The Obama administration finalized new fuel efficiency and emissions standards for cars and light trucks on August 28, announcing that they will double to 54.5 miles per gallon (MPG) by 2025. Proposed last summer and developed in consultation with the auto industry, the new corporate average fuel economy (CAFE) standards will go into effect for model year 2017 vehicles. More efficient cars will dramatically cut oil dependence and put money in drivers’ pockets: the new standards are expected to save 163-170 billion gallons of fuel and generate over $450 billion in net economic benefits.

Fuel efficiency standards will increase by approximately five percent per year for model years 2017-2025. The U.S. Environmental Protection Agency (EPA) will measure fuel economy via carbon dioxide (CO2) tailpipe emissions, which must be limited to 163 grams per mile – equivalent to 54.5 MPG – by model year 2025.

The National Highway Traffic Safety Administration (NHTSA) will separately monitor fuel mileage, which must reach 49.6 MPG by model year 2025 for the combined fleet (56.0 MPG for cars and 40.3 MPG for light trucks). The discrepancy comes from the fact that the CO2 standard also includes expected improvements to air conditioning systems.

The standards do not incentivize automakers to build and sell smaller cars. Instead, vehicles are grouped by size and subject to size-specific increases in fuel economy. This will help to accommodate consumer preferences while also facilitating fuel savings for vehicles throughout the fleet.

The new CAFE rules build off standards established in 2010 for model years 2012-2016. The 2010 rulemaking revised fuel economy improvements set by the Energy Independence and Security Act of 2007, which had represented the first changes to CAFE standards in nearly 20 years. The current rule raises fuel efficiency approximately four percent per year to reach 34.1 MPG in 2016. For the upcoming model year 2013, the fleet average must meet 30.5 MPG.

Earlier this year, EESI held a Congressional briefing on the economic and energy security impacts of both in-place and the now newly-established CAFE standards. The panel of experts pointed out that fuel economy improvements since the inception of CAFE in 1978 have reduced U.S. fuel consumption by 70 billion gallons annually, saving the country $250 billion in 2011. They conceded that improving vehicles to meet CAFE standards requires additional labor and new technologies which make new vehicles more expensive. However, this added cost will be repaid in four years or less for most drivers thanks to fuel savings. By increasing the value of domestically-made cars and reducing spending on oil imports, CAFE standards spur investments that create American jobs and retain a greater percentage of transportation dollars in the domestic economy.

For more on vehicle efficiency from EESI, please see: