View from Washington: Forthcoming EPA rule key piece of the EV transition puzzle

Editor's note: This is part of the monthly "View from Washington," where we take complex, hot-button topics brewing in the nation's capital and break them down with the help of an expert. Want to be featured? Email Audrey LaForest at [email protected].

WASHINGTON — The EPA as soon as this month is expected to finalize its rule on light-duty vehicle emissions for the 2027-32 model years, but the regulation could do more than just challenge the U.S. auto industry to meet stricter limits on tailpipe pollution.

It could also determine what the industry looks like by the end of this decade and beyond.

As Nick Nigro, founder of Atlas Public Policy, puts it: "Nothing short of the future of the auto industry is at stake with this rule."

Under the EPA's proposal, automakers would have to achieve 13 percent fleetwide average emissions reductions in the 2027-32 model years, representing a 56 percent reduction in average emission target levels from the 2026 model year.

If finalized, the requirements could push electric vehicles to 60 percent of new-vehicle sales by the 2030 model year and 67 percent by 2032, according to the agency's projections, which excluded plug-in hybrids from its analysis.

"If it's implemented in the way that it was proposed, or something like that, which is what I think generally people are expecting, it's going to put us on a glidepath to full electrification," Nigro said. "That's going to be nothing short of a total transition and transformation of the auto industry in the United States and globally."

Since the proposal was unveiled in April, automakers, dealers and the UAW have pleaded with the EPA to relax requirements that they argue would effectively mandate an aggressive increase in EV sales before the supply chains, infrastructure and market are ready. The U.S. also is in the midst of a global competition with China and Europe to lead the transition to an all-electric future and mitigate the effects of climate change.

"The EPA's mission is to protect the environment and to reduce the impacts of the transportation industry on both the global climate and the local population and public health. The industry's mission is to sell cars and to have viable businesses," Nigro told Automotive News.

"Sometimes those goals can be competing. Often they can be complementary, but very rarely do they align perfectly," he said. "It's no surprise that the industry wants to go slightly slower than what the EPA is proposing."

In response to industry pressure, the EPA is widely expected to adopt a less-aggressive pace of emissions reductions followed by more stringent cuts after the 2029 model year, giving the EV market, supply chains and infrastructure a chance to catch up.

The EPA rule and other EV policies are likely to be scrutinized in the upcoming November election, where President Joe Biden will face off against ex-President Donald Trump, who loosened standards put in place under predecessor Barack Obama.

"Regardless of where the election comes out, I think the facts are going to win the day," said Nigro, citing 150,000 EV-related U.S. jobs that have been announced since November 2021 and more than $125 billion in investments tied to EVs after legislation such as the Inflation Reduction Act was signed into law.

"The leaders in the Republican Party, even if they do take the White House, are going to see that rolling back regulations and/or slowing down this transition are actually going to hurt the U.S. economy far more than help it," he said.