Trump administration may freeze fuel economy standards

Key Points
  • The Trump administration is considering lower fuel efficiency targets for the auto industry.
  • The National Highway Traffic Safety Administration says it will review the CAFE standards for the model years 2022-2025.
  • One option being considered would freeze fleetwide average fuel economy at 2021 levels, or an average of 41 miles per gallon, instead of increasing them every year through 2025.
A worker installs tires on a Jeep Wrangler at the Chrysler Toledo North Assembly Plant in Toledo, Ohio.
Bill Pugliano | Getty Images

Six months after the Obama administration tried to lock in fuel efficiency standards that would require new vehicles to average 49.7 miles per gallon by 2025, the Trump administration is considering much lower fuel efficiency targets.

The National Highway Traffic Safety Administration said it will review the Corporate Average Fuel Economy, or CAFE, standards for the model years 2022-2025.

One option being considered is freezing the fleetwide average fuel economy at 2021 levels instead of increasing them every year through 2025. If that happens, it could lead to far lower fuel economy targets for newer vehicles sold early next decade.

The current targets, which were established in 2011, call for 2021 models to average 41 miles per gallon, while 2025 models would be required to average 49.7 mpg.

As part of its analysis to determine what type of mileage future models should achieve, NHTSA said it is considering "a rule that would continue the current CAFE standards for MY 2021 indefinitely."

NHTSA told CNBC the notice is one step in the process to determine the scope of environmental factors the agency should analyze prior to proposing CAFE standards for model year 2022-2025 vehicles in the future. The agency stressed it will consider a range of alternatives and has not proposed those future standards yet.

In March, President Donald Trump ordered a review of the fuel efficiency standards for model year 2022-2025 vehicles.

Those targets were established in 2011 by the Obama Administration. At the time, the auto industry was still struggling with extremely weak sales and two of the Big 3, General Motors and Fiat-Chrysler, were just coming out of structured bankruptcies overseen by the federal government.

In short, the industry had little power to stop the Obama Administration from pushing automakers to build steadily more fuel efficient vehicles. Since then the CAFE standards have risen from 25.3 mpg in 2010 to 35.4 mpg in 2016.

While automakers have argued that developing more fuel efficient engines would cost the industry billions of dollars and ultimately hurt demand for new vehicles by driving up prices, sales have climbed for seven straight years to an all-time of 17.6 million vehicles in 2016.

But with the review of CAFE standards for 2022-2025 vehicles scheduled to take place before April of 2018, NHTSA is making it clear we may see fuel efficiency standards freeze after 2021.

The Sierra Club is fighting to stop NHTSA from rolling back the mpg targets.

"Even hinting at freezing these popular standards is a bad idea, so of course Trump is proposing to pump the breaks at the expense of the American people just to pad the pockets of big oil and auto executives," said the environmental organization.

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