Hasty action on fuel standards would hurt environment, business
The Trump administration’s plan to dial back Obama-era fuel efficiency standards for automobiles wouldn’t just be harmful to the environment, it could also hurt the auto industry itself. In a report issued last week, researchers from the Brookings Institution laid out a scenario in which the regulatory change could disrupt the industry — particularly auto supply companies — and blunt the gains it has made since the recession.
The problem would occur if the administration chose to push through the change without the support of both the industry and the state of California, both of which got behind the current standards. As the researchers explained, that would break up the so-called “One National Program” approach of the current standards, which would create two separate sets of fuel efficiency and emissions standards in the U.S. market — one for California and the states that follow its lead, and one for everybody else.
That would cause problems on three levels.
First, suppliers have already invested in tooling and designing for products designed to help carmakers meet the existing standards, which were crafted to bump up MPG requirements in two stages — one in 2021 and the next in 2025. Should the Trump administration freeze the current standards, suppliers would be unable to recoup those investments.
Second, pushing ahead without California’s support and creating two standards would result in about 40 percent of cars being required to meet the more stringent regulations, which in turn would hurt suppliers’ ability to compete in either market. A bifurcated standard “would mean these firms would have many fewer vehicles over which to amortize these fixed costs” for meeting the California standards, the researchers said.
The final problem would come in the form of a legal fight between California and the Trump administration, which is not only considering freezing the standards but challenging California’s authority to set its own regulations.
A drawn-out suit would create uncertainty over regulatory targets and “absorb time, money and attention that would be better spent on innovation,” the report said. The legal wrangling also could prompt U.S. suppliers to relocate to foreign countries where the regulatory environment is more steady.
Such outcomes would be bad not only for auto suppliers and the people who work for them, but for the American economy at large. Supply companies employ 1.5 million workers, about four times more than domestic car manufacturers.
The good news here is that the Trump administration is negotiating with California after getting pushback on the regulatory change from industry and environmental experts. So there’s a chance that the “One National Program” approach that fueled the current standards can remain in place.
The best way forward would be to stay the course that California and the automakers agreed to during the Obama administration — which, it’s important to note, even contains a relief valve for the industry. In a compromise measure, there’s an interim review to examine whether the targets are still reasonable. If not, they can be adjusted.
Trump, with his maniacal zeal to erase Obama’s legacy and his disdain for California, is probably not inclined to do the rational thing and keep the regulations on track. And that’s a disgrace, considering his campaign promises about reviving the nation’s manufacturing industry.
But Trump’s advisers and his Republican supporters in Congress need to apply extreme pressure to him to keep from kicking this hornet’s nest. If they truly care about American workers, they need to run interference.