EPA compromises with auto industry on vehicle emissions rule

WASHINGTON — After nearly a year of auto industry grievances about the stringency of the EPA's proposed vehicle emissions standards for cars and light trucks, the Biden administration has a response: We heard you.

The rule finalized Wednesday on tailpipe pollution limits for 2027-32 model-year vehicles adopts a less aggressive pace than what was proposed last year by easing up on carbon reduction targets in the first few model years and applying more stringent cuts after 2030.

Amid industry backlash that initial requirements were unachievable in the six-year time frame, the EPA alleviated some of the pressure by giving automakers a longer runway to ramp up electric vehicle production and sales and by adding more flexibility for compliance by factoring in plug-in hybrids and other technologies.

"When we looked at the process for achieving the most durable rules, we wanted to give the industry the best footing to do that," EPA Administrator Michael Regan told reporters at an event here Wednesday announcing the rule, which covers carbon dioxide and other pollutants such as smog-producing nitrogen oxides, and sets requirements for medium-duty vehicles.

"We saw it as not a trade-off from an environmental standpoint, but a trade-off in terms of giving the companies more choice, giving consumers more choice, keeping that enthusiasm for clean-energy vehicles and hopefully exceeding the environmental goals that we set," he said.

For the light-duty fleet, the standards mandate an industrywide average target of 85 grams of carbon dioxide per mile by the 2032 model year, representing a nearly 50 percent reduction in average emission target levels from the 2026 model year.

In comparison, the EPA's April proposal would have required an industrywide average target of 82 grams of carbon dioxide per mile by the 2032 model year, representing a 56 percent reduction in average emission target levels from 2026.

Combined, the light- and medium-duty vehicle standards are expected to prevent more than 7 billion tons of carbon emissions through 2055, equating to roughly four times the emissions of the entire transportation sector in 2021, the EPA said.

"These rules are the most consequential carbon-reducing policies in transportation history. They're also — this is important — much improved over what was originally proposed," John Bozzella, CEO of the Alliance for Automotive Innovation, said in remarks at Wednesday's event.

"Will these standards be daunting? Yes, very much so," he said. "The requirements in 2032, they're especially daunting. But the administration showed a willingness to measure progress not just now but in the years ahead."

Automakers, dealers and the UAW had pleaded with the EPA to relax requirements in its proposal that they argued would effectively mandate an aggressive increase in EV sales before the supply chains, infrastructure and market are ready.

Republican opponents also had criticized the proposal, often referring to the EPA's approach as an "EV mandate" or "a de facto ban on gas-powered cars," as Rep. Bob Latta, R-Ohio, described it in a statement Wednesday.

To be sure, the EPA's rule does not mandate a specific technology such as EVs. Instead, it is designed to allow automakers to meet the performance-based requirements through multiple pathways, including efficiency improvements in internal combustion engine vehicles.

"These are technology-neutral standards, so they have a lot of different options with how to comply with them, especially in the earlier years," Chris Harto, senior policy analyst at Consumer Reports, told Automotive News. "We'll see some different strategies and see what works."

Under the proposal issued last year, EVs were expected to make up 60 percent of new-vehicle sales by the 2030 model year and 67 percent by 2032, according to EPA projections, which excluded plug-in hybrids from its analysis in the draft rule.

"2027 is just around the corner for automakers, and the reason we had strong views on the feasibility of the original proposal and what it required in terms of EV sales is because we know the challenges: a choppy EV sales market, public charging still coming online, new supply chains that must be built," Bozzella said.

"Our message," he said, "was not whether this can be done — it can — but how fast can and should it be done?"

In the final rule, the EPA's "central analysis case," which reflects a higher use of EVs to comply, projects EVs could account for 44 percent of new-vehicle sales by 2030 and 56 percent by 2032 — estimates that are more in line with President Joe Biden's goal of EVs making up 50 percent of new-vehicle sales by the end of the decade.

The rule's analysis also considers other vehicle technologies that could be used by automakers to comply. For example, the EPA projects plug-in hybrids could make up 13 percent of new-vehicles sales by 2032 and internal combustion engine vehicles could make up 29 percent by that year under its EV-heavy analysis case.

"EPA has recognized that consumers need choices," said Bob Holycross, Ford Motor Co.'s vice president of sustainability, environment and safety engineering. "Whether it's fully electric or hybrid or plug-in hybrid, they ultimately have to be able to choose the vehicle that meets their needs."

The industry, while investing heavily in electrification, has faced challenges in the transition, including weaker-than-anticipated demand that has caused automakers to adjust their production plans and sales targets.

Those concerns were echoed by thousands of new-car dealers who had repeatedly urged Biden to reconsider the EPA's initial proposed rule.

In a statement Wednesday, the coalition of dealers said despite the softened pace in the early model years, the final rule would require an increase in EV sales that is "far beyond" the consumer interest they are experiencing in their showrooms.

Those dealers, as well as the National Automobile Dealers Association, are urging the administration to track EV sales versus projections and adjust the rule to reflect consumer demand.

"We can take some solace in knowing that the voice of our customers broke through enough to convince the Biden administration to moderate the mandate in the early years," the coalition said. "But sadly, the regulation stubbornly hangs on to an EV mandate that is clearly disconnected from the realities of the marketplace."