Ignore politicians: lower fuel-economy rules don't create jobs, analyst says


Production line at GM’s Orion Assembly plant in Michigan

Production line at GM’s Orion Assembly plant in Michigan

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A common refrain among critics of current and future fuel-economy standards is that the need to comply with them produces job cuts in the auto industry.

It's a theme picked up by President Donald Trump during a much-publicized visit to Detroit last week.

In the hometown of the Big Three U.S. automakers, Trump discussed plans to end what he termed the government "assault" on the auto industry.

DON'T MISS: What Trump did and didn't say in Detroit on EPA emission rules

He painted regulations as a major cause of job losses in the auto industry, along with what he views as automakers' over-eagerness to build cars for sale in the U.S. outside the country.

Trump directed the EPA to reopen the midterm review of proposed fuel-economy rules for 2022 through 2025 model-year cars that it had ended more than a year early when it finalized those standards in the last days of the Obama administration.

But there is no hard evidence that fuel-economy standards are "job killers," argues a recent Yale School of Forestry & Environmental Studies blog post.

2014 Chevrolet Corvette Stingray production line

2014 Chevrolet Corvette Stingray production line

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That's because the standards were developed with enough flexibility to deal with economic factors like market shifts and changes in gas prices, notes author John M. DeCicco, a research professor at the University of Michigan Energy Institute.

Even if automakers have to make design changes to accommodate regulations, they still produce and sell cars all the same.

An efficiency-improving component like a new transmission must still be engineered, manufactured, and installed in new cars, DeCicco notes—just like any other component.

ALSO SEE: EPA to reopen emission-rule review; how important is this step?

In fact, the last major job losses in the U.S. auto industry began during the 2008 recession, which directly followed a period of stagnant Corporate Average Fuel Economy standards.

Ford, General Motors, and Chrysler were hurt not only by decreasing sales, but were hit particularly hard by the higher gas prices that also occurred during that period.

That's because the Detroit automakers had largely ignored fuel-efficient cars in favor of gas-guzzling SUVs and trucks, which had admittedly sold very well for them up to that point.

2015 Ford Mustang production at Flat Rock Assembly Plant, Michigan

2015 Ford Mustang production at Flat Rock Assembly Plant, Michigan

Enlarge Photo

The auto industry was well on its way to recovery when the current CAFE standards were approved, and has enjoyed record sales for the past couple of years.

Over the five-year phase-in leading up to the final 2025 fuel-economy target, the incremental cost of compliance per vehicle will average $240, according to DeCicco.

That's "well within the cost savings automakers routinely achieve each year through productivity gains," he said.


 
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