MOST RECENT UPDATES: As previously discussed, GHG-3 is facing change under the current administration. Trump’s executive order, the Senate’s Transportation Freedom Act, and the EPA’s plans to review the rule all mean one thing: GHG-3 will eventually cease to exist in its current form. Rulemaking is typically a slow process, so it will be some time before we know just what the new standards will be. But we can certainly expect less stringency as the aim of the Trump administration is to undo “EV mandates.”
SUMMARY: The EPA’s GHG emissions standards have become steadily more stringent over the years and will continue to do so through MY 2032+ per the EPA’s GHG-3 standards (finalized in April 2024). Though these standards will change under the new administration, this section covers the rule as it stands for reference.
The Biden EPA was adamant that GHG-3 is not a ZEV mandate, though many in the industry are concerned that the stringency of the standards implies just that. The EPA provides a variety of examples of possible compliance pathways. In the most aggressive compliance example, the EPA shows what compliance would look like should manufacturers choose to comply using only ZEVs from Model Year (MY) 2027-MY 2032 (see chart below).
Since the final rule was published, several states and entities have filed lawsuits over GHG-3 in the D.C. Circuit Court of Appeals. Under the new administration, these petitioners could see their problem (current GHG-3) solved (changes to GHG-3) before a judge is able to make a formal decision.
What does EPA GHG Phase 3 (as is) mean for you?
MANUFACTURERS: GHG-3 compliance would be challenging and could mean lower overall sales if an insufficient number of ZEVs, H2-ICE, hybrids, or NG CVs can be sold alongside traditional diesel-ICE CVs. While GHG-3 has generally been considered a tough ask, especially in the HD space, manufacturers like regulatory stability. GHG-3 may have the grim reaper in sight in the short term, but there is no guarantee that the next administration won’t want to reinstate it. Seesaw rulemaking is precisely what OEMs do not want. Product planning and development are informed by requirements defined by federal rules, and the expectation that those rules will be generally consistent over time.
DEALERS: Dealers would have to consider inventory management, especially in the later years of the rule when fewer diesels would be sold. The Trump administration pull-back should make dealers happy to not have to worry about diesel allocation constraints when GHG-3 would start to restrict diesel sales.
CARRIERS AND FLEETS: While the GHG-3 will undoubtedly become less stringent (if not entirely retracted), traditional diesel-ICE vehicles will eventually become a declining percentage of the sales mix. The Trump administration’s actions will likely not be a forever change as the next administration could regulate CV GHG emissions more stringently again or increase stringency for later years. The time to start thinking about alternatively powered vehicles is still sooner rather than later. The addition of non-diesel vehicles may not happen in your fleet right away, but think about what planning should start so that your business is prepared when the time does come.
While there haven’t been any recent changes, this rule is often part of the discussion when considering the Trump administration’s agenda. This rule has not yet been a direct target of the Trump administration, so we consider it “stickier” than GHG-3. That is, it has been finalized longer, and is less offensive to its detractors, than GHG-3, so at this point it has a higher likelihood of survival. The EPA announced in March that it would “reevaluate” the rule, though at this point it is unclear exactly what this entails. If this administration does decide to make changes to the EPA Low NOx rule, we would expect those changes to come in the form of amending the new warranty and useful life (UL) standards.
SUMMARY: As part of the EPA’s Clean Trucks Plan, on December 20, 2022, the EPA posted a final rule, “Control of Air Pollution from New Motor Vehicles: Heavy-Duty Engine and Vehicle Standards,” that set NOx and PM emissions reduction standards (the “EPA Low NOx rule”). The EPA Low NOx rule sets more stringent NOx and PM standards for MY 2027+ heavy-duty engines. The EPA’s 2027 rule will require a NOx reduction of over 80% from current standards.
INDUSTRY IMPACT:
The adjacent chart shows the EPA’s MY 2027 NOx standards for heavy-duty engines.1 Along with the new NOx emissions standards, the EPA has updated useful life (UL) and warranty periods. The tables below detail the emission-related warranty periods and updated useful life standards for engines compared to the current standards.
