Commentary: Why the EPA’s Fuel-Efficiency Plan is Bad for Jobs, Security and Trade

April 5, 2018, by David Livingston

(Reuters)

The Trump administration has announced a proposal to weaken Obama-era national fuel efficiency standards. This plan is a mistake. Lower standards would undermine U.S. security, lead to a spate of legal battles with states that want to maintain stronger standards, and give other auto-producing countries an advantage.

In a Monday statement, U.S. Environmental Protection Agency head Scott Pruitt said that the Obama administration set the standards on model year 2022 to 2025 vehicles “too high.” The standards called for automakers to roughly double the average fuel efficiency of new vehicles sold in the United States by 2025. These may seem like lofty goals, but they are critical for strengthening U.S. energy security, reducing fuel costs, and creating jobs manufacturing electric and other high-efficiency vehicles in the United States.

To appease automakers’ objections that the current regulations are too rigid and expensive to meet, the EPA could slightly loosen the targets or expand the credits it offers for certain vehicles. This could include, for example, more generous credits for certain flex-fuel vehicles, which run on combinations of traditional fuels and biofuels. This added flexibility would be far better than weakening the standards, which would lead states to sue the federal government, generating uncertainty for automakers. On Tuesday the attorneys general from 11 states said in a statement that they would challenge a rollback in court.

The U.S. government needs to help create an environment that allows automakers to manufacture electric and other fuel-efficient vehicles and export them to the world’s fastest-growing markets. Consumers, particularly in China and other emerging markets in Asia, are rapidly embracing electric vehicles. A growing number of policies around the world, including planned bans on internal combustion engine vehicles, will only drive additional demand for electric, hydrogen, and other highly-efficient vehicles.

Strong fuel efficiency standards also help generate new manufacturing jobs in the United States – a focus of Trump’s presidential campaign. Worldwide, automakers are investing a huge share of their capital expenditures – at least $90 billion – in electric vehicle and battery manufacturing.

Volvo is spending $1.1 billion on a new electric vehicle plant near Charleston, South Carolina, while Daimler is investing $1 billion to revamp its factory outside of Tuscaloosa, Alabama so that it can produce more electric vehicles. American electric bus startup Proterra is expanding its Greenville, South Carolina manufacturing activities to meet demand for its quieter, cleaner buses in cities across the United States. In Nevada, Tesla’s “gigafactory” is set to be the largest factory in the world, and has helped create thousands of jobs and drive down state unemployment rates, thanks in part to state incentives.

Fuel efficiency standards also help create jobs in related industries, such as auto parts manufacturing. Over 288,000 Americans now work making components for fuel-efficient vehicles. In Michigan, for example, LG Electronics is investing $25 million and hiring around 300 workers for a new manufacturing plant for electric vehicle components.

Past government support of fuel-efficient vehicles has helped to create jobs: As part of a 2008 program under President George W. Bush, Nissan received a low-cost loan that helped it create 1,300 jobs manufacturing batteries and electric cars.

Fuel efficiency standards are also good for consumers. Over five years, the owner of an electric vehicle will spend around $15,000 less on fuel than the owner of an inefficient SUV. These savings will only grow if oil prices start to rise again.

The National Highway Traffic Safety Administration (NHTSA), which implements the EPA’s directive on fuel efficiency standards, should craft a deal with automakers and states such as California – giving automakers additional flexibility in terms of eligible vehicles and fuels, but maintaining a single national standard.

Automakers by necessity think in terms of quarterly profits, so the government must take the long view. It should do so by supporting strong standards that will make the United States more competitive – and wealthy – for years to come.

ABOUT THE AUTHOR

David Livingston is the Deputy Director for Advanced Energy at the Atlantic Council. He previously served in the Office of the U.S. Trade Representative. @DLatAC

The views expressed in this article are not those of Reuters News.