The Fuse

New Efficiency Rules for Trucks to Save $170 million, 2 Billion Barrels of Oil

by Leslie Hayward and Matt Piotrowski | August 16, 2016

The U.S. government took a major step Tuesday in reducing future oil consumption and decreasing oil dependence by finalizing efficiency rules for heavy duty trucks. The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) published their medium and heavy-duty Phase 2 vehicle rules that set fuel efficiency standards for model years 2018-27. The two government agencies estimate that the new regulations, which were released after four years of study and testing, will save vehicle owners and fleet operators a net total of $170 million and reduce oil consumption by an enormous 2 billion barrels over the lifetime of vehicles sold during the program.

“These standards are ambitious and achievable, and they will help ensure the American trucking industry continues to drive our economy,” said Gina McCarthy, administrator of the EPA.

In a rare increase in stringency over the proposed rules, released last year, certain large trucks are required to be up to 25 percent more fuel efficient.

The significance of the new rules should not be understated. In a rare increase in stringency over the proposed rules, released last year, certain large trucks are required to be up to 25 percent more fuel efficient. Medium and heavy-duty vehicles are only 4 percent of vehicles on American roads, but account for 22 percent of transportation oil demand. Moreover, they will make up the most growth in oil demand in the transportation sector, rising from 2.7 million barrels per day (mbd) to 3.4 mbd in 2040. Meanwhile, freight volumes are slated to increase by one third by 2040, putting additional pressure on the trucking sector to increase efficiency to remain competitive.

In a recent analysis, the U.S. Energy Information Administration (EIA) said it expects overall energy demand from large trucks—which includes gasoline and natural gas in addition to diesel—to be sharply lower with Phase 2 regulations. The EIA projects trucking demand to average 3.35 million barrels of oil equivalent per day at the end of the forecast period in the reference scenario, but 730,000 boe/d of oil equivalent lower with the stricter fuel economy standards. The EIA’s analysis, however, was based on the proposed rule and not the more stringent final one.

The final rule comes more than a year after the proposed regulations were first released. Efficiency indicators for vehicles, engines and trailers were all increased over the agencies’ initial proposal.

Fuel efficiency rules for trucks are also structurally different from rules for light duty vehicles, because of significant differences in how vehicles and engines are manufactured, brought to market, and used.

Fuel efficiency rules for trucks are also structurally different from rules for light duty vehicles, because of significant differences in how vehicles and engines are manufactured, brought to market, and used. The rules are broken down differently for required increases in engine efficiency, with different rules applying to truck chassis and the rest of the vehicle. Part of the reason is that a significant number of truck engines are supplied by third party engine manufacturers, such as Cummins or Caterpillar, while the vehicle itself is manufactured and sold by another company. Conversely, with light-duty vehicles, almost without exception, the automaker who sells a car has also manufactured the engine.

The reason that regulators have implemented different rules for engines and vehicles is that there are many ways to address truck fuel efficiency. Volvo, Daimler, and a few other top manufacturers represent nearly 90 percent of the truck market, and also manufacture their own engines. Many believed they could increase efficiency by up to 25 percent without adjusting engine technology, but regulators wanted to be sure that engine manufacturers were also making efficiency improvements. EPA and NHTSA also sought to improve engine technology overall to reduce criteria pollutants and other unwanted emissions.

For example, two smaller trucks which achieve 10 miles per gallon might carry the same amount of freight as one truck which achieves 7 mpg, but they would consume more fuel to do it.

Another way that truck efficiency rules differ from the corporate average fuel economy (CAFE) standards that apply to light-duty vehicles is how the vehicles are used—the amount of freight a truck is carrying has a massive impact on its miles per gallon (mpg) efficiency. For car manufacturers, efficiency rules are imposed in terms of mpg goals. This approach was unlikely to be effective with truck manufacturers, because they could meet such goals by reducing the amount of weight a truck could haul, potentially resulting in more vehicles on the road. For example, two smaller trucks which achieve 10 miles per gallon might carry the same amount of freight as one truck which achieves 7 mpg, but they would consume more fuel to do it. Today’s rules will build a truck fleet that is 25 percent more efficient to do the same amount of work, rather than creating artificial boosts in mileage.

Despite the final rule being more stringent than anticipated, the trucking industry is generally favorable to the new rules. “While today’s fuel prices are more than 50% lower than those we experienced in 2008, fuel is still one of the top two operating expenses for most trucking companies,” said American Trucking Associations (ATA) President and CEO Chris Spear in a statement. “That’s why our industry has worked closely with both the Environmental Protection Agency and the National Highway Traffic Safety Administration over the past three-and-a-half years to ensure these fuel efficiency and greenhouse gas standards took into account the wide diversity of equipment and operations across the trucking sector.”

Despite the final rule being more stringent than anticipated, the trucking industry is generally favorable to the new rules.

Environmentalists are also pleased with the rule. The Union of Concerned Scientists lauded the rule, saying trucks will “run cleaner and go farther on a gallon of fuel,” adding, “The new final rule from the Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) will significantly cut oil use, save truck owners money, and reduce the carbon pollution that causes climate change.”

The first ever truck standards were implemented in the Energy Security and Independence Act of 2007, signed into law by President George W. Bush, and have been tightened under the Obama administration. Securing America’s Future Energy (SAFE) originally proposed efficiency rules for trucks in its 2006 report, Recommendations to the Nation on Reducing U.S. Oil Dependence, and has lobbied in support of them in the decade since. “With freight volumes slated to increase by one third by 2040, now is the time to lead, and we applaud the release of final rules. SAFE was instrumental in implementing the first ever truck standards in the Energy Security and Independence Act of 2007, and we are now at the end of Phase 2 of the process laid out in that historic legislation,” said Robbie Diamond, SAFE’s CEO and founder.

While the new rule is a big step in making fuel efficiency gains, work must continue to be done to improve the efficiency of the trucking fleet, as well as move it towards non-petroleum fuel sources. For instance, in the EIA report on Phase 2, the agency noted that cost savings from the new standard may undercut the use alternative fuels in trucking, such as natural gas. Moreover, industry purchasing choices will be key. As ATA Vice President and Energy and Environmental Counsel Glen Kedzie said,While the potential for real cost savings and environmental benefits under this rule are there—fleets will ultimately determine the success or failure of this rule based on their comfort level purchasing these new technologies.”

ADD A COMMENT