Reversing harmful fuel economy standards will save money — and lives  

Reversing harmful fuel economy standards will save money — and lives  
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If you’ve purchased a vehicle in the past year-and-a-half, it’s likely some of your money went to California — and you probably had no idea. There’s a corporate welfare scheme, implemented by the Obama administration, that has been cruising under the radar. But to the relief of consumers across the country, the Trump administration is working to bring it to a screeching halt.  

The Environmental Protection Agency and the National Highway Traffic Safety Administration proposed a rule this week that would reform Corporate Average Fuel Economy (CAFE) standards. The rule also would revoke California’s authority to enforce its Zero-Emission Vehicle (ZEV) mandate — a power that never should have been granted in the first place.

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CAFE standards are harming consumers, and it’s not difficult to understand why. To meet the standards, automakers must spend more money to increase the average fuel economy of vehicles sold in the United States. Those higher costs get passed to the customer through higher sticker prices. When the costs of those price increases outweigh the benefits of saving fuel and delay the turnover of the fleet to a cleaner, safer, more fuel efficient fleet, the rules do more harm than good.

 

A study found that high fuel economy standards would cost Americans who want to buy a model year 2025 vehicle an extra $7,200. Analysts estimated that between 3.1 million and 14.9 million households would not have enough credit to purchase a new car under that standard.

The ZEV mandate is much more convoluted, which has allowed it to exist, for the most part, without scrutiny. California and nine other states that followed its lead require manufacturers that don’t sell a certain number of electric vehicles to purchase credits from a manufacturer that does sell them (such as Tesla) or face a $5,000 fine for every credit they lack, while mandating an increasing percentage of ZEV sales each year, regardless of cost and consumer preference.  

 

But because many Americans don’t want those kinds of vehicles, most automakers don’t sell enough of them. So they must buy the expensive credits. Tesla likely has made more than $700 million just by selling credits to other manufacturers.

While CAFE standards and ZEV mandates make winners out of affluent California car buyers and Tesla, they make losers out of consumers across the country. Automakers put a hidden premium in every one of their vehicles — sold in every state — to pay for the credits and the cost to comply with mandates in those few states.  

These rules aren’t fair. A single mom in Ohio or a day laborer in Texas should not be forced to pay more for their cars just to subsidize a Californian’s Tesla. (Of course, these subsidies are in addition to the $7,500 from federal taxpayers to EV buyers, plus additional subsidies from state and local governments and utilities.)  It’s encouraging to see that the current administration recognizes this.

The EPA’s proposed reform is known as the SAFE Vehicles Rule. It will make standards more manageable for manufactures and consumers, and it will increase safety while being environmentally conscious.  

“Our proposal aims to strike the right regulatory balance based on the most recent information and create a 50-state solution that will enable more Americans to afford newer, safer vehicles that pollute less,” said EPA Acting Administrator Andrew Wheeler. “More realistic standards can save lives while continuing to improve the environment.”

The EPA projects the SAFE Vehicles Rule will save consumers more than $2,300 in overall average ownership costs for new vehicles, including nearly $500 in costs related to financing, insurance and taxes. Manufactures also can expect to sell 1 million more new vehicles through model year 2029.  

Most importantly, the EPA expects the SAFE Vehicles Rule to save up to 1,000 lives a year because more people will be driving newer, safer vehicles.  

Nothing is final yet, because the EPA and National Highway Traffic Safety Administration are seeking public comment on the proposal. But for the sake of American consumers, let’s hope these reforms become reality. Making cars unaffordable for millions of hard-working Americans was never in anyone’s best interest.  

Mary Kate Hopkins is policy manager at Americans for Prosperity, a nonprofit group dedicated to promoting limited government. Martin Rodriguez is a policy analyst at AFP.