The US Environmental Protection Agency (EPA) and US Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) released their long-expected notice of proposed rulemaking (NPRM) to adjust the Congressionally-mandated Corporate Average Fuel Economy (CAFE) and Light-Duty Vehicle Greenhouse Gas Emissions Standards. This Notice of Proposed Rulemaking (NPRM) is the first formal step in setting the 2021-2026 Model Year (MY) standards that must be achieved by each automaker for its car and light-duty truck fleet.

The joint proposal also launches the Administration’s initiative to establish a new 50-state fuel economy and tailpipe carbon dioxide emissions standard for passenger cars and light trucks covering MY 2021 through 2026. Specifically, EPA is proposing to withdraw the waiver of CAA preemption for California’s Advanced Clean Car (ACC) program, Zero Emissions Vehicle (ZEV) mandate, and Greenhouse Gas (GHG) standards that are applicable to model years 2021 through 2025.

In the larger proposal, EPA and NHTSA are seeking public comment on a wide range of regulatory options, including their preferred alternative that freezes the standards at the MY 2020 level (specifically, the “footprint” or “size-based” target curves for passenger cars and light trucks) through 2026.

Under the preferred alternative, the estimated CAFE and CO₂ curves for passenger cars would average out to 43.7 mpg (5.38 l/100 km) for CAFE, and 204 g CO₂/mile for GHGs for MYs 2021-2026. The requirements for light trucks would be 31.3 mpg (7.51 l/100 km) and 284 g CO₂.

EPA is also proposing to exclude CO₂-equivalent emission improvements associated with air conditioning refrigerants and leakage (and, optionally, offsets for nitrous oxide and methane emissions) after model year 2020.

Broadly, the agencies’ rationales for the changes include:

• Technologies have played out differently in the fleet from what the agencies assumed in 2012. The proposal says that the technology to improve fuel economy and reduce CO₂ emissions has not changed significantly since prior analyses were conducted. A wide variety of technologies are still available to accomplish the goals of the programs, and a wide variety of technologies would likely be used by industry to accomplish these goals.

  There remains no single technology that the majority of vehicles made by the majority of manufacturers can implement at low cost without affecting other vehicle attributes that consumers value more than fuel economy and CO₂ emissions, the agencies said.

  Even when used in combination, technologies that can improve fuel economy and reduce CO₂ emissions still need to (1) actually work together and (2) be acceptable to consumers and avoid sacrificing other vehicle attributes while also avoiding undue increases in vehicle cost.

  Optimism about the costs and effectiveness of many individual technologies, as compared to recent prior rounds of rulemaking, is somewhat tempered; a clearer understanding of what technologies are already on vehicles in the fleet and how they are being used, again as compared to recent prior rounds of rulemaking, means that technologies that previously appeared to offer significant “bang for the buck” may no longer do so. Additionally, in light of the reality that vehicle manufacturers may choose the relatively cost-effective technology option of vehicle lightweighting for a wide array of vehicles and not just the largest and heaviest, it is now recognized that as the stringency of standards increases, so does the likelihood that higher stringency will increase on-road fatalities. As it turns out, there is no such thing as a free lunch.

  —NPRM

• Technology that can improve both fuel economy and/or performance may not be dedicated solely to fuel economy. As fleet-wide fuel efficiency has improved over time, additional improvements have become both more complicated and more costly, the agencies said. First, there is a known pool of technologies for improving fuel economy and reducing CO₂ emissions. Many of these technologies, when actually implemented on vehicles, can be used to improve other vehicle attributes such as “zero to 60” performance, towing, and hauling, etc., either instead of or in addition to improving fuel economy and reducing CO₂ emissions.

• This makes actual fuel economy gains more expensive. Even though the technologies may be largely the same, previous assumptions about how much fuel can be saved or how much emissions can be reduced by employing various technologies may not have played out as prior analyses suggested, meaning that previous assumptions about how much it would cost to save that much fuel or reduce that much in emissions fall correspondingly short.

• Incremental additional fuel economy benefits are subject to diminishing returns. As fleet-wide fuel efficiency improves and CO₂ emissions are reduced, the incremental benefit of continuing to improve/reduce inevitably decreases. Put simply, a one mpg increase for vehicles with low fuel economy will result in far greater savings than an identical 1 mpg increase for vehicles with higher fuel economy, and the cost for achieving a one-mpg increase for low fuel economy vehicles is far less than for higher fuel economy vehicles. This means that improving fuel economy is subject to diminishing returns.

