In August of 2012, the Obama administration finalized the new standard for the country's corporate average fuel economy (CAFE) regulations. The implication of that regulations meant that by 2025 all cars and light-duty trucks built by US Auto manufacturers will have to meet the 54.5 mpg combined fuel economy standard and will have to commit to a yearly 5% increase in fuel economy of the cars built.
Benefits of CAFE
This regulation was duly supported by the major automakers with plants in the US who also saw America as one of their biggest markets. On the environmental side, the new regulation was to effectively reduce the amount of greenhouse gas emission, as well as help mitigate the growing effects of global warming. On the consumer side, the new regulation would help save car owners an estimated $8000 or ₦2.94 Million per vehicle.
However, those benefits seem not to be so interesting to the current President of America Donald J. Trump, who has decided that a new approach to managing fuel economy is needed, given the US current fuel consumption calculations. In 2018 President Trump made clear his intention of cutting back on the Obama administration's fuel economy standard and has thus made true this intention by adjusting the CAFE regulation to numbers that he believes are best for the economy.
The following video will through more light on CAFE standards affect vehicle fuel efficiency and performance.
Video: US CAFE standards: Performance vs. fuel economy
The new standard will only allow US auto manufacturers to commit to a yearly increase in the fuel economy of cars they build by up to 1.5%, a sizeable reduction of about 3.5%. The implication of this is unarguably more greenhouse gas emissions from cars manufactured under this regulation. In fact, it is estimated that 1 billion extra CO2 will be emitted under this new standard. Consequently, the combined fuel economy standard is effectively set at about 40 mpg, a good 14.5 mpg of fuel economy-design commitment on cars and light-duty trucks lost to the new cafe fuel economy regulations.
Implications on Nigeria and Nigerian buyers of American built cars
In making this new regulation, the Trump administration based their decision on the fact that they believe that the new Corporate Average Fuel Economy (CAFE) standards will save American auto manufacturers an estimated ₦5.5 trillion or about $15 billion in costs that would have gone into developing technology innovations meant for the design of lighter and more fuel-efficient cars. In announcing the CAFE standards, President Donald Trump himself tweeted the following;
Great news! American families will now be able to buy safer, more affordable, and environmentally friendly cars with our new SAFE VEHICLES RULE. Get rid of those old, unsafe clunkers. Build better and safer American cars and create American jobs. Buy American!— Donald J. Trump (@realDonaldTrump) March 31, 2020
So the big question I believe that is obviously on a lot of minds now is, how will this American issue affect us here in Nigeria? Well, if you were one of those people who believed that stuff that happen in America, or Asia or in some faraway land across the Atlantic can't affect us here, I guess the Convid-19 global pandemic has jangled you back to reality. The world is now getting smaller and people can move from one extreme location to the other in just a matter of hours.
More so, world economies are becoming ever more connected, as a little glitch here is good enough to rattle the global economy. So, you can be sure this regulation will affect us in more than one way. Let's consider these areas:
1. Cars built under this regulation should be relatively cheaper
This is one of the areas the Trump administration are basing their argument on. They strongly believe that the new regulation will allow auto-makers build cheaper cars. The Obama CAFE fuel economy standards put automakers under obligation to build more fuel-efficient cars and in the process, these companies had to shift their attention to the use of lighter and obviously more expensive materials for the production of cars.
The extensive use of aluminum, low-grade steel, and carbon fiber boomed within this period starting from 2012. The implication of this was that car prices started going up the curve as the cars became more fuel-efficient.
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So if this obligation to build lighter and more efficient cars is relaxed as is the case with this new regulation, the prices of cars built under the duration of this standard should be less compared to if the 54.5 mpg obligation were still in place. Generally, American built cars were supposed to cost a lot more yearly as these manufacturers pushed for the 54.5 mpg target but with 40 mpg target, which we don't even think they will be motivated to meet, cars should be relatively cheaper as manufacturers resort to heavier and less expensive materials.
Cars built under the New CAFE regulation should be relatively cheaper
2. Spend more on fuel
It is just simple, if your car is more fuel-efficient, you would likely visit the filling station a lot less and vice versa. Consider that you own a car with a real-world-tested fuel economy of 50 mpg, surely you will be spending less on fuel. What if your car fuel economy rating is set at 38 mpg, it's just not rocket science that you will have to buy fuel a lot more often for this car compared to the other. So expect to pay more for fuel, in fact, a report by the New York Times estimates that you could spend as much as ₦183,000 extra on fuel for cars built under this regulation.
3. Environmental implications
The Trump administration believes that CO2 is not a major contributor to global warming and the attendant climate change. However, a number of recent reports have fingered CO2 as a major greenhouse gas that causes global warming. As mentioned earlier, if this regulation goes ahead, an estimated 1 billion tons of additional CO2 will be emitted into our air.
An estimated 1 billion tons of extra CO2 will be pumped into our Atmosphere with this new standard
Already we here are struggling to cope with changes that come with the whole global warming thing and the climate change effects that result from it. The level of flooding we are experiencing is way above normal. States like Bayelsa, Rivers, Niger, Delta and Edo have experienced a yearly rise in flooding occasioned by high volume rainfall. Even the average temperature seems to have increased across the country.
I was in Abuja a few months ago and the heat there was baking hot; even cooler coastal cities like Port Harcourt and Calabar are recently experiencing a marked rise in temperature. So, possibly expect these to continue and even worsen with these extra tons of CO2 that will surely continue through the life span of those cars.
In the coming weeks and months, we expect a barrage of litigations to follow this new CAFE 2025 fuel economy standards.