Automakers get more time to ramp up EVs under final EPA emissions rules

The U.S. Environmental Protection Agency revealed Wednesday its final automobile emissions standards, which will allow additional time for the automotive sector to ramp up production for electric vehicles and other alternative fuel powertrains in the latter half of the decade than it would have under a previous proposal.

The change shows the Biden administration bowing to requests by the automotive industry and the United Auto Workers, which represent a significant voting demographic in key states like Michigan. Both called for moderation in regulations in light of slowing growth in EV sales.

But the rules still are the "strongest vehicle pollution technology standard ever finalized in United States history," EPA Administrator Michael Regan said during a news conference. They'll necessitate automakers sell many more fuel-efficient vehicles, including EVs, in the years to come. The leeway, though, is particularly relieving to Detroit's three automakers, the worst-ranking for carbon dioxide tailpipe fleet emissions.

Many consumers remain hesitant to buy into all-electric vehicles because of high prices, limited charging infrastructure, charging speeds slower than filling a tank of gas and grid reliability concerns. Those circumstances have fueled criticism on the campaign trail of President Joe Biden from expected Republican nominee Donald Trump who has indicated he would seek to overturn the Biden rules if elected.

Trump has characterized the regulations as an EV "mandate" that'll force Americans to buy vehicles they don't want, jeopardize jobs and increase the United States' reliance on China, while Biden has made subsidies in the clean-energy sector and slashed carbon dioxide emissions from gasoline-powered vehicles cornerstones in his environmental policy fighting climate change. Regan characterized the final EPA rules as a "more durable process" for the emissions reductions the administration is seeking to achieve.

“It’s transparently a concession to the UAW and to others in states like Michigan that are concerned about a forced march to EVs that will result in big job losses,” Patrick Anderson, CEO of the East Lansing-based consulting firm Anderson Economic Group that has done work for automakers, said about the difference in the final rule. “They are rushing full speed ahead, regardless of all the doubts, regardless of all the difficulties, regardless of all the mounting evidence that consumers are not in a rush to replace their EVs."

The administration, however, says the rules are technology-neutral and that combined with other legislation like the Bipartisan Infrastructure and Inflation Reduction acts that are investing in charging stations, domestic production of EVs and their batteries and consumer subsidies, the standards will fuel prosperity.

Those kinds of changes are "irreversible," National Climate Adviser Ali Zaidi said following the news conference. "It's steel in the ground. It's a change that is not going to get rolled back."

“The president’s goal really reflects what he thinks is possible across the whole government and all of the industry pulling in the same direction,” he later told The Detroit News, noting the country has been lagging China in clean-energy technology. “Under President Biden’s leadership, we are leading the world to win that race and bring those jobs back here to the United States.”

John Bozzella, CEO of the Alliance for Automotive Innovation, a large industry trade group, said during the news conference the final rules reflect how the EPA "listened to what is happening in the auto market. You understood we've got lots of work to do on public charging, and the industrial incentives and policies of the inflation Reduction Act need more time to do their thing. And you were mindful of consumer choice."

What's different

The final rules don't require customers to buy an EV, but are a performance standard that allows automakers to determine their sales mix to comply with the greenhouse gas tailpipe emissions limits for light-duty vehicle fleets of model years 2027 to 2032 and beyond.

The final rules clarify how there can be multiple pathways to achieve compliance. Last April, the EPA said to qualify under the 2032 standard at the lowest cost would mean a 67% EV U.S. sales rate for an automaker. That's still applicable under the final rules, but the EPA says it expects the mix of EVs as well as plug-in hybrids, hybrid electric vehicles and cleaner international combustion engine vehicles to increase.

It projects that from model years 2030 to 2032 at reasonable costs, manufacturers may choose to produce all-electric vehicles for about 30% to 56% of new light-duty vehicle sales with some of those other options, as well.

That penetration is more in line with industry projections but potentially shows a pullback from Biden's aspirations for half of new-car sales to be zero-emission by 2030.

The president, in a statement, however, said that's not the case: "We’ll meet my goal for 2030 and race forward in the years ahead."

