As the world moves towards reducing greenhouse gas emissions and curbing air pollution, government regulations have increasingly become the driving force behind the electrification of school buses in the United States. With a strong focus on improving air quality and reducing the carbon footprint of transportation, key regulations such as the California Air Resources Board (CARB) Advanced Clean Trucks (ACT) regulations and the U.S. Environmental Protection Agency’s (EPA) Greenhouse Gas (GHG) Phase 3 regulations are paving the way for more electrification of school buses.
School buses are a vital part of the U.S. transportation system, carrying over 25 million children daily on more than 480,000 buses. While traditionally powered by diesel, the introduction of propane engines by Blue Bird has expanded low-emission powertrain options for the school bus industry. Let us go through some of the current and upcoming regulations, how they impact internal combustion engine sales and understand why electrification is here to stay.
CARB’s Advanced Clean Trucks (ACT) Regulations
The California Air Resources Board (CARB) has long been at the forefront of environmental regulations in the United States. In 2020, CARB introduced the Advanced Clean Trucks (ACT) regulation, a groundbreaking mandate aimed at accelerating the adoption of zero-emission vehicles (ZEVs) in the medium- and heavy-duty truck sectors, including school buses.
The ACT regulation requires school bus manufacturers to begin increasing the percentage of zero-emission trucks in their sales mix, starting with the 2024 model year. By 2035, 75% of all Class 4-8 new sales of these vehicles in California must be zero-emission. This regulation has a direct impact on the school bus market, pushing manufacturers to develop and produce electric school buses and encouraging school districts to adopt clean student transportation.
California’s leadership in this area has had a ripple effect, with other states considering similar regulations or adopting the ACT framework. This creates a larger market for electric school buses, driving innovation, reducing costs, and increasing the availability of these vehicles nationwide.
Here is a list of states that have adapted CARB ACT regulations and their corresponding adaption years:
Manufacturers must strictly adhere to ACT sales requirements. Each year, Original Equipment Manufacturers (OEMs) face the challenge of balancing ACT Credits across all CARB ACT-regulated states to maintain a credit-positive or neutral position.
Due to these stringent regulations, School Bus OEM’s have limited options, including:
- Increasing Electric School Bus sales: In our case, this means selling more electric school buses.
- Purchasing credits: Acquire credits from other OEMs willing to sell. Cost of credits depend on supply vs demand.
- Reducing Internal Combustion engine school bus sales: Adjust internal combustion engine school bus offerings to meet electric school bus sales requirement.
OEMs are subject to civil penalties if they fail to comply with the California Air Resources Board’s (CARB) Advanced Clean Trucks (ACT) program credit and deficit requirements. Under Health and Safety Code section 43212, OEMs that produce vehicles in violation of ACT regulations can be fined up to $37,500 per noncompliant vehicle.
EPA’s Greenhouse Gas (GHG) Phase 3 Regulations
At the federal level, the Environmental Protection Agency (EPA) has introduced the Greenhouse Gas (GHG) Phase 3 regulations, which set stricter emission standards for heavy-duty vehicles, including school buses. These regulations are part of a broader strategy to reduce GHG emissions from the transportation sector, which is the largest contributor to carbon pollution in the United States. The GHG Phase 3 regulations, which are being phased in over the next decade, set ambitious targets for reducing CO2 emissions from new heavy-duty vehicles. Manufacturers are incentivized to develop vehicles with improved fuel efficiency and lower emissions, with a particular emphasis on transitioning to electric and other zero-emission technologies. For school buses, these regulations mean that diesel-powered models will need to become significantly more efficient or give way to electric models.
Table above shows the new GHG Phase 3 standards for different regulatory subcategories. With earlier EPA GHG regulations, standards were set for 3 years. With GHG Phase 3, EPA has introduced dynamic CO2 standards, where the standards get stringent every year.
EPA has developed these new standards by using the following zero-emission vehicle (ZEV) penetration rates.
The EPA’s proposed standards will be effective when OEMs and the industry as a whole meet the specified ZEV targets or adoption rates. However, ZEV adoption is contingent on the development of the necessary infrastructure. The EPA has stated that they will collaborate with OEMs to analyze infrastructure progress and make any appropriate adjustments to the GHG Phase 3 regulations as required. The new regulations are expected to drive increased sales of electric school buses. In order for automakers to offset their CO2 emissions credits, they will need to either improve the efficiency of internal combustion engines and powertrains by 10-20%, or sell more electric vehicles.
Manufacturers will have a three-year window to offset any negative CO2 credits accumulated from selling school buses with higher CO2 emissions. However, as emission standards grow increasingly stringent each year, it will be extremely challenging for manufacturers to make up credit deficits unless they can sell significantly more electric school buses. Consequently, OEMs will be left with only two viable options:
- Sell more electric school buses
- Purchase CO2 credits to offset deficits
If an OEM fails to eliminate their CO2 credit deficits within three years, the EPA will withhold certification for the OEM’s new products. Without EPA certification, the OEM will be prohibited from selling those products.
EPA Clean Trucks Plan
The U.S. Environmental Protection Agency (EPA) finalized Clean Trucks plan that requires heavy-duty vehicles and engines to reduce their nitrogen oxide (NOx) emissions for model year 2027 and later. The rule is part of the EPA’s Clean Truck Plan and is more than 80% stronger than current standards. The new rule requires that engine NOx emissions be capped at 0.035 grams per horsepower-hour during normal operation, 0.5 grams at low load, and 10 grams at idle. This is an 82.5% reduction from the current standard of 2 milligrams. The rule also includes the ability to generate credits for NOx that can be used to certify engines above the direct standard from 2027 through 2034, GHG Phase 3 also has increased warranty and useful life of emissions components for vehicles and engines.
