Happy Holidays from the Regulatory State

Eakinomics: Happy Holidays from the Regulatory State Congress is gone, Build Back Better is bust, and the holidays approach. So, just to check whether anyone is paying attention, the Environmental Protection Agency (EPA) issued a final rule on greenhouse gas emissions by cars and light trucks (“light-duty vehicles” or LDVs) that with a cost of $180 billion is – in the words of AAF’s Dan Bosch – “the most expensive final rule tracked by the American Action Forum since 2005.” Yikes. The rule is part of transportation sector regulations that support an effort to meet the U.S. goal of reducing nationwide emissions 50 percent from 2005 levels by 2030. Recall that there are two relevant standards for car emissions. The more familiar ones are the Corporate Average Fuel Economy (CAFE) standards that govern miles per gallon of fuel and are issued by the Department of Transportation. The EPA rule dictates the grams-of-carbon-dioxide-per-mile standard. It is entitled “Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions Standards,” and is more stringent than the proposed emissions requirements published in August (and $30 billion more expensive) and, in the process, scraps a signature Trump Administration deregulatory action. The EPA estimates a reduction of 3,125 million metric tons (MMT) due to the final rule. This is compared to the baseline formed by the Trump-era rule and about 40 percent more stringent than the rule as proposed in August. While this is notable, considering what the Biden Administration will need to achieve to reach its 2030 goal, the final rule remains modest at best. According to Bosch, “the United States emitted more than 6,500 MMT of greenhouse gases in 2019, with about 1,900 MMT from transportation sources. The projected reductions from the final rule, therefore, are less than half of the annual nationwide total but spread over 28 years. A visual representation of the annual impact of the final rule demonstrates the modest effect. The graph below shows the effect the final rule’s projected reductions would have on the Energy Information Administration’s (EIA) expected transportation sector emissions until 2050, and also compares it to the proposed rule.” The emissions targets in the Biden climate plan are ambitious, to say the least. In the absence of something sensible (like an economy-wide, upstream carbon tax), this is just the beginning of an expensive, sector-by-sector regulatory drive.