President Makes 54.5 MPG CAFE Proposal Official

Jul 29: Approximately 20 minutes after he addressed the nation on status of debt ceiling negotiations, President Obama announced an historic agreement with thirteen major automakers to pursue the next phase in the Administration's national vehicle program, increasing corporate average fuel economy (CAFE) standard to 54.5 miles per gallon for cars and light-duty trucks by Model Year 2025 [See WIMS 7/28/11]. The President was joined by Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo – which together account for over 90 percent of all vehicles sold in the United States -- as well as the United Auto Workers (UAW), and the State of California, who were integral to developing this agreement.

 

    Immediately following the nationally televised debt ceiling announcement, the President opened the CAFE announcement saying, "I've been having a lot of fun this week, but -- nothing more fun and more important to the future of the American economy than the agreement that we're announcing today. I am extraordinarily proud to be here today with the leaders of the world's largest auto companies, and the folks who represent autoworkers all across America. . .

 

    "For decades, we've left our economy vulnerable to increases in the price of oil. And with the demand for oil going up in countries like China and India, the problem is only getting worse. The demand for oil is inexorably rising far faster than supply.  And that means prices will keep going up unless we do something about our own dependence on oil. That's the reality. . .

 

    "I've laid out an energy strategy that would do that. In the short term, we need to increase safe and responsible oil production here at home to meet our current energy needs. And even those who are proponents of shifting away from fossil fuels have to acknowledge that we're not going to suddenly replace oil throughout the economy. We're going to need to produce all the oil we can. But while we're at it, we need to get rid of, I think, the $4 billion in subsidies we provide to oil and gas companies every year at a time when they're earning near-record profits, and put that money toward clean energy research, which would really make a big difference. Those are all short-term solutions, though.  In the long run, we're going to have to do more.. .

 

    "And that's why we're here today. This agreement on fuel standards represents the single most important step we've ever taken as a nation to reduce our dependence on foreign oil. Think about that. Most of the companies here today were part of an agreement that we reached two years ago to raise the fuel efficiency of their cars over the next five years. And the vehicles on display here are ones that benefited from that standard.  Folks buying cars like these in the next several years will end up saving more than $3,000 over time because they can go further on a gallon of gas. And today, these outstanding companies are committing to doing a lot more. The companies here today have endorsed our plan to continue increasing the mileage on their cars and trucks over the next 15 years. We've set an aggressive target, and the companies here are stepping up to the plate.

 

    "By 2025, the average fuel economy of their vehicles will nearly double to almost 55 miles per gallon. So this is an incredible commitment that they've made.  And these are some pretty tough business guys. They know their stuff. And they wouldn't be doing it if they didn't think that it was ultimately going to be good business and good for America. . . Think about what this means. It means that filling up your car every two weeks instead of filling it up every week.  It will save a typical family more than $8,000 in fuel costs over time. And consumers in this country as a whole will save almost $2 trillion in fuel costs. . .

 

    "And just as cars will go further on a gallon of gas, our economy will go further on a barrel of oil.  In the next 15 years, we're going to reduce the amount of oil we need by 2.2 million barrels per day. And this will help meet the goal that I've set for America:  reducing our dependence on foreign oil by one-third. Using less oil also means our cars will produce fewer emissions. So when your kids are biking around the neighborhood, they'll be breathing less pollution and fewer toxins. It means we're doing more to protect our air and water. And it means we're reducing the carbon pollution that threatens our climate. Lastly, these standards aren't just about the bad things we'll prevent; it's about the good things that we'll build.  As these companies look for ways to boost efficiency, they'll be conducting research and development on test tracks. They're going to look to startups working on biofuels and new engine technologies. They're going to continue to invest in advanced battery manufacturing. They're going to spur growth in clean energy. And that means new jobs in cutting-edge industries all across America. . ."

 

    The oil savings, consumer, and environmental benefits of this comprehensive program are detailed in a new report entitled Driving Efficiency: Cutting Costs for Families at the Pump and Slashing Dependence on Oil, which the Administration released today. 

 

    U.S. Transportation Secretary Ray LaHood said, "These standards will help spur economic growth, protect the environment, and strengthen our national security by reducing America's dependence on foreign oil. Working together, we are setting the stage for a new generation of clean vehicles." EPA Administrator Lisa Jackson said, "This is another important step toward saving money for drivers, breaking our dependence on imported oil and cleaning up the air we breathe. American consumers are calling for cleaner cars that won't pollute their air or break their budgets at the gas pump, and our innovative American automakers are responding with plans for some of the most fuel efficient vehicles in our history."

    The White House indicated in a release that a national policy on fuel economy standards and greenhouse gas emissions provides regulatory certainty and flexibility that reduces the cost of compliance for auto manufacturers while addressing oil consumption and harmful air pollution. Consumers will continue to have access to a diverse fleet and can purchase the vehicle that best suits their needs.

    EPA and the National Highway Traffic Safety Administration (NHTSA) are developing a joint proposed rulemaking, which will include full details on the proposed program and supporting analyses, including the costs and benefits of the proposal and its effects on the economy, auto manufacturers, and consumers. After the proposed rules are published in the Federal Register, there will be an opportunity for public comment and public hearings. The agencies plan to issue a Notice of Proposed Rulemaking by the end of September 2011. California plans on adopting its proposed rule in the same time frame as the Federal proposal.

 

    Given the long time frame at issue in setting standards for MY2022-2025 light-duty vehicles, EPA and NHTSA intend to propose a comprehensive mid-term evaluation. Consistent with the agencies' commitment to maintaining a single national framework for vehicle GHG and fuel economy regulation, the agencies will conduct the mid-term evaluation in close coordination with California.

 

   In achieving the level of standards described above for the 2017-2025 program, the agencies expect automakers' use of advanced technologies to be an important element of transforming the vehicle fleet. The agencies are considering a number of incentive programs to encourage early adoption and introduction into the marketplace of advanced technologies that represent "game changing" performance improvements, including:

• Incentives for electric vehicles, plug-in hybrid electric vehicles, and fuel cells vehicles;
• Incentives for advanced technology packages for large pickups, such as hybridization and other performance-based strategies;
• Credits for technologies with potential to achieve real-world CO2 reductions and fuel economy improvements that are not captured by the standards test procedures. 

In addition, EPA plans to propose provisions for:

• Credits for improvements in air conditioning (A/C) systems, both for efficiency improvements and for use of alternative, lower global warming potential refrigerant;
• Treatment of compressed natural gas (CNG);
• Continued credit banking and trading, including a one-time carry-forward of unused MY 2010-2016 credits through MY 2021.

    Access the full text of the President's comments (click here). Access a background document listing all auto company attendees, legislators, and officials (click here). Access a White House press release (click here). Access the Driving Efficiency report (click here). Access a CAFE overview from the NHTSA website (click here). Access EPA's Fuel Economy website (click here). Access the May 10 FR announcement (click here). Access the NHTSA docket for this action (click here). [#Energy/CAFE]

 

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