The EPA’s proposed new auto emissions rule, the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule, is now half-way through its comment period, which ends in October.
Buried in the 500-page notice of proposed rulemaking is an issue few are talking about, but it’s one that could have profound consequences for U.S. competitiveness in the global energy market. Were the administration to remove Mobile Air Conditioning (MAC) credits, U.S. industry would lose its competitive edge to the benefit of competitors like China.
President Barack Obama’s 2012 standards, which promised to “achieve significant CO2 and oil reductions,” called for most vehicles built by 2025 to reduce greenhouse gas emissions to 163 grams per mile. This translates — in a certain, often-cited scenario — to 54.5 mpg.
The new rule would amend “tailpipe carbon dioxide emissions standards for passenger cars and light trucks and establish new standards covering model years 2021 through 2026.
The proposal would retain the model year 2020 standards for both programs through model year 2026.”
In other words, the new rule would “freeze” emissions standards at 2021 levels. It also seeks to revoke California’s privilege of setting “its own” emissions standards that, in practice, become a national mandate.
Automakers can meet the (current or proposed) mandate through ways other than reductions in mpg. Auto manufacturers are permitted to buy or sell credits, defined by the Department of Transportation as a type of incentive (similar to incentives for electric or hybrid vehicles) for technologies with the potential to achieve fuel economy improvements.
MAC credits are among the existing credits potentially slated for elimination. Before the EPA rule that created MAC credits, the primary refrigerants used in the U.S. market were highly polluting hydroflourocarbon (HFC) refrigerants in which a major component was fluorspar. Chinese producers dominate world supply of fluorospar, the price of which reached a six-year high last year.
MAC credits incentivize U.S. industry with the option to transition to cleaner HFO-1234yf, a “next generation” refrigerant made in the United States. Since the MAC credits were introduced, U.S. industry has made considerable investments in cutting-edge chemical plants. In 2017, for example, Honeywell invested $300 million in a plant in Louisiana to produce HFO-1234yf.
Despite a costly transition, the end result is that the United States has become the world’s leading manufacturer of advanced refrigerant products. Removing MAC credits would vitiate this investment by allowing the U.S. market to be flooded with cheap, toxic Chinese products.
Removing MAC credits would lead to a loss of investment in American manufacturing technologies. These investments have already been made by an industry that adapted to EPA regulations, and did so in a way that made the United States the dominant market leader with a cleaner product. Eliminating options for automakers to meet miles per gallon goals would undermine the administration’s goal of easing regulatory pressure on U.S. industry.
The erosion of U.S. industry, moreover, would occur to the benefit of China at precisely a moment when the Trump administration is seeking leverage over Beijing to combat its illicit trade policies. Giving China the opportunity to flood the U.S. market with older refrigerants would boost the Chinese economy and undercut the administration’s position in ongoing trade negotiations.
President Donald Trump’s review of onerous Obama-era emissions standards is long overdue. Preserving the MAC credits in a broader policy of deregulation would help maintain America’s competitive edge in energy while advancing the country’s strategic interests vis-à-vis China.
Conna Craig has worked as an adviser to governors and policy leaders of two White House administrations. Her work is focused on private-sector solutions to social issues.
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