CEI submitted comments yesterday on the National Highway Traffic Safety Administration’s (NHTSA) proposed Corporate Average Fuel Economy (CAFE) standards for model year (MY) 2024-2026 motor vehicles. Our comments show that the standards’ purported climate benefits are illusory, and that the proposal’s costs likely exceed its benefits.
NHTSA’s proposal aims to repeal and replace the MY 2024-2026 CAFE standards established by the Trump administration’s Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule. Under the SAFE Rule, CAFE standards increase in stringency beyond MY 2020 levels by 1.5 percent annually during MYs 2021-2026. In the current rulemaking, NHTSA invites public comment on three alternatives to the SAFE Rule standards. Alternative 2—an 8 percent annual increase in regulatory stringency during MYs 2024-2026—is NHTSA’s “preferred” alternative.
NHTSA calculates the alternative standards’ costs and benefits under two “perspectives”—model year and calendar year (CY). The MY perspective “considers the lifetime impacts attributable to all vehicles produced” during model years 1981-2029. The CY perspective considers the annual impacts attributable to all vehicles estimated to be in service during 2021-2050. Surprisingly, the two perspectives lead to very different estimates of costs, benefits, and net benefits.
For example, assuming a 3 percent discount rate, the costs, benefits, and net benefits of NHTSA’s preferred alternative are $121.1 billion, $121.4 billion, and $0.3 billion, respectively, in the MY perspective, but $333.6 billion, $433.6 billion, and $100 billion, respectively, in the CY perspective.
Similarly, estimated climate benefits are larger in the CY perspective than in the MY perspective. Using a 3 percent discount rate, NHTSA estimates that alternatives 1, 2, and 3 will reduce climate damages by $20.3 billion, $32 billion, and $45.6 billion, respectively, in the MY perspective (86 FR 49720), and $71.6 billion, $118.2 billion, and $161.4 billion, respectively, in the CY perspective (Table B-7-25).
One implication of the above numbers is that the proposal’s climate benefits are critical to achieving positive net benefits—a rule in which total benefits exceed costs. For example, assuming a 3 percent discount rate, if climate benefits are zero in dollar terms, Alternative 2 produces negative net benefits. Costs exceed benefits by $31.7 billion in the MY perspective and $18.2 billion in the CY perspective.
Here is a brief summary of our argument. The proposed rule’s projected climate benefits are phantasms. Those benefits derive from the Biden administration Interagency Working Group’s (IWG) social cost of carbon (SCC) estimates. Whatever its value as an academic pursuit, SCC estimation is too speculative, subjective, and prone to partisan manipulation to inform policy decisions.
The IWG exercise is a case in point. All of the IWG’s methodological decisions err on the side of climate alarm and regulatory ambition. Those dubious decisions include the use of below-market discount rates, an analysis period (2000-2300) extending far beyond the limits of informed speculation, outdated climate sensitivity assumptions, unscientific depreciation of carbon dioxide fertilization benefits, unjustified pessimism regarding human adaptive capabilities, implausible “return to coal” baseline emission scenarios, and net-benefit calculations that misleadingly compare domestic costs to global benefits. Absent those biases, the IWG’s SCC estimates could fall to zero dollars or below during 2021-2050 and beyond.
Even if the IWG’s methodology were not biased in multiple ways, NHTSA’s claim that its preferred alternative would deliver $118.2 billion in climate benefits by 2050 would still defy common sense. In the agency’s own analysis, the preferred alternative reduces global average temperature by about 0.001°C in 2050. That hypothetical change is 80 times smaller than the margin of error (0.08°C) for estimating annual average global temperature.
The proposed standards’ undetectably small impacts on global temperatures over the next 30 years would make no discernible difference in weather patterns, crop yields, polar bear populations, or any other environmental condition people care about.
Benefits no one can experience are “benefits” in name only. They are not real enough to be netted against the tens of billions of dollars in annual costs NHTSA’s proposed CAFE standards would indisputably impose on automakers and consumers.
CEI’s comments were co-authored by CEI climate scientist Patrick Michaels, Heritage Foundation Principal Data Scientist, Statistician, and Research Fellow Kevin Dayaratna, and yours truly. Dr. Dayaratna, whose peer-reviewed studies feature prominently in our analysis, contributed in his capacity as an independent scholar and not on behalf of any organization.