13

Emergent Findings, Recommendations, and Future Policy Scenarios for Continued Reduction in Energy Use and Emissions of Light-Duty Vehicles

The period that this report focuses on, from 2025 to 2035, could bring the most fundamental disruption in the 100-plus year history of the automobile. Light-duty vehicle (LDV) manufacturers are planning major introductions and penetrations into their product mix of electrified and connected and automated vehicles in this time period. These technologies will fundamentally change how consumers interact with and use their vehicles, contributing to ongoing fundamental changes in vehicle ownership models, ride sharing practices, traffic planning and management, urban design, and refueling infrastructure. As General Motors’ chief executive officer Mary Barra recently stated, “I have no doubt that the automotive industry will change more in the next 5 to 10 years than it has in the past 50. The convergence of connectivity, vehicle electrification, and evolving customer needs demand new solutions” (GM Chevrolet Pressroom, 2016).

Other major factors will also influence and complicate projections of motor vehicle fleets and technologies in the 2025–2035 period. In addition to electrified and autonomous vehicles, other advances in vehicle technology are expected, including further developments in internal combustion engine vehicles, hybrid vehicles, and fuel cell vehicles, and new or increased reliance on alternative fuels such as biofuels and other low-carbon fuels. Political, economic, and regulatory pressures to decrease vehicle fuel consumption and reduce greenhouse gas (GHG) emissions may grow not only at the federal level but also at the state and local level. Increasing demand for travel is leading to increasing congestion, and automakers are facing limits on petroleum-fueled or even all LDVs in certain urban areas. International developments and regulatory pressures will also be critical, as the automobile industry becomes more globalized over this period. New modes of mobility, from ride sharing vehicles, to scooters, to new types of public transportation, and perhaps even flying cars, will all expand and diversify in the growth of mobility as a service.

These disruptive changes in the automotive industry and in transportation will have impacts, direct and indirect, on fuel consumption and GHG emissions. The development of new engine and vehicle technologies will be critical to improving fuel efficiency and environmental performance, but technology alone will not determine the performance of the vehicle fleet in the 2025–2035 period. Government regulation will continue to play a critical role in the development and implementation of more fuel-efficient vehicles and vehicle technology. Because of the fundamental changes in vehicle types and operation that may be possible, consumer acceptance, infrastructure development, transportation planning, and other off-vehicle factors will play key roles in determining the fuel consumption and GHG emissions of the vehicle of the future. These goals are pursued in a global market in which automotive manufacturers and suppliers comply with varying fuel economy and emissions standards in

different countries around the world. The trend toward globalized markets and vehicle platforms adds complexity in projecting future fuel economy improvements in the U.S. market.

Section 13.1 highlights the findings and recommendations that emerge from the preceding chapters of this report. Section 13.2 identifies broader concerns and provides recommendations that go beyond the existing statutory authority, and are primarily directed to Congress for updating and refocusing the corporate average fuel economy (CAFE) program in light of evolving legal, scientific, policy, technological, and economic factors.

13.1 EMERGENT FINDINGS AND RECOMMENDATIONS

The findings and recommendations in the following section emerged from synthesis of learning across the technology, consumer, market, and regulatory sections of the report. The findings and recommendations in this section are premised on continued increase in requirements for energy efficiency and reduced GHG emissions of vehicles but do not assume any major changes in policy, such as requirements that all vehicles be zero-emission vehicles at the tailpipe. It considers current statutory authority or straightforward changes to statutory authority. Section 13.2 discusses transformative ideas for fuel economy, vehicle efficiency, and GHG emissions that go beyond the current statutory authority.

13.1.1 Synthesized Report Findings and Recommendations

13.1.1.1 Zero-Emission Vehicle (ZEV) Penetration

SUMMARY FINDING 1. ZEV Transition: The greatest opportunity and uncertainty for light-duty vehicle energy efficiency in 2025–2035 will be the increasing penetration of zero-emission vehicles (ZEVs). The price of the vehicles, fueling infrastructure, performance attributes, and consumer interest in and comfort with the technology will be major determinants in their uptake. For the mass-market consumer, electric and fuel cell vehicles represent a different energy source and different fueling behavior than is the norm today. They have lower operating and repair costs, and may have better vehicle performance. A transition to ZEVs is more significant and disruptive than other vehicle technologies that do not impact the fuel/energy source or refueling behavior.

SUMMARY FINDING 2. Global and U.S. ZEV Penetration: Regulations, incentives, and the interconnected international markets for zero-emission vehicles (ZEVs) will also affect their sales and technological development. Automakers are predicting deployment of tens of millions of ZEVs globally during the period of 2025–2035, aiming to achieve at least 50%–100% ZEV sales by 2030–2035 in leading jurisdictions (e.g., California, China, Europe). High penetration of ZEVs will involve profound changes to the vehicle fleet, charging/fueling infrastructure, business models for dealers, driver behaviors, repairs, emergency responders, materials, and battery recycling/second life. These changes will impact consumers, automakers, suppliers, dealers, fleet owners, and many others in the light-duty vehicle transportation system.

SUMMARY FINDING 3. Fuel Cell Electric Vehicle Deployment: Availability of commercial fuel cell electric vehicles (FCEVs) in the United States is limited to California and Hawaii. Introduction of FCEVs in the Northeast United States has been delayed, largely owing to the ban on hydrogen vehicles in tunnels and on the lower deck of two-tier bridges in the region. Recent studies have examined the behavior of hydrogen in tunnels, providing results of risk and scenario analyses to enable informed decisions on FCEV use in tunnels moving forward.

