By Sam Ori

Earlier this month, at an automotive testing facility just outside Detroit, President Trump announced that his administration will re-open an eleventh hour final determination by the Obama Administration that would have cemented light-duty fuel economy standards for the years 2022 to 2025. Those rules represented the final phase of a broader National Program on fuel economy that federal regulators originally projected would save nearly 12 billion barrels of oil over their lifetime by doubling the efficiency of cars sold in 2025 compared to those sold in 2010.

The announcement was cheered by automakers, who are hoping to avoid being held to the rules’ most onerous targets at a time when demand for highly fuel-efficient models is low and demand for trucks is at record highs. But it was met with widespread criticism from environmental advocates, who argue that any weakening of the standards represents a setback on efforts to curb greenhouse gas emissions.

But environmentalists are picking the wrong fight. There is a deal to be made on fuel economy that reduces costs for the auto industry and still cuts massive amounts of oil consumption both in the near and long term. The re-opened review provides the launching point.

First, consider this fact. According to the EPA’s own estimates, the overwhelming majority—nearly 90%—of originally projected fuel savings under the current policy will have been locked into place by 2021. This might seem confusing given that the real headline-grabbing numbers don’t come into play until 2025. But because they regulate efficiency instead of consumption, the current standards run into some simple math: there are declining marginal benefits of increasing fuel efficiency. The fuel savings of going from 10 to 20 miles per gallon (mpg) are far greater than going from 40 to 50 mpg. In other words, the biggest benefits are captured at the beginning.

The 2021 fuel economy targets were originally expected to produce a fleet of new vehicles that averaged 42 mpg in 2021, up from 28.7 mpg in 2012. Over a 200,000 mile lifetime, that is a savings of more than 2,200 gallons in fuel per vehicle. But by pushing the fleet average to the originally projected 46.2 mpg in 2025, the rules achieve only an additional 430 gallons in savings per vehicle. The bottom line is that if the Trump Administration simply extends the 2021 fuel economy targets forward through 2025, the final rules would forgo just 1 billion barrels of fuel savings out of the originally-targeted 12 billion.
Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Energy Efficiency
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Energy Efficiency
Improving energy efficiency is lauded as a promising way reduce emissions and lower energy costs. Yet, a robust body of research demonstrates that not all efficiency investments deliver. EPIC faculty...
Fossil Fuels
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Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...
Transportation
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Transportation
Mobility is central to economic activity. Yet, a lack of fuel diversity and continued demand growth have made the transportation industry a major contributor to global pollution and carbon emissions....
Climate Change
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Climate Change
Climate change is an urgent global challenge. EPIC research is helping to assess its impacts, quantify its costs, and identify an efficient set of policies to reduce emissions and adapt...
Climate Economics
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Climate Economics
Climate change will affect every sector of the economy, both locally and globally. EPIC research is quantifying these effects to help guide policymakers, businesses, and individuals working to mitigate and...
Fuel Economy Standards
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Fuel Economy Standards
Fuel economy standards are the United States’ cornerstone transportation policy aimed at reducing both oil consumption and greenhouse gas emissions. EPIC research is exploring whether these standards are structured optimally...