`[Federal Register Volume 87, Number 67 (Thursday, April 7, 2022)]
[Proposed Rules]
[Pages 20608-20688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07141]



[[Page 20607]]

Vol. 87

Thursday,

No. 67

April 7, 2022

Part IV





Department of Energy





-----------------------------------------------------------------------





10 CFR Parts 429 and 430





Energy Conservation Program: Energy Conservation Standards for Room Air 
Conditioners; Proposed Rule

  Federal Register / Vol. 87, No. 67 / Thursday, April 7, 2022 / 
Proposed Rules  

[[Page 20608]]


-----------------------------------------------------------------------

DEPARTMENT OF ENERGY

10 CFR Parts 429 and 430

[EERE-2014-BT-STD-0059]
RIN 1904-AD97


Energy Conservation Program: Energy Conservation Standards for 
Room Air Conditioners

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Notice of proposed rulemaking and announcement of a webinar.

-----------------------------------------------------------------------

SUMMARY: The Energy Policy and Conservation Act, as amended (``EPCA''), 
prescribes energy conservation standards for various consumer products 
and certain commercial and industrial equipment, including room air 
conditioners. EPCA also requires the U.S. Department of Energy 
(``DOE'') to periodically determine whether more-stringent standards 
would be technologically feasible and economically justified, and would 
result in significant energy savings. In this notice of proposed 
rulemaking (``NOPR''), DOE proposes amended energy conservation 
standards for room air conditioners, and also announces a webinar to 
receive comment on these proposed standards and associated analyses and 
results.

DATES: DOE will hold a webinar on Tuesday, May 3, 2022, from 12:30 p.m. 
to 4:30 p.m. See section VIII, ``Public Participation,'' for webinar 
registration information, participant instructions, and information 
about the capabilities available to webinar participants.
    Comments: DOE will accept comments, data, and information regarding 
this NOPR no later than June 6, 2022.
    Comments regarding the likely competitive impact of the proposed 
standard should be sent to the Department of Justice contact listed in 
the ADDRESSES section on or before May 9, 2022.

ADDRESSES: Interested persons are encouraged to submit comments using 
the Federal eRulemaking Portal at www.regulations.gov. Follow the 
instructions for submitting comments. Alternatively, interested persons 
may submit comments, identified by docket number EERE-2014-BT-STD-0059, 
by any of the following methods:

    (1) Federal eRulemaking Portal: www.regulations.gov. Follow the 
instructions for submitting comments.
    (2) Email: [email protected]. Include the docket 
number EERE-2014-BT-STD-0059 in the subject line of the message.

No telefacsimilies (``faxes'') will be accepted. For detailed 
instructions on submitting comments and additional information on this 
process, see section IV of this document.
    Although DOE has routinely accepted public comment submissions 
through a variety of mechanisms, including postal mail and hand 
delivery/courier, the Department has found it necessary to make 
temporary modifications to the comment submission process in light of 
the ongoing Covid-19 pandemic. DOE is currently suspending receipt of 
public comments via postal mail and hand delivery/courier. If a 
commenter finds that this change poses an undue hardship, please 
contact Appliance Standards Program staff at (202) 586-1445 to discuss 
the need for alternative arrangements. Once the COVID-19 pandemic 
health emergency is resolved, DOE anticipates resuming all of its 
regular options for public comment submission, including postal mail 
and hand delivery/courier.
    Docket: The docket for this activity, which includes Federal 
Register notices, comments, and other supporting documents/materials, 
is available for review at www.regulations.gov. All documents in the 
docket are listed in the www.regulations.gov index. However, not all 
documents listed in the index may be publicly available, such as 
information that is exempt from public disclosure.
    The docket web page can be found at www.regulations.gov/docket?D=EERE-2014-BT-STD-0059. The docket web page contains 
instructions on how to access all documents, including public comments, 
in the docket. See section VIII of this document for information on how 
to submit comments through www.regulations.gov.
    Written comments regarding the burden-hour estimates or other 
aspects of the collection-of-information requirements contained in this 
proposed rule may be submitted to Office of Energy Efficiency and 
Renewable Energy following the instructions at RegInfo.gov.
    EPCA requires the Attorney General to provide DOE a written 
determination of whether the proposed standard is likely to lessen 
competition. The U.S. Department of Justice Antitrust Division invites 
input from market participants and other interested persons with views 
on the likely competitive impact of the proposed standard. Interested 
persons may contact the Division at [email protected] on or 
before the date specified in the DATES section. Please indicate in the 
``Subject'' line of your email the title and Docket number of this 
proposed rulemaking.

FOR FURTHER INFORMATION CONTACT: 
    Mr. Bryan Berringer, U.S. Department of Energy, Office of Energy 
Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 
1000 Independence Avenue SW, Washington, DC 20585-0121. Telephone: 
(202) 586-0371. Email: [email protected].
    Ms. Sarah Butler, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. 
Telephone: (202) 586-1777. Email: [email protected].
    For further information on how to submit a comment, review other 
public comments and the docket, or participate in the webinar, contact 
the Appliance and Equipment Standards Program staff at (202) 287-1445 
or by email: [email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Synopsis of the Proposed Rule
    A. Benefits and Costs to Consumers
    B. Impact on Manufacturers
    C. National Benefits and Costs
    D. Conclusion
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Room ACs
    C. Deviation From Appendix A
III. General Discussion
    A. Product Classes and Scope of Coverage
    B. Test Procedure
    C. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    D. Energy Savings
    1. Significance of Savings
    E. Economic Justification
    1. Specific Criteria
    a. Economic Impact on Manufacturers and Consumers
    b. Savings in Operating Costs Compared To Increase in Price (LCC 
and PBP)
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. Scope of Coverage and Product Classes
    2. Technology Options
    a. Reduced Evaporator Air Recirculation
    b. Compressors
    c. Significant New Alternatives Policy (SNAP)-Approved 
Refrigerants

[[Page 20609]]

    B. Screening Analysis
    1. Screened-Out Technologies
    2. Remaining Technologies
    C. Engineering Analysis
    1. Efficiency Analysis
    a. Baseline Efficiency
    b. Higher Efficiency Levels
    2. Cost Analysis
    3. Cost-Efficiency Results
    D. Markups Analysis
    E. Energy Use Analysis
    F. Life-Cycle Cost and Payback Period Analysis
    1. Product Cost
    2. Installation Cost
    3. Annual Energy Consumption
    a. Rebound Effect
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Product Lifetime
    7. Discount Rates
    8. Energy Efficiency Distribution in the No-New-Standards Case
    9. Payback Period Analysis
    G. Shipments Analysis
    H. National Impact Analysis
    1. Product Efficiency Trends
    2. National Energy Savings
    3. Net Present Value Analysis
    I. Consumer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Overview
    2. Government Regulatory Impact Model and Key Inputs
    a. Manufacturer Production Costs
    b. Shipments Projections
    c. Product and Capital Conversion Costs
    d. Manufacturer Markup Scenarios
    3. Manufacturer Interviews
    4. Discussion of MIA Comments
    K. Emissions Analysis
    1. Air Quality Regulations Incorporated in DOE's Analysis
    L. Monetizing Emissions Impacts
    1. Monetization of Greenhouse Gas Emissions
    a. Social Cost of Carbon
    b. Social Cost of Methane and Nitrous Oxide
    2. Monetization of Other Air Pollutants
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results and Conclusions
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable Presumption Payback
    2. Economic Impacts on Manufacturers
    a. Industry Cash Flow Analysis Results
    b. Direct Impacts on Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Utility or Performance of Products
    5. Impact of Any Lessening of Competition
    6. Need of the Nation To Conserve Energy
    7. Other Factors
    8. Summary of National Economic Impacts
    C. Conclusion
    1. Benefits and Burdens of TSLs Considered for Room AC Standards
    2. Annualized Benefits and Costs of the Proposed Standards
VI. Cooling Capacity Verification
VII. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Information Quality
VIII. Public Participation
    A. Attendance at the Webinar
    B. Procedure for Submitting Prepared General Statements for 
Distribution
    C. Conduct of the Public Meeting
    D. Submission of Comments
    E. Issues on Which DOE Seeks Comment
IX. Approval of the Office of the Secretary

I. Synopsis of the Proposed Rule

    Title III, Part B \1\ of EPCA,\2\ established the Energy 
Conservation Program for Consumer Products Other Than Automobiles. (42 
U.S.C. 6291-6309) These products include room air conditioners (``room 
ACs''), the subject of this proposed rulemaking.
---------------------------------------------------------------------------

    \1\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
    \2\ All references to EPCA in this document refer to the statute 
as amended through the Infrastructure Investment and Jobs Act, 
Public Law 117-58 (Nov. 15, 2021).
---------------------------------------------------------------------------

    Pursuant to EPCA, any new or amended energy conservation standard 
must be designed to achieve the maximum improvement in energy 
efficiency that DOE determines is technologically feasible and 
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new 
or amended standard must result in a significant conservation of 
energy. (42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later 
than 6 years after issuance of any final rule establishing or amending 
a standard, DOE must publish either a notice of determination that 
standards for the product do not need to be amended, or a notice of 
proposed rulemaking including new proposed energy conservation 
standards (proceeding to a final rule, as appropriate). (42 U.S.C. 
6295(m))
    In accordance with these and other statutory provisions discussed 
in this document, DOE proposes amended energy conservation standards 
for room ACs. The proposed standards, which are expressed in the amount 
of cooling provided per amount of energy consumed, measured in British 
thermal units per watt-hour (Btu/Wh) are shown in Table I.1. These 
proposed standards, if adopted, would apply to all room ACs listed in 
Table I.1 manufactured in, or imported into, the United States starting 
on the date 3 years after the publication of the final rule for this 
proposed rulemaking.
BILLING CODE 6450-01-P

[[Page 20610]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.011

A. Benefits and Costs to Consumers

    Table I.2 presents DOE's evaluation of the economic impacts of the 
proposed standards on consumers of room ACs, as measured by the average 
life-cycle cost (``LCC'') savings and the simple payback period 
(``PBP'').\3\ The average LCC savings are positive for all product 
classes, and the PBP is less than the average lifetime of a room AC, 
which is estimated to be 9 years (see section IV.F.6 of this document).
---------------------------------------------------------------------------

    \3\ The average LCC savings refer to consumers that are affected 
by a standard and are measured relative to the efficiency 
distribution in the no-new-standards case, which depicts the market 
in the compliance year in the absence of new or amended standards 
(see section IV.F.8 of this document). The simple PBP, which is 
designed to compare specific efficiency levels, is measured relative 
to the baseline product (see section IV.F.9 of this document).

---------------------------------------------------------------------------

[[Page 20611]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.012

BILLING CODE 6450-01-C
    DOE's analysis of the impacts of the proposed standards on 
consumers is described in section IV.F of this document.

B. Impact on Manufacturers

    The industry net present value (``INPV'') is the sum of the 
discounted cash flows to the industry from the base year through the 
end of the analysis period (2021-2055). Using a real discount rate of 
7.2 percent, DOE estimates that the INPV for manufacturers of room ACs 
in the case without amended standards is $1.08 billion in 2020$. Under 
the proposed standards, the change in INPV is estimated to range from -
6.0 percent to 7.8 percent, which is approximately -$64.5 million to 
$84.1 million. In order to bring products into compliance with amended 
standards, DOE estimated that the industry would incur total conversion 
costs of $22.8 million.
    DOE's analysis of the impacts of the proposed standards on 
manufacturers is described in section IV.J of this document. The 
analytic results of the manufacturer impact analysis (``MIA'') are 
presented in section V.B.2 of this document.

