Planes and Trucks and Carbon: EPA Moves Ahead on Multiple Fronts in the Transportation Sector

While much attention has been focused on the recent release of the U.S. Environmental Protection Agency’s greenhouse gas regulations for the power sector, including the Clean Power Plan, EPA is moving more quietly ahead on two other important GHG-related proposals for the transportation sector. Earlier this summer, EPA issued its proposed second phase of carbon tailpipe standards for medium and heavy duty trucks and engine, and a proposed “endangerment finding” and advanced notice of proposed rulemaking (ANPRM) for regulation of GHGs from aircraft engines. Comment periods for both come to a close in the next two months. While not as far reaching as the Clean Power Plan, both proposals, if and when finalized, will have significant impacts on their respective sectors. Like the Clean Power Plan, they are also key to the President’s Climate Change Action Plan and the proposed U.S. commitment to GHG reductions for the upcoming United Nations negotiations of a global climate accord. A comparison of the two recent proposals shows how EPA is seeking to leverage its authority over mobile source emissions under the Clean Air Act to reduce GHG emissions from a sector that is a significant source of GHG emissions.

Phase 2 Standards

EPA’s authority for regulating tailpipe emissions of GHGs is derived from section 202 of the Clean Air Act which authorizes EPA to set emissions standards for any class of new motor vehicles or new motor vehicle engines which cause or contribute to air pollution which endangers public health or welfare. This decisional predicate to regulation is referred to as an “endangerment finding,” and once made, further regulation is mandatory though timing is not. Under section 202, EPA is to put such regulations into effect in such a time period so as to permit the development and application of the requisite technology, taking cost into account.

EPA’s Phase 2 proposal builds on an existing set of regulations of motor vehicles begun at the start of the Obama administration. Thus, much of the preliminary regulatory work has been completed, including the endangerment finding made in 2009 under section 202. After making the endangerment finding, EPA, in conjunction with the Department of Transportation’s National Highway Transportation Safety Administration, set GHG tailpipe and Corporate Average Fuel Economy standards for “light-duty” vehicles—cars and light trucks—for model years 2012-2016, and subsequently for model years 2017-2025. EPA and NHTSA also set CAFE and GHG vehicle and engine standards for medium and heavy trucks for model years 2014-2018 (Phase 1 standards). Significantly, the endangerment finding and all current GHG tailpipe standards have been upheld in court.

EPA now is simply extending its authority to secure additional GHG reductions further into the future. Thus, EPA again with NHTSA, published a draft rule on July 13 of this year, setting Phase 2 fuel efficiency and GHG standards for medium and heavy duty trucks and engines for model years 2021-2027 (and for trailers, model years 2018-2027). While the Phase 1 standards focused on improving efficiency by using off-the-shelf technology to achieve 10-20 percent reductions in fuel consumption and GHG emissions (percentage varies by class of vehicle), the Phase 2 proposal seeks to push the industry a bit further into the future. It would require additional technology and efficiency improvements to yield a 24 percent improvement in fuel efficiency for combination tractors, eight percent for trailers, and 16 percent for pick up trucks, light vans and vocational vehicles (garbage trucks, buses, on-road construction trucks and recreational vehicles) for model years 2021 to 2027 (trailer standards begin in 2018).

EPA claims these standards would reduce GHG emissions by 1 billion metric tons, conserve approximately 1.8 billion barrels of oil, and reduce fuel costs by $170 billion over the lifetime of the affected vehicles. The proposal was largely welcomed by the automotive manufacturing industry, which worked with EPA to set reachable goals. There is not a consensus though, because other industry groups expressed concern about the timetable of implementation or costs imposed on smaller fleets of specialized vehicles. Some environmental groups had hoped for more significant improvements.

