The Trump Administration has proposed to halt the steady increases in auto fuel economy standards that were part of backroom deals made by the Obama administration with California and automakers in 2009-12.
In doing so, the administration has struck a blow for consumer choice that will be good news for drivers planning or hoping to buy a new car in the next decade. That’s because the mileage mandate is one of the main causes of rapidly rising vehicle prices.
Corporate Average Fuel Economy standards were first enacted in 1975 as a response to the 1973 OPEC oil embargo. The idea was that reducing American dependence on foreign oil was a national interest more important than other factors that people consider in buying a new car, such as safety, size, performance and cost.
The federal government was therefore justified in imposing a mandate that overrode consumer choice.
Even with CAFE, American dependence on foreign oil increased as more people drove many more miles and domestic oil production declined. But by 2012 it was clear that the shale oil and gas revolution was rapidly increasing domestic production and was therefore going to solve the very problem that CAFE was designed to address.
Although Congress refused to enact global warming legislation, a 2007 Supreme Court decision allowed Obama’s Environmental Protection Agency to repurpose CAFE as a program to reduce greenhouse gas emissions.
The average mileage requirements were set to increase rapidly from the existing standard of 35 mpg by 2020 for passenger cars, pickup trucks and SUVs to 54.5 mpg by 2025.
After reviewing the impacts of the new standards, the Department of Transportation and EPA have now decided to scale back the rate of annual increases, and then flatline CAFE at 37 mpg from 2020 to 2026.
Meeting ever more stringent fuel economy standards is driving up new vehicle prices. Sticker shock is thereby causing a lot of people to hang on to their current cars. The average age of all cars on the road is now at an all-time high of over 111/2 years.
The Transportation Department’s analysis shows that having so many 15- to 25 year-old cars on the road is a major safety concern. Not only are newer cars safer, but systems such as braking and airbags become less reliable as cars get older.
Freezing CAFE standards will make new cars more affordable for millions of Americans and also allow many of them to buy bigger and hence even safer new models.
How much safer will be hotly debated. The Transportation Department concludes that the proposed changes will prevent about 1,000 traffic fatalities a year. If that number is anywhere close to reality, then it is going to be hard to argue against making those changes.
Supporters of CAFE respond by pointing to polls showing strong public support for higher fuel economy standards. The polls are no doubt accurate on that one question, but they fail to ask whether you would support higher fuel economy standards if it meant that the vehicles you could buy were smaller, less safe and more expensive.
That there are trade-offs between price, safety, fuel economy, size, and performance is the key point. Federal CAFE standards have limited consumer choice and forced consumers either to buy models that they would not otherwise buy or to put off buying new cars altogether.
For many people, fuel economy will still be the most important factor in choosing a new car. The good news for them is that the Trump administration’s action will in no way prevent them from buying a model that gets great gas mileage. The good news for everyone else is that the choice of models will be much wider than if the CAFE standard remained 54.5 mpg.