Trump’s Two Trillion Dollar Mistake: Turning Against Energy-Saving Standards

MPG Standards Deliver Over Half the Consumer Savings Threatened By Administration’s Attack on Pocketbook Protections

Washington, D.C. — In a move that could cost consumers trillions of dollars, the Trump administration is turning its back on four decades of money-saving energy-efficiency standards. That’s according to a new report from the Consumer Federation of America (CFA), to be submitted in support of filings in the regulatory reform dockets at the Department of Transportation (later this week).

“Even in Washington, two trillion is a big number,” said Dr. Mark Cooper, senior fellow for economic analysis at CFA and author of the report, “especially when half of it comes out of consumers’ pockets and half comes out of economic growth.”

CFA’s 300-page report, entitled Trump’s $2 Trillion Dollar Mistake: The “War” on Energy Efficiency, details how the administration’s drive to abandon or weaken policies that decrease the operating costs of light- and heavy-duty vehicles and lower the energy consumption of home appliances will increase costs for American families and businesses and slow economic growth.

“By ensuring vehicles go further on each tank of gas, fuel economy standards are saving people money at the pump every day,” said Cooper. “They are overwhelmingly responsible for the majority of savings that consumers enjoy from all standards set at the federal level. Why on earth would you undo that?”

Using real, discounted dollars (inflation adjusted to 2016 at a three percent discount rate), the report breaks down the $2 trillion in losses that would result from the Trump administration’s war on efficiency standards as follows:

  • Half a trillion dollars in pocketbook savings on transportation costs (both household gasoline and the cost of diesel used for work trucks, which are passed through to consumers in the cost of goods and services).
  • Half a trillion dollars in pocketbook savings for home energy (electricity, natural gas) for lighting, air conditioning, refrigeration, cooking and heating.
  • One trillion dollars in economic growth that is stimulated by consumers “respending” the pocketbook savings on other goods and services.
  • With 3/4 of a trillion in public health benefits, and total costs of about 1/3 of a trillion, the benefit cost ratio for the standards in the aggregate is 7-to-1.

President Trump’s executive order directing federal agencies to remove two regulations for every one new regulation put in place prompted the Department of Transportation to issue a request for regulatory review of “existing regulations and other agency actions that are good candidates for repeal, replacement or modification,” with a deadline of Dec. 1 for comments.

CFA says the executive order and the associated regulatory review threaten energy efficiency standards that are saving consumers money right now. The group is urging the administration not to roll-back or repeal current energy efficiency standards, and, instead, to continue strengthening them, as the laws require.

“Converting these aggregates to per household impacts is challenging, but studies of specific energy-using consumer products tell the story,” Cooper added. “A freeze or rollback of the light-duty fuel economy standards will cost consumers over $2,000 in pocketbook savings on gasoline expenditures. And the attack on lighting standards alone would put $2,800 of pocketbook savings energy costs at risk.”

“Executive orders going back to Ronald Reagan and updated by Clinton, Bush and Obama tell agencies to do rigorous cost-benefit analysis, using all costs and benefits to calculate several measures of the effectiveness of standards, including benefit-cost ratios, cost per unit of energy saved and internal rates of return,” Cooper noted. “Past and current standards pass every one of these tests with flying colors.”

  • Future benefits of the standards CFA studied are between five and ten times the cost.
  • The cost of saving energy is less than half the cost of burning energy.
  • The rates of return are between 20 percent and 40 percent.

Another way to consider the value of these standards – as suggested in Bush’s OMB Circular – is to calculate how much it would cost to save a gallon of gasoline or diesel. This estimate measures how low prices would have to fall to make efficiency an unattractive investment.

  • The break-even cost for gasoline is around $1.00, less than half the current price and less than one-third the price projected by the Energy Information Administration.
  • The cost of electricity saved by the rules being placed at risk is one-seventh of what consumers pay today.

“Our confidence in these estimates of future benefits placed at risk by the Trump administration is bolstered by our review of the literature evaluating past standards,” Cooper added.

  • Over the past 40 years, fuel economy standards have delivered $1.8 trillion in consumer net pocketbook savings, another $1.8 trillion in growth for the economy, and $0.8 trillion in public health and environmental benefits.
  • Add to that the benefits of appliance efficiency standards, and the total pocketbook and economic benefits of efficiency standards top $5.5 trillion, with environmental benefits close to $1 trillion, for a total of $6.5 trillion in benefits over 40 years. The cost of achieving all these benefits, meanwhile, is less than $1 trillion.

“Current standards represent a tried and true, ‘command-but-not-control’ approach to rulemaking that has enjoyed bi-partisan support from congress and the executive branch for four decades,” Cooper added. “The administration’s attempted U-turn not only risks stifling vetted and cost-effective rules, but also could make it much more difficult for future administrations to put smart, money-saving policies in place for the benefit of American consumers.”

Executive Summary of Report

Contact: Mark Cooper, 301-384-2204

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