SUMMARY RECOMMENDATION 1. Growing Role of ZEVs: The agencies should use all their delegated authority to drive the development and deployment of zero-emission vehicles (ZEVs), because they represent the long-term future of energy efficiency, petroleum reduction, and greenhouse gas emissions reduction in the light-duty vehicle fleet. Vehicle efficiency standards for 2035 should be set at a level consistent with market

dominance of ZEVs at that time, unless consumer acceptance presents a barrier that cannot be overcome by public policy and private sector investment. At the same time, maximum feasible fuel economy of petroleum-fueled vehicles should be pursued, under the National Highway Traffic Safety Administration’s interpretation of its existing authority, and as a portion of the U.S. Environmental Protection Agency’s combined stringency assessment. The pathway to zero emissions should be pursued in a technology-neutral manner.

SUMMARY RECOMMENDATION 2. Purchase Subsidies: The U.S. federal battery electric vehicle, plug-in hybrid electric vehicle, and fuel cell electric vehicle purchase subsidies should be continued until financial and psychological consumer barriers to purchasing such vehicles have been overcome. However, it should be changed to point-of-sale rebates to increase effectiveness and lower fiscal burdens. Income eligibility should be considered for both policy equity and effectiveness. Research organizations in partnership with federal agencies should conduct studies to optimize which type of vehicles and electric ranges should receive more or less subsidy, with considerations of equity and policy effectiveness in promoting zero-emission vehicle sales and/or electric vehicle miles traveled share.

SUMMARY FINDING 4. Battery Electric Vehicle Charging: Battery electric vehicle (BEV) charging is a paradigm shift from gasoline refueling. In a BEV charging ecosystem, charging opportunities are ubiquitous and frequent and part of normal vehicle parking, rather than a separate activity, like going to a gas station. The convenience of BEVs centers on at-home, overnight charging. Besides private home charging, semipublic infrastructure like multifamily dwelling and workplace charging are most important for increasing electric miles for daily trips. Public, fast charging on major corridors is most important for increasing electric miles for longer trips and providing assurance of urgent range extension.

SUMMARY FINDING 5. Fuel Cell Electric Vehicle Fueling Infrastructure: Hydrogen infrastructure build-out is the most significant challenge for fuel cell electric vehicle (FCEV) deployment. FCEV fueling infrastructure deployment would benefit from broader regional and national strategies and increased engagement with policy makers and local jurisdictions. Hydrogen infrastructure development for industrial and utility applications as well as for medium- and heavy-duty FCEVs have potential to accelerate build-out of the refueling network and reduce the cost of hydrogen.

SUMMARY RECOMMENDATION 3. Charging Infrastructure: The U.S. Department of Transportation, the U.S. Environmental Protection Agency, and the U.S. Department of Energy should coordinate to facilitate electric charging and hydrogen refueling infrastructure deployment with relevant stakeholders, including state and local government agencies, business associations, and entities. Congress should appropriate funds for and the agencies should create a national public-private partnership to lead this coordinating effort. For plug-in electric vehicle (PEV) charging, this coordinated effort should explicitly incorporate corridor fast charging, public charging at public parking spaces, PEV readiness of new and renovated homes and communities, and PEV readiness of workplace parking. For fuel cell electric vehicles, this coordinated effort should include support of hydrogen fuel infrastructure for light-duty vehicle (LDV) users in conjunction with medium- and heavy-duty vehicles and industry users, and deployment of LDV hydrogen refueling stations.

13.1.1.2 Agency Coordination

SUMMARY FINDING 6. Agency Coordination of Different Authorities: The National Highway Traffic Safety Administration and the U.S. Environmental Protection Agency (EPA) regulate under different statutory authorities, and for as long as these statutes remain as currently written, each agency is required to continue to adopt its own standards pursuant to its statutory criteria. Since 2010, the two agencies have coordinated their light-duty vehicle (LDV) regulations under the corporate average fuel economy (CAFE) and greenhouse gas (GHG) programs, which have minimized to the extent possible conflicting and duplicative requirements for industry. However, as the costs, performance, and sales of dedicated alternative fuel vehicles (AFVs),

especially battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs), improve substantially over the next decade, the two programs may increasingly diverge. EPA is permitted to consider the availability and feasibility of zero-emission vehicles (ZEVs) in setting its standards, and so as ZEVs become a growing portion of new LDV sales, the EPA standards will become progressively more stringent by incorporating the associated reduced GHG emissions. As currently implemented, however, the CAFE program does not include dedicated AFVs such as BEVs and FCEVs in its stringency feasibility analysis. If this practice continues, the CAFE standards will grow increasingly less stringent than the corresponding EPA standards over time, and the CAFE program will become less relevant to meeting its efficiency and petroleum reduction goals.

SUMMARY RECOMMENDATION 4. Agency Coordination of Different Authorities: The efforts of the National Highway Traffic Safety Administration (NHTSA) and the U.S. Environmental Protection Agency (EPA) to coordinate their fuel economy and greenhouse gas (GHG) emission standards since 2010 have been beneficial and should be continued to the extent feasible. However, the separate agency standards may now diverge because of the growing availability and benefits from zero-emission vehicles (ZEVs) and the agencies’ different statutory authorities. The EPA can and must consider the availability and benefits of ZEVs and more efficient petroleum-fueled vehicles in setting the most stringent feasible GHG emission standards. In order to remain binding and relevant, NHTSA’s program must consider the fuel economy or energy efficiency benefits provided by alternative fuel vehicles such as battery electric vehicles and fuel cell electric vehicles in setting the stringency of its corporate average fuel economy standards, either by NHTSA’s interpretation of existing statute or by Congress passing a new or amended statute.

