In the United States, transportation use accounts for 28% of greenhouse gas emissions. Within transportation, light-duty vehicles contribute 60% of those emissions, with the rest coming from heavy-duty vehicles, aircraft and other smaller sectors. The Corporate Average Fuel Economy (CAFE) program aims to address and reduce the transportation industry's emissions.

Source: Environmental Protection Agency (EPA), "Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007, April 2009

Phase I
The first phase of the National Program was announced by President Obama in May 2009. It governed both CAFE and greenhouse gas emission standards for cars and light trucks of model years 2012-2016. The final rule was adopted in April 2010 and was a significant step since it was the first time the U.S. has strengthened fuel economy standards since the 1970's. The final rule of Phase I requires an estimated fleet wide average of 34.1 mpg and 250 grams of CO2 per mile by 2016.

Phase II
In October 2010, the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) issued a joint Notice of Intent that identified a range of proposed standards for cars and light-duty trucks of model years 2017-2025. The agencies projected an annual decrease in carbon dioxide (CO2) emissions of 3% to 6%. This correlates to a range of 47 mpg to 62 mpg in 2025. They are expected to propose the new standards by September 2011.

According to a recent study, even under the most stringent standards being considered (6% decrease or 62 mpg), variable profits in the industry would likely increase. Also, the Detroit Three (General Motors, Ford and Chrysler) actually would gain more of the profit increase than the rest of the industry, since they are more invested in trucks and larger cars and therefore likely to be required to make greater fuel economy improvements than their competitors. Improved technology doesn't come without its costs. But these higher fuel standards are actually cost-effective as long as fuel stays above $1.80 per gallon, and with gas currently hovering around $4 a gallon it's not hard to imagine it staying this high.

Many companies are improving their own fleets ahead of the anticipated fuel economy regulations. For example, in 2004, FedEx launched the first street-ready hybrid trucks. They increased fuel efficiency by 57%, decreased particulate emissions by 96%, and reduced smog-causing emissions by 65%. As of 2010, FedEx was operating one of the largest fleets in the industry. They use nearly 2,000 alternative energy vehicles worldwide, include natural gas, all-electric and biodiesel vehicles.

Instead of trying to roll out hybrid vehicles across the entire fleet, which would not have been cost effective, FedEx instead has focused on managing the fleet to reduce emissions. They have set a goal of improving efficiency of the entire fleet by 20% by 2020. This includes a variety of methods such as optimizing routes, using smaller and more fuel-efficient "sprinter" vans, and delivering by foot or bicycle in large cities like New York City and London.

FedEx image source: Autoblog Green