National Fuel Efficiency Standards Could Require 62 MPG Within 15 Years

Photo: Myleen Hollero/Orange Photography
Photo: ##http://www.orangephotography.com/##Myleen Hollero/Orange Photography##

The Obama administration got a lot of attention earlier this year when it raised fuel efficiency rules to an average 35 miles per gallon across the nation’s fleet of automobiles that will be produced between 2012 and 2016. Now the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA), a division of the U.S. Department of Transportation (US DOT), have laid out an ambitious road map [pdf] to push tougher greenhouse gas emission and fuel economy standards for passenger cars and trucks built from 2017 through 2025, standards that hypothetically could push the national fleet average up as high as 62 mpg.

“We must, and we will, keep the momentum going to make sure that all motor vehicles sold in America are realizing the best fuel economy and greenhouse gas reductions possible,” said U.S. Transportation Secretary Ray LaHood. “Continuing the national program would help create a more secure energy future by reducing the nation’s dependence on oil, which has been a national objective since the first oil price shocks in the 1970s.”

reducsss..
GHG and MPG levels analyzed for various scenarios. Source: US DOT

Today’s report provides an initial assessment for a potential national program for the 2025 model year horizon and outlines next steps for additional work the agencies will undertake to meet the yet-to-be established GHG reduction goals. Depending on the scenario eventually chosen, the industry will have to reduce CO2 production across the national car and truck fleet from a minimum 3 percent (or the equivalent of 47 mpg) up to 6 percent (or the equivalent of 62 mpg).

The report outlines the costs and benefits of several approaches for reaching the targets (technology pathways A, B, C, or D), from focusing on reducing vehicle size and advanced gasoline, to relying on gas-electric hybrids and full electric vehicles (EVs). Rule makers assert that even the 6 percent target is achievable with existing technology, though the higher benchmark would require more hybrids and EVs within a manufacturer’s fleet.

Even though there will be an increase in the initial cost of vehicles employing more advanced technologies to meet the expected rules, the payoff will be fewer trips to the pump and significant long-term cost savings. From the report:

The preliminary estimated per-vehicle cost increases for a [manufacturer year] 2025 vehicle ranged from $770 to $3,500 across the range of stringency targets and technology pathways. Due to the fuel savings consumers experience by purchasing vehicles with improved fuel economy, the net lifetime owner savings would be $5,000 to $7,400, or a payback period of 1.4 to 4.2 years,

The range standarss.... Source: US DOT
Projections for MY 2025 preliminary per-vehicle cost estimates, vehicle owner payback, and net owner lifetime savings.... Source: US DOT

Assuming a 6 percent GHG reduction target, if the industry followed Pathway A, for example, manufacturers would rely on hybrid electric technology (including plug-ins) and would see the highest preliminary per-vehicle cost increase of $3,500, but would save the vehicle’s owner $6,200 in fuel over the vehicle’s lifetime, with a payback period of 4.1 years. Under the same target but following Pathway C, manufacturers would rely on advanced fuels and smaller vehicles and would see the smallest initial per-vehicle cost increase of $2,800 and would save its owner $7,400 over the vehicle’s lifetime, with a payback period of 3.1 years.

Estimated Total CO2e and Fuel Reductions for the Lifetime of MY 2025 Vehicles. The CO2e numbers vary depending on the penetration of hybrids and full EVs. Source: US DOT.
Estimated total CO2e and fuel reductions for the lifetime of MY 2025 vehicles. The CO2e numbers vary depending on the scenario chosen and the penetration of hybrids and full EVs. Source: US DOT.

The overall impact of the reductions would be quite significant just for the vehicles produced in model year 2025, with varying levels of CO2e reductions depending on the technology pathway and the penetration of hybrids and electric vehicles in the market. If rule makers settled on the 6 percent target, for instance, the lifetime reduction of CO2e from all the cars and trucks manufactured in 2025 would be 530-590 million metric tons and the equivalent of 1.3 billion fewer barrels of oil than the baseline.

“Continuing the successful clean cars program will accelerate the environmental benefits, health protections and clean technology advances over the long-term,” EPA Administrator Lisa P. Jackson said in a statement.  “We will continue to work with automakers, environmentalists and other stakeholders to encourage standards that reduce our addiction to foreign oil, save money for American drivers, and clean up the air we breathe.”

