each manufacturer's alternative fuel offerings, and participation in various programs such as the DOE Clean Cities Program. Manufacturers are also participating in the DOE Clean Cities Program's Advancing the AFV Choice marketing seminars being held in Clean Cities across the nation. Manufacturers are also placing advertisements for their alternative fueled vehicle offerings in fleet and alternative fuel publications. A new marketing strategy recently employed by Ford Motor Co. is the advertisement of their alternative fueled vehicle offerings on the side of transit buses. Additionally, Ford also ran a series of ads for the Ford TH!NK City electric car, which were broadcast on network and cable television during the Spring of 2000.

Manufacturers are also cooperating in the production of educational material for use in schools such as the GM story, "Daniel and his Electric Car," and the Texas General Land Commission's "Alberta Einstein Music Video," and its companion board game.

To enable a new generation of engineers to become familiar with alternative fuel technologies, major automakers, government agencies and engineering societies are currently sponsoring student design competitions such as FutureTruck, FutureCar, the Ethanol Vehicle Challenge, and the Tour de Sol. University and college students participate in all four design competitions, while high school students participate in the Tour de Sol. In the first three competitions students are provided vehicles by the manufacturers, which they then modify to meet the goals of the challenge. In all competitions the vehicles then are formally judged against a multitude of criteria. The design team scoring the best overall is determined to be the winner. Awards are also given out for individual categories. The automakers benefit by witnessing new, innovative approaches to design and quite frequently end up employing many of the student engineers who were part of the design team, especially if it was a winning team. These competitions are widely publicized by the sponsors. This year, the FutureTruck competition was broadcast live on yahoo.com.

Incentives: A number of incentives are available to reduce incremental costs of alternative fuel vehicles for U.S. purchasers, both from the Federal government and from state governments. The Federal government offers a tax deduction of $2,000 to $50,000 (dependent on vehicle size) for the purchase or conversion of qualified alternative fuel vehicles, and a credit is available for 10% of the purchase price of an electric vehicle, up to $4,000. Thirty-five states offer some sort of alternative fuel vehicle incentive, including Colorado, which offers incentives that include a tax credit for up to 85 percent of the incremental cost of an alternative fuel vehicle, sales tax exemptions, and reduced fuel tax rates on CNG and LPG.

Market Locations and Regional Sales Specifics: Infrastructure considerations are a major influence on alternative fuel vehicle sales. Availability of an infrastructure in a given area for a given fuel will dictate whether or not vehicles using that fuel will be popular (or even available) in that area. Also, the availability of an infrastructure itself can vary from region to region depending on the availability of the alternative fuel. For example, propane vehicles are popular in rural areas, because of propane's availability in rural areas as a home heating fuel. Propane is especially popular as a motor fuel in Texas, because of that state's abundant natural supply of the fuel. Natural gas vehicles can be found throughout the U.S., since the country has an extensive natural gas pipeline system providing the fuel to most areas. While ethanol vehicles are sold throughout the country, ethanol vehicle infrastructure is centered in the corn-producing states in the Midwest.

In some cases, alternative fuel vehicle sales can dictate the construction of infrastructure. Electric vehicles are offered predominantly in California and Arizona due to the favorable climate in those states. It was felt by the auto manufacturers that the warm Southwestern climate offered the most favorable environment for these vehicles, and thus vehicles such as the GM EV1 were offered only in those two states. In this case, the electric vehicle infrastructure was constructed as a result of the increasing numbers of EVs being introduced.

Future AFV Technologies

The CAFE incentives have had a clear impact on the development of new alternative fuel vehicle technologies. For instance, ethanol vehicle technology has been developed significantly, to the point where these vehicles are being produced in large numbers at no incremental cost to the consumer. Also, the Partnership for a New Generation of Vehicles (PNGV) which was a program involving the government and the auto industry to develop a vehicle capable of obtaining 60 to 80 mpg fuel economy and AMFA programs have been mutually beneficial. These programs have produced technologies which are applicable to alternative fuel vehicles, in terms of weight reduction, high-pressure storage tanks, advanced batteries, etc. The PNGV program was instrumental in the development of fuel cells that can use alternative fuels such as hydrogen, methanol, or ethanol. This should result in increased interest in these alternative fuels in the future.

On January 9, 2002, DOE announced the establishment of the FreedomCAR program. FreedomCAR is a new public-private partnership with the nation's automobile manufacturers to promote the development of hydrogen as a primary fuel for cars and trucks. It replaces and builds on the PNGV program. It will focus on the research needed to develop hydrogen from domestic renewable sources, and technologies to enable mass production of affordable hydrogen-powered fuel cell vehicles and the hydrogen-supply infrastructure to support them.

