U.S. 54.5 mpg rule may add $2,000 to car prices by 2025

A proposed U.S. rule requiring automakers to double average fuel economy of vehicles to 54.5 miles per gallon by 2025 would add an average of $2,000 to the price of each passenger vehicle sold, two agencies said.

The National Highway Traffic Safety Administration and Environmental Protection Agency made the projection in posting the proposal today on NHTSA's Web site. Benefits of $419 billion to $515 billion would offset $157 billion in costs, the highway agency wrote.

The draft detailed a proposal agreed to in July by President Barack Obama's administration and automakers including Ford Motor Co., Honda Motor Co., Toyota Motor Corp. and General Motors Co. to take effect in 2017.

Daimler AG and Volkswagen AG were among automakers that didn't sign on and weren't part of a ceremony in Washington where Obama touted the rule as part of his plan to reduce the use of imported oil in the United States.

The proposed rule requires annual fuel-economy increases of 5 percent for cars. Light trucks such as pickups and SUVs can raise fuel economy at 3.5 percent for the first five years the rule will be in effect. Then, unless regulators decide differently in a midterm review, trucks also would have to boost fuel economy by 5 percent a year.

"The proposed regulations present aggressive targets, and the administration must consider that technology break-throughs will be required and consumers will need to buy our most energy- efficient technologies in very large numbers to meet the goals," Mitch Bainwol, CEO of the Alliance of Automobile Manufacturers, said in an e-mailed statement.

NADA objects

The National Automobile Dealers Association objected to today's announcement.

"America's auto dealers support continuous improvement in the fuel economy of the fleet of vehicles that drive on the nation's roads," the association said in a statement. "To this end, we are concerned that adding about $3,000 to the average cost of a car will price millions of Americans out of the market, which could reduce fleet turnover and delay environmental gains."

Representative Darrell Issa, a California Republican, opened an investigation into how it was written, saying it was rushed and may jeopardize safety by reducing the weight of vehicles on the road.

California, which has the authority to write its own air- quality regulations, plans to issue its own rule, the White House said today in an e-mailed statement.

By 2025, U.S. fuel-economy standards and other fuel- efficiency moves will save 12 billion barrels of oil; reduce oil consumption by 2.2 million barrels a day, about one-fourth of the oil the country imports; and save consumers more than $8,000 a vehicle in fuel costs, the White House said in a statement today.

House letter

Representative Ed Markey, a Massachusetts Democrat, and 107 other U.S. House members yesterday sent a letter to Obama supporting the rule.

"We believe that these standards to reduce petroleum use in cars and light trucks represent an opportunity to increase our national and economic security in an unprecedented way by dramatically decreasing our dependence on foreign sources of petroleum," they wrote.

A proposed rule had been due Sept. 30 before regulators said they needed more time. The final rule is scheduled to be published next year.

A separate rule issued in 2009, which takes effect next year, requires automakers to increase average fuel economy to 35.5 mpg by 2016.

PRESS RELEASE: Obama Administration Proposes Historic Fuel Economy Standards to Reduce Dependence on Oil, Save Consumers Money at the Pump

Next phase in national program for light-duty vehicles will save consumers thousands of dollars at the pump while saving billions of barrels of oil, curbing pollution, enabling long-term planning for automakers

WASHINGTON – Building on President Obama's historic national program, the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Transportation (DOT) today formally unveiled their joint proposal to set stronger fuel economy and greenhouse gas pollution standards for Model Year 2017-2025 passenger cars and light trucks. Cars, SUVs, minivans, and pickup trucks are currently responsible for nearly 60 percent of U.S. transportation-related petroleum use and greenhouse gas emissions.

Today's announcement is the latest in a series of executive actions the Obama Administration is taking to strengthen the economy and move the country forward because we can't wait for Congressional Republicans to act. When combined with other historic steps this administration has taken to increase energy efficiency, this proposal will save Americans over $1.7 trillion at the pump, more than $8,000 per vehicle by 2025. These combined actions also will reduce America's dependence on oil by an estimated 12 billion barrels, and, by 2025, reduce oil consumption by 2.2 million barrels per day – enough to offset almost a quarter of the current level of our foreign oil imports. Taken together, these actions will also slash 6 billion metric tons in greenhouse gas emissions over the life of the programs.

Today's proposed standards alone will slash oil consumption by 4 billion barrels and cut 2 billion metric tons of greenhouse gas pollution over the lifetimes of the vehicles sold in those years.

