Accelerating Global Vehicle Efficiency

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Based on analysis and collaboration with the International Council on Clean Transportation and the FIA Foundation
Accelerating Global
Vehicle Eciency
By Cecilia Springer, Pete Ogden, Nigel Purvis,
and Andreas Dahl-Joergensen June 2014
Accelerating Global
Vehicle Eciency
By Cecilia Springer, Pete Ogden, Nigel Purvis,
and Andreas Dahl-Joergensen June 2014
Based on analysis and collaboration with the International Council on Clean Transportation
and the FIA Foundation
1 Introduction and summary
3 Why vehicle efficiency matters
7 The policy context
10 Potential opportunities and obstacles to implementation
15 The path forward: An opportunity for U.S. global leadership
22 Recommendations and conclusion
24 Endnotes
Contents
1 Center for American Progress | Accelerating Global Vehicle Efficiency
Introduction and summary
Te U.S. government should lead a global efort to improve vehicle efciency
through more stringent, long-term fuel-economy standards for cars and trucks.
Doing so would align interests in economic growth, energy security, public health,
and climate protection across a wide range of countries.
Oil consumption from road transport is increasing rapidly, contributing to
increased emissions, especially in developing countries.
1
Many countries already
have efciency policies to manage fuel consumption, but these policies need to be
scaled up and expanded across a wider range of vehicles. Fortunately, consumer
and industry acceptance of vehicle-efciency policies is growing, paving the way
for world leaders to set more ambitious efciency standards.
Improved vehicle-efciency policies are a political opportunity for world lead-
ers. Leaders should conclude a nonbinding global agreement to increase the rate
of efciency improvement in vehicles. Leaders could strike this agreement at a
number of upcoming global venues, including the U.N. Secretary-Generals 2014
Climate Summit and the 2014 G-20 Leaders Summit.
An agreement among all major economies is possible but may prove challenging
or move slowly due to the diferences in domestic policies and regional markets
between countries. In the meantime, the United States should pave the way for
a global agreement on vehicle efciency by negotiating bilateral deals with key
countries such as China, India, and Mexico. Tanks to new standards adopted
during the Obama administration, the United States is now the world leader in
fuel-economy standards for cars and trucks,
2
and it should help other countries
ramp up their own vehicle-efciency policies through bilateral agreements.
Doing so would demonstrate that vehicle efciency has many benefts for these
nationssome of the worlds largest vehicle marketsand could inspire other
countries to join a global agreement.
In order to improve vehicle efciency worldwide, global leaders should pursue the
following multilateral actions:

Announce a leader statement of interested countries at the U.N. Secretary-
Generals Climate Summit in September.

Conclude a strong G-20 leaders statement with vehicle-efciency goals.

Forge a multicountry alliance on vehicle efciency within the Climate and
Clean Air Coalition and other multilateral venues.
Additionally, the United States should pursue bilateral agreements with the fol-
lowing countries:

China, to improve truck efciency through 2025.

India, to expand efciency standards to cover more types of vehicles and
improve fuel quality.

Mexico, to harmonize efciency standards for cars and extending standards
for trucks.
Tese agreements would demonstrate U.S. leadership while bringing signifcant
benefts to the involved countries. At the same time, they would help pave the way
for a global agreement by demonstrating the benefts of early action on vehicle
efciency, including economic growth, energy security, improved health, and
reduced climate impact.
Why vehicle efficiency matters
Few policies neatly align interests in economic growth and sustainability across
a wide range of countries. Yet, promoting vehicle efciency
3
meets both of
these needs and more. Improving vehicle efciency simultaneously benefts the
economy, energy security, public health, and the climate.
The economy
Increased vehicle fuel efciency saves consumers and businesses money by reduc-
ing fuel costs. Meanwhile, designing and manufacturing vehicles to meet new
fuel-economy standards could spur job growth in the manufacturing and clean
technology sectors. Te Global Fuel Economy Initiative, or GFEI, has estimated
that improved fuel-economy policies for new passenger cars
4
could stimulate $3
trillion in new vehicle technology investments and create $5 trillion in global sav-
ings on fuel costs between now and 2025. Tis would lead to potential net savings
of $2 trillion for the worlds drivers.
5

Te Obama administrations new efciency standards are a case in point. Tese
standards will save consumers an estimated $1.7 trillion in fuel costs by 2025.
6

In addition, the frst phase of new U.S. fuel-efciency standards proposed for
trucks that will go into efect for 2014 through 2018 will save consumers $50
billion at the pump.
7

Establishing long-term fuel-economy requirements also provides the regulatory
certainty needed for automakers to invest in job-boosting efciency technology.
For example, the new U.S. fuel-economy standard for passenger cars will create an
estimated 50,000 new auto manufacturing jobs, out of a total 570,000 jobs gener-
ated by 2030. Tese standards create jobs by saving drivers money on transporta-
tion fuel costs and allowing them to spend that money elsewhere.
8
In addition,
marketing more efcient, low-cost vehicles will bolster the competitiveness
of individual automakers by allowing them to atract consumers who are cost-
conscious about the price of a car as well as its fuel. Finally, manufacturing more
efcient cars can insulate automakers from gasoline price shockssuch as the
steep price increases seen in 2009which cause consumers to shif their spend-
ing away from less efcient vehicles.
9

Energy security
Fuel-efciency standards can improve energy security by reducing dependence on
foreign oil imports, which play an outsized role in many nations trade defcits. For
example, oil imports accounted for more than half of Indias 2013 trade defcit.
10

