In a boost for EVs, EPA finalizes strict new limits on tailpipe emissions

After nearly a year of frantic lobbying and debate, the EPA has finalized strict new rules on vehicle emissions that will push the auto industry to accelerate its transition to electric vehicles.

The EPA expects that under the new rules, EVs could account for up to 56% of new passenger vehicles sold for model years 2030 through 2032, meeting a goal that President Biden set in 2021.

The regulations are a cornerstone of the Biden Administration's efforts to fight climate change.

Combined with investments the U.S. is making in battery and electric vehicle manufacturing, the auto regulations will help shift the U.S. away from relying on fossil fuels for transportation, a senior administration official said during a call with reporters.

"Three years ago, I set an ambitious target: that half of all new cars and trucks sold in 2030 would be zero-emission," Biden said in a statement, adding that the country will meet that goal "and race forward in the years ahead."

Biden added that U.S. workers "will lead the world on autos making clean cars and trucks, each stamped 'Made in America.'"

The new rules require auto manufacturers to slash emissions of greenhouse gasses like carbon dioxide that are heating the planet, as well as air pollutants that contribute to soot and smog. The administration says the new standards will avoid more than seven billion tons of carbon dioxide emissions and deliver almost $100 billion in annual benefits, including $13 billion in health benefits as a result of less pollution.

"That's going to have immediate benefits in improving air quality, but also improving people's health," Cara Cook, director of programs at the Alliance of Nurses for Healthy Environments, told reporters ahead of the EPA's announcement. "So they're not breathing in dirty air, especially for those who are living near major roadways and highways, heavy traffic [areas]. Those are the ones that are going to really experience a significant amount of benefits from these rules."

Entire fleets, not individual cars, must meet strict rules

The rules cover light- and medium-duty vehicles — cars, SUVs, vans and pickup trucks, but not 18-wheelers — from model years 2027 to 2032.

For light-duty vehicles, the EPA expects the rules will result in an industry-wide average emissions target of 85 grams of carbon dioxide per mile, representing an almost 50% reduction compared to existing standards for model year 2026 vehicles. The agency expects the average CO2 emissions target for medium-duty vehicles to fall by 44%.

The EPA rules are not written as an EV mandate or a ban on the sale of gas cars, like some states and other countries have adopted. Instead, the EPA sets standards that apply across an entire fleet — meaning an automaker still can make vehicles with higher emissions, as long as they also make enough very low or zero-emission vehicles that it averages out.

That means over the next decade, automakers can continue to offer a range of vehicle types, but the "menu" that's available to consumers will shift to be cleaner overall.

The rules will likely drive a shift not just among automakers, but among their suppliers and in infrastructure, says Thomas Boylan, regulatory director at the Zero Emission Transportation Association, which advocates for electric vehicles.

"I think it creates a substantial tailwind in the EV market itself, but I think it's even more pronounced throughout the supply chain" for things like parts manufacturing and charging infrastructure, Boylan said.

"It's really that full supply chain that has an additional level of certainty with these types of rules."

The EPA says consumers will also be able to opt for gas-powered vehicles with particulate filters and gas-electric hybrids.

Electric vehicles have higher price tags, on average, than gas-powered vehicles, although the gap has been narrowing and federal tax credits sometimes exceed the difference. Consumer groups have expressed support for the EPA's rules, noting that EVs save drivers money over the life of the vehicle because it's almost always cheaper to charge than to fuel up. Researchers last year found the proposed rule would save all drivers money, with the biggest savings for lower-income Americans.

The EPA says it expects the new rules will deliver fuel savings to consumers of up to $46 billion annually, plus savings on maintenance and repairs that the agency values at $16 billion annually.

"This is one of the biggest pieces of climate regulation in history," Chris Harto, senior policy analyst for transportation and energy at Consumer Reports, said on a call with reporters.

"It's going to have opponents," Harto added, because the money consumers will save is "coming out of the pockets of the oil industry."

