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Trump administration will give one year to revisit fuel economy standards

This undoes the previous EPA's November decision to leave the standards alone.

Scott Olson/Getty Images

President Donald Trump, in keeping with his word to limit regulations deemed onerous, will have his administration revisit fuel economy standards that take effect through 2025.

Automakers will have until April 2018 to lobby for changes to the EPA's Corporate Average Fuel Economy (CAFE) standards. President Trump delivered the news to a group of auto workers and executives outside of Detroit on Wednesday.

"These standards are costly for automakers and the American people," said EPA Administrator Scott Pruitt. "We will work with our partners at DOT to take a fresh look to determine if this approach is realistic. This thorough review will help ensure that this national program is good for consumers and good for the environment."

As the regulations currently stand, the feds want automakers to achieve an average of more than 50 mpg across their light-duty vehicle lineups by 2025. It is expected that a revisit of this target will see the number drop, although by how much is anybody's guess.

It's important to note that CAFE measurements are different EPA estimates, which you see on window stickers and on automaker websites. The CAFE requirement of 54.5 mpg is closer to 35-37 mpg in EPA numbers.

Automakers can currently purchase "credits" from more efficient automakers in order to meet CAFE targets. It's believed that Tesla makes a decent chunk of cash from selling excess credits each quarter.

President Trump and members of his cabinet meet with Detroit's Big Three CEOs as part of a press conference discussing the revisit of 2025 CAFE standards.

Environmental Protection Agency

California knows how to party, will keep doing so

While the CAFE target may be rolled back in the near future, it appears that the Trump administration will continue to let California chart its own path. California has the ability to set its own rules regarding vehicle economy and pollution, and 13 other states have chosen to follow along with the stricter regulation.

According to Reuters, a White House official "did not rule out seeking to withdraw California's authority in the future," but for now, it remains.

Jerry Brown, governor of California, was quick to shrug off the decision to revisit CAFE standards. "President Trump's decision today to weaken emission standards in cars is an unconscionable gift to polluters," Brown says in a letter sent to the EPA. "Once again, you've put the interests of big oil ahead of clean air and politics ahead of science."

The letter also points out that the EPA's own analysis claims that the current 2025 CAFE standards would save consumers upwards of $1,500 per vehicle on average and decrease greenhouse gas emissions by 540 million metric tons.

Undoing the November decision

Back in November, the EPA decided to leave the current 2025 standard in place. "Based on extensive technical analysis that shows automakers are well positioned to meet greenhouse gas (GHG) emissions standards for model years 2022-2025," the EPA said in a statement.

The evaluation didn't need to conclude until April 2018, but the EPA put its statement out in part to help cement the Obama administration's environmental legacy. In fact, the EPA's data reportedly suggested that the standards could actually be strengthened, rather than relaxed.

The EPA at the time believed its decision at the time was sound and necessary to "enable long-term planning in the auto industry." Oil is a finite resource, after all, and cheap gasoline is unlikely to stick around forever.

Not everybody is happy

Reactions to the news have been mixed. From a business standpoint, automakers appear pleased, as it allows them to focus on building vehicles that customers want, as opposed to chasing regulations and foisting more efficient vehicles on a market that's perfectly content with big-body crossovers in the midst of cheap gas prices.

"We applaud the Administration's decision to reinstate the data-driven review of the 2022-2025 standards," said Mitch Bainwol, CEO of Auto Alliance, a group representing 12 manufacturers including Ford, Toyota and GM. "[W]e will get back to work with EPA, NHTSA, CARB and other stakeholders in carefully determining how we can improve mileage and reduce carbon emissions while preserving vehicle safety, auto jobs and affordable new cars and trucks."

Not all automakers have the same approach. "Americans are increasingly understanding that driving electric vehicles helps reduce pollution, protect public health and ensure a more sustainable future, all without sacrificing performance," a Tesla spokesman said in an emailed statement. "The recent success of auto manufacturers in responding to the growing demand for electric vehicles is proof that the nation's current fuel economy standards are practical, achievable and having their intended effect."

It should be noted that Tesla does make some money selling its emissions credits to other automakers, so naturally, it may shy away from a move that could hamper its ability to do so.

Supplier opinions are reportedly even more mixed. Suppliers can make more money from selling parts required for more efficient engines, but other suppliers that still rely on traditional parts may feel some hurt from stronger CAFE regulations.

Environmentalist groups are not too happy with the decision.

"Today's announcement of backtracking on vehicle standards for model years 2022-2025 puts at risk tens of billions of dollars of fuel savings for consumers and big reductions in tailpipe emissions," said Therese Langer, transportation program director for the American Council for an Energy-Efficient Economy, in a statement.

"Any delay in settling efficiency standards introduces uncertainty that will disrupt manufacturers' product planning. What is certain is that technological stagnation is not a recipe for continuing the remarkable success our domestic manufacturers have achieved in recent years," Langer's statement continued.