On February 12, the EPA finalized the rescission of the 2009 Greenhouse Gas Endangerment Finding that had allowed the federal government to regulate emissions as threats to public health, and repealed all vehicle greenhouse gas emission standards based on it. President Trump called it “the single largest deregulatory action in American history.”
This ostensible deregulatory act does not free the market, though. It removes the legal infrastructure that has shielded businesses from litigation and could expand states’ ability to regulate and sue independently, creating exactly the kind of regulatory chaos that industries have spent decades trying to prevent. The impact analysis defending the decision as economically sound is based on best-case scenarios rather than regulatory best practices. Far from a clear deregulatory victory, the rollback rests on contested legal reasoning, selective economics, and risks creating the very regulatory uncertainty businesses fear.
The finding was a legal shield, not just a regulatory burden
For 15 years, Supreme Court precedent has effectively shielded major emitters from broad climate nuisance suits by anchoring authority at EPA. In American Electric Power v. Connecticut, the Supreme Court unanimously held that the Clean Air Act displaces federal common-law nuisance claims against greenhouse gas emitters, precisely because EPA has regulatory authority over those emissions. Remove that authority, and the shield disappears. The Edison Electric Institute, representing the nation’s investor-owned utilities, stated that without federal GHG authority, its members would face “a patchwork of state regulations and lawsuits from plaintiffs that could raise costs to customers.”
During the public comment period last fall, Ford and Honda supported keeping the finding in place to ensure regulatory stability, even as they pushed for less stringent emission targets. The distinction matters: Automakers wanted relief from Biden-era stringency, not the elimination of the legal framework itself. Predictable regulation, even regulation that imposes costs, is less burdensome to businesses than a vacuum that invites 50 different state regimes and an open season for litigation.
How EPA turned costs into ‘savings’
When EPA rescinds a major rule, it must first assess the economic consequences of that decision. In this case, the agency’s final Regulatory Impact Analysis (RIA) evaluated four scenarios, each of which included the same basic components: compliance cost savings for automakers, higher vehicle fuel costs for consumers, changes in vehicle prices, and additional climate damages from increased emissions. What differed was how EPA valued fuel savings: assumptions about future fuel prices and how long vehicle fuel savings are counted.
In the baseline scenario, EPA followed a standard regulatory practice by using Energy Information Administration (EIA) reference fuel price projections and counting fuel savings over the vehicle’s lifetime. The three alternative scenarios modified one or both of those inputs. They substituted a “low oil price” assumption, truncated fuel savings to the first 2.5 years of ownership, or applied both adjustments simultaneously.
Under the baseline scenario using EIA fuel price projections and lifetime fuel accounting, EPA’s own analysis finds a $180 billion net societal loss— largely from increased fuel, repair, maintenance, and related operating costs — from rescinding the regulation. The administration highlighted only the benefits from the alternative assumptions — the ones that departed from standard regulatory practice.
To produce the headline “savings,” EPA made two key adjustments. The first adjustment substituted a $47-per-barrel Brent crude price for the EIA’s reference price of roughly $75 per barrel. EPA justified the lower figure with a vague appeal to Trump administration policies “intended to drive down the price of gasoline.” But oil prices are among the most volatile of any major commodity, and prudent regulatory analysis hedges against that uncertainty rather than assuming a best-case scenario.
The economic logic is also questionable. Rescinding fuel economy standards increases gasoline consumption, which, all else equal, pushes prices higher. And as recent records show, frackers in the oil-rich Permian Basin in the Southwest United States were already mothballing rigs when oil dropped to $60, let alone $47.
Second, EPA limited fuel cost accounting to just 2.5 years of vehicle ownership rather than the vehicle-lifetime standard. That assumption alone flips the results, turning a $180 billion net cost to society into a $790 billion net benefit because it excludes most fuel costs that accrue over the life of the vehicle. Together with the low-oil-price assumption, the agency’s analysis produces nearly $920 billion in claimed savings.
The first assumption is generous; the second is simply inaccurate because it misapplies a consumer behavior phenomenon. And then, of course, none factored in President Trump’s decision to go to war against Iran, which has ignited oil and gas markets. As of this writing, Brent crude is trading at $106 a barrel.
Misreading the myopia literature
The 2.5-year assumption deserves particular scrutiny because EPA selectively invoked a behavioral phenomenon to justify a conclusion the literature does not support.
Fuel economy standards address a well-documented “energy efficiency gap,” the difference between the real energy savings from higher fuel economy standards and how a consumer values them.
EPA cited six studies in its RIA that measured this gap, with consumers internalizing between 16 percent and 101 percent of future fuel costs, but gave them a new interpretation. The agency ultimately relied on research by economists at Resources for the Future and the University of Maryland, which found that the typical buyer values only about 22 percent of lifetime fuel costs, behaving as though only the first three years of savings matter.
This underweighting of future fuel savings influences what consumers are willing to pay for a vehicle. Consider a car that saves $100 a year in fuel costs over eight years, roughly the average duration of new-car ownership. Discounted at 7 percent — a standard conservative assumption in the current OMB‘s economic cost-benefit analysis — those savings have a present value of about $600. A fully rational buyer would therefore pay up to $600 more for that vehicle. In practice, many buyers do not; they may pay only $130 more, roughly three years’ worth of fuel savings. But they are still saving the full eight years of fuel.
EPA treats this low valuation as evidence that consumers have already incorporated fuel costs into their decisions, implying there is little additional loss to count when standards disappear.
But the authors’ own conclusion says the opposite. Their analysis finds that higher emission standards raised public wellbeing by $83 billion, because the fuel savings consumers ultimately realized exceeded both higher vehicle prices and performance tradeoffs. The myopia is what makes the standards beneficial, not what makes them dispensable.
EPA’s case does not survive scrutiny
As legal analyses have noted, the rescission rests on novel, if not exotic, legal reasoning rather than on new scientific findings. The administration initially explored rescinding the finding on scientific grounds, relying in part on a Climate Working Group assembled by the Department of Energy (DOE). But that effort quickly unraveled: A federal court ruled that the DOE had violated federal advisory committee law in forming the group, leaving the administration lacking scientific backing for its preferred policy. Indeed, a study by the National Academies of Sciences concluded last year that the 2009 finding “was accurate, has stood the test of time, and is now reinforced by even stronger evidence.”
With the scientific case set aside, the economics are no stronger. EPA has cherry-picked economic conclusions and inserted speculative fuel price scenarios to advance its political agenda. Nor is repeal the deregulatory victory the administration claims. Removing the finding eliminates the federal framework that had displaced nuisance suits and limited a state-level fragmentation, exposing businesses to greater litigation risk and regulatory uncertainty. Congress could affirm an EPA authority to regulate emissions, or it could implement the most efficient solution: an economy-wide carbon price, ideally paired with a border adjustment. Taking no action is bad for consumers and risky for business.
