Trump Undoes Obama’s Corporate Average Fuel Economy Standards

In 2012, the Obama administration issued rules ordering carmakers to improve the average miles per gallon of their car fleets (the Corporate Average Fuel Economy mandate, known as CAFE) from about 27 miles per gallon in 2012 to 54.5 miles per gallon by 2025. The new standards were to reduce fuel consumption and carbon dioxide emissions, which would help achieve Obama’s pledge to reduce U.S. carbon dioxide emissions as part of the Paris Climate Agreement. Automakers agreed to the rule because of the Obama administration bailout in the 2008-2009 financial crises, hoping to later convince politicians that the new standard was not feasible. Automakers do not have the technology to meet the standards other than forcing low-or-no-profit electric vehicles and other small cars upon consumers, who prefer SUVs, pick-up trucks, and crossover vehicles that are far more profitable. The Obama standards assumed that two thirds of vehicles sold would be cars, and a third light trucks, but the ratio lately has been just the reverse.

To meet Obama’s CAFE standards, auto manufacturers would have to produce vehicles that are at least 30 percent electric over the next seven years—far more electric vehicles than consumers are likely to want. Electric vehicles make up only about 1.5 percent of new vehicles sales. Further, nearly half of consumers who purchase an electric car do not buy another because of low vehicle range and long recharging times. Thus, the Obama standard would make automakers build and sell electric vehicles at a loss, and sell other vehicles at higher prices to make up the difference. Since electric vehicles are mostly purchased by more well-to-do buyers, this results in a regressive tax imposed on lower-end auto buyers, forced to pay more for the vehicles that fit their needs.

Realizing the automakers’ predicament and the public’s desire to select their own vehicles for purchase, the Trump administration is proposing to freeze the CAFE standards at about 37 miles per gallon that is required by 2020 in the Obama CAFE plan through 2026. The proposal is estimated to save consumers about $2,300 per new car and to save about 1,000 lives per year, because consumers will be able to afford safer cars. A Heritage Foundation study found that Obama’s fuel regulations had already cost consumers at least $3,800 per car for the 2016 model year.

Higher production costs for cars meeting the more stringent CAFE emissions standards pushed the price of new cars to above $30,000—beyond the range at which many American households can afford to purchase new vehicles. According to the Trump administration, the best way to reduce emissions is to help put newer cars on the road by reducing prices. Changing the CAFE standards will make cars safer by discouraging the production of very light vehicles, which may not be as resilient to crash impacts, and by helping to put new cars on the road. The average American car is about 12 years old and does not have the features of many of the newer vehicles that have increased vehicle safety.

The Trump proposal also revokes California’s waiver to set its own fuel economy standards because Congress intended for the federal government—not any single state—to set the standards for the entire nation. Carmakers do not want to make two lines of cars, one for California and another for other states. When Congress created the CAFE program in 1975, it forbade states from adopting their own rules because it would increase the costs of compliance to manufacturers. Despite that, the Obama administration decided to continue an exemption that California originally received because of unique weather and geographic conditions around Los Angeles that made it especially susceptible to smog. Since smog-forming pollutants and greenhouse gases are much different emissions, there is no reason for California to continue to receive a waiver from the one standard national rule. The argument is that carbon dioxide is a “pollutant” affecting global warming, not local air conditions. In addition, if California is able to have its own unique standards, consumers throughout the United States would end up paying more for the vehicles they want in order to fulfill California’s desire to make a statement about electric vehicles. California would, in effect, be imposing the costs of its political decisions upon the citizens in many other states, many of whom cannot afford and do not want an electric vehicle.

Further, the reason for CAFE originally was because of a shortage of oil and high prices that no longer exists due to the shale oil renaissance and the technology to reap its benefits through hydraulic fracturing and directional drilling. The Energy Information Administration estimated that in 2019, the United States will be the world’s leading producer of oil, topping its 1970 peak of 9.6 million barrels per day by 2.1 million barrels.

Electric Vehicles Do Not Reduce Carbon Dioxide Emissions

Most electricity in the United States is generated by burning fossil fuels, mainly coal and natural gas, despite the Obama administration’s push toward wind and solar. Due to losses in generation and transmission, it takes the combustion of three British thermal units (BTUs) of coal, natural gas, or other fuel to deliver one BTU of electricity. Thus, the savings in carbon dioxide emissions is far less than suggested by the Obama CAFE standards. The Obama administration wanted an all renewable future and was pushing toward it through its Clean Power Plan despite the impossibility of an all-renewable electricity sector. The Clean Power Plan is also being overturned by the Trump administration.

Conclusion

The Trump administration has proposed a change to the Obama administration’s CAFE standards to freeze them at 2020 levels (37 miles per gallon) for six years, thereby bringing down the cost of new vehicles so that more American families can afford to purchase them and obtain their increased safety features, saving lives. The Trump administration is also proposing to revoke the waiver that the Obama administration approved that allows California to set its own standard. The legislation that created CAFE had intended only one national standard because of the cost to manufacturers to comply with additional standards. The Trump administration proposal is returning to the single standard originally required by legislation.

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