C. National Benefits and Costs 4
---------------------------------------------------------------------------

    \4\ All monetary values in this document are expressed in 2020 
dollars.
---------------------------------------------------------------------------

    DOE's analyses indicate that the proposed energy conservation 
standards for room ACs would save a significant amount of energy. 
Relative to the case without amended standards, the lifetime energy 
savings for room ACs purchased in the 30-year period that begins in the 
anticipated year of compliance with the amended standards (2026-2055) 
amount to 1.40 quadrillion British thermal units (``Btu''), or 
quads.\5\ This represents a savings of 12 percent relative to the 
energy use of these products in the case without amended standards 
(referred to as the ``no-new-standards case'').
---------------------------------------------------------------------------

    \5\ The quantity refers to full-fuel-cycle (``FFC'') energy 
savings. FFC energy savings includes the energy consumed in 
extracting, processing, and transporting primary fuels (i.e., coal, 
natural gas, petroleum fuels), and, thus, presents a more complete 
picture of the impacts of energy efficiency standards. For more 
information on the FFC metric, see section IV.H.2 of this document.
---------------------------------------------------------------------------

    The cumulative net present value (``NPV'') of total consumer 
benefits of the proposed standards for room ACs are $4.83 billion (at a 
7-percent discount rate) and $10.56 billion (at a 3-percent discount 
rate). This NPV expresses the estimated total value of future 
operating-cost savings minus the estimated increased product costs for 
room ACs purchased in 2026-2055.
    In addition, the proposed standards for room ACs are projected to 
yield significant environmental benefits. DOE estimates that the 
proposed standards would result in cumulative emission reductions (over 
the same period as for energy savings) of 49.5 million metric tons 
(``Mt'') \6\ of carbon dioxide (``CO2''), 19.1 thousand tons 
of sulfur dioxide (``SO2''), 69.4 thousand tons of nitrogen 
oxides (``NOX''), 339.3 thousand tons of methane 
(``CH4''), 0.5 thousand tons of nitrous oxide 
(``N2O''), and 0.1 tons of mercury (``Hg'').\7\
---------------------------------------------------------------------------

    \6\ A metric ton is equivalent to 1.1 short tons. Results for 
emissions other than CO2 are presented in short tons.
    \7\ DOE calculated emissions reductions relative to the no-new-
standards case, which reflects key assumptions in the Annual Energy 
Outlook 2021 (``AEO 2021''). AEO 2021 represents current Federal and 
State legislation and final implementation of regulations as of the 
time of its preparation. See section IV.K of this document for 
further discussion of AEO 2021 assumptions that effect air pollutant 
emissions.
---------------------------------------------------------------------------

    DOE estimates the value of climate benefits from a reduction in 
greenhouse gases using four different estimates of the social cost of 
CO2 (``SC-CO2''), the social cost of methane 
(``SC-CH4''), and the social cost of nitrous oxide (``SC-
N2O''). Together these represent the

[[Page 20612]]

social cost of greenhouse gases (``SC-GHG''). DOE used interim SC-GHG 
values developed by an Interagency Working Group on the Social Cost of 
Greenhouse Gases (``IWG'').\8\ The derivation of these values is 
discussed in section IV.L of this document. For presentational 
purposes, the climate benefits associated with the average SC-GHG at a 
3-percent discount rate is $2.39 billion. DOE does not have a single 
central SC-GHG point estimate and it emphasizes the importance and 
value of considering the benefits calculated using all four SC-GHG 
estimates.
---------------------------------------------------------------------------

    \8\ See Interagency Working Group on Social Cost of Greenhouse 
Gases, Technical Support Document: Social Cost of Carbon, Methane, 
and Nitrous Oxide. Interim Estimates Under Executive Order 13990, 
Washington, DC, February 2021, available at www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf?source=email.
---------------------------------------------------------------------------

    DOE also estimates health benefits from SO2 and 
NOX emissions reductions.\9\ DOE estimates the present value 
of the health benefits would be $1.82 billion using a 7-percent 
discount rate, and $4.14 billion using a 3-percent discount rate.\10\ 
DOE is currently only monetizing (for SO2 and 
NOX) PM2.5 precursor health benefits and (for 
NOX) ozone precursor health benefits, but will continue to 
assess the ability to monetize other effects such as health benefits 
from reductions in direct PM2.5 emissions.\11\
---------------------------------------------------------------------------

    \9\ DOE estimated the monetized value of NOX and 
SO2 emissions reductions associated with electricity 
savings using benefit per ton estimates from the scientific 
literature. See section IV.L.2 of this document for further 
discussion.
    \10\ DOE estimates the economic value of these emissions 
reductions resulting from the considered TSLs for the purpose of 
complying with the requirements of Executive Order 12866.
    \11\ On March 16, 2022, the Fifth Circuit Court of Appeals (No. 
22-30087) granted the federal government's emergency motion for stay 
pending appeal of the February 11, 2022, preliminary injunction 
issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a 
result of the Fifth Circuit's order, the preliminary injunction is 
no longer in effect, pending resolution of the federal government's 
appeal of that injunction or a further court order. Among other 
things, the preliminary injunction enjoined the defendants in that 
case from ``adopting, employing, treating as binding, or relying 
upon'' the interim estimates of the social cost of greenhouse 
gases--which were issued by the Interagency Working Group on the 
Social Cost of Greenhouse Gases on February 26, 2021--to monetize 
the benefits of reducing greenhouse gas emissions. In the absence of 
further intervening court orders, DOE will revert to its approach 
prior to the injunction and present monetized benefits where 
appropriate and permissible under law.
---------------------------------------------------------------------------

    Table I.3 summarizes the economic benefits and costs expected to 
result from the proposed standards for room ACs. In the table, total 
benefits for both the 3-percent and 7-percent cases are presented using 
the average GHG social costs with 3-percent discount rate. DOE does not 
have a single central SC-GHG point estimate and it emphasizes the 
importance and value of considering the benefits calculated using all 
four SC-GHG estimates. The estimated total net benefits using each of 
the four SC-GHG estimates are presented in section V.B.8 of this 
document.
BILLING CODE 6540-01-P

[[Page 20613]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.013


[[Page 20614]]


    The benefits and costs of the proposed standards, for room ACs sold 
in 2026-2055, can also be expressed in terms of annualized values. The 
monetary values for the total annualized net benefits are (1) the 
reduced consumer operating costs, minus (2) the increase in product 
purchase prices and installation costs, plus (3) the value of the 
benefits of GHG, NOX, and SO2 emission 
reductions, all annualized.\12\
---------------------------------------------------------------------------

    \12\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2021, the year 
used for discounting the NPV of total consumer costs and savings. 
For the benefits, DOE calculated a present value associated with 
each year's shipments in the year in which the shipments occur 
(e.g., 2030), and then discounted the present value from each year 
to 2021. The calculation uses discount rates of 3 and 7 percent for 
all costs and benefits. Using the present value, DOE then calculated 
the fixed annual payment over a 30-year period, starting in the 
compliance year, that yields the same present value.
---------------------------------------------------------------------------

    The national operating savings are domestic private U.S. consumer 
monetary savings that occur as a result of purchasing the covered 
products and are measured for the lifetime of room ACs shipped in 2026-
2055. The climate benefits associated with reduced GHG emissions 
achieved as a result of the proposed standards are also calculated 
based on the lifetime of room ACs shipped in 2026-2055.
    Estimates of annualized benefits and costs of the proposed 
standards are shown in Table I.4 of this document. The results under 
the primary estimate are as follows.
    Using a 7-percent discount rate for consumer benefits and costs and 
health benefits from reduced SO2 and NOX 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated cost of the standards 
proposed in this rule is $216.9 million per year in increased equipment 
costs, while the estimated annual benefits are $727.5 million in 
reduced equipment operating costs, $137.5 million in climate benefits, 
$192.1 million in health benefits. In this case, the net benefit would 
amount to $840.2 million per year.
    Using a 3-percent discount rate for all benefits and costs, the 
estimated cost of the proposed standards is $190.1 million per year in 
increased equipment costs, while the estimated annual benefits are 
$796.7 million in reduced operating costs, $137.5 million in climate 
benefits, and $237.9 million in health benefits. In this case, the net 
benefit would amount to $982.0 million per year.

[[Page 20615]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.014

BILLING CODE 6450-01-C

[[Page 20616]]

    DOE's analysis of the national impacts of the proposed standards is 
described in sections IV.H, IV.K and IV.L of this document.

D. Conclusion

    DOE has tentatively concluded that the proposed standards represent 
the maximum improvement in energy efficiency that is technologically 
feasible and economically justified, and would result in the 
significant conservation of energy. Based on the analyses described 
previously, DOE has tentatively concluded that the benefits of the 
proposed standards to the Nation (energy savings, positive NPV of 
consumer benefits, consumer LCC savings, and emission reductions) would 
outweigh the burdens (loss of INPV for manufacturers and LCC increases 
for some consumers).
    DOE also considered more-stringent energy efficiency levels as 
potential standards, and is still considering them in this rulemaking. 
However, DOE has tentatively concluded that the potential burdens of 
the more-stringent energy efficiency levels would outweigh the 
projected benefits.
    Based on consideration of the public comments DOE receives in 
response to this document and related information collected and 
analyzed during the course of this rulemaking effort, DOE may adopt 
energy efficiency levels presented in this document that are either 
higher or lower than the proposed standards, or some combination of 
level(s) that incorporate the proposed standards in part.

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this proposed rule, as well as some of the relevant 
historical background related to the establishment of standards for 
room ACs.

A. Authority

    EPCA authorizes DOE to regulate the energy efficiency of a number 
of consumer products and certain industrial equipment. Title III, Part 
B of EPCA established the Energy Conservation Program for Consumer 
Products Other Than Automobiles. These products include room ACs, the 
subject of this document. (42 U.S.C. 6292(a)(2)) EPCA prescribed energy 
conservation standards for these products (42 U.S.C. 6295(c)(1)), and 
directs DOE to conduct future rulemakings to determine whether to amend 
these standards. (42 U.S.C. 6295(c)(2)) EPCA further provides that, not 
later than 6 years after the issuance of any final rule establishing or 
amending a standard, DOE must publish either a notice of determination 
that standards for the product do not need to be amended, or a NOPR 
including new proposed energy conservation standards (proceeding to a 
final rule, as appropriate). (42 U.S.C. 6295(m)(1))
    The energy conservation program under EPCA consists essentially of 
four parts: (1) Testing, (2) labeling, (3) the establishment of Federal 
energy conservation standards, and (4) certification and enforcement 
procedures. Relevant provisions of EPCA specifically include 
definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), 
labeling provisions (42 U.S.C. 6294), energy conservation standards (42 
U.S.C. 6295), and the authority to require information and reports from 
manufacturers (42 U.S.C. 6296).
    Federal energy efficiency requirements for covered products 
established under EPCA generally supersede State laws and regulations 
concerning energy conservation testing, labeling, and standards. (42 
U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal 
preemption for particular State laws or regulations, in accordance with 
the procedures and other provisions set forth under EPCA. (See 42 
U.S.C. 6297(d))
    Subject to certain criteria and conditions, DOE is required to 
develop test procedures to measure the energy efficiency, energy use, 
or estimated annual operating cost of each covered product. (42 U.S.C. 
6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products 
must use the prescribed DOE test procedure as the basis for certifying 
to DOE that their products comply with the applicable energy 
conservation standards adopted under EPCA and when making 
representations to the public regarding the energy use or efficiency of 
those products. (42 U.S.C. 6293(c) and 42 U.S.C. 6295(s)) Similarly, 
DOE must use these test procedures to determine whether the products 
comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The 
DOE test procedures for room ACs appear at title 10 of the Code of 
Federal Regulations (``CFR'') part 430, subpart B, appendix F.
    DOE must follow specific statutory criteria for prescribing new or 
amended standards for covered products, including room ACs. Any new or 
amended standard for a covered product must be designed to achieve the 
maximum improvement in energy efficiency that the Secretary of Energy 
(``Secretary'') determines is technologically feasible and economically 
justified. (42 U.S.C. 6295(o)(2)(A) Furthermore, DOE may not adopt any 
standard that would not result in the significant conservation of 
energy. (42 U.S.C. 6295(o)(3))
    Moreover, DOE may not prescribe a standard: (1) For certain 
products, including room ACs, if no test procedure has been established 
for the product, or (2) if DOE determines by rule that the standard is 
not technologically feasible or economically justified. (42 U.S.C. 
6295(o)(3)(A)-(B)) In deciding whether a proposed standard is 
economically justified, DOE must determine whether the benefits of the 
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make 
this determination after receiving comments on the proposed standard, 
and by considering, to the greatest extent practicable, the following 
seven statutory factors:

    (1) The economic impact of the standard on manufacturers and 
consumers of the products subject to the standard;
    (2) The savings in operating costs throughout the estimated 
average life of the covered products in the type (or class) compared 
to any increase in the price, initial charges, or maintenance 
expenses for the covered products that are likely to result from the 
standard;
    (3) The total projected amount of energy (or as applicable, 
water) savings likely to result directly from the standard;
    (4) Any lessening of the utility or the performance of the 
covered products likely to result from the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
standard;
    (6) The need for national energy and water conservation; and
    (7) Other factors the Secretary considers relevant.

