A Deep Dive into EPA’s TAR on Fuel Economy

07.27.16 | Blog | By:

While I was living it up on vacation last week, U.S. EPA, NHTSA and CARB released its draft technical assessment report (TAR) on the GHG and CAFE standards for the years 2022-2025. Much has been made in the media about the apparent disconnect between the standards and current U.S. consumer vehicle preferences tending toward larger SUVs driven by lower gasoline prices. Headlines have ranged from “Government abandons 54.5-mpg CAFE standard” to “EPA Study Bolsters Keeping 2025 U.S. Fuel Economy Targets.”

While the TAR acknowledges the 2012 54.5 miles per gallon (mpg) projection will not be met collectively, real world fuel economy will end up somewhere around 50-52.6 mpg (at least a 40% improvement over today’s standards) met with a combination of technologies that do not include electric vehicles (EVs) or even hybrids. Here are a few takeaways from my review of the TAR.

1. EVs Are Not Projected to Achieve Significant Penetration

Despite the media attention and strong advocacy for EVs and the analysis from some groups that the GHG/CAFE standards can’t be met without a significant increase in EV penetration (see my post on this topic), the government has estimated differently. The chart taken from the TAR shows a very small penetration of EVs, plug-in hybrid electric vehicles (PHEVs) and full hybrids needed to meet GHG and CAFE standards. Turbocharged and downsized gasoline engines, higher compression ratio, naturally aspirated engines and advanced transmission technologies are expected to dominate.

The TAR “projects a consistent and increasing reliance on start/stop, integrated starter generators (ISG), and strong hybrids. While the penetration rate of pure electric vehicles also increases over the period, only Nissan is projected to convert more than 3% of its passenger car fleet to BEVs, and most manufacturers show no significant deployment of pure EVs. Similarly, the CAFE simulations project that manufacturers would be able to achieve compliance without any reliance on fuel cell vehicles (FCV).”


2. The Car Industry Will Rely on GDI and Turbocharging, Other Technologies, to Meet the Standards

The TAR notes that vehicles utilizing gasoline direct injection engines (GDI) have been entering the market at a very rapid pace. In MY2008, GDI engines represented 2.3% of production, and in MY2015 that number grew to 45%. Moreover, six-speed transmissions increased from 19% in MY2008 to a projected market share of 57% in MY2015.

The government notes that through MY2022, with few exceptions, GDI and variable valve timing (VVT) will be applied to most engines. The TAR also projects which engine, transmission technologies and electrification technologies the car companies are likely to use to comply with the standards for both passenger cars and light-trucks (see chapter 13, figures 13.30-13.37 and attendant discussion) in 2015, 2021 and 2030.

The TAR notes manufacturers are projected to deploy most of the lower complexity engine technologies (e.g., VVT and lift (VVL), direct injection) at levels approaching 100% for most manufacturers by MY2030, and after deploying all of these engine technologies, manufacturers choose different levels of turbocharging technology.

“At the industry level, the penetration rate of level 1 turbocharging (TURBO1) drops over time as the rates of level 2 turbocharging (TURBO2) and cooled EGR both steadily increase. This trend is observable for individual manufacturers as well, though most pronounced among the primarily European manufacturers (and Ford) that already rely on TURBO1 to a significant degree in MY2015. Some of these manufacturers continue along the engine path to cooled EGR, though only VW relies on advanced diesel engines to any meaningful degree, and at a level that is projected to decrease over time.”

In 2015, 2021 and 2030, respectively, the diesel percentage for VW is 15%, 12% and 12%. I’m sure that will drop to near zero as VW shifts out of passenger diesel vehicles in the U.S. market and into executing its EV strategy.


3. Meeting the Standards Is Possible, But It Will Be A Challenge

The TAR notes that between MY2015 and MY2030, manufacturers as a group will be required to increase required vehicle fuel economy levels by more than 50% for passenger cars and 40% for light trucks – a hefty challenge. The figure below from the TAR shows “the required and achieved CAFE levels for the MY2025 fleet simulated from the MY2010 analysis fleet in the 2012 FRM and the MY2025 fleet simulated from the MY2015 fleet in the current analysis.

Total industry average CAFE level and standard are lower using the MY2015 fleet in the current analysis than they were using the MY2010 fleet in the FRM, largely attributable to the shifts in sales between light trucks and passenger cars, described earlier in this chapter. Both simulations show manufacturers achieving CAFE levels close to the requirements, albeit generally closer for the passenger cars than the light trucks.”

You can see the significant improvements in fuel economy between these two model years. Some manufacturers are better off than others for total CAFE: BMW, Daimler, Fiat, GM, Mitsubishi, Toyota and Volkswagen.


4. But Don’t Count EVs or Fuel Cell Electric Vehicles Out

Under the TAR analysis, neither EVs nor fuel cell electric vehicles (FCEVs) will be needed to meet the GHG/CAFE standards and a low penetration of these technologies are expected. This counters or fends off the argument that car companies will be stuck under the regulation building cars that consumers don’t want and aren’t buying.

Does that mean the government is backing away from its support of EVs? Not at all. The TAR notes, “State and national policies have increasingly adopted the perspective that FCEV and BEV technologies will be complementary vehicle technologies that will likely both be needed in order to achieve long-term GHG reduction goals.

Well-to-wheel GHG emissions for FCEVs and BEVs vary depending on the method of production for their various fuels (electricity for BEVs and hydrogen for FCEVs), but both technologies hold promise for significant reduction below current and projected future ICE vehicle GHG emission rates.” The TAR notes that since FCEV technology is still so new and only beginning to be deployed commercially, it was not included in the analysis.

Moreover, other regulatory factors are encouraging these technologies, the most important of which is the California Zero Emission Vehicle (ZEV) program which has been adopted by seven other states to date. The TAR also notes that “the 2017-2025 GHG/CAFE regulation assigns a high GHG effectiveness to BEVs, further enhanced by assigning 0 g/mi for upstream emissions and a multiplier for the earlier years of the rule.

Some manufacturers have therefore chosen to consider BEVs as part of their pathway for compliance with the 2017-2025 standards. Production of BEVs also generates GHG credits that may be used for regulatory compliance or sold to other manufacturers. Production of BEVs can also assist manufacturers in meeting fleet average criteria pollutant regulations such as EPA’s Tier 2 and Tier 3 standards or CARB’s LEV II and LEV III standards.

And, just as with PHEVs, California’s ZEV regulation continues to drive BEV production to generate ZEV credits as manufacturers prepare for ever increasing requirements through 2025 model year.” Also noted was the federal tax credit of up to $7,500, which applies to the first 200,000 eligible vehicles (BEVs and PHEVs combined) produced by a given manufacturer.

And, in case you missed it, later that week the White House unveiled its Guiding Principles to Promote Electric Vehicles and Charging Infrastructure, “an unprecedented set of actions from the federal government, private sector, and states, as well as a new framework for collaboration for vehicle manufacturers, electric utilities, electric vehicle charging companies, and states, all geared towards accelerating the deployment of electric vehicle charging infrastructure and putting more electric vehicles on the road.”

The TAR analysis may end up providing some cover, but it’s clear (at this point and in this Administration) that EVs are the end game, which I believe is ultimately about meeting the 2050 2°C reduction requirement nations agreed to in Paris last December.