New Fuel Economy Standards Cap Series of Federal Rules Boosting EV Production
In August, the Biden Administration proposed new fuel economy and efficiency standards for light-duty vehicles, the culmination of regulatory efforts to electrify ground transportation in the United States through the spring and summer. Under the National Highway Traffic Safety Administration’s (“NHTSA”) new draft rule, the average vehicle in the passenger car and light truck fleet is estimated to achieve 58 miles per gallon of gasoline (or gasoline equivalent) by 2032. Comments are being accepted until October 16, 2023.
NHTSA’s proposal caps a flurry of federal action by the Biden Administration designed to boost domestic battery-electric vehicle (“EV”) production. In April, the Department of Energy (“DOE”) proposed a rule that would require automakers to either sell many more EVs or substantially increase the efficiency of their gas-powered vehicles to maintain compliance with the now-proposed fuel economy standards. The Internal Revenue Service (“IRS”) then proposed a regulation implementing narrower eligibility requirements for the EV tax credits included in the 2022 Inflation Reduction Act (“IRA”). Finally, the Environmental Protection Agency (“EPA”) issued two proposals for more stringent tailpipe emission standards for new vehicles sold in the United States starting in model year (“MY”) 2027. EPA projects that, if finalized, its draft regulations would result in 67% of new light-duty vehicles, 46% of new medium-duty vehicles, and 15–57% of new heavy-duty vehicles being electric by MY 2032.
When viewed in tandem with the Administration’s and Congress’s other actions over the past two years—such as proposing to include EVs in the Renewable Fuel Standard (although that program is now on hold[1]), offering tax credits for EV manufacturing, and giving grants for EV charging infrastructure—the nation is approaching its electrification “tipping point.”
I. New Vehicle Fuel Economy Standards
a. Introduction
NHTSA sets annual fuel economy requirements for passenger cars and light trucks. These corporate average fuel economy (“CAFE”) standards apply to vehicles like sedans, crossovers, smaller pickup trucks, SUVs, and minivans.[2] The agency also sets annual fuel efficiency standards for heavy-duty pickup trucks and vans (“HDPUV”), which are pickup trucks and vans with gross vehicle weight ratings of between 8,501 and 14,000 pounds.[3] By statute, these standards must represent “the maximum feasible average fuel economy level that [NHTSA] decides the manufacturers can achieve in that model year.”[4] In analyzing feasibility, NHTSA uses a series of models, supported by data and estimates, to simulate how manufacturers respond to hypothetical standards and the resultant changes in total vehicle sales and fleet turnover. Then, other models assess the impacts those responses will have on fuel consumption and other variables.[5]
With this data in hand, NHTSA promulgates standards, which take the form of fuel economy targets expressed as functions of vehicle footprint (i.e., wheelbase times width) for passenger cars and for light trucks; for HDPUVs, the standards take the form of fuel consumption targets expressed as functions of vehicle “work factor” (i.e., a function of hauling and towing capabilities).[6] Using the functions, each manufacturer thus has unique fleetwide standards for passenger cars, light trucks, and HDPUVs, based on the footprint (or work factor) and production volumes of the models it produces in a given model year. Automakers comply with the resulting standards by achieving the target fuel economy, paying a penalty, or using averaging, banking, and trading approaches (e.g., trading credits across fleets or automakers, some of which are subject to “multipliers” to further incentivize use of preferred technologies, such as electrification). NHTSA’s most recent final standards were issued in May 2022 and covered MYs 2024-2026.[7]
b. New Standards for Passenger Cars, Light Trucks, and HDPUVs
On August 17, NHTSA published new proposed fuel economy and efficiency standards for the three classes of vehicles discussed above.[8] The standards covering passenger cars and light trucks will apply to model years (“MY”) 2027-2032, and the standards applicable to HDPUVs will cover MYs 2030-2035.[9] NHTSA considered four regulatory alternatives of varying stringency for both passenger cars and light trucks and three alternatives for HDPUVs, as well as no-action alternatives for each case.[10] The agency is proposing to increase stringency by 2% per year for passenger cars, 4% per year for light trucks, and 10% per year for HDPUVs, for each applicable MY.[11] NHTSA also considered several dozen sensitivity cases varying different inputs (e.g., oil prices, availability and amount of EV tax credits, petroleum equivalency factor) and concluded that the resulting changes were not significant enough to warrant departure from the preferred alternatives identified above.[12]
