California cut a deal with automakers who don’t want Trump’s lighter fuel economy mandate
Forbes.com
The Trump White House’s position on climate change is not only one held by an extreme minority–that it is a “hoax” and not real–but automakers are telling the 45th President in their actions that his position is also bad for business.
Several big automakers–Ford, Volkswagen, BMW and Honda, representing about 30% of new-car sales in the U.S.–cut a deal with the State of California that essentially preserves the Obama-era fuel economy targets that Trump has rolled back at the federal level and criticized. Normally, companies are happy to catch a break from the government. But in this case, the industry knows that the Trump position is not only against California’s mandate, with several other big states following its lead, but that Trump’s position will evaporate when he leaves office, which could be as soon as January 2021.
The pact with California lays out the goal of an average vehicle fuel economy of 50 miles per gallon by 2025. That is what Obama left in place when he exited office.
Trump turned to Twitter Thursday to criticize the automakers. “My proposal to the politically correct Automobile Companies would lower the average price of a car to consumers by more than $3000, while at the same time making the cars substantially safer. Engines would run smoother. Very little impact on the environment! Foolish executives!”
There are at least two things wrong with Trump’s assertion. First, Trump’s steel and aluminum tariffs are already costing big automakers like GM and Ford over $1 billion a year with costs increasing the price of vehicles and forcing automakers to cut back staff. The tariffs, meant to shrink the trade deficit the U.S. has with countries like China and Japan, has had the reverse effect, making the U.S. trade deficit worse under Trump as other countries have levied retaliatory tariffs. His assertion that cars are too expensive rings hollow.
The second thing to understand is that climate change is real, not a hoax, and automakers are developing technology that is not only going to be applied in California, but in every other country in the world that is paying attention to the dire warnings from scientists. Vehicles generate almost one-third of man-made greenhouse gas.
California has been able to set its own air standards since the Clean Air Act was established in 1970. And it has vigorously defended that provision through Democrat and Republican administrations, as well as the current Republican Party platform plank that climate change is a “hoax.”
Last month, 17 automotive companies sent Trump a letter warning that weakening fuel economy standards could destabilize their industry. Administration officials responded by have signaled it will try to challenge California’s ability to set stricter standards than the federal government in court.
The reaction from the industry to Trump’s desire to roll back the Obama mandate shows that regulation is not the enemy of industry–uncertainty is. When industries have sensible regulations, they can use technology and innovation to solve their challenges. Stability makes it easier for them to allocate investments and human capital to solving the issues. Chaotic rule making, however, makes their own investment strategy chaotic and wasteful.
When industry tells regulators that it is a mistake to go easier on them, it’s time to take the issue seriously.
