NHTSA Must Stay the Course on Fuel Economy Standards Agreed to By Car Companies

Standards Produce Savings 6 Times the Cost of Implementation

Washington, D.C. – In response to the National Highway Transportation Safety Administration’s Notice of Intent to Prepare an Environmental Impact Statement for the model year 2022-2025 CAFE standards and a possible reconsideration of the 2021 standards, the Consumer Federation of America (CFA) submitted comments on Monday continuing its vigorous support of federal fuel economy standards because the standards currently on the books will save consumers hundreds of billions of dollars over the life of the standards. “The fuel economy standards are justified in going forward as is, based on the massive record that has already been established. A rollback or freeze would contradict agency statutes, executive order guidance and congressional law,” said Mark Cooper, CFA Senior Fellow and author of the comments.

The congressionally mandated goal of the law governing the Corporate Average Fuel Economy Program (CAFE) is to institute maximum feasible fuel economy standards and that goal was reaffirmed and strengthened less than ten years ago in the Energy Independence and Security Act (EISA). The guidance offered by executive orders and OMB circulars for the past twenty years have emphasized maximum net benefits. “While these clear goals are balanced by other concerns, such as technical feasibility and economic practicability, the extensive evidence in the record shows that the standards are quite moderate, and are well-within the bounds of feasibility,” Cooper stresses. “Based on the massive record established at the agencies since EISA reformed and rebooted the CAFE program, there is no justification to roll back the 2021 fuel economy or carbon emission standards for light duty vehicles, or modify the 2022-2025 standards.”

Below is a summary of the comments findings:

Section I, discusses the laws governing agency action that require maximum energy savings and greenhouse gas reductions, as well as executive orders and OMB circulars that still guide agency actions that advocate maximum net benefits to society. The laws and guidance recognize that there are economic, technological and social balancing factors that should be considered in setting standards. The Administrative Procedure Act requires that agency actions are not arbitrary and capricious, do not lack justification or run counter to critical evidence in the record. A freeze or rollback the standards would be contrary to current law and practice.

Section II begins with a review of the economic analysis on which the standards proposed in the National Program were based. It shows that the standards adopted by the National Plan took the balancing factors into account and proposed standards that fell far short of either the maximum feasibility or maximum net benefit levels. An empirical discussion of benefit cost analysis shows:

  • The National Program standards have a benefit-cost ratio greater than 6-to-1; and,
  • A breakeven cost of gasoline of $0.75 per gallon.

This means that as long as gas prices stay above $0.75 per gallon, the standards are justified. Thus, the record and current economic conditions suggest that, if the agencies want to change the levels, they should be raised, not lowered.

Rolling back the 2021 standards and freezing the 2022-2025 standards would:

  • Rob consumers of net savings of over $3,500 per household,
  • Prevent a reduction in operating costs of $150 billion,
  • Undermine $150 billion of macroeconomic growth; and,
  • Forego over $50 billion of environmental, public health and other benefits.
  • The total of $350 billion of benefits foregone would yield automaker savings of only $50 billion.

Section III examines several aspects of the proposed standards from the automaker point of view. The empirical evidence shows that the standards are readily achievable for a variety of reasons.

  • Consistent with the long history of fuel economy standards, automakers’ efforts to implement the standards show that the cost of compliance has been below the NHTSA/EPA projections and far below inflated industry estimates.
  • The standards are well within the technological frontier of the industry as analyzed not only by NHTSA/EPA, but also MIT and the National Academy of Sciences.
  • The rate of improvement is consistent with historical periods where standards were implemented.
  • The standards are consistent with (or slightly below) other advanced industrial nations.
  • Higher fuel economy pays for itself in a market where it has taken on much greater importance to consumers. As a result, fuel economy sells.
  • With a gradual, but steady approach, developing new models to meet the standards and consumer needs has been evident in the marketplace and automakers have been able to comply with as well as exceed the standards.

Section IV presents brief observations on the reasons that the reboot of the CAFE program signed into law by President Bush and implemented through the National Program, which coordinated the approach to improving fuel economy and the reduction of carbon emissions between EPA, NHTSA and the California Resources Board (CARB) have worked so well. The National Program is a perfect example of “command-but-not control” regulation that has been evolving under executive orders and OMB guidance written by Republican and Democratic presidents over almost four decades. The CAFE standards set by the National program are long-term, product neutral, technology-neutral, responsive to industry needs, responsive to consumer needs, and procompetitive.

Contact: Mark Cooper, 301-384-2204

The Consumer Federation of America is an association of more than 250 non-profit consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy.