The SAFE rule is fundamentally flawed
March 31, 2020 (Washington, D.C.) — Earlier today, the U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) and the U.S. Environmental Protection Agency (EPA) issued the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021–2026 Passenger Cars and Light Trucks. The final rule reduces the annual fuel economy improvement required for new passenger cars and light trucks from 5% to 1.5%, and projects essentially no increase in electric vehicle sales share by 2026 beyond the current level of 2%.
The new regulation is fundamentally flawed. It is based on incorrect data and relies on an intellectually unsound cost-benefit analysis. As we have shown in our own independent analysis of the U.S. automotive market and through analyses conducted in cooperation with U.S. and international auto suppliers on turbocharging, transmissions, and lightweighting, manufacturers are capable of meeting the standards that the new regulation rolls back. The ICCT’s estimated compliance costs for the more stringent 2025 standards would have been about 70% lower than the agencies’ purported compliance costs used to justify the rollback. In addition, the fuel savings for consumers under the original standards are several times larger than the cost to comply.
The global auto sector continues to see major innovations in efficiency and electrification technologies. Technologies such as downsized turbocharged engines, high compression ratio engines, cylinder deactivation, lightweighting, and mild hybridization make compliance with strict standards even more cost-effective. Further, ICCT research indicates electric vehicles will reach cost parity with internal combustion vehicles and become a highly cost-effective compliance option by 2025. The new lower efficiency standards put the United States out of step with other major auto markets with standards that are significantly more stringent. The new rolled-back standards disincentivize continued innovation and put U.S. manufacturers at a competitive disadvantage as the global industry shifts to advanced technologies. In contrast, the regulatory electric vehicle sales targets for Europe are 15% (2025) and 35% (2030), and targets for China increase to 20% in 2025. Both of these major auto markets are also investigating stronger standards with increased supportive fiscal, infrastructure, and incentive policies.