On March 14, President Donald Trump announced with great fanfare that he plans to roll back fuel economy standards set by the Obama administration.
The standard, known as CAFE (Corporate Average Fleet Economy), would require the auto industry to have a fleet average of at least 54.5 mpg by 2025, which could reduce CO2 emissions by 1.1 billion metric tons.
CAFE began in the early 1970s as a result of an oil embargo by Middle Eastern oil producers, which caused gas prices to rise sky-high and resulted in widespread fuel shortages. In an effort to be less dependent on foreign oil, the government began setting standards of fuel efficiency, which have been revised as auto technology improved.
Environmental groups have praised CAFE for its benefits of reduced air pollution and greenhouse gas emissions, but conservative think tanks like the Heritage Foundation have claimed that CAFE standards as they stand today are “a costly mistake.”
Trump’s announcement was less radical than some had predicted: he said he would review the mileage target and timing rather than slashing the numbers immediately or repealing the CAFE standard altogether.
But there are a number of states that already have emissions standards different from those the EPA has mandated nationally. Foremost among these is California, which was granted a waiver by the federal government to set its own, tougher emissions standards. Twelve other states, including New York, Pennsylvania, Washington, and New Jersey, operate under the same California emissions rules.
Because it’s not practical for automakers to make different versions of the same car for different parts of the country, they are likely to continue designing their vehicles to meet the California emissions standard.
Shortly after a meeting with President Trump and CEOs of the other two U.S. automakers, Ford CEO Mark Fields said in a call with investors, “We weren’t advocating for the elimination of standards. I made the point that, one of the reasons we were very supportive of the one national standard is because it was one national standard…and that’s what we emphasized that was important going forward.”
Both U.S. and foreign automakers are still planning to design and sell fuel-efficient hybrids and plug-in vehicles, regardless of what happens with the CAFE standards. General Motors CEO Mary Barra said her company “remains committed” to alternative vehicles.
Foreign-based automakers still plan to build high-efficiency gasoline and alternative-power vehicles.
“No matter what happens in the U.S., we will not change any of our plans for electrified vehicles and more efficient vehicles,” Nissan CEO Carlos Ghosn said during a news conference the week of March 6.
The fact of the matter is that what the U.S. does with its own automotive environmental standards is less relevant to automakers than legislators may think. The auto industry is a worldwide business, and many nations—including key markets like China and Japan—are likely to develop even tougher emissions standards than the U.S. has. The result will be that carmakers that want to sell their products in those markets will most likely end up building for the toughest emissions standards, whichever country has them.