U.S. Biden Administration to Enact Tougher Fuel Economy Regulations to Promote EVs
Will new fuel economy regulations be created based on agreement between California and 6 automakers?
This report provides an overview of the developments surrounding environmental regulations in the United States over the past couple of years. President-elect Biden has emphasized his focus on environmental issues, including declaring that he would return to the Paris Agreement soon after he takes office. Regarding CO2 and CAFE (Corporate Average Fuel Economy) standards for automobiles, in 2012, the Obama administration formulated a regulation to set the fuel economy for MY 2025 at 46.7 mpg (hereinafter referred to as the 2012 regulations), but afterwards the Trump administration drastically relaxed this standard. (The new regulation is called the SAFE Vehicles Rule.) However, the incoming Biden administration has pledged to return to stricter standards and at the same time promote the full-scale shift to EVs, including the deployment of 500,000 new public charging stations.
In September 2019, the Trump administration announced that it would relax the 2012 regulations, while simultaneously suspending California's authority to enact its own fuel economy and zero-emission vehicles (ZEV) regulations. In November of the same year, California and 22 other states filed a federal lawsuit claiming the decision was unfair. Major automakers were divided into two groups: those supporting the Trump administration (GM, FCA, Toyota, etc.) and those supporting California (Honda, Ford, BMW, VW/Audi and Volvo).
Of these, the six automakers in the group that support California reached an agreement with California on fuel economy regulations, and announced the final agreement in August 2020. The agreement will add some time to the 2012 regulations, which are stricter than the SAFE Vehicles Rule created by the Trump administration. Ford and the California Air Resources Board (CARB) claims that the agreement will serve as a good template for new federal fuel economy standards to be established under the incoming Biden administration.
In addition, the state of California announced in September 2020 that it will develop regulations to mandate that all light vehicles sold in the state will be Zero-Emission Vehicles (ZEVs) by 2035, banning the sale of new gasoline and diesel-powered vehicles.
2012 regulations for light vehicles, SAFE Vehicles Rule, and California agreement with 6 automakers
|Regulation||Announced||Annual fuel efficiency improvement||Target average fuel consumption (CAFE)|
|Aug. 2012||Improve by an average of 4.7% per year over the 4 years from MY 2021 to MY 2025||46.7 mpg(MY 2025)|
|SAFE Vehicles Rule
|Mar. 2020||Improve by an average of 1.5% per year over the 5 years from MY 2021 to MY 2026||40.4 mpg(MY 2026)|
|California agreement with 6 automakers||Aug. 2020||Improve by an average of 3.7% per year over the 5 years from MY 2021 to MY 2026||Equivalent to 2012 regulations (in MY 2026)|
Source: NHTSA/EPA (March 31, 2020), State of California (August 17, 2020)
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U.S. OEM Electrification Strategies, Including EV Product Timelines (Sep. 2019)
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U.S. CO2/CAFE Regulations: Trump administration plans significant relaxation of current standards (Jun. 2018)