The Trump administration recently proposed revisions to Obama era EPA fuel-economy standards that would effectively weaken the intended climate protections of the policy. Critics of the move are making their concerns known. Sixteen states, including California, along with the District of Columbia, are suing the Trump administration for its decision. California Attorney General Xavier Becerra’s office said that “the federal standard that states are suing to protect was estimated to reduce carbon pollution equivalent to 134 coal power plants burning for a year and to save drivers $1,650 per vehicle.”
However, there may be a bigger, more widespread issue at hand. While there exists the fear that these rollbacks indicate possible regulatory capture by the auto industry, it is an apparent pattern within the current EPA administration. The Conversation reports that Scott Pruitt’s “efforts to undo, delay, or otherwise block at least 30 existing rules reorient EPA rule-making away from the public interest and toward the interest of the regulated industry.” Even with Pruitt now leaving the agency, the EPA is unlikely to change direction on these issues, especially with former coal-industry lobbyist Andrew Wheeler now at the helm.
Justifying their position, current EPA officials claim that the previous administration overstated the benefits of cutting emissions and also estimated the “social cost of carbon” six times higher than its own evaluation. The problem is, the EPA has done a poor job of backing up the decision with actual data and scientific research. How might this impact the future of the auto industry? Will weakened regulations change market forecasts for Electric Vehicle manufacturing and sales?
Science and the EPA
There is definite concern that the EPA’s own scientific research is being ignored in the move to relax emissions regulations. A subgroup of the 44-member Science Advisory Board is calling for the review of research and methodology leading up to the rollback of several protection policies. The SAB consists of “outside researchers and experts who review the quality of the technical information the EPA relies on, gives advice on broad scientific matters, and examines agency research programs.” The importance of the board’s role is evident when you consider the EPA’s move to rescind a rule regarding so-called glider trucks and their level of pollution. These trucks have rebuilt diesel engines that do not have modern emissions controls. The agency asserted that pollution from glider trucks is equal to and sometimes less than that from modern trucks. However, the study that Pruitt cited was done by the University of Tennessee Technological University and funded by Fitzgerald Glider Kits. “It wasn’t peer reviewed, and the university… has now withdrawn it, citing questions about the ‘methodology and accuracy’ of the study.” What has raised alarms with the working group of the SAB is that the EPA’s own research found that the glider trucks emitted nearly “40 times more nitrogen oxide and at least 50 times more particulate matter than modern competitors.” Furthermore, the proposal hardly mentioned the health of the public as related to the trucks - a stark departure from the EPA’s mission statement to protect human health and the environment.
These kinds of conflicts have prompted the SAB to review a number of recent changes that the Trump administration’s EPA has made. The EPA has an obligation to use accurate and independent research to determine possible public health consequences and the SAB is charged with overseeing that process. David Cooke, a senior vehicles analyst with the Union of Concerned Scientists believes this oversight is imperative during the current administration as “Trump’s EPA is more ‘cavalier’ in ‘ignoring science’ and is relying more heavily on industry research.” But is the threat of regulatory capture alive in the auto industry?
How Might Changing EPA Regulations Affect Innovation for Automakers?
Long known as a pioneer state in cleaning up the environment, California wants to stick with their plan to reduce car and light-truck emissions by 2025. With vehicle emissions surpassing energy production as the leading polluter in the United States, CA is once again leading the pack to curb the damage to the climate and environment. Automakers are worried that this crusade will lead to a lengthy legal dispute between the federal government and the state of California, which may disrupt their business. The companies argue that if CA is allowed to set their own standards, they must then comply with two sets of regulations, making production of vehicles much more complicated.
The Trump administration, along with the aggressive auto industry lobbyists, plan to invoke an old law from 1975 which “prohibits states from setting their own limits on greenhouse gas emissions.” This strategy has been attempted - twice - with no success. Ann Carlson, a UCLA law professor says “It strikes me as an extraordinarily weak legal argument.” But other legal experts disagree, describing it as a very open question. In 2009, when CA was granted a Clean Air Act waiver by the EPA, the auto industry was in a rather weak position, having just received government bailouts to remain operational. Whatever the outcome, this will be an important decision - one which could have real consequences for the auto industry. With roughly a dozen states who tie their emissions standards to California, nearly a third of the nation’s auto market could mandate tougher standards.
As the old adage goes, necessity is the mother of invention. If automakers are forced to comply with stricter fuel efficiency standards across nearly a third of their market, will we see new and exciting innovation? The answer is, we’re already seeing it. The Obama administration had previously set standards at an average of 50 mpg for cars and light-trucks, a real world equivalent of about 36 mpg. An expectation of meeting this standard by 2025 meant that automakers already had to get started in the last few years. Forbes reports that by the end of 2017, there were about 30 different Electric Vehicles on the market, with total sales topping 159,000 vehicles. Forecasts for the future of the EV market has shown no signs of slowing. Tesla’s Elon Musk shares his insight that “in 10 years, more than half of new vehicle production is electric in the United States. Half of all production will be EV, I think almost all cars produced will be autonomous.” EVs may be a very viable option for most US households.
These exciting market forecasts could very well change in the coming months. A fuel economy standards freeze as of 2020 may have big impacts on automakers’ motivation to innovate and create more efficient vehicles in the coming years. Without financial incentive, or regulatory mandate to create more fuel efficient cars and trucks, auto manufacturers can easily end up reproducing the status quo. This situation will be one to watch closely, both on the national and global scale, as automakers, government organizations and environmentalists battle for conflicting interests. The question is, can they find some middle ground?