Today, automakers yearning to weaken environmental regulations found an ear on Capitol Hill—Senator Blunt (R-MO) introduced a bill with support of a few auto-state senators which would undermine the federal fuel economy regulations in three ways: 1) it extends the life for credits, some of which have already expired, creating so-called “zombie credits”; 2) it awards windfall credits for vehicles already sold by pulling forward a flexibility which regulators explicitly said they were not granting when setting the stringency of the program; and 3) it allows for manufacturers to focus all their efforts on just one segment of their fleet, undermining the promise to consumers that all types of vehicles—cars, trucks, and SUVs—would become more efficient over time.
Taken in total, the impact of this legislation would result in 350 million barrels of additional oil consumption, which means $34 billion taken from consumers in new fuel costs and handed over to oil companies (corporate handouts aren’t just for the automakers with this bill!).
It also puts the industry on a course for dismal technology investment, as they continue to pay lobbyists to weaken regulations instead of engineers to deploy the very technologies which have shown such promise in their labs—this, of course, is just another attempt to undermine the mid-term evaluation of the standards and further the industry’s “Yes We Can’t” agenda at the expense of consumers.
Zombie credits—a windfall for exceeding a 30-year-old standard
Back in 2010, fuel economy regulations for cars were still stuck at the same value they’d been set at back in 1985. The industry as a whole well exceeded these meager fuel economy targets, which were no longer serving their purpose to reduce oil consumption.
Even though the CAFE fuel economy regulations have been significantly improved, moving to a size-based standard and finally resulting in nearly doubling the efficiency of vehicles out to 2025, credits earned under the original, long stagnant CAFE program were still available to manufacturers.
These credits were given a five-year lifetime—this helps give manufacturers some flexibility as they introduce improvements to models or invest in new vehicles, since a typical product cycle is about five years. However, the legislation proposed today gives these credits (most of which have already expired) new life by extending their use out to 2021. In doing so, it assures manufacturers that rather than having to invest in new technology improvements, they can rest on their laurels thanks to exceeding standards first set THIRTY years ago.
This provision is designed to stifle investment, while manufacturers like Toyota sit back and withdraw from a huge bank of hundreds of millions of early credits.
Retroactive off-cycle credits—the everlasting gobstopper of handouts
When the 2012-2016 fuel economy regulations were set, the National Highway Traffic Safety Administration (NHTSA) was quite clear—they did not believe they could give credit to technologies which did not have a measurable improvement on the test cycle and therefore must exclude such improvements from consideration. Had they been able to include them, they further noted, the standards would have been set more stringently.
The legislation undercuts the standards by awarding credits for these technologies anyway, ignoring the agency’s carefully-crafted justification for its standards. EPA did later include the credits in their program, however, and we are seeing that these credits aren’t being given to incentivize technology development—they’re being given as a windfall credit for vehicles that have already been sold! And worse still, manufacturers have come back on multiple occasions to continue to ask for additional credits for those old vehicles—it’s a never-ending source of give-me credits!
With the zombie credit provision acting to extend the lifetime of credits, this provision acts to multiply its impacts by creating even more bogus credits.
Lifting the transfer credit cap—stifling consumer choice just got a whole lot easier
The size-based vehicle efficiency standards are designed to ensure that consumers have more efficient vehicle choices available year after year, whether they’re looking at cars, trucks, or SUVs.
When first directing NHTSA to move to an attribute-based standard, Congress also set a limit on how relatively inefficient a car or truck fleet could be: While manufacturers could use a small amount of credits by making one fleet more efficient than the standard to offset a shortfall in the other fleet, Congress set a limit to that number to ensure that a manufacturer couldn’t focus all their resources on improving just one segment.
The reasons for the transfer cap are clear—if manufacturers can focus development all in one segment, consumers looking at the other vehicle segment are going to get short shrift and not see continued improvement in fuel economy. However, this legislation effectively says “bye-bye” to the transfer cap by instating a level so ridiculously high that, for example, a manufacturer could flatline improvements to their truck fleet for the length of the program: i.e., the average truck in 2022 could be the same efficiency as the average truck in 2016.
Because of the exorbitant credits created under the first two provisions of the legislation, it is actually conceivable for a manufacturer to do just that, hurting consumers in the process.
This isn’t “harmonization”—it’s a credit bonanza
Manufacturers have claimed that these provisions are necessary in order to “harmonize” the EPA and NHTSA standards, but it is quite clear that this bill goes well beyond any such thing. In fact, the mountain of credits earned in 2010 and 2011 before the National Program put forth by EPA and NHTSA went into effect are completely unnecessary to meet EPA’s standards, but that hasn’t stopped the Senators sponsoring this bill from giving away the store anyway.
The projection of CAFE credits for cars and trucks under the proposed legislation shows how manufacturers will be able to use credits given away under this bill to shirk their responsibilities out through 2021, continuing to fall well below the standards (hence, negative credits). In fact, this bill is so egregious in its handouts that manufacturers don’t even need a huge chunk of the credits to comply (indicated as hashed bars).
Giving these credits away, however, allows automakers to continue to pit the unique aspects of each agency’s authority against each other as they winnow away at the overall program under the false guise of “harmonization”. And of course, Congress is not the only venue for this action—they’ve also petitioned EPA and NHTSA for actions which would continue to weaken the standards, including the zombie credits and transfer cap provisions in this bill.
By continuing to eat away at the standard in every venue, automakers are showing that they have no interest in meeting their obligations to their consumers or to the environment—it’s critical that we don’t let our elected representatives give them a way out.