New Class 8 MPG and GHG standards are closer than you think

Nearly a year ago, we reported on how the White House called on the Department of Transportation and Environmental Protection Agency to develop new fuel economy standards for Class 8 trucks manufactured after 2018 in the form of a miles per gallon (MPG) and greenhouse gas (GHG).

President Obama at that time that these standards, for which a proposal is due in the coming months, require the DOT and EPA partnering with various entities, including manufacturers and autoworkers, states, and other stakeholders to come up with the specifics.

While lower oil and gas prices in recent months are clearly welcomed by supply chain stakeholders and the general economy, how long this era of low prices remains intact is not known. But one thing that has been known for more than a while is that truck efficiency can always be improved, especially considering the low MPG heavy-duty trucks deal with on a daily basis.

There is talk in industry circles that a more aggressive MPG standard could reduce the costs to own and operate a truck by 21 cents per mile, which, for larger shippers, could result in millions of dollars in annual savings.

According to the Environmental Defense Fund (EDF), truck manufacturers are active in discussions regarding the new standards, but the majority of shippers are not involved or informed. The EDF says that shippers need to be communicating with and offering up their thoughts to the National Highway Traffic Safety Administration and EPA–the two parties making the standards known.  

EDF Senior Manager, Supply Chain Logistics Jason Mathers said that these proposed standards for new regulations for fuel-efficient standards make sense on multiple levels on a societal basis for things like protecting health and infrastructure, as well as from a commerce-based perspective, as EDF believes these standards will provide a clear business value, with shippers saving money and carriers lowering business costs.

“To us, it seems like a place where advocates in the industry can work together and build a better future,” he said.

The timeline for the proposed standards includes rule expected to be issued in March, followed by a comment period roughly 30 days after the rule is announced, which would then likely be followed by public hearings. And by late spring or early summer, he said there would be opportunities for industry stakeholders to weigh in on aspects of the rule they like and endorse or would like to see strengthened or modified. A final rule is expected by March 2016.

As for how the DOT and EPA are advancing communications on the proposed standards, Mathers said that they have been meeting with manufacturers, carriers, shippers, and environmentalists, they have been talking about particulars of the policy.

“They are listening to our recommendations and asking questions to better understand from a technical perspective or things related to GHG emissions,” he said. “These talks are not in the shadows per se. It is an open process given where things are in the rulemaking process, and parties are seeking information, with details not released until things are publicly released.”

Looking ahead, Mathers said that given the regulatory lead time requirements for this endeavor, the standards EPA and DOT are currently working on would go into effect in 2021, with a possible second set of standards kicking in around 2024.

When factoring in the current decline in oil and gas prices, Mathers said that emphasizes the critical need for strong standards.

As an example, he said a manufacturer is trying to decide whether to invest capital into things like more advanced transmissions or more efficient engine components to scale, with the willingness to make those types of investments impacted by the volatility of fuel prices.

And strong standards in place enables companies to make an investment that will pay off quite handsomely as fuel prices increase, which is likely, he explained.

“Fuel has been the dominant costs for moving trucks only rivaled by the costs of putting drivers into cabs and they will still be the top two costs of trucking, and from an operational perspective it is nearly four times as important as that equipment purchase,” he said.

With not much time left until the recommended MPG and GHG emission standards for Class 8 trucks manufactured after 2018 are issued, it is not too early for shippers to think about how to best work within these future parameters. While the supply chain is currently reaping the benefits of low fuel prices, their unpredictable nature makes it hard to know what the future holds. That said, now looks like a prime time to get involved and in the know, when it comes to knowing what is coming down the regulatory road.