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Washington Watch: Biden’s EPA targets emissions with higher fuel standards as fate of climate-focused Build Back Better uncertain

The Biden administration has announced the strongest rules yet for vehicle fuel efficiency, a step meant to slow polluting emissions that emerges just as the White House digs in to preserve threatened spending legislation loaded with climate-change proposals.

The Environmental Protection Agency’s final rule Monday would raise mileage standards for cars and other light-duty passenger vehicles starting with the 2023 model year, reaching a projected industry-wide target of 40 miles per gallon by 2026. That’s 25% higher than a rule finalized by the Trump administration last year and 5% higher than an earlier Biden proposal.

EPA Administrator Michael Regan said the move is “a giant step forward” in delivering on President Biden’s climate agenda, “while paving the way toward an all-electric TSLA, -3.39%, zero-emissions transportation future.″

“‘Vehicle electrification and stronger  efficiency  standards will … insulate drivers from future  fuel  price spikes…’”

— Carol Lee Rawn of Ceres

Over the weekend, Democratic Sen. Joe Manchin, part of nearly evenly split chamber, reportedly surprised the White House when he said he couldn’t vote to approve Biden’s $2 trillion social and environmental policy bill. The bill was still too costly and likely, inflationary, he said.

Read: Biden’s social-spending bill ‘not dead yet’ as Joe Manchin could back parts of it, analysts say

The White House and leading Democrats had already negotiated with Manchin, who represents coal- and oil-producing West Virginia, on changes to pare back the broad spending initiative, which features several environmental proposals aimed at EVs, home solar and more.

Read: Tesla, EV Stocks Are Big Losers With Manchin’s ‘No’ on Build Back Better

The Build Back Better bill includes up to a $12,500 tax credit to buyers to lower the cost of EVs, depending on the amount of American-made parts and labor in such vehicles. Smaller tax credits are also part of the proposal.

Democrats had suggested they’d have a vote on the bill by the end of the year, but that looked in greater doubt.

The new fuel efficiency rule accelerates the rate of emissions reductions to between 5% and 10% each year from 2023 through 2026, the EPA said.

The EPA said its analysis shows the auto industry can meet the final standards with modest increases in the numbers of EVs entering the fleet. EVs and plug-in hybrids are expected to have about 7% market share in 2023, the Associated Press reported.

“The auto industry continues to make significant progress improving fuel economy and reducing GHG emissions and is investing $330 billion in electrification by 2025. While the challenge before us is great, we are committed to achieving a cleaner, safer, and smarter future,” said John Bozzella, president and CEO of the Alliance for Automotive Innovation. The group represents the makers behind nearly 99% of new cars and light trucks sold in the U.S.

But “EPA’s final rule for greenhouse gas emissions is even more aggressive than originally proposed, requiring a substantial increase in electric vehicle sales, well above the four percent of all light-duty sales today,” Bozzela said.

By 2025, the industry will have invested $330 billion toward electrification, Bozzella stressed. IHS Markit predicts 130 EV models will be available in the U.S. by 2026 versus 50-plus models today.

Automakers at one point were accepting of stricter rules on fuel and EV adoption than those advanced by the Trump administration and some congressional Republicans, largely as the industry has responded to shifting demand from drivers and keeps up with competition abroad. For sure, fuel standards have split the industry, with some manufacturers moving toward EVs and hybrids faster than others.

Read: Chasing Tesla: Here are the current electric vehicle plans of every major car maker

“‘EPA’s final rule for greenhouse gas emissions is even more aggressive than originally proposed, requiring a substantial increase in electric vehicle sales…’”

— John Bozzella of the Alliance for Automotive Innovation

Carol Lee Rawn, senior director of transportation at Ceres, which promotes sustainable investing, said her group’s research shows that emissions and fuel-economy standards not only advance U.S. climate goals, “they also carry major benefits for the auto industry, particularly suppliers,” who will be needed to bring about the industry transformation.

Plus, “vehicle electrification and stronger efficiency standards will support businesses and communities by reducing toxic air pollution, lowering lifetime vehicle costs and insulating drivers from future fuel price RB00, -1.89% spikes,” she said.

Transportation is the largest source of greenhouse gas emissions in the U.S., making up 29% of all emissions, according to EPA data. Within the sector, passenger cars and trucks account for more than half of emissions and they make up 17% of overall U.S. carbon emissions.

Biden has set a goal of cutting U.S. greenhouse gas emissions by at least 50% by the end of the decade, on the way to net-zero emissions by 2050. Republicans and some Democrats have said such pledges do little to hold other global polluters, including China, accountable and they risk putting the U.S. in a weakened position in global energy markets CL00, -3.45%, including against gas-giant Russia.

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