Stricter fuel efficiency standards, establishing a 35 miles per gallon target for the corporate average fuel economy of new vehicle sales by model year (MY) 2020, were part of the 2007 Energy Independence and Security Act. During spring of this year, the Obama administration moved up the deadline by which the new requirements have to be met from MY2020 to MY2016. In addition, it instructed the US Environmental Protection Agency to regulate automobile emissions of greenhouse gases (GHG). On Jun 4, 2009, the Federal Reserve Bank of Chicago held a workshop at its Detroit branch to discuss the challenges of meeting these stricter fuel efficiency requirements. In order to meet the new fuel economy and GHG emissions targets, automakers will be looking to technologies available at the lowest cost per fuel economy improvement. Producers adjusted by making vehicles shorter and lighter and, in the process, reducing the size of engines.
ESSAYS ON ISSUES THE FEDERAL RESERVE BANK SEPTEMBER 2009 OF CHICAGO NUMBER 266 Chicago Fed Letter Raising automotive fuel efficiency by Taft Foster, associate economist, and Thomas H. Klier, senior economist The Obama administration recently moved up the schedule for achieving the fuel efficiency standards set forth by Congress in the 2007 Energy Independence and Security Act. The deadline for meeting these standards is now vehicle model year 2016 instead of 2020. Stricter fuel efficiency standards, estab- through fuel efficiency improvements lishing a 35 miles per gallon (mpg) target equates to achieving a fleet average level for the corporate average fuel economy of 35.5 mpg by MY2016 (see figure 1). (CAFE) of new vehicle sales by model On June 4, 2009, the Federal Reserve year (MY) 2020, were part of the 2007 Bank of Chicago held a workshop at its Energy Indepen- Detroit branch to discuss the challenges 1. Historical and future CAFE standards dence and Security of meeting these stricter fuel efficiency Act (EISA). These re- miles per gallon requirements.1 Thomas H. Klier, senior quirements will be 40 economist, Federal Reserve Bank of phased in beginning Chicago, provided lessons from past ex- with MY2011 vehicles. perience with regulating fuel efficiency The National High- 30 in the auto sector. Brent Yacobucci, way Traffic Safety specialist in energy and environmental Administration policy, Congressional Research Service, (NHTSA), which is 20 shared his inside-the-Beltway perspective part of the U.S. De- on the new regulations. The session con- partment of Trans- cluded with two views from the frontline: 10 portation, is the Eric Fedewa, vice president of global government agency powertrain forecasts, CSM Worldwide authorized to regu- 0 (an industry consultancy), shared his late fuel economy. 1978 ’84 ’90 ’96 2002 ’08 ’14 ’20 thoughts on the likely sources of improve- The NHTSA there- ments in fuel economy; and Roger Wood, Passenger cars Light trucks fore issues the de- 2009 requirements executive vice president and general EISA requirements tailed rules required manager of turbo and emissions systems, Notes: CAFE means corporate average fuel economy. EISA means Energy to implement fuel Independence and Security Act of 2007. The 2009 requirements indicate the Borg Warner, provided the perspective Obama administration’s accelerated plan; see the text for further details. The economy standards. of a supplier of technology that improves dashed lines apply to both passenger
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