Chinawhose rapid growth has already made it the worlds largest car marketis
also highly reliant on imported oil.
11
Te transportation sector is currently respon-
sible for more than 40 percent of Chinas oil consumption, and it will consume
two-thirds of Chinas oil by 2035.
12
Spurred by a rapid growth in oil imports in
2000, the Chinese government began drafing its frst fuel-economy standards,
which were issued in 2004.
13
Tese fuel-economy standards have reduced gaso-
line demand by 1 percent each year since then.
14
Te United Statesthe worlds
largest importer of oilalso issued new passenger car fuel-efciency standards in
2012 that will reduce U.S. oil consumption at an almost identical rate.
15
Public health
Air pollution is a serious public health issue across the world, in large part due
to vehicle pollution from tailpipe emissions. Te most harmful types of vehicle
air pollution are particulate mater, nitrogen oxides, and sulfur dioxide. Diesel-
powered vehicles and trucks are the largest contributors to such emissions.
Te World Health Organization, or WHO, recently estimated that air pollution
causes 7 million premature deaths across the world each year, 2.6 million of which
are caused by outdoor air pollution.
16
Air pollution causes nearly 2 million deaths
per year in China alone,
17
and it has shortened life expectancy by more than three
years in Delhi.
18
Beyond direct loss of life, other health efects of air pollution such
as chronic respiratory illness damage overall welfare by reducing the productivity
of the populationcosting up to $300 billion per year in China.
19

While air pollution is worst in the fastest-growing emerging economies, it is
also a signifcant problem in the United States and Europe. Transportation is a
major source of air pollution in the United States, causing respiratory problems
and increasing the incidence of cancer and other long-term diseases.
20
Paris, for
example, banned half of the passenger cars from the roads in March to halt vehicle
air pollution afer fve consecutive days of dangerous air pollution levels.
21

It is important to note that vehicular air pollution depends largely on fuel quality
and emission standards, not just on the fuel economy of vehicles. Tus, vehicle-
efciency policies should be paired with clean fuel and emission standards that
regulate the level of harmful pollutants, such as sulfur, in fuel and tailpipe emis-
sions in order to capture the maximum beneft of new efciency standards.
Climate change
Te transportation sector currently accounts for one-quarter of greenhouse gas
emissions. Tese emissions are growing at a faster rate than any other sector
with a full 80 percent of that growth coming from road vehicles.
22
Tis trend
has prompted groups such as the GFEI to advocate for a global target of 50
percent reductions in new car fuel use by 2030 compared to 2005 levels and a
50 percent reduction of the global vehicle feet by 2050.
23
Tese targets have
also been proposed as part of the new Sustainable Development Goalsthe
global development goals that nations are negotiating to replace the Millennium
Development Goals afer 2015. Reaching the 2050 goal would prevent an esti-
mated 33 billion tons of carbon dioxide emissions cumulatively between 2015
and 2050.
24
Tis makes up nearly 3 percent of the required global solution to
climate change during this period.
25
Other vehicle technologies, such as fuel cell and electric cars, can also reduce
emissions. But upfront investment in these technologies is currently a barrier to
wider deployment. While transitioning to batery- or fuel-cell-powered vehicles
will have emissions benefts in the long term, efciency standards are the single
most important solution for reducing emissions from vehicles now. In the
International Energy Agency policy scenario designed to limit global warming
to 2 degrees, fuel-economy measures make up nearly half of reduced demand by
2050 and are the primary climate solution prior to 2035.
26
Tus, emissions reductions from vehicle efciency are a key component of
national strategies to halt climate change. Tis holds true for the United States,
where the Obama administrations new fuel-efciency standards will have elimi-
nated 6 billion tons of carbon dioxide emissionsmore than the total U.S. emis-
sions in 2013by 2025.
27

Taken together, the benefts of vehicle-efciency policies for the economy, energy
security, public health, and the climate make such policies atractive to many
countries. Given the baseline appeal of these policies, the next section analyzes
the market trends and political forces shaping progress on vehicle efciency.
The policy context
What are the market trends?
Te markets for both passenger vehicles and heavier freight vehicles are expand-
ing rapidly. Most of the growth comes from emerging economies, such as India
and China, which accounted for 60 percent of vehicle sales profts in 2012.
28

China is and will likely remain for some time the worlds largest market for
vehicle sales. While wealthier areas on Chinas eastern coast could reach satura-
tion in vehicle ownership by 2020, sales will continue to soar in less-developed
interior regions, especially as Chinas road infrastructure continues to expand
westward.
29
In other countries, auto manufacturing is expanding alongside sales.
Mexicos auto industry has grown at a rate of 6 percent each year, triple the
growth rate of other manufacturing sectors there.
30

At the same time, this growth in the transportation sector, largely driven by
vehicle sales, is transforming the global oil market. Te transportation sec-
tor accounts for some 75 percent of the growth in total projected oil demand
by 2035. Oil use in the transport sector will grow fve-fold over the next two
decades, mostly driven by consumption in China, India, and the Middle East.
China is on course to surpass the United States as the largest oil consumer by
2030, and India will take over as the largest source of oil demand growth by
2020, with an average increase in demand of 3.6 percent per year. Diesel fuel
will see the greatest increase in demand, refecting fuel preferences and the rapid
growth of the freight sector in emerging economies.
31