NHTSA’s modeling considers scores of vehicle technologies (e.g., advanced transmissions, turbocharged engines, mass reductions) as it maps out potential compliance pathways for a given scenario. However, Congress placed specific limitations on how the agency may consider the fuel economy of EVs when setting CAFE standards. NHTSA “may not consider the fuel economy of dedicated automobiles,” which are vehicles “that operate[] only on alternative fuel,” in prospectively setting standards.[13] (No such constraint exists for HDPUVs.) Largely for this reason, NHTSA’s standards are less stringent than EPA’s greenhouse gas (“GHG”) emission standards, discussed below.[14] But because EVs already make up a substantial portion of new vehicle standards, they are considered when NHTSA measures the existing fleet’s fuel economy, which serves as the baseline for determining what further fuel economy gains may be feasible within the rulemaking timeframe.[15] NHTSA also factored compliance with California’s zero-emission vehicle program and the IRA’s manufacturing and vehicle tax credits into its modeling.[16] Additionally, as explained in further detail below, EVs are still counted towards a manufacturer’s fleet fuel economy using a petroleum equivalency factor (“PEF”).[17]
Although Congress has limited the extent to which NHTSA may consider electrification in setting fuel economy standards, EVs still play a prominent role in the new proposal. In its press release announcing the proposal, the agency noted this constraint but emphasized that “manufacturers may use all available technologies—including … electric vehicles—for compliance.”[18] For one thing, “[a]s a result” of NHTSA being “allowed to consider electrification in determining maximum feasible standards for HDPUVs,” the agency selected the most stringent alternative considered for HDPUVs.[19] NHTSA also elected to retain the “advanced technology credit multipliers” of 3.5 and 4.5 for plug-in hybrid electric and battery-electric HDPUVs, respectively, through MY 2027.[20]
II. Updated EV Petroleum Equivalency Factor
On April 11, DOE proposed a new PEF that NHTSA will apply to EVs for CAFE compliance purposes, starting in model year 2027.[21] The proposal came in response to a 2021 petition from two environmental groups requesting DOE revisit the value, which has not been updated since 2000.[22] Almost counterintuitively, the groups argued that the value’s basis in “outdated data and circumstances” rendered it too high. But an artificially high value means that an automaker gets too much “bang for its buck” and can use a smaller fleet of EVs to offset a larger fleet of gas-powered vehicles, other things being equal.[23]
DOE agreed it was time for an update after considering the four statutory factors informing the calculation—(1) EV energy efficiency; (2) the national average electricity generation and transmission efficiency; (3) the national need to conserve energy and relative scarcity and national value of all fuel used to generate electricity; and (4) driving patterns of EVs compared to non-EVs. The agency proposed to leave the vehicle efficiency value as is but discard an outdated “accessory factor,” since modern EVs do not have petroleum-fueled onboard accessories characteristic of many 1990s EVs. DOE does intend to update the inputs for generation and transmission efficiencies and relative grid mix projections to account for updated data and recent policy changes. As for the third element—fuel scarcity—DOE concluded it was time to eliminate the fuel-content factor, citing (1) the significant market share EVs now enjoy; (2) new EV incentives in the IRA and Bipartisan Infrastructure Law (“BIL”); (3) the vast gulf in fuel economy between otherwise similar vehicles that the factor creates—which incentivizes production of vehicles that use petroleum and thereby exacerbates petroleum scarcity—and (4) the lack of legal support for applying a factor designed for non-EV alternative fuel vehicles to EVs. Finally, DOE found that EVs are “equivalently capable vehicles” to petroleum-fueled vehicles and a driving pattern adjustment was not warranted.[24]
Thus, the dispositive value for the updated PEF equation is simply the gasoline-equivalent energy content of electricity on a full lifecycle basis. DOE considered a 2029 projected mix of electricity sources and the production and generation efficiencies of those fuels, then performed a series of calculations relating to energy input and output, distribution and transmission losses, and a gasoline-to-electricity conversion factor. This left a proposed PEF of 23,153 Wh/gal, a steep decrease from the current value of 82,049 Wh/gal.[25]
Generally speaking, the proposed factor means automakers will have to sell roughly three and a half times as many EVs as they currently sell to receive the same reduction in their fleetwide average for purposes of the CAFE compliance, starting in 2027. For this reason, the new factor may incentivize more EV production and encourage automakers to aggressively market those EVs. On the other hand, manufacturers may decide to pursue alternative strategies such as focusing on hybrid-electric vehicles or simply purchasing credits (or paying penalties[26]).
