Passenger Vehicle Greenhouse Gas and Fuel Economy Standards

Governments around the world are currently grappling with two distinct but interconnected issues—how to reduce emissions of climate-changing greenhouse gases (GHG) and how to reduce dependence on finite, and often imported, supplies of petroleum.

Vehicle standards, either designed to reduce fuel consumption or GHG emissions, can play an important role in addressing both of these policy goals. There is a great deal of policy activity around these issues today: the European Union is working out the specific regulatory policy to reduce carbon dioxide (CO2) emissions from passenger vehicles; Canada is expected to propose new fuel economy standards in the fall; the U.S.Congress and a group of federal agencies are developing separate proposals to address fuel economy and climate change respectively; China recently revised its vehicle tax policy to diminish demand for larger, inefficient passenger vehicles;and the State of California is awaiting news on a waiver from the U.S. government to regulate GHG emissions and facing litigation from automakers for trying to do so.

This report compares on an equal basis the vehicle standards that have recently been put in place, updated or proposed by governments around the world to address these two policy goals. Japan and Europe currently lead, and will continue to lead, the world in controlling GHG emissions and fuel consumption from passenger vehicles, partly due to fuel and vehicle taxation policies that favor more efficient vehicles. Interms of absolute improvement, California and Canada are posed to make the largest gains in the next decade, provided that legal and technical barriers to implementing and enforcing their standards can be overcome. Other countries could make meaningful strides in the coming years, depending on how policy actions play out. The U.S. and China are both poised to make important decisions in coming years on the next stages of their fuel economy regulations. The most prominent U.S. proposal will bring fuel economy close to current Chinese levels, but considering these two countries together account for close to 40 percent of global sales,each will have a great deal more to do to reduce petroleum consumption in coming years (Automotive News 2007). A few countries with significant and growing vehicle sales, such as India and Mexico, are notably absent from this report and others, such as Brazil and South Korea, could enact stronger vehicle standards to support their policy goals. Decisions on how to meet and enforce fuel economy or GHG emission goals will not only affect their own domestic affairs, but worldwide conditions for generations to come.

In 2004, the Pew Center on Global Climate Change published a groundbreaking report that compiled and compared GHG emission standards and passenger vehicle fuel economy from seven governments around the world. The Comparison of Passenger Vehicle Fuel Economy and Greenhouse Gas Emission Standards Around the World (An and Sauer 2004), developed a methodology for directly comparing vehicle standards in terms of European-style grams of CO2 per kilometer and U.S.-style miles per gallon (mpg). Such a methodology is needed since different parts of the world use different test procedures to determine fuel consumption and GHG emissions. Since the report’s publication in 2004, sustained high oil prices and the growing scientific evidence and real world consequences of global climate change have added urgency to these important vehicle performance policies, increasing the need for accessible and reliable benchmarking across jurisdictions.

This report presents a significant update to the 2004 Pew Report. Major changes in vehicle standards have occurred in Japan, Europe and the United States. In addition, the methodology of how standards are converted—in order to compare them on an equal basis—was updated to reflect a broader mix of vehicles sold in the European and Japanese markets and a new Japanese vehicle test cycle. This report identifies new fiscal policies enacted in China and Canada that are designed to promote fuel-efficient vehicles and discourage larger, inefficient vehicles. While these fiscal policies are not reflected in our comparisons of regulatory vehicle standards, their importance should not be overlooked or under-estimated.