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Global average fuel consumption improved only 0.9% between 2017 and 2019, compared to a 2.6% annual average reduction between 2010 and 2015. To overcome sluggish progress, aggressive policies are needed to address the rise in average vehicle size, prompted by increasing market shares of SUVs. Under the Net Zero Emissions by 2050 Scenario, global average fuel consumption of new light-duty vehicles in 2030 is nearly half the 2019 level. Ambitious fuel economy and/or CO2 emissions standards should be a policy focus to support and accelerate widespread uptake of more fuel-efficient vehicles. Policies that counter ongoing growth in vehicle weight and power should also be implemented, and road fuels should be taxed at a rate that reflects their impact on people’s health and the climate.
Global light-duty vehicle fuel economy improvements, Net Zero Scenario, 2005-2030
The urgency of policy action is underlined by the fact that fuel economy progress is stalling. Overcoming trends that have blocked further improvements in recent years requires accelerated policy efforts and harmonisation of standards beyond the national level. International co-operation and harmonisation can lower the costs of implementing and enforcing regulations, and encourage governments to draw upon existing policies in countries that have demonstrated success.
Average fuel consumption of new light-duty vehicles, 2005-2019
The amount of energy required to move a vehicle, which is mostly based on its size and weight, is a key determinant of fuel consumption. In general, larger and heavier vehicles require more energy, as well as more power, to provide adequate acceleration.
While advances in vehicle technology improved the rated fuel consumption of all new vehicles from 2010 to 2019, a large share of these fuel savings has been offset by increased vehicle weight and power (vehicle attributes). The share of technical improvements that have been nullified by greater vehicle size and power range from 40% in the United States, China and Europe, to 17% in India.
Fuel consumption is also determined by how efficiently a vehicle’s powertrain converts fuel into energy. Some powertrains are more efficient than others, resulting in differences in fuel consumption. Electric powertrains are more efficient than hybrid ones, followed by diesel and gasoline engines.
Changes in the market share of powertrain technologies between 2010 and 2019 (whether towards greater or lesser efficiency) have not had a major impact on average fuel consumption in most markets. In Europe, higher fuel consumption stemming from considerably fewer diesel powertrains in use has been offset by increases in hybrid and electric vehicles. In China, hybrid and electric powertrain uptake offset higher fuel consumption due to a decrease in the market share of flex-fuel vehicles.
Vehicle weight, size, powertrain and power mainly determine fuel economy
Decomposition of fuel consumption trends in China, 2010-2019
Decomposition of fuel consumption trends in Europe, 2010-2019
The overall increase in the average weight of vehicles sold globally stems from a decline in the sales share of city and medium-sized cars, accompanied by a massive shift toward SUVs. In fact, the sales share of small and large SUVs and pick-up trucks expanded from 20% in 2010 to almost 45% in 2019. Market share growth of small SUVs has been the greatest, and they were the most popular segment in 2019.
While the SUVisation trend is global, sales shares of SUVs in 2019 were the highest in Canada (67%), Australia (66%) and the United States (65%). Sales shares remained below 40% in the largest car markets in Europe in 2019, while Japan had the lowest rate of SUV adoption. In contrast, China’s SUV sales shares have expanded the most, growing from 10% in 2010 to 42% in 2019.
While the rise in SUV popularity has decelerated in the last two years, their share in total car sales is ~3% higher than in 2019. Targeted policies are therefore needed to reverse stalling fuel economy improvements, with measures that accelerate the adoption of efficient powertrain technologies and disincentivise the sale of vehicles of ever-increasing size and weight.
The SUV market continues to expand, slowing reductions in global fuel consumption
SUV sales share by region, 2005-2019
Introduced in 2020, the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule set Corporate Average Fuel Economy (CAFE) standards that were significantly less stringent than previous standards. The SAFE Rule established an annual fuel economy improvement rate of 1.5% for model years 2021-2026, while previous standards required a 4.7% yearly improvement for model years 2017-2025. The SAFE Rule also phased out the GHG credit multiplier for EVs in 2022 and extended the multiplier for natural gas vehicles to 2026.
