Luke Tonachel, Vehicles Analyst, New York City
Today, the U.S. Department of Transportation (DOT) and U.S. Environmental Protection Agency (EPA) finalized new automobile standards that reach the equivalent of 54.5 mpg in 2025. Let’s take a look at the final numbers and what this historic achievement means for consumers, our nation’s oil dependence, the environment, and jobs.
The standards for model years 2017 to 2025 are very similar to those proposed last November—I’ll discuss some adjustments below—and they extend the light-duty vehicle National Program that ramped up fuel economy and cut greenhouse gas emissions for model years 2012 to 2016.
Stringency of the Model Year 2017-2025 Standards
The stringency of the finalized standards remains the same as the November proposal. The new fleet average fuel efficiency improves about 4.5 percent per year. Starting from a 2016 baseline of 34.1 miles per gallon (mpg), the corporate average fuel economy (CAFE) standard is 35.0 mpg in 2017 and 49.7 mpg in 2025.,  The greenhouse gas emissions standard starts from a 2016 baseline of 250 grams CO2 per mile (g/mi) and ramps down to 243 g/mi in 2017 and 163 g/mi in 2025. If all emissions reductions are achieved through technologies that improve fuel economy and reduce fuel consumption, then the fleet would achieve 54.5 mpg in 2025.
According to the agencies, a fleet that meets the MY 2025 clear car and fuel economy standards will achieve about 40 mpg in real-world driving. Today, the stock of vehicles on the road average about 20.6 mpg, so the efficiency of new vehicles will roughly double. We are already seeing more fuel-efficient options at dealerships. New vehicles sold during the first six months of 2012 hit a record fleet average label value of 23.8 mpg. In just the last three years, the number of vehicle models that are popular and fuel-efficient has more than doubled from 28 in 2009 to 60 in model years 2012 and 2013, thanks in large part to the existing 2012-2016 standards.
The finalized 2017-2025 standards, like the November proposal, include incentives to promote more rapid development and deployment of new, advanced technologies. The slightly expanded incentives are described here:
Natural Gas Vehicles: As a temporary incentive for model years 2017 to 2021, vehicles that are powered by natural gas can receive an emissions credit multiplier for the natural gas portion of their operation. The multipliers start at 1.6 in 2017 and phase down to 1.3 in 2021. Because of the linkage of the credit to actual natural gas range, the credit is designed to encourage automakers to make vehicles that are fueled primarily by natural gas, like the dedicated Honda Civic Natural Gas. The incentive would be less valuable for dual-fuel vehicles that are primarily powered by gasoline and have a short range on natural gas.
NRDC recognizes that natural gas can play a role in meeting transportation energy needs but the expansion of natural gas use in transportation must be accompanied by strong, responsible safeguards on natural gas extraction and fuel production, especially concerning hydraulic fracturing and methane leakage.
Off-cycle Technologies: The agencies allow automakers to get up to 10 g/mi of credits for applying technologies that can reduce emissions and/or fuel consumption in real-world operation but are not captured by the standard laboratory compliance test cycle. Examples include high-efficiency lighting that reduces electrical loads, active grill shutters and other aerodynamic equipment that change position according to driving conditions, and engine start/stop systems that prevent unnecessary engine idling. Since some of these systems are already being deployed, the agencies have proposed to allow credits to be generated as early as model year 2014. In some cases, there is significant uncertainty in how much the off-cycle technologies will improve vehicle fuel and emissions performance. Therefore, it is appropriate that the agencies maintain an overall cap on off-cycle credits while real-world experience is being gained.
Principally unchanged from the proposal are incentives for hybrid large pickup trucks and plug-in electric vehicles. While the standards can help spur innovation in these vehicles, the agencies expect the standards to be primarily achieved by improvements in conventional vehicle technology. The agencies project the 2025 fleet to be made up of over 90 percent internal combustion engine vehicles (albeit more advanced than today’s) with about 5 percent full hybrids and 2 percent plug-in electric vehicles.
