EPA Emission Standards: The First Inning is Over, and Automakers are Ahead…For Now

April 25, 2014
Dave Cooke
Senior Vehicles Analyst

The EPA’s landmark greenhouse gas emissions standards for passenger vehicles went into effect in 2012, and the first scores are in: manufacturers are meeting and exceeding the standard. This means that manufacturers are producing vehicles with lower emissions, enabling new car buyers to reduce their oil consumption and global warming emissions and keep a little more gas money in their wallets.

EPA has thrown the first pitches, and automakers are hitting ’em well…but the game is far from over.
Pictured: Gina McCarthy, EPA Administrator

Automakers are achieving emission reductions beyond the tailpipe

Today’s announcement that automakers are outpacing the 2012 greenhouse gas emissions standard by nearly 10 grams per mile underscores the importance of well-crafted regulations—manufacturers not only reduced tailpipe emissions, but used a number of flexibilities within the regulation to improve the emissions performance of these new vehicles. In particular, many manufacturers improved the air-conditioning systems in their vehicles to reduce the amount of coolant leaked into the atmosphere—these A/C coolants are extremely potent heat-trapping gases. While these emissions may be small compared to the tailpipe emissions from a conventional vehicle, such improvements help achieve the climate reductions these standards were designed to ensure.

Credit flexibilities help balance technology innovation and reductions with manufacturer lead time

EPA’s report also shows how automakers are working together to achieve these reductions. A key flexibility in the light-duty vehicle standards was the opportunity for manufacturers to trade credits. This can give manufacturers an incentive to get the most efficient vehicles on the road sooner, but it also provides flexibility for manufacturers who may have started out behind the curve to phase into their fleet the technologies that are necessary to meet these standards.

There are a number of manufacturers who are well ahead of the curve, with vehicles out on the road today that are not only capable of meeting the 2012 standards but standards well into the future. Credit trading may buy industry laggards time to catch up to such innovators, but it is not a substitute for investment in the technologies that make our cars cleaner and more efficient.

EPA’s report provides the transparency needed to monitor credit activity to ensure that manufacturers aren’t just trying to buy their way to compliance but are instead making the critical investments necessary in efficiency technologies to continue to improve the environmental performance of their fleets.

But all credits need to reflect actual performance

There is one caution: Flex fuel credits account for most of the 2012 over-compliance. These credits were supposed to reflect the benefit of operating vehicles on 85% ethanol, but historically flex-fuel vehicles have run on E85 less than 2% of the time. This may change, but in the meantime the current credits will phase down over the next several years and be replaced in 2016 with credits that more accurately reflect the actual use of this alternative fuel. While flexibility in the regulation can provide options for manufacturers, it’s critical that any credits are based only on real world emissions reductions.

Technology innovations not captured on the standard test cycle (e.g., idling reduction, active aerodynamics, efficient accessories) are just beginning to appear on the market and receiving what are known as “off cycle credits.” While the use of these credits in 2012 was very small, it is likely that we will see growth of these credits in the coming years. Because we have already seen manufacturers try to take advantage of this flexibility in ways that do not reflect real world usage, it will be crucial that EPA continue to ensure that these credits reflect actual real world emissions reductions.

The first inning is important, but the game is far from over

We will hold off celebrating with automakers until they push beyond the 2025 standards
Pictured: Toyota Motors’ women’s softball team

This first scoresheet shows that manufacturers are more than capable of making efficient vehicles and that consumers are ready at the gate to purchase them. EPA will have an opportunity to strengthen these standards in the coming years through a mid-term evaluation process, and these results should bolster the case that consumers want cleaner vehicles, and automakers can provide them. While I’m pleased to see that manufacturers are giving consumers more options to reduce the environmental footprint of their vehicle, this is just the first year of standards, and there is tremendous progress—and big fuel savings—yet to come.