May 11, 2018 – Today, automakers are meeting with President Trump to discuss his administration’s plans to rollback fuel efficiency and emissions standards on light-duty vehicles. Since reports of the proposal first began to leak, we’ve seen a number of statements from automakers claiming that this wasn’t what they asked for.  Unfortunately, these statements ring hollow—and their own proposals explain why.

You can’t renegotiate a Faustian bargain

It took just two days after President Trump was elected for the Alliance of Automobile Manufacturers to request that his administration put the brakes on any decision regarding the 2022-2025 standards, fearing that the agency would follow the science and not their wishes to weaken the standards. When EPA moved forward with this decision and correctly determined that automakers could not just meet but exceed the standards, and that these vehicle emissions standards remained appropriate, the Alliance again went to the administration to have the process reversed.

Enlisting an ideological administration to pull back on regulations amounts to a Faustian bargain—when regulations stop being based in scientific rigor and instead are based in political expediency, a technically indefensible proposal like freezing progress at 2020 levels is exactly what you get.  This was an entirely foreseeable result, and automakers and their lobbyists are neither so stupid nor naïve as to not see this coming—for them to feign surprise now at the outcome is insulting. Of course, it’s made even worse by the fact that they themselves have been in the driver’s seat as we’ve headed down this road.

What the industry has asked for thus far

From the get-go, automakers have been asking for “harmonization” while failing to acknowledge that these requests come at the cost of increased emissions and fuel usage. In fact, in their first letter to the President, they requested that the administration approve a petition that would result in 150 million barrels of additional oil consumption by overcrediting vehicles that had already been sold and adding “flexibilities” to the program that directly undermine the standards.

Of course, the Alliance has not limited themselves to executive action when it comes to lowering the bar—they’ve asked Congress to intervene as well, with legislation that would result in at least 350 million barrels of additional oil use and put the industry on a path to 2025 that is 8-10 mpg lower than the standards already on the books.  That endpoint is within spitting distance of the current proposal, so it seems hard to argue this isn’t President Trump’s administration just naturally following the Alliance’s lead.

Similarly, while manufacturers like HondaFord, and GM have all come out and said they don’t want a full rollback of the standards, some of the details surrounding these announcements raise serious doubts. For example, while Honda has come out with the most vocal support for the standards, requesting that the targets be maintained as is, that came with a major caveat regarding additional incentives for electric vehicles were requested, as did Ford’s. GM’s proposal included a request for credits based on the unproven benefits of autonomous electric vehicles.

The impact of these types of “flexibilities” is massive—for example, extending EV multipliers and ignoring emissions associated with the electricity powering these vehicles would result in additional emissions and oil usage in the near-term, to the tune of over 230 million metric tons just over the lifetimes of vehicles sold through 2025 by our estimate, even at modest EV sales (< 5% in 2025).  That’s equivalent to freezing the standards at 2022 levels—not a far cry from the administration’s proposal—and the impact would be even worse if EV sales outpace those expectations. Similarly, giving away credits for safety or automated vehicle technologies is a strategy which would have serious consequences for the robustness of these rules and may not even result in any real reductions.

What the industry should be asking of the President

If the industry is now having second thoughts, it is time to eschew the sort of wiggle room granted in the public statements thus far and stick with a clear proposal to ensure we maintain the benefits of strong standards. To that end, here is what the automotive CEOs should tell the President in today’s meeting:

  • We can meet the standards as they stand. Ford told its shareholders yesterday that they are planning to exceed the current standards—now they need to say that to the President. Of course, this is consistent with the technical record underpinning the Obama administration determination that these standards are appropriate.
  • These standards have accelerated technology investment. Automotive manufacturers and especially suppliers have both invested significantly in the technology needed to reduce oil use and emissions from light-duty vehicles.
  • To continue that investment, we need certainty. Not only does pulling back on strong standards send the wrong market signal to continue that improvement—it also all but ensures continued uncertainty as these rules wind up in years of litigation.
  • Oil prices are on the rise, and these standards protect our customers from that volatility. Domestic manufacturers were ill-prepared the last time gas prices rose dramatically, and these standards act as a hedge against a volatile, global oil market that finds prices at the highest they’ve been since 2014.
  • Respect state leadership—the entire country benefits. California and the 12 states that follow California’s policies are going to enforce the 2025 standards as they stand today—don’t fight that progress. California stepped up to the plate to set the first-ever vehicle emissions standards, and we continue to reap the benefits of that today nationwide.
  • These standards are job creators—so get out of the way and let us get to work “making America great.” Analysis is clear—these cost-effective standards are great for consumers, and because those savings get reinvested into the economy, they end up creating new jobsnot just in the automotive sector but across the economy.

Instead of quibbling about how weak is weak enough, they need to push for strong policy commitments.  Given the repeated asks of the administration to weaken the standards, I find recent automaker pleas a bit dubious—but at the moment, they at least have the ear of the President, so they need to make it count.

If the automakers can’t succeed in putting the genie back in the bottle, we will see more than 200 billion gallons of additional oil use by 2050, costing consumers hundreds of billions of dollars at the pump and forestalling investment in technologies needed to address the challenge of climate change. And they will shoulder the blame for generations to come.

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