What efficiency policies are currently in play?
Domestic fuel-economy standards for cars covered about three-quarters of all cars
sold globally in 2013. However, these standards represent a wide range of emis-
sions limits and have various compliance dates, rendering many of them insuf-
fcient to substantially limit emissions or fuel consumption. Current efciency
standards are on pace to improve global fuel economy by 1.7 percent per year
through 2015 and then decline to about 1 percent per year from 2016 to 2020.
To put this in perspective, meeting the GFEI 50 by 50 targetwhich sets a goal
of halving fuel use across the global passenger car feet by 2050will require an
average 3 percent annual global improvement in fuel economy for cars.
32

For trucks, efciency standards are in a much earlier stage of development.
Currently, only the United States, Canada, China, and Japan have fuel-efciency
standards for trucks, although numerous countries, including Mexico, the
European Union, Brazil, and Korea are considering them.
33

Global oil demand by region Global oil demand by sector
2012 2020 2025 2030 2035 2012 2020 2025 2030 2035
FIGURE 1
The transportation sector in Asia will drive global oil demand
Projected increase in global oil demand, 20122035, in millions of barrels per day
Bunkers, or marine
and aviation fuel
Oceania
Europe
Americas
Other
Buildings
Other industries
Petrochemicals
Power generation
Transport
Eastern Europe and Eurasia
Africa
Latin America
Middle East
Asia
80
100
87.4
60
40
20
0
Source: International Energy Agency, "World Energy Outlook" (2013).
101.4 87.4 101.4
In addition to fuel-economy standards for cars and trucks, the carbon intensity of
the fuel plays an important role in determining overall carbon emissions. Diferent
sources of fuel have diferent carbon content, so tracking of fuel carbon inten-
sity is also an important step toward future improvements in vehicle efciency.
Currently, California and the European Union are tracking carbon intensity of
fuels and deploying policies to discourage investments in high-carbon fossil fuels
and to accelerate deployment in low-carbon alternatives.
TABLE 1
Comparing vehicle sales and efficiency standards by country
Region
Share of world
vehicle sales
Car-efficiency standards Truck-efficiency standards
2015 2020 2015 2020
China 25%
European Union 20%
United States 19%
Japan 7%
Brazil 5%
India 5%
Russia 4%
Canada 2%
South Korea 2%
Australia 1%
Mexico 1%
Other 9%
= Policies in place = No policies
Source: International Council on Clean Transportation, Global passenger vehicle standards, available at http://www.theicct.org/info-tools/global-passenger-vehicle-
standards (last accessed May 2014).
Potential opportunities and
obstacles to implementation
While the benefts of enhanced vehicle fuel efciency to the economy, energy
security, public health, and the climate are well documented, obstacles to imple-
mentation still remain that need to be addressed.
Consumer acceptance
While consumers can save money over the lifespan of a fuel-efcient vehicle com-
pared with a standard vehicle, one potential obstacle to fuel-economy standards
is consumers willingness to make the upfront investment in more costly vehicles.
Fortunately, there is clear evidence that consumer acceptance is not a signifcant
obstacle to the adoption of stringent fuel-economy standards in most countries.
Consumer willingness to pay for fuel economy is increasing.
34
In the United States,
37 percent of consumers rated fuel economy as the leading factor in their choice
of their next car, compared with 17 percent who chose quality and 16 percent who
chose safety.
35
In India, one study found that a majority of consumers atach even
greater importance to fuel economy in their vehicle-purchasing decisions than
simple economics would suggest.
36
Since 2006, fuel economy has consistently
ranked among the top three priorities for car buyers in India.
37

Moreover, consumer demand for efcient vehicles is growing. In mature mar-
kets, consumers strongly support fuel-economy standards with 85 percent of
Americans supporting President Barack Obamas latest fuel-economy standards
for cars.
38
In emerging economies, consumers are increasingly aware of transporta-
tion externalities such as air pollution and are demanding more information on
the fuel economy of the vehicles they are considering.
Efective policies can also stimulate greater consumer demand for efcient vehi-
cles. Tese policies include beter labeling and communication of lifecycle con-
sumer savings, as well as economic incentives to help reduce diferences in upfront
cost through so-called feebate programs. Tese programs impose fees on highly
polluting vehicles, and rebates are issued for the most efcient vehicles. Following
the implementation of Frances feebate program in 2008, the average vehicle size
in France decreased signifcantly, and carbon dioxide emissions dropped 6 percent
across the feet. As a result, the French vehicle market weathered the economic
downturn beter than comparable markets.
39

