Global Automakers

Global Automakers Comments on the Mid-Term Evaluation for the Greenhouse Gas Emissions Standards

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October 5, 2017

The Association of Global Automakers, Inc. (Global Automakers) submitted comments to the Environmental Protection Agency and National Highway Traffic Safety Administration on the “Request for Comment on Reconsideration of the Final Determination of the Mid-Term Evaluation of Greenhouse Gas Emissions Standards for Model Year 2022–2025 Light-Duty Vehicles; Request for Comment on Model Year 2021 Greenhouse Gas Emissions Standards” [82 FR 39551, August 21, 2017].

Global Automakers' member companies are global leaders in the design, manufacture and sale of environmentally-friendly vehicles, and we support long-term efforts to reduce greenhouse gas (GHG) emissions and increase fuel economy. 

In support of these goals, Global Automakers and our members came together with regulators from the United States Environmental Protection Agency (EPA), National Highway Traffic Safety Administration (NHTSA) and California Air Resources Board (CARB) and with other stakeholders to craft the “One National Program” (or “National Program”) in 2009, to provide annual fuel economy and GHG emissions improvements for all light-duty vehicles. This National Program was continued in 2012 with rulemaking covering model years (MY) 2017-2025.

One critical aspect of the National Program is the Mid-Term Evaluation (MTE), an activity conceived six years ago that is currently in-process. It was established because the standards finalized in 2012 were dictating vehicle requirements more than ten years into the future, well in advance of product planning and development cycles. The agencies also recognized that assumptions used in setting the standards—such as technology cost, technology effectiveness, projected gasoline prices, and consumer demand for fuel-efficient technologies—may change in the ensuing years, and a mid-stream, updated evaluation of the appropriateness of the standards was warranted for the program’s latter years.

Unfortunately, the MTE process was abruptly cut short at the end of the previous administration. This truncated schedule led to a hasty decision that left many critical questions unanswered and failed to remedy fundamental shortcomings in the agency’s computer modeling efforts that serve as a technical underpinning to the standards. More importantly, EPA’s rushed process came at the expense of important interagency coordination and much needed improvements to the National Program.

Global Automakers was one of the parties that asked EPA to reopen the MTE, in order to allow EPA to take a fresh look at all of the factors on which the standards were based and to account for the most up-do-date information concerning automakers’ product planning, the cost and efficacy of technologies, and the impact of fuel prices on customers’ purchasing choices. It further allows EPA and NHTSA to coordinate their processes and provides an opportunity to address outstanding harmonization issues.

The following summarizes our major points related to harmonization, technology and modeling, consumer acceptance, and other issues raised in this MTE.

Harmonization

A key element of the National Program is the harmonization of overlapping regulatory programs, thereby reducing unnecessary and duplicative requirements, while allowing manufacturers to comply by producing a single fleet of vehicles. A consistent and harmonized National Program supports investment in more efficient vehicles that customers want and need now, while also accommodating the next-generation of technologies. As such, the National Program needs to provide sufficient regulatory flexibility to manage these investments, while securing long-term environmental benefits and providing fuel savings for customers. There are three specific areas where harmonization can be improved:

  1. Further harmonization is needed between EPA’s and NHTSA’s standards to make sure that when a manufacturer complies with one set of rules, it is also in compliance for the other set. As Global Automakers has noted, there are differences between the two agencies’ standards, primarily related to how credits are banked, accrued and applied, and these differences only serve to unnecessarily drive up costs. Several regulatory fixes can easily be applied and fill the compliance gap between the two federal programs, without impacting the overall programmatic targets. Alternatively, the agencies could consider adjustments to the regulatory targets to align these programs as well. Global Automakers urges EPA and NHTSA to take immediate action to improve alignment within the National Program
  2. The agencies use different models for each of the programs as well as different metrics for assessing technologies (e.g., EPA measures energy efficiency by looking at power-to-weight ratio while NHTSA measures tractive energy), which can lead to differing answers to the same questions. Harmonizing the models would help address this issue, but at a minimum, the agencies should seek to further align their metrics to help ensure more consistent modeling results. 
  3. Harmonization between the federal and California programs must be maintained. EPA, NHTSA, and California need to work together to maintain the One National Program as all parties committed to at its inception. Additionally, full harmonization cannot be realized so long as California and other states continue to enforce the Zero Emission Vehicle mandate, which forces automakers to use one of the most expensive technologies – electric drive technology – at a greater rate than would be required to meet the GHG regulation alone.

Technology

One of the foundational underpinnings of the standards is the agencies’ technical modeling. There has been a lot of discussion about the modeling since the draft Technical Assessment Report (TAR), including the way the models work and assumptions inputted into each of the models. Upon request, Global Automakers and our members have worked with the Volpe Center to provide updated and revised assumptions to support improved outputs from the Volpe model, and we understand that the Volpe Center is contemplating use of these updated inputs.

