Petroleum

Trump Guts Fuel Efficiency Standards: A Win for the Oil Industry at the Expense of Consumers

Attacking Fuel Efficiency

The Trump administration has been waging war on fuel efficiency standards. Within the past decade, initiatives related to vehicle fuel economy have attracted considerable attention from both the public and government policymakers. The boom and bust periods within the global oil market continue to create enormous fluctuations in the price of gasoline and diesel. In the not-so-distant past, significant concerns mounted over the reliability of the gasoline supply, especially during the peak summer driving season. Fear related to the alleged peak oil crisis caused fuel prices to skyrocket. The notion that the global demand for oil would surpass available supplies created a sense of panic. There was an assumption that the high oil prices were here to stay. However, beginning in 2014, collapsing oil prices ended the wave of fear about the end of the fossil fuel era. As oil prices disintegrated, the Trump administration decided that it was time to take on the Corporate Average Fuel Economy standards.

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CAFE Standards

The Corporate Average Fuel Economy (CAFE) Standards were first established by the U.S. Congress in 1975 during the height of the 1970s oil crisis. These standards were developed as part of a larger series of policy measures to reduce U.S. reliance on foreign oil (McConnell, 2013). The overall purpose of the CAFE standards is to enhance the overall fuel economy for light-duty trucks and passenger cars. Between 1978 and 1985, the introduction of the CAFE standards mandated that the average fuel efficiency of the American fleet of automobiles be raised from 18 miles per gallon to 27.5 miles per gallon. Between 1985 and 2007, the CAFE standards remained unchanged with the mandate of 27.5 miles per gallon. However, following this period of fuel economy stagnation, the standards were dramatically revamped in 2007.

In 2007, the U.S. House and Senate passed a landmark law known as the Energy Independence and Security Act (EISA). The EISA was passed with broad bipartisan support in order to a set a goal for the national fuel economy standards to reach 35 miles per gallon by 2020. As part of his overall initiative to reduce American dependence on oil, President George W. Bush signed the bill into law on December 19, 2007. The EISA also established a system for the National Highway Traffic Safety Administration to develop a credit trading and transferring program that allowed automobile manufacturers to transfer fuel efficiency credits between vehicle manufacturing categories, which helped provide flexibility in each automaker’s ability to meet the newly revamped CAFE standards.

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Obama Administration Changes

While the EISA legislation was still in its relative infancy, President Barack Obama directed the U.S. Department of Transportation to review applicable legal, technological, and scientific factors related to establishing more rigorous fuel economy standards shortly after he took office in January 2009. In May of 2009, President Obama proposed a new national fuel efficiency program to adopt the standardized regulation for both greenhouse gas emissions and fuel economy, while also upholding the legal authorities of U.S. Department of Transportation, the Environmental Protection Agency, and the State of California. In response to questions about previously adopted fuel efficiency standards, President Obama notably stated, “The status quo is no longer acceptable.”

In 2011, the Environmental Protection Agency and the National Highway Traffic Safety Administration announced a joint regulatory proposal to address greenhouse gas emissions and fuel consumption in America’s fleet of passenger cars and light-duty vehicles. This proposal adjusted CAFE standards based on a vehicle’s overall footprint, which was said to be defined as a vehicle’s average track width multiplied by its wheelbase. These new CAFE standards aimed to increase the average fuel efficiency of passenger cars in the U.S. to 55.3 miles per gallon for the 2025 vehicle model year (Sen et al, 2017). In order to compel vehicle manufacturers to come into compliance with the stricter CAFE standards, the Environmental Protection Agency and the National Highway Traffic Safety Administration would issue manufacturers fines for each mile per gallon that was below the efficiency standards. While these rules received significant praise from the environmental community, many conservatives and business-oriented leaders were infuriated by the need to continually make vehicles more fuel efficient.

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Dissidence from Volkswagen Group of America

In response to the Obama administration CAFE standards, Volkswagen Group of America released the following statement: “Volkswagen does not endorse the proposal under discussion. It places an unfairly high burden on passenger cars, while allowing special compliance flexibility for heavier light trucks. Passenger cars would be required to achieve 5% annual improvements, and light trucks 3.5% annual improvements. The largest trucks carry almost no burden for the 2017–2020 timeframe, and are granted numerous ways to mathematically meet targets in the outlying years without significant real-world gains. The proposal encourages manufacturers and customers to shift toward larger, less efficient vehicles, defeating the goal of reduced greenhouse gas emissions” (Cervone, 2011).

Ironically, as Volkswagen argued against the CAFE standards based on the perspective that they would inadvertently increase greenhouse gas emissions, the German automaker was heavily involved in a diesel emissions cheating scandal that was ultimately found to be in violation of the Clean Air Act. Volkswagen was convicted of intentionally programming its turbocharged direct injection (TDI) diesel engines to switch on emissions controls only during specific emissions testing. Volkswagen’s sophisticated software allowed the company’s vehicles to secretly emit a wide array of hazardous and smog-forming chemicals into the atmosphere when driven normally (Plumer, 2015).

Following the CAFE standards overhaul from Obama administration, Volkswagen was the only automaker to not sign the agreement, which set them up for significant fines beginning in 2025. While Volkswagen was the only major automaker to officially reject the revised CAFE standards, other automakers also voiced that the strict standards would place too much of a burden on the auto industry. Some regulators feared that the increased costs associated with research and manufacturing related to enhancing vehicle efficiency would ultimately be passed on to the consumers.

