The transportation sector is the largest source of U.S. greenhouse gas emissions, recently surpassing the power sector. Cars and light-duty trucks are responsible for about 61 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.

Congress voted in the 1970s to introduce Corporate Average Fuel Economy (CAFE) standards for new passenger vehicles. CAFE is the sales-weighted average fuel economy in miles per gallon (mpg) of the vehicles in a manufacturer’s fleet. When federal fuel economy standards were updated in 2010, standards for greenhouse gas emissions were added for the first time. The standards were adopted by the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) with the cooperation of major automakers and the state of California. EPA’s standards govern vehicles’ greenhouse gas emissions and NHTSA’s standards govern vehicles’ fuel economies; the standards were harmonized to produce a target for automakers to meet.

The standards implemented by EPA and NHTSA aim to raise average fuel economy to up to 54.5 mpg for model year 2025, nearly double the 27.5 mpg required before new CAFE standards were adopted in 2010.

Following a mid-term review and draft Technical Assessment Report, EPA issued a final determination on January 12, 2017, that maintained federal fuel economy standards through 2025. The final determination cited the success of automakers in meeting early fuel economy requirements and the 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 concurred with the EPA’s determination in its own midterm review of vehicle standards, finding that automakers were successfully and affordably deploying advanced technologies to meet fuel economy requirements and the state’s Zero-Emission Vehicle program.

In March 2017, the Trump Administration revisited the EPA’s January 2017 decision to finalize light-duty vehicle emissions standards through 2025. EPA will review the financial and technological feasibility of the standards, and if it determines revisions are required, will undertake a formal rule-making. Separately, EPA is taking comments on the appropriateness of light-duty vehicle emissions standards for 2021. NHTSA has also begun to consider the next phase of vehicle standards beginning in 2022.

For medium- and heavy-duty vehicles, fuel economy and greenhouse gas standards were first set in 2011 for model years 2014-2018. In August 2016, EPA and NHTSA finalized new Phase 2 fuel economy standards for model years 2021-2027. The Trump Administration has shown interest in revisiting Phase 2 standards for medium- and heavy-duty vehicles. In April 2017, EPA requested a pause in a federal court case (Truck Trailer Manufacturers Association v. EPA) over the Phase 2 standards. In its filing, EPA said it might adjust the standards, resolving the manufacturers’ concerns.

Passenger Cars/Light-Duty Trucks

The passenger vehicle standards finalized in April 2010 cover passenger cars, light-duty trucks, and medium-duty passenger vehicles from model year 2012 to 2016. The standards set a foundation for those set in 2012 for model years 2017 to 2025. The standards are based on the vehicle’s footprint, which is a measure of vehicle size. Footprints are divided into two categories: passenger vehicles and light trucks, which include pickup trucks, vans, and sport utility vehicles.

A mid-term evaluation was required because NHTSA, under its statutory authorities, cannot set standards beyond model year 2021. Thus, standards for model years 2022 through 2025 are considered “augural” – or a prediction – by NHTSA.

As seen in the table, EPA’s greenhouse gas standard requires vehicles to meet a target of 163 grams of carbon dioxide equivalent (CO2e) per mile in model year 2025, equivalent to 54.5 mpg if the automotive industry meets the target through only fuel economy improvements.

Light-Duty Vehicle Program Flexibilities

Features to make compliance with vehicle standards more cost-effective and encourage technological innovation, include:

