President Trump Can Keep ‘America First’ in Energy
$USO, $UGA, $USD, $HON
The EPA’s proposed new auto emissions rule, the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule, is now half-way through its comment period, which ends in October.
Deep in the 500-pg notice of proposed rule-making is an issue few are talking about, but it’s one that could have profound consequences for US competitiveness in the global energy market.
Were The Trump Administration to remove Mobile Air Conditioning (MAC) credits, US industry would lose its competitive edge to the benefit of competitors like China.
President Barack Hussein Obama’s Y 2012 standards, which promised to “achieve significant CO2 and Crude O reductions,” called for most vehicles built by Y 2025 to reduce greenhouse gas emissions to 163 grams per mile.
This translates to 54.5 mpg.
The new rule would amend “tailpipe carbon dioxide emissions standards for passenger cars and light trucks and establish new standards covering model years 2021 through Y 2026.
The proposal would retain the model Y 2020 standards for both programs through model Y 2026.
In other words, the new rule would “freeze” emissions standards at Y 2021 levels. It also seeks to revoke California’s privilege of setting “its own” emissions standards that become a national mandate in practice.
Automakers can meet the (current or proposed) mandate through ways other than reductions in MPG.
Auto manufacturers are permitted to buy or sell credits, defined by the Department of Transportation as a type of incentive, similar to incentives for electric or hybrid vehicles, for technologies with the potential to achieve fuel economy improvements.
MAC credits are among the existing credits potentially slated for elimination. Before the EPA rule that created MAC credits, the primary refrigerants used in the US market were highly polluting hydroflourocarbon (HFC) refrigerants in which a major component was fluorspar. Chinese producers dominate world supply of fluorospar, the price of which reached a six-year high last year.
MAC credits incentivize US industry with the option to transition to cleaner HFO-1234yf, a “next generation” refrigerant made in the United States.
Since the MAC credits were introduced, U.S. industry has made considerable investments in cutting-edge chemical plants. In 2017, for example, Honeywell (NYSE:HON) invested $30-M in a plant in Louisiana to produce HFO-1234yf.
Despite a costly transition, the end result is that the United States has become the world’s leading manufacturer of advanced refrigerant products. Removing MAC credits would invalidate this investment by allowing the US market to be flooded with cheap, toxic Chinese products.
Removing MAC credits would lead to a loss of investment in American manufacturing technologies.
These investments have already been made by an industry that adapted to EPA regulations, and did so in a way that made the United States the dominant market leader with a cleaner product. Eliminating options for automakers to meet MPG (miles per gallon) goals would undermine The Trump Administration’s goal of easing regulatory pressure on US industry.
The erosion of US industry would occur to the benefit of China at precisely a moment when The Trump Administration is seeking leverage over Beijing to combat its illicit trade policies. Giving China the opportunity to flood the US market with older refrigerants would boost the Chinese economy and undercut President Trump’s position in ongoing trade negotiations.
President Donald Trump’s review of onerous Hussein Obama-era emissions standards is long overdue.
Preserving the MAC credits in a broader policy of deregulation would help maintain America’s competitive edge in energy while advancing the country’s strategic interests Vs China’s.
Have a terrific weekend
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