Trump’s New CAFE Rule: Better than Obama, Still Too Much

By Robert Bradley Jr. -- April 16, 2020

“… the rule plus the revocation of the California waiver is a huge win for auto buyers and drivers, but it should and could have gone much further in increasing consumer choice, especially in terms of safer vehicles, and still have complied with the Energy Policy and Conservation Act of 1975 that created CAFE standards.” (Myron Ebell, Competitive Enterprise Institute)

“Demand destruction from the current Pandemic offers a new opportunity for demand construction. Letting the petroleum industry, from the wellhead to the pump, receive its rightful free-market demand in the car and truck market should be a ‘restart’ strategy of the Trump Administration. Full repeal of CAFE would be part of this.” (below)

The Trump Administration has rolled back Obama’s 2012 proposal to mandate a 5 percent annual fuel reduction per mile from covered motor vehicles. The Corporate Fuel Economy Standard (CAFE), first enacted during the energy-shortage 1970s, has not gone away more than 40 years later. A new pretext has emerged: reducing motor fuel usage to address “climate change” via reductions in carbon dioxide (CO2) emissions.

Rolling back proposed regulation that has little economic purpose or environmental benefit is good. But Trump’s new Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule requires 1.5 percent annual improvements in average fuel economy through 2026. A proposed rule in 2018 would have ended the required improvements in 2021, but compromise was in the air.

Rolling back proposed regulation has been attacked as rolling back regulation itself. No, existing regulation is being increased, not decreased. Still, the other side spins this misleading narrative. Thus, 48 pro-consumer, free-market groups signed support in a letter sponsored by the American Energy Alliance.

“Contrary to claims that this final rule has been rushed out in a time of crisis,” the AEA letter stated, “the rule is the culmination of a several years long joint process from the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA), and it is required by the law.”

Evaluation

“[SAFE] replaces the 2012 CAFE rule and, together with the withdrawal of the California waiver last September, fulfills one of the biggest parts of the Trump administration’s commitment to undo President Obama’s climate regulatory agenda,” noted Myron Ebell of the Competitive Enterprise Institute. But while progress was made, there is still much to be done. Ebell explained:

My view is that the rule plus the revocation of the California waiver is a huge win for auto buyers and drivers, but it should and could have gone much further in increasing consumer choice, especially in terms of safer vehicles, and still have complied with the Energy Policy and Conservation Act of 1975 that created CAFE standards.

Playing defense is not easy or fun. But good defense against Obama offense and California’s energy statism has been just played. But just as the other side always reaches for more, the pro-consumer, pro-liberty side should strive for the same. Full repeal should be the goal when offense can replace defense.

Title III of the Energy Policy and Conservation Act of 1975, [Public Law 94-163, 89 Stat. 871 at 901], as amended by the Energy Independence and Security Act of 2007, is a relic of the running-out-of-oil era. As I wrote in Oil, Gas, and Government (vol. 2):

Mandatory conservation as a tonic for oil shortages is another example of government intervention attempting to solve the problems created by earlier intervention (in this case oil price and allocation controls).  A market conservation strategy, in contrast, would simply let oil prices rise to their free-market level to induce motorists and other petroleum users to economize. 

There was irony involved:

In fact, natural market incentives from higher motor fuel prices were encouraging fuel economy at the same time the mandates came into play.  To the extent that the mandates have become controlling over market conservation, however, distortions set in such as vehicles becoming more expensive to purchase (from costly redesign or tax penalties for not a company violating the minimum) or less safe to drive (from downsizing to get better fuel economy).  Thus an energy conservation issue turns into a consumer and safety issue as well.

Conclusion

Demand destruction from the current Pandemic offers a new opportunity for demand construction. Letting the petroleum industry, from the wellhead to the pump, receive its rightful free-market demand in the car and truck market should be a ‘restart’ strategy of the Trump Administration. Full repeal of CAFE would be part of this.