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EPA and DOT Finalize 2017-2025 Fuel Economy Standards

The DOT and EPA finalized fuel efficiency standards today for cars and light duty trucks, increasing fuel efficiency to 54.5 mpg by Model Year 2025. The agencies calculate that consumer savings under the new standards will be comparable to lowering the price of gasoline by $1 per gallon by 2025.

The final rule acknowledged several points made in our comments to the agencies, including our recommendation of not using a footprint-based standard, which would put larger vehicles under less stringent controls than smaller vehicles. The National Highway Traffic Safety Adminstration (NHTSA) determined not to follow our suggestion to eliminate the footprint-based approach. The agencies saw merit in our suggestion to use an attribute-based approach to maximize benefits but argued that such an undertaking would be impractical at this time.

The rule also cites our suggestion not to create distorting incentives for electric vehicles by considering them as zero-emission vehicles and allowing manufacturers to use a multiplier when counting them in their fleet averages. EPA says in the final rule that the incentives are necessary considering the “major barriers for new vehicle technologies” and are worth the trade-off of short-term benefits given the potential for “far-greater game-changing benefits in the longer run.”

On our recommendation to update its calculation of the social cost of carbon (SCC) value, the EPA says that it has considered the suggestions, but they require additional research, review, and public comment before they can be applied to a rulemaking context.

Finally, the NHTSA acknowledges our comment that the vehicle choice model may be affected by the positional goods theory, which posits that fuel-efficient vehicles will become more attractive to consumers when alternative options are also more fuel-efficient. Copies of our comments on this theory were distributed to the U.C. Davis and U.C. Irvine researchers supporting NHTSA.