Fuel Economy Standards Are Not Job-Killers, Says Yale Study

There are a lot of points brought up by critics of modern and planned fuel-economy standards, but one that seems to pop up more than any is that compliance with them leads to job cuts in the auto industry. This was a theme that was picked up by Donald Trump during his highly-publicized visit to Detroit last week, where he vowed to end what he called a “government assault” on the US auto industry.

Trump pointed to fuel economy regulations as a major cause for job losses in the American auto industry, along with what he sees as auto companies’ over-eagerness to build cars intended to be sold outside of the country. He directed the EPA to reopen its midterm review of fuel economy rules proposed for car models in 2022 through to 2025, which was ended more than a year early in the final days of Obama’s presidency.

Electric car charging

By Elektroauto_1.jpg: Michael Movchin (This file was derived from  Elektroauto 1.jpg:) [CC BY-SA 3.0], via Wikimedia Commons

However, a recent blog post by the Yale School of Forestry and Environmental Studies suggests that there’s no hard evidence that more eco-friendly fuel economy standards are job killers. This is because the standards proposed by the Obama administration were created with enough flexibility to adapt to economic factors such as market shifts and abrupt changes in gas prices. The regulations set to come into effect over the coming years are thought to be a much bigger threat to performance parts companies like Flowmaster. Even if auto manufacturers have to make changes in design to stick to regulations, they will invariably produce and sell cars all the same. Energy-efficient changes, like fitting cars with a new transmission for instance, must still be manufactured and installed in new models, just like any other component.

Despite what Trump and his supporters have said, the last big job loss in the American auto industry occurred in the recession of the late noughties, which hit the western world directly after a period of stagnant fuel economy standards. Companies such as Ford, Chrysler and General Motors were impacted not only by their ugly sales figures, but also higher gas prices that occurred around 2008. This is at least partially down to these manufacturers neglecting newer fuel-efficient models in favour of gas-guzzling trucks and SUVs, which had sold fairly well up until the recession.

Toyota auto plant

By Bertel Schmitt (Own work) [CC BY-SA 3.0], via Wikimedia Commons

When current Corporate Average Fuel Economy standards were approved, the auto industry was well on its way to recovery, and many manufacturers have enjoyed record-breaking sales figures over the past few years. Over the transition phase leading up to the Obama administration’s 2025 fuel economy target, the incremental expense of complying with them per vehicle will average out at around $240. This is easily within the usual savings that auto manufacturers achieve each year, simply through productivity gains.

Although American automakers are expected to spend a total of $200billion from 2012 all the way up to the 2025 deadline in order to comply with greener standards, this is a minuscule drop in the $7trillion in revenue they’re predicted to generate in the same period!