The High Cost of Rolling Back Fuel Standards
A Republican president takes office, vowing to eliminate job-killing regulations issued by his Democratic predecessor. In his first weeks, the automobile industry publicly asks him to eliminate specific regulations that are, in its view, crushingly burdensome. He agrees.
Sound familiar? It should. But we’re speaking of 1981, not 2017, and of Ronald Reagan’s decision to repeal one of the central achievements of the Jimmy Carter administration: a rule designed to reduce highway deaths and injuries by requiring “passive restraints,” such as airbags, in motor vehicles.
For fans of deregulation, the story ends badly. In 1983, the Supreme Court unanimously struck down Reagan’s repeal on the ground it was arbitrary and unjustified by reasons or evidence -- a naked exercise of political power.
That’s a warning for the Trump administration. Sure, the Supreme Court in coming years will not be the same as it was in 1983. But its current and future members are not likely to be comfortable with arbitrary or evidence-free decisions from federal administrators.
Reagan’s ignominious defeat bears directly on what might well be the biggest regulatory controversy of the coming years. Acting in direct response to the pleas of the automobile industry, Trump’s regulators appear poised to revisit a major accomplishment of the Obama administration: a fuel-economy rule intended to save both money and lives, and finalized in 2012 by the Department of Transportation and the Environmental Protection Agency.
True, deregulation is often a sensible response to unjustifiably costly federal requirements. But on the basis of the numbers, discussed at length in the government’s technical analysis, the fuel-economy program looks quite solid -- and if the Trump administration concludes otherwise, it will have to offer a detailed justification, not talking points.
The program covers the period from 2017 to 2025, and it is designed to increase vehicles’ average fuel economy to more than 50 miles per gallon by the final year. It was developed in close collaboration with automobile companies, and in 2012, they embraced it. (Disclosure: As administrator of the Office of Information and Regulatory Affairs, I had some involvement in the rulemaking.)
It is true that the fuel-economy program will be quite expensive, imposing annual costs of about $6.49 billion. Most of those costs will be borne by consumers, who will have to pay more for new cars. But according to the current numbers, those very consumers will ultimately be the rule’s biggest beneficiaries: Because fuel-efficient vehicles are less costly to operate, people are expected to save a whopping $20.5 billion annually. On net, the annual benefit to consumers is more than $14 billion.
Putting climate change entirely to one side, you’ll also find big benefits for human health, because the rule will cut emissions of both particulate matter and ozone. The result will be to reduce premature deaths, chronic bronchitis, hospital admissions for respiratory causes, and emergency admissions for asthma.
In terms of greenhouse-gas emissions, the program will also have a big impact. Over its lifetime, it is expected to eliminate the equivalent of two billion metric tons of carbon-dioxide emissions.
The technical analysis explores other effects as well, including reductions in imported oil and the impact on accidents, noise and congestion. The overall conclusion is that the program will produce annual net benefits of $19.5 billion. You can’t find a lot of regulations with that kind of payoff.
An unusual feature of the program, as it was finalized in 2012, is that it called for a midterm government review in 2017, reassessing the requirements for the period from 2022-2025. (Through 2021, the program now appears to be locked in.) Because markets and technology can go in surprising directions, the idea of a midterm review makes a ton of sense.
In January, the Obama administration undertook that review and elected to retain the program as it was originally designed. In the process, it offered a painstaking and highly technical explanation of its decision.
In fact, it concluded that the progress of technology development would support even more stringent standards from 2022-2025 -- but that in view of the need for regulatory certainty, and to respect the industry’s need for long-term planning, the 2012 program should not be amended.
To be sure, it is perfectly appropriate for the Trump administration to reconsider the decisions of its predecessors, and to listen carefully to those who vigorously object to regulatory requirements. But as the Supreme Court made clear in 1983, an agency can’t repeal a regulation simply because it doesn’t like it. It must engage with the law and the facts. And if the prior administration has offered a technical justification, the repeal must be accompanied by an explanation of why that justification is wrong.
The Trump administration might be able to offer such an explanation. For example, it might conclude that by 2025, a standard in excess of 50 miles per gallon is not feasible, or that it cannot be achieved at reasonable cost. It might reject the EPA’s conclusion, in January, that consumers would ultimately be big winners, gaining $100 billion from the 2022-2025 standards. It might argue that a creative approach of its own could generate large benefits at lower cost.
But conclusions of this kind require evidence and analysis, rather than a plea from an interest group, or general skepticism about regulation and the very idea of climate change. Whether you’re concerned about consumer savings, public health, energy independence, cost-benefit analysis or greenhouse-gas emissions, the fuel-economy program has a lot going for it. If the Trump administration wants to scale it back, it will have some explaining to do.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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