(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))
    Further, EPCA establishes a rebuttable presumption that a standard 
is economically justified if the Secretary finds that the additional 
cost to the consumer of purchasing a product complying with an energy 
conservation standard level will be less than three times the value of 
the energy savings during the first year that the consumer will receive 
as a result of the standard, as calculated under the applicable test 
procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
    EPCA also contains what is known as an ``anti-backsliding'' 
provision, which prevents the Secretary from prescribing any amended 
standard that either increases the maximum allowable energy use or 
decreases the minimum required energy efficiency of a covered product. 
(42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended 
or new standard if interested persons

[[Page 20617]]

have established by a preponderance of the evidence that the standard 
is likely to result in the unavailability in the United States in any 
covered product type (or class) of performance characteristics 
(including reliability), features, sizes, capacities, and volumes that 
are substantially the same as those generally available in the United 
States. (42 U.S.C. 6295(o)(4))
    Additionally, EPCA specifies requirements when promulgating an 
energy conservation standard for a covered product that has two or more 
subcategories. DOE must specify a different standard level for a type 
or class of product that has the same function or intended use, if DOE 
determines that products within such group: (A) Consume a different 
kind of energy from that consumed by other covered products within such 
type (or class); or (B) have a capacity or other performance-related 
feature which other products within such type (or class) do not have 
and such feature justifies a higher or lower standard. (42 U.S.C. 
6295(q)(1)) In determining whether a performance-related feature 
justifies a different standard for a group of products, DOE must 
consider such factors as the utility to the consumer of the feature and 
other factors DOE deems appropriate. Id. Any rule prescribing such a 
standard must include an explanation of the basis on which such higher 
or lower level was established. (42 U.S.C. 6295(q)(2))
    Finally, pursuant to the amendments contained in the Energy 
Independence and Security Act of 2007 (``EISA 2007''), Public Law 110-
140, any final rule for new or amended energy conservation standards 
promulgated after July 1, 2010, is required to address standby mode and 
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE 
adopts a standard for a covered product after that date, it must, if 
justified by the criteria for adoption of standards under EPCA (42 
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into 
a single standard, or, if that is not feasible, adopt a separate 
standard for such energy use for that product. (42 U.S.C. 
6295(gg)(3)(A)-(B)) DOE's current test procedures for room ACs address 
standby mode and off mode energy use. In this rulemaking, DOE intends 
to incorporate such energy use into any amended energy conservation 
standards that it may adopt.

B. Background

1. Current Standards
    In a direct final rule published on April 21, 2011 (``April 2011 
Direct Final Rule''), DOE prescribed the current energy conservation 
standards for room ACs. 76 FR 22454. These standards are set forth in 
DOE's regulations at 10 CFR 430.32(b) and are repeated in Table II.1 
where CEER stands for ``Combined Energy Efficiency Rating.''
[GRAPHIC] [TIFF OMITTED] TP07AP22.015

2. History of Standards Rulemaking for Room ACs
    EPCA prescribed initial energy conservation standards for room ACs 
and further directed DOE to conduct two cycles of rulemakings to 
determine whether to amend these standards. (42 U.S.C. 6295(c)(1)-(2)) 
DOE completed the first of these rulemaking cycles on September 24, 
1997, by adopting amended performance standards for room ACs 
manufactured on or after October 1, 2000. 62 FR 50122. Additionally, 
DOE completed a second rulemaking cycle to amend the standards for room 
ACs by issuing the April 2011 Direct Final Rule, in which DOE 
prescribed the current energy conservation standards for room ACs 
manufactured on or after April 21, 2014. 76 FR 22454 (April 21, 2011). 
DOE subsequently published a final rule amending the compliance date 
for the

[[Page 20618]]

current room AC standards to June 1, 2014. 76 FR 52852 (Aug. 24, 2011). 
In a separate notice, also published on August 24, 2011, DOE confirmed 
the adoption of these energy conservation standards in a notice of 
effective date and compliance dates for the April 2011 Direct Final 
Rule. 76 FR 52854.
    As part of the current analysis, on June 18, 2015, DOE prepared a 
Request for Information (``June 2015 RFI''), which solicited 
information from the public to help DOE determine whether amended 
standards for room ACs would result in a significant amount of 
additional energy savings and whether those standards would be 
technologically feasible and economically justified.\13\ 80 FR 34843.
---------------------------------------------------------------------------

    \13\ Pursuant to amendments to appendix A to 10 CFR part 430, 
subpart C (``Appendix A'') DOE generally will issue an early 
assessment request for information announcing that DOE is 
considering initiating a rulemaking proceeding. Section 6(a)(1) of 
Appendix A; see also 85 FR 8626, 8637 (Feb. 14, 2020) and 86 FR 
70892 (December 13, 2021). Section 6(a)(2) of Appendix A provides 
that if the DOE determines it is appropriate to proceed with a 
rulemaking, the preliminary stages of a rulemaking to issue or amend 
an energy conservation standard that DOE will undertake will be a 
Framework Document and Preliminary Analysis, or an Advance Notice of 
Proposed Rulemaking. Because this proposed rulemaking was already in 
progress at the time the relevant amendments to the Process Rule 
were published, DOE did not reinitiate the entire rulemaking 
process. Additionally, the June 2015 RFI presented the issues, 
analyses, and processes relevant to consideration of amended 
standards for room ACs.
---------------------------------------------------------------------------

    Comments received following the publication of the June 2015 RFI 
helped DOE identify and resolve issues related to the subsequent 
preliminary analysis.\14\ DOE published a notice of public meeting and 
availability of the preliminary technical support document (``TSD'') on 
June 17, 2020 (``June 2020 Preliminary Analysis''). 85 FR 36512.
---------------------------------------------------------------------------

    \14\ Comments are available at www.regulations.gov/document/EERE-2014-BT-STD-0059-0001/comment.
---------------------------------------------------------------------------

    DOE subsequently held a public meeting on August 5, 2020, to 
discuss and receive comments on the preliminary TSD. The preliminary 
TSD that presented the methodology and results of the preliminary 
analysis is available at: www.regulations.gov/document/EERE-2014-BT-STD-0059-0013.
    DOE received comments in response to the June 2020 Preliminary 
Analysis from the interested parties listed in Table II.2.
[GRAPHIC] [TIFF OMITTED] TP07AP22.016

    A parenthetical reference at the end of a comment quotation or 
paraphrase provides the location of the item in the public record.\15\
---------------------------------------------------------------------------

    \15\ The parenthetical reference provides a reference for 
information located in the docket of DOE's rulemaking to develop 
energy conservation standards for room ACs. (Docket No. EERE-2014-
BT-STD-0059, which is maintained at www.regulations.gov/docket?D=EERE-2014-BT-STD-0059). The references are arranged as 
follows: (commenter name, comment docket ID number, page of that 
document).
---------------------------------------------------------------------------

C. Deviation From Appendix A

    In accordance with section 3(a) of 10 CFR part 430, subpart C, 
appendix A (``appendix A''), DOE notes that it is deviating from the 
provision in appendix A regarding the pre-NOPR stages for an energy 
conservation standards rulemaking. Section 6(d)(2) of appendix A 
specifies that the length of the public comment period for a NOPR will 
vary depending upon the circumstances of the particular rulemaking, but 
will not be less than 75 calendar days. For this NOPR, DOE has opted to 
instead provide a 60-day comment period. As stated, DOE requested 
comment in the June 2015 RFI on the technical and economic analyses and 
provided stakeholders a 76-day comment period. 80 FR 34843, 80 FR 
44301. Additionally, DOE provided a 74-day comment period for the June 
2020 preliminary analysis. 85 FR 36512, 85 FR 52280. DOE has relied on 
many of the same analytical assumptions and approaches as used in the 
preliminary assessment and has determined that a 60-day comment period, 
in conjunction

[[Page 20619]]

with the prior comment periods, provides sufficient time for interested 
parties to review the proposed rule and develop comments.

III. General Discussion

    DOE developed this proposal after considering oral and written 
comments, data, and information from interested parties that represent 
a variety of interests. The following discussion addresses issues 
raised by these commenters.

A. Product Classes and Scope of Coverage

    When evaluating and establishing energy conservation standards, DOE 
divides covered products into product classes by the type of energy 
used or by capacity or other performance-related features that justify 
differing standards. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such 
factors as the utility of the feature to the consumer and other factors 
DOE determines are appropriate. (42 U.S.C. 6295(q)) DOE's preliminary 
analysis indicated that the current room AC product classes are still 
appropriate.

B. Test Procedure

    EPCA sets forth generally applicable criteria and procedures for 
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293) 
Manufacturers of covered products must use these test procedures to 
certify to DOE that their product complies with energy conservation 
standards and to quantify the efficiency of their product. In addition, 
consistent with section 8(d)(1)(i) of appendix A, DOE will finalize 
amended test procedures that impact measured energy use or efficiency 
at least 180 days prior to the close of the comment period for a NOPR 
proposing new or amended energy conservation standards. DOE published a 
test procedure final rule on March 29, 2021, retaining the CEER metric 
used to express DOE's current energy conservation standards for room 
ACs in Btu/Wh. 86 FR 16446. DOE's test procedures for room ACs appear 
at appendix F to 10 CFR part 430, subpart B.

C. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology options and prototype designs that could improve the 
efficiency of the products or equipment that are the subject of the 
rulemaking. As the first step in such an analysis, DOE develops a list 
of technology options for consideration in consultation with 
manufacturers, design engineers, and other interested parties. DOE then 
determines which of those means for improving efficiency are 
technologically feasible. DOE considers technologies incorporated in 
commercially-available products or in working prototypes to be 
technologically feasible. Sections 6(b)(3)(i) and 7(b)(1) of appendix 
A.
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
Practicability to manufacture, install, and service; (2) adverse 
impacts on product utility or availability; (3) adverse impacts on 
health or safety, and (4) unique-pathway proprietary technologies. 
Sections 6(b)(3)(ii)-(v) and 7(b)(2)-(5) of appendix A. Section IV.B of 
this document discusses the results of the screening analysis for room 
ACs, particularly the designs DOE considered, those it screened out, 
and those that are the basis for the standards considered in this 
proposed rulemaking. For further details on the screening analysis for 
this proposed rulemaking, see chapter 4 of the NOPR TSD.
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt an amended standard for a type or class 
of covered product, it must determine the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the 
engineering analysis, DOE determined the maximum technologically 
feasible (``max-tech'') improvements in energy efficiency for room ACs, 
using the design parameters for the most efficient products available 
on the market or in working prototypes. The max-tech levels that DOE 
determined for this proposed rulemaking are described in section IV.C.1 
of this document and in chapter 5 of the NOPR TSD.

