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Forbes: Obama’s Stricter Fuel Efficiency Standards Will Save Money, Create Jobs, Report Says

By Erica Gies
Forbes
Nearly lost in the debt-ceiling drama was President Obama’s announcement last Friday of new corporate average fuel economy (CAFE) standard for cars and light-duty trucks: 54.5 miles per gallon by 2025. Thirteen automakers, representing 90 percent of the cars sold in the United States, were on board with the agreement, which follows Obama’s 2009 mandate for a CAFE average of 35.5 by 2016.
Forbes: Obama’s Stricter Fuel Efficiency Standards Will Save Money, Create Jobs, Report Says

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Nearly lost in the debt-ceiling drama was President Obama’s announcement last Friday of new corporate average fuel economy (CAFE) standard for cars and light-duty trucks: 54.5 miles per gallon by 2025. Thirteen automakers, representing 90 percent of the cars sold in the United States, were on board with the agreement, which follows Obama’s 2009 mandate for a CAFE average of 35.5 by 2016.

Following the announcement, Ceres, a national coalition of investors and public interest organizations, released a report detailing what stronger fuel economy and greenhouse gas standards would mean for the U.S. economy. It’s conclusion: the higher the standard, the more jobs and greater savings. “More Jobs Per Gallon,” the report by independent research firm Management Information Services Inc., evaluated various regulatory scenarios the Obama administration had been considering, including fuel economy improvements of 3, 4, 5 and 6 percent per year. It used economic data from the Bureau of Economic Analysis, Bureau of Labor Statistics, and U.S. Treasury Department

Obama’s 54.5 mpg plan is most closely aligned with the report’s 4 percent scenario. According to the report, under that mandate we can expect:

  • Approximately 484,000 new jobs in the United States by 2030.
  • 43,000 of those would be full-time jobs in the auto sector.
  • Consumers would save approximately $107 billion at the pump in 2030 compared to business as usual.
  • 49 states would see net job gains.


The report’s results put the lie to the tired trope that stronger fuel standards will hurt the auto industry and jobs. Indeed, it found that stronger standards are good for the auto industry. It is expected to increase the industry’s variable profits, particularly those of the Big Three in Detroit: General Motors, Ford, and Chrysler.

Perhaps most important, higher mileage is technologically feasible: “John DeCicco at the University of Michigan’s Energy Institute found that even if car makers rely only on technologies that are already available and affordable, fleet-wide average fuel efficiency could reach 74 mpg over the next 25 years,” said the report.

Again, bucking conventional wisdom, the report found that voters want better mileage and GHG standards: Researchers polled voters in the historic heart of the auto industry, Michigan. Of likely voters, 78 percent supported a standard of 60 mpg by the year 2025, and 81 percent favored reducing vehicle greenhouse gas emissions.

That actually not too surprising because increased fuel economy and greenhouse gas emissions standards benefit consumers, workers, investors, automakers and the broader economy, said the report. In particular, Obama’s target is expected to bring $21 billion (in 2009 dollars) in U.S. gross economic output in 2030, $14 billion in U.S. personal income, and $13 billion in federal, state, and local government tax revenues.

Of course, better fuel economy means consumer savings at the pump, which will shift consumer spending away from the oil industry and toward other parts of the economy, including retail, food, and health care. Obama’s mandate is expected to generate an estimated $107 billion in fuel savings for consumers in 2030 compared to business as usual. Of that savings, about $42 billion is likely to be spent on cleaner, more efficient vehicles. The remaining $65 billion will be spent across the rest of the economy.

Still, a more aggressive scenario would have created even more jobs, according to the report. A 6 percent scenario (roughly 60 mpg by 2025) would have created approximately 700,000 jobs by 2030. “Our report makes clear that the stronger the standards, the greater the economic benefits,” said Mindy S. Lubber, president of Ceres.

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