SUMMARY RECOMMENDATION 5. NHTSA ZEV Authority: To fulfill its statutory mandate of obtaining the maximum feasible improvements in fuel economy, the National Highway Traffic Safety Administration should consider the fuel economy benefits of zero-emission vehicles (ZEVs) in setting future corporate average fuel economy (CAFE) standards. The simplest way to accomplish that would be for Congress to amend the statute to delete the prohibition (42 U.S.C. § 32902[h][1]) on considering the fuel economy of dedicated alternative-fueled vehicles in setting CAFE standards. If Congress does not act, the Secretary of Transportation should consider ZEVs in setting the CAFE standards by using the broad authority under the statute to set the standards as a function of one or more vehicle attributes related to fuel economy, and define the form of the mathematical function. For example, recognizing that the maximum feasible average fuel economy depends on the market share of gasoline and diesel vehicles relative to ZEVs, the Secretary could consider redefining the function used for setting the standards to account for the expected decreasing share of gasoline and diesel vehicles relative to ZEVs. One possible mechanism to do this could be setting the standard as a function of a second attribute in addition to footprint—for example, the expected market share of ZEVs in the total U.S. fleet of new light-duty vehicles—such that the standards increase as the share of ZEVs in the total U.S. fleet increases.

SUMMARY RECOMMENDATION 6. Fulfilling EPA Mandate: If the National Highway Traffic Safety Administration is unable to consider alternative-fuel vehicles, and in particular zero-emission vehicles (ZEVs), in its stringency analysis, then the U.S. Environmental Protection Agency should continue under its mandate with divergent, more stringent standards, based on the advancements in ZEVs.

13.1.1.3 Life Cycle Emissions and Energy Use

SUMMARY FINDING 7. Life Cycle LDV Transportation Emissions, Fuel, and Energy Use: In current practice, vehicle manufacturers are responsible for meeting onboard per-mile fuel efficiency and emissions requirements. A full-fuel-cycle assessment more fully captures the total light-duty vehicle (LDV) system greenhouse gas emissions and energy consumption than an onboard, in-use consumption or emissions metric, and more evenly compares vehicles using different fuels. A full vehicle life cycle assessment including vehicle manufacture and disposal is an even more comprehensive measure of LDV system emissions or fuel and energy consumption.

SUMMARY FINDING 8. ZEV Upstream Emissions Accounting: Zero-emission vehicles (ZEVs) have zero greenhouse gas (GHG) emissions at the tailpipe, but have upstream emissions and energy use associated with processes to generate electricity, hydrogen, or other zero-emission fuels. Internal combustion engine vehicles including hybrid electric vehicles have both tailpipe and upstream emissions and energy use. Currently, neither the National Highway Traffic Safety Administration (NHTSA) nor the U.S. Environmental Protection Agency (EPA) account for the full fuel cycle including upstream emissions in regulatory compliance treatment in order to incentivize ZEVs. EPA currently assumes a 0 g/mi upstream carbon dioxide emission factor for ZEVs, and NHTSA uses a petroleum equivalency factor for upstream emissions that applies to only 15% of energy utilized by ZEVs to incentivize such vehicles (consistent with other alternative fueled vehicles). However, the full-fuel-cycle treatment is used in the benefit cost assessment of the regulations. The exclusion of upstream emissions in the corporate average fuel economy and GHG regulatory compliance metrics provides an incentive to produce ZEVs, relative to internal combustion engine only and hybrid electric vehicles, in states where there is no binding ZEV mandate, and could help to overcome significant market barriers that ZEVs face during a transition in the market toward the long-term goal of zero tailpipe emissions.

SUMMARY RECOMMENDATION 7. Life Cycle Emissions: Congress should define long-term energy and emissions goals for the corporate average fuel economy (CAFE) and greenhouse gas (GHG) programs, and the National Highway Traffic Safety Administration (NHTSA) and the U.S. Environmental Protection Agency (EPA) should set regulations that put the United States on a path to meet those goals. Considering other regulatory systems that may be implemented as part of a national program to reduce energy use and emissions in the fuel, electricity, and manufacturing sectors, the light-duty vehicle CAFE and GHG programs may or may not need to address the full vehicle and fuel life cycle emissions and energy consumption. Any vehicle or fuel life cycle requirements within the NHTSA or EPA programs should be set with appropriate lead-time for manufacturers to revise their upcoming product plans.

SUMMARY RECOMMENDATION 8. ZEV Upstream Emissions Accounting: In the longer term, it makes sense to address the full-fuel-cycle emissions of all vehicles, including zero-emission vehicles (ZEVs), especially as ZEVs become a progressively larger portion of the light-duty vehicle fleet. The National Highway Traffic Safety Administration and the U.S. Environmental Protection Agency should undertake a study of how and when to implement a full-fuel-cycle approach, including consideration of the potential benefits and drawbacks of the current temporary exclusion of upstream emissions for compliance of ZEVs. Based on that study, the agencies should decide whether and when to adopt a different approach for accounting for upstream ZEV emissions for compliance.

13.1.1.4 Technology

SUMMARY FINDING 9. Internal Combustion Engines: Internal combustion engines (ICEs) will continue to play a significant role in the new vehicle fleet in MY 2025–2035 in ICE-only vehicles, as well as in hybrid electric vehicles (HEVs) from mild hybrids to plug-in hybrids, but will decrease in number with increasing battery electric vehicle (BEV) and fuel cell electric vehicle penetration. In this period, manufacturers will continue to develop and deploy technologies to further improve the efficiency of conventional powertrains, for ICE-only vehicles and as implemented in HEVs. Developments in the ICE for hybrids will advance toward engines optimized for a limited range of engine operating conditions, with associated efficiency benefits. Major automakers are on differing paths, with some focusing their research and development and advanced technology deployment more squarely on BEVs, and others more focused on advanced HEVs to maximize ICE efficiency.