Consumers play a large role in stimulating demand for more efcient vehicles.
Tis demand can drive investment in more efcient technologies by automakers.
But the interests of the auto industry are also an important part of the vehicle-
efciency equation.
Industry acceptance
While there is widespread recognition that fuel-efciency improvements are
essential for competitiveness in an increasingly global market, new efciency stan-
dards will not always be met with support from the auto industry. Companies that
are unable to comply with rapid fuel-economy increases or that compete in the
lowest cost markets will see themselves as disadvantaged by rising fuel-economy
standards. Typically, these automakers operate in emerging economies and fear
having to buy expensive Western technology to comply with standards.
Yet, many countries, including emerging economies, have managed to garner
support from industry for fuel-efciency standards. Developing countries have
used innovative, fexible compliance mechanisms to ensure that efciency policies
are stimulating innovation in their domestic markets. Te Brazilian Inovar-Auto
program, for example, introduced a tax on passenger cars and light commercial
vehicles but, at the same time, provides equivalent tax discounts for automakers
that meet certain efciency guidelines. Te program will foster innovation and
reduce fuel consumption in Brazil by about 15 percent by 2017.
40
In addition,
domestic automakers in emerging economies are increasingly partaking in joint
ventures with Western automakers that have the capacity, technological expertise,
and political will to pursue vehicle efciency.
Despite a lack of coordinated global fuel-efciency policies, there has been some
convergence in efciency improvements across markets due to the globally inter-
connected supply chains of major automakers. All Organisation for Economic
Co-operation and Development, or OECD, markets, for example, improved
vehicle efciency by between 16 percent and 18 percenta rate of nearly 2
percent per yearbetween 2002 and 2011.
41
Additionally, countries with a high
share of imported cars or car parts tend to adopt the most-advanced efciency
improvements within only a few years time.
42
In contrast, there is a greater time
lag or efciency discrepancy in markets with signifcant domestic production
primarily for the lowest-cost segments of domestic markets, such as Tata in India,
Lada in Russia, and Wuling in China. Tese fndings suggest that a staged, bilat-
eral approach to encourage key markets to adopt efciency standards can have
a signifcant impact within the involved countries, as well as pave the way for a
broader multilateral agreement.
Te competitiveness of domestic versus foreign companies plays a key role in
geting political support for new standards, but the distinction between domestic
and foreign is not straightforward. Te auto industries in emerging economies
are increasingly integrated with foreign automakers, especially automakers in the
United States, Europe, and Japan that are more supportive of fuel-economy stan-
dards due to their technological advantage or experience with standards adopted
in other key markets.
In China, for example, most domestic automakers partner with international
frms to exchange market access for technological expertise, a patern that has
persisted for several decades. During the Cultural Revolution, China halted pro-
duction of cars. While promoting reform and opening in the 1980s, the Chinese
government encouraged joint ventures with foreign automakers to fll the
vacuum of domestic research and development capacity.
43
Te most prominent
example of such joint ventures is the SAIC-General Motors-Wuling Automobile
partnership in southwestern China, which sells nearly 1.5 million cars in China
annually. SAIC-GM-Wuling is now expanding into the Indian market through
other joint ventures and even full acquisitions of Indian manufacturers.
44

Currently, China faces a very large technology gap between domestic-only manu-
facturers and companies in joint venture manufactures. As a result, joint venture
manufacturers are driving fuel economy in China.
45

Spurred by an increasingly connected global marketplace, the auto industry is
growing progressively ambitious on fuel economy. But, as discussed above, many
countries have fuel-economy standards for cars but not trucks. Yet trucks are the
vehicle class with the fastest growth, and truck efciency could yield the greatest
benefts associated with reduced fuel consumption.
Challenges and opportunities for trucks
New standards for trucks could deliver the greatest reductions in fuel consump-
tion globally, particularly in developing countries. Trucks use disproportionately
more fuel than cars per mile traveled. While trucks are responsible for 20 percent
of road transport emissions in developed countries, they can account for as much
as 60 percent in developing countries.
46

Although there is a clear opportunity for progress, particularly in emerging mar-
kets, many countries have standards for cars but not trucks. Te United States only
adopted its frst fuel-efciency standards for trucks in 2011, and just three other
countriesChina, Japan, and Canadacurrently have their own truck standards.
Even the European Union has yet to issue truck standards. Many stakeholders are
eager to leverage U.S. progress to promote harmonization of standards across the
world, but this will require signifcant political persuasion.
Tere are clear hurdles for improving the fuel economy of trucks. First, truck
manufacturers are not beholden to consumer preferences for efcient, clean
vehicles. Trucks are ofen operated by small commercial feets, which may lag
