Trump administration officials have claimed that they are saving Americans over $1.3 trillion by ending regulation of greenhouse gas emissions from cars and trucks. But the figure does not incorporate any benefits of the emissions standards. By one of the Environmental Protection Agency’s own calculations, getting rid of the standards could cost billions.
On Feb. 12, the EPA announced that it was revoking the 2009 endangerment finding, which allowed the agency to regulate greenhouse gases such as carbon dioxide that trap heat and cause climate change. Without that policy in place, the agency said it was terminating its rules that limit such pollution from vehicles. The regulation has primarily acted to increase fuel efficiency, since more efficient cars and trucks burn less gas and release less carbon pollution.
“This action will save American taxpayers over $1.3 trillion,” EPA Administrator Lee Zeldin said in the press conference announcing the policy change. “What that means is lower prices, more choices, and an end of heavy-handed climate policies. With today’s announcement, American families will save over … $2,400 for a new vehicle.”
In the same briefing, President Donald Trump and Russell Vought, director of the Office of Management and Budget, also mentioned the $1.3 trillion figure. White House Press Secretary Karoline Leavitt has similarly referred to it, and in official communications, the EPA has also emphasized it.
But the $1.3 trillion is not a net total. It only includes the added cost of making cars and trucks more fuel efficient over a period of nearly three decades, without considering any of the benefits, such as reduced fuel or maintenance costs. One of the agency’s own estimates, which also ignores any health or environmental benefits, shows that repealing the policy could ultimately cost Americans $180 billion.
“This is a very biased and misleading way to talk about the effects of this rollback,” Jason Schwartz, regulatory policy director at New York University School of Law’s Institute for Policy Integrity, told us of the $1.3 trillion framing. “It’s actually worse than only looking at one half of the equation because they’ve also left a bunch of really important effects off the other side of the equation.”
“I honestly can’t recall another rulemaking where the focus of all of the fact sheets and press releases was ONLY about the costs of the policy,” Kenneth Gillingham, a Yale University economics professor, told us in an email.
With the elimination of these standards, soon there will be effectively no fuel efficiency standards in place on American cars and trucks. While the Department of Transportation’s fuel economy standards still technically exist, with the passage of the One Big Beautiful Bill Act earlier this year, Congress set the compliance penalties in the program to zero. The Trump administration is also now working to finalize significant rollbacks to the standards.
Here, we’ll take a closer look at the EPA’s calculations and explain why the administration’s singular focus on $1.3 trillion is misleading.
EPA’s Math
According to an EPA fact sheet, the $1.3 trillion in alleged savings for U.S. consumers includes about $1.1 trillion in avoided vehicle technology costs and $200 billion in avoided electric vehicle charger and equipment costs between 2027 through 2055.
Those figures are taken from the agency’s regulatory impact analysis. The analysis modeled four different scenarios, making different assumptions about the future cost of gasoline and to what degree fuel savings are counted, under two discount rates. (A discount rate is how much future money is discounted on an annual basis to convert it to a present value.) For each of the scenarios at the 3% discount rate, the EPA estimated a “savings” of either $1.29 trillion or $1.34 trillion.
But those estimates are only one half of the EPA’s ledger. Partially or fully offsetting the alleged savings are a variety of increased costs as a result of undoing the standards, primarily due to higher fuel and maintenance costs (electric vehicles are cheaper to maintain). In no case is there a net savings of $1.3 trillion.
Most of the EPA’s modeled scenarios do show a net savings in repealing the greenhouse gas emissions standards. However, as we said, that analysis does not factor in any health or environmental benefits.
“A correct cost-benefit analysis – even under the Trump Administration’s Circular A-4 guidance document – must include all relevant benefits and costs,” Gillingham told us, referring to the Office of Management and Budget’s guidance for such analyses. “In this rule, they are simply arguing that the benefits don’t exist. The science is not on their side on this one.”
Even still, one of the agency’s key estimates — one using the Energy Information Administration’s best guess for future fuel prices — shows that rescinding the policy will cost Americans $180 billion on net. Even with nearly $1.3 trillion in savings, there will be almost $1.5 trillion in costs under that scenario.
The other scenarios assume either lower fuel prices or only factor in fuel savings for 2.5 years, or both — each of which lowers the benefits of any fuel efficiency policy and makes the standards appear more expensive.
In response to a series of questions about the agency’s calculations and why the agency is using the $1.3 trillion number when it is not a net figure, the EPA press office told us that the analysis included eight projected net impacts under different modeling assumptions (four scenarios under two discount rates). “We didn’t single out scenarios to suit a narrative, we followed the data,” the agency said in an email, which again highlighted the $1.3 trillion.
“Rescinding the 2009 Endangerment Finding means real dollars back in the pockets of American families and unleashing consumer choice. Now, Americans will be able to buy the car they want, including newer, more affordable cars with the most up to date safety standards and that emit fewer criteria and hazardous air pollutants,” the agency continued, adding that the action “does not affect regulations on any non-GHG air pollutants.”
It’s true that the EPA retains its other regulations on vehicles that limit the release of so-called criteria air pollutants, such as ozone and fine particle pollution. But it’s not the case that ending the emissions standards will have no effect on those pollutants. Schwartz said the standards “would have had important indirect impacts on criteria pollutants.”
He cited an analysis by the Environmental Defense Fund, which estimated that with a repeal of the greenhouse gas emissions standards, there would be up to 58,000 more premature deaths and as many as 37 million more asthma attacks through 2055.
