Fuel economy standards toughen under Biden administration

The new U.S. fuel economy standards will require an industrywide fleet average of about 49 mpg in the 2026 model year.

April 01, 2022 09:30 AM

WASHINGTON — Starting with the 2024 model year, automakers will need to meet increasingly stringent fuel economy standards compared with what was required under previous administrations.

NHTSA on Friday finalized standards for light-duty vehicles that it said will “strengthen U.S. energy independence and help reduce reliance on fossil fuels,” while pushing automakers to further improve the fuel efficiency of gasoline-powered vehicles as the industry shifts to electrification.

The standards will “spur innovation, make our country more energy independent, strengthen our national security and save American families money,” Steven Cliff, NHTSA’s deputy administrator, said at an event here.

Closer look

NHTSA said its final rule on CAFE standards for 2024-26 model year light vehicles will:
Increase fuel efficiency 8% annually for 2024-25 model years.
Increase fuel efficiency 10% annually for the 2026 model year.
Require an industrywide fleet average of approximately 49 mpg in the 2026 model year.
Reduce U.S. gasoline consumption by more than 200 billion gallons, as compared with continuing under the Trump-era standards.
Reduce average fuel costs over the lifetime of 2029 model-year vehicles by $1,387, while increasing the average cost of those vehicles by about $1,087.

Source: NHTSA

The standards will increase fuel efficiency by 8 percent annually for cars and light trucks in the 2024 and 2025 model years, and by 10 percent annually for 2026. The standards will require an industrywide fleet average of approximately 49 mpg in the 2026 model year.

U.S. gasoline consumption will be cut by more than 200 billion gallons through 2050 in comparison with a continuation of the Trump-era standards, NHTSA said. Under the rule, consumer fuel costs will be reduced by about $192 billion for new vehicles sold through 2030.

NHTSA estimates the action could reduce the average fuel cost over the lifetime of 2029 model-year vehicles by $1,387, while increasing the average cost of those vehicles by about $1,087.

“Car manufacturers will be required to produce cars, minivans, SUVs and pickup trucks that get better mileage than ever before, and the benefits are going to be real for drivers across America,” Transportation Secretary Pete Buttigieg said in remarks.

During his first month in office, President Joe Biden ordered a review of regulations on vehicle fuel economy and greenhouse gas emissions after the Trump administration in 2020 enacted less stringent improvements in mileage than those put in place under predecessor Barack Obama. The Trump-era rule required 1.5 percent annual increases in efficiency through 2026 compared with 5 percent annual increases under Obama.

Biden also set a goal of reaching 50 percent zero-emission new-vehicle sales by 2030, a nonbinding target that props up his climate and energy ambitions.

The Alliance for Automotive Innovation, which represents most major automakers in the U.S., said it looks forward to reviewing the final rule.

“That said, increased regulatory requirements for automakers will require supportive policies as well as regulatory alignment with the EPA to ensure that standards can be attained when considering a host of factors, including safety, consumer preferences, improved fuel economy and the transition to electrification,” John Bozzella, the group’s CEO, said in a statement.

The EPA in December finalized its rule on vehicle greenhouse gas emissions for the 2023-26 model years that — alongside NHTSA’s standards — could act as a regulatory driver for speeding up the industry’s electrification plans.

Bozzella told reporters at an event on Friday that the industry’s transition to electrification will require more than fuel economy and greenhouse gas emissions standards.

“To really reach numbers like 50 percent of new-vehicle sales as electric by the end of the decade, it’s going to take a comprehensive national policy, and that comprehensive policy has to include significant private sector engagement,” he said, “everything from more EV charging infrastructure, clean power, building codes — both residential and commercial — that are EV ready, as well as government policy.”

Reactions to the new standards

"Ford applauds NHTSA’s efforts to strengthen fuel economy standards and create consistent benchmarks to accelerate our national transition toward a zero-emissions transportation future. Ford is committed to doing our part. We will combat climate change and lead the electric vehicle revolution by shattering constraints to increase the production of the exciting no-compromise EVs customers want, invest $50 billion in vehicle electrification by 2026 and become carbon neutral worldwide by 2050 in alignment with the Paris Climate Agreement. These new NHTSA standards are an important step toward achieving our shared national goals." — Steven Croley, chief policy officer, Ford Motor Co.

“NHTSA’s new fuel economy standards will only add to the cost of new cars, depriving people of safe, affordable vehicles, at a time when they are already struggling. It also enforces burdensome penalties on manufacturers — who are finding it difficult to keep up with high demand and inventory shortages as it is — which will only increase prices further as these ’penalties’ are passed along to the consumers. Keeping the cost of new vehicles high will force American families to continue driving older, less safe models. Improving fuel efficiency and making our roads safer are important goals. Our priority should be to ease the burdens for Americans and American companies. If the Biden administration is serious about road safety, affordability and securing a cleaner American energy future, it should work to secure our supply chains, reduce regulatory burdens and unleash American energy.” — Rep. Cathy McMorris Rodgers, R-Wash.

“Shifting to cleaner vehicles and a transportation system free of oil consumption is good for our climate, our wallets, and our lungs. We need policies like this regulation, and much more, to get the automotive industry to be manufacturing 100 percent zero-emission cars. We urge NHTSA to get moving on the strongest possible long-term standards that rapidly increase fuel economy along the way to zero-emission vehicles to protect our communities by addressing the nation’s top source of pollution.” — Ramón Cruz, president, Sierra Club

“This rule is another opportunity Biden’s missed. Strong gas mileage standards could’ve been the biggest single step any nation has taken to slash climate-heating pollution, and they’d save people billions more at the pump.” — Dan Becker, director for the Safe Climate Transport Campaign, Center for Biological Diversity

“These critical regulations will help ensure our cars remain the best in the world, but most of all, they will help American families drive further before they need to fill up their tanks, saving them hundreds of dollars every year. These improvements also steer us on the path to energy independence and will ensure our air is cleaner for generations to come. As I have long said, we need one national fuel economy program – one set of standards well into the future that increase year over year – that simultaneously gives the industry certainty while reducing greenhouse gas emissions and making fuel economy more efficient.” — Rep. Debbie Dingell, D-Mich.

NHTSA also recently reinstated higher penalties for automakers whose vehicles do not comply with fuel economy standards for the 2019 model year and beyond. For the 2019-21 model years, the civil penalty rate is now $14, up from $5.50, for each tenth of a mile per gallon that an automaker’s performance falls short of its compliance obligation, multiplied by the number of vehicles in its fleet. For 2022, the fine is $15.

Automakers, now represented by the alliance, argued in 2016 that the increased penalty could raise industry compliance costs by at least $1 billion annually.

NHTSA’s more stringent fuel economy standards come as U.S. consumers face high prices at the pump triggered in part by a reduction in oil supply amid Russia’s deadly invasion of Ukraine and rising inflation.

Biden in March banned imports of Russian oil, natural gas and coal in response to the invasion — a move supported by Democrats and Republicans in Congress.

The president this week unveiled a plan to ease fuel prices by increasing the supply of oil, encouraging domestic production and urging Congress to pass clean-energy legislation.

“We need to choose long-term energy security over energy and climate vulnerability,” said Gina McCarthy, White House national climate adviser. “This is a step forward, a significant step forward, in that direction.”