Gearing Up: Smart Standards Create Good Jobs Building Cleaner Cars

In 2011, the U.S. Department of Transportation (DOT) and Environmental Protection Agency (EPA) proposed joint fuel economy and greenhouse gas pollution standards for new cars and light trucks. These proposed standards would reach the equivalent of 54.5 miles per gallon (mpg) and 163 grams of carbon dioxide per mile (g/mi) for the average new vehicle by 2025. The new standards would be phased in over the period 2017 through 2025. This report analyzes the macroeconomic impacts of the proposed standards with particular attention to the net gain in jobs for the United States.

The analysis first examines whether the proposed fuel economy standards would result in a net fuel bill savings for consumers as a result of improved vehicle fuel economy. It suggests that, while the new, more fuel-efficient vehicles are incrementally more expensive as a result of technology upgrades, the projected fuel savings are expected to more than outweigh the added cost of new car purchases. Once the costs and fuel bill savings are identified, the analysis then uses the proprietary Dynamic Energy Efficiency Policy Evaluation Routine (DEEPER) modeling system, a quasi-dynamic input-output analytical tool to estimate the net changes in U.S. jobs over the full period of analysis. The modeling exercise suggests that the proposed standards will create an estimated 570,000 jobs (full-time equivalent) throughout the U.S. economy, including 50,000 in light-duty vehicle manufacturing (parts and vehicle assembly) by the year 2030. Real wages are projected to increase even faster than job growth. This implies that the proposed standards will both lead to new jobs and, on average, higher-paying jobs across the U.S. economy. By 2030, we also find a net increase of about $75 billion in annual Gross Domestic Product (all monetary values in 2010 dollars).