D. Energy Savings

    For each trial standard level (``TSL''), DOE projected energy 
savings from application of the TSL to room ACs purchased in the 30-
year period that begins in the year of compliance with the proposed 
standards (2026-2055).\16\ The savings are measured over the entire 
lifetime of a room AC purchased in the previous 30-year period. DOE 
quantified the energy savings attributable to each TSL as the 
difference in energy consumption between each standards case and the 
no-new-standards case. The no-new-standards case represents a 
projection of energy consumption that reflects how the market for a 
product would likely evolve in the absence of amended energy 
conservation standards.
---------------------------------------------------------------------------

    \16\ Each TSL is composed of specific efficiency levels for each 
product class. The TSLs considered for this NOPR are described in 
section V.A of this document. DOE conducted a sensitivity analysis 
that considers impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------

    DOE used its national impact analysis (``NIA'') spreadsheet model 
to estimate national energy savings (``NES'') from potential amended or 
new standards for room ACs. The NIA spreadsheet model (described in 
section IV.H of this document) calculates energy savings in terms of 
site energy, which is the energy directly consumed by products at the 
locations where they are used. For electricity, DOE reports national 
energy savings in terms of primary energy savings, which is the savings 
in the energy that is used to generate and transmit the site 
electricity. DOE also calculates NES in terms of full-fuel cycle 
(``FFC'') energy savings. The FFC metric includes the energy consumed 
in extracting, processing, and transporting primary fuels (i.e., coal, 
natural gas, petroleum fuels), and thus presents a more complete 
picture of the impacts of energy conservation standards.\17\ DOE's 
approach is based on the calculation of an FFC multiplier for each of 
the energy types used by covered products or equipment. For more 
information on FFC energy savings, see section IV.H.2 of this document.
---------------------------------------------------------------------------

    \17\ The FFC metric is discussed in DOE's statement of policy 
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as 
amended at 77 FR 49701 (Aug. 17, 2012).
---------------------------------------------------------------------------

1. Significance of Savings
    To adopt any new or amended standards for a covered product, DOE 
must determine that such action would result in significant energy 
savings. (42 U.S.C. 6295(o)(3)(B)) Although the term ``significant'' is 
not defined in the EPCA, the U.S. Court of Appeals, for the District of 
Columbia Circuit in Natural Resources Defense Council v. Herrington, 
768 F.2d 1355, 1373 (D.C. Cir. 1985), opined that Congress intended 
``significant'' energy savings in the context of EPCA to be savings 
that were not ``genuinely trivial.''
    The significance of energy savings offered by a new or amended 
energy conservation standard cannot be determined without knowledge of 
the specific circumstances surrounding a

[[Page 20620]]

given rulemaking.\18\ For example, the United States recently rejoined 
the Paris Agreement and will exert leadership in confronting the 
climate crisis. These actions have placed an increased emphasis on the 
importance of energy savings that reduce greenhouse gas emissions and 
help mitigate the climate crisis. Additionally, some covered products 
and equipment, particularly those providing space cooling, such as room 
ACs, are likely to consume significant energy during periods of peak 
energy demand. The impacts of these products on the energy 
infrastructure can be more pronounced than products with relatively 
constant demand. Lastly, in evaluating the significance of energy 
savings, DOE considers differences in primary energy and FFC effects 
for different covered products and equipment when determining whether 
energy savings are significant. Primary energy and FFC effects include 
the energy consumed in electricity production (depending on load 
shape), in distribution and transmission, and in extracting, 
processing, and transporting primary fuels (i.e., coal, natural gas, 
petroleum fuels), and thus present a more complete picture of the 
impacts of energy conservation standards.
---------------------------------------------------------------------------

    \18\ The numeric threshold for determining the significance of 
energy savings established in a final rule published on February 14, 
2020 (85 FR 8626, 8670), was subsequently eliminated in a final rule 
published on December 13, 2021 (86 FR 70892).
---------------------------------------------------------------------------

    Accordingly, DOE is evaluating the significance of energy savings 
on a case-by-case basis. DOE has initially determined the energy 
savings for the TSL proposed in this rulemaking are nontrivial, and, 
therefore, DOE considers them ``significant'' within the meaning of 42 
U.S.C. 6295(o)(3)(B).

E. Economic Justification

1. Specific Criteria
    As noted previously, EPCA provides seven factors to be evaluated in 
determining whether a potential energy conservation standard is 
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII)) The 
following sections discuss how DOE has addressed each of those seven 
factors in this proposed rulemaking.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts of a potential amended standard on 
manufacturers, DOE conducts an MIA, as discussed in section IV.J of 
this document. DOE first uses an annual cash-flow approach to determine 
the quantitative impacts. This step includes both a short-term 
assessment--based on the cost and capital requirements during the 
period between when a regulation is issued and when entities must 
comply with the regulation--and a long-term assessment over a 30-year 
period. The industry-wide impacts analyzed include (1) INPV, which 
values the industry on the basis of expected future cash flows, (2) 
cash flows by year, (3) changes in revenue and income, and (4) other 
measures of impact, as appropriate. Second, DOE analyzes and reports 
the impacts on different types of manufacturers, including impacts on 
small manufacturers. Third, DOE considers the impact of standards on 
domestic manufacturer employment and manufacturing capacity, as well as 
the potential for standards to result in plant closures and loss of 
capital investment. Finally, DOE takes into account cumulative impacts 
of various DOE regulations and other product-specific regulatory 
requirements on manufacturers.
    For individual consumers, measures of economic impact include the 
changes in LCC and PBP associated with new or amended standards. These 
measures are discussed further in the following section. For consumers 
in the aggregate, DOE also calculates the national net present value of 
the consumer costs and benefits expected to result from particular 
standards. DOE also evaluates the impacts of potential standards on 
identifiable subgroups of consumers that may be affected 
disproportionately by a standard.
b. Savings in Operating Costs Compared to Increase in Price (LCC and 
PBP)
    EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered product in the 
type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered product 
that are likely to result from a standard. (42 U.S.C. 
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP 
analysis.
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating expense (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the product. The LCC analysis requires a variety of inputs, such as 
product prices, product energy consumption, energy prices, maintenance 
and repair costs, product lifetime, and discount rates appropriate for 
consumers. To account for uncertainty and variability in specific 
inputs, such as product lifetime and discount rate, DOE uses a 
distribution of values, with probabilities attached to each value.
    The PBP is the estimated amount of time (in years) it takes 
consumers to recover the increased purchase cost (including 
installation) of a more-efficient product through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
due to a more-stringent standard by the change in annual operating cost 
for the year that standards are assumed to take effect.
    For its LCC and PBP analysis, DOE assumes that consumers will 
purchase the covered products in the first year of compliance with new 
or amended standards. The LCC savings for the considered efficiency 
levels are calculated relative to the case that reflects projected 
market trends in the absence of new or amended standards. DOE's LCC and 
PBP analysis is discussed in further detail in section IV.F of this 
document.
c. Energy Savings
    Although significant conservation of energy is a separate statutory 
requirement for adopting an energy conservation standard, EPCA requires 
DOE, in determining the economic justification of a standard, to 
consider the total projected energy savings that are expected to result 
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As 
discussed in section III.D of this document, DOE uses the NIA 
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Products
    In establishing product classes and in evaluating design options 
and the impact of potential standard levels, DOE evaluates potential 
standards that would not lessen the utility or performance of the 
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data 
available to DOE, the standards proposed in this document would not 
reduce the utility or performance of the products under consideration 
in this rulemaking.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition, as determined in writing by the Attorney General, that is 
likely to result from a proposed standard. (42 U.S.C. 
6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine 
the impact, if any, of any lessening of competition likely to result 
from a proposed standard and to transmit such determination to the 
Secretary within 60

[[Page 20621]]

days of the publication of a proposed rule, together with an analysis 
of the nature and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(ii)) 
DOE will transmit a copy of this proposed rule to the Attorney General 
with a request that the Department of Justice (``DOJ'') provide its 
determination on this issue. DOE will publish and respond to the 
Attorney General's determination in the final rule. DOE invites comment 
from the public regarding the competitive impacts that are likely to 
result from this proposed rule. In addition, stakeholders may also 
provide comments separately to DOJ regarding these potential impacts. 
See the ADDRESSES section for information to send comments to DOJ.
f. Need for National Energy Conservation
    DOE also considers the need for national energy and water 
conservation in determining whether a new or amended standard is 
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy 
savings from the proposed standards are likely to provide improvements 
to the security and reliability of the Nation's energy system. 
Reductions in the demand for electricity also may result in reduced 
costs for maintaining the reliability of the Nation's electricity 
system. DOE conducts a utility impact analysis to estimate how 
standards may affect the Nation's needed power generation capacity, as 
discussed in section IV.M of this document.
    DOE maintains that environmental and public health benefits 
associated with the more efficient use of energy are important to take 
into account when considering the need for national energy 
conservation. The proposed standards are likely to result in 
environmental benefits in the form of reduced emissions of air 
pollutants and greenhouse gases (``GHGs'') associated with energy 
production and use. As part of the analysis of the need for national 
energy and water conservation, DOE conducts an emissions analysis to 
estimate how potential standards may affect these emissions, as 
discussed in section IV.K of this document; the estimated emissions 
impacts are reported in section V.B.6 of this document.
g. Other Factors
    In determining whether an energy conservation standard is 
economically justified, DOE may consider other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To 
the extent DOE identifies any relevant information regarding economic 
justification that does not fit into the other categories described 
previously, DOE could consider such information under ``other 
factors.''
2. Rebuttable Presumption
    As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a 
rebuttable presumption that an energy conservation standard is 
economically justified if the additional cost to the consumer of a 
product that meets the standard is less than three times the value of 
the first year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. DOE's LCC and PBP 
analyses generate values used to calculate the effects that proposed 
energy conservation standards would have on the payback period for 
consumers. These analyses include, but are not limited to, the 3-year 
payback period contemplated under the rebuttable-presumption test. In 
addition, DOE routinely conducts an economic analysis that considers 
the full range of impacts to consumers, manufacturers, the Nation, and 
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The 
results of this analysis serve as the basis for DOE's evaluation of the 
economic justification for a potential standard level (thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification). The rebuttable presumption payback calculation 
is discussed in section IV.F.9 of this document.

IV. Methodology and Discussion of Related Comments

    This section addresses the analyses DOE has performed for this 
proposed rulemaking with regard to room ACs. Separate subsections 
address each component of DOE's analyses.
    DOE used several analytical tools to estimate the impact of the 
standards proposed in this document. The first tool is a spreadsheet 
that calculates the LCC savings and PBP of potential amended or new 
energy conservation standards. The national impacts analysis uses a 
second spreadsheet set that provides shipments projections and 
calculates national energy savings and net present value of total 
consumer costs and savings expected to result from potential energy 
conservation standards. DOE uses the third spreadsheet tool, the 
Government Regulatory Impact Model (``GRIM''), to assess manufacturer 
impacts of potential standards. These three spreadsheet tools are 
available on the DOE website for this proposed rulemaking: 
www.regulations.gov/docket?D=EERE-2014-BT-STD-0059. Additionally, DOE 
used output from the latest version of the Energy Information 
Administration's (``EIA's'') Annual Energy Outlook (``AEO''), a widely 
known energy projection for the United States, for the emissions and 
utility impact analyses.

