New proposals for the U.S. Environmental Protection Agency were announced by President Trump and several automotive executives yesterday. The proposals would revert Corporate Average Fuel Economy (CAFE) standards back to 2022 levels and modify fuel economy gains down to about 0.5% annually (versus 2.0%).
The proposed changes follow legislative changes that happened earlier this year, which removed the fines the EPA could issue if automakers did not meet CAFE requirements and consumer credits for purchases of electric vehicles. The former effectively eliminated the emissions exchange the industry used to trade credits from over-compliant manufacturers to under-compliant ones. The latter has tanked EV sales since it took effect.
The CAFE standard is the required miles per gallon (or equivalent) fuel economy any given automotive manufacturer must meet over their entire fleet. It’s calculated with a complicated structure wherein each vehicle type is measured differently. The current guidance calls for vehicles to get about two percent more efficient year-on-year to meet strict 2035 MPG requirements and to encourage electric and hybrid car production.
The proposed EPA changes now enter a public commentary period. Many automakers have complained that the electric vehicle rollout has not been met by consumer interest, making the earlier policies unworkable.
Automakers, for their part, have voiced concerns over constant policy changes between administrations, making an industry that works within decade projections try to make guesses as to what will and or will not change every four years.
