Trump Moves to Ease Obama Auto-Mileage Rules, California's Clout

(Bloomberg) -- The Trump administration, taking aim at one of former President Barack Obama’s signature environmental achievements, is proposing to suspend required increases in vehicle fuel economy after 2020 and unwind California’s authority to limit tailpipe greenhouse gas emissions in the state.

The Environmental Protection Agency and National Highway Traffic Safety Administration jointly proposed on Thursday to cap fuel economy requirements at a fleet average of 37 miles per gallon starting in 2020. Under the Obama plan, the fleetwide fuel economy would have risen gradually to roughly 47 mpg by 2025.

They also propose to revoke California’s authority under the Clean Air Act to set rules more stringent than the federal ones limiting tailpipe greenhouse gas emissions as well as an electric-vehicle sales mandate.

Taken together, the proposal is an aggressive move to dismantle what some environmentalists have hailed as one of the most potent efforts anywhere in the world to combat climate change. Yet for President Donald Trump, who’s prioritized eliminating regulations, the auto rules represent a grand prize.

“We think we can have a win-win, if we lock in at 2020 levels,” Bill Wehrum, the assistant administrator for EPA’s Office of Air and Radiation, said in a call with reporters Thursday. “We’re not imposing undue costs on manufacturers. We’re not imposing undue costs on consumers who want affordable vehicles. And therefore we think as a result of these standards we will be able to have our cake and eat it too.”

Release of the proposal begins a 60-day period of public comment that is sure to attract a spirited response from California’s leaders who have vowed to defend their smog-fighting authority in court and from environmentalists who view the plan as a setback to efforts to curb climate change. Automakers, who had asked to be relieved of some of the mandates, have expressed misgivings about having to accommodate a patchwork of federal and state standards.

In a statement through their trade associations, automakers urged federal and California regulators to reach a consensus on the standards, saying the companies support higher mileage standards that can be met in a variety of ways.

“With today’s release of the administration’s proposals, it’s time for substantive negotiations to begin,” the Alliance of Automobile Manufacturers and the Association of Global Automakers said in a statement. “We urge California and the federal government to find a common sense solution that sets continued increases in vehicle efficiency standards while also meeting the needs of America’s drivers.”

Trump in March 2017 announced his administration would be reopening a review of the Obama automobile rules that he and some automakers said was unfairly cut short by Obama’s EPA. Before a crowd of autoworkers assembled at a decommissioned car factory, Trump said “we’re going to work on the CAFE standards so you can make cars in America again. We’re going to help the companies, and they’re going to help you.”

Thursday’s rulemaking proposal from the EPA and NHTSA also presents several other options for modifying the Obama targets, while recommending the proposed freeze starting in 2020, the most severe of the scenarios.

“The goal is to get it right -- to create one national standard that is technologically feasible and economically practicable, while promoting energy conservation, furthering other environmental goals, and preserving consumer choice,” Transportation Secretary Elaine Chao and EPA chief Andrew Wheeler said in an opinion piece in the Wall Street Journal. “Our goal is to ensure that consumers have a variety of safe, fuel-efficient choices so they can decide for themselves which options suit them best.”

The current, Obama-era plan effectively subsidized “expensive electric vehicles at the expense of affordable traditional cars and trucks,” they said.

In a separate move to unwind California’s power to set the pace of auto emissions requirements, the proposal also asserts that a 1975 law prohibits states from setting their own greenhouse gas limits, a view two federal district judges have already rejected.

“Their analysis of the cost savings is based on weak if not faulty arguments,” said Dan Sperling, a member of the California Air Resources Board. “Consumers come out way ahead with the original regulations because they save money on gas.”

Asked where today’s proposals leave room for a dialogue which the administration says it wants with California, Sperling say, “the waiver issue is non-negotiable.”

Carmakers Speed Toward Electric Future Despite Rollback: Bloomberg Law

California Governor Jerry Brown, in a statement, said “California will fight this stupidity in every conceivable way possible.”

Supporters of the Trump administration approach say Congress gave California unique authority under the Clean Air Act to regulate local air pollution problems that contribute to smog. But greenhouse gas emissions are not a local problem, and California’s special powers shouldn’t extend to regulating them, they say.

