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Gina McCarthy testifies before a Senate Environment and Public Works Committee hearing on her nomination to be administrator of the Environmental Protection Agency on Capitol Hill in Washington April 11, 2013. (REUTERS/Joshua Roberts) Gina McCarthy testifies before a Senate Environment and Public Works Committee hearing on her nomination to be administrator of the Environmental Protection Agency on Capitol Hill in Washington April 11, 2013. (REUTERS/Joshua Roberts)  

Report: New EPA fuel standards could raise gas prices, harm climate

The Environmental Protection Agency’s new fuel and tailpipe standards, intended to reduce sulfur and other harmful emissions from gasoline, may have the opposite effect.

The rules aim to improve air quality and curb global warming, but they could increase U.S. carbon dioxide emissions by mandating more energy-intensive refining techniques. The tailpipe rules could also drive up fuel costs for consumers.

The EPA’s fuel standards, called Tier 3, cuts sulfur levels in gasoline by more than 60 percent by 2017 and will cut nitrogen oxide and other pollutants as well. By 2018, the agency estimates that its rules will prevent prevent between 225 and 610 premature deaths annually and reduce ozone and reduce nitrogen oxide emissions by 260,000 tons.

“These standards are a win for public health, a win for our environment, and a win for our pocketbooks,” said EPA Administrator Gina McCarthy. “By working with the auto industry, health groups, and other stakeholders, we’re continuing to build on the Obama Administration’s broader clean fuels and vehicles efforts that cut carbon pollution, clean the air we breathe, and save families money at the pump.”

But these projections hide the economic and environmental costs of the EPA’s Tier 3 rule, according to other analysts. In fact, the rule could very well end up costing consumers more at the gas pump and cause U.S. greenhouse gas emissions to increase.

A study commissioned by the American Petroleum Institute found that Tier 3 would require $10 billion in capital costs and cost refineries $2.4 billion per year in compliance costs. These high compliance costs, could translate into higher fuel costs — as much as nine cents per gallon.

“This rule’s biggest impact is to increase the cost of delivering energy to Americans, making it a threat to consumers, jobs, and the economy,” said Bob Greco, API’s downstream group director. “But it will provide negligible, if any, environmental benefits.”

Even the EPA acknowledged that gasoline costs would be impacted by Tier 3 — estimating that the fuel standards would increase gas costs by less than one penny per gallon, or about $72 per vehicle. The EPA, however, only pegged the annual compliance cost of the program at $1.5 billion per year.

Tier 3 itself, however, is only aimed at reducing harmful pollution levels from gasoline, not addressing carbon dioxide emissions which the agency says cause global warming. That is why the EPA has aligned the implementation of Tier 3 with the agency’s program to lower carbon emissions from light-duty vehicles in 2017.

“Together, the Tier 3, light-duty GHG, and LEV III standards will maximize reductions in [greenhouse gases], criteria pollutants and air toxics from motor vehicles while streamlining programs and providing regulatory certainty and compliance efficiency,” the EPA argues.

But Tier 3 means that refineries will have to use a more energy intensive process in order to get the more sulfur out of gasoline. Sulfur levels in gas have already been reduced by 90 percent, according to the refining industry, and additional sulfur removal will yield negligible benefits.

“EPA’s decision to move forward on Tier 3 is yet the most recent example of the agency’s propensity for illogical and counterproductive rulemaking,” said Charles Drevna, president of the American Fuel & Petrochemical Manufacturers.

“Tier 3 not only lacks scientific justification, but in fact will lead to higher greenhouse gas emissions due to the greater energy-intense refining process required to reduce sulfur in gasoline from 30 [parts per million] to just 10 [parts per million],” Drevan added.

The EPA says that the Obama Administration’s efforts to improve fuel economy and reduce carbon dioxide emissions result in average fuel savings of more than $8,000 by 2025 over a vehicle’s lifetime and save Americans $1.7 trillion in fuel costs from 2012-2025.

A 2013 study done by the consulting firm ENVIRON for API found that Tier 3 would only yield “relatively small additional” improvements to air quality in 2022. Previous federal standards have already improved air quality, and the EPA actually predicts improving air quality even without Tier 3.

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