The Biden administration on Wednesday unveiled sweeping tailpipe pollution limits for cars and light trucks in the United States, a move designed to accelerate automakers' sales of electric vehicles and plug-in hybrids while potentially weighing on crude prices.
The new rules could nearly halve average industry emissions by 2026 compared with the existing requirements. By 2032, tailpipe carbon dioxide would be capped at 85 grams per mile, down from about 170 grams per mile in 2027, the model year that the administration has focused on for the most stringent requirements.
The new rules also set tighter limits on smog-forming pollutants, and the administration said they would deliver cleaner air to overburdened communities near major roadways.
Under one scenario modeled by the Environmental Protection Agency, automakers would boost sales of electric vehicles to 56% of total U.S. sales by 2032, and plug-in hybrids would account for another 13%, with traditional gasoline-powered internal combustion vehicles making up just 29%. Currently, EVs account for less than 8% of U.S. auto sales, and plug-in hybrids make up less than 2%.
The final mandates largely aligned with the Biden administration's earlier proposals, but included some concessions, including weaker standards for 2027-2030 and a greater role for plug-in hybrids as a way to reduce emissions. Still, the EPA called on automakers to make a rapid transition to zero-emission vehicles.
The administration's concessions in the final rule drew praise from automakers, who said the changes would give them more time to prepare their markets and supply chains.
The new rules are the most ambitious vehicle pollution standards in U.S. history and will drive continued American innovation, said Michael Regan, the EPA administrator. The standards will ensure cleaner vehicles are on the road while allowing companies to chart their own path to meet the standards in the most sustainable and cost-effective way possible.
President Biden has made addressing climate change a top priority, and the new regulations are among his most impactful and visible climate policies. Other major climate policies under Biden, such as targeting greenhouse gas emissions from oil wells and power plants, have significant economic implications, but are less directly felt by American consumers. By contrast, auto standards will have a profound impact on car companies' decisions and ultimately on the vehicles Americans drive. The Biden administration casts this as a boon for U.S. consumers because it should help bring more EVs to market and reduce Americans' dependence on oil.
Yet the Biden administration's rules face vocal opposition. Critics, including former President Donald Trump, denounce them as an electric vehicle mandate that will force automakers to focus on selling zero-emission cars to the detriment of traditional gasoline-powered vehicles. They also include manufacturers of liquid transportation fuels such as corn-based ethanol and oil, and the head of the nation's largest oil industry trade group has vowed to challenge the rules in court.
The final rules are projected to reduce carbon dioxide emissions by 2.5 billion tons from 2023 through 2055, according to the EPA. The agency also estimated that the requirements would save the average American driver about $6,000 over the life of a vehicle due to lower fuel and maintenance costs once they are fully implemented. The limits are also expected to curb oil demand, reducing U.S. imports by roughly 14 billion barrels from 2023 to 2055.
Oil prices fell Wednesday. West Texas Intermediate crude for April delivery fell $1.79, or 2.10%, to settle at $81.68 a barrel. Brent crude for May settlement fell $1.43, or 1.60%, to settle at $85.95 a barrel. In automotive stocks, Tesla rose more than 2%, Ford Motor gained more than 4%, General Motors added nearly 3% and Stellantis rose nearly 2%.
One notable aspect of the current automobile market is that the electric car bubble has burst - demand for electric cars continues to slow in Europe and the United States, and competition within the sector is heating up.
As the euphoria surrounding electric vehicles fades, traditional American automakers are making a surprise comeback. Some analysts believe that the U.S. "Big Three" automakers of GM, Ford and Stellantis may be the winners if demand for electric vehicles wanes. The reason for this is that despite their exposure to electric vehicles, these legacy automakers currently generate the majority of their revenue and profits from conventional gasoline and hybrid vehicles, and have established distribution networks, customer loyalty and a profit-making formula in place. Moreover, these vehicle types still make up a significant proportion of the global market and will continue to bring in cash for the companies in the future.
