Trump Revives Auto Efficiency Debate With Pledge to Slash Rules

  • Automakers see opportunity to ease fuel-economy standards
  • California regulators could be wild card in negotiations

Why Detroit’s Big 3 Might Be Reluctant to Add Jobs

President Donald Trump’s pledge to ease environmental regulations hands automakers a second chance to amend the U.S. vehicle efficiency standards that the Obama administration sought to finalize in its final days.

In a White House meeting Tuesday with the chief executives of General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV, Trump called environmental regulations "out of control." That re-opened a debate automakers say was unfairly cut short when President Barack Obama issued a final determination on greenhouse gas emissions standards through model year 2025 a week before Trump’s inauguration.

"We are optimistic that these issues will get a fresh look," said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, a trade group representing the three Detroit-based auto manufacturers and nine other carmakers. "Both our customers and those who work in the vital auto sector deserve no less."

Yet even as the new administration lends carmakers a more willing ear, California’s powerful Air Resources Board remains the wild card. The agency sets its own efficiency targets, and could upend the coordinated rules that enable carmakers to sell the same cars and trucks in all 50 states.

Read more: Thwarting Auto Fuel-Economy Rule Unlikely a 100-Day Priority

The stakes are enormous. Relaxed standards would make it easier for the companies to sell more of the light trucks that account for the bulk of U.S. carmaker profits. But it could also put the industry at odds with consumer groups, who compare automaker opposition to environmental measures to the initial opposition to air bags and seat belts.

"If President Trump were to roll back the fuel efficiency standards, the biggest victims would be the voting block that put him into office, because these standards save consumers money, period," said Jack Gillis, spokesman for the Consumer Federation of America.

Automakers have argued that the Obama administration’s vehicle efficiency standards are too costly in an era of cheap U.S. gasoline prices and tepid demand for the most efficient vehicles. They also contend the regulations could impact U.S. auto-sector employment. At the same time, they are reluctant to pursue a major rollback of the overall efficiency goals because they’ve already made significant investments in clean car programs.

"The auto industry generally wants to keep the long-term goals," said Robert Bienenfeld, assistant vice president for environmental policy at Honda Motor Co. in the U.S. "We’re just looking for some near-term relief or flexibilities, because it’s very, very challenging. It’s not like the industry wants to do away with regulations. The question is ‘what’s the best approach?’" 

Broad Support

With broad support from automakers, the Obama administration brokered a deal in 2011 to align the efficiency standards from the EPA, the U.S. Department of Transportation and the California Air Resources Board that initially called for a 54.5 miles per gallon fleet average by 2025. Now the EPA expects a fleet average of 50.8 mpg, from 35.3 today. The parties also agreed to a mid-term evaluation of the rules.

But the EPA shocked the auto industry by moving on Jan. 13 to conclude its portion of the mid-term evaluation, finding its 2022-2025 emissions standards were feasible and needed no change. To change the rules, the Trump administration would need to initiate a new rulemaking -- a process that could take more than a year.

But automakers may have a quicker remedy. They could push for changes through the National Highway Traffic Safety Administration, which must promulgate fresh Corporate Average Fuel Economy standards for the 2022-2025 model years. That rulemaking is expected to begin by mid-2017.

Economy Standards

NHTSA’s CAFE targets may remain aligned with the EPA’s standards, "but the whole idea is it could also change," former NHTSA Administrator Mark Rosekind said in a Jan. 17 interview, before he left the agency.

"Everyone agrees that the NHTSA fuel economy standards and the EPA’s greenhouse gas standards should be harmonized," said Jeff Holmstead, a former assistant administrator of EPA for Air & Radiation and now a partner at law firm Bracewell LLP. "That’s what the Obama folks did, and I would expect the Trump administration to do the same thing."

Along the way, California regulators have signaled they’re unwilling to back down from their own set of ambitious efficiency standards in the largest auto sales market among U.S. states. Last week, staff recommended that the agency boost its requirement for zero-emission vehicles and plug-in hybrids to as much as 40 percent of each automaker’s sales by 2030, up from three percent now. They also warned Sacramento could go its own way.

On the same day, Oklahoma Attorney General Scott Pruitt, Trump’s nominee for EPA administrator, said he’d also review California’s ability to chart its own course, embedded in the 1970 Clean Air Act, setting up a possible showdown. Pruitt also said he’d review the EPA’s mid-term evaluation conclusion.

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