A. Market and Technology Assessment

    DOE develops information in the market and technology assessment 
that provides an overall picture of the market for the products 
concerned, including the purpose of the products, the industry 
structure, manufacturers, market characteristics, and technologies used 
in the products. This activity includes both quantitative and 
qualitative assessments, based primarily on publicly-available 
information. The subjects addressed in the market and technology 
assessment for this proposed rulemaking include (1) a determination of 
the scope of the rulemaking and product classes, (2) manufacturers and 
industry structure, (3) existing efficiency programs, (4) shipments 
information, (5) market and industry trends, and (6) technologies or 
design options that could improve the energy efficiency of room ACs. 
The key findings of DOE's market assessment are summarized in the 
following sections. See chapter 3 of the NOPR TSD for further 
discussion of the market and technology assessment.
1. Scope of Coverage and Product Classes
    In the June 2020 Preliminary Analysis, DOE did not identify any 
potential changes to the room AC scope of coverage or product classes. 
85 FR 36512.
    The Joint Commenters expressed concerns regarding DOE's current set 
of room AC product classes. (Joint Commenters, No. 20 at p. 1 \19\) The 
Joint Commenters disagreed with DOE's explanation that Product Classes 
1 and 6 are necessary, despite having the same efficiency requirements 
as Product Classes 2 and 7, respectively, to recognize the value to 
certain consumer segments of a low-cost, low-cooling capacity room AC 
in Product Classes 1 and 6. They did not object to maintaining these 
product class distinctions based on cooling capacity, but suggested 
that cost must not be a rationale for maintaining the

[[Page 20622]]

distinctions because cost is not a ``performance-related feature.'' Id.
---------------------------------------------------------------------------

    \19\ A notation in the form ``Joint Commenters, No. 20 at p. 1'' 
identifies a written comment: (1) Made by the Joint Commenters; (2) 
recorded in document number 20 that is filed in the docket of this 
energy conservation standards rulemaking (Docket No. EERE-2014-BT-
STD-0059) and available for review at www.regulations.gov; and (3) 
which appears on page 1 of document number 20.
---------------------------------------------------------------------------

    DOE understands the Joint Commenters' concerns about cost being a 
rationale for distinguishing product classes. However, the cost is 
substantively related to the performance-related features used to 
distinguish between the product classes, namely product size and 
weight. The NOPR analysis, based on models currently on the market, 
identified different efficiency levels above the ENERGY STAR[supreg] 
qualification levels for Product Classes 1 and 2, showing that these 
product classes have performance-related distinctions between them.
    While DOE is not proposing to combine product classes at this time, 
DOE is proposing a clarifying modification to the cooling capacity 
descriptors delineating the product classes, specifying that the 
capacity used to determine the product class of a basic model is the 
certified cooling capacity and expressing the capacity ranges to the 
nearest hundred British thermal units per hour (``Btu/h'') in 
accordance with the rounding instruction in 10 CFR 429.15(a)(3). For 
example, Product Class 2 currently specifies it includes room ACs with 
capacities ranging from 6,000 to 7,999 Btu/h; however, DOE recognizes 
that based on the rounding instruction in 10 CFR 429.15(a)(3), the 
upper range of this product class is, in practice, 7,900 Btu/h. 
Accordingly, DOE proposes in this NOPR to revise the threshold values 
of cooling capacity in the product class descriptions to the nearest 
hundred Btu/h that would not exceed the existing thresholds. DOE 
believes this slight modification that is being proposed for product 
class delineation is what manufacturers are using today in practice due 
to the rounding instruction at 10 CFR 429.15(a)(3) and will not impact 
compliance with current energy conservation standards. DOE is simply 
proposing to add clarity and consistency amongst two existing 
regulatory provisions.
    DOE requests comment on the proposal to make clarifying amendments 
to the product class descriptions, but otherwise not make any changes 
to room AC product classes.
    For ease of reviewing this NOPR, DOE is presenting the results of 
its analysis using the existing product class descriptions. The 
proposed new labeling of the product class thresholds using the rounded 
cooling capacity values are included in the proposed standards in Table 
I.1 and Table V.58 of this document.
2. Technology Options
    In the preliminary market analysis and technology assessment, DOE 
identified 22 technology options that would likely improve the 
efficiency of room ACs, as measured by the DOE test procedure:

[[Page 20623]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.017

    Several commenters provided feedback on some of these technology 
options. These comments are summarized below, along with DOE's 
responses.
a. Reduced Evaporator Air Recirculation
    The Joint Commenters referenced a 2013 National Renewable Energy 
Laboratory (``NREL'') study in which room AC performance was found to 
degrade with evaporator air recirculation, with the cooling coefficient 
of performance (``COP'') decreasing by 7 percent on 
average.20 21 The Joint Commenters emphasized NREL's 
conclusion that the room AC energy efficiency ratio (``EER'') could be 
improved by at least 1 Btu/Wh using simple and low-cost methods such as 
supplying air from the bottom rather than the top of the interior face, 
or providing an attachment fin to separate supply and return airflows. 
The Joint Commenters noted that DOE mentioned the results of this NREL 
study in the preliminary TSD but did not consider reduced evaporator 
air recirculation in the engineering analysis. Thus, given the large 
potential energy savings, the Joint Commenters urged DOE to investigate 
how to model the efficiency improvement associated with reduced 
evaporator air recirculation. (Joint Commenters, No. 20 at p. 2)
---------------------------------------------------------------------------

    \20\ As determined using experimental infrared camera imaging 
techniques applied to units outside of controlled calorimeter 
chamber conditions.
    \21\ s3.amazonaws.com/szmanuals/f50601c1a4960b3d7627df44cc951d28.
---------------------------------------------------------------------------

    DOE is aware of, and has reviewed the 2013 NREL study cited by the 
Joint Commenters, and notes that that study had a limited sample of 
four room ACs from only two different manufacturers (Frigidaire and GE/
Haier), and found a wide range of COP degradation due to evaporator air 
recirculation, from losses as low as 2 percent to as high as 19 
percent. Without intensive airflow modeling of each unit analyzed in 
the DOE teardown sample, more data on evaporator air recirculation in 
the market as a whole, and test data from a unit incorporating the sort 
of airflow changes suggested by NREL (DOE is not aware of such a unit 
on the market), DOE is unable to properly assess the impacts, both 
positive and negative of evaporator air recirculation reduction as a 
technology. Therefore, DOE is not incorporating this technology into 
its engineering analysis. DOE seeks

[[Page 20624]]

additional comment on whether evaporator air recirculation should be 
included in the engineering analysis.
b. Compressors
    AHAM and GEA stated that their data do not support DOE's 
assumptions regarding the efficiency of single-speed compressors. 
(AHAM, No. 19 at p. 12; GEA, No. 26 at pp. 1-2)
    Feedback given to DOE by manufacturers during interviews supported 
the commenters' assertion that the efficiency of the most efficient 
single-speed compressor available was overestimated in the June 2020 
Preliminary Analysis. Upon further analysis, DOE has reduced its 
estimate for the efficiency of the most efficient single-speed R-410a 
compressor available, from 13.1 to 10.9 Btu/Wh, based on a 
comprehensive survey of compressor catalogues and information provided 
by manufacturers, as discussed further in chapter 3 of the NOPR TSD. 
However, as discussed below, DOE also implemented a changeover from R-
410A to R-32 refrigerant, resulting in the most efficient available 
single-speed compressor being 12.7 Btu/Wh. DOE requests comment on the 
updated single-speed compressor maximum efficiency estimates.
c. Significant New Alternatives Policy (SNAP)--Approved Refrigerants
    In the June 2020 Preliminary Analysis, DOE discussed the potential 
for alternative refrigerants, restricted to the Significant New 
Alternatives Policy (``SNAP'')--approved refrigerants (i.e., R-32, R-
441A, R-290),\22\ but decided to forgo implementing them in the 
engineering analysis because they either did not significantly improve 
unit efficiency or DOE lacked sufficient technical and economic data to 
assess the costs and benefits of a changeover. AHAM, the California 
IOUs, Joint Commenters, and NEEA disagreed with DOE's decision not to 
consider these alternative refrigerants in the engineering analysis. 
They stated that alternative refrigerants are already in use for some 
product classes to meet current energy conservation standards 
(baseline) and ENERGY STAR (Efficiency Level (``EL 2'')) levels. (AHAM, 
No. 19 at pp. 10-11; California IOUs, No. 23 at p. 3; Joint Commenters, 
No. 20 at p. 2; NEEA, No. 24 at pp. 4-5; NEEA, Public Meeting 
Transcript, No. 18 at pp. 59-60) \23\ AHAM emphasized the significant 
costs associated with changing refrigerant type. (AHAM, No. 19 at pp. 
10-11) The California IOUs, Joint Commenters, and NEEA specifically 
noted that room ACs using R-32 are now widely available in the United 
States, suggesting that the use of alternative refrigerants is not cost 
prohibitive to manufacturers, as DOE stated in the preliminary TSD. 
NEEA stated that manufacturers using R-32 in air conditioning systems 
have generally found energy savings ranging from 8 to 11 percent. AHAM, 
the California IOUs, and NEEA noted that there is currently a proposed 
rule from the California Air Resource Board (``CARB'') that would ban 
all refrigerants with global warming potential (``GWP'') equal to or 
greater than 750 in new residential and commercial AC systems beginning 
in 2023 and would likely push additional manufacturers to explore 
alternative refrigerants.\24\ (AHAM, No. 19 at pp. 10-11; California 
IOUs, No. 23 at p. 3; Joint Commenters, No. 20 at p. 2; NEEA, No. 24 at 
pp. 4-5; NEEA, Public Meeting Transcript, No. 18 at pp. 59-60) The 
Joint Commenters referenced a study performed by the Oak Ridge National 
Laboratory (``ORNL'') in which ORNL developed a high-efficiency room AC 
to determine the viability of a window AC unit with an EER over 13.0 
Btu/Wh and found that using a ``drop-in'' 85-percent R-32 mixture as 
the refrigerant in place of R-410A boosted efficiency by about 3 
percent and, thus, that pure R-32 would offer an additional efficiency 
gain. The Joint Commenters referenced another ORNL study in which a 
room AC unit was modified to use propane (R-290) and demonstrated an 
increase in EER of 17 percent. The Joint Commenters also stated that, 
while any cost impacts to consumers and/or manufacturers should be 
considered as part of the economic analysis, cost cannot be a 
consideration in determining what is technologically feasible. (Joint 
Commenters, No. 20 at p. 2) Thus, AHAM, the California IOUs, Joint 
Commenters, and NEEA urged DOE to further investigate alternative 
refrigerants as a technology option. (AHAM, No. 19 at pp. 10-11; 
California IOUs, No. 23 at p. 3; Joint Commenters, No. 20 at p. 2; 
NEEA, No. 24 at pp. 4-5) NEEA specifically urged DOE to consider R-32. 
(NEEA, No. 24 at pp. 4-5) The California IOUs encouraged DOE to work 
closely with CARB, the American Society of Heating, Refrigerating and 
Air-Conditioning Engineers (``ASHRAE'') Standing Standard Project 
Committee 15--Safety Standard for Refrigeration Systems, and the Air-
Conditioning, Heating, and Refrigeration Institute (``AHRI'') Low-GWP 
Alternative Refrigeration Evaluation Program to address in this 
rulemaking the efficiency benefits from using low-GWP refrigerants in 
room ACs. (California IOUs, No. 23 at p. 3)
---------------------------------------------------------------------------

    \22\ For the latest information on EPA SNAP regulations, visit: 
www.epa.gov/snap/snap-regulations.
    \23\ A notation in the form ``NEEA, Public Meeting Transcript, 
No. 18 at pp. 59-60'' identifies an oral comment that DOE received 
on August 25, 2020 during the public meeting, and was recorded in 
the public meeting transcript in the docket for this energy 
conservation standards rulemaking (Docket No. EERE-2014-BT-STD-
0059). This particular notation refers to a comment (1) made by the 
Northwest Energy Efficiency Alliance during the public meeting; (2) 
recorded in document number 18, which is the public meeting 
transcript that is filed in the docket of this energy conservation 
standards rulemaking; and (3) which appears on pages 59 through 60 
of document number 18.
    \24\ See https://ww2.arb.ca.gov/rulemaking/2020/hfc2020 for more 
information on the CARB refrigerant rulemaking.
---------------------------------------------------------------------------

    DOE is aware that R-32 refrigerant is currently in use in the room 
AC market and that adoption of the refrigerant in room ACs is 
increasing, in part due to the CARB regulation regarding low-GWP 
refrigerants. R-32 has a GWP of 675, just under a third of the GWP of 
R-410a, which is 2,090. However, the research findings on efficiency 
impacts due to the transition from R-410A to R-32 are inconsistent, 
ranging from a 2-percent decrease in efficiency to the 8- to 11-percent 
increase cited by NEEA. Due to these inconsistent data, DOE did not 
consider efficiency gains due to R-32 implementation alone. However, as 
discussed previously, DOE found that the most efficient single-speed 
compressors available on the market use R-32 refrigerant, so DOE did 
incorporate a changeover to R-32 in the engineering analysis to capture 
the compressor efficiency gains that are technologically feasible by 
implementing improved-efficiency single-speed compressors (which use R-
32 refrigerant) in place of existing baseline-efficiency single-speed 
compressors (which use R-410A refrigerant). DOE requests comment on the 
approach to addressing alternative refrigerants in this engineering 
analysis.

