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Trump Administration to Review Obama-Era CAFE Standards

'We're going to work on the CAFE standards so you can make cars in America again'

CAFEEPAEPAOn its way out the door in January, the Obama administration rushed to lock in the Environmental Protection Agency's Corporate Average Fuel Efficiency (CAFE) standards at 54.5 miles per gallon for light duty vehicles by 2025. The final determination also calculated that the higher CAFE standards would save American drivers nearly $100 billion in fuel costs by 2025.

Today, President Donald Trump told a cheering audience of auto industry workers in Michigan: "We're going to work on the CAFE standards so you can make cars in America again. We're going to help companies so they are going to help you. We're going to be the car capital of the world again."

New EPA administrator Scott Pruitt also announced today that the agency in coordination with the Department of Transportation's (DOT) National Highway Traffic Safety Administration (NHTSA) will reconsider the final determination and decide by April 1, 2018 whether the Obama-era CAFE standards will stand. The reconsideration of the stringent CAFE standards is taking place at the request of American automakers who argue in a February letter to Pruitt that they are unachievable using currently foreseen automotive technologies. In its letter the Alliance of Auto Manufacturers asserts that the Obama adminstration's EPA final determination is "riddled with indefensible assumptions" regarding available technologies, consumer acceptance, technology affordability, and industry employment effects. The Alliance is not asking for a different final determination "at this time." The group just wants the agency resume the evaluation "consistent with the timetable embodied in the EPA's own regulations."

The environmental lobby is not happy. "Americans don't want to return to days of more pollution and higher fuel costs. They want a clean, efficient economy. Rolling back vehicle fuel standards would make Americans spend more at the pump, leaving them with less for their families and basic needs," declared Kristin Igusky, Climate Program Associate at the World Resources Institute in a statement. "In compelling a review of these standards, the administration is creating more uncertainty and blocking progress toward cleaner, more efficient vehicles for America."

Whatever else they do, CAFE standards especially hurt the poor. As I reported in January:

In a new study contrasting the effects on consumers of energy efficiency standards versus energy taxes, the Georgetown economist Arik Levinson notes that both energy efficiency standards and energy taxes function as a regressive tax, taking a larger percentage of a lower income and a smaller percentage of a higher income. His analysis aims to find out which is more regressive—in other words, which is worse for poor Americans.

Levinson cites earlier research that estimates a gasoline tax would cost 71 percent less than the comparable CAFE policy per gallon of fuel saved. Meanwhile, a 2013 study calculates that CAFE standards cost more than six times as much as a corresponding gas tax for the same reduction in fuel consumption. In other words, if policy makers want people to use less fuel and drive more fuel-efficient cars, taxing gasoline is a much cheaper way to achieve that goal than mandating automobile fuel efficiency. Levinson concludes that "efficiency standards are, ironically, inefficient."

I have long been a critic of CAFE standards. Back in 2009, for example, I concluded that Obama's proposed CAFE standards operate as an inefficient stealth tax on driving. It's inefficient because drivers pay more, car companies make less money, and state and federal governments don't get any extra revenues. If activists and politicians want Americans to drive more fuel-efficient cars, the simple and honest thing to do would be to substantially raise gasoline taxes concluded a 2002 National Academy of Sciences report. Ultimately, I argued, setting CAFE standards is just a way for cowardly politicians to avoid telling their fellow citizens that they should pay more for the privilege of driving. If that's what our political leaders think, then they should just be honest and come out in favor of higher fuel taxes.

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  • kbolino||

    "Americans don't want to return to days of more pollution and higher fuel costs. They want a clean, efficient economy. Rolling back vehicle fuel standards would make Americans spend more at the pump, leaving them with less for their families and basic needs," declared Kristin Igusky, Climate Program Associate at the World Resources Institute in a statement.

    Yes, because you couldn't possibly buy a 40 mpg car unless the government forced the manufacturers to make one. It's not like they have to answer to consumer tastes or anything.

  • OldMexican Blankety Blank||

    He's saying that in order to appease the Angry Volcano God aka Climatey Changey, we need to drive around in Isetta mini cars.

    He's lying, of course. All Angry Volcano God priests are charlatans and mountebanks.

  • american socialist||

    Why would this mean more pollution and less efficient? I dont see car makers going back to say 20 mpg just because

  • kbolino||

    I dont see car makers going back to say 20 mpg just because

    Eh, it might be what some consumers want, with gas as cheap as it has been lately. But people will buy 20 mpg cars because they want them not because the relaxing of emissions standards forced them to.

  • SIV||

    20mpg in real world city driving is not bad at all. I believe the 2.5l-4 WRX STI doesn't make that.

  • Scottzilla||

    Because people do want 20mpg when gas is cheap. They should just tax gas higher but they are afraid to do it.

  • OldMexican Blankety Blank||

    'We're going to work on the CAFE standards so you can make cars in America again'


    Right, because Comparative Advantage is driven by CAFE and not economic reality.

