The US has mandated that light vehicles become much more efficient in coming years in an effort to lower greenhouse gas emissions. For example, light vehicles will be required to average nearly 50 miles per gallon across automaker production by 2026. The requirements are set to become even more stringent thereafter, with the ultimate goal of pushing automakers toward an all-EV fleet in coming decades. However, as a practical matter, there are increasing costs to driving emissions to zero. The improvements in fuel efficiency for many models are reaching diminishing returns, so the benefit to the environment of further gains is minimal. In addition, the country is not ready for an all-EV fleet. As EV production ramps up, the costs of needed raw materials will skyrocket, driving up vehicle prices.

Policymakers could speed up progress toward lowering US gasoline usage and vehicle emissions with existing hybrid technology instead. To do this, policymakers would have to stop rewarding ever-higher miles per gallon for some models and instead focus on eliminating the worst gas-burning vehicles. This would bring down fuel usage in the meantime until the economy is readier for wide-scale EV production.

Diminishing Returns. We have made a lot of progress for many vehicles that now get 33 to 50 miles per gallon. At 33 miles per gallon, it would take huge further gains to save little in terms of gasoline usage.

Chart 1 shows miles per gallon on the horizontal axis and the corresponding gallons used to drive 100 miles on the vertical axis. By basing estimates of fuel efficiency on miles per gallon gauges, the gains seem much bigger than they are. As fuel efficiency rises – measured by miles per gallon – the fuel savings decline.