behind private consumers and large car automakers in terms of understanding the
benefts of vehicle efciency. In addition, such feets may have less access to capital
for upfront investments in efciency.
47
Despite these obstacles, there are reasons to believe that improved standards for
trucks are politically feasible.
First, truck markets in emerging economies are increasingly international.
Historically, local manufacturers have dominated Chinas heavy-duty feet. In the
past fve years, however, foreign manufacturers have penetrated Chinas rapidly
growing truck market by partnering with domestic manufacturers in joint ven-
tures similar to those of the passenger car market. Conversely, Chinese truck
manufacturers are now looking toward export markets.
48
In India, Volvo has begun
to manufacture its most efcient truck engines. Greater integration with the
international market could help spur the stronger Chinese truck standards or the
adoption of new standards in India. Just as with cars, truck manufacturers have an
increasing sensitivity to international fuel-economy standards.
Second, the proliferation of so-called green freight programs is establishing an
important foundation for future standards. Such programs collect extensive data
on feets and technologies to inform best practices for improving truck efciency.
Green freight programs aim to use public-private partnerships rather than regula-
tion to stimulate improved truck efciency. Data sharing via these programs can
help facilitate the adoption of truck standards in other countries. In many cases,
this data has never been examined before. Green freight programs can accelerate
adoption of efcient technologies, such as low rolling resistance tires and aero-
dynamic devices. Tese programs ensure that the data and technology needed
to implement fuel-economy standards for trucks are in place. Partners that are
administrating green freight programs include the Climate and Clean Air Coalition,
Clean Air Asia, the Energy Foundation, the World Bank, the German International
Cooperation, and the U.S. Environmental Protection Agency, or EPA.
Consumer demand and industry acceptance for efcient vehicles are increasing.
Te internationalized market means that even truck manufacturerswhich are
not directly subject to consumer demandhave more access to efciency-con-
scious markets and new efciency technologies. Tese trends are paving the way
for stronger policies on vehicle efciency. Now, political leadership is needed to
move these policies forward.
The path forward: An opportunity
for U.S. global leadership
Te United States is currently well positioned to lead an international efort to
increase vehicle efciency. Its recently enacted, robust fuel-economy standards
and clean fuel standards make it a global leader in this area. U.S. standards for cars
require improvements through 2025the longest-term standard of any coun-
try except Canada. In addition, the administration will issue a new truck fuel-
efciency standard by March 2016 that extends regulations beyond the current
2018 timeline. Now is the moment for the United States to translate this domestic
leadership into internationally coordinated action.
Near-term opportunities for an international deal
International progress on vehicle efciency will ultimately depend on interna-
tional political will. Te United States is already engaged in multilateral partner-
ships and dialogues that could serve as a good foundation for scaled-up action
on vehicle efciency. Te international diplomatic calendar provides two key
opportunities to reach an international agreement on vehicle efciency among the
key set of countries that make and buy the lions share of cars and trucks: the U.N.
Climate Summit and the G-20 Leaders Summit. G-20 countries, for example, are
responsible for 95 percent of the worlds vehicle production and 91 percent of
vehicle sales. (see Figure 2)
Te U.N. Climate Summitwhich will take place in New York in September
will bring together world leaders to discuss how to raise ambition for a 2015
global climate agreement and provide a platform for them to announce new policy
commitments. If a select group of countries commit to adopting best practice
standards, then the majority of global vehicle fuel consumption will be covered by
stringent fuel-economy standards. (see Figure 3) An agreement could be atractive
to Europe, Japan, and Canadawho are already politically commited to raising
fuel-efciency standardsas well as to India, Mexico, and China, where vehicle-
efciency standards are gaining traction.
Just two months later, the leaders of the worlds largest economies will convene
again, this time at the G-20 Summit in Brisbane, Australia. Te G-20 has dem-
onstrated an interest in this topic in the past: It tasked the International Energy
Agency with producing an impact analysis of clean energy and energy-efciency
policies, including fuel economy, at its 2011 meeting in Cannes, France. Tis
report found that ambitious fuel-economy standards would cut fuel use and
carbon emissions far more than electric vehicle deployment could over the next
decade. Te report also recommended that countries adopt fscal measures to
send market signals to potential purchasers of more efcient vehicles.
49
Prior G-20
interest and action has paved the way for agreements on vehicle efciency, and this
years G-20 gathering could provide another such opportunity.
Number of vehicles produced
Number of vehicles registered and sold
Number of
vehicles produced
Number of vehicles
registered and sold
FIGURE 2
A G-20 agreement would capture almost the entire global vehicle market
G-20 share of global vehicle market, 2013
87,300,115
85,393,803

