On April 12, 2023, the Environmental Protection Agency (EPA) proposed new pollutant emissions standards for light-duty and medium-duty vehicles and heavy duty vehicles.  The proposed rules set new, aggressive greenhouse gas (GHG) emission limits for all three vehicle classes and criteria pollutant standards for light and medium duty vehicles.

Big picture: Both proposed rules are premised on a sweeping shift from internal combustion vehicles to electric vehicles as well as, at least with respect to heavy duty vehicles, hydrogen fuel cells.  Because of their focus on tailpipe rather than lifecycle emissions, the rules include little mention of the role biofuels might play in meeting these new standards, despite recent Inflation Reduction Act and Renewable Fuel Standard developments that encourage biofuels production for transportation.

While its goals align with what is needed to combat climate change, the proposal will no doubt draw both significant support and critiques, the latter likely focusing on feasibility and technology neutrality. Whatever the rule’s final form will be, it is likely that the Administration will utilize it to try to stimulate large-scale changes in vehicles technology that could greatly alter transportation markets for years to come. The proposal is a key part of the Administration’s plan to combat GHG emissions now, with the aim of aligning the United States with international goals to mitigate the impacts of climate change and avoid worst-case climate scenarios. Comments on the proposed rules are due 60 days after they are officially published in the Federal Register.

Light and Medium Duty Vehicles

The proposed rules require a 56% reduction in tailpipe GHG emissions from passenger vehicles and trucks on a fleetwide average basis by 2032.  The proposed standards are intended to result in an industry-wide average target for the light-duty fleet of 82 grams/mile (g/mile) of CO₂ in MY 2032.  As to criteria pollutants, EPA is proposing non-methane organic gases (NMOG) plus nitrogen oxides (NOx) standards that would phase-down to a fleet average level of 12 mg/mi by MY 2032 for light-duty vehicles and 60 mg/mi by MY 2032 for medium duty vehicles.

Although the standards themselves are technology agnostic, EPA is projecting that a potential route to compliance is EVs representing about 67% of new vehicle sales in 2032.  This is a huge increase from the roughly 5-6% of EV U.S. car sales in 2022.

To support its 67% compliance path, EPA argues that the U.S. is already on track to hit nearly 50% EV sales by 2030 based on “public announcements of U.S. and global electrification targets to date by major manufacturers.”

EPA relies heavily on incentives established by the Bipartisan Infrastructure Law and Inflation Reduction Act regarding EVs and EV charging when arguing that it is technologically feasible to meet these standards.  This includes much discussion of the newly revamped EV tax credits and National Electric Vehicle Infrastructure Program. EPA also includes analysis regarding supply chain, manufacturing, and mineral security considerations in the administrative record for the rule.  Again, relying heavily on the above discussed recent climate legislation and private sector announcements, EPA determines that the U.S. will be able to meet the proposed standards. Critics of the proposal, however, will likely point to potential supply chain shortfalls (for example, with respect to critical minerals like lithium and cobalt) and the ability of electricity production and distribution to keep pace with enhanced demand from EVs when questioning the feasibility of the rule.

Significantly, the proposal focuses solely on tailpipe emissions, and eschews any consideration of the lifecycle greenhouse gas emissions associated with different vehicle types. The proposal would actually eliminate a requirement that the standards at least partially take into account lifecycle greenhouse gas emissions associated with EVs that is set to phase in. Depending on one’s favored climate technology, this focus is either a boon or a curse. EVs and hydrogen vehicles obtain significant benefits despite any upstream impacts or differences between vehicles. Many would argue that the standards appropriately favor these vehicles as the most promising for transportation GHG reductions. On the other hand, biofuels (which still emit CO2 from the tailpipe that is ultimately taken back up by plants) are treated on par with petroleum by the rule structure, a feature that biofuels advocates will surely argue unfairly and illogically prefers some climate technologies over others.

Lastly, EPA estimated net present value of benefits in the range of $850 billion to $1.6 trillion, with equivalent annualized net benefits in the range of $60 billion to $85 billion through 2055.  EPA calculated the climate benefits at $83 billion to $1.0 trillion using an updated social cost of carbon metric.  In addition, EPA estimated the total value of benefits from criteria pollutant reductions at $63 to $280 billion, social benefits from fuel savings of $450 billion to $890 billion, and repair and maintenance savings estimated at $280 billion to $580 billion.  This compared to an estimated vehicle technology costs range from $180 billion to $280 billion.

