Fuel-economy rollbacks facing a rough ride
Give Donald Trump his props; mercurial he may be, but he is sticking to his campaign promises like no other politician before him.
Less than 10 days after the chaotic introduction of his (surprisingly not eponymous) health care bill, America’s newly elected president has signalled that he will be looking into rolling back yet another piece of Barack Obama’s signature legislation, namely the Corporate Average Fuel Economy (CAFE) regulations that called for the American automotive fleet to average 54.5 miles per gallon — 4.3 litres per 100 kilometres — by 2025.
In this quest, Trump is supported by automakers — General Motors, Fiat Chrysler, Ford, Toyota and others — and one very important climate change denier: the newly nominated head of the Environmental Protection Agency, Scott Pruitt.
Their assault on future fuel economy standards is two pronged. Pruitt is on record as not believing that greenhouse gases cause global warming while the automakers are hedging their bets; they are not saying that conservation is unnecessary, but that Obama’s regulations are so stringent that they will drive the price of new cars higher and stunt the sales of their (highly profitable) trucks and SUVs. They need reprieve!
That’s a load of malarkey. Or not.
In claiming that customers are buying less-fuel-efficient vehicles as a result of today’s cheap gas, the automakers are implying that the Obama rules might force loyal truck owners into subcompacts and — worse yet — hybrids.
But the Obama rules do nothing of the sort. What the current rules mandate is that every class of car — designated by their “footprint” or size — must attain certain year-over-year fuel economy improvements.
According to the rules, a company like Ford could sell nothing but pickups as long as it improved the F-150’s fuel economy by the mandated 3.5 per cent each and every year. Indeed, according to the Union of Concerned Scientists, “if a manufacturer sold nothing but full-sized pickups in 2025, its target would not be 54.5 mpg but only 35 mpg in the regulatory test cycle.”
In other words, just selling pickups doesn’t penalize the automaker. In fact, it might help; while pickups have to increase their fuel economy by 3.5 per cent yearly, passenger cars must improve by five per cent per annum. In other words, it might be easier to hit the targets the more trucks they sell. Indeed, says the UCS, Ford’s aluminum-bodied F-150 already meets the standards for 2020. In the end, while the threat the automakers are implying is that everyone might be forced to drive subcompacts, the real impetus seems to be a desire to spend less on research and development.
But how will any changes affect Canada? Now there’s a can of worms. Or, as the leader of the free world recently opined, “Nobody knew (insert pretty much any important regulatory process) could be so complicated.”
Canada follows American federal emissions standards and has done so for quite some time.
So what happens if those regulations change significantly? Do we, as we’ve always done, meekly follow suit? Or do we get our dander up, prove that we are more environmentally righteous than our cousins to the south and continue with the current regulations?
Both choices are fraught with peril. For instance, if Prime Minister Justin Trudeau were to acquiesce, the auto industry might breathe a sigh of relief, but the opposition parties — not to mention the disaffected Liberal faithful — would surely make his life a living hell. But if we stick to our guns, will our auto plants have to crank out two versions of each model, one to meet American standards and another for our own? Will American plants bother altering their products so they could be sold in our (relatively small) market? And, if they do, at what price increase? As Mark Buzzell, chief executive of Ford of Canada, recently told the Financial Post, the more regulations an automaker has to comply with, the higher its costs will be.
The wild card? Californication. California has been given special dispensation — because Los Angeles’ smog was so bad in the 1970s — to create its own regulations for what is otherwise a federal mandate. It was granted a waiver that allowed the state to set its own rules, stricter than the EPA’s nationwide standards.
In 2013, it was granted another waiver that allows the Golden State to force automakers to sell more zero-emissions vehicles than they do in the rest of the states. And New York and eight other states have adopted the mandate of the California Air Resources Board (CARB).
Technically, these waivers still represent a federal “permission” rather than a state right. Already, there’s been talk of new EPA head Pruitt — he who sued the organization he now runs 14 times — trying to revoke those waivers. CARB would be sure to resist.
And, as with all pronouncements from the new American administration, there remains a glaring gap between Trump’s statements and his government’s actions. (Witness the recent news that Robert Lighthizer, America’s prospective trade secretary, is being urged to get “tough” on Canada despite Trump’s seeming assurances to Trudeau that all our part of NAFTA required was a couple of “tweaks.”)
If the current American administration has any brains — I’ll leave that as an open-ended question — what it will do is keep the current guidelines pretty much intact while extending enough concessions to automakers that it appears they’ve “done something.” Perhaps the credits that the current rules allow for adding stop/ start functions, cylinder deactivation and other known technologies can be expanded. Or there could be an increase in the “bonus” that automakers receive for the electric vehicles they do sell. Maybe, we’ll finally see some of Trump’s vaunted ability to negotiate.
A repeal of the previous president’s mandate is a frightening prospect that could dramatically undermine the automakers’ ability to sell the same cars in all jurisdictions in North America. If this yearlong “midterm review” is as ham-handed as the recent introduction of the American Health Care Act, might we see different standards invoked for different districts?
That would be a disaster.