December 1975 was a rough month.
On the second day of the month terrorists seized a train in the Netherlands, taking scores of hostages. The next day thieves took bank customers hostage in Paris. The following week militias took over hotels in Beirut. Two weeks later Carlos the Jackal led a commando team that attacked an OPEC meeting in Vienna and kidnapped energy ministers. Against this backdrop the next day President Ford signed the Energy Policy and Conservation Act, which created the strategic petroleum reserve and required the federal government to set mandatory efficiency levels for appliances and vehicles. The latter standards, called Corporate Average Fuel Economy, CAFE, have been the main way that the federal government pushes automakers towards efficiency, but tools created years earlier in the Clean Air Act are changing that approach and creating a new opportunity for nuclear energy.
Putting aside hostage-taking and kidnappings abroad, America and Ford had a tough 1975. Unemployment was above 8%, the homicide rate was still almost double what it had been a decade earlier, and inflation started the year near 12% and remained near 7%. Ford’s approval ratings sagged. Americans were upset about the high cost of gas, which soared during the oil crisis unfolding then. Oil had jumped from $28/barrel (in 2023 dollars) in December 1973 to $61/barrel when Ford signed the energy bill. Gas soared to $3.18/gallon, cheaper than today, but the typical American car on the road at the time averaged only 13 mpg, half the mileage in 2022 (the average US passenger vehicle is over 12 years old). Despite initially rapid increases from 18 mpg in 1978 to 27.50 mpg in 1985, by 2010 CAFE standards remained stuck at 27.50 mpg. It was not until 2011 that the Department of Transportation, DOT, under the Obama administration, began to use CAFE standards as a potent tool to combat climate change, although the talking points emphasized saving Americans money on gas. As the US and other nations seek to reduce greenhouse gas emissions and speed the transition to electric vehicles, CAFE standards have taken on outsize importance.
In 2011 the DOT proposed a rule for US vehicles to reach 55 mpg by 2025 and finalized the rule the next year. In 2018 the Trump administration announced that it would significantly roll back the Obama-era rule and later attempted to block California from setting its own, stricter rules (in March 2023 the Biden administration allowed California to adopt much tougher rules). In 2020 the Trump administration set CAFE standards to 40 mpg by 2026, a threshold which automakers likely would have achieved without regulation. In Biden’s first year the approach flipped again, and last year the DOT required a standard of 49 mpg by 2026. These figures have several caveats, hence car buyers in three years should not expect the typical vehicle to achieve 49 mpg. The DOT framed these CAFE standards as saving Americans money at the pump first and foremost, with one brief sentence mentioning that they would also reduce greenhouse gasses and air pollution. Yet transportation plays an outsize role in American greenhouse gas emissions and energy use, with passenger vehicles by far the biggest contributor.
Transportation accounts for about 29% of US greenhouse gasses, with passenger vehicles making up three-fifths of transportation emissions, over twice as much as trucks. Given that transportation accounts for more emissions than electricity or industry, it is critical to plans to decarbonize the American economy, the world’s second biggest emitter after China. To this end the Biden administration has taken a new approach, switching from a gradual increase in fuel economy via DOT CAFE standards to a more aggressive approach using a less well known provision in the Clean Air Act that permits the Environmental Protection Agency, EPA, to limit the quantity of health-harming pollutants – ozone, particulate matter, lead, etc. – that vehicles may emit. In April the EPA announced a proposed rule to update the current Tier 3 standards in dramatic fashion. The rule aims to restrict tailpipe pollutants so strictly by 2032 that about two-thirds of US passenger vehicles and one quarter of heavy trucks would need to be electric to comply.
While the federal government is empowered to set fuel economy and tailpipe pollutant standards, it is not allowed to compel automakers to sell a certain percentage of electric vehicles, EVs. Instead the EPA’s proposed rule is crafted such that for the average pollutants produced by an automaker’s fleet to meet the requirements, most vehicles in the passenger fleet will need to produce no air pollutants. The proposal is incredibly ambitious, given that EVs accounted for only about 6% of passenger vehicle sales and 2% of heavy truck sales last year. Yet even if the rule survives inevitable legal challenges and is not overturned by a future administration, it faces two hurdles to achieving its aims, one of which nuclear may be well-poised to address.
