The Great California Mileage Con

Source: By Wall Street Journal Editorial Board • Posted: Tuesday, August 13, 2019

Four car companies cut a sweetheart deal with Sacramento.

Ford Explorer SUVs are parked for sale at a dealership in Glendale, Calif., June 12. Photo: Mario Tama/Getty Images

Ford, Honda, Volkswagen and BMW have been canonized in the media for cutting a deal with California that flouts the Trump Administration’s fuel-economy deregulation. This is corporate cynicism hiding under the hood of green virtue.

The Environmental Protection Agency is finishing revisions of the Obama-era corporate average fuel-economy rules. In its waning days the Obama Administration rolled through a mandatory midterm review and reaffirmed the 2012 rules requiring auto makers to average 54 miles a gallon by 2025.

Most auto makers are failing to meet the Obama standards, despite huge improvements in fuel economy, because consumers have shifted to buying more trucks and SUVs. Americans have also spurned electric cars despite government subsidies that can reach $10,000 in some states. Nearly all auto makers are using regulatory credits banked in prior years to avoid penalties.

The Obama targets would effectively require auto makers to dump electric cars on the market below cost, raise prices on popular SUVs and trucks, and stop manufacturing everything in between. Auto makers including GM and Ford are laying off workers as they steer more money into electric cars to meet government mandates.

The Trump Administration has proposed freezing the mileage mandates at the current 2020 target of 37 miles a gallon. Its proposal would also eliminate regulatory credits for low-leakage air conditioning systems that make it easier for automakers to comply with the mandates.

California plans to sue to defend its ability to impose its own emissions standards, and auto makers have implored the Trump Administration to compromise with the state’s progressives to avoid litigation uncertainty. They are also hedging in case the next Democratic President revs up the standards again.

Ford, VW, BMW and Honda have formed a pact with California committing to increase fuel economy by 3.7% a year and meet the Obama 2025 target by 2026. This is the same so-called middle road that California offered to the Trump EPA. But the salvation for auto makers is in the details.

The deal increases the cap that auto makers can receive for “off-cycle” credits such as solar-reflective glass and high-efficiency lights by 50%, which is an admission that the mileage targets aren’t achievable any other way. California will give the companies double credit for electric cars and fuel-cell vehicles while eliminating the requirement that they account for “upstream” emissions from electric production.

Even in California’s green-energy paradise, natural gas accounts for a third of electricity production. In most states like New Jersey and Massachusetts that have adopted California’s emissions standards, fossil fuels account for half or more.

So the companies get to pose as anti-Trump and receive political grace from California regulators while crafting rules they can exploit. Other auto makers will now be under pressure to do the same. Meantime, California can lean on them to fight the Trump EPA since they have formally agreed to accept California’s authority to set its own rules.

The companies may have bought themselves some regulatory time, but we don’t want to hear them wail when a Democratic President vitiates the California deal and imposes far more onerous mileage rules.