|Proposed increases in new vehicle fuel economy, MY 2011-2015. Click to enlarge.|
The US Department of Transportation’s (DOT) National Highway Traffic Safety Administration (NHTSA) has issued a Notice of Proposed Rulemaking for new vehicle fuel economy standards that would bring the US average to about 31.6 miles per gallon in 2015 (35.7 mpg cars, 28.6 mpg trucks).
The Energy Independence and Security Act of 2007 (EISA), passed in December 2007 (earlier post), mandates the setting of separate attribute-based maximum feasible standards for passenger cars and for light trucks at levels sufficient to ensure that the average fuel economy of the combined fleet of all passenger cars and light trucks sold by all manufacturers in the US in model year (MY) 2020 equals or exceeds 35 mpg.
Under EISA, NHTSA, the agency that “owns” fuel economy regulations, can establish standards for a maximum of five model years at one time. Hence, the initial proposed rulemaking covers model years 2011-2015.
The 35 mpg target for 2020 represents a 31% increase above the 2007 new fleet average of 26.7 mpg. NHTSA is front-end loading the fuel economy increases—achieving the 31.6 mpg combined average represents about 60% of the total increase from current levels pushed into the first half of the plan.
The new proposal sets a required level of corporate average fuel economy (CAFE) for each vehicle manufacturer based on target levels of average fuel economy set for vehicles of different sizes and on the distribution of that manufacturer’s vehicles among those sizes. Size would be defined by vehicle footprint.
The target for each footprint would be the same for all manufacturers, regardless of differences in their overall fleet mix. Compliance would be determined by comparing a manufacturer’s harmonically averaged fleet fuel economy levels in a model year with a required fuel economy level calculated using the manufacturer’s actual production levels and the targets for each footprint of the vehicles that it produces.
To develop the targets, NHTSA used a computer model (the “Volpe Model”) that, for any given model year, applies technologies to a manufacturer’s fleet until the manufacturer reaches compliance with the standard under consideration. The process recognizes that the relevance of costs in achieving benefits, and uses benefit figures that include the value of reducing the negative externalities (economic and environmental) from producing and consuming fuel. These environmental externalities include, among other things, reducing tailpipe emissions of CO2. In view of the process used to develop the proposed standards, they are also referred to as “optimized standards.”
Compared to the 2006 rulemaking that established the MY 2008-11 CAFE standards for light trucks, this rulemaking much more fully captures the value of the costs and benefits of setting CAFE standards. This is important because assumptions regarding gasoline price projections, along with assumptions for externalities, are based on changed economic and environmental and energy security conditions and play a big role in the agency’s balancing of the statutory considerations in arriving at a determination of maximum feasible.
In light of EISA and the need to balance the statutory considerations in a way that reflects the current need of the nation to conserve energy, including the current assessment of the climate change problem, the agency revisited the various assumptions used in the Volpe Model to determine the level of the standards. Specifically, in running the Volpe Model and stopping at a point where marginal costs equaled marginal benefits or where net benefits to society are maximized, the agency used higher gasoline prices and higher estimates for energy security values ($0.29 per gallon instead of $0.09 per gallon). The agency also monetized carbon dioxide (at $7.00/ton), which it did not do in the previous rulemaking, and expanded its technology list.
NHTSA cannot specify the exact level of CAFE that each manufacturer will be required to meet for each model year under the proposed passenger car or light truck standards since the levels will depend on information that will not be available until final actual production figures are available the end of each of the model years.
The agency can, however, project what the industry wide level of average fuel economy would be for passenger cars and for light trucks if each manufacturer produced its expected mix of automobiles and just met its obligations under the proposed “optimized” standards for each model year. Adjacent to each average fuel economy figure is the estimated associated level of tailpipe emissions of CO2 that would be achieved.
|NHTSA Proposed Average Optimized Fuel Economy Targets, MY 2011-2015|
(CO2 rates based on gasoline characteristics)
EISA also requires that each manufacturer’s domestic passenger fleet each model year achieve 27.5 mpg or 92 percent of the CAFE of the industry-wide combined fleet of domestic and non-domestic passenger cars for that model year, whichever is higher. This requirement results in the an alternative minimum standard (not attribute-based) for domestic passenger cars of 32.9 mpg by 2015.
NHTSA also issued, along with the proposed rule, a notice requesting updated product plan information and other data from automakers to assist in developing a final rule.
The agency estimates that the proposed standards would save approximately 18.7 billion gallons of fuel and avoid tailpipe CO2 emissions by 178 billion metric tons over the lifetime of the passenger cars sold during those model years; would save approximately 36 billion gallons of fuel and prevent the tailpipe emission of 343 million metric tons of CO2 over the lifetime of the light trucks sold during those model years; and deliver a total benefit of $88 billion over the lifetime of the vehicles, compared to what would occur if the standards remained at the adjusted baseline (i.e., the higher of manufacturer’s plans and the manufacturer’s required level of average fuel economy for MY 2010).
The agency estimates that compliance will cost the automakers approximately $16 billion for passenger cars and approximately $31 billion for light trucks, for a combined $47 billion.