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As the Trump Administration Seeks to Rollback Nationwide Fuel Economy Standards, Automakers Strike Secret Deal with California to Keep Them in Place

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【Summary】Four of the world’s biggest automakers, Ford, BMW, Volkswagen and Honda have rebuffed the Trump administration's planned fuel economy rollback and have struck a deal with California to more closely adhere to the Obama era mandate of achieving 54.5 mpg by 2025.

Eric Walz    Jul 25, 2019 12:10 PM PT
As the Trump Administration Seeks to Rollback Nationwide Fuel Economy Standards, Automakers Strike Secret Deal with California to Keep Them in Place

In Aug 2012, the Obama administration finalized standards requiring automakers to increase fuel economy to the equivalent of 54.5 miles per gallon for cars and light-duty trucks by model year 2025.  

However, a new Trump administration rule in the works is trying to rollback the Obama-era emission regulations, essentially freezing mileage standards at around 37 miles per gallon for passengers cars until 2026. Details of the new rules are expected to be made public this summer. Critics argue that the Trump administration is essentially trying to strip California's ability to fight climate change by setting lower fuel economy standards. 

Now four of the world's biggest automakers, Ford, BMW, Volkswagen and Honda have rebuffed the fuel economy rollback and have struck a deal with California to more closely adhere to the Obama era mandate of achieving 54.5 mpg by 2025. The original mandate preserved the legal authorities of the DOT, EPA and the state of California to set it own standards. 

California's compromise with the four automakers would increase stringency of the requirements at a nationwide average rate of 3.7% each year starting with the 2022 model year through 2026. One percent of that annual improvement could be covered by credits awarded for building electric vehicles.

"Ensuring that America's vehicles are efficient, safe and affordable is a priority for us all," Ford Motor Co, BMW AG, Volkswagen AG and Honda Motor Co said in a joint statement. They said the accord could help maintain a nationwide set of fuel efficiency requirements.

The move could have widespread implications, as California accounts for about 12% of all U.S. vehicle sales.

The Trump administration said it was still moving ahead to finalize its proposal and showed no willingness to reopen talks with California or with automakers. The administration is seeking to freeze emissions requirements for new cars and trucks at 2020 levels through 2026.

CA_Emissions_1042520904.jpg

Rush hour traffic backs up near San Francisco. (Photo:David Paul Morris/Bloomberg/Getty Images)

Reducing Greenhouse Gases and Encouraging Innovation

The national program, first proposed in 2011 by the Obama administration, was designed to improve fuel economy and reduce greenhouse gas emissions and save consumers more than $1.7 trillion at the gas pump, while reducing U.S. oil consumption by 12 billion barrels.

In addition, achieving the new fuel efficiency standards was meant to encourage innovation and investment in advanced technologies, such as hybrid and electric vehicles. It was also intended to increase economic competitiveness in the U.S. and support high-quality jobs in the auto industry. 

The Obama-era rules adopted in August 2012 called for a fleetwide fuel efficiency average of 46.7 miles per gallon by 2025, with average annual increases of about 5 percent, compared with 37 mpg by 2026 under the Trump administration's plan.

"These fuel standards represent the single most important step we've ever taken to reduce our dependence on foreign oil," said President Obama in 2012. "This historic agreement builds on the progress we've already made to save families money at the pump and cut our oil consumption.  By the middle of the next decade our cars will get nearly 55 miles per gallon, almost double what they get today.  It'll strengthen our nation's energy security, it's good for middle class families and it will help create an economy built to last."

The Trump administration claims that Obama's fuel economy stands are too strict and unattainable by 2025, adding that relaxing the rules would save automakers billions in development costs. The administration also argued that the tougher Obama rules would make newer cars unaffordable, forcing drivers to use older, less safe, and environmentally unfriendly vehicles. 

Higher Fuel Economy Standards Have Support From Automakers

Last month, 17 automakers sent a letter to the White House and to California Governor Gavin Newsom requesting that the previous standards remain for the most part in place. The automakers were seeking to revive talks to avoid lengthy litigation. However, the White House rejected that effort, prompting the automakers and California to launch their own private talks.

The automakers "didn't want to face the expense, distraction and the bad publicity that comes from being part of a big rollback on clean cars," Mary Nichols, who chairs the California Air Resources Board, told Reuters in an interview on Wednesday.

She said the state hoped to turn the voluntary agreement "into enforceable agreements" and that the companies had agreed not to legally challenge California's vehicle regulatory authority.

Environmental Protection Agency spokesman Michael Abboud called the agreement "a PR stunt that does nothing to provide certainty and relief for American consumers."

California has one of the most strict rules in place for vehicle emissions. Under federal law, the state of California is allowed to promote more stringent vehicle emissions standards. Other states may choose to follow either the national or California standards.  

So far, 12 U.S. states have adopted California's vehicle emissions rules.

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