Does cheaper gas mean that fuel efficiency standards need to be relaxed?

EPA Fuel Economy Label

It may not be time to panic yet, but auto industry pundits are parsing some recent comments by a DOT official suggesting that the EPA may consider watering down federal fuel efficiency standards that are scheduled to take effect in 2022.

A midterm review of the CAFE regulations is coming up, beginning with a report for public comment by June 2016, and ending with a final ruling on whether to change the standards by April 2018. Government officials have said they are “cautiously optimistic” that carmakers can meet the current standards, which will require average fuel economy of 54.5 mpg.

The regulations were announced in 2012, and naturally a review will need to take account of changes in the auto market since then. Just as naturally, automakers see those changes – lower gas prices and a stronger economy – as reasons to relax the standards.

“We agreed the midterm review would take a fresh look…that those [regulations] would be based on updated data,” Kevin Green, Chief of the DOT’s CAFE Program Office, told the Detroit News following a presentation at Automotive World’s Megatrends USA conference. “I can’t see how we would not use an updated assessment of the market.”

“This is a consumer-driven program,” said Chris Nevers of the Alliance of Automobile Manufacturers, a trade organization that represents 12 automakers. “These vehicles have to be sold, not just produced.” Nevers said that, according to EPA figures, only 3.1 percent of 2013 model-year vehicles met the 2025 CAFE standards.

According to Green Car Reports, the general consensus is that carmakers have had little trouble meeting the increasing requirements so far, even though hybrid sales are actually declining, and plug-in sales remain a small part of the market. In 2014, the automakers had their best year of sales since 2006.

 

Source: Detroit News, Green Car Reports, New York Times