In a move that the Biden-Harris administration is promoting as a partial fulfillment of a campaign promise to cut US greenhouse gas emissions (GHGs) at least in half by 2030, President Joseph Biden signed a new executive order last week setting a goal of 50% of all new passenger cars and light trucks to be zero emissions vehicles by 2030 and building on Environmental Protection Agency (EPA) proposed tailpipe emission standards that are set to begin with the 2023 car model year.
EPA’s proposed rules are a rollback of Trump-era standards and are generally more in line with prior Obama-era standards at least through 2026; however, they build in some flexibility for automakers. The executive order picks up where the proposed rules leave off: directing federal agencies to propose increasingly stringent emissions standards starting in model year 2027 for light-, medium-, and certain heavy-duty vehicles. Both the proposed rules and the executive order push the administration’s overall goal of reducing GHGs and incentivizing a shift from internal combustion engines to electric vehicles (EVs).
Under the Obama administration’s rules, automakers were required to improve fuel economy 5% per year from 2021 through 2026. However, the Trump administration lowered the standard to a 1.5% improvement annually. The Trump administration also repealed California’s historic waiver under the Clean Air Act, whereby the state was authorized to set its own emission standards for new vehicles—which were generally more stringent than federal standards. Despite repealing the California waiver, in 2019 California and five automakers reached a deal wherein the automakers agreed to voluntarily increase fuel economy by 3.7% annually. In April of this year, the Biden-Harris administration moved to allow California to set its own emission standards once again. While, the formal decision on reinstating the California waiver is expected soon, the proposed EPA rules are being promoted as an effort to harmonize the federal standards to the California deal.
EPA recently released a prepublication version of its proposed, and more stringent, emission standards for light-duty vehicles for 2023 to 2026 model years. These standards rescind Trump-era emission standards and were drafted in response to President Biden’s “Day 1” executive order, which directed EPA to consider revising vehicle fuel economy and emissions standards. The proposed rule has yet to be published in the Federal Register, but EPA is already set to hold virtual hearings regarding the proposal and will accept written comments from the public and industry stakeholders.
EPA’s proposed GHG emissions standards for model years 2023 and later increase the stringency of the requirement to improve fuel economy from the 1.5% required under the Trump-era rules to nearly 10% for model year 2023, followed by approximately 5% annual increases through model year 2026. While these increases are more stringent than the existing requirements, EPA has built in some flexibility for automakers by way of compliance options. For example, EPA proposes to retain existing GHG credit-based emissions averaging, banking, and trading flexibilities. The agency has also proposed new compliance flexibilities and incentives—largely due to the lack of lead time and the regulatory stringency—including carrying over previously earned compliance credits, advanced technology vehicle multiplier credits, and hybrid full-size pickup truck incentives, as well as increasing the off-cycle credits menu cap.
While most of the attention on President Biden’s August 5, 2021 executive order was centered around the goal that 50% of all new passenger cars and light trucks sold in 2030 be zero-emission vehicles, the order also sets forth a policy of aggressive emission targets beyond model year 2026. The executive order directs EPA and the Secretary of Transportation to establish new emissions and fuel efficiency standards for all vehicles beginning with the model year 2027 and extending at least until model year 2030. The agencies are strongly encouraged to issue their final rulemakings by December 2022 and are required by the order to issue final rulemakings by July 2024. While the executive order is silent as to specific targets that these standards will require, it is expected that any new future emissions and fuel efficiency standards will be more stringent than the recently proposed standards for model years 2023 through 2026. The agencies are directed to engage with California and other similar states in proposing the new standards and are further required to secure input from industry, labor, environmental justice, and public health organizations.
EPA has been pursuing a rulemaking and regulatory effort that is likely to add complexity to the planning for new vehicles. The pressure on EPA to pursue these technology forcing efforts is unlikely to abate during this administration, and all stakeholders should be carefully tracking EPA’s proposed rulemaking. There will be opportunities to provide public comment and input, starting with the public comment period on the 2023-2026 standards which EPA proposed to last until September 27, 2021.
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