RFF Comments on NHTSA and EPA Fuel Economy and GHG Standards

The Trump administration is proposing to freeze the fuel economy and greenhouse gas standards, maintaining model-year 2020 levels through model-year 2026. This is an abrupt change from the Obama standards, which would have continued reducing fuel consumption and emissions limits over that time period. Given current policies, the new standards would increase fuel consumption and greenhouse gas emissions during that period and beyond; our report in April provides a rough sense of the fuel consumption and emissions at stake. 

The period for public comment on these proposed standards closes today, and we have submitted two sets of comments to the two agencies that administer the standards: the National Highway Traffic Safety Administration (NHTSA) and the Environmental Protection Agency (EPA). Commenting on proposed regulations is an important part of the regulatory process, because the agencies are required to consider the comments they receive from the public when they set the final standards.

The first set of comments, by Alan Krupnick, Benjamin Leard, Joshua Linn, and Virginia McConnell, is based on our recent research and blog post series. We appreciate the effort the agencies have made to expand the scope of their benefit-cost analysis by including the effects of the standards on vehicle sales and scrappage. These outcomes could substantially affect the estimated benefits and costs of the standards. Unfortunately, the way the agencies model these effects runs counter to economic theory and empirical evidence from the literature. We find that more reasonable assumptions about scrappage and driving would dramatically reduce net benefits of freezing the standards at model year 2020 levels—at least by half, and perhaps entirely. We make suggestions on other aspects of the analysis, and our comments are organized in seven sections:

1. Analysis of the effects of vehicle standards on vehicle sales and retirements
2. Comparison of fuel cost savings between 2016 Draft Technical Assessment Report (TAR) and 2018 Notice of Proposed Rulemaking (NPRM)
3. Implications of behavioral assumptions for the estimated fuel cost savings and traffic accidents
4. Evaluation of the rebound literature
5. Greenhouse gases and local air pollution
6. Inclusion and modeling of credit averaging, banking, and trading
7. Other issues related to cost estimates

The second set of comments, submitted by Maureen Cropper, Robert Kopp, Richard Newell, Billy Pizer, Kevin Rennert, and Casey Wichman, focuses on the method used by EPA and NHTSA to update the social cost of carbon dioxide used to value the economic effects of expected changes in greenhouse gas emissions from the proposed rule. These comments explain that EPA and NHTSA’s update to the social cost of carbon dioxide is unresponsive to recommendations put forth by the National Academy of Sciences, Engineering, and Medicine; focuses on a domestic social cost of carbon dioxide in the central analysis that omits important economic interactions and considerations related to the global nature of climate change; and adopts a seven percent discount rate that is conceptually inappropriate for estimating the social cost of carbon dioxide.

These are important issues, and we hope that the agencies will consider our input, and all the other input they have received, as they develop the final standards.