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The Environmental Protection Agency is expected to announce steps today that will roll back the strict, 54.5 mpg fuel economy rules set to phase in between now and 2025. The move would eliminate one of President Barack Obama's key climate change initiatives and set the White House on a collision course with states that have already pledged to follow the tighter regulations.
The Obama administration had been required to conduct a “mid-term review” of the fuel economy standards — and opted to keep them, shortly before President Donald Trump took office. But Trump quickly made it clear the EPA, led by pro-business Administrator Scott Pruitt, would reconsider that decision.
Manufacturers such as Ford and General Motors initially agreed to the rules as part of a much-heralded agreement, but they later reversed course, arguing that the rules would be too expensive and would threaten U.S. jobs, especially as American motorists begin switching from smaller, fuel-efficient sedans and hybrids to more gas-hungry SUVs and pickups.
Not all automakers support a rollback, however, and the debate has led to an unusual split between manufacturers and key auto suppliers who support the 54.5 mpg target, according to a new study by CALSTART, a California-based consortium aimed at developing clean transportation technologies.
“We found that suppliers strongly support the standards and are encouraging the administration to stay the course,” said CALSTART President John Boesel. “They felt (the 54.5 mpg target for 2025) was feasible and do-able.”
Under the Obama administration, the Corporate Average Fuel Economy, or CAFE, standards were raised twice after years of stagnation. The current targets aims to boost the mileage of the average new vehicle sold in the U.S. to 54.5 mpg by 2025 — though that figure is a little misleading. Due to adjustments in testing procedures and credits the industry can earn, the actual target is in the low to mid-40 mpg range.
Most experts agree that figure is possible, but the question is at what cost — and with what impact. The general consensus is that the standard will require a sharp increase in the use of electrified powertrain technologies, including conventional hybrids, plug-ins, and battery-electric vehicles, or BEVs. A 2010 study by the Center for Automotive Research, in Ann Arbor, Michigan indicated this would add thousands of dollars to the cost of the typical vehicle and, by driving down new vehicle demand, cost tens of thousands of industry jobs.
But other research suggests such dire warnings are overblown. The price of current state-of-the-art lithium batteries has fallen by over 70 percent since the beginning of the decade, when the 2025 standards were being negotiated. And a study released by the Boston Consulting Group last December forecast that by the time the 54.5 mpg target goes into effect the cost of owning and operating an all-electric vehicle would be roughly comparable to a conventional gas model.
Ironically, even as automakers have pushed for a rollback, they have radically ramped up their electrification programs. GM plans to have around two dozen BEVs in its showrooms by mid-decade. Volkswagen will launch 50 by the same time. Volvo says every model it sells will use some form of electrification, a target several other marques, including Infiniti, have also laid out. Nissan announced plans last week to add an assortment of its own pure electric models, and Carlos Ghosn, CEO of the Renault Nissan Alliance, said in an interview last autumn that the Japanese side of the group will not back off of its mileage commitment no matter what the EPA decides.
The administration could completely gut the program, says one expert.
The administration could completely "gut the 2025 program,” Margo Oge, the former director of the EPA's Office of Transportation and Air Quality, the department that helped negotiate the 2010 mileage compromise, has warned.
Exactly how much of a cut Pruitt will call for is uncertain and there is some concern that he might also try to eliminate the special exemption Congress wrote into the 1970 Clean Air Act for the traditionally smoggy state of California. It currently has the right to set its own emissions targets, routinely tougher than the EPA’s national standards. By lowering acceptable levels of CO2, blamed for global warming, California can effectively force higher mileage targets even if the national standard drops.
And 11 other states — collectively accounting for about one-third of the American new car market — have adopted the California guidelines.
For his part, EPA chief Pruitt has said “California is not the arbiter” of mileage rules and insisted the state “can't dictate to the rest of the country what these levels are going to be."
California Air Resources Board chairperson Mary Nichols has said she would be willing to discuss the merits of changes to the CAFE rules, but stressed that, “absent any such evidence” to support a rollback, “we will certainly resist any changes.”
Whatever the Trump administration calls for, the issue is expected to wind up in court. Groups like the Union of Concerned Scientists have also called out individual manufacturers who support a rollback. That could create problems in the court of public opinion, with studies routinely finding that even with gas prices well below previous records, mileage remains a hot-button issue with motorists.
The White House has until April 1 to complete its version of the mid-term review, though it could take time before any final revisions to the CAFE standards are put in place — especially if opponents challenge the move in court.