Technical Assessment Report on Fuel Economy Regulations: A Quick Guide

, senior vehicles analyst | September 1, 2016, 11:38 am EDT
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A few weeks ago, the Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) released a technical assessment report (TAR) looking at the latest and greatest information about the cars we buy, the technologies available to make those cars more efficient, and the ability of manufacturers to meet fuel economy and global warming emissions regulations that are helping to push those technologies to market.

As I noted when the TAR came out, the two biggest takeaways of the agencies’ report are that 1) manufacturers can meet the current 2025 standards at costs less than or equal to the initial projections and 2) if the rules remain unchanged, the average fleet will emit more CO2 and use more fuel than originally projected.  However, there is a lot more behind this report, and EPA and NHTSA are currently seeking comment on the report itself.  Here are a few additional highlights…

Federal testing of engines like the Mazda SkyActiv combined with vehicle and powertrain modeling were key inputs to the TAR. These and other technology developments show that manufacturers are exceeding expectations and can achieve the 2025 standards at reduced cost.

Federal testing of engines like the Mazda SkyActiv combined with vehicle and powertrain modeling were key inputs to the TAR. These and other technology developments show that manufacturers are exceeding expectations and can achieve the 2025 standards at a reduced cost.

Manufacturers are deploying technology faster than expected, and consumers love it

An entire chapter of the TAR is devoted to consumer response to fuel consumption reduction technologies.  In one case, as a surrogate for consumer experiences EPA analyzed the responses of car reviewers to a number of newer technologies.  Across the board, vehicles employing fuel efficiency technologies were less likely to receive negative feedback.  Every single technology, even those with the most negative feedback, were (on average) positively received.

Manufacturers are right now exceeding what is required by the regulations by deploying a breadth of technologies, many of which weren’t even anticipated when the rules were finalized.  And consumers are generally responding positively to these and other innovative internal combustion engine and vehicle technologies that will be necessary to meet 2025 standards.

Efficient vehicles are helping those who spend more of their budgets on fuel

Consumer benefits of the fuel economy and emissions regulations are important for the used car market as well as the new car market.  The agencies have found that lower income households are more vulnerable to changes in fuel prices than they are to changes in vehicle prices, and the latest data shows that the payback for these more efficient vehicles on the used market is even shorter than the payback period for brand new cars.  These regulations are helping to get more efficient vehicles on the road, and those benefits are especially important not just to the first purchaser, but the next buyer as well, who is even more vulnerable to spikes in the price of fuel.

State EV regulations are critical to getting EVs on the road because the 2025 federal standards don’t require (hardly) any of them

California and nine other states have adopted a Zero Emission Vehicles (ZEV) policy that requires a certain fraction of vehicles sold in the state by a manufacturer to be electric.  It is clear this rule is helping to push manufacturers to offer electric vehicles in these states, particularly California.  And in the TAR, EPA has rightfully included the impacts of these state requirements in its baseline.  Sales of electric vehicles in these 10 states, combined with the sales of vehicles like the Tesla Model S, the Chevy Volt, and the Nissan Leaf that are offered in all 50 states, are estimated to result in 3.8 percent of new vehicles sold in 2025 having a plug. To meet the federal standards by 2025, a mere 0.5 percent additional electric vehicles would be needed to comply.

For most manufacturers, improvements to conventional, gasoline-powered vehicles are what is necessary to meet the 2025 efficiency regulations, not electrification.  Some additional electric vehicles will be required for manufacturers who have used efficiency improvements to increase performance rather than reducing fuel consumption, such as some manufacturers of luxury sports cars.

Costs have come down but could be even cheaper than agency estimates

EPA has spent millions of dollars and numerous person-hours of lab time benchmarking technologies and even devoting time to “futuring” technologies that aren’t yet available, using modeling and engineering expertise to anticipate how manufacturers could build more efficient cars in the future.  Programmers, engineers, and scientists at EPA, NHTSA, and Argonne National Lab (who was contracted to do most of NHTSA’s technology analysis) have devoted uncountable hours of time assessing manufacturers’ ability to make cars more efficient, with what technologies they may choose to do so, and how effective those technologies can be.  Each agency put together its own assessment, and both led to the conclusion that, if anything, meeting the 2025 standards would actually be cheaper than originally anticipated, due to a number of unforeseen improvements in technology

However, because each agency did its own analysis, there are some discrepancies.  It is our estimate that these discrepancies result in overestimating the costs of compliance in 2025.  That means the costs of meeting the rules as they are set out today would be even further reducedTechnologies like the application of lightweight materials, improvements to continuously variable transmissions, and high-compression ratio engines like Mazda’s SkyActiv are all more efficient than estimated by NHTSA.  Correcting for this will mean getting more bang for the buck for manufacturers and not having to deploy additional technologies to meet the standards, lowering the costs even further.

The TAR is the first step to strengthening the current standards

The TAR makes clear that manufacturers can meet even stronger standards in 2025 than are currently on the books.  Automakers are trying to obfuscate and deflect to weaken the standards, so it is critical that we publicly respond to the agencies to provide them with the best technical data as they begin their assessment of the standards themselves.  We know that the rules as they stand will fall short of the reductions in fuel use and global warming emissions anticipated when they were passed—but we also know that the technology is there to strengthen the standards and help correct course towards the reductions we need.

If you would like to let the agencies know what you think about the TAR, click here to submit a public comment.  It is important to let them know that the public is engaged and following this process closely.

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