SUMMARY FINDING 10. Road Load Reduction: Road load reduction leads to reduced fuel consumption and greenhouse gas emissions, and opportunities include mass reduction, improved aerodynamics, and reduced rolling resistance. In 2025–2035, mass reduction will be implemented for fuel consumption reduction and

driveability for all vehicles, and also for increased driving range for battery electric vehicles and fuel cell electric vehicles. Improved aerodynamics will be challenged by the shift to taller vehicles with larger frontal area, and may be positively or negatively impacted by vehicle architectures responding to electrification. There will be incremental improvements available in tire rolling resistance. Mass and geometric disparity in the fleet may increase or decrease owing to electrified powertrains, new architectures, automated and connected vehicle technologies, and a shift from sedans to crossover vehicles, sport utility vehicles, and pickup trucks in 2025–2035.

SUMMARY RECOMMENDATION 9. Safety: Improved crash compatibility will reduce the adverse effect of mass and geometric disparity on crash safety for passengers of all vehicles and vulnerable roads users, including pedestrians. The National Highway Traffic Safety Administration should study mass disparity in 2025–2035, improve federal motor vehicle safety standard testing protocols for crash compatibility, and further develop testing or computer-aided engineering fleet modeling to simulate real-world crash interactions between new vehicle designs and with vulnerable users at different impact speeds and impact configurations.

SUMMARY FINDING 11. Battery Technology: Lithium-ion batteries will be the dominant battery technology for battery electric vehicles (BEVs) in 2025–2035. The chemistries within them will have incremental improvements in performance and cost during this time frame. There are opportunities for breakthroughs in battery technologies to go “beyond lithium”; however, such breakthroughs are not guaranteed. By 2035, there may be limited commercial sales of BEVs with “beyond lithium ion” technologies, most likely solid-state batteries. Engineering improvements at the module and pack level will contribute to further increases in energy density and cost reduction.

SUMMARY FINDING 12. Electric Vehicle Costs: Battery electric vehicles (BEVs) with longer electric range (e.g., 300 miles) may reach first-cost parity with comparable internal combustion engine only vehicles by 2030, especially from high-volume BEV manufacturers. Shorter range BEVs may be favored by some consumers and would reach cost parity even sooner. When considering fuel and maintenance, BEVs have or will reach total cost of ownership parity earlier than first-cost parity. Reducing battery cost while meeting specifications for greater durability and rapid charging capabilities will widen their appeal. The BEV cost driver is the battery, which for high-volume battery production is expected to decrease to $90–$115/kWh by 2025 and $65–$80/kWh over 2030–2035 at the pack level.

SUMMARY FINDING 13. Electric Drive System Technologies: While the majority of the automakers are still using insulated gate bipolar transistor power switching devices in their power electronic circuitry (inverter and converter), many are pursuing the use of wide-bandgap devices (silicon carbide, SiC, or gallium nitride, GaN) in their next-generation propulsion systems, owing to their size, weight, and efficiency benefits. Most automakers are expected to be using SiC in their vehicles by 2025 owing to its widespread availability. However, given the inherent cost advantage of GaN on silicon devices compared with SiC, if the problems with GaN device architecture can be resolved, it is expected that GaN on silicon devices will gradually replace SiC during the period 2025–2035.

SUMMARY FINDING 14. Fuel Cell Electric Vehicles: Several automakers are releasing their second generation of fuel cell vehicles. A few major automakers are planning a strategy of high fuel cell vehicle deployment in the United States and elsewhere to take advantage of their long ranges and short refueling times relative to battery electric vehicles. Developers have identified pathways to reduce fuel cell powertrain and hydrogen tank cost through materials and manufacturing improvements and economies of scale. Fuel cell electric vehicles (FCEVs) could reach parity with internal combustion engine only vehicles in total cost of ownership in 2025–2035 if aggressive efficiency and cost targets are met. FCEVs are expected to be particularly valuable to operators and fleet owners that need constant operation and/or high daily vehicle miles traveled, and those that require continuous low-end torque, such as for towing.

SUMMARY FINDING 15. Connected and Automated Vehicle Technologies: Vehicle connectivity and automation technologies could improve the fuel efficiency of internal combustion engines by up to 9% in city driving and up to 5% on the highway by detecting upcoming conditions and adjusting acceleration and powertrain operation accordingly. In 2025–2035 new vehicles, there will be even more widespread implementation of automated vehicle technologies at the lower levels of automation for convenience and safety than exists in 2020, and growing but uncertain use of vehicle-to-vehicle and vehicle-to-infrastructure connectivity. Connected and automated vehicle technology efficiency benefits are not currently detectable in fuel economy certification testing but may be eligible for off-cycle credits when direct fuel savings can be demonstrated. However, fuel savings are not presently the primary driver of connected and automated vehicle technologies in the market, and the potential energy benefits of these technologies are unlikely to be realized absent incentives or other policies to ensure that they are implemented with fuel efficiency as a fundamental goal.