Aircraft Endangerment Finding and ANRPM

In contrast to motor vehicles, EPA is just beginning its regulatory path with regard to aviation emissions. Section 231 of the Clean Air Act authorizes EPA to issue emission standards for any air pollutant from any class of aircraft engines which cause or contribute to air pollution that endangers the public health or welfare. EPA is to consult with the FAA on any such engine standards, and cannot change standards if such a change significantly increases noise or adversely affects safety. Like section 202, an endangerment finding makes regulations mandatory, but again, EPA is to ensure such regulations take effect in such a time period so as to permit the development and application of the requisite technology, taking cost into account.

On June 10 of this year EPA issued a proposed endangerment finding that GHG emissions from aircraft engines cause and contribute to endangerment of public health and welfare. The finding was largely based on the 2009 finding for motor vehicles, discussed above, though EPA did provide new and additional information to bolster that prior finding. It did not, however, re-open the finding itself as to whether GHGs cause air pollution that endangers the public. Thus, the only issue theoretically open for comment on the endangerment finding is whether aircraft engines cause or contribute to that air pollution; EPA proposed to find that emissions from aircraft did so. As with motor vehicles, such a finding is an administrative prelude to future regulation under the Clean Air Act, and was court-ordered after petitioner environmental groups sued EPA for failing to act on their petition to regulate. EPA has not issued any proposed regulations but instead released an “advanced notice of proposed rulemaking” which sets forth the EPA’s intentions on potential future regulation and seeks comments. While EPA seeks comments on both the endangerment finding and ANPRM, only the former is a formal rulemaking proposal; thus, once the comment period closes, EPA will move ahead on finalizing the finding. The ANPRM, by contrast, merely indicates the direction EPA is likely to go in the future and there will be further time for comment before any regulations go final.

In brief, EPA plans to await final agreement by the International Civil Aviation Organization (ICAO) which is discussing an international GHG standard or program, and would then base domestic regulations on what emerges from the ICAO agreement. The ICAO decision is expected by February 2016, though formal adoption could take longer.  EPA anticipates that it would likely merely adopt ICAO standards, as it has done with respect to other regulations (e.g. emission standards for conventional pollutants like oxides of nitrogen), but it could possibly go beyond them if EPA does not think the ICAO standards are strong enough.  The US is actively involved in the ICAO process through the FAA.

Should ICAO not reach an agreement, it is likely that EPA would then move ahead on its own.  In either event, EPA has clarified that any final regulatory decisions would have to await evaluation of any ICAO action.  Hence, any regulatory actions would take place in the next Administration.  That is also because the endangerment finding would not be final until 2016 and any proposed rules would come out no earlier than 2017, with final rules then issued in 2018.  EPA would continue to coordinate its actions with the FAA.

In essence, EPA’s action was forced by court order and merely sets EPA on a path toward adoption of eventual international standards, but the current administration will not make the call, leaving it to a new president and his/her EPA.

How They Compare

At the outset, these proposed regulations arise from programs at very different levels of development. EPA’s Phase 2 standards follow an established line of regulation where cars and trucks have already been subject to regulation, and the proposal merely extends that regulation in to the future. By contrast, EPA’s aircraft finding and ANPRM are the very initial stages of regulation. The two statutory provisions from where these proposals arise also have some significant differences. For one, section 201 covers both motor vehicle and engines, but is restricted to new units. Section 231, on the other hand, focuses only on engines and doesn’t distinguish new engines from old. Thus, EPA theoretically has more limited authority for aviation emissions—only on the engine and not on the whole aircraft, but it could also theoretically regulate existing engines on planes in operation, not just new engines.

The statutory context of the two proposals are also different. EPA’s mobile source regulations are implemented at the manufacturer level, when a manufacturer wishes to introduce a vehicle into commence and must secure a certificate of compliance with EPA standards. This compliance is based on a tested model vehicle, and is applied to the entire fleet of that vehicle. The Clean Air Act also expressly allows manufacturers to average compliance across fleets and bank or trade credits with others to ensure compliance. Section 231 does not contain any of this detailed text on certification, averaging, banking or trading. Rather, EPA sets emission standards, and the FAA sets and administers the certification requirements for aircraft and engines to demonstrate compliance with those emissions standards. Hence, EPA must determine whether it can apply some of these features it uses with motor vehicle regulation to the aircraft industry or whether the FAA may need to use its authority.