B. Screening Analysis

    DOE uses the following five screening criteria to determine which 
technology options are suitable for further consideration in an energy 
conservation standards rulemaking:
    (1) Technological feasibility. Technologies that are not 
incorporated in commercial products or in working prototypes will not 
be considered further.
    (2) Practicability to manufacture, install, and service. If it is 
determined that mass production and reliable installation and servicing 
of a technology in commercial products could not be achieved on the 
scale

[[Page 20625]]

necessary to serve the relevant market at the time of the projected 
compliance date of the standard, then that technology will not be 
considered further.
    (3) Impacts on product utility or product availability. If it is 
determined that a technology would have significant adverse impact on 
the utility of the product to significant subgroups of consumers or 
would result in the unavailability of any covered product type with 
performance characteristics (including reliability), features, sizes, 
capacities, and volumes that are substantially the same as products 
generally available in the United States at the time, it will not be 
considered further.
    (4) Adverse impacts on health or safety. If it is determined that a 
technology would have significant adverse impacts on health or safety, 
it will not be considered further.
    (5) Unique-Pathway Proprietary Technologies. If a design option 
utilizes proprietary technology that represents a unique pathway to 
achieving a given efficiency level, that technology will not be 
considered further due to the potential for monopolistic concerns.
    Sections 6(b)(3) and 7(b) of appendix A.
    In summary, if DOE determines that a technology, or a combination 
of technologies, fails to meet one or more of the listed five criteria, 
it will be excluded from further consideration in the engineering 
analysis. The subsequent sections include comments from interested 
parties pertinent to the screening criteria, DOE's evaluation of each 
technology option against the screening analysis criteria, and whether 
DOE determined that a technology option should be excluded (``screened 
out'') based on the screening criteria.
1. Screened-Out Technologies
    In the June 2020 Preliminary Analysis, DOE considered screening out 
air and water economizers and suction-line heat exchangers in the 
screening analysis, based on their negative impacts on product utility 
to consumers and on manufacturing impracticality.
    AHAM agreed with DOE screening out these technologies. AHAM stated, 
as DOE noted, air and water economizers and suction line heat 
exchangers would increase the size and weight of room ACs, which would 
negatively impact consumer utility and require retooling. AHAM further 
stated that suction line heat exchangers could also decrease compressor 
lifetime. (AHAM, No. 19 at p. 10)
    DOE agrees with the comments made by AHAM and proposes to screen 
out the same technologies in this NOPR analysis. For additional 
details, see chapter 4 of the NOPR TSD. DOE requests comment on the 
technologies screened out in the NOPR screening analysis.
2. Remaining Technologies
    Through a review of each technology, DOE tentatively concludes that 
all of the other identified technologies listed in section IV.A.2 of 
this document met all five screening criteria to be examined further as 
design options in DOE's NOPR analysis. In summary, DOE did not screen 
out the following technology options:

[[Page 20626]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.018

    DOE determined that these technology options are technologically 
feasible because they are being used or have previously been used in 
commercially available products or working prototypes. DOE also finds 
that all of the remaining technology options meet the other screening 
criteria (i.e., practicable to manufacture, install, and service; do 
not result in adverse impacts on consumer utility, product 
availability, health, or safety; and do not represent unique-pathway 
proprietary technologies). For additional details, see chapter 4 of the 
NOPR TSD.

C. Engineering Analysis

    The purpose of the engineering analysis is to establish the 
relationship between the efficiency and cost of room ACs. There are two 
elements to consider in the engineering analysis; the selection of 
efficiency levels to analyze (i.e., the ``efficiency analysis'') and 
the determination of product cost at each efficiency level (i.e., the 
``cost analysis''). In determining the performance of higher-efficiency 
products, DOE considers technologies and design option combinations not 
eliminated by the screening analysis. For each product class, DOE 
estimates the baseline cost, as well as the incremental cost for the 
product at efficiency levels above the baseline. The output of the 
engineering analysis is a set of cost-efficiency ``curves'' that are 
used in downstream analyses (i.e., the LCC and PBP analyses and the 
NIA).
1. Efficiency Analysis
    DOE typically uses one of two approaches to develop energy 
efficiency levels for the engineering analysis: (1) Relying on observed 
efficiency levels in the market (i.e., the efficiency-level approach), 
or (2) determining the incremental efficiency improvements associated 
with incorporating specific design options to a baseline model (i.e., 
the design-option approach). Using the efficiency-level approach, the 
efficiency levels established for the analysis are determined based on 
the market distribution of existing products (in other words, based on 
the range of efficiencies and efficiency level ``clusters'' that 
already exist on the market). Using the design option approach, the 
efficiency levels established for the analysis are determined through 
detailed engineering calculations and/or computer simulations of the 
efficiency improvements from implementing specific design options that 
have been identified in the technology assessment. DOE may also rely on 
a combination of these two approaches. For example, the efficiency-
level approach (based on actual products on the market) may be extended 
using the design option approach to ``gap fill'' levels (to bridge 
large gaps between other identified efficiency levels) and/or to 
extrapolate to the max-tech level (particularly in cases where the max-
tech level exceeds

[[Page 20627]]

the maximum efficiency level currently available on the market).
    In this proposed rulemaking, DOE relies on a combination of these 
two approaches. For each product class, DOE analyzed a few units from 
different manufacturers to ensure the analysis was representative of 
various designs on the market. The analysis involved physically 
disassembling commercially available products, reviewing publicly 
available cost information, and modeling equipment cost. From this 
information, DOE estimated the manufacturer production costs (``MPCs'') 
for a range of products currently available on the market. DOE then 
considered the design options manufacturers would likely rely on to 
improve product efficiencies. From this information, DOE estimated the 
cost and efficiency impacts of incorporating specific design options at 
each efficiency level.
    DOE analyzed six efficiency levels as part of the engineering 
analysis: (1) The current DOE standard (baseline); (2) an intermediate 
level above the baseline but below the ENERGY STAR level, either 
halfway between the two or at a level where a number of models were 
certified (EL 1); (3) the ENERGY STAR efficiency criterion (EL 2); (4) 
the efficiency attainable by a unit with the most efficient R-32 
single-speed compressor on the market (EL 3); (5) an intermediate level 
representing the efficiency of variable-speed units on the market, as 
tested by DOE using the recently amended test procedure (EL 4); and (6) 
the maximum technologically feasible (max-tech) efficiency (EL 5).
    In evaluating the technologies manufacturers could use to achieve 
the analyzed efficiency levels, DOE considered design options which 
made the largest impact on unit efficiency and for which the cost-
efficiency relationship was well defined. Accordingly, DOE implemented 
increased heat exchanger area, condenser coil subcoolers, improved 
blower motor efficiency, improved compressor efficiency, variable-speed 
compressors, and low standby-power electronic controls as design 
options, some or all of which were used to estimate the cost required 
to reach each efficiently level. DOE did not consider for analysis 
certain technologies that met the screening criteria but were unable to 
be evaluated for one or more of the following reasons: (1) Data are not 
available to evaluate the energy efficiency characteristics of the 
technology, (2) available data suggest that the efficiency benefits of 
the technology are negligible, and (3) certain technologies cannot be 
measured according to the conditions and methods specified in the 
existing test procedure. Further information on how the design options 
were chosen and implemented in the engineering analysis is available in 
chapter 5 of the NOPR TSD.
a. Baseline Efficiency
    For each product class, DOE generally selects a baseline model as a 
reference point for each class, and measures changes resulting from 
potential energy conservation standards against the baseline. The 
baseline model in each product class represents the characteristics of 
a product typical of that class (e.g., capacity, physical size). 
Generally, a baseline model is one that just meets current energy 
conservation standards, or, if no standards are in place, the baseline 
is typically the most common or least efficient unit on the market.
    For this NOPR, DOE selected 19 baseline units, of the 48 total 
units selected, that fell within 12 of the 16 room AC product classes 
as reference points for each analyzed product class, against which DOE 
measured changes that would result from amended energy conservation 
standards to support the engineering, LCC, and PBP analyses. The 
baseline units in each of the analyzed product classes represent the 
basic characteristics of equipment in that class
b. Higher Efficiency Levels
    As part of DOE's analysis, the maximum available efficiency level 
is the highest efficiency unit currently available on the market. DOE 
also defines the ``max-tech'' efficiency level to represent the maximum 
possible efficiency for a given product. As discussed in chapter 5 of 
the NOPR TSD, for the max-tech level, DOE modeled replacing permanent 
split capacitor (``PSC'') fan motors with more efficient electronically 
commutated motors (``ECMs''), replacing single-speed compressors with 
the maximum efficiency variable-speed compressors available, reducing 
standby power to the minimum observed in DOE's teardown sample, and 
increasing the cabinet and heat exchanger to the largest feasible sizes 
to improve efficiency. For all product classes, the max-tech level 
identified for EL 5 exceeds any other regulatory or voluntary 
efficiency criteria currently in effect.
    DOE notes that the max-tech level is based entirely on modeled 
combinations of design options that have not yet been combined in a 
commercially available product. Notably, the key design option, 
variable-speed compressors, are nascent in room ACs, and because there 
are no models on the market or prototypes that implement these highest 
efficiency variable-speed compressors, the efficiency level at max-tech 
for each product class is a numerical estimation. This is in contrast 
to the variable-speed compressors currently implemented in room ACs on 
the market today, for which performance has been characterized through 
testing. Furthermore, the room AC test procedure measures variable-
speed unit performance differently than test procedures for other air 
conditioning products, so limited performance and efficiency data are 
available for the most efficient examples of this emergent technology 
for room ACs.
    Additionally, the most efficient variable-speed compressors that 
were implemented in the analysis at the max-tech efficiency level are 
manufactured by one manufacturer and have rated EERs between 11.2 and 
11.7 Btu/Wh, with a range of rated capacities between 4,705 Btu/h and 
16,170 Btu/h. Given the lack of information regarding availability of 
these highest efficiency variable-speed compressors, and the limited 
number of variable-speed compressors rated at or near the compressors 
considered for the max-tech efficiency level, there may not be 
widespread availability of these high-efficiency variable-speed 
compressors.
    The Joint Commenters and NEEA encouraged DOE to consider evaluating 
additional efficiency levels, particularly an intermediate level 
between EL 3 and EL 4. According to the Joint Commenters and NEEA, the 
most efficient products available today fall between these two 
efficiency levels. (Joint Commenters, No. 20 at pp. 2-3; NEEA, No. 24 
at pp. 3 and 7) DOE agrees that the most efficient available units 
should be represented in the engineering analysis. In particular, 
variable-speed models, of which an increasing number of models are 
available, were not included in a separate efficiency level in the 
preliminary engineering analysis as a stand-alone design option. 
Therefore, DOE included a new efficiency level (EL 4) in the NOPR 
engineering analysis, between EL 3 and the max-tech level (EL 4 in the 
preliminary analysis, now EL 5 for this NOPR). This new EL 4 is an 
intermediate efficiency level that represents the efficiency of 
variable-speed units on the market, as tested by DOE using the recently 
amended test procedure. DOE modeled all teardown units to reach this 
efficiency level in the engineering analysis by replacing each single-
speed compressor with a variable-speed compressor and

