Trump Calls New Fuel Economy Rule a Boon. Some Experts See Steep Costs.
WASHINGTON — The Trump administration on Tuesday announced a new rule on automobile fuel efficiency, completing the president’s rollback of Obama-era standards and gutting the federal government’s most important climate change policy.
President Trump lauded the measure, which his administration called the single largest deregulatory initiative of his tenure. He said on Twitter that the move would save lives, lift the economy and help the auto industry.
Great news! American families will now be able to buy safer, more affordable, and environmentally friendly cars with our new SAFE VEHICLES RULE. Get rid of those old, unsafe clunkers. Build better and safer American cars and create American jobs. Buy American!
— Donald J. Trump (@realDonaldTrump) March 31, 2020
Some of the data in the administration’s own analysis of the rule, however, does not support those claims.
For example, the analysis found that the new rule, when fully in place, could impose an overall cost on the economy of up to $22 billion. It found that, despite saving money on the initial sticker price of a less-fuel-efficient new car, individual motorists could end up spending about $500 more on gasoline over the life of the vehicle. And it concluded that the rule would lead to the loss of roughly 13,000 jobs in the auto industry in a single year, model year 2029.
Critics of the rule vowed to use the numbers in the administration’s analysis against it in a legal fight against the rule. Already, multiple states are preparing to file a joint lawsuit against the rollback in what is expected to ultimately become a landmark case before the Supreme Court.
The Trump rule rolls back a 2012 standard, put in place by the Obama administration, that had required automakers to cut planet-warming tailpipe pollution by selling vehicles that reach an average fuel economy of about 54 miles per gallon by 2025, replacing that with a standard of 40 miles per gallon.
That would require automakers to increase the average fuel economy of passenger vehicles by 1.5 percent annually, compared with the 5 percent annual increase required by the Obama rules, and the roughly 2 percent annual increase that they had achieved absent any regulations.
The heads of the Transportation Department and the Environmental Protection Agency, which jointly wrote the new rule, gave a full-throated defense of the measure on Tuesday morning.
“This rule will save hundreds of billions of dollars in regulatory costs over the next decade, and it will save thousands of lives,” said Elaine Chao, the transportation secretary. “This means millions of new vehicles will be more affordable to consumers, more will be sold, and this will be good for the economy, as well.”
Andrew Wheeler, the E.P.A. administrator, said that the economic and societal benefits of the rule would outweigh the costs and result in “thousands of lives saved.”
Mr. Wheeler cited several numbers from his agency’s 2,673-page analysis of the rule, saying the measure would lead to 3,300 fewer fatalities and 46,000 fewer hospitalizations after crashes over the lifetime of vehicles through model year 2029.
He said that consumers would see a $1,400 reduction in the total cost of owning a new vehicle, even counting the higher total fuel costs, and that the rule would lead to 2.7 million additional new vehicles being sold thanks to increased affordability.
The administration’s analysis said the job losses predicted for model year 2029 could be offset elsewhere in the economy as car companies used the money they would no longer have to spend on cleaner technology.
“The $15 billion in avoided required technology costs can be invested by manufacturers into other areas, or passed on to consumers,” the document says. “Moreover, consumers can either take those cost savings in the form of a reduced vehicle price, or used toward the purchase of specific automotive features.”
Over all, outside experts said that Mr. Wheeler’s rosy numbers did not represent a full and accurate accounting of the costs of the rule.
“They are monkeying around with the numbers and the benefits, undermining a four-decade commitment to on-the-level cost-benefit analysis that has been in place since the Reagan administration,” said Michael Greenstone, an economist at the University of Chicago who served on Mr. Obama’s Council of Economic Advisers.
As an example, other experts pointed to the fact that, in the administration’s own analysis, the overall economic impact of rolling back the auto rule could range from a net cost to the economy of $22 billion to a net benefit of $6.4 billion.
That wide range comes from using two different variables in an economic calculation known as the discount rate. Using a 3 percent discount rate, which would place a high value on lost benefits like improved public health from cleaner air, the new Trump plan would cost the economy $22 billion. Under a 7 percent discount rate, which would place a low value on those benefits, the rule would create a net economic benefit of $6.4 billion.
Analysts said those calculations demonstrated that the rule was likely to be more costly to society.
“It is highly unusual to emphasize the 7 percent discount rate — typically we always did calculations with the 3 percent discount rate,” said Margo Oge, a former top official in the E.P.A.’s vehicle emissions program. “That is more representative of the way the federal government does these calculations.”