“What we’re talking about here is something different: greenhouse gases, not the conventional pollutants that cause smog in Los Angeles,” said the EPA’s Wehrum.

California isn’t the only state vowing to fight the proposal. Massachusetts Attorney General Maura Healey on Thursday said a coalition of 19 states and the District of Columbia would challenge the Trump administration’s plan. The group includes all states that have adopted California’s more stringent standards.

EPA Fuel Economy Rollback Aims to ‘Strip Away’ Auto Compromise

The comment period on the proposal released Thursday will begin once it is published in the Federal Register, and a final rule could be finalized by the end of 2018 or early next year.

“This proposal will substantially increase pollution and will cost the average American family hundreds of dollars a year extra for gas,” said Fred Krupp, president of the Environmental Defense Fund. “It’s a proposal that attacks the states’ right to protect people from dangerous pollution, one that no one -- not the American public, not the states, not even most automakers -- really wants, and one that’s being presented to the public under the false and easily discredited guise of improving public safety.”

Rhea Suh, head of the Natural Resources Defense Council, said the Trump administration plan runs counter to what consumers want and the environment needs.

“The clean car standards are already saving our families billions at the pump, supporting nearly 300,000 American jobs, and cleaning up dangerous tailpipe pollution,” she said in an emailed statement. “We need to speed up that progress, not slide backward.”

In Thursday’s proposal, the Trump administration argues that its proposed freeze will have a “negligible’’ impact on air quality, and boost the earth’s temperature by 3/1000th of one degree Celsius by 2100. The administration also says that its preferred plan for fuel economy will reduce society-wide spending by $502 billion for vehicles built between 1975 and 2029.

Savings Calculation

About a third of these projected savings, or $198 billion, are tied to the agencies’ assertion that, by slowing pace at which new vehicles get more expensive, they’ll allow people to replace older and less-safe cars more rapidly. The agencies say this accelerated fleet turnover will reduce the cost of accidents and avoid 12,700 traffic deaths in vehicles built through 2029. Not everyone’s convinced.

“This would be utterly unprecedented. Nobody in any regulatory agency has ever done a cost-benefit analysis anything like this,’’ said Nic Lutsey, an engineer at the International Council on Clean Transportation. “There’s no evidence that efficiency regulations have depressed sales and added fatalities as a result -- in any market in the world.’’

Just over half of the administration’s projected cost savings, $253 billion, come from reducing the plan’s technology requirements. Part of this comes from a big increase in the projected cost of the Obama targets, and so, the expected savings from the Trump rollback.

The Trump administration estimates that Obama’s fuel economy rules would have pushed car prices higher by an average of about $2,700 per vehicle by 2025. This compares to an initial Obama forecast of $1,500 to $1,800. The new estimates are higher in part because the administration asserts that 44 percent of new vehicles will need to be expensive gas-electric hybrids to meet the targets. This compares to a 4 percent estimate by Obama, who expected high-compression engines and other improved gas-only technologies to make a bigger contribution.

Gas Prices

The rest of the administration’s projected savings, or $52 billion, derive from the argument that, since higher costs will force consumers to drive less, they’ll avoid the cost of being stuck in traffic.

The administration acknowledged its actions would erase some economic benefits of the Obama plan. For example, consumers would save $133 billion less at the gas pump because engines won’t get more efficient. By driving less, they’ll forgo “mobility benefits’’ worth $61 billion.

Because such forgone benefits from the Obama plan need to be subtracted from the projected cost savings from today’s announcement, the administration estimates that the Trump rollback will reduce total societal spending on improved fuel economy by $176 billion through 2050.

The efficacy of the administration’s cost estimates will shape the plan’s public acceptance and its ability to withstand court challenges. California, 16 states and the District of Columbia have already filed a lawsuit that challenges the plan’s scientific underpinnings.

John M. DeCicco, research professor at the University of Michigan Energy Institute, said the rollback amounted to a “denial of basic science and a denial of American automakers’ engineering capabilities and ingenuity.”

“Michigan’s automakers have the technology and intellectual capital needed to meet ever-tighter MPG and GHG emission targets. The standards are designed with flexibility in mind, and have already adjusted to the shift back to SUVs and other light trucks,” DeCicco said.

©2018 Bloomberg L.P.