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CEI Files New Challenge to the Administration's Fuel Economy Standards

Sam Kazman discusses the issue with Walter Kreucher, one of the petitioners in the case

Walter Kreucher is a retired automotive engineer who spent over three decades working on regulatory compliance programs. He helped Ford institute the first new-car fuel economy program, known as CAFE, for Corporate Average Fuel Economy, in the 1970s and ran Ford’s CAFE compliance program later in his career. Walter is also one of the petitioners in a new lawsuit challenging the CAFE standards that were issued on March 31.

Sam: Walter, you’ve spent many years working on CAFE. At what point did you first start to have doubts about this program?

Walt: CAFE was a poorly conceived policy, fraught with problems and unintended consequences from the beginning.

Why do you oppose higher fuel economy standards?

Higher fuel economy standards distort the market, increase vehicle costs, and inevitably lead to more traffic fatalities.

But higher fuel economy means lower pollution. Isn’t that a good thing?

If it’s carbon dioxide (CO2) that you’re worried about, there is practically no difference in the climate impact due to CO2 emissions between the Obama-era standards and less stringent standards of the sort that I favor. At most, it’s about 0.0006 degrees Centigrade in average global temperatures by the year 2100, according to the Final Environmental Impact Statement published with the rule.

As for particulate emissions, it’s important to understand that, from 2000 to 2017, national annual average PM2.5 concentrations have declined by over 40 percent, largely reflecting reductions in emissions of precursor gases. According to the Final Regulatory Impact Analysis, the differences in health effects among the various regulatory alternatives is insignificant.

What is the basis of your complaint in the legal action?

The National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA) arbitrarily selected a set of standards that are economically impractical. This is contrary to their statutory mandate. Bear in mind that the 2016 model year marked the first time in history that the automobile industry as a whole failed to meet the CAFE standards. In terms of noncomplying manufacturers, that situation has gotten worse in every model year since then. Despite this, NHTSA and the EPA have decided to increase the standards in each of the next six years. Clearly, this is not economically practical. It will result in higher vehicle prices and more fatalities, according to the Final Regulatory Impact Analysis, when compared to other alternatives considered.

You’ve brought up higher fatalities due to CAFE. How does this occur?

Stringent CAFE standards cause manufacturers to reduce vehicle weight and to focus on fuel-saving technologies at the expense of improving safety. Further, as the agencies point out in the Final Regulatory Impact Analysis, “as the price of vehicles increase beyond the reach of more consumers, such consumers continue to drive or purchase older, less safe vehicles.”

But the auto companies are not complaining. Why should you?

Toyota and the Alliance for Vehicle Efficiency argued in the rulemaking process that compliance shortfalls are evidence that the standards are so stringent that they are beyond the maximum feasible level and told the agencies that the Obama-era standards were not achievable. Others made similar comments.

But didn’t the major automaker associations support standards that increased in stringency year over year? The Alliance of Automobile Manufacturers, for example, stated that it could support stringency increases between 0 percent per year and 2 to 3 percent per year.

But their position was based on a key point—that the standards needed to contain “appropriate flexibilities.” These flexibilities would have allowed the agencies to claim credit for a higher numerical standard while the practical effect would have been reduced stringency. The agencies, however, largely denied the automakers those flexibilities.

BMW, Ford, Honda ,and Volkswagen signed an agreement to honor voluntary emissions regulations with the state of California. Why do you say they cannot comply with the less stringent federal standards?

First, the California standards are voluntary. Second, California added a number of “flexibilities,” including enhanced credits for various types of electric vehicle sales.

Complying with a voluntary standard reduces the risk to the companies. If the federal standards were voluntary there would be fewer issues. The other “accommodations” California agreed to make mean the standards are not as stringent as they seem.

It is notable that the industry as a whole did not agree with the voluntary California standards.

Under the CAFE statute, when deciding maximum feasible average fuel economy, the Secretary of Transportation must consider technological feasibility, economic practicability, the effect of other government motor vehicle standards on fuel economy and the need of the United States to conserve energy. There is nothing in the statute concerning saving lives or considering fatalities. Why do you think your legal action will succeed?

Economic practicability includes safety. Fatalities have some very real costs, ranging from the value of a human life to the cost to a family that loses a loved one and the loss of income due to an untimely fatality. These economic impacts are all too real. In 1992, the Competitive Enterprise Institute won a federal appeals court ruling that NHTSA had failed to fully consider the lethal safety impact of CAFE; we are confident that we can win a similar ruling in this new case.

Thank you, Walt.