In January 2021, the new US administration issued an executive order directing the EPA to reconsider the SAFE programme, and in August 2021 a revision was proposed to establish more stringent standards starting in 2023. Compared with SAFE, the proposed standards represent a 10% greater improvement for model year 2023 and a 5% improvement in the years following. The revision proposes removing the natural gas multiplier and extending the credit multiplier for electric vehicles to model year 2025. Final rules will be established in December 2021.
Canada aligns its standards closely with those of the United States, and in response has announced that it will remain committed to adopting regulations with the most stringent performance standards in North America post-2025.
The United States seeks to restore regulations after previous rollbacks, and Canada follows suit
Under its Corporate Average Fuel Consumption (CAFC) scheme, China has progressively strengthened its targets. In 2021, China set CAFC targets of 4.0 L/100 km for 2025 and 3.2 L/100km for 2030 (China-NEDC test cycle). These targets will require annual fuel consumption reductions of 6.5% by 2025 and 5.5% by 2030.
New energy vehicle (NEV) regulations stipulate the number of NEV credits each OEM must generate annually and are expressed as a percentage of total passenger car sales. The target for 2020 is 12% NEV credits, rising to 18% in 2023. The regulation thereby incentivises the sale of vehicles with greater fuel efficiency, as they generate more NEV credits.
The NEV credit scheme is scheduled to expire in 2023, leaving China without any specific ZEV policies. However, China’s New Energy Automobile Industry Plan (2021-2035) sets a target for 20% of vehicle sales to be NEVs by 2025, and the China Society of Automotive Engineers targets over 50% NEV sales by 2035.
China’s fuel consumption regulations continue to tighten
Under the “Fit for 55” initiative, in 2021 the European Commission proposed new CO2 emissions targets for 2030 and 2035. The new targets require CO2 emissions reductions of 55% for cars and 50% for vans by 2030, and 100% for both by 2035. Given that it effectively mandates that all vehicles sold be zero-emissions by 2035, the target will accelerate the transition to more efficient EV powertrains in Europe.
New EU CO2 emissions targets
Higher fuel prices are correlated with lower fuel consumption. European countries as well as Japan and Korea, where high fuel taxes are levied, have the world’s lowest fuel consumption per vehicle km.
In comparison, low fuel taxes in Canada, Australia and the United States correspond with above-average fuel consumption. Higher fuel taxes could therefore encourage the uptake of fuel-efficient vehicles in these countries and support alignment with the Net Zero Emissions by 2050 Scenario. Importantly, to ensure that fuel taxes are not a form of regressive taxation, targeted measures could be devised to offset impacts on disproportionately affected segments. Furthermore, all governments must move towards eliminating fossil fuel subsidies.
Increase fuel taxation
There is a direct correlation between a country’s long-term fuel prices and the average fuel economy of the vehicles its citizens purchase. Morocco is one country that has successfully phased out road fuel subsidies in recent years, while others such as India, Mexico and Indonesia have been working on lifting them.
Globally, direct subsidies for road transport fuels are still in place in at least 38 countries, mostly developing ones. As these subsidies disincentivise the designing and marketing of efficient vehicle equipment, countries should reduce or remove them to reach the SDS goals by promoting the uptake of technologies that improve average fuel economy.
Accelerate adoption of more fuel-efficient vehicles with CAFE standards and feebates
One of the most widespread regulatory instruments to incentivise rapid adoption of efficient technologies are CAFE standards. Although CAFE standards did not successfully drive down fuel consumption in the European Union between 2017 and 2019, once the new EU 2020 target came into force, average CO2 emissions dropped 12% within a single year (the same amount achieved between 2010 and 2019).
Additionally, “feebate” schemes, such as France’s bonus-malus policy introduced in 2008, impose a fee on the purchase of vehicles for which rated specific CO2 emissions (gCO2/km) exceed a predetermined level, and subsidise the purchase of vehicles with CO2 emissions below a specified level. Although feebates directly target CO2 emissions performance, they indirectly affect vehicle weight and size, as larger, heavier vehicles tend to be less fuel-efficient.
