Obama Announces New National Fuel Policy; Two Harmonized Standards, with Fleet Average of 35.5 mpg, 250 gCO2/mile by 2016
US President Barack Obama today announced a new harmonized national policy intended to reduce fuel consumption and greenhouse gas (GHG) emissions for all new cars and trucks sold in the US. The resulting new standards will cover model years 2012-2016, and will require an average fuel economy standard of 35.5 mpg in 2016 (39 mpg for cars, 30 mpg for trucks), or approximately 250 grams CO2/mile. The CAFE program established by the EISA 2007 legislation specified a minimum 35 mpg in 2020.
However, there will not be an exact one-to-one correspondence between the two standards—GHG and fuel economy—which will be the foundation of the national program.
The Environmental Protection Agency(EPA) and the Department of Transportation, through are jointly developing the proposed rulemaking. EPA is proposing GHG emissions standards under the Clean Air Act (CAA), and NHTSA is proposing Corporate Average Fuel Economy (CAFE) standards under EPCA, as amended by the Energy Independence and Security Act of 2007 (EISA). The two issued a Notice of Upcoming Joint Rulemaking to Establish Vehicle GHG Emissions and CAFE Standards today.
If proposed and finalized, the new standards would apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles. These vehicle categories are responsible for almost 60% of all US transportation-related greenhouse gas emissions.
If ultimately adopted, these standards would represent a harmonized and consistent national policy pursuant to the separate statutory frameworks under which EPA and DOT operate.—Notice of Upcoming Joint Rulemaking
In addition to the EPA and DOT, California—and states adopting California emissions standards—represent a third policy interest in the area. Under the scope the new proposal, according to a senior Obama administration official in a backgrounder on Monday night, if the EPA does grant the waiver allowing California to implement the Pavley greenhouse gas standards for vehicles, the state has agreed to defer to the proposed national standard through model year 2016.
The 2016 endpoint of the two standards—Pavley I and the new national standard—are essentially the same, although the national standard is using an attribute-based approach (consistent with the new CAFE), while California’s standard used the older approach of vehicle type. The national program ramps up slightly more slowly than the California program envisioned, but does get to the same fleet average endpoint.
The national program also results in a greater total amount of greenhouse gas reductions than what a California program would have delivered, even with the 14 states who they said they would join the California program, according to the official.
Automakers and the UAW embraced the national program because it provides certainty and predictability to 2016 and includes flexibilities that will significantly reduce the cost of compliance. The collaboration of federal agencies also allows for clearer rules for all automakers, instead of three standards (DOT, EPA and a state standard).
With respect to technological feasibility, during MYs 2012-2016 manufacturers are expected to go through the normal automotive business cycle of redesigning and upgrading their light-duty vehicle products (and in some cases introducing entirely new vehicles not on the market today). The proposal under consideration is expected to allow manufacturers the time needed to incorporate technology to achieve GHG reductions and improve fuel economy during the vehicle redesign process This is an important aspect of the proposal under consideration, as it would avoid the much higher costs that would occur if manufacturers needed to add or change technology at times other than these scheduled redesigns. This time period would also provide manufacturers the opportunity to plan for compliance using a multi-year time frame, again in accord with normal business practice.—Notice of Upcoming Joint Rulemaking
Key Elements of the National Program:
EPA and NHTSA will propose two separate sets of standards, each under their respective statutory authorities. EPA expects to propose a national CO2 vehicle emissions standard under section 202 (a) of the Clean Air Act. EPA currently is considering proposing standards that would, if made final, achieve on average 250 grams/mile of CO2 in model year 2016. The standards for earlier years would begin with the 2012 model year, with a generally linear phase-in from MY 2012 through to model year 2016.
NHTSA expects to propose appropriate related CAFE standards. The proposal under consideration would also include a harmonized CAFE standard for MY 2016. Compatible GHG and CAFE standards for earlier model years would increase from the MY 2011 CAFE standard to the MY 2016 level of the National Program.
There will be some important differences in the development of the proposals. For example, under a GHG standard, EPA would expect manufacturers to take advantage of the option to generate credits by reducing emissions of HFCs and CO2 through upgrades to their air conditioner systems. EPA plans to take these reductions into account in developing a proposed GHG standard. However, EPCA does not permit NHTSA to consider air conditioning credits in developing a proposed CAFE standard for passenger cars. As a result, improvements in the efficiency of passenger car air conditioners would not be considered as a possible control technology for purposes of CAFE.
In addition EPA would take into consideration all of the compliance flexibilities discussed below, such as averaging, banking, and trading of credits, while NHTSA is prohibited by statute from taking such flexibilities into account.