In its final rule, the EPA argued that removing the standards would have “only marginal and incidental impacts” on non-greenhouse gas emissions. The agency also said it “is no longer monetizing benefits” from reducing particle and ozone pollution because of uncertainty in how to do those calculations precisely.
“In the past, EPA has always considered air pollution benefits as part of a cost vs benefit sort of study. Here the assumption is that the pollution benefits are all zero,” Mark Jacobsen, an economist at the University of California, San Diego, told us, adding that the benefits are not just to the climate, but to air quality, which the EPA “has typically found to be quite important.”
In its 2024 rule finalizing increased greenhouse gas emissions standards under then President Joe Biden, the EPA estimated that those standards would provide $200 billion in health benefits due to less particle pollution and $1.6 trillion in climate benefits (in 2022 dollars, 3% discount rate). The overall net benefit was estimated at $2 trillion.
Even without factoring in health or environmental benefits, the EPA two years ago found a $62 billion net benefit to the increased standards, with higher vehicle technology and battery port costs more than offset by lower fuel, repair and maintenance costs.
‘Deeply Flawed’
This gets at problems several experts identified in the EPA’s analysis. Jacobsen told us that the agency’s estimates are “deeply flawed.”
Jacobsen, along with Gillingham and other economist and mechanical engineer co-authors, several of whom the EPA has frequently cited in its rulemaking, wrote a comment to the EPA explaining their criticisms of the agency’s proposed rule in September. While not all of the issues still apply to the revised final rule, some remain.
One of the biggest issues affects half of EPA’s scenarios, which only factor in 2.5 years of the standards’ fuel savings. In these scenarios, the fuel savings are dramatically reduced.
Gillingham, who said there were “many issues” with the EPA’s analysis, said this is “simply incorrect and flips it from how it has always been done.”
A major question for the cost-benefit analysis is why consumers undervalue fuel efficiency. As noted in the EPA’s regulatory impact analysis, some evidence suggests that buyers are only willing to pay for about 2.5 years’ worth of fuel savings upfront for a more fuel-efficient car. If it’s a market failure and buyers are simply not properly considering the benefits of better gas mileage for the lifetime of the car, then a cost-benefit analysis should factor in the fuel savings beyond the first 2.5 years. But if consumers dislike the features of fuel-efficient cars, then they could be already valuing and “paying” for those future fuel savings in the form of a less desirable vehicle, so those fuel savings should not be counted.
For half of its scenarios, the EPA assumes that the latter is true in full, so it doesn’t include fuel savings beyond the 2.5 years in its cost-benefit calculation.
“This makes a gigantic difference to the costs and benefits,” Gillingham told us.
Jacobsen, Gillingham and colleagues note in their comment that this assumption “is not supported by the economics literature.” Moreover, they said, the EPA is ignoring that some electric vehicle attributes are superior to conventional gasoline vehicles.
In its analysis, the EPA defended its approach on undervaluation, noting that it uses scenarios that both likely overestimate and underestimate the costs of the rule, and that it views them as “a form of a bounding exercise.”
Schwartz, of NYU, independently flagged the same concern about zeroing out most fuel savings as well. “They’re saying there must be $900 billion in lost vehicle features,” he said of the EPA. “That is absolutely not the case.”
At the same time, when the EPA estimates the cost of making vehicles more fuel efficient, the agency assumes that manufacturers preserve vehicle performance, and don’t opt for cheaper solutions, such as lowering a car’s horsepower, Schwartz said.
“By modeling both extra costs to maintain performance and assuming additional costs of alleged performance losses,” an economic report from Schwartz’s group explains, the EPA is “effectively double-counting costs.”
Gillingham and Jacobsen noted the same problem, calling it an “inconsistent combination” that makes the cost of regulation appear high and the benefits appear small.
Half of the scenarios also assume a “low” oil price to “take into account the policies being implemented by President Trump that are intended to drive down the price of gasoline and diesel,” according to the regulatory impact analysis.
But as Schwartz noted, and as we have explained before, oil is a global commodity. The price is set based on worldwide supply and demand. Economists and energy experts told us during the 2024 presidential campaign that Trump’s plans to reduce prices by increasing production are unlikely to be very successful over the long term. U.S. and global producers wouldn’t be incentivized to produce more if prices are low. In a world with less-fuel-efficient vehicles, demand will also be higher, driving up the cost of gasoline — a feature the EPA also did not fully account for in some scenarios, Schwartz said.
“Every step of this analysis is biased in an effort to make their repeal look as favorable as possible and to hide from the public the real costs to consumers, to public health, and to the environment, that [are] going to result from this rollback,” Schwartz said.
Misleading Per-Vehicle ‘Savings’ Figure
Along with the $1.3 trillion, officials have often referred to an average per-vehicle savings of “over” $2,400 by eliminating greenhouse gas emissions standards. Zeldin gave this figure during the policy repeal announcement, and an agency fact sheet includes it.
In the announcement press conference, Trump also said that the repeal would “help bring car prices tumbling down dramatically. … You’re going to get a car that starts easier, a car that works better for a lot less money.”
But this figure, too, is not a net number and only captures the costs of the regulation, ignoring all benefits. The EPA’s estimate of $2,400 appears to comes from dividing the $1.1 trillion in reduced new vehicle costs by its estimated figure of how many new vehicles will be purchased.
As Gillingham told us, the savings “comes from fuel-saving technology not being installed. It definitely would not be reducing the price of a car by $2,400. It would mean that cars would not increase in price as quickly and that car buyers would lose out on a lot of fuel savings.”
======
No comments:
Post a Comment