Problems with the fuel economy rollback

Problems with the fuel economy rollback
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The Trump administration has proposed to freeze car and light truck fuel economy and greenhouse gas fleet standards at 2020 levels through 2026, replacing current law that increases the stringency of these standards over time. 

Transportation is now the single largest source of greenhouse gas emissions in the United States, and most transportation emissions come from cars and light trucks. The fleet standards are the most important law determining future emissions from cars and light trucks, and there’s a fundamental problem with freezing them.

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The National Highway Traffic Safety Administration (NHTSA), which administers the fuel economy standards, is required by law to set the “maximum feasible average fuel economy level” for each model year, while considering “technological feasibility” and “economic practicability.” The proposed frozen standard fails to meet this requirement because technological capabilities and cost are constantly improving; the fuel economy and/or horsepower of cars have increased by about 2 percent per year since 1996, and the agencies’ own preliminary regulatory impact assessment assumes that even with frozen standards “manufacturers would still choose to increase fuel economy,” every year, exceeding the proposed standards every year that the standard stays frozen.

The law requires standards to be “maximum feasible” every year. Flat standards like this just aren’t.

When it comes to predicting the effects of the proposed change, the administration claims the proposed rule will increase petroleum consumption by 0.5 million barrels per day, prevent more than 12,700 fatalities, and reduce driving, all while making a minor impact on climate change and increasing net benefits to society. But serious questions have been raised about the analysis.

The model used by the administration predicts the rollback will make new vehicles cheaper to buy (because of lower compliance costs) but more expensive to drive (because they will be less efficient) and that new vehicles will therefore be driven less while old vehicles will be scrapped earlier. Qualitatively, these effects make sense, but questions have been raised about the magnitude of the assumptions used in the analysis.

For example, the administration assumes that the rate of reduced driving due to cars being less efficient is twice as large as in prior government analysis, yet the prior assumptions are arguably better-supported by the most relevant recent peer reviewed studies. And the model predicts that for every one extra new vehicle purchased due to lower prices, 50 to 60 old vehicles will be scrapped early and no longer driven, according to EPA analysis. Overall, the administration’s analysis predicts that making cars less efficient and cheaper by rolling back the regulation will cause the vehicle fleet to get smaller and be used less. In practice, though, vehicle ownership, driving, and fatalities could actually increase with the proposed rollback.

Additionally, until now analysis by NHTSA and the Environmental Protection Agency (EPA) has consistently found that the standards in current law will increase net benefits to society. But to assess the new proposed rule, the new analysis ignores EPA’s model and instead uses a changed version of NHTSA’s model — one based on many new assumptions that increase the assumed cost of compliance. For instance, internal EPA documents identify several ways the new model assumes that automakers will implement technologies that are several thousand dollars more expensive than other available packages with similar effectiveness. To my knowledge, the new model has not been independently peer reviewed and assessed for validity of the changes in assumptions.

Overall, there are problems with the proposed rollback — the supporting analysis has issues that raise questions about its claimed benefits, and the proposal itself fundamentally fails to satisfy the law’s “maximum feasible” criteria in any meaningful way. 

Jeremy Michalek is a professor of engineering, public policy, mechanical engineering, and director of the Vehicle Electrification Group at Carnegie Mellon University.