Nearly two years after announcing its initial plan, the Trump administration issued a final rule on March 31 that rolls back Obama-era automobile fuel economy standards and requires modest fuel efficiency increases in forthcoming internal combustion models.
While the rollback has angered environmental groups and will prompt additional lawsuits from states, the most certainty around the ruling may come after the November presidential election when Trump is likely to face Obama’s Vice President, Joe Biden.
“Ironically that will be the next big decision point in all of this,” said Mike Wall, director of automotive analysis in Grand Rapids for IHS Markit. “We’re not expecting any broad resolution between now and November.”
The Obama administration rule, known as corporate average fuel economy (CAFE) standards, called for ramping up fuel efficiency by about 5 percent each year through 2026. The Trump administration’s rule scales it back to 1.5 percent each year.
The Department of Transportation and Environmental Protection Agency’s rule will result in roughly 2 billion additional barrels of oil being consumed and roughly 900 million metric tons of additional carbon dioxide emissions, according to the administration’s estimates, while increasing average fuel costs by $1,000 per vehicle. Administration officials say the rule will cut average vehicle prices by roughly $1,000 and cause fewer traffic deaths, although critics dispute the claims.
Meanwhile, California’s Zero-Emission Vehicle program calls for vehicles to have an average fuel efficiency of about 50 miles per gallon by 2026. Fourteen other states have adopted California’s model. Notably, Ford Motor Co. says it’s committed to meeting emission reductions in line with California’s framework.
Less certainty, more dynamics
Prior to Trump’s rule, there was a “meeting of the minds” between the states and federal government on uniform vehicle emissions standards, according to Wall.
“There’s not that meeting of the minds anymore,” he said.
The administration’s move and states’ reactions create more uncertainty for automakers and suppliers, but it’s unlikely to derail plans around both internal combustion and electric vehicle deployment.
Automakers including Ford and General Motors have announced hundreds of millions of dollars in investments in new electric vehicle models, largely to stay competitive with European and Chinese companies and comply with regulations there. Bigger factors affecting that sector involve the coronavirus-related recession and, to an extent, declining oil prices, Wall said.
The Alliance for Automotive Innovation, a trade group representing automakers, said it is “carefully reviewing the full breadth of this final rule” to determine how well it supports a “customer-friendly shift” toward electrification and high-efficiency vehicles.
Wall said automakers will continue down a “dual path approach” of internal combustion and electric models, and a new ruling on CAFE standards won’t significantly affect automakers and their suppliers on that path.
The administration’s own analysis shows that the new rule could end up costing consumers more with additional fuel costs. Outside of oil producers, there appears to be no clear winners under the new rule, while adding uncertainty to an already convoluted legal and regulatory environment.
“The loss in one sense is we don’t have a meeting of the minds across the state and federal side,” Wall said. “What that could have afforded us — and it’s cliche — is more certainty around the regulations and just knowing what the rules of the road are. But automakers and suppliers are still executing a strategy and work doesn’t stop because there’s a lawsuit between states and the federal government.”
John DeCicco, research professor at the University of Michigan’s Energy Institute, said the administration’s final rule came “barely in time” for the 2022 model year timetable. He has watched the fuel economy debate span nearly three decades, and automakers’ public statements fluctuate based on which party controls the White House.
“We’ve seen this situation again where (automakers) take advantage of the changes with who’s in charge in Washington,” he said. “In that regard, we’re seeing that up-and-down again.”
Climate rollback, industry disagreement
Meanwhile, environmental groups are gearing up to join states in a lawsuit defending the Obama-era regulations.
Howard Learner, executive director of the Chicago-based Environmental Law and Policy Center, said his group and other allies will file suit in federal appeals court “soon.” It will likely be joined with the states’ case.
“The Trump administration acknowledges its change in sensible clean car standards will cause more public health harms, including worse morbidity and mortality rates, and will cost consumers more money at the gas pump,” Learner said. “It plainly trumps ideology over common sense during the midst of a public health crisis, and it is legally flawed.”
The Obama-era standards were seen as a key component of a nationwide climate change strategy. As the U.S. power sector has steadily reduced greenhouse gas emissions by retiring coal plants, the transportation sector has emerged as the leading source of emissions.
Learner added the clean car standards have been “driving innovation” in the Midwest auto industry, including the move to electric models.
“GM and Ford in particular are making large investments in retooling their manufacturing process to build innovative cleaner cars of the future,” Learner said. “The Trump administration’s misguided rollback … will constrain that innovation and put the American domestic auto industry behind as European and Asian automakers are stepping up.”
DeCicco and Learner agree that the fuel-economy rollback produces one clear winner.
“If Americans are driving more fuel-inefficient cars and having to fill up more,” Learner said, “the winner is the oil industry.”