Op-Ed: What Obama's New 54.5 MPG Standard Means For Our Rides

New 54.5 standard will spawn more electrics but still leave us plenty of trucks and muscle cars to enjoy

President Obama is pushing the auto industry to accept a new fuel economy rating of 54.5 miles per gallon by 2025, a standard that presumes many more drivers will buy into electric cars in the next fifteen years.

The new target, if made final after a period of review and public comment, would become law in July 2012, and builds on the 35.5 mpg standard that automakers already have to meet by 2016.

While the new higher standard is a step forward in the quest to lower America's fuel consumption and tailpipe emissions, the government employs (no big surprise here) a confusing, mind-numbing calculus to determine how automakers will actually meet the new standard. As with most government mandates, and anything agreed upon by more than two lawyers in the same room, the complexity stems from the hard work of lobbyists who work tirelessly to see that their clients can skate through the loopholes without too much trouble.

An average fuel economy of 54.5 seems sky high and impossible when you consider that the car with the highest fuel economy today is the Toyota Prius at 50 mpg. But that doesn't mean the new standard of 54.5 mpg is wrong-headed or impossible to reach.

Breaking it down to understandable terms

To understand the new standard that seems on the surface to indicate half of us will be commuting on pogo sticks next decade, let's first consider the current fuel economy standard. The average fuel economy for passenger cars is supposed to improve to 37.8 mpg by 2016. The fuel economy standard for pickup trucks and SUVs is supposed to rise to 28.8 mpg. This means cars, starting this year, must improve by 37 percent, and trucks by 23 percent, in the next five years. Combined, cars and trucks in 2016 should average 34.1 mpg, up 35 percent from the current 25.3 mpg-a climb of 5.1 percent per year.

Sounds great. How do we get there?

Here's where it gets very governmental, confusing and lawyerly. But stay with me. The tests used to measure Corporate Average Fuel Economy" (CAFE) numbers are based on city and highway tests devised by the Department of Transportation. Today's window stickers take those numbers, manipulate them, and incorporate other tests with the goal of providing a more realistic, lower estimate. Our friends at Car and Driver magazine use this example: A BMW 328i that is rated at 18 mpg city and 28 highway on its window sticker has a "raw" CAFE fuel economy of about 28 mpg-just above today's passenger car standard of 27.5.

In 2009, passenger car fleets posted an average of 32.5 mpg, according to the CAFÉ calculations, and pickups and SUVs were scored at 24.5 mpg. That was 5 mpg above the standard the industry was supposed to hit. In those years when the industry over-achieves the standard, they earn credits to help them meet the future standards when they can't quite get there.

Each automaker, take Ford for example, will hit the standard applied to it by averaging their fuel economy across all their models. So, for example, selling the Transit Connect Electric will help cancel out the guzzling nature of the Ford Expedition SUV. After all, an SUV of that size is never going to get much more than 25 mpg on the highway and it will only get that with a long list of enhancements and technology that will drive its cost up.

Here is another feature of the new standard: The 54.5 mpg target for 2025 is a "projection," just like the current 37.8 mpg standard by 2016. These future requirements are based on the size of each vehicle in a car company's lineup. In the federal calculus, each car and truck has a "footprint" based on the vehicle's wheelbase (length) and track (width). This is an attempt to force a company to make all cars and trucks more fuel efficient. Car and Driver, again, gives us a useful example: The Honda Accord has a wheel-base of 110.2 inches and a track of 62.6 inches, making for a "footprint" of 47.9 square feet. Based on the government's formula, the Accord should achieve 35.9 mpg by 2016. Today's Accord gets 27 mpg. But not only will Honda have an all-new Accord between now and the date, but it also has earned credits that will help make up the shortfall if it can't quite get to 36 mpg. The company nevertheless has a huge incentive to get as close to the target as possible. And that's a good thing.

Car companies today are searching for every 1 mpg they can find

While it all seems overly complex (have you ever tried to actually read a piece of legislation?), the benefit of the higher standard and the formula is that it motivates automakers to pull out the stops on every new model to improve fuel economy, And before we even get to futuristic technology like hydrogen power cars, it means that the companies are installing a lot of technology they have had on the shelves for years that improves efficiency.