[[Page 20628]]

adjusting the rated efficiency of the modeled variable-speed compressor 
to achieve the target overall CEER value. DOE requests comment on the 
new efficiency level (EL 4) in the engineering analysis.
    AHAM and GEA stated that any energy standard levels achievable only 
with variable-speed compressors should not be selected and asserted 
that EL 3 and above would require the use of variable-speed 
compressors. AHAM and GEA further stated that manufacturers would 
likely begin using variable-speed compressors to meet energy 
conservation standards at EL 3. GEA supported AHAM's position and noted 
that incorporating variable-speed compressors into existing room AC 
units requires platform-level changes to room AC designs and 
manufacturing facilities. GEA further stated that, while variable-speed 
compressors are becoming available in some products, the technology is 
not sufficiently cost-effective to use as the basis for setting an 
energy standard level for this proposed rulemaking. Thus, AHAM and GEA 
urged DOE to adjust its analysis to reflect the use of variable-speed 
compressors at EL 3. (AHAM, No. 19 at pp. 11-12; GEA, No. 26 at pp. 1-
2)
    As discussed in section IV.A.2.b of this document, DOE adjusted its 
estimated efficiency for the most efficient available single-speed 
compressors, thus slightly reducing the CEER level for EL 3, but along 
with the additional proposed changeover to more efficient compressors 
that use R-32 refrigerant, room ACs that implement single-speed 
compressors are still expected to meet EL 3. Therefore, DOE did not 
revise its analysis to assume that the use of variable-speed 
compressors would be necessary to achieve EL 3. DOE requests comment on 
the approach to design EL 3 as the level reached by the most efficient 
single-speed room ACs.
2. Cost Analysis
    The cost analysis portion of the engineering analysis is conducted 
using one or a combination of cost approaches. The selection of cost 
approach depends on a suite of factors, including the availability and 
reliability of public information, characteristics of the regulated 
product, the availability and timeliness of purchasing the product on 
the market. The cost approaches are summarized as follows:
     Physical teardowns: Under this approach, DOE physically 
dismantles a commercially available product, component-by-component, to 
develop a detailed bill of materials for the product.
     Catalog teardowns: In lieu of physically deconstructing a 
product, DOE identifies each component using parts diagrams (available 
from manufacturer websites or appliance repair websites, for example) 
to develop the bill of materials (``BOM'') for the product.
     Price surveys: If neither a physical nor catalog teardown 
is feasible (for example, for tightly integrated products such as 
fluorescent lamps, which are infeasible to disassemble and for which 
parts diagrams are unavailable) or cost-prohibitive and otherwise 
impractical (e.g., large commercial boilers), DOE conducts price 
surveys using publicly available pricing data published on major online 
retailer websites and/or by soliciting prices from distributors and 
other commercial channels.
    In the present case, DOE conducted the analysis using physical 
teardowns. The resulting BOM provides the basis for the MPC estimates. 
DOE estimated the cost of the highest efficiency single-speed and 
variable-speed compressors implemented in EL 3 and EL 5, respectively, 
by extrapolating the costs from price surveys of other compressors. DOE 
used this approach because, as discussed previously, DOE is not aware 
of these most efficient single-speed and variable-speed compressors 
being implemented in any available room ACs to date.
3. Cost-Efficiency Results
    The results of the engineering analysis are presented as cost-
efficiency data for each of the efficiency levels for each of the 
product classes that were analyzed, as well as those extrapolated from 
a product class with similar cooling capacity and features. DOE 
developed estimates of MPCs for each unit in the teardown sample, and 
also performed additional modeling for each of the teardown samples, to 
develop a comprehensive set of MPCs at each efficiency level. DOE then 
consolidated the resulting MPCs for each of DOE's teardown units and 
modeled units using a weighted average for product classes in which DOE 
analyzed units from multiple manufacturers. DOE's weighting factors 
were based on a market penetration analysis for each of the 
manufacturers within each product class. The resulting weighted-average 
incremental MPCs (i.e., the additional costs manufacturers would likely 
incur by producing room ACs at each efficiency level compared to the 
baseline) are provided in Tables 5.5.5 and 5.5.6 in chapter 5 of the 
NOPR TSD. See chapter 5 of the NOPR TSD for additional detail on the 
engineering analysis. DOE requests comment on the incremental MPCs from 
the NOPR engineering analysis.

D. Markups Analysis

    The markups analysis develops appropriate markups (e.g., retailer 
markups, distributor markups, contractor markups) in the distribution 
chain and sales taxes to convert the MPC estimates derived in the 
engineering analysis to consumer prices, which are then used in the LCC 
and PBP analysis and in the manufacturer impact analysis. At each step 
in the distribution channel, companies mark up the price of the product 
to cover business costs and profit margin.
    To account for manufacturers' non-production costs and profit 
margin, DOE applied a non-production cost multiplier (the manufacturer 
markup) to the MPC. The resulting manufacturer selling price (``MSP'') 
is the price at which the manufacturer distributes a unit into 
commerce. DOE developed an average manufacturer markup by examining the 
annual Securities and Exchange Commission (``SEC'') 10-K reports filed 
by publicly traded manufacturers primarily engaged in appliance 
manufacturing and whose combined product range includes room ACs.
    For room ACs, DOE further developed baseline and incremental 
markups for each link in the distribution chain (after the product 
leaves the manufacturer). Baseline markups are applied to the price of 
products with baseline efficiency, while incremental markups are 
applied to the difference in price between baseline and higher-
efficiency models (the incremental cost increase). The incremental 
markup is typically less than the baseline markup and is designed to 
maintain similar per-unit operating profit before and after new or 
amended standards.\25\
---------------------------------------------------------------------------

    \25\ Because the projected price of standards-compliant products 
is typically higher than the price of baseline products, using the 
same markup for the incremental cost and the baseline cost would 
result in higher per-unit operating profit. While such an outcome is 
possible, DOE maintains that in markets that are reasonably 
competitive it is unlikely that standards would lead to a 
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------

    DOE relied on economic data from the U.S. Census Bureau to estimate 
average baseline and incremental markups. Specifically, DOE used the 
2017 Annual Retail Trade Survey for the ``electronics and appliance 
stores'' sector to develop retailer markups; \26\ and the 2017 Annual 
Wholesale Trade Survey for the ``household appliances, and electrical 
and electronic goods merchant

[[Page 20629]]

wholesalers'' sector to estimate wholesaler markups.\27\
---------------------------------------------------------------------------

    \26\ U.S. Census Bureau, Annual Retail Trade Survey. 2017. 
www.census.gov/programs-surveys/arts.html.
    \27\ U.S. Census Bureau, Annual Wholesale Trade Survey. 2017. 
www.census.gov/awts.
---------------------------------------------------------------------------

    Chapter 12 of the NOPR TSD provides additional detail on the 
manufacturer markup and chapter 6 of this NOPR TSD provides additional 
detail on DOE's development of the baseline and incremental retail 
markups.

E. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of room ACs at different efficiencies in 
representative U.S. single-family homes, multi-family residences, 
manufactured housing, and commercial buildings, and to assess the 
energy savings potential of increased room AC efficiency. The energy 
use analysis estimates the range of energy use of room ACs in the field 
(i.e., as they are actually used by consumers). The energy use analysis 
provides the basis for other analyses DOE performed, particularly 
assessments of the energy savings and the monetary savings in consumer 
operating costs that could result from adoption of amended or new 
standards.
    To estimate annual room AC use and energy consumption in the June 
2020 Preliminary Analysis, DOE first calculated the number of operating 
hours in cooling mode for each room AC in the residential and 
commercial samples using the reported energy use for room air 
conditioning in the Residential Energy Consumption Survey (``RECS'') 
2015 \28\ and Commercial Building Energy Consumption Survey (``CBECS'') 
2012,\29\ along with estimates of the EER of the room AC(s) in each 
sample home or building. DOE based the latter on the reported age (or 
simulated age) of the unit and historical data on shipment-weighted 
average EER. In the June 2020 Preliminary Analysis, the estimated mean 
number of cooling mode operating hours for the residential room AC 
sample is 912 hours for the 6,000 to 7,999 Btu/h product class, 636 
hours for the 8,000 to 13,999 Btu/h product classes, 422 hours for the 
14,999 to 19,999 Btu/h product class, and 261 hours for the >=20,000 
Btu/h product class. The estimated mean number of cooling mode 
operating hours for the commercial room AC sample is 746 hours for the 
6,000 to 7,999 Btu/h product class, 868 hours for the 8,000 to 13,999 
Btu/h product classes, 921 hours for the 14,999 to 19,999 Btu/h product 
class, and 1,073 hours for the >=20,000 Btu/h product class. DOE 
assumed that units plugged in, but not in cooling mode, would be in 
standby mode and included the contribution of standby power consumption 
in its energy use model.
---------------------------------------------------------------------------

    \28\ U.S. Department of Energy-Energy Information 
Administration, Residential Energy Consumption Survey, 2015 Public 
Use Microdata Files, 2015. Washington, DC. Available online at: 
www.eia.doe.gov/emeu/recs/recspubuse15/pubuse15.html. DOE will 
update all the 2015 RECS data to 2020 RECS if it is available prior 
to the final rule.
    \29\ U.S. Department of Energy-Energy Information 
Administration, Commercial Buildings Energy Consumption Survey, 2012 
Public Use Microdata Files, 2012. Washington, DC. Available online 
at: www.eia.doe.gov/emeu/cbecs/cbecspubuse12/pubuse12.html. DOE will 
update all 2012 CBECS data to 2018 CBECS when it becomes available.
---------------------------------------------------------------------------

    AHAM agreed that, in the absence of field data on annual operating 
hours, DOE should use the most recent version of RECS and CBECS to 
establish the annual operating hours for residential room ACs. (AHAM, 
No. 19 at p. 15)
    NEEA believes DOE has identified energy savings associated with 
room ACs, but contends that there are more energy savings achievable. 
NEEA encourages DOE to look at more of the efficiency technology 
options and how they perform the energy analysis in order to get more 
savings. (NEEA, Public Meeting Transcript, No. 18 at pp. 8-9) NEEA 
suggested modifying the energy use analysis to capture more of the 
benefits of other technologies in the market that are not necessarily 
captured in the current test procedure. (Id. at pp. 57-58)
    DOE notes that the standards rulemaking must recommend efficiency 
levels that are both economically justified and technologically 
feasible. The availability of technologies used to achieve different 
efficiency levels are identified in the market and technology 
assessment (see chapter 3 of the NOPR TSD). DOE's engineering analysis 
analyzes technologies in currently available room AC units. The energy 
use analysis uses the efficiency levels and power consumption values 
from the engineering analysis. Estimates for energy consumption are 
based on available data of how room ACs are operated in the field. DOE 
welcomes information about additional technologies that can be analyzed 
in the rulemaking process.
    NEEA recommended that DOE include fan-only hours in its analysis 
and take into account energy savings from variable-speed fans and 
motors. NEEA stated that fan-only operation is likely to account for a 
significant number of operating hours, resulting in a significant 
portion of overall energy use. (NEEA, No. 24 at p. 5) Rice suggested 
measuring the energy consumption of the fan-mode during cooling mode 
operation when the fan typically runs continuously while the compressor 
cycles. If it is not accounted for, Rice recommended, at a minimum, 
that the energy use information on the Energy Label indicate that the 
energy costs is based on the economy mode setting. (Rice, No. 25 at p. 
3)
    DOE is unaware of a data set that can be used to estimate the 
amount of time room ACs spend in fan-only mode. For this NOPR analysis, 
DOE included the impact of fan-only mode energy consumption to the 
total energy use consumption, based on available data for portable ACs. 
Based on field metering data of portable ACs, fan-only mode is 
estimated at 30 percent of cooling mode hours.\30\ DOE assumed that 
models below ENERGY STAR efficiency level would operate in fan-only 
mode 30 percent of cooling mode hours. For ELs that meet or exceed the 
ENERGY STAR level, DOE assumed a reduction in the amount of time the 
unit spent in fan-only mode based on the ENERGY STAR Version 4.2 for 
room ACs criterion requiring that the unit run in off-cycle fan mode 
less than 17 percent of the time spent in off-cycle mode. Thus, for ELs 
that meet or exceed the ENERGY STAR efficiency level, DOE assumed units 
would operate in fan-only mode 5 percent of cooling mode hours. DOE 
welcomes feedback on its approach and any additional data that can be 
provided to estimate the amount of time spent in fan-only mode.
---------------------------------------------------------------------------

