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.
.png?width=700&height=504&name=Regulatory%20Roadmap%20(2).png)
What does EPA HD Low NOx (as is) mean for you?
MANUFACTURERS: With economic uncertainty at an all-time high as Trump tariff policy seesaws, ACT Research is no longer forecasting a prebuy ahead of 2027. Market uncertainty along with uncertainty around what the rule will look like should the administration make amendments during its “review” mean manufacturers face planning challenges.
DEALERS: As dealers are the ones selling the vehicles for the OEMS, they can no longer expect higher than usual sales in the next couple of years ahead of the rule.
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. 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: Both Oregon and Massachusetts have opted to delay compliance start by one year to MY 2026. Vermont has delayed HD Omnibus enforcement by one year to MY 2027.
Delays are currently overshadowed by Congress’ choice to use the CRA to overturn the EPA’s waiver decision. Now that the president has signed, the waiver is rescinded and the rule is unenforceable. California has already filed a lawsuit to challenge the resolutions. This means that HD Omnibus will likely be tied up in the courts while it is determined whether the use of the CRA in this instance holds up.
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.
What does CARB HD Low NOx Ombnibus mean for you?
MANUFACTURERS: OEMs are faced with more regulatory uncertainty. While the EPA waiver decision has been overturned by Congress, meaning HD Omnibus is not enforceable, CARB has already indicated it will file a lawsuit contesting the use of the CRA to squash the waivers. There are also questions surrounding the Clean Truck Partnership Agreement in which the OEMs agreed to follow HD Omnibus in California regardless of any challenges to its authority to set its own standards. CARB intends to continue to enforce compliance in California on the basis of that agreement.
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. While the other HD Omnibus states can no longer enforce the rule, since the OEMs agreed to comply in California, fleets in California may still see some price increases.
MOST RECENT UPDATES: In the past few months, multiple states have announced that they will delay ACT enforcement. Massachusetts and Oregon announced two-year delays and will not begin enforcement until 2027. Vermont announced a one-year delay and will now being enforcement in 2027. Maryland announced a two-year delay, and as it was not set to begin compliance until 2027 in the first place, this means it has pushed out enforcement to 2029.
Of course, all of these announcements are currently overshadowed by Congress’ choice to use the CRA to overturn the EPA’s ACT waiver decision. Now that the president has signed, the waiver is rescinded and the rule is unenforceable. California has already filed a lawsuit to challenge the resolutions. This means that ACT will likely be tied up in the courts while it is determined whether the use of the CRA in this instance holds up.
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: OEMs are faced with more regulatory uncertainty. While the EPA waiver decision has been overturned by Congress, meaning ACT is not enforceable, CARB has already indicated it will file a lawsuit contesting the use of the CRA to squash the waivers. There are also questions surrounding the Clean Truck Partnership Agreement in which the OEMs agreed to follow ACT in California regardless of any challenges to its authority to set its own standards. CARB intends to continue to enforce compliance in California on the basis of that agreement.
DEALERS: Congress overturning the waiver decision should alleviate pressure on dealers to sell ZEVs in order to see more diesel CVs. Constraints may continue to persist in California where OEMs have agreed to comply, but the remaining ACT state dealers will see relief.
CARRIERS AND FLEETS: Fleets in ACT states (outside of California) should not have problems buying the vehicles they are looking for now that OEMs and dealers do not have to tie ZEV sized strings to diesel sales.
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.
Looking for a PDF version of this report? Download it below!
