April 12, 2023 Blog

How to Think About EPA's New Greenhouse Gas Rules...

By John Bozzella

The Environmental Protection Agency (EPA) is out with its proposed light-duty vehicle greenhouse gas (GHG) and multi-pollutant rules for model year 2027 through 2032.

Immediate reaction: Two things can be true at the same time (and in this case they are).

Yes, America’s transition to an electric and low-carbon transportation future is well underway. EV and battery manufacturing is ramping up across the country because automakers have self-financed billions to expand vehicle electrification.

It’s also true that EPA’s proposed emissions plan is aggressive by any measure. By that I mean it sets automotive electrification goals in the next few years that are… very high.

In fact, the proposal exceeds the administration’s own 50 percent electrification target (see executive order 14037) announced in August 2021 – with auto industry support – by requiring more than one EV for every new gas vehicle sold by 2030 and potentially two EVs for every gas vehicle just two years later.

And it goes beyond the National Blueprint for Transportation Decarbonization – a government-wide plan rolled out recently by four cabinet agencies that doubled down on the 50 percent target from 2021.

To be clear, 50 percent was always a stretch goal and predicated on several conditions. Those included supportive policies like the manufacturing incentives in the Inflation Reduction Act (that have only just begun to be implemented) and tax credits to support EV purchases and affordability.

How will EPA justify exceeding the carefully considered and data-driven goal announced by the administration in the executive order and the more recent national blueprint? That’s a key question as the rulemaking unfolds and something to look for in the expansive proposal.

You might be thinking: “Of course the auto industry would resist going faster.”

A couple of points to consider when evaluating this rule and its ultimate feasibility:

Automakers are fully committed to an electric and low-carbon transportation future.

There are now 91 EV models on the market – across all segments and price points. Electric vehicles were 10 percent of new vehicles sales in December, and automakers have invested billions in U.S.-based EV and battery manufacturing. I could go on about sales and product excitement. (We do, here.)

But EV sales momentum is only the beginning of the story.

Remember this: a lot has to go right for this massive – and unprecedented – change in our automotive market and industrial base to succeed, especially as 284 million light-duty vehicles across the country (that average 12 years in age) remain on the roads. As of last year, EVs accounted for just over one percent of all light-duty vehicles.

EPA and the petroleum industry should act quickly to concurrently lower the carbon intensity of liquid fuels. This will produce higher and faster returns by reducing emissions from not only new gas vehicles (including plug-in hybrid EVs), but from the millions of light-duty gas vehicles currently on the road.

Monumental amounts of capital are being invested in zero carbon personal mobility.

One challenge: every dollar invested in internal combustion technology is a dollar not spent on zero carbon technology. And vice versa.

Why does that matter? Automakers and battery partners have already committed $110 billion in the U.S. to electrify products. Requiring self-financed investments from automakers for incremental gains from gas-powered engines comes at the expense of where our collective focus ought to be: electrification. That’s the future.

So, are EPA’s new standards feasible? Will they accelerate the EV transformation?

It depends. First, factors outside the vehicle, like charging infrastructure, supply chains, grid resiliency, the availability of low carbon fuels and critical minerals will determine whether EPA standards at these levels are achievable. Did EPA consider factors outside the vehicle when it crafted its proposal?

To some extent, the baseline policy framework for the transition has come into focus. But it remains to be seen whether the refueling infrastructure incentives and supply-side provisions of the Inflation Reduction Act, the bipartisan infrastructure law, and the CHIPS and Science Act are sufficient to support electrification at the levels envisioned by the proposed standards over the coming years.

One thing we know for sure today: IRS’s new rules for the 30D EV consumer tax credit – with stricter sourcing rules for critical mineral and battery components starting April 18 – means far fewer EV models will qualify for the $7,500 purchase incentive.

Another challenge: There are 100,000 publicly available, non-proprietary charging outlets in the U.S. for three million EVs on the road. That’s a ratio of 29 EVs per charger… and not enough.

Whatever happened to a national plan?

Finally, as various government agencies – federal and state – release competing or overlapping requirements for both EV and gas-powered vehicles, we’ve got to remember to get the balance right.

About six years ago we had one national standard to reduce carbon in personal mobility, providing nationwide consumer and environmental benefits through a single, streamlined regulatory path for automakers.

EPA’s new proposal on the other hand was developed separately from the Department of Transportation’s coming Corporate Average Fuel Economy (CAFE) standards expected later this spring and not in concert with EPA.

We’re committed to constructive engagement between the regulators (EPA, DOT, DOE, California Air Resources Board) and the regulated. We also believe a successful EV transformation requires several sustained commitments: sound, realistic and consistent policy; smart regulation; and concurrent action from the non-automotive sectors of the economy – namely utilities, critical mineral mining and processing operators, infrastructure providers, and energy producers.

The question isn’t can this be done, it’s how fast can it be done, and how fast will depend almost exclusively on having the right policies and market conditions in place to achieve the shared goal of a net zero carbon automotive future. 

More to say during the comment period in the weeks and months ahead...

John Bozzella is president and CEO of Alliance for Automotive Innovation.

Alliance for Automotive Innovation MEMO on EPA emissions rules (April 6, 2023).