A conservative advocacy group is reversing its prior criticism of the Trump administration’s vehicle greenhouse gas standards rollback, and is now touting the rule as a “major victory” by selectively citing cost savings while avoiding the administration’s own estimates that the rule may spur up to $22 billion in net costs on the economy.
The American Action Forum’s (AAF) claims about the vehicle rule’s cost-benefit analysis broadly echo messaging from EPA and Transportation Department (DOT) officials about their joint final rollback issued March 31.
But the group’s claims are also showcasing a broader battle to define the Trump administration’s deregulatory accomplishments, along with critics’ concerns that the administration’s “regulatory budgeting” efforts focus on compliance costs while ignoring foregone benefits from rolled back environmental protection measures.
“I haven’t been this surprised since the Clean Power Plan vanished,” AAF President Douglas Holtz-Eakin writes in an April 2 blog post defending the rollback, touting an analysis by AAF staff showing “economic savings of nearly $200 billion” from the final vehicle GHG rollback.
“Recall that only a month ago the word on the street (and in the press) was that the [rollback] was a costly misadventure,” Eakin added.
Holtz-Eakin’s praise of the final rule echoes an administration fact sheet for the final rule touting “$200 billion reduction in total costs over the lifetimes of vehicles through MY 2029, including the value of increased safety.”
But AAF’s praise represents a 180-degree shift in recent weeks.
Specifically, Holtz-Eakin’s “word on the street” reference cites his own prior reaction to press reports about a draft of the final rule. Those stories, based on summaries publicized by Sen. Tom Carper (D-DE), cited preliminary administration projections that the rule could impose $34 billion in net costs, while boosting fuel costs to consumers beyond any upfront reduction in car sticker prices.
“Regardless of how the administration got here, the . . . rulemaking is a threat to its regulatory success over the past three years,” he wrote in a March 2 post, suggesting there was “enough smoke” in the press coverage “to conclude there is a raging fire in the rulemaking.”
Omitted Net Costs
But there has been relatively little change in the final rule’s underlying analysis -- compared to the draft referenced by Carper. Specifically, the completed regulation still shows as much as $22 billion in net costs to the public under a 3 percent discount rate, as Inside EPA previously reported.
Holtz-Eakin’s post omits this figure completely, and the AAF staff analysis also sidesteps discussion of the issue while prominently touting the rule’s projection of saving $200 billion in “economic costs,” including costs to deploy compliance technology.
The AAF staff analysis, however, does show the cost and benefits of the package essentially cancel one another out, though the staff focus only on analysis using a 7 percent discount rate, which generates more favorable findings for EPA and DOT.
Long-standing White House guidance instructs agencies to use both the 3 and 7 percent rates when assessing rules, with the 3 percent figure aimed at calculating the rate an average consumer uses for future consumption, while the 7 percent figure is intended to assess the “opportunity cost of capital” in the private sector.
Additionally, use of the 7 percent discount rate has been the subject of particular criticism in the context of climate policy because it significantly downplays the benefits of current emissions controls for future generations.
Holtz-Eakin referred an Inside EPA query on the group’s shifting posture to AAF Director of Regulatory Policy Dan Bosch, who co-authored the underlying analysis.
“We default to the 7 percent discount rate, which is what [the White House budget office] uses for the regulatory budget,” he says.
Bosch also acknowledged that the roughly $200 billion in “economic savings” touted by AFF does not represent the full cost to the economy but rather is essentially a “compliance” or “regulatory cost” number. The rule itself finds its net benefits “straddle zero.”
The “regulatory cost” nomenclature is arguably confusing in the context of the vehicle rule, given that some of the rule’s claimed cost savings actually include co-benefits such as reduced crash deaths and not costs to automakers.
The difficulty in distinguishing between “regulatory costs” and net costs to society underscores the gymnastics that Trump officials and their allies are engaged in to defend the rollback’s cost-benefit review, with Holtz-Eakin at one point alternately referring to the $200 billion figure as both “economic savings” and saved “regulatory costs.”
Deregulatory Agenda
The advocacy also points to a fight not just over the vehicle rule itself but also about the extent to which the policy allows the Trump administration to claim a high-profile victory in its deregulatory agenda, in the wake of multiple executive orders calling for elimination of rules and regulatory “costs.”
Holtz-Eakin, for example, in his blog post cites the $200 billion figure as a regulatory cost savings that “saved the Trump regulatory budget aspirations.”
But such conflating of regulatory costs with net costs to the public also highlights prior concerns -- including from nearly 100 economists in an April 2017 letter -- that the administration’s regulatory budget is justifying an arbitrary focus on costs rather than net benefits.
“By tying new regulations to the elimination of existing regulations, and by not requiring consideration of the foregone benefits of the eliminated regulations, Executive Order 13771 opens the door to arbitrary and haphazard regulation that could harm the public,” the economists wrote.
Meanwhile, former EPA transportation official Jeff Alson, a frequent critic of the rollback who now works with the Environmental Protection Network, offers a harsh appraisal of both the administration’s fact sheet and AAF’s analysis.
“I worked on cost-benefit studies for 40 years at EPA and reviewed every [DOT fuel economy] rulemaking, and I can state unequivocally that neither agency has ever only talked about one side of the cost-benefit equation while ignoring the other side,” Alson said.
Holtz-Eakin’s characterization of economic savings of “nearly $200 billion” implies the figure reflects the overall effect on society, when it is not a net cost number, Alson says. That’s “economic malpractice.” -- Doug Obey (dobey@iwpnews.com)
