Podcast Summary

Shift Key with Robinson Meyer and Jesse Jenkins
Host: Heatmap News
Episode: The Outdated Economics Driving Trump’s Car Standards Rollback
Date: February 20, 2026

Overview

In this episode, Robinson Meyer takes a deep dive into the Trump administration's rollback of car emissions and efficiency standards, dissecting the economic justifications behind these decisions and evaluating their relevance and accuracy. The first segment features an in-depth discussion with Ken Gillingham, Yale economics professor and former senior economist for energy and the environment at the White House Council of Economic Advisors. The conversation unpacks how and why the Trump administration’s arguments lean heavily on outdated or selectively interpreted economic literature. The second half features Hannah Hess of the Rhodium Group, who breaks down new data showing divergent trends in the U.S. clean energy investment landscape—where clean electricity is booming but the electric vehicle (EV) supply chain is struggling.

1. The Trump Administration Rollbacks: Key Changes and Economic Arguments

[00:00 – 03:40]

• The Trump EPA revoked the Endangerment Finding—removing the agency’s power to regulate greenhouse gases as pollutants—and simultaneously repealed the clean car (tailpipe greenhouse gas) rules.
• Meyer emphasizes that, soon, the U.S. could have no fuel economy or emissions regulations whatsoever, essentially reversing decades of progress.
• The administration argues these repeals will save Americans money, claiming about $1.3 trillion in public benefits from eliminating the rules—a figure built on a series of contested and often outdated economic assumptions.
• Quote: “By the end of this year, the U.S. will probably not regulate fuel mileage or vehicle efficiency in any way. We’ll essentially be back to the days of the early George W. Bush administration…” — Robinson Meyer [01:24]

2. Breaking Down the Tweaks: How the Trump EPA’s Analysis Departs from Reality

[03:41 – 10:50]

Key Points from Ken Gillingham

• The Trump EPA’s analysis is described as “very simplistic”—basically a tweaked version of the previous (Biden-era) analysis, except for two critical changes:
  • Removal of the endangerment finding (greenhouse gases don’t matter)
  • Assumption that consumers already fully value future fuel savings when buying cars; thus, no need for regulation to promote efficient vehicles.
• Both assumptions dramatically skew the cost-benefit analysis and are central to justifying the rollback.
• Quote: “They changed the expected future gasoline price. They changed how they value future fuel savings when people buy a more efficient car.” — Ken Gillingham [05:00]
• Discussion on the historical basis for efficiency standards: decades of economic theory suggested “market failures”—consumers undervalue long-term fuel savings when buying cars, justifying regulation.
• Meyer notes that economic thinking has shifted over time; what was conventional wisdom in 2008 has evolved repeatedly.

3. The "Energy Efficiency Gap" and Shifting Economic Consensus

[10:50 – 17:35]

Evolution of Economics Literature

• For years it was accepted that consumers heavily discount long-term fuel savings—valuing only about the first 2.5–3 years’ worth, justifying efficiency standards (“energy efficiency gap”).
  • Quote: “Consumers value roughly 2.5 to 3 years… of future fuel savings when they purchase a car.” — Ken Gillingham [08:24]
• In the early 2010s, studies suggested consumers might actually value nearly all future savings, shaking this foundation for standards.
  • These studies looked at car pricing (new and used), comparing fuel efficiency to how much consumers paid, notably in cases like Prius pricing.
• More recent critiques identified methodological flaws in those studies, especially in how valuation ratios were calculated. Corrected analyses swing the consensus back toward the original view: consumers still don’t fully value future fuel savings.
  • Quote: “If you correct for that error, then you swing right back to where the literature used to be.” — Robinson Meyer [17:03]

4. Fuel Price Assumptions and Real-World Consumer Behavior

[17:29 – 19:39]

• Trump’s EPA proposal assumed unusually low future gasoline prices, further reducing projected benefits of efficiency. This assumption was criticized as baseless and was weakened in the final rule, but remains unrealistically low.
  • Quote: “They arbitrarily said… fuel prices were going to be much, much lower and thus the benefits from future fuel savings are going to be much, much lower.” — Ken Gillingham [17:56]
• Gillingham’s own research, exploiting a real-world fuel economy misstatement by Hyundai/Kia, confirms that consumers undervalue fuel requirements—valuing only 23–30% of the possible fuel savings (about three years’ worth).
  • Quote: “People value about 23 to 30% of future fuel savings, which means there’s still 70 to 77% that they don’t value.” — Ken Gillingham [19:40]

5. The End of Fuel Economy Regulation: Historical Context and Market Effects

[20:04 – 26:33]

• Trump’s “one big beautiful bill” reduced CAFE (fuel economy) standard penalties to zero—rendering them non-binding. Simultaneously, the EPA is moving to eliminate greenhouse gas standards altogether.
  • Quote: “Automakers will not be fined for violating the CAFE standards on the one hand. On the other hand, the EPA is now… trying to repeal not only the greenhouse gas standards for vehicles, but… the idea that it should regulate greenhouse gases altogether.” — Robinson Meyer [20:41]
• This double elimination puts the U.S. in an unprecedented regulatory vacuum, save for pre-1970s conditions.
  • As a result, automakers are incentivized to focus technology improvements on horsepower and vehicle size—not efficiency. Historical parallel: in periods of weak or no regulation (pre-1970s, 1980s), cars got bigger and more powerful but no more efficient.
  • Quote: “There are periods, long periods, especially in the 80s, when standards stayed pretty flat… we didn’t see much improvement in fuel economy, minimal improvement… for years on end.” — Ken Gillingham [23:10]
• The removal of credit trading markets eliminates a crucial revenue source for EV-makers like Tesla, Rivian, and Lucid, further threatening the economics of zero-emission vehicles.

