Obama Takes Big Step toward Cleaner, Fuel-Sipping Cars

The Obama Administration formally proposed new car and light truck fuel economy and carbon pollution standards today. This blog will give you a ‘first read’ on what they mean for consumers, the environment and our energy security.

Overall, the standards are strong. They are a good deal for consumers because owning these cars will be cheaper. Fuel savings will far outweigh the cost of new fuel-saving technologies. Less pollution and oil consumption under the standards will bring huge environmental and national security benefits, too. The standards will also give the auto industry a needed roadmap for another 14 years, which will guide investments, spur innovation and secure jobs.

The official proposal is consistent with the landmark agreement struck by the Obama Administration with domestic and foreign automakers. In July, President Obama announced a fuel economy and carbon pollution program for model years (MY) 2017 through 2025 that will reach 49.6 miles per gallon and cut carbon pollution to 163 grams CO2 per mile.

Below I describe the main components of the rule, including stringency, benefits and costs and advanced technology incentives. I conclude with an outline of the next steps to finalize the standards.

Program Stringency

  • U.S. Environmental Protection Agency Pollution (EPA) Standard of 163 gram per mile of CO2. The EPA pollution standard is equivalent to a fuel efficiency level of 54.5 mpg if the standard was met all through fuel economy technologies.  Model year 2010 passenger vehicles averaged 314 grams per mile and the 2016 standard is 250 grams per mile.
  • A separate, but jointly coordinated National Highway Safety Traffic Administration (NHSTA) fuel economy standard of 49.6 mpg. The Corporate Average Fuel Economy (CAFE) standard is lower than 54.5 mpg since the fuel economy standard, unlike the EPA standard, cannot consider air conditioning emission reductions and other measures not captured over the official certification test cycle. The current standard for 2011 is 27.3 mpg and the 2016 standard is 34.1 mpg.
  • Average fuel economy window label value of about 40 mpg, according to the agencies. Because of the differences between the laboratory certification test cycle and the on-road fuel efficiency, drivers can expect to see the average window fuel economy label to be about 40 mpg, compared to today’s average of about 22.5 mpg
  • Separate car and light truck (SUV, minivans, pickups) standards. The 2025 fleet is expected to reach the 163 g/mi and 49.6 mpg levels when cars and trucks are combined. However, 2025 cars will average about 144 g/mi and 56 mpg, which is an improvement from a MY 2011 standard of 30.2 mpg (equivalent to 294 g/mi). Trucks will average 203 g/mi and 40 mpg, an improvement from MY 2011 standard of 24.1 mpg (equivalent to 369 g/mi).

Program Benefits and Costs

According NHTSA and EPA, the proposed program will:

  • Save consumers up to $6600 in fuel costs over the life of their vehicle. New fuel-saving, lower emission technologies needed to reach the 2025 standards are projected to cost about $2000. Consumers can expect to see net savings of $4400. For consumers that purchase their vehicle with five-year loan, the fuel savings will outweigh the increased loan cost resulting in lower total bills in the first month.
  • Reduce U.S. dependence on oil by 1.7 million barrels per day. We estimate that this is more than the U.S. imports from Saudi Arabia and Iraq in 2010 based on Energy Information Administration statistics.
  • Reduce harmful air pollution that causes climate change by 297 million metric tons per year by 2030, which is equivalent to the annual emissions of 76 coal-fired power plants.

Program Incentives to Accelerate New Technology Deployment

Through the standards proposed today, automakers have several ways to promote new, innovative technologies. Done right, these incentives can accelerate the deployment of technologies that we ultimately need to reach long-term carbon reduction goals in transportation. The agencies have asked stakeholders to submit their views on these proposed program elements and once we thoroughly review them, we will submit detailed comments. Here’s an initial take on some key incentives:

  • Plug-in electric vehicle emissions accounting: EPA compliance ignores carbon pollution from the production of electricity at the power plant, scoring electric drive miles of plug-in vehicles as 0 gCO2/mi. EPA estimates that this generous incentive could result in about a 5% reduction in total carbon reductions from the 2017-2025 standards but recognizes that it can be helpful in spurring the low-carbon plug-in vehicle market. EPA proposes to cap the 0 gCO2/mi treatment beyond 2021 at 200,000 vehicles per manufacturer. The proposal also encourages early action by raising the cap to 600,000 if a manufacturer produces 300,000 vehicles during 2019 to 2021.
  • Off-cycle technology credits: The benefits of some fuel-saving technologies cannot be quantified in the standard compliance laboratory test (specified according to a 1975 law). EPA and NHTSA propose to allow automakers to take limited credits for a set of deployed ‘off-cycle’ technologies including active aerodynamics, electric heater pumps,  active engine and transmission warm up, high efficiency lights, start-stop systems, and solar roof panels for plug-in vehicle battery charging. What is critical here is that there is a system in place to verify that the technologies actually achieve the emissions reductions commensurate with the credit allowance.
  • Pickup-truck incentives: Large pickups have historically been laggards in the adoption of fuel efficient technologies. The agencies propose extra credits for mild hybrid pickup trucks provided that the penetration of mild hybrid technologies beyond simple start-stop systems are deployed in 30% of new vehicles in 2017 and ramp up to 80% by 2021, when the credit is removed. Credits for strong hybrid pickup—which have minimum requirements for regenerative breaking and energy recovery—are   available through 2025 but also require minimum deployment of at least 10%.

A Chance to Make Your Voice Heard: Next Steps in the Process

As my colleague Roland Hwang points out, there is tremendous support for new vehicle efficiency and pollution standards. But there are more opportunities to weigh in the Administration’s work.

Now that proposal is done, the federal agencies will follow their regular process for finalizing the regulation. The proposal will be published in the Federal Register and a 60 day window will start for the collection of comments (submitted electronically) from the public and interested stakeholders. NHTSA and EPA will also solicit comments in public hearings scheduled for January 17th in Detroit, January 19th in Philadelphia and January 24th in San Francisco. After addressing comments received, the agencies plan to finalize the new standards in July 2012.

Recent history in America has been filled with a culture of driving. We love our cars (but not their fuel or pollution). These standards make them cleaner and guzzle a lot less gas. In the process they will save drivers money. That’s something to cheer about.