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EPA to Revise U.S. Fuel Economy Standards, Looks to Revoke California's Stricter Requirements

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【Summary】As expected, the U.S. Environmental Protection Agency (EPA) today rejected an Obama-era plan to make automobiles more fuel efficient in a win for automakers and oil companies and the latest move by the Trump administration to roll back environmental regulations.

Eric Walz    Apr 02, 2018 3:22 PM PT
EPA to Revise U.S. Fuel Economy Standards, Looks to Revoke California's Stricter Requirements

WASHINGTON — As expected today, the U.S. Environmental Protection Agency (EPA) rejected an Obama-era plan to make automobiles more fuel efficient in a win for automakers and oil companies and the latest move by the Trump administration to roll back environmental regulations.

The corporate average fuel economy (Cafe) standards, were deemed not appropriate and should be revised, the EPA said in a release. The Obama-era standards from 2012 included a mid-term evaluation (April 2018) to allow the agencies to review their effectiveness and make any needed adjustments, which is exactly what was done in this case by the EPA.

EPA Administrator Scott Pruitt said the Obama administration "set the standards too high" and "made assumptions about the standards that didn't comport with reality," but he did not offer any specifics on revising them.

In addition, Trump administration signaled Monday that it may revoke California's ability under the Clean Air Act to impose its own stricter rules for vehicle emissions. Although the decision revises fuel economy standards, automakers will still need to comply with emissions rules set by California and several other states, which are even tougher than the EPA's.

"Cooperative federalism doesn't mean that one state can dictate standards for the rest of the country," EPA chief Scott Pruitt said in a statement. "EPA will set a national standard for greenhouse gas emissions that allows auto manufacturers to make cars that people both want and can afford – while still expanding environmental and safety benefits of newer cars. It's in everyone's best interest to have a national standard, and we look forward to working with all states, including California, as we work to finalize that standard."

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EPA Administrator Scott Pruitt

The original standards were seen by proponents as a way to spur innovation in clean vehicle technologies.

In August 2012, the Obama Administration finalized the standards to increase fuel economy to the equivalent of 54.5 mpg for cars and light-duty trucks by Model Year 2025. The move was supposed to nearly double the fuel efficiency of those vehicles by 2025.

The Administration's national program was intended to improve fuel economy and reduce greenhouse gas emissions, while saving consumers money at the gas pump and reducing U.S. oil consumption.

However, lobbying groups representing U.S. automakers argued that the proposed fuel economy targets would be difficult and expensive to achieve and will force them to produce smaller, more fuel-efficient cars at a time when most Americans are buying SUVs and trucks that are less fuel-efficient, but more profitable for automakers.

Trucks and SUVs are Profitable to Automakers

The Ford Motor Company, for example, counts light trucks and SUVs as one of its biggest profit makers. Last year, the company sold 2,586,715 vehicles, which over half (1,693,066) were light trucks and SUVs. In addition, Ford set an all-time record for truck sales in 2017, while Ford's car sales fell by 15.2 percent. Last year, the popular Ford Explorer SUV posted its highest December sales since 2003.

President Obama first announced the proposal in July 2011 and was joined by Ford, GM, Chrysler, BMW, Honda, Hyundai, Toyota, and Volvo and others, as well as the United Auto Workers. The State of California also supported the proposal and was integral in developing this national program.  

The plan to achieve new fuel efficiency standards was also designed to encourage innovation and investment in advanced automotive technologies, including electric vehicles, that increase economic competitiveness and support high-quality domestic jobs in the U.S. auto industry.

Now that the standards are being revised, automakers can meet the less-stringent fuel economy standards without requiring additional electric or hybrid vehicles in their vehicle lineups, a move that will likely upset environmental groups. Meanwhile, while the U.S. debates lowering fuel economy standards, other countries are busy adopting electric vehicles which burn no fuel.

The Chinese government is increasing subsidies for longer range electric vehicles in the country—the world's largest EV market. In February, electric vehicles with over 400 km (249 miles) received a 13% increase in subsidies—from RMB 44,000 to RMB 50,000 (~$7,800 USD). China also raised by 50% the minimum range required for electric vehicles to qualify for EV incentives from 100 km to 150 km (93 miles).

Despite the U.S. lowering its emission standards, German automaker Volkswagen AG said in January it would invest $2 billion over the next decade to create the largest EV charging network in the U.S. to support the widespread adoption of electric vehicles.

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