Automakers propose loopholes, not rollbacks of cleaner car standards—both are terrible

Since word first leaked that the Administration was planning to freeze fuel economy and global warming emissions standards for passenger cars and trucks, automakers and their trade associations have been adamant about “not wanting a rollback.”  Now that the public comment period on the agencies’ proposed freeze has closed, we have an opportunity to see just exactly what it is that the manufacturers want instead of a rollback—the answer is, in some cases, actually even worse:

• Honda proposes keeping the curves the same but asks for a number of changes that would erode the benefits of the standards we have today. Lost Emissions Benefits: ~20-40%
• The Association of Global Automakers not only asks for all those same flexibilities, but they have also requested further revisions downward “to account for today’s market realities.” Lost Emissions Benefits: ~50-70+%
• General Motors has proposed scrapping the greenhouse gas emissions program entirely, replacing it with a weak National Zero Emissions Vehicle (NZEV) program that will not drive electric vehicle (EV) adoption beyond the status quo, and their proposal does little to drive down emissions from the 95 percent of the vehicle market that will still be powered by gasoline. Lost Emissions Benefits: ~75-90%
• The Alliance of Automobile Manufacturers asks for every loophole under the sun and then some—so much so that even if the year-over-year improvements remained unchanged from the rules we have today, progress on emissions could actually be even worse than the proposed rollback. Lost Emissions Benefits: ~70-130+%

“Flexibilities” are at the heart of all automaker comments

While there are rhetorical flourishes from automakers about “meaningful year-over-year improvements” and insistence on being “committed to reducing greenhouse gas emissions,” every single automaker indicated that they believe there are changes needed to the standards that are on the books, standards which have successfully driven investment in fuel efficiency across all vehicles classes, saving consumers over $70 billion at the pump.

The standards on the books today have roughly comparable year-over-year requirements for every type of vehicle but are adjusted so that bigger vehicles and light trucks have lower targets.  There are two ways to dampen the progress from these standards:  the first approach is to adjust the year-over-year requirements of the standards, the “curves” underpinning the rules—this is what the administration has done by freezing the standards at 2020 levels; the second approach is much sneakier, which is to ask for “extra credit” for specific applications of technology that give more credit for emissions and fuel reductions than will actually result in the real world—this is the approach favored by automakers (though some have deployed a combination of both strategies).

The agencies have already included some incentives in the current standards, which the industry refers to as “flexibilities” and others may refer to as “loopholes” (for example, EV emissions are currently credited without acknowledging emissions from upstream electricity production).  However, many of these incentives were designed to be temporary to drive early adoption and are now phasing out.  Manufacturers are now requesting that these incentives be extended, in some cases indefinitely, and additionally that these flexibilities be broadened well beyond the original intent of the incentive—while promoting sustainable technologies like EVs in the near-term is important, it shouldn’t be done at the expense of encouraging a less efficient fleet overall.  This can have a profound impact on the overall benefits of the rule—by crediting manufacturers with more reductions than would actually appear in the real world, those benefits are simply “lost.”

Tallying up the impact of automaker proposals

The impact of many of these requested flexibilities are uncertain because they depend upon exactly how many vehicles are sold with a given technology.  Furthermore, not all requests have been explicitly quantified, and in the case of requests for credits for safety technologies, the data is uncertain not just about how many vehicles would adopt this technology, but whether there is even any benefit at all.

However, I’ve put together an assessment of the four most clearly-defined proposals below, assessing their impact relative to the standards that we currently have on the books:

Honda:  Honda has specifically proposed a stringency of “approximately 5 percent per year annual improvement,” making it essentially the same as the rules we have on the books right now.  The catch, however, is that they’ve requested added incentives, asking for EV incentives to be extended and for hybrid incentives to be available for all light trucks, including the hybrid Honda CR-V going on sale in some parts of the globe in 2019.

Global Automakers:  The Association of Global Automakers represents the major Asian manufacturers as well as a handful of small luxury car companies.  Unlike Honda, they have only hinted at what level of stringency they believe would be appropriate, including and citing a study by Novation Analytics claiming that gasoline-powered cars and trucks could only achieve standards of 49 mpg and 35 mpg in 2025, respectively (compared to 55 mpg and 40 mpg according to the current standards).  Additionally, they asked for even more flexibilities than Honda, including giving credits for hybrid cars like the Prius, which has been on sale for two decades.  They have also requested credits for safety technology like adaptive cruise control, despite little evidence suggesting it will result in net emissions reductions—we have not considered the impact of these additional “off-cycle” credit requests.

GM:  In lieu of the program now on the books, General Motors proposed a completely different scheme—gasoline-powered vehicles would be required to improve by about 1 percent per year, but in addition there would be put in place a National Zero Emission Vehicle (NZEV) program to encourage sale of electric vehicles.  The problem, as my colleague has already written, is that the NZEV proposed by GM is quite weak, leading to just 8 percent EV sales by 2030.  On top of this, the proposal on conventional vehicles is flimsy and includes credit giveaways, but it would be in effect for the vast majority of vehicles because conventional vehicles will be 95 percent of vehicles sold 2020-2030, even under GM’s proposal.

