President Obama’s Climate Action Plan called for the continued development of existing programs aimed at reducing greenhouse gas (GHG) emissions in the transportation sector in two main areas:  1. heavy-duty vehicle GHG emissions and fuel economy standards; and 2. so-called “advanced transportation technologies,” including renewable and alternative fuels.  Unlike its new and potentially far-reaching demand for regulation of GHGs from power plants, the plan’s goals in the transportation sector call for relatively modest extensions of existing programs developed with significant input from industry.  The heavy-duty vehicle GHG emissions and renewable fuels standards are discussed in more detail below.

GHG Emissions Reductions from Heavy-Duty Vehicles

Noting that EPA had already established fuel economy and GHG emission standards for heavy-duty vehicles through model year (MY) 2018 and light-duty passenger cars and trucks through MY 2025, the plan called for more stringent standards for heavy-duty vehicles beyond MY 2018.  The U.S. Environmental Protection Agency (EPA) has stated that the heavy-duty highway vehicle sector represents “the second largest contributor to oil consumption and GHG emissions from the mobile source sector, after light-duty passenger cars and trucks.”1  It is probable that the MY 2018 and later GHG emissions and fuel economy standards will be similar to those already in place for MY 2014-2018.  Some background, then, on the MY 2014-2018 rules should provide a reasonable preview of what is likely to come for MY 2018 and beyond.

President Obama first called for GHG emissions reductions from heavy-duty vehicles in a May 21, 2010, Presidential Memorandum Regarding Fuel Efficiency Standards (Memorandum) issued soon after EPA and National Highway Traffic Safety Administration (NHTSA) issued joint final rules for MY 2012-2016 GHG emissions and fuel economy standards for light-duty vehicles.2  The Memorandum called on EPA, NHTSA, and the California Air Resources Board (CARB) jointly to develop similar standards for medium- and heavy-duty trucks for MY 2014-2018.3  As they did for GHG and fuel economy standards for passenger cars and light-duty trucks, California and industry stakeholders issued commitment letters supporting the new regulations.  These commitment letters were important to quell ongoing and potential future litigation regarding EPA’s and NHTSA’s authority to issue these regulations and California’s earlier attempts to impose more stringent standards than those proposed by the federal agencies.  To smooth passage of the new MY 2018 and later heavy-duty GHG emissions rules, EPA and NHTSA will likely seek commitment letters again. 

The MY 2014-2018 regulations reflected a set of goals shared by the agencies, industry, and CARB, including phased-in standards, harmonization of GHG emissions and fuel economy standards, and incentives for advanced technologies, such as renewable fuels and hybrid and electric-powered vehicles.4  GHG emissions and fuel economy standards for heavy-duty vehicles are based on attributes the agencies consider relevant to GHG emissions, fuel consumption, and vehicle uses.  Vehicle-based standards for combination tractors, for example, were established by reference to the type of cab on a tractor, gross vehicle weight, and cab height.5  Similarly, standards for heavy-duty pickup trucks and vans were based on payload and towing capabilities.6  The MY 2018 and later emissions requirements for heavy-duty vehicles will likely be structured similarly.    

The MY 2014-2018 regulations provide for an averaging, banking, and trading (ABT) program for CO2 emissions credits and debits.7  The ABT program allows for the exchange of CO2 emissions credits within averaging sets distinguished by fuel type and vehicle weight.8  The regulations provide incentives for use of “off-cycle” technologies such as solar panels, which achieve emissions reductions that are not captured by current required testing, as long as they result in a “measurable, demonstrable, and verifiable real-world CO2 reduction.”9  In addition, the regulations provide alternative emissions calculations for hybrid vehicles and other advanced technologies.10  These credit provisions will also likely be expanded in future regulations. 

Renewable Fuels Standard

The plan supports the Renewable Fuels Standard (RFS) program, which emphasizes the development of “alternative” fuels, including ethanol and other bio-based fuels.  Renewable fuels are thought to be beneficial for the environment because upon combustion they emit a significantly lower amount of CO2 than fossil fuels.  As with the proposed MY 2018 and later heavy-duty vehicle GHG emissions and fuel economy standards, the plan’s proposals for alternative and renewable fuels build on well-established programs that have been incorporated by industry for almost a decade. 

EPA has emphasized renewable and alternative fuels for some time.  Under the Energy Policy Act of 2005 (EP Act), Congress amended section 211 of the Clean Air Act to establish a RFS program that requires gasoline producers, with few exceptions, to produce a percentage of their motor vehicle fuel output from renewable fuels, which the EP Act defined as produced from plant or animal products or wastes rather than from fossil fuels.11

EPA issued its first RFS regulations in 2007, by which time the volume of renewable fuels produced in the United States had already exceeded EP Act requirements.12  Similar to the GHG emissions regulations, the RFS regulations provide for a credit trading program through which obligated producers can sell or purchase renewable identification numbers if they exceed their renewable fuels production requirements or cannot or do not blend renewable fuels into their products for sale in the United States.13

The RFS program was further modified by the Energy Independence and Security Act of 2007 (EISA).14  The EISA made a number of significant changes to the program.  First, it significantly increased the volume requirement for biofuels, and it continued the volume increases through 2022.15  Second, it divided the RFS volume requirements into four categories of biofuels: cellulosic, biomass-based, advanced, and renewable fuel.16  Third, it expanded the application of the RFS program beyond gasoline to cover all transportation fuel, including diesel.17  Fourth, it applied GHG emissions reductions thresholds to renewable fuels, requiring that they achieve a certain level of GHG emissions reductions as compared to fossil fuels before being counted toward RFS volume requirements.18

Based on market conditions and the development of renewable fuel technology, EPA subsequently issued updated regulations each year for RFS production volume requirements, lifecycle GHG emissions reduction standards, and trading and compliance programs.19  As with the heavy-duty vehicle GHG emissions and fuel economy standards, we can expect RFS standards to become increasingly stringent, especially as fuel production technologies advance and additional bio-based fuels become viable.  The Obama Administration also indicated in the plan that it would attempt to create a larger market for such fuels by spurring their development for use in military applications and in the U.S. flag fleet.  Such prodding from the Obama Administration can be expected to result in an even greater degree of technological innovation that will advance the use of alternative fuels in a number of vehicle sectors and industries.