By Mike Palicz, Americans for Tax Reform
President Obama’s special waiver allowing California to set and enforce its own greenhouse-gas regulations for cars beyond federal standards has been a complete disaster.
California’s waiver from the federal fuel economy rules, the so-called Corporate Average Fuel Economy (CAFE) standards, kneecaps auto manufacturers who must build more expensive and less desirable cars in compliance with California’s radical green agenda, or else be barred from selling in the most populous state.
As manufacturers can’t economically build two separate vehicle fleets, the waiver effectively empowers California to dictate national requirements for vehicles in 49 other states. No single state should hold such power. As Louisiana Attorney General Jeff Landry put it, CAFE does not stand for “California Assumes Federal Empowerment.”
Bureaucrats in California shouldn’t hold sway over what kind of cars and trucks Americans are allowed to drive. That decision belongs to consumers. If we are indeed required to have one national standard for vehicle fuel efficiency, then that standard should be set by the federal government which is at least representative of the broader country. Nobody living in Ohio or Texas voted for the California’s politicians, they certainly shouldn’t have to abide by radical green rules of the California Air and Resources Board.
Thankfully, President Trump is ending this madness by simply withdrawing California’s waiver to enforce their own standards, an action set to earn him praise from a coalition of conservative and free-market groups. Trump’s decision places California in the same box as every other state and restores proper federalism. Although California will likely contest the decision in court challenges, the decision has precedent given the Bush administration previously denied California’s waiver in 2007.
Further attempts to compromise with California are pointless. State officials have proven themselves more interested in thwarting Trump’s agenda with prolonged legal battles than reaching an agreement. Mary Nichols, Chair of the California Air and Resources Board, openly bragged to the New York Times about slow-walking the Trump administration by refusing to even submit a written proposal. Nichols next smeared the EPA’s reform efforts in a House Committee hearing by predictably claiming oil companies are pulling the administration’s strings. Such actions led EPA Administrator Andrew Wheeler to criticize Nichols’s testimony, stating such “conspiracy theories” are “beneath the responsibilities of the substantial position she holds.”
Wheeler is right to blast Nichols for maliciously slandering a pro-consumer, pro-vehicle safety effort. The Trump administration’s proposal to freeze CAFE standards at 2020 levels is projected to save American consumers nearly $2,500 on the price of a new vehicle, putting more Americans behind the wheel of newer and safer cars. If adopted, the Department of Transportation projects the rule would lead to a reduction of up to 1,000 lives lost annually in fatal vehicle crashes.
The administration’s reform of CAFE standards accomplishes this by easing Obama’s disastrous mandate to raise CAFE standards to an average of 54.5 miles per gallon by 2025, instead freezing requirements at 2020 levels of roughly 37 miles per gallon.
To meet current CAFE standards, automakers must sell electric vehicles at a loss and then charge consumers higher prices on other vehicles to make themselves whole. In effect, consumers buying a pick-up truck are subsidizing the purchases of electric vehicles that consumers wouldn’t otherwise buy at real cost.
Additionally, meeting the current 2025 target would require electric vehicles to make up roughly 30 percent of all cars sold by 2025. The problem: We’re 6 years away and electric vehicles are projected to barely crack 2 percent of market share in 2019. This despite the significant taxpayer subsidies individuals receive for purchasing EVs.
Given the reality of EVs trivial share of the vehicle fleet, the industry will have no technical capability of complying with the Obama-era standards if left unchanged. According to the EPA’s 2017 Automotive Trends report, only 3 out of the 13 large auto manufacturers even reached the Model Year 2017 standards on their own, while the other manufacturers were forced to comply using credits from prior years. Fiat Chrysler recently revealed they were forced to pay a $77 million penalty in 2018 for missing prior CAFE targets. The only way the auto industry can meet requirements while staying in business is passing these fines on to consumers in higher vehicle costs.
The Trump administration has no real choice but to reform the current CAFE standards to better reflect the reality on the ground, to do otherwise would be an abdication of responsibility.
Without stripping California’s special waiver, any change to the federal standards would immediately be rendered useless as California’s regulations would still serve as the de facto national standard. To reform CAFE at any level, Trump must pull California’s waiver.
Mike Palicz is Federal Affairs Manager on Energy Policy at Americans for Tax Reform