Federal EV tax credit: unnecessary, inefficient, unpopular, costly, and unfair

In April, Senator Debbie Stabenow (D-MI) introduced the Drive America Forward Act, a bill that would expand the tax credit for new plug-in electric vehicles (EVs) by allowing an additional 400,000 vehicles per manufacturer to be eligible for a credit of up to $7,000. Currently, the tax credit is worth up to$7,500 until a manufacturer sells more than 200,000 vehicles. In late September, groups that stand to benefit from the extension of the federal tax credits wrote to Senator McConnell and other leaders in Congress, encouraging them to support on the Drive America Forward Act. As IER has documented in the past, lawmakers should not extend the EV tax credit as the policy is unnecessary, inefficient, unpopular, costly, and unfair.

Unnecessary and inefficient

The EV tax credit is not necessary to support an electric vehicle market in the U.S. as one group estimates that 70 percent of EV owners would have purchased their vehicle without receiving a subsidy, which is reasonable seeing as 78 percent of credits go to households making more than $100,000 a year.  Furthermore, the federal tax credit overlaps with a number of other government privileges for EVs, including:

  • State rebates and/or other favors (reduced registration fees, carpool-lane access, etc.) in California, as well as in 44 other states and the District of Columbia.
  • Tax credits for infrastructure investment, a federal program that began in 2005 and, after six extensions, expired in 2017.
  • Federal R&D for “sustainable transportation,” mainly to reduce battery costs, averaging almost $700 million per year.
  • Credit for EV sales for automakers to meet their corporate fuel economy (CAFE) obligations.
  • Mandates in California and a dozen other states for automakers to sell Zero-Emission Vehicles—a quota in addition to subsidies.

Even if the federal tax credits were needed to support demand for EVs, the extension of the tax credit would be an absurdly inefficient means of achieving the stated goal of the policy, which is ostensibly to lower carbon emissions. The Manhattan Institute found that electric vehicles will reduce energy-related U.S. carbon dioxide emissions by less than 1 percent by 2050.

Unpopular

Lawmakers should be aware that the vast majority of people do not support subsidizing electric vehicle purchases. The American Energy Alliance recently released the results of surveys that examine the sentiments of likely voters about tax credits for electric vehicles. The surveys were administered to 800 likely voters statewide in each of three states (ME, MI and ND). The margin of error for the results in each state is 3.5 percent.

The findings include:

  • Voters don’t think they should pay for other people’s car purchases. In every state, overwhelming majorities (70 percent or more) said that while electric cars might be a good choice for some, those purchases should not be paid for by other consumers.
  • As always, few voters (less than 1/5 in all three states) trust the federal government to make decisions about what kinds of cars should be subsidized or mandated.
  • Voters’ sentiments about paying for others’ electric vehicles are especially sharp when they learn that those who purchase electric vehicles are, for the most part, wealthy and/or from California.
  • There is almost no willingness to pay for electric vehicle car purchases. When asked how much they would be willing to pay each year to support the purchase of electric vehicles by other consumers, the most popular answer in each state (by 70 percent or more) was “nothing.”

The full details of the survey can be found here.

Costly and unfair

Most importantly, an extension of the federal EV tax credit is unfair as the policy concentrates and directs benefits to wealthy individuals that are predominantly located in one geographic area, namely California. A breakdown of each state’s share of the EV tax credit is displayed in the map below:

In 2018, over 46 percent of new electric vehicle sales were made in California alone. Given that California represents only about 12 percent of the U.S. car market, this disparity means that the other 49 states are subsidizing expensive cars for Californians.  However, in order to understand the full extent of the benefits that people in California are receiving, some further explanation is in order.

When governments enact tax credit programs that favor special businesses without reducing spending, the overall impact is parallel to a direct subsidy as the costs of covering the tax liability shift to the American taxpayer or are subsumed in the national debt (future taxpayers). California offers a number of additional incentives on top of the federal tax credit for electric vehicles that are also driving demand for EVs in the state. These incentives include an additional purchase rebate of up to $7,000 through the Clean Vehicle Rebate Project, privileged access to high-occupancy vehicle lanes, and significant public spending on the infrastructure needed to support EVs. Therefore, the additional incentives that California (and other states) offer to promote EVs have broader impacts as these policies incentivize more people to make use of the federal tax credit, passing their costs on to American taxpayers. In other words, you’re not avoiding the costs of California’s EV policies by not living in California.