6. The Legality and Credibility of the Cost-Benefit Analysis

[26:06 – 27:23]

• Agencies must prove (via cost-benefit analysis) that regulatory changes generate more public good than they cost. Historically, courts rarely uphold rules with negative net benefits.
  • Gillingham points out the Trump rollback’s declared benefits are built on outdated or faulty assumptions, and more accurate inputs would show the rules actually impose net costs.
  • Quote: “It’s pretty clear that the net benefits would not be positive from this rule… The decision to rescind the rules was made before the analysis and the analysis had to follow.” — Ken Gillingham [27:03]

7. State of Clean Energy Investment: The Tale of Two Sectors with Hannah Hess

[29:19 – 39:06]

Mixed Fortunes in the U.S. Energy Transition

• Hannah Hess (Rhodium Group) shares insights from the Clean Investment Monitor, which tracks quarterly investment across the clean tech economy.
  • Q3 2025 saw record investment, mainly driven by a surge in EV purchases due to expiring tax credits.
  • Q4 2025 marked the first year-over-year quarterly decline (down 11% from Q4 2024), predominantly due to a sharp drop in EV purchasing and a steep contraction in new EV-related manufacturing projects.
    • Quote: “Q4 is the first instance in our tracking of negative quarter on year growth in clean investment.” — Hannah Hess [30:56]
• Manufacturing announcements for new projects plummeted to lowest levels since Q4 2020; canceled projects in 2025 outpaced new ones—$22 billion canceled (mostly in EV supply chain) vs. $21 billion new announcements.
  • Top cancellations came from major automakers but were also seen throughout the battery/component supply chain.
    • Quote: “97% of all the canceled investment in 2025 was in the EV supply chain. That’s a total of $22 billion of canceled projects, and that exceeded the $21 billion of announced projects.” — Hannah Hess [36:58]
• Good news: Clean electricity investment (solar, storage, wind) is robust, with 2025 investment up 18% year-over-year to $101 billion. The pipeline for new electricity projects is growing.
  • Quote: “Solar and storage are really the workhorses when it comes to clean investment… the pipeline of clean electricity is continuing to grow.” — Hannah Hess [37:21]
  • Quote: “In just the last quarter, we saw $18 billion worth of utility scale solar and storage installations, which was up about 10% from the same time last year.” — Hannah Hess [38:49]

8. Notable Quotes & Memorable Moments

• “By the end of this year, the US will probably not regulate fuel mileage or vehicle efficiency in any way.”—Robinson Meyer [01:24]
• “Consumers value roughly 2.5 to 3 years… of future fuel savings when they purchase a car.”—Ken Gillingham [08:24]
• “People value about 23 to 30% of future fuel savings, which means there’s still 70 to 77% that they don’t value.”—Ken Gillingham [19:40]
• “97% of all the canceled investment in 2025 was in the EV supply chain. That’s a total of $22 billion of canceled projects, and that exceeded the $21 billion of announced projects.”—Hannah Hess [36:58]
• “Solar and storage are really the workhorses when it comes to clean investment… the pipeline of clean electricity is continuing to grow.”—Hannah Hess [37:21]

9. Important Timestamps

• [05:00] – Gillingham outlines the key changes in Trump’s EPA analysis
• [08:24] – The original theory of the energy efficiency gap
• [17:03] – The literature swings back: consumers still undervalue fuel savings
• [19:40] – Empirical evidence on undervaluing future fuel costs
• [22:14] – Regulatory credit markets and their effect on EV manufacturers
• [26:33] – Legal standards for cost-benefit analysis and rulemaking
• [29:55] – Q4 2025 data on clean investment: first negative growth quarter
• [36:58] – Scope and scale of EV sector investment cancellations
• [37:21] – Clean electricity is booming, even as EV investments falter

Conclusion

This episode provides a clear, data-driven, and accessible look at how economic thinking on car standards has evolved and why the Trump administration’s rollback is built on shaky, outdated assumptions. The segment with Hannah Hess highlights the dual realities of the U.S. energy transition: while EV investment is faltering and the regulatory environment is in flux, clean electricity is accelerating at historic rates. Robinson Meyer and his guests convey both the legal, economic, and practical ramifications of these shifting policies, making this a vital episode for anyone invested in climate policy, economics, or the future of transportation.