US proposes to double auto fuel economy by 2025

WASHINGTON (Reuters): The Obama administration has proposed doubling auto fuel efficiency to 54.5 miles per gallon by 2025, a White House energy priority that has come under scrutiny in Congress.

The plan grew out of an uneasy agreement between the administration, automakers and environmental groups to reduce U.S. dependence on oil imports and cut tailpipe emissions.

Regulators hope to finalise the proposal by summer following a 60-day public comment period. The administration wants to give industry five years to develop fuel-saving technologies further and plan products before the rule would start taking effect in 2017.

“We expect this program will not only save consumers money, it will ensure automakers have the regulatory certainty they need to make key decisions,” Transportation Secretary Ray LaHood said in a statement.

Current standards require automakers to raise efficiency from 27 mpg today to 35.4 mpg by 2016.  Targets beginning in 2017 would require a 5 percent annual efficiency gain for cars and 3.5 to 5 percent for light trucks, which include SUVs, pickups and vans.

Thirteen major automakers, incl-uding General Motors Co , Ford Motor Co, Fiat SpA affiliate Chrysler Group LLC, Toyota Motor Corp and Honda Motor Co Ltd, have signed on to the fuel deal.

Automakers - especially truck-heavy U.S. vehicle producers - consider the 54.5 mpg target ambitious and the proposal estimates it could cost them $157 billion to meet it.

“The proposed regulations present aggressive targets, and the administration must consider that technology break-throughs will be required and consumers will need to buy our most energy-efficient technologies in very large numbers to meet the goals,” Mitch Bainwol, chief executive of the Alliance of Automobile Manufacturers trade group, said in a statement.

President Barack Obama has made fuel efficiency a signature environmental and energy priority since cars and trucks account for 20 percent of carbon emissions and more than 40 percent of U.S. oil consumption.

But the role of federal environmental regulators and the state of California - a leader in efforts to reduce emissions - in developing auto standards has rankled the Republican-led House of Representatives.

Republican members of the Oversight Committee, who are scrutinising Obama’s “green economy” agenda, have challenged administration assumptions on who can regulate gas mileage and emissions under federal law. It is unclear whether the panel’s investigation would slow or derail the regulation, especially should Obama fail to be re-elected next November.

The proposal envisions reducing oil imports by 2.2 million barrels per day by 2025, offsetting almost a quarter of current American use of foreign petroleum.

The average fuel economy for new vehicles is now 2.5 mpg more than four years ago, according to the University of Michigan Transportation Research Institute.

Automakers would rely on numerous conventional engine, transmission and component technologies and lighter vehicle designs to meet the new standard even though Obama is pushing further electric and hybrid car improvements and the plan includes strong incentives for their development.

GM’s Chevy Cruze, Ford’s Focus and Hyundai Motor’s Elantra are new, small car entrants powered by conventional engines that are popular with consumers as gasoline prices now average about $3.43 per gallon in a rough economy. Dozens of fuel-efficient vehicles were on display at this week’s Los Angeles Auto show.“Our surveys show car buyers want better fuel standards, particularly because they want to spend less on gasoline,” said Shannon Baker Branstetter, policy counsel for Consumers Union.

Efficiency improvements would save consumers an average of up to $6,600 in fuel costs over the lifetime of a model-year 2025 vehicle, but they would pay up to $2,200 on average for more fuel efficient vehicles, according to the proposal.

Although environmental groups pushed for a tougher standard, they lined up behind the proposal. They said, however, that actual fuel economy would come in lower than 54.5 mpg due to real-world driving factors.

They also said regulators still need to tighten provisions favoring production of less efficient, bigger pickups and SUVs, a complaint of European automakers that did not sign on to the agreement.