At President Obama’s request, the California Air Resources Board (CARB) has participated in the development of the initial analysis and will come up with a technical assessment to inform the subsequent rulemaking process.

CARB spokesperson Stanley Young said Obama had asked CARB to work with the national rulemakers because they have “a great deal of expertise in developing vehicle standards. The President believes we would be able to contribute to the efforts and it would make it easier for California to harmonize its standards with national standards.”

The reaction from the Alliance of Automobile Manufactures, which represents BMW Group, Chrysler LLC, Ford Motor Company, General Motors, Jaguar Land Rover, Mazda, Mercedes-Benz, Mitsubishi Motors, Porsche, Toyota, Volkswagen and Volvo, affirmed a commitment to improving fuel economy and reducing GHGs, but said the data in the report was still incomplete.

In a statement, Alliance president Dave McCurdy said, “In the coming weeks, we will carefully review the technical assessment’s assumptions regarding factors that will impact vehicle fuel economy increases over this time period…. EPA and DOT should now engage a broad range of independent experts to undertake a thorough analysis and balance the technological opportunities to improve vehicle and fleet fuel economy with the economic challenges they present – for automakers and American consumers.”

  • Hooser

    That ain’t ever gonna happen. The political blowback would be huge, and the cost estimates are too low. If it could be implemented, it would slow down new car sales, keeping old cars on the road longer and defeating the purpose.

    The CO2 reduction estimates are also probably incorrect, depending on what kind of vehicles are relied upon. If the automakers shift–can persuade the public to buy–ZEV electric vehicles, we have to ask what kind of power source will be used to charge them. The number one source of electrical power in the U.S. is coal, and the CO2 savings from shifting from gasoline to coal are not exactly substantial.

  • Chris P

    Hooser, If you don’t like this approach, what politically achievable alternative approaches would you suggest? I’d be ecstatic if fuel taxes were raised by enough to change purchasing decisions and driving patterns, but I don’t see any chance of that happening. I’d also support fee-bates under which people who buy gas guzzlers pay fees that fund rebates for people who buy more efficient vehicles, but proposals to do that haven’t gone anywhere, either.

  • Hoosier

    Hmm, that should be Hoosier, not Hooser. Misspelled my own screen name.

    I think the crucial thing is to regulate emissions. From an economic point of view, the amount of gas I use is a private business decision–the costs are internalized. It’s the emissions that are an externalized cost, imposed on others, so that’s what the regulations should focus on.

    If we’re truly at or near peak oil, the price of gas will rise and people will begin demanding higher gas mileage cars. If it doesn’t, and/or they don’t, their buying choices are none of my business–only what come out of their tailpipe.

    Not everything is solved well through regulation, and a) I just don’t believe in trying to make people conform to our view of what is good behavior through regulation (which is moralistic), and b) if it’s not politically acceptable you’ll spend too much time and energy misdirecting your political resources towards small gains. All resources are limited, including time, attention, and political will.

  • Chris P

    Hoosier,

    A couple of points:

    For gasoline- and diesel-powered vehicles, fuel efficiency regulations are a pretty good proxy for regulation of tail-pipe CO2 emissions. Plus, there are a variety of other reasons for trying to reduce fossil fuel consumption – e.g., non-carbon pollution associated with pumping, transporting, and refining fuel and national security costs and risks associated with the unstable or oppressive regimes that produce much of the world’s oil.

    Though you don’t quite come out and say it, I gather your preferred solution approach would be a market-based approach such as cap-and-trade or a carbon tax. Although I’d be happy with many potential cap-and-trade or carbon tax systems, it seems unlikely that such market-based approaches (or any other approaches, for that matter) will be able to get through the Senate for the next few years. That leaves us with the more traditional kinds of regulation that don’t require new legislation – and that often poll quite well, despite your perception that people don’t like the moralistic connotations that regulations sometimes convey.

  • Hoosier

    Chris P.,

    You’re mostly right, and I appreciate the thoughtful response. I was a bit wary in my first reply because this forum is one where a preference for market solutions won’t always receive a polite reply (which isn’t to say I don’t think this is a great blog, because it is).

    Certainly the amount of fuel usage is a decent proxy for amount of emissions, but I would note that we’ve also managed to reduce tailpipe emissions by approximately 90% by relying on improvements in combustion and emissions technology. I’d rather keep pushing for improvements there.

