Maximilian Auffhammer at the Energy Institute at Haas blog:
Maybe the most significant development is President Trump’s call for a review of the Corporate Average Fuel Economy standards, which were updated under the Obama Administration requiring the auto industry to deliver a fleet average of at least 54.5 mpg by 2025. This means that the average new car sold would achieve roughly the fuel economy of a current day Toyota Camry Hybrid. This is no doubt ambitious and US manufacturers have complained publicly about the significant costs this would entail, which would be largely passed through to consumers (or so they claim). ...
The CAFE standard was introduced after the 1973-4 oil embargo and is so complex that a number of my colleagues are spending significant parts of their careers understanding it and its consequences. The most recent version of the standard regulates vehicles by class (passenger cars vs. light trucks) and within class by footprint (trackwidth times wheelbase). ...
If you do the back of the envelope calculation, this is equivalent to a roughly 28% improvement in gallons per mile (the right measure) from the 2017 model year to 2025 for all passenger cars and small footprint light trucks and a 17% improvement for the bigger “light” trucks. This sounds like a lot. And the car industry is crying wolf. A number of think tanks are immediately translating this burden into massive domestic job losses. However, if you read the collected works of the brilliant former EI student Chris Knittel, you will know that auto manufacturers have funneled technical progress into more power rather than into more fuel efficiency. For example, a 1980 Honda Civic in its base model had 55 horsepower which got 34 mpg. The 2017 base model has 158 horsepower and gets roughly 35 mpg. Same fuel economy – thrice the power. The argument has forever been: “Power. It’s what consumers demand”. Chris’ paper suggests that the historical improvements in fuel efficiency amounted to about 2% per year. The Obama goals are about 3% a year. So an acceleration would be required, yet it’s not a moonshot.
In other words, 1 million jobs are not at risk from higher fuel economy standards.
