Fuel efficiency standards are often touted to help reduce greenhouse gases and air pollutants’ emissions, but where does the correlation ends, and does a limit exists on fuel efficiency? Specifically, is there a limit beyond which fuel efficiency of vehicles running on fossil fuels could not be improved further? And what is a better yardstick for environmental sustainability for electric and hybrid vehicles? Could energy efficiency calculated based on the efficiency in which energy is used in transporting a specific weight per kilometer be used in place of fuel efficiency? Searching for answers to the above questions, this analysis describes the conceptual underpinning of how improving fuel efficiency is related to the reduction of greenhouse gas emissions and common air pollutants (such as nitrous oxide, sulphur dioxide, carbon monoxide etc.), but expounds on whether a finite limit exists in fuel efficiency for gasoline powered vehicles, as well as whether energy efficiency would be a better environmental sustainability measure for vehicles moving forward, especially with the use of renewable energy for charging electric vehicles.