Commentary: How Rolling Back Fuel Standards Could Crush America’s Auto Industry

March 30, 2018, 4:31 PM UTC

A looming Trump administration decision could damage major American industries and put hundreds of thousands of American jobs at risk—and almost nobody is talking about it.

I’m not talking about tariffs or trade agreements. Rather, I’m talking about the impending decision by the Environmental Protection Agency (EPA), run by Scott Pruitt, on whether or not to roll back national fuel economy and emissions standards for passenger vehicles.

Weakening fuel economy and emissions standards would undermine the global competitiveness of the U.S. auto industry at a time when the rest of the world is moving in the opposite direction in response to energy security concerns, consumer preferences, and climate regulation. Having worked hard to establish global leadership in fuel efficiency and emissions-control technology, why would America want to throw all its progress into reverse?

According to an analysis by Ceres, strong miles-per-gallon standards provide market certainty, spur innovation, and make U.S. auto manufacturers and suppliers more competitive. The analysis also found that strong standards insure automakers against future market share loss when gas prices inevitably rise again.

During the last global spike in oil prices, Detroit’s Big Three (General Motors, Ford, and Chrysler) found themselves overinvested in inefficient vehicles they couldn’t sell, which contributed to their financial downfall in 2009. Further, for component suppliers that contribute nearly 2.4% of U.S. GDP and employ 871,000 Americans—more than twice as many as automakers themselves do—weakened standards could cause losses of $3.3 billion a year between 2022 and 2025 due to lost sales of fuel-efficient technologies.

At Impax Asset Management, we manage $16 billion in assets for institutional investors around the world. We have decades of experience investing in the auto supply sector. It is clear to us that rolling back fuel-efficiency and emissions targets would make zero sense economically for anyone but oil companies. In fact, it would set back American car companies and those working for them because the global automotive market is moving the opposite direction, away from gas guzzlers and toward cleaner, more efficient cars and associated technology.

Auto suppliers are well aware of this threat. Recently, groups representing America’s auto parts suppliers joined advanced materials manufacturers and emissions control technology companies in stating that “it is in the nation’s best interests to continue leading the development and manufacture of the cleanest and most efficient vehicles in the world.” Individual suppliers agree, with 95% saying that more ambitious fuel economy standards encourage innovation and investment in U.S. companies. And it is certainly in the best interests of the hundreds of thousands of workers in 1,200 U.S. factories and engineering facilities in 48 states that develop and manufacture advanced technologies that reduce vehicle pollution and improve fuel economy.

Stronger standards also help the broader economy; fuel cost savings lead to increased consumer spending in other areas that create local jobs and boost American economic growth. An analysis by Synapse Energy Economics, Inc. estimates that more than 100,000 jobs will be created and U.S. GDP will increase by more than $13 billion by the time the standards are fully implemented. After all, consumer spending remains our economy’s biggest driver.

In addition to improving national economic stability, investing in advanced energy technologies improves our standing in the global economy. A report from CNA’s Military Advisory Board concludes that nations leading in new energy options and energy efficiency stand to gain advantage in the world market and that if the U.S. sits on the sidelines, it does so at risk to its economic security.

Strong national fuel economy and emissions standards spur innovation and open the door to tremendous economic opportunities. They represent an investment in technological and economic leadership. Weakening them would be a bad deal for investors, workers, car owners, and businesses—and for the American economy itself.

David Richardson is the executive director of business development for Impax Asset Management.

Read More

Great ResignationClimate ChangeLeadershipInflationUkraine Invasion