The Trump administration’s plan to freeze fuel efficiency standards in defiance of California’s stricter, more environmentally friendly rules is set to have dire ramifications for emissions levels and the economy, according to new research out Wednesday.
Rolling back California’s robust vehicle emissions requirements could cost the U.S. economy $400 billion through 2050, an analysis from the environmental policy group Energy Innovation found. President Donald Trump’s efforts to undo Obama-era rules will also increase U.S. gasoline consumption by up to 7.6 billion barrels, subsequently increasing U.S. transport emissions up to 10% by 2035.
Under Trump, the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) have been engaged in a bitter feud with California over emissions standards.
California has set its own standards for decades under the Clean Air Act’s Section 177 through an EPA waiver, with significant success: 14 states and the District of Columbia have adopted the same standards. Data shows that those “Section 177 states” — which represent more than 35% of the U.S. auto market — have reduced pollution and improved air quality, improving both public health and the environment.
But the Trump administration has targeted California’s waiver, arguing in favor of freezing fuel efficiency standards on new vehicles through 2025 nationally while stripping the state of its exemption. The government is also embroiled in litigation with the Section 177 states, which are fighting to keep their standards.
As California and the White House escalate their feud, Energy Innovation’s new modeling gives a preview of what the Trump administration’s plans would mean long-term.
“Freezing federal fuel economy and [greenhouse gas] emissions standards will harm U.S. consumers, who will pay more money to drive their cars the same distance,” the Energy Innovation report warns, pointing to both economic implications and likely associated climate impacts and poorer air quality.
“The only winners are the oil companies, who stand to sell more gasoline at the expense of American consumers, manufacturers, and the environment,” the group underscores.
Initially, the firm found that there would be economy-wide financial gains, as low-efficiency cars are cheaper to make. But over the years, increasing fuel expenses are projected to cut into those gains, ultimately costing the national economy hundreds of billions.
Using the open-sourced and peer-reviewed Energy Policy Simulator (EPS), the group looked at the economic impact of freezing the standards nationally and revoking California’s waiver, in addition to a scenario in which California retains its waiver following litigation but the rest of the country is held to the frozen standard.
In the first scenario, the economic cost by 2050 is projected to be $400 billion.
The second scenario is more uncertain. However, the report estimates it would affect around 65% of vehicle sales and could create a split market — one where automakers sell more efficient vehicles in Section 177 states and less efficient vehicles elsewhere.
Energy Innovation estimates that scenario would cost between $240 billion and $400 billion by mid-century. Costs on the lower end reflect a situation in which carmakers in non-Section 177 states would still largely comply with California’s standards, while those on the higher end reflect a split market possibility.
In addition to the economic costs, the report also underscores the climate implications. While the growing market for electric vehicles would mitigate climate impacts beginning in the 2040s, Energy Innovation finds that vehicle emissions would spike to their highest point in the 2030s based on current trends.
Under current policy, “transportation sector emissions are projected to be 1,370 million metric tons (MMT) of carbon dioxide equivalent (CO2e)” by 2035, the report notes. But with a nationwide freeze, emissions would increase to 1,510 MMT in 2035 — a 10% increase. If Section 177 states retain their autonomy, that increase would fall between 1,460 and 1,510 MMT.
The report’s authors clarify that all estimates should be viewed as somewhat conservative, however, given that they assume a trend towards purchasing electric vehicles — meaning the actual emissions impact could be much larger.
Energy Innovation policy analyst and report author Megan Mahajan told ThinkProgress that the overall result of a freeze would be rising emissions and increasing costs.
“Although the current administration argues the standards freeze is in Americans’ best interest, we find that it hurts consumers and the climate,” Mahajan said. “Our results show that the economic impacts to consumers will only grow over time as they continue to lose out on the significant fuel savings that come with stronger standards.”
The report also focuses on the international implications of the proposed freeze. Due to the Canada-California fuel economy memorandum of understanding, impacts associated with the move will be felt across the border. Canada’s auto market is closely tied with the United States and the country has indicated it will likely side with California in a split market scenario.
But if that doesn’t happen and Canada follows the U.S. federal freeze, Energy Innovation predicts the move could cost Canadian consumers up to $67 billion through 2050. It could also increase Canadian transport emissions up to 11% by 2035.
“In addition to hurting U.S. consumers, a fuel economy and… emissions standards freeze would have global implications,” the report argues.
Energy Innovation’s findings are only the latest to counter the Trump administration’s push for the freeze. Even the auto industry has expressed deep reservations. Many carmakers had already incorporated the emissions standards into their products, along with Obama-era efficiency efforts. The sudden change could cost companies, and some have made efforts to insulate themselves from any shifts in policy.
At the end of July, California inked a deal with Ford, BMW, Honda, and Volkswagen, with all four major carmakers pledging fuel-efficient cars. At the time, California Gov. Gavin Newsom (D) linked the deal to broader efforts to combat global warming.
“Clean air emissions standards … are perhaps the most significant thing this state can do, and this nation can do, to advance those goals,” the governor said. “The Trump administration is hellbent on rolling them back. They are in complete denialism about climate change.”
But the standoff between California and the White House is only set to escalate. Last Friday, the EPA and NHTSA sent the final proposed rule to the White House for review.
That same day, California and New York led a group of states in suing NHTSA, which has reduced the penalties facing automakers who fail to meet Obama-era corporate average fuel economy (CAFE) standards. Under Trump, the penalty has been reduced from $14 to $5.50 per tenth of a mile per gallon.
And on Tuesday, 30 Senate Democrats encouraged 14 major automakers to join the four companies that have already made a deal on emissions with California.
“In the absence of an agreement between the Federal government and states, the California agreement is a commonsense framework that provides flexibility to the industry to meet tailpipe standards while also taking important steps to reduce greenhouse gas emissions and save money on fuel for consumers,” the senators wrote in a letter to the companies, which include Nissan, Toyota, and Volvo.
The letter was signed by several presidential candidates, including frontrunners Sen. Bernie Sanders (I-VT), Elizabeth Warren (D-MA), and Kamala Harris (D-CA).