What You Need to Know About the New Car Emissions Standards

The Obama administration is certain about a couple things in its plan for a new national fuel economy and tailpipe emission standard: It’s meant to start taking effect in 2012, and have automakers achieving a fleet average of 35.5 MPG by 2016, four years earlier than previously required. That condensed time frame, as we wrote earlier this week, means big auto companies and young startups alike are under added pressure to get moving on green car tech.

But there are several key points on which the EPA and the Department of Transportation are undecided, as explained in their memo on the upcoming proposal, released this week. Here’s what you should know about incentives for green car innovation that are still under consideration and will open up for public comment before the rules are finalized.

Emission Limits: Just what of kind limits are we talking for greenhouse gas emissions? The feds are proposing to require a maximum average of 250 grams of carbon dioxide per mile by model year 2016, with a “generally linear phase-in” beginning with 2012 models.

Size Matters: A critical point for automakers in getting on board with the administration’s proposal is that it is “attribute-based.” The attribute that will be used to determine what emission and fuel economy standard applies to a given fleet is what’s called vehicle footprint. This is defined as “a vehicle’s wheelbase multiplied by its track width — in other words, the area enclosed by the points at which the wheels meet the ground.” Vehicle footprints will be used to calculate a unique standard for each manufacturer’s fleet, with a separate standard for passenger cars and light trucks. As explained in the memo:

Generally, manufacturers of larger vehicles (i.e. vehicles with larger footprints) would face less stringent standards […] than manufacturers of smaller vehicles.

Final Tallies: Fleet averages will be based on final model year sales figures, not the number of cars produced.

Credit or Debit: When automakers exceed the standards for their fleet, they’ll earn credits. When they don’t make the required emission reductions/fuel economy improvements, they’ll generate debits, or negative credits.

Spending Credits: Automakers that have earned credits can spend them through: credit carry-back, credit carry-forward (like rollover minutes for emission reductions), credit transfers, and credit trading. The EPA is considering limiting carry-back (applying credits to past years) to three years, and allowing “banked” credits to apply no sooner than five years after they’re earned.

Unlimited Credit Transfers: The administration plans to propose giving an automaker the option to shuffle credits around within its fleet, using low-emission passenger cars, for example, to offset the poor performance of SUVs and trucks in the company’s lineup. The EPA envisions these credit transfers being unlimited for calculating emissions, but they would not count for fuel economy averages.

Selling, Trading = Fair Game: Automakers will be able to trade or sell their credits to other car companies.

Technologies: The administration’s memo offers a glimpse of what technologies are on its radar (and also the automakers it met with to hash out the proposal). Among the technologies that the EPA and the DOT expect automakers to consider using to meet the proposed standards are: gasoline direct injection engines, smaller engines with turbochargers, advanced transmissions, start-stop technology, high-performance tires, lighter weight vehicles, hybrid, plug-in hybrid and all-electric vehicles vehicles. The EPA is also considering offering emission credits for clean technologies that don’t register reductions in current measurement systems, such as solar panels on hybrids (a possible nod to Toyota’s new Prius and the Fisker Karma), adaptive cruise control and active aerodynamics.

Air Conditioning: The EPA is considering giving automakers the option to generate emission credits by tweaking air conditioning systems to reduce leakage of greenhouse gases (hydrofluorocarbon refrigerants and CO2). It also might let companies start racking up these credits before the other standards and systems go into effect in 2012.

Consumer Costs: While an administration official told the Associated Press that the plan could add some $600 to the cost of an average vehicle by 2016, the EPA and DOT anticipate consumers will “see cost savings due to the significant fuel savings.”

Alt-Fuels, Flex Fuel and Ethanol: The EPA may propose awarding emission credits for flex-fuel vehicles, most of which use E85 ethanol, for the model years 2012-15. It may extend these allowances if automakers that alternative fuels are “actually being used in the vehicles.” It doesn’t know yet how that demonstration should be made.

Exceptions for Small Automakers: The agency might give a special lead time for smaller automakers, allowing companies with sales of say, 400,000 vehicles or less during a specified year to face much looser standards. The idea is to let these smaller companies work with the standards of a company that has a much larger (125 percent) vehicle footprint level.

Carrots for Early Movers: The EPA may award early credits for 2009-11 models for fleets that exceed California emission standards.

Super Credits: The EPA is considering giving “super credits” as a reward for electric vehicles and plug-in hybrids. As explained in the memo:

These “super credits” could take the form of a multiplier that would be applied to the number of vehicles sold such that they would count as more than one vehicle in the manufacturer’s fleet average.

The Sticks: Penalties will likely be assessed based on a manufacturer’s most polluting vehicles.

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