Blog Post

Air Pollution and Trump’s CAFE Proposal

Sep 11, 2018 | Justine Huetteman, Alan J. Krupnick, Joshua Linn, Virginia McConnell

The Trump administration’s proposed freeze of CAFE standards is predicated on compliance cost savings to the auto industry as well as benefits from reducing traffic congestion and accidents. It also represents a turn away from an emphasis on societal benefits from greenhouse gas (GHG) emissions reductions. In this fourth blog in our series, we address GHG and conventional (non-GHG) pollution elements in the regulatory impact analysis (RIA) from the Trump administration compared to that from the Obama administration.

Predicting GHG emissions consequences of the Trump proposed rule relative to Obama’s is fairly straightforward, being proportionally related to use of gasoline and diesel fuel. However, there are electric vehicles (EVs) in the fleet that add analytical complications. While the dedicated electric vehicles themselves have no carbon emissions, the power to charge their batteries does. In general, CO2 emissions will be lower for an EV than a conventional vehicle driven the same distance. Thus, because the share of EVs in the fleet is smaller in the Trump rule relative to the Obama rule, the CO2 emissions would be larger for the Trump rule.

The Trump administration’s analysis estimates the change in damages from GHG emissions relative to the Obama standard for the existing fleet and new vehicles out to the 2029 model year. Using a domestic social cost of carbon (SCC) ranging from $6 to $7 per ton over the analysis period, the analysis concludes that there are added benefits from CO2 emissions reductions of 1.2 billion from the existing vehicle fleet (MY1977–MY2018 vehicles) under the Trump rule compared to the Obama rule. This occurs because these older vehicles are driven less or scrapped more (thereby producing fewer emissions). This effect occurs because, with the weakening of CAFÉ requirements, new vehicles are relatively cheaper than older vehicles and therefore are purchased preferentially to keeping older vehicles longer. At the same time, with more vehicles for the future model years (MY2019–MY2029) sold, and because they are less efficient than they would have been under the Obama standard, CO2 emissions would increase for this part of the fleet. Overall, predicted CO2 emissions are higher under the Trump rule, and they increase over time from a value of $100 million in forgone climate benefits for MY2019 vehicles to a peak of $600 million for MY2024 vehicles and beyond. Thus, the total climate benefits forgone is $4.3 billion (using a 3 percent discount rate) according to the RIA for Trump’s proposed rule.

These forgone climate benefits are calculated using the Trump administration’s domestic estimate of the SCC of $6 to $7 dollars a ton. In contrast, the Obama administration used a global estimate rather than domestic benefits in many of its rulemakings, which accounts for climate change damages to the United States and the rest of the world. This estimate ranges over time from $42 to $52 per ton. If the higher global estimate is used in the Trump analysis of the proposed rule, we estimate that forgone climate benefits would be close to ten times higher ($42 billion) than the current estimate ($4.3 billion). However, this increase in forgone benefits is not large enough by itself to erase the net benefits the Trump administration shows for its proposed rule compared to the Obama rule. Another $130 billion would be needed to break even.

Estimating the effects of the Trump rule on conventional pollutants is more complicated. Auto manufacturers face gm/mile tailpipe standards on conventional pollutants (CO, PM, SO2, NOX, VOCs) emitted by new vehicles. A frequently made assumption is that whatever changes are made to CAFE standards, the automakers will adjust their technical pollution controls to just meet these tailpipe standards. So, with this assumption, on a gram per mile basis we should expect no changes in emissions from new cars between the Obama and Trump proposals. But, of course, to the extent that vehicle miles traveled changes (and the Trump administration forecasts that total vehicle miles traveled (VMT) will be lower for its proposal—something we questioned here), then pollution should be lower, and therefore the benefits from conventional air pollution impacts should be higher in the Trump proposal relative to the Obama standard. Overall, however, the Trump proposal says that benefits from conventional air pollution reductions are lower relative to the Obama standard by about $1.2 billion.

Emissions of conventional pollutants from vehicles are related partly to vehicle age. So, if the older vehicles (MY1977–MY2018) are driven less, as the Trump administration asserts, then conventional pollutants should be lower—and therefore benefits should be higher—for these model years. Indeed, emissions as presented in the Trump RIA are significantly lower for these older vehicles, and benefits higher. This suggests that emissions changes related to future vehicles (MY2019–MY2029) are motivating the net decrease in benefits compared to the Obama standard.

Estimates of emissions of every conventional pollutant increase for the future model years (MY2019–MY2029) relative to the Obama standard. This result could follow from the decrease in fuel economy for future model year vehicles relative to the Obama standard. However, the Trump administration’s analysis shows that this change in emissions is not, in fact, motivated by increases in tailpipe emissions, but rather increases in “upstream” emissions, which are emissions related to the production, and distribution of gasoline as well as electric power generation. The analysis does not distinguish between the two types of upstream emissions (gasoline production versus electric power production), but given the Trump administration’s finding that electric vehicles are a lower share of the fleet than in the Obama analysis, the increase must be related to the greater consumption of fuel from reducing fuel economy standards.

Curiously, for all the air pollutants except SO2, the net effect over all model years is that benefits with the Trump proposal are $1.2 billion (counting PM, VOCs and NOX, leading to changes in ozone and PM2.5), driven by the reduction in fuel use by the existing fleet. But, for SO2, the net effect is that benefits are forgone of $2.4 billion. We cannot comment on the reasonableness of this result, but note that SO2 emissions come from such activities as burning diesel fuel at the well site and elsewhere in the value chain, from treating hydrogen sulfide emissions emitted from the wells, and from the refining of crude oil into gasoline. Increased emissions under the Trump proposal related to supplying fuel to new vehicles would have to be large enough to more than offset reduced emissions of SO2 from the power sector and from lower fuel use of the existing fleet.

For all the complexities of addressing air pollutants, they don’t add up to much compared to the cost savings of the Trump rule. Some of the bigger differences between the two rules are the value of fuel savings and technology costs. We explore these issues in future blogs in this series.

The views expressed in RFF blog posts are those of the authors and should not be attributed to Resources for the Future.