    \30\ Burke et al., 2014. ``Using Field-Metered Data to Quantify 
Annual Energy Use of Residential Portable Air Conditioners.'' LBNL, 
Berkeley, CA. LBNL Report LBNL-6469E. September 2014.
---------------------------------------------------------------------------

    DOE notes that the Federal Trade Commission is responsible for the 
information included on the yellow EnergyGuide labels.
    Edison Electric Institute (``EEI'') noted that, in northern 
climates, many consumers unplug their units or even take them out of 
the windows during the wintertime, meaning the 8,000 standby hours 
value used in the annual energy use calculation formula could be an 
overestimate. EEI suggested gathering more data on this. (EEI, Public 
Meeting Transcript, No. 18 at pp. 51-52)
    DOE agrees that many consumers unplug their room AC units in the 
non-cooling seasons in northern climates. However, DOE is not aware of 
reliable, publicly available data for hours spent in standby and off 
modes in room ACs. DOE recognizes that a room AC may be unplugged for a 
certain percentage of time, and, therefore, will not be in either 
standby mode or off mode. For the purposes of this NOPR analysis, DOE 
estimates that approximately half of room ACs are unplugged for half of 
the year. The ``unplugged'' time associated

[[Page 20630]]

with these units is averaged over all units. DOE estimates active mode 
based on RECS inputs and time spent in fan-only mode based on available 
data for portable ACs. Standby hours comprise the remaining time. See 
chapter 7 of the NOPR TSD for further discussion.
    The California IOUs noted that, in the LCC Excel spreadsheet 
downloaded from DOE's website, for product class (``PC'') 2, the 
cooling mode operating hours are 2,922 hours, but for PC 3, the cooling 
mode operating hours are only 217 hours.\31\ The California IOUs 
expressed concern at the cooling mode operating hour difference between 
PC 2 and PC 3. (California IOUs, Public Meeting Transcript, No. 18 at 
pp. 55-56)
---------------------------------------------------------------------------

    \31\ The Room Air Conditioning Life-Cycle Cost Analysis 
Spreadsheets (EERE-2014-BT-STD-0059-0010) can be found at 
beta.regulations.gov/document/EERE-2014-BT-STD-0059-0010.
---------------------------------------------------------------------------

    DOE's LCC spreadsheet model uses a Monte Carlo simulation in its 
LCC calculations. Operating hours vary for each house in the household 
sample and are used as an input into the LCC calculations. The hours 
mentioned in the California IOUs comment represent the operating hours 
for one household in the sample and are not representative of the full 
household sample, or an entire Monte Carlo simulation. The average 
hours of use for the full sample used for each product class can be 
found in chapter 7 of the NOPR TSD.
    Appliance Standards Awareness Project (``ASAP''), Rice, California 
IOUs, NEEA, and the Joint Commenters encouraged DOE to investigate 
modifications to the energy use model to account for potential energy 
savings by variable-speed units. ASAP stated that variable-speed units 
would be able to reduce cycling losses in addition to providing 
additional part-load benefits. (ASAP, Public Meeting Transcript, No. 18 
at p. 54) Rice noted that DOE's energy use methodology in the June 2020 
Preliminary Analysis does not capture the benefits of part load 
operation and suggested applying a performance adjustment factor 
(``PAF'') for ELs with variable-speed compressors. (Rice, No. 25 at p. 
2) NEEA and the California IOUs further stated the energy use model in 
the June 2020 Preliminary Analysis only used the full-load energy EER 
of the compressors to calculate energy savings, meaning the analysis 
does not capture any inefficiencies due to single-speed compressor 
cycling at part load. (California IOUs, No. 23 at p. 2; NEEA, No. 24 at 
p. 5) The Joint Commenters noted that in addition to significantly 
reducing cycling losses, variable-speed operation improves heat 
exchanger effectiveness at reduced cooling loads, resulting in 
additional energy savings. (Joint Commenters, No. 20 at pp. 3-4)
    For this NOPR analysis, DOE modified its approach to calculating 
energy use for models that use a variable-speed compressor to account 
for the reduced energy consumption during part load operation. Unlike 
single-speed compressors, variable-speed compressors have the ability 
to operate at part load depending on the cooling load. The amount of 
the time spent in part load operation will depend on the local climate 
of the household or business operating the room AC. For example, room 
ACs in milder climates will spend more time in part load operation 
relative to a household in a hot climate where a compressor is likely 
to run at maximum load. DOE accounted for geographic-dependent climate 
variability by calculating U.S. State-dependent PAFs using historical 
climate data spanning the period from 2008-2016 from the National 
Oceanic and Atmospheric Administration.\32\ For each state in the U.S., 
DOE performed a temperature bin analysis to calculate within the 
cooling season (June through August) the fraction of time the outdoor 
dry bulb temperature was in one of four temperature bins: 80-84 degrees 
Fahrenheit (``[deg]F''), 85-89 [deg]F, 90-94 [deg]F, and 95-99 [deg]F. 
DOE then calculated the corresponding PAF for each state using the 
methodology developed for variable-speed drive units in the test 
procedure and applied the PAF to the EER at full load. DOE requests 
feedback on its approach to calculating the energy-use of variable-
speed compressors and would welcome field metered data to further 
investigate the varying amounts of energy use due to single-speed and 
variable-speed units.
---------------------------------------------------------------------------

    \32\ National Oceanic and Atmospheric Administration. Quality 
Controlled Local Climate Data. www.ncdc.noaa.gov/cdo-web/.
---------------------------------------------------------------------------

    Rice stated that the off-cycle energy use term in the June 2020 
Preliminary Analysis energy-use model is inappropriate for a variable-
speed room AC. Rice stated that it should be modified to account for 
lower standby energy usage due to longer run times in the cooling 
season for variable-speed units in meeting the cooling season load. 
Rice notes that since DOE's calculation of energy use in cooling mode 
assumes operation at full rated cooling capacity, it is inappropriate 
for use in the standby energy use term for variable-speed room ACs. 
(Rice, No. 25 at p. 2)
    DOE's test procedure requires that the low compressor speed at the 
low test condition achieve a capacity that is 47-57 percent of the 
``peak'' rated capacity. Therefore, DOE would not expect a variable-
speed compressor unit to enter off-cycle mode above loads 47 percent of 
the rated capacity, which is close to a representative of outdoor 
temperature conditions of 82 [deg]F. In this NOPR analysis, DOE 
calculates the energy use of variable-speed units using a geographic-
dependent performance adjustment factor to account for time the unit 
spends at partial load. DOE is unaware of a data-set that would allow 
for the estimation of the change in cooling run time of variable-speed 
units relative to a single-speed unit. DOE welcomes any available 
information or data that can be used to improve assumptions in the 
energy use model.
    The California IOUs noted that DOE uses EER to estimate average 
annual energy use, however, only CEER is listed for each energy use 
results tables in chapter 7 of the preliminary TSD. To minimize 
confusion that CEER was used to calculate the average annual energy 
use, the California IOUs recommended that DOE add EER to energy use 
tables along with the corresponding CEER for each EL. (California IOUs, 
No. 23 at p. 3)
    DOE has included both EER and CEER in the energy use results tables 
in the NOPR TSD.
    Chapter 7 of the NOPR TSD provides details on DOE's energy use 
analysis for room ACs.

F. Life-Cycle Cost and Payback Period Analysis

    DOE conducted LCC and PBP analyses to evaluate the economic impacts 
on individual consumers of potential energy conservation standards for 
room ACs. The effect of new or amended energy conservation standards on 
individual consumers usually involves a reduction in operating cost and 
an increase in purchase cost. DOE used the following two metrics to 
measure consumer impacts:
    [ballot] The LCC is the total consumer expense of an appliance or 
product over the life of that product, consisting of total installed 
cost (manufacturer selling price, distribution chain markups, sales 
tax, and installation costs) plus operating costs (expenses for energy 
use, maintenance, and repair). To compute the operating costs, DOE 
discounts future operating costs to the time of purchase and sums them 
over the lifetime of the product.
    [ballot] The PBP is the estimated amount of time (in years) it 
takes consumers to recover the increased purchase cost (including 
installation) of a more-efficient product through lower operating 
costs. DOE calculates the PBP

[[Page 20631]]

by dividing the change in purchase cost at higher efficiency levels by 
the change in annual operating cost for the year that amended or new 
standards are assumed to take effect.
    For any given efficiency level, DOE measures the change in LCC 
relative to the LCC in the no-new-standards case, which reflects the 
estimated efficiency distribution of room ACs in the absence of new or 
amended energy conservation standards. In contrast, the PBP for a given 
efficiency level is measured relative to the baseline product.
    For each considered efficiency level in each product class, DOE 
calculated the LCC and PBP for a nationally representative set of 
housing units and commercial buildings. As stated previously, DOE 
developed household samples from the 2015 RECS \33\ and commercial 
building samples from the 2012 CBECS. For each sample household or 
building, DOE determined the energy consumption for the room AC and the 
appropriate energy price. By developing a representative sample of 
households and commercial buildings, the analysis captured the 
variability in energy consumption and energy prices associated with the 
use of room ACs.
---------------------------------------------------------------------------

    \33\ DOE will update all the 2015 RECS data to 2020 RECS if it 
is available prior to the final rule. Similarly, DOE will update all 
2012 CBECS data to 2018 CBECS when it becomes available.
---------------------------------------------------------------------------

    Inputs to the calculation of total installed cost include the cost 
of the product--which includes MPCs, manufacturer markups, retailer and 
distributor markups, and sales taxes--and installation costs. Inputs to 
the calculation of operating expenses include annual energy 
consumption, energy prices and price projections, repair and 
maintenance costs, product lifetimes, and discount rates. DOE created 
distributions of values for product lifetime, discount rates, and sales 
taxes, with probabilities attached to each value, to account for their 
uncertainty and variability.
    The computer model DOE uses to calculate the LCC and PBP relies on 
a Monte Carlo simulation to incorporate uncertainty and variability 
into the analysis. The Monte Carlo simulations randomly sample input 
values from the probability distributions and room AC user samples. For 
this rulemaking, the Monte Carlo approach is implemented in MS Excel 
together with the Crystal Ball\TM\ add-on.\34\ The model calculated the 
LCC and PBP for products at each efficiency level for 10,000 housing 
units or commercial buildings per simulation run. The analytical 
results include a distribution of 10,000 data points showing the range 
of LCC savings for a given efficiency level relative to the no-new-
standards case efficiency distribution. In performing an iteration of 
the Monte Carlo simulation for a given consumer, product efficiency is 
chosