AFPM ’24: INSIGHT: New US auto emission rule to boost plastic demand, squeeze refiners

HOUSTON (ICIS)–The new greenhouse gas restrictions that the US imposed on automobiles will speed up the adoption of electric vehicles (EVs), which will have several knock-on effects on plastics, lubricants and chemicals produced by refineries.

• Under the new greenhouse gas standards, EVs and plug-in electric vehicles (PHEVs) will make up a growing share of the nation’s light automobile fleet at the expense of internal combustion engines (ICEs).
• EVs and PHEVs consume larger amounts of plastics on a per-capita basis than autos powered by ICEs.
• If the prevalence of ICE-powered vehicles declines as forecast by the US, then that would lower demand for fuel, discouraging refiners from expanding or making expensive investments on their units. That could lower production of aromatics and other refined products.

DETAILS OF NEW EPA TAILPIPE RULE
The new rule requires the US light vehicle fleet to emit progressively smaller amounts of carbon dioxide (CO2), as shown in the following table. Figures are listed in grams of CO2 emitted per mile driven.

	2026	2027	2028	2029	2030	2031	2032
Cars	131	139	125	112	99	86	73
Trucks	184	184	165	146	128	109	90
Total Fleet	168	170	153	136	119	102	85

Source: EPA

The US will have to greatly increase its reliance on EVs to meet such standards, according to the EPA.

The regulator forecasts what its new rule will entail for the makeup of the US light vehicle fleet. It presented three scenarios that make different assumptions about the share of EVs, PHEVs, hybrids and autos powered by ICEs.

Hybrid vehicles rely predominantly on ICEs, while PHEVs rely predominantly on batteries, which is why they need to be plugged in to recharge.

The following charts show the three scenarios.

Scenario A	2027	2028	2029	2030	2031	2032
ICE	64%	58%	49%	43%	35%	29%
Hybrid	4%	5%	5%	4%	3%	3%
PHEV	6%	6%	8%	9%	11%	13%
EV	26%	31%	39%	44%	51%	56%

Source: EPA

Scenario B	2027	2028	2029	2030	2031	2032
ICE	62%	56%	49%	39%	28%	21%
Hybrid	4%	4%	3%	6%	7%	6%
PHEV	10%	12%	15%	18%	24%	29%
EV	24%	29%	33%	37%	41%	43%

Source: EPA

Scenario C	2027	2028	2029	2030	2031	2032
ICE	61%	41%	35%	27%	19%	17%
Hybrid	4%	15%	13%	16%	15%	13%
PHEV	10%	17%	22%	27%	32%	36%
EV	24%	26%	30%	31%	34%	35%

Source: EPA

IMPACT ON PLASTICS
EVs and hybrids typically consume more plastics than ICEs, according to Kevin Swift, ICIS senior economist for global chemicals.

Swift compared two automobile models that their manufacturers offered in ICE, hybrid and EV versions.

The following chart shows how plastics consumption fared across the three versions.

Not only do EVs tend to consume more plastics, they impose different challenges on the materials.

Because EVs need to be recharged, their systems are running even when the vehicles are stationary. Materials must have the durability to maintain their properties after several thousands of additional hours of use.

The wires and cables within EVs generate heat through electrical resistance, so materials need to manage heat.

Materials used in battery packs and the charging equipment need to have flame retardancy to prevent thermal runaway.

Some materials must withstand high voltages from fast charging times, while others need to shield sensors and other electrical components from electro-magnetic interference (EMI) and radio frequency interference (RFI).

As EV production grows, demand for these materials will increase.

IMPACT ON BASE OILS
If the EPA’s forecasts come true, then demand for base oils used in engine lubricants will decline. EVs lack ICEs so they do not use motor oil.

However, EVs still have moving parts so they will require greases and lubricants.

A more lucrative opportunity may lie in thermal management fluids. Petroleum-based thermal management fluids avoid the problems that come with using water-based cooling fluids like glycols in electric vehicles.

In time, EVs could manage heat by relying on direct immersion cooling. Here the battery, the inverter and the motor are submerged in a bath of thermal management fluids.

The base stocks that would be used in thermal management fluids will be a combination of polyalphaolefins (PAOs), esters and polyaklylene glycols (PAGS).

IMPACT ON AROMATICS
A faster adoption of EVs could speed up the arrival of peak oil demand.

Figures from the US Energy Information Administration (EIA) show that gasoline demand in the country peaked in 2018. That peak was barely higher than the previous record set in 2007.

Refiners are not going to add new capacity or make expensive investments if demand for their primary products have stagnated.

As their units age or suffer damage from fires and other accidents, refiners could choose to shut operations or convert their complexes to produce renewable fuels or other sustainable products.

The consequences would cause production to stagnate or even decline for benzene, toluene and xylenes (BTX), chemical building blocks that are primarily produced in refineries in the US.

Downstream consumers of these chemicals will have to consider imports if they wish to maintain their operations.

US COULD LAVISH MORE POLICIES ON EVS
US EVs could get more supportive policies in the months ahead.

• The EPA is expected to decide if California can adopt its Advanced Clean Car II (ACC II), which would phase out the sale of ICE-based vehicles to 2035. If the EPA grants California’s request, that would trigger similar programs in several other states.
• The US Department of Transportation (DOT) is proposing stricter efficiency standards under its Corporate Average Fuel Economy (CAFE) program.

The American Fuel & Petrochemical Manufacturers (AFPM) has raised concerns about the new EPA rule as well as the two pending policies that would provide further support for EVs at the expense of vehicles powered by ICEs.

It raised more concerns on Thursday right before the group’s International Petrochemical Conference (IPC), which begins on Sunday.

“At a time when millions of Americans are struggling with high costs and inflation, the Biden administration has finalized a regulation that will unequivocally eliminate most new gas cars and traditional hybrids from the US market in less than a decade,” said Chet Thompson, AFPM CEO, said.

“Whether you are a Republican or Democrat, Congress has to make a decision whether to protect consumer choice, US manufacturing workers and our hard-won energy security by overturning this deeply flawed regulation,” Thompson said. “Short of that, our organizations are certainly prepared to challenge it in court.”

Insight article by Al Greenwood

Thumbnail image shows an electric vehicle (EV) charging station in Takoma Park, Maryland. Photo by MICHAEL REYNOLDS/EPA-EFE/Shutterstock