Key Economic Errors in the Clean Car Standards Rollback
The federal Clean Car Standards promised steadily increasing fuel efficiency and lower vehicle emissions. The National Highway Traffic Safety Administration and the Environmental Protection Agency have now rolled back those standards, eviscerating important public health benefits and fuel savings for consumers. But the agencies’ own analysis shows that the rollback will cause more harm than good for society. And even the slight benefits that the agencies find under certain assumptions are premised on a flawed economic analysis that is riddled with problems.
We released a resource that explains the main economic problems with the rollback’s justification, identifying several critical errors and detailing how they invalidate the agencies' own claims. Here is a brief summary of each problem:
- The agencies were forced to abandon their cost-benefit analysis from the initial proposed rule, as it was riddled with errors. And now they have been forced to finalize a rule that shows net costs to society. That violates longstanding agency guidance and practice and is likely to be judged unreasonable in court.
- The agencies have overestimated the impact of fuel efficiency improvements on car prices by ignoring various compliance options available to manufacturers.
- The agencies have underestimated the climate damages caused by the rollback, through the use of an arbitrary calculation of the social cost of carbon.
- The agencies significantly overstate the benefits of rolling back the Clean Car Standards -- assuming that drivers will drive less with less efficient cars and that the reductions in driving will lead to significantly less pollution, less congestion, and fewer accidents.
- The agencies have unreasonably weighed their statutory factors to focus in a lopsided way on shortterm costs over lifetime energy savings and societal impacts to health and the environment.
- The agencies have undercounted the respiratory harms and premature deaths caused by increased pollution from oil extraction, refining, and distribution, by relying on assumptions about oil imports that are inconsistent both internally and with basic economics.
- The agencies’ analysis now finds that the rollback will cause the fleet size to increase, reversing the assumption that formed the main justification for the agencies’ 2018 proposal. But they make a new error by failing to recognize that the rollback will cause people to move into driving their own cars, exacerbating congestion and pollution.
- The only way to make the rule’s benefits outweigh its costs is through one of the agencies' numerous sensitivity analyses, which inflates the benefits of the rollback by assuming that it will allow consumers to buy vehicles with more features, like higher horsepower and fancy entertainment systems. But the agencies themselves conclude that the analysis is unreliable and, indeed, that sensitivity analysis relies on flawed assumptions.
Our resource includes a full description of each economic problem, as well as citations to the final rule and other relevant materials.