The fuel cell employs a rather interesting technology in that it does not burn the fuel, but rather catalyzes it. The fuel cell uses hydrogen as a fuel and by combining it with oxygen, produces electricity and water as a by- product. Fuel cells are electrochemical energy conversion devices. They are two to three times more efficient than internal combustion engines in converting fuel to power. However, there remain any number of technological hurdles before the fuel cell replaces the internal combustion engine as the prime mover for motor vehicles. Size, weight, and cost are examples of some of the concerns. Although fuel cell prices have dropped from their space age levels, they are still much higher per kilowatt than the price of internal combustion engines.

Many of the technological advances that led to today's state of the art developments were in the areas of materials used in the fuel system to reduce evaporative emissions and corrosion caused by some fuels. Special fuel sensors were developed to aid in maintaining performance and making the transition from gasoline to the alternative fuel seamless in the operation and performance of the vehicle.

Ford has developed a number of new technologies to provide outstanding emissions along with safety and performance features on their dedicated natural gas vehicles. Technologies are being developed to apply these to their dual-fuel vehicles. Ford did not provide figures for the development cost of these technologies individually, but throughout the years, has spent more than one billion dollars on the development of alternative fuel vehicles.

While it is too early to predict what direction alternative fuel vehicles will take in the future, considerable work is underway in the areas of hybrid-electric vehicles, advanced battery development such as Lithium-Hydride, and fuel cells.

Impact of AMFA on Future Plans

Based on the auto manufacturers' response to the Federal Register notice, termination of the CAFE credit would result in a significant reduction in the number and types of alternative fuel vehicles available in the U.S. The manufacturers stated that the CAFE incentive program has been a major factor in developing and manufacturing alternative fuel vehicles in high volume. They also stated that extension of the credit provision will be a major factor in their decision to continue offering dual-fuel vehicles in the volumes that are being produced today.

The reduction in the available CAFE credit from 1.2 mpg to 0.9 mpg may result in a reduction of the number and types of alternative fuel vehicles made available in the U.S. Allowing the credit to remain at 1.2 mpg could result in as many as 1.2 million alternative fuel vehicles being made available each year, while reducing the credit to 0.9 mpg could result in only as many as about 900,000 alternative fuel vehicles being made available each year. It is likely that many of these 900,000 alternative fuel vehicles would not be made available if the credit were terminated. Such a reduction in the production of these vehicles would likely result in a sharp decrease in interest in expanding the alternative fuel refueling infrastructure, and possibly result in a decrease in the number of alternative fuel refueling stations being operated.

According to the study, An Analysis of Alternative Fuel Credit Provisions of US Automotive Fuel Economy Standards (Rubin, J. and Leiby, P., July, 2000), conducted by ORNL of the alternative fuel CAFE credit provisions, if the CAFE credits were reduced to zero, the number of alternative fuel vehicles purchased, (excluding those attributable to EPACT mandates) would fall to about 0.5% of new vehicle sales depending on the year in question. They then concluded that the value of alternative fuel vehicle-generated CAFE credits is responsible for about one-half of all new alternative fuel vehicles that will likely be produced over the next decade. That same study found that if alternative fuel vehicles are produced in large scale production runs and the retail availability of alternative fuel is equivalent to gasoline, there would be a 32% penetration of alternative fuel vehicles into the marketplace by the year 2010 and a 7% penetration of alternative fuels in the same year.


Number of Alternative Fuel Vehicles Subject to AMFA

The number and percentage of vehicles manufactured (annually & aggregate) since the beginning of MY 1993 with dedicated and dual-fuel capacity is shown in Table III-1.

Table III-1
Year Total Car Production (Thousands) Dedicated Fuel Cars (Thousands) Flexible-fuel Cars (Thousands) Flexible-fuel Percent of Total








Year Total Light Trucks Production (Thousands) Dedicated Fuel Light Trucks (Thousands) Flexible-fuel Light Trucks(Thousands) Flexible-fuel Percent of Total








Dual (Flexible) Fuel Vehicle Lines Available in MY 2000 vs. MY 1993

Passenger Cars

In MY 1993, the only flexible-fuel car was the Ford Taurus FFV with a production of 2,000. Again in MY 1994, MY 1995, and MY 1996, the Ford Taurus FFV was the only flexible-fuel car, with a production of 2,400 in MY 1994, a production of 2,000 in MY 1995, and a production of 5,300 in MY 1996.

Ford produced 5,100 Taurus FFV's in MY 1997. The Ford Taurus FFV was the only flexible-fuel car produced in MY 1998, with a production of 3,500. In MY 1999, the Ford Taurus FFV repeated as the only flexible-fuel car with a production of 4,800. The Ford Taurus FFV and Ford Taurus wagon FFV, with a combined production of 126,200 were the only MY 2000 flexible-fuel passenger car models.