• Credit Trading System: Both the EPA and NHTSA programs include a credit system allowing manufacturers to carry efficiency and greenhouse gas credits forward by up to five years and backward up to three years to achieve compliance and avoid fines. Manufacturers can also transfer credits between cars and trucks of their fleet and trade credits with other manufacturers. Additionally, CO₂ credits generated for EPA compliance from model year 2010 to 2016 can be carried forward as far as model year 2021.
• Air Conditioning Improvements: Both programs allow manufacturers to use air conditioning system efficiency improvements toward compliance. For the NHTSA program, credits will depend on fuel consumption reductions. The EPA program allows credits for reductions in fuel use and refrigerant leakage, as well as the use of alternative refrigerants with lower global warming potential.
• Off-Cycle Credits: Current test procedures do not capture all fuel efficiency and greenhouse gas improvements available. Technologies that qualify for additional credit might include solar panels on hybrid vehicles, active aerodynamics, or adaptive cruise control. In addition, manufacturers can apply for credit for newer technologies not yet considered if they can provide sufficient data to EPA.
• Alternative Vehicle Incentives: To encourage plug-in electric vehicles, fuel cell vehicles, and compressed natural gas (CNG) vehicles, EPA has included a credit multiplier in the rule for model years 2017 to 2021. NHTSA can incentivize alternative fuels through simple accounting adjustments, but the agency does not believe it has the legal authority to offer credit multipliers.
• Truck Hybridization: Both programs offer incentives to add battery-electric hybrid support to full-size trucks. Mild hybrid pickup trucks (15-65 percent of braking energy is recaptured) and strong hybrid pickup trucks (at least 65 percent of braking energy is recaptured) are eligible for a per vehicle credit under specific conditions.

Medium- and Heavy-Duty Vehicle Standards

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. The table below defines the breakdown for medium- and heavy-duty vehicles by weight.

In August 2016, EPA and NHTSA finalized new fuel economy standards for model years 2021-2027 building on earlier standards put in place in 2011 that were the first of their kind in the world. By model year 2027, according to EPA, the buyer of a new vehicle would recoup the extra cost of technology used to achieve the standard relative to Phase 1 vehicles within:

• 2 years for tractor/trailer combos;
• 3 years for pick-ups and vans; and
• 4 years for vocational vehicles.

EPA’s and NHTSA’s finalized Phase 2 standards will impact model years 2021 to 2027, though standards for some categories of box trailers begin in model year 2018. All carbon dioxide and petroleum use reductions are relative to the final Phase 1 standards, which were implemented through 2017, with the exception of trailers, which had not previously been regulated. Notably, Phase 2 standards use different methodologies and test procedures, and should not be construed as directly comparable to Phase 1 standards.

The standards described below take effect in 2021 and would provide a full 10 years of lead time from their final authorization in 2016 to their completion in 2027. Standards are divided into five segments while also offering flexibilities for manufacturers to meet their obligations.

1. Combination Tractors: Class 7 and 8 combination tractors and their engines are responsible for almost two-thirds of fuel consumption from medium- and heavy-duty trucks. The vehicles in this category are required to achieve a 25 percent reduction in fuel consumption over Phase 1 standards by model year 2027.
2. Trailers: Standards for trailers, which are new under Phase 2 standards, must achieve a 9 percent reduction in fuel consumption by model year 2027. Technologies that can help include improving aerodynamics, reducing weight, and addressing tire pressure and resistance.
3. Heavy-Duty Pickup Trucks and Vans: These vehicles must improve fuel economy 16 percent by model year 2027. The standards rely on a “work” factor, which considers the vehicle’s cargo capacity, towing capabilities, and whether it has 4-wheel drive. Similar to the light-duty standards, the standards are based on the manufacturer’s sales mix.
4. Vocational Vehicles: Delivery trucks, buses, garbage trucks, and other vocational vehicles must achieve a 24 percent reduction in fuel consumption by model year 2027.
5. Engine Standards: EPA and NHTSA are adopting separate standards and test cycles for tractor engines, vocational diesel engines, and vocational gasoline engines. By 2027, final diesel engine standards will reduce carbon dioxide emissions by 5 percent for tractor engines and 4 percent for vocational engines compares to Phase 1. Technologies for the reduction of carbon dioxide emissions and petroleum use include: improved air handling, reduced engine friction, improved emissions after-treatment technologies and waste heat recovery.
6. Flexibilities: The final rule includes a credit system that allows averaging, banking, and trading among regulated parties. These flexibilities can increase the rate at which new technologies can be implemented, reduce the cost of compliance, and address potential lead time challenges in meeting the standards.