President Obama announced new mileage and emissions standards on May 19, combining fuel economy and emissions standards in one unified plan and removing the complexity of having multiple fuel economy standards determined by different states. The new national standard will make cars 30% more efficient than today's new vehicles. Cars and trucks will meet a comprehensive 35.5-mpg standard by 2016 (cars would be held to a standard of 39 mpg, trucks at 30 mpg), ramping up 5% per year from 2012 to 2016. Doing so will reduce both greenhouse emissions and the U.S.'s dependency on foreign oil.

Why is this important?
President Obama's new plan is important because it is the most aggressive new fuel economy standard for automobiles in the U.S. since the 1970s. For the first time it establishes a standard that accounts for tailpipe emissions and fuel economy. This will mean that fuel-efficient technologies (such as hybrid-electric vehicles and pure electric vehicles) will likely come to showrooms quicker than previously expected.

Few Meet 2016 Standards Today

By 2016, passenger cars will be held to a standard of 39 mpg; trucks will be held to a standard of 30 mpg.

The plan also clears up an age-old struggle that existed between California, the U.S. Government and the car manufacturers. California traditionally called for higher standards and wanted to enact its own rules for cars sold within its boundaries. This new plan essentially mirrors California's plan for a national standard, making the building and selling of cars simpler for carmakers, while pleasing the most ardent of environmentalists.

Will this save me money?
Yes and no. Because all new cars will be more efficient, consumers will spend less money at the pump. From a global perspective, this means we'll import less oil.

Getting each automaker to produce a car that is 30% more efficient will be a technological challenge, however. Officials estimate that this will add about $1,300 to the cost of a new vehicle. There will be no tax breaks associated with this cost directly, but consumers can receive discounts for special vehicles right now. For example, purchasing alternative-fuel vehicles (one powered by diesel, hybrid, or natural gas, for example) can be good for up to a $3,400 tax credit (until that manufacturer has sold 60,000 units of said car, then the rebate phases out; sorry, Prius buyers). A common example is the 2009 Volkswagen Jetta TDI, which has a tax credit of $1,300 -- the exact premium that is estimated by President Obama's new plan.

Drivers will recoup the additional cost to buy one of these more-efficient vehicles in three years. Drivers will, over the life of the vehicle, save $2,800, on average, President Obama said.

What if my old car doesn't meet the standard?
The new plan only affects the purchase of new vehicles. If you decide to drive your current (potentially less fuel-efficient) vehicle now or after 2016, it will still be completely legal and valid for registration in the U.S.

What are today's standards?
Today's Corporate Average Fuel Economy (CAFE) standard is 27.5 mpg for cars and 23.1 mpg for light trucks (pickups and SUVs under 8500 lbs). "CAFE" is an average of a car company's total fuel economy, weighted by sales. The change from today's standard to the 2016 regulations is about a 30% jump in fuel economy.

How will these new cars be different from today's vehicles?
Some manufacturers will bring high-tech innovations to the showroom as a way to increase fuel economy. This could be in the form of more hybrid-electric vehicles and other forms of alternative fuel.

Another way that fuel economy numbers can be achieved is by creating lighter or smaller vehicles. In fact, critics of CAFE often state that the regulations force manufacturers to create small vehicles that do a poor job of holding up in collisions with larger SUVs and trucks.

How does this compare to other countries?
Even should this new plan go into law, the U.S. will lag behind other countries for fuel economy standards. Right now in Europe, the average is 40 mpg and will be 49 mpg in a few years. Japan is aiming for 47 mpg by 2015.

Which manufacturer is closest to meeting the standards right now?
Technically, all manufacturers who sell vehicles in the U.S. must meet the standard. Some do so naturally by meeting the standard while others pay fines because their fleet of vehicles is not efficient enough; in 2006, BMW, DaimlerChrysler, Volkswagen, Ferrari, Porsche and Maserati paid fines.

Will this help or hurt the automakers?
Automakers are in favor of it as it simplifies their lives significantly; instead of building cars to one national standard and then worrying that California (the largest single market in the U.S.) would enact a different set of rules, now there is just one standard. In a show of support, car company CEOs and UAW members were in Washington during the announcement.

The Alliance of Automobile Manufacturers (a group composed of 11 car companies, including Detroit's Big Three and Toyota) published a statement that they were in favor of the new plan.

"The president has succeeded in bringing three regulatory bodies, 15 states, a dozen automakers and many environmental groups to the table," the Alliance's president and CEO, Dave McCurdy, said. "We're all agreeing to work together on a National Program."

GM's CEO, Fritz Henderson, applauded the move as well.

"General Motors commends President Obama's leadership to establish a harmonized National Program to improve vehicle fuel economy and lower greenhouse gas emissions," Henderson said.

How Do Environmentalists Feel About This?
All signs point to near universal support from environmental groups.

"Today's announcement is one of the most significant efforts undertaken by any president, ever, to end our addiction to oil and seriously slash our global warming emissions," Sierra Club Executive Director Carl Pope said.

The EPA estimates that autos represent 17% of all man-made C02 in the U.S.

Administration officials say this new plan will save 1.8 billion barrels of oil and reduce C02 by 900 million metric tons. This would be the environmental equivalent of taking 58 million cars off the road or closing 194 coal-fired power plants.

Is this a new law or just a plan?
At this point it is just a plan, but one that has a lot of support. The new standards must clear a few regulatory hurdles at the Environmental Protection Agency and the Transportation Department before it would move to be passed into law by legislators.

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