The Department of Transportation and the Environmental Protection Agency today finalized federal car and light truck fuel economy and greenhouse gas emissions standards for model years 2017 to 2025. The standards, together with those previously adopted for model years 2012 to 2016, mean an 80 percent increase in fuel economy for the average model year 2025 vehicle from the 2011 CAFE (Corporate Average Fuel Economy) requirement of 27.6 miles per gallon.
ACEEE projects the standards for the entire period 2012-2025 will yield savings of 3.1 million barrels of oil per day in 2030, bringing oil consumption of light-duty vehicles below 7 million barrels per day—levels not seen since the mid-1980s. These savings projections include a “rebound” of 10 percent from increased vehicle efficiency, reflecting the tendency of some to drive more when driving becomes less expensive. A joint ACEEE-BlueGreen Alliance report found the standards also would create more than a half million jobs by 2030, including 50,000 jobs in auto manufacturing.
The agencies estimate that the average vehicle will cost about $2,000 more due to the additional technology required to reach the higher fuel economy levels. Savings from reduced fuel consumption will pay back these extra costs in less than four years, however. Buyers financing new vehicles over five years typically will realize a reduction in ownership costs, due to fuel savings greater than the increment in loan payment, starting at the time of purchase.
In the rulemaking, the agencies show in detail one technology scenario for meeting the standards. Their recipe includes 15 percent full hybrids, 26 percent mild hybrids, and 2 percent plug-in electric vehicles in 2025. The biggest contribution to the fuel economy ramp-up, however, is improvements to “conventional” gasoline-powered vehicles, the vast majority of which will likely gain turbocharged, direct injection engines and 8-speed automatic and dual-clutch transmissions, while becoming substantially lighter. Neither horsepower nor size of vehicles is expected to change. Fuel economy targets now vary with vehicle “footprint”—the area defined by the wheels’ contact points with the ground—and provide no advantage to a manufacturer that downsizes its vehicles to raise fuel economy.
As the earlier increase in standards has kicked in and manufacturers have anticipated today’s increases, a host of technology improvements has moved into the mainstream. The certainty provided by the new standards is leading to sustained investment in better technology. This includes not only incremental improvements to conventional vehicles, but also the more advanced technologies that require higher sales volumes to bring costs down. Buyers have responded enthusiastically to recent technology introductions and have already begun to save substantially at the pump while enjoying a widening selection of vehicle types. All this demonstrates the important role of standards in addressing inefficiencies in the market for fuel economy.
NOTE: An earlier version of this post listed incorrect percentages in the hybrid recipe.