G-20 countries total
Rest of world
South Africa
United States
Canada
Mexico
Brazil
Argentina
China
Japan
South Korea
India
Indonesia
Russia
Turkey
European Union
Germany
France
United Kingdom
Italy
Saudi Arabia
Australia
Rest of world
World total
545,913
11,045,902
2,379,806
3,052,395
3,740,418
791,007
22,116,825
9,630,070
4,521,429
3,880,938
1,208,211
2,175,311
1,125,534
6,469,984
5,718,222
1,740,000
1,597,433
658,207
-
215,926
82,613,531
4,686,584
87,300,115
650,620
15,883,969
1,779,860
1,100,542
3,767,370
948,858
21,984,100
5,375,513
1,543,564
3,241,209
1,218,900
2,950,483
893,124
4,620,991
3,257,718
2,201,068
2,595,713
1,419,494
740,000
1,136,227
77,309,323
8,084,480
85,393,803
Rest of world
Source: International Organization of Motor Vehicle Manufacturers, "World Motor Vehicle Production" (2013), available at http://www.oica.net/category/production-statistics; International
Organization of Motor Vehicle Manufacturers, "World Motor Vehicle Sales" (2013), available at http://www.oica.net/category/sales-statistics.
Potential targets and actions
At the U.N. Climate Summit, the G-20 Leaders Summit, and other venues, there
are a number of possible outcomes that could signifcantly advance vehicle-ef-
ciency policies. In order to capture the opportunity that the Climate Summit and
the G-20 meetings present, the United States and other countries should work
toward the following international targets and accompanying actions.
For cars, countries should commit to gradually increasing vehicle-efciency
performance. Such a commitment should be underpinned by a target or aspira-
tional goal of reducing carbon dioxide emissions per distance traveled by at least
5 percent per year. Tis rate of improvement is possible with known and emerg-
ing cost-efective technologies. Carbon dioxide emissions standards will apply
to three-quarters of the worlds passenger car feet sales through 2015, but these
standards will only apply to one-third of the world feet through 2020. Currently,
U.S. fuel-economy standards for cars will reduce average carbon dioxide emissions
at a rate of more than 4 percent per year through 2025, making these standards the
most ambitious in the world. If the world adopted fuel-economy standards that
encouraged improvement on a more ambitious rate and timeline, the fuel savings
would be monumental. In the United States alone, a 4 percent rate of improve-
ment for cars through 2050alongside improved technologieswould reduce
oil consumption by up to 80 percent.
50
Similarly, countries should commit to gradually increasing vehicle-efciency
performance for trucks, underpinned by a target or aspirational rate of at least a
4 percent reduction in carbon dioxide emissions per distance traveled each year
through 2050. As one of only a few countries with truck fuel-economy standards,
the United States can help other countries by drawing atention to the benefts of
action and encouraging nations to move forward in tandem. Te United States
can help spur this progress through technical assistance. Such assistance is needed
to establish standards that deliver the appropriate technologies for diferent types
of trucks, given the variety in this type of vehicle. Using its existing venues, such
as the EPAs SmartWay program, the United States can couple a push for global
standards with efective technical assistance.
Te G-20 or the U.N. Secretary-General should also task additional work on
vehicle efciency to a technical body that could support their eforts. Building on
the International Energy Agencys, or IEAs, 2011 report, for example, the G-20
could task IEAits energy secretariatto convene standard-seting agencies
and facilitate the exchange of information and proven policy approaches. Te IEA
could also serve the important role of reporting back to the G-20 on what prog-
ress countries are making toward their goals.
An international vehicle-efciency agreement could be supported by ongoing
multilateral work as well. Te Climate and Clean Air Coalition, or CCAC, for
example, is a group of 38 countries, institutions, and nongovernmental organiza-
tions focused on eliminating short-lived climate pollutants, potent greenhouse
gases that persist for a relatively short time in the atmosphere. Cars and trucks are
a signifcant source of black carbon, a short-lived climate pollutant that has serious
warming efects, as well as detrimental health impacts. Te United States is a lead
partner on the CCAC initiative for reducing pollution from trucks.
A multilateral agreement with strong targets for cars and trucks, plus platforms
for technical exchange, would transform the vehicle efciency landscape. Such an
agreement would provide lasting political imperative for action. However, balanc-
ing the needs of many diferent countries in a global venue can
be difcult. Swifly negotiating an ambitious vehicle-efciency
agreement has a low guarantee of success but, if negotiated,
would be very high impact. Te United States can help ensure
the success of a global agreement by paving the way with one or
more bilateral agreements with key countries.
Bilateral agreements
Tere are also a number of important bilateral opportunities
in the area of vehicle efciency that can be seized in the com-
ing months. Tese opportunities not only have benefts unto
themselves, but will also help build the foundation for a larger
multilateral agreement.
Several key countries have already demonstrated political will to
regulate vehicle fuel economy. Some of these countries are also
large vehicle markets that are responsible for signifcant portions
of global fuel consumption. If the United States worked with just
a few key countries to improve vehicle efciency, then the major-
ity of the worlds fuel consumption for road transport would be
regulated by ambitious fuel-economy standards. (see Figure 3)
Potential partners for the United States are discussed below.
Policies that encourage cleaner fuels are also
critical for reducing air pollution and carbon
emissions. Clean fuel policies typically limit the
sulfur and/or carbon content of fuels. Some
countries and citiesincluding Canada, Australia,
and Koreaalready have ultra-low sulfur fuel
standards, and the United States has the worlds
most stringent standards for sulfur emissions
from trucks. However, some countries whose citi-
zens would benet the most from the air quality
benets of reducing sulfursuch as China, India,
Brazil, and Mexicohave yet to adopt low-sulfur
fuel standards.
Only California and the European Union currently
track the carbon intensity of fuels, but doing so is
important for understanding emissions from new,
unconventional fuels. These tracking eorts can
be expanded internationally, and clean fuel poli-
cies can be adopted within bilateral or multilat-
eral agreements on fuel economy.
Clean fuels
China
China is devoting signifcant resources to reducing air pollution
in and around its cities, and vehicles are a signifcant source of
that pollution. To meet this challenge, China has sought to limit
the number of cars on the road and has promoted fuel-economy
standards. But more must be done.
To that end, the United States and China are well positioned
to act together on fuel efciency. Te Chinese auto industry
has never been more outward facing as it strives to be a glob-
ally competitive industry, with strong joint ventures between
Chinese and American automakers. At the same time, the U.S.
Department of State, U.S. Department of Transportation, and
EPA are working with China on an initiative to reduce emissions
from trucks and other vehicles. Te current cooperation
under the umbrella of the U.S.-China Climate Change Working
Groupconsists of technical support on fuel quality, fuel ef-
ciency, and green freight.
Te United States and China could agree to substantially improve
their respective vehicle-efciency policies for trucks over the next decade between
