President Barack Obama has inked a deal with 13 major automakers to pursue the next phase in the Administration’s national vehicle programme, increasing fuel economy to 54.5 miles per gallon for cars and light-duty trucks by Model Year 2025.

The President signed the agreement with Ford, General Motors, Chrysler, BMW, Honda, Hyundai, Jaguar Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo – which together account for more than 90% of all vehicles sold in the US – as well as the United Auto Workers (UAW), and the State of California.

“This agreement on fuel standards represents the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil,” said Obama. “Most of the companies here were part of an agreement we reached two years ago to raise the fuel efficiency of their cars over the next five years.

“We’ve set an aggressive target and the companies are stepping up to the plate. By 2025, the average fuel economy of their vehicles will nearly double to almost 55 miles per gallon.”

Model years 2012-2016 vehicles will raise fuel efficiency to 35.5 mpg, while the next round of standards will require performance equivalent to 54.5 mpg or 163 grams/ mile of CO2 for cars and light-duty trucks by Model Year 2025.

The programmes are estimated to save US$1.7tn in fuel costs and by 2025 result in average fuel savings of more than US$8,000 per vehicle. Additionally, the programmes will cut oil consumption by 12bn barrels of oil and by 2025 reduce oil consumption by 2.2m barrels a day – as much as half of the oil the US imports from OPEC (Organisation of the Petroleum Exporting Countries) every day.

These new standards are also estimated to curb carbon pollution, cutting more than 6bn metric tons of greenhouse gas during the programme life – more than the amount of carbon dioxide emitted by the US last year.

The Environmental Protection Agency (EPA) and the Department of Transportation (DOT) have worked closely with auto manufacturers, the state of California, environmental groups, and other stakeholders for several months to ensure the standards can be met. 

The programme will increase the stringency of standards for passenger cars by an average of 5% each year. The stringency of standards for pick-ups and other light-duty trucks will increase by an average of 3.5% annually for the first five model years and an average of 5% annually for the last four model years of the programme.

“These standards will help spur economic growth, protect the environment, and strengthen our national security by reducing America’s dependence on foreign oil,” said US Transportation Secretary Ray LaHood.

“Working together, we are setting the stage for a new generation of clean vehicles.”

EPA and NHTSA (National Highway Traffic Safety Administration) are developing a joint proposed rule-making, which will include full details on the proposed programme and supporting analyses, including the costs and benefits of the proposal and its effects on the economy, auto manufacturers, and consumers.

After the proposed rules are published in the Federal Register, there will be an opportunity for public comment and public hearings. The agencies plan to issue a Notice of Proposed Rule-making by the end of September 2011.

California plans on adopting its proposed rule in the same time frame as the federal government.

Given the long time frame at issue in setting standards for MY2022-2025 light-duty vehicles, EPA and NHTSA also intend to propose a mid-term evaluation.

The agencies are considering a number of incentive programmes to encourage early adoption and introduction into the marketplace of advanced technologies and performance improvements, including incentives for electric vehicles, plug-in hybrid electric vehicles, and fuel cells vehicles, as well as incentives for advanced technology packages for large pick-ups, such as hybridisation and other performance-based strategies.

There will also be credits for technologies with potential to achieve real-world CO2 reductions and fuel economy improvements that are not captured by the standard test procedures.

In addition, the EPA plans to propose provisions for credits for improvements in air conditioning systems, both for efficiency improvements and for use of alternative, lower global warming potential refrigerant, as well as treatment of compressed natural gas.

There will also be continued credit banking and trading, including a one-time carry-forward of unused MY 2010-2016 credits through MY 2021.