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New NAS report finds automakers on target to meet 2025 CAFE target

Today the National Academies released a study on the feasibility of federal CAFE (fuel economy) and greenhouse gas emission standards for vehicles.  Overall, the study indicates that automakers are on track to meet 2025 standards on time and at reasonable cost and that the vehicle fleet is likely to become safer as it becomes lighter.

The NAS study uses a range of cost estimates, some of which are consistent with EPA and NHTSA estimates and others that use a higher alternative cost.  For example, the report’s projected incremental direct manufacturing cost (assuming no new innovations) for a midsize car is $1,181 or $1,658, slightly higher than EPA and NHTSA assumptions at $1,060.  Even with the higher cost assumptions and today’s low gas prices, the standards still deliver lifetime fuel cost savings that outweigh the incremental costs.   And low gas prices are unlikely to be a long-term trend, so savings for consumers are likely understated.  The report also recommends further research on real world fuel economy to ensure savings from newer technologies are realized–an issue that Consumer Reports continues to explore, providing feedback to EPA and the public.

A recent report by the Union of Concerned Scientists had a similar finding that 10% of new vehicles sold today already meet CAFE targets for 2020 and beyond and that manufacturers are well on their way to meeting the 2025 standards.

It’s important to note that CAFE standards have quite a bit of regulatory flexibility and are “footprint based,” meaning that larger vehicles still have to improve, but they have less stringent fuel economy and emissions targets than smaller vehicles.  Automakers can sell any distribution of vehicle types they wish, and the target is adjusted to reflect automakers’ actual fleet mix of vehicles sold.  A long-term trend towards higher sales of larger vehicles could save less fuel and emit more pollution than the scenario envisioned by the 54.5 mpg by 2025 target, but automakers could still fully comply with existing regulations if their larger vehicles meet the efficiency requirements for their footprint size or are offset by vehicles that overcomply with their own footprint based targets.