On the Road to Cleaner Cars

On Wednesday, U.S. EPA and DOT's National Highway Traffic Safety Administration (NHTSA) held a public hearing in Detroit on recently proposed, first-ever national limits on global warming pollution from cars and light trucks and strengthened fuel economy requirements. The proposed standards call for new autos to average 250 gCO2/mi and about 34.1 mpg in 2016 (the average for model year 2008 is 26 mpg).

As I testified at the hearing, the proposed standards show real progress to fulfill the goals of the National Program, which harmonizes federal standards from EPA and NHTSA with California's global warming pollution standards. Of course there is room for improvements, and I commented on those too.

The National Program is a historic step forward for protecting the environment and helping consumers save money at the pump. It secures the benefit of the CA vehicle emissions program while also giving consumers more clean vehicle choices.

The Program is also a win for automakers, their workers and the states. It is good for automakers because it gives them certainty and lays the foundation for them to be more sustainable businesses in a future world of volatile fuel prices and intensifying global warming. It is good for autoworkers because a stronger industry means more, better-paying jobs. The program is also good for the states because it preserves their right to act to protect their local interests and citizens and it upholds their tremendous value as laboratories for clean vehicle policy.

According to EPA and NHTSA, the new standards have the potential to cut global warming pollution by 950 million metric tons and save 1.8 billion barrels of oil over the life of vehicles sold in model years 2012-2016. To ensure these benefits are achieved, however, the proposed standards should be strengthened with some structural adjustments. Also, the proposal should revise some of its underlying economic assumptions. I explain a few of these items below:

1. "Backstop" standards are necessary to ensure environmental objectives are met.

A key feature of the new standards is that they are set based on the size (measured by a vehicle's "footprint" on the road) instead of having a fleet average standard. Under the size attribute-based system, an automaker could sell a lot of large, high emitting vehicles and still meet their obligation under the rule. If the sales of the larger vehicles are higher than what EPA and NHTSA projects, however, the fleet average emission rate will be higher than agencies' projection and the fleet fuel economy will be lower, which means the greenhouse gas reduction and oil savings will be lower. 

To prevent intentional and unintentional market shifts from undermining the environmental and oil savings benefits of the Program, EPA and NHTSA should adopt backstop standards specific to each manufacturer that prevent automakers from deviating too far from their expected reduction trajectories.

2. Emissions scoring of advanced technology vehicles should be based on their true full fuel cycle emission impacts, i.e. driving on grid electricity is not zero emissions.

Under the proposed compliance system, EPA assigns grid electric-drive and hydrogen fuel cell vehicles a zero gCO2/mi emissions value. In reality, the production and delivery of electricity and hydrogen results in global warming pollution and EPA should account for it. Even when accounting for the "upstream" emissions, these advanced technology vehicles have substantially lower emissions than their gasoline-only counterparts. But a zero gCO2/mi designation could mean that an automaker selling a small percentage of EVs in their fleet could meet the EPA standards without making significant improvements to emissions technology in their conventional vehicle fleet.  

Consider the impact of the EPA proposal on Nissan's compliance strategy: Nissan has indicated that they could produce more than 100,000 Leaf electric cars annually by 2016, which is about 10% of their expected overall car sales. If the EVs are assigned zero gCO2/mi and given the 2x multiplier credit for advanced technology also proposed by EPA, then Nissan's gasoline car fleet would average about 8 mpg lower fuel economy then if Nissan did not produce any EVs, about 31.5 vs. 39.5 mpg. That is, Nissan would have to do very little, if anything to improve the performance of their car fleet!

To avoid this situation, EPA should set upstream emission factors for electricity (gCO2e/kWh) and hydrogen (gCO2e/kgH2) that would be multiplied by a vehicle's efficiency (kWh/mi or kgH2/mi) to get a true accounting of the vehicle's emissions.

3. The federal agencies should revise estimates of potential damages from global warming.

The estimate of the economic costs of global warming proposed by the agencies, $20/metric ton of CO2, is too low. EPA and NHTSA use this cost factor, called the social cost of carbon or SCC, to estimate the value of pollution reduction benefits of the program and to help determine at what level to set the car and truck standards. When agencies estimate a low SCC, as they have done in this case, the U.S. underestimates the risks of dangerous climate change and therefore may to take actions that are too weak to mitigate the true risks. Cars and light trucks currently contribute about 20 percent of U.S. carbon pollution and it is a primary objective of the National Program to significantly reduce that pollution. Proper accounting of climate change risks is critical to designing an effective program.  

The National Program is one component of a set of policies for cutting global warming pollution in transportation and weaning us off oil. If EPA and NHTSA set car and truck standards right, they will help put us on the road to cleaner cars and a clean energy economy.