By Luke Tonachel, Natural Resources Defense Council
EPA’s latest annual assessment of new automobile fuel economy, the “Fuel Economy Trends” report, shows that automakers have made great progress building fuel-efficient vehicles from when standards were tightened in the 1970s and early 1980s and with the gains of the last five years. The report findings are evidence that fuel economy standards are working as designed.
Today’s report provides data on how fuel efficient recently-sold vehicles are; it is not a report on actual compliance with fuel economy standards. The Department of Transportation, which sets fuel economy standards, separately assesses automaker compliance based on various crediting mechanisms.
EPA also released a report today that covers the compliance with EPA’s emissions standards for greenhouse gases. More on that below.
Back to fuel economy, the recent trends demonstrate that fuel economy standards are saving drivers hundreds of dollars at the pump annually. New cars, SUVs and pickup trucks use nearly 20 percent less gas on average than those purchased a decade ago because manufacturers are responding to the challenge of meeting progressively tighter fuel economy and clean-car standards. Strong standards are essential to keeping these encouraging trends going.
EPA reports that model year 2016 vehicles—the latest finalized data—achieved 24.7 miles per gallon (mpg). The most recent data also shows that improvements in the average fuel economy of all passenger cars and light trucks have slowed in recent years (0.5 mpg from 2014 to 2015 and 0.1 mpg from 2015 to 2016). There are two primary causes of this: The growth in SUV sales and a slow-down in new vehicle designs.
More SUVs on the Road
SUVs are the sales king these days. EPA reports that 41 percent of model year 2016 vehicles were car- or truck-based SUVs. Sales of new larger truck SUVs as a share of total sales have grown 8.5 percent since 2012, the largest amount among cars, car SUVs, pickups and vans.
Light trucks must meet less stringent gas mileage standards than cars, so when consumers buy more light trucks, it drives down the average fuel economy for all vehicles sold. The standard that each manufacturer must meet is based on the mix of vehicles it sells, so if it sells more trucks, its overall fuel-economy requirement goes down. The standards adjust themselves to changes in the market. They were designed knowing that consumer choices could shift.
Fuel economy standards also vary based on the size of the vehicle within the car and truck classifications, but increase over time for all vehicle sizes and types. That way, buyers get more fuel savings for any type of vehicle with each future purchase (as long as standards tighten over time). Importantly, without the standards, the market shift to trucks could still have occurred due to low gas prices, but buyers would have missed out of fuel-saving efficiency gains without the push of the standards.
Fortunately for consumers, SUVs, cars, and pickups all continued to make fuel economy gains in 2016. As long as strong standards remain in place, these gains should increase in the coming years.
New Product Lull Means Less Fuel-Saving Technology…But It’s Temporary
The second reason fuel-economy gains are slowing is because automakers are at a low point in their model redesign cycle. Manufacturers typically overhaul their vehicle models and add major fuel-saving technologies about every 5 years. They’ve revamped fewer models recently, which has contributed to the slow-down in fleet average improvements. According to an analysis by auto industry experts at Baum and Associates, 10 percent to 11 percent of vehicles sold in model years 2012 and 2013 “were either new models or product redesigns that saw a major improvement in fuel economy.” In 2016 and 2017, the number of new or redesigned models dropped to 4 to 6 percent. Baum and Associates also points out that the lull will be short-lived because of strong growth in new models planned for 2018, 2019 and 2020.
Automakers Make Use of Credit Banks
EPA also released information today about how automakers are keeping up with EPA’s emissions standards for greenhouse gases. The agency’s annual GHG Emission Standards for Light-Duty Vehicles: Manufacturer Performance Report shows that model year 2016 marks the first time the majority of automakers dipped in their credit banks to meet their GHG emissions target under the standards. From 2012 to 2015, almost all automakers produced new vehicle fleets that did better (e.g. had lower GHG emissions) than the standards, allowing those manufacturers to accumulate credits for later use. The GHG and fuel economy programs are designed to work this way precisely because there will be years when automakers have lulls in their vehicle redesign cycles and apply less technology. In model year 2016, the automakers collectively reduced carbon pollution slightly from 2015, but missed the standard’s fleet average target by 9 grams of CO2 per mile. To make up the difference, the report shows that automakers made modest withdrawals from their credit banks. Manufacturers still have ample credits in their accounts to draw on for future years if needed. In fact, based on the projections of new models coming in 2018 through 2020, credit accounts could grow again soon. Automakers also have the option of buying credits from companies that exceed the standards and wish to sell their credits. Honda, Nissan, Tesla and Toyota have previously sold credits to other companies including BMW, FCA, Ferrari, Jaguar/Land Rover and Mercedes.
Strong Standards are Key for the Climate and U.S. Jobs
Automakers have been attacking the fuel-efficiency and GHG emissions standards over the last year and the Trump administration is intent on rolling them back. Instead, the United States should at least maintain the existing standards and set stronger standards beyond 2025. Weaker standards will put U.S. jobs at risk by stifling innovation and investment as suppliers move overseas to meet more aggressive targets. Governments in major auto markets around the world—including leaders in China, India, the United Kingdom, Germany, Norway, the Netherlands and France—have announced intentions to speed away from today’s gas guzzlers to an electric car future. Those countries understand that a cleaner transportation sector will help build their economies while also meeting climate targets. Strong vehicle standards are necessary for adequately reducing transportation carbon pollution to stabilize the climate.
The U.S. fuel economy trend is currently headed in the right direction. We’ll be fighting to keep it going that way.