Automotive Fuel Economy How Far Can We Go? (1992) / Chapter Skim
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8 ACHIEVABLE FUEL ECONOMY LEVELS
8 ACHIEVABLE FUEL ECONOMY LEVELS
Pages 149-167
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From page 149... ...
The technically achievable fuel economy levels should not be taken as the committee's recommendations on future fuel economy standards. Rather, they should be viewed by policymakers as one of the many inputs necessary for determining what would be practically achievable in the coming decade.
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From page 150... ...
Also, where possible, the chapter illustrates the uncertainties in the fuel economy projections and in their impacts. TECHNICALLY ACHIEVABLE FUEL ECONOMY Method and Assumptions The committee's determination of Technically achievable" levels of future fuel economy was accomplished using a structured judgmental process.
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From page 151... ...
also presents the committee's judgments about the likely increases in cost (in terms of their retail price equivalents, or RPE) associated with each estimate of technically available fuel economy for each vehicle class for MY 2006.i Expected increases in the average prices of new cars and light trucks in MY 2006 associated with the technically achievable levels range from a low of $500 to a high of $2,750 in 1990 dollars.
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From page 152... ...
Aside from the limits imposed by the foregoing assumptions, no cost-benefit considerations entered into the determination of the technically achievable fuel economy levels. Specifically, the estimates do not take into account other factors that should be considered by policymakers in determining any future fuel economy regulations, including impacts on the competitiveness of automotive and related industries, sales and employment effects, petroleum import dependence, effects on nonregulated emissions (e.g., the greenhouse gas, carbon dioxide)
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From page 153... ...
Fuel economy values by size class shown for MY 2001 were obtained by interpolation between values for MY 1996 and MY 2006. The new-car and light-truck fleet average fuel economies are shown above for illustrative purposes and are calculated assuming a size-class mix similar to that for MY 1990 vehicles, as follows: passenger cars -- subcompact, 23 percent; compact, 35 percent; midsize, 26 percent; large, 16 percent; light trucks -- small pickup, 15 percent; small van, 29 percent; small utility, 16 percent; large pickup, 40 percent.
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From page 154... ...
PRACTICALLY ACHIEVABLE FUEL ECONOMY Cost-Benefit Considerations As discussed above, determining the practically achievable levels of the future fuel economy of automobiles and light trucks requires consideration of the nature and magnitude of the costs and benefits of higher fuel economy, not only to consumers but also to industry, workers, and the nation as a whole. Upon consideration of these costs and benefits, policymakers may conclude that it is desirable to push fuel economy to the technically achievable levels defined above, or even beyond, or they may decide to set lower levels after considering all of the costs that might flow from higher levels.
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From page 155... ...
The projections of future fuel economy in Chapter 7 and the committee's estimates of technically achievable fuel economy reported earlier in this chapter were carried out only within vehicle classes, without reference to whether new standards might be applied at the class level or on some other basis.4 As noted previously, this study did not examine the degree to which more stringent fuel economy standards might lead to downsizing, downweighting, or shifts in the market mix of vehicles of different classes, yet these factors are critical in defining the costs and benefits. Thus, policymakers are urged not to view the analyses of specific costs and benefits in this chapter as definitive, but rather as suggestive of further analysis that might be appropriate.
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From page 156... ...
Costs and Benefits of Higher Fuel Economy to Consumers The estimates of technically achievable future vehicle fuel economy are based on the assumption that attributes valued by consumers, such as interior volume, comfort, acceleration performance, safety, and load-carrying capacity are not degraded. However, it was assumed that vehicle prices would have to increase to cover the costs of adopting technologies that could improve fuel economy while keeping these attributes fixed.
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From page 157... ...
By comparison, the fuel cost savings using a 10 percent discount rate and a 12-year decision horizon are nearly twice as high as those estimated under the other two sets 51 he cost and benefits of practically achievable fuel economy levels would differ from those in Table 8-3. 6It is not clear whether the initial purchaser of a vehicle should take into account the fact that a vehicle with a higher fuel economy might have a higher value at time of resale or trade-in.
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From page 158... ...
