The Trump administration wants to back down from the 54.5 mpg fuel economy mandate for automobiles and back away from the Obama administration’s Clean Power Plan. Businesses in general like the new plan, as do automakers and coal miners specifically. They say fewer rules lowers manufacturing costs and makes American factories competitive.
There are problems with the plans. US automakers have global operations. They still must design world cars to meet economy and pollution rules in countries that aren’t hitting the pause button. If the US retreats from the 2015 Paris climate agreement, China might also, leading to a domino effect taking out India and Brazil.
54.5 mpg standard? It’s pronounced “40 mpg”
The 2012 EPA fuel economy standards (until the current administration’s proposal) had the corporate average fuel economy, or CAFE, ratcheting upward until it hits a fleet average of 54.5 mpg by 2025. If that seems high to the average driver, who knows most economy cars still get in the 30s and only a few outliers such as the Toyota Prius hybrid are anywhere near 54.5, it’s because there are multiple ways to state fuel economy.
For instance, a car or SUV that is configured to burn E85 (gasoline with 51%-83% ethanol) is rated higher than its recorded test ratings because it is E85-capable — even if it’s sold to buyers who have no intention of using E85, and even if it’s sold to buyers in states where there is no E85. (E85 actually gives lower real world mpg because the mix contains fewer BTUs than pure gasoline.) This and other modifiers raise the calculated mpg number well beyond real world economy.
To reach the 54.5 mpg level the government is talking about, the average car would have to get approximately 40 real-world mpg. Real world meaning if you poured one more gallon of gasoline into the car, it would carry you 40 miles farther down the road. Real world mpg is what’s printed on the Monroney (window) sticker in the showroom. If it’s off, it’s only by 1-2 mpg.
40 rear-world mpg is easier — still not easy — to attain than 54.5 real world mpg. Right now the most efficient automaker, with a 29.5 mpg rating overall, is Mazda, and even Mazda would need to be a third more more efficient to get to real-world 40 mpg.
That’s one reason Mazda is adding high-efficiency diesel engines to the mix, starting with the highly regarded 2017 Mazda CX-5. It’s the reason why automakers sell, with small markups, small hybrids, plug-in hybrids, and EVs to offset the lower mpg of big SUVs. In California, where automakers also have to sell a certain minimum of zero emissions cars, last fall one dealer, Orange Coast Alfa Romeo-Fiat, offered Fiat 500e EVs for $49 a month with no money down.
Will hybrid and EV tax credits go away?
Automakers are worried the administration will end the tax credits of up to $7,500 per vehicle for hybrids, plug-ins, and EVs. Vehicles with batteries less than 18 kWh (hybrids, many PHEVs) are in one bucket of credits covering 200,000 cars, and EVs in another for EVs. The purpose was to jump-start sales of alternative-fuel EVs while automakers reduce the cost of EV technology.
If the credit goes away, the Bolt EV and Tesla Model 3 would cost about $37,500 (base model) versus $30,000 with the credit. Analysts estimate lithium ion battery packs cost about $300 per kilowatt-hour, and will decline to $100 per kilowatt-hour in five years. But GM managed to get LG Chem to supply batteries for its 60-kWh Bolt EV pack for $145 per kilowatt-hour, or $8,700. The same pack would cost $6,000 in 2022 at $100 per kilowatt-hour.
The Trump administration has made noises about ending the federal tax credits for buyers, saying component prices have come down a lot. At the same time, it’s possible to buy a compact gasoline-engine car with the same roominess for $20,000, which is $10,000 less than a Bolt EV or Tesla Model 3, or $17,500 less if there’s no tax credit. That’s likely to drive some buyers out of EVs and back into combustion engine cars.
How far will the administration go back to the past?
The Obama administration agreed with the vast majority of climate scientists who say climate change is real and troubling. Before he became president, Donald Trump in 2012 said, “The concept of global warming was created by and for the Chinese in order to make US manufacturing non-competitive.” Trump has so far avoided saying whether he continues to agree. Scott Pruitt, head of the Environmental Protection Agency, has said human activity is not a “primary contributor” to global warming.
The upshot: Buyers of EVs could see the cost go up by $7,500, even more as some of the dozen states with additional credits step back from offering them.
Toyota has already used up its allocation of 200,000 tax credits for hybrids, yet it remains the No. 1 seller of hybrids in the US. Both sides say this proves their points: Tax credits made it possible for Toyota to grow the hybrid market, versus Toyota was simply the best maker of hybrids and never needed the credits.
If the administration backs off on the push to 54.5 in 2025, we’ll see more SUVs and pickup trucks sold. They’re already the majority of new vehicles purchased; sedans are in the minority. Buyers of midsize cars will pick larger engines. SUV and crossover buyers will go for all-wheel-drive more often. Automakers will stop spending money on lightweight aluminum or carbon fiber body panels. Bigger engines and AWD can reduce fuel economy by 1-5 mpg.
Since the first safety regulations of the 1960s, automakers have often said making safety or emissions improvements would take longer and cost more, if it was possible at all. Eventually it all worked out, even if there were hassles moving to unleaded gasoline in the 1970s, shifting from carburetors to fuel injection, problems with the first 1980s cars with cylinder deactivation, and issues adding turbocharging.
How to protect future generations, current workers
President Trump has made much of the plight of coal miners. But coal is on the way out. The US is finding increasing amounts of natural gas that is cheaper to extract than coal and burns cleaner than coal. He probably can’t remove enough restrictions, for instance on coal-burning electricity plant smokestack emissions, to create a level playing field for coal versus natural gas and oil.
The majority of Americans believe climate change and global warming are real and serious issues. That puts Trump and the EPA’s Scott Pruitt at odds with the electorate. Interestingly, the vast majority of Americans surveyed by the Yale Program on Climate Change said climate change is real and it’s happening now. But they majority also they don’t see themselves as affected.
The danger of not dealing with climate change is what happens if and when the US backs off on the Obama administration’s climate change agreements. In 2014, US President Obama and China President Xi Jinping agreed that each country should limit its pollution. Coincidentally, Trump and Xi are due to meet next week at the southern White House in Mar-a-Lago. Hopefully, Xi likes golf.
If Trump abrogates the 2014 agreement, other countries may back away from their agreements to the Paris agreements signed a year later, starting with India. Developing nations such as China, India, and Brazil in the past have traded off pollution control for cheaper-to-run factories, trains, and cars.
Anyone who’s been in the industrial areas of China or India knows how bad the pollution is. An America First policy will damage a lot of children growing up around the world, and hasten the departure of the elderly.
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(Top image credit: ExxonMobil)