Lawmakers say standards hurt industry, consumers

Source: Ariel Wittenberg, E&E reporter • Posted: Friday, September 23, 2016

House Energy and Commerce Committee members pushed back against the Obama administration’s fuel economy standards yesterday, expressing concerns that the regulations could stifle innovation for the auto industry and reduce consumer choice.

During a joint hearing of the subcommittees on Commerce, Manufacturing and Trade and on Energy and Power, lawmakers grilled U.S. EPA acting air chief Janet McCabe and National Highway Traffic Safety Administration Chief Counsel Paul Hemmersbaugh about the agencies’ corporate average fuel economy (CAFE) standards for 2017 through 2025.

Those standards are undergoing a midterm evaluation to determine whether they need to be adjusted, something full committee Chairman Fred Upton (R-Mich.) said he was thankful for, calling it a potential “do-over” for the auto industry.

“You don’t have to come from Michigan to be concerned about the administration’s CAFE standards, because these will hurt consumers as well as automakers,” he said.

That point was a favorite of Republican lawmakers as they questioned McCabe and Hemmersbaugh.

Commerce, Manufacturing and Trade Subcommittee Chairman Michael Burgess (R-Texas) noted that there are benefits to fuel-efficient vehicles, saying, “In Texas, we have big spaces, and we like to get around those big spaces in our big cars with big air conditioners.”

But he said achieving greater fuel economy could not be justified if it comes at the expense of industry.

“The auto industry is one of the few bright spots in our economy,” he said. “I am deeply concerned that the planned fuel economy standards for future model years will significantly stall that progress and dramatically reduce consumer choice.”

Rep. David McKinley (R-W.Va.) agreed and said he was worried that his rural constituents would be priced out of buying cars due to the cost of using energy-efficient technology.

Hemmersbaugh disputed that argument, saying that NHTSA estimates the average cost increase on a vehicle in 2025 due to the standard will be approximately $1,200, but that amount would be offset by an estimated $1,900 in fuel savings costs. He added that the overall cost to industry would be $87 billion, compared with overall benefits — including pollution and health benefits — of $175 billion.

That answer did not satisfy McKinley, who asked, “Am I supposed to feel good in West Virginia that I can’t buy a car, but health benefits are going to improve across the country?”

He added that the costs to consumers may not be too expensive “if you want to promote that car in Connecticut or Maryland, but in a rural area we are trying to buy the same car.”

Consumer Federation of America Research Director Mark Cooper argued that low-income Americans would actually benefit the most from CAFE standards because they do not typically buy new cars.

“Low-income people are much more likely to be in the used car market, where the prices are lower,” he said. “They benefit more than the average consumer because to them, the ownership costs are more important than the purchase costs” of a new vehicle.

During the hearing, lawmakers also questioned whether the standards would be too onerous on automakers by requiring them to develop hybrid and electric vehicles.

But McCabe said that innovation within the auto industry means the standards can be met with gasoline vehicles.

“Due to the innovation and pioneering spirit, the automakers are just moving along like gangbusters in developing technology that applies to gasoline engines,” she said. “While hybrids and electric vehicles are welcome in the program, they are not largely necessary to get each automaker to where they need to be.”

Mitch Bainwol, president of the Alliance of Automobile Manufacturers, noted that while electrified vehicles may not be necessary to meet CAFE standards, California has a zero-emission vehicle mandate requiring sales of electric cars and hybrids.

“Harmonizing with California is really complex,” he said. “We talk a lot about not needing electrification and hybrids in order to comply with CAFE, but we have to produce those to comply with [the California mandate], so there are costs there.”

Cooper had a different take on automakers’ approach.

“History has shown that capitalists do a good job,” he said. “They are not dumb; they put the least costly things in the vehicles.”