This problem is made even worse when we consider the impact of zero-emission vehicle (ZEV) regulations, which require manufacturers to offer for sale specific numbers of zero-emission vehicles. As recently as 2017, auto producers have been producing EVs at a loss in order to meet these standards, and they have been passing the costs on to their other consumers. This was made apparent in 2015 by Bob Lutz, the former Executive Vice President of Chrysler and former Vice-Chairman of GM, said:

“I don’t know if anybody noticed, but full-size sport-utilities used to be — just a few years ago used to be $42,000, all in, fully equipped. You can’t touch a Chevy Tahoe for under about $65,000 now. Yukons are in the $70,000. The Escalade comfortably hits $100,000. Three or four years ago they were about $60,000. What this is, is companies trying to recover what they’re losing at the other end with what I call compliance vehicles, which are Chevy Volts, Bolts, plug-in Cadillacs and fuel cell vehicles.”

Fiat Chrysler paid $600 million for ZEV compliance credits in 2015 (plus an unknown amount of losses on their EV sales), and sold 2.2 million vehicles, indicating Fiat Chrysler internal combustion engine (ICE) buyers paid a hidden tax of approximately $272 per vehicle to subsidize wealthy EV byers. ICE buyers were 99.3 percent of U.S. vehicle purchases in 2015. So, even if half the credits purchased were for hybrids, each EV sold in 2015 was subsidized by more than $13,000 in ZEV credit sales, in addition to all of the other federal, state, and local subsidies.

As is typical with most policies that benefit a politically privileged group, the plan to extend the federal tax credit program comes with tremendous costs, which are likely being compounded by people abusing the policy.  One estimate found that the overall costs of the Drive America Forward Act would be roughly $15.7 billion over 10 years and would range from $23,000 to $33,900 for each additional EV purchase under the expanded tax credit. Seeing as the costs of monitoring and enforcing the eligibility requirements of the EV tax credit program are not zero, it should surprise no one that the program has been abused as it has recently come to light that thousands of auto buyers may have improperly claimed more than $70 million in tax credits for purchases of new plug-in EVs. Finally, additional concerns arise over the equity of the federal EV tax credit due to the fact that half of EV tax credits are claimed by corporations, not individuals

End this charade

When the tax credit was first adopted, politicians assured us that the purpose of the program was to help launch the EV market in the U.S. and that the tax credit would remain capped at the current limit of 200,000 vehicles. At that time, we warned that once this program was in place, politicians would continue to extend the cap in order to appease the demands of manufacturers and other political constituencies that were created by the program. A decade later, we find ourselves in that exact situation. At this point, it should be clear that Congress should not expand the federal EV tax credit as the program is nothing more than an extension of special privileges to wealthy individuals and corporations that are mostly located in California. If Congress can’t find the courage to put an end to such an unfair and inefficient policy, President Trump should not hesitate to veto any legislation that extends the federal EV tax credit, as doing so would be consistent with his approach to other energy issues such as CAFE reform.


AEA to Senate: Highway Bill is Highway Robbery

WASHINGTON DC (July 30, 2019) – Today, Thomas Pyle, President of the American Energy Alliance, issued a letter to Senate Environment and Public Works Committee Chairman John Barrasso highlighting concerns about the recently introduced America’s Transportation Infrastructure Act. Included in the legislation is an unjustified, $1 billion handout to special interests in the form of charging stations for electric vehicles.  AEA maintains that provisions like this are nearly impossible to reverse in the future and create a regressive, unnecessary, and duplicative giveaway program to the wealthiest vehicle owners in the United States. 
 
Read the text of the letter below:
 

Chairman Barrasso,

The Senate Committee on Environment and Public Works is scheduled to consider the reauthorization of the highway bill and the Highway Trust Fund today.  At least some part of this consideration will include provisions that provide for $1 billion in federal grants for electric vehicle charging infrastructure.  This is among $10 billion in new spending included in a “climate change” subtitle.  All of this new spending is to be siphoned away from the Highway Trust Fund (HTF), meant to provide funding for the construction and maintenance of our nation’s roads and bridges.  The HTF already consistently runs out of money, a situation that will only be exacerbated by these new spending programs.

