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The average improvement was estimated to be -3 to 3% improvement for cars and 2-15% for light trucks (NRC, 2002). A third concern is that this method has tended to focus only on currently available technology and generally fails to account for likely improvements in technology performance and cost over time, and the development of new technology that conceivably might play a significant role during the time period of the analysis (if this is 10 years or more). This leads to conservative results, although these factors are hard to quantify.

4. Application to Europe The above discussion is quite applicable to an analysis of new fuel economy standards for the European Union, but several adjustments are necessary. The European light-duty fleet and the economic and policy environment that affects it have important differences from conditions in the United States. Among the most important differences: • The physical makeup of the European fleet is quite different from the US fleet: o o o o Engine power (for vehicles of the same size) tends to be considerably lower, on average, in the European fleet; Diesel engines make up close to 50% of new vehicle sales in Europe, while light duty diesel sales are negligible in the US; Manual transmissions are the norm in Europe, automatic transmissions in the US; Light trucks form a small part of the new vehicle fleet in Europe, and over half the new vehicle fleet in the US.

Unfortunately, there is no such method. Instead, it may make sense to try a few THE COST AND EFFECTIVENESS OF POLICIES TO REDUCE VEHICLE EMISSIONS – ISBN 978-92-821-0212-1 - © OECD/ITF, 2008 EXAMINING FUEL ECONOMY AND CARBON STANDARDS FOR LIGHT VEHICLES - 47 different approaches to setting new standards to get a broad perspective for what options might be open to policymakers. 1. “Cost-effective” standards A common method of identifying fleet targets for a new standard is to identify a fuel economy level that would create fuel savings over the vehicles’ lifetimes that, at the margin3, would be greater than the added cost of fuel saving technologies.

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