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Trump Administration Rollbacks

When he first took office in 2016, President Trump vowed to roll back the enhanced CAFE standards enacted by the Obama administration. In early August 2018, the Environmental Protection Agency and the U.S. Department of Transportation issued a proposed ruling to roll back a portion of the Obama-era fuel efficiency regulations. The ruling was set to limit fuel efficiency goals to the 2021 target of 37 miles per gallon. Moreover, it would freeze requirements on the production of hybrids and electric vehicles, while also eliminating the legal waiver that allowed states like California to set stricter fuel efficiency standards. The head of the Environmental Protection Agency and the Secretary of the Department of Transportation issued a joint statement that highlighted how Obama-era CAFE standards would eliminate jobs and impose significant costs on American consumers.

During the height of the coronavirus outbreak in the U.S., President Trump announced a final rollback on the Obama-era fuel efficiency standards. As oil prices collapsed and the global demand for fossil fuels plummeted, the fossil fuel industry heavily lobbied the Trump administration to increase efforts to boost oil consumption and thereby raise oil prices. While automakers were already investing billions of dollars into plans to ramp up the production of electric vehicles and other fuel-efficient cars and trucks, the Trump administration’s gutting of the fuel efficiency standards has thrown a wrench into one of the world’s biggest efforts to combat climate change.

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Bipartisan Criticism

While oil and gas companies have praised the Trump administration’s efforts to lock the American public into a transportation system dependent on fossil fuels, environmentalists are furious that President Trump has been gutting his predecessor’s legacy effort to address climate change. Chet France, a former 39-year employee of the Environmental Protection Agency, said that, “given the catastrophe they’re in with the coronavirus, they’re pursuing a policy that’s going to hurt public health and kill people” (Knickmeyer and Krishner, 2020).

The senior Democrat on the Senate Environmental and Public Works Committee, Delaware Senator Tom Carper, labeled the Trump administration’s proposal as “the height of irresponsibility for this administration to finalize a rollback that will lead to dirtier air while our country is working around the clock to respond to a respiratory pandemic whose effects may be exacerbated by air pollution ” (Knickmeyer and Krishner, 2020). Many lawmakers and environmentalists have become increasingly angered that, while the coronavirus outbreak captured the world’s attention, the Trump administration continued with efforts to bolster the fossil fuel industry while also negatively impacting public health and environment regulations.

Even though the Trump administration has called the roll back in fuel efficiency regulations a major victory for the auto industry, many economists disagree with this assertion. In fact, industry executives say that Trump administration standards are likely to wreak havoc in the auto industry as a result of legal challenges and the efforts that have already been made to comply with the Obama-era regulations. According to Richard J. Pierce Jr., a distinguished law professor specializing in government regulations at George Washington University, the Trump administration’s efforts will be extraordinarily disruptive for the auto industry as a whole.

Public Scrutiny

In addition to questions raised by the auto industry, economists, and the environmental community, the American public overwhelmingly wants to see better gas mileage and stricter gas mileage standards. According to a nationwide survey conducted by Consumer Reports, nearly 90 percent of Americans say that automakers should continue to enhance fuel efficiency, while the government should also implement stricter fuel efficiency requirements (Kurczewski, 2017). The only sector of the country that truly supports the Trump administration changes is the oil and gas industry, which will now be able to sell more gasoline and diesel.

The Obama administration’s CAFE standards would have cut oil consumption by two million barrels per day, reduced tailpipe emissions from passenger cars and light-duty trucks by roughly six billion tons, and saved Americans a total of $1.7 trillion in fuel costs (Roberts, 2020). These CAFE standards were set to improve fuel efficiency by about five percent annually from 2021 to 2025 (Becker and Gerstenzang, 2020). A total of thirteen automakers agreed to comply with these efficiency standards. Instead, with the Trump administration changes, the average American will end up paying more at the pump at the benefit of the oil industry. Moreover, an Environmental Defense Fund analysis calculated that the Trump administration CAFE standards would add 1.5 billion more tons of pollutants to the atmosphere and burn 142 billion additional gallons of gasoline (Becker and Gerstenzang, 2020).

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A Questionable Future

Consumer Reports says that an average American should expect to pay about $3,200 more in fuel costs for a 2026 model year vehicle when compared to the Obama-era CAFE standards. The Environmental Defense Fund also found that the relaxed standards will contribute to upwards of 18,500 premature deaths from air pollution by the middle of this century (Becker and Gerstenzang, 2020). Overall, oil industry executives refute these numbers and are thrilled that their campaign to crush fuel efficiency rules has convinced the Trump administration to gut the CAFE standards.

Sources

Becker, D., and Gerstenzang, J. (2020). “Climate Progress Stalls Again, Thanks to Trump’s New Auto Rules.” The New York Times.

Cervone, T. (2011). “Statement by Volkswagen Group of America Regarding Proposed CAFE Standards.” Volkswagen Group of America.

Knickmeyer, E., and Krishner, T. (2020). “New Trump mileage standards to gut Obama climate effort.” Associated Press.

Kurczewski, N. (2017). “Survey Finds Consumers Want Better Gas Mileage, Stricter MPG Standards.” Consumer Reports.

McConnell, V. (2013). “The new CAFE standards: Are they enough on their own?” Washington Post.

NRC. (2002). “Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards.”

Plumer, B. (2015). “Volkswagen’s appalling clean diesel scandal, explained.” Vox.

Roberts, D. (2020). “Gutting fuel economy standards during a pandemic is peak Trump.” Vox.

Sen, B., et al. (2017). “Will Corporate Average Fuel Economy (CAFE) Standard help? Modeling CAFE’s impact on market share of electric vehicles.” Energy Policy: Vol 109. Pp 279-287.

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