Fuel Economy Increase to 35 MPG Is Law

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December 19, 2007

President Bush has signed the Energy Independence and Security Act of 2007 into law today.

The US House of Representatives recently passed the bill overwhelming with a vote of 314-100, which would have overridden the veto threat by the President.

This law signed today now requires the fuel economy average in the US to be 35 mpg by 2020.

The fuel economy debate is not over yet as it appears to be heating up in Europe.

The European Commission announced a plan to cut CO2 emissions (130g/km) by vehicles with the phase-in starting in 2012 with increasing stringency through 2016.

The CO2 requirement is an attempt by the European Commission to curb greenhouse gases. However, regulating a decrease in CO2 emissions is another way to cut fuel consumption such as the increase in the US CAFE standard.

With both Europe and the US taking significant action to curb fuel consumption, I would expect further cooperation between manufacturers to meet the requirements, to reduce the cost burden and risk associated with the introduction of advanced technologies.

I would also expect there could be another round of industry consolidation as fringe manufacturers will have a difficult time meeting the CO2 or mpg requirements and may have to rely on a larger manufacturer to develop the appropriate technology.

With the aggressive fuel consumption targets fixed, it is now up to each automobile company to figure out how they will do it. With that, I suspect the automobile industry will look a lot different in the next six to 12 years as will the vehicles they produce.

Additional Information: European Commission Agrees to force down CO2 Emissions. 

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