Recent regulatory retreat over automobile fuel efficiency undermines both climate progress and U.S. competitiveness.
In late March, the Trump Administration announced its final rollback of federal automobile fuel efficiency standards. If upheld, this action would deal a significant blow to efforts to combat climate change, given that greenhouse gases from transportation constitute approximately 28 percent of total emissions in the United States—not including pollution from oil refineries which produce the fuel burned in automobiles.
The recent regulatory change replaces Obama Administration standards that covered model years 2020 through 2025. The rules required fuel economy improvements in automobiles between four to five percent per year to achieve average fuel economy levels of about 55 miles per gallon by 2025. After initially proposing to freeze the standards at roughly 37 miles per gallon, the Trump Administration instead settled on requiring fuel economy improvements of only about two percent per year.
Why even this minimal increase from an Administration notoriously hostile to environmental protections?
First, automakers appear set to improve fuel economy on their own by over two percent annually, even without additional mandates. Second, the math justifying the rule ultimately required the Administration to budget for some incremental progress. Notably, the rule would—at the earliest—affect vehicle models from the year 2022 forward.
The new rule would take the United States from a position that ranked among global leaders in fuel economy to a position of a global laggard. For example, the European Union requires automakers to achieve an average fuel economy equivalent to 57 miles per gallon by 2021 and 92 miles per gallon by 2030. And in China, the average fuel economy of new passenger vehicles sold in 2018 was already equivalent to approximately 41 miles per gallon. China also has a goal for 25 percent of total vehicle sales by 2025 to be zero-emission vehicles, increasing to up to 50 percent by 2030.
Perhaps equally damaging to the U.S. position as an environmental leader, the new changes to the federal fuel economy requirements also revoke California’s ability to create emissions standards stronger than federal standards. California has adopted a state mandate for automakers to produce or buy credits for a minimum number of zero-emission vehicles—a longstanding policy that has helped jump-start the market for battery electric vehicles in the United States.
Despite the steps backward taken by the new rule changes, three positive scenarios remain for climate progress in the U.S. transportation sector.
First, the courts may likely find the new rule does not pass muster under administrative law precedent. Specifically, they may invalidate the proposal as arbitrary and capricious because of flawed assumptions and basic math errors used to justify the new rule. The Trump Administration, for example, claims that the rollback will result in fewer deadly accidents by encouraging consumers to buy heavier, newer vehicles at cheaper prices, even though market forces largely determine vehicle pricing, size, and weight—not regulations.
Second, if Trump is replaced in January 2021 by a Democrat—presumably former Vice President Joe Biden—the new President could stop the rollback and restore the old rule. Given that litigation over the rule will proceed into next year at least, the November election may decide its ultimate fate.
Finally, the auto industry may achieve significant reductions in emissions over the next few years notwithstanding U.S. requirements. The industry already faces increasingly stringent zero-emission policies in the European Union and China in the global market, along with increasing competition from the success of Tesla. Ongoing massive declines in battery prices—87 percent cost reductions over the past decade—have also enabled progress on vehicle electrification. These cost reductions will push the industry to convert their products to electric motors powered by batteries charged on increasingly clean electricity grids.
California has already negotiated a separate fuel economy deal with four major automakers who recognize this trend toward increasing vehicle efficiency and seek to avoid the drawn-out litigation and uncertainty over the new Trump rule. These automakers, which represent about one-third of the U.S. market, have agreed to comply with fuel economy improvements of about four percent per year through 2025—albeit with offsets included for additional zero-emission vehicle production.
Ultimately, stringent fuel economy regulations will not be the only policy needed to reduce transportation emissions. Federal support for zero-emission vehicle purchases such as the existing $7,500 tax credit—already expired for manufacturers like Tesla and General Motors—helped spur significant consumer demand and could be extended in a future U.S. Congress.
Federal investment in battery research and incentives for electric vehicle charging infrastructure can also help boost deployment of electric vehicles. In addition, many state and local governments offer cash rebates and tax credits, prioritize zero-emission vehicles for fleet purchases, and authorize utility-funded investments in electric vehicle charging stations, among other incentives.
But to truly meet the imperative of climate change and remain competitive with other countries in a global automobile market, the United States needs a proactive federal government to develop a strong national policy to reduce vehicle emissions. Unfortunately, with its recent regulatory rollback, the Trump Administration once again proves that it is not up to the challenge.