III. New Vehicle Tailpipe Emission Standards
a. Introduction
Section 202(a) of the Clean Air Act requires EPA to establish standards applicable to emissions of air pollutants from new motor vehicles and engines which cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare.[27] EPA also must consider issues of technological feasibility, the cost of compliance, and lead time.[28] Although Section 202(a) standards are based on application of technology, the statute does not prescribe a particular technology or technologies that must be used to set such standards; rather, Congress authorized and directed EPA to adapt its standards to emerging technologies. Since 2012, following the Supreme Court’s 2007 decision in Massachusetts v. EPA,[29] the agency has promulgated GHG emissions standards for new vehicles. Currently, the light-duty vehicle category includes passenger cars and light trucks (e.g., most pickup trucks, SUVs, passenger vans); heavy-duty Class 2b and 3 vehicles (e.g., large pickups and vans) are referred to as medium-duty vehicles; and Class 4 and higher vehicles (i.e., buses, trucks, etc. above 14,000 pounds GVWR) fall under the heavy-duty program.
b. Light- and Medium-Duty Proposal
On May 5, EPA proposed new, more stringent standards for both GHG and “criteria pollutant”[30] emissions from light- and medium-duty vehicles.[31] The GHG standards are based on fleet average CO2 emissions. Similar to CAFE standards, light-duty vehicle models are assigned CO2 targets based on their footprint, while medium-duty targets are based on a work factor attribute. The fleet-average standards are the production-weighted fleet averages of the targets for all the vehicles in the manufacturer’s light- and medium-duty fleets for a given model year.[32]
In contrast to NHTSA, EPA framed its proposal with a lengthy discussion of electrification trends in the light- and medium-duty market, which it attributed in large part to increasing federal and state (i.e., California) GHG stringency standards and, more recently, vehicle purchase and charging incentives provided by the IRA and BIL. As such, EPA said it “considers these [electrification] technologies to be an available and feasible way to greatly reduce emissions, and expects that these technologies will likely play a significant role in meeting the proposed standards for both criteria pollutants and GHGs.”[33]
As proposed, the GHG emissions standards will increase in stringency each model year, such that by 2032, EPA projects that two-thirds of new light-duty vehicles sold in the United States will be EVs.[34] The agency also estimates a staggering 98% of new medium-duty vans sold—though only 19% of new medium-duty pickups—will be EVs by 2032 under the proposal.[35] EPA also modeled out costs, benefits, and other impacts (including EV penetration) for alternative standards featuring more or less (or later-weighted) stringency. Similarly, the agency included sensitivity analyses for different battery pack costs and varying rates of consumer EV acceptance.[36]
The draft rule includes several other EV-related changes as well. EPA is not proposing to restore multiplier incentives for light-duty EVs, which currently end after MY 2024 under existing regulations, and is proposing to end multiplier incentives currently in place for medium-duty vehicles one year earlier (i.e., MY 2026). As with its draft heavy-duty rule, discussed below, the agency is proposing that manufacturers include BEV batteries—and associated electric powertrain components—as components covered under the vehicle’s emission-related warranty. Finally, EPA is also proposing to remove a requirement that EV upstream emissions are counted as part of a manufacturer’s compliance calculation starting in MY 2027; thus, EVs would continue to be counted as zero grams/mile in a manufacturer’s compliance calculation as they have since the beginning of the light-duty GHG program.[37]
c. Heavy-Duty Proposal
On April 27, EPA proposed its Phase 3 GHG emissions standards for heavy-duty vehicles, which will cover model years 2027 through 2032.[38] The GHG emission standards follow the agency’s previous GHG trucking standards (the October 2016 Heavy Duty GHG Phase 2 rule)[39] and its January 2023 final rule that limits soot and smog-forming pollution like nitrogen oxides from the trucking industry, in which the agency considered (and took comment on) but eventually declined to also include GHG standards.[40]
Generally, speaking, for GHG emissions purposes, EPA classifies heavy-duty vehicles into subcategories of vocational vehicles or tractors based on their application (urban, regional, or multipurpose), weight, engine type (compression or spark ignition), and other factors, and assigns emissions limits of grams of CO2 per ton-mile. Manufacturers generate credits based on the production volume of the vehicles in the averaging set and their respective emission levels relative to the standard; manufacturers may use credits to offset higher emission levels from vehicles in the same averaging set such that the averaging set meets the standards on “average,” “bank” the credits for later use, or “trade” the credits to another manufacturer.[41]
Right away, EPA recognized since the 2016 Phase 2 rule, “[s]everal significant developments have occurred … that point to [ZEV] technologies becoming more readily available much sooner than we had previously projected for the [heavy-duty] sector.”[42] First, the heavy-duty market has already begun to shift to ZEVs, with ZEV models being used for an increasing number of applications, technology costs falling, and manufacturer plans to dramatically increase ZEV investments. Second, the BIL and IRA have provided “unprecedented” production and purchase incentives for heavy-duty ZEVs as well as charging infrastructure.[43] (That being said, the BIL charging grants are limited to public chargers; EPA “expect[s] many [EV] or fleet owners to invest in charging infrastructure for depot charging.”[44]) Third, states have forged ahead on heavy-duty ZEV adoption, as evidenced most dramatically by California’s 2021 Advanced Clean Truck program (and now the state’s April 28, 2023 approval of the Advanced Clean Fleets regulation).[45]