Finally, the motor vehicle standards were not set with an eye to international standards. Rather, EPA tends to coordinate with California, which is often leading the way on new regulations and has potential authority to set its own standards. Motor vehicle manufactures tend to support national standards to avoid piecemeal regulation, and by and large, they have supported the various EPA standards over time, in particular where EPA has worked with them to ensure that the regulations are technically feasible. Nevertheless, opposition might arise from some sectors which find EPA’s proposed technologies inapplicable or too expensive.

With regard to aviation, EPA is looking to be consistent with ICAO, and airplane manufactures generally have supported the ICAO process, although this will ultimately depend on what ICAO adopts. There would likely be significant opposition to EPA standards that would go beyond ICAO.

The scope of regulations may also vary based on the different statutory sections. EPA’s regulatory authority over motor vehicles is clearly set forth in the Clean Air Act, and its Phase 2 regulations focus specifically on new medium and heavy duty engines and vehicles sold in the United States. The scope of any aviation regulations is far more uncertain at this time. As stated above, EPA is restricted to engines only but not just to new engines. Questions arise as to whether EPA can broaden its authority to include aircraft designs and operational standards if it can show they are directly related to engine performance. ICAO is indeed looking for standards applicable to the entire aircraft, and EPA has asked for comment in the ANPRM on its authority on this very issue.

Moreover, there is no question what Phase 2 standards cover—new engines and vehicles sold in U.S. commerce—but section 231 does not specify whether engines must be made in the U.S. or sold in commerce, so EPA will need to determine whether and how it will distinguish between U.S.-owned and foreign-owned aircraft flying into the U.S. It appears, for example, that EPA’s cause and contribute finding included emissions from both U.S. and foreign-owned aircraft. Finally, it is not clear whether EPA can or will regulate in service aircraft, in production aircraft or just newly designed aircraft. ICAO is apparently only considering in production and newly designed, cognizant of the long lead times necessary for designing more fuel efficient aircraft. EPA has asked for comments on this issue as well.

Perhaps one of the most significant differences between the two proposals is the very nature of the regulated activity: carbon emissions, which are entirely a matter of fuel efficiency. Many motor vehicle manufactures seek to ensure as high a level of fuel efficiency as possible, but there are tradeoffs with safety, and certain models are simply not designed to be fuel efficient. For example, some trucks are designed primarily for their strength, and fuel efficiency may undercut designs intended to enhance power. Hence, gas mileage is an important factor, but not necessarily the deciding factor in automotive design.

Fuel efficiency in aircraft, on the other hand, is a primary factor in design. Planes and engines are designed to be as fuel efficient as possible while guaranteeing safety. Thus, the aviation industry has already driven technology to produce the most fuel efficient planes because every gallon of fuel is extremely valuable. Some may even argue that there is simply no reason to regulate aviation emissions since the industry has a cost imperative to do that on its own. Significantly, EPA reports the ICAO standards would look to existing technologies, suggesting EPA may not be looking to drive technologies, at least for planes in production. At the same time, EPA notes that new airplane designs take years, and one would expect EPA to push technology standards forward in these future designs. Moreover, as it does with motor vehicles, EPA may very well be interested in how to use market based standards to ensure cost-effective compliance while rewarding those companies seeking more efficient technologies.

Despite all these differences, however, both proposals can be seen as part of a comprehensive effort by EPA to address some of the most significant components of GHG emissions from transportation. They show an agency moving forward on what it considers established science and methodically moving toward regulations on an incremental basis. And though neither proposal has the scope of the Clean Power Plan, and neither has resulted in the level of controversy and criticism engendered by that recent rule, the proposals will certainly have significant impacts on the respective sectors well into the future. Moreover, how EPA ultimately decides to regulate these sectors, including how broadly it interprets its authority and ability to force technological development, clearly has implications for other significant sources of GHGs in the transportation and even other stationary source sectors.

Jim Rubin is counsel at Denton U.S. LLP.