Light Trucks

From MY 1993 through MY 1997 there were no dual-fuel light trucks produced. In MY 1998 there were two Chrysler flexible-fuel light trucks:

Caravan/Voyager 2WD FFV: production of 142,800 (4-speed automatic)
Town & Country 2WD FFV: production of 4,400 (4-speed automatic)

There were no other flexible-fuel light trucks produced in MY 1998. In MY 1999, DaimlerChrysler (DC) had three dual-fuel trucks in its domestic fleet as follows:

Caravan 2WD FFV: production of 148,600 (4-speed automatic)
Town & Country 2WD FFV: production of 5,900 (4-speed automatic)
Voyager 2WD FFV: production of 77,200 (4-speed automatic)

There were four dual-fuel Ford light truck lines sold in MY 1999:

Ranger 4X2 FFV: production of 97,100 (4-speed automatic)
Ranger 4X2 FFV: production of 24,700 (5-speed manual)
Ranger 4X4 FFV: production of 47,300 (4-speed automatic)
Ranger 4X4 FFV: production of 19,300 (5-speed manual)

In MY 2000, there was an expansion of the availability of flexible-fuel light trucks. This included:

GM produced four light trucks:

Sonoma 2WD-FFV: production of 12,500 (4-speed automatic)
Sonoma 2WD-FFV: production of 6,200 (5-speed manual)
S10 2WD FFV: production of 54,300 (4-speed automatic)
S10 2WD FFV: production of 26,100 (5-speed automatic)

There were two DaimlerChrysler light truck models:

Caravan 2WD FFV: production of 203,200 (4-speed automatic)
Town & Country 2WD FFV: production of 31,600 (4-speed automatic)

Ford/Mazda produced eight flexible-fuel light trucks models:

Mazda 2WD FFV: production of 8,600 (4-speed automatic)
Mazda 2WD FFV: production of 4,700 (4-speed automatic)
Ranger 2WD FFV: production of 113,000 (4-speed automatic)
Ranger 2WD FFV: production of 22,200 (5-speed manual)
Mazda 4WD FFV: production of 2,000 (4-speed automatic)
Mazda 4WD FFV: production of 1,200 (5-speed manual)
Ranger 4WD FFV: production of 48,300 (4-speed automatic)
Ranger 4WD FFV: production of 12,800 (5-speed manual)

Impact of Flexible-fuel Vehicles on MY 1993-1999 CAFE

An analysis was performed to determine the impact of flexible-fuel cars and light trucks on CAFE during MY 1993-1999. The analysis consisted of identifying the flexible-fuel vehicles in each model year and comparing the CAFE computed using the flexible-fuel credits for these vehicles, indicated by CAFE FFV, with the CAFE computed using "normal" fuel economy values.

In MY 1993, the Ford Taurus FFV was the only flexible-fuel car which had credits entitling it to a fuel economy of 42.4 mpg and an estimated mid-model year production of 2,000. This produced a Ford domestic CAFE of 27.95 mpg based on mid-model year data. However, if this particular Taurus had a "normal" fuel economy of 28.0 mpg (for a 3.0 Liter Taurus), then the Ford domestic CAFE would have been 27.94 mpg, or 0.01 mpg less.

From MY 1993 through MY 1999 the Ford Taurus was the only flexible-fuel car with measurable (at least 0.1 thousand) production. As seen in the accompanying table, the inclusion of the Taurus flexible-fuel vehicle fuel economy credits produced a benefit of no more than 0.03 mpg in the Ford domestic CAFE.

There were no dual-fuel light trucks produced from MY 1993 through MY 1997. In MY 1998 and MY 1999 there were over 300,000 Caravan/Voyager and Town and Country flexible-fuel vans produced by Chrysler/DaimlerChrysler. Ford estimated almost 200,000 Ranger flexible-fuel sales in its MY 1999 fuel economy report. The increase in light truck CAFE due to the flexible-fuel vehicle credits, i.e., CAFE FFV-CAFE Normal, ranged from 0.57 mpg to 0.94 mpg as shown in Table III-2.

Table III-2


Ford Domestic Cars

Chrysler/DaimlerChrysler Domestic Trucks

Ford Domestic Trucks


Actual EPA Year End

MMY CAFE with FFV credit


MMY CAFE with FFV credit


MMY CAFE with FFV credit


1993 28.3 27.95







27.7 27.37 27.35 * * * *


27.7 27.45 27.44 * * * *
1996 26.4 26.61 26.59 * * * *
1997 27.2 27.09 27.06 * * * *
1998 27.8 27.34 27.31 20.54 19.93 * *
1999 27.6 26.94 26.91 20.74 19.80 20.41 19.84

* No flexible-fuel vehicles produced in these years.

Note: Mid-Model Year (MMY) CAFE level differs from EPA final year end totals due to additional adjustments made by EPA. The first column indicates these totals for Ford domestic cars as an example.

