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  • Allison Stalker

New Fuel Efficiency Standards

Updated: Aug 29, 2023




On July 29 President Obama announced a new fuel efficiency standard that will increase fuel economy to 54.5 miles per gallon for cars and light-duty trucks by the year 2025. This agreement builds on the existing agreement, which sets a standard of 35.5 mpg by the year 2016. The first parts of this agreement begin for Model Year 2012 vehicles. The agreement was reached with thirteen major automakers including Ford, GM, Chrysler, BMW, Honda, Hyundai, Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo. Additionally, the United Auto Workers (UAW) and the State of California were major contributors to the development of the agreement.


“This agreement on fuel standards represents the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil,” said President Obama. ”Most of the companies here today were part of an agreement we reached two years ago to raise the fuel efficiency of their cars over the next five years. We’ve set an aggressive target and the companies are stepping up to the plate. By 2025, the average fuel economy of their vehicles will nearly double to almost 55 miles per gallon.”


It is estimated that both programs together will save American families $1.7 trillion in fuel cost and also save a total of 12 billion barrels of oil by 2025. Additionally, the standards will cut more than 6 billion metric tons of greenhouse gas emissions through 2025. The new technologies and manufacturing necessary to meet the standards will hopefully spur economic growth and create domestic jobs in various industries across America.

The Environmental Protection Agency (EPA) and the Department of Transportation (DOT) have worked with the automakers and other groups to ensure that the standards are achievable and cost-effective. The standards would require an increase in fuel efficiency of 5% each year for passenger cars.


“This is another important step toward saving money for drivers, breaking our dependence on imported oil and cleaning up the air we breathe,” said EPA Administrator Lisa P. Jackson. “American consumers are calling for cleaner cars that won’t pollute their air or break their budgets at the gas pump, and our innovative American automakers are responding with plans for some of the most fuel efficient vehicles in our history.”


Full details of the program will be presented in a joint proposed rulemaking which should be available to the public and open for comments by the end of September. The EPA and the National Highway Traffic Safety Administration (NHTSA) are also considering incentive programs including:

  • Incentives for electric vehicles, plug-in hybrid electric vehicles, and fuel cells vehicles

  • Incentives for advanced technology packages for large pickups, such as hybridization and other performance-based strategies

  • Credits for technologies with potential to achieve real-world CO2 reductions and fuel economy improvements that are not captured by the standards test procedures

  • Credits for improvements in air conditioning (A/C) systems, both for efficiency improvements and for use of alternative, lower global warming potential refrigerant; Treatment of compressed natural gas (CNG)

  • Continued credit banking and trading, including a one-time carry-forward of unused MY 2010-2016 credits through MY 2021.

The Obama administration released a report on the oil savings, consumer, and environmental benefits of the program which can be found here.


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