In 2010 and again in 2012, the Obama administration negotiated agreements with auto companies on new fuel economy standards.
Passenger vehicles were to get an average of 34.5 miles per gallon by the model year 2016 and 54.5 mpg by 2025. The rules also set greenhouse gas emission limits for cars, trucks and SUVs.
Anyone who has driven a newer vehicle cannot help but notice the improved fuel economy. It represents the biggest jump in federal efficiency standards since their introduction in 1975. Yet the value of the rules could be greatly diminished if consumers maintain their current preference for SUVs and light trucks over cars.
Presumably, buyers’ decisions reflect currently low gasoline prices as well as an improving economy. And why should buyers change given minimal incentives to choose more efficient vehicles?
Adopting a carbon tax or raising gas taxes to pay for much needed highway and related infrastructure improvements could provide a big incentive to conserve fuel.
That said, are the new fuel economy and greenhouse gas emission rules a good deal for us?
Yes, they are, although analysts differ in how they estimate the effects. To get the fullest picture, we should include both direct financial gain from improved fuel economy and indirect benefits related to climate change and improved air quality.
The direct financial gain for new car buyers depends on the cost of gasoline and the anticipated rise in the cost of new vehicles attributable to the higher fuel economy standards. We don’t know the latter precisely. Much depends on how auto companies alter vehicle designs and which technologies they employ.
In its most recent analysis, the Environmental Protection Agency estimates that the buyer of a 2016 car will save $3,000 over its lifetime. The anticipated savings are even greater for a 2025 car, about $10,000.
In short, the EPA says the new standards generate far more savings to consumers than they will cost. These estimates are for those paying cash for a car, but there are substantial savings as well for those who finance a vehicle.
What about indirect benefits of the rules? Improved fuel economy also translates into gains in public health, reduction in the risk of climate change, and improved energy security related to lowering the nation’s dependence on imported oil.
All of these benefits are substantial, particularly the public health effects for those suffering from lung diseases such as asthma — 23 million people, or more than 7 percent of the population.
The agencies’ regulatory impact analysis for the 2016 model year standards puts the monetized or measurable benefits at nearly five times the costs, or $240 billion in benefits compared to $52 billion in costs.
The benefits for the 2017 through 2025 model years are about three times the anticipated costs even when many benefits were not taken into account at all or were not fully measured.
There are additional gains from the new rules that often are ignored. For example, the standards encourage automakers to innovate and invest in new technologies that may well make the U.S. more economically competitive and resilient in a shifting and uncertain global economy.
How the rules were developed is also important. They were adopted only after extensive consultation with the auto industry, auto workers, consumer groups, environmental and energy experts, and state governments.
Thirteen major automakers supported the initiative to develop a consistent nationwide standard and create regulatory certainty going forward. In addition, the agencies continue to work with auto companies on many details of how the rules will be applied.
We are well on our way to a far brighter future in vehicle efficiency. We should recognize the enormous value of the new standards and strongly encourage automakers to do even better in developing new transportation technologies.
Michael Kraft is a professor emeritus of political science and public and environmental affairs at the University of Wisconsin- Green Bay. Readers may write him at UWGB, 2420 Nicolet Drive, MAC B310, Green Bay, WI 54311 or email him at kraftm@ uwgb.edu.