No doubt about it: 2016 has been the Year of WTF. The latest proof comes in the form of an announcement from the Environmental Protection Agency that it plans to maintain its current auto emissions goals for 2025.
That wasn't what most observers expected. Then again, there may be more to this than meets the eye.
In the beginning
The EPA and the National Highway Traffic Safety Administration debuted their 2025 roadmap way back in November 2011. (For reference, the EPA sets emissions standards, while NHTSA sets fuel economy standards.) Eco-advocates praised the plan, which, among other things, requires automakers to achieve average fleet-wide fuel economies of 54.5 miles per gallon of gas.
Most automakers liked the new regulations, too, because they set different guidelines for different types of vehicles. For example, per NHTSA's proposal, passenger cars are required to have a combined rating of 62 mpg by 2025, while trucks and SUVs are held to a lower standard of 44 mpg.
Dealers were less comfortable with the rules, fearing that they'll drive up the prices of new vehicles. And a couple of foreign car companies were downright mad, insisting that by distinguishing between cars and trucks, the regulations make it easier for U.S. automakers to meet the benchmarks because Detroit automakers have more truck-heavy lineups.
Volkswagen was perhaps most vocal, issuing a statement that said, in part:
"Volkswagen Group clean diesel products are among the most fuel efficient vehicles on the road today. Our new mid-size Passat TDI, built here in the US in Chattanooga, TN, achieves 43 mpg highway and can travel almost 800 miles on a single tank of fuel. If one-third of the vehicles on the road today were clean diesel, the US would save 1.4 million barrels of oil a day. Yet there is no consideration in the current proposal for the positive impact clean diesels can have on fuel consumption here in the US."
Which is thoroughly ironic, given what we now know about Volkswagen's not-so-clean-diesels--namely, that the company designed software to allow those vehicles to cheat on emissions tests because engineers couldn't find any other way to meet strict U.S. regulations.
Nearly five years down the road, automakers are feeling a little less optimistic about the rules than they were in 2011. The EPA recently launched a review of the regulations to determine whether car companies were likely to meet the benchmarks on schedule. As part of that process, many in the industry hoped that the agency would soften the rules.
That's not because automakers lack technology to reach the EPA's targets. It's because of strong consumer demand for less-efficient vehicles.
When the EPA first issued its guidelines, the price of oil hovered above $100 a barrel. That kept gas prices high and boosted consumer interest in smaller cars and hybrids.
In the summer of 2014, though, the price of oil began to tumble, falling from more than $107 a barrel in June to $55 a barrel in December. In January 2016, it dropped to nearly $29 a barrel--a low not seen since 2002.
That's helped keep gas prices low, which, in turn, has caused American consumers to worry less about the cost of filling up their tanks. They've shelled out for larger, less-efficient vehicles like trucks and SUVs, which has kept automakers' fleet-wide emissions higher--and fuel economy lower--than they might've expected in 2011.
That's also boosted America's demand for petroleum, which is exactly what OPEC was hoping might happen by keeping its oil wells humming.
Bottom line: automakers have the tools and the know-how to build vehicles that meet EPA and NHTSA regulations, but they're worried that no one will buy them.
EPA stays the course
Yesterday, EPA administrator Gina McCarthy announced that despite some concerns about consumer interest in efficient vehicles, the agency intended to stick to its plan. According to the mid-term evaluation report, there are at least four major reasons that the agency decided to stay the course:
- Auto manufacturers can meet the MY 2022-2025 standards at slightly lower per-vehicle costs than predicted in the TAR, and lower costs than predicted in the 2012 rulemaking that established the standards.
- The current standards will save consumers money and provide benefits to the health and welfare of Americans.
- Automakers have a wide range of technology pathways available to meet the standards. Standards are achievable with very low penetration of strong hybrids, electric vehicles and plug-in hybrid electric vehicles. This finding is consistent with the conclusions the National Academy of Sciences found in a comprehensive 2015 study.
- Automakers have outperformed the standards for the first four years of the program (MY2012-2015) and manufacturers are adopting fuel efficient technologies at unprecedented rates, all while vehicle sales have increased for 6 consecutive years. There are over 100 car, SUV, and pickup versions on the market today that already meet 2020 or later standards.
There's now a 30-day period of public comment on the report. (If you're inclined to make such a comment, you can do so here.) Once that period ends, the EPA administrator will have until April 2018 to issue a final determination about the 2025 guidelines.
Though automakers remain concerned about consumer demand for fuel-efficient, low-emission vehicles, in public they've been more overtly critical of the patchwork of government regulations that run counter to those improvements. They've reached out to the incoming Trump administration to request the formation of a committee that might streamline federal guidelines so that they work toward common goals.
Will the EPA get its way?
The big question, of course, is how the EPA's policy will fare over the next four years--four years led by an administration likely to scale back regulation, and one that remains critical of climate change science.
If administrator McCarthy doesn't issue a final determination on the mid-term review, her successor will be tasked with doing so. Assuming that the successor's policies align with those of president-elect Trump, he or she could keep some, all, or none of the provisions in place.
If, on the other hand, McCarthy does issue her determination, and if that determination keeps the 2025 regulations as-is, it would become somewhat harder for her successor to undo. It wouldn't be impossible, but it would be more of a stretch.
And there are two other factors at play:
- Consumer support for higher efficiency standards. That might give incoming, anti-regulation-minded staff a bit of pause when planning to dismantle the EPA's current plan.
- OPEC's surprising decision yesterday to curtail oil production for the first time in eight years. That will almost certainly increase the price of oil as well as consumer interest in efficient vehicles, which might allay some automakers' concerns.
At this point, only one thing is certain: it's going to be an interesting four years.
Got any thoughts about the EPA's plans? Sound off in the comments below. If you'd like to read the full mid-term report for yourself, click here.