Upstream Emissions Accounting Offered in Vehicle Emissions Dispute

In late July, four automakers signed a deal with the California Air Resources Board (CARB) on an alternative to the Trump administration’s proposed changes of current US vehicle greenhouse gas (GHG) standards. The current rule was created under the Obama administration and progressively increases standards to 2025—the Trump administration wishes to effectively freeze them at 2020 levels. CARB’s proposal falls in between the two; its more aggressive than the Trump administration proposal but less so than the current rule. Among its changes, the proposal resurfaces a nuanced and complicated issue: how to fairly rate the GHG emissions of plug-in EVs.

EVs and the Current Policy

Up to 2022, the current rule gives EVs a rating of 0 grams/mile, regardless of what fuel is burned to generate electricity for the vehicle charge. This is because emissions ratings are calculated at the tailpipe, and full EVs don’t have one. This is not fair to the vehicle powered by the conventional internal combustion engine, which does have a tailpipe. The rule also ignores biofuel contributions to petroleum fuel supply chains that reduce fuel GHG intensities upstream. 

Though it is not perfect, the policy is popular globally, with similar structures in the EU, China, and Japan (among others). The popularity comes from the difficulty in creating a fair way to calculate upstream GHG. This difficulty is due to the great diversity of possible transportation fuels, each with multiple and varied production pathways into the fuel supply chain. 

Best to Explore All Options

Be that as it may, governments have been keen to explore their options. For example, the EU is expected to evaluate the possibility of establishing a method to report the full life cycle of vehicle GHG in upcoming reviews to its rules. The current US rule would require automakers to account for upstream GHG of electricity generation beginning in 2022. It is possible to likely, however, that the US may instead be going in a different direction as CARB and Trump administration proposals remove the requirement. 

It is not surprising that the CARB proposal removes this requirement because CARB needs automaker backing to increase the proposal’s legitimacy. Generally, automakers do not like the upstream accounting requirement, even though it would provide more accurate comparisons of vehicle GHG ratings. If implemented, the GHG ratings of EVs would jump to around 90-100 g/mile, meanwhile the current batch of plug-in hybrids would potentially add between 35 and 60 g/mile to the existing ratings (between 78 and 245 g/mile). The increases would mean automakers get less value of each EV produced, which contrarily means they would have to produce more EVs to comply.

The possibility exists that neither proposal comes into effect and the regulatory environment instead reverts to a no-deal default: California regulators enforce current regulations and pursue legal challenges to a finalized Trump administration rule.