To that end, the agency proposed revised, more stringent CO2 standards for some MY 2027 vehicles and new, increasingly stringent CO2 standards for MY 2028-2032. As with previous rules and its CAA mandate, the proposed standards do not mandate the use of a specific technology;[46] rather, “EPA anticipates that a compliant fleet under the proposed standards would include a diverse range of technologies (e.g., transmission technologies, aerodynamic improvements, engine technologies, battery electric powertrains, hydrogen fuel cell powertrains, etc.).” Still, the agency projected ZEV adoption rates for different regulatory subcategory vehicle groupings over the lifespan of the proposal and a less-stringent alternative. For example, sales of new vocational vehicles in 2032 would be approximately 50% ZEVs, while day cab tractor sales would be roughly 34% ZEVs the same year.[47]
Notably, EPA is also proposing to end credit multipliers for BEVs and PHEVs one year earlier (i.e., in 2026) than provided in the Phase 2 program. The agency cited a similar basis as DOE with respect to the PEF—the market has outpaced the usefulness of the existing multipliers, such that, “if left as is, the multiplier credits could allow for backsliding of emission reductions expected from ICE [Internal Combustion Engine] vehicles for some manufacturers in the near term…as sales of advanced technology vehicles which can generate the incentive credit continue to increase.” The agency is also proposing battery durability monitoring requirements for BEVs and PHEVs that would allow customers to view the battery’s remaining “usable battery energy,” and likely will include specific durability testing requirements in a subsequent rulemaking. Additionally, EPA is proposing that manufacturers include BEV batteries—and associated electric powertrain components—as components covered under the vehicle’s emission-related warranty.[48]
IV. New Tax Credit Eligibility Requirements
Finally, on April 17, the IRS proposed amendments to the rules for determining the amount of the federal income tax credit under the IRA for the purchase of qualifying new EVs.[49] The IRA had extended the Internal Revenue Code Section 30D credit that had existed in various iterations since 2008, though with several key revisions aimed at promoting EV sales among lower and middle-income Americans, supply chain resiliency, and domestic manufacturing, among other things.[50] In particular, although Congress kept the overall amount of the maximum credit ($7,500), half the credit is subject to battery critical minerals requirements and the other half is subject to battery component requirements, both of which are subject to annual or biennial increases in stringency for vehicles placed into service in 2024 and later.[51] Additionally, Congress left some details to the implementing agency. Last December, the IRS released a white paper previewing a multistep process for assessing eligibility for the critical minerals and component aspects of the credit,[52] and the agency’s April proposal sets the stage for final rules on the subject, expected later this year.
In this proposal, the IRS kept the three-step process for both aspects of the credit. For the critical minerals element, the manufacturer first determines the “procurement chain(s)”[53] for each critical mineral in the EV’s battery. Second, the manufacturer will use a “50% of value added test” to evaluate whether each mineral in the chain has meets the IRA’s locational requirements. Thus, a mineral would meet this step in the test if at least one of three conditions is met: (1) 50% or more of the value added to the mineral by extraction is derived from extraction that occurred in the United States or in any country with which the United States has a free trade agreement in effect;[54] (2) 50% or more of the value added to the mineral by processing is derived from processing that occurred in the United States or in any country with which the United States has a free trade agreement in effect; or (3) 50% or more of the value added to the mineral by recycling is derived from recycling that occurred in North America. Notably, the IRS indicated it plans to revisit (and make more stringent) this locational component for 2025 and later years. Third, the manufacturer calculates the battery’s qualifying critical mineral content by simply dividing the total value of the qualifying critical minerals from step two above by the total value of critical minerals. The manufacturer must select a date for determining the values and use that date for all critical minerals in the battery, and may average these calculations with respect to vehicles from the same model line, plant, class, or some combination thereof.[55]
For the component element, the manufacturer first determines whether or not “substantially all” of each battery component was manufactured or assembled in North America, “without regard to the location of the manufacturing or assembly activities of the components that make up the particular battery component.” The IRS proposed definitions for a number of terms of this element (for example, battery components are defined to include things like electrodes, electrolytes, battery cells, and battery modules) but conspicuously did not define “substantially all.” Second, the manufacturer calculates the incremental values of each North American and non-North American component, by subtracting from the value of that component the value of the manufactured or assembled subcomponents that make up the component. Third, the total incremental value of components is calculated and the incremental value of the North American components is divided by the total incremental value of all components.[56]
The IRS also offered further color around several special circumstances contemplated in the IRA. For instance, with respect to possible “double benefits,” the agency clarified that an otherwise eligible taxpayer could claim the Section 25E credit (for used EVs) for a vehicle for which a different taxpayer had already claimed the Section 30D credit, and that a Section 30D credit and a Section 45W credit (for commercial EVs) could not be claimed for the same vehicle, regardless of who claims it or the taxable year in which its claimed. The agency also clarified that the credit is not subject to adjusted gross income limitations for corporate similar claimants, and that where multiple persons purchased a qualifying EV together, only one may claim the credit.[57]
