Fuel Economy and Greenhouse Gas Regulation in the United States: Change is Coming Part 2

Part 2: Key Elements of the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026

Critical elements of the 2018 SAFE Vehicles Rule proposed (or preferred) alternative include:

• A cap on fuel economy requirements for passenger vehicles at 2020 standard (35.5 mpg) through MY 2026
• A revocation of the California waiver to the 1975 Clean Air Act

Another point of emphasis raised by the NPRM is whether NHTSA and EPA should continue to account for air conditioning efficiency and off-cycle improvements. The 2017 -2025 regulation relied on flexibilities to allow manufacturers the ability to meet standards via the use of a credit system which encouraged the application of advanced technologies, and technologies that may not be measurable on the 2-cycle federal test procedure but would contribute to increased fuel economy and a concomitant reduction in CO2. The NPRM brings into question that process and asks for comment.

The regulators also comment on the challenge (or opportunity) for companies to leverage scale economies to offer products that exceed local fuel efficiency.[1]  The authors of the NPRM offer that if U.S. consumers want fuel efficiency technology, the regulation allows manufacturer’s the choice of offering more fuel-efficient vehicles. For example, if an automaker chooses to “globalize a vehicle platform to meet more stringent standards in other countries, that automaker would comply with United States standards and additionally generate overcompensation credits that it can save for future years if facing compliance concerns, or sell to other automakers.” While CAFE standards are set at maximum feasible rates, efforts of manufacturers to exceed those standards are rewarded not only with additional credits, but a market advantage in consumers who place a large weight on fuel savings will find such vehicles that much more attractive. By making this statement, the regulators appear to be placing the burden of the decision upon the consumer, and encouraging the market to decide the value for fuel economy.

An essential theme put forth by the regulators was improved safety from the derived from implementing the preferred alternative, so much so they named it the “SAFE” rule. The CAR review does not include an investigation of the “not-yet-peer-reviewed” module for predicting consumer behavior and its modeled outcomes for the safety implications derived from the SAFE act. However, several commenters felt it was fundamentally flawed. The National Resource Defense Council stated:

“We are not the first to point out that the efficiency algorithm does not work as it should—technical staff at EPA provides the Office of Management and Budget pages of detailed analysis illustrating that the algorithm does not function properly.” [4]

While the American Council for Energy Efficiency added:

“That the NPRM would make assertions about vehicle fatalities, which play a substantial role in weighing the appropriateness of the standards, based on approaches and methods that are experimental and ill-supported is startling and evidence of poor policy-making.” [5]

It is important to note that several manufacturers offered support for the agencies acknowledgment of the risk of an aging fleet due to cost concerns. For example, FCA highlighted the Jalopy effect:

“Keeping these older, less safe vehicles on the road longer will add fatality risks to the consumer.” [6]

However, while agreeing with safety risks associated with driving greater numbers of older vehicles instead of newer ones, Honda raised concerns over the “reasonableness” of the modeling.

“The reasonableness of the so-called scrappage model, potential behavioral changes previously not considered in the model, the model’s statistical uncertainties, and proper VMT accounting should all be reconsidered.” [7]

And further stated:

“This phantom VMT (either disappearing in one scenario or appearing in another, depending on the point of reference) is troubling. We believe it is an artifact of a new, insufficiently matured model that needs further refinement and validation. We urge the agencies to investigate the phantom VMT phenomenon and correct the model accordingly.” [8]

The SAFE Vehicle Proposed Alternatives

The regulators offered eight alternative standards for consideration (Table II). The first alternative (leaving standards in place through 2021, and confirming the augural standards for 2022-2025 and holding 2026 standards at 2025) levels serve as the baseline for analysis. The proposed (alternatively referred to as preferred) alternative (1 in the table) is to continue the existing standards through MY 2020, then hold no increase in stringency for both passenger cars and light trucks, for MYs 2021-2026.

Table II – 1 SAFER Vehicle Proposed Alternatives

Source: https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/fact_sheet_-_alternatives_final_clean_080218_v1-tag.pdf

The NPRM authors state that easing of standards would result in benefits to the manufacturer’s including a USD 252.6 billion reduction in regulatory costs through model year 2029; 1 million additional new sales through model year 2029; and a reduction from 56 percent to 3 percent in the percentage of hybrid vehicles needed to comply in model year 2029. [9]

The NPRM includes an assessment of vehicle consumer impacts and manufacturer impacts for the proposed alternative. These estimates reflect a very different analysis than previously published by the agencies. For the proposed alternative, vehicle consumer’s impacts highlighted by the regulators include a $2,340 reduction in average vehicle ownership costs for new vehicles; $1,850 reduction in the average required technology cost; $490 reduction in the financing, insurance and taxes; Over 12,000 fewer crash fatalities over the lifetime of all vehicles built through MY 2029, which up to 1,000 lives saved annually. [10]

Figure II-1 shows historical and future passenger car and light truck corporate average fuel economy (CAFE) standards and industry performance to the standard through 2016. The figure includes the current regulation (referred to as the baseline in the NPRM), and the preferred option (presented as Alt Regulation in Figure II-1) as presented in the NPRM (holding passenger car CAFE at 43.7 and light truck fleet average at 31.3 after 2021). For 2016, the industry overall did not meet fuel economy standards performance (and used credits to remain in compliance) to the standard. Between 2012 and 2016, the U.S. market has seen a 1.2 percent annual growth rate in fuel economy for passenger cars, and a 1.8 percent increase for light trucks. Under the current regulation, manufacturers would be challenged to meet the standards without a significant change in fuel economy technology. If the market were to match the previous five-year growth rate, even under the preferred option, the industry would be in an under-compliance position through 2021 for light trucks, and not achieve an over-compliance position for passenger cars until 2027.

