House Subcommittee Considers Environmental, Economic Effects and Industry Involvement in CAFE Standards

On October 29, the House Oversight and Reform Subcommittee on Environment held a hearing, “Trump’s Wrong Turn on Clean Cars: The Effects of Fuel Efficiency Rollbacks on the Climate, Car Companies, and California.”

The hearing came a day after GM, Fiat Chrysler, and Toyota, along with the Association of Global Automakers, sided with the Trump administration by seeking to intervene in a lawsuit filed by the Environmental Defense Fund against the administration over the state of California’s right to set its own greenhouse gas emissions and fuel economy standards. In July, Ford, BMW, Honda, and Volkswagen reached an agreement with California to increase fuel economy standards to the state’s levels. In September, the Justice Department launched an antitrust investigation into the latter agreement.

The hearing was off to a rocky start when Rep. Paul Gosar (R-AZ) raised a point of order to demand that the meeting be adjourned so that committee Republicans could attend a closed-door impeachment deposition being held by the full committee at the same time. Subcommittee chairman Harley Rouda (D-CA) moved to table Gosar’s motion, – but normally, roll call votes are not held during hearings, so there was a roughly 30-minute delay while waiting for a committee clerk to make it to the room to take the roll call. After Gosar’s motion was defeated on a roll call vote, all but two Republicans (James Comer of Kentucky, and Bob Gibbs of Ohio) left the room after the vote.

The first witness panel included:

The second witness panel included:

  • Antonio M. Bento, Professor of Public Policy and Economics, Sol Price School of Public Policy and Department of Economics, University of Southern California
  • The Honorable Samuel Liccardo, Mayor of San José, California
  • Emily Wimberger, Climate Economist, Rhodium Group
  • Marlo Lewis (minority witness), Senior Fellow, Competitive Enterprise Institute

Across both panels, themes of US economic competitiveness, taking a close look at the parameters that went into the Trump Administration’s Safer Affordable Fuel Efficient (SAFE) Vehicles proposed rule for model years 2021-2026, and investigating the fossil fuel industry’s financial backing of the interests pushing for the revocation of the California waiver came up a number of times.

Standard-setting and economic competitiveness

 The stated purpose of the Trump Administration’s SAFE Vehicles Rule is to “give the American people greater access to safer, more affordable vehicles that are cleaner for the environment.”  Proponents often point to both a need for one national standard for fuel economy to provide regulatory certainty for the auto industry. The argument is that rather than buying newer, supposedly safer cars, Americans will continue to drive older, less safe vehicles.*

In his opening statement, Gov. Brown countered that there are currently stricter standards in Europe and China. Referencing the increasing market share of foreign automakers, he stated that “if Detroit wants to ignore the rest of the world, it will lose market share.” Brown pointed to a similar pattern with the photovoltaic industry’s rapid growth in China in recent years.

Rep. Mark DeSaulnier (D-CA) picked up on this point, saying that the California waiver, and California’s history of advancing renewable technology more generally (the state gets more investment than the other 49 states combined, he said), sets an important standard for the rest of the country as the economy shifts away from nonrenewable energy. Brown and Rep. Alexandria Ocasio-Cortez (D-NY) both indicated that the California waiver is important because it allows the state to be a laboratory for policies to be explored on a federal level.

 Accounting for the social cost of carbon

 First to testify after the half hour delay caused by an attempt to cancel the hearing in favor of closed-door impeachment hearings, Brown indicated that “impeachment is important, but the climate is even more important,” a theme that came up throughout the hearing in discussions of accounting for the social cost of carbon.

But the real number-crunching was highlighted by the researchers on the second panel. It didn’t take long for critiques of the Trump administration’s analysis to surface shortly after the NPRM was published in 2018. Dr. Bento elaborated on his own research, claiming that there were “absurd differences” in the cost-benefit calculations for the 2022 and 2025 standards as calculated in the 2018 NPRM as compared to the 2016 Obama-era review. For example, he said, the 2016 review found a net benefit of $87.6 billion to the economy for the fuel economy standards while the 2018 analysis, using the exact same standards, determined an economic loss of $176 billion. According to Bento, these differences can be explained by “misguided parameter choices”, in particular the scaling down of social costs of carbon – healthcare costs, for example – from $48 per ton to $7 per ton. While the Trump administration’s justification for this number was that the model should only account for domestic effects, Bento said there was “no scientific reason” to make this choice.

In response to Dr. Lewis’s claim that the emphasis thus far has been on a “2-dimensional consumer” who only weights between up-front costs and long-term operating expenses, Dr. Bento countered that every morning, individuals make transportation decisions based on private costs (fuel, parking, etc.), but we don’t realize the costs of emissions to communities, in particular vulnerable communities that live close to highways.

Investigating “dark money” and covert industry actions

Stating that the Obama-era standards would save US car owners an average of $8,000 per car by model year 2025, a number that “would have little effect on the number of cars sold but would affect the amount of gasoline sold,” Sen. Whitehouse suggested that this effect on gasoline consumption has pushed the fossil fuel industry to steer the rulemaking process. He referenced a minimum of $252.7 million in support from the fossil fuel industry to groups and individuals in support of revoking the California waiver.

In response to a question from Rep. Anna Eshoo (D-CA), who is not an Oversight Committee member but was allowed to sit with the panel by unanimous consent, about how the subcommittee should continue to explore the issue of fossil fuel industry funding, Whitehouse pointed to “two good avenues for Americans to discover the rest of the story”: uncovering the industry’s documents through the litigation process of the California rule, and obtaining the documents directly through subpoenas.

Whitehouse indicated that communication between fossil fuel lobbyists and regulators is not the problem per se, but rather “the danger is when those conversations descend into darkness and are done secretly and privately.”

*According to Dr. Bento, the idea that raising fuel economy standards pushes people to buy used cars is incorrect, because if the prices of new cars go up, so too do the prices of used cars based on simple demand. Further, increases in new vehicle prices have more to do with new accessory (i.e. comfort-related) demands consumers have for vehicles. By 2025, the standard would typically raise the price of a new vehicle by $1,100, not considerable when considering the overall economic cost of purchasing a new vehicle.

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