EPA Guide Could Prompt Automakers To End Flex Fuel Vehicle Production

Posted: Monday, April 1, 2013

Biofuel advocates warn that a new draft EPA guidance could prompt automakers to abandon production of flexible-fuel vehicles (FFVs) that run on both conventional gasoline and alternative fuels, because the guide would limit FFVs’ ability to win compliance credit for EPA’s greenhouse gas (GHG) vehicle rule starting in model year 2016.

Automakers declined to comment on the guidance, saying they are still reviewing it. However, renewable fuels advocates are strongly opposing the guidance because it could act as a disincentive for producing FFVs. Environmentalists have long criticized the FFV efficiency credit, saying the vehicles largely run on regular gasoline rather than cleaner alternative fuels, but at the same time they say the agency’s guidance falls short of necessary policy changes.

EPA in the draft guidance — published in the March 22 Federal Register and open for public comment for 30 days — is scaling back the GHG credit for FFVs for model years 2016-2019 based on a revised “F factor” that assumes FFVs are fueled with 85 percent ethanol (E85) 20 percent of the time, compared to the current 50 percent assumption. The guidance is available on InsideEPA.com. (Doc ID: 2429053)

The agency offers the 20 percent figure as one option, with a second allowing manufacturers to forgo the GHG credit entirely based on other fleet factors, and a third having automakers provide EPA data based on real-world sale of fuel comprised of 85 percent ethanol (E85) and then asking the agency to determine a unique F factor for specific vehicle models.

“The F factor is based on the assessment of real-world fuel use over the life of the average FFV,” EPA says in the guidance, which also notes that automakers asked that the agency provide a weighting factor for model year 2016 and later vehicles. The guidance will be revised at latest for model year 2020, the agency says.

The new determination revises downward the existing GHG credit for FFVs, which assumes they are fueled with E85 50 percent of the time and awards the vehicles a 1.2 mile per gallon credit based on that estimate.

EPA in its model year 2012-2016 GHG rule for light-duty passenger vehicles mandated that the compliance credit would change beginning with model year 2016 to comply with the 2007 energy law, which begins phasing down the credit that FFVs can get for compliance with transportation department fuel efficiency standards in the same model year. The change was made in response to the fact that E85 is rarely available.

Ernie Shea of the renewable energy advocacy organization 25x’25 Coalition told Inside EPA in a March 25 interview that the agency’s draft guidance is “regressive” because it creates a “significant disincentive for the production of FFVs. . . . We think the guidance will encourage manufacturers not to build FFVs.”

The guide appears to conflict with EPA’s renewable fuel standard (RFS) that aims to encourage increasing levels of biofuels use by setting production targets for ethanol and other alternative fuels. “What good is an RFS calling for 36 billion gallons [of renewables to be blended with gasoline] if we don’t have the vehicle fleet available to burn the fuel?” he asked.

Shea also complained that the EPA GHG tailpipe rule provides “generous incentives” for other vehicle technologies, such as hybrid and electric cars. While Shea acknowledged that the longstanding 50 percent credit needed “some adjustments,” he said EPA has “gone overboard, the pendulum has swung far the other way.”

According to Shea, the guidance “just continues to demonstrate to us that there is a bias against biofuel technologies and failing to properly incentivize the auto manufacturers so they continue to produce the vehicles that are needed to utilize these cleaner fuels. . . . We are worried that there could be an abandonment of production of FFVs. We are hearing a lot of that kind of talk coming out of the auto manufacturers.”

Despite the biofuel advocates’ concerns, one environmentalist says EPA should go further than it does in the guidance, by basing the FFV credit on the reality that E85 is not available, noting that a Bush-era evaluation found that FFVs ran on E85 less than 1 percent of the time. The source calls E85 “a non-existent fuel.”

EPA is taking steps in the guidance to look at how many of these vehicles are running on E85, but the source notes that the agency will track ethanol sales to make the blanket assumption that all fuel sold that is not E10 or E15 is E85. Instead, EPA should evaluate how much E85 is sold, which it can accomplish by checking the pumps that sell the fuel. “There aren’t that many of them. That onus should be put on industry in order to qualify for the credits.”

The source likens EPA’s approach in the guidance to “taking a pulse rather than taking a blood sample,” saying the agency should actually do the work to base the FFV credit on real data rather than going through the motions. And the source rebuts renewable energy advocate claims that the new approach will force automakers to abandon manufacture of FFV because “it doesn’t cost them very much” to convert a conventional gasoline vehicle into an FFV. “It is almost free,” the source says.

A second environmentalist calls the guide “an improvement” on the current FFV credit, while noting the difference in tailpipe GHGs from an FFV running on E85 and one running on conventional fuel is about 5 percent.

The source adds that automakers knew the change in FFV credit was coming ever since the energy law was enacted in 2007 and should have been preparing to meet GHG and efficiency requirements without the credit — what the first environmentalist calls a “crutch” that manufacturers do not need to meet the rules.

But another alternative fuel vehicle proponent agrees with Shea of the 25x’25 Coalition that the guidance will “discourage, or certainly not encourage, the production of more FFVs. . . . E85 is not available in any immediate time frame, which makes it a hard go. This guidance does nothing to help that along.”

Other flaws in the guidance, according to alternative fuel sources, is that it requires manufacturers to take a weighted average that can reduce a 5 percent GHG benefit assumed for FFV vehicles down to 1 percent; that it assumes increased E15 usage will result in lower E85 usage; and that it reduces the calculated weighting factor of 23 percent to 20 percent to “be on the conservative side of environmental protection.”

Auto industry sources declined to comment on the draft guide, which is still under review, but one source says the industry asked for the document as a way to address the phaseout of FFV credits in the energy law.

This source also describes EPA’s general approach of tying the FFV credits to ethanol sales “dicey” for automakers who have no control over which fuels are available. —