Figure II-1: Corporate Average Fuel Economy Regulation, and Performance (including current and proposed)

Source: NHTSA, EPA

Several commenters raised concern over how holding a standard steady for at least six years could meet the reasonableness of maximum feasible as required by EPCA. For example, U.S. Senator Tom Carper, Ranking Member of the Committee on Environment and Public Works commented:

“It is simply implausible that the “maximum feasible” fuel economy standard required under NHTSA’s statue could legally be left unchanged for seven model years.” [11]

And the Union for Concerned Scientists added:

“The Agency has seriously mischaracterized several of the factors under consideration, which has led to an erroneous conclusion about the appropriate stringency of a standard to satisfy the maximum feasibility requirement. Furthermore, it has ignored its statutory obligation to support the ultimate purpose of EPCA: energy conservation.”  [12]

However, historically there is precedence for holding CAFE flat for an extended period. Passenger car CAFE was held constant for nearly two decades, starting in 1990.

With a focus on stability, business planning and economic growth for its members, MEMA did offer support for progressively increasing standards:

“Continued progress in the standards, rather than an abrupt stagnation, will ensure that the rule maintains the stability and predictability that motor vehicle suppliers need for continued employment growth and to secure significant technological investments”  [13]

General Motors offered a different perspective. While indicating the Preferred Alternative was not the answer, they offered their vision of what is “maximum feasible”:

“We prefer standards through 2026 that continue improving the fuel economy of gasoline-powered vehicles at historic rates and policies that support American leadership in zero emissions.”  [14]

The policy strategy offered by GM was a national standard for electric vehicles:

“GM Strongly believes that EVs are the future of transportation. But, the path to that future will require deliberate regulatory incentives due to the high cost of batteries and competition from foreign manufacturers—The time is right for a National ZEV program administered by the EPA.”  [15]

Further stating:

“America must take the lead in this effort or other nations will dominate in electric vehicles and set the standard for the world.”  [16]

The proposed SAFE vehicles rule present a significant change from current regulation. 

Brett Smith

Director, Propulsion Technologies & Energy Infrastructure

[1] Federal Register/ Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules, pp 42817 and Federal Register/ Vol. 83, No. 165 / Friday, August 24, 2018 / Proposed Rules (https://www.transportation.gov/briefing-room/dot4818)

[2] https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/2021-2026_nprm_comment_period_extension_09212018.pdf

[3] https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/ld-cafe-co2-nhtsa-2127-al76-epa-pria-180823.pdf – Page 113

[4] Submitted by Union of Concerned Scientists: Comments Concerning the Proposed Rulemaking to Revise Light-Duty Vehicle Greenhouse Gas Emissions Standards and Corporate Average Fuel Economy Standards: Technical Appendix; Referencing docket ID numbers: EPA-HQ-OAR-2018-0283NHTSA-2018-0067, page 28

[5] Comments of the American Council for an Energy-Efficient Economy (ACEEE) on NHTSA and EPA’s Notice of Proposed Rulemaking “Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light Trucks” (Docket No. EPA-HQ-OAR-2018-0283 and NHTSA-2018-0067), page 1

[6] Comments submitted by Fiat Chrysler Automobiles, October 26, 2018, page 9

[7] Comments submitted by American Honda Motor Co., Inc. in response to Docket No. EPA-HQ-OAR-2018-0283 and NHTSA-2018-0067, dated October 25, 2018, page 16

[8] Comments submitted by American Honda Motor Co., Inc. in response to Docket No. EPA-HQ-OAR-2018-0283 and NHTSA-2018-0067, dated October 25, 2018, page 16

[9] https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/rev_fact_sheet_cafe_nprm_by_the_numbers_003-tag.pdf

[10] https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/rev_fact_sheet_cafe_nprm_by_the_numbers_003-tag.pdf

[11]  Comments submitted by Tom Caper, U.S. Senator, Delaware, dated October 16, 2018

[12] Comments submitted by the Union for Concerned Scientist, Comments Concerning the Proposed Rulemaking to Revise Light-Duty Vehicle Greenhouse Gas Emissions Standards and Corporate Average Fuel Economy Standards: Technical Appendix; Referencing docket ID numbers: EPA-HQ-OAR-2018-0283 NHTSA-2018-0067, Page 1

[13] Comments submitted by Motor Equipment Manufacturers Association to National Highway Traffic Safety Administration, October 26, 2018, page 3

[14] Comments submitted by General Motors, October 26, 2018: Comments of General Motors on Docket ID Nos. NHTSA–2018–0067; EPA–HQ–OAR–2018–0283; FRL9981–74–OAR; The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Model Years 2021–2026 Passenger Cars and Light Trucks (NPRM) page 1GM Comments, page 3

[15] Ibid, page 1

[16] Ibid page 1