How U.S. fuel-economy rules work now, and what changed in 2026

The rules that shaped what Americans drive for half a century were rewritten in 2026. On Sept. 30, the National Highway Traffic Safety Administration published its final Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule III, which amends Corporate Average Fuel Economy standards for model years 2022 through 2031 and takes effect Nov. 30, 2026. NHTSA projects the new standards will correspond to an industry-wide average of roughly 34.9 mpg in model year 2031. The standards it replaced, finalized in June 2024, were projected to require about 50.4 mpg by 2031.

It is the biggest reset since the program began, and NHTSA did not hide its view of what came before. In the rule's executive summary the agency wrote:

"While the CAFE program was intended to push manufacturers to improve fuel economy while preserving their ability to design and produce vehicles that meet market demands, the system has spun off its axis and requires recalibration." — NHTSA, SAFE Vehicles Rule III, Sept. 30, 2026

How CAFE works

Congress created fuel-economy standards in the Energy Policy and Conservation Act of 1975, after the Arab oil embargoes, and the first standards applied to passenger cars beginning with model year 1978. NHTSA sets the standards; the Environmental Protection Agency measures fuel economy. Automakers are judged on the average of their fleets, with separate standards for passenger cars and light trucks, and since model year 2011 each vehicle's target has depended on its footprint, the area between its four tires. No single model has to hit its target; what matters is how a manufacturer's fleet average compares with the average of its vehicles' targets. Domestically built car fleets must also meet a minimum of the greater of 27.5 mpg or 92% of the projected average for all cars.

The CAFE number is not the one on your window sticker. Compliance is measured on the EPA's original two-cycle city and highway tests, weighted 55% city and 45% highway, while the label uses the tougher five-cycle method adopted for model year 2008 vehicles. NHTSA says real-world fuel economy is generally 20% to 30% lower than the CAFE figure, which is why a 34.9-mpg fleet average does not mean a 35-mpg real-world fleet.

What changed, step by step

• July 4, 2025: Public Law 119-21 set the civil penalty for missing CAFE standards at $0, a change NHTSA wrote into its regulations in the final rule.
• June 11, 2025: NHTSA issued an interpretive rule, "Resetting the Corporate Average Fuel Economy Program," spelling out factors it says the law bars it from considering, including electric vehicles.
• Dec. 5, 2025: NHTSA proposed SAFE III, projecting a fleetwide average of roughly 34.5 mpg in model year 2031.
• Feb. 18, 2026: The EPA rescinded its 2009 greenhouse-gas endangerment finding and repealed all greenhouse-gas emission standards for light-, medium- and heavy-duty vehicles, effective April 20, 2026.
• Sept. 30, 2026: NHTSA published the final SAFE III rule, effective Nov. 30, 2026.

The final rule raises passenger-car standards 0.90% a year from the newly reset model year 2022 levels through model year 2029, then 1% a year through 2031. Light-truck standards rise 0.51% a year through 2029, then 1% a year. Model year 2030 acts as a bridge to a new way of sorting vehicles into the two fleets. The rule also notes that the President signed three Congressional Review Act resolutions disapproving EPA waivers, including the one for California's Advanced Clean Cars II light-duty regulations, and that states may not adopt their own fuel economy standards under federal law.

The changes that matter most

EVs no longer set the bar. NHTSA says the new standards are based solely on vehicles powered by gasoline and diesel, a category that includes non-plug-in hybrids, and that it did not consider the fuel economy of EVs or the electric operation of plug-in hybrids when setting them. Automakers can still build EVs and earn compliance credit for them through the Department of Energy's petroleum-equivalency factor.

Credit trading ends. NHTSA is eliminating trading of CAFE credits between manufacturers for credits earned beginning in model year 2028, arguing that the system produced a windfall for EV-only companies. Credits earned through model year 2027 can still be bought and used for up to five model years. Automakers can still carry their own credits forward or back and move them between their own fleets.

Fewer paper credits. Starting with model year 2028, NHTSA removed air-conditioning efficiency and off-cycle credits, such as those for engine stop-start, from its standard-setting analysis, saying they produced uncertain real-world benefits.

Crossovers move to the car fleet. NHTSA says 68% of the light-duty fleet meets today's light-truck definition, even though many of those vehicles, including all-wheel-drive crossovers and three-row SUVs, cannot realistically go off-road or carry much cargo. A third row of seats will no longer qualify a vehicle as a light truck by itself; new performance-based tests such as approach angle, running clearance and a light-duty work factor will decide, with the new classifications taking effect in model year 2030. The agency expects both fleets' measured averages to fall as a result, even if a manufacturer's combined average stays the same.

What it means for buyers

NHTSA estimates the final rule will cut the average up-front vehicle cost attributable to CAFE by about $1,290 compared with the standards it replaces. It also argues that gains shrink as mpg rises: a driver covering 15,000 miles a year saves 250 gallons moving from a 15-mpg vehicle to a 20-mpg one, but only 125 gallons moving from 30 to 40 mpg. Nothing changes on the window sticker, which still uses EPA's label values. With greenhouse-gas limits repealed, CAFE fines set at $0 and EVs excluded from the math, much of the pressure on automakers to improve efficiency now comes from buyers rather than regulators. Hybrids, which count fully under the new standards, fit that environment neatly.