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Power Generation Initiative Updates

CAFE Standards Midterm Evaluation

Published on 04 Apr 2016  |   Written by    |  

Potential Impact on Electric Vehicle (EV) Incentives

 

Introduction

In 1974, Congress enacted the Corporate Average Fuel Economy (CAFE) Standards to improve the fuel efficiency of passenger vehicles and reduce oil imports. In April 2010, and August 2012, the National Highway Transportation Safety Administration (NHTSA) and Environmental Protection Agency (EPA) established the 2012 – 2016 CAFE standards and 2017 – 2025 CAFE standards, respectively. These CAFE standards included vehicle efficiency standards and, for the first time, greenhouse gas (GHG) emissions standards, calculated in grams of carbon dioxide (CO2)/mile. There are also incentives for advanced vehicles, including electric vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles, herein referred to as “EVs.”

NHSTA was not permitted by statute to set CAFE standards further than five years in advance. Therefore, the CAFE standards between 2022 and 2025 are considered “augural.” EPA will conduct a Midterm Evaluation, starting in June 2016, to determine if and how the standards and incentives should be modified.

Below is an overview of the CAFE standards, the incentives for advanced vehicle technologies and the Midterm Evaluation Process.


I) 2012 – 2016 CAFE Standards

Beginning in 2012, automakers were required to improve fleet-wide economy and reduce fleet-wide GHG emissions by approximately five percent each year. The average fuel economy standard for passenger cars, light-duty trucks, and medium-duty passenger vehicles in 2016 is 34.1 mpg, while the GHG emission standard is 250 grams of CO2 emissions/mile.1

The CAFE standards include a credit trading program that allow manufacturers to transfer efficiency and GHG standards between cars and trucks, carry credits forward up to five years and back by three years, and trade credits between manufacturers. CO2 credits generated for model years (MY) 2010-2016 can be carried forward up to MY 2021.2


Special Incentives for EVs

Under the 2012-2022 CAFE standards, GHG emissions for EVs are calculated based on the GHG emissions from the electricity source - such as coal, natural gas, nuclear or renewable resources. In order to incentivize the production of EVs, the 2012-2016 CAFE standards permit a certain number of EVs to have a GHG emissions value of zero, regardless of the upstream emissions.

A GHG emissions compliance value of zero grams CO2/mi for 2012-2016 CAFE standards is given to:

  • The first 200,000 EVs for a manufacturer that produces less than 25,000 advanced vehicles in MY 2012
  • The first 300,000 EVs for a manufacturer that produces 25,000 or more advanced vehicles in MY 20123


II) 2017 – 2021 CAFE Standards

In August 2012, NHTSA and EPA set CAFE standards for MY 2017-2021. 2017-2021

Projected Fleet-Wide Emissions Compliance Targets under the Footprint-Based CO2 Standards (g/mi) and Corresponding Fuel Economy (mpg)4
 

2017

2018

2019

2020

2021

Combined Cars & Trucks GHG Emissions (g CO2/mi)

243

232

222

213

199

Combined Cars & Trucks Fuel Efficiency (mpg)

36.6

38.3

40.0

41.7

44.7


A. Special Incentives for EVs
  • Credit multiplier enabling each electric vehicle and fuel cell vehicle to count as two vehicles in MY 2017, phasing down to 1.7 vehicles by MY 2021
  • EV and FCVs have an emission compliance value of zero grams CO2/mi for all vehicles 
    • Plug-in hybrid electric vehicles, which can run on electricity and gasoline, begin with a multiplier of 1.6 in MY 2017, phasing down to 1.3 vehicles in MY 20215


III) 2022 – 2025 “Augural” CAFE Standards

In August 2012, NHTSA and EPA set “augural” CAFE standards for MY 2022-2025, which are subject to revision under a Midterm Evaluation.

2022-2025 Projected Fleet-Wide Emissions Compliance Targets under the Footprint-Based CO2 Standards (g/mi) and Corresponding Fuel Economy (mpg)6
 

2022

2023

2024

2025

Combined Cars & Trucks GHG Emissions (g/mi)

190

180

171

163

Combined Cars & Trucks Fuel Efficiency (mpg)

46.8

49.4

52.0

54.5

 

A. Special Incentives for EVs (subject to modification in Midterm Evaluation)

  • GHG emissions compliance value of zero grams CO2/mile for:
    • Up to 600,000 EVs for companies that sell 300,000 EVs in MY 2019-2021
    • Up to 200,000 EVs for companies that sell less than 300,000 EVs in MY 2019- 2021
    • Additional EVs must account for upstream GHG emissions from electricity generated or hydrogen produced
  • There is no credit multiplier for vehicles sold7

IV) Midterm Evaluation of CAFE Standards 2022 – 2025

EPA’s Evaluation will determine whether the CAFE standards for 2022-2025 are appropriate, need to be less stringent or should be more stringent. The Evaluation will determine whether to continue, modify or terminate the incentives for EVs, PHEVs and FCVs. There will be time for public comment during the Draft Technical Assessment Report (TAR) in June 2016 and the Proposed Determination in 2017. A Final Determination will be issued in April 2018.

During the Evaluation, EPA will consider a number of factors including:

  • Development in powertrain technology
  • Vehicle electrification
  • Light-weighting and vehicle safety impacts
  • Penetration of fuel efficiency technology
  • Consumer acceptance of fuel efficiency technology in the market place
  • Trends in fuel prices and vehicle fleets
  • Employment impacts8


Midterm Evaluation Schedule9

Image 004

 

1DOT, EPA Set Aggressive National Standards for Fuel Economy and First Ever Greenhouse Gas Emission Levels For Passenger Cars and Light Trucks. NHTSA Press Release. http://www.nhtsa.gov/PR/DOT-56-10 http://www.nhtsa.gov/PR/DOT-56-10

2 EPA and NHTSA Set Standards to Reduce Greenhouse Gases and Improve Fuel Economy for Model Years 2017- 2025 Cars and Light Trucks. United States Environmental Protection Agency (EPA). p.7. https://www3.epa.gov/otaq/climate/documents/420f12051.pdf 

3 EPA and NHTSA Finalize Historic National Program to Reduce Greenhouse Gases and Improve Fuel Economy for Cars and Trucks. United States Environmental Protection Agency (EPA). p.7. https://www3.epa.gov/otaq/climate/regulations/420f10014.pdf

4 EPA and NHTSA Set Standards to Reduce Greenhouse Gases and Improve Fuel Economy for Model Years 2017- 2025 Cars and Light Trucks. United States Environmental Protection Agency (EPA). August 2012. p.4. https://www3.epa.gov/otaq/climate/documents/420f12051.pdf

5 EPA and NHTSA Set Standards to Reduce Greenhouse Gases and Improve Fuel Economy for Model Years 2017- 2025 Cars and Light Trucks. United States Environmental Protection Agency (EPA). p.8. https://www3.epa.gov/otaq/climate/documents/420f12051.pdf

6 Id.

7 EPA and NHTSA Set Standards to Reduce Greenhouse

8 http://www3.epa.gov/otaq/climate/mte.htm#tar http://www.nhtsa.gov/Laws+&+Regulations/CAFE+-+Fuel+Economy/ld-cafe-midterm-evaluation-2022-25

9 Id.

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