Automotive Industry Has Mixed Feelings About Trump’s Approach to Fuel Standards

by | Sep 18, 2017

One might think that the auto industry favors weaker greenhouse gas emissions and fuel efficiency standards, or at least the penalties set forth for non-compliance. But what it really favors are standards that are economically achievable and a definite set of rules for it to follow.

Auto manufacturers, of course, are dependent on their suppliers, which take orders and which depend on the big car makers to follow through. According to a piece in Crain’s Auto News, the suppliers make investments in research and development and then do the same for production. Their financial health is thus dependent on regulatory certainty.

“From a supplier’s standpoint, you are making that investment and expecting certain levels of demand, which allows you to price your product more favorably because the volumes are going to be greater,” said Alan Baum, founder of market research firm Baum & Associates, in Crain’s Auto News.  “If the standards change and demand drops, you will still be able to sell the product, but not at the same volume. So, the piece price is likely to rise. And that’s not good for the automaker or the consumer.”

Fuel efficiency standards are established, of course, to make driving a car cleaner. When it comes greenhouse gas emissions, the transportation sector produces 27% of them while the power sector release 29%. That is according to the US Environmental Protection Agency, which also said that industry releases 21%, commercial and residential buildings produce 12% and agriculture creates 9%.

To that end, car makers can produce whatever types of vehicles the buying public demands. Fuel efficiency standards are now at 34 miles per gallon for all new cars and trucks. This increases to 54.5 miles per gallon by 2025. And if auto manufacturers can’t hit that, they will pay a penalty of $14 for each tenth of mile they fall short — a price that rose to $8.50 in December 2016. (This civil penalty is something that Trump administration wants to delay, which has started a rash of lawsuits from five attorneys general, including California and New York.)

At the same time, the Obama’s Clean Power Plan — now stuck in the DC Court of Appeals — would require 32% cuts in CO2 emissions by 2030. The Trump administration is now contesting those rules but it is reported that it may try to rewrite them rather than have them tossed out.

Most automakers produce hybrid vehicles that run on both petroleum and electricity while some are in the process of making those that rely on exclusively on electricity and those that need to be plugged in to an outlet. Trade associations representing parts makers have said — according to Crain’s Auto News — that thousands of jobs are dependent on the Trump staying the course.

“Suppliers have made long-term investment decisions based on the 2017-2021 standards set in the previous rule-making,” testified Laurie Holmes, senior director of environmental policy at the Motor & Equipment Manufacturers Association, in the Auto News piece. “In fact, automotive suppliers have seen an overall 23.3 percent increase in employment since 2012. This increase can partly be attributed to advanced technology development spurred by the 2012 rule-making.”

Crain’s points to a May report by the BlueGreen Alliance, a coalition of labor and environmental groups, that says 288,000 work at 1,200 facilities in 48 states — all to produce parts and materials that try to achieve greater fuel efficiency. The story adds that a 2016 Ceres analysis  shows that auto makers have spent $111 billion on fuel-saving technology with about $89 billion of that going to their suppliers.

While economics may be driving the parts makers to petition their government, the environmental aspect of it all is motivating California, New York, Vermont, Maryland and Pennsylvania to file a lawsuit against the Trump administration.

According to The Whim, the attorney generals from those states have alleged that the administration is“illegally delaying a rule” that would increase the “civil penalty rate” for violations of fuel economy standards by automobile manufacturers. That story says that the states are arguing in their suit that the administration’s delay of the civil penalties is illegal.

“More fuel-efficient cars on our roads means cleaner air, better overall health for our children, and savings at the pump for consumers,” said California Attorney General Xavier Becerra, in a statement 

On December 28, 2016, the National Highway Traffic Safety Administration — under Obama — increased the penalty rate for violating fuel efficiency standards by $8.50, from $5.50 per tenth of a mile per gallon to $14 per tenth of a mile per gallon. But in July 2017, The Whim reported that Trump’s NHTSA announced that it was “delaying the effective date of the final rule,” which postpones the updated penalty.

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