Signaling a new chapter in the history of Corporate Average Fuel Economy (CAFE) standards, President Obama and representatives from 13 major automakers have agreed to press for a 54.5-mpg benchmark figure by 2025. “This agreement on fuel standards represents the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil,” said Obama. “Most of the companies here today were part of an agreement we reached two years ago to raise the fuel efficiency of their cars over the next five years. We’ve set an aggressive target and the companies are stepping up to the plate. By 2025, the average fuel economy of their vehicles will nearly double to almost 55 miles per gallon.”
Currently pegged at 27.5 mpg, the CAFE number will rise to 35.5 mpg in 2016. According to the administration, enacting the far-more stringent 54.5-mpg index called for by the proposed new legislation will result in huge cost savings over the current CAFE standards, trimming the annual average fuel outlay by $8,000 per family over current levels and reducing the amount of foreign oil consumed in the U.S. by some 2.2 million barrels per day, roughly a 50 percent saving over the amount we presently import from OPEC countries. If approved, the 2025 CAFE standard also will help reduce greenhouse gas emissions by an estimated six billion metric tons over the course of the program.
To make the 54.5 mpg CAFE happen, mileage figures for passenger cars would have to increase by an average of five percent per year from 2017 to 2025 while trucks would see their mpg requirements rise by 3.5 percent bump for trucks during the first five years and five-percent percent during the last four. Attaining those gains also foresees the use of numerous incentives to encourage greater sales of electric, hybrid and other types of alternative-fuel vehicles with game-changing potential, as well as additional credits for automakers who switch over to technologies that would contribute to even lower CO2 emissions, items like adopting “greener” forms of air conditioning refrigerants. The final legislation, which will likely be voted on late this year, also is expected to include the provision for all of the agencies involved to perform a mid-term progress evaluation.
While a 62-mpg CAFE standard previously floated by the administration met with strong opposition from many parts of the automotive industry for being unrealistically demanding and having the potential to create massive sticker shock, the 54.5 mph number has the support of BMW, Chrysler, General Motors, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo, which collectively account for over 90 percent of all vehicles sold in America. In addition to the EPA, the Department of Transportation (DOT) and various environmental groups, the United Auto Workers and the state of California also worked to develop the new legislation.
At this point, the most pointed opposition to this new CAFE proposal primarily comes from two sources, Volkswagen and American Road & Transportation Builders Association (ARTBA). VW contends the plan as written unfairly places a far higher burden on passenger cars than on heavier trucks (primarily full-size pickups produced by Chevy, Ford and Chrysler) while providing no consideration for the impact that clean diesel — a technology in which VW excels — can have on overall fuel consumption. The ARTBA takes a more direct bottom-line approach. It claims that any benefits the 54.5-mpg standard generates will be offset by a loss of some $65 billion during the 2017-2025 period as a result of the accompanying reductions in federal gasoline and diesel fuel taxes, monies that would normally go to the federal Highway Trust Fund to underwrite various road, bridge and transport projects.
