Busting Three Myths About the 2025 Fuel Economy Standards

On a sunny Friday in July of 2011, President Obama stepped to a lectern in the Rose Garden and announced the first ever regulations on greenhouse gas emissions. They were ambitious.  By 2025 the rules would double the fuel efficiency and halve the greenhouse gas emissions of new passenger vehicles on America's roads.  But the President's company on the stage was even more remarkable:  13 auto executives, including the heads of GM, Ford, Chrysler, Toyota and BMW.  Industry usually pushes back on any new regulations, but these executives were applauding the tough new measures.  They must have known they were getting a fair and flexible deal.

How have the regulations done since then?  Very well.  After decades of intransigence, fuel economy is quickly rising.  The Economist magazine called the regulations the sixth most effective action to slow global warming ever.  Automakers have not only been able to meet, but have consistently exceeded their annual regulatory requirements.  Over a quarter of vehicles produced in 2015 already meet the standards for 2018.  In 2015 sales topped 17.5 million vehicles.  Not only is this a near record high, it is about three million more vehicles than the industry sold when the regulations came into effect.

In short, the rules seem like a pretty good deal for everyone involved--the automakers, consumers and the planet.  But recently some car companies are starting to push back.  Why now?  Most likely because this June, as part of the rule, there is a "Mid-term Review" where the government has to review the standards, decide to strengthen, weaken or just reaffirm them.  As we approach this review, it is appropriate that we separate truth from fiction.

Myth #1: In 2025, every new car will have to achieve the regulation's goal of 54.5 miles per gallon.
Not True.  First, the 54.5 miles per gallon number is not an ironclad requirement for every vehicle but a projected average for all new 2025 vehicles sold.  There are, in fact, a wide variety of individual fuel efficiency standards based on the size of new vehicles.  Thus, cars and trucks have their own individual set of standards, which are quite different.
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Myth #2: With low gasoline prices consumers, are buying more SUVs so the Government should change the standards and not force consumers into small cars.
Not True.  There are two huge problems with this argument.  First, the regulations are very flexible -- designed to give consumer choices to buy any car they want regardless of gasoline prices.  If consumers decide they want to buy SUVs instead of compacts, the car companies aren't penalized for producing more SUVs.  In fact, a manufacturer, let's say Chrysler, could sell nothing but SUVs, as long as those larger vehicles meet the standards established by the regulation.  The bottom line is that the consumer buying an SUV today will have a car that is more fuel efficient and cleaner than a SUVs purchased in 2010.  By 2025, it will be even cleaner and more fuel-efficient than today.

Second, gas prices are extremely variable. 
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Myth #3: Companies are forced to produce electric and hybrid cars to meet the 2025 standard.
Not True:  The ambitious regulations are based almost exclusively on the improvements in conventional, gas-powered vehicles.  With strategies like engine downsizing and turbocharging, lighter weight materials, mild hybrids with stop/start systems, and higher transmission gears, it is assumed no more than 1-3 % of vehicles sold in 2025 will need to be electrics and hybrids.  Guess what?  Sales numbers are already there in 2016.

Busting Three Myths About the 2025 Fuel Economy Standards