    Mostly, though, I just wanted to emphasize that we could reach the CAFE goal by building a lot more electric vehicles, but because so many of those would ultimately be powered by coal, the emissions gains would be largely illusory. It could lull us into thinking we’ve accomplished something that we really haven’t.

    I’m not in disagreement with the reasons for reducing CO2. Unfortunately, at present our primary alternative is coal, which is (from the environmental perspective) distressingly cheap and plentiful. Right now whole mountaintops are being torn off and shoved into river valleys in West Virginia to access coal–it’s one of the worst environmental harms occurring right now, and needs to be taken into account in our decision-making as well as the harms of CO2.

  • “I was a bit wary in my first reply because this forum is one where a preference for market solutions won’t always receive a polite reply”

    Um, you are wrong. And if you believe that gas prices are market rate, wrong isn’t a strong enough word. Which it looks like you do assume:

    “From an economic point of view, the amount of gas I use is a private business decision–the costs are internalized. It’s the emissions that are an externalized cost, imposed on others…”

    So much more than the cost of emissions are externalized with gas.

    Though I do agree with you when you talk about an electric car fleet powered by coal as “[it] could lull us into thinking we’ve accomplished something that we really haven’t.”

  • Hoosier

    Mikesonn,

    Sort of a case in point. Not rude, but making contrary assertions without evidence or explanation. I’ve heard all the “not market price” claims for gas prices in the U.S., and none of them hold. They’re all based on the explanation that “government has done X, and if they hadn’t done X, gas prices wouldn’t be what they are.” That’s true, but it doesn’t mean they’re not market prices. Or if the conversation takes the truly wrong turn, the claim is that big oil is manipulating prices to keep them artificially high, which is demonstrably untrue (I’m not accusing you of claiming that, since you didn’t explain yourself well enough to know just what you are saying.)

    The most legitimate claim is that the prices aren’t market prices because they’re not incorporating the externalities of oil production and consumption, but that’s evidence of a market failure, and it doesn’t mean the price isn’t a market price–it’s just a market price as the market currently is (mis)functioning.

    If you come at it from an ideological perspective about what oil prices “should” be from some idealistic perspective, then you’re definitely not talking about market prices.

    Finally, you could be talking about various subsidies to big oil. I’d agree with you if that was your approach, but the proper response to that is to eliminate subsidies, not to increase the price of oil or increase fuel efficiency standards (which will also price poorer people out of newer cars, and keep older cars on the road longer).

    I can probably predict where this discussion will go, as I’ve had it many times before. Unless you’re an economist, or have some economic training beyond reading Paul Krugman’s NYT columns, I’m not really in the mood to engage beyond this.

  • Maybe Mike was referring to the fact that the cost of the roads is mainly paid for through general tax revenue, which means heavy road users are subsidized by light users. (Not to mention ubiquitous free parking, which is also a subsidy…)

    But I’m with Hoosier in thinking market-based solutions are better than the misguided subsidies we have now. We should jack up the gas tax until gas tax receipts could cover all road costs at the local, state, and national levels. Some of the money could also go into a fund to pay for health care costs of people sickened by air pollution from motor vehicles. That would still leave lots of externalized costs not accounted for, but it would be a start. And probably we wouldn’t need fuel economy standards, since gas guzzlers would be a lousy deal.

    (It’s hard to get statistics on road spending vs. gas tax revenue, but e.g. it appears that the gas tax pays for less than 1% of road paving costs in Seattle: http://www.publicola.net/2010/08/31/we-all-pay-for-the-roads/)

  • Hoosier

    Agreed with peternatural that roads are subsidized, which is why, although I lean libertarianish (small l, not Lib Party type), I support subsidies for passenger rail and mass transit. I despise the conservatives’ pretense that only Amtrack is subsidized, and not roads and airports.

  • This is silly. Due to declining oil fields world-wide and the fact that we import 70% of our oil, there will be no gasoline-powered cars in the US in fifteen years, making whatever gas mileage standards we legislate now utterly moot.

    Countries who have faced this reality by imposing large taxes on gasoline and using the money to beef up their bicycle infrastructure and public transportation systems will experience a great deal less pain than we will in the coming decades. They are also, coincidentally, healthier and have lower health care costs than we do, as well as a higher standard of living and a happier populace. But hey, we’re Americans. Anyone with any economic training knows the GDP is what counts. Health and happiness–that’s for brie-eating socialists.

