New Fuel Efficiency Rules Could Leave High Octane Fuels Out In the Cold

Source: By Jessie Stolark, EESI • Posted: Sunday, August 5, 2018

On Thursday, August 2, the Trump administration released its long-awaited proposal for Corporate Average Fuel Economy (CAFE) standards, which propose freezing fuel efficiency for cars and trucks at 2020 levels, or 37 miles per gallon (mpg), for model years 2021 through 2026. It also revokes California and nine other state’s ability to set more stringent emissions requirements, setting up a fierce legal battle. Buried within the nearly 1,000 page proposed rule is a nod to high-octane low carbon biofuels, which proponents have argued are the least-cost option to increasing fuel efficiency. But with automotive manufacturers already set to meet 37 miles per gallon, will there be any demand for high octane fuels that can bring even greater fuel efficiency?

Under the Obama administration, automotive manufacturers and the administration had agreed to reach 54.5 mpg by 2025 (these standards adapt to the makeup of the vehicle fleet), which could have been a huge driver for high octane fuels. However, low gas prices and a surge in the purchase of larger cars and trucks has put those ambitious goals in jeopardy for some time. Currently, the fleet average is set at 35.5 mpg for model year 2016, and the automotive industry is already on track to meet the 2020 level of 37 mpg.  Citing technological feasibility of the standards, EPA and NHTSA finalized the mid-term review for model years 2021 – 2026 in the waning days of the Obama administration, but at the behest of the automotive industry, the Trump administration made re-assessing fuel efficiency standards a priority.

Auto Industry Gets More Than They Bargained For

Touted by EPA as a compromise between safety, cost, and efficiency, the newly proposed Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule would mean an additional 500,000 barrels of oil consumption per day after 2020 and flat-lining efficiency.  And while the automotive industry asked for a second look at fuel efficiency requirements that they say are increasingly difficult, if not impossible, to meet – they may be getting more than they bargained for.

While freezing fuel efficiency gains will save them money over the next several years as auto manufacturers are currently on a glide path to meeting 37 mpg, lower efficiency standards in the United States will only continue to be increasingly mismatched with higher efficiency and electric vehicle requirements in other major car markets. Additionally, early investors in electric vehicles, such as General Motors and Telsa, stand to lose big. The oil industry, while mum on the subject, appears to be the outright winner.

Widening gaps between various fuel efficiency standards will essentially create vastly different marketplaces that automotive manufacturers will have to develop and market vehicles for.  At a recent hearing, Senator Tom Carper (D-DE) commented that automakers don’t want a prolonged legal battle and that manufacturers want “certainty and predictability.”  Indeed, these are some of the same market conditions that led to the “Big 5” bailout.

Biofuels Use – More of the Same?

The biofuels industry let out a collective sigh of relief to see their efforts pay off in the proposed rule.  In it, EPA and NHSTA ask for further comments of the potential of higher octane fuels, something the biofuels industry has advocated for quite some time. The EPA states that “Automakers and advocacy groups have expressed support for increases to fuel octane levels for the U.S. market.”  Greater amounts of octane could either be provided by petroleum products or ethanol; the ethanol industry would like to see a fuel blend of approximately 25 percent ethanol, which would provide an octane rating of 98 (equivalent to today’s premium).

The biofuels industry is “pleased to see that EPA’s proposal recognizes that high octane fuels can help enable more efficient engines and reduce GHG emissions,” according to the Renewable Fuel Association’s Geoff Cooper.  The industry is hopeful that they can make the case for higher ethanol blends as a good way to meet vehicle efficiency as well as reduce tailpipe emissions.

However, if efficiency standards only preserve the status quo – will there be an incentive to make a higher octane fuel blend available to consumers? It appears unlikely.

For now, biofuels supporters remain hopeful.  Urban Air Initiative’s Technical Director Steve VanderGriend commented that he hopes EPA will “listen to all of the people saying high octane fuels will make a huge difference to improve mileage and reduce emissions.”

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