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54.5 mpg Fuel Efficiency Standard will save U.S. drivers $1.7 trillion by 2025

The new debt-limit agreement with Congress has been the big news. Big enough for Fitch to keep U.S. Treasuries at AAA for the time being. Last week another major agreement was reached.

President Obama announced a historic agreement with thirteen major automakers to increasing fuel economy to 54.5 miles per gallon for cars and light-duty trucks by Model Year 2025. This will save U.S. drivers $1.7 trillion in fuel costs with today’s oil prices of about $100 per barrel. If the price of oil is higher in 2025, consumers will save more.

The President was joined by Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo. Fuel economy will help automakers lower the lifetime cost of operating cars. By 2025, new cars will average the fuel economy of today’s popular Prius Liftback. Next year, Toyota will already start selling cars with better MPG than the classic Prius including the Prius Plug-in Hybrid, Prius C, and RAV4 EV.

Toyota is now scrambling to hold its fuel-economy lead as scramble to up their forecast for the Nissan Leaf, Chevrolet Volt, Ford Focus Electric, and Honda Fit Electric just to name a few new electric cars.

Ten Million Electric Cars

Forecasts of 10 million electric cars by 2020 in the U.S. look more likely. High volumes will lower the cost of lithium battery packs and electric motors, which are also used in hybrids. By 2013, at least one of these automakers will sell 100,000 electric cars and hybrids in one year – Toyota, GM, Nissan, and Ford.

New fuel efficiency and emission standards will make it easier for automakers to build drive systems and cars for the global market where fuel is often more expensive and high MPG necessary to gain market share. Ford has taken a lead is saving billions with global car platforms and in improving fuel economy by shaving hundreds of pounds of vehicle weight. Heavy metal is increasingly replaced with stronger metals and composites. Electric drive systems can support lighter electric accessories instead of mechanical devices.

Consumer savings is real. My wife and I have been driving our Nissan LEAF for three months. Last month, our electricity cost to fuel the car for a month was the same as one gasoline fill-up of our other car, a hybrid. OK, we we’re on vacation part of the month. Next month the electricity bill may be the same as 2 fill-ups.  That electricity is not from foreign oil, it is from local generation with natural gas, wind, solar, other renewables, and yes, 20% nuclear.

“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,” said President Obama. ”Most of the companies here today were part of an agreement we reached two years ago to raise the fuel efficiency of their cars over the next five years. We’ve set an aggressive target and the companies are stepping up to the plate. By 2025, the average fuel economy of their vehicles will nearly double to almost 55 miles per gallon.”

The new builds on the existing agreement for Model Years 2012-2016 vehicles, which will raise fuel efficiency to 35.5 mpg and begin saving families money at the pump this year, the next round of standards will require performance equivalent to 54.5 mpg or 163 grams/ mile of CO2 for cars and light-duty trucks by Model Year 2025. Achieving the goals of this historic agreement will rely on innovative technologies and manufacturing that will spur economic growth and create high-quality domestic jobs in cutting edge industries across America.

Truck and SUV Drivers to Save

These programs, combined with the model year 2011 light truck standard, represent the first meaningful update to fuel efficiency standards in three decades and span Model Years 2011 to 2025. Together, they will save American families $1.7 trillion dollars in fuel costs, and by 2025 result in an average fuel savings of over $8,000 per vehicle. Additionally, these programs will dramatically cut the oil we consume, saving a total of 12 billion barrels of oil, and by 2025 reduce oil consumption by 2.2 million barrels a day – as much as half of the oil we import from OPEC every day.

People buying all wheel drive SUVs and trucks to deal with snow and ice will finally see real fuel economy improvements.

The standards also curb carbon pollution, cutting more than 6 billion metric tons of greenhouse gas over the life of the program – more than the amount of carbon dioxide emitted by the United States last year. 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.

The program would increase the stringency of standards for passenger cars by an average of five percent each year. The stringency of standards for pick-ups and other light-duty trucks would increase an average of 3.5 percent annually for the first five model years and an average of five percent annually for the last four model years of the program, to account for the unique challenges associated with this class of vehicles.

“This is another important step toward saving money for drivers, breaking our dependence on imported oil and cleaning up the air we breathe,” said EPA Administrator Lisa P. Jackson. “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.”

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 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.