    Aren't Trumpistas ridiculous?

  • Ron Bailey||

    OMBB: Excellent point.

  • OldMexican Blankety Blank||

    Mine are always excellent points, Ron.

    ;-)

  • Ron Bailey||

    And modest too. ;-)

  • NotAnotherSkippy||

    Not really. Margjns are razor thin on small (read fuel efficient) cars so differences in labor costs are a significant factor. Larger vehicles has much better margins so it has less of an impact especislly when one considers relocation and other switching costs. CAFE essentially makes the latter vehicles illegal so it does have an impact well beyond comparative advantage.

  • SIV||

    No it isn't. We don't make most American marque cars in America anymore. We make trucks. Consumers buy trucks, in part, because CAFE has largely killed the (affordable*) full size sedan and trucks//SUVs are the closest approximation.

    * "Let them drive Bentley Mulsannes!"

  • WoodChipperBob||

    This is exactly how the minivan killed the station wagon. Minivans are classified as light trucks, whereas station wagons are classified as cars.

  • ||

    My rule of thumb? If Obama liked it, repeal, reject, reverse it.

  • OldMexican Blankety Blank||

    Anything, just ask El Señor Presidente Bananero Trumpo to not sell it as a solution to the NON EXISTING problem of not making enough cars in America because that reasoning is bullshit.

  • John||

    You really don't even write English anymore do you?

  • Jerry Brickley||

    How old are you? I'm just wondering how long you have left.

  • Microaggressor||

    then they should just be honest and come out in favor of higher fuel taxes.

    If they were honest they wouldn't get elected. You've just demonstrated the huge incentive for politicians to lie. Is it any surprise that's the result we get?

  • ||

    ...the Obama administration rushed to lock in the Environmental Protection Agency's Corporate Average Fuel Efficiency (CAFE) standards at 54.5 miles per gallon for light duty vehicles by 2025. The final determination also calculated that the higher CAFE standards would save American drivers nearly $100 billion in fuel costs by 2025.

    You might as well say that they would save American drivers a pony and a rainbow, since an impossible premise can logically yield any conclusion.

  • OldMexican Blankety Blank||

    Exactly. The problem with such estimates is that they depwnd on the notion that costs are always constant, which is to say that value is objective. In fact a 'cost' is nothing more than the value of the next best kption forgone. You can't really estimate that

  • Butler||

    It will "save American drivers nearly $100 billion in fuel costs by 2025" at a cost of $200 billion in fuel-saving technology improvements and additional maintenance, etc. Maybe . . . if we're lucky.

  • B.P.||

    Maybe Mercedes Benz will reequip its vehicles with the traditional hood ornaments.

  • Ron Bailey||

    BP: And maybe Jaguar will restore its leaping kitty.

  • american socialist||

    Ron how do these conflict with safety standards?

  • JFree||

    CAFE standards are the reason why Americans moved to big honking gas guzzling SUV's in the first place - and away from the old-fashioned 'station wagon'. No doubt the new ones will have a loophole that encourages upsizing to consumer tanks and APC's.

    They're nuts. I actually do agree with the implicit thought - reduce the externalities of pollution/etc - by capitalizing some of the lifetime cost of energy usage when the car is bought. That's really the 'point of pollution' - deciding what car to purchase that fits your annual driving needs - not filling ones gas tank. Best way to handle it though would have been some sort of transfer credit - where the transfers themselves can encourage higher trade-in/crush prices for old guzzlers, discourage new guzzlers, encourage new sippers, etc - and where its not government that gets/allocates those transfers.

  • american socialist||

    The problem how does this higher cost actually go to abate pollution?

  • JFree||

    Higher credit for an old guzzler means there is a profit incentive for dealers (or car companies or whoever is gonna arbitrage these credits) to get them off the streets and scrap them. Capitalizing some of the 'expected lifetime energy costs' into the sales price of new cars would make it more profitable to produce new sippers relative to new guzzlers - and/or cheaper to buy new sippers relative to new guzzlers - and/or cheaper to finance sippers v guzzlers whether they are old or new.

  • NotAnotherSkippy||

    Get back to me when you can provide a defensible pollution cost, i.e. not one requiring the output of falsified models bith econometric and climatological.

  • JFree||

    It doesn't depend on some scientific model. 10c bottle deposits reduce littering by the exact same principle. No scientific studies necessary as to what the exact social cost of littering is. That's how pricing systems work. Put a price on it already - and don't drain the system (via using the funds for taxes and such). THEN markets can work.

  • kbolino||

    Higher credit for an old guzzler means either that you're creating a market for "old guzzlers" and thus defeating the purpose of the plan, or that you're increasing the cost of all cars to offset the credit.

  • JFree||

    You increase the scrapping demand not the usage demand. Scrapping the car allows you to separate the capitalized usage credit from the heap of metal just as producing a car combines the two. Which can then be used to get either a new guzzler (at a high price cuz you gotta buy the new capitalized usage as well) or a new sipper (at a lower price cuz lower usage). I may have phrased it poorly.