It is the combination of the new NOx emissions stringency, the increased UL, and the increased warranty period that result in significant costs added to the diesel purchase price (~$20k-$30k). Because of this cost increase, we have seen prebuying activity and continue to forecast additional prebuying ahead of 2027 as long as willingness and ability align. Tariffs or other inflationary policies could throw a wrench in equation.
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What does EPA HD Low NOx (as is) mean for you?
MANUFACTURERS: A prebuy will affect OEM’s annual sales. Demand for vehicles should increase ahead of 2027, so long as the ability for fleets to prebuy exists (aka, they can afford to do it). Should it occur, OEMs will see a dip in sales in 2027.
DEALERS: As dealers are the ones selling the vehicles for the OEMS, they can expect higher than usual sales in the next couple of years followed by a decline in 2027 post prebuy.
CARRIERS AND FLEETS: The EPA Low NOx rule doesn’t mandate the type of powertrains that make up your fleet, but it will impact the price of diesel-ICE trucks. ACT Research has been forecasting a prebuy ahead of 2027 for this very reason. As noted earlier, we are expecting the price of a Class 8 truck or tractor to increase around $20k-$30k. The coming price increase may or may not change your purchasing decisions in the next few years, but having those discussions now is critical.
MOST RECENT UPDATES: CARB received a waiver from the EPA in December 2024, which means the rule is now fully enforceable. Both Oregon and Massachusetts have opted to delay compliance start by one year to MY 2026. As mentioned previously, the Trump administration and Congress are now attempting to overturn the waiver granting decision for HD Omnibus.
SUMMARY: In August 2020, CARB adopted HD Omnibus which lowers NOx and PM emissions standards to 0.05 g/hp-hr for MYs 2024-26 California heavy-duty engines and matches the EPA standards for MY 2027 and beyond. CARB and the Truck and Engine Manufacturer’s Association (EMA) announced the Clean Truck Partnership agreement in July 2023. The Clean Truck Partnership agreement includes CARB’s agreement to amend HD Omnibus MYs 2024-26 compliance pathways and to align with the EPA’s Low NOx emissions standards, among other things.
Alongside California, nine additional states have proactively adopted the HD Omnibus rule (see adjacent map). Pennsylvania has an existing regulation that would require it to adopt California vehicle emissions standards. However, Pennsylvania put a hold on this requirement and will now follow California’s HD Omnibus standards beginning with MY 2027. The states starting compliance with MY 2027 will effectively be complying with the federal standard set by the EPA that CARB has agreed to align with. CARB will continue to have a separate engine certification program as it will continue to maintain its On-Board Diagnostic and HD in-use compliance program.
MANUFACTURERS: HD Omnibus compliance from 2024-26 will largely depend on CARB certified engine availability. Manufacturers are allowed a percentage of legacy engine sales from 2024-26; however, the ability to sell a greater number of vehicles with legacy engines depends on the ability to sell vehicles with engines that are CARB certified for the 2024-26 MYs. Manufacturers choosing either of the alternative compliance options are required to offset emissions generated by legacy engines by using credits, or, if there are not enough HD zero-emission NOx or PM credits available, the manufacturer needs to complete projects targeted at disadvantaged communities that would meet the offset requirements. However, if OEMs struggle to sell ZEVs in compliance with ACT requirements (and are limited in their ICE sales), HD Omnibus compliant engines will likely not be the main item hampering sales.
DEALERS: The confusion surrounding HD Omnibus had California dealers questioning if they would be punished for selling legacy or EPA engines to customers out of state. In early 2024, CARB provided guidance for California dealers grappling with this question—they can sell a non-HD Omnibus compliant engine into other states under certain conditions. With additional states phasing in with MY 2026, additional questions from dealers will likely arise, but hopefully compliant engine availability will increase and no longer be a concern.