SUMMARY FINDING 16. Autonomous Vehicles: Fully capable, fully automated, Level 4 and 5 light-duty vehicles will be deployed in some ride hailing, delivery, and closed-campus fleets by 2025. More widespread adoption will require ensuring safety under all conditions, resolving cybersecurity issues, developing appropriate regulations, and gaining consumer acceptance of a radically different driving experience. Hence, autonomous vehicles’ share of the market in 2035 is highly uncertain but likely to fall in the 0–40% range. Adoption of autonomous vehicles could greatly increase or reduce transportation energy use and the impact will be determined to a large degree by their effects on travel choices and vehicle ownership decisions, particularly vehicle miles traveled.

SUMMARY RECOMMENDATION 10. Autonomous Vehicle Efficiency Regulation: The agencies should consider regulating autonomous vehicles for fleet use differently from personally owned vehicles. Maximum feasible standards for these vehicles could be substantially more stringent than standards for personally owned vehicles; an all-electric requirement should be considered. To achieve the fuel-savings potential of autonomous driving and avoid its unintended consequences, the U.S. Department of Transportation should consider actions to guide the effects of autonomous driving on the U.S. transportation system and make recommendations accordingly to other agencies and to Congress.

13.1.1.5 Consumer Value of Fuel Economy

SUMMARY FINDING 17. Consumers: New vehicle purchasers select vehicles with a variety of factors in mind, including fuel economy. Manufacturers perceive that consumers expect higher fuel economy but will not pay for the full value of fuel saving technologies, while many academics think consumers almost fully value fuel savings. Some automakers are trying to engage their future consumers in new vehicle options, including changes in propulsion systems like battery electric vehicles and fuel cell electric vehicles. Many consumers initially resist new technologies that disrupt current practices and lifestyles, or create novel risks or uncertainties, even if the technology provides net benefits to them.

SUMMARY RECOMMENDATION 11. Novel Technology Barriers: Because consumer resistance to novel technology is a significant issue in market penetration and acceptance of new technologies, policy interventions beyond purchase subsidies may be needed to address these barriers. Such policies may include investment in charging and refueling infrastructure, or consumer education and exposure to the new technology and its benefits.

13.1.1.6 Test Cycles and Regulatory Structure

SUMMARY FINDING 18. Test Cycles and New Vehicle Technologies: Two test cycles for corporate average fuel economy compliance were established in 1975, a city and a highway cycle. In 2008, three additional cycles, originally developed for criteria pollutant measurement in high speed, air conditioning, and cold temperature operation, were incorporated into fuel economy testing to better reflect real-world fuel economy for vehicle labeling.

There have been modifications to the test procedure to accommodate alternative powertrains, including a test for electric vehicle range. The current test procedures are insufficient to test electric vehicle range and connected and automated vehicle operation, and they do not adequately reflect modern driving patterns of light-duty vehicles.

SUMMARY FINDING 19. On-Road Fuel Economy: There is no representatively sampled, empirical measure of on-road fuel consumption or greenhouse gas (GHG) emissions for the U.S. light-duty fleet. Using onboard diagnostics and customer data available, it is increasingly possible to assemble such a statistically valid and relevant data set. Such data could be used to monitor the fuel consumption and GHG emissions of the light-duty vehicle sector, the effectiveness of the corporate average fuel economy program, and the effectiveness of off-cycle technologies in reducing real-world emissions and fuel consumption.

SUMMARY RECOMMENDATION 12. In-Use Performance: The agencies should implement a program that measures fuel consumption and greenhouse gas emissions from the light-duty vehicle fleet in use. The purpose of the in-use program should be to evaluate and improve the effectiveness of the corporate average fuel economy program, not for year-by-year enforcement against individual manufacturers. New data sources and telematic technologies makes such in-use monitoring feasible, but safeguards must be established to minimize privacy risks for vehicle owners and operators.

SUMMARY RECOMMENDATION 13. Driving Patterns and Emissions Certification: The agencies (U.S. Department of Transportation, U.S. Environmental Protection Agency, U.S. Department of Energy) should conduct a study on how well current driving patterns and new vehicle technology impacts are reflected by current vehicle certification test cycles. The results of this study should then be used to propose new light-duty vehicle test cycles, or adoption of the current or a new weighting of the existing 5-cycle test. The study of driving patterns and emissions and resulting changes in the test cycle may make it possible to eliminate some off-cycle treatment of fuel efficiency technologies and evaluate the energy saving impacts of those that remain.

SUMMARY RECOMMENDATION 14. Off-Cycle Technologies: The U.S. Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration should consider off-cycle technologies in setting the stringency of the standards. The agencies should approve off-cycle credits on an annual cycle, require automakers to clearly and transparently document the test procedures and data analysis used to evaluate off-cycle technologies, and produce a compiled report on proposed credits that is available for public comment. The agencies should track the adoption of off-cycle credits in the vehicle fleet at the model level and report these data to the public, for example through the EPA Trends Report.

SUMMARY RECOMMENDATION 15. CAV Efficiency Regulation: In setting the level of the standards, the agencies should consider connected and automated vehicle (CAV) technologies that can save energy. Off-cycle credits should be available for CAV technologies only to the extent that they improve the fuel efficiency of the vehicle on which they are installed. Credits should be based on realistic assumptions, where needed, regarding technology adoption on other vehicles or infrastructure.

SUMMARY FINDING 20. Passenger Car and Light Truck Standards: Passenger cars and light trucks are regulated under separate standards. In some cases, light truck capability and use is very similar to counterpart vehicles classified as passenger cars, sometimes with the same make and model, only distinguished by two- or four-wheel drive. In other cases, light trucks have duty-cycle requirements of off-road capability, hauling, towing, and four-wheel drive that could justify a different efficiency or emissions standard than passenger cars not designed with those requirements.

