Apr 2018

EPA Revises Fuel Economy Goals

The Trump administration has announced plans to disband a program instituted by the Obama administration, the EPA’s vehicle fuel economy standards aimed to reduce greenhouse gas emissions.

A Change in Plans

The Obama-era plan would have affected vehicles produced from 2022-2025. The plan required manufactures to increase their fleet mpg ratings to 55 miles per gallon by 2025. This isn’t to say that all vehicles produced would need to average this, but the average of manufacturer’s entire fleet would need to. So the combined mpg ratings of their hybrids, trucks, cars, vans, etc. would have needed to average 55mpg. Specifics of the new regulations are not known at this time.

The pull-back of this plan should result in manufacturers continuing to focus on producing more SUV’s and crossovers, which are the fastest growing segments in current markets. It should also help vehicle production costs to remain stable, pending the ongoing tariff discussions, resulting in vehicle prices to do the same. However, as we’ve seen time and time again, the volatility of the oil industry could quickly change buyer habits.

California Nightmares

The state of California is the 6th largest economy in the world. And with 34.7 million registered vehicles, it’s safe to assume that their regulations have an impact on vehicle manufacturers.

While the federal government sets the fuel economy standards for the country, California has some special privileges. Since the 1970 signing of the Clean Air Act, California has had the authority to set their own vehicle emissions standards because of the extremely poor air quality in areas of the state. The Obama administration aligned national standards with those of California, meaning vehicles could be sold in every state without issue.

With the EPA’s announcement of these new rules, there’s a disconnect that could result in some confusion. If the two entities cannot agree on new standards, automakers could be in a precarious situation. Do they simply follow CA regulations and apply them to their vehicles across the country, thus ignoring the new EPA rules? Do they produce special vehicles for CA? Or do they not sell certain vehicles in CA?

In an attempt to avoid this issue, the EPA is now targeting the waiver that enables the California to enforce its own rules. A battle between the two entities is expected, a battle that could very well shape the fuel economy standards for the rest of the country.

Time Will Tell

It will be very interesting to see what the new rules for fuel economy ratings end up being. Though it may be even more interesting to see California and vehicle manufacturers respond to them. The Obama-era plan was criticized by auto manufacturers for a number of reasons, but a non-alignment between California and the EPA could make things even more difficult for them.