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Sheila Watson
Deputy Director, FIA Foundation

The auto industry has been significantly affected by COVID-19. Vehicle manufacturers shut down factories and showrooms to safeguard workers’ health, and sales stalled with vehicle use dropping dramatically. Vehicle manufacturers were already facing challenges: globalsales have plateaued for the past five years, with most growthnow occurring only in emerging markets. Weak finances, poor consumer confidence as well as rapid developments in electric and autonomous technology have caused significant market disruption. Governments may now be under pressure to roll back fuel economy regulations to lower production costs. But to do this would be a mistake

– increasing total fuel costs and delaying vital action to tackle climate change. As governments consider economic stimulus and recovery, this is the time to accelerate policies and investments to transform mobility with a focus on efficient, zero emission, lowcarbon vehicles.
Fuel Economy Policy Saves Money In the EU, net fuel cost savings from adopted policies are expected to be around double the additional cost of efficiency improvements. Across the pond, the Environmental Protection Agency’s own modelling of the U.S. light-duty vehicle efficiency standards for 2025-30 originally estimated that $600 spent per vehicle on efficiency would lead to $2,200 in benefits, including $1,400 in fuel savings. The U.S. has subsequently revised its vehicle standards downward, a decision that the International Council on Clean Transportation (ICCT) described as “fundamentally flawed” since any consumer buying a vehicle in 2025 would have recouped their investment in the third year of ownership. Fuel Economy Policy is Fital for Cutting Carbon Emissions
Transportation uses a large amount of energy and is responsible for just under a quarter of total carbon dioxide emissions worldwide. This means that fuel efficiency measures have enormous potential for energy and emissions savings: The International Energy Agency (IEA) estimates that fuel economy policies for passenger transport have saved the equivalent of 2.5 EJ of energy between 2015 and 2018.
The Global Fuel Economy Initiative (GFEI) has undertaken scenario modelling which shows that even with further growth in the total number of vehicles on the road, improvements to internal combustion engine vehicles could
limit overall emissions at near current levels by 2050, saving five Mtonnes of CO2eq emissions globally compared with current adopted policies. However, this is not enough to meet our climate goals. A widespread switch to electric vehicles (EVs) is urgently needed. This could achieve further reductions of between three to five Mtonnes – depending on the extent to which the electricity grid is decarbonized. We Need to Sharpen the Policy Focus on Key Issues GFEI also monitors trends in average fuel economy overtime. Average fuel economy improvements in advanced economies (measured in liters of gas equivalent/km) slowed to only 0.2% between 2016-2017, and even reversed in almost 20 countries. A significant trend has been the reduction in sales of diesel vehicles in the largest EU markets, where diesel market share has declined by between 5-15% since 2014. This shift away from diesel (which tends to be more efficient) followed the dieselgate scandal, which showed that vehicles emitted far higher levels of dangerous nitrogen oxide emissions on the road than they did in laboratory tests. We need to get our efficiency gains back on track through focused, future-minded policy. There are several ways to accelerate improvements:
Encourage smaller vehicle size: Increasing sales of larger sport utility vehicles (SUVs) have undermined the overall impact of efficiency improvements. According to the IEA, SUVs were the second-largest contributor to the increase in global CO2 emissions since 2010 after the power sector. The global fleet of SUVs has seen its emissions grow by nearly 0.55 Gt CO2 during the last decade. North America and Australia have particularly high market shares of large vehicles (especially in the small SUV segment which includes many ‘crossover’ models), which consume 15% more fuel than medium-sized cars on average. Using fuel economy standards and financial incentives to reverse this trend could lower overall emissions.

Support the transition to EVs: Electric motors are significantly more efficient than internal combustion engines and will offer increasing climate savings over time as the carbon intensity of the electricity grid improves. However, although there has been some growth in more efficient electric powertrains, these still only make up a small proportion of sales. The latest data from the IEA for 2019 suggests that 2.1 million electric vehicles were sold in 2019, taking the total to 7.2 millon – still just 1% of all vehicles. Fuel economy policy can accelerate the transition to EVs, including through zero emission vehicle mandates, which have been introduced in California and China. Actions taken within the next decade will be key for this transition; although batteries and charging infrastructure are rapidly improving, additional incentives are still needed.
Future investment in vehicle manufacturing needs to be focused on the transition to EVs to ensure cleaner mobility; 

Sheila Watson,
Deputy Director, FIA Foundation