As a result of those and other factors, As a result, the agencies do not anticipate a one-to-one correspondence between the level of EPA’s proposed GHG standards and NHTSA’s proposed CAFE standards. Instead the CAFE standards under consideration for proposal would be somewhat lower than the mile per gallon equivalent of the corresponding GHG standard. This reflects both the specific differences in standard setting criteria, as well as the general attempt by each agency to harmonize its proposed standards in a way that allows them to achieve their respective statutory and regulatory goals.
Form of the standards:
Both EPA and NHTSA currently intend to propose attribute-based standards for passenger cars and light-trucks. The agencies currently intend to propose vehicle footprint as the attribute for the GHG and CAFE standards, with footprint defined as a vehicle’s wheelbase multiplied by its track width.
Under a footprint-based standard, each manufacturer would have a GHG and CAFE standard unique to its fleet, with a separate standard for passenger cars and light-trucks, depending on the footprints of the vehicle models produced by that manufacturer. Generally, manufacturers of larger vehicles (i.e. vehicles with larger footprints) would face less stringent standards (i.e., higher CO2 grams/mile standards and lower CAFE standards) than manufacturers of smaller vehicles.
While a manufacturer’s fleet average standard could be estimated throughout the model year based on projected sales volume of its vehicle fleet, the standard of compliance would be based on the final model year sales figures. A manufacturer’s calculation of fleet average emissions at the end of the model year would be based on the sales-weighted average emissions of each model in its fleet.
EPA and NHTSA currently intend to propose separate footprint-based standards, or curves, for passenger cars and light-trucks. In designing the footprint-based standards, EPA and NHTSA intend to work together to build upon the footprint standard curves used in the CAFE rule for MY 2011,12 and to consider proposing changes to the shape of the curve based on, among other things, concerns about the steepness of the slope. EPA and NHTSA intend to consider, among other things, an approach that would generally flatten the passenger car curve, more in line with the shape of the truck curve for the MY 2011 CAFE standard.
Program flexibilities for achieving compliance:
CO2/CAFE Credits earned based on fleet average performance. Fleet average standards would be based on the applicable attribute-based curves. At the end of each model year, when sales of the model year are complete, a sales-weighted fleet average would be calculated for each averaging set (cars and trucks). Under this approach, a manufacturer’s car and/or truck fleet that achieves a fleet average CO2/CAFE level better than the standard would earn credits. Conversely, if the fleet average CO2/CAFE level does not meet the standard the fleet would generate debits (also referred to as a deficit or negative credits).
Air conditioning credits. EPA is considering an approach that would enable manufacturers to earn credits by reducing GHG emissions related to air conditioning systems.
Flex-fuel and alternative fuel vehicle credits. EPCA authorizes an incentive under the CAFE program for production of dual-fueled or flexible-fuel vehicles (FFV) and dedicated alternative fuel vehicles. For the GHG program, EPA contemplates proposing to allow FFV credits in line with EISA limits only during the period from MYs 2012 to 2015. EPA will also consider allowing FFV credits beyond MY 2015 if manufacturers are able to demonstrate that the alternative fuel is actually being used in the vehicles. EPA is also considering how that demonstration could be made.
Temporary lead-time allowance alternative standards. EPA is considering a temporary lead-time allowance for manufacturers whose sale of vehicles in the US in a specified time period is below a specified cut-off, such as sales of 400,000 vehicles or less during a specified year, such as MY 2009 or 2010. EPA is considering a less stringent GHG standard that would be 125% of the vehicle’s otherwise applicable foot-print target level. EPA envisions that this allowance would be available only during the MY 2012-2015 phase-in years of the program.
Additional potential credit opportunities. EPA is considering opportunities for early credits in MYs 2009-2011 through over-compliance with a baseline standard that EPA is considering. The baseline would be set to be equivalent, on a national level, to the California standards.
EPA is currently considering proposing additional credit opportunities to encourage the commercialization of advanced GHG/fuel economy control technology such as electric vehicles and plug-in hybrid electric vehicles. These “super credits” could take the form of a multiplier that would be applied to the number of vehicles sold such that they would count as more than one vehicle in the manufacturer’s fleet average. EPA is also considering allowing such credits to be generated for years prior to MY 2012.
EPA is also considering an option for generation of credits for employing technologies that achieve GHG reductions that are not reflected on current test procedures. Examples of technologies that EPA could consider include technologies such as solar panels on hybrids, adaptive cruise control, and active aerodynamics, among other things.