Vehicle fleets are often drawn into efforts to improve the environmental performance of cars and trucks because fleets are managed in groups and are more easily regulated than individually owned vehicles. This report explores the role fleets have played and can play in raising the fuel economy of U.S. passenger vehicles. High fuel economy vehicles do not require properties specific to fleets, such as centralized refueling, to gain a foothold in the market, so a fleet strategy is not nearly so fundamental to promoting high fuel economy as it has been to promoting alternative fuel vehicles. On the other hand, advances in vehicle fuel economy in the fleet market are more readily transferable to the retail market, precisely because fuel economy improvements are not dependent upon features only fleets possess.

Fuel economy is one of the most important criteria for assessing a vehicle's environmental performance, because consumption of petroleum results in a large share of vehicles’ adverse impacts. A variety of vehicles do relatively well on this score, most of them employing efficiency technologies that have evolved slowly over recent decades. Among conventional vehicles on the market, there are fuel economy differences of up to 40% between the efficiency leaders in a given vehicle class and the class average. Advanced technology vehicles such as hybrids are very efficient, but are still expensive. Numerous "conventional" improvements remain that can be packaged to raise a vehicle's fuel economy substantially without a major effect on purchase price.

Fleet practices and priorities depend heavily on fleet type. Rental vehicles turn over very rapidly and dominate fleet purchases of cars, but rental fleets have no motivation to conserve fuel. Government fleets pay attention to environmental performance and are the easiest to regulate, but turn over slowly and are subject to numerous and sometimes incompatible mandates. Commercial fleets, whose vehicles outnumber rental and government fleets' combined, take an interest in fuel economy but have not yet been drawn to any significant extent into coordinated efforts into promote fuel-efficient vehicles.

Each of these fleet types is attuned to a different degree to vehicle purchase considerations that could result in a preference for, or aversion to, fuel-efficient vehicles. These considerations include vehicles' purchase and operating costs and resale value, corporate agenda, ties to specific manufacturers, and existing laws and policies. In any case, fuel economy is not at present a sufficiently important factor in vehicle purchase to result in high fleet efficiency.

The most prominent efforts to date to promote green vehicles through fleet sales have been alternative fuel vehicle programs launched over the past decade to reduce reliance on imported fuels and improve air quality. The alternative fuel vehicle experience provides some insights into the promise of fleet approaches to improving fuel economy. Requirements of the Energy Policy Act of 1992 (EPAct) mandating purchase of increasing percentages of alternative fuel vehicles in federal, state, and alternative fuel provider fleets are leading to acquisition of a significant number of alternative fuel vehicles, though not in numbers sufficient to meet the requirements of the act. Moreover, fleets covered by the EPAct are only a small fraction of all fleets. Most states and some local governments have added their own requirements for alternative fuel vehicle purchase to the federal mandates, and the DOE’s Clean Cities Program has encouraged many voluntary participants across the country to join efforts to increase alternative fuel use in transportation. Nonetheless, cost and infrastructure issues have prevented alternative fuel vehicles from gaining a foothold in the general market, and even from claiming a major share of the fleet market. They currently make up about 3% of all fleet vehicles.

Efforts to increase fleet fuel efficiency are generally not well developed, but several are underway. At the federal level, Executive Order 13149 mandates modest increases in fuel economy and reductions in fuel consumption for federal fleets in the next few years. Various proposals have been made to allow certain efficient, advanced technology vehicles to be purchased in fulfillment of alternative fuel vehicle requirements, at both the federal and state levels. Large-scale production of fuel cell vehicles is still some way off, but hybrids may soon appear in considerable numbers and could dampen demand for alternative fuel vehicles in some scenarios. Few states have developed plans specifically to promote high fuel economy. It is local governments that have been most active in this regard, due largely to the work of the International Council for Local Environmental Initiatives. Cities whose procurement policies require purchase of fuel-efficient vehicles include Denver, Los Angeles, Portland (OR), and numerous smaller jurisdictions.

Fleets are not easy targets for efforts to expand the demand for fuel-efficient vehicles, but they do offer some promising opportunities. Recommended steps for interested parties to take advantage of those opportunities include:

• Promote use of life-cycle costs, rather than purchase price, as a criterion in selecting vehicles.

• Support high resale values for fuel-efficient vehicles by extending any reductions in sales tax or other incentives to resale.

• Aggregate vehicle purchases among jurisdictions, while ensuring that this does not lead to a "lowest common denominator" approach.

• Engage fleet managers in efforts to raise manufacturers' prioritization of fuel economy. Fleet managers' focus on fuel economy of particular models with high fleet sales could be helpful.

• Avoid conflicts between fuel economy and other environmental transportation priorities. In particular, avoid incentives to promote high fuel economy vehicles that result in more driving, use of vehicles during peak hours, greater tailpipe emissions, etc.

• Consider allowing hybrids that are sufficiently clean and efficient to qualify for EPAct credit while expanding requirements to fleets not currently covered.

• Promote high fuel economy through both advanced technology vehicles and conventional, affordable vehicles.

• Consider ENERGY STAR®-type designations for vehicles and for fleet practices to attract fleets and raise public awareness of fuel economy issues.

• Expand vehicle criteria for "environmentally preferable products" under the EPA's pollution prevention program to include fuel economy.

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31 pp., 2002, $13.00, T024