In 2025, we expect widespread deployment of improvements to gasoline internal combustion engine vehicles including downsized, turbocharged engines with direct injection and sophisticated valve controls; cooled exhaust gas recirculation; eight-speed dual clutch transmissions; fuel-efficient tires; improved aerodynamics; improved air conditioning systems; and greater use of light-weight, high-strength steel, aluminum and magnesium parts. Click on the image to the right to open a graphic of the example technologies.
According to EPA and DOT, the incremental cost of the technology to meet the 2025 standards compared to today’s vehicles will be about $2560. (It will cost about $720 to reach the 2016 standard and then about $1840 to reach the 2025 standard). Therefore net savings are $8,000 or more.
If consumers purchase a new car with a loan they will save money as soon as they drive off the lot because the savings in fuel are greater than the increase in the loan payment for the fuel-saving technologies.
Used car buyers will see a very quick return on their investment. Most of the incremental cost of fuel-saving technology will not be included in the price of a 5 or 10-year-old vehicle yet the buyer will still get the benefit improved efficiency with fewer trips to the pump. EPA and DOT estimate that a 5-yr-old 2025 vehicle will have a payback of about a year compared to a 2016 vehicle.
Environmental and Energy Security Benefits
When combined with the 2012-2016 standards, the new 54.5 mpg standards will result in the biggest action ever taken by the U.S. to cut carbon pollution and oil dependence.
The 2012-2025 standards could cut imports by one-third in 2030 because the program avoids consumption of 3.1 million barrels of oil per day. Annual carbon pollution in 2030 will be reduced by about 570 million metric tons of CO2, which is equivalent to the pollution from 85 million of today’s cars or 140 coal-fired power plants.
The 2017-2025 standards alone will cut oil consumption by 1.5 million barrels per day, which is equivalent to current U.S. imports from Saudi Arabia, and reduce carbon pollution by about 270 million metrics tons. To see a state-by-state breakdown of fuel and pollution reductions (and jobs), click here.
And More Jobs Too!
As I’ve written before, More MPG = More Jobs. Fuel efficiency standards are critical because they establish long-term predictability in a world of highly uncertain gas prices. Automakers use the certainty from the standards to guide investments in fuel-saving technologies years before they hit the showroom floor. The investments drive job growth as new workers are needed to manufacture the new parts. The auto industry has already added over 236,000 jobs since 2009. The stories of new jobs from the auto sector’s investment in clean, fuel-efficient technologies are in the media almost daily – and we’ve made the stories, along with additional information on the auto industry’s strong recovery, easy to find at www.DrivingGrowth.org.
The fuel-saving technologies save consumers money at the pump, which is spent on other goods and services. A recent BlueGreen Alliance study estimates that 570,000 jobs will be created across the economy from just the 2017-2025 standards, and 50,000 of those will be in the automotive sector. Under the standards, the U.S. will be pumping money into U.S. jobs and the U.S. economy instead of sending it overseas for oil.
When it comes to cutting auto carbon pollution and improving fuel economy, the federal EPA and DOT agencies have done a stellar job. Finalizing the 54.5 mpg clean car and fuel economy standards is like a baseball game-winning grand slam. Scoring four times for America, the standards are good for consumers, good for the environment, good for our energy security and good for jobs. That’s something to cheer about.
 The finalized 2025 CAFE level of 49.7 mpg is a 0.1 mpg above the 49.6 mpg level originally proposed by NHTSA. Like the proposal, the 49.7 mpg CAFE is based on a projection of pre-recession fleet description in MY 2008 and consistent with the methodology for EPA’s greenhouse gas emissions standard of 163 g/mi.
 The CAFE and greenhouse gas emissions standards are actually set along a curve mapped between a vehicle’s size (as measured by its footprint) and required fuel economy and emissions rate. Smaller size vehicles have more stringent standards so automakers have little incentive to down-size. The fleet average level is a sales-weighted average and the 2025 fleet level is based on a projection of sales across vehicle sizes.
 Included among the internal combustion engines vehicles are “mild” hybrids with start/stop technology and some regenerative braking that capture 15-64 percent of total braking energy. Full or “strong” hybrids, like today’s Toyota Prius or Ford Fusion Hybrid, capture at least 65 percent of breaking energy for reuse in the vehicle.
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