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EPA to Revise CAFE Standards

Administrator Pruitt questions California’s waiver in opening salvo toward national standards

WASHINGTON -- U.S. fuel emissions and economy standards are about to get a downward revamp.

The U.S. Environmental Protection Agency (EPA) just completed its midterm evaluation of greenhouse-gas-emission standards for 2022-2025 model-year cars and light trucks and decided that they are “not appropriate.”

In 2012, the EPA under President Barack Obama finalized emissions and fuel-economy standards that would require a nationwide fleet average of 54.5 miles per gallon for cars and light-duty trucks. It did so after getting the support of 13 large automakers, representing 90% of vehicles sold in the United States. In January 2017, just before Obama left office, the EPA announced that the U.S. auto industry was beating expectations on meeting emissions standards and the 54.5-mpg target, and it planned to leave it in place. (The projected average fuel economy for 2017 is 25.2 mpg.) 

But since 2012, when the nationwide gasoline average was $3.60 per gallon, fuel prices have steadily fallen. In its most recent Short Term Energy Outlook, the U.S. Energy Information Administration projected a $2.60-per-gallon average for 2018. U.S. automakers and their industry representatives lobbied for President Donald Trump’s EPA to revisit the 2025 target, arguing that the 54.5-mpg standard did not predict this gasoline price falloff, which has swayed consumer demand toward less fuel efficient SUVs and trucks. As expected, the EPA was open to the argument.

“The Obama administration's determination was wrong,” said EPA Administrator Scott Pruitt in a statement. “Obama’s EPA cut the midterm evaluation process short with politically charged expediency, made assumptions about the standards that didn’t comport with reality, and set the standards too high.”

The EPA said it will begin working with the National Highway Traffic Safety Administration (NHTSA), which oversees the Corporate Average Fuel Economy (CAFE) standards, to develop a new notice and comment rulemaking for setting new targets for U.S. automakers. This process could take at least a year to play out, not including any legal challenges.

California Waiver Questions

One catch to the plans to adjust federal CAFE and greenhouse gas emission targets is that the state of California has a waiver granted by the EPA to set its own, tougher vehicle-emission standards. A dozen additional states, representing more than one-third of the U.S. vehicle market, follow California's standards. The EPA said that waiver “is still being re-examined.” In his statement, Pruitt sounded skeptical about its future.

“Cooperative federalism doesn’t mean that one state can dictate standards for the rest of the country,” Pruitt said. “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 is in America's best interest to have a national standard, and we look forward to partnering with all states, including California, as we work to finalize that standard.”

Automakers prefer one national emissions and fuel-economy standard, since a patchwork of regulations would require them to build vehicles specifically for certain markets, an expensive prospect.

California Attorney General Xavier Becerra, meanwhile, has vowed to fight any effort to rescind his state’s waiver.

“My team is currently reviewing the EPA’s determination and working closely with the California Air Resources Board,” said Becerra in a statement. “We’re ready to file suit if needed to protect these critical standards and to fight the Administration’s war on our environment. California didn’t become the sixth-largest economy in the world by spectating.”

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