The transportation sector is the largest direct source of U.S. greenhouse gas emissions, surpassing the power sector in 2015. Cars and light-duty trucks (including pickups and SUVs) are responsible for about 59 percent of transportation emissions. Medium- and heavy-duty vehicles, which include tractor-trailers, large pickups and vans, delivery trucks, buses, and garbage trucks, produce about 23 percent of transportation emissions.

Background

In April 2010, the federal government finalized the first harmonized set of standards for light-duty vehicles with the cooperation of major automakers and the state of California. The Environmental Protection Agency (EPA) established greenhouse gas emission standards and the National Highway Traffic Safety Administration (NHTSA) established corporate average fuel economy (CAFE) standards. The first CAFE standards were adopted in 1975 while the first greenhouse gas vehicle standards were adopted in 2010.

The 1975 Energy Policy and Conservation Act directed the U.S. Secretary of Transportation to establish Corporate Average Fuel Economy (CAFE) standards for new passenger cars. CAFE is the sales-weighted average fuel economy in mpg of the vehicles in a manufacturer’s fleet. This law was updated in 2007, when Congress increased the fuel economy standards for passenger vehicles and also established efficiency standards for medium- and heavy-duty vehicles.

California is the only state allowed to set its own air emissions standards for motor vehicles. California was granted an exception under the Clean Air Act because the state had already implemented standards in 1966 to address its critical smog problem and had established an Air Resources Board (CARB) to oversee them. The Clean Air Act states EPA shall grant a waiver if California’s standards are necessary to meet compelling circumstances and are at least as stringent as federal standards. Other states may choose to adopt California’s vehicle emissions standards without EPA approval. Thirteen states and the District of Columbia, making up about 30 percent of U.S. auto sales, currently follow at least some of California’s vehicle emissions standards.

A September 2019 EPA rule, however, preempted California’s ability to set its own standard. The federal action is challenged by California and other states.

Passenger Cars/Light-Duty Trucks

2021–2026 Standards

In March 2020, the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) issued new greenhouse gas emission standards and fuel economy standards for new passenger cars and light-duty trucks. The Safer Affordable Fuel Efficient (SAFE) Vehicles Rule requires automakers to improve fuel efficiency 1.5 percent annually from model years 2021 through 2026. The SAFE rule is less stringent than the Obama-era rule it replaces. That rule would have required automakers to improve fuel efficiency 5 percent annually for model year 2020–2025 vehicles, reaching 46.7 miles per gallon (mpg) by 2025.

The SAFE rule justification projects that increased fuel efficiency standards have a “rebound effect” that encourages more driving and therefore more exposure to the risk of traffic accidents; that higher vehicle costs from increased fuel efficiency standards discourage consumers from purchasing new vehicles and encourage them to keep driving older, less safe vehicles; and that manufacturer “lightweighting” of vehicles to achieve fuel efficiency makes vehicles less safe. EPA and NHSTA project the SAFE rule would reduce vehicle costs by more than $1,000, but consumers will spend between $1,125 and $1,425 more on fuel costs over the life of the vehicle. The SAFE rule is also projected to slow electrification rates by 2029 to 7.9 percent compared to 19.6 percent under the Obama-era rules.

The SAFE rule also upends state emission programs. In September 2019, EPA and NHTSA issued a final action that enables federal vehicle standards to preempt state action and withdrew the waiver for California’s Advanced Clean Cars Program, Zero Emission Vehicle Program (ZEV), and Low-Emission Vehicle Program (LEV). EPA and NHTSA argued that the 1975 Energy Policy and Conservation Act preempts California’s authority to regulate tailpipe carbon dioxide emissions. They pointed to California’s voluntary agreement with four auto manufacturers— Ford, Volkswagen, Honda, and BMW — to increase their vehicle standards by 3.7 percent annually between model years 2022–2026 (51 mpg by 2026) as one reason for federal preemption. Without a waiver of federal preemption, California’s authority to maintain these programs would be undercut. In response, California and other states sued in federal court to challenge the final action on preemption of state vehicle standards.

History of Light-Duty Vehicle Standards

In October 2012, EPA and NHTSA finalized the second set of national program standards for model year 2017–2025 light-duty vehicles with the cooperation of major automakers and the state of California. Now replaced by the Trump Administration’s 2021–2026 standards, these standards aimed to raise the combined average fleet fuel efficiency to 46.7 mpg for model year 2025, nearly double the 27.5 mpg required for model year 2010 (before the first set of national program standards were adopted). Canada also adopted standards aligned with the second set of national program standards through model year 2025.

These standards included features aimed at improving flexibility, making compliance more cost-effective and encouraging technological innovation. Features for greater flexibility included:

• A credit trading system;
• Possibility of compliance for air conditioning improvements;
• Qualifying off-cycle credits (like solar panels on hybrid vehicles, active aerodynamics, or adaptive cruise control) for compliance;
• Alternative vehicle incentives; and
• Inclusion of truck hybridization for compliance.

