The EPA’s New Standards Set the U.S. on Path Towards Electric Future: What Fleet Owners and Operators Need to Know

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After nearly a year of deliberation, the U.S. Environmental Protection Agency (EPA) released the final rules for light and medium-duty vehicle and heavy-duty vehicle emissions standards on March 20 and 29, respectively.

The preliminary rules for each sector were by far the strictest emissions standards to date. Even with modest modifications meant to ease the requirements, the final rules will ultimately require automakers to put more clean vehicles on the road, reducing emissions from the transportation sector by billions of metric tons.

While the rules are technology-neutral, automakers will increasingly rely on electric vehicles (EVs) and plug-in hybrid EVs to meet the new stringent standards. The rules apply to new vehicles beginning with model year 2027, adding urgency for fleet owners and operators to plan for the inevitable transition to EVs and other clean vehicles.

Light and Medium-Duty Emissions Standards

The EPA’s final rules for light and medium-duty vehicles will apply to new passenger cars and trucks, as well as class 2a and 3 medium trucks, beginning in model year 2027, and will decrease allowable emissions and pollutants through 2032. Auto manufacturers must meet the increasingly stringent emissions thresholds in total across their new vehicle fleets, not necessarily by individual vehicles. The final targets will provide a 50% reduction in CO2 emissions from the model year 2026 standard for light-duty vehicles and 44% for medium-duty, while also reducing criteria pollutants by 50-70% and providing numerous other health, climate, and financial benefits to consumers.

While the rules require automakers to produce cleaner vehicles, the EPA maintains that the rules are technology-neutral. The final rule provides several scenarios for automakers to reach compliance with varying combinations of battery electric vehicles (BEVs), hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and advanced internal combustion engines vehicles (ICE), shown in Figure 1 below.

In a shift from the proposed rules, the final rule allows for a less aggressive transition within the initial years, while still maintaining the same final target in 2032. This change is largely due to automakers, who provided feedback to the EPA during the public comment period that the early targets were unachievable.

The EPA argues that by reducing the requirements in the early years of the rules, they will provide the flexibility automakers requested, while still being effective in reducing emissions. The EPA projects that the rules will prevent 7.2 billion metric tons of CO2 from being emitted over the life of the program.

Figure 1. Projected new vehicles technology penetrations for final light-duty vehicle GHG standards for varying scenarios. (Pg 47)

Heavy-Duty Emissions Standards

The final rules for the heavy-duty vehicle sector, which include vocational vehicles such as those used in construction and refuse collection, buses, and up to class 8 trucks, operate in a similar way to the light and medium-duty standard. The rules take effect for new vehicles from model year 2027-2032, and the standards must typically be met across a manufacturer’s available new vehicles. However, because of the variance in vehicles across the heavy-duty sector, targets are set for specific vehicles categories, shown below in Figure 2.

Figure 2. Percent Reduction from Phase 2 CO2 Emissions Standards for Heavy-Duty Vehicles for Model Year 2027 and Beyond

The EPA also maintained their technology-neutral approach for the heavy-duty sector, providing pathways for use of the various hybrid, electric, and ICE technologies, as well as specific mention of hydrogen fuel cell vehicles as a potential option. Figure 3, below, shows one example pathway for using various vehicle technologies to achieve compliance in model year 2027 and 2032, provided by the EPA in the final rule document.

Figure 3. Projected Percent Mix of Vehicle Technologies that Support the Feasibility of the Phase 3 MY 2027 and 2032 Standards (Pg 41.)

The new standards are expected to avoid 1 billion metric tons of GHG emissions while also reducing negative health effects from particulate matter emissions. This air pollution typically has the greatest negative impact on the low-income or marginalized communities that are often found near major freight routes. The EPA estimates that the reduced emissions from the heavy-duty ruling will result in annualized benefits upwards of $10 billion and $300 million for climate and health impacts, respectively.

Impact to Fleet Owners and Operators

While the EPA emissions standards directly target vehicle manufacturers, fleet owners and operators must also contend with impacts of this rule to their overall fleet transition. There are a few key considerations when building a fleet transition strategy, including:

Navigating regulatory changes: Fleet owners face an increasingly complex regulatory landscape with this final rule. In addition to the EPA emissions standards, state-level regulations like the California Advanced Clean Fleets (ACF) and multi-state Advanced Clean Trucks (ACT) have different timelines, criteria, and regulated parties. Fleets must integrate different regulations when planning their future procurement of zero-emission vehicles (ZEVs).

Fleet composition adjustments: Fleet owners and operators will need to assess their vehicle makeup and build a long-term fleet transition strategy, considering factors like fleet turnover, leasing options, availability of charging infrastructure, and operational changes. The overall strategy must align with regulations to ensure availability of vehicles and to minimize operational disruption.

Total cost of ownership and available incentives: Transitioning to a cleaner fleet provides long-term operational and fuel savings but may require higher upfront capital investment due to the higher purchase price cost of ZEVs. Fleets can access funding opportunities to help lower the initial investment costs. According to the regulatory impact analysis by the EPA, after accounting for the vehicle purchase tax credits provided under the Inflation Reduction Act, the typical buyer of new clean technology, heavy-duty vehicles will recoup any costs in two to five years for MY 2032 vehicles.

Operational Changes: Transitioning to new types of vehicles, such as electric or hybrid models, may necessitate operational changes and employee training programs. Fleet managers and drivers may need to familiarize themselves with the unique characteristics and maintenance requirements of cleaner vehicles to ensure optimal performance and compliance with emissions standards.

Environmental benefits: Perhaps the most significant impact of stricter emissions standards is the substantial environmental benefits. This rule will result in fleet owners and operators lowering Scope 1 emissions from owned vehicles, and potentially Scope 3 emissions from their supply chain and employee transportation. These standards also help improve air quality, leading to health benefits – particularly in communities disproportionately impacted by vehicle emissions and pollutants.

The final EPA emissions standards are just another factor impacting fleets’ electric vehicle transition. Reach out to Trio to help navigate the transition, regardless of where you are in your fleet decarbonization journey.

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