Why the “weakening” of US car pollution standards should not impact Australia

The announcement last week by the Biden administration that it was diluting parts of the next stage of the country’s vehicle emission standards was met with the predictable chorus of calls for Australia to roll back its planned National Vehicle Emissions Standards.

But the context is vastly different from what is being portrayed. Analysts and advocates suggest that the US move is more about election time concessions that do not detract from the fact that the US standards are its toughest ever.

In the US, Morgan Stanley’s automotive industry analyst Adam Jonas believes the Biden move is a concession to auto industry OEMs (original equipment manufacturers) and unions in order to win support during an election year.

“The final rule eases emission limits near-term, delays stringency to beyond 2030 and offers flexibility with hybrids, which could reflect an election year concession to the auto industry … and a changing demand environment,” Jonas writes in a note to clients.

On March 20 the EPA announced a “final rule” for multi-pollutant emissions standards for model years 2027 and later light-duty and medium-duty vehicles.

Jonas says the rule requires OEMs to meet average emissions limits for 2027-2032 across their entire product lines, but that there is flexibility because OEMs can comply by boosting sales of petrol powered plug-in hybrids (PHEVs) in addition to battery electric vehicles (BEVS).

Jonas says the new rule also relaxes the pace at which OEMs much comply with the rule in its early years starting in 2027 and only sharply accelerating after 2030.

Rule weakening to appease OEMs, unions and fossil fuel companies

Morgan Stanley believes the changes weakening the pollution standards stem from pressure from carmakers, unions and the petrochemical industry whose profits are directly threatened by the global shift to electric vehicles.

“The delay and flexibility baked into the new timeline could be part of an effort to appease the UAW [United Auto Workers] a key Democratic constituency historically concerned about the rise of EVs,” says Jonas.

“Existing EV regulations and ‘mandates’ are facing pressure from political opposition and fossil fuel companies.”

EV Council says US policy change not a major backdown

Despite reports over the weekend suggesting that the federal government is preparing to weaken its proposed New Vehicle Efficiency Standard, the head of Australia’s Electric Vehicle Council Behyad Jafari told The Driven he thinks the policy shift in the US isn’t a major one and that he thinks concerns about the US changes are overblown.

“The US have introduced their strongest ever fuel efficiency standards, making it clear their future is in electric vehicles.” Jafari told The Driven.

“While it’s easy to look at how the final standard is weaker than the proposed one, it’s by no means a major backdown. In its principles and objectives, it still points to a major step forward in transitioning to electric vehicles.

“The policy was announced with speakers flanked by EVs. While it suits some people to claim this is a change in direction, actually the changes made are pretty standard in the policy development process. That includes drafting a position, talking to stakeholders and arriving at an end point.”

Jafari says recent shift in US policy needs to be placed in context with broader pro-EV direction.

“If you watch that conversation every day, you can look at say well this has gone from 100% to 90%, but that’s the wrong perspective.”

“The US’s rules have gone from more like 50% to 90%. In Australia, we’re going from never having had a standard, to introducing what I hope are pretty strong ones.”

After two months of fierce debate including an aggressive misinformation campaign from the fossil car lobby, the Australian government is expected to introduce its New Vehicle Efficiency Standard to parliament this week.

Many will be keenly watching to see if the final detail is weaker or stronger than the government’s “preferred” Option B proposal indicating whether the fossil car lobby has been successful with its fear campaign.