EPA is out with a final regulation this month that the agency hopes will curb greenhouse gas emissions from new passenger cars but one that corn growers and ethanol producers fear will depress demand for ethanol-blended gasoline. The size and speed of any decline is still uncertain.
The ethanol industry joined auto makers, labor unions, oil companies and fuel distributors in expressing widespread concern with EPA’s emphasis on electric vehicles when the rule was proposed last year. The final rule gives automakers more ways to meet GHG reduction targets for model years 2027-2032 and slows the compliance schedule at the start of the six-year period.
Notwithstanding any flexibility, agricultural and ethanol interests expressed worry about its emphasis on electric vehicles. It amounts to a “de facto EV mandate,” the Renewable Fuels Association said,” calling on EPA to “instead adopt a technology-neutral, full lifecycle analysis approach for assessing the true greenhouse gas impacts of various transportation options.” The group said EPA has ignored “the significant upstream emissions related to electricity generation, as well as the substantial emissions involved in battery mineral extraction and processing.”
The National Corn Growers Association and Growth Energy voiced similar criticism. Growth CEO Emily Skor said the rule “offers automakers some limited flexibility … [but] fails to include any meaningful changes to ensure we’re not leaving biofuels on the sidelines.” NCGA said the plan “still relies almost exclusively on the use of electric vehicles, requiring that a majority of the specified fleets are electric in less than a decade.” NCGA cited a study showing that both corn prices and the value of farmland would drop significantly with such a mandate.
University of Illinois agricultural economist Scott Irwin told Agri-Pulse, “To an economist, this looks like what I would call a small to moderate additional loss in gasoline demand in the next six years, due to a somewhat faster adoption of EVs,” whose market share has been growing. But when it comes to the impact on the ethanol industry, he said, “It’s certainly not an apocalypse.”
Scott Irwin, University of IllinoisIrwin stressed that the new standards apply only to new vehicles, and with 250 million passenger cars on the road, only a small percentage of that total can be replaced with lower-emitting models each year.
Without minimizing the impact on gasoline demand, Irwin said in a thread on X, “the reality of the new tailpipe emission standards is that they may not have as much impact on the composition of the total rolling stock of light-duty vehicles on the road in 2030 as you might think. And it is the composition of the total rolling stock of vehicles that is the base for gasoline (and ethanol demand.)”
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Roughly calculating the loss in gasoline demand, Irwin told Agri-Pulse, “Maybe we have been on a path of something like 5 to 7% loss of gasoline demand without these new tailpipe standards,” he said. “And now it might be moved up to like, 8 or 10%.” Even if 10% of the rolling fleet of about 250 million is replaced with less-polluting vehicles, Irwin says that won’t translate into a loss of 10% in gasoline demand “because I'm very confident over the next five, six years, we're going to continue with hybrids being the sweet spot in the adoption curve.”
RFA says the rules will lead to an average loss in ethanol demand from 2027-2032 of between 283 million and 425 million gallons annually for 10% and 15% blends, respectively. The Energy Information Administration says 14 billion gallons of fuel ethanol was consumed in 2022. However, those numbers go up annually, so that by 2032, demand for 10% ethanol would fall by 709 million gallons and demand for 15% ethanol would fall slightly more than 1 billion gallons.
EPA expects manufacturers to produce a diverse range of clean vehicles under the standards, including cleaner gasoline vehicles, hybrids, plug-in hybrid-electric vehicles and full battery electric vehicles, the agency said in a fact sheet, creating more options for consumers.
If fully implemented, the rule is estimated to reduce GHGs from light-duty vehicles by 11% annually, which would be an improvement from the current 8% per year, the International Council on Clean Transportation said. In addition, the rule, which also applies to medium-duty vehicles, is expected to result in a cumulative reduction of 7.2 billion metric tons of CO2-equivalent emissions through 2055. It is also supposed to save $6,000 over the life of a new vehicle in fuel and maintenance and reduce health care costs by $13 billion per year.
EPA claims the rule is technology-neutral, offering automakers a variety of ways to get to the same point. The agency estimates the rule could result in a 53% light-duty sales share for plug-in electric vehicles in 2030, including 44% battery electric and 9% plug-in hybrid electric, ICCT noted. By 2032, that share could be 68% plug-in electric vehicles, including 56% battery electric and 13% plug-in hybrid electric. EPA says manufacturers could meet the standards with a share as low as 31% EVs by 2030.
Automakers and labor unions, which had significant input into the rulemaking process, called the new rules challenging but achievable.
The United Auto Workers said the rule “tak[es] seriously the concerns of workers and communities.” EPA, the union said, “has created a more feasible emissions rule that protects workers building [internal combustion engine] vehicles, while providing a path forward for automakers to implement the full range of automotive technologies to reduce emissions.”
John Bozzella, CEO of the Alliance for Automotive Innovation, called the rule “the most consequential carbon-reducing policy for vehicles ever” and “significantly different from the unworkable plan” originally proposed. A major difference: “EPA’s original proposal only projected battery electric vehicles (BEVs) in the electrification targets,” Bozzella wrote on AAI’s website. “But we said plug-in hybrids (PHEVs) – vehicles with both an electric motor and a combustion engine – have a role to play.”
“It’s still going to be very challenging to achieve, given the scale of the industrial base transformation and massive amounts of capital required, the public charging and supply chains still getting ironed out, and the change in consumer behavior ultimately needed to succeed,” he added. Bozzella made it clear where the industry stands, however, at the event to announce the new standards last week. “The future is electric,” he said.
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