On Friday, April 1, 2022, Transportation Secretary Pete Buttigieg unveiled new CAFE (Corporate Average Fuel Economy) standards for 2024-2026 model year passenger cars and light-duty trucks. These new standards will require new vehicles sold in the US to average at least 40 miles per gallon. This change comes at nearly a 43% increase from the previous standard of approximately 28 mpg, undoing the Trump Administration’s rollback of Obama-era standards in 2020. For model years 2024-2025, the new standards will increase fuel efficiency annually by 8% and 10% annually for model year 2026.
The announcements come at a time when consumers in the US are paying record-high prices at the fuel pump as a consequence of the ongoing war in Ukraine. The NHTSA press release notes that under the new standards, fuel consumption will decrease fuel use by over 250 billion gallons through the year 2050 compared to sustaining the previous Trump-era standards. Less reliance on foreign oil, consumer savings on gas, and reduced emissions were also emphasized in the announcement as an advantage of stronger standards. Officials highlighted that carbon emissions would be reduced by 2.5 billion metric tons and estimated that consumers could save almost $1,400 in fuel expenses over the lifetime of a 2029 model vehicle under new rules. However, it is also estimated that the new regulations will likely drive up the cost of new vehicles by nearly the same amount.
Relatedly, NHTSA announced earlier in the week tougher fines for automakers not meeting CAFE standards for model years 2019-2022. The penalties for model years 2019-2021 increased from $5.50 to $14 for every 0.1 mpg that new vehicles fail to meet, multiplied by the number of new vehicles sold that do not meet the standards. The fine for 2022 model year vehicles increased to $15. Significantly, this is the first increase since 1997, when the penalty increased from $5 to $5.50. Some automakers will be impacted by tougher fines more than others. Most auto manufacturers have improved or maintained estimated real-world fuel economy over the last five years, as shown in Figure 1.