And when you make the car lighter and smaller, you worsen passenger safety, and possibly increase costs (depending on what you're using to make the car lighter).

Lighter, smaller cars are actually safer.

An independent review of the impact of California's CARB emissions regulations found that if you totally ignored the health and climate change benefits, the regulations were still a net benefit just because they encouraged lighter cars, which lead to less death and injury on the roads.

Possibly you're thinking, but if my car was bigger than everyone elses, then I'd kill them, instead of them killing me. But unfortunately, everyone else is thinking the same thing. A classic case for regulation leading to improved outcomes for everyone.

There's lots of leeway to make trucks more aerodynamic. It's the biggest low hanging fruit.