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Consumer Preferences vs. Environmental Mandates - 12/28/15

The past year has served to create a major conflict between consumer preferences and environmental mandates.  As indicated by Reuters, surging demand for trucks and SUVs fueled by cheap gasoline is constraining improvements in U.S. fuel economy and the quest to diminish greenhouse gas emissions. 

Nearly fifty nine percent of U.S. vehicle sales this year have been of sport utility vehicles, pickup trucks or other larger vehicles, up from fifty four percent last year according to industry consultant Autodata Corporation.  The Toyota Motor Corporation has indicated that within two years, its RAV4 SUV will displace the mid-size Camry sedan as its top selling model in the United States. 

Because of the large-scale movement toward larger vehicles, this past November, fuel efficiency for new vehicles purchased fell sharply to twenty five miles per gallon, down nearly a full mile per gallon from August two thousand and fourteen’s peak. 

At the same time, the U.S. inked a landmark agreement in France recently to help transform the world’s fossil fuel driven economy.  Some automakers are arguing that fuel economy targets should be relaxed given the shift away from smaller cars, but the U.S. government has global commitments to keep.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.