EPA Vehicle GHG Hearings Showcase Industry Splits On EV Credits

Source: By Doug Obey, Inside EPA • Posted: Sunday, August 29, 2021

Public testimony on EPA’s near-term vehicle greenhouse gas plan is showcasing splits between traditional automakers who broadly embrace its flexibilities — including credit “multipliers” for electric vehicle (EV) and other advanced powertrains — and EV makers arguing they could undercut the EV markets.

The remarks at EPA’s August 25-26 hearing on proposed vehicle GHG standards for model years 2023- 2026 showcase how the plan’s effects depend on both its top-line stringency and detailed compliance provisions, including controversy about whether various technology incentives spur, or instead delay, GHG cuts by undercutting the rule’s overall stringency.

“We support EPA’s inclusion of provisions that incentivize and encourage [electrification], including electric vehicle production multipliers and recognition that electric vehicles have zero tailpipe emissions,” said the Alliance for Automotive Innovation, the main automaker trade group, in Aug. 26 testimony. “These tools are necessary and important to a robust and well-balanced program.”

The alliance’s comments appear consistent with Aug. 26 testimony from Ford Motor Co. sustainability director Cynthia Williams, who praised the goals of the proposal but also more specifically its inclusion of “a range of compliance mechanisms,” including recognition of “advanced technologies like electric vehicles.”

While Williams’ remarks did not go into more detail, they appeared to nod favorably to the multiplier credits that treat EVs as more than one vehicle under the regulations.

Such multipliers were included in Obama-era standards that stretched from MY17-25, though EPA in that rule phased them out in the latter years of the program. The new EPA proposal, however, essentially restores and extends them for MY22-25, in combination with a cap on cumulative credits, with agency officials claiming they will encourage a transition to zero emission vehicles.

Traditional automakers’ embrace of such flexibilities contrasts markedly with input from other business groups focused on the EV sector, with Zero Emissions Transportation Association (ZETA) Policy Director Kelly Fleming raising concerns about “potential loopholes” that could lead to “overly generous crediting” of technologies.

Among the concerns from ZETA — whose members includes EV makers like Tesla and Rivian, as well as utilities and EV charging companies — are that multiplier provisions “double the credits earned for every EV sold.” That “weakens the standards and indirectly incentivizes traditional automakers to continue manufacturing their least efficient vehicles, especially as EVs reach price parity.”

ZETA also attacks as “outdated” the EPA proposal’s embrace of a technology incentive for strong hybrid trucks. “While it made sense to provide these incentives when electric drivetrains were still being innovated, we currently have fully electric pickup trucks slated to be on the road by 2023, including from Rivian, Tesla, and Ford.”

A footnote in ZETA’s testimony with respect to EV incentives links to a working paper by Yale University economist Kevin Gillingham, which environmental groups are also citing, asserting that such multipliers could actually reduce EV market share by undercutting the top-line stringency of auto GHG standards. ZETA’s comments also track with similar testimony from Rivian that the multipliers are “no longer needed” and could now undercut rather than boost EV deployment.

Off-Cycle Credits

The discussion of such advanced technology multipliers — whether for fully or partially electrified vehicles — is just one of the compliance flexibilities at play in EPA’s proposal, with environmentalists and other critics of such flexibilities arguing they undermine the stringency of EPA’s plan even as they garner significant support from many in industry.

Another such issue is the topic of “off-cycle” emission credits that recognize for compliance purposes certain technologies not necessarily captured by traditional test cycles. Some examples include solar panels that help take the load off an alternator in gasoline vehicles; stop-start technology; passive cabin ventilation; and heating of powertrains to boost their efficiency.

The Motor and Equipment Manufacturers Association (MEMA), representing more than 1,000 auto supplier members, praises such off-cycle credits in Aug. 26 remarks that more broadly support a “stringent but realistic” MY23-26 rule. The group also touts its members’ role in both traditional and advanced vehicles, including through manufacture of electrified power trains.

“MEMA supports expanding the off-cycle technology credit program and increasing the credit cap on the credits received through the off-cycle menu,” the group says, nodding toward language in EPA’s proposal that would increase a cap on such credits for a menu of specific technologies from 10 to 15 grams per mile.

Such credits, along with a separate program for efficient air conditioning systems, “are important as they recognize technologies that achieve real-world GHG emissions reductions,” according to MEMA.

The group adds: “An expansion of the off-cycle credit program is critical in encouraging innovative technologies that allow a broader, more creative, and cost-efficient range of technology options for meeting the standards.”

MEMA’s testimony is silent on the issue of EV multipliers, but its off-cycle credit support is in line with auto companies’ longstanding backing of that idea.

However, the suppliers’ embrace of off-cycle credits also appears at odds with ZETA, which takes a swipe at credits for one such technology — stop-start technology — by noting it is now widely available.

Environmental groups are also increasingly critical of the off-cycle credits in EPA’s rules.

“The off-cycle credit program is broken, as indicated by EPA’s acknowledgment in the proposal that manufacturers have been receiving undue credits for a number of technologies,” Union of Concerned Scientists vehicle expert David Cooke said in Aug. 26 testimony. “Now is the time to rein in this program, not expand it.”

Consumer Reports Sustainability Policy Director Quinta Warren in Aug. 26 hearing remarks also cited such off-cycle credits as one of several factors behind an estimate some environmentalists are citing that EPA’s proposal recovers only 75 percent of the “lost benefits” of the Obama standards.

‘Checkpoints’

A common thread running through industry remarks at the hearing is that EPA’s broad plans to move toward electrification — both incrementally in the MY23-26 rule and in its subsequent, more stringent rulemaking extending at least out to MY30 — depends on broader efforts by federal, state and local officials as well as numerous stakeholders.

But testimony from Hyundai may have been the most explicit at the hearing in floating the concept of periodic assessments to determine if such efforts are adequate. The company floated the notion of “checkpoints” on progress over time, a concept that could be interpreted as akin to the “mid-term review” in the Obama rules.

“We recommend metric-based checkpoints that ensure that all required components for success, such as consumer acceptance, infrastructure, battery supply, grid resiliency, and more, are in place as the aggressive electrification path moves forward. Continuing review is appropriate to ensure complimentary actions are well-balanced. Checkpoints provide an opportunity to address any issues before they have negative impacts on the program.”

Meanwhile, the hearing also may have provided an early read of potential legal strategies by groups outside the auto sector fighting stronger vehicle standards, with several members of the free-market Competitive Enterprise Institute (CEI) — which challenged the Trump administration’s rollback of vehicle GHG standards as too stringent — also testifying.

CEI General Counsel Sam Kazman, for example, argued in Aug. 25 testimony that EPA’s proposal “arbitrarily restricted the range of alternatives that it is considering” by failing to weigh the option of rules less stringent than agreements California negotiated with five automakers during the Trump administration.

Kazman also argued the proposal understates the safety risk of tighter standards.

Safety concerns were a key public argument the Trump administration used to defend its rollback plan. But the claims also sparked a barrage of expert criticism by outside analysts who noted that the claimed safety benefits of the plan mostly or completely disappeared when modeling errors, including flawed projections of miles driven by the public, were taken into account. — Doug Obey (dobey@iwpnews.com)

 

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