President Joe Biden is taking major steps to boost U.S. vehicle fuel efficiency and cut greenhouse gases even as his green-focused "Build Back Better" legislation is stalled in Congress. The Environmental Protection Agency (EPA) on Dec. 20 issued new rules that dramatically boost average fleet-wide fuel efficiency standards to 55 miles per gallon for passenger cars and light trucks for the model year 2026. That's a nearly 45% increase from the current average fuel efficiency standard of 38 miles per gallon. The rules also reduce tailpipe pollution that is contributing to warming the planet.
The new rules are likely to benefit electric vehicle (EV) makers, including industry leader Tesla Inc. (TSLA), by accelerating consumer purchases of EVs. In the short term, it will put enormous pressure on traditional automakers to quickly comply with the new standards, including Ford Motor Co.(F), General Motors Co. (GM), and Volkswagen AG (VWAGY). They also are rushing to boost EV sales, but are far behind Tesla.
The EPA says that its new rules will benefit American motorists and the environment in several ways. The total savings to individual owners of 2026 models and beyond will exceed the increase in the cost of purchase by around $1,000 per consumer, according to the agency. And the program would reduce greenhouse gas (GHG) emissions, improve public health, and reduce fuel costs for car owners. According to EPA estimates, American drivers will save between $210 billion and $420 billion on fuel costs through 2050 as a result of its actions.
- EPA raises fuel-efficiency standard 45% to 55 miles per gallon for passenger vehicles for the 2026 model year.
- The agency says the new standards will cut 3.1 billion tons of greenhouse gases, climate-warming carbon-dioxide, through 2050.
- American drivers will save between $210 billion and $420 billion on fuel costs through 2050.
Soaring Fuel Efficiency, Lower Emissions
Transportation accounted for 29% of total U.S. emissions in 2019 and is the largest contributor to greenhouse gases. The agency expects the rules to cut GHG emissions by 3.1 billion tons through 2050.
To reduce GHG, the agency will tighten the originally proposed cap of 171 grams per mile of carbon-dioxide emissions for the 2026 model year. Now, vehicle manufacturers will have to meet a more stringent cap of 161 grams per mile. The multi-year plan requires passenger vehicles to boost fuel efficiency and lower fleet-average emissions in each year from 2023 to 2026.
The EPA announcement is the latest move by the Biden administration aimed at accelerating the adoption of electric vehicles (EVs) in the U.S. The $1 trillion bipartisan infrastructure legislation signed into law in November 2021 allocated about $22 billion to pay for EV charging stations and networks, electric school buses, and to bolster the electric battery supply chain. It's unclear whether the EV industry will get help from the stalled $2 trillion 'Build Back Better' bill, which proposes $20 billion in tax credits to EV buyers.
Catalyst for Electric Vehicle Industry
John Bozzella, president of the Alliance for Automotive Innovation, says the new EPA rules will have a broad impact on the EV industry. In a statement, he said that the final plan “is even more aggressive than originally proposed.” Bozzella added that the rules will require a large increase in EV sales, investments in the charging infrastructure, and more government support. Due to the new EPA rules, sales of plug-in hybrids and electric vehicles are expected to more than double from 7% of the market in the 2023 model year to 17% by 2026.