The Trump administration on Monday, April 2, took steps to ease pollution and efficiency rules for new passenger cars and trucks, giving automakers a reprieve from more stringent Obama-era standards. But in the process, the move could yield global leadership in the auto sector to the Chinese.
Environmental Protection Agency Administrator Scott Pruittย announced a plan to revise existing tailpipe standards that were going to apply for model years 2022 to 2025, saying the current standards โare not appropriateโ and were set โtoo high.โ Pruitt also said the EPA is re-examining the state ofย Californiaโsย historic ability to adopt tailpipe standards that are more ambitious than the federal governmentโs.
One might think of this as another case ofย industry versus environmentalists. After all, the automakers areย callingย for eased regulatory burdens and โharmonizedโ standards across the states and the federal government. Environmentalistsย decry the moveย as undermining our nationโs efforts to cut carbon pollution.
But the EPAโs planned rollback of fuel economy rules defies the simple narrative that businesses and environmentalists are butting heads. Over the last half century, tailpipe emissions rules have helped the nation develop a vibrant, globally competitive automotive sector. As a former senior energy congressional staffer and now a law professor, I have learned that well-designed environmental standards can spur innovation and give our domestic companies a โfirst-mover advantage.โ
As a policy professional, I met countless times over two decades with car makers, their suppliers, technologists, environmental advocates and entrepreneurs. In my view, reversing course on the EPAโs tailpipe standards threatens to yield this competitive advantage to other nations.
Parts suppliers versus car makers
Some segments of the auto industry understand the importance of emissions standards. A recentย surveyย done on behalf of a clean transportation industry group found that 95 per cent of auto parts suppliers agreed that more ambitious standards encourage innovation and investment in the U.S.
These companies overwhelmingly want the EPA standards maintained or even strengthened and areย letting policymakers knowย that any relaxation will cost U.S. manufacturing jobs. Suppliers of pollution control technologies haveย toldย the EPA that weakening the standards could strand current investments and jeopardize new investments in domestic manufacturing of clean car technologies.
These parts suppliers employ hundreds of thousands of workers and their market is expected to grow to $23 billion (U.S.) by the end of the decade. In theirย own words, the industry group Manufacturers of Emission Controls Association said its members continue โto grow and add more jobs in response to environmental regulations.โ In 2017 alone, these manufacturers invested over $3 billion in developing technologies that reduce emissions from mobile sources.
Although Pruittย said in a statementย that the standards are based on โassumptions that do not comport with realityโ and are set โtoo high,โ the manufacturers responsible for producing technological options for compliance haveย saidย that there are โwell known technologies โฆ to meet the 2025 standardsโ including some new technologies that werenโt anticipated when the standards were last reviewed but are now expected to be available.
Developed and made in America
The landmark Clean Air Act, passed in 1970 and strengthened in 1990, has two key policy features that have spurred innovation and economic activity in the auto manufacturing sector.
First, the actย saysย that EPA standards for cars and trucks take effect after the period โnecessary to permit the development and application of the requisite technology, giving appropriate consideration to the cost of compliance within such period.โ This even-handed approach ensures that the auto manufacturers have the time they need to develop pollution control technology, and that the EPA can set standards stringent enough to require the development and deployment of new technology.
This โtechnology-forcingโ approach has brought innovation to an industry that hasnโt always embraced it โ from the industryโs well-known resistance to catalytic converters decades ago to todayโsย reluctanceย to adopt available technology to improve the efficiency of conventional internal combustion engines.
Second, Congress hasย preserved the abilityย of California to set its own tailpipe standards โ an authority the state has exercised since before the EPA was created in 1970. Other states may opt-in. In the case of Californiaโs greenhouse gas standards for cars and trucks,ย 13 states have decided to do so, creating a combined market pull ofย approximately 30 per centย of the nationโs annual new passenger car and truck sales.
The world can then follow. This โCalifornia effectโ occurs as jurisdictions within and outside of the United States trade up to more stringent emissions standards to achieve their benefits and simplify compliance.
Under this virtuous cycle, the U.S. leads with tougher standards that drive research, technology development, commercialization and manufacturing. That technology is then sold to the world.
California vs. China
China, however, is leap-frogging the U.S. policy.
In 2010, the Chinese government designated โnew energy vehiclesโ โ essentially those that plug in to electrical outlets โ as a โstrategic emerging industry.โ Officials have done this not only to reduce urban smog but also asย a tool for industrial development. It helps Chinese industry capture domestic market share while establishing Chinese automakers as global leaders in the technology; it also develops their domestic battery-making sector.
California also requires automakers to supply a growing number of plug-in vehicles. But that program, which has seemed ambitious domestically and hasย shared goals and approachesย with China, simply is not at the same scale as Chinaโs.
This has created an opportunity that China seeks to capitalize on in the coming decades. Chinaโs recently adopted goals for plug-in vehicles overtake Californiaโs program by requiring anย aggressive deploymentย of plug-in vehicles beginning in 2019 with a target ofย 7 million new plug-in cars sold per yearย by 2025. The Chinese government is evenย openly discussingย the appropriate date to discontinue sales of internal combustion engine vehicles within China.
By comparison, automakers will be able to comply with Californiaโs zero emission vehicle requirement ifย just 8 per centย of new cars sold in 2025 are electric. If 2 million new cars continue to be sold in California in 2025, that would amount to just 160,000 electric vehicle sales annually.
Chinaโs policies are being reflected in corporate decisions. Even as Daimler teams with a Chinese partner to invest $2 billion in a manufacturing plant in China, Chinese automaker Geely has accumulatedย nearly 10 per centย of Daimlerโs stockย reportedly in a bidย to secure its electric and autonomous vehicle technology. Ford has committed to aย $765 million investmentย to jointly build electric vehicles with a Chinese partner.
Given the essential need to reduce carbon pollution from the transportation sector, I see the policy rationale for fuel efficiency and pollution reduction mandates in the years to come as ironclad.
From an economic point of view, clean car technology represents a tremendous opportunity for the nation willing to step up and lead as the world transitions in the decades to come. While it may still be an open question as to which country will benefit the most from this transition, the EPA decisions could tilt the playing board away from U.S. companies.
This article originally appeared onย The Conversation