In the wake of the infamous 2015 Volkswagen diesel emissions cheating scandal, which cost the German automaker a staggering $33 billion in fines and settlements, the automotive industry has faced increasing scrutiny over environmental compliance. However, a recent opinion piece in The Wall Street Journal by Mr. Buschbacher, who is a partner at the law firm Boyden Gray PLLC, sheds light on a new scandal, one that involves electric vehicles and the questionable practices of government regulators. Here’s the full story.
The Hidden Scandal
The scandal, hidden away in the Federal Register, challenges the integrity of the government’s approach to enforcing fuel-efficiency rules for electric cars. Unlike the high-profile cases involving diesel emissions cheating, this scandal surrounding electric cars has garnered considerably less attention.
At the heart of the issue is a little-known rule buried on page 36,987 of volume 65 in the Federal Register.
The Values to Be Used
Automakers must use actual values measured in a lab environment when testing gasoline-powered vehicles for compliance with the Transportation Department’s fuel-efficiency regulations.
However, the Energy Department has a different set of rules for electric cars. According to this rule, carmakers are allowed to multiply the efficiency of electric cars by a factor of 6.67 arbitrarily. This means that a 2022 Tesla Model Y, for example, which tests at the equivalent of about 65 miles per gallon in a laboratory, is counted as having a compliance value of a staggering 430 mpg.
Lacks Any Basis
This inflated compliance value, as the opinion piece points out, lacks any basis in reality or law. The consequences of such exaggeration are not trivial.
Car manufacturers receive compliance credits as a reward for overstating electric-car efficiency. These credits can be traded for cash, and economists estimate their value could reach into the billions. Essentially, it becomes a cross-subsidy invented by bureaucrats, ultimately paid for by every individual purchasing a new gasoline-powered car.
A Well-Kept Secret
For years, this subsidy remained a well-kept secret in Washington. Both carmakers and regulators seemed content with this arrangement.
Regulators could set seemingly stringent targets, and carmakers could comply by producing electric cars with artificially inflated compliance values. Meanwhile, consumers remained unaware of the financial implications of this hidden subsidy.
The Expose
However, the secret is now out, thanks to environmental groups who exposed the illegality of this practice. The Energy Department has responded by proposing the elimination of the 6.67 multiplier for electric cars, accepting that the number has “no basis” and “lacks legal support.”
Carmakers have voiced their concerns and asked the Biden administration to postpone any return to engineering or legal realities in response to the proposed modifications.
The removal of the multiplier puts the Transportation Department’s proposed rules, which were likely crafted with the multiplier in mind, in a difficult position. Car manufacturers argue that the rules, without the multiplier, become unattainable.
Government-Created Cheat Codes
This revelation poses broader questions about the ethics of government-created cheat codes in regulatory frameworks. While carmakers may resist the removal of the multiplier due to the challenges it presents, the fundamental issue is the reliance on artificially inflated compliance values.
So what are your thoughts? How can regulatory frameworks be restructured to ensure fairness, balancing the promotion of electric vehicles with accurate compliance measures that show their environmental impact?