High Low 12 Years, 4 Years, 12 Years, Vehicle Class 1990 2006 Estimate Estimate 30~o 10% 10% Low Estimates of mpg in 2006 Passenger Cars Subcompact 31.4 39 1,250 500 428 413 801 Compact 29.4 34 1,250 500 318 306 594 Midsize 26.1 32 1,250 500 467 470 912 Large 23.5 30 1,250 500 636 613 1,190 Light Trucks Small Pickup 25.7 29 1,000 500 305 295 571 Large Pickup 19.1 23 1,750 750 613 591 1,146 Small Van 22.8 28 1,250 500 562 542 1,051 Small Utility 21.3 26 1,250 500 586 565 1,095 High Estimates of mpg in 2006 Passenger Cars Subcompact 31.4 44 2,500 1,000 629 607 1,177 Compact 29.4 38 2,500 1,000 531 512 994 Midsize 26.1 35 2,500 1,000 672 646 1,257 Large 23.5 33 2,500 1,000 845 815 1,581 Light Trucks Small Pickup 25.7 32 2,000 1,000 529 510 989 Large Pickup 19.1 25 2,750 1,500 852 822 1,595 Small Van 22.8 30 2,500 1,000 726 700 1,359 Small Utility 21.3 29 2,500 1,250 860 829 1,609 Present value of fuel cost savings discounted to 2006 for a new MY 2006 vehicle driven 14,400 miles in the first year, declining by 5 percent per year thereafter. Fuel price is $1.45 (1990 $)
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From page 159... ...
this suggests that buyers of new vehicles watt be indifferent to fuel economy at the present time, a stance seemingly supported by vehicle market trends over the past half decade. Although consumers watt receive some savings in fuel costs in return for the higher vehicle price associated with fuel economy improvements.
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From page 160... ...
Sales Mandated higher fuel economy levels could have two major types of negative impacts on manufacturers. First, the higher cost of new vehicles is likely to depress sales if the resultant increase in the vehicle's initial price outweighs the benefit of fuel savings over the vehicle's life, as evaluated by consumers.
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From page 161... ...
, one way to make the estimate is to assume that vehicle sales respond to changes in the present value of fuel costs in the same way they do to vehicle price changes. As exemplified in Table 8-3, with the estimates of technically achievable fuel economy and costs reported for this study, the net present cost of higher fuel economy to the consumer is always substantially less than the initial vehicle price increase, and there may even be a positive benefit.
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From page 162... ...
F o r example, a fuel economy standard that averages corporate fuel economy performance across all cIasses -- the current approach -- has important differential effects among manufacturers. Because domestic producers make a larger proportion of midsize and large cars than do most foreign manufacturers, even if domestic producers met the committee's technically achievable fuel economy levels in each class, they could not reach the same corporate average levels of fuel economy as the foreign (primarily Japanese)
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From page 163... ...
420f course, even if the fuel economy standards for new cars and light trucks were set at the Technically achievable levels in 2006, such significant reductions would not be achieved until years thereafter. New vehicles constitute only a small portion of the existing fleet; the standards have impact only over time as the fleet turns over and more efficient new vehicles replace less efficient older vehicles.
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From page 164... ...
In addition, depending on the balance of price increase and fuel cost savings discussed earlier, increases in new-vehicle prices could keep older vehicles on the road longer, thus delaying reductions in total automotive emissions. For the estimates of "technically achievable" fuel economy presented in Table 8-l, it was assumed that safety and Tier ~ emissions regulations watt be met, but Tier IT and California's standards were not taken into account.
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From page 165... ...
If consumers do not like the design changes that are made to increase fuel economy, the cost in lost sales and profits to the manufacturers could be substantial, even if fuel savings outweigh the retail price increase to the consumer. And, stringent fuel economy requirements would impose special pressures on U.S.
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From page 166... ...
It is clear from the committee's analysis that the risks of setting overly stringent fuel economy standards could have annual costs to consumers and industry in the tens of billions of dollars, not to mention the possible costs in jobs and lives. On the other hand, insufficient fuel economy improvement could contribute to continuing energy insecurity and growing greenhouse gas emissions.
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From page 167... ...
1991. Potential for Improved Fuel Economy in Passenger Cars and Light Trucks.
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