SUMMARY RECOMMENDATION 16. Car and Truck Standards: The National Highway Traffic Safety Administration and the U.S. Environmental Protection Agency should commission an independent group to study the effectiveness and appropriateness of separate standards for passenger cars and light trucks.

13.2 BIG PICTURE: RETHINKING REGULATION OF FUEL ECONOMY IN 2025–2035 AND BEYOND

So far, this report has provided analysis, findings, and recommendations on the future of the CAFE program largely within the confines of the existing statutory authority. However, that existing statutory authority only prescribes fuel economy standards for specific years through 2030, so it is likely that the statute will be revised by Congress for the period of this study of 2025–2035. Given the increasing changes to vehicle technology, national goals for vehicle efficiency and emissions, and other changes to the LDV transportation system projected in 2025–2035, and the natural time to update the statute, the congressional amendments will likely consider other changes to the CAFE program. Because many possible changes to standard goals and structure will be relevant to this committee’s assigned task in evaluating the CAFE program in the 2025–2035 period, the committee offers the following discussion and recommendations for Congress and policy makers with respect to the structure of the CAFE program from 2025 to 2035.¹

The existing CAFE program is quickly becoming outdated and will need to be updated in the time period from 2025 to 2035 for legal, scientific, policy, technological, global leadership, and economic reasons.

• From a legal perspective, the existing CAFE statute was last amended in 2007 and only explicitly authorizes new standards through 2030, so it will need to be updated to provide relevant criteria for setting CAFE standards beyond 2030.
• From a scientific perspective, climate change has become an increasingly urgent problem for the nation and world since the last statutory update in 2007, and as discussed in greater detail below, the CAFE program needs to be updated to better focus on this urgent national need.
• From a policy perspective, the United States is likely to enact broader climate change legislation in the coming years, which will interact and overlap with the CAFE program, requiring alignment or synergy of the CAFE program with these broader efforts.
• From a technological perspective, vehicle manufacturers are planning large-scale deployment of advanced technology vehicles such as battery electric vehicles (BEVs), fuel cell vehicles, and connected and automated vehicles. The existing statute does not adequately address nor ensure the environmental benefits of these important new vehicle technologies that could become dominant in the next couple of decades.
• From a global leadership perspective, other nations are surging forward with new vehicle requirements that surpass those envisioned in the existing CAFE program, and the United States will need to upgrade its approach if it wishes to remain an international leader in clean vehicle technology.
• From an economic perspective, consumer behavior and automaker business plans are likely to change substantially as advanced vehicle technologies grow in the market.

FINDING 13.1: The current statutory authority for the CAFE program is becoming increasingly outdated as a result of legal, scientific, policy, technological, global leadership, and economic developments and trends.

RECOMMENDATION 13.1: Given the end of the latest legislative specification for corporate average fuel economy (CAFE) in 2030, Congress should extend the CAFE program and, as part of that reauthorization, evaluate and update the statutory goals of the CAFE program. With those goals in mind, Congress should consider changes to the program structure and design, and its interaction with other related policies and regulations.

13.2.1 Changes Within Existing CAFE Program

In considering statutory changes to the CAFE program, it is useful to think both within and outside the current CAFE structure. Looking within the existing program first, one statutory change would be to refocus the objectives

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¹ In addition to the implications of the committee’s statement of task, the committee held a public meeting with the U.S. Environmental Protection Agency (EPA) in June 2020 at which EPA senior staff explicitly asked the committee to advise them on “big ideas” of vehicle efficiency and GHG emissions regulations that fit in the changing world of LDVs expected in 2025–2035.

of the CAFE program. At the time the CAFE program was adopted, enhancing energy security by reducing reliance on petroleum imports was a primary objective of the CAFE program. Today, while energy security concerns remain relevant, their importance for the CAFE program have diminished as the United States has become a net energy-exporting nation. Energy conservation was another important goal of the original CAFE program, and that objective remains important today. A new objective, not present when the CAFE program was originally enacted, is addressing climate change, and this should now be expressly recognized as an important objective of the CAFE program.

RECOMMENDATION 13.2: The statutory authorization for the corporate average fuel economy (CAFE) program should be amended to expressly include climate change as a core objective of the program, along with existing objectives such as energy conservation. Specifically, the statutory considerations for setting CAFE standards in 49 U.S.C. § 32902(f) should be amended to include the goal of reducing greenhouse gas emissions.²

The emergence of reducing GHGs as a national goal, and the partial overlap with the CAFE program of the U.S. Environmental Protection Agency’s (EPA’s) role in directly addressing LDV GHG reduction, raises the question of whether it continues to make sense to have both a CAFE program administered by the National Highway Traffic Safety Administration (NHTSA) and a GHG reduction program administered by EPA. The existence of two partially overlapping programs does create some redundancy, which increases costs to the government and compliance burdens for manufacturers. However, these duplicated costs have been minimized by aligning the two programs as much as possible. Moreover, there are benefits from maintaining the two programs. While the EPA program focuses specifically on GHG emissions, the NHTSA CAFE program expressly considers other relevant factors such as energy conservation, energy imports, and vehicle safety. While again there is some overlap in the practical impact on standards of these factors and the GHG emissions considered by EPA, there is value in giving independent consideration to the CAFE-exclusive factors. In addition, NHTSA and EPA staff have different expertise, experience, and capabilities, and so the two agencies can provide a useful check on each other’s analyses and estimates. Last, the two programs can provide a backstop to each other if one set of standards is delayed or rescinded by administrative or judicial actions.