We oppose this new federal program for EV infrastructure for a number of reasons, including, but not limited to the following:

  • The grant program, once established in the HTF, will never be removed.  Our experience with other, non-highway spending in the trust fund (transit, bicycles, etc.) is that once it is given access to the trust fund, the access is never revoked.  Our nation’s highway infrastructure already rates poorly in significant part due to the diversion of highway funds to non-highway spending.
  • As we have noted elsewhere, federal support for electric vehicles provides economic advantages to upper income individuals at the expense of those in middle and lower income quintiles.  This grant program would exacerbate that problem.
  • This program will result in taxpayers in States with few electric vehicles or little desire for electric vehicles having their tax dollars redirected from the roads they actually use to subsidize electric vehicle owners in States like California and New York.
  • This program is duplicative.  There is already a loan program within DOE that allows companies and States to get taxpayer dollars to subsidize wealthy electric vehicle owners.

For these and other reasons, we oppose the provisions that would create a regressive, unnecessary, and duplicative giveaway program to wealthy, mostly coastal electric vehicle owners.  This giveaway not only redirects taxpayer money from the many States to the few, in looting the Highway Trust Fund it also leaves those many States, including Wyoming, with less money to maintain their own extensive road networks.


Sincerely,

Thomas J. Pyle

Au revoir, Paris

American Energy Alliance celebrates President Trump’s continued leadership on U.S. withdrawal from lopsided climate agreement

WASHINGTON DC (November 5, 2019) – Today, the American Energy Alliance (AEA) cheered the announcement that the Trump administration was making formal steps to withdraw from the Paris Agreement on climate change.
 
Since nearly the moment it was announced more than four years ago, AEA has been advocating that the United States depart from this ill-advised, misleading, and ineffective arrangement that committed U.S. taxpayers to billions of dollars while doing  virtually nothing to protect the environment.
 
According to the models of the Intergovernmental Panel on Climate Change (IPCC), the economic costs of cutting greenhouse gas emissions to hit the Paris targets are greater than the expected costs of environmental damage from climate change. This is true when looking at all representative pathways, even the worst-case scenario modeled. In other words, the IPCC consensus science is that compliance with the Paris minimum target of 2 degrees Celsius—let alone the more ambitious 1.5 degrees goal—would be more harmful than the environmental cost of doing nothing.
 
Furthermore, as evidenced by recent documents uncovered by the watchdog group Government Accountability & Oversight, it was probably unlawful to enter into the treaty in the first place. 
 
Tom Pyle, President of the American Energy Alliance, issued the following statement in reaction to Secretary of State Michael Pompeo’s announcement:

“President Trump promised to represent Pittsburgh, not Paris. Today, by submitting the formal notification of its withdrawal of the Paris Agreement to the United Nations, the president took another important step towards ending American participation in this costly and unpopular U.N. climate scheme. The Paris Agreement was a bad deal for the U.S. and another in a long line of “America last” energy policies put forward by the previous administration. President Trump stood up to the climate bullies here and across the globe when he promised to withdraw from an agreement with no redeeming value fo the United States. Today was another important step towards fulfilling that promise.” 

For media inquiries, please contact Jon Haubert.
[email protected]
303.396.5996

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Pittsburgh’s “Clean Energy” Cronies Can’t Hide Behind Mayor Peduto Forever

On Wednesday, President Trump appeared in Pittsburgh to discuss American energy policy and his commitment to withdraw from the Paris Climate Agreement. Following the appearance, Pittsburg’s mayor, William Peduto, issued a press release that made several claims misrepresenting the reality of American energy policy and the current state of the energy industry in Pennsylvania. Two of those claims are worth addressing here.

Claim 1: “President Trump’s remarks on energy and the Paris Agreement today underscore why the 2020 election is so important, not only for the United States but for the world.  The United States cannot officially withdraw from the Paris Agreement until November 2020, so final action will rightly be made by the next President.”

Response: President Trump will remain President until at least January 20, 2021 and he has stated that he remains committed to removing the United States from the Paris Climate Agreement in November just as he previously announced.  If we recognize that politicians are at least partially motivated by their desire to be reelected, it’s not surprising that Mayor Peduto would pair an inaccurate claim like this with an emphasis on the importance of a future election. In fact, because of the press release’s emphasis on the mayor’s policies and their support for the clean energy industry (addressed below), it’s reasonable to interpret the entire press release as the mayor simply reminding those who are dependent on those policies to vote in future elections.