Like what? Hyundai and Porsche are installing stop-start devices into cars-mechanisms that stop the engine at stoplights or of the car is at idle. The driver touches the gas pedal when the light changes green, and the car starts up again. It's technology already found in hybrids that is migrating to non-hybrid vehicles. BMW is putting high-performance twin-turbo four cylinder engines in its U.S. cars again after decades of just offering six and eight cylinder engines. Chevy is planning to offer a clean-diesel engine in the Chevy Cruze that should get well North of 40 mpg on the highway. And so on.

Automakers are making smart and progressive choices already that can be attributed in part to the tougher standards, and not just today's $4.00 per gallon gas. After all, five years ago, when these vehicles were being developed, gas prices were well below $3.00. The 2011 Ford Explorer with a six cylinder engine gets a combined 20 mpg, and a forthcoming four-cylinder version will get perhaps 24-26 mpg. That is up from 17 mpg for the old Explorer. The 2011 Chevy Equinox comes in a four-cylinder engine and gets a combined 26 mpg, while the old version got just 20 mpg. Each time an automaker redesigns a vehicle, they are finding ways to dial in big improvements to engines, and transmissions and new light weight materials to reduce weight and improve economy.

Every automaker's CAFE requirement will be calculated differently depending on the size of the vehicles it produces. This makes sense. Ford, for example, is the leading brand of pickup truck. That's because Ford, GM and Dodge are good at making pickups, while Honda and Toyota are not. When the housing market finally recovers, pickup sales will spike with the recovery in the economy and Detroit should not be penalized for that.

In a recent Consumer Reports poll of car owners, 62 percent said when they buy their next car, they expect to choose a model with better gas mileage than their current vehicle. 87 percent said the number-one reason for choosing a more fuel-efficient car was lower fuel costs. 73 percent of those planning to buy a vehicle said they were considering an alternative power train, such as hybrid, electric, or flex fuel.

Why not let the market decide?

Many might ask: Why force such a complicated calculus on the auto companies and consumers. Why not just let the markets and consumers buy and sell the vehicles they want. If gas prices get to $5.00 per gallon then the guy who bought the Hummer H2 is going to pay through the nose by his own choice.

Despite the rantings and ravings of Rush Limbaugh who insists that such measures as the new standard will have us all driving gas-powered skateboards, there is an undeniable social and economic benefit of herding the nation into more fuel efficient vehicles.

European countries have done this by taxing the heck out of fuel. On a recent drive through Germany, it cost me about $143.00 to fill up the tank on the Jeep Wrangler I was driving as part of an assignment. Ouch! If I lived in Germany, I most certainly would not drive a Wrangler, with which I was getting 18 mpg, as my everyday ride. I would probably drive something like a Volkswagen Golf TDI, which gets 34 mpg (U.S.) and well above 40 mpg on the highway. A Golf, in fact, in Europe is a typical family car for a family of four. People adjust their habits and perspective, and get used to a smaller vehicle. Less fuel is consumed, and less smog is created.

The U.S. finds European-style gas taxes politically undigestable, so the higher CAFÉ standards and the formula for getting there is what we have as our system. If the higher standard was not in place, consumers, based on past behavior, would simply revert to buying gas hungry trucks and SUVs they don't need when there is a dip in oil prices. That behavior is viewed as bad for the public, and bad for the country as it tries to become less dependent on oil.

Bottom Line: In order to satisfy the new fuel economy requirement, we will see more electric and hybrid vehicles coming from the car companies, as well as more clean-diesel cars and high performance and efficient four-cylinder engines in crossover SUVs and sedans. Pickup trucks will become more fuel efficient, and be sold with more six-cylinder engines, but those who need bigger engines for jobs like construction and farming will certainly be able to buy them, and car companies will not be penalized for selling them. The new standard for 2025 is much higher than today's, but companies generally think they will be able to hit it.

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