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Study: Fuel Economy Rules Threaten Jobs And Vehicle Prices

March 14, 2017 0 Comments

In 2012, the federal government and automakers agreed on a timeline to bring U.S. corporate average fuel economy (CAFE) ratings for new cars sold in the United States to an average of 54.5 miles per gallon (mpg), along with a sharp reduction in carbon emissions by 2025. As the Obama administration was winding down, federal regulators reiterated the goals over requests from the industry for more time.

However, the Trump administration has been more receptive to automakers’ pleas, and in keeping with Trump’s pledge to eliminate unnecessary regulation, a relaxation of the CAFE standard is expected.

Now, a study from researchers at Indiana University that was sponsored by the Alliance of Automobile Manufacturers (AAM) provides some support for holding off on the increased mileage standard.

The study indicates that American consumers may pay an average premium of more than $1,800 per vehicle by 2025, due to tougher economy and emissions targets. John Graham, a co-author of the study, said employment losses will peak at approximately 150,000 in 2021, as consumers will shy away from buying more expensive cars and trucks.

“Our findings don’t call into question the need for regulation but we found that the federal requirements need to be fine-tuned,” Graham said in a statement. “Due to unexpectedly low gas prices and tepid demand for electric and hybrid vehicles, the standards will have greater economic impact than envisioned when they were developed.”

This study adds to the debate over fuel economy standards that has intensified as the Trump administration considers revoking a decision to leave intact rules aimed at curbing vehicle emissions through 2025. Last month, eighteen automakers asked Trump to reinstate an evaluation of the rules. In January, Ford CEO Mark Fields warned that approximately 1 million American jobs are at risk if standards aren’t aligned with market realities.

According to the study, approximately one-third of the initial job losses would be concentrated in a five-state area near the Great Lakes, while the short-term pain will eventually give way to longer term benefits from consumers saving more at the pump. In a phone interview with Bloomberg, Graham said that the U.S. may end up with a net gain of about 150,000 jobs by 2031.

The Indiana University report recommends several ways that lawmakers could reorganize fuel-economy regulations, including by commissioning an independent assessment of California’s requirements that automakers produce and sell zero-emission vehicles. Graham said that the state’s program fails to curb much fuel consumption nationwide because manufacturers earn federal credits that make it easier to sell gas guzzlers elsewhere in the United States.

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