Auto Alliance:  The Alliance of Automobile Manufacturers ramps nearly every requested loophole to 11.  Not only do they request permanently excluding the impact of the electricity powering EVs, but it requests that the multipliers be more than doubled, from 2 to 4.5 for battery-electric vehicles and from 1.6 to 4.8 for plug-in hybrid vehicles—yes, they are actually requesting more credit for vehicles with worse emissions.  They are also seeking to change the definition of a truck so that all utility vehicles fall under significantly weaker standards, even while acknowledging that consumers are cross-shopping sedans and crossovers.  Importantly, the Alliance does not propose a specific change to the year-over-year stringency of the program, only a general call for “adjustment”—our analysis of flexibilities thus assumes that the standard curves remain in place, clearly a very, very conservative assumption given the rest of the Alliance proposal.

A rollback by another name

The future impacts of these proposals are uncertain—the adverse effects on emissions from giving extra credit for hybrid or plug-in electric vehicles depends on the number of those vehicles sold.  Our modeling spans a number of scenarios of technology penetration, ranging from the agencies’ 2016 analysis and compliance with state ZEV standards to the agencies’ 2018 analysis and its ludicrously high assessment of technology needed to comply with regulations.  No matter how you cut it, it is clear from this analysis just how severely these automaker asks would erode the standards.

The asks from the Alliance in particular are so egregious one wonders whether they were accompanied by maniacal laughter and moustache twirling.  Without even reducing on paper the requirements of the standards on the books today, the Alliance asks are equivalent to a rollback under even the most moderate assumptions, and at the level of technology adoption that they and their members claim is necessary, the giveaways would actually be worse than the administration’s proposal.

An incredibly myopic “vision”

The GM NZEV plan has been heavily covered in the media, with some mistakenly calling it a vision for the future.  But the numbers speak for themselves—the GM proposal disregards significant improvements in the vast majority vehicles through 2030 and provides not much better than status quo adoption of EVs in return.  Additionally, they call for increased credit for hybrid light trucks and reclassification of more of the fleet as light trucks, which would fall under weaker standards.

The result is predictable and amounts to an average improvement of about 1.4 percent per year, well short of the nearly 5 percent improvement on the books right now.  It also serves to undermine state and EPA authority under the Clean Air Act, escalates giveaways for unproven technologies that (coincidentally) GM is planning on selling anyway, and doesn’t even provide a guarantee for the benefits under its piddly NZEV because it has an escape clause which would nullify the proposal and any meager attempt at progress if things get too hard—not unlike the eject button they’re trying to push as a part of this mid-term review.

Is anyone not calling for a rollback?

Maybe the clearest outcome of the mid-term review has been to show the viability of the current standards—as time has gone on, more opportunities to reduce fuel use and emissions have been put to market, and even some of the most obvious, low-cost solutions are still only gradually making their way across the fleet.  We and many others continued to press this point to the agencies in the public comment period, pushing back on the administration’s rollback.

Unfortunately, apart from Tesla (who called for even stronger standards), the closest any automaker got to calling for standards equivalent to what we already have right now is Honda.  While they distanced themselves from some flexibilities requested by their trade group like the Prius loophole, Honda still mirrored a number of the same requests.  That means that while on paper the rules would remain as stringent as they are right now, Honda’s proposal would still cut 20-40 percent of the benefits of the rules on the books today, leading to an increase of 175 to 350 million metric tons over the lifetime of vehicles sold through 2025.

While compared to the rest of the industry that may be about as good as it gets, even Honda’s proposal is a significant step backwards, slowing down near-term progress with a wink and a nod that the industry is committed to a sustainable future.  That, of course, is a tactic we’ve seen before.

Promises today, pollution tomorrow

The history of the auto industry is rife with examples of automakers undermining progress not out of technological infeasibility but out of profit and disregard for public outcomes.  When it came to tailpipe pollution, the Alliance spent years undermining the science. When California pushed for action, the companies pushed back, claiming that voluntary action that would prove woefully inadequate to the problem was the right path. After California’s successful regulatory push to move tailpipe control devices to market led to federal regulations, automakers again stalled, winning a reprieve again on the claims that what is really needed is fleet turnover—a claim which, of course, proved false and led to untold adverse health consequences as a result.

There are positive statements in the positions of Global Automakers and Honda that recognize the need for continued progress, and while the proposals represent a short-term setback, it is possible that this is merely strategic positioning as the companies look to negotiate a truly sustainable path forward.  But when looking at the proposal from General Motors looking to codify the status quo and the harmful, cartoonish nonsense out of the Alliance that would actually make the country worse off than the administration’s proposal, it’s hard not to see these proposals together as just another example of an industry doing what it can to avoid responsibility for its products, consequences be damned.