EPA finalizes tougher new vehicle emissions requirements

WASHINGTON -- The EPA is finalizing new vehicle emissions requirements through 2026 that reverse former President Donald Trump's rollback of car pollution cuts and will speed a U.S. shift to more electric vehicles.

"We are setting robust and rigorous standards that will aggressively reduce the pollution that is harming people and our planet – and save families money at the same time," EPA Administrator Michael Regan said in a statement.

In August, President Joe Biden's administration proposed undoing the Trump-era action easing requirements imposed during the presidency of Barack Obama. The new rule finalized Monday is tougher than EPA's August proposal or requirements issued by Obama.

If expressed in miles per gallon (mpg) requirements, the EPA rules would result in a fleetwide average of about 40 mpg in 2026, versus 38 mpg under the August proposal and 32 mpg under the Trump rules.

The Democratic administrations of Biden and Obama have pushed for stricter fuel efficiency standards to reduce greenhouse gas emissions and fight climate change. The new rules will result in 3.1 billion tons of avoided CO2 emissions through 2050 and come after many states and environmental groups urged the administration to impose stricter rules.

Biden wants 50 percent of all new vehicles sold in 2030 to be EV or plug-in hybrid models.

In March 2020, Trump's Republican administration rolled back Obama's standards to require only 1.5 percent annual increases in efficiency through 2026. Obama had required 5 percent annual increases.

The new rules take effect in the 2023 model year and require a 28.3 percent reduction in vehicle emissions through 2026.

The rules will be challenging for automakers to meet, especially for the Detroit 3 automakers. General Motors , Ford Motor Co. and Chrysler-parent Stellantis NV are appearing at an event Monday with Regan announcing the rules.

The Alliance for Automotive Innovation, the primary auto industry representative dealing wtih emissions regulations, said the industry will need help to reach the goals set by the new standards.

"EPA’s final rule for greenhouse gas emissions is even more aggressive than originally proposed, requiring a substantial increase in electric vehicle sales, well above the four percent of all light-duty sales today," the Alliance said in a statement.

"Achieving the goals of this final rule will undoubtedly require enactment of supportive governmental policies – including consumer incentives, substantial infrastructure growth, fleet requirements, and support for U.S. manufacturing and supply chain development. Collaboration between industries across the economy and government will be essential to achieving our shared goals for a cleaner transportation future that benefits all communities and enhances U.S. economic competitiveness.”

GM plans to launch 30 EVs globally through 2025, with two-thirds slated for the U.S.

Steve Carlisle, president of GM North America, told Automotive News in an interview Monday that the automaker had anticipated new standards such as the EPA rule.

“There's kind of an inevitability in terms of where we need to end up from an emissions and fuel economy point of view,” he said. “It’s something that we had anticipated and that's been driving our strategy and our planning. It's good to have that clarity.”

Administration setbacks

The Biden administration's EV plans suffered a setback Sunday when moderate U.S. Sen. Joe Manchin, D-W.Va.,  said he would not support a $1.75 trillion domestic investment bill that includes new EV tax credits that would favor the Detroit 3.

EPA estimates the vehicle emissions reduction benefits will exceed costs by up to $190 billion and drivers will save between $210 billion and $420 billion through 2050.

EPA estimates the final rule will result in 17 percent of new U.S. vehicles by 2026 as EVs or plug-in hybrids.

The mandates, governing passenger cars, SUVs and light trucks from model years 2023 through 2026, represent the toughest-ever standards of the kind. Still, the administration did not bow to the demands of environmentalists to tighten a suite of proposed credits and incentives that give automakers more flexibility to fulfill the requirements.

Although environmentalists and administration officials had warned those provisions risked undercutting actual, real-world emissions reductions, automakers stressed the flexibilities are vital to meeting the new standards. Without them, the industry wouldn’t have been able to independently satisfy model year 2020 requirements, according to a recent EPA analysis.

In the final rule, the EPA said it would continue effectively overcounting the sales of EVs and rewarding automakers with extra credit for technologies that make cars more fuel efficient but don’t necessarily show up in tailpipe readings.

Flexibilities protected

“Automakers are in a strong position to meet these final standards,” the EPA said. Still, “the program includes averaging, credit banking and trading provisions to aid the industry in meeting standards through a multiyear planning process.”

Those flexibilities could be critical in the out years, as annual emissions improvements get tougher. For model year 2023, the EPA is requiring a combined fleet-wide average of 202 grams of carbon dioxide per mile -- a 9.8 percent increase in stringency over the relaxed Trump-era standards for model year 2022. In model year 2024, requirements would tighten an additional 5.1 percent, followed by another 6.6 percent in model year 2025 and 10.3 percent in model year 2026.

The updated standards set the stage for another layer of auto standards governing multiple pollutants for model year 2027 and beyond. The EPA is already working to develop that next era of requirements, which it said will govern light- and medium-duty vehicles through at least model year 2030.

Many Republicans, including Cathy McMorris Rodgers, the ranking GOP member on the House and Energy and Commerce Committee oppose the additional emissions regulations, calling them "radical."

“As people struggle to stretch their last dollar to afford reliable transportation amid rising gasoline prices, this administration is now asserting more control over the vehicles we drive to work, take our children to school, and live our lives,” the New York Times quoted her as saying in summer. “It’s also a radical push for electric vehicles that will make America more dependent on Chinese supply chains and hurt our global competitive edge.”

The EPA estimated the new requirements would yield $190 billion in net benefits tied to public health improvements, gasoline savings and avoided emissions -- some 3 billion tons worth through 2050. While the standards are expected to boost the price tag of cars, the EPA estimates fuel savings will ultimately exceed that initial cost increase by more than $1,000 over the lifetime of an average model year 2026 vehicle.

The EPA’s final requirements represent the kind of executive action Biden can employ to trigger deep greenhouse gas emissions cuts, even without help from Congress.

“Today’s executive action will unlock literally hundreds of billions in fuel savings for American consumers,” said Ali Zaidi, deputy national climate adviser. “It’s part of a broader win-win playbook for our consumers, workers and environment.”

The UAW endorsed the new regulations:

"President Joe Biden and EPA Administrator Michael Regan have created a win-win for UAW members, the U.S. manufacturing workforce and our environment by putting into place nationwide 2023 to 2026 Model Year light-duty emission regulations that are good for our air quality, preserve and grow both American jobs and our economy," the union said in a statement.

"History has demonstrated that strong standards based on input from stakeholders that include American workers at the table can be an opportunity for both job retention, job creation and environmental protections."

Bloomberg, Hannah Lutz and Automotive News staff contributed to this report.