The U.S. government on Aug. 28 announced that it has finalized a regulation establishing 54.5 mpg as the average fuel economy required of cars and light trucks in MY2025. The newest set of CAFE (corporate average fuel economy) regulations begins with MY2017 products; a prior set of regulations covers MY2012 through 2016, the final year of which the CAFE requirement is 35.5 mpg.
The so-called National Program is estimated to save about 4 billion barrels of oil and reduce greenhouse gas emissions by the equivalent of about 2 billion t over the lifetimes of light-duty vehicles produced in MY2017-2025.
The two agencies that worked together to produce the National Program—the U.S. Department of Transportation’s NHTSA (National Highway Traffic Safety Administration) unit and the U.S. EPA—project that fuel savings will far outweigh the higher costs expected to be incurred by automakers to develop and deploy fuel-saving technologies. They say that the net benefits to society will be in the range of $326 billion to $451 billion over the lifetimes of light-duty vehicles sold in MY2017-2025. Including the first set of regulations, savings to consumers are expected to total $1.7 trillion.
In a conference call Aug. 28, DOT Secretary Ray LaHood and EPA Administrator Lisa Jackson said the new regulation estimates that technologies used to meet the standards will add, on average, about $1800 to the price of a new light-duty vehicle in MY2025. From previous experience, Jackson noted, such price-hike estimates are usually high.
On the plus side of the balance sheet, consumers who drive their MY2025 vehicles for their entire lifetime will save, on average, $5700 to $7400 in fuel for a net savings of $3400 to $5000. This estimate assumes gasoline prices of $3.87 per gallon in 2025 with small increases most years throughout the vehicle’s lifetime. For families purchasing a MY2025 vehicle, the net savings will be comparable to lowering the price of gasoline by approximately $1 per gallon.
Asked by AEI whether automakers agree with the agencies’ price and cost estimates, a spokeswoman for the Alliance of Automobile Manufacturers deferred, saying by email that a technical team from the lobbying organization that represents all of the U.S. and most of the world’s other major automakers will be spending days poring over all the data in the nearly 2000-page document embodying the regulations.
LaHood and Jackson noted that the National Program was developed with the support of automakers and the state of California, which has committed to aligning its state CAFE requirements with the federal ones. (California long ago had been granted the right to develop its own vehicle emissions standards, and other states were given the option of adhering to either the California or the federal standards).
In a statement released to AEI, the Alliance said: “We are pleased to see a single, national program because conflicting requirements from several regulatory bodies raise costs, ultimately taking money out of consumers' pockets and hurting sales.”
In addition to lowering consumer fuel expenses, another goal of the program is to reduce emissions of greenhouse gases. The agencies estimate that there will be a 6 billion t reduction over the life of the first and second sets of regulations covering 2012-2025.
The National Program is also designed to reduce U.S. reliance on imported oil. The two sets of regulations are estimated to reduce oil importation by 12 billion barrels and reduce consumption by 2 million barrels a day, the latter figure being about the amount the U.S. imports from abroad daily.
As is currently the case, not all automakers are held to the same CAFE requirement. The National Program is structured so the overall industry average is 54.5 mpg by 2025; the specific figure for each individual automaker for each year leading up to and including 2025 is determined by its product mix in a given year. This provision allows for different fuel-economy requirements to be applied to vehicles of different sizes vs. a one-size-fits-all approach under which automakers might have to restrict their offerings of larger vehicles.
LaHood touted the agencies’ accommodation of vehicle size difference, which reflects their acknowledgment that vehicles of different sizes are appropriate for different purposes (large pickup trucks for work, as an example).
Automakers may earn CAFE credits for deploying certain “advanced” technologies (such as battery-derived propulsion)—and for deploying them quickly.
Although it calls for a midterm review for tweaking or reworking if circumstances at the time justify, the newest set of regulations “give manufacturers the regulatory certainty they need” to develop wide-ranging product plans, said LaHood.
According to the Alliance statement, “We all want to get more fuel-efficient autos on our roads, and a single, national program with a strong midterm review helps us get closer to that shared goal.”