On April 1, the Environmental Protection Agency (“EPA”) and the National Highway Traffic Safety Administration (“NHTSA”) issued a joint final rule, “Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards,” establishing a National Program to reduce greenhouse gas (“GHG”) emissions and improve fuel economy.  The National Program creates new standards for cars, light-duty trucks, and medium-duty passenger vehicles for model years 2012-2016.  According to EPA, the new standards will reduce greenhouse gas emissions by approximately 21 percent by 2030 from the light-duty vehicle fleet.  This rule is EPA’s first final rule directly regulating GHG emissions.

EPA’s new GHG standards require that by model year 2016, vehicles have an estimated combined average emissions level of 250 grams of carbon dioxide per mile.  This level would equate to 35.5 miles per gallon (mpg) if the automotive industry met EPA’s requirements completely through fuel economy improvements.  However, the industry may meet this emission level with a combination of improvements such as fuel economy, engine technology, air conditioning units, and tire performance, as well as increased use of hybrid and alternative fuel technologies.

NHTSA’s new Corporate Average Fuel Economy (“CAFE”) standards set fuel economy targets for each light vehicle model produced for sale in the U.S.  By model year 2016, passenger cars and light trucks must meet an estimated combined average of 34.1 mpg.  Because the new fuel economy standards are averaged across the industry, CAFE levels which individual manufacturers must meet may differ, depending upon the type and mix of vehicles in their fleet.

Manufacturers will be able to earn and transfer credits to be used toward achieving fleet-wide standards.  For example, manufacturers that design vehicles to operate on alternative fuels will be eligible for credits.  Credits earned may be averaged, banked for years in which the manufacturer did not meet its CAFE level, or traded between companies. 

According to EPA, the National Program will “reduce[] carbon dioxide emissions by about 960 million metric tons, . . . conserve[] about 1.8 billion barrels of oil,” and save the average car buyer approximately $3,000 over the lifetime of the vehicles regulated.  According to NHTSA, the National Program will provide “lifetime benefits” of over $240 billion, with most of the savings from reduced fuel consumption.  [NHTSA Fact Sheet at 5.] 

Now that GHGs are regulated under the Clean Air Act (“CAA”), it is expected that EPA will regulate stationary sources like power plants, steel mills, and refineries.  Last Fall, EPA proposed a rule (the “Tailoring Rule”) that would require new and existing industrial facilities emitting more than 25,000 tons of GHGs per year to obtain permits under the CAA’s New Source Review and Title V operating permits programs.  Once the Tailoring Rule is finalized, the GHG emissions thresholds for stationary sources will take effect immediately. 

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