    We all know that the free market always, without fail, allocates scarce resources to create maximum efficiency. Indeed, our current capitalist dream of naked credit default swaps, too-big-to-fail banks, and Federal Reserve-blown bubbles has created the most efficient economy imaginable! (Pollution is efficiently distributed to poor people who are too-little-to-complain. Habitat destruction is distributed to various species who are too-unimportant-to-be-noticed.)

    I understand that we love, love, love our cars, that they foster our national image of power and independence, and that we just can’t conceive of anything different. Yes, while other countries may be able to provide their citizens with safe bicycle infrastructure and efficient transit, this is AMERICA not XXX! (XXX=Holland! Japan! France! China! Denmark! You name it!) We are genetically, culturally, historically, politically and economically incapable of having anything but a complete car-based society. We are genetically, culturally, historically, economically and politically programmed to be asthmatic, obese and diabetic. There is nothing we can do about it. We are helpless as newborn babes. Cheap gas is our lifeblood. People will revolt rather than give up their cars. Free parking is an American, god-given right, and all of our problems can be solved by just building more roads.

    Still, unless some magic source of energy suddenly appears out of nowhere, the keys we clutch so tightly in our hands will soon be worthless. We will learn how to walk and bike and take transit where we want to go. We will abandon our McMansions and live as best we can a few miles from work. We will grow vegetables, and most of our goods will no longer come from China. We will learn to make do with less.

    If we had started to ramp up non-fossil fuel energy sources twenty years ago, (say a combination of thorium, solar and wind, as well as greater energy efficiency) the transition wouldn’t be nearly as bad. However, we didn’t. Energy was cheap, debt was cheap, the party was on. We spent and consumed as if we could just move on to the next planet when we wore this one out. It is only now we’re beginning to understand that every binge is followed by a hangover, and that in our stupor we bet (poured money into tax breaks and housing and infrastructure) on the wrong (cheap gas dependent) horse.

    At the very least we could stop subsidizing the oil companies with tax breaks to the tune of $4 billion dollars a year. But fuel efficiency standards for the year 2025? Pretty much useless. We need to get the upgrade of electrical grid going, and pronto. That’s where the future is, and it’s coming quick.

    (Note: because electric engines are so much more efficient than internal combustion ones, they produce less emissions even if the electricity is entirely supplied by coal. Luckily in California, only 3% of our electricity is coal-based. However, the electricity requirement of electric cars–about 5 kilowatt-hrs for every 20 miles, means they will place a load on our electrical grid far greater than it is anywhere near handling. On the bright side, the economic collapse that will accompany the full onset of peak oil will mean very few will be able to afford an electric car, rendering worry about the electrical grid moot.)

    http://green.blogs.nytimes.com/2010/09/09/study-warns-of-perilous-oil-crisis/?src=twt&twt=nytimesgreen

  • It does seem like politicians will never act to raise the price of gas (via taxes), but peak oil may finally do it (via lack of supply). Here’s a good overview of the situation: http://www.theoildrum.com/node/5969

    I noticed the price of a barrel of oil is back over $80 lately… according to the article, just what you need to push the economy into the toilet.

ALSO ON STREETSBLOG

The New White House Fuel Efficiency Rule: Count the Loopholes

|
The final fuel-efficiency rule released by the Obama administration this morning includes what some lobbyists have nicknamed "the German provision," giving automakers that sell less than 400,000 vehicles in the U.S. an exemption for 25 percent of their fleet. GM CEO Fritz Henderson’s company can earn fuel-efficiency "credits" for its Chevy Volt. (Photo: IB Times) […]
STREETSBLOG USA

Pitchfork-Wielding Consumers Hold Auto Industry Hostage!

|
It’s sad, really. Tremendous gains in vehicle fuel efficiency have been squandered, MIT’s Christopher Knittel demonstrates in a study published in the American Economic Review. Knittel’s analysis quantifies how, while automakers have applied meaningful fuel economy innovations over the past several decades, these have produced only modest gains in miles per gallon, because at the same […]
STREETSBLOG USA

Who’s Afraid of Federal Action on Climate Change?

|
In financial reports that publicly traded companies file to their investors and the Securities and Exchange Commission (SEC), the words "material adverse effect" are often found. Automakers are bracing for new fuel-efficiency standards more than any coming climate bill. (Photo: TreeHugger) Put simply, the phrase is a red flag for any factor that could significantly […]