The Obama administration today plans to propose tough standards for tailpipe emissions from new automobiles, establishing the first nationwide regulation for greenhouse gases.The new rules are the result of negotiations intended to bridge differences between California and other states that were pushing for their own tougher standards, the White House, and automobile manufacturers. In return for the tougher new national standards, California will drop its fight to establish its own standards.
It will also raise fuel efficiency targets to 35.5 miles per gallon for new passenger vehicles and light trucks by 2016, four years earlier than required under the 2007 energy bill, sources close to the administration said.
While cleaner air, fewer oil imports, and a more uniform regulations are big pluses, there will be added costs for manufacturers and ultimately consumers.
A senior administration official said the new standards would raise the cost of an average car by $1,300, $600 of which could be attributed to the rules being announced today. The remaining increase would stem from previous energy policy.At first glance those costs seem high. However, upon closer inspection, they will be more than balanced by fuel cost savings over the life of each car.
The current CAFE standards for passenger cars are 27.5 mpg. Assuming that gas prices are $2.25 per gallon, it costs just under $818 to drive each ten thousand miles. The new passenger car standards will be 39 mpg. Assuming the same gas prices, it will cost just under $577 to drive the same distance, a savings of about $241. Ignoring discounting, a driver would recoup the $1,300 after about 54,000 miles driven or about four years of driving. If gas prices rise, the costs would be recouped even sooner.
That's not a bad deal at all.