Vehicle Greenhouse Gas and CAFE Standards

On May 19, 2009, President Obama announced a new federal policy to reduce greenhouse gas emissions from vehicles and improve fuel economy. The Environmental Protection Agency and Department of Transportation issued a Notice of Intent for the two agencies to begin a joint rulemaking process to achieve these goals.

On September 15, 2009, EPA and DOT released a proposed rule to establish a National Program consisting of new standards for light-duty vehicles: establishing the first-ever national greenhouse gas emissions standards under the Clean Air Act, and raising Corporate Average Fuel Efficiency standards under the Energy Policy and Conservation Act. The new standards would apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles, covering model years 2012 through 2016, together representing 60% of all greenhouse gases from transportation.

On April 1, 2010, after more than 6 months of review, the DOT and EPA finalized these proposed rules to increase fuel efficiency. Starting with 2012 model year vehicles, the rules together require automakers to improve fleet-wide fuel economy and reduce fleet-wide greenhouse gas emissions by approximately five percent every year. The National Highway Traffic Safety Administration has established fuel economy standards that strengthen each year reaching an estimated 34.1 mpg for the combined industry-wide fleet for model year 2016. Only the EPA standards, not NHTSA, allow credits for improvements in air conditioning credits, so by the 2016 model-year, manufacturers must achieve a combined average vehicle emission level of 250 grams of carbon dioxide per mile, equivalent to 35.5 miles per gallon if all reductions came from fuel economy improvements.

These final regulations were developed through inter-agency partnership, achieving the goal set by President Obama to develop agency wide standards that meet the needs of the states and the nation as a whole to conserve energy and reduce greenhouse gas emissions.

The agencies estimate that the program would reduce U.S. emissions by 950 million metric tons and save 1.8 billion barrels of oil over the course of the model year 2012-2016 vehicles’ lifetime. In addition, the average cost increase per vehicle is projected to be less than $1,100, which consumers would offset in three years due to lower fuel costs, totaling $3,000 in fuel savings over the lifetime of the vehicle.

These regulations are contingent upon EPA’s greenhouse gas endangerment finding, which was finalized in December 2009.