CARRIERS AND FLEETS: HD Omnibus means more expensive trucks. While we do not expect the same price impact that hits in 2027 when the EPA’s rule comes into play, a 75% reduction in NOx emissions still means additional cost.
MOST RECENT UPDATES: In March 2024, CARB proposed amendments to Advanced Clean Trucks (ACT). A key change is increasing flexibility to make up a credit deficit. The proposal would extend the make-up time from one to three consecutive MYs. It would require the net deficit balance to be reduced below 30% by the end of the first make-up year if more than 30% of the net deficit balance is generated from the most recent MY. Final adoption and approval are still pending. This amendment would require confirmation from the EPA that it is within the scope of the original ACT waiver. This will be challenging considering the Trump administration’s ire towards California’s authority to set its own standards, especially as the administration and Congress are attempting to overturn the original waiver decision.
SUMMARY:
CARB’s ACT rule requires OEMs to sell ZEVs as an increasing percentage of their annual sales through 2035+. The table below outlines the gradual increase in sales percentage requirements.
This regulation allows credit trading. A manufacturer’s deficit is the product of the annual sales volume, percent sales requirement, and a weight class multiplier. Deficits for all Classes can be met with ZEV and Near Zero Emission Vehicle credits from other classes. The exception is Classes 7-8 tractors—the deficit calculated for this category can only be met with ZEV and NZEV credits from this group. In addition to California, 10 states have adopted ACT and will phase in through 2027 (see map).
With challenges like infrastructure, weight limits, and cost competitiveness at top of mind during fleet purchasing decisions, OEMs are likely to struggle selling ZEVs. There is nothing stopping fleets from purchasing compliant diesel vehicles in non-ACT states. Overall CV sales volumes may not change, but the location of those sales could start shifting. While ACT will certainly drive some ZEV sales, the industry faces a lot of moving parts as compliance begins in additional states.
MANUFACTURERS: Since OEMs are the group required to comply with ACT, the burden of selling ZEVs (or buying credits) falls to them. ACT is uniquely challenging for OEMs looking to use credits because, unlike CARB’s passenger vehicle ZEV mandates, ACT does not allow for credit pooling and trading between all the states that have adopted this regulation. For example, compliance in California must be met with ZEV sales or credits generated in California. ACT will necessitate diesel CV sales be paired with ZEV sales for OEMs to stay on top of compliance for years to come as other ACT states begin compliance.
DEALERS: In the ACT states where OEMs must consider what vehicles are sold to meet compliance requirements, the dealerships in these states will likely see ZEVs being pushed on them. It is a real possibility that dealers will continue to lose new diesel allocations if OEMs are unable to sell enough ZEVs in each ACT state.
CARRIERS AND FLEETS: Fleets buying in ACT states may have a hard time purchasing the trucks they want. If dealers are pressured to sell ZEVs to get or maintain certain levels of new diesel allocations, then dealers will be attaching ZEV-sized strings to new diesel purchases. Fleets may find themselves buying in non-ACT states to get the trucks they need without spending extra on a ZEV they aren’t ready for.
While the next four years will bring about plenty of change for the trucking industry, it can be a challenge to know just what and when changes will occur. Fortunately, whether you agree with the President’s policies or not, the direction this administration is heading has been made very clear from day one. We know that GHG-3 will change—we just don’t know if it will be fully repealed or amended with less stringent standards. We know the EPA Low NOx rule hasn’t been threatened directly by President Trump, leading us at ACT Research to believe it will stick around. However, we don’t know that it will never come up as an issue. We know that President Trump is not in favor of California’s ability to set its own emissions standards, as it has done for decades, but we don’t know the exact path he may take to revoke waivers or try to fully upend California’s longstanding rulemaking authority. We know California will continue to set its own standards and fight for its ability to continue to do so.
All of this to say, we may not have a crystal ball to tell us exactly when and how this landscape will change, but we know what the Trump administration has its sights on and the direction things are heading. Keeping abreast of key policy and regulatory changes is pivotal for your team, no matter where you sit in the industry.
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