Obama unveils new national fuel efficiency policy, 35.5mpg by 2016

Carmakers are already fretting at the thought of achieving the new 35mpg CAFE standards imposed by the U.S. government by the current 2020 deadline, but an announcement by President Barack Obama today revealed the plan to get the standard up to 35.5mpg by 2016. The plan requires a gain of over 5% per year, matching a standard imposed by California and several other states and thus ending chances of a patchwork of different standards for the U.S.

The deal fulfills a campaign promise by Obama to allow California’s tougher emissions standard to be enacted. Up to 17 other states were expected to implement the same standards but today's announcement ties all states to a single, coherent standard.

"In the past, an agreement such as this would have been considered impossible," said Obama. "That is why this announcement is so important, for it represents not only a change in policy in Washington, but the harbinger of a change in the way business is done in Washington. As a result of this agreement, we will save 1.8 billion barrels of oil over the lifetime of the vehicles sold in the next five years. And at a time of historic crisis in our auto industry, this rule provides the clear certainty that will allow these companies to plan for a future in which they are building the cars of the 21st century."

Administration officials portray the decision as one that unites the industry and the government with a result that is beneficial to all parties, and the environment. Widespread announcements of support from union and industry leaders on Monday backed up with statement with action, and now all that is left is to get to the business of improving fuel efficiency.

"GM and the auto industry benefit by having more consistency and certainty to guide our product plans," said GM CEO Fritz Henderson in a statement. Toyota also praised the national plan. "We welcome the Administration’s leadership in developing a coordinated fuel efficiency and greenhouse gas standard. This is something we have encouraged and sought for a very long time," said Jim Lentz, president of Toyota Motor Sales, USA.

Ford's Alan Mulally echoed that sentiment, saying, "The framework of the national program will give us greater clarity, certainty and flexibility to achieve the nation’s goals. We will continue to work with the federal agencies to finalize the standards that we are committed to meeting."

Even with the coherent standard, the expenses won't be miniscule. The new plan means that the industry as a whole must meet a 35.5mpg average for both passenger vehicles and light trucks, up 8mpg from today's requirements. Cars will have to hit 42mpg, while trucks will be targeting 27mpg. The new standards cover cars built between the 2012 and 2016 model years. Dovetailing with the mpg requirements is a CO2 target of 250g per mile by 2016 and a linear ramp-up to that figure.

The savings this could represent for the economy is up to 1.8 billion barrels of oil over 5 years, or the same as taking about 58 million cars off the roads. As part of the agreement to a single national standard, the state lawsuits seeking ability to enact tougher-than-federal standards will be dropped. About 900 million metric tons of of green house gas emissions will be prevented.

Consumers will benefit directly as well, saving on average $2,800 in fuel costs over the life of their vehicles. The costs to buy the cars - which will by necessity be more expensive than current cars - will be recouped within three years, according to the Obama administration, though what figure they're using for fuel prices isn't disclosed.

The next challenge will be overcoming the technological and financial hurdles involved in making cars dramatically more fuel efficient with each passing year.