Moves on CAFE could just bring uncertainty

Automakers were upset that outgoing Obama administration officials fast-forwarded a midway review of fuel economy and emissions standards that was scheduled to end in April 2018. Instead, they locked it up in the weeks before they left office in January 2017.

The objective of that review was to assess whether assumptions about market conditions and technology progress still were valid seven years after aggressive standards were agreed to and whether the industry reasonably could meet them. But industry officials say the abbreviated review ignored more than two years' worth of data reflecting the effects of a huge shift in sales to light trucks, low gasoline prices and lukewarm demand for electrified vehicles.

Beyond that, the coordinated approach synthesizing NHTSA's fuel economy standards, the EPA's greenhouse gas emissions standards and California's emissions standards has proved popular with automakers — despite complaints the programs still could be better aligned to reduce complexity — because it allows them to build a single national fleet projected to average more than 50 mpg by 2025. That's equivalent to about 36 mpg in real-world driving.

The forthcoming decisions may be anticlimactic. The EPA has a regulatory deadline to issue a final determination by Sunday, April 1. The administrator widely is expected to announce that the standards are not appropriate, which would then kick off a new rule-making process. The explanation for the decision could provide insight into which way the agency is headed. A proposal for new standards could take months, although some reports say officials are shooting for a release this summer.

At NHTSA, which governs the fuel economy side of the national program, officials say they plan to issue a preliminary rule-making by Friday, March 30, for the 2022-25 span. NHTSA operates under different statutory authority from the EPA and can set standards for no more than five years at a time.

There is wiggle room in NHTSA's schedule, especially if officials intend to coordinate a rule-making with EPA's greenhouse gas emissions proposal. The auto safety agency needs to produce a final ruling 18 months before the first model year that it covers, so a rule for 2022 would need to be finalized by April 2020. But federal officials also are considering resetting the standards for the 2021 model year, which are supposed to locked in already. In that case, a final rule would need to be issued by April 2019.

Yet no proposed rule has been delivered to the Office of Management and Budget for final approval, according to a government website that tracks rule-making.

If NHTSA goes ahead with a rule this week, it would signal that NHTSA is driving the process and that the agencies aren't coordinating their standards to translate greenhouse gas reductions in equivalent mpg terms. Most Washington observers expect NHTSA to postpone its decision so the agencies can develop a joint proposal, with any announcement laying out the process it will follow.

"If NHTSA comes out with a proposal, it would guarantee that the EPA is not involved at all and that the greenhouse gas proposal will not be rigorous," Cooke said.

Margo Oge, the former director of the EPA's Office of Transportation and Air Quality who helped develop the tailpipe emissions standards, said she is worried that NHTSA is preparing to "gut the 2025 program."

Her comments were based on reports by Bloomberg that the auto safety agency was considering a range of options, including one to significantly lower fleetwide fuel economy to 35.7 mpg by 2026, down from the 46.6 mpg target set under President Barack Obama, and that it might justify the cutback by arguing that lighter-weight vehicles would lead to hundreds more highway fatalities each year.

Scaling back too much could hurt vehicle manufacturers that have built long-term investment strategies around fuel-saving, hybrid and electric technologies to meet higher efficiency requirements. Instead, auto companies appear more interested in softening the rules by being able to gain more credits for efficiency improvements that don't show up in the EPA's testing cycle; continuing tax incentives for electric vehicles; and extending the compliance period beyond 2025.

"Unless the car industry stands up and pushes the White House on the importance of a national program, EPA and NHTSA efforts will create massive uncertainty," Oge warned.

Another risk of a rollback is a clash with California regulators that could upend the uniformity automakers want.

California has special authority under the 1970 Clean Air Act to establish stricter smog and greenhouse gas rules of its own. While automakers have expressed hope that the federal government and California will continue to coordinate emissions policies, reopening the midterm review could jeopardize the "one national program."

The California Air Resources Board is talking with the EPA and NHTSA on how to maintain compatible standards for 2022 to 2025. State officials have said they are willing to go along with a mild loosening of standards in exchange for extending them until 2030, but they have made clear that radical changes are unacceptable.

California, along with a dozen other states and the District of Columbia that have adopted its emissions standards, has stated its intent to legally challenge a rollback. The states collectively represent more than a third of the U.S. light-duty vehicle market, which means automakers would have to retool plants to make different versions of the same vehicle or make all to California standards.

Pro-business EPA Administrator Scott Pruitt, who has worked to roll back several other Obama environmental initiatives on grounds that they are too expensive or ineffective, has said the EPA won't be pressured to force California's standards on the rest of the nation. Those comments, the White House's antipathy toward blue-state California and Trump's attitude that regulations are an unnecessary burden on business have led environmentalists to worry that the administration may try to revoke the state's waiver from federal standards.

This month, 20 House Democrats sponsored legislation that would codify the EPA and NHTSA standards that were created in 2012. But the Clean and Efficient Cars Act has little chance of being passed in the Republican-controlled chamber.

A national group of 41 powerful businesses, including General Mills, Owens Corning and Unilever, has urged Pruitt to maintain the existing standards, saying they are good for the environment, job creation and the auto industry's global competitiveness. It also opposed any attempt to undermine states' rights to maintain higher standards.

Auto suppliers and emissions-control companies are fighting to maintain the standards, too, or keep changes to a minimum. They have invested heavily in fuel-efficient and alternative-energy technologies and would be hurt most by weakening the standards, through reduced sales and return on investment.