On March 20, the U.S. Environmental Protection Agency (“EPA”) released its final rule on Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium-Duty Vehicles (the “Final Rule”). The Final Rule establishes new, gradually more restrictive, emissions limits for light-duty (passenger cars and light trucks) and medium-duty (Class 2b and 3 vehicles – large pickups and vans) vehicles for Model Years (MY) 2027-2032 for greenhouse gases (GHGs) as well as emissions of non-methane organic gases (NMOG), particulate matter (PM2.5), and nitrogen oxide (NOx).
The Final Rule is generally in line with the proposed rule EPA published in May 2023; however, in response to comments received on the proposed rule, EPA decided to change its approach and allow industry to more slowly build towards meeting the most stringent standards for MY 2032, which EPA also slightly relaxed in the Final Rule. With respect to GHGs, the final MY 2032 standards are very restrictive, and EPA is targeting 85 grams of carbon dioxide per mile (g/mi) for light-duty vehicles and 274 g/mi of carbon dioxide for medium-duty vehicles. EPA expects these levels to result in approximately 56 percent and 49 percent industry-wide reductions in average emissions for light-duty and medium-duty fleets respectively. For NMOG and NOx, the Final Rule sets limits representing a reduction of about 50 percent from the existing standards for MY 2025 for light-duty vehicles, and between 58-70 percent from the existing Tier 3 standards for medium-duty vehicles. For PM2.5, EPA has set the standards for MY 2032 light-duty vehicles at 0.5 milligrams of PM2.5 per mile.
Although the EPA continues to tout electric vehicles (EVs), it is continuing to utilize a performance-based approach, meaning specific technologies (e.g., EVs) are not necessarily mandated, and the EPA states that it anticipates manufacturers will rely on a broad range of technologies to achieve compliance. However, the EPA also anticipates that the Final Rule’s emissions limits as well as other market conditions and incentives (e.g., Inflation Reduction Act incentives and consumer demand) will lead to approximately 68% of all new light-duty vehicles in MY 2032 being EVs. That 68% projection also falls in line with California’s efforts to require at least 68% of passenger vehicles sold in the state to be EVs by the year 2030, and it also remains to be seen whether California’s standards will continue to play a dominant role in shaping the standards followed by the U.S. market.
In addition to emissions limits, the Final Rule also:
- Finalized various greenhouse gas program revisions, including off-cycle and air conditioning credits, changes to how upstream emissions associated with EVs are treated in compliance calculations, and vehicle certification and compliance;
- Finalized new battery durability and warranty requirements for light- and medium-duty EVs;
- Revised emission-related warranty requirements for non-EVs;
- Adopted new standards to control refueling emissions from incomplete medium-duty vehicles; and
- Revised flexibility programs for small-volume manufacturers (less than 5,000 vehicles per year) and small businesses.
The Final Rule has not yet been published in the Federal Register, and it will take effect 60 days after publication. As was the case with the EPA’s December 2021 final rule setting emissions limits through MY 2026, the Final Rule will undoubtedly be challenged in court by various interested parties once it is officially published. Various cases brought by different states challenging the 2021 rule are still pending before the U.S. Court of Appeals for the D.C. Circuit, and it is likely that similar suits will follow the Final Rule’s publication.