V. What’s Next?
a. Finalizing the Rules
Each proposal discussed above is or was subject to public comment. NHTSA will accept written comments on its draft standards until October 16, 2023. The IRS received approximately 80 written comments on its proposal, from several individuals as well as a broad array of citizens’ groups, trade organizations, vehicle manufacturers, battery and components manufacturers, and mining companies, including a number of foreign entities.[58] DOE has posted approximately two dozen comment letters, primarily from vehicle and fueling trade groups, public interest organizations, automakers, think tanks, and a collection of states and cities.[59] EPA has posted over 1,200 comment letters on its heavy-duty proposal, including from key stakeholders and policy advocates such as the state of California, Tesla, the American Petroleum Institute, and the International Council on Clean Transportation.[60] As for its light- and medium-duty proposal (for which the comment period ended on July 5), EPA has posted only approximately 350 comments to date, again from a broad swath of stakeholders and other interested parties.[61]
The IRS will likely finalize its Section 30D rule this year, given its relatively limited scope and the tight timetable contemplated by the IRA. NHTSA must finalize its MY 2027 CAFE standards by March 31, 2025,[62] and DOE is expected to finalize its relatively straightforward PEF rule early next year. EPA’s final heavy-duty emissions rule is expected this year, with the light-duty rule finalization to follow in early 2024.
Lastly, each rule will take effect on its applicability date or for a specified vehicle MY. As noted above, the new PEF value will be effective for MY 2027 and later EVs. The IRS critical mineral and battery component requirements will be retroactive to new vehicles placed in service after April 17, 2023. The 30D “special rules” and general credit requirements will take effect for new vehicles placed in service after the final rule is issued, and the new 30D definitions will be retroactive to January 1, 2023. The vehicle emissions and fuel economy provisions will take effect for the model years provided in the proposals.
b. Litigation and Other Obstacles to Implementation
Once finalized, EPA’s and NHTSA’s emissions and fuel economy rules will almost certainly face legal challenges, which must be filed in the D.C. Circuit within sixty days of publication in the Federal Register.[63] The DOE and IRS rules may prove less contentious but may still face lawsuits.
Challenges to the emissions rules may follow a path similar to the light-duty petitions currently playing out in the D.C. Circuit. Following EPA’s December 2021 promulgation of the most recent light-duty emissions rule, Texas and fourteen other states petitioned for review of the rule, as did a number of pro-liquid transportation fuel trade associations and other private parties.[64] In their opening brief, the private petitioners explicitly attacked the rule as EPA (and NHTSA) “on a mission to phase out the internal-combustion engine and electrify the Nation’s vehicle fleet.”[65] And both the State and private petitioners extensively cited the Supreme Court’s 2022 decision in West Virginia v. EPA for the proposition that electrifying the nation’s light-duty fleet is a “major question” that Congress has not clearly authorized EPA to tackle.[66] The rule challengers reiterated these contentions to a panel of D.C. Circuit judges during oral argument last week.[67]
Challenges to NHTSA’s rule will also likely echo current litigation around the MY 2024-2026 standards, where opponents of those standards have argued that the agency “may not set fuel-economy standards that are feasible only if automakers produce electric vehicles,”[68] while the agency has argued that its standards “represent the maximum level that … manufacturers can feasibly achieve without producing new alternative fuel vehicle models.”[69] The parties pressed these arguments to the same panel of D.C. Circuit judges during oral argument last week.[70]
Anticipating legal challenges and their likely reliance on the major questions doctrine, EPA took care to frame its emissions rules as part of a larger, congressionally sanctioned push for electrification. As discussed in greater detail above, the agency pointed to studies showing rapid electrification due in large part to the IRA and BIL even absent more stringent GHG emissions standards. More specifically, the manufacturing investment incentives should bring down costs, which the agency must consider in the rulemaking. Additionally, the IRA’s new definition of “greenhouse gas” as “the air pollutants carbon dioxide, hydrofluorocarbons, methane, nitrous oxide, perfluorocarbons, and sulfur hexafluoride” may also help shield the emissions rules from “major questions” challenges.[71]
