Daily Archives: April 6, 2018

Debate Over How US Consumers and Businesses Will Be Affected by Changes To CAFE Standards

On April 2, 2018, the USEPA took initial steps to roll back Obama-era rules that mandated that automobile manufacturers meet ambitious mileage and emission standards (Corporate Average Fuel Economy or CAFE) from cars sold in the US by 2025. The most recent CAFÉ standards that the Trump Administration wishes to reverse were set in 2012 and mandated an average fuel economy of cars and trucks of 54.5 miles per gallon (mpg) by 2025. At that time, the USEPA estimated that meeting such a limit would reduce greenhouse gas emissions by 6 billion tons per year and reduce total oil usage by 12 billion barrels over the cars’ lifetime. The announcement did not say to what level the USEPA would change the required fuel economy requirement – back to the pre-2012 level or something in between.

US automakers argued that the current standards for 2025 were too difficult and costly for car manufacturers to meet and would likely cause car prices to rise significantly and/or force manufacturers to produce a fleet of cars for sale not reflective of what US consumers want. Each of these could hurt the U.S. economy. In addition, some business interests point to research studies that indicate that reducing gasoline consumption in the transportation sector is not as effective in reducing greenhouse gas emissions compared to reducing energy use in the residential building sector. (http://journals.sagepub.com/doi/abs/10.1177/0739456X17729438)

Historically, California has requested and received the right to enforce stricter standards than the nationwide one given its smog issues. However, the USEPA indicated they may fight California and any other state that may wish to maintain the 54.5 mpg standard. California subsequently did. Several car manufacturers stated that it would be difficult to build and sell fleets of cars having to meet different mileage requirements for California (and other states that may follow it) and for the rest of the US. Leaders from states representing one-third of the US car market stated support for the current standards; it is unknown how many will follow through.

On the other hand, several business groups issued statements against the proposed roll back of fuel economy standards, stating that such actions would undermine the global competitiveness of the US auto industry at a time when the larger world market is prioritizing cleaner vehicles and those that use less gasoline, and save consumers and businesses (which are major customers for automobiles and trucks) significant costs. Other statements pointed out that the aggressive fuel economy standard would also reduce the US’s dependence on oil, reduce climate risk, create jobs, and by saving costs at the gas pump, give US consumers more discretionary spending opportunities, growing the overall economy. Strong fuel economy standards also offer automakers flexibility to keep market share by selling fuel efficient vehicles during periods when gasoline prices spike.

Given the recent tumult and controversy at the USEPA and its Administrator, Scott Pruitt, it is unknown whether the agency will modify the CAFÉ Standards, how drastically, and when and how. But this will likely result in lawsuits and other actions.

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