EPA, DOT finalize fuel efficiency rule, address biofuel comments

By Erin Voegele | August 29, 2012

The U.S. EPA and U.S. Department of Transportation finalized new fuel efficiency standards on Aug. 28. The new corporate average fuel economy (CAFE) standards will increase fuel economy to the equivalent of 54.5 mpg for cars and light-duty trucks by model year (MY) 2025. According to the EPA and DOT, the fuel efficiency standard will reduce greenhouse gas (GHG) emissions and save consumers more than $1.7 trillion in fuel costs while reducing U.S. oil consumption by 12 billion barrels. The current fuel efficiency standard of 35.5 mpg applies to cars and light trucks for MY 2011-2016.

“These fuel standards represent the single most important step we’ve ever taken to reduce our dependence on foreign oil,” said President Obama. “This historic agreement builds on the progress we’ve already made to save families money at the pump and cut our oil consumption. By the middle of the next decade our cars will get nearly 55 miles per gallon, almost double what they get today. It’ll strengthen our nation’s energy security, it’s good for middle class families and it will help create an economy built to last.”

While CAFE standards apply to the mechanical aspects of a vehicle—not the carbon intensity of the fuel it uses—the EPA and DOT responded to several public comments regarding the use of biofuels in the final rule. The rulemaking also addresses flex-fuel vehicles (FFVs).

According to the rulemaking, the Clean Fuels Development Coalition, Growth Energy, the 25x’25 Alliance, Volkswagen and the Association of Global Automakers recommended that the EPA provide GHG incentives to automakers that produce vehicles capable of operating on biofuels beyond MY 2015, when incentives under the light-duty vehicle GHG program are set to expire. In its response, the EPA said that it recognizes that the use of certain biofuels has the potential to reduce lifecycle GHG emissions, but that it also recognizes that other programs already either require increased use of biofuels or provide incentives for vehicle manufacturers to produce vehicles capable of operating on more than one fuel. “In that context, EPA believes it is not appropriate to adopt incentive multipliers, or the 0.15 divisor, in this rule for manufacturers of biofuel-capable vehicles,” said the EPA in the rule. “The tailpipe GHG emissions of biofuel-capable vehicles when operated on biofuels are typically slightly lower than GHG emissions from conventional vehicles, and those GHG emissions performance-based reductions would be accounted for in EPA compliance calculations based on the actual use of biofuels. On the other hand, biofuels-capable vehicles are typically no more expensive than conventional vehicles, they may or may not use a biofuel (since they can operate on conventional fuel), and they do not face significant consumer acceptance barriers since they can, and most often are, operated on fuels with high gasoline content.”

The EPA also noted that several commenters pointed out that cellulosic biofuels have the potential to yield large GHG emissions savings, and recommended that those fuels be given credit to reflect the resulting GHG benefits. In its response, the EPA said that the use of low-GHG biofuels is already required under the renewable fuel standard (RFS), and that it has already quantified the GHG emissions benefits associated with the RFS program. “Providing an additional incentive in the MYs 2017-2025 GHG program, which is focused on vehicle tailpipe emissions and not lifecycle emissions, would not achieve any greater use of renewable fuels than is already required under the RFS program, and thus would not achieve any greater emissions reductions from the use of such fuel,” said the EPA. “Thus, providing an additional incentive would only lead to a reduction in the emissions benefits of the MYs 2017-2025 light-duty vehicle GHG emissions program. Given that renewable fuel use is already required by and accounted for under the RFS program, it therefore would be inappropriate to provide additional incentives in the MYs 2017-2025 program.”

Several commenters also said that not providing incentives for ethanol or biofuel vehicles creates a rule that is inconsistent with the RFS and would make the volume requirements of the RFS unachievable. The EPA disagreed, stating that the CAFE standards are designed to achieve GHG emissions reduction from vehicle operation at the tailpipe, and that the RFS program is a standalone program designed to increase the use of renewable fuel and achieve GHG reductions through upstream emissions reductions. Essentially, the EPA said that the RFS aims to reduce the GHG footprint of fuel production and use, while CAFE standards aim to further reduce GHG emissions mechanically via more efficient use of fuel, which means using less fuel to travel the same distance. “The RFS program can be achieved independent of the vehicle GHG standards,” the EPA said. “The RFS program does not mandate any particular type of fuel (or vehicle) and relies on market forces to determine the most cost-effective approaches for meeting the RFS program's volume requirements. Achievement of the RFS volume mandates is largely based on decisions that will be made by the fuel industries about what renewable fuels to produce and how to distribute and market them. The RFS program already contains mechanisms to create market incentives to facilitate such increases. No additional incentives for vehicle manufacturers are needed to do so.”

The EPA also stressed that there have been CAFE incentives for automakers to produce ethanol FFVs and other duel fuel vehicles more many years, and that CAFE incentives will remain in place. “Although the GHG emissions incentive under the light-duty vehicle GHG rule, designed to be equivalent to the CAFE incentive, will end in MY 2015, automakers can achieve lower GHG emissions compliance values for ethanol FFVs based on lower tailpipe GHG emissions when operating on E85 and a weighting of E85 and gasoline emissions performance based on actual E85 use, an option that EPA is finalizing,” the EPA continued.

According to the EPA, automakers produced approximately 2 million FFVs in MY 2011 alone, but that the majority of FFVs in existence currently use gasoline. The agency also noted that it believes automakers will continue to produce FFVs. “Given the long history of federal incentives for ethanol FFVs, and the fact that ethanol FFVs can achieve small GHG emissions credits after the GHG emissions incentives expire, the agency believes that there is no need to provide additional incentives for ethanol FFVs in this rulemaking, beyond those already provided,” the EPA said.

Regarding CAFE compliance for FFVs, EPA said it will treat E85 and other FFVs based on the relative weighting of gasoline and E85 (or other fuel) emissions performance on the actual national average of use, or on manufacturer-specific data showing the percentage of miles that are driven on E85 compared to gasoline for that manufacture’s FFVs.

A full copy of the final rule can be downloaded from the National Highway Traffic Safety Administration website.