New Zealand recently introduced a Clean Car Discount that provides purchase rebates for eligible new and used electric LDVs. It also plans to implement a Clean Car Standard, which will impose a fee on imported vehicles above a specified CO2 emissions rating and provide a credit for vehicles below the rating.
Accelerate adoption of more fuel-efficient vehicles with CAFE standards and feebates
Augmenting taxes applied to the purchase of large, heavy cars can disincentivise the sale of ever-larger and heavier vehicles. Since 1955, Norway has implemented a one-off registration (purchase) tax on ICE light-duty vehicles based on vehicle kerb weight as well as CO2 and NOx emissions. More recently, France imposed a tax on vehicles weighing over 1 800 kg, while BEVs and PHEVs remain exempt.
Impose taxes to disincentivise higher vehicle weight and size
Alternatively, policies can discourage the uptake of large, heavy vehicles by reducing taxes to purchase and/or own small ones. In Japan, several incentives, including lower acquisition and insurance taxes, have promoted very small, lightweight vehicles known as Kei cars. Likewise, in 2021 Indonesia revised existing regulations that provide tax benefits for smaller fuel-efficient vehicles. Tax rates under Indonesia’s new Low-Carbon Emission Vehicle programme are no longer based on engine capacity alone, but also take engine efficiency and emissions into account.
Adopt fiscal policies to incentivise low-emission vehicles
Cities can discourage SUV and large-vehicle uptake by implementing measures that make owning them less appealing. Parking fees can be based on vehicle size, and/or a greater share of parking spaces can be reserved for smaller cars. For example, Berlin is considering charging SUV owners as much as USD 590 for city parking permits (five times the cost for a small car), and in Vancouver, Canada, owners of a 2023 or newer large ICE SUV or pick-up truck may be charged USD 789 annually for a residential parking permit.
Use local incentives to stem the uptake of SUVs and large vehicles
To ensure fuel economy and CO2 emissions standards are effective, governments must continue regulatory efforts to monitor and reduce the gap between real-world fuel economy and rated performance. Encouragingly, new EU regulations will require on-board fuel consumption meters for all new cars from 2021 onwards.
Continue to monitor and address the gap between rated and real-world fuel consumption
The Global Fuel Economy Initiative (GFEI), was founded in 2009 to promote and support government action to improve energy efficiency of the global light-duty vehicle fleet. The initiative draws on the expertise of six partners, and pursues three core activities:
- Providing data and research analysis of fuel economy potential by country and region
- Supporting national and regional policy makers
- Raising awareness among stakeholders (e.g. vehicle manufacturers) through outreach and campaigns
In 2019, the GFEI reaffirmed their target of doubling the fuel economy of new passenger vehicles globally by 2030 (relative to 2005), and extended this target to a 50% reduction in new passenger vehicle per-kilometre CO2 emissions by 2030 (relative to 2005). Given slow progress in fuel economy improvements to date, the global average fuel consumption of new light-duty vehicles needs to decrease 4.3% per year from 2019 to 2030 to achieve the GFEI’s 2030 target.
Support the Global Fuel Economy Initiative to promote improvements in energy efficiency of the global light-duty vehicle fleet
The Global Fuel Economy Initiative (GFEI) works to secure real fuel economy improvements across the globe and maximum deployment of efficient vehicle technologies – encompassing LDVs and HDVs and including the full range of technologies, such as hybrid and fully electric vehicles. The GFEI promotes these objectives through shared analysis and advocacy, offering country policy support and tools. The GFEI’s partners are the IEA, the UNEP, the OECD’s International Transport Forum (ITF), the ICCT, the Institute for Transportation Studies at UC Davis, and the FIA Foundation.
- Global Fuel Economy Initiative
The Advanced Motor Fuels Technology Collaboration Programme (AMF TCP) is an international network that serves to foster collaborative research, development, and deployment (RD&D) and to provide unbiased information on clean, energy-efficient, and sustainable fuels and related engine and vehicle technology.
- AMF TCP
The IEA Clean and Efficient Combustion Technology Collaboration Programme carries out experimental and computational research related to internal combustion in engines and gas turbines, and furnace combustion.