2015 and 2025. On the part of the United States, this would require robust, new
truck standards, which the Obama administration has commited to issuing by
March 2016. China could make current standards more stringent for all types of
trucks and agree to step up enforcement. For cars, the United States can also provide
assistance to help bring Chinas passenger car feet up to a more stringent rate of
efciency improvement through 2025. Te next U.S.-China Strategic and Economic
Dialogue, expected to take place in July, provides one opportunity for securing such
an agreement.
India
India released its frst-ever efciency standards for cars in January, which are efec-
tive for new cars starting in 2017. Importantly, the new standards have support
from domestic producers. In fact, Indian automakers participated in the formation
of the standards and approved consultation papers throughout the process.
51
China
Mexico
India
Canada
United
States
European
Union
FIGURE 3
Agreements between a few G-20
countries would cover a majority of
global vehicle fuel consumption
Road sector fuel consumption, 2011,
kilotons of oil equivalent
Source: International Council on Clean Transportation, Global
passenger vehicle standards, available at http://www.theicct.org/in-
fo-tools/global-passenger-vehicle-standards (last accessed May 2014);
The World Bank, "Road sector energy consumption (kt of oil
equivalent)," available at http://data.worldbank.org/indica-
tor/IS.ROD.ENGY.KT (last accessed May 2014).
Rest of world
Rest of G-20
Te United States should explore the potential for cooperation in this area.
For instance, India could expand its fuel-economy standards to cover not only
passenger cars, as is currently the case, but also trucks and buses. India faces
many challenges in achieving its fuel-economy standards due to widespread
fuel mixing. Subsidized fuels in India, such as kerosene, are frequently mixed
with gasoline to create cheaper mixed fuels. Tis can lead to higher emissions
of pollutants and greenhouse gases. Alongside cooperation on fuel-economy
standards, the United States should provide technical assistance to help track
fuel quality. Te EPA should work with the Indian Petroleum and Natural Gas
Regulatory Boardunder the Ministry of Petroleum and Natural Gasto
coordinate this efort.
Tere are multiple bilateral tracks through which such bilateral cooperation could
occur, including the U.S.-India Energy Dialogue, the U.S.-India Climate Change
Dialogue, and the new Joint Working Group on Sustainable Growth.
Mexico
As Japan, Europe, and the United States lead on fuel-economy standards, Mexicos
auto industry is feeling strong pressure to act too. Japanese and European auto-
makers are expanding vehicle assembly capacity in Mexico to save on labor costs
and to serve the U.S. market. As a result, Mexico has developed a robust vehicle
parts export market, with more than half of these exports going to the United
States.
52
To stay competitive and maintain market share in the United States,
Mexico has already expressed a desire to harmonize its fuel-economy standards
with those of the United States through a regional approach along with Canada.
Mexico adopted standards in July 2013 for carbon dioxide emissions and fuel
economy of new cars for 2014 to 2016 at levels that mirror previous U.S. stan-
dards. Now, the United States should work with Mexico to harmonize its policies
with U.S. standards by extending this timeline and rate of improvement through
2025. Given the close trade relationship between the United States and Mexico,
a bilateral agreement on car standard harmonization should occur through the
Commission for Environmental Cooperation within the North American Free
Trade Agreement, or NAFTA.
Te United States and Mexico can also work together to reduce the fuel consump-
tion of trucks. At the 2014 North American Leaders Summit, U.S., Canadian,
and Mexican leaders agreed on a call to action to adhere to high standards in
fuel quality and efciency for trucks.
53
Given this existing political will, there
is an opportunity for progress with the Mexican government. Both countries
should improve their current fuel-economy standards for trucks by extending the
standards through 2025. Such a commitment will require high-level support and
could be announced at next years North American Leaders Summit.
Te United States, by working with these countries on bilateral agreements, can
bring countries representing a signifcant portion of the global vehicles market
into alignment on the importance of vehicle efciency. Doing so will pave the way
for a global agreement on vehicle efciency.
Recommendations and conclusion
Tere are many opportunities in the coming months to accelerate global vehicle
efciency. Specifcally, global leaders should pursue multilateral actions in a num-
ber of venues. A coalition of willing countries could spearhead a leader statement
at the U.N. Secretary-Generals Climate Summit in New York in September, or at
the G-20 meetings in November. Other multilateral tracks, such as the CCAC,
could provide a platform for technical exchange between countries. Te United
States should use the strength of its domestic action on fuel economy and vehicle
efciency to lead in these venues.
Te United States should also use its domestic leadership on vehicle efciency to
form bilateral agreements with a number of like-minded countries that are also
signifcant players in the vehicles market. Te United States should work with
China, the worlds largest vehicle market, to improve truck efciency through
2025. Te United States should also work with India on expanding efciency
standards to cover more types of vehicles, especially trucks, and to improve
fuel quality. Finally, the United States should work with Mexico, a close trading
partner for the U.S. auto industry, to harmonize cars standards and increase the
stringency of truck standards.
Tese bilateral agreements would cement U.S. leadership on vehicle efciency and
demonstrate to the rest of the world that some of the worlds largest automakers
and vehicle markets are demanding more efcient vehicles. More efcient vehicles
will help countries save on fuel costs and boost the economy, strengthen energy
security, and protect public health. In addition, fuel-economy standards will
help reduce greenhouse gas emissions that drive global climate change. In short,
vehicle efciency neatly aligns political priorities for nations seeking to grow their
economies while promoting a healthy environment for all.
About the authors
Cecilia Springer is a senior associate at Climate Advisers, where she leads projects
on low-carbon transportation, sustainable fnance for energy and agricultural com-
modities, and carbon pricing. Previously, she served as a U.S. Fulbright scholar,
conducting research in Tianjin, China, on planning and transport in ecocities.
Pete Ogden is a Senior Fellow and the Director of International Energy and
Climate Policy at the Center for American Progress. From 2012 to 2013, he
served on the White House national security staf as director for climate change
and environmental policy. Previously, he served on the White House Domestic
Policy Council as senior director for energy and climate change and at the
U.S. State Department as chief of staf to the special envoy for climate change.
Before joining the Obama administration, he was Chief of Staf of the Center for
American Progress.
Nigel Purvis is the founder, president, and CEO of Climate Advisers. Previously,
Purvis directed U.S. environmental diplomacy in the Clinton and George W. Bush
administrations, most recently as deputy assistant secretary of state for oceans,
environment, and science. Currently, Purvis holds climate change and international
afairs research appointments at Resources for the Future, the German Marshall
