Consumers and global climate will win with new vehicle standards

As early as this week, the federal government will announce what is likely the largest move ever to save oil. If last year’s proposal becomes final, as expected, the fuel economy of a typical new car will go up by more than 70 percent by 2025. The standards will improve how far cars and trucks travel on a gallon of gas even more than the original corporate average fuel economy (CAFE) standards, enacted by Congress in 1975.

The new passenger vehicle standards for fuel economy and greenhouse gas emissions are also the single largest move by the federal government to address climate change. Three critical factors made this possible: consumer commitment, technological progress, and smart public policy.

Consumers voice strong support for fuel economy improvements (see here and here), and it’s no wonder. Gasoline prices last year were the highest ever – averaging more than $3.50 per gallon – but that record could be eclipsed in 2012 if trends continue. These stubbornly high prices, combined with memories of the 2008 oil price spikes, have led to strong consumer sentiment in favor of better fuel economy for their cars. Consumer commitment, check.

Thanks to advances by the auto industry in technology, gasoline-powered cars and trucks can get a lot more efficient. Automakers are building cars with more transmission speeds and hybrid-electric drivetrains that allow cars and trucks to sip less gas without sacrificing power. Lighter materials like high-strength steel and carbon fiber can also save gas without compromising safety. And notably, automakers have put almost 40,000 electric vehicles, which often get the equivalent of 100 miles per gallon, on America’s roads since 2011. Technological progress, check.

The new standards being issued by National Highway Traffic Safety Administration and Environmental Protection Agency are rooted in a long history of concerns over oil dependence and the environmental impacts of cars and trucks. The original CAFE standards were a response to energy security threats caused by the Arab oil embargo of 1973. Congress in 2007 tasked NHTSA with toughening those standards. As new technological advances allowed event greater efficiencies, California, which under federal law can set its own standards, began pushing hard to translate them into lower greenhouse gas emissions.  Worried about differing California and federal standards, automakers and the government found common ground on a consistent set of fuel economy and greenhouse gas standards. Public policy, check.

Transportation accounts for more than a quarter of U.S. greenhouse gases emissions and these standards set a historic environmental target for our cars and trucks. However, three-quarters of our climate problem still needs serious attention to avoid the worst potential consequences of global warming.

The next big challenge is curbing emissions from electricity, but stakeholder alignment is tougher here. We use power in so many different ways in our homes and offices that lowering electricity bills is more complicated than lowering gasoline bills. There are many more power companies than auto companies and different regions of the country rely on a different mix of energy sources.

The Clean Air Act is what enabled EPA to regulate greenhouse gases from vehicles, and it can also be used to address greenhouse gas emissions from the power sector. Unfortunately, the law doesn’t allow for as much compliance flexibility for power plants as it does for cars and trucks. Thus for this sector, new legislation would be better, making congressional gridlock the major barrier.

Consumer education about the potential for lower electricity bills, for example, through energy efficiency and carbon calculators, could pique consumers’ interest. Power companies’ desire for regulatory certainty and compliance flexibility could also drive action. States are implementing a number of policy approaches — such as Clean Energy Standards, Energy Efficiency Resource Standards, and cap and trade — that give electric utilities the flexibility to comply at least cost and help consumers save money.  Ultimately, policymakers have plenty of smart options to choose from.

The new vehicle standards show it is possible for government to get it right on greenhouse gases. We can do that for the rest of the economy, too.