The United States has finalized fuel economy rules that would increase the average to 54.5 miles per gallon by 2025, almost twice as much as the current standards. It’s the first update since the mid-1980s, and it should have a big impact on the annual cost of fueling up cars and trucks as well as the emitting of greenhouse gas emissions.
Without a climate bill, you can say that the fuel economy standards represent the biggest action taken by the Obama Administration on greenhouse gas emissions. “These fuel standards represent the single most important step we’ve ever taken to reduce our dependence on foreign oil… It’ll strengthen our nation’s energy security, it’s good for middle class families and it will help create an economy built to last,” President Obama said. The Administration claims this will reduce oil consumption over time by 12 billion barrels, at a savings for consumers of over $1.7 trillion. In fact, that’s precisely what the President said in a statement.
This builds on standards already finalized by the Department of Transportation and the EPA that increase fuel economy to 35.5 MPG by 2016. The new 54.5 MPG standard was finalized last July, and EPA Administrator Lisa Jackson said on a conference call today that the final rule is essentially identical to that proposal.
Light trucks will have a bit more time to reach their standards, under the rules. “There are curves, related to how quickly a car or truck has to reduce,” said the EPA’s Jackson, with steeper reductions in the earlier years for autos. “It’s a recognition that the technology for trucks needs more time.”
Auto companies, which collaborated with federal regulators on the changes, have made substantial investments in electric cars and other new technologies that raise fuel efficiency. These tend to increase the cost of the car, but that’s outweighed, maintains Transportation Secretary Ray LaHood, by the savings in fuel costs. He estimated that the cost of a new car could be around $1,800 more by 2025, but that consumers would save $8,000 in fuel over the life of the car (equivalent to the lowering of gas prices by $1 a gallon), thanks to the new standards. And even those estimates of $1,800 could trend lower because of market competition and innovation.
There are some incentives in the rule for electric vehicles, plug-in hybrids, hydrogen fuel cell vehicles, natural gas vehicles, and vehicles which achieve greenhouse gas reductions outside of the fuel economy standard.
The rule includes a mid-term evaluation within five years, to “allow the agencies to review their effectiveness and make any needed adjustments.” So that would be a second bite at the apple in case car companies want to argue for a slackening of the standards. We don’t know who would be President at that time, so the final effectiveness of this remains to be seen. Mitt Romney opposes the new standards, saying they give an advantage to foreign automakers.
But for now, this gives automakers certainty about the standards well into the future, so they can build their models accordingly. And it should reduce emissions (by 6 million metric tons over the life of the program, according to EPA) and save on day-to-day fuel costs. This is generally an advancement.
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