EPA finds automakers 'off to good start' on cutting emissions

Across the industry, cars and light trucks averaged 286 grams of carbon dioxide emissions per mile in the 2012 model year. That is 9 grams per mile better than the EPA projected when it finalized its rules in 2011. Photo credit: BLOOMBERG

UPDATED: 4/25/14 11:18 am ET -- adds comments

WASHINGTON -- Automakers beat U.S. government goals for the first year of President Barack Obama’s new fuel economy standards, with only Jaguar Land Rover lacking enough EPA-issued credits to cover its obligations through the 2012 model year, according to an analysis the agency released today.

All other companies had enough credits to comply with the new EPA standards, which measure tailpipe emissions. They run parallel to corporate average fuel economy standards requiring cars and light-duty trucks to average 54.5 mpg by 2025.

Toyota, Honda, Ford, General Motors and several smaller automakers produced fleets of cars and light trucks that were efficient enough to meet the first year of the EPA’s standards, the report shows.

Chrysler Group and Daimler AG, the maker of Mercedes-Benz luxury cars, bolstered their stockpiles of credits by acquiring them from competitors. Other automakers, such as BMW, Nissan and Volkswagen, carried over enough credits from prior years to comply.

Christopher Grundler, the director of the EPA’s Office of Transportation and Air Quality, said these numbers give an early indication that automakers are on track to meet the goal that the White House laid out before them.

“It’s the first year of a 14-year program, so we don’t want to overstate the significance of what the data are revealing,” Grundler said. “But the data show that the automakers are off to a good start. … There are lower emissions at the tailpipe than we expected.”

Automakers signaled that they remain on board with the fuel economy program. John Bozzella, the CEO of the advocacy group Global Automakers, which represents members like Honda, Hyundai and Nissan, noted the report shows that the auto industry reduced greenhouse gas emissions by 6 percent in a single year.

“We are making progress,” Bozzella said. “Our members are committed to a single, harmonized national program that reduces motor vehicle [greenhouse gas] emissions and increases fuel economy.”

Jaguar’s shortfall

The report shows that Jaguar Land Rover was short by 424,032 credits at the end of the 2012 model year, with each credit equivalent to 1 ton of carbon dioxide.

Jaguar Land Rover’s vehicles averaged 371 grams of carbon dioxide emissions per mile in the 2012 model year, above its target of 364 grams per mile, which was based on the average footprint of the company’s sports cars, luxury sedans and high-end SUVs.

A company can carry a deficit for up to three years, during which time it can sell more efficient vehicles to offset its shortfall or acquire credits from competitors. Grundler said he is not worried about Jaguar Land Rover’s corporate strategy.

“They brought out a whole range of new product offerings with more efficient technologies that will get them the kind of reductions they need to comply with the program,” Grundler said.

Stuart Schorr, a Jaguar Land Rover spokesman, said the company will “exceed the industry average” in efficiency gains in the coming years to comply. Starting with the 2013 model year, the company started a transition from V-8 engines to more efficient V-6 and inline-four engines, from six-speed transmissions to eight-speed transmissions, and from steel platforms to aluminum platforms on some product lines.

Christopher Grundler, director of the EPA's Office of Transportation and Air Quality: "There are lower emissions at the tailpipe than we expected."

Schorr said Jaguar Land Rover’s portfolio will also become more efficient when the XE compact sedan arrives in 2016 with an available diesel engine.

Across the industry, cars and light trucks averaged 286 grams of carbon dioxide emissions per mile in the 2012 model year. That was 9 grams per mile better than the EPA projected when it finalized its rules in 2011.

Grundler said this was due to a quicker-than-expected adoption of efficient powertrain technologies, such as gasoline direct injection, variable valve timing, continuously variable transmissions and transmissions with six or more speeds.

The compliance figures are somewhat dated, reflecting cars that were mostly sold three or four years ago. Still, the EPA’s report gives the first glimpse of automakers’ progress under the fuel economy program, finalized in two parts in 2010 and 2012.

Buyers and sellers

The strict new standards put out then by the Obama administration were the first changes to the corporate average fuel economy standards since 1987.

Automakers amassed large numbers of credits from the National Highway Traffic Safety Administration in the intervening years. As a result, fuel economy experts say, if any automaker is going to flunk the new standards, it will likely be the result of a shortfall of EPA credits.

Chrysler, known for its powerful muscle cars and trucks, and Daimler, known for its luxury cars, have started buying credits to protect against such a situation.

"I can tell you this with confidence," William Craven, general manager of regulatory affairs at Daimler, said in an interview last year. "We're going to comply."

Under the EPA program, Tesla Motors transferred 227,713 credits from the 2010 to 2012 model years to Daimler, which owns 4 percent of the EV manufacturer.

Daimler also bought 250,000 credits for the 2012 model year from Nissan. These two purchases were the difference between a deficit and a surplus for Daimler, which ended the 2012 model year with a balance of 107,262 credits.

Also acquiring credits were Ferrari, which received 90,000 2010 model year credits from Honda, and Chrysler, which got 500,000 2011 model year credits from Nissan.

Grundler said the agency doesn’t know how much companies paid for their credits because “these are private transactions between two firms.”

As the standards grow stricter, EPA credits could become a steadier revenue stream for Tesla, which does not need any of its credits because its battery-powered cars do not consume fossil fuels and have no tailpipe emissions.

The same is true of Toyota and Honda. Because their cars consume relatively little fuel for their size, the two Japanese automakers held a combined 136.7 million credits at the end of the 2012 model year -- 60 percent of all credits available across the industry.

You can reach Gabe Nelson at gnelson@crain.com

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