Perhaps to demonstrate his pro-business, anti-government credentials, President Donald Trump has committed to the narrative that regulations kill private sector jobs. Yet there are many examples in which that simplistic platitude doesn't hold true, and fuel economy standards for cars and light trucks — so-called CAFE (Corporate Average Fuel Economy) standards that date to the Ford administration and that President Trump is now seeking to roll back — are a perfect illustration of how wrong that assumption can be.
U.S. automakers have traditionally resisted CAFE standards — but it has been to their peril. During the Reagan administration, an effort to roll back vehicle emissions standards wasn't what caused a downtown in domestic automobile manufacturing, it was a failure to innovate and invest in compact car production. Foreign producers cleaned their clocks. This latest effort to weaken rules could produce a similar effect as consumers in other countries are seeking fuel-efficient vehicles and 85 percent of cars and trucks are sold outside the U.S.
Strengthening the standards, as was approved during the Obama administration, doesn't kill jobs, it creates them as companies re-engineer their vehicles and update their production facilities. Instead of reproducing older designs with more cup holders, companies are expected to slowly phase in higher efficiency standards by 2025 so that the average vehicle gets 36 miles per gallon compared to 25 mpg today. That comes with a cost (an estimated $240 per vehicle per year) but also comes with a savings as buyers spend less money on fuel. According to one estimate, truck buyers can save between $4,800 and $8,200 on gasoline over the life of a 2025 new model.
Originally, CAFE standards were imposed to make the U.S. less dependent on foreign oil and reduce unhealthful pollutants like nitrogen oxides and sulfur dioxide that contributes to the production of ground-level ozone or smog. More recently, reducing fossil fuel consumption has been seen as a key pathway to reducing carbon dioxide and other greenhouse gases that contribute to climate change. Wall Street investors see the advantages in this — Tesla recently surpassed General Motors as the most valuable U.S. carmaker even though it doesn't turn a profit. Its $50 billion market capitalization is built on the expectation that the future leads to electric cars and not oversized, fuel-hogging sport utility vehicles.
It's not just Tesla stock speculators who are expressing support for greater fuel economy standards. Companies that supply components to increase fuel efficiency in vehicles stand to lose "big league" should President Trump succeed in his attack on CAFE — as much as $1.4 billion in fuel efficiency technologies, according to an analysis by the Ceres Business for Innovative Climate and Energy Policy, which represents the interests of companies worth a combined $400 billion in annual revenue. Those business losses translate to tens of thousands of jobs lost.
And the costs don't stop there. If left unchecked, climate change could cost Americans on a scale that will make even the most carbon-tax-boosted gasoline prices look like peanuts. Various studies, including some by the U.S. Environmental Protection Agency, have put the cost at $180 billion in drought and fresh water shortages alone by the end of the century. While power plants are the top source of greenhouse gas emissions (particularly the coal-fired variety that President Trump unwisely wants to encourage by rolling back the EPA's Clean Power Plan), vehicle emissions are a top-three source, accounting for 10.5 percent of the problem, according to the International Energy Agency.
So why not trust automakers to recognize their future lies in higher fuel efficiency? History shows companies will drag their feet and overestimate the costs of upgrades as they so often have with safety standards. Better for producers and regulators to work together to find ways to make cleaner, more fuel efficient vehicles that not only save consumers money in the long run but allow the industry to be competitive on the global market. Whether President Trump believes in climate change or not, the science is clear and the world is moving to respond to a dangerously warming planet.
This isn't the first time there's been a push to freeze or rollback CAFE standards. But, as a Union of Concerned Scientists white paper notes, "CAFE works," beginning with a doubling of fuel efficiency of in the 1970s when executives claimed they'd be reduced to selling "sub-Pintos." The big cars and trucks on the road today, like the Ford Expedition with its 42.6 cubic feet of cargo space (the equivalent of about three Honda Accords), suggests that Detroit engineers can work miracles when they are properly challenged.