Does NHTSA's fuel economy proposal come up short? Some policy experts say yes

WASHINGTON — Automotive policy experts are calling into question the effectiveness of NHTSA's proposed fuel economy standards, which they argue would do little to improve the efficiency of gasoline-powered vehicles if finalized alongside the EPA's stricter limits on tailpipe pollution.

NHTSA last month outlined fuel economy standards for the 2027-32 model years that would require a 2 percent per year improvement in fuel efficiency for cars and a 4 percent per year improvement for light trucks. The standards would require average fleet fuel economy of nearly 58 mpg — or about 40 to 46 mpg in real-world driving — by the 2032 model year.

In comparison, standards finalized last year call for fuel efficiency to increase by 8 percent per year for cars and light trucks in the 2024 and 2025 model years and by 10 percent in 2026. The rule requires a combined fleet average of about 49 mpg in the 2026 model year and acts as somewhat of a catch-up from the less stringent Trump-era standards, which required 1.5 percent annual increases.

Though many policy stakeholders were still reviewing NHTSA's proposal in greater detail, several told Automotive News it was weaker than expected, especially given the EPA's more aggressive approach that could put automakers on a path that surpasses President Joe Biden's goal for zero-emission vehicles — battery-electric, plug-in hybrid and fuel cell — to make up half of new-vehicle sales by 2030.

"If this rule is finalized at its current stringency and the EPA rule is finalized at its current stringency, [corporate average fuel economy is] not really going to do anything," said Chris Harto, senior policy analyst at Consumer Reports. "What we would really like to see is a strong CAFE standard that acts as a sort of backstop on automakers backsliding on their conventional [internal combustion engine] vehicle fleets."

In other words, any automaker that complies with the EPA's proposed rule on vehicle emissions "will almost certainly easily comply with these CAFE standards," Harto said.

Under the EPA proposal unveiled in April, 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 proposal could mean EVs — solely battery-electric — would make up 60 percent of new light-duty sales by the 2030 model year and 67 percent by 2032, according to the agency's projections.

In contrast, NHTSA is prohibited from considering the fuel economy of EVs when determining its maximum feasible CAFE standards for a given model year. However, automakers can use all available technologies — including EVs — for compliance with both EPA and NHTSA rules.

"That definitely hampers NHTSA's ability to set a rule that's as strong as EPA," Harto said. "But looking at NHTSA's analysis that I've seen so far, it seems like there's still a lot of room for them to increase the proposed stringency, even with those restrictions on electric vehicles."

In its environmental impact statement, NHTSA does model an "unconstrained" scenario that considers EV penetration. In absence of its proposed standards, EVs — solely battery-electric — could make up 53 percent of new vehicles in the 2032 model year. Under the proposed standards, that would rise slightly to 56 percent. The agency's projections for hybrid and plug-in hybrid vehicles remain the same in either scenario, stalling at 4 percent for hybrids and 3 percent for plug-in hybrids.

Dave Cooke, senior vehicles analyst at the Union of Concerned Scientists, called NHTSA's inability to consider EVs and other alternative fuels when setting its standard "an unfortunate shortcoming."

"But on the flip side," Cooke said, "that means they should be driving the maximum level of fuel efficiency from the remaining ICE fleet."

Both Harto and Cooke pointed to modeling in the EPA's proposal that shows automakers could choose to neglect the efficiency of their internal combustion engine fleets — a scenario they argue is more plausible if fuel economy standards aren't stringent enough.

"EPA's modeling shows a substantial chunk of the combustion fleet decontenting over time, often removing technologies that were initially used to meet the standards currently on the books. In some cases, the vehicles end up even worse than they started," Cooke explained in a follow-up email to Automotive News. "This is allowable under a technology-neutral standard (reductions are reductions), but it also shows the level of 'slop' in the standard."

Instead, Cooke's group — along with other environmental organizations — are urging the EPA to adopt a "no backsliding" approach in its modeling for the final rule that assumes automakers would not remove certain technologies from their combustion vehicle fleet in later model years.

More stringent CAFE standards could then act as reinforcement, Cooke said.

"There's a lot of room for continued improvement in fuel efficiency, just by taking what manufacturers haven't deployed yet and moving it across the fleet," he said. The NHTSA rule "doesn't seem to do that."

The Alliance for Automotive Innovation, which represents many of the industry players investing in electrification, has called for one national standard that aligns NHTSA's fuel economy standards with the EPA's regulation.

The group was still reviewing NHTSA's proposal but said it was "encouraging" that the two regulators seem to have tried to "sync up" the rules.

"Conflicting and overlapping rules are complex and expensive," John Bozzella, the group's CEO, said in a statement last month. "If an automaker complies with EPA's yet-to-be-finalized greenhouse gas emissions rules, they shouldn't be at risk of violating CAFE rules and subject to civil penalties that levy costs on consumers and manufacturers but deliver no corresponding environmental benefits."

NHTSA last year reinstated higher penalties for automakers whose vehicles do not comply with fuel economy standards for the 2019 model year and beyond. Automakers argued in 2016 that the increased penalties could raise industry compliance costs by at least $1 billion annually.

Last month, NHTSA told reporters that its proposed fuel economy standards "complement and align with" the EPA's proposal and that the two regulators will work together to optimize their effectiveness while minimizing compliance costs.

Several automakers contacted by Automotive News said they were still reviewing NHTSA's proposal but welcomed the intent to harmonize the regulations.

"The idea that a manufacturer can make one fleet that complies with both rules is definitely true," Cooke said of the EPA and NHTSA proposals. "Unfortunately, I think it just means that manufacturers are just going to largely design toward EPA's program."

Given previous legal challenges — some still ongoing — that involve both regulators' standards, some legal experts have suggested the NHTSA proposal could act as extra support.

"I have seen some speculation that this is sort of a 'belt and suspenders,' " said Bob Meyers, a partner at Crowell & Moring law firm's Washington office. "In case one goes down, the other one stands."