Trump administration rolls back plans to raise fuel economy standards for autos 

Key Points
  • The Trump administration proposes rolling back ambitious targets for higher fuel economy and lower greenhouse gas emissions from cars and trucks.
  • The administration confirms it will seek to strip California of its special authority to set its own fuel economy levels for autos.
  • Cars and light-duty trucks will only have to average about 37 mpg by 2026, rather than targets near 50 mpg envisioned by the Obama administration.
President Donald Trump speaks at American Center for Mobility in Ypsilanti, Michigan with auto industry executives on March 15, 2017.
Nicholas Kamm | AFP | Getty Images

The Trump administration on Thursday revealed its long-anticipated plan to roll back Obama-era standards meant to cut planet-warming emissions from tailpipes and boost fuel efficiency in cars and trucks sold in the United States in the coming years.

At the same time, the administration confirmed it will seek to strip California of its special authority to set its own fuel economy levels for autos, escalating a legal battle with more than a dozen states. Shortly after the announcement, 19 states and Washington D.C. said they intended to sue over the revision.

The National Highway Transportation Safety Administration and Environmental Protection Agency say they intend to reverse ambitious targets for fuel economy and emissions reductions, which the agencies developed under President Barack Obama. Instead of requiring automakers to steadily increase the average fuel efficiency of passenger vehicles through 2025 as previously planned, the Trump administration would freeze those levels after 2020.

That would mean the fleet of cars and light-duty trucks that automakers release each year will only have to average about 37 mpg by 2026, rather than targets near 50 mpg envisioned by the Obama administration. Those fleets would also be allowed to emit more greenhouse gases for each mile driven under the Trump plan.

To be sure, those are simple, round numbers that mask the complicated formulas behind the standards, known as Corporate Average Fuel Economy, or CAFE. But put simply, the Trump administration is trying to ease regulatory burdens for American automakers, even though the industry sought less drastic changes to the CAFE standards.

The proposal would lower the hurdles that automakers face in meeting tougher standards, especially as demand for trucks and large, less fuel efficient vehicles remains healthy. However, the administration's decision to revoke California's special status opens a path to an outcome the industry has long tried to avoid: having to engineer cars and trucks for two different sets of fuel economy standards in the United States.

California, along with 16 other states and Washington D.C., sued the Environmental Protection Agency in May after the administration said it would lower the Obama-era standards. The federal government has long issued California a waiver so it can combat pollution levels that are higher than in the rest of the country.

"Federal rules to limit tailpipe pollution and improve fuel economy are our best strategy to reduce carbon pollution, improve air quality, and save drivers money on gas," the 20 attorneys general that intend to sue said in a statement on Thursday. "The Administration's proposal to weaken these rules will cause the American people to breathe dirtier air and pay higher prices at the pump."

The CAFE standards stretch back to the 1970s and were designed to cut fuel consumption and bolster U.S. energy security in the wake of the Arab Oil Embargo. The Obama administration accelerated efforts to boost fuel economy and integrated that push with a new focus on cutting planet-warming emissions.

Automakers got on board with more aggressive mpg targets after being bailed out by Washington in the wake of the global financial crisis nearly a decade ago.

However, Americans have not gravitated toward fuel efficient cars, electric vehicles and hybrids as much as anticipated. That means automakers have to achieve better fuel economy by improving the fossil-fuel engines and by designing lighter and more aerodynamic models, said Carla Bailo, president and CEO of the Center for Automotive Research.

"It would have really created quite a strain," she said.

The Trump administration argues that the industry has picked the low-hanging fruit when it comes to technology improvements. Consequently, finding ways to squeeze more mileage out of a gallon of gasoline will become increasingly expensive, it says. That threatens to raise prices for automakers and consumers alike, the administration warns.

Those claims are disputed by some analysts. Tougher standards are financially feasible through 2030, while estimates for the cost of complying with fuel economy and emissions rules are overstated by as much as 40 percent, according to the International Council on Clean Transportation, a nonprofit that provides analysis to environmental regulators.

However, consumer trends do create challenges for car manufacturers trying to hit the goals.

When oil prices are high and car buyers are focused on fuel costs, companies typically have an easier time selling the smaller, more fuel efficient cars that help them hit the fleet-wide targets. But when the price at the pump falls — as it did between 2014 and 2016 — demand typically rises for SUVs and trucks, skewing the average mpg of an automaker's fleet higher.

The Trump administration argues the Obama-era standards could leave dealers with showrooms packed with small, fuel-efficient cars that shoppers don't want. That could cause vehicle owners to keep their old trucks rather than trading up to a new model with better fuel economy and pollution control, it says.

The policy change does not necessarily mean automakers will stop improving fuel efficiency. Car companies typically try to harmonize their fleets for the global market to the best of their ability, and other parts of the world are still pushing forward policies to improve fuel economy standards and put more electric vehicles on the road.

Bailo says the lower standards will offer automakers relief in their pickup truck segments, a particularly strong business in the United States. But the manufacturers are still likely to focus on fuel economy in sedans and crossover vehicles that sell well around the world.

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