Energy Economy

The Trump Administration's Fuel-Efficiency Proposal Is Unnecessary and Harmful

By Jason S. Miller and Shoshana Lew of the Brookings Institution

[Two weeks ago], the Trump administration issued a Notice of Proposed Rulemaking (NPRM) which, if finalized, would cast aside the commitment made by President Bush and President Obama to increase fuel economy and reduce pollution. In doing so, the administration is on a path that could needlessly upend a settled regulatory framework that has brought together disparate interests, delivered predictability to automakers, improved cars, and reduced pollution. As such, the proposed new rules run counter to what Ford, General Motors, and others across the industry have consistently advocated. In fact, industry and the state of California appear largely aligned on how to proceed in resetting fuel-efficiency standards, and the only missing player is the Trump administration, despite the president’s prior direction to his team to negotiate.

Given that, it is not too late for federal agencies to course correct and utilize the regulatory process as it was intended: for serious stakeholder dialogue. Accordingly, here are three key points that the needed dialogue must recognize:

1. Abandoning the One National Program framework breaks from the bipartisan history of this program

Congress enacted Corporate Average Fuel Economy (CAFE) standards in 1975 to bolster energy security in the wake of the 1973 oil embargo. President Bush called for their establishment as a national priority in 2007 and worked with Democratic congressional leaders to pass the Energy Independence and Security Act (EISA), which required regulatory increases to fuel economy standards. The progression of fuel-efficiency standards in the Obama administration were part of an overall competitiveness strategy for the auto industry, coming on the back of coordinated actions by the Bush and Obama administrations to rescue the industry. In a historic collaboration between the U.S. Department of Transportation (DOT), the Environmental Protection Agency (EPA), the state of California, auto manufacturers, labor, and the environmental community, the Obama administration announced the “One National Program” for the regulation of cars and trucks in 2009.

The result was a policy that not only applied to the whole nation—extended from 2011 through 2025—but also streamlined the implementation of statutory authorities under EISA, the Clean Air Act (CAA), and California state law (the state is given unique flexibility under the CAA to establish its own requirements). The current policy has led to regulatory stability, an auto sector boom, increased innovation, and reduced emissions. None of the diverse stakeholders that supported the One National Program are supportive of the current proposal.

2. The administration’s proposal will hurt the U.S. auto industry

The U.S. auto industry represents 3.5 percent of U.S. GDP and is responsible for 7 million direct and indirect American jobs. Freezing the standards will undermine investments by auto manufacturers and their suppliers, harming the competitiveness of the industry going forward. Research shows that when standards are set at aggressive but attainable levels, they immediately spur technological innovation, catalyze competitiveness, and support jobs. For example, a report published last year by Indiana University looking at the impact of fuel-efficiency standards estimated that investment in innovation could increase jobs by between 200,000 and 375,000 in the year 2025, and add between $138 billion to $240 billion in GDP between 2017 and 2025.

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