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Deep Dive on US Fuel Efficiency Regulations and Implications to EV Adoption

The transportation sector is the largest source of US greenhouse gas (GHG) emissions and the second-largest contributor of emissions reductions needed to reach emission goals. New regulatory proposals would significantly narrow the gap between US and EU vehicle fuel efficiency standards. Electric vehicles (EVs) are no longer just "nice to have" but critical to regulatory compliance.

@BettyJiang and team’s analysis shows EV's share of total vehicle sales needs to rise from its current ~3% to ~12-14% by 2026 to meet proposed standards. This estimate assumes organic fuel efficiency and performance credits track close to historical trends. Even under the current, less stringent standards, most automakers have been in deficit in recent years.

Our findings suggest the cost of non-compliance could also rise. The failure to achieve established targets may result in non-trivial cost implications. The separate EPA compliance system – though unclear on explicit penalties – could potentially double compliance costs.

Both EPA and NHTSA proposals are in their comment period. In order to affect the 2024 model year, the NHTSA needs to finalize its ruling by April 2022.