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Tough New Fuel Economy Standards

Obama’s new standards could require a gas tax to get consumers to buy more efficient cars.

Today President Obama announced a new plan for increasing fuel economy standards. It will speed up an earlier plan established by Congress that would have required vehicles to have an average fuel economy of 35 miles per gallon by 2020. The new plan will require a slightly higher standard of 35.5 miles per gallon, and the standard must be met much earlier, by 2016.

In his announcement, Obama said:

[I]n the next five years, we’re seeking to raise fuel-economy standards to an industry average of 35.5 miles per gallon in 2016, an increase of more than eight miles per gallon per vehicle. That’s an unprecedented change, exceeding the demands of Congress and meeting the most stringent requirements sought by many of the environmental advocates represented here today.

As a result, we will save 1.8 billion barrels of oil over the lifetime of the vehicles sold in the next five years. Just to give you a sense of magnitude, that’s more oil than we imported last year from Saudi Arabia, Venezuela, Libya, and Nigeria combined.

According to the Wall Street Journal, “new passenger cars sold in the U.S. will have to meet an average mileage requirement of 39 mpg, up from 27.5 mpg currently. Light trucks would have to deliver an average of 30 mpg, compared with about 23 mpg today.”

The plan doesn’t give automakers much time. Only a few cars–hybrids–meet these standards today, and it can take 5 years to develop a new car. The good news is that technology exists to achieve these standards, and automakers are already planning on rolling out much of it. That includes lightweight materials, direct-injection engines paired with turbochargers, and various types of hybrids, including plug-in hybrids and electric vehicles. But ramping up production will take time. Also, convincing consumers to buy enough of the most fuel efficient cars to make up for other people buying larger cars will be difficult. Gas taxes have helped meet a similar fuel economy standard in Europe. A proposed system of government fees and rebates could also help, and might be more palatable to consumers than raising gas prices.

Here’s a more in-depth analysis of the issues involved, based on an earlier Obama plan.

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