"These unprecedented standards are a remarkable leap forward in improving fuel efficiency, strengthening national security by reducing our dependence on oil, and protecting our climate for generations to come. We expect this program will not only save consumers money, it will ensure automakers have the regulatory certainty they need to make key decisions that create jobs and invest in the future," said U.S. Transportation Secretary Ray LaHood. "We are pleased that we've been able to work with the auto industry, the states, and leaders in the environmental and labor communities to move toward even tougher standards for the second phase of the President's national program to improve fuel economy and reduce pollution."

"By setting a course for steady improvements in fuel economy over the long term, the Obama administration is ensuring that American car buyers have their choice of the most efficient vehicles ever produced in our country. That will save them money, reduce our nation's oil consumption and cut harmful emissions in the air we breathe," said EPA Administrator Lisa P. Jackson. "This is an important addition to the landmark clean cars program that President Obama initiated to establish fuel economy standards more than two years ago. The progress we made with the help of the auto industry, the environmental community, consumer groups and others will be expanded upon in the years to come -- benefitting the health, the environment and the economy for the American people."

The proposed program for MY 2017-2025 passenger cars and trucks is expected to require increases in fuel efficiency equivalent to 54.5 mpg if all reductions were made through fuel economy improvements. These improvements would save consumers an average of up to $6,600 in fuel costs over the lifetime of a MY 2025 vehicle for a net lifetime savings of up to $4,400 after factoring in related increases in vehicle cost. Overall, the net benefit to society from this rule would total more than $420 billion over the lifetime of the vehicles sold in MY 2017-2025.

Today's action builds on the success of the first phase of the Obama Administration's national program(2012-2016), which will raise fuel efficiency equivalent to 35.5 mpg by 2016 and result in an average light vehicle tailpipe CO2 level of 250 grams per mile. These standards are already in effect and saving consumers money at the pump now. Combined with 2011 fuel economy standards and the standards in effect for 2012-2016, today's proposal represents the most significant federal action ever taken to reduce greenhouse gas emissions and improve fuel economy. Taken together, these actions would reduce greenhouse gas emissions by half and result in model year 2025 light-duty vehicles with nearly double the fuel economy of model year 2010 vehicles.

The national policy on fuel economy standards and greenhouse gas emissions created by DOT and EPA provides regulatory certainty and flexibility that reduces the cost of compliance for auto manufacturers while reducing oil consumption and harmful air pollution. By continuing the national program developed for MY 2012-2016 vehicles, EPA and DOT have designed a proposal that allows manufacturers to keep producing a single, national fleet of passenger cars and light trucks that satisfies all federal and California standards. It also ensures that consumers will continue to enjoy a full range of vehicle choices with performance, utility and safety features that meet their individual needs.

The standards will rely on innovative technologies that are expected to spur economic growth and create high-quality jobs across the country. Major auto manufacturers are already heavily invested in developing advanced technologies that can significantly reduce fuel use and greenhouse gas emissions beyond the existing model year 2012-2016 standards. In addition, a wide range of technologies are currently available for automakers to meet the new standards, including advanced gasoline engines and transmissions, vehicle weight reduction, lower tire rolling resistance, improvements in aerodynamics, diesel engines, more efficient accessories, and improvements in air conditioning systems. The standards should also spur manufacturers to increasingly explore electric technologies such as start/stop, hybrids, plug-in hybrids, and electric vehicles. The MY 2017-2025 proposal includes a number of incentive programs to encourage early adoption and introduction of "game changing" advanced technologies, such as hybridization for pickup trucks.

The proposal released today follows President Obama's announcement in July that the Administration and 13 major automakers representing more than 90 percent of all vehicles sold in the U.S. have agreed to build on the first phase of the national vehicle program. EPA and DOT worked closely with a broad range of stakeholders to develop the proposal—including manufacturers, the United Auto Workers, the State of California, and consumer and environmental groups.

There will be an opportunity for the public to comment on the proposal for 60 days after it is published in the Federal Register. In addition, DOT and EPA plan to hold several public hearings around the country to allow further public input. California plans to issue its proposal for model year 2017-2025 vehicle greenhouse gas standards on December 7 and will finalize its standards in January. .

To view NHTSA and EPA's Notice of Proposed Rulemaking, visit http://www.nhtsa.gov/fuel-economy.

For more information, visit http://www.epa.gov/otaq/climate/regulations.htm or http://www.nhtsa.gov/fuel-economy.