White House Backing Off Proposed Fuel-Efficiency Freeze

Source: By Ben Foldy and Timothy Puko, Wall Street Journal • Posted: Sunday, November 3, 2019

Trump administration plans for annual efficiency increases of 1.5%; rule likely to come by year’s end

California and other states are expected to challenge the administration’s final number in court. Photo: robyn beck/Agence France-Presse/Getty Images

The Trump administration is backing away from a plan to freeze tailpipe-emissions targets for new vehicles through 2025, say people familiar with the process.

The administration is now considering requiring a 1.5% annual increase in fleetwide fuel efficiency, using an industry measure that takes both gas mileage and emissions reductions into account, the people said. The target moves the number closer to the Obama-era rules calling for 5% gains but still provides auto makers with significant relief and would allow cars to emit more pollution.

The new final number for annual increases could change, as the rules remain under review, one of these people said. In addition, the administration’s number is expected to be challenged in court by California and other states, which favor tougher regulations.

President Trump has been trying for years to soften a set of stringent targets to reduce greenhouse gas emissions first agreed to in 2012 by the Obama administration, California and much of the automobile industry. The move to 1.5%—expected to be announced by year’s end—comes after intense industry lobbying, which opposed the Trump administration’s original plan to freeze targets at 2019 levels, around 37 miles a gallon.

The process has cleaved an auto industry traditionally united on emissions policy, with some companies siding with California and some with the White House over who should set the standards and what they should be.

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California’s Air Resources Board said that a 1.5% annual increase wouldn’t be enough for the state to meet federal air quality standards.

A coalition of companies including General Motors Co. , Toyota Motor Corp. and Fiat Chrysler Automobiles NV filed Monday to intervene in a lawsuit over the standards, lending support to the Trump administration’s argument that the federal government set emissions targets. In July, Ford Motor Co. , Honda Motor Co. , Volkswagen AG and BMW AG agreed to recognize California’s authority to set its own targets, which would be more stringent than those proposed by the federal government and are followed by 13 other states.

“The Trump Administration is focusing on finalizing [its] rule which will deliver one national standard to the American auto market,” Environmental Protection Agency spokesman Michael Abboud said in response to questions.

The agency’s administrator, Andrew Wheeler, hinted last week in Detroit that the final rule would be more restrictive than the proposed freeze, in part because of industry feedback, but declined to provide details. He said the agency expects to publish the new requirements by year’s end and hoped they will appease both auto makers and California.

“I’m, again, the eternal optimist: Once everybody sees our final CAFE regulation, everybody will see that it makes sense and maybe we won’t have litigation on that part of it,” Mr. Wheeler said, referencing the acronym used for federal fuel efficiency standards.

A regulation satisfying all parties seems unlikely considering the long and contentious rule-making process so far. The administration first proposed freezing the Obama standards at their current levels in August 2018, triggering fears in the industry of disrupted product planning and prolonged uncertainty pending rulings by the courts.

Those anxieties pushed Ford, Honda, BMW and Volkswagen to strike their deals with California, people familiar with those companies’ thinking said. The move angered the White House, and the Justice Department has opened an investigation into whether the four companies violated antitrust statutes in negotiating with California.

In September, the administration moved to revoke California’s ability to set its own standard under a federal waivergranted through the Clean Air Act.

But the emissions targets themselves have been delayed, as the data analysis supporting the rule change has been redone, according to people briefed on the process.

The administration initially justified freezing the standards by arguing that improvements in technology have made new cars safer and that any emissions improvements would raise the prices of new cars. According to the analysis, people would consequently keep their older cars on the road longer, leading to increased deaths and injuries from crashes.

The initial analysis showed that the most social and cost benefit would come from eliminating the emissions-target increases entirely, a former EPA official involved in that effort said.

Opponents of the proposal have focused much of their criticism on the assumptions and data underpinning the administration’s analysis.

Since then, changes have been made in the modeling of the data that show room for an increase in the efficiency targets, people briefed on the matter said.

“It’s not as cut and dry anymore,” the former EPA official said.

—Mike Colias contributed to this article.