• Changed petroleum market has supported a shift in consumer preferences. In 2012, the agencies projected fuel prices would rise significantly, and the United States would continue to rely heavily upon imports of oil, subjecting the country to heightened risk of price shocks.28 Things have changed significantly since 2012, with fuel prices significantly lower than anticipated, and projected to remain low through 2050.

The two agencies claimed that their analysis showed that the preferred alternative would prevent thousands of on-road fatalities and injuries as compared to the standards set forth in the 2012 final rule. The agencies said that the preferred alternative would improve vehicle affordability leading to increased use of newer, safer, cleaner and more efficient vehicles (hence their forecast drop in fatalities and injuries).

Under the preferred alternative, EPA and NHTSA estimate a reduction of up to 1,000 lives lost annually in fatal vehicle crashes; a $2,340 reduction in the average ownership cost of new vehicles; and $500 billion in cost savings for the US economy.

The agencies also claim that the preferred alternative would have negligible environmental impacts on air quality. They argue that improving fleet turnover will result in consumers getting into newer and cleaner vehicles, accelerating the rate at which older, more-polluting vehicles are removed from the roadways. Also, reducing fuel economy (relative to levels that would occur under previously-issued standards) would increase the marginal cost of driving newer vehicles, reducing mileage accumulated by those vehicles, and reducing corresponding emissions.

The agencies claim none of the regulatory alternatives considered in this proposal would noticeably impact net emissions of smog-forming or other criteria pollutants.

The agencies also claimed that the estimated effects of the preferred alternative in terms of fuel savings and CO₂ emissions are relatively small as compared to the 2012 final rule.

NHTSA’s Environmental Impact Statement performed for this rulemaking shows that the preferred alternative would result in 3/1,000ths of a degree Celsius increase in global average temperatures by 2100, relative to the standards finalized in 2012. On a net CO₂ basis, the results are similarly minimal, according to the proposal.

There are compelling reasons for a new rulemaking on fuel economy standards for 2021-2026. More realistic standards will promote a healthy economy by bringing newer, safer, cleaner and more fuel-efficient vehicles to US roads and we look forward to receiving input from the public.

—DOT Secretary Elaine L. Chao

The public will have 60 days to provide feedback once the proposal is published at the Federal Register.

Background. NHTSA sets and enforces the CAFE standards, while EPA calculates average fuel economy levels for manufacturers, and sets related reducing greenhouse gas (GHG) emissions standards.

NHTSA establishes CAFE standards through its authorities provided under the Energy Policy and Conservation Act of 1975 (EPCA), as amended by the Energy Independence and Security Act of 2007 (EISA), while EPA establishes GHG emissions standards under the Clean Air Act (CAA), as amended.

In April, the EPA issued the Mid-Term Evaluation Final Determination which found that the current MY 2022-2025 GHG standards are not appropriate and should be revised.

The joint proposal outlines a preferred alternative, and also requests comment on a broad range of options. In addition to the preferred scenario, several of the options proposed for public comment include fuel economy increases that range from 0.5% per year for both passenger vehicles and light trucks up to 2% per year for passenger vehicles and 3% per year for light trucks.

As for California, while the Clean Air Act (CAA) generally preempts state regulation of motor vehicles, California has been specially empowered to apply for a waiver from this preemption. EPA grants the waiver unless certain blocking conditions are triggered.

Under CAA section 209(b)(1)(B) (compelling and extraordinary conditions), EPA proposes to find that California does not need its GHG and ZEV standards to meet compelling and extraordinary conditions because those standards address environmental problems:

• that are not particular or unique to California;

• that are not caused by emissions or other factors particular or unique to California; and

• for which the standards will not provide any remedy particular or unique to California.

Under CAA section 209(b)(1)(C) (consistency with section 202(a)), EPA proposes to find that California’s GHG and ZEV standards are inconsistent with section 202(a) because they are technologically infeasible in that they provide insufficient lead time to permit the development of necessary technology, giving appropriate consideration to compliance costs.

Furthermore, NHTSA has proposed to find that California’s GHG and ZEV standards are preempted under EPCA. EPA is soliciting public comment as to whether, if NHTSA finalizes EPCA preemption, that would provide a separate basis to withdraw the waiver separate and apart from its statutory analysis.