In January 2017, following a mid-term review of these standards and draft Technical Assessment, the Obama administration issued a determination that maintained the standards through 2025. EPA cited the success of automakers in meeting early standard requirements and a seven-year growth in U.S. auto sales as reasons to expect that automakers could affordably continue to meet the standards. The California Air Resources Board (CARB) concurred with the EPA’s determination in its own midterm review of California’s vehicle standards. California found that automakers were successfully and affordably deploying advanced technologies to meet fuel economy requirements and the state’s zero-emission vehicle program.

In April 2018, the Trump administration issued a reconsideration of the midterm evaluation for greenhouse gas emission standards for model year 2022–2025 light-duty vehicles. EPA concluded that the standards were based on outdated information and that more recent information suggested that the current standards may be too stringent, making vehicles less affordable. EPA concluded that since the 2012 rulemaking finalizing the initial standards, expectations about gas prices and consumer adoption of advanced technology vehicles had changed.

In response, a California-led group of 17 states and the District of Columbia sued in federal court to challenge EPA’s reconsideration. The group includes California, Connecticut, Delaware, the District of Columbia, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington – states representing roughly 43 percent of the market for new car sales and 44 percent of the country’s population. The lawsuit alleges that EPA’s decision lacked scientific justification. In November 2019, the DC Circuit dismissed the lawsuit, ruling the petitioners lacked jurisdiction because EPA had not issued the final rule stemming from the reconsideration.

California also announced in May 2018 it would consider amending its regulations so that only automakers that comply with the Obama administration greenhouse gas emissions standards will be “deemed to comply” with California standards and that compliance with any new emissions standards set under the Trump administration may not equate to compliance with California standards.

Medium- and Heavy-Duty Vehicles

Medium- and heavy-duty trucks make up only 5 percent of vehicles on the road but account for about 20 percent of U.S. transportation emissions. This category includes tractor-trailers, large pickups and vans, delivery trucks, buses, and garbage trucks.

Phase 2 standards developed by EPA and NHTSA currently apply to semi-trucks, large pickup trucks, vans, and all buses and work trucks of model years 2021–2027. Phase 2 standards for box trailers that would have gone into effect in 2018 have been stayed by court order. EPA has proposed to repeal Phase 2 emissions standards for heavy-duty glider vehicles, glider engines, and glider kits.

History of Medium- and Heavy-Duty Standards

In 2007, Congress directed the Department of Transportation to establish efficiency standards for medium- and heavy-duty vehicles after consultation with the Department of Energy and EPA. In 2011, EPA and NHTSA established the heavy-duty national program (known as the Phase 1 standards), the world’s first harmonized greenhouse gas emissions standards and fuel economy standards for on-road heavy-duty vehicles of model years 2014-2018. The Phase 1 standards applied to combination tractors, heavy-duty pickup trucks and vans, and vocational vehicles. Some of the standards are exclusively within EPA’s jurisdiction, such as hydrofluorocarbon standards limiting leakage from vehicle air conditioning systems from certain heavy-duty vehicles, and nitrous oxide and methane emissions standards for pickup trucks and vans and heavy-duty engines. The Phase 1 standards did not apply to commercial trailers.

In August 2016, EPA and NHTSA finalized the Phase 2 standards for medium and heavy-duty vehicles. The Phase 2 standards were designed to apply to certain trailers of model years 2018 – 2027 and to semi-trucks, large pickup trucks, vans, and all buses and work trucks of model years 2021-2027.

The Phase 2 standards are divided into five segments and were designed to help provide manufacturers with flexibility.

1. Combination Tractors: Class 7 and 8 combination tractors and their engines should reduce fuel consumption by 25 percent from Phase 1 standard levels by model year 2027.
2. Trailers: Trailers should reduce fuel consumption by 9 percent by model year 2027, including by improving aerodynamics, reducing weight, and addressing tire pressure and resistance.
3. Heavy-Duty Pickup Trucks and Vans: These vehicles should reduce fuel consumption by 16 percent by model year 2027.
4. Vocational Vehicles: Delivery trucks, buses, garbage trucks should reduce fuel consumption by 24 percent by model year 2027.
5. Engine Standards: Tractor engines should reduce carbon dioxide emissions by 5 percent, and vocational diesel and gasoline engines should reduce carbon dioxide by 4 percent from Phase 1 standard levels by improving air handling, reducing engine friction, or improving emissions after-treatment technologies and waste heat recovery.

To provide manufacturers flexibilities, the program allows averaging, banking, and trading among regulated parties in order to speed up implementation of new technologies and reduce the cost of compliance.

Penalties for Failing to Meet CAFE Standards

In addition to substantive changes to the federal vehicle standards, there are changes to how the program is enforced. In July 2019, NHTSA finalized a rule retaining the existing penalty rate $5.50 per tenth of a mile per gallon for auto makers that fail to meet the CAFE standards, rather than allowing a scheduled increase to $14 per tenth of a mile per gallon to account for inflation.

In May 2018, a multi-state group led by California and New York expressed opposition to this proposal. Participants included California, Delaware, the District of Columbia, Illinois, Iowa, Maryland, Massachusetts, New Jersey, New York, Oregon, Virginia, Vermont and Washington. They emphasized that without a robust penalty, automakers will not have an appropriate incentive to manufacture fuel-efficient cars.