(Forbes) - For green-minded motorists, Monday brought a classic good news-bad news tale. The Biden administration announced it will tighten fuel emissions standards beyond what it proposed earlier this year but, with the Build Back Better plan stalled and possibly dead, there may be no money to back President Joe Biden’s goal of funding a nationwide charging network and providing bigger EV incentives.
Under the Environmental Protection Agency’s plan, cars and light trucks will need to deliver an average 40 miles per gallon by 2026. That not only reverses cuts made by former President Donald Trump but pushes beyond the target initially proposed in August.
“The final rule for light-duty vehicles reflect core principles of this Administration: We followed the science, we listened to stakeholders, and we are setting robust and rigorous standards that will aggressively reduce the pollution that is harming people and our planet—and save families money at the same time,” Michael Regan, the EPA Administrator, said in a statement.
For 2026: 36 mpg Under Obama, 32 Under Trump, 40 Under Biden
Fuel economy targets have ping-ponged in recent years. The Obama administration reached a compromise with the auto industry that would have hit 36 mpg by 2026 after factoring in credits automakers qualify for. But manufacturers reversed course, calling for lowering the Corporate Average Fuel Economy target as the 2016 election approached. Trump officials rolled the 2026 CAFE back to just 32 mpg.
This past summer, the EPA set a tentative 38.2 mpg (real-world) mandate, but environmental advocates felt that didn’t go far enough, triggering the White House to now push to 40 real-world mpg. In official terms unrelated to how many miles a gallon of gas would transport the average driver, the new average is reported as 55 mpg but that figure includes different calculations and some virtual credits. The Biden administration is saying the average of all vehicles would have to be 40 mpg within five years, which is one reason automakers are pushing forward on EVs.
“We went backwards under President Trump and we lost a lot of momentum,” said Margo Oge, who served as the EPA’s Director of Transportation and Air Quality when the Obama emissions rules were enacted. Now Chair of the International Council on Clean Transportation, she said in a statement that “These [new] standards will bring the country ahead again but we have so much more work to do.”
Gasoline Savings Mean Fewer CO2 Emissions
According to the Biden administration, the rules will reduce U.S. fuel consumption by 360 billion gallons versus the Trump plan—eliminating 3.1 billion tons of carbon dioxide (CO2) emissions—over three decades. The U.S. used 123 billion gallons of gas in 2020 and the EPA
Carbon dioxide emissions relate directly to how much hydrocarbon fuel (gasoline, diesel) is consumed. Cut consumption in half, CO2 emissions decline by half as well.
Environmental advocates also see the increase helping shift Americans from vehicles using internal combustion engines to those powered by batteries.
Auto Industry Embraces Change. Car Buyers Need to Be Convinced
The auto industry now largely embraces that shift, with some analysts estimating manufacturers will invest more than $500 billion in zero-emissions vehicles by 2030.
General Motors plans to have 30 all-electric vehicles in production worldwide by mid-decade—though not all for the U.S. Ford has increased its electrification budget by almost 250% over the last two years and is planning a six square-mile EV factory complex, dubbed Blue Oval City, outside Memphis. Toyota upped its own budget this month and its Lexus luxury brand will go 100% electric in the U.S. by 2030.
But the industry counted on Biden to help win over potential customers. Experts see a variety of hurdles to EV adoption, including range, cost and the lack of a nationwide charging infrastructure.
The latest battery-electric vehicles have stretched range to as much as 500 miles for the new Lucid Air sedan. And battery costs are beginning to come down – but not fast enough. The president has been calling for funds from both the $1.2 trillion infrastructure fund, as well as the Build Back Better bill, to address challenges:
- Setting up a nationwide network of 500,000 charging points
- Boosting the current, $7,500 federal EV tax credits to as much as $12,500 for cars built in U.S. union factories and batteries built in the U.S.
- Additional funding was to be provided for improved mass transit, including the cash-starved Amtrak rail service.
Build Back Better Had EV and Charger Credits
Build Back Better contains $320 billion in clean energy funding, including the EV tax credits and funding for charging stations. But the proposal is, at best, stalled in the Senate now that West Virginia Democrat Joe Manchin has said he won’t vote for the roughly $2 trillion proposal. Senate leaders still hope to win Manchin over but Congress won’t return to Washington until the New Year. Critics say the administration didn’t make a solid case in a time of rising inflation.
Clearly, the auto industry wants Democrats to find a way to work out their logjam. Leaders like Jim Farley, the CEO of Ford Motor Co., and GM CEO Mary Barra, have both stressed the need to set up a charging network and boost incentives. Under the current rules, GM has already passed a sales threshold, as has Tesla, triggering a phase-out of tax credits for their products. They’re at a $7,500 disadvantage per car, although even without those credits, Tesla is the top EV seller in the U.S.
“Achieving the goals of this final [EPA auto emissions] rule will undoubtedly require enactment of supportive governmental policies—including consumer incentives, substantial infrastructure growth, fleet requirements, and support for U.S. manufacturing and supply chain development,” John Bozella, the president of the auto trade group, the Alliance for Automotive Innovation, said in a statement.
