Making Sense of the Trump Administration's Fuel Economy Standard Rollback
On April 2, 2018, the US Environmental Protection Agency (EPA) announced that planned fuel economy increases for model year 2022–2025 cars and light trucks are too stringent and should be revised. The EPA thus initiated a process to set new standards for 2022–2025, in partnership with the National Highway Transportation Safety Administration (NHTSA). Although the agencies may eventually ease fuel economy standards less than a full rollback of the standards to 2021 levels would imply, for illustrative purposes we assess the implications of a full rollback for gasoline consumption, oil imports, and carbon emissions. Given that the agencies’ 2016 analysis suggests that a full rollback would harm society on balance, we discuss which changes to the 2016 analysis might lead the agencies to conclude that a rollback benefits society. To facilitate discussion of these important public policy issues, this paper makes two points about the EPA’s announcement: Due to the gradual turnover of the on-road vehicle fleet, eliminating the tighter fuel economy standards for 2022–2025 would have small effects on gasoline consumption, greenhouse gas emissions, and oil imports during those years and even out to 2030. However, the ultimate impact of the weaker standards could be greater, especially if they hurt the progress of new technologies and the political momentum for tighter standards in the United States and in other countries over the longer term. Changes in the social cost of carbon, fuel prices, miles traveled, and market shares of light trucks since the 2016 analysis are unlikely to cause the benefits of rolling back the standards to exceed the costs. If the agencies conclude that the benefits of rolling back the standards exceed the costs, the reasoning will likely be based on other factors, such as consumer willingness to pay for fuel-saving technologies or the cost and effectiveness of those technologies.
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