The SUV-Sized Loophole In The New Fuel Economy Standards

While any major change to our nation’s transportation model is currently floundering on Capitol Hill in the form of a massive transportation bill being used as a political football, it’s still possible for the president to slowly change the way we get around in this country. He can do this by exercising some of his regulatory power, something he has tried to do by raising the fuel economy standards of America’s automotive fleet.

Last week, an additional round of fuel efficiency standards passed another mile marker: Public comments were submitted to the EPA, edging the rule closer to completion. In 2017, if all goes according to plan, the American auto fleet will get a whopping 56 miles per gallon of gas. The measure is projected to save approximately 4 billion barrels of oil and 2 billion metric tons of greenhouse gas emissions--translating to roughly $300 billion in benefits. But these benefits will never fully be realized if car companies take advantage of a major loophole in the proposed regulations.

The standards (currently in draft form) are tied to a vehicle’s footprint. Large vehicles will be subject to less stringent controls than smaller vehicles. Based on the mix of cars and trucks they produce, every automaker’s average fuel efficiency requirement will be different.

So if an automaker wants to avoid the higher efficiency requirement, it can simply make its product line bigger. Because of the footprint guideline, a sports car will have to meet a higher miles per gallon standard than an SUV.

Obviously, this means the regulation will not be as effective in reducing auto emissions as a single, more stringent standard for vehicles of all sizes would be.
The footprint loophole was intended to ensure consumers could choose from a range of different sized vehicles. The thinking was that people like options and a fleet of uniformly smaller cars would risk taking that away from them. Automakers would be forced to shrink their fleets across the board, yielding fewer choices for buyers: fewer trucks, minivans, and SUVs in dealership showrooms than there are today.

This logic doesn’t hold up. If consumers really want bigger cars, they will demand them and producers will supply them, but their prices will better reflect their true costs. The agencies behind the loophole also fail to take into account the fact that consumer preferences would likely shift if all vehicles at the dealership were smaller than their predecessors. People won’t feel the need buy the big SUV to keep up with the Joneses if the Joneses (and everyone else on their block) own a two-door electric hatchback.

Contrast the benefits of having the bigger cars at the dealership with the health benefits of decreased auto emissions like decreased asthma rates. Plus (though no one in politics really wants to talk about it) there will be massive climate change mitigation benefits.

The Obama administration can best ensure cleaner air and a healthier population by doing away with the vehicle footprint loophole. According to the EPA’s own calculations, the benefits already far outweigh the costs; evening the playing field between big and small cars will generate even more bang for our buck.