Due to these new regulations:
- Cost of Internal Combustion engine increases:
The useful life of the engine is directly tied to the durability of its components. When these components are designed to last longer, it often increases the overall production cost of the engine. Additionally, stricter emissions regulations, such as those for nitrogen oxides (NOx), necessitate the implementation of advanced technologies (pre-heater, heated catalyst or additional SCRs). These technologies often involve additional catalysts or increased precious metal loadings in after-treatment systems, further driving up the cost of the engine. Given the substantial increase in cost associated with newer school buses, there’s a risk that school districts might be unable to afford them. This could lead to the continued use of older, less efficient, and potentially fewer safe vehicles or move towards adapting zero-emissions vehicles.
- Cost of warranty coverage increases:
The Clean Trucks Plan mandates that engine manufacturers extend warranties on emissions-related components. This warranty increase is substantial, nearly tripling for medium-duty engines and quadrupling for heavy-duty engines. Consequently, the higher warranty costs will likely be passed on to consumers in the form of increased engine prices.
This rule does not just apply to diesel engines but also applies to propane and gasoline engines as well. The above-mentioned impact will be seen across all Internal Combustion engine portfolio. With these new NOx reduction technologies, the maintenance and replacement of these components on diesel engines and aftertreatment systems will be substantially increased compared to gasoline and propane engines. Gasoline and propane engines have much simpler strategies and hardware resulting in less maintenance cost.
CARB NOx Omnibus Regulations
The California Air Resources Board (CARB) has introduced a stricter NOx emission standard on engines for model years 2024-2026. This standard applies to engines installed in school buses sold in California and other states that adopt CARB regulations. OEMs must meet this more stringent standard for three years before transitioning to the federal Environmental Protection Agency’s (EPA) Clean Trucks Plan.
Under this new regulation, “Legacy Engines” can continue to be sold in California and CARB adapted states if the manufacturer offsets their NOx emissions through NOx credits earned from sale of zero-emissions vehicles or by purchasing credits from another OEM. Legacy engines are those certified to the current EPA proposed NOx standard of 0.2 grams per brake horsepower hour.
Due to this requirement:
- There will be specific allotment of diesel engines by engine suppliers for every vehicle manufacturer.
- This allotment will be state specific.
- The engines will have an emissions label that reflect the state to which that particular engine was allocated to. This will impose limitations during vehicle second life preventing the vehicle from being registered in a new state.
Given the current limitations and restrictions, fleet managers may need to adjust their strategies over the next three years. For those looking to avoid disruptions in their fleet updates, gasoline, propane, and electric vehicles offer viable options.
Challenges and Opportunities
While the push towards electrification is gaining momentum, there are still challenges to be addressed. The higher upfront cost of electric school buses, concerns about battery life and range, and the need for charging infrastructure continue to be barriers for many school districts.
Blue Bird Corporation has emerged as a leader in the electric school bus market. We have been at the forefront of electric school bus development and production. Blue Bird continues to invest in expanding its production facilities to meet the growing demand for electric school buses. This increased capacity allows us to deliver vehicles efficiently and meet customer needs. The U.S. government has allocated billions of dollars to support the electrification of school buses. Blue Bird has been a major beneficiary of these funds, enabling us to invest in research, development, and production. Recently, we have been selected to receive an $80 million grant from the U.S. Department of Energy (DOE) to expand our electric vehicle manufacturing capabilities and related workforce development efforts.
To meet the increasing demand for electric school buses and accelerate the adoption of clean transportation of students in North America, Blue Bird Corporation and Generate Capital, a leading sustainable investment and operating company, have formed a joint venture (JV) named Clean Bus Solutions, LLC. The joint venture’s fleet electrification-as-a-service offering will make it simpler for school districts to upgrade to advanced electric vehicles (EVs) by offering electric school buses and associated charging infrastructure at an affordable monthly fee. This turnkey electrification solution will include Blue Bird’s best-selling and widest range of electric school buses in the industry, financing of both electric vehicles and charging infrastructure, project planning and management as well as fleet and charging optimization. The JV will help school districts accelerate the electrification of their fleets while delivering new revenue and profit streams to Blue Bird and its dealers. In addition to the traditional up-front vehicle sale, Blue Bird’s ownership in the JV will generate additional recurring revenue from the financing and charging infrastructure services that are paid over the vehicle lifetime and from the maintenance and repair services delivered through Blue Bird’s dealer network.
In addition to regulatory mandates, government funding and incentives play a crucial role in facilitating the transition to electric school buses. Programs like the EPA’s Clean School Bus Program, which was expanded under the Bipartisan Infrastructure Law, provide significant financial support to school districts for the purchase of electric buses. This includes grants and rebates that help offset the higher upfront costs of electric buses compared to their diesel counterparts.
State-level programs, particularly in states like California and New York, also offer additional incentives, making it more economically feasible for school districts to invest in electric buses. These financial supports are crucial in accelerating the adoption of electric buses, particularly in underfunded districts that may struggle with the higher initial costs.
The future of school buses is electric driven by robust government regulations and a growing recognition of the environmental and health benefits of zero-emission vehicles. As states like California lead the way with pioneering regulations and the federal government reinforces these efforts with nationwide standards, the school bus sector continues to experience a paradigm shift.
Even as the school bus industry shifts towards electric vehicles, there’s still a significant journey ahead. Gasoline, propane, and diesel-powered vehicles continue to play a vital role in our transportation infrastructure and our journey towards electrification. Blue Bird understands this dynamic and is committed to supporting your business throughout this transition. We’re dedicated to ensuring that you have access to the products and services you need, regardless of the evolving landscape.
The path ahead may be challenging, but the destination promises a cleaner, healthier future for this and coming generations.
Author:
Sumanth Balesh
Director of Product Certification and Compliance
Blue Bird Corporation