While dedicated alternative fuel vehicles played an important role during the process of technological developments for dual-fuel alternative fuel vehicles, their intrusion into the marketplace has been too small to have had any impact on the CAFE of manufacturers.

Economic incentives to produce flexible-fuel vehicles

The previously referenced ORNL study, An Analysis of Alternative Fuel Credit Provisions of US Automotive Fuel Economy Standards (Rubin, J. and Leiby, P., July, 2000), examined how CAFE credits for producing alternative fuel vehicles influence the behavior of vehicle manufacturers. In doing so, the study estimated the value to vehicle manufacturers of CAFE credits that are generated from the sale of alternative fuel vehicles. The study concludes that the theoretical marginal value of a CAFE credit from the production of a dedicated alternative fuel vehicle and a flexible/dual-fuel vehicle would be $1100 and $550 respectively. When adjusted by the ratio of actual versus estimated total penalties paid over the ten-year period 1986-1995 ($45 million/$71 million), the range of marginal values becomes $638-$319 per dedicated and flexible/dual-fuel vehicles respectively.

If model volumes are 100,000 units per annum or more, the incremental manufacturing cost associated with alcohol dedicated or alcohol flexible-fuel vehicles will be substantially less than the projected marginal value of the CAFE credit under either of the above scenarios.

Marginal Value
Marginal Value (Adj.)
Incremental Per Unit (@ 100,000 units/ year)
Dedicated Alcohol
Flexible/Dual Alcohol
$ 550

Thus the net effect of the credit could provide a benefit to the manufacturer between $415 per unit for the dedicated alcohol fueled model ($638-$223) and $35 per unit ($319-$284) for the flexible-fueled model when using the more conservative adjusted market value estimates. If the unadjusted market value per credit estimates are used, the gap between per unit credit and incremental manufacturing cost becomes even more favorable to the auto maker. The net per vehicle credit would be $877 for the dedicated model ($1100-$223) and $266 for the flexible-fueled model ($550-$284).

The other alternative fuel technologies for which cost volume estimates were made include CNG, LPG, and electric power. Diesel and electric or gas and electric hybrid technologies were not investigated by ORNL. Of the remaining technologies, only LPG would yield a net credit to the vehicle manufacturer when the unadjusted marginal value per credit assumption is used:

Marginal Value
Marginal Value (Adj.)
Incremental Per Unit
Dedicated LPG
Flex/Dual LPG
$ 550

The dedicated LPG fueled vehicle would yield a net credit per vehicle of $359 ($1100-$741) at an annual production volume of 100,000 vehicles. The study did not quantify incremental manufacturing costs at higher annual volumes and all other technologies did not yield a favorable net credit.

CNG technology proved to be nearly twice as expensive as LPG and even less attractive from the standpoint of net marginal CAFE credits to auto manufacturers:

Marginal Value
Marginal Value (Adj.)
Incremental Per Unit
Flexible / Dual
$ 550

Whether the marginal value of the CAFE credit is adjusted or not, the result is a net manufacturing cost increase per vehicle. For the dedicated CNG vehicle, net incremental cost is $448 unadjusted ($1100-$1548). Net incremental cost for the flexible-fuel vehicle is $1151 unadjusted ($550-$1701). The comparison between marginal credit vs. marginal cost is much more unfavorable when the CAFE credit is adjusted. Net incremental costs after adjustment would be $910 for the dedicated fuel vehicle($638-1548) and $1382 for the flexible-fuel vehicle ($319-$1701).

The study concluded that there is strong evidence to believe that the CAFE credit incentives for alternative fuel vehicles have value to U. S. manufacturers since manufacturer-specific data show that current CAFE standards are a binding constraint. The value of these CAFE credits was found to exceed the incremental manufacturing costs of alcohol alternative fuel vehicles at medium-to-large scale production volumes.


The AMFA CAFE credit program has been successful in stimulating a significant increase in the availability of alternative fuel vehicles (mostly E85 flexible-fuel vehicles). While the number of dedicated alternative fuel vehicles (cars and light trucks) has actually decreased in recent years, the growth in dual-fuel vehicles has been significant, especially in the past three years. Since 1998, the annual production of flexible-fuel light trucks has increased 270 percent, and from 1999 to 2000, the annual production of flexible-fuel passenger cars grew from 4,800 to 126,200 vehicles. Since EPACT was enacted in1992, the population of alternative fuel vehicles has grown to over 1.2 million vehicles, and the number of alternative fuel vehicles in the Federal fleet has increased from a small number of demonstration vehicles under AMFA to over 45,000 alternative fuel vehicles in 2000. In their comments responding to the Federal Register notice, automobile manufacturers stated that the CAFE credit provision has strongly influenced their decision to produce dual-fuel vehicles and would continue to do so in the future.


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