Litigation is not the only way the rules could be negated. Congress may elect to invoke the Congressional Review Act (CRA) to nullify rules; subject to certain timing rules, if the House and Senate each pass a resolution of disapproval and the President signs it (or Congress overrides a presidential veto), a rule becomes void and cannot be re-issued in substantially the same form absent congressional approval. In May 2023, Congress passed a CRA resolution to void EPA’s January 2023 heavy-duty vehicle final rule mentioned above, though President Biden vetoed the measure and the rule took effect as planned.[72] Congress could also pass legislation mandating more specific guardrails for the proposals or simply prohibiting their enactment.[73] Additionally, as we have seen with a number of high-profile environmental rules over the past decade or so (including vehicle emissions standards), a new presidential administration in 2025 could rewrite any of the regulations—as former president Trump recently pledged during a campaign video[74]—subject of course to judicial constraints.[75]
VI. Conclusion: Continued EV Market Growth
As the Biden administration has pointed out in these proposals and elsewhere, automakers are trending heavily towards electrification. Of course, regulatory carrots and sticks have certainly played their part, but EPA noted that even in its “baseline” scenario for the light- and medium-duty emissions rule (i.e., no federal tailpipe rules for MY 2027 and later), it expected EVs to make up 39% of new vehicle sales by 2032. Auto manufacturers then are expected to continue announcing new and expanded facilities for EV and battery production (particularly in the United States or elsewhere in North America), and states will continue to vie for those projects.[76] Miners of critical minerals should also see a boost for their products, though development of new or expanded mines in the United States continues to be slowed by regulatory approvals, including environmental reviews. Finally, all of these new EVs will need access to reliable power—including those owned by drivers who do not have access to chargers at home or the workplace—which should be a boon to companies who build, install, or operate public charging stations.
[1] On July 20, EPA published the Renewable Fuel Standard (RFS) Program Standards for 2023–2025. As anticipated, EPA announced that it was not finalizing the proposed provisions related to the generation of RINs from qualifying renewable electricity, citing “the significant number of comments provided by stakeholders on EPA’s proposed eRIN approach, and the complexity of many of the topics raised in those comments, and the consent decree deadline on other portions of the rule.” Instead, EPA indicated that it would continue to assess the comments received on the proposal and seek additional input from shareholders to inform potential next steps. Renewable Fuel Standard (RFS) Program: Standards for 2023-2025 and Other Changes, 88 Fed. Reg. 44,468 (July 12, 2023).
[2] Corporate Average Fuel Economy Standards for Passenger Cars and Light Trucks for Model Years 2027-2032 and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030-2035, p. 12 n.2 (proposed July 28, 2023) (to be codified at 49 C.F.R. Parts 531, 533, 535, 537), https://www.nhtsa.gov/sites/nh... (pre-publication version) [hereinafter “2023 CAFE Proposal”]; see also 49 C.F.R. Pt. 523.
[3]Id.
[4] 49 U.S.C. § 32902(a).
[5] 2023 CAFE Proposal at pp. 42-48.
[6] 49 U.S.C. § 32902(a)(3)(A); 49 C.F.R. §§ 531.5, 533.5, 535.5.
[7] Corporate Average Fuel Economy Standards for Model Years 2024–2026 Passenger Cars and Light Trucks, 87 Fed. Reg. 25,710 (May 2, 2022).
[8] Corporate Average Fuel Economy Standards for Passenger Cars and Light Trucks for Model Years 2027-2032 and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030-2035, 88 Fed. Reg. 56,128 (proposed Aug. 17, 2023) (to be codified at 49 C.F.R. Parts 531, 533, 535, and 537).
[9]Id. at 56,132.
[10]See id. at 56,258-76.
[11]Id.
[12]See id. at 56,301-10.
[13] 49 U.S.C. §§ 32902(h)(1), 32901(a)(1)(J), (a)(8).
[14] 88 Fed. Reg. at 56,139-40.
[15]See, e.g., d. at 56,319.
[16]Id.
[17]Id. at 56,201-02.
[18] NHTSA, USDOT Proposes Updated Fuel Economy Standards to Strengthen Energy Security, Save Americans Hundreds of Dollars at the Gas Pump (July 28, 2023), https://www.nhtsa.gov/press-re....
[19] 88 Fed. Reg. at 56,138.
[20]Id. at 56,367, Table V-25.
[21] Petroleum-Equivalent Fuel Economy Calculation, 88 Fed. Reg. 21,525 (proposed Apr. 11, 2023) (to be codified at 10 C.F.R. Part 474).
[22]Id. at 21,526. The 2000 final rule set out a calculation procedure that first converts the measured electrical energy consumption of an EV into a raw gasoline-equivalent fuel economy value. Then a “fuel-content factor” (to “reward” alternative-fueled vehicles for their relative social benefits) is applied to arrive at a final petroleum-equivalent fuel economy value which may then be included in the calculation of the manufacturer’s corporate average fuel economy. See Electric and Hybrid Vehicle Research, Development, and Demonstration Program; Petroleum-Equivalent Fuel Economy Calculation, 65 Fed. Reg. 36,985, 36,987 (June 12, 2000).
