Hey Donald Trump, Pulling Back Obama’s Car Fuel Standards Could Actually Hurt America’s Auto Industry
On Wednesday, the Trump Administration announced it would review Obama’s historic greenhouse gas standards that aimed to double fuel efficiency to 54.5 mpg by 2025 for cars and trucks. Trump’s move can be viewed as a first step to relax the standards.
And it comes under pressures from the auto industry, which in my view falsely claims that these rules threaten manufacturing jobs. The last time the government weakened fuel efficiency standards based on similar claims, the US auto industry suffered a long decline and came close to extinction in 2008 when GM and Chrysler went bankrupt.
History has shown that fewer regulations are not always a win for America’s auto industry. When the US relaxed efficiency rules in the mid-1980s, foreign automakers controlled about 25% of the market. Today they own 55%. Repealing existing standards once again will not only set back efforts to mitigate climate change, undermine the consumers pocketbook, and cost jobs, but it will again set America’s auto companies on a collision course.
It was back in 1986 that the US automakers first convinced the government to relax fuel economy. Throughout the 1990’s, Ford, GM and Chrysler made huge profits on low-efficiency minivans, SUVs and pick-ups. But gas prices couldn’t stay low forever. Beginning in 2004, gas prices began spiking. Americans increasingly valued fuel-efficient models like the Toyota Corolla and Honda Civic. Domestic companies couldn’t compete.
Then, in 2008, the perfect storm hit: the financial industry collapsed just as gas went to $4 per gallon. Already financially weakened over two decades, US auto manufacturers had to beg Congress for a bail out. As hard as it is to believe now, it many imagined then that the American auto industry wouldn’t survive in any recognizable form.
In 2009, in the wake of the global financial crisis, the Obama administration agreed to bail out the Big Three. Their new leaders recognized the need to plot a new course in the future. They worked with the Obama administration to set the first, national greenhouse gas standards that would double fuel economy by 2025. It proved to be a rare “win-win.” Since then, the industry has regained its competitive edge and returned to record sales and profits partly by offering more fuel-efficient cars and SUVs. And, the planet is foregoing billions of tons of carbon pollution and consumers are on a path to saving about $3000 to $5000 in fuel over the life of a car or truck.
By eliminating greenhouse gas and efficiency standards, the Trump administration could start this cycle over again. This time, however, the negative impact of relaxing US greenhouse gas standards will be exacerbated by the new dynamics of today’s global markets. Domestic automakers’ decline could be even more rapid and profound than in the 2000s.
For one, the world’s major economies that account for some 75% of global production are converging on largely common fuel economy standards by 2022. The US would no longer be part of this group. The gains the US companies have made, like GM’s fuel efficient, advanced powertrain technologies that give it a commanding share in its largest market, China, would atrophy. By relaxing standards, the government will nudge the US auto industry toward losing both its technology gains and the higher paying jobs associated with advanced technologies.
Second, the tipping point for electric vehicles (EV) is approaching. EV battery prices have come down ~65% since 2011. At price parity, EVs compete very well with traditional autos – they are quieter, cleaner, more responsive, require less maintenance and zero trips to the gas station. But without US fuel efficiency standards fostering investment, American auto companies could miss out on this massive revolution in automotive technology.
So, why is the industry shooting itself in the foot, again? A huge part of it is myopic market vision. Fuel prices are relatively low today; US automakers can make short-term profits with their trucks and SUVs. But this isn’t a good enough reason to blow up the existing standards.
A better approach is to repeat a more constructive era in history. In 2009, the federal government and California worked collaboratively with the automakers to develop the existing, national fuel efficiency program that offers certainty through 2025. There was a constructive atmosphere without drawn out court battles or recriminations. Together, these groups once again could hash out technical flexibilities that help industry without harming the standards’ positive impacts. In fact, it would be of so much greater value if these discussions were not limited to the 2025 standards, but instead on 2030 and beyond.
So far, the Trump administration hasn’t shown much interest in nuance or negotiation. If they want to fulfill their promises of a robust economy and more jobs, they would be well served by reconsidering their plans. Without thoughtful collaboration and discussion, a repeal of the US fuel standards stands to become a Pyrrhic victory for the industry – and for the workers, consumers, and the planet.
Margo Oge served the United States Environmental Protection Agency for over 32 years and most recently, was the director of the EPA’s Office of Transportation and Air Quality(OTAQ) from 1994 to 2012 and a key architect of the 2025 GHG/CAFE Standards. She is also the author of the book, Driving the Future: Combating Climate Change with Cleaner, Smarter Cars.