The Environmental Protection Agency said Monday that it plans to lower future U.S. fuel-economy targets, a move that could slow down or stall technological advances already under way in the auto industry.

EPA Administrator Scott Pruitt said in a statement Monday that “the Obama Administration's determination was wrong," adding that the administration "made assumptions about the standards that didn’t comport with reality, and set the standards too high."

Pruitt didn’t say how much the standards would be lowered for cars built for the model years 2022 to 2025. Actual numbers will have to await formal rulemaking and talks with the National Highway Traffic Safety Administration (NHTSA) and California regulators.

The Obama-era rules set mpg targets based on the mix of vehicles sold by each automaker. For a company selling 48 percent cars and 52 percent light trucks and SUVs, the current target is equivalent to a fleet average of 45.7 mpg by 2025. After automakers use credits, and the ideal conditions of the laboratory are accounted for, the real-world target works out to 35.5 mpg.

There are likely few short-term implications for consumers. Industry plans for the next few model years appear to be locked in place. However, fuel-economy progress could stall for model year 2022 and beyond.

Fuel Economy

Automaker investments in better engines and transmissions have delivered both horsepower and consumer savings, says David Friedman, director of Cars and Products Policy and Analysis for Consumers Union, the advocacy division of Consumer Reports. Friedman says walking away from scheduled fuel-economy improvements through 2025 could cost consumers up to up to $100 billion.

But if the targets are unchanged, the continued fuel economy improvements through model year 2025 would yield savings of about about $3,200 per car and $4,800 per truck or SUV over the life of that vehicle even after added costs of new technologies, he says.

“EPA’s decision defies the robust record and years of review that show these targets are reasonable and appropriate,” Friedman says. “Undermining these consumer protections will cost consumers more at the pump while fulfilling the wishes of the auto industry.”

Two-Market Reality?

Adding to the complexity, the auto industry doesn’t want a straight rollback of federal rules, even if it would like more time to comply with standards and also relief in the form of more credits for specific technologies. That's because automakers have made huge investments in fuel-saving technologies, and regardless of U.S. policy, the industry will still need to comply with increasing fuel-economy targets in China, Europe and Japan.

For automakers that sell in the U.S., the plan also could lead to a two-market reality: One set of fuel-economy rules for California and the states (and the District of Columbia) that follow its greenhouse-gas emissions rules, and another for the rest of the country, which follow the federal standards.

Under current rules, the EPA, NHTSA and California’s Air Resources Board (CARB) all have the same targets. This so-called unified national program is a high priority for the auto industry because companies don’t want to build two sets of cars—one for California and its followers, and another for the remaining states.

NHTSA said Tuesday it was continuing to work with EPA on fuel-economy regulations and that by law it must conduct a comprehensive review of the feasibility of new targets for model years 2022-25. 

"NHTSA is authorized to set standards for no more than five years at a time, and as previously announced the agency will propose the next set of standards for public review and comment before establishing any final standards," the agency statement said. "Given that the work is ongoing, at this time any reports that allege specific approaches should be recognized as speculative.”

California officials see the current fuel-economy targets as an essential element of their plan to combat climate change, and they show no sign of going along with the federal effort to rollback fuel-economy rules.

That means whatever happens this week, it’s the beginning of a process that will involve negotiations with California, dialogue with automakers and a real possibility that the whole thing ends up in court. California has had the ability to write its own smog rules since the 1960s, before there was a federal EPA.

In his statement, Pruitt said the EPA was going to examine California’s waiver to issue its own rules because it’s in the country’s best interest to have a single national standard for greenhouse gas emissions that auto companies to make cars “that people both want and can afford.”

“Cooperative federalism doesn’t mean that one state can dictate standards for the rest of the country,” Pruitt said.

The Clean Air Act was written to give California a lot of say in its own environmental rules because of the state’s historically bad smog, said Irene Gutierrez, a lawyer with the Natural Resources Defense Council, based in San Francisco.

Other states have chosen to follow California’s stricter rules because they’re struggling with air quality. Several states and the District of Columbia also follow the state’s greenhouse-gas rules, according to the American Council for an Energy-Efficient Economy.

“The way the Clean Air Act is structured, Congress intended to give California a lot of deference,” Gutierrez said. “It would be a tough fight for the EPA.” 

Sen. Richard Blumenthal, a Connecticut Democrat, said Tuesday during a visit to the Consumer Reports Auto Test Center that the standards are well within reach for automakers and important for the future of the planet. The last time a group of states sued the federal government over inaction on automotive greenhouse-gas regulation, Blumenthal led the effort as Connecticut's attorney general. 

"Connecticut should work with California to make sure its standards are realistic and effective, and help lead the nation," Blumenthal said. "We've seen this movie before." 

2018 Nissan Leaf
2018 Nissan Leaf