New York City exemplifies the first hurdle. While the spike in gas prices and EV rebates led EV ownership to double from 2020 to 2022 in the New York metropolitan area, as of last spring NYC itself had fewer than 13,000 EVs out of two million registered vehicles. The city estimates that it will need at least 40,000 public EV chargers by 2030, but the city currently only has around 600 charging locations, most of them private, where the cost to charge varies widely. Most charging stations are within parking garages, meaning that only customers may charge at all. There are only about 100 curbside EV chargers in the city. To meet its goal the city will need to add over 14 EV chargers daily now through New Year’s Eve, 2030. While NYC may be an outlier, the one-third of Americans who rent will struggle to access an EV charger reliably every day unless the federal government and states supply vastly more EV charger funding.
The second hurdle comes not from EVs but from the electricity itself. Three-fifths of US electricity comes from fossil fuels, and about one-fifth each from coal, nuclear, and renewables. Thus the average electric vehicle today is mostly a gas plus coal vehicle. While the Inflation Reduction Act provides vast funding to increase the production of emissions-free electricity, if the almost entirely petroleum-powered US vehicle fleet switched to electric tomorrow electricity demand would roughly double. Many more nuclear reactors, whether large plants or small modular reactors, SMRs, will likely come online by the early 2030s, but the push to switch EVs further increases the need for an all-of-the-above clean electricity approach incorporating nuclear, wind, solar, and more. Yet producing an EV charging solution large enough and fast enough to meet the EPA’s timeline, while ensuring that future gas and electricity fueling stations can still turn a profit may provide another avenue for nuclear power, will be difficult. Microreactors, which generate 1 MW – 10 MW of electricity, could address part of this issue.
Gas stations source their gasoline from a nationwide network, so the gas sold by a BP station may have been pulled out of the ground by Exxon. This system ensures convenience and lower prices for companies and consumers. As much as gas prices vary by state, electricity prices vary even more widely, especially for non-residential customers. Industrial users in Connecticut, for instance, pay over twice as much as neighboring New York. Rhode Island customers pay nearly as much as Alaskan ones, both over triple what Iowans or Georgians do. Currently gas in the most expensive state, California, costs 60% more than in the cheapest, Mississippi. If the cost to fuel a vehicle were 200% more in some states than others, it may lead to a political backlash against the de facto EV rule. Microreactors present a potential opportunity for the companies that own fueling stations to own their own sources of electricity and thus ensure a fixed price for themselves, and ultimately lower costs for consumers.
To realize this scenario, consider Exxon, which has over 12,000 Exxon/Mobil gas stations in the US alone. Regulations permitting, Exxon could place a bulk order for microreactors, adding them to areas with the highest EV density as reactors are delivered over time. By effectively pre-purchasing a vast amount of electricity, Exxon would be able to sell it to consumers at a fixed profit margin. With other companies doing the same, the market would remain competitive.
Such an approach may be even more valuable for trucks. While a typical passenger vehicle driver may drive 35 miles per day on average, an average truck driver may exceed over 500 miles per day in a vehicle that requires far more energy per mile (the average freight truck achieves under 10 mpg). Highway fueling stations with microreactors could be laid out with ample fast/DC/level three chargers in configuration to charge numerous trucks concurrently, or future trucks may come with swappable batteries, enabling them to swap a battery within a few minutes, rather than charge a battery during a longer rest stop. Argonne National Laboratory, one of several Department of Energy national labs working on nuclear reactors, is researching microreactors for EV truck charging.
Beyond showing the power of efficiency rules to shape an industry and climate policy, 1975 holds two other lessons for today’s push to shape climate and energy policy. The first is the value of momentum in major projects: thirteen nuclear reactors were commissioned in 1974, nine in 1975, and seven in 1976, along with many more throughout the decade. This created a large workforce with the knowledge and skills to build nuclear reactors relatively cheaply and quickly.
The second lesson is the importance of clear planning and following standards to avoid fiscal problems in megaprojects, whether that project is a power plant or America’s largest city. In mid-October 1975 New York City came within hours of a disastrous bankruptcy, saved only at the 11th hour by a municipal union (Ford balked at helping the city, although he never uttered the words from the infamous NY Daily News headline, “Ford to City: Drop Dead”). In the wake of a state and federal rescue, the city was forced to create multi-year fiscal plan that followed Generally Accepted Accounting Principles and to share them publicly for review, while not relying on budgetary gimmicks. Transparent, realistic, highly-detailed fiscal plans reduce the risk of project time and cost overruns. As the US prepares to embark on a wholesale transformation of its 282 million highway vehicles, public and private entities must anticipate and prepare voters and infrastructure for EVs and perhaps microreactors, lest they be caught by surprise. President Ford learned that lesson in 1976, when he lost New York State, and thus the White House, by fewer than 300,000 votes – 4% of NYC’s population.