Heavy-Duty Vehicles

The heavy-duty vehicle emissions standards are also geared toward electrification (and other fuel sources, like hydrogen) but are estimated to result in CO₂ emissions reductions at a more modest rate compared to the light-duty standards—approximately 6.7 percent by 2032 and approximately 30 percent by 2055.   Heavy-duty vehicles present a greater challenge for emissions reductions for several reasons.  Due to their nature, heavy-duty vehicles require large quantities of energy-dense fuel to run for long periods of time and carry heavy cargo.  EV batteries have not yet advanced to the point of reliably supporting these longer trips.  Hydrogen fuel cells are a possible solution, with a recent study showing that hydrogen-powered trucks require far fewer stops and much less time to refuel than their electric counterparts.  Yet clean hydrogen and hydrogen fuel cells, like EV batteries, are not yet available at scale for heavy-duty vehicles.

But this may change soon.  The Administration has provided significant funding and incentives for batteries and clean hydrogen technology in the Bipartisan Infrastructure Law and the Inflation Reduction Act.  EPA’s proposed fuel economy standards for heavy-duty vehicles complement these programs to some degree.  Rapid advances in battery and hydrogen technology for heavy-duty vehicles are needed for the tailpipe standards to be achieved.

Below are additional relevant provisions of EPA’s proposed fuel economy rule for heavy-duty vehicles:

• The proposed rule applies to heavy-duty vocational vehicles, including delivery trucks, refuse haulers, public utility trucks, transit, shuttle, and school buses, as well as tractors (day cabs and sleeper cabs on tractor-trailer trucks).
• EPA is revising the CO₂ standard for MY 2027 and imposing new standards for MY 2028 to 2032 heavy-duty vehicles. The emissions standards become progressively more stringent for many heavy-duty vehicles.  For sleeper cab and heavy-haul tractors, the new standards begin for MY 2030 and become more stringent in 2031 and 2032.
  • For vocational vehicles, the Proposed Rule sets separate standards for three categories of compression ignition vehicles and two categories of spark ignition vehicles for each model year. Within each model year, the standards are subdivided further into Urban, Multi-Purpose, and Regional for each vehicle category.  The MY 2027 proposed standards are shown below.

Table II-19 Proposed MY 2027 through 2032+ Vocational Vehicle CO2 Emission Standards (grams/ton-mile)

• EPA has generally eschewed an application-by-application approach to the standards, meaning that it is not setting separate standards for buses than, for example, delivery trucks. However, EPA is proposing optional emissions standards for custom chassis vocational vehicles, such as school buses, coach buses, other buses, refuse haulers, concrete mixers, motor homes, emergency vehicles, and mixed-use vehicles.
• EPA has also proposed standards for tractors emissions for MY 2027-2032. The proposed MY 2027 standards are shown below.  The standards become progressively more stringent each year, except for Class 8 Sleeper Cabs, which remain static through MY 2029 and then become more stringent for MY 2030 and later.

Table II-21 Proposed MY 2027 through MY 2032+ Tractor CO2 Emission Standards (grams/ton-mile

• Finally, EPA has proposed a set of standards for heavy-haul tractor emissions that, like the Class 8 Sleeper cab standards, remain static through MY 2029 and then begin increasing in stringency for MY 2030 and later.
• Like the proposed rule for light-duty vehicles, the heavy-duty vehicle standards, too, are technology agnostic, though the proposed rule focuses mainly on battery electric and fuel cell electric vehicles.
• EPA is also proposing reforms to how emissions credits under the rules are averaged, banked, and traded. One significant change is that EPA seeks to phase out “Advanced Technology Multipliers” that multiplied credits for plug-in hybrid electric vehicles, all-electric vehicles, and fuel cell vehicles. EPA says that other recently enacted laws and policies provide sufficient incentives for those vehicles, and that the multipliers may skew actual emissions reductions achieved under the rules.

Conclusion

The Biden Administration set a target of 50% of electric vehicle sale shares in the U.S. by 2030. If all goes according to EPA’s plan, these new vehicle emissions standards could provide the final push to meet this goal. However, the rule’s feasibility and its focus on tailpipe instead of lifecycle emissions will no doubt draw fire from critics.

Comments on the proposed rules are due 60 days after they are officially published in the federal register.