U.S. lags in a global race for fuel efficiency


Driving down greenhouse gas emissions with more fuel-efficient vehicles may be the world's greatest opportunity to combat climate change, but it will take a truly global effort to get there.

As the global middle class expands, more and more people will seek the freedom of mobility. But the more cars there are, the worse traffic jams, air quality, oil demand and greenhouse gas emissions will become.

The United States recently completed historic new fuel economy standards, but the aggressive increase in international vehicle sales could undermine any environmental benefits derived from them.

"We believe we're at an energy crossroads and the stakes are high," said Kathleen Hogan, deputy assistant secretary for energy efficiency at the Department of Energy, at the 5th International Environmentally Friendly Vehicle Conference earlier this month. "The global transportation system has really never challenged our economic and environmental security more than it does today."

Despite expected increases in fuel economy, the world will need to develop twice the amount of oil currently being developed in the Middle East to meet growing demand, nearly all of which will come from emerging economies, she said. The political and economic risks will increase as demand grows, she added. And the environment will suffer, too.

According to the International Energy Agency, transportation currently produces about a quarter of global greenhouse gas emissions, and that figure is en route to double by midcentury without major advances in fuel economy.

But, independent of any formal international negotiations, policies are being implemented to confront these challenges in both wealthy and emerging economies.

American automakers play 'catch-up'

In the United States, the new corporate average fuel economy, or CAFE, standards completed by the Obama administration last month are considered the most significant single step the country has taken to address global warming.

Under the new law, light-duty vehicles will double in fuel efficiency, reaching an average fleetwide target of 54.5 mpg by 2025.

The United States is the first country with a standard up to 2025. But Japan and Europe's policies for light-duty vehicles up to 2020 go even further in reducing fuel use and cutting greenhouse gases.

The European Union finalized targets to limit the average emissions from new cars to 130 grams of carbon dioxide per kilometer (g CO2/km) by 2015. It also has firm proposals to reach 95 g CO2/km by 2020, which is the equivalent to about 60 mpg on the CAFE cycle.

Using the same analysis, the U.S. standards would actually be 49.1 mpg, according to the International Council on Clean Transportation (ICCT).

In Japan's standards for 2020, the government set the equivalent of a 55.1 mpg target. The mpg number is lower than the European Union's, but in practice, Japan's fleet is expected to be equally efficient, said Anup Bandivadekar, a vehicle expert with ICCT.

Hybrids already make up about 20 percent of new vehicle sales in Japan, and numerous automakers have decided to introduce their electric and fuel-cell vehicles in Japan before entering other markets. The Japanese vehicle fleet is already on track to meet or exceed its 2015 standard this year and is likely to meet its 2020 target a few years ahead of schedule, Bandivadekar said.


Necessity, and not just standards, drives fuel efficiency. In India, where gasoline costs just under $4 a gallon -- a very high price relative to income levels -- the average fuel economy of the passenger fleet is around 40 mpg, well above present-day fuel economy in the United States.

"Let's be clear," said Mark Cooper, director of research at the Consumer Federation of America. "The rest of the world was more fuel-efficient. We're doing the catch-up."

Positioning for a global competition

But now that the United States has taken action, ripple effects have emerged.

Prompted by the United States, Canada is also pursuing national fuel economy standards for cars and trucks made after 2016. Canadian Environment Minister Peter Kent said in an interview that the Canadian rule would mirror the American one and be released in December or January.

Mexico has put forward a similar proposal that would align with U.S. 2012-2016 fuel economy standards that will bring the fleet average to 35.5 mpg.

The U.S. fuel economy standards are important because they put North American automakers on track to compete globally, said Cooper. By 2025, the U.S. light-duty fleet will be about on par with the rest of the world in terms of fuel economy, making it much easier for companies to sell across markets.

"And that's why automakers haven't complained," said Cooper. "[The standard] may be hard, but it's where they have to be, and that's why they decided to support it."

In the 1990s, U.S. automakers had a much larger share of the U.S. auto market. And since the U.S. market was so big, they dominated the world market, too. But that's not the case today, said Cooper.

"Now, you have to compete globally," he said.

In response, some unlikely partnerships have emerged within the auto industry.

For instance, Ford Motor Co. and Toyota Motor Corp. announced last year that they would collaborate to build hybrid trucks and SUVs with an expected launch date before the end of the decade.

Toyota and BMW Group also signed memorandum of understanding last year to collaborate on next-generation lithium-ion battery cell technologies. And this year, the two companies announced they will also be working on a fuel-cell system, a sports vehicle, powertrain electrification and lightweight materials.

"As manufacturers are looking to deploy products on more global platforms, they are finding that there's a lot of value in doing this precompetitive development together and then deploying technologies in a way that suits their needs when it comes to product development," said Bandivadekar. "That's creating some interesting opportunities."

When Chrysler and Fiat SpA announced their strategic alliance in 2009, the two car companies had little in common. But it gave the Italian company the opportunity to enter the American market and gave Chrysler, known for its larger trucks and sedans, access to Fiat's fuel-efficient automobile technologies.

"You can't be a, quote, U.S. automaker anymore," said Cooper. "You have to be a global automaker, because you have to spread your costs."

China could transform the auto industry

To boost their domestic auto industries and curb greenhouse gas emissions, emerging economies are also pushing for fuel economy standards on their own accord. South Korea, for example, is working on standards for 2020, and Brazil is poised to launch tax incentives for cleaner vehicles.

By the end of this year, the government of India is expected to release its National Electric Mobility Mission Plan, which would put 6 million to 7 million electrified vehicles on the roads by 2020. Proposed standards would also increase the fleet average fuel economy to the equivalent of 52 mpg by the end of the decade.

Fuel economy standards are also being put in place in China, where annual vehicle sales will double sales in the United States in the next decade. The government has already directed the 2015 target to reach 6.9 liters per 100 kilometer (L/100 km), or the equivalent of 37 mpg, and is planning to increase fuel economy to 5 L/100 km, or roughly 50 mpg, by 2020.

China's targets are "really ambitious," said Bandivadekar. But if it succeeds, China could transform the auto industry for the better.

According to the consulting firm Pike Research, the number of plug-in electric vehicles (PEVs) will surpass the number of hybrids on the global market by 2020, driven largely by China, which is hungry for smaller, zero-emissions cars to reduce congestion and local pollutants.

Annual PEV sales, which continue to sorely lag in the United States, will reach more than 1.7 million units globally, and hybrid sales will reach 1.6 million by the end of the decade.

In considering all of the various international fuel economy standards together, Bandivadekar's research actually paints a fairly positive image.

"In spite of the growth in light-duty vehicles around the world ... light-duty fuel consumption and carbon dioxide emissions will be nearly flatlined for the next 20 years as a result of these efficiency standards," he said.

"And if we keep up with these standards going forward, going beyond 2025, we could see a trajectory that declines continuously beyond 2025."