Washington’s four-decade science experiment in mandating fuel efficiency — the so-called Corporate Average Fuel Economy Standard (CAFE) — has been a disaster. It eliminated thousands of Detroit jobs until carmakers found a loophole which made SUVs an option for consumers, killed thousands of Americans by making them drive smaller cars, and created endless lobbying debates in Washington. And it was fracking — not CAFE — that ended America’s dependence on foreign oil from risky countries.
The Obama administration’s Environmental Protection Agency jettisoned the formal rule-making process as it left office and tried to cement in place tougher fuel-efficiency standards that will require cars and light-duty trucks to average 54.5 miles per gallon of gasoline by model year 2025, up from 35.5 miles per gallon in the 2016 model year. The agency failed to consult the Office of Management and Budget as required — or do any realistic cost-benefit analysis. For example, it argued that CAFE standards would fight climate change. But even CAFE advocates admit the new standards would reduce global temperatures, at best, by 0.02 degree Celsius by 2100.
Today, the Trump EPA held a pair of meetings with players in the CAFE debate, including the Department of Transportation, carmakers and California officials who desperately want to maintain the even stricter standards their state has been allowed to impose since the 1970s.
The Trump EPA has stopped the Obama steamroller and will now initiate a formal rule-making to revise the targets. Its goal is to work towards a single national CAFE standard and reduce the burden of the Obama standards on consumers.
Let’s stipulate that CAFE represents an arrogant attitude that bureaucrats in Washington should have the power to decide what kind of car Americans can drive. But CAFE is horrendous policy: It increases the price of new vehicles, prices millions of Americans out of the market for new cars, and second-guesses consumer needs in a clumsy and outdated way.
Even the Obama administration conceded that the new standards would increase the price a new car by an average of $3,000 by 2025. Economists Salim Furth and David Kreutzer think that estimate is a lowball figure. Their research shows that prior to 2008, the price of new vehicles was falling, but then as CAFE increases kicked in, they dramatically increased. They found that new vehicles today cost over $6,000 more than they likely should.
CAFE supporters insist the tougher standards will encourage a great leap forward by automakers into new non-fossil-fuel technologies. But that’s unlikely, and may even be shortsighted. Charging electric batteries could generate more carbon dioxide than combustion engines do.
But car makers are loath to make such arguments, fearing they can’t make their case in the media and will simply stir up greater wrath from the environmental lobby. Some have become so timid that some like Ford are no longer backing a rollback of the Obama fuel standards. Instead they just want “flexibility.” They fear the uncertainty of a long, drawn-out regulatory battle that will head to the courts.
But that simply means that the Trump administration needs to implement a CAFE rollback sooner rather than later. Not only is CAFE a policy that hobbles the U.S. auto industry and destroys jobs, but the improper method by which it’s been imposed has to be overturned if there is to be any deterrent to regulatory bureaucrats running amok.