For the auto industry, weaker fuel economy rules would mean a world of chaos

Trump administration proposed return At first glance, car fuel consumption and emission standards seem like a welcome gift to the car industry. It’s more like federal regulators just handed the auto industry a big box of chaos.

The best outcome will be serious negotiations to reach a new set of standards that everyone can agree on. A long period of uncertainty is likely. And this at a time when the auto industry is pouring billions of dollars into finding its future path — a path that revolves around electric vehicles, autonomous driving and a big step back from fossil fuels.

Cars take years to conceive, design, build and test. Industry requires predictability and long time horizons. Requirements that could change drastically at unpredictable intervals can be far worse than rules that might be a little too demanding, like the one President Obama put in place in 2012.

Rebecca Lindland is an industry analyst at Kelley Blue Book and participated in the Obama-era review of standards. Even then, she felt that some easing of standards was warranted, she said.

The problem with the fuel economy increases projected under Obama’s plan was that they were based on expectations of greater consumer demand for hybrid and electric cars than actually materialized. Also, car buyers have shown even more demand for SUVs than anyone expected.

“I would like to see a more gradual and less intrusive release of fuel economy standards,” Lindland said. According to her, the new proposal will certainly cause bitter fights.

The The Trump administration’s proposal would essentially overturn Obama’s demands. The proposed changes would freeze fuel economy and emissions standards at 2020 levels and change the way emissions are regulated.

John Graham of Indiana University, who worked on fuel economy regulation during the George W. Bush administration, says some automakers would welcome the Trump administration’s aggressive approach. Automakers lagging behind Obama-era standards would see any delays as help.

“Even if the administration loses, this whole program could be delayed,” he said.

Automotive fuel consumption and emissions requirements are a complex regulatory blanket. Fuel consumption is regulated by the National Road Safety Authority. However, exhaust emissions are regulated at the federal level by the Environmental Protection Agency. The state of California also regulates exhaust emissions in its state, and more than a dozen other states are following suit.

This awkward mix of regulations worked more or less well for years. That was until 2007, when the courts ruled that the EPA should regulate carbon dioxide emissions. Carbon dioxide, which causes global warming, differs from other automotive pollutants in that there is simply no way to reduce it beyond reducing the amount of fuel burned. This put the EPA in a position to essentially regulate fuel economy.

California also wanted to regulate C02 emissions. This created a nightmare for the auto industry with three conflicting sets of fuel economy requirements. The answer, the result of negotiations between NHTSA, the EPA, California, and the auto industry, was the emissions and fuel economy rules announced in 2012.

In addition to halting future increases in fuel economy requirements, the Trump administration also wants to strip California of its right to set its own emissions standards for vehicles. This will be the biggest source of conflict.

While individual automakers have not yet commented on the proposal, the largest industrial groups have, The Auto Alliance and the Association of Global Automakers signaled their hope for a quick negotiated deal.

“With today’s release of the administration’s proposals, it is time for substantive negotiations to begin,” the groups said in a joint statement. “We urge California and the federal government to find a common-sense solution that provides for continued increases in vehicle efficiency standards while meeting the needs of America’s drivers.”

In the meantime, automakers will likely continue to increase the fuel economy of their new vehicles, said Carla Bailo, head of the Michigan Center for Automotive Research.

First, companies have already invested time and money in designing more efficient vehicles. Consumers have been trained through years of fuel economy improvements to expect better mileage with every new car they buy.

The big automakers are also global companies, and emissions regulations continue to tighten in other parts of the world. Automakers dare not stop in their tracks – no matter what the current administration in Washington he says.

CNNMoney (New York) First published August 2, 2018: 5:31 pm ET

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