Yahoo Autos Automakers Send Letter to Trump about Plan to Lower Fuel-Economy Rules
UPDATE 6/7/2019: In a letter to the Trump administration and California governor Gavin Newsom on Thursday, 17 automakers stated their distaste for a new plan to reduce fuel-economy standards by rolling back an Obama-era policy to hit an average of 54.5 mpg estimate across the industry by 2025. The automakers say that they fear states may push through their own legislation with higher standards to counteract the new policy, essentially creating a bifurcated automotive market in the United States which could increase the cost to manufacture vehicles for specific regions. The automakers are asking for a compromise between the EPA and the state governments, starting with California, which currently has the strictest standards. We’ll have more information on this story as it develops.
In a reversal of the toughest fuel-economy mandates in U.S. history that were adopted during the Obama administration, the Environmental Protection Agency under President Trump is advocating to abandon the much talked about 54.5-mpg passenger-car fuel-economy standard. Among other changes, it would also strip California’s ability to set its own emissions standards, instead focusing on market realities and prioritizing cost savings when setting new-car environmental standards. The agency acknowledges that its revised proposal would result in a 5 percent increase in CO2 emissions through 2026 and a 9 percent increase in CO2 emissions through 2035, but just a 1 percent increase in smog-forming emissions during the same time period.
The agency, in a proposed ruling jointly issued by the National Highway Traffic Safety Administration (NHTSA) last Thursday, has never so explicitly favored economics to justify a new standard. The 978-page proposal states that the EPA wants to freeze Corporate Average Fuel Economy (CAFE) targets (which are set by NHTSA) and greenhouse-gas emissions (which are set by the EPA) at the 2020-model-year level. If approved, the EPA would retain the industry-wide average of 37 mpg for the nation’s fleet of passenger cars and light trucks for model years 2021 through 2026. Compare that to the Obama-era rule that mandated a rise to 46.7 mpg by 2025. The widely reported 54.5-mpg figure was from 2012, when the EPA first approved the current plan for requirements through the 2025 model year, and it only refers to passenger cars. The new proposed car average is 43.7 mpg. (All figures are based on older CAFE calculations and not current “real world” EPA estimates on new-car window stickers.)
One major change is that automakers will have to produce only a fraction of the hybrid vehicles they would have had to make to comply with the new standards by model year 2030: from an estimated mix of 56 percent by 2030 to only 3 percent. Electric vehicles are expected to make up just 1 percent of the nation’s fleet during this same time period, according to the EPA. The agency justifies discarding the current targets by citing market realities, including low gas prices that help drive strong demand for larger SUVs and crossovers and referring to increased fuel economy as having “diminishing returns.” The EPA, referencing a report from the Energy Information Administration that cites increased domestic oil production, projects that average gas prices could be lower by 2050 than they are today.
“There remains no single technology that the majority of vehicles made by the majority of manufacturers can implement at low cost without affecting other vehicle attributes that consumers value more than fuel economy and CO2 emissions,” the EPA said. “Automakers, who must nonetheless continue adding technology to improve fuel economy and reduce CO2 emissions, will either sacrifice other performance attributes or raise the price of vehicles-neither of which is attractive to most consumers.”
“It’s not a question of ‘If you build it, they will come,’ ” the EPA said.
Less Expensive Cars and Bullish Sales Projections
In its analysis, the EPA stops short of attacking the Obama-era rules as unreasonable. Rather, the Trump administration’s focus on economics and its downplaying of environmental issues such as climate change are the polar opposite of the Obama administration, which saw high compliance costs and rich government incentives for electric vehicles as the necessary sacrifices for a cleaner environment.
The EPA cited the figure of $2340 in estimated ownership cost savings per car by model year 2030 despite an increase in vehicles’ fuel consumption. Lowering the price of a car enables newer, safer, and more efficient models to replace older ones, the EPA said. It also lauds more than $500 billion saved in “societal costs,” which includes an estimated 1000 lives saved per year through the 2029 model year as compared to current rules. The agency is especially bullish on new-car sales through 2030. It assumes annual sales between 17.2 million and 18.0 million each year from 2018 through 2030, an astronomical level that would break the record 17.5 million sold in 2015 and 2016 and last year’s 17.2 million.
An End to California Emissions Standards
The biggest change is with regard to California. Ever since the 1970 Clean Air Act, the EPA has granted the state a right to set separate, stronger emissions standards to combat smog. And since then, the California Air Resources Board has assumed broader authority to regulate carbon-dioxide emissions and all but require the production of electric vehicles to meet zero-emission mandates that nine other states and the District of Columbia now follow. The EPA wants to eliminate this ability and instead set a single, national standard.
For the first time, the EPA will attempt to prove that California no longer needs this ability. It will use that denial to dismantle the state’s zero-emission mandate, which requires automakers to meet emissions targets by earning, buying, or-in Tesla’s case-selling a set number of credits corresponding to their total fleet emissions. Rules within the Clean Air Act allow the EPA to deny California’s right if the state’s rules are “arbitrary and capricious.” The EPA intends to show that the state has “disproportionately focused on greenhouse-gas emissions” to fight smog and that CO2, instead of smog-forming pollutants like nitrogen oxides, is “not part of that local problem.” In this way, the EPA says, these regulations have affected how “consumers lived and drove.”
Removing the zero-emission mandate, the EPA insists, would let automakers “develop such vehicles in response to consumer demand instead of regulatory mandate.” The state is undoubtedly planning to sue the federal government should the EPA proceed with this action. Court fights could last years.
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CAFE: A Brief Guide to the Corporate Average Fuel-Economy Law
The EPA is allowing the standard 60 days for public comments-and it’s likely there’ll be a much lengthier response from the Golden State.
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