Cutting Fuel Efficiency Standards Won’t Help Much Of Anything, Certainly Not Workers | Vol. 4 / No. 21.4

Photo: Arthur Caranta, CC BY-SA 2.0

So the new head of the EPA (and man who sued the EPA 14 times) Scott Pruitt has a piece in USA Today about how he and the new Secretary of Transportation (and wife of Republican Senate Majority Leader Mitch McConnell) Elaine Chao are suspending the Obama-era automobile fuel standards for the good of America. There’s only one problem as I see it: it’ll be bad for Americans.

See, in this wacky piece (which a friend of mine summed up as “We all want clean air, and what could be cleaner than that fresh, new car smell?”) Pruitt says he’s doing it “to keep auto manufacturing jobs here in the United States” because to meet the targets, manufacturers “would need to spend $200 billion to comply. That type of expense would lead to higher prices for consumers, lower wages for workers and jobs moving out of the country.”

But here’s the thing: killing the emissions standards in the US isn’t going to help with any of that.

Take a look at this chart.

This is a chart of actual regulated vehicle fuel efficiency standards (in miles per gallon) and then projected standards. It’s from the Center for Climate and Energy Standards, an independent organization who basically work with powerful companies to create policy and market-based solutions to climate change.

Under Obama’s rule, by (model year) 2025, to sell a car in the US you’d need to meet the 56.2 mpg mark under test conditions. Note also that to sell cars in the EU, they’ll need to hit 60.6 by 2021. Note also that in China and India—two of the world’s fastest-growing auto markets—they’ll need to hit 50.1 by 2020 and 52 by 2021, respectively, targets which put them on par with or even higher than the standard Pruitt and Chao are re-evaluating for the US.

Note also that in Japan the number is 55.1 by 2020.

Note finally that in 2021, the current US standards—the ones they’re complaining about—appear to be just shy of 45 mpg. And they want to relax this.

This leaves us with a number of scenarios to explore.

Let’s start with the assumption that automakers are going to produce cars that are as lacking in efficiency as their governments allow (even though they’ve had little problem meeting or exceeding efficiency targets to date).

Either (a) everybody else is going to make cars with better fuel efficiency than the US, and the US isn’t going to be able to sell cars any of those markets, (b) everybody’s going to invest in the technologies needed to make their cars more efficient, but they’re going to leave it out when they sell cars to Americans, or (c) everybody’s going to invest in the technologies needed to make their cars more efficient, US companies going to leave it out when they sell cars to Americans, and foreign-made cars are going to be sold with better miles-per-gallon ratings in the US, probably at a higher price because this is a government that loves tariffs (despite being supposedly the party of free trade… I don’t know).

So to start, (a) isn’t going to happen. There’s no way in hell the big three aren’t going to want to sell cars in China or India or the EU. Full stop. This means that the investment the auto companies are complaining about? It’s still going to need to happen.

That leaves (b) and (c) as the more likely outcomes, with car dealers in the US still developing the technologies (like everyone else) but charging a premium for it. This is especially the case in (c), where tariffs are placed on more efficient foreign cars that go further on a tank of gas.

So how does this outcome—in the US more efficient cars will cost more—stack up against Pruitt’s claims?

Well, first off, they’re spending the money to develop the tech anyway. So if the expense is going to drive jobs out of the country, they’re going regardless.

Would ditching the standards in the US lead to lower prices for consumers? It depends. If you as an American want a car that goes as far on a tank of gas as everybody else in the world is getting, then you’ll be paying higher prices since they can charge for it as a luxury. But if you don’t mind one that doesn’t go as far on a tank of gas you might be able to get it for a little less (but don’t bet on it, since cars are only ever priced at “what people will pay”). But remember that to keep the costs up, they’ll be charging tariffs on foreign cars, meaning the average price of a car in general is going to go up.

Will it lead to avoiding “lower wages for workers” or stop “jobs moving out of the country”? Well, not likely no. Remember they’re still investing in the R&D for the global market, they just aren’t including the newer, pricier parts in the average car. Plus the cost of labour is the cost of labour. The only thing that’d stop jobs moving out of the country would be if the US government offered them incentives to stay—and skimping out on fuel efficiency standards they’re going to have to be able to meet anyway isn’t really much of one. Instead, think subsidies and union-breaking to keep wages low.

What does that leave us with? Basically that lowering fuel efficiency standards for cars below those in other major markets leads to (a) continued R&D expense, and (b) possibly slightly less-expensive (but sub-par) cars, for (c) auto-sector workers whose jobs’ continued existence and pay levels are at best unaffected by the change, and at worst exported and/or lowered.

So tell me again Mr. Pruitt: what are you relaxing fuel efficiency standards for again?


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Richard Ford Burley is a human, writer, and doctoral candidate at Boston College, as well as Deputy Managing Editor at Ledger, the first academic journal devoted to Bitcoin and other cryptocurrencies. In his spare time he writes about science, skepticism, feminism, and futurism here at This Week In Tomorrow.