Earlier in the year, President Trump signed legislation that effectively ended fuel economy penalties for automakers. The penalties applied to automakers for failing to meet Corporate Average Fuel Economy (CAFE) standards dating back to the 2022 model year. The measure was part of the “One Big Beautiful Bill Act,” signed into law in July 2025. And now the president has pushed the envelope further by rolling back Biden-era fuel economy standards, terming them ‘‘ridiculous.’’
Trump has officially ended CAFE rules, with automakers now required to meet just 34.5 mpg across their model fleet by 2031, much lower than 50.4 mpg that the Biden administration had imposed. Trump says the less stringent fuel standards will allow automakers to produce more affordable cars, cutting the price of vehicles by at least $1,000.
According to the White House, the reset will save American families $109 billion in total. Earlier in the year, U.S. Secretary of Transportation Sean Duffy claimed the Biden administration wrongly assumed that fuel economy averages for automaker fleets would automatically rise in the coming years as EV adoption accelerates.
“And we’re not only talking about outside of our country, because nobody could do it. Nobody wanted to do it. And it was ridiculous, very expensive. It put tremendous upward pressure on car prices, combined with the insane electric vehicle mandate. Biden’s burdensome regulations have caused the price of cars to soar more than 25%, and in one case, they went up 18% in one year,” Trump said.
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Not surprisingly, automakers are now breathing a sigh of relief, “Today is a victory for common sense and affordability,” Ford Motor Company (NYSE:F) CEO Jim Farley said at the event. “This is the right move … We will invest more in affordable vehicles.”
The EV sector is the biggest loser of this policy change. EV adoption in the United States remains low compared to other major world economies. Indeed, just 7.5% of new vehicle sales in the country are Battery-electric vehicles (BEVs), compared to 50% in China and less than a tenth of Norway’s 80%. These rules were designed to push automakers toward producing more EVs, and their relaxation removes a primary regulatory driver for the transition to electric mobility. To exacerbate matters, the administration has canceled the $7,500 consumer tax credit for EV purchases effective September 30, a major financial incentive that helped offset the higher upfront cost of electric vehicles.
Meanwhile, U.S. oil producers and fuel traders are the biggest winners here. According to Will Anderson, zero-emission vehicles policy advocate at Public Citizen, the Biden-era regulations could have cut U.S. fuel consumption by 70 billion gallons per year, saving Americans $23 billion in fuel costs. However, the real impact is likely to come from the expected slowdown in EV sales. The International Energy Agency (IEA) has forecast that EVs will displace over 5 million barrels of oil per day by 2030, or ~5% of global oil demand. Some analyses suggest that this number could be even higher, with projections of displacing 10 million barrels per day by 2035 based on announced policies. Those are big numbers by any measure, and could easily offset demand growth by other sectors.
Overall, Trump’s energy policies will have a negative effect on a cleaner America. Policies supporting electric vehicles and wind/solar projects have been targeted, including restrictions on tax credits for renewable energy. The administration is also attempting to revoke California’s authority to set stricter vehicle emissions standards than federal requirements. The administration has declared a national energy emergency to expedite domestic oil and gas production, including in protected offshore areas.
This emphasis on “energy dominance” favors traditional energy sources over renewable ones and is expected to increase the burning of fossil fuels. Numerous environmental protections have been targeted for repeal or weakening, including air and water quality standards, limits on methane emissions, and coal mining oversight. These actions are projected to increase cancer-causing pollutants like soot, benzene, and heavy metals in the air and water. The U.S. has withdrawn from the Paris Agreement and the Climate Loss and Damage Fund, and rescinded domestic net-zero GHG emission goals. The “social cost of carbon” metric, used to justify climate regulations, is also being targeted for elimination or reduction.
Carbon Brief’s analysis shows that this means Trump’s policies will add an extra 7 billion tonnes of emissions to the environment. U.S. emissions will now effectively flatline, rather than fall by the required 40% in order to hit climate targets.
By Alex Kimani for Oilprice.com
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