Trump administration cuts fuel economy, CO2 standards with final regulations
The changes, wrapped into the SAFE Vehicles Rule, will result in less stringent CAFE improvements through 2026.
For more than a year, the Trump administration suggested it was readying changes to corporate average fuel economy and CO2 regulations last put in place under the Obama administration. On Tuesday, we received the final regulatory changes.
The SAFE Vehicle Rule, announced by the Environmental Protection Agency and the National Highway Traffic Safety Administration, lowers required fuel economy and CO2 improvements to 1.5% each year through 2026. Under previous Obama administration regulations, automakers were set to increase vehicle efficiency across their fleet by 5% annually. Although the new rule relaxes the regulations a great deal, it's more stringent than the White House had originally proposed.
The Trump administration first proposed a fleet-wide average of just 37 miles per gallon by 2026. The official changes will result in an average of 40.4 mpg. Under the outgoing Obama-era regulations, automakers were expected to meet a corporate-wide average of 54 mpg.
The administration cited a few major factors in the final rules, including significantly lower oil prices, expanded US oil production and a major uptick in consumer demand for larger vehicles, which are often less fuel efficient. Gas prices dipped drastically in recent weeks, largely due to a Saudi-Russian price war and the coronavirus outbreak, which has left millions of Americans at home and off the roads. Officials also said the 2012 regulations were based on assumptions no longer relevant in today's auto market.
In the regulation changes, the EPA and NHTSA said the moves will help the US stay competitive on a global scale, with cost savings expected to reach $100 billion by 2029. The Trump administration noted fewer regulations should help automakers produce vehicles at a lower cost, and expects the average vehicle will cost $1,000 less. In turn, the theory is more Americans will be able to afford a new car and that, in turn, will boost the number of safer, more fuel-efficient vehicles on the road. There's no guarantee automakers will pass the savings along to customers, however.
My proposal to the politically correct Automobile Companies would lower the average price of a car to consumers by more than $3500, while at the same time making the cars substantially safer. Engines would run smoother. Positive impact on the environment! Foolish executives!
— Donald J. Trump (@realDonaldTrump) March 31, 2020
President Trump tweeted about the cost savings for future car buyers, though it's unclear where the $3,500 figure comes from. Aside from the $1,000 savings from fewer regulations, the EPA and NHTSA did mention a $1,400 cost savings over a future vehicle's entire lifetime, though that's $2,400 maximum.
These rules also effectively create a single national fuel economy standard -- a move at odds with California's standards, which numerous other states follow. The administration noted all vehicles will still need to meet the Clean Air Act's pollution standards.
The EPA and NHTSA underscored the regulations don't create a ceiling, but a "floor," and nothing will stop automakers from introducing more efficient and zero-emission vehicles. Nearly every automaker doing business in the US has plans to electrify vehicles, or introduce new battery-electric cars.
Opponents of the rule, such as the Environmental Protection Network, have already slammed the rule and cited an increase in oil consumption through 2040. The regulations also remain at odds with numerous other countries, which continue to dial up regulatory efforts to curb emissions and increase fuel economy in an effort to combat climate change.
First published March 31.
Update: Corrects the Obama administration figure for CAFE requirements.