One of the boldest chapters in American policymaking is about to begin. It appears that the administration of President-elect Donald Trump will, among other things, roll back President Barack Obama’s energy and environmental agenda.
One of the first measures likely to go is Obama’s lofty fuel economy standards, which say that by 2025, the average vehicle being built should be able to travel 54.5 miles per gallon.
Overly ambitious, unnecessary and completely out of touch with consumer preferences, the Obama administration’s fuel economy target was a mistake to begin with and should rightfully be at the top of Trump’s regulatory chopping block.
Fuel economy standards are a legacy of the oil crises of the 1970s. While these standards have become conflated with environmental goals - namely carbon reduction - they were foremost designed to strengthen U.S. energy security in the face of growing dependence on imported oil.
Even when President George W. Bush signed into place new energy legislation that included raising fuel economy to at least 35 miles per gallon by 2035, the driving force behind the effort was energy security. The name of the legislation was, after all, the Energy Independence and Security Act of 2007.
But times have changed. And although the book on U.S. energy security has been rewritten, we remain beholden to energy policies that reflect a different time.
Oil and natural gas are no longer scarce. The shale revolution and the corresponding surge in U.S. natural gas and oil production have transformed energy from an economic and strategic weakness into a tangible strength.
The U.S. is now the world’s largest combined oil and natural gas producer. In 2005, our nation’s dependence on foreign fuel had risen to an all-time high of more than 60 percent of consumption. By 2015, net oil imports were only 24 percent of total consumption, the lowest level since 1970.
Simply put, U.S. energy security, long the driving force behind fuel economy standards, is not the Achilles’ heel it had once been and should not be used as justification for a federal mandate that is wildly out-of-touch with reality.
The Obama administration’s standard is based on an outdated assumption that the automobile market will be 67 percent cars and just 33 percent trucks and SUVs in 2025.
That doesn’t reflect the actual makeup of our current fleet, made up of 50 percent cars and 50 percent larger vehicles, with trucks and SUVs growing in number while fewer consumers choose cars.
With a 50-50 vehicle fleet, it may not even be technically possible to achieve a 54.5 mpg average.
American consumers already have voted with their wallets and concern for safety: They want trucks and SUVs. Thanks to low oil prices, the assumed shift in consumer preference to hybrids and electric vehicles has not materialized.
Sales of the Toyota Prius, the best-selling hybrid, have dropped significantly since peaking in 2013. While electric vehicles are gaining competitiveness and becoming more attractive to consumers, they still make up just 1 percent of the global auto market.
We’ve already bailed out the U.S. auto industry once. Forcing the industry to defy consumer preferences and make cars nobody wants is a predictable recipe for trouble.
Those who are concerned that rolling back fuel economy standards will slow electric vehicle adoption and have an adverse effect on energy security and the environment should know that the right way to spur innovation for emerging technologies is not to tilt the playing field in their favor but to force new model vehicles to hold their own in a competitive market.
Fuel economy standards aren’t the answer. With the U.S. more energy-secure than it has been in generations and consumer preference so clear, the Trump administration would be wise to drop the current fuel economy standards.
There are far better ways to enhance U.S. energy security and achieve environmental goals than to force auto manufacturers to make and sell cars consumers don’t want.
Mark J. Perry is a professor of economics and finance in the School of Management at the University of Michigan at Flint.