U.S. Toughens Tailpipe Emission Rules to Accelerate EV Transition

To meet stricter tailpipe emissions standards proposed by the Biden administration, automakers are facing steep challenges in converting the nation to electric vehicles. There are several hurdles to overcome, including consumer sentiment, supply chain issues, and the lack of public charging stations.

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The proposed emission rules announced Wednesday by the Environmental Protection Agency would apply to cars, sport-utility vehicles, and pickup trucks manufactured between 2027 and 2032, with the goal of jump-starting EV sales and phasing out the age of internal combustion engines as early as possible.

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President Biden plans to propose one of the nation's toughest-ever limits on car pollution as part of an aggressive effort to fight climate change, which is one of the most aggressive things the president has done to date. In a previous speech, he had called for half of all new car sales to be electric-powered by 2030, a goal he had previously set.

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While many automakers are already making the switch to EVs, industry trade group officials said meeting the new goals depends on a number of factors, including consumer appetite for EVs, among others.

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"It is without a doubt that this is the direction we are headed in," said John Bozzella, president and chief executive officer of the Alliance for Automotive Innovation, the industry's top lobbying group in the U.S. "The way we get there, and whether we can get there by having the necessary complementary conditions in the marketplace and in the industrial base, are, I think, key conditions that we need to keep looking at as we go through this rulemaking process."

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Republicans said that many consumers can't afford to buy an electric vehicle due to its higher price. It is estimated that the average transaction price for an electric vehicle was $61,800 in March, compared to $45,600 for vehicles with internal combustion engines, according to J.D. Power, an industry research firm.

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"There is no solution to the 'electrification of everything'. It’s a road to higher prices and fewer choices,” said Sen. John Barrasso (R., Wyo.). 

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The Biden administration officials pointed out that tougher pollution standards are necessary to reduce the nation's dependence on fossil fuels which generate greenhouse gases in the atmosphere.

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“People have been betting against the ingenuity of American workers and American industry time and time again, which is why we are leading the world in the clean-energy economy because we deliver products that are so innovative,” said White House National Climate Adviser Ali Zaidi in a conference call with reporters. 

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During the past two years that Mr. Biden has been president, Mr. Zaidi said, the number of electric vehicle models available as well as the number of charging stations have doubled during the period of his presidency. In addition to this, he indicated that analyst projections for EV sales had increased in recent months.

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In order to help spur the transition, the U.S. government plans to spend $7.5 billion to expand the electric vehicle charging network as part of the $1 trillion infrastructure bill that was passed in 2021. It is anticipated that the U.S. government will announce next week that it will issue criteria for tax credits of up to $7,500 for consumers who buy qualified electric vehicles, as a result of the Inflation Reduction Act.

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It is expected that the EPA will finalize its proposal for emission control technology by the spring of 2024 after receiving public feedback. The proposal will allow auto manufacturers to comply with performance-based standards using a variety of emissions control technologies, primarily electrification, administration officials said on Wednesday.

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A separate proposal, covering medium-duty vehicles such as box trucks and school buses, is expected to electrify nearly half of those vehicles by the 2032 model year.

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The EPA estimated that the benefits of the proposals would exceed costs by at least $1 trillion, achieved through lower vehicle maintenance costs, savings on fuel, and by reducing emissions of greenhouse gases.

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There were many environmentalists who praised the proposed rules as a milestone in the U.S.'s efforts to reduce greenhouse gas emissions and combat climate change in order to reduce environmental pollution.

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“In addition to the massive investment laws currently in place, both of these laws are expected to expedite the ability of car and truck manufacturers to reach higher standards than what the president has stated for 2021," said Margo Oge, former head of the EPA's Office of Transportation and Air Quality, during a conference call organized by the Environmental Defense Fund, a Washington-based advocacy group. 

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EPA administrator Michael Regan said that the proposal is expected to reduce carbon dioxide emissions from the U.S. transportation sector by 7.3 billion tons by 2055, which is the equivalent of removing all greenhouse gas emissions for four years from the sector, according to the agency.

