EPA Urges Stronger Emission Cuts in Road Transportation

Posted by | Rauf Mammadov

The EPA’s proposal for passenger cars, unveiled on April 12, 2023, sets forth the strictest emission standards for light and medium-duty vehicles. This initiative is a key component of the EPA’s comprehensive efforts to decarbonize road transportation in the United States. The agency aims to finalize these regulations within one year and will actively collaborate with various stakeholders, including auto OEMs and fleet owners, during this process.

Last December the EPA finalized its strongest-ever heavy-duty vehicle standards, originally proposed in December 2021.  These standards faced opposition from both the industry and legislative branches due to their perceived burden. In response, the Senate passed a joint resolution to rescind the EPA’s final standards which the Biden administration has vowed to veto.

In contrast to the EU and California’s policies which mandate that all vehicles sold after 2035 must be zero-emission vehicles, the EPA’s regulations do not outright ban internal combustion engines. Instead, they propose an incremental but significant increase in standards to reduce emissions.  According to the EPA’s proposal for passenger cars, it is estimated that EVs (Electric Vehicles) could account for 54 to 60 percent of new vehicles sold in the United States by the end of the decade.

The rise of zero and near-zero-emission vehicles: Optimism justified

Recent trends in market penetration of zero and near-zero-emission vehicles suggest that demand for these vehicles in the US is rapidly increasing. Even under current standards, the production of new Plug-in Electric Vehicles (including both BEVs and PHEVs) is growing rapidly and roughly doubling every year, projected to reach 8.4 percent of US light-duty vehicles. At the end of 2021, just over 3 percent of all new car sales were EVs, but by the end of 2022 that number had nearly doubled. In California, in 2022 new light-duty zero-emission vehicle (ZEV) sales reached 18.8 percent of all new cars, up from 12.4 percent in 2021 and more than twice 2020 sales. Europe is even further ahead in EV adoption.

These trends echo an ongoing global shift toward electrification. Global light-duty passenger PEV sales reached 6.6 million in 2021, bringing the total number of PEVs on the road to more than 16.5 million globally. For fully electric BEVs, global sales rose to 7.8 million in 2022, an increase of about 68 percent from the previous year and representing about 10 percent of the new global light-duty passenger vehicle market.

Navigating Compliance Challenges: EPA’s Proposal for Passenger Cars and Inflation Reduction Act Constraints

Complying with the EPA’s proposal for Passenger cars requires automobile OEMs to make significant investments in electrifying their portfolio. However, this will be an uphill battle considering the existing constraints imposed by the Inflation Reduction Act. The US Treasury’s IRA rules specify that EV and battery manufacturers must produce and source EV components either within the U.S. or with countries that have relevant agreements with the US

Transforming the energy landscape: The impacts of transportation decarbonization

Auto manufacturers will bear the brunt of the new standards, but the decarbonization of transportation will also have a direct impact on the global energy industry. Currently, road transportation accounts for 40% of total oil consumption. But as the major demand geographies such as North America, China, and the EU strengthen their policies in favor of electrification of transportation, demand for fuels made from petroleum will shift from oil-based fuel to electric fuels. This shift will oblige the energy companies to start replacing the oil molecules with electric molecules the share of electric molecules in their portfolio at the expense of oil.

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