Fund of the United States, and the Brookings Institution. He also serves as the
executive director of the bipartisan Commission on Climate and Tropical Forests.
Andreas Dahl-Joergensen is director of policy at Climate Advisers. Prior to join-
ing Climate Advisers, Dahl-Joergensen was with the Norwegian governments
International Climate and Forest Initiative, where he led Norways landmark $1
billion partnership with Indonesia. He represented Norway in the international
climate negotiations. Dahl-Joergensen previously worked for the World Bank as a
carbon fnance analyst overseeing several large carbon funds.
Endnotes
1 International Energy Agency, World Energy Outlook
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2 The International Council on Clean Transportation,
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dards (2014), available at http://www.theicct.org/sites/
default/fles/info-tools/ICCT_PV_standard_Feb2014.
pdf.
3 In this paper, efciency is defned in terms of fuel
consumptionor carbon emissionsper distance
traveled.
4 Vehicles are typically split into two categories: light-
duty vehicles and heavy-duty vehicles. Light-duty
vehicles include passenger cars, minivans, SUVs, and
light-commercial vehicles. Heavy-duty vehicles include
medium and heavy commercial vehicles as well as
buses. In this paper, for the sake of clarity, we call light-
duty vehicles cars, and heavy-duty vehicles trucks.
5 Global Fuel Economy Initiative, Fuel Economy: State
of the World 2014 (2014), available at http://www.
globalfueleconomy.org/Documents/Publications/
gfei_state_of_the_world_2014.pdf. GFEI is a partner-
ship between the U.N. Environment Programme, the
International Energy Agency, FIA Foundation, the
International Council on Clean Transportation, and
the Institute of Transportation Studies at UC Davis and
International Transport Forum.
6 The White House, Improving the Fuel Efciency of
American Trucks (2014), available at http://www.white-
house.gov/sites/default/fles/docs/fnaltrucksreport.
pdf.
7 Ibid.
8 BlueGreen Alliance, Gearing Up: Smart Standards Cre-
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9 Driving Growth, How Fuel Efciency is Driving Job
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10 Victor Mallet, Indias reliance on imported energy
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11 U.S. Energy Information Administration, China (2014),
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12 International Energy Agency, Oil and Gas Security:
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13 Yuefu Jin and others, Development of Fuel Consump-
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14 Hongyan H. Oliver and others, Chinas Fuel Economy
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15 Securing Americas Future Energy, A National Strategy
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security-2013. Passenger car standards will reduce oil
consumption by 3.1 million barrels per day by 2030.
Currently, the United States consumes nearly 19 million
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16 percent reduction in oil consumption over 16 years,
U.S. oil consumption will decline by roughly 1 percent
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16 World Health Organization, 7 million premature deaths
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17 Michael Greenstone and others, Background Material
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18 World Health Organization, Burden of Disease from
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19 The World Bank and the Development Research Center
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20 Union of Concerned Scientists, Cars, Trucks, and Air
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21 BBC News, Paris car ban starts after pollution hits high,
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22 Stefan Nicola, Cars Become Biggest Driver of Green-
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23 Global Fuel Economy Initiative, Fuel Economy: State of
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24 Ibid.
25 This estimate was calculated by comparing annual
emissions from 2015 to 2050 from the UNEP 2 degrees
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the GFEI target from 2015 to 2050.
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27 The White House, Improving the Fuel Efciency of
American Trucks.
28 McKinsey & Company, The road to 2020 and beyond:
Whats driving the global automotive industry? (2013),
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insey/dotcom/client_service/automotive%20and%20
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29 Oliver and others, Chinas Fuel Economy Standards for
Passenger Vehicles.
30 Carlos Gomes, Global Auto Report (Scotiabank, 2014),
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bns_econ/bns_auto.pdf.
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33 The International Council on Clean Transportation,
Global Comparison of Passenger Car and Light-
commercial Vehicle Fuel Economy/GHG Emissions
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34 David Greene, How Consumers Value Fuel Economy:
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35 Consumer Reports, High gas prices motivate drivers to
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36 Randy Chugh, Maureen L. Cropper, and Urvashi Narain,
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37 J.D. Power McGraw Hill Financial, Vehicle Interior
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38 Consumer Federation of America, New Research:
Consumers Embrace New Fuel Economy Standard, are
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39 John German and Dan Meszler, Best Practices for Fee-
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41 Ibid.
42 Ibid.
43 Oliver and others, Chinas Fuel Economy Standards for
Passenger Vehicles.
44 Edward Niedermeyer, Suicide, Scandal and Chinas
Auto Market Power Grab, Bloomberg View, January 30,
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articles/2014-01-30/suicide-scandal-and-china-s-auto-
market-power-grab.
45 Hui He and Jun Tu, The New Passenger Car Fleet in
China, 2010: Technology Assessment and International
Comparisons (Washington: The International Council
on Clean Transportation, 2010), available at http://
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47 Mike Roeth and others, Barriers to the Increased
Adoption of Fuel Efciency Technologies in the North
American On-Road Freight Sector (Washington: The
International Council on Clean Transportation, 2013),
available at http://www.theicct.org/sites/default/fles/
publications/ICCT-NACFE-CSS_Barriers_Report_Fi-
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48 KPMG International, Competing in the Global Truck
Industry: Emerging Markets Spotlight (2011), available
at http://www.kpmg.com/RU/en/IssuesAndInsights/
ArticlesPublications/Documents/Global%20Truck%20
Industry.pdf.
49 International Energy Agency, G-20 Clean Energy, and
Energy Efciency Deployment and Policy Progress
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50 National Research Council, Transitions to Alternative Ve-
hicles and Fuels (Washington: The National Academies
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51 The Economic Times, Bureau of Energy Efciency to
soon fnalise fuel efciency norms for cars, March
5, 2012, available at http://articles.economictimes.
indiatimes.com/2012-03-05/news/31124325_1_fuel-
efciency-fuel-economy-standards-for-new-cars.
52 Gomes, Global Auto Report.
53 The White House, FACT SHEET: Key Deliverables for the
2014 North American Leaders Summit, Press release,
February 19, 2014, available at http://www.whitehouse.
gov/the-press-ofce/2014/02/19/fact-sheet-key-deliv-
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