Court Tosses out Biden-Era Fuel Economy Formula for Electric Vehicles

September 06, 2025

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by Alex Guillén (Politico Pro) The Energy Department "lacks statutory authority" to apply a multiplying factor that boosted the miles per gallon equivalent for electric vehicles, the ruling said. -- The 8th U.S. Circuit Court of Appeals on Friday (September 5, 2025) overturned a 2024 rule from the Energy Department altering how it calculates the fuel economy of electric vehicles.

The Biden-era change would have phased out a multiplier factor that increased the calculated fuel economy equivalent of electric vehicles, which environmentalists had argued overvalued the fuel economy level — and thus indirectly the pollution reduction benefits — from EVs. The Energy Department rule in turn would have meant automakers would need to sell more EVs to meet fleetwide average fuel economy standards.

However, the court ruled DOE completely lacks the authority to apply the factor at all. While the ruling has the strange effect of reinstating a 2000 rule that set the factor, it will likely prompt DOE to conduct a fresh rulemaking to remove the multiplier.

Background: DOE uses a "petroleum equivalency factor," or PEF, to determine the mileage for electric vehicles under the corporate average fuel economy program, which is then administered by the Transportation Department. The metric had last been updated in 2000, when electric vehicles were largely a novelty. With more and more of those vehicles on the roads, however, DOE said it was time to reconsider its formula. READ MORE

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CAFE Standards: From Energy-Security Measure to Backdoor EV Mandate (The Heritage Foundation)

Excerpt from The Heritage Foundation: Corporate Average Fuel Economy (CAFE) standards were explicitly designed to regulate conventional-fuel vehicles, not alternative-fuel vehicles. Yet through regulatory sleight of hand, the program now effectively mandates their production. The Department of Energy’s flawed conversion methodology, particularly the Petroleum Equivalency Factor with its bonus multiplier, has artificially inflated electric vehicle (EV) efficiency metrics, creating a distorted regulatory landscape that forces manufacturers to produce EVs regardless of profitability or consumer demand.

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Fuel economy standards, among many other regulatory requirements, were established through congressional authority granted by the Energy Policy Conservation Act (EPCA) of 1975. The EPCA’s fundamental purpose was to reduce America’s dependence on foreign oil imports in response to the Arab oil embargo that threatened America’s energy security.

Congress designed the Corporate Average Fuel Economy (CAFE) standards to encourage American and foreign automakers to develop more fuel-efficient vehicles for the American market. The intention of the CAFE standards under the EPCA was to, as the name implies, regulate fuel economy, with “fuel” to include gasoline and diesel to further reduce U.S. dependence on foreign oil.1

Energy Policy and Conservation Act, Public Law No. 94-163, December 22, 1975, https://www.govinfo.gov/content/pkg/STATUTE-89/pdf/STATUTE-89-Pg871.pdf (accessed May 2, 2025).

The Department of Transportation, which had original regulation authority, has delegated this authority within the department to the National Highway Traffic Safety Administration (NHTSA).2

U.S. Department of Transportation, “Corporate Average Fuel Economy (CAFE) Standards,” August 11, 2014, https://www.transportation.gov/mission/sustainability/corporate-average-fuel-economy-cafe-standards (accessed May 2, 2025).

History of Corporate Average Fuel Economy

The EPCA initially set fuel-economy targets by statute and directed the NHTSA to adopt standards that would gradually raise fuel-economy standards to reach 27.5 miles per gallon (mpg) by 1985. For the next quarter century, the NHTSA held the CAFE standards flat until 2010. Light-truck standards did not increase for nearly 30 years, from 1976 until 2005.3

Baruch Feigenbaum and Julian Morris, “CAFE Standards in Plain English,” Reason Foundation, January 2017, https://reason.org/wp-content/uploads/2017/01/pb137_cafe_standards.pdf (accessed May 2, 2025).

