CO2 ruling puts Trump, automakers in a bind

WASHINGTON -- The politics of fuel economy just got messier.

The EPA's surprise decision last week to uphold its greenhouse-gas targets keeps the auto industry pretty much where it was, on the road to cleaner and more efficient cars, and in pursuit of a light-vehicle fleet that averages more than 50 mpg by 2025.

But it significantly reduces the latitude for automakers to seek changes to the grand bargain they struck with federal and California regulators in 2011 to advance President Obama's energy and environmental agenda. It also limits the options for the incoming administration of Donald Trump to reconcile the rules with his deregulatory campaign rhetoric.

The EPA ruling compresses the promised midterm evaluation of the government's ambitious fuel economy program.

The midterm evaluation, which formally began in July, was a big reason that auto CEOs stood in support of Obama in 2011 when he announced what has come to be known as the One National Program of aligned greenhouse-gas and fuel-economy regulations.

Automakers knew they'd be expected to meet ever-stricter standards in exchange for regulatory clarity. But they were counting on an extended period of data analysis and discussions as an opportunity to vie for changes to the standards to reflect technological hurdles and marketplace realities. 

Just weeks ago, industry leaders were seizing on the surprise election of Donald Trump to appeal for even more time to deliberate the feasibility and economic costs of the program, in light of low gasoline prices, booming light-truck sales and tepid demand for hybrids and electric cars. 

Instead, the EPA hit the fast-forward button with its proposal to keep the standards as they are, subject to a 30-day comment period. A final ruling, whose original deadline was April 2018, could now come within a month. 

The new timeline makes it possible for Obama's appointee, EPA Administrator Gina McCarthy, to be the one who issues the final ruling. If that happens, it would be much tougher for the incoming administration to change the 2025 model year standards, said Dave Cooke, senior vehicles analyst at the Union of Concerned Scientists. 

"They would have to do a new rulemaking," Cooke said. "That's a large undertaking. This is years' worth of data and pretty rigorous analytic work justifying this conclusion. You can't just snap your fingers and say, "I don't like what the data concludes.'" 

The truncated process also helps keep the broader goals of the One National Program on track with more work still to do. The National Highway Traffic Safety Administration must still set Corporate Average Fuel Economy standards for 2022-2025. The Transportation Department last week said it planned to do so soon, and consider a request by automakers to streamline nagging differences between CAFE and EPA's standards.

Auto executives who spoke to Automotive News privately said the decision was a political one designed to prevent the incoming Trump administration -- and his appointee to head the EPA -- from undermining a signature piece of Obama's environmental legacy.

"No one was expecting Trump to blow up" the national program, wrote one senior executive in an email. "But we were hopeful that his administration may provide some increased flexibility/timing relief. This move insures that any flexibilities sought by the industry would now have to be addressed through additional rulemaking."

The action, this executive added, "potentially creates an atmosphere of confrontation versus collaboration."

Ford's chief lobbyist, Ziad Ojakli, decried the EPA's move as "11th-hour politics in a lame-duck administration" that "short-circuited a data-driven process for developing regulation."

While the timing of the EPA ruling was a jolt to the auto industry, ultimately it's the desire for consistency and predictability that persuaded automakers to agree to the standards in the first place. Janet McCabe, acting administrator of the EPA's Office of Air and Radiation, acknowledged that when she announced the EPA's decision last week.

"The technical record could arguably support strengthening the 2022-2025 standards," McCabe told reporters. "However, the administrator's judgment is [that] now is not the time to introduce uncertainty by changing the standards. The industry has made huge investments in fuel efficiency and low emissions technologies based on these standards, and any changes now may disrupt those plans."

Those realities may limit the auto industry's options under the Trump administration.

Trump's views about the national program are unknown. His transition team didn't respond to an email seeking comment last week. But he has been a skeptic of the scientific evidence concerning climate change, and he has promised to curtail regulations that unduly burden businesses.

To keep that promise, he could initiate a rule-making process to upend the EPA standards. He could try to weaken NHTSA's forthcoming fuel-economy standards for the 2022-25 model years. Or he could also seek legislation from Congress to take aim at the fuel-economy regulations.

Such moves would face opposition from Democrats and environmental groups, and possibly the auto industry itself, which has fought to keep fuel-economy and greenhouse-gas emissions standards running in tandem and based billions of dollars in investments on the assumption that the rules will stay largely on track.

"We want to keep improving fuel economy," said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers. "We just want to figure out the best way to do it and reduce the regulatory burden of three different entities setting different rules on us."