David Friedman, vice president of advocacy for nonprofit Consumer Reports, said the administration’s timing will hurt households that could be slow to recover from COVID-19’s hit to the job market and monthly budgets: less-efficient cars than planned rolling off the line will mean higher totals at the gas pump and could bring a slowdown of new-car purchases at a time the economy is trying to rebound from the pandemic.
According to Friedman, any assumption of long-term low gas prices offsetting the fuel-efficiency change assumes an unlikely failure of the economy to bounce back. After the Great Recession of 2008, for instance, gas prices bounced back in less than three years. However, even if gas prices went down to $1.50 per gallon on average and stayed there for the next 30 years, the rollback would still increase new vehicle total cost of ownership for consumers, he argues, based on the 1.5% annual fuel economy increases (down from about 5% today).
Ken Locklin, director at Impax Asset Management, questions the economics in a different way. He noted the administration is easing regulations for a traditional auto sector that employs about half the number of people working in the fuel-efficiency technology market. Global investors, he said, will funnel their money to where the innovation is, including outside the U.S.
The decision to scrap the Obama fuel-economy targets and strip California of its autonomy are intended to make vehicles overall less expensive, and thus encourage consumers to buy newer, safer vehicles, the Trump administration’s EPA administrator Andrew Wheeler has said in speeches, including to the Detroit Economic Club.
“Counter to what the EPA is stating, fuel economy is not the driving factor for increased vehicle prices: consumer preferences have shifted, and Americans are willingly buying bigger, more expensive trucks and SUVs loaded with more options,” said Jessica Caldwell, executive director of insights at Edmunds, which provides new and used car research and reviews.
Critics of the Obama-era rules have said the prevalence of loopholes has meant that only three auto makers actually complied with U.S. fuel efficiency standards.
One way car makers complied with increasing fuel economy standards was by using regulatory credits they stockpiled from previous years or purchased from competitors, rather than push technological change.
The EPA report, covering 2017, showed Fiat Chrysler purchased a significant number of vehicle emissions credits, while Tesla Inc. /zigman2/quotes/203558040/composite TSLA +7.95% , Honda Motor Co. /zigman2/quotes/207173990/composite HMC +1.81% and Toyota sold credits. Daimler AG, Volkswagen and BMW AG /zigman2/quotes/202432319/delayed XE:BMW +3.11% also bought credits.
The tougher standards had meant that companies were not only drawing down saved credits, but were banking or selling fewer new credits. All but a few auto makers had to rely on credits, not necessarily innovation or model changes, to meet the standard. The shortage of credits was seen driving up their trading value, enriching some companies with credits to spare while putting others at risk of non-compliance and creating an imbalance in the sector that the Trump changes have sought to smooth.
Paul Billings, senior vice president of advocacy at the American Lung Association, said the change “will have drastic consequences on health.” His group predicts the higher level of pollution created by lower fuel economy will result in the deaths of up to 10,000 Americans by 2035.
The Trump administration has been broadly promoting a regulation-lite agenda, including during the COVID-19 crisis, by allowing for looser enforcement of polluting.
“This time of crisis requires smart, strong and science-based leadership, not more senseless handouts to the special interests,” said House Speaker Nancy Pelosi, in a statement .
Billings warned against climate-focused regulatory easing that he argues has come under the guise of a policy response to COVID-19 without long-term thinking for health. That includes a waiver for oil producers, including BP /zigman2/quotes/207305210/composite BP +0.86% , Chevron /zigman2/quotes/205871374/composite CVX +0.79% and others, who were walloped by a drop in demand, allowing them to forgo their typical summer-grade gasoline reformulation meant to cut pollution during high-driving season.
Clearly, thinking on fuel policy is more than seasonal for environmental analysts.
“Improvements in vehicle, lighting and appliance efficiency have been successful in slowing the pace of emissions growth in transportation and buildings (and perhaps even halting it in transportation while higher fuel-efficiency standards were in place), but it will require much more than efficiency to achieve meaningful absolute declines,” said Trevor Houser and Hannah Pitt, writing earlier this year for energy-research firm Rhodium Group. “Large-scale fuel substitution (to decarbonized electricity and other zero-carbon fuels) will be required.”