The Trump administration is rolling back vehicle fuel efficiency standards. The U.S. Department of Transportation on Monday unveiled changes to the corporate average fuel economy (CAFE) standards, which will significantly reduce the target rate for how many miles per gallon new vehicles must hit.
Federal officials framed the decision as a win for consumers, claiming that the Biden administration’s more stringent CAFE standards contributed to higher costs for new vehicles. In a press release, the Department of Transportation described the previous policy as a “backdoor EV mandate” and said the new CAFE standards would reduce the cost of a new vehicle by $1,300.
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Environmental groups are pushing back on the decision, which they say will allow more air pollution and increase long-term spending on gasoline for American drivers. The changes come as Americans pay an average of $4.48 per gallon.
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“For decades, our national fuel economy standards have steadily made our vehicles more efficient and less expensive to drive,” said Andy Su, a senior transportation attorney at the nonprofit Environmental Defense Fund, in a press release.
How do CAFE standards affect car manufacturing?
The CAFE standards are fleet-wide fuel efficiency targets for all the vehicles an automobile manufacturing company produces. They date back to 1975 when they were instituted to reduce dependence on foreign oil following the Arab oil embargo against the U.S. and other nations that supported Israel during the Yom Kippur War.
Under the new standards, the Trump administration said new vehicles will achieve an average of 34.1 miles per gallon in 2031, far below the Biden administration’s target of 50.4 miles by then. In 2024, the average fuel efficiency rating for new vehicles was 27.4 miles per gallon, according to the Environmental Protection Agency.
Automakers that fail to meet the targets are subject to fees.
The Alliance for Automotive Innovation expressed support for the changes, calling it an “appropriate course correction,” in a statement Monday.
“The standards finalized under the previous administration effectively required a switchover to electric vehicles that was out of step with market realities and customer demand,” the Alliance for Automotive Innovation said.
However, some research suggests that over the long-run CAFE standards have inadvertently led to an increase in large trucks and SUVs and a decline in choices for smaller vehicles. That’s because vehicles with the smallest wheelbase dimensions are subject to the highest efficiency standards.
Will this save consumers money?
Whether the rollback of CAFE standards will save or cost consumers money is a central point of tension in the debate around the policy decision. The Department of Transportation’s estimate that new vehicle costs will fall by $1,300 adds up to an estimated $138 billion over five years.
But the Environmental Defense Fund points out that according to the department’s own estimates, Americans will spend $1,600 more on gasoline over the lifetime of those new vehicles.
Both sides cite the National Highway Traffic Safety Administration (NHTSA) report on the CAFE standard changes, but they select the parts fitting a specific narrative. The environmental group cites the modeled increased fuel costs. The department press release includes the estimated savings on manufacturing. Neither group puts these two figures together to measure the net impact on consumers.
The Environmental Defense Fund also said the $1,600 in gasoline costs could be underestimated because of the volatile price of gasoline, with the NHTSA modeling only considering a $3.30 per gallon price.
The net benefits to consumers, according to the NHTSA, are between $270 and $315. These numbers assume automakers will pass on the savings of lower regulatory compliance to consumers through lower sticker prices. Straight Arrow reached out to multiple auto industry trade groups to ask if manufacturers planned to lower prices; none responded.
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