Mileage Rule for New Cars Everything Free Marketers Hoped
The National Highway Traffic Safety Administration (NHTSA) and Environmental Protection Agency (EPA) on August 2nd proposed to revise Corporate Average Fuel Economy (CAFE) standards and carbon dioxide tailpipe standards for model year 2021-2025 motor vehicles, and set new standards for model year 2026 vehicles.
The proposal, known as the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule, invites public comment on eight regulatory alternatives, including a “baseline” scenario that leaves intact the standards prescribed by the Obama administration in 2012.
The agencies’ preferred alternative is to lock in the Obama administration’s 2020 standards through model year 2026. That represents a significant rollback in regulatory stringency. Instead of rising to 54.5 miles per gallon in 2025, as in the Obama administration’s 2012 rule, CAFE standards for passenger cars would peak at 43 mpg in 2020 and remain at that level during 2021-2026.
A five-year “time out” from the Obama agenda of ever-increasing regulatory stringency would have substantial net benefits for consumers, EPA and NHTSA estimate. According to the agencies’ By the Numbers Fact Sheet, the SAFE Vehicles Rule would reduce average new car ownership costs by $2,340, making new cars more affordable to millions of middle-income households (the average new car today already costs $35,000).
The acceleration in vehicle turnover would have significant safety benefits, because new cars are safer than older vehicles. The agencies project a reduction in 12,700 traffic fatalities through model year 2029 relative to the Obama baseline.
Other benefits include an estimated $252.6 billion reduction in regulatory compliance costs and more than $500 billion in overall societal benefits (including $77.1 billion attributable to fewer traffic fatalities and $120.4 billion attributable to fewer serious injuries).
Daily fuel consumption is estimated to increase by 2-3 percent relative to the Obama baseline. However, given the significant drop in recent years in both fuel prices and U.S. oil imports, which the EPA and NHTSA did not foresee in 2012, the SAFE Vehicle Rule would have only minor impacts on energy conservation and U.S. oil import dependence.
The proposed rollback in regulatory stringency would have negligible impacts on climate change mitigation efforts. Assuming mainstream climate modeling, the proposal would add only 3/1000ths of a degree Celsius to global average surface temperature in 2100 compared to the Obama baseline.
Perhaps most importantly, the SAFE Vehicles Rule would end California’s intrusion into fuel economy regulation. California’s carbon dioxide tailpipe standards are directly and inherently “related to” fuel economy standards, and the state’s Zero Emission Vehicle (ZEV) mandate also implicitly regulates fuel economy. As such, those policies are pre-empted by the Energy Policy and Conservation Act of 1975, the agencies argue.
Removing California from the regulatory equation would permanently change the institutional framework and political dynamics of the CAFE program, enabling automakers to cater to consumer preferences without interference from regulatory zealots in Sacramento. For further discussion, see my commentary, “Will Trump Auto Rule End California’s Regulation of Fuel Economy?”