Blog Post

Lower CO2 emissions from trucks are in the works

Jun 23, 2015 | Alan J. Krupnick, Benjamin Leard, Virginia McConnell, William Raich

Medium-duty and heavy-duty trucks likely will be getting a lot cleaner. Joint Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) programs announced Friday will build off existing regulations (Phase I, adopted in 2011) to significantly reduce carbon emissions and fuel consumption from the nation’s trucks. Covering tractor-trailers, buses, and heavy pickups and vans, Phase 2 of these regulations will cover model years 2021 through 2027.

In announcing these proposed standards, the Obama administration is addressing roughly a fifth of all transportation GHG emissions, which themselves account for 28% of the United States’ total GHG emissions. The rules will set standards for fuel economy and GHG emissions for different types and sizes of trucks, and truck trailers would be separately regulated for the first time. As with CAFE standards for light-duty vehicles, the Agencies propose to allow some flexibility to manufacturers in how to meet the standards cost-effectively with provisions that allow banking reductions over time and trading and averaging reductions across vehicles and fleets.

Perhaps most important for individual and fleet truck owners are the payback periods for meeting these regulations. Trucks will cost more because of added technology (estimates are around $13,000 for the biggest trucks), but at what point will the resulting fuel savings exceed the additional up-front costs? In spite of a lifetime of a decade or more for heavy trucks and their sale into the secondary market after only four years or so, heavy-duty truck manufacturers appear to expect payback periods on fuel economy technologies as short as 18-months before they would invest.

There are a number of possible reasons for this short time horizon, but the one we most often hear is the buyer’s need for a cushion against the claims sellers make for their fuel-saving technology. According to the draft Regulatory Impact Analysis from EPA and NHTSA, the payback period for heavy duty pickups and vans is roughly three years. For tractor trailers, the payback point is early in the 2nd year of ownership. Vocational vehicles, encompassing a wide variety of vehicles from delivery trucks to refuse haulers, see a payback period of roughly six years. Thus, payback periods from these new rules are being estimated to be in the ballpark of acceptability to buyers, even without the standards. This raises two questions: are technological improvements underlying EPA and NHTSA’s thinking making inroads already and if so, are new standards needed?

Another important issue to consider is whether trucks will actually be driven more as fuel economy improves, and the cost of driving each mile falls. This so-called rebound effect has big implications for calculating carbon emissions, fuel consumption, and even road damage—trucks account for significantly more road damage than light-duty vehicles. Fuel costs for trucks make up over one third of per-mile costs to drivers. Savings could be even more pronounced with higher fuel prices. The Agencies do try to account for a possible rebound effect, but better data and more analysis is needed to have a better estimate of its magnitude.

Poor data also plague an understanding of truck characteristics and utilization for goods transport, including technology purchase behavior by trucking companies and independents – information needed to judge the actual economic impact of the standards. The main federal survey to collect data on truck use was discontinued in 2002, but it may be restored in the future. It is interesting that an annual industry survey conducted by the North American Council for Freight Efficiency, which polls major carriers about such decisions for their 18-wheelers, shows a steady improvement in adoption rate of fuel efficient technologies and rising fuel economy in recent years.

Additional data and analysis will be essential for assessing the benefits and costs of these new rules for achieving their energy savings and emissions reduction goals.