[23] 88 Fed. Reg. at 21,530. Take the following simplified example, adapted from Section II.B of the proposal’s preamble. An automaker (Ford) sells only two models of vehicles, an EV light truck (F-150 Lightning) and a non-EV light truck (F-150). The automaker anticipates it will sell 100,000 non-EVs at 25 mpg. To meet a CAFE standard of 26 mpg, it must sell around 6,530 EVs at 67.1 mpge (reflecting the proposed PEF). If its EVs are rated at 237.7 mpge (reflecting the current PEF), it needs to sell around only around 4,490 EVs for compliance.
[24]Id. at 21,527-30. Interestingly, DOE had also concluded in the 2000 rule that no adjustment was necessary, though the most popular EV at that time—General Motors EV1—had an advertised range of 80-100 miles (later 100-140 miles), took up to eight hours to fully charge, and featured only two seats. See, e.g., Electric Vehicle News, General Motors EV1, https://electricvehiclesnews.c....
[25] 88 Fed. Reg. at 21,531-33.
[26] In a meeting with Office of Management and Budget officials on July 17, a General Motors executive warned that the new value could cost the auto industry hundreds of billions of dollars in penalties by 2031. See Office of Management and Budget, View EO 12866 Meeting 2127-AM55, https://www.reginfo.gov/public.... The Biden administration disputed GM’s estimates of the rule’s impact. See David Shepardson, Biden administration rejects GM’s warning that US emissions rules will be costly, Reuters (July 28, 2023), https://www.reuters.com/busine....
[27] 42 U.S.C. § 7521(a)(1).
[28]Id. § 7521(a)(2).
[29] 549 U.S. 497, 529, 534 (2007).
[30] The proposal also covers emissions of certain criteria pollutants—particulate matter (PM), ground-level ozone (O3), nitrogen oxides (NOx), and carbon monoxide (CO)—from light- and medium-duty vehicles, subject to a phase-in schedule where not all vehicles need to meet the standards in earlier compliance years. Most notable are increasingly stringent fleetwide average NOx standards. Additionally, EPA will continue to count both EVs and non-EVs toward the NOx average, and the agency “anticipates that most (if not all) automakers will include [EVs] in their compliance strategies.” 88 Fed. Reg. at 29,197.
[31] Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium-Duty Vehicles, 88 Fed. Reg. 29,184 (proposed May 5, 2023) (to be codified at 40 CFR Parts 85, 86, 600, 1036, 1037, and 1066).
[32] 40 C.F.R. § 86.1818-12.
[33] 88 Fed. Reg. at 29,194.
[34]Id. at 29,329, Table 80.
[35]Id. at 29,331, Table 88.
[36]Id. at 29,334-41.
[37]Id. at 29,197.
[38] Greenhouse Gas Emissions Standards for Heavy-Duty Vehicles—Phase 3, 88 Fed. Reg. 25,926 (proposed Apr. 27, 2023) (to be codified at 40 CFR Parts 1036, 1037, 1054, 1065, and 1074).
[39] Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles—Phase 2, 81 Fed. Reg. 73,478 (Oct. 25, 2016).
[40] Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards, 88 Fed. Reg. 4296 (Jan. 24, 2023).
[41] 49 C.F.R. § 535.7.
[42] 88 Fed. Reg. at 25,930.
[43]Id.
[44]Id. at 25,933.
[45]Id. at 25,930-31; see also Cal. Code Regs. tit. 13, §§ 1963-1963.5; Cal. Air Resources Bd., Release No. 23-13, California approves groundbreaking regulation that accelerates the deployment of heavy-duty ZEVs to protect public health (Apr. 28, 2023), https://ww2.arb.ca.gov/news/ca....
[46] Relatedly, when EPA uses the term “ZEVs,” it is referring to vehicles whose use “result[s] in zero tailpipe emissions,” including “battery electric vehicles and fuel cell vehicles.” 88 Fed. Reg. at 25,928, note 5.
[47] 88 Fed. Reg. at 25,932, Table ES-3.
[48]Id. at 26,012-16.
[49] Section 30D New Clean Vehicle Credit, 88 Fed. Reg. 23,370 (proposed Apr. 17, 2023) (to be codified at 26 C.F.R. Part 1).
[50] Inflation Reduction Act, Pub. L. No. 117-69, § 13401 (codified as amended at 26 U.S.C. § 30D). The law also removed the “cap” that prevented buyers from claiming the credit for vehicles made by manufacturers who had sold 200,000 EVs. Id.
