NHTSA and EPA issue final CAFE/GHG rule for MYs 2017-2025; 40.3–41.0 mpg for MY 2021, estimated 48.7–49.7 mpg for MY 2025, 163 gCO2/mile for MY2025
The US Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) issued the final rule for greenhouse gas emissions and fuel economy standards for MYs 2017-2025 for passenger cars, light-duty trucks, and medium-duty passenger vehicles. (Earlier post.) These rules represent the continuation of a harmonized and consistent National Program. (Earlier post.)
Consistent with its statutory authority, NHTSA developed two phases of standards in this rulemaking. The first phase, from MYs 2017-2021, includes final standards that are projected to require, on an average industry fleet-wide basis, a range from 40.3—41.0 mpg US (5.84 to 5.74 L/100km) in MY 2021. The second phase of the CAFE program, from MYs 2022-2025, includes standards that are not final, due to the statutory requirement that NHTSA set average fuel economy standards not more than 5 model years at a time.
Thus, the second phase standards are augural, meaning that they represent NHTSA’s current best estimate, based on the information available to the agency today, of what levels of stringency might be maximum feasible in those model years. NHTSA projects that those standards could require, on an average industry fleet wide basis, a range from 48.7–49.7 mpg (4.83 to 4.73 L/100km) in model year 2025.
EPA is establishing standards that are projected to require, on an average industry fleet-wide basis, 163 grams/mile of carbon dioxide in model year 2025, which would be equivalent to 54.5 mpg (4.3 L/100km) if this level were achieved solely through improvements in fuel efficiency. However, the agencies expect that a portion of these improvements will be made through improvements in air conditioning leakage and through use of alternative refrigerants, which would not contribute to fuel economy.
Both the CO2 and CAFE standards are footprint-based, as are the standards currently in effect for these vehicles through model year 2016. The standards will become more stringent on average in each model year from 2017 through 2025. Generally, the agencies note, the larger the vehicle footprint, the less numerically stringent the corresponding vehicle CO2 emissions and fuel economy targets.
As a result of the footprint-based standards, the burden of compliance is distributed across all vehicle footprints and across all manufacturers. Manufacturers are not compelled to build vehicles of any particular size or type (nor do the rules create an incentive to do so), and each manufacturer will have its own fleet-wide standard that reflects the light duty vehicles it chooses to produce.
The agencies will conduct a comprehensive mid-term evaluation and agency decision-making process for the MYs 2022-2025 standards. The agencies are also finalizing several provisions which provide compliance flexibilities and incentives, including:
Credit Averaging, Banking and Trading. The agencies are continuing to allow manufacturers to generate credits for over-compliance with the CO2 and CAFE standards. A manufacturer will generate credits if its car and/or truck fleet achieves a fleet average CO2/CAFE level better than its car and/or truck standards. Conversely, a manufacturer will incur a debit/shortfall if its fleet average CO2/CAFE level does not meet the standard when all credits are taken into account.
As in the prior CAFE and GHG programs, a manufacturer whose fleet generates credits in a given model year would have several options for using those credits, including credit carry-back, credit carry-forward, credit transfers, and credit trading.
Air Conditioning Improvement Credits. As proposed, EPA is establishing that the maximum total A/C credits available for cars will be 18.8 grams/mile CO2-equivalent and 24.4 grams/mile for trucks CO2-equivalent. The approaches used to calculate these credits for direct and indirect A/C improvement (i.e., improvements to A/C leakage (including substitution of low GHG refrigerant) and A/C efficiency) are generally consistent with those of the MYs 2012-2016 program, although there are several revisions.
Most notably, a new test for A/C efficiency, optional under the GHG program starting in MY 2014, will be used exclusively in MY 2017 and beyond. Under its EPCA authority, EPA proposed and is finalizing provisions to allow manufacturers to generate fuel consumption improvement values for purposes of CAFE compliance based on these same improvements in air conditioner efficiency.
Off-Cycle Credits. Off-cycle credits are for measurable GHG emissions and fuel economy improvements attributable to use of technologies whose benefits are not measured by the standard mandated two-cycle test. EPA proposed and is finalizing provisions to allow manufacturers to generate fuel consumption improvement values for purposes of CAFE compliance based on the use of off-cycle technologies.
Incentives for Electric Vehicles, Plug-in Hybrid Electric Vehicles, Fuel Cell Vehicles and compressed Natural Gas Vehicles. EPA is finalizing, as proposed, an incentive multiplier for CO2 emissions compliance purposes for all electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles (FCVs) sold in MYs 2017 through 2021. The incentives are expected to promote increased application of these advanced technologies in the program’s early model years, which could achieve economies of scale that will support the wider application of these technologies to help achieve the more stringent standards in MYs 2022-2025.
In addition, in response to public comments persuasively explaining how infrastructure for compressed natural gas (CNG) vehicles could serve as a bridge to use of advanced technologies such as hydrogen fuel cells, EPA is finalizing an incentive multiplier for CNG vehicles sold in MYs 2017 through 2021.
NHTSA currently interprets EPCA and EISA as precluding it from offering incentives for the alternative fuel operation of EVs, PHEVs, FCVs, and NGVs, except as specified by statute, and thus did not propose and is not including incentive multipliers comparable to the EPA incentive multipliers described above.
Incentives for Use of Advanced Technologies including Hybridization for full-Size Pick-up Trucks. The agencies recognize that the standards presented in this final rule for MYs 2017-2025 will be challenging for large vehicles, including full-size pickup trucks. To help address this challenge, the program will, as proposed, contain incentives for the use of hybrid electric and other advanced technologies in full-size pickup trucks.
The two agencies estimate the MY 2017-2025 National Program will save approximately 4 billion barrels of oil and reduce GHG emissions by the equivalent of approximately 2 billion metric tons over the lifetimes of those light duty vehicles produced in MYs 2017-2025. The agencies project that fuel savings will far outweigh higher vehicle costs, and that the net benefits to society of the MY 2017-2025 National Program will be in the range of $326 billion to $451 billion (7 and 3% discount rates, respectively) over the lifetimes of those light duty vehicles sold in MYs 2017-2025.
The MY 2017-2025 National Program is also projected to provide significant savings for consumers due to reduced fuel use. Although the agencies estimate that technologies used to meet the standards will add, on average, about $1,800 to the cost of a new light duty vehicle in MY 2025, consumers who drive their MY 2025 vehicle for its entire lifetime will save, on average, $5,700 to $7,400 (7 and 3% discount rates, respectively) in fuel, for a net lifetime savings of $3,400 to $5,000. This estimate assumes gasoline prices of $3.87 per gallon in 2025 with small increases most years throughout the vehicle’s lifetime.