President Trump's Historic Weakening of Fuel Economy Standards

This summer, the Trump administration began taking steps to roll out what is being referred to as a "historic" weakening of fuel economy standards for passenger vehicles and the trucking industry. Besides the national implications of such an effort, the President also aims to revoke the state of California's authority to set its own unique standards, which many believe will incite legal battles of epic proportions.

The Reversal of Our Current Standards

Under the previous Obama administration, fuel economy standards trended in the direction of higher and higher fuel economy, calling on automakers to develop cars and light trucks with a fleet average of 50 MPG by the year 2025. At the time, the automotive industry was on board - supporting these goals and playing a part in their design. With our current administration automakers are singing a different tune, working to roll back fuel efficiency standards, although the Trump administration exceeded their expectations, essentially seeking to "gut" the standards entirely.

A Problem For U.S. States

With a proposal to decrease fuel efficiency standards nationwide, a problem between the states arises, creating a grid of conflicting regulations that impacts each differently. California, for example, operates as its own authority when it comes to setting and regulating fuel efficiency standards within its borders. As a result of California's efforts to mitigate issues with smog throughout the past several decades, it has implemented tighter and tighter fuel economy standards, which other states have modeled their own standards after. Under Obama, a top-down approach guided national fuel efficiency standards via the EPA, with California following suit and leading the pack. With the future of national fuel efficiency standards being altered in favor of decreased regulation at the federal level, California's autonomy to define its own standards is now under threat.

The 2020 Proposal

President Trump's proposal to freeze fuel efficiency standards would go into effect after 2020. The proposal suggests lowering the fleet-wide standard from the goal of 50 MPG by 2025 to 37 MPG. It is likely that in response to the proposal for lowered standards, California will do what it does - resist, which will translate to added complications for automakers in other states. Vehicle manufacturers such as Ford and GM will have the freedom to make cars at the lowered standards nationally, but will still have to comply with California's standards in order for their cars to be sold within the state. It is not cost effective for companies to design separate production lines to accommodate differing fuel efficiency standards based on state-by-state preferences. Hence, why President Trump aims to eliminate California's authority around setting their own standards.

Does This Mean War?

The proposal calls for the revocation of California's unique ability to determine its own fuel efficiency standards, but the federal government and the EPA may find themselves entrenched in long, drawn-out legal battles as California is currently granted such authority by law. According to an OilPrice.com article, the Trump administration claims that by decreasing fuel efficiency regulations, consumers stand to save half a trillion dollars. Advocates of higher standards counter by saying that fuel savings will be to their benefit. According to a recent study published by Energy Innovation, "(Our) modeling predicts that freezing these standards would damage the U.S. economy, costing a total of $450 billion through 2050."

The Bottom Line on Fuel Efficiency Standards

If fuel efficiency standards are decreased nationally, Americans will be consuming a significantly higher amount of gasoline. According to Energy Innovation, "In 2035, with the standards frozen, U.S. gasoline consumption would increase from 1,837 to 2,200 million barrels per year, a 20 percent increase. And cumulatively, freezing the standards would result in the U.S. consuming an additional 6.9 billion barrels between 2021 and 2050. Higher U.S. demand would also tighten the oil market, so global crude oil prices will be higher than they otherwise would be." As a Californian, it will be interesting to watch how this issue unfolds as the Trump administration proceeds with their proposal. Either way, California is likely to counter, and the legal battles that ensue may take years before both a national and statutory solution is reached.

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