FINDING 13.2: The continued existence of two partially overlapping programs, the CAFE program administered by NHTSA and the GHG emissions program administered by EPA, imposes some duplication and extra costs on government and industry, but these additional burdens can be mostly offset by coordinating the two programs. In addition, the continued existence of the two separate programs provides some benefits that outweigh the duplicated costs and burdens, including the consideration of different unique and relevant factors by each agency, and the benefits of having the two agencies check and backstop each other’s activities.

RECOMMENDATION 13.3: Congress should reauthorize the continuation of the National Highway Traffic Safety Administration (NHTSA) corporate average fuel economy (CAFE) program, notwithstanding its practical overlap with the U.S. Environmental Protection Agency light-duty vehicle greenhouse gas program. Congress can minimize any disruption from having two programs by eliminating any obstacles to coordinating the two programs, such as by eliminating the current prohibition that prevents NHTSA from considering zero-emission vehicles and other dedicated alternative-fueled vehicles in setting CAFE standards.

Another useful change to the CAFE program would be for Congress to provide a longer-term target for vehicle manufacturers’ planning. Vehicle manufacturers face many different options of where to invest their research and development (R&D) efforts, from further improving internal combustion engines and developing such vehicles

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² In discussion with stakeholders after the prepublication version of this report was released, it became apparent that this recommendation could be interpreted in a way that would have unintended effects that were not examined by the committee. This footnote was added to this final publication of the report in order to clarify that in making this recommendation, the committee did not examine and did not intend for any changes to statute to disrupt the regulatory structure that provides for state GHG emissions standards, state ZEV requirements, and GHG emissions standards promulgated by EPA.

for low-carbon fuels, to developing and advancing hybrid technologies, to focusing on zero-emission technologies such as BEVs and fuel cell electric vehicles (FCEVs). Without long-term targets, there is a greater risk that vehicle manufacturers will choose a technology investment and development strategy that “locks in” technologies that represent wasteful dead-ends rather than stepping-stones to the longer-term goals (Coglianese and D’Ambrosio, 2008; Williams et al., 2015). Because NHTSA can only set CAFE standards for a maximum of 5-year periods, Congress should adopt a longer-term national goal to assist the future planning of both NHTSA and industry.

One of the critical goals for the countries of the world will be to deeply decarbonize their economies by 2050. Government jurisdictions, some major vehicle manufacturers, and academic and think tank analyses have converged on the concept that all new LDVs should achieve net-zero emissions by the 2035–2050 period (NASEM, 2021).³ To provide a longer-term target for manufacturers to plan their ongoing and future R&D and product rollout, Congress should set an explicit goal that all new LDVs should achieve net-zero GHG emissions by a specified date.⁴ This zero-emission requirement should be technology neutral, to allow each manufacturer to choose its own technology pathway. Summary Recommendation 8 recommends a transition to address full-fuel-cycle emissions of all vehicles, including ZEVs. It recommends a study of how and when to implement a full-fuel-cycle approach. The study should evaluate the cost and emissions effectiveness of incentivizing ZEVs by excluding upstream ZEV emissions, relative to other methods of incentivizing the transition to ZEVs. It should also address some of the complexities of considering upstream emissions including their uncertainties, their heterogeneity by region and fuel used for energy generation, the dynamic changing nature of upstream emissions over time, the metrics that should be used to measure upstream emissions, and the respective roles and approaches of NHTSA and EPA to account for upstream emissions. Last, the study should identify whether statutory changes are needed to best account for upstream emissions, and if so, what those changes might be. Such full accounting would ensure more informed and effective policy choices in setting the standards, as well as provide consumers full transparency in their vehicle choices.

While a zero-emissions goal should be the primary motivator behind both EPA and NHTSA’s regulations, NHTSA’s existing authorities related to energy efficiency, consumer fuel savings, and safety continue to be important. Given a hierarchy of goals, Congress and NHTSA might consider what metric (GHG emissions, fuel consumption, energy consumption, or some combination) is best to use for meeting the goals of its regulatory program. Congress should provide appropriate funding for consumer tax credits, refueling infrastructure, and other incentives to help enable this systemic transformation to a zero-emission light-duty fleet. To reach an economy-wide deep decarbonization goal, the transition in the vehicle fleet must occur alongside transformation in the full fuel cycle of all fuels to be net-zero emissions. The transformation to a zero-emission standard and ZEVs will not only help address climate change and other emission problems but will also help to ensure that U.S. vehicle manufacturers and suppliers remain at the forefront of new vehicle technologies and save consumers money.

FINDING 13.3: Many studies suggest that reaching an economy-wide deep decarbonization goal will require new vehicles to be zero-emissions. To comprehensively address climate change, a transition to ZEVs needs to be in concert with a full move to net-zero GHG fuels and electricity, and also net-zero vehicle manufacturing GHG emissions.

RECOMMENDATION 13.4: To provide vehicle manufacturers a longer-term target to assist planning their ongoing technology investments and pathways, Congress should set a goal that all new light-duty vehicles will have net-zero greenhouse gas emissions by a specific date that aligns with a national deep decarbonization goal, and includes interim goals. This target should be technology neutral, to allow each manufacturer to choose its compliance pathway and technology strategy.

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³ Example jurisdictions with goals of only ZEV sales, or zero internal combustion engine vehicle (ICEV) sales, have been California, 2035 (including PHEVs); UK, 2030 (only ICEVs, part of green economic recovery); France, 2040; Norway, 2025; Germany, Ireland, and the Netherlands, 2030.

