President Donald Trump has repealed more than 15 years of regulations limiting greenhouse gas emissions from vehicles, an action that raises doubts over the future of other climate regulations.
The US Environmental Protection Agency (EPA) earlier this month revoked tailpipe standards that limited CO2 emissions, in addition to repealing its 2009 endangerment finding that gave it the ability to regulate greenhouse gas emissions from vehicles. Trump says the tailpipe rules were part of a "giant scam" to address climate change, forcing consumers to buy vehicles they did not want. The now-gutted tailpipe rules were among the last remaining federal measures to constrain CO2 emissions from cars and trucks.
The Republican-led Congress last year voted to block California from enforcing its own tailpipe rules, after which lawmakers eliminated all penalties for carmakers that fail to meet federal fuel-economy standards. US car manufacturer General Motors said last month it expects $500mn-750mn in savings this year from no longer having to purchase fuel-economy compliance credits.
The tailpipe repeal will likely increase fuel demand and thereby raise gasoline prices by 75¢/USG by 2050 in constant dollar terms, or 29pc above a reference-case scenario, according to the EPA. That would be a positive development for US oil producers and refiners. Ahead of the rollback, the US Energy Information Administration's reference case in its Annual Energy Outlook showed fuel demand from light-duty vehicles falling to 4.9mn b/d by 2050 from 8.3mn b/d this year.
But the additional spending on fuel could start to bite for consumers. Under one scenario the EPA modelled, consumers would face net losses of $180bn over 2027-55, as greater spending on fuel and maintenance overwhelms any upfront savings from cheaper vehicles. The EPA relied on an alternative scenario, where oil prices plunge to $47/bl by 2050 compared with a reference-case scenario of $91/bl, to demonstrate the rollback would produce net savings of $250bn by 2055.
None of the EPA's analyses accounted for the billions of dollars in health costs from additional air pollution or damage from climate change. Under a recent policy change, the EPA assigned a value of $0 for negative air pollution externalities, despite outcry from environmentalists that say this has distorted its analyses.
Methane uncertainty
The sweeping arguments the EPA used to repeal its tailpipe rule could complicate the oil sector's push for long-term stability in federal methane regulations. To support the revoking of the tailpipe standards and the underlying endangerment finding, the EPA says it now believes the US' Clean Air Act is only able to regulate "local and regional" air pollution, rather than global greenhouse gas emissions. The EPA also says it was futile to issue costly rules in the US because it believes the climate benefits will be immaterial. If the courts agree with that argument, that could spell trouble for a separate methane regulation. "It seems logically impossible to set standards for methane if the EPA's argument in its recent rule rescinding the endangerment finding succeeds," Harvard Law School's Environmental and Energy Law Programme director, Jody Freeman, says.
Oil groups have sought to retain federal methane regulations, with some change to reduce costs. Doing so would avoid creating uncertainty over millions of dollars of investments the industry has already made in emission controls, while also preventing backlash from foreign buyers that have to consider carbon intensity when buying LNG and oil. The EPA has yet to say if it wants to repeal its methane authority. EPA administrator Lee Zeldin last year said he plans to reconsider the methane rule, but the agency is months late in releasing a proposal.
