A Rock and a Hard Place

The White House is pressing automakers to support its plan to freeze CAFÉstandards and roll back those promulgated by the Obama Administration which would have raised the CAFÉstandard to 54.5 mpg by 2025.  While on its face, auto manufacturer support would seem to be a no brainer but few things are as they appear on the surface.

The Administration is on firm ground in that the Obama regulations provided for a mid-course review of feasibility. Increasing the average miles per gallon to 54.5 is technologically feasible. Unless the mix shifts to compact, hybrid and electric categories, 54.5 mpg is an “aspiration”.  That would require a major change from what is taking place now with buyers moving to SUVs and pickups.  While CAFÉadvocates point to possible technology improvements in internal combustion engines, they down play the impact on the price of new vehicles. Estimates put the averageprice increase at $2000 per vehicle.

The biggest uncertainty is California which is threatening to sue if there is a roll back.  The odds of California prevailing against a Trump EPA are not great for two reasons.  First, CAFÉwas designed to reduce air pollutants; not greenhouse gases. Second, California has to apply for a waiver to set its own standards.  The effect on global warming if California prevailed in litigation is almost too small to measure even if the emission reductions of state that can opt-in to the California standards are included.  It fails any realistic cost-effectiveness test.

The problem for the manufacturers is that they prefer the rollback but can’t be sure that it will withstand judicial challenge given the Supreme Court’s decision on EPA’s ability to classify greenhouse gases as pollutants.  If the rule making is stayed pending judicial action, which no doubt will involve going all the way to the Supreme Court, there could be a new Administration before then and it would likely settle with California and re-establish stringent standards.  Being risk adverse keeps manufacturers from all out support.

If the Administration was not going forward with its E-15 ruling or if there was a chance of it being withdrawn, there might be stronger incentive for manufacturers’ support.  But that is not going to happen.  The Administration will not do anything to put Iowa at risk in 2020, so there is almost no possibility of not moving forward with the E-15n rule making. That is going to present auto manufacturers with a number of problems as most void warranties for vehicles using higher than E-10. 

Author: billo38@icloud.com

Founder and president of Solutions Consulting which focuses on public policy issues, strategic planning, and strategic communications.

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