for Fuel Economy Standards
Credits provide flexibility, reduce compliance costs, and were intended to allow the auto industry to deal with shocks like the plunge in gasoline prices and ensuing shift to SUVs that began in 2014.
Modernized fuel-efficiency standards have been a cornerstone of energy policy since the 1970s, reducing the negative effects of petrostates on the U.S. economy.
The geopolitical events of today are a perfect reminder of why the country must not come to an impasse over fuel efficiency standards.
Lost in the albeit important discussion of the environmental benefits of CAFE is the pivotal role that they have played in reducing U.S. oil consumption and putting the nation on a path to making the rare transition from being a net importer of oil to being a net exporter.
The UAE recently announced that it rolled out draft standards for fuel economy in order to reduce emissions. This action follows the emirate's Gulf neighbor Saudi Arabia, which implemented similar measures earlier this year.
Instead of achieving the original, headline-grabbing efficiency target of 54.5 miles per gallon (mpg), the fleet of new vehicles sold in 2025 is likely to clock-in at more like 50 mpg. And even that target depends on fuel prices over the next decade—with oil prices needing to approach $100 per barrel by 2025 to keep efficiency above 50 mpg.
Fuel economy standards have a significant social benefit relative to their costs. Total industry-wide costs of meeting the MY2022-2025 GHG standards are estimated at $34 to $38 billion. Societal monetized benefits of the MY2022-2025 standards (exclusive of fuel savings to consumers) range from $40 to $41 billion.
The contradiction of proposed increases in fuel efficiency standards for large trucks is that although they will reduce oil consumption, they will also discourage the adoption of alternative vehicles that run on natural gas and make them less competitive in the trucking sector.
In SAFE’s view, not only will the car of the future not run on oil, it will likely be shared, autonomous, incredibly safe, highly efficient, and better in almost every way than our current transportation system—a vision that the private sector is striving to achieve, but will only be possible with the cooperation of policymakers.
Understanding why 54.5 mpg is a largely symbolic number, why higher truck sales make it easier for automakers to reach their targets, and how automakers are balancing performance with efficiency.