NCPA - National Center for Policy Analysis

Fuel Efficiency Standards Will Be Expensive

November 29, 2011

Doubling fuel-efficiency standards to 54.5 miles per gallon (mpg) by 2025 won't be cheap -- and it will require the government to consider other implications, says the Detroit News.

  • The Obama administration finally unveiled the price tag to the auto industry for its proposed 2017-2025 fuel economy regulations earlier this month: $157.3 billion.
  • In total, the proposed regulations will supposedly save drivers $1.7 trillion at the pump.
  • But the administration said the savings at the pump will wipe out about $50 billion in gas tax revenue -- and the government will have to find another way to fund road repairs.

It's one of the most expensive -- if not the most expensive -- regulation in U.S. history.

  • The hike comes on top of the $51.5 billion price tag for 2012-2016 rules that boosted by more than 30 percent requirements to a fleet-wide average of 34.1 mpg by model year 2016.
  • Most of the increases -- $113 billion -- comes to boost passenger car fuel economy, while $44 billion will be to improve light trucks.
  • The proposal will boost the cost of an average car in 2025 by $2,023 and light truck by $1,578.
  • But costs could be as high as $2,800 if a different analysis is used to forecast future price costs, the administration said.

The regulation will have other costs.  Since it will be cheaper to drive, Americans will drive more -- and the administration predicts congestion costs from added driving will be between $26.2 billion and $32.7 billion.

The rule also will have some safety implications.  Americans will drive more and therefore get into more car crashes.  The National Highway Traffic Safety Administration (NHTSA) estimated the cost of the crashes over the life of the rule at $12.4 billion to $15.5 billion.

Source: David Shepardson, "Price Tag of 2025's Fuel Efficiency Standards: $157 Billion," Detroit News, November 16, 2011.


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