U.S. EPA approves the final emissions targets for new car from 2027 to 2032, with a mild weakening but still aspirant

On Wednesday 20 March, the U.S. Environmental Protection Agency (EPA) approved the final 2027-2032 emissions targets for new vehicles.

Compared to the previously published draft, the final standards modestly and appropriately relax the requirements for new vehicles on the road. For example, the average total carbon dioxide emissions of vehicles sold by manufacturers for 2027 are relaxed from 152g/mi to 170g/mi. Similarly, the average total carbon dioxide emissions of vehicles sold by manufacturers for 2032 are relaxed from 82g/mi to 85g/mi.

At the same time, the final version removes the limitation in the earlier draft that electric vehicles should account for two-thirds of new car sales by 2032. In its place, a gradually shrinking average total carbon emissions is required. The EPA says they are adopting a technology-neutral regulatory plan that no longer forces automakers to develop and build pure electric vehicles (EVs). This allows manufacturers to choose any route that reduces carbon emissions to achieve the targets, including plug-in hybrid electric vehicles (PHEVs), turbocharging, lightweight bodies, and more. Under the EPA's standards, total new vehicle emissions in 2032 would be reduced to 51% of what they would be in 2026, slightly higher than the 44% that the draft limits would achieve.

SMM believes that the finalisation of this standard has somewhat created a negative impact on short-term market growth for electric vehicles. However, in the long run, the new rules will still force significant emissions reduction. According to EPA projections, automakers will need to sell 35%-65% zero-emission vehicles of their total sales in 2030-2032 to have any chance of meeting the relevant emissions reduction targets. Judging from a technology and industry perspective, electric vehicles are virtually the only relatively mature, low-cost, zero-emission vehicles that can be produced and sold at scale and profitably in the near future. Therefore, the dust settling on the standard should still be seen as positive news in the long run. The demand for lithium-ion batteries in EVs and PHEVs in the US is expected to continue to grow over the next 5-8 years.