White House Floats 56.2-MPG CAFE Plan for 2025By John O'Dell June 27, 2011
In what is likely to be the opening round in a months-long battle to lock in next-generation federal fuel efficiency standards, the Obama administration has floated the idea of setting a 56.2 miles per gallon fleet average requirement for all light vehicles by 2025, a compromise between the 47 mpg the auto industry was asking for and the 62 mpg the environmental community wants to see. The administration is estimating that hiking the Corporate Average Fuel Economy (CAFE) standard to 56.2 miles per gallon from the 35.5 mpg requirement already set for 2016 would add from $2,100 to $2,600 to the initial price of a new vehicle in 2025 but would result in lifetime fuel savings of $5,500 to $7,000. The initial buyer would have to own the vehicle for at least three years to recoup the initial price premium through fuel savings.
The official proposal for the next round of CAFE standards that would encompass the 2017-2025 period isn't due until September, but the administration apparently has tossed out the 56.2 mpg figure first reported over the weekend by the Detroit News to gauge reaction. The figure represents an approximately 5 percent per year increase from the level set for 2016. Automakers aren't commenting at this point but reportedly were briefed by the White House in meetings over the weekend. The CAFE numbers, being developed jointly by the Environmental Protection Agency and the National Highway Traffic Safety Administration, are set in advance to give the auto industry time to initiate the longer-term planning and engineering necessary to hit the fuel-economy targets.
When 56 Is 41
Because they are an average, the CAFE standards don't reflect the fuel economy any individual model or type of vehicle must deliver an automaker can field several highly-efficient electric vehicles to offset the lower efficiency of scores of pickups, SUVs or high-performance models, for instance. Additionally, the mileage for CAFE purposes is computed using different benchmarks than the so-called window sticker fuel efficiency numbers calculated by the Environmental Protection Agency and posted on the price sticker of all new cars and light trucks sold in the U.S. In effect, a 56.2-mpg CAFE standard equates to an EPA rating of 41 miles per gallon in combined highway and city driving. The 2016 CAFE standard of 35.5 mpg equals about 27 miles per gallon in the EPA ratings and a 62 mpg standard would equate to a combined 44 mpg on window stickers.
Environmentalists long have argued that the technologies exist today to get to a CAFE of 62 miles per gallon by 2025. Advanced technologies deployed would include using lightweight materials, improving internal-combustion engine fuel efficiency with various known design improvements; use of electronic steering, braking and climate-control systems to reduce parasitic drag on internal-combustion engines and broader use throughout the industry of hybrid and all-electric drivetrains. Automakers argue that achieving such a lofty goal, while technologically feasible, would create a tremendous financial burden on the industry and consumers. The industry would have to spend billions of dollars speeding-up development and real-world reliability of the proper fuel-saving technologies, and consumers would pay for that with sharply increased pricing for new vehicles. Various estimates have placed the cost-to-the-consumer of a 62-mpg fuel efficiency average at $2,000 to almost $10,000 per vehicle the lower estimates from environmental groups, the higher amounts from groups more closely associated with the auto industry.
Industry Not Pleased
By tossing out 56.2 mpg as the potential target, the administration apparently hopes to jumpstart a new round of intensive debate that will give some clue as to how far it can go with the real proposal when it is released in September. It already is apparent the auto industry is not going to be supportive. The Alliance of Automobile Manufacturers, which represents most of the major auto companies active in the U.S., is suggesting that although the 56.2-mpg target represents what is technologically possible, it ignores some potentially high costs. Making cars lighter to improve fuel economy also can make them less safe, said AAM vice president Gloria Bergquist. Raising CAFE to that level also could reduce consumers' choices by forcing the industry to stop making some of the largest and thirstiest vehicles pickups and SUVs. All that, along with the higher prices automakers would have to charge for such efficiency-optimized vehicles could slash annual sales and further reduce auto industry employment in the process, she added.
We have repeatedly said this should be a data-driven standard, Bergquist said. And while the EPA and NHTSA are still conducting their studies, nobody should be talking about target numbers. The administration may well have started with a technology target, but now we need to start factoring in some of those other concerns to get to the maximum feasible fuel efficiency. Bergquist, who was reached while driving through Minnesota on the way home from a family event, added, I'm seeing an unbelievable number of pickup trucks out here, which tells me there's still a big demand and need for them, but pickups arent going to come anywhere near a 56.2-mpg average. Electric vehicles can achieve that and more, though, and their higher fuel efficiency, when factored into an industry average, can help offset the lower efficiency of trucks and SUVs. But with hybrids and fully electric models already in the market Toyotas seminal Prius now for more than a decade Bergquist noted that conventional hybrids still account less than 3 percent of market share. We have the technology to improve overall fuel efficiency, she said. What we've got to concentrate on now is how to get people to buy them.
Firm Stand Demanded
Proponents of higher fuel efficiency standards are hoping the administration is using 56.2 mpg as a baseline and not a starting point for negotiations. "We still think 62 mpg is the right number, but if the administration wants 56.2 (mpg), then it has got to hold firm and not negotiate down from there, said Roland Hwang, transportation programs director for the National Resources Defense Council. We think, though, that this is a lot more than just a trial balloon. In the last round of CAFE negotiations that resulted in the 35.5-mpg standard for 2016, the administration pulled automakers into talks that were aimed at how to get there, not whether to get there, Hwang said.
If automakers really want a 50-state standard, then that's what the discussion should be, he said, referring to an agreement by California the only state allowed to set emissions standards that differ from federal standards to eschew going it alone and work with federal regulators to achieve a single, unified national requirement (emissions standards have become synonymous with fuel efficiency standards because some of the most critical automotive emissions levels are tied to the amount of fuel burned per mile traveled). But if California regulators aren't persuaded that the new round of federal CAFE standards will be tough enough, it is likely the state will pursue its own more-rigid standards.
Hwang disagreed with what he sees as Bergquist's argument that because hybrids haven't caught fire in the marketplace the discussion ought to be about how to sell more of them rather than how to get higher overall fuel efficiency from the entire vehicle fleet. Strong standards drive innovation and when automakers are forced to innovate, then the costs of the technologies come down and people can afford them, he said. Americans still buy a lot of pickups, he agreed, but Ford says that the big demand for F150s the best-selling pickup is for the new high fuel-efficiency model with a V6. People do want fuel efficiency, that's why they're now paying premiums in the used-car market for the most efficient models, he added.
NHTSA and the EPA have said they will issue the formal proposal for CAFE standards for 2017-2025 in September. The agencies then will launch a lengthy session of gathering comment and counter-proposal from industry, environmental and safety groups and the general public. Federal rules call for the final CAFE regulations for the new period to be issued by July 2012 five years before they take effect in order to give automakers time to develop plans and make needed changes in technologies and manufacturing systems in order to comply. So this weekend's news marks the start of the dialogue, not the end.