Claim 2: “In Pennsylvania there are twice as many workers employed by the clean energy industry than by fossil fuel producers. There are more clean energy workers in Allegheny County than any other county in the state, including Philadelphia. The plans the City of Pittsburgh has adopted to cut carbon emissions in half are projected to add 110,000 full-time equivalent jobs by 2030.”

Response: These job numbers come from E2, and a recent blog from that organization makes a similar claim: “Since 2014, Pennsylvania has increased its workforce in clean technologies like renewables, energy efficiency, clean vehicles, storage, and grid modernization by nearly 60 percent – employing now twice as many workers as the state’s entire fossil fuel industry. This recent growth over the past several years has put Pennsylvania within 4,400 jobs of overtaking Virginia as the No. 10 state in the U.S. for clean energy employment.” 

Politicians define economic success based on irrelevant metrics like the number of jobs their policies create because they need some way of convincing people that their “contributions” to economic activity are valuable. Unfortunately for Mayor Peduto, his argument only highlights how destructive his clean energy policies actually are. The purpose of economic activity isn’t to create jobs; it is to produce things that people want. Imagine if we organized economic activity in such a way where people’s labor was directed at digging ditches using spoons. This would create a lot of jobs, but no reasonable person would consider that arrangement to be ideal.

Here is a breakdown of end-use energy consumption in Pennsylvania in 2017 (the most recent year data is available): 

And here is a breakdown of the U.S. in 2018:

As you can see, while the clean energy industry might be creating a lot of jobs, the fossil fuel industry is doing all the heavy lifting when it comes to producing reliable and affordable energy that enriches people’s lives. This suggests that a great deal of these clean energy jobs exist simply to meet the guidelines of costly regulations and the state’s alternative portfolio mandate.

Mayor Peduto might argue that these jobs are in research and development and are working to produce the products of the future. That’s all well and good, but since those products have yet to pass a market test, it’s too early to say whether or not these jobs are contributing to anything productive. That leaves us to wonder why the Mayor of Pittsburgh spends time speculating about the future success of certain industries; it’s almost as if he has a vested interest in seeing them succeed.

The fact that the fossil fuel industry produces more energy with less labor is not a trivial matter. Labor is scarce and can only be allocated to solving so many problems at a time. Therefore, we should recognize that the efficiency of the fossil fuel industry is freeing up labor to supply other goods and services in order to meet the other needs of Pennsylvania’s economy. Thank you fossil fuels!

USDA Seeks to Right Past Wrongs in Alaska

After two decades of needless, halted activity, exempting Tongass National Forest from 2001 Roadless Rule right call for Alaska and America

WASHINGTON DC (October 21, 2019) – The American Energy Alliance applauded the United States Department of Agriculture (USDA) today for moving forward on public comment on a draft Environmental Impact Statement for alternatives to a proposed Alaska Roadless Rule.  If adopted, the proposed rule would exempt the 17-million acre Tongass National Forest from the 2001 Roadless Area Conservation Rule which many Alaskans and businesses believe has thwarted the state’s economic development.  Thomas Pyle, President of AEA, made the following statement: 

“Alaska – rich in nearly every natural resource known to mankind – has been stuck in regulatory morass for decades because of past mistakes from previous administrations’ shortsightedness. The Tongass National Forest alone is larger than West Virginia, and its forest is important to the local residents for their livelihoods.  The state has been asking for this for years and it’s great to see an administration finally step up.”

“Whether it’s pipeline protests, offshore drilling, stopping development in or near ANWR, mining, transportation, abusing the Endangered Species Act or the National Environmental Policy Act, environmentalists have thwarted responsible development in Alaska for decades. President Trump is bringing back common sense stewardship that will allow for human uses as well as better management, and making up for so much time lost.  We support and applaud this effort.”

For media inquiries, please contact Jon Haubert.
[email protected]
303.396.5996

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Key Vote NO on CRA resolution on ACE rule

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The American Energy Alliance urges all Senators to oppose the Congressional Review Act resolution on the Affordable Clean Energy (ACE) rule.