The George W. Bush Administration started increasing standards in 2005, followed by the 2007 Energy Independence and Security Act, which mandated 35 mpg by 2020.4

Energy Independence and Security Act of 2007, Public Law No. 110-140, December 19, 2007, https://www.congress.gov/bill/110th-congress/house-bill/6 (accessed May 2, 2025).

The Obama Administration began to implement these increases in 2009, and in 2012 dramatically expanded the requirements to reach 54.5 mpg by 2025. This goal has not been met, and as penalties, automakers must pay fines and purchase credits—raising the price of vehicles to drivers.

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EVs are defined as “alternative fuel” vehicles, and the EPCA specifically prohibits the NHTSA from considering the fuel economy of EVs.7

U.S. Code § 32901, “Definitions,” 1999, https://uscode.house.gov/view.xhtml?req=granuleid:USC-1999-title49-section32901&num=0&edition=1999 (accessed May 2, 2025).

However, the Alternative Motor Fuels Act (AMFA) of 1988 mandates the inclusion of EVs in CAFE compliance calculations.8

U.S. Code § 32904(a)(2), “Calculation of Average Fuel Economy,” 2023, https://www.govinfo.gov/content/pkg/USCODE-2023-title49/pdf/USCODE-2023-title49-subtitleVI-partC-chap329-sec32904.pdf (accessed May 2, 2025).

To get around this paradox, converting electrical efficiency (watts per mile) to a liquid fuel equivalent (mpg) needs to take place. To do this, the mpg for EVs is determined using the Department of Energy’s (DOE’s) Petroleum Equivalency Factor (PEF) per the AMFA.9

U.S. Department of Transportation, “Corporate Average Fuel Economy Standards for Passenger Cars and Light Trucks for Model Years 2027 and Beyond.”

But critically, the PEF includes a “bonus multiplier” called the Fuel Content Factor (FCF) that artificially inflates the calculated fuel economy of EVs, undermining the intent of the EPCA to conserve energy.

For more than 20 years, this multiplier has been about 6.67, meaning an EV’s calculated mpg equivalent is about seven times higher than it would be based solely on energy content comparison.10

U.S. Department of Energy, “Petroleum-Equivalent Fuel Economy Calculation,” Notification of ex parte communication; request for comments, Federal Register Vol. 88, No. 189 (October 2, 2023), p. 67682, https://www.federalregister.gov/documents/2023/10/02/2023-21654/petroleum-equivalent-fuel-economy-calculation (accessed May 2, 2025).

For example, an EV with a petroleum equivalent to 30 mpg would be scored as 200 mpg with the FCF multiplier.

The FCF may be coming to an end this decade, however. In the DOE final rule set in 2024, the mpg-inflating FCF will phase out the PEF by 2030. Interestingly, the justification for the change was an admission that the PEF discourages improvement of fuel economy for gasoline-powered vehicles.11

U.S. Department of Energy, “Petroleum-Equivalent Fuel Economy Calculation.”

The artificially inflated PEF values through the FCF effectively forces manufacturers to produce EVs or plug-in hybrid EVs (PHEVs) regardless of consumer demand or market conditions.

Although a reduced PEF will help to balance the compliance for conventional-fuel vehicles and alternative-fuel vehicles, losing the cash cow without reducing standards will raise compliance costs by requiring either increasing EV production or by improving the efficiency of automakers’ conventional vehicles. Whether or not the PEF stands, too-stringent CAFE standards increase auto manufacturers’ total costs. These costs are passed on to consumers, forcing millions of households out of the new-car market altogether.12

Salim Furth and David Kreutzer, “Fuel Economy Standards Are a Costly Mistake,” The Heritage Foundation, March 4, 2016, https://www.heritage.org/government-regulation/report/fuel-economy-standards-are-costly-mistake.

As Americans hold on to older cars for longer, the age of the vehicle fleet makes driving less safe than it otherwise would have been.