EPA/NHTSA Phase 2 Fuel Efficiency & GHG Standards for Freight Trucks:

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Mae Meryl Elliott
8 years ago
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1 EPA/NHTSA Phase 2 Fuel Efficiency & GHG Standards for Freight Trucks: Projected Effect on Freight Costs U P D A T E M A Y Dana Lowell dlowell@mjbradlley.com

Effect on Freight Costs U P D A T E M A Y 2

2 PURPOSE Analyze the effect on freight costs of more stringent EPA /NHTSA Phase 2 fuel efficiency standards for new trucks Compare truck operating costs with Phase 2 standards to a base case scenario in which EPA/NHTSA Phase 1 standards do not change for new trucks purchased after MY2019 More stringent EPA /NHTSA Phase 2 standards are expected to achieve a significant reduction in total operating costs as large fuel cost savings offset much smaller increase in truck & trailer initial purchase costs. 2

change for new trucks purchased after MY2019 More stringent EPA /NHTSA Phase 2 standards are expected to achieve a significant

3 FREIGHT TRUCK OPERATING COSTS ($/MI) Current Costs Future Costs Affected By Other Costs 50% Labor Maintenance Tolls, fees Insurance Equipment Costs 11% General inflation General inflation Compliance Costs Fuel Costs 39% Fuel Price ($/gal) Fuel Consumption (gal per mile) 3

Equipment Costs 11% General inflation General inflation Compliance

4 ANALYZED EPA/NHTSA PHASE 2 SCENARIO Metric Reduced Fuel Use 1 Marginal Change in Cost 2 Equip EPA/NHTSA Phase 1 EPA/NHTSA Phase 2 MY MY MY MY Sleeper Cab 21% 23% 29% 39% Day Cab 11% 13% 22% 24% Van Trailer NA NA 8% 15% Sleeper Cab $7,875 $232 $1,034 $9,583 Day Cab $3,353 $601 $4,446 - $564 Van Trailer NA NA $1,546 $3,209 Already in place, Incorporated into baseline Based on April 2015 ICCT analysis of feasible and cost-effective technologies. 1 Compared to MY2013 truck/trailer. 2 Change is relative to previous compliance period. All costs in 2014 dollars 4

Day Cab $3,353 $601 $4,446 - $564 Van Trailer NA NA $1,546 $3,209 Already in place, Incorporated into baseline Based on April 2015 ICCT analysis of

5 PHASE 2 TECHNOLOGY OPTIONS Improved aerodynamics Low rolling resistance, single-wide tires 6 x 2 axle configuration Automated manual or dual-clutch transmission APU for idle reduction Exhaust waste heat recovery Engine improvements Lower friction Better air handling Better heat transfer Improved after-treatment Improved aerodynamics Low rolling resistance, single-wide tires There are a range of technologies that could be combined to ensure compliance with bold EPA/NHTSA Phase 2 rules. This analysis is based on estimated costs for feasible combinations that could be used to meet the modeled efficiency targets, and is not reliant on the use of any specific technology(s) 5

rolling resistance, single-wide tires There are a range of technologies that could be combined to ensure compliance with bold EPA/NHTSA Phase 2 rules.

6 BASELINE FUEL ECONOMY & FREIGHT RATES Despite improved truck fuel economy freight rates continue to rise due to general and fuel price inflation Fleet Fuel Economy improves due to turn-over to trucks compliant with EPA Phase 1 standards 6

general and fuel price inflation Fleet Fuel Economy

7 FLEET FUEL ECONOMY WITH EPA/NHTSA PHASE 2 +19% +31% Phase 2 trailer standards will increase the benefits by 48% compared to truck standards alone 7

8 FREIGHT COSTS NEW SLEEPER CAB & TRAILER From model year net savings of $ $0.29/mi for new sleeper cab + new trailer meeting modeled EPA Phase 2 standards $18,000 - $38,000 savings in first year new truck is in service 8

9 FREIGHT COSTS NEW DAY CAB & TRAILER From Model Year net savings of $ $0.8/mile for new day cab + new trailer meeting modeled EPA Phase 2 standards $4,100 - $4,800 savings in first year new truck is in service 9

10 FLEET AVERAGE FREIGHT COSTS By 2030 fleet average savings of $0.06/mi, or $4,000 annually per truck By 2040 fleet average savings of $0.21/mi, or $13,800 annually per truck 10

11 POTENTIAL FREIGHT RATES WITH EPA/NHTSA PHASE 2-6.8% Where savings are passed on to shippers, average freight rates could fall by up to 2.6% in 2030 and up to 6.8% in 2040 compared to baseline rates 11

12 POTENTIAL COMPANY SAVINGS Example Company Potential Annual Savings Revenue Distribution from a strong phase two (in millions) Miles Sporting Goods manufacturer $500 1,000,000 $ 60,000 $ 207,000 Mid-size apparel company $5,000 10,000,000 $ 600,000 $ 2,070,000 Large consumer food brand $30,000 60,000,000 $ 3,600,000 $ 12,420,000 * estimate based on two miles per $1,000 of revenue 12

$ 207,000 Mid-size apparel company $5,000 10,000,000 $ 600,000 $ 2,070,000 Large consumer food

13 SUMMARY Bold EPA/NHTSA Phase 2 fuel efficiency & GHG standards will result in significant net savings in freight truck operating costs for companies that purchase compliant trucks Per mile savings in fuel costs for sleeper cab trucks are 3-4x greater than increased costs for equipment amortization If EPA & NHTSA include trailers in Phase 2 this could increase the net benefits by 48% compared to more stringent truck standards alone When operating cost savings are passed on to shippers, more stringent EPA/NHTSA Phase 2 fuel efficiency standards for trucks and trailers could reduce average shipping rates ($/mile) by up to 6.8% by

include trailers in Phase 2 this could increase the net benefits by 48% compared to more stringent truck standards alone When operating cost savings are passed

EPA/NHTSA Phase 2 Fuel Efficiency and Greenhouse Gas Standards for Heavy-Duty Trucks: Projected Effect on Freight Costs

EPA/NHTSA Phase 2 Fuel Efficiency and Greenhouse Gas Standards for Heavy-Duty Trucks: Projected Effect on Freight Costs May 2014 Submitted to: Environmental Defense Fund 18 Tremont Street Boston, MA 02108