The ACE rule was a necessary corrective on the overreaching Clean Power Plan (CPP) from the previous administration.  The CPP asserted entirely new federal powers from the statutory language that had a long-settled interpretation.  As was clear from the CPP’s record in court proceedings, which were so negative that the rule never went into effect, this assertion of new power was unlawful.  The current administration correctly withdrew the unlawful CPP and substituted a replacement which more accurately conforms to the statutory powers of the Environmental Protection Agency.

The AEA urges all members to support free markets and affordable energy by voting NO on the ACE Rule Congressional Review Act resolution.  Should a vote on this resolution occur, AEA will include it in its American Energy Scorecard.

Voters to Congress: Make a U-Turn on Special Vehicle Preferences

Latest AEA polling shows voters in Michigan, South Dakota, and Maine overwhelmingly distrust the federal government to make decisions about what kinds of vehicles should be subsidized or mandated.

WASHINGTON DC (October 15, 2019) – As some in Congress are attempting to extend the federal electric vehicle tax credit, the American Energy Alliance (AEA) today released the results of three more state surveys conducted by MWR Strategies that examined the sentiments of likely voters regarding tax credits for electric vehicles and their willingness to pay for them.  
 
The surveys were administered to 800 likely voters statewide in each of three States (MichiganSouth Dakota, and Maine) in September.  This follows on nine essentially identical statewide surveys conducted in May (MO, PA, IA, KY, GA, SC, NC, CO, and OH).  The margin of error for the surveys in each state is 3.5%.
 
The findings in the most recent surveys are very similar to the findings in the surveys conducted previously in other States. They include: 

  • There is almost no willingness to pay for others’ electric vehicles.  When asked how much they would be willing to pay each year to support the purchase of electric vehicles by other consumers, the most popular answer in each State (usually more than two-thirds of respondents, 70% in Michigan, 74% in Maine, 82% in South Dakota) was “nothing”. 
  • As always, few voters (usually less than 1/5) trust the federal government to make decisions about what kinds of cars should be subsidized or mandated. 
  • Voters don’t think they should pay for other people’s car purchases.  In every State, overwhelming majorities (typically three-quarters of respondents) said that while electric cars might be a good choice for some those purchases should not be paid for by other consumers. 
  • Voters’ sentiments about paying for other’s electric vehicles are especially sharp when they learn they that those who purchase electric vehicles are, for the most, wealthy and/or from California.

Thomas Pyle, President of AEA said:  “This is further evidence that efforts to compel taxpayers, ratepayers, workers, and consumers to pay for the choices of others, and the preferences of government bureaucrats, are doomed and will lead directly to voter resistance. The citizens of Maine, Michigan, and South Dakota see an expansion of the electric vehicle tax credit exactly for what it is: a giveaway to rich Californians and large, already prosperous corporations.

Michael McKenna, President of MWR Strategies, said: “Elected officials who are concerned about voter opinion should probably think twice before expanding favorable tax treatment for electric vehicles. Voters in each of the 12 States we examined are very skeptical of them, and that skepticism extends across partisan and demographic groups.

Additional Background:

For media inquiries, please contact Jon Haubert.
[email protected]
303.396.5996

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Bringing Guidance Out of Darkness Executive Order Sheds Light on Rarely Seen Regulatory Abuse

WASHINGTON DC (October 10, 2019) – Today, Thomas Pyle, President of the American Energy Alliance, issued the following statement in support of the “Bringing Guidance out of the Darkness” executive order signed by President Trump.

“Only Congress has the ability to make laws. Unfortunately, Congress has abdicated its responsibility to update our existing energy and environmental laws, while unelected bureaucrats have been filling the void by abusing the regulatory process to circumvent inaction from Congress. This executive order strengthens our existing rules and restore checks and balances system which many Americans and businesses have lost faith in.

President Trump should be commended for putting a stop to these abusive regulatory maneuvers, which often take place behind closed doors and falsely imply the rule of law. Every American and every industry deserves an open, fair and structured process when dealing with their government.”

This executive order effectively stops the use of guidance documents used by federal agencies to inappropriately imply authority in attempts to legislate by regulation without following the rulemaking procedures of the Administrative Procedure Act (APA).

America’s energy industry is no stranger to this abusive practice and the “Bringing Guidance out of the Darkness” Executive Order is squarely aimed at stopping agencies from sidestepping the legislative process. Even when accompanied by a non-binding disclaimer, a guidance document may carry an implicit threat of enforcement action if the regulation (or guidance) is not adhered to which creates uncertainty and a costly business environment.