[51]Id.
[52] Dep’t of the Treasury, Internal Revenue Service, Anticipated Direction of Forthcoming Proposed Guidance on Critical mineral and Battery Component Value Calculations for the New Clean Vehicle Credit (Dec. 2022), https://home.treasury.gov/syst....
[53] “Procurement chain” is “a common sequence of extraction, processing, or recycling activities that occur in a common set of locations, concluding in the production of constituent materials.” 88 Fed. Reg. at 23,375. Additionally, the agency contemplated that sources of a single critical mineral may have multiple procurement chains, which necessitates separate evaluations for each. Id.
[54] The agency also proposed a definition for “country with which the United States has a free trade agreement in effect,” among other key terms, by providing certain criteria related to the existence of trade barriers, environmental and labor protections, and export restrictions. As of now, the agency recognized twenty such countries with which the United States had comprehensive agreements and an additional country (Japan) with which the United States has a critical minerals-specific agreement. The IRS requested comment on the proposed criteria, other potential approaches for identifying these countries, and its proposed list of such countries. Id. at 23,376-77. For critical minerals, the most important of these countries are Australia, Canada, and Morocco.
[55]Id. at 23,375-77.
[56]Id. at 23,377-78.
[57]Id. at 23,378-79. The IRS did not attempt to clarify the IRA’s exclusions around foreign entities of concern, electing to issue guidance on that point “at a later date." Id.
[58] Regulations.gov, Docket ID No. REG-120080-22, https://www.regulations.gov/do....
[59] Regulations.gov, Docket ID No. EERE-2021-VT-0033, https://www.regulations.gov/do....
[60] Regulations.gov, Docket ID No. EPA-HQ-OAR-2022-0985, https://www.regulations.gov/do....
[61] Regulations.gov, Docket ID No. EPA-HQ-OAR-2022-0829, https://www.regulations.gov/do....
[62]See 49 U.S.C. § 32902(a) (requiring final CAFE standards to be prescribed at least 18 months before the beginning of each model year). NHTSA and manufacturers have historically considered April of the prior calendar year to mark 18 months before the beginning of a model year.
[63] 42 U.S.C. § 7607(b); 49 U.S.C. § 32909(a)-(b).
[64] No. 22-1031 (D.C. Cir. filed Feb. 28, 2022).
[65] Initial Brief for Private Petitioners, Texas v. EPA, No. 22-1031 (D.C. Cir. filed Nov. 3, 2022).
[66]Id. (citing West Virginia v. EPA, 142 S. Ct. 2587 (2022)); Proof Brief for State Petitioners, Texas v. EPA, No. 22-1031 (D.C. Cir. filed Nov. 3, 2022).
[67] Clark Mindock, U.S. appeals court judges appear skeptical of challenge to Biden clean car rule, Reuters (Sept. 14, 2023), https://www.reuters.com/legal/....
[68] Initial Reply Brief of Petitioner American Fuel & Petrochemical Manufacturers and State Petitioners, National Resources Defense Council v. NHTSA, No. 22-1080 (D.C. Cir. filed May 5, 2023).
[69] Brief for Respondents, National Resources Defense Council v. NHTSA, No. 22-1080 (D.C. Cir. filed March 21, 2023).
[70] Keith Goldberg, DC Circ. Judges Unsure That Auto Regs Are A Major Question, Law360 (Sept. 14, 2023), https://www.law360.com/appella....
[71]See, e.g., Inflation Reduction Act, § 60101 (codified at 42 U.S.C. § 7432(d)(4)); id. § 60103 (codified at 42 U.S.C. § 7434(c)(2), (4)).
[72] S.J.Res.11 - A joint resolution providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Environmental Protection Agency relating to "Control of Air Pollution From New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards”; David Shepardson, Biden vetoes bill that would negate EPA heavy truck pollution cuts, Reuters (June 13, 2023), https://www.reuters.com/world/....
[73]See, e.g., H.R. 4468, To prohibit the Administrator of the Environmental Protection Agency from finalizing, implementing, or enforcing a proposed rule with respect to emissions from vehicles, and for other purposes (118th Cong.), https://www.congress.gov/bill/... (bill that would prevent EPA from implementing proposed emission standards on light- and medium-duty vehicles).
[74]See Timothy Cama, Trump vows to undo Biden’s electric vehicle policies, Politico (July 20, 2023), https://www.politico.com/news/....
[75]See, e.g., FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513-22 (2009).
[76]See, e.g., Scott Cohn, States are spending billions on electric vehicles in battle to replace automotive capital Michigan, CNBC (July 7, 2022), https://www.cnbc.com/2022/07/0....