States Shouldn’t Regulate Vehicle Emissions

The new Obama administration has decided to direct the EPA to review whether states such as California should be permitted to enact tougher fuel economy standards on auto manufacturers to reduce Greenhouse Gas (GHG) emissions. While reducing GHG emissions and oil consumption is a great goal, letting states do so is not the way to go about it.

If anything, EPA should handle it. There should be Federal preemption on all emissions regulations for mobile sources. Unless cars never cross state lines, letting states regulate them is a huge potential regulatory burden and an impediment to interstate commerce without any clear benefits.

In the long term increasing the CAFE figure (regulated by NHTSA) is good. Requiring a fleet average of 35 mpg by 2020 is not that high of a hurdle. It’s going to get a lot of needlessly excessive vehicles off the road. But that doesn’t come without a price. The cost of the technology will increase vehicle prices, manufacturers will have to redirect and commit extra R&D funds, and there will be a steep learning curve where new cars may not live up to expectations. Regulation tends to disrupt “business as usual” and leads to (sometimes ungainly) innovation. But it happens over time. Trying to compress it into too short a time is going to result in a lot more unintended outcomes and drive up the cost.

Also, the unrealistic concept of changing the regulations for 2011 is akin to rulemaking after the fact. The specifications for new models to be launched then are already frozen. Some will be launched in 2010. And that doesn’t include vehicles that are already in production that will still be in production then. It’s less than two years away. No matter what the rules say, it isn’t going to happen. I suspect this part of it is posturing for negotiations about the 2015 time-frame and beyond.

My recommendation would be to only allow the Federal government to regulate mobile emissions and accelerate the CAFE requirements starting around 2015 by etching the requirements in stone for the period of 2015-2025 by the end of 2009 so that manufacturers have the assurance of regulatory stability and can commit to investing toward those goals.