The standards for 2032 end in the same place, according to EPA officials, but accomplish it at a more consistent rate of increase across the six years, similar to what the EPA called "alternative 3" in its original proposal for which several automakers advocated during the public comment period. The final rules put the fleetwide light-duty limit at 85 grams of carbon dioxide per mile compared to 82 under the preferred proposal from last April. The different number, though, is a reflection of an updated analysis concerning the size of the vehicle fleet, not a different standard.

The biggest differences are in the first three years. Model year 2027 actually represents an increase in allowed grams per mile from the current 2026 standard: 170 grams per mile versus 168. For model year 2029, the total light-duty fleet standard falls to 136 grams of carbon dioxide per mile, a nearly 50% decrease from model year 2026. The original proposal placed the 2029 target at 111 grams per mile.

David Dulio, a political science professor at Oakland University, said some will interpret the move as the Biden administration backing off its previous, more stringent proposal, which could be disappointing for environmentally minded Democratic voters. It could, he said, prompt some not to vote in the presidential race at all or cast a ballot instead for the Green Party candidate. Still, Dulio said the new rule probably would not be “at the top of most Americans’ list.”

The EPA's Regan, however, contends the final rules aren't "rollbacks or less stringent" and said the EPA cannot issue mandates.

"Take a look at the bottom line: If you look at what we proposed versus what we finalized, then you'll see that they're essentially the same," he said following the news conference. "During the comment period, the industry came back and said, '... Give us a little bit more flexibility in terms of choices of technology, and we will prove to you that we can meet and exceed those environmental goals.' So, the proof is in the pudding. When you look at the end result, the environmental stringency is the same, if not more."

Meeting the standards

Since noncompliance could result in fines for automakers, the longer runway of less stringent regulations compared to last year's EPA proposal gives the industry additional time before a greater share of the mass market makes the leap to EVs to address their affordability and technology challenges and for the national charging network to be built out.

Still, U.S. EV sales hit a record 1.19 million last year, up 47% as market share rose to 7.6% from 5.8%. That growth, however, slowed toward the end of the year. Market research firm Guidehouse Inc. is forecasting EVs will represent 42% of the U.S. new-sales market in 2030. But the pathways identified by the EPA call for a fleetwide all-electric vehicle mix of at least 24% in three years.

“All of this just seems mildly optimistic because we’re looking at automatically transforming automobile manufacturing in the next eight years,” said Jason Hayes, director of energy and environmental policy at the conservative Mackinac Center for Public Policy think tank, noting it comes weeks after Ford Motor Co. said it was cutting production of its F-150 Lightning, the country’s best-selling electric pickup, because of changing market demand.

“The translation in the English language for that is nobody wants them. You’ve got a clear choice: If you like EVs, Biden is your guy. If you don’t, then Trump is.”

But Biden adviser Zaidi said during the news conference the ability for automakers to have multiple avenues to compliance is increasing options: "We are breaking the monopoly that one industry had on how we get from point A to point B. You no longer have to go to a gas station to make sure you're going to get to work or to school or to your place of worship. You have choices now."

The greater leniency in the early years is especially good for the Detroit Three who are the worst three of the major automakers tracked in the EPA's Automotive Trends Report for carbon dioxide emissions.

Ford in a statement sent by spokesperson Melissa Miller highlighted its product strategy in hybrids, plug-in hybrids and EVs: "We appreciate EPA’s efforts and collaboration in strengthening greenhouse gas emissions standards in ways that reflect the realities of the EV transition. The agency’s final rule is ambitious and challenging, and achieving its requirements will take close public-private cooperation."

General Motors Co. previously had said it was "all-in" on EVs, but earlier this year announced that it would add some plug-in hybrids to its lineup in light of slower-than-expected growth in EV sales to meet government regulations.

“GM supports the goals of the EPA’s final rule and its intention to significantly reduce emissions," the Detroit automaker said in a statement sent by spokesperson Jeannine Ginivan. "Although challenging, we believe our commitments and investments in an all-electric future place GM in an excellent position to contribute to the goals."

Meanwhile, Stellantis NV has been a laggard in the all-electric space in North America, launching its first for sale on the continent this year.

"While the later-year targets remain aggressive," the company said in a statement sent by spokesperson Jodi Tinson, "the final rule improves on the proposal by better reflecting the expected trajectory of market demand and enabling infrastructure. It is critical that forthcoming rules align with this proposal so that U.S. manufacturers can effectively comply with a single set of rules."

The UAW also cheered the final rules in a news release for "taking seriously the concerns of workers and communities": "The EPA has created a more feasible emissions rule that protects workers building ICE vehicles, while providing a path forward for automakers to implement the full range of automotive technologies to reduce emissions."

The Vehicle Suppliers Association known as MEMA in a news release said the rules will promote a coordinated path forward in the EV transition: It "will facilitate a more gradual, steady implementation of the stated emissions requirements. This approach will provide global supply chains greater flexibility to adapt to the regulations while reorienting to meet market demands and restructuring needs."

Economic and environmental impact

The more moderate path also may help to safeguard the rules from legal challenges. The EPA and other federal agencies in recent years have faced increased regulatory limits from the Supreme Court that's dominated by a 6-3 conservative majority. In 2022, a landmark ruling reined in the EPA's power to regulate carbon dioxide emissions from power plants.

Leaders at the American Fuel & Petrochemical Manufacturers and American Petroleum Institute in a statement said they were prepared to take legal action. The AFPM has run a seven-figure ad campaign across battleground states including Michigan calling on residents to tell Biden to "stop the EPA car ban.”

“At a time when millions of Americans are struggling with high costs and inflation, ... this regulation will make new gas-powered vehicles unavailable or prohibitively expensive for most Americans," AFPM CEO Chet Thompson and API CEO Mike Sommers said. "For them, this wildly unpopular policy is going to feel and function like a ban."

The EPA estimates the light-duty standards, along with final medium-duty standards, will avoid 7.2 billion tons of carbon emissions by 2055, down from nearly 10 billion tons under the original proposal last year, and save 14 billion gallons of oil. It expects they'll provide nearly $100 billion in annual net benefits, including from public health benefits because of 95% less fine particulate emissions that can cause respiratory and other health issues and reduced fuel and maintenance costs.

Although the changes represent delayed decreases in the emissions standards, environmental and health groups have largely communicated that the new rules represent steps toward protecting the planet and improving wellness.

"This common sense standard will not just save lives and deliver environmental justice," Matthew Davis, vice president of federal policy for the League of Conservation Voters, said on Tuesday ahead of the final rules during a virtual news conference, "it will make us less reliant on fossil fuels that wreak havoc on our family budget and economy."

Added Cara Cook, the Alliance of Nurses for Healthy Environments' director of programs: "We do see significant health benefits, and so I do think that is cause for celebration. Of course, we're never going to get exactly what we hoped for, and we will continue to advocate for the strongest possible standard."

Chris Harto, Consumer Reports' senior policy analyst for transportation and energy, noted that in the latter half of the time period the regulations cover, he forecasts there will be EVs with cost parity to or that are even less expensive than internal combustion engine vehicles.

"The only group that started to be upset about these rules is big oil," Harto said, "because consumers are going to be making a lot fewer trips to the pump."

But U.S. Rep. Tim Walberg, R-Tipton, called the rules "devastating news for Michigan."

"The only change is a slight adjustment while keeping the same end goal," he said in a statement. "Top-down government edicts cannot change the demand of consumers overnight, yet this is exactly the Biden administration's plan. This rule restricts the choices of American consumers and will price millions out of the market, eliminate American jobs, and forever link our auto industry with the Chinese Communist Party."

U.S. Rep. Debbie Dingell, D-Ann Arbor, however, in a statement, emphasized the importance of consumer choice in her goals to "protect American jobs and our environment, keep the United States at the forefront of automotive manufacturing, technology, and innovation, and keep our domestic industry strong and competitive. The EPA has worked with all stakeholders to reach this final rule that includes hybrid and electric vehicles, and ensure these goals are achievable."

Added U.S. Sen. Debbie Stabenow, D-Lansing: “I appreciate EPA’s commitment to engaging with our automakers and autoworkers to develop an ambitious but achievable final rule. It represents an opportunity for union workers to continue to build the vehicles of the future right here in the U.S. and tackle the climate crisis.”

bnoble@detroitnews.com

@BreanaCNoble

lramseth@detroitnews.com

@lramseth

Staff Writer Melissa Nann Burke contributed.