The Environmental Protection Agency (EPA) held its Midterm Evaluation hearing Wednesday in Washington, DC, as part of its ongoing review process for corporate average fuel economy (CAFE) regulations. A long list of stakeholders gave oral testimony for input on the reexamination of existing fuel economy standards for 2022-25, and the agency will make its final determination by April 2018.
The EPA reopened the review of national fuel efficiency standards earlier this year, after the Obama administration had moved the timetable forward before it left office. The Trump administration returned the assessment back to its original schedule, to which carmakers had originally agreed in 2012. The EPA has to harmonize its fuel economy standards with NHTSA, a point of contention with the auto industry, as it has to follow different rules from two different government agencies. Complicating matters further is California’s independent authority to regulate tailpipe emissions.
After being included in the sweeping 2007 Energy Independence and Security Act, CAFE standards were strengthened in 2012 to reach a goal of 54.5 miles per gallon by 2025—but that number has been largely symbolic. The tangible on-road levels for new vehicles would be closer to 37 mpg. Sales-weighted fuel economy has leveled out since 2014 when oil prices crashed and consumers started buying larger vehicles. Automakers are advocating for flexibility in the rules as a result of changing consumer preferences and shifting oil market dynamics that have brought about low gasoline prices. However, it’s important to note that given different fuel economy requirements for large vehicles, the shift in consumer preferences does not undermine the ability of automakers to meet the 2025 standard.
EPA officials at the hearing heard from a variety of speakers, including Senator Ed Markey (D-Massachusetts), Congressman Scott Peters (D-California), the California Air Resource Board (CARB), and a number of advocacy organizations, including Securing America’s Future Energy (SAFE).
The country’s outsized reliance on petroleum in the transportation sector brings about economic vulnerabilities. For instance, the U.S. has sent roughly $1.6 trillion to OPEC members in the last decade.
Ahead of the first panel of the morning, General James Conway, co-chairman of the Energy Security Leadership Council for SAFE, headlined the event, arguing that fuel economy standards are a critical and effective tool in combating uncertain and unfree dynamics in the global oil market. “Fuel economy regulations are a preemptive strike against this collusion and market-distorting behavior,” Conway told the audience. “In fact, current regulations will eliminate 12 billion barrels of oil imports between 2015 and 2040 according to EPA’s calculations.”
His speech reinforced how U.S. consumers are subject to fluctuations in global oil prices that are determined by national oil companies, OPEC, and surprise geopolitical events. The country’s outsized reliance on petroleum in the transportation sector brings about economic vulnerabilities. For instance, Conway noted that the U.S. has sent roughly $1.6 trillion to OPEC members in the last decade.
In light of the economic and national security implications of oil dependence, modifications in standards are vital in continuing to make CAFE key for the country’s longer-term interests. “This policy is among our greatest weapons to combat America’s oil reliance, and your review of the Midterm Evaluation represents a generational opportunity,” Conway said.
Conway laid out SAFE’s five main principles in writing new fuel economy rules:
- Support a unified national program so that EPA, NHTSA, and the states have programs that are harmonized.
- Provide necessary relief to the auto industry in the 2022-2025 timeframe in exchange for more ambitious targets out to 2030 and 2035.
- Make standards up-to-date by including new technologies, such as autonomous and semi-autonomous vehicles, along with business models such as ridesharing.
- Include five-year reviews to take into account new technologies and changing market dynamics in both oil and the transportation sector.
- Extend the credit multiplier for advance-fuel vehicles and examine how autonomous vehicles and ridesharing can boost fuel economy.
When asked by an EPA official about the need to set a long-term view on setting fuel economy targets, Conway responded: “A strategic plan is not a five-year outlook. It has to go beyond that in order to provide certainty on the one hand and for potential flexibility on the other,” he said, adding: “There’s potential for impasse and that’s the last thing we need now.”
Reducing oil consumption “gets to heart of who we are as a country”
The EPA’s 45-day public comment period is open until October 5, 2018, giving stakeholders about another month to submit written statements. “We are moving forward with an open and robust review of emissions standards, consistent with the time-frame provided in our regulations,” said EPA administrator Scott Pruitt last month. “We want to increase public participation, listen to those impacted directly by our regulations and use the best available information and data to inform our regulatory actions.”
Based upon testimony on Wednesday, technological changes, oil market dynamics, public health, environmental concerns, and the auto labor market will all be factors considered by the EPA in making its final assessment.
Based upon testimony on Wednesday, technological changes, oil market dynamics, public health, environmental concerns, and the auto labor market will all be factors considered by the EPA in making its final assessment. Chris Nevers of the Alliance of Auto Manufacturers said that car makers are committed to gains in fuel economy, but are calling for one national program and looking for flexibility due to changes in consumer patterns and new market realities. Speaking for the United Auto Workers, Josh Nassar highlighted how U.S. manufacturing needs longer-term predictability and rejected the argument that environmental regulations undercut jobs. Annette Hebert, testifying for CARB, stressed that if EPA breaks its commitment to fuel economy, her state may revisit participation in the national program. Senator Markey emphasized relieving the U.S’ military burden in the Middle East through reducing oil consumption, which “gets to heart of who we are as a country.”
Advocates of stricter fuel economy are concerned that when the EPA releases its final determination by April of next year, the standards will be weaker than originally anticipated. But flexibility for the 2022-25 time period, along with the inclusion of autonomy and ridesharing in the standards, will bring about a longer-term improvements in fuel economy that will be necessary to reduce dependence on oil, cut imported volumes from OPEC, strengthen U.S. leverage globally, and boost manufacturing through a competitive car industry.