In addition to reducing greenhouse gas emissions, the rules also call for a reduction in other types of tailpipe pollution. A senior Biden administration official said those pollution regulations will reduce hospitalizations and prevent 2,500 premature deaths in 2055.

Auto industry asked for a slower start

The auto industry is in the midst of a dramatic transformation, with virtually all major companies pivoting toward making electric vehicles — albeit at different speeds.

In the U.S., EV sales increased by 50% last year, to just under 10% of new car sales. Automakers are also looking to Europe and China, which have embraced the idea of an electric future, and shifting their global plans accordingly.

But U.S. charging infrastructure is not increasing fast enough to keep pace with EV growth. Most EVs for sale right now are luxury vehicles, with relatively fewer options on the cheaper end of the scale. And, significantly, legacy automakers are making far more money on their gas-powered vehicles than their EVs, some of which are not yet profitable at all.

The Alliance for Automotive Innovation, a trade group representing auto manufacturers, asked the EPA to adjust the timeline for the new rules, dialing down the ambition for the next few years and then cranking up the pace toward the end of the time frame. The United Auto Workers union made a similar appeal.

The approach reflected what the Alliance calls a "Goldilocks problem": automakers see huge risks if they move too slowly or too quickly toward EVs.

Of course, the auto industry is not a monolith. All-electric automakers like Tesla and Rivian encouraged the EPA to set even more stringent rules. Dealers, who have generally been more skeptical of EVs than manufacturers, sharply criticized the EPA's original proposed rules.

The final rules the EPA settled on reflect the input from auto makers, labor unions and car dealers, a senior administration official said. Manufacturers will be able to make more gradual cuts to emissions in the early years, the official said, but the rules will ultimately deliver the same reductions as the agency's initial proposal.

The oil industry is fundamentally opposed

The oil industry, meanwhile, has been an even more vocal critic of these rules and other policies promoting EVs. Rising adoption of electric vehicles is expected to reduce oil demand over time, although it will take decades for the global fleet of vehicles to turn over.

Oil trade groups call the new EPA rule a ban on gas-powered cars, although the regulations allow the continued sale of gas vehicles. The American Petroleum Institute has said the rule "threatens consumer freedom, energy reliability and national security."

The American Fuel and Petrochemical Manufacturers, which has spent millions on ads against the EPA rules and other policies, also criticized the EPA for not considering the environmental impact of manufacturing a giant battery or charging an EV. A large body of research has found that even with those impacts factored in, EVs are still vastly better for the planet than comparable fossil fuel vehicles. It's true, however, that larger, less efficient EVs have a bigger environmental footprint than smaller ones.

But the oil industry's opposition goes even further. The attorney general of Texas has previously filed a lawsuit challenging the EPA's authority to set rules designed to promote electric vehicles. Multiple oil trade groups backed Texas in the case. The auto industry sided with the EPA, noting that carmakers are investing billions in going electric and that reducing greenhouse gas emissions is a "national priority."

In fact, cutting greenhouse gas emissions is a global priority. The world has now agreed that transitioning away from fossil fuels is key to reducing the devastating impacts of climate change that, even in the best-case scenario, will disrupt ecosystems and human lives around the world.

And as the EPA sets rules designed to accelerate the shift away from fossil fuels, carmakers and oil producers are responding very differently.

The auto industry sees a profitable zero-emissions future for itself — if it can figure out how (and when) to get there. The oil industry is fighting to defend its core product.

On a call with reporters earlier this month, Chet Thompson, the CEO of the AFPM, lambasted media reports that the EPA was considering a "compromise" that would give the auto industry a few more years of more lenient standards, buying companies time to prepare for the EV transition.

Thompson emphasized that the EPA rules would still be, fundamentally, aimed at making most cars sold in the U.S. run on batteries.

"At 2032, it's the same outcome," Thompson said, frustrated. "This administration should not be calling that a compromise when in fact, they want to take us to the same place."