Trump is freezing Obama’s fuel economy standards. Here’s what that could do.

Quantifying the damage to our air and pockets.

The Environmental Protection Agency, along with the the National Highway Traffic Safety Administration, formally announced Thursday that the agencies will abandon the long-term fuel economy standards for passenger cars and light trucks developed by the Obama administration for 2022-2025, declaring, without evidence, that they are “too high.”

It plans to replace Obama’s standards, which required the auto industry to just about double the fuel economy of vehicles to an average of about 54 miles per gallon by 2025, with … nothing. Instead, it will simply freeze the standard at the 2021 level.

What’s more, the EPA is revoking the Clean Air Act waiver that allows California to set its own air quality standards (and thus its own fuel economy standards). That would force California and the 13 states (and DC) that follow its lead on fuel economy to conform to a federal standard that is certain to be weaker than they’d like.

It is signature Trump: a crude sledgehammer to regulations, with only desultory gestures at justification.

To be sure, many barriers stand between the EPA and its vision of higher tailpipe emissions. The EPA will have to do a whole new rulemaking process, which could take up to a year and be subject to legal challenge. And California has already signaled that it is moving ahead with its own stricter standards, which means it’s headed for a legal showdown with the administration.

A coalition of 17 states and DC filed suit against the administration in May when it first announced its intentions to roll back the standards. They charge that it is acting arbitrarily and capriciously in tossing out Obama’s standards, which were the result of years of research, stakeholder meetings, and public engagement.

But let’s say Trump gets everything he wants — standards are frozen at 2021 levels and California loses its waiver. What effect would it have?

The analysts at Rhodium Group in May sent out a short research note on that very question. While acknowledging that enormous uncertainty remains around the fate of the standards, they set out to model a world where Trump gets what he wants.

YouTube

The effects of EPA’s fuel economy freeze

Corporate Average Fuel Economy (CAFE) standards regulate what kind of cars automakers must make. An automaker must sell so many fuel-efficient cars per so many SUVs, to hit a fleet average target.

The cost of complying with the regulations depends crucially on the price of oil. If oil (and thus gas) prices are high, consumers will naturally seek fuel-efficient vehicles anyway, so the standard will be easy and cheap to meet. If oil (and thus gas) prices are low, consumers will naturally seek bigger vehicles, and the standards will start to bite.

So Rhodium modeled three scenarios: low, reference, and high oil prices, drawn from International Energy Agency forecasts.

Here’s what the freeze would do to the average fuel economy of the fleet:

RHG

“Under Obama-era standards, fleetwide fuel economy rises from 32 mpg today to between 44 and 46 mpg in 2025, depending on the price of oil,” Rhodium writes (emphasis mine). “Without updated standards after 2025, fuel economy improvements level off at lower oil prices and grow modestly at higher oil prices. If the Administration proceeds to freeze CAFE standards at 2020 levels, the fleetwide average reaches only about 38 mpg in 2025 under AEO 2018 reference oil prices, 36 mpg in a low oil price environment and 42 mpg under high oil prices.”

What does that translate to in terms of demand for oil?

RHG

By 2025, the freeze would increase US oil consumption between 126,000 and 283,000 barrels a day; by 2030, assuming no change in standards, between 221,000 and 644,000 barrels a day.

“Purchasing this oil,” Rhodium writes, “would cost drivers an additional $193 to $236 billion cumulatively between now and 2035, again depending on oil prices.”

And finally, what about carbon dioxide emissions?

RHG

The emissions impact is modest early on, but it compounds over time, especially if oil prices remain low (again, assuming no change in standards).

Slowing down on fuel economy is goofy

In sum, the EPA’s plan would bequeath America vehicles that guzzle more gas, have higher fuel costs, produce more pollution, and profit the dirtiest automakers.

The damage would go beyond the numbers, though. As Rhodium notes, even if a future administration returns to these standards, the starting point will be lower. Low-carbon R&D and industry investment will have been delayed at a time when the entire transportation sector is approaching an inflection point for which it is scarcely prepared.

US fuel economy standards are already among the lowest in the world, and have been for a while. While the world’s auto industry stampedes toward electrification, the US auto industry, drunk on short-term SUV money, is betraying the promise it made to Obama (when he bailed its ass out) and doubling down on gasoline.

Worst of all, the EPA is indulging the worst instincts of the largest incumbents in the industry at a time when transportation has become America’s biggest carbon challenge.

If they lose CAFE standards, California and other states that are serious about climate change will have to find creative new ways to limit transportation emissions. There’s no way to decarbonize without taming transportation.