Light-duty vehicle efficiency

International policy developments for light-duty efficiency 2014–2015

Fuel efficiency and GHG standards have a strong record of reducing fuel use and GHG emissions of light-duty vehicles (LDVs), which include passenger cars, sport utility vehicles, vans, and light trucks. Such standards were first implemented in the U.S. in the 1970s to reduce vulnerability to the price volatility of oil imports. In recent years, most of the largest markets have adopted or implemented mandatory standards that require vehicle manufacturers to meet targets for new vehicle fleets based on CO₂, GHG emissions, fuel consumption, or fuel economy. In this publication, we use the term "efficiency standards" to refer to this collection of policies.

In 2014, 83% of new LDVs worldwide were sold in markets that have adopted LDV efficiency standards. As of January 2016, ten major markets have adopted such standards (Table 1), the latest of which require reductions in CO₂ emission rates of new vehicles (in grams per vehicle-km) between 9% and 35% as measured on laboratory tests. In light of a growing gap between laboratory and real-world fuel consumption that has been documented in Europe, strong compliance programs are needed to ensure that regulatory requirements translate to real-world emissions reductions and fuel savings to consumers. While the EU has adopted new test cycle requirements that will go into effect in 2017, these are expected to only partially close the gap. Measures that could further close the gap include independent re-testing of in-use vehicles and enhanced authority of regulatory agencies to issue fines or require manufacturer recalls. Such requirements have been included in US programs but have yet to be adopted across all countries with vehicle efficiency standards.

Seven major LDV efficiency standards were proposed, adopted, or first implemented between January 2014 and January 2016 (Table 2).

The ICCT has compared corporate average vehicle efficiency requirements for the new fleet across countries that have adopted efficiency standards or comparable fiscal instruments (Figure 1 and Figure 2). To date, the U.S. and Canada have adopted the longest regulatory timeline for LDV efficiency standards out to 2025. For the EU, China, India, Japan, and South Korea, the stringency of new standards for the 2021-2025 period could determine the global leader in new LDV efficiency. In Brazil and Mexico, the next several years are a critical period to determine whether these will keep pace with other top vehicle markets.

Figure 1. Global comparison of passenger car efficiency standards (Source)

Figure 2. Global comparison of light truck efficiency standards (Source). While North American standards include separate limits for passenger cars and light trucks within the same regulation, the EU addresses passenger cars and light commercial vehicles in separate regulations.

Impact assessment of light-duty vehicle efficiency policies

The Global Fuel Economy Initiative (GFEI) is a partnership of the IEA, UNEP, ITF, ICCT, ITS-Davis and the FIA Foundation that seeks to double the fuel economy of new LDVs worldwide by 2030, and halve the average CO₂ rate of in-use LDVs by 2050. Figure 3 compares global progress under LDV efficiency standards adopted to date with the 2030 GFEI target, compared to a 2005 baseline. Among regions that have adopted LDV efficiency standards, the sales-weighted average CO₂ rate of new LDVs is forecast to be 34% lower in 2030 than in 2005 (without additional standards).

As shown in Table 3, reaching the global GFEI target would require continuous improvements in regions with existing policies and expansion of these policies to cover the remaining 21% of worldwide new LDV sales (forecast in 2030).

Figure 4 compares projected LDV CO₂ emissions under three scenarios:

• Business as usual: Considers improvements in LDV efficiency up until 2015, but no further improvements after 2015. This scenario serves as a baseline for estimating the impacts of standards implemented after 2015 (e.g. 2020 targets).
• Adopted: Reflects improvements in LDV efficiency that are required under all adopted policies, but no additional improvements beyond the requirements of these policies (summarized in Table 1).
• Efficiency potential: Considers the impacts on LDV energy use and CO₂ emissions if all vehicle markets adopt standards that reduce average CO₂ rates of new vehicles by 3-5% per year from 2020 to 2030, and 2-4% per year from 2030 to 2050 according to the efficiency potential estimated by the National Research Council. Achieving the efficiency potential estimated by the National Research Council could reduce the global average new LDV CO₂ rate by 50% in 2030 compared to 2005 as targeted by GFEI.

Compared to a business as usual scenario without improvements in LDV efficiency after 2015, standards adopted to date will reduce annual lifecycle emissions by 1.4 billion metric tons carbon dioxide (GtCO2), equivalent to 8 million barrels of oil per day (mbd) in 2050. Achieving the technology potential for LDVs could further reduce emissions by 3.4 GtCO2 in 2050, equivalent to 18 mbd, compared to a scenario with adopted policies.

Cost-effectiveness of light-duty efficiency standards

In addition to climate and energy security benefits to society, vehicle efficiency standards result in fuel savings to consumers and vehicle operators that pay back the incremental cost of technologies that improve vehicle efficiency. The length of time it takes for fuel savings to pay off the initial incremental cost is commonly referred to as the payback period. Regulatory agencies typically publish analyses of regulatory cost-effectiveness in support of their proposed rules, and these analyses are often supplemented by studies from independent research organizations.

Table 4 summarizes the findings of cost-effectiveness analyses of light-duty efficiency standards. As shown, the incremental cost of technology has ranged from $435 to $2,233 per vehicle, with payback periods of 1.5 to 5 years. The length of payback is determined by various region-specific factors including technology cost, annual vehicle mileage, fuel prices, and the discount rate used to put future costs and benefits into present value terms.