US EPA softens final tailpipe emissions rule with slower pace, more room for hybrid vehicles

The US Environmental Protection Agency released its final tailpipe emissions rules for light- and medium-duty vehicles covering model years 2027-2032 March 20, unveiling more lenient than proposed standards after months of intensive lobbying by automotive, labor and fuel industry groups.

The final rule, which the EPA said will help tackle climate change by significantly reducing greenhouse gases and air pollution, will allow automakers to produce fewer than proposed battery electric vehicles – and incorporate more plug-in hybrid vehicles – to remain compliant.

"We received what we thought was persuasive information from the OEMs, from the dealers and from labor suggesting that the rule would be more durable if we provided the OEMs and the market a little bit more lead time," a senior administration official told reporters on a call ahead of the rule's release.

New EPA projections released alongside the final rule predict auto manufacturers "may choose" to produce EVs for 30%-56% of new light-duty vehicle sales and 20%-32% of medium-duty vehicle sales from 2030 to 2032. The new rule also slows the proposed pace of projected emissions reductions in 2027, 2028 and 2029 before accelerating sharply in the final three years of the rule.

The initial proposal's stricter emissions requirements projected automakers to allocate 67% of new vehicle sales to EVs by 2032, a standard vigorously derided by fuels groups, farmers and the nation's largest automotive dealers association as akin to an "EV mandate" or an outright ban on internal combustion engines.

The United Auto Workers union, which has endorsed President Joe Biden, also shared concerns that a too-fast EV push could harm union jobs for certain kinds of workers. "I've never been opposed [to the EV transition]," UAW President Shawn Fain said in a November interview. "We just want it to be a just transition."

'Technology neutral'

The EPA stressed the rule is "technology neutral," and that manufacturers have the option of reducing emissions by deploying a mix of emissions control technologies such as hybrid electric vehicles, plug-in hybrid vehicles and cleaner gasoline vehicles alongside EVs.

One senior administration official suggested the final rule could involve as much as 13% of new vehicle production allocated to plug-in electric hybrids, which allows the agency to reach the same calculated emissions reduction goal by 2032 and strongest-ever standard even with fewer battery EVs on the road.

Specifically, the EPA's new rule for light-duty vehicles maintains the proposal's requirement for manufacturers to cut their passenger car fleets' average emissions of carbon dioxide from 152 grams per mile in model year 2026 to 73 g/mile of CO2 by 2032. But under the looser timeline, average fleetwide CO2 emission standards for cars will be capped at 139 g/mile in 2027, 125 g/mile in 2028, 112 g/mile in 2029, 99 g/mile in 2030 and 86 g/mile in 2031.

When factoring in light trucks along with passenger cars, the standards project an industry-wide average target for the light-duty fleet of 85 g/mile of CO2 in 2032, representing a nearly 50% cut in emissions from 2026.

For medium-duty vehicles that encompass full-size pickup trucks, smaller utility trucks and cargo vans, the rule would slash emissions by 44% from 2026 levels to 274 g/mile of CO2 by 2032.

Consumer benefits, savings

The EPA estimated the new standards will add an average of $1,200 to new light-duty vehicle costs and $1,400 to medium-duty vehicle costs by model year 2032. But the agency said those additional compliance costs will not necessarily be borne by consumers due to state and federal purchase incentives, such as the up to $7,500 tax credit for plug-in hybrid and battery EVs under the Inflation Reduction Act.

Consumers are also expected to see $99 billion in net benefits from the rule through the year 2055, including saving nearly $16 billion in reduced annual maintenance and repair costs and $46 billion in reduced annual fuel costs through the year 2055. Once the standards are fully phased in, the EPA said that would amount to savings for drivers of an average of $6,000 over the lifetime of a new vehicle.

The EPA also projects carbon dioxide reductions of 7.2 billion mt through 2055, equivalent to four times the transportation sector's total emissions in 2021. A senior administration official projected the rule would reduce US oil demand by 14 billion gallons through 2055.