We have also conducted ongoing work with the Alliance of Automobile Manufacturers (Auto Alliance) and a third-party contractor that has shown that the EPA modeling has significant structural problems, particularly with the agency’s Lumped Parameter Model. These shortcomings have caused the agencies to overestimate the role that conventional technologies can play in achieving future GHG reductions. Necessary improvements to EPA’s modeling activities include using quality checks, ceasing use of the Lumped Parameter Model, and moving away from 0-dimensional modeling steps. Correcting for these errors demonstrates that greater quantities of advanced technology (such as hybridization and electrification) will be required to meet the regulatory targets, at additional cost.

We have recently learned from EPA personnel that the agency is developing a new modeling approach and as part of it, plans to eliminate, for the most part, use of the Lumped Parameter Model. We think this is a positive step. However, EPA must provide stakeholders with adequate time to evaluate the updated modeling approach, ensure it is analytically robust, and provide meaningful feedback. If EPA is unable to do so in the time leading up to a MTE decision point, it may be necessary to reconsider EPA’s use of a separate model from NHTSA. Should this be the case, EPA should remain involved in providing necessary inputs to the Volpe model to maintain a reliable, data-driven analytical process.

Global Automakers believes that in updating the agencies’ modeling, assumptions and data, revised findings would support the conclusion that adjustments to the regulations are needed. This point is supported by our industry analysis. Adjustments could take numerous forms, including credit flexibilities that allow automakers to manage investments, build vehicles that consumers want and can afford, encourage innovation and continue on the path of annual fuel economy improvements and GHG emissions reductions.

Consumer Demand

As the agencies have recognized, “[c]onsumer acceptability is . . . an element of economic practicability, one which is particularly difficult to gauge during times of uncertain fuel prices.” Current trends indicate that consumers undervalue fuel-efficient technologies. Indeed, consumer demand for all high fuel-economy vehicles is stagnant, declining, or at best underwhelming. Lower than expected gasoline prices are likely a factor in the sluggish or declining demand for high fuel-economy vehicles. There has also been an increased demand for trucks since 2012. This shows that consumer demand for fuel efficiency is not aligned with the increasing stringency of the standards and will create challenges as automakers implement technologies to meet the standards.

In addition, overall vehicle sales have leveled off in recent years, and early indications are that sales will be on the decline. This suggests that the years between MY 2017–2025 will be more challenging than previously anticipated, potentially lowering available research and development funds at a time when the standards are seeing steep escalations in stringency.

Furthermore, the market has demonstrated that it is not ready to support costly hybrids and electric vehicles at the levels needed for compliance, with today’s sales of electric vehicles barely over one percent of the U.S. new light-duty vehicle market. Sales of hybrid electric vehicles peaked in 2013 and now hover around two percent of the market.

The Proposed and Final Determinations dismissed concerns about consumer acceptance, noting that consumers value fuel savings over the long term more than increased purchase costs in the short term; that fuel economy technologies have no “hidden costs” that will affect consumer demand; and that increased purchase prices of more fuel-efficient vehicles will have no adverse impact on low-income households. These issues need to be reconsidered. Any misalignment between the market demands and the requirements will result in less affordable consumer choices, slowed sales, reduced fleet turnover, diminished fuel savings, and potentially lost jobs.

Other Issues

Harmonization of MY 2021 Standards. Both agencies request comment on whether the 2021 standards should be included in the MTE. We support the agencies considering adjustments to MY 2021 if for no other reason than to address ongoing harmonization issues that industry has raised over the years, and more fully articulated in our June 2016 petition for rulemaking. Since a truly harmonized set of CAFE and GHG standards has not yet been achieved, reexamination of MY 2021 requirements is appropriate to address these concerns, particularly if efforts are not taken immediately to further align the two programs.

Global Automakers also addresses vehicle classification, regulatory streamlining considerations, ethanol-related test procedure adjustments, and octane in this section of our comments.

Looking Ahead

Even as we work on the regulatory process for this MTE, it is important to remember that much of the world and California are already looking ahead to 2030, and even to 2035 and beyond. The undeniable trend in both the market and in the regulatory environment is away from the use of fossil fuels and towards greater electrification of the vehicle fleet. At the same time, the industry is undergoing a transformational shift towards connected and automated vehicles, as well as the expansion of ride sharing models that will influence the underlying nature of the automotive business. These trends taken together promise a future of a more efficient and safer fleet of vehicles, and the need to invest in and encourage these technologies should not be ignored. As regulators look past the current MTE—and we would encourage them to do so—they should consider how to leverage these significant transformations in mobility to provide a light duty fleet that is cleaner, more efficient, and safer than ever before.

In the attached comments, Global Automakers addresses the issues that the agencies should consider in the reopened MTE to help achieve the National Program’s goals.

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