The Dirty Truth About Fuel-Efficiency Regulations

If you want to know who benefits from regulations, just check who lobbies for them.

If you believed the press and the Democrats, the White House was handing the keys over to the automaker lobby and other big business “polluters” with its plan to dial back efficiency standards for cars.

“President Trump’s decision today to weaken emission standards in cars is an unconscionable gift to polluters,” California Gov. Jerry Brown said when the administration laid out its plan last year. “Once again, you’ve put the interests of big oil ahead of clean air and politics ahead of science.”

The New York Times said Trump was “handing a victory to car manufacturers.” The frame was easy, obvious, and familiar: Obama’s stricter regulations were for the environment. Trump’s less-strict regulations are gifts to the industry.

It's Not Quite That Simple

The truth is far more complicated. There have been corporate lobbyists on all sides of the fuel-efficiency debate. And the most laissez-faire position—the one staked out by the administration—has almost no corporate lobbyists supporting it at all. In short, some businesses want a ton of regulation, some want moderate regulation, and almost nobody is lobbying for low or no regulation.

It’s hard to find any industry lobby that wants to go as far as the Trump administration in dialing down the efficiency regulations.

It’s an important dynamic to explore, not only because it undermines the conventional wisdom declared by Democrats and implied by reporters, but also because we can better understand the nature of a regulation—and better predict its effects—when we look at who is lobbying for it.

The oil industry is pretty uniform and consistent in wanting weaker fuel economy standards, for obvious reasons: more fuel-efficient cars use less gasoline, and these regulations push consumers into more fuel-efficient cars. Environmental Protection Agency Director Scott Pruitt, from Oklahoma, has long been partial to the oil industry.

But after that, it’s hard to find any industry lobby that wants to go as far as the Trump administration in dialing down the efficiency regulations.

“We are not asking for a rollback,” William Clay Ford, Jr., executive chairman of Ford Motor Company said this year. The auto industry “has called for ‘year-over-year’ increases in stringency rather than freezing the standards,” a trade journal called Inside the EPA reported this month. “Two high-profile automakers—Honda and Ford—as well as a major automaker trade group have also signaled that they would prefer changes that retain EPA’s GHG standards while including more compliance flexibility.”

Why would carmakers not want to roll back emissions standards?

Why would carmakers not want to roll back emissions standards? Part of it is predictability: These companies have built their business plans around the Obama-era rules, and shifting power in car choices from regulators to consumers brings with it all the uncertainty that characterizes open markets.

Another probable factor: The federal lobbyists advising these companies like the federal rules which they helped shape and which guarantee their continued relevance.

It's Not Just Cars

But then venture into other industries and you find outright hostility to any effort to slow the regulations. An industry lobby for the electric utilities (and electric carmaker Tesla), the National Coalition for Advanced Transportation, has repeatedly gone to court to battle the administration’s decision to reverse Obama’s rule.

This serves as a healthy reminder that the Tesla and other plug-in cars aren’t really zero-emissions vehicles.

Their angle is pretty obvious: Tesla makes cars that run on electricity. That means fuel-economy regulations impose burdens on Tesla’s competitors, but not on Tesla, whose cars become more cost-competitive with more regulation. For the electric utilities, the motive to support regulation is exactly the same as the motive for oil companies to oppose regulation: The utilities want drivers to fuel up on electricity rather than on gasoline.

This serves as a healthy reminder that the Tesla and other plug-in cars aren’t really zero-emissions vehicles. They create emissions—and profits—at the power plant.

Then there’s the aluminum lobby. The Aluminum Association has been lobbying on fuel economy standards, lobbying disclosures show. For many parts, carmakers choose between aluminum and steel. Aluminum is lighter in weight and more expensive. Fuel-efficiency mandates push carmakers toward aluminum components over steel ones.

This tells us two things about the hidden costs of these regulations.

This tells us two things about the hidden costs of these regulations. First, it reminds us that these regulations make cars more expensive to make and thus to buy. This is normal for environmental regulations.

Second, it reminds us that the manufacture of lighter-weight cars can actually cause higher greenhouse gas emissions than the manufacture of heavier cars. The high-heat smelting process involved in aluminum uses tons of energy, and the chemical process that follows inevitably gives off potent greenhouse gases. So measuring the tailpipe emissions only, as the U.S. rules do, misses much of the environmental impact of using aluminum to comply with fuel economy standards.

That the aluminum and electricity lobby—regularly blasted as “polluters”—favor Obama’s regulations doesn’t prove that those regulations are bad. It just proves that the story we’re told about the regulations is wrong.

Reprinted from the American Enterprise Institute.