At the end of August, the Obama Administration announced sweeping new rules dictating fuel efficiency standards for cars and light-duty trucks. The previous rules for the Corporate Average Fuel Economy program (CAFE) mandated an average of about 29 mpg, with gradual increases to 35.5 mpg by 2016. The new rules expand upon previous standards and now require American-made vehicles to average 54.5 mpg by 2025.
While the new rules have been met with criticism by some opposition, the announcement marked the culmination of a year's worth of compromise between the White House, the auto industry, environmentalists, labor unions and several different states. Given that so many different groups worked together to change the standards, odds are they will stick. So, what exactly do the new efficiency measures mean for the average American besides fewer trips to the gas station?
Despite the fact that higher efficiency standards will increase the average price of a car by $3,000, the long-term cost savings may be worth it. Citing a study by the Union of Concerned Scientists (UCS), transportation secretary Ray LaHood estimates the new rules will help Americans save roughly $1.7 trillion in fuel costs. That translates into individual consumers saving $8,000 over the lifespan of a 2025 car versus one on the road today. Those savings, according to the Obama administration, are the equivalent of lowering gas prices by $1 per gallon.
Consumers Union, the organization behind the popular Consumer Reports magazine, praised the new mileage requirements.
"These standards mean that consumers will be able to save thousands of dollars on gasoline over the life of their vehicle. Overall, those savings can be plowed back into the economy as additional consumer spending or retirement savings," said Shannon Baker-Branstetter, policy counsel for the organization.
Union leaders at the 13 major automakers, which account for more than 90% of all vehicles sold in the U.S., have another reason to smile. According to a study published in June by the Blue Green Alliance, the changes in mpg requirements will lead to the creation of roughly 50,000 new American jobs in light-duty vehicle manufacturing and assembly by 2030.
The group, which is made up of 14 different labor unions and environmental organizations, also found that the changes will help support the creation of 570,000 more jobs in the U.S. From retail to banking, the group found net gains across the board.
With light-duty vehicles representing approximately 17% of the country's total greenhouse gas emissions, the new rules go a long way to help clean the environment. The new rules also establish an emissions standard of 144 grams of CO2per mile for passenger cars and 203 grams of CO2per mile for trucks. This standard will help cut greenhouse gas emissions in half by 2025 and eliminate roughly six billion tons of greenhouse gas over the course of the program. The Union of Concerned Scientists pegs these efforts to control CO2 as the equivalent of taking a third of today's cars and trucks off the road for a year.
Less Oil Imports
Perhaps the biggest savings could come from having to import less foreign oil each year. By 2025, the standards will cut U.S. oil consumption by 2.2 million barrels per day compared with 2010 levels, according to the Environmental Protection Agency. Extend that timeline out a little further to 2030, and the U.S. could cut crude consumption by 3.1 million barrels per day. That's roughly equivalent to what the U.S. imports from the Persian Gulf and Venezuela combined.
The Bottom Line
In the end, the higher cost per vehicle will be balanced out by huge cost savings, more jobs, a cleaner environment and less reliance on imported crude oil. Overall, the standard can be seen as a win for the American people.