In 2018, the EPA released a proposal called the SAFE Vehicle Rule, with SAFE standing for “Safer, Affordable, and Fuel Efficient.” The rule featured an aggressive rollback of Obama-era fuel economy rules for motor vehicles. The original version would have frozen corporate average fuel economy (CAFE) standards at 37 miles per gallon, rather than allowing them to rise to 54 MPG, as would happen with no new action.
Since that time, the agency has been working on a revised version. Although the revision has not yet been made public, the Washington Post has published a description of it, in the form of a letter written by Senator Thomas Carper (D-Del). If the details given in the letter and the Post article are accurate, the new rule is both weaker and even less defensible than the original version.
For those who like CAFE standards, the new rule might look like a step in the right direction. Rather than freezing fleet mileage standards at 37 mpg, it would allow them to increase by 1.5 percent per year until they reached 40.5 mpg by 2030. But, as I pointed out in an earlier commentary, a policy that supplemented CAFE standards with a carbon tax, or even replaced them entirely with such a tax, would do even more to cut greenhouse gas emissions.
As suggested by the name, the EPA’s rule is justified in large part by a claim that relaxing CAFE standards would improve highway safety. The improvement would come partly from reducing a reduced incentive to make vehicles lighter, and therefore less crashworthy, and partly from the so-called “rebound effect” by which drivers have an incentive to drive more miles if their cars are more fuel efficient. In announcing the original version, the EPA claimed that the SAFE rule would save 12,000 lives over a period of several decades. In the new version, however, that estimate has now been scaled back to just 471 lives.
The rule was also supposed to make cars more affordable. President Trump himself claimed in a Tweet last August that it would cut the price of a new car by $3,000. However, the new rule cuts the projected saving in vehicle price to $977, and even that would be more than offset by an estimated $1,461 increase in fuel costs over the life of a vehicle.
Finally, the original rule based its estimate of the rule’s net benefits on an assumption that it would increase the rate at which consumers replaced older, less safe, and less efficient cars with new ones. However, those assumptions, too, appear to be flawed. An analysis by the EPA’s own Scientific Advisory Board found serious deficiencies in the model used to estimate vehicle turnover:
In particular, two of the new modules recently added to the CAFE Model, the sales and scrappage equations, have weaknesses in their theoretical underpinnings, their econometric implementation and, in one case, possibly in the interpretation of their coefficients. Together the weaknesses lead to implausible results.
In short, the new version of the SAFE Vehicle Rule would make vehicles insignificantly safer, less affordable, and less fuel-efficient – a remarkable triple-play of regulatory ineptitude.
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