For media inquiries, please contact Jon Haubert.
[email protected]
303.396.5996

#1: Tom & Mike on California & Trump

In the inaugural episode of Unregulated Tom & Mike focus on the issues surrounding Trump’s battle with California over their tailpipe emissions waiver.

Links:

Another Carbon Tax? Here’s Your Yellow Vest

Republican lawmaker Brian Fitzpatrick (R-PA) ‘vested’ by the American Energy Alliance for proposing an energy tax increase on American families.

WASHINGTON DC (October 1, 2019) – The American Energy Alliance (AEA) has “awarded” another yellow vest to a Republican lawmaker for his proposed carbon tax legislation which ultimately will raise costs on American consumers with no significant environmental benefit.

Earlier this year, AEA issued its first yellow vest to Rep. Francis Rooney (R-FL), signaling to the lawmaker and other Members of Congress that the organization is closely watching bait-and-switch proposals that claim to reduce carbon dioxide emissions, but in reality will make energy more costly and end up restricting consumer choice. Since the U.S. House of Representatives is on a two-week recess, AEA is sending the yellow vest to the lawmaker’s District office in Langhone, PA. Thomas Pyle, AEA President, issued the following statement:

“The misleadingly titled MARKET CHOICE Act ironically reduces options for consumers. Rep. Fitzpatrick’s national energy tax will harm each and every American family by increasing their energy costs, taking away choices, and creating more government bureaucracy. A national energy tax is hardly a conservative policy. In addition to the fact that it is a new tax, it manipulates the free market and creates a preference for one energy source over another.”

Yellow-vest protesters first emerged in Paris last fall when citizens began to publicly rebel against rising fuel taxes explicitly billed by President Macron as a way to meet France’s commitments under the Paris climate accord. In order to speak out, average citizens took to the streets wearing yellow safety vests that served as a rallying symbol for French motorists. AEA’s Pyle added to his statement:

“The ferocious commitment of the yellow-vest protesters to fighting against a carbon tax ought to send a clear message to our own lawmakers. President Trump was right to pull the U.S. out of the Paris Agreement, saying he represented Pittsburgh, not Paris. My advice to Congressman Fitzpatrick is he should draw a lesson from President Trump and the yellow vest movement by looking out for the citizens of the suburbs of Philly, not France,” Pyle said.

Below is a copy of the letter included with Rep. Fitzpatrick’s yellow vest.

Dear Representative Fitzpatrick,

In solidarity with the French citizens who protested expensive climate policies in their country, we at the American Energy Alliance have provided you with a yellow vest to object to your sponsorship of a destructive national energy tax, the inaptly named “MARKET CHOICE Act,” that will raise energy costs on American families and put the U.S. in a weaker financial state.

The “Gilets Jaunes” movement that began last fall in France was in response to rising fuel taxes explicitly billed by President Macron as a way to meet France’s commitments under the Paris climate accord. In order to speak out, average citizens took to the streets wearing yellow safety vests that serve as a rallying symbol for French motorists. Just like your carbon tax, Macron’s destructive tax would have made fuel more costly and restricted consumer choice, for little or no environmental benefit.

Your tax on energy will result in higher energy prices for all Americans, disproportionally harming lower-income people. Furthermore, it will not only inflict harm on consumers and the broader U.S. economy, it would foist additional burdens on state and local governments, all while failing to make any meaningful dent in the total emissions profile worldwide. While we agree that the nation needs to focus on its infrastructure needs, this is not the way to do it.

Whether ballot initiatives in Washington state, provincial elections in Canada, or protests in France, when the people weigh in on carbon taxes the answer is always the same: Non!

On behalf of AEA’s one million grassroots activists, we hope you reverse course. Our policy experts stand by ready to assist you whenever you and/or your staff are ready.

Sorry California, You Don’t Get to Choose What Vehicles the Rest of America Can Drive

“The Administration’s efforts to reform this ill-conceived and wickedly regressive mandate will save consumers and workers money, preserve their choices, and ensure that the federal government, and not California, sets national policy.” 

WASHINGTON DC (September 18, 2019) – The American Energy Alliance (AEA) supports President Trump’s federal action to revoke the previous administration’s decision to allow California to set fuel mandates and environmental policy for the rest of the nation.

