EPA Proposes New Fuel Economy Labels for Electric Cars

The federal government released two fuel-economy label proposals Monday to address the emergence of electric cars and the policy mandate to disclose tailpipe emissions for all types of vehicles.

Under one proposal, consumers would see a letter grade reflecting both a vehicle's fuel economy and its emissions. It also would show an estimate for what consumers can expect to get in fuel cost savings over five years compared with an average gasoline-powered car manufactured in the same model year.

Under the second proposal, the label would keep the mile-per-gallon metrics and the estimate for annual fuel costs. It also would include information on the tailpipe emissions of the cars.

For electric and plug-in hybrid electric vehicles, either label will translate the electricity usage into an equivalent in miles per gallon. For electric cars in particular, either label would show fuel economy as measured in kilowatt hours per 100 miles.

Currently, the fuel economy labels, which show up as window stickers on every new car in the sales lot, show a fuel economy measured in miles per gallon, as well as an estimated fuel costs for driving an average of 15,000 miles per year. The government compares the fuel economy and costs among cars in the same class.

One Option: Easy to Understand Letter Grades

The new proposals announced Monday would compare numbers across all classes. For example, under the letter-grade proposal, electric cars are likely to get A+ while regular hybrids such as the Toyota (TM) Prius would get an A-. A Toyota Corolla would get a B+ while a Chevy Corvette would fall in the C category. A Ferrari 612 would get a D.

"As new technologies emerge from laboratories and start to show up in showroom floors, we think a new label is absolutely necessary for consumers to make the right decisions for the wallet and the environment," said Gina McCarthy, assistant administrator for air and radiation at the Environmental Protection Agency, during a press conference Monday.

Consumers can see details of the proposed labels at the EPA's Website. The government is seeking public comments on the proposal for 60 days and hold hearings before settling on a label design in early 2011. The goal is to have the new label available for 2012 models. Consumers can email their comments to newlabels@epa.gov.

Biggest Change in Three Decades

The plan to change the label represents the biggest change how the government evaluates and labels cars' fuel economy in about 30 years, McCarthy said. The change is coming in part because the government and auto industry expect to see a growth in the sales of alternative-fuel vehicles.

The government began to push the auto industry to invest more in building fuel-efficient cars after gasoline prices shot up a few years ago. President Obama announced plans to require fuel economy improvements soon after he took office. General Motors vowed to do more to engineer those kind of cars after it received government bailout last year.

But revamping the fuel-economy sticker has been a complex task, not least because the information that will end up on the new label could greatly sway consumers' buying decisions. The EPA, along with the Department of Transportation, has had to figure out how to make valid comparisons between conventional gasoline cars and cars that run entirely or partly on electricity. It also had to come up with a way to label greenhouse gas emissions -- information that hasn't been available on sales stickers -- in order to comply with the Energy Independence and Security Act of 2007.

As a result, the EPA took more time than was initially expected by the auto industry to come up with rules for new fuel economy and greenhouse gas emissions labeling.

Both GM and Nissan (NSANY) have been itching to show off fuel economy numbers for the new cars they are rolling out later this year: the plug-in hybrid Chevy Volt and the all-electric Nissan Leaf. Both companies once released some incredible fuel-economy numbers based on one version of the EPA's proposal to measure fuel economy for electric cars and plug-in hybrids. But the numbers raised eyebrows and questions about their accuracy (and warnings from the government), so both companies stopped touting them.

The EPA is working with GM and Nissan on labeling the Volt and Leaf separately since both automakers have started taking orders for the cars. But McCarthy declined to say more about how fuel economy information might appear on labels for these two vehicles.

Interactive Website and Smartphone Use

The EPA is also proposing to to provide more information than can fit on the labels by setting up a website that consumers can browse, and a method for downloading cars' data onto smartphones.

The additional information being made available would include greenhouse gas emissions emitted by power plants and refineries. Consumers also could access the website to get better electricity pricing for where they live.

"We don't want to make the label so complicated that it becomes meaningless. With smartphones, you can download info at the point of sale. The goal is to make the label useful and simple," said David Strickland, administrator for the National Highway Traffic Safety Administration.

Given the importance of fuel-economy labels in car sales, the government can expect to receive heavy lobbying from carmakers, who might not like the letter-grade proposal. After all, a C or D will denote poor performance in consumers' minds, so cars getting those grades might not sell well.

McCarthy said the grades follow a standard bell curve and are meant to provide information to consumers in a format they can relate to. She also pointed out that the consumers might ultimately prefer the second proposal, which sticks with the more traditional metrics.

"It's our job to communicate what the law says, so we are interested to hear from the public if they don't like the grades," she said.