While the world struggles to contain the deadly coronavirus pandemic and the U.S. economy heads into a recession, the Trump administration unveiled its final rules to severely weaken U.S. fuel economy and vehicle emissions standards in a move that will “undermine the ability of the U.S. auto industry to recover from economic turmoil and compete in a clean vehicle future,” said Carol Lee Rawn, Ceres’ Senior Director of Transportation.
The new fuel economy and greenhouse gas (GHG) emissions rules drastically reduce the mandate for increased fuel economy and reduced emissions by 2025 from approximately 5 percent improvement per year down to an expected paltry 1.5 percent improvement per year. This will result in reduced investment in clean vehicle technologies, more job losses, greater costs for consumers, and increased emissions -- all hitting right when the industry is reeling from the economic shock of COVID-19.
The negative impacts of the final rules are only exacerbated by the Trump administration’s revocation of the California waiver last year, which grants California and the thirteen states that have adopted California’s standards the ability to set their own vehicle emission standards if they are stricter than the federal standards. Thirteen other states and the District of Columbia - comprising approximately 40% of the U.S. auto market - have adopted California’s existing standards. Both the revocation of state authority and the rollback itself have been condemned by major investors, who have urged the federal administration and automakers to support strong standards and pointed out that clean vehicle standards spur innovation, preserve and create jobs, and keep the U.S. auto industry competitive in a global marketplace that is increasingly pivoting to clean vehicles.
“Hitting at the worst possible time, the Trump administration’s rollback of national and state clean car standards will further compromise the future of the American auto industry, not to mention the future of our planet,” said New York City Comptroller Scott Stringer. “This rollback reverses our progress and undermines clean vehicle investments at a time when we need it most.”
Ceres’ analysis found that if standards are frozen at 2020 levels, suppliers would lose $1.9 billion between 2021 and 2025 in sales of fuel efficiency technologies, even under low fuel prices. Increasing the fuel economy standard to 1.5 percent would offer little relief.
“We have long invested in the auto equipment supply industry, which employs roughly two and a half times the number of Americans that auto manufacturers themselves do,” said Ken Locklin, Director, Impax Asset Management. “These suppliers make the technologies that make cars more fuel efficient and we have seen them thrive under the current strong standards. Changing the rules now will put this important American economic sector at a global disadvantage, and drastically slow the pace of investment and innovation, undermining the interests of the hundreds of thousands of workers in 1,200 U.S. factories and engineering facilities in 48 states that develop and manufacture advanced technologies to reduce vehicle pollution and improve fuel economy.”
Investors have long opposed weakening clean vehicle standards and revoking the waiver, warning automakers of the competitive, legal, regulatory, and reputational risks these changes pose to the U.S. auto industry. They have urged automakers like GM, Toyota, and Fiat Chrysler to reverse their support for the waiver revocation and instead join Ford, Honda, Volkswagen, and BMW in reaching a compromise deal on clean vehicle standards with California. Twenty-three states have joined California in a lawsuit defending state authority to set stricter standards, and industry, health, consumer and environmental groups have also challenged the revocation.
In addition to investors, the Ceres BICEP network, made up of more than 45 major companies have voiced their support for strong clean vehicle standards.
The revocation of California’s waiver faces a host of legal challenges from a diverse set of stakeholders, including states, industry, and consumer, health and environmental organizations, and has created significant regulatory and legal risk for the industry. This final rule will also be challenged, and only intensify the uncertainty and legal, regulatory and economic risk faced by the industry.
Rawn added:
“Automakers have a choice; instead of siding with the Trump administration, they can join farsighted automakers like Ford, Honda, VW and BMW in a compromise agreement with California, committing to cleaner cars and acknowledging the right of states to ensure clean air and vehicles for their residents. For the sake of their employees, consumers, the broader economy, and future generations, we urge them to make the right decision.”