Shipper group, EDF urge administration to set stricter truck fuel-economy standards

Over the next nine years, can America's heavy-duty truck fleets cut 40 percent of their fuel consumption and carbon emissions? A consortium of 12 food and apparel companies, all of whom have rich environmental pedigrees, thinks they can. So does the nonprofit advocacy group the Environmental Defense Fund (EDF).

The founder of startup trucking information website Trucks.com, who cut his teeth as CEO of online car-purchasing site Edmunds.com, said it's economically impractical even if the technology is available to do it. The American Trucking Associations (ATA), which represents the nation's big fleets, thinks it's somewhat ridiculous to look out that far ahead because no one has a crystal ball on available technology and economic activity, among everything else.

In an April 1 letter, the shipper consortium urged the Environmental Protection Agency and the Department of Transportation to require big rigs to meet even tougher standards for fuel and greenhouse gas (GHG) reductions than the Obama Administration has proposed for a new phase of vehicle environmental standards set to begin in 2018. EPA and DOT are expected to publish final rules in late summer or in the fall.

According to the letter, a 40-percent cut in fuel use would raise a loaded big rig's efficiency to 11 miles per gallon by 2025. Currently, the most efficient heavy-duty truck gets about 7 mpg. Fleets would experience lower life-cycle costs as soon as the new fuel-efficient trucks entered service, the group said, citing test results from the Department of Energy's "Smart Truck" program. By 2040, the typical big truck would save 21 cents per mile in fuel costs and the industry in total would save about $25 billion a year, according to the letter.

Among the group's members are Minneapolis-based General Mills Inc.; Waterbury, Vt.-based Ben & Jerry's Homemade Inc., a unit of the multinational food and personal-care company Unilever PLC; Richvale, Calif.-based Lundberg Family Farms, and Londonderry, N.H.-based Stonyfield Farm Inc., a unit of French food giant Danone. Ventura, Calif.-based apparel manufacturer Patagonia Inc. is the only nonfood company member.

EDF, for its part, has proposed a more aggressive fuel-consumption cut for big rigs. Its proposal calls for an overall 40-percent reduction, spread across all truck asset classes. However, because EDF's formula is a weighted average based on the volume of fuel consumption, the heavy-duty trucks that are the biggest guzzlers would be required to cut by 46 percent.

Jeremy Anwyl, CEO of Trucks.com, doesn't buy the push for tougher fuel-economy standards. If the payback was so robust and rapid, fleets and independent drivers alike would rush on board, borrowing capital in confidence that they would be repaid in spades, Anwyl said. The fact that such a change would need to be regulated, rather than dictated by market forces, indicates the math simply doesn't work, especially with diesel-fuel prices still hovering near multiyear lows, he said.

Instead, the shipper group should focus on the environmental benefits, which are more clear cut, and on who should ultimately pay for the investments needed to reach GHG-reduction goals, Anwyl said.

Jason Mathers, senior manager of EDF, said strict measures are in the best interests of shippers because they require the trucking industry to stay the fuel-efficiency course and not be swayed by short-term energy-price fluctuations. "As this industry learned just a few years ago, it takes time to improve fleet fuel efficiency," Mathers said in an e-mail. Efficiency practices aren't "something that can be flipped on when diesel goes north of $4 gallon," he said.

As of this past Monday, nationwide on-highway diesel prices stood at $2.27 a gallon, about 30 cents a gallon above 13-year lows hit earlier this year, but still 60 cents a gallon below the already low prices of May 2015.

Mathers' comments were echoed by Ben & Jerry's CEO Joséein Solheim, who wrote on Trucks.com's site today that "efficiency gains don't come on their own," and will require long-term policies that spawn lasting change.

Solheim acknowledged that fleet owners view fuel-efficiency investments differently when diesel is $2.30 a gallon than when it's $4.00 a gallon or higher. The value of stricter efficiency standards is that they "act as a hedge" against fuel price volatility, and the higher prices that may be a byproduct of those swings, he said.

Glen Kedzie, who heads energy and environmental issues at ATA, said it can't evaluate the group's proposal because no one knows what technology will be available nine years out to support the objective, or whether the technology would be effective. Kedzie said it's easy for outsiders to make projections when they're not in the shoes of the fleet owner. Unless fleets are reasonably certain that they can achieve a solid return on investment, they won't commit, Kedzie said.

The proposed EPA-DOT regulations will run until 2027, making it one of the longest rule-implementation cycles in trucking history. The Administration projects that, by 2027, big truck fuel consumption and GHG emission levels will be cut by 32 percent from 2017 levels. The rules will be imposed on truck, trailer, and engine manufacturers, but fleets will foot much of the bill as those costs get passed on.

Complying with the tougher standards will end up costing an owner of a typical "Class 8," or heavy-duty, truck about $16,800 by 2027 compared with 2017 levels, according to Administration projections. Kedzie said, however, that the government's estimate is dramatically understated because it doesn't include the higher costs of maintenance, warranties, and driver and vehicle down times.