Tom Pyle, AEA President, issued the following statement in reaction to today’s tweet thread from @RealDonaldTrump:

“We commend President Trump on his decision to ensure that consumers can make the decisions about what cars and trucks they should buy.  While there are some who would rather have those decisions made by bureaucrats in California, we believe that workers, consumers, and families can and should be trusted to make decisions that affect their lives.
 
“The Administration’s efforts to reform this ill-conceived and wickedly regressive mandate will save consumers money, preserve their choices, and ensure that the federal government, and not California, sets national fuel efficiency policy.
 
“It’s simple.  The State of California should not be able – as it has been – to determine what kinds of cars are sold in other states.  Moreover, consumers should pay for their own cars and not be compelled by a regulatory scheme to pay for the choices of others.
 
“As we have noted before, the existing unlawful mandate makes cars more expensive​.​ To meet the mandate, automakers often have to sell smaller, less desirable cars at a discount, while increasing prices on the cars people want to buy, like trucks, SUVs, and crossovers. This is a very real and regressive tax on American workers and families that makes consumers poorer and the economy weaker.

“Today’s message to California is that that they’re just like everyone else. The administration’s action puts power back into the hands of drivers, not California bureaucrats, saving American families money, and reestablishes the states’ and the federal government’s proper roles with respect to fuel efficiency.

“Reforming the CAFE mandate is not about doing a favor for automakers, it’s about looking after average American workers, consumers, and families.

Common misconceptions about California’s unlawful waiver:

  • The administration is only withdrawing the Clean Air Act (CAA) waiver for tailpipe greenhouse gas (GHG) emissions granted by the Obama administration, as well as the related approval of the state’s zero-emission vehicle (ZEV) mandate.
  • The administration is not withdrawing the numerous other CAA waivers granted over the decades applying to pollutants or other emissions sources.


This decision is well-grounded in law, in fact it was the Obama administration’s granting of the GHG tailpipe waiver that was unlawful:

  • The Corporate Average Fuel Economy (CAFE) standards, created by the Energy Policy and Conservation Act (EPCA) in 1975 in reaction to the Arab fuel embargo, mandates higher fuel efficiency for vehicles towards the goal of reducing U.S. reliance on foreign oil. The EPCA expressly preempts states from establishing their own fuel economy standards, or any regulations “relating to” fuel economy.[1]
  • The CAA, passed in 1970, includes a mandate for the regulation of tailpipe emissions of vehicles. Under the CAA, federal air standards also generally preempt state level standards. CAA does allow the state of California to seek a waiver of federal preemption in order to impose more stringent air standards under certain circumstances.[2]  This is permitted when the emissions cause a problem locally specific to California (e.g. smog in Los Angeles).
  • GHG emissions are directly related to fuel economy, practically one for one.  There is no catalytic convertor for GHGs, the only way to reduce tailpipe GHG emissions is to reduce fuel consumption.  Additionally, GHGs are not local to California, GHGs dissipate fairly uniformly throughout the atmosphere globally.Thus the CAA waiver does not apply for GHGs, rather the EPCA state preemption under CAFE standards applies.  The Bush administration correctly denied California’s CAA tailpipe GHG waiver request, and the Obama administration incorrectly reversed that decision.

This is not about state’s rights:

  • This is not a federalism issue.  Only one state, California, is permitted to make special rules under the Clean Air Act.  Those rules were then imposed on the rest of the country by the Obama administration through its merging of the Clean Air Act waiver with the federally preempted CAFE rulemaking process.
  • California’s ZEV mandate, which is only possible because of this unlawful waiver, also impacts all other states.  Because the ZEV mandate is fleet wide, carmakers sell electric vehicles at a loss in California to meet the mandate while charging the rest of the country higher prices for pick-up trucks and SUVs to cover the loss.
  • One state taxing and regulating the rest of the country is not federalism.

For more information:

  • Our July 11th coalition letter urging President Trump to stay the course on CAFE reform from 30 national and state groups can be read here.
  • For more information on the President Trump’s CAFE reform, click here.
  • To view AEA’s latest public opinion research on the topic, click here.

[1] 49 U.S.C. §32919

[2] 42 U.S.C. §7543(b)

For media inquiries please contact Jon Haubert.
[email protected]
303.396.5996

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