Trump’s CAFE Rollback is a Short-Sighted Bet Against America’s Energy and Economic Future
Photo: Jeffrey St. Clair.
In an executive order issued early last week, Trump took another swipe at Biden-era regulations, specifically changes to Corporate Average Fuel Economy (CAFE) standards.
So what are CAFE standards? You have to go back to the 1970s, when Congress passed the Energy Policy and Conservation Act of 1975. The legislation was enacted following an oil embargo set by Arab members of the Organization of Petroleum Exporting Countries (OPEC) against the US, a direct retaliation for the US decision to support Israel during the 1973 Arab-Israeli War. Due to shortages, oil prices skyrocketed, and voters were generally unhappy as they waited in long lines at gas stations. CAFE standards were introduced to reduce US dependence on oil by setting targets that compelled automakers to improve the miles-per-gallon (mpg) performance of their vehicles.
The words “greenhouse gases,” “carbon,” or “global warming” don’t appear in the Energy Policy and Conservation Act’s text. This is because there are multiple benefits to improving mpg. Only in the last 20 years has the focus of CAFE standards shifted to emphasize reducing carbon emissions. During the Biden administration, the US Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) set new goals of an average of 50.4 mpg for new cars and passenger trucks sold in 2031 and an average of 35 mpg for new heavy-duty pickup trucks and vans sold in 2035. The Environmental Defense Fund projected that the new standards would save vehicle owners money on fuel over the vehicle’s lifespan: $600 for owners of cars and standard pickup trucks, and $700 for owners of heavy-duty pickup trucks and vans. The organization also projected that the new standards would save over 70 billion gallons of gasoline by 2050.
But in his executive order, Trump proclaimed that the new standards were impossible to meet, and the NHTSA is proposing drastic reductions (Table 1). In the following table, the percentages represent year-over-year reductions in gallons/mile (the inverse of mpg), indicating that the vehicle consumes less fuel over a given distance.
Source: NHTSA notice of proposed rulemaking.
Here’s the thing: there are vehicles on the market that already achieve the “impossible” Biden-era standards. For reference, according to Consumer Reports, the majority of hybrid electric and gas SUVs in 2025 achieve fuel economy exceeding 35 mpg, and most hybrid sedans surpass 45 mpg. And electric vehicles have fuel efficiency, measured in miles per gallon equivalent (mpge), ranging from 53 to 140 mpge, according to the Department of Energy. Even the Tesla Cybertruck, a model popular with Trump supporters following the president’s appointment of Elon Musk to make the government “more efficient,” achieves 79 mpge.
Were the Biden-era standards an EV mandate, as Trump has claimed? It does appear the Biden administration was promoting cleaner technologies to move the country toward reduced reliance on oil. That is not outside the scope of the Energy Policy and Conservation Act of 1975, despite Trump’s arguments. And we’ve been moving in that direction with the help of the standards. The Environmental Protection Agency’s 2024 Automotive Trends Report noted that for model year 2023, new vehicle fuel economy increased to a record 27.1 miles mpg. In 1975, it was at 13.1 mpg. The report also notes that between the 2004 model year and 2024, fuel economy rose by 40 percent (7.8 mpg), accompanied by a 31 percent reduction in CO2 emissions.
A Bogus “Affordability” Argument
But Trump is attempting to center his message on affordability. He argues that EV technology increases manufacturers’ costs, which are passed on to consumers. Specifically, under the proposed rule, NHTSA estimates that automakers would save $37.1 billion over the lifetime of the total vehicles produced through 2031 by no longer being required to implement fuel-saving technologies to comply with current standards. That is true: Most new technologies entail increased costs associated with research, development, and implementation. But in the very near future, that won’t be the case. Some analysts have already predicted EVs will be cheaper to manufacture than gas cars by 2027, some of this based on innovations introduced by Trump’s former buddy over at Tesla. We’re already seeing the effect of technological manufacturing innovations on prices. In China, the cost of EVs has been significantly reduced, with some models priced as low as $8,000.
On the other hand, maintaining reliance on oil increases costs for Americans in various ways. From the fluctuating prices at the pump to the environmental costs of extraction and the climate effects of emissions, oil is by far the more expensive option in the long run. Yes, there are costs associated with electricity, but the administration doesn’t appear to be interested in addressing those issues either.
By easing CAFE requirements, the Trump administration is not only slowing the clean energy transition but is also betting against the long-term economic interests of the American people. Stricter CAFE standards have historically driven innovation, prompting manufacturers to invest in and adopt fuel-saving technologies, including hybrid and electric technologies we see today. By relaxing these standards, the administration removes a critical incentive for this progress, potentially leaving American automakers less competitive globally as other nations continue to adopt and legislate for higher efficiency and the deployment of electric technology.
In the end, easing up on CAFE rules gives some parts of the auto industry a quick win on regulations, but it totally misses the bigger picture: we’re losing ground on securing our energy future, protecting the environment, and helping consumers save money. If affordability is the goal, this is the wrong approach.
This first appeared on CEPR.
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