⁴ While this net-zero emissions goal would primarily be met by ZEVs, the standard should provide some flexibility for allowing some relatively small number of non-ZEV vehicles to be sold as necessary to meet extreme duty cycle, weather, or geographical needs, or because of the local deficiencies in ZEV infrastructure. Any emissions from these non-ZEVs could be offset by trades, offsets, credits, or other mechanisms to satisfy the net-zero emissions goal.

13.2.2 Changes Outside Existing CAFE Program

Given the fundamental changes expected in mobility and the transportation industry over the next couple decades, no single agency or program can develop an adequate regulatory framework in isolation. Rather, an integrated approach is required that considers the many facets of sustainable transportation:

• New vehicle technology;
• Fuel supply and infrastructure;
• Existing vehicle use and vehicle miles traveled (VMT);
• Connected and autonomous vehicles;
• Public transportation;
• New modes of transport including ride-sharing, scooters, and drones;
• Roads and other infrastructure;
• Smart cities and transportation planning;
• Congestion strategies including pricing and car-free zones;
• New vehicle ownership models;
• Consumer issues;
• Justice and fairness impacts;
• Safety;
• International developments and competitiveness; and
• Other society-wide strategies and policies for addressing climate change.

Many of these extrinsic factors will interact with and affect the CAFE program, so NHTSA will need to find new ways to coordinate and integrate the program with other related efforts.

One possible way to promote greater coordination would be to create a federal interagency task force on the changes that are occurring in transportation and mobility. NHTSA and other U.S. Department of Transportation (DOT) agencies and offices should participate, as well as several offices and programs from the EPA, the U.S. Department of Energy, the Department of Health and Human Services, the Department of Housing and Urban Development, and the White House. The goal of this task force should be to adopt and coordinate interagency efforts to move the nation toward a more sustainable system of transportation and mobility. The interagency task force could regularly report to Congress and the public on the progress and obstacles it identifies. The goals of the task force should be to expedite the transition to a cleaner, safer, and fairer transportation system and to promote U.S. leadership in developing the vehicle and mobility technologies of the 21st century.

RECOMMENDATION 13.5: The Executive Branch should create an interagency task force with the objective of coordinating and integrating government efforts to achieve a cleaner, safer, and fairer transportation and mobility system.

In addition to zero tailpipe emissions technologies such as BEVs and FCEVs, another important change in vehicle technology for the period 2025 and beyond will be connected and automated vehicles. Safety is likely to be the primary driver and determinant of when and how such vehicles will be deployed at the lower levels of automation, while the opportunity for cost savings will cause fleets to pursue fully autonomous vehicles. However, autonomous vehicles also could have substantial impacts on fuel consumption and GHG emissions, which could range from strongly beneficial to strongly detrimental, for the reasons discussed earlier in this report. The issue is complicated by the fact that a simple measure like VMT will not alone be a useful measure of environmental impact, as it will depend on the emissions the vehicles produce. If, for example, most autonomous vehicles in a region are BEVs or FCEVs, and have no carbon tailpipe emissions, then additional VMT may not substantially increase emissions, especially if renewable fuels are used to generate the electricity or hydrogen used to power those vehicles. Yet, they could add to congestion and safety issues, raising societal costs. New policies governing autonomous vehicles and their environmental and congestion impacts may be a relevant subject matter for

the interagency federal committee discussed above but may also be the subject of state or local legislation or incentives on the occupancy of autonomous vehicles or the types of engine technologies used to power them in that jurisdiction.

RECOMMENDATION 13.6: The federal interagency committee on new mobility, along with state and local policy makers, should consider rules or incentives to encourage future autonomous vehicles, especially in fleets, to use zero or near-zero emission technologies. Furthermore, the impact of any incentives should be evaluated for their ability to promote an overall reduction in vehicle miles traveled and increase in the use of transit and shared rides.

The most important large-scale and longer-term issue for the future is how the CAFE program, and GHG emissions from LDVs generally, fit within a broader national strategy or program to combat climate change. It is increasingly likely that the United States will and must adopt an economy-wide national program to reduce GHG emissions across all sectors before or during the 2025–2035 period of this study. That national program may include a national carbon tax or a national emissions-trading program, or another approach with a real or shadow price on carbon, and perhaps also a suite of facilitating policies to transition to a lower-emitting economy (NASEM, 2021). Regardless of the structure or approach of any nationwide climate change program, it will almost certainly intersect and interact with the CAFE program, given the large role the transportation sector plays in overall U.S. GHG emissions. Moreover, the transition to full-fuel-cycle ZEV technologies that operate on electricity and hydrogen will increasingly depend on the carbon intensity of the electricity generation and hydrogen production. Thus, carbon emissions must be addressed as a system, and one that is likely to be increasingly integrated.

A key issue going forward will therefore be how the CAFE program aligns with and contributes to the nationwide efforts to manage the carbon system. Will and should the CAFE program continue to operate under its old mandate, unaffected by these larger economy-wide programs? Or should the CAFE program be modified, or perhaps even eliminated, in response to a comprehensive, nationwide carbon regulatory system? The answers to these questions will depend in large part on how the nationwide carbon regulatory program is designed and implemented, and whether or how the CAFE program can be integrated into a coherent and effective national program to reduce GHGs.

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CAFE has historically been the bedrock of U.S. vehicle energy efficiency and climate policy, eventually joined by EPA vehicle and other GHG programs. It is now entering a time of major change. New technologies are enabling a pathway to zero emissions, and the future of the LDV market is likely to have a diversity of energy sources and modes of mobility. The committee expects that CAFE will continue to play an important role in the future if the recommendations in this report are adopted, and serve as an example for other energy and climate policies administered by government agencies in the United States and around the world.

13.3 REFERENCES

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