Sustainable Finance

US administration raises Automobile Fuel-economy standards to fight climate change

Published on: 23 December 2021 11:25 AM
by KnowESG
US administration raises Automobile Fuel-economy
US administration raises Automobile Fuel-economy

A Brief Summary

The US environmental protection agency released its fuel-economy standards for greenhouse gas emissions for trucks and passenger cars for model years 2023-2026. Combating vehicle emissions is the key to achieving the administration's climate goals, as transportation represents one of the largest sources of GHG emissions in the US.

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The Biden administration is strengthening vehicle mileage regulations to drastically decrease emissions of planet-warming greenhouse gases, reversing a Trump-era rollback that loosened fuel economy standards, is a major step toward combating climate change. Starting with the 2023 model year, a final regulation announced Monday will enhance mileage standards, aiming for a projected industry-wide objective of 40 miles per gallon by 2026. The new requirement is 25% higher than the Trump administration's final regulation from last year and 5% higher than the Environmental Protection Agency's proposal from August.

"We're establishing strong and rigorous regulations that will aggressively decrease the pollution that harms people and the environment – while also saving households money," said EPA Administrator Michael Regan. "While laying the path toward an all-electric, zero-emissions transportation future," he said, the rule is "a big step ahead" in delivering on President Joe Biden's climate goal.

The action comes a day after Democratic Senator Joe Manchin dealt a possibly fatal blow to Joe Biden's $2 trillion social and environmental policy programme, endangering Democrats' agenda and alarming the White House. The West Virginia senator said he couldn't support the plan, which includes a slew of climate ideas, because it was too costly and risked causing inflation and adding to the country's mounting debt.

A $7,500 tax credit for buyers of electric vehicles is included in the now-stalled package.

Regan said the government will "push diligently" for the EV tax credits and other incentives in the so-called Build Back Better measure, but even if they aren't included, "We feel we offered a regulation that is practical, cheap, achievable, and we're thrilled about it."

The new mileage limits are the most stringent ever imposed for passenger automobiles and light trucks in terms of exhaust pollution. The new criteria surpass the Trump administration's mileage targets, which were set at 32 miles per gallon by 2026. In August, Biden set a target of 38 miles per gallon. According to the administration, the rules would assist increase the market share of zero-emission vehicles, with the objective of battery-electric and plug-in hybrid vehicles accounting for 17% of new vehicle sales by 2026. In 2023, electric vehicles and plug-in hybrids are estimated to account for around 7% of the market.

According to the EPA, the regulation would not only halt climate change, but it will also enhance public health by decreasing air pollution and cut driver expenses by increasing fuel efficiency.

As he advocates for a historic change in the United States from internal combustion engines to battery-powered vehicles, Biden has set a goal of decreasing greenhouse gas emissions by at least half by 2030. He has pushed for components needed to accomplish that dramatic shift — from batteries to semiconductors — to be built in the United States as well, asking for business and labor support for the environmental drive in exchange for new jobs and billions in federal electric car funding.

The new criteria, while ambitious, provide automakers enough time to comply at a reasonable cost, according to the administration. According to the EPA's estimate, the sector can meet the final standards with just minor increases in the number of electric vehicles in the fleet. The new limits were widely praised by environmental and public health groups, although the trade group representing most major automakers reacted cautiously.

According to John Bozzella, president and CEO of the Alliance for Automotive Innovation, automakers are "committed to achieving a cleaner, safer, and smarter future," but the EPA's final rule for greenhouse gas emissions is more aggressive than originally proposed, "requiring a substantial increase in electric vehicle sales, well above the 4% of all light-duty sales today." The organization represents nearly all of the new vehicles and light trucks sold in the United States.

In a statement, Bozella stated, "Achieving the goals of this final rule will need implementation of complementary governmental policies – including consumer incentives... and support for U.S. manufacturing and supply chain development."

"Now that a strong federal clean car rule has been restored, we can all breathe a collective sigh of relief," Morgan Folger of Environment America, an advocacy group, said.

Despite the auto industry's opposition, Folger believes the law will greatly cut air and climate pollution. She hailed the revelation as a "climate success" that will pave the way for "zero emissions from our automobiles and trucks in the future."

According to Harold Wimmer, president and CEO of the American Lung Association, the EPA's decision is "an important step forward that will reduce greenhouse gases and air pollution while also improving lung health."

The new rule, according to the EPA, is "essential" in combating climate change. Transportation emits the most greenhouse gases in the United States, accounting for 29 percent of total emissions. Passenger automobiles and trucks are the greatest contributors to transportation-related emissions, accounting for 58 percent of all transportation-related emissions and 17 percent of total U.S. carbon emissions.

The final standards will contribute toward a goal set by the 2015 Paris climate agreement to keep the increase in the global average temperature to well below 2° Celsius above pre-industrial levels, the EPA said. The U.S. rejoined the Paris agreement on Biden’s first day in office after former President Donald Trump had withdrawn the U.S. from the global pact.

The new limits would go into effect with the 2023 model year of cars and gradually reduce emissions until 2026. The rule accelerates the rate of emissions reductions to between 5 and 10% each year from 2023 through 2026, the EPA said, far higher than under previous rules.