  • ||

    One mostly forgotten aspect of CAFE standards is their dreadful anti-competitive and anti-comparative advantage aspects.

    A car company can't produce only heavier cars under these rules, and therefore cannot focus its attention exclusively on producing and improving them. Instead it must sell small cars as well, meaning it must either work against a comparative advantage in heavier cars or merge with a company that specializes in smaller cars.

    This is a complete rejection of what makes firms work and makes firms profitable, rendering them instead inefficient and anticompetitive.

  • JFree||

    The sole reason SUV's came about was because:
    a)the CAFE standards separated 'car chassis' vehicles from 'light truck chassis' vehicles and
    b)boomers started having kids in the early 80's (before engines had really improved) so they had to switch from lilJapanese putputs to family vehicles.

    Japanese car companies had the CAFE leeway to produce more sedans and such. They were late entrants to SUV market.
    American car companies had no CAFE leeway cuz they had their older customers who were used to their landboats. So they had to produce light-truck chassis vehicles instead for that next generation of customers. First minivans morphing into SUV's.

    You're right. CAFE standards are a perfect example of economic ignorance by pols and unintended consequences

  • brady949||

    We make a ton of cars in the US.

  • SIV||

    Foreign marques do. American marques make trucks.

  • creefer||

    Ford, Dodge, Lincoln, Chevy all make cars in the US.

  • C. S. P. Schofield||

    "Ultimately, I argued, setting CAFE standards is just a way for cowardly politicians to avoid telling their fellow citizens that they should pay more for the privilege of driving. If that's what our political leaders think, then they should just be honest and come out in favor of higher fuel taxes."

    Ah, but if they did that they might receive the butt-kicking at the polls they so richly deserve.

    While we're at it, can we admit that the whole CAFE scam is in significant part responsible for the existence of SUVs? As I recall (and do correct me if I'm wrong) CAFE basically outlawed the station wagon, without really addressing what families with active children were supposed to drive. Vans ride badly and have no crush-space. SUVs allowed Dad to maintain some shred of dignity, rather than buy a 'people carrier' and admit that he was going to spend the rest of his life (in the wonderful phrase from Jeremy Clarkson) slowly turning beige.

    So, now we are applying CAFE restrictions to SUVs, aren't we. I look for the development and hot sales of personal panel trucks.

    Or we could just admit that milage is none of the federal government's goddamned business and devote the money administering this scam to something more socially productive.

    Like running a National Numbers Game ... I mean Lottery ... or establishing public service brothels.

  • Ron Bailey||

    CSPS: can we admit that the whole CAFE scam is in significant part responsible for the existence of SUVs? Of course.

  • Ron Bailey||

    ...and the demise of station wagons.

  • SIV||

    Chicks hate wagons. I have no idea why.I'm not sure if even one woman ever bought Dodge Magnum. Reportedly, nearly every sale to "the man of the house" was nixed by the wife, even if it was going to be his primary vehicle.

  • Last of the Shitlords||

    Lots of chicks own Subaru Outbacks. Most of them are not even lesbians.

  • ||

    Seatbelt laws actually led to the demise of the station wagon. I mean, if you can't sit kids in the rumble seat, where's the fun?

  • Johnny B||

    And the demise of spare tires! The wife hit something with her expensive run-flats about 50 miles from home. So I fired up the 4WD truck to go pick her up, and then to return the next day with the fixed tire. So I count 200 miles extra driving to satisfy CAFE.

  • WoodChipperBob||

    We can't blame the existence of SUVs on them, just the proliferation. SUVs existed before CAFE, but pre-CAFE, if you needed to haul a family of 7, you bought a station wagon. SUVs were mostly the province of outdoorsmen.

  • Last of the Shitlords||

    The expense of the technology necessary to hit the ever more draconian FE requirements drives the cost of new cars ever higher. Ensuring that less people purchase them and hold onto their old inefficient higher polluting vehicles. Which is the obvious outcome, given this typical market distortion created by government.

  • Jerry Brickley||

    This site is supposedly endorsing Free Minds and Free Markets, no?

    I would like no CAFE restriction standards so the market will offer choices for the consumer.

    I would like a comfortable car without being forced to buy a truck.

    Tree huggers can buy what they want and the market will respond to the individual choice of the consumers.

    Mostly I see people shoehorning the consumer into overpriced, undersized, uncomfortable tin cans.

  • Jima||

    Right on.
    Why the fuck should I accept or tolerate some "sin tax" on gasoline? The government doesn't need to have any say at all about how much gasoline I purchase or burn. I have no problem paying a tax that maintains roads and related infrastructure. A "behaviour tax" on gasoline is pure bullshit. I am also fine with emission standards on the vehicles, I'm not advocating for anarchy. Make them as clean as is economically and technically feasible, on average. The rest is marketplace meddling and it's a piss poor idea.

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