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Trump Gives Carmakers a Year to Push for Reset of Mileage Rules

March 15, 2017
Automakers now get to make their case to new EPA Administrator Scott Pruitt, who downplayed how much human activity is contributing to climate change.

Carmakers will get another year to dispute fuel economy standards the Trump administration will scrutinize, overruling an Obama-era ruling that the industry is capable of meeting tougher mileage and emissions rules.

Automakers were right to cry foul over the Environmental Protection Agency failing to collaborate with them and expediting a review of requirements for the companies to boost the fuel economy of their fleets to an average of more than 50 miles per gallon by 2025, a senior White House official said. President Donald Trump will tell auto workers and executives near Detroit on Wednesday that his administration will examine the standards into 2018.

Trump’s overruling of an attempt by Barack Obama’s government, a week before his departure from the White House, to solidify the regulations marks a victory for carmakers. Companies including General Motors Co. (IW 500/3), Toyota Motor Corp. (IW 1000/6) and Volkswagen Group AG (IW 1000/8) have argued the standards are out of step with market realities. Low gasoline prices have spurred record demand for sport utility vehicles and pickups and dragged on demand for electric vehicles and fuel-sipping passenger cars.

The automakers now get to make their case to new EPA Administrator Scott Pruitt, who downplayed how much human activity is contributing to climate change. The agency will restore the original timeline set in agreement with carmakers, which was to determine by April 2018 whether the standards for 2022 through 2025 are still feasible, the White House official said, speaking on the condition of anonymity ahead of Trump’s announcement.

Automakers agreed in 2011 to the so-called “one national program” that coordinated fuel economy standards set by the U.S. Transportation Department, and greenhouse gas emissions standards set by the EPA and California’s Air Resources Board.

Eighteen auto industry executives including Mary Barra of GM, Ford Motor Co.’s Mark Fields and Fiat Chrysler Automobiles NV boss Sergio Marchionne sent a letter to Trump in February, asking him to reinstate the review of fuel economy regulations. The EPA’s decision to end the review prematurely ended a promised debate, they said.

Cars and light trucks from the 2016 model year will be the first to fall short of fleet-wide average fuel economy targets in more than a decade, according to automaker projections released by the National Highway Traffic Safety Administration.

California Challenge Unlikely

The White House official said the administration is not currently contemplating a challenge to California’s authority to set its own vehicle emissions standards or electric-car sales mandates. The official said reopening the review does not guarantee that the standards will be weakened.

While the official told reporters the president’s move was narrowly focused on reviving the review, the former head of Trump’s EPA transition team said Trump’s administration is contemplating a full-blown attack on Obama’s fuel economy standards.

“This is not coming from the auto industry, it’s coming from consumers and the auto dealers association,” Myron Ebell, who left the Trump transition team in January, said of the onus for the potential rollback. “I don’t think the auto companies are united in what they want.”

Seeking a Fresh Consensus

Automakers aren’t looking to slash the efficiency goals they agreed to under Obama, according to Representative Debbie Dingell, a Michigan Democrat and former GM executive. The review will offer a forum for parties involved to reach fresh consensus on the standards, she said in an interview.

“My goal is to bring permanent peace between California, Michigan and the rest of the country and have everybody working together toward strong fuel economy standards,” Dingell said. “That was the beauty of the process that President Obama established and the agreement that was reached.”

California’s top air-quality regulator meanwhile said she’s ready to consider changes to the fuel economy standards -- to a point. The current regulations could be improved from both an environmental and administrative standpoint, said Mary Nichols, chairman of California’s Air Resources Board.

“We’re not going to refuse to participate in the newly-reopened review process,” Nichols said in a phone interview. “We’ll be there and we’ll be active.”

That said, the Trump administration and automakers shouldn’t expect California to abandon its core principles.

“We have the technical and legal ability to run a program that recognizes where electrification of vehicles is headed,” she said. “We’re trying to put together a mix of incentives and regulations to move the entire industry in this direction. This is what we’re going to do.”

By Ryan Beene and John Lippert

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Licensed content from Bloomberg, copyright 2016.

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