• <div class="header-image" style="background-image: url(/live/image/gid/4/2957_V6N10_Header.rev.1542820788.jpg);">​</div><div class="header-background-color"/>

The Implications of Changing Fuel Efficiency Standards

November 15, 2018
Following a trend of deregulation advanced by the Trump administration, the Environmental Protection Agency is proposing a change to fuel efficiency standards.  In 2012, President Obama established a new fuel efficiency standard that required vehicles to meet roughly 54 miles per gallon by 2025. [1] The administration stated that such strict rules would decrease about 6 billion tons of greenhouse gas emissions by 2026, and save $1.7 trillion in fuel costs.[2]  Further predictions suggested that 12 billion barrels of oil would be saved by the regulations.[3]

Image: Changes in Fuel Efficiency with New Rule Source: Washington Post
Image: Changes in Fuel Efficiency with New Rule Source: Washington Post
However, with this new proposal, standards would be locked in at the 2020 level of 37 mpg. [4] The Trump administration states that this freeze benefits both consumers and industry; arguing that the Obama-era fuel efficiency standards would place these groups under unnecessary economic stress. Additionally, the administration claims that stringent standards compromises safety, for lighter-efficient cars place passengers at higher risk in the case of an accident. [5] The Department of Transportation and the Environmental Protection Agency support these statements, praising the new standards for their pragmatism. [6] Andrew Wheeler, the currently acting administrator of the EPA, states, “Our proposal aims to strike the right regulatory balance based on the most recent information and create a 50-state solution that will enable more Americans to afford newer, safer vehicles that pollute less. More realistic standards can save lives while continuing to improve the environment”. [7]


Fuel efficiency is no new concept. The first Corporate Average Fuel Economy (CAFE) standards were introduced by Congress in 1975 as a result of the 1973 oil embargo. [8] Standards continued to call for increased efficiency over the years as a result of oil consumption, annual mileage, and competitive markets. [9] It is estimated that fuel efficiency standards have saved Americans over $2 trillion in fuel costs since their establishment. [10]


These new standards also change how California regulates air pollution within the state. With the establishment of the Clean Air Act in 1970, California was granted a waiver to exceed national fuel efficiency standards by requiring vehicles to be even more efficient. [11] While it may seem strange that California is afforded such a luxury, the wavier was created with good reason. The geography of the state places it in a difficult position to regulate air pollution. With some of the country’s largest car-dependent cities, and large mountains and an ocean on either side of the Los Angeles Basin, conventional air pollution gets trapped. [12] This pollution, which in some parts of the state is in “extreme nonattainment” with federal standards, can lead to public health problems such as asthma.”[13] With the waiver granted by the Clean Air Act, California is able to pursue alternative solutions such as its Zero Emission Vehicle Program, which provides incentives to residents and businesses to purchase electric and hydrogen-powered vehicles. [14] Efforts such as these allow California to regulate its air quality. However, the EPA’s new proposal would revoke this waiver, stating a desire for a “50-state fuel economy” which will have “negligible environmental impacts on air quality”.[15] In response, California and several other states are preparing for a lengthy legal battle to defend its right to regulation. [16]
The fuel efficiency proposal has been met with mixed reactions. According to a poll by Politico-Morning Consult between August 2nd-6th, 49% of voters were either strongly against or somewhat against rolling back the Obama-era national standards. [17] Automakers also appear torn on whether to support the proposal. With Trump’s election, many in the auto industry pleaded for relaxed standards.[18] However, with the EPA’s proposal, some have had a change of heart. In a letter to the Office of Management and Budget, David Schwietert, Executive Vice President of Federal Government Relations and Public Policy at the Alliance of Automobile Manufacturers wrote “automakers remain committed to increasing fuel efficiency requirements, which yield everyday fuel savings for consumers, while also reducing emissions – because climate change is real, and we have a continuing role in reducing greenhouse gases and improving fuel efficiency”.[19] Another huge concern for automakers stems from the brewing lawsuit between the states and the federal government. Depending on the outcome, automakers may need to make two types of cars—one for California, and one for the rest of the country. [20] Such effort would take more time and money, likely raising costs for consumers. [21] In the meantime, automakers will face great uncertainty waiting for the result of the lawsuit. In his letter, Mr. Schwiertert “urged the Administration and California to work together to increase standards year over year and keep new vehicles affordable to more Americans”, striving to maintain a single national program of increasing vehicle efficiency standards. [22]

