Automakers push for brokered fuel-economy deal

August 2, 2017

Editor's note: An earlier version of this story misstated a position by the Alliance of Automobile Manufacturers, which is a lobbyist for automakers. The AAM supports increased fuel economy regulations, but added that the changes should be agreed upon after a mid-term review of the regulations. 

You've probably heard the old chestnut, "Be careful what you wish for, because you just might get it." Automakers have come face-to-face with the wisdom of that phrase in recent months— they're now asking President Donald Trump to step in and make things right by setting fuel economy standards they say the public supports.

Yes, you read that correctly. Car companies like General Motors, Toyota, and a host of others are asking the president—the same president who predicted doom and gloom for the auto industry if high, Obama-era fuel economy standards remained in place—to broker a deal that increases fuel economy standards. At issue is how quickly those standards would be in place and how much consumers would be willing to pay. A presentation made by an auto industry trade group Aug. 1 could provide insight. 

How did we get here?

The situation began way back in 2011, when fuel prices were high, and consumers were keenly aware of how much they were spending at the pump. The Environmental Protection Agency (which sets auto emissions standards) and the National Highway Traffic Safety Administration (which sets fuel economy standards that align with EPA benchmarks) announced new rules covering vehicles through the 2025 model year. Those rules called for a Corporate Average Fuel Economy (which is higher than real-world economy) of 54.5 mpg for cars and lower targets for U.S. trucks. 

In 2016, the EPA launched a mid-term review of those goals, giving automakers and others a chance to discuss whether they were on track to meet 2025 targets and if not, why not.

As it turns out, they were not.

Fuel prices began to plummet in 2014, which gave consumers less incentive to purchase smaller, more efficient cars. Automakers argued that maintaining efficiency goals that were set when gas prices were high would force automakers to make increasingly smaller, gas-sipping rides that no one would want to buy.

Those laments fell on deaf ears. The EPA announced that it would maintain its emissions targets for 2025, which meant that NHTSA would have to follow suit. One week before Trump was sworn into office, the EPA signed off on that ruling, well over a year before it was obligated to do so.

Not surprisingly, automakers cried foul and began asking Trump to launch a review of the EPA's decision, which he did in March


Environmental advocacy groups were infuriated by Trump's decision, but they weren't entirely without hope. When he authorized the EPA review, Trump didn't call into question California's right to set its own emissions standards. 

California was given that right in 2009. At the same time, states were allowed to peg their own emissions standards to those set by the EPA or those set by the California Air Resources Board. To date, Arizona, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and the District of Columbia have followed the latter path.

That's never caused much of an issue before now. CARB and the EPA had a good working relationship, and CARB has tried to align its own policies so that they match those of the EPA. That's made things easier for automakers, because they've had to meet similar standards from coast to coast. 

In the wake of Trump's announcement, though, California Gov. Jerry Brown made it extremely clear that his state was not about to lower emissions standards. That generated concern among automakers because it created the possibility that cars and trucks would have to meet different targets in different parts of the country.

Complicating matters was the question of whether Trump could legally undo the ruling that allowed CARB to set its own emissions goals. At the very least, it set the stage for a long courtroom battle and lots of uncertainty—and if there's one thing that businesses hate, it's uncertainty.

Recent request

Now, the Alliance of Automobile Manufacturers, a lobbying arm for carmakers, is urging President Trump and his administration to broker a deal between themselves, the EPA, and CARB. And they say that deal should set high fuel economy standards—perhaps as high as those approved under the Obama administration, which are still under review—but perhaps not as quickly as originally intended.

Why the change of heart? First and foremost, there's the possibility of a legal war between the EPA and CARB, which could leave automakers in limbo for months or years. But just as importantly, polls show that consumers want the government to set high standards for fuel economy.

One of those polls was commissioned by the Alliance just last month. It found bipartisan support for aggressive fuel economy targets: 69 percent of self-identified Democrats, 63 percent of Republicans, and roughly 60 percent of independents believe that the government should support efficiency gains. (Respondents were less enthusiastic about higher sticker prices, with nearly 25 percent saying that they don't want the improvements to increase car costs.)

In pushing for a deal, could automakers be hoping to undo CARB's power to set its own emissions targets? Possibly. The Alliance has long pushed for uniform regulations, and it's likely that a mid-term review could change the pace for future fuel economy regulations.

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