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In its ongoing effort to squeeze out carbon pollution from the U.S. economy, the Obama administration's latest target is the trucking industry. On June 19, the EPA proposed new limits on greenhouse gases from heavy-duty trucks.
According to the EPA, the new regulations would slash 1 billion metric tons of greenhouse gases. Heavy-duty trucks manufactured from 2021 to 2027 will have to become 24% more fuel efficient, a requirement the EPA says will create new jobs, reduce the cost of freight, and clean up the air. Tractor trailers for 18-wheelers will also have to meet fuel standards for the first time.
While the cost of upgrading the efficiency of an average heavy-duty truck could run as high as $12,000 each, the fuel savings will pay back that investment within two years.
There is a lot of low-hanging environmental fruit to pick by imposing fuel standards on the trucking industry. Each year, an estimated $10 trillion worth of goods are moved by trucks across the country. However, the fleet only gets around 6 miles per gallon, meaning a massive amount of fuel is burned. Heavy-duty trucks consumed around 2.7 million barrels of oil per day in 2013.
Even increasing the fuel efficiency in trucks by a little bit would go a long way. Despite only accounting for about 5% of the vehicles on the road, heavy-duty trucks are responsible for about 20% of the country's total greenhouse gases in the transportation sector.
Unlike some of the EPA's other rules -- on power plant emissions, most notably -- the trucking industry is not united against the move. "Fuel is an enormous expense for our industry – and carbon emissions carry an enormous cost for our planet," Bill Graves, the American Trucking Association's president and CEO, said in a statement. "That's why our industry supported the Obama Administration's historic first round of greenhouse gas and fuel efficiency standards for medium and large trucks and why we support the aims of this second round of standards."
Glen Kedzie, ATA's vice president, noted the opportunity that exists for the industry. "In 2014, trucking spent nearly $150 billion on diesel fuel alone," he said. "So the potential for real cost savings and associated environmental benefits of this rule are there -- but fleets will need a wide variety of proven and durable technologies to meet these new standards throughout the various implementation stages."
And those technologies are becoming increasingly affordable and accessible, and the EPA rules may merely accelerate a trend that is already under way. The technology to achieve fuel savings already exists, and the industry even has a few options on how to get there.
Garbage trucks, bus fleets, and tractor trailers are increasingly turning toward compressed natural gas (CNG) or hybrid technologies. CNG trucks, for example, can slash emissions by one quarter, while hybrid-electric can cut emissions by nearly half.
That could save companies a lot of money. According to the Union for Concerned Scientists, some of the largest trucking companies could dramatically cut costs. A March 2015 report from UCS found that FedEx could save upwards of $570 million per year in lower fuel costs from federal fuel economy standards. UPS could save more than $450 million annually. It should be noted that UCS studied a much more stringent standard than what EPA proposed, but the message is the same: there is big money in fuel efficiency.
Waste Management, a garbage hauling company, is moving the quickest on CNG trucks. It has more than 3,000 natural gas trucks, and is moving forward plans on using natural gas in 90% of its new trucks. Waste Management estimates that by 2020 it will save over $1 billion per year in fuel costs by slashing 350 million gallons of fuel.
The EPA is staring down a lot of heat from utilities over its rules on power plants, but it is finding itself a willing partner with the latest fuel economy standards for heavy-duty trucks.
By Nick Cunningham of Oilprice.com. Oilprice has no position in any stocks mentioned. The Motley Fool owns shares of Waste Management. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.