Image: Fuel Economy Standards for Passenger Cars Source: NYTimes

Image: Fuel Economy Standards for Passenger Cars Source: NYTimes
The new fuel efficiency standards not only provide uncertainty for consumers within the United States, but also for the global market. Several countries model their vehicles standards based on the United States, indicating that relaxed regulations could also potentially relax regulations in other nations as well. [23] Furthermore, the United States has recently been a leader in technology designed to improve vehicle efficiency. Weaker standards could slow this research, placing the United States at a competitive disadvantage. [24] European and Australian regulators are currently looking to implement stricter fuel efficiency standards, which potentially could be challenged by lobbyists if the United States rolls back their regulations. [25] However, if countries remain dedicated to reduce emissions, cars sold within the United States may no longer meet the standards of other nations. [26] Already, American-produced cars are falling behind in the world market, with the percentage of American vehicles in the global marketing dropping from 70% in the 1960s, to an anticipated 15% by 2025. [27] With Europe and Japan holding higher fuel economy standards, and China taking a strategic role in leading the switch to electric vehicles, the United States is at risk of falling behind in a world of increased competition. [28]
While the EPA’s proposal is not final, its potential implications demand attention by both consumers and industry officials. But only time will tell the impacts of such a change.

 

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

 

References:


  [1] https://www.washingtonpost.com/national/health-science/2018/08/01/90c818ac-9125-11e8-8322-b5482bf5e0f5_story.html?noredirect=on&utm_term=.ac6b12d26959
  [2] https://www.theguardian.com/environment/2018/aug/02/epa-trump-vehicle-emissions-clean-car-rules
  [3] https://www.bbc.co.uk/news/business-45048994
  [4] https://www.forbes.com/sites/oliverwyman/2018/08/08/why-lower-fuel-economy-standards-may-end-up-hurting-u-s-automakers/#2e16b4912d18
  [5] https://www.npr.org/2018/08/02/634882047/trump-administration-proposes-freezing-fuel-economy-standards
  [6] https://www.bbc.co.uk/news/business-45048994
  [7] https://www.theguardian.com/environment/2018/aug/02/epa-trump-vehicle-emissions-clean-car-rules
  [8] https://www.ucsusa.org/clean-vehicles/fuel-efficiency/fuel-economy-basics.html#.W24BP9JKjic
  [9] https://www.ucsusa.org/clean-vehicles/fuel-efficiency/fuel-economy-basics.html#.W24BP9JKjic
  [10] https://www.theguardian.com/environment/2018/aug/02/epa-trump-vehicle-emissions-clean-car-rules
  [11] https://www.theguardian.com/environment/2018/aug/02/epa-trump-vehicle-emissions-clean-car-rules
  [12] https://www.theatlantic.com/science/archive/2018/08/fuel-efficiency-rollback-trump-epa/566615/
  [13] https://www.theatlantic.com/science/archive/2018/08/fuel-efficiency-rollback-trump-epa/566615/
  [14] https://www.theatlantic.com/science/archive/2018/08/fuel-efficiency-rollback-trump-epa/566615/
  [15] https://www.theguardian.com/environment/2018/aug/02/epa-trump-vehicle-emissions-clean-car-rules
  [16] https://www.washingtonpost.com/national/health-science/2018/08/01/90c818ac-9125-11e8-8322-b5482bf5e0f5_story.html?noredirect=on&utm_term=.ac6b12d26959
  [17] http://thehill.com/policy/energy-environment/401101-almost-half-of-voters-oppose-trumps-vehicle-emissions-plan-poll
  [18] https://www.nytimes.com/interactive/2018/04/03/climate/us-fuel-economy.html
  [19] file:///C:/Users/Ashley/Downloads/EPA-HQ-OAR-2015-0827-11419%20(1).pdf
  [20] https://www.npr.org/2018/08/02/634882047/trump-administration-proposes-freezing-fuel-economy-standards
  [21] https://www.brookings.edu/blog/the-avenue/2018/07/02/why-undermining-fuel-efficiency-standards-would-harm-the-us-auto-industry/
  [22] file:///C:/Users/Ashley/Downloads/EPA-HQ-OAR-2015-0827-11419%20(1).pdf
  [23] https://www.nytimes.com/interactive/2018/04/03/climate/us-fuel-economy.html
  [24] https://www.nytimes.com/interactive/2018/04/03/climate/us-fuel-economy.html
  [25] https://www.nytimes.com/interactive/2018/04/03/climate/us-fuel-economy.html
  [26] https://www.forbes.com/sites/oliverwyman/2018/08/08/why-lower-fuel-economy-standards-may-end-up-hurting-u-s-automakers/#2e16b4912d18
  [27] https://www.forbes.com/sites/oliverwyman/2018/08/08/why-lower-fuel-economy-standards-may-end-up-hurting-u-s-automakers/#2e16b4912d18
  [28] https://www.forbes.com/sites/oliverwyman/2018/08/08/why-lower-fuel-economy-standards-may-end-up-hurting-u-s-automakers/#2e16b4912d18

PENN WHARTON PPI
RESOURCE SPOTLIGHT:

  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>