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While acknowledging concerns about the proposal, Mr. Regan said that the industry would be given the flexibility to achieve the proposed objectives.

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“We are offering a broad range of options for the markets, for the automobile industry, and for the private sector to make their own decisions about how to best move forward to reach these very, very, very ambitious climate goals that we must achieve if we are going to keep this planet alive,” Mr. Regan told reporters Wednesday.

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But high costs remain a major factor for many buyers and polls show mixed results in consumer interest.

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12% of Americans are seriously considering buying an electric car, according to a Gallup poll released this week, while 43% of U.S. adults have said they might consider buying an electric vehicle in the future. 41% of those surveyed said unequivocally that they would not participate in the survey.

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In recent years, a number of major auto companies have been making efforts to shift their vehicle lineups to include more battery-powered vehicles, driven by the success of EV leader Tesla Inc., as well as tighter tailpipe emissions standards in many countries.

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GM, Ford Motor Co., and Jeep-maker Stellantis NV signed a joint agreement in 2021 to target a percentage of 40-50% of their annual U.S. vehicle sales to be electric by 2030, in line with the administration's goal at the time, which was to reduce greenhouse gases.

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By 2021, a more stringent set of emissions standards were set in motion by an executive order issued by Mr. Biden, which aimed for electric vehicles, hydrogen fuel cell vehicles, and plug-in hybrid vehicles to make up 50% of all auto sales in the U.S. by 2030. Additionally, the executive order calls for the National Highway Traffic Safety Administration to complete the new corporate average fuel economy targets for the model year 2027 and beyond no later than July 2024 in order to comply with the executive order. 

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The NHTSA spokeswoman said that the agency expects to make its CAFE rule proposal in the near future. It is expected that the agency's proposed standards will be in line with the EPA's emissions regulations in terms of its net effect on the industry, the spokeswoman said.

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Alliance for Automotive Innovation, a lobbying group that represents GM, Ford, Toyota Motor Corp., and a number of other major automobile manufacturers, told White House officials in a mid-February meeting that electric vehicle adoption depends on factors outside the control of automakers, such as the development of a robust charging infrastructure and the availability of minerals necessary for battery manufacture.

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In a readout of the meeting, a reader said that the group was seeking a shorter time period of model years for what the coming rules will cover so that risk and uncertainty can be reduced.

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One more challenge that Mr. Biden may face as he prepares for his re-election campaign in 2024 is continuity at the White House. As he was leaving office in 2017, President Barack Obama set standards for tailpipe emissions, only for the Trump administration to roll back those standards just one year later, during his second term in office.

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According to Lawrence Burns, former corporate vice president of research and development and planning at General Motors, this sort of back-and-forth makes planning difficult for the auto industry because there are long lead times, and it takes significant amounts of capital and technology validation before they can sell their products to customers.

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“In my opinion, it is impossible to win if the requirements are constantly changing,” said Mr. Burns.

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In addition to the EPA's proposal, California regulators took even more aggressive measures last year to ban the sale of new gasoline-powered cars by the middle of this decade. And Japan has also said it intends to stop the sale of such vehicles by the middle of this decade. Around the same time, the European Union is also discussing a measure to effectively ban the sale of vehicles with internal combustion engines within its borders.

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The domestic auto industry is also dealing with the challenge of a change in leadership at the United Auto Workers, a union that represents over 400,000 workers in the automotive sector and other industries as well. In contract negotiations with GM, Ford, and Stellantis, which are due to begin later this year, the organization's new leader, Shawn Fain, has promised to make EV manufacturing a point of focus in the negotiations. 

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With the new EPA regulations, companies will have more certainty when it comes to how to allocate their resources over the coming years, said Thomas Boylan, regulatory director of the Zero Emission Transportation Association, a group that is committed to the adoption of electric vehicles. 

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“The whole thing helps to make sure that everybody is working in the same direction and gives them the cover to deploy the capital in the right direction,” said Boylan, who previously worked for the EPA’s Office of Transportation and Air Quality.