Fuel Efficiency Standards: The Perfect Example of Economic & Environmental Policy

In last week’s column, I discussed how environmental regulations are not harming our economy and are actually making other parts of the economy stronger. In this week’s piece, I’d like to dive into one of the more relevant policies which is President Trump’s recent loosening of regulations on fuel standards for car manufacturers.

Earlier this year, Trump loosened fuel efficiency standards that were originally implemented during Obama’s administration. The goal of Obama’s policy, under the Corporate Average Fuel Economy (CAFE), was to increase fuel efficiency and cut greenhouse gases by requiring each automaker’s fleet of vehicles average 50 miles per gallon by 2025. Trump has argued that this costs business too much regulation, costs are passed down to the consumers, and deregulation is the necessary next step. 

It is no surprise that this fuel efficiency standard was deregulated considering Trump’s deregulatory agenda as well as his disinterest in climate change solutions. But, having not included a wealth of stakeholders, such as California, and developing strong economic and environmental policy, they deregulated for the sake of deregulating. 

Ann Carlson, an environmental law professor at UCLA, in a report by the LA times said, “What they did instead is unleash this anti-regulatory monster, and a process that has been driven entirely by antipathy toward regulations." 

The increased fuel efficiency standard was doing exactly as it was intended though. It was driving innovation on engines that could be both powerful and fuel efficient, saving money at the pump, increasing consumer satisfaction, and strengthening public health. To reiterate from my previous column, the Office of Management and Budget found that emissions regulation did cost a great deal to car manufactures, but those costs was greatly exceeded by the benefits to public health because of the elevated air quality. By loosening the fuel standards, they’ve cut off incentive to innovate, increased risk for the public health, and potentially lost consumer savings that would be gained by more fuel-efficient cars. 

But the irony of this story is that the auto industry did not want this dramatic of a change in fuel standards and are pushing for a nationwide fuel standard because “California and the states allied with it…account for 37% of all vehicles sold.” 

Fuel efficiency standards have done an incredible job of driving innovation and positively changing the vehicle market. Because of increased fuel efficiency, consumers are opting for more SUVs, crossovers, and trucks over the mid-size sedan or smaller vehicle market. The Chicago Tribune reported “crossovers drove new vehicle sales to a record 17.5 million last year and in the process bumped aside the midsize sedan as the family vehicle of choice.” And, “midsize car sales fell 12 percent and compact cars fell 5 percent, and their combined total of 4.2 million was less than 25 percent of the market. Five years ago, midsize cars alone accounted for about 25 percent of new vehicle sales.” 

Increased fuel efficiency standards drove innovation which drove the market to larger vehicles. For example, despite the lack of clarity on federal fuel efficiency regulations, Ford went ahead and removed sedans from their lineup entirely and are betting on fuel efficient utility vehicles over smaller sedans. 

Moreover, the new fuel efficient technology and innovated engineering in today’s modern vehicle isn’t driving up the price tag either. The Consumer Federation of America conducted a study of the CAFE rules and standards and their effects on the market and consumer habits. Their report found a host of data debunking claims by deregulators that have detrimental effects to consumers and the economy. It found that these new vehicles cost less, fuel savings exceeded technology costs, the auto industry is on track to meet Obama’s 2025 fuel standard, and that the market and public opinion has vindicated these policies. 

It becomes increasingly difficult to understand why Republicans have been so adamant to loosen clean air rules. Regardless if you believe that the climate is changing as a result of human activity—an argument that is beyond inconceivable --you have to recognize that vehicle emissions do effect the air quality and therefore do harm the public health. If the auto industry is on track to meet the standards, the market has responded well to the changes, the public supports it, and the policy is saving public health and money, then why are we removing the policy?

I’ll end on this take by David Roberts from Vox who wrote about the OMB study and the clean air regulations:

“To frame the same point another way: Air quality regulations serve as a downward redistribution of wealth, out of the pockets of industrialists and into the pockets of ordinary Americans, particularly the poor and vulnerable Americans (African Americans and Hispanics in particular) who tend to live closest to pollution sources. They shift costs, from the much higher health and social costs of pollution remediation to the comparatively smaller costs of pollution abatement.

And therein lies the source of industry and GOP rage toward EPA. It’s why EPA delayed and delayed air rules under Bush. It’s why the GOP Congress worked so furiously to block air rules under Obama. And it’s why EPA is weakening or repealing air rules as fast as possible under Trump.”

It sounds cynical, but doesn’t it coincide perfectly with what happened with the GOP tax cuts too? And doesn’t it coincide perfectly with their policy on healthcare?


Joe MelisiComment