Blunt Rollback of Fuel Economy Standards DRAFT ICCT Assessment v5 June 8nd, 2017

Key Points about the Blunt Bill Strictly speaking, the bill’s direct impacts are modest because it only adjusts the CAFE standards from now until 2021, and leaves the GHG emission standards untouched. But such a view about the bill’s impacts ignores the forthcoming regulatory actions to reopen the GHG emissions standards and set the next phase of CAFE standards. Within this context, the Bill sets the course for delaying the 2017-2021 annual rate of improvement from 4.3%/3.0% (car/LDT) to about 1.2% and delaying the 2025 GHG and CAFE standards by 2 to 6 years. The Bill’s stated rationale of harmonizing the CAFÉ program with the GHG program, but it provides over twice the credits needed to harmonize. The Bill does this by granting two windfall credits to auto companies that were explicitly designed to ease the transition into the early stages of the rulemaking and then expire.

Credits 101 CAFE credits GHG credits And why they differ . . .

Existing Credit Provisions 2025 CAFE walk-down from the 2012 rulemaking GHG stds. – mpg equivalent without A/C refrigerant credits CAFE stds. – adj. for A/C refrigerant credits (2010 baseline) Actual CAFE achieved with flexibilities and credits (2010 baseline) 54.1 mpg 48.7 mpg 46.2 mpg Air conditioning refrigerant credits – GHG only Off-cycle credits (inc. air conditioning efficiency credits) GHG: 2012-2021 CAFE: 2017-2021 Overcompliance credits – all model years CAFE: Carryforward 5 years, carryback 3 years GHG: always allowed carryforward from 2010-2021

What would the Blunt Bill do? Impacts CAFE standards Increases lifetime of credits for over-compliance Allow credits from 2010-2015 to be carried forward to 2021 Retroactively adds off-cycle credits for 2012-16 NHTSA specifically set lower 2012-16 CAFE standards to compensate for lack of credits

Credit Impacts CAFE windfall credits

Blunt Bill Impacts on CAFE Standards 2010-15 overcompliance credits gain new life Windfall credits were granted in 2010 against the old car standard of 27.5 (unchanged since 1990), with the understanding they would expire by 2015 Excess 2010 and 2011 credits have already expired 2012-16 off-cycle credits are a new windfall Retroactively weakens the 2012-16 standards – even though they have already been met, this is another pool of credits that can be used through 2021 Net is not harmonization with GHG standards, but far less stringent requirements for CAFE

Off-Cycle Credits Windfall EPA GHG Air Conditioning and Off-Cycle Credits retroactively added to CAFE compliance A/C and off-cycle credits currently available only for 2012-16 GHG Tailpipe over-compliance credits available for GHG and CAFE adapted from analysis by the Union of Concerned Scientists

Carry-forward Credits Windfall Removal of 5-year carry-forward limit roughly doubles the amount of credits available under the CAFE standards, compared with the GHG standards Left graph: Credits available for to help comply with EPA 2017-2021 stds. Right graph: Same credits applied to CAFE with the 5 year carryforward limit removed adapted from analysis by the Union of Concerned Scientists

Application of Credits to Compliance Pathways Direct impact on 2017-21 CAFE standards Baseline for 2022-25 CAFE and GHG standards

adapted from analysis by the Union of Concerned Scientists Direct MPG Loss – 2017-21 - Car Blunt Bill could reduce 2021 car CAFE by 5.7 mpg, 3.0 mpg below EPA GHG-equivalent requirements Jump needed for 2022 Blunt Bill windfall credits adapted from analysis by the Union of Concerned Scientists CAFE Compliance includes 5-year carryforward of overcompliance credits Blunt-Stabenow adds 2012-16 off-cycle credits and extends all credits to 2021 Trend/EPA line is compliance with GHG requirements, including credits

Direct MPG Loss – 2017-21 – Light Truck Blunt Bill could reduce 2021 light-truck CAFE by 4.4 mpg, 1.3 mpg below EPA GHG-equivalent requirements Total car + light-truck reductions would result in about 350 million barrels of additional oil being burned and $34 billion in additional fuel costs Jump needed for 2022 Blunt Bill windfall credits adapted from analysis by the Union of Concerned Scientists CAFE Compliance includes 5-year carryforward of overcompliance credits Blunt-Stabenow adds 2012-16 off-cycle credits and extends all credits to 2021 Trend/EPA line is compliance with GHG requirements, including credits

Bigger Issue – Reset of 2022-25 baseline: 4 Bigger Issue – Reset of 2022-25 baseline: 4.7% annual improvement maintained The Blunt Bill would likely reset the baseline for the 2022-2025 standards Otherwise, CAFE would require massive jump from 2021 to 2022 Current 2022-25 standards require annual improvement of 4.7% Assuming the 4.7% annual improvement is maintained, resetting the baseline to Blunt Bill would delay 2025 CAFE compliance by about 3 years EPA trend line would delay 2025 CAFÉ compliance by 1.5 to 2 years

Bigger Issue – Reset of 2022-25 baseline: Annual improvement decreased to 2017-21 trend The Blunt Bill would likely reset the baseline for the 2022-2025 standards Otherwise, CAFE would require massive jump from 2021 to 2022 2017-21 annual improvement trend under EPA GHG standards, assuming all available credits are used, is 2.6% for cars and 2.4% for light trucks Assuming these 2017-21 EPA trends are extended, resetting the baseline to: Blunt Bill would delay 2025 CAFE compliance 8 to10 years (car/LDT) EPA trend line would delay 2025 compliance by 5.5 to 8 years (car/LDT)