Trump Administration Proposes Major Cuts to Fuel Economy Standards

The Trump administration has proposed significant reductions to the fuel economy standards established by former President Joe Biden last year. On December 3, 2023, the National Highway Traffic Safety Administration (NHTSA) unveiled plans to lower the average fuel economy requirements for gasoline-powered vehicles, making it easier for automakers to sell such cars.

Under the new proposal, the NHTSA aims to reduce the fuel economy standards for model years 2022 to 2031, requiring an average of only 34.5 miles per gallon by 2031, a substantial decrease from the previous standard of 50.4 miles per gallon (approximately 21.4 km per liter). The agency indicated that it will also revise down the standards for 2022, with annual increases projected between 0.25 percent and 0.5 percent through 2031. In contrast, under Biden’s administration, the NHTSA had mandated an annual increase of 8 percent for model years 2024-2025 and 10 percent for 2026.

The proposed changes are expected to lower the average up-front costs of vehicles by around $900, but they are likely to lead to an increase in overall fuel consumption across the country. By relaxing the standards, NHTSA argues that automakers will find it easier to comply with regulations for the years still under review.

End of Credit Trading and Impact on Automakers

In addition to the fuel economy cuts, the proposal includes a significant overhaul of the existing credit trading program. NHTSA is considering eliminating credit trading among automakers by 2028 and will cease providing credits for specific fuel-saving features. NHTSA described the current credit trading system as a “windfall for EV-exclusive manufacturers” that sell credits to competitors producing gasoline-powered vehicles.

During a promotional event for the proposal, President Trump will be joined by the CEOs of Stellantis and Ford Motor Company. Earlier this year, Trump signed legislation that eliminated penalties for automakers regarding fuel economy standards, meaning they have faced no fines since the 2022 model year. The potential end of credit trading could disadvantage electric vehicle manufacturers like Tesla and Rivian, which have relied on selling credits to more traditional automakers.

Ford CEO Jim Farley expressed support for Trump’s approach, stating it aligns fuel economy standards with “market realities.” He emphasized that progress on carbon emissions and energy efficiency is achievable while maintaining consumer choice and affordability.

In contrast, General Motors CEO Mary Barra highlighted challenges posed by previous regulations, noting that the auto industry faced requirements mandating that 35 percent of new vehicles sold in 2026 must be electric, which could have forced plant shutdowns.

Environmental Concerns and Future Implications

The previous fuel economy standards were projected to yield significant environmental benefits, with estimates suggesting a reduction of gasoline consumption by 64 billion gallons and a decrease in emissions by 659 million metric tons. This would have resulted in net benefits of approximately $35.2 billion for drivers. The 2022 regulations aimed at cutting fuel use by over 200 billion gallons through 2050.

Critics of the new proposal, including Kathy Harris, director of clean vehicles at the Natural Resources Defence Council, argue that it would lead to higher costs for consumers at the pump, benefiting the oil industry at the expense of drivers. Harris stated, “The Trump administration is sticking drivers with higher costs at the pump, all to benefit the oil industry.”

This latest move is part of a broader trend by the Trump administration to promote gasoline-powered vehicles while disincentivizing electric vehicle production. Previous actions have included rescinding electric vehicle tax credits and preventing California from implementing its own zero-emission vehicle regulations.

With the proposed changes, the landscape of the automotive industry could shift significantly, impacting manufacturers, consumers, and the environment for years to come.