In an effort to combat climate change and reduce greenhouse gas emissions, the Biden administration has announced new federal rules that will require new vehicles sold in the United States to achieve an average fuel economy of about 38 miles per gallon (mpg) of gasoline by 2031. The finalized rules, released by the National Highway Traffic Safety Administration (NHTSA), reflect a 2% per year increase in fuel economy from model years 2027 to 2031 for passenger cars, and from model years 2029 to 2031 for SUVs and other light trucks.

These regulations signify a lower standard than what was proposed last year, allowing the auto industry greater flexibility to focus on electric vehicles (EVs). The Biden administration believes that higher gas-mileage requirements would have imposed significant costs on consumers without substantial fuel savings to offset them. President Biden's ambitious goal is for 50% of all new vehicles sold in the US in 2030 to be electric, as part of his broader plan to tackle climate change.

Gasoline-powered vehicles currently contribute the largest share of US greenhouse gas emissions, necessitating a shift towards cleaner transportation alternatives. The new standards are predicted to save nearly 70 billion gallons of gasoline by 2050, preventing over 710 million metric tons of carbon dioxide emissions by midcentury, according to estimates from the administration.

Transportation Secretary Pete Buttigieg highlighted the benefits of the new standards, stating that they will not only save Americans money on fuel costs, but also reduce harmful pollution and decrease reliance on foreign oil. The Biden administration projects that car owners will save more than $600 in gasoline expenses over the lifetime of their vehicle.

To align with the new rules, the NHTSA worked in tandem with the Environmental Protection Agency (EPA) to ensure that regulations for tailpipe emissions are also tightened. In instances where there are discrepancies, automakers will likely have to adhere to the more stringent regulation.

While the Biden administration's push for EVs has garnered support from the United Auto Workers union, concerns have been raised regarding potential job losses. The union, which has endorsed President Biden, emphasized the importance of ensuring that the transition to electric vehicles does not harm employment rates and advocated for top wages for workers involved in EV and battery production.

Notably, the new fuel economy standards aim to incentivize the adoption of electric vehicles without completely disregarding the role of internal combustion vehicles. The Alliance for Automotive Innovation, a leading industry group, has cautiously welcomed the regulations, with its president and CEO, John Bozzella, acknowledging that the Biden administration has worked to align the corporate average fuel economy (CAFE) rules with recent federal tailpipe rules. Bozzella also questioned the need for CAFE standards in an increasingly electric vehicle-focused world.

However, environmental groups such as the Center for Biological Diversity have criticized the new rules as inadequate. They argue that the 2% annual improvement falls short of what is technologically feasible and allows automakers to continue producing vehicles that consume excessive amounts of fuel and contribute to pollution.

The new fuel economy regulations will undoubtedly shape the future of the automotive industry, pushing for increased electric vehicle adoption while allowing a mix of EVs, gas-electric hybrids, and efficiency improvements in gas and diesel vehicles to meet the requirements. As the world rapidly moves towards electrification, the Biden administration's focus on reducing emissions and promoting sustainable transportation remains a key priority.