U.S. Fuel Rules 2027-2032: The Stricter Shift

1. NHTSA’s Bold Fuel Rule: Aiming for 58MPG by 2032

Recently, the National Highway Traffic Safety Administration (NHTSA) in the U.S. made a new proposal. They want new cars to use fuel better by 2032. They aim for 58 miles per gallon (58MPG). That’s like using 4 liters of gas every 100 kilometers. This will cut greenhouse gas. Reuters said this is double the old standard. It will change new cars on U.S. roads.

The new rules are for cars made from 2027 to 2032. Starting in 2027, cars need to be 2% more fuel-efficient each year. Light trucks need to be 4% better each year. For 2030 to 2035, big trucks must get 10% better every year.

After this proposal, the old 2024 to 2026 standards are replaced. This is the toughest fuel rule in U.S. history. In April, the U.S. Environmental Protection Agency (EPA) made strict exhaust rules. Car companies are under a lot of pressure. Some are not happy.

2. U.S. Fuel Rules: The Evolution Over a Decade

Over the last 10 years, U.S. car fuel rules have changed a lot. They became strict, then loose, then strict again. Under Trump, the rules were much looser than Obama’s time. When Biden became president, things changed. People who care about the environment wanted stricter rules. Biden’s team did that to support electric cars.

In March last year, NHTSA shared new fuel rules for 2024 to 2026. Cars and light trucks must use 8% less fuel each year from 2024 to 2025. In 2026, they must use 10% less. So, by 2026, cars will use fuel much better. They will go from using 5.8 liters every 100 kilometers in 2024 to 4.8 liters in 2026. NHTSA said this could make cars use 30% less fuel by 2026 compared to 2021. This rule started last year.

People said the 2024-2026 rules were the strictest ever in the U.S. But the new 2027-2032 rules are even stricter. By 2032, cars must use fuel even better than the 2026 rule.

NHTSA said if the new rules are approved, people will save over $50 billion on gas. By 2050, the U.S. will use 88 billion fewer gallons of gas and produce over 9 billion tons less carbon.

Anne Carlson, the acting head of NHTSA, talked on a call. She said the proposal is a win-win. Cars will use less gas. The U.S. will depend less on others for energy. It will help the environment. Carlson said many cars in the U.S. still use gas. People still want fuel-efficient cars.

3. Huge Fines Await Car Companies Under New Rules

General Motors (GM) plans to stop selling gas cars by 2035. But they said new U.S. car rules could be hard to follow. Before NHTSA showed the new fuel rules, GM’s boss, David Strickland, talked with White House officials on July 17. They discussed the new rules. GM said if these rules start, U.S. car companies might pay $100 billion to $300 billion in fines from 2027 to 2031. That’s $1,300 to $4,300 per car.

The exact fine depends on a U.S. Energy Department idea. In April, they suggested making electric car ratings lower to meet fuel standards.

The U.S. Energy Department said in their idea: “We want people to buy electric cars to use less oil. But if electric car ratings are too high, companies will use them to balance gas car ratings. Most cars sold are still gas cars.” They want to change how electric cars are rated and use that for CAFE rules.

Electric car ratings (MPGe) are based on power, oil production, and driving style. For example, the 2022 Ford F-150 Lightning would be rated 67.1 MPGe, not 237.1 MPGe, if the idea passes. So, electric cars won’t help companies meet the rules as much. GM said that even if 67% of their cars are electric by 2032, it won’t be enough for CAFE rules.

Right now, CAFE fines are based on how cars use fuel. For every 0.1 MPG a car is off, there’s a fine. The fine is multiplied by the number of cars. Before, the fine was $5.5 for every 0.1 MPG difference. Then, it went up to $14 for 2019-2021 and $15 after 2022.

In June, Reuters reported that Stellantis and GM paid a $363 million fine because some cars didn’t meet fuel rules. NHTSA said the record fine included $235.5 million for Stellantis’s 2018 and 2019 models and $128.2 million for GM’s 2016 and 2017 models. Before this, Stellantis paid $156.6 million for 2016 and 2017 models. Many companies complained about NHTSA’s higher fines.

4. U.S. Government Questions GM’s Fine Estimates

The U.S. government doesn’t agree with GM’s fine estimate. NHTSA says GM’s guess is “just that and not accurate.” A U.S. official said if the Energy Department’s idea passes, the car industry might face about $3 billion in CAFE fines. If it doesn’t pass, there might be no fines. If car companies don’t meet fuel standards, they can buy credits or sell many electric cars.

We can expect the new U.S. fuel and emission rules will push companies to make more electric cars. With Biden’s support, the U.S. might become a big electric car market after China and Europe. The U.S. “Inflation Reduction Act” last year made many car and battery companies build factories in North America. This includes Volkswagen, Hyundai, Stellantis, Samsung SDI, and LG Chem.

NHTSA’s new idea doesn’t force companies to sell electric cars. But to meet new rules, they might have to sell more. Besides fuel rules, companies also have to follow emission rules. In April, the U.S. EPA made very strict car exhaust standards for cars made from 2027 to 2032. They plan to cut car and light truck carbon emissions by 56% by 2032.

The U.S. EPA thinks by 2030, 60% of new cars and light trucks sold will be electric. By 2032, it might be 67%. This is more ambitious than Biden’s 2021 goal. Biden wants 50% of new cars sold in 2030 to be electric. By comparison, “U.S. Auto News” said in the first quarter this year, 7% of cars and light trucks sold were electric. There’s a lot of room to grow.

Another thing to note is NHTSA’s 2027-2032 CAFE standards are moving closer to the EPA’s 2027-2032 emission standards. NHTSA has set five different fuel economy standards for cars from 2027 to 2032. Carlson points out that the 2032 model standard is a prediction, not a legal requirement. It’s meant “to give car makers certainty and match the EPA’s idea.”

NHTSA says its fuel economy standards and the EPA’s idea “complement and align.” Both agencies will work together to increase efficiency and reduce costs. “We’ve been working closely with the EPA to make sure car companies can follow both rules. If they follow the EPA’s rules, they should easily meet NHTSA’s standards. We’re working to make sure of that,” said Carlson.