US Auto Fuel Economy Standard in a flux
By Louis Rumao:
While clean-air advocates sound alarm about a dramatic weakening of the Obama-era efficiency & emission standard, automakers prefer the 2022-25 model year emissions targets, which they expect, would ratchet up more gradually and offer more compliance flexibility
In 2012, the Obama administration signed a new regulation for Corporate Average Fuel Economy (CAFE) requirements. In essence, it takes a single automaker and considers the average fuel economy rating of each model vehicle it produces, then combines those averages into one single average score for the company as a whole. This regulation mandates all automakers to average up a CAFE rating of 54.4 miles per gallon (mpg) by the year 2025. The cost of compliance notwithstanding, this requirement forced automakers to innovate to reduce fuel consumption and greenhouse gases. Some of the results from the mandate led to trends such as engine downsizing – no more V-6 and V-8’s for many models, more widespread use of turbo-charging, and more efficient transmissions with numerous gears. This mandate is also why hybridisation and electrification are all the buzz these days!
Then comes the new administration in January 2017 of President Donald Trump, who had promised during election campaign to undo many of Obama’s initiatives. So, out go the Paris Climate agreement and the Iran nuclear agreement, while the 2012 CAFÉ standard is also under scrutiny for possible relaxation.
Now the US Environmental Protection Agency (EPA), under chief Scott Pruitt, has proposed to modify this 54.4 mpg CAFE mandate. “The Obama Administration’s determination was wrong,” Pruitt noted in a statement. “Obama’s EPA cut the Midterm Evaluation process short for political expediency, made assumptions about the standards that didn’t comport with reality, and set the standards too high.”
Automakers surely would like to see updated CAFE standards that are consistent with market realities and industry trends, and it is not surprising that the Trump administration, with its supposedly industry-friendly bias, would be happy to help. Besides, the emerging trends of electrification and car-sharing were not considered when the current standard was established in 2012. Some auto makers feel that CAFÉ revision is overdue to highlight differences between vehicles powered by fossil fuels and those that use alternative energy sources.
While clean-air advocates have sounded alarm about a dramatic weakening of the Obama-era efficiency & emission standard, automakers certainly prefer that the 2022-25 model year emissions targets would ratchet up more gradually and offer more compliance flexibility. “The auto industry CEOs support continuous improvements in fuel economy, while aligning CAFÉ standards with market demand”, said Wade Newton, a spokesman at the Alliance of Automobile Manufacturers.
GM’s CEO Mary Barra said the following in an open letter to employees. “Regardless of the outcome of these discussions with the Trump administration, I assure you we have an absolute and unwavering commitment to improve fuel economy, reduce emissions and invest in technologies to drive an all-electric future,” Barra wrote. “These are the right actions for our customers, our company and our environment. A single, national standard would allow us to focus our resources on innovations that benefit our customers and society as we pursue our vision of a world with zero crashes, zero emissions and zero congestion, instead of diffusing resources to meet different rules within the United States,” Barra told GM’s workforce.
But there is a problem: Under the 1975 Clean Air Act, California has the authority to set its own rules, if it determines that the Federal standard is more lenient than what it wants. Seventeen additional states have indicated that they would join California to preserve the current emission standard, challenging EPA administrator’s April 2 ruling that the existing rules are too aggressive.
The auto industry would prefer relaxation of the current CAFÉ standards, but not so much that they provoke a legal fight with California, which has power to impose its own stricter tailpipe pollution limits. Such a fight would entail long court fight and could create more than one standard.
Auto makers’ stated priority is finding a sweet spot where modest changes can be made to the program without risk of losing the support of California’s strict air-quality regulators, so that they can sell all models in every state. The Trump proposal jeopardises that by seeking to scuttle California’s authority to set stricter emissions rules if it objects to the federal plan.
Addressing that key concern for manufacturers, President Donald Trump has instructed his administration to explore negotiations with California on achieving a single fuel economy standard for the nation and tasked Transportation Secretary Elaine Chao and Environmental Protection Agency Administrator Scott Pruitt to handle the talks with California officials. The president met with top auto executives on May 11, 2018 to further discuss their issues. During the meeting, which was described as “constructive,” Trump pointed to Marchionne, CEO of Fiat Chrysler, saying that he was “my favorite man in the room,” an obvious reference to Fiat Chrysler’s plan to move some auto production from Mexico to Michigan. After the meeting Mr. Marchionne said, “We deal with a multitude of standards on a global scale, not very pleasant to deal with, as they require phenomenal effort, both in terms of engineering and manufacturing, to make sure we comply. A uniform world would make it much easier to operate.”
Hopefully, the US government will proactively issue a right standard to satisfy both the auto industry and the environmentalists.