EPA expects shortfall in fuel economy standards

OREANDA-NEWS. July 19, 2016. The US fleet of cars and trucks is likely to fall short of achieving an expected fuel economy standard of 54.5 miles/USG by 2025, the US Environmental Protection Agency (EPA) said today.

EPA now expects the average light-duty vehicle sold that year will be 3-8pc less fuel-efficient than President Barack Obama's administration anticipated in 2012. That year, the agency finalized the second phase of fuel economy standards it projected would cut 6.6bn short tons (6bn metric tonnes) of CO2 emissions — equivalent to all of the greenhouse gas emissions of the US in 2014 — over the lifespan of light-duty vehicles sold between 2012-25.

The findings, included in a 1,217-page technical assessment released today, represent the first step in a mid-term review of the US' federal fuel economy and greenhouse gas standards. The release of the assessment will set off an intense debate over standards that represent the largest greenhouse gas reduction target the US has made to date.

EPA during its mid-term review will have to decide whether to retain fuel-economy standards it set for 2022-25, or make them more or less stringent. Automakers have said the plunge in fuel prices has shifted consumer preferences toward larger and less efficient light trucks and sports utility vehicles, making it more costly for them to meet earlier fuel economy targets.

"Given changes in the market landscape, it will be a daunting challenge to meet the very aggressive requirements of the 2022-25 federal fuel economy and greenhouse gas rule," industry trade group the Alliance of Automobile Manufacturers said.

Environmental and consumer groups, in contrast, are pushing EPA to retain the standards or make them more stringent. They argue that automakers have contributed to the efficiency shortfall by heavily marketing large and inefficient vehicles that have higher profit margins, while pulling back on investments in hybrid and electric vehicles.

"They need to use the mid-term review to tighten the standards," said Dan Becker, climate campaign director for consumer group the Center for Auto Safety. "They could say we are going to create a backstop so that each manufacturer achieves the emission reductions the president originally promised."

Even though the average fuel economy of US vehicles is on track to end up lower than expected, that does not mean automakers would necessarily be out of compliance. EPA made its rules flexible so that they could become more or less stringent, depending on the size of vehicles that consumers were purchasing.

EPA said the assessment shows automakers will be able to meet the fuel-economy standards for 2022-25 with a fleet mostly consisting of gasoline vehicles and at a lower cost than it initially expected. The agency expects only 14pc of the US light-duty fleet by 2025 will employ hybrid technology, with less than 2pc of the fleet consisting of electric vehicles.

EPA in its technical assessment projects its fuel economy standards will reduce oil consumption by 1.2bn bls, over the lifespan of vehicles sold between 2022-25. The agency expects the regulations for those years will increase vehicle and maintenance costs by \\$87bn but save consumers \\$120bn in fuel costs and provide \\$55bn in other benefits.