What you need to know about the new fuel efficiency standard

It’s official: passenger car and truck makers will have to roll out vehicles with an average fuel efficiency of 54.5 miles per gallon by 2025, federal regulators said Tuesday. Getting there will require billions of dollars of investment for new technologies.

The announcement by Transportation Secretary Ray LaHood and EPA Administrator Lisa P. Jackson capped the administration’s effort to reduce the country’s reliance on imported oil and greenhouse gas emissions. They noted that, prior to President Obama taking office, the fuel efficiency standard hadn’t gone through this large of an update since the 1980’s. The administration also is proud to have corralled 13 major carmakers to support the new regulation.

The new rule affects passenger cars and trucks for model years 2017-2025. It’s an extension of the standard adopted in 2010 for model year 2012-2016.

Here’s what you need to know about the new standard:

1). What model years does the new standard cover? It will affect car models 2017-2025 and calls for an incremental increase of the fuel efficiencies during that time.

2). What are the new fuel efficiencies?: The new fuel efficiency is set to roughly double the efficiency of the new cars on the road today. The standard calls for increasing the efficiency to 35.5 mpg by 2016 for the combined average (passenger cars and trucks) and eventually to 54.5 mpg by 2025.

3). Why do we need the new standard? The proposed standard takes into consideration the greenhouse gas emissions produced by cars on the roads and aims to curb that. Plus, encouraging more fuel efficient cars also means more savings for consumers, who have shown a preference for more economical cars when fuel prices go up and, well, the economy tanks.

4). How will the new rule affect tech investments and innovation? Carmakers will have to come up with a variety of ways to make their vehicles go farther with the same amount of fuel, and that will require new technologies, such as new gasoline engines and transmissions, materials to reduce the weight of a car and energy efficient air conditioning systems. The new rule will require passenger cars to increase their fuel efficiencies at a greater pace than trucks because, Jackson said, the technologies that will be required to improve the trucks’ efficiency could take longer to reach the market.

To encourage innovation, carmakers will get credits that count toward their compliance of the fuel efficiency requirements if they invest in and use certain new technologies, such as cars that run on electricity, fuel cell or natural gas.

5). How will consumer benefits? More fuel efficient cars, because of their use of new technologies, will likely cost more. But the government maintains that the fuel savings will more than make up for the high prices.  Consumers should see an increasing amount of fuel savings as more fuel efficient cars are rolled out through 2015. By 2025, the fuel savings should reach over $8,000 over the lifetime of that vehicle, according to the federal government. The fuel efficiency rules from 2012 through 2025 will save over $1.7 trillion in fuel costs and reduce oil consumption by 12 billion barrels overall.

6). What are the environmental benefits? The standards, for models 2012-2025, also will lower greenhouse gas emissions by half by 2025, or 6 billion metric tons over the duration of the fuel economy program. Jackson said the reduction will be much more significant than any other efforts so far to reduce emissions by other industries.