President Donald Trump recently traveled to Detroit to announce his commitment to rolling back fuel economy standards for automobiles. Newly-released documents show that Trump also is proposing to cut funding to government enforcement of fuel economy standards, allowing automakers to ignore even rolled-backed standards.
In sum, the Trump administration seems determined to “make American auto manufacturing obsolete again.”
The future of the automobile lies in electric and hybrid cars. This is not just our opinion. It is also the opinion of the automakers themselves.
In April 2016, Ford CEO Mark Fields declared that the company would not be left behind in the race to develop long-range electric vehicles. That’s part of why automakers themselves agreed to the Obama-era standards back in 2011. The standards were seen as a fair compromise between those who advocated for weaker standards and those who advocated for much stricter ones. But they were also seen as a necessary boost to an industry otherwise reluctant to innovate. Even at the time, Chrysler-Fiat CEO Sergio Marchionne declared: “It will be a huge boost for the industry.”
Marchionne was right. Corporate managers have a tendency to focus only on the next quarter’s earnings and stock prices, which is why sometimes they need the government to nudge them to think and act for the long-term.
But now, by turning around and lobbying to weaken the standards, Ford and other automakers are pulling up the seeds of their own success. The fact is that companies don’t advance by becoming less efficient. Especially when the rest of the world continues to become more efficient. Lowering domestic fuel economy standards will only make American cars less competitive abroad, where standards are not set to go down. This will have a profound ripple effect on the automakers and on the economies of several Midwestern states.
A large number of small and medium-sized businesses in the Midwest service the large auto companies. These include a growing tech sector that would have prospered from greater production of high-tech, low and zero emissions vehicles. The thriving wind industry in the Midwest — an industry whose product is electricity — also will be harmed by a retreat from a commitment to higher fuel economy standards.
And it is not as if meeting the fuel economy standards the automakers previously agreed to will be particularly expensive. According to one recent study, automakers will have to invest less than $900 per vehicle on average to meet the 2025 standards. No one disputes that meeting the standards, or even exceeding them, is technologically feasible.
So why are automakers doing this? For one thing, gas prices continue to be low, and automakers enjoy a higher profit margin on SUVs than they do on smaller vehicles. The automakers want to boost their near-term profits, even if that disadvantages them in the long run. And the election of Trump has led them (and an array of other corporations) to believe they now can reap profits without any consideration of the impacts on the environment.
The automakers also may figure that Trump’s EPA will not permit California to adopt strict fuel economy standards as a response to the federal roll back.
Under the federal Clean Air Act, California is given special authority to adopt standards that are stricter than the federal ones, but it must obtain a waiver from the EPA to do so. All available indications are that Trump’s EPA will deny California’s waiver request. The Trump Administration appears poised both to undo federal initiatives to combat climate change and to attempt to thwart states that wish to fill the void left by the absence of federal leadership.
This brings us to the ultimate act of short-sightedness in the federal roll back: the impact on climate change. Despite what politicians say, climate change is perhaps the greatest threat to the nation and the world. Rising sea levels really do threaten large chunks of Florida and the East Coast, just as drought threatens large parts of California and the Southwest. Climate change could also effectively destroy the ecosystem of the Great Lakes, which in many ways are the very heart of the Midwest. And in an interconnected nation, and for that matter an interconnected world, harms from climate change will be felt by all of us, even if we do not see them first-hand.
There is something citizens can do: they can call their representatives in Congress and make clear that they care about keeping strict fuel economy standards. And, in Illinois, we can press the Rauner Administration and the state legislature to side with California in its fight to retain the right to exceed federal standards. The long-term economic vitality of the U.S. auto industry — and indeed the future of the planet — may depend on it.
David Dana and Michael Barsa are professors at Northwestern Pritzker School of Law.
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