New rules to reduce carbon dioxide emissions from light vehicles have now been completed by the Danish Environmental Protection Agency. EPA Administrator Michael Regan unveiled the revised rules on Dec. 20 at a signing ceremony outside EPA headquarters. The increasing feasibility of electric vehicles has enabled the Agency to impose stricter standards in the confidence that automakers can dramatically improve their fleets through electrification and hybridization.
The proposed revisions governing the 2023-2026 model years were significantly stricter than those given by the Trump administration in 2020, and the final rules ended up being even tougher than the EPA’s original proposal. The agency had requested comments on a more aggressive set of targets called Alternative Two, and this stringency option was partially adopted and went into effect in 2025. They had also expressed willingness to enforce 5 to 10 grams per mile of additional stringency in addition to Alternative To. They ultimately chose Option Two plus 10 g / mile for 2026, maximizing the program’s rigor in its final year.
The EPA also reduced some of the proposed loopholes that had been criticized for undermining stringency increases. Environmentalists had vehemently argued against the restoration of the electric vehicle multiplier, which was being phased out. The multiplier makes it possible to count one electric car as two electric cars when calculating a car manufacturer’s average fleet performance. The generous incentive was designed to accelerate the spread of electric cars, but is known to reduce the effectiveness of the regulatory framework. Even without the multiplier, electric cars generate unexpected compliance credits that far exceed their real emissions benefits. The EPA decided to reduce the multiplier so that a single electric car can only count as 1.5 electric cars. The restored incentive will only be available in 2023 and 2024, and the fleet’s performance benefit will be limited to 10 g / mile.
Environmentalists had also opposed the EPA’s plan to continue delaying the expiration of bank compliance credits. Car manufacturers that do not meet their fleet standards can still achieve compliance by purchasing excess credits from more environmentally responsible car manufacturers. The original rules set limits on this pay-for-polluting strategy by expiring bank loans after five years, but the EPA ended up granting extensions until 2021. A huge amount of compliance credits have accumulated, undermining enforcement of the standards , but the EPA had proposed generous new extensions, arguing that some carmakers still need the extra “flexibility”. The finalized rules provide more limited expiry delays, offering modest relief for criminal carmakers in 2023 and 2024. An extraordinarily high number of bank loans should expire in 2021, and it is extremely important that the EPA chose not to postpone their expiry further.
While environmentalists have much to celebrate, the EPA contented itself with a “business-as-usual” approach that will continue to deliver slow, step-by-step CO2 reductions in the short term. The high level of rigor in 2026 will pave the way for a more robust regulatory framework on the road. Before the end of President Biden’s term of office, a whole new regulatory process will establish emission standards for 2027 and beyond. The EPA has signaled that its 2027 program will usher in an urgent, orderly transition to zero-emission vehicles that reduce carbon dioxide in the exhaust pipe at an accelerated pace.