The proposed Corporate Average Fuel Economy (CAFE) standards for passenger cars and light trucks for model years (MYs) 2027–32 suffer from numerous legal infirmities and analytical errors. This comment will focus on three of these failures in particular: (1) NHTSA is statutorily prohibited from considering electric vehicles in setting CAFE standards, but the proposed standards consider electric vehicles; (2) maximum feasible CAFE standards must be economically practicable, but the proposed standards are economically detrimental; and (3) the proposed standards claim national security benefits from increased electric vehicles when the electric vehicle supply chain is controlled by the United States’ most powerful geopolitical opponent, China.
I. NHTSA knowingly violates the law by considering electric vehicles in its proposed rule
The enabling statute for the CAFE program, 49 U.S.C. § 32902, expressly prohibits NHTSA from considering the fuel economy of electric vehicles. Specifically, 49 U.S.C. § 32902(h)(1) states: “the Secretary of Transportation— (1) may not consider the fuel economy of dedicated automobiles.” 49 U.S.C. § 32901(a)(8) states: ““dedicated automobile” means an automobile that operates only on alternative fuel.” This definition includes electric vehicles. Indeed, NHTSA itself acknowledges this statutory limitation, admitting “statutory constraints that prevent NHTSA from considering the fuel economy of battery electric vehicles.” 88 Fed. Reg. at 56,133.
This admission should be the end of the discussion of this proposed rule. NHTSA is prohibited from considering electric vehicles in the setting of CAFE standards. NHTSA acknowledges that it is prohibited from considering electric vehicles in setting CAFE standards. Yet, in this proposed rulemaking NHTSA does consider electric vehicles in setting its fuel economy standards. This is a transparent violation of the plain language of statute.
That NHTSA not only blatantly violates statute, but even admits that it is violating statute in its own rulemaking, is a breathtaking assertion of impunity. It is the very definition of arbitrary and capricious regulatory action. By proceeding with a rulemaking while knowingly disregarding plain statutory language, NHTSA is asserting that the statutory language does not matter. That they are not bound by statute. That statute can be disregarded at the agency’s whim. This is contrary to all legal precedent, and this factor alone should require NHTSA to withdraw the proposed rule for modification to be in compliance with the plain language of the CAFE program’s enabling law.
II. The proposed standards do not meet the threshold for economic practicability
When assessing the “maximum feasible” fuel economy standards, the CAFE enabling statute 49 U.S.C. §32902(f) lists four factors that the Secretary “shall” consider, one of which is “economic practicability.” A key way to determine “economic practicability” is through cost-benefit analysis. Indeed, NHTSA acknowledges this in the proposed rule and undertakes this analysis. Across all alternatives, NHTSA finds net costs, billions of dollars in net cost to consumers and to society. The rapid increases in cost of vehicles forced by the proposed CAFE standards are not offset by fuel savings. As noted in an analysis published in the Wall Street Journal, even this analysis from NHTSA finding large net costs is based on rosy assumptions.[1]
What this means is that according to NHTSA’s own analysis, the best case scenario is that this rulemaking will do economic harm. That the costs of the proposed rule outweigh any benefits. This is a textbook example of a proposal is that is not economically practicable. One of the key goals for the creation of the CAFE program was to save consumers money. The CAFE program is not a Swiss army knife to deploy to in pursuit of an administration’s policy goals, it has specific, defined justifications.
NHTSA openly acknowledges that this proposed rule completely contradicts one of the four justifications for the CAFE program, that again according to Congress NHTSA “shall” consider. The fact that NHTSA does not propose any alternative that does meet the threshold for economic practicability must be viewed as deliberate. In this proposed rulemaking NHTSA is thus asserting that economic practicability is a factor that can be disregarded at the agency’s whim. This disregard for a specific mandate from Congress suggests that NHTSA is substituting its own policy goals for the will of the legislative branch.
III. The proposed standards actually harm national security
In this proposed rule, NHTSA asserts national security benefits from reduced oil imports. However, this assertion is doubly wrong, espousing an outdated understanding of domestic oil production and refining as well as a lack of understanding of global electric vehicle supply chains. Forcing the adoption of electric vehicles does not improve US national security, it actually undermines it.
The NHTSA assumption of national security benefits from reduced oil imports is completely out of date. The US today is a net exporter of petroleum, and even of those amounts of crude oil the US still imports, around two-thirds come from just Canada and Mexico.[2] Even these imports are often processed at US refineries for export, with the US being a massive exporter of refined products.[3] The few regions of the US where imports are still required are primarily victims of regulatory or transportation limitations that prevent domestic supply from other parts of the country meeting demand. It is not a from a lack of domestic supply. US domestic oil production has more than doubled since the last time the CAFE statute was updated by Congress in 2007, and is significantly higher than the peak record in the 1970s when CAFE standards were first created. The simple fact is that domestic fuel needs today are overwhelmingly met by domestic production and refining. NHTSA’s claims of national security benefits from reduced imports are illusory, frozen in amber from the mid-2000’s.
But the assumption of national security benefits is even more eroneous because this proposed rule relies so heavily on forcing adoption of electric vehicles for its fuel economy improvements. In contrast to liquid fuel supplies, which are overwhelmingly domestically sourced, electric vehicle inputs are overwhelmingly imported. The supply of minerals for the production of electric vehicles, in particular the battery modules, are sourced from overseas. Both the mining and the processing of minerals for electric vehicles happens outside the US. Even worse, the mining and especially the processing of these inputs is dominated by China and Chinese state-owned enterprises. As exhaustively detailed in IER’s report The Economic and Strategic Importance of Domestic Mineral Production, for virtually every mineral and battery component category, China is the dominant supplier or processor.[4]
While in the longer term, it is possible that electric vehicle supply chains can be diversified away from China, in the time frame of this propose rule, China will continue to dominate the electric vehicle supply chain. A new mine proposed today will not enter production by 2027, and may not even begin operation by 2032, such is the nature of permitting and investment timelines. Thus for the years 2027-2032, any proposed rule forcing the adoption of electric vehicles will increase reliance on China for US domestic transportation needs.
The combination of these two factors, domestic oil supply and Chinese control of electric vehicle supply chains, means that NHTSA’s claims of national security benefits from this proposed rule are simply incorrect. Promotion of electric vehicles built with Chinese inputs over internal combustion vehicles fueled by American fuel is not a national security benefit. Given that the original purpose of the CAFE program was to reduce dependence on foreign energy supplies, NHTSA’s failure to understand these basic dynamics calls into question the entire premise of this rulemaking. This rulemaking is not a good faith implementation of the CAFE program as envisioned by Congress; it is a political exercise promoting an industry favored by the current administration.
[1] https://www.wsj.com/articles/transportation-department-fuel-standards-car-ev-electric-vehicle-auto-industry-climate-change-388d6dd0
[2] https://www.eia.gov/tools/faqs/faq.php?id=727&t=6#:~:text=Crude%20oil%20exports%20of%20about,million%20b%2Fd%20in%202022.
[3] https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTPEXUS2&f=A
[4] https://www.instituteforenergyresearch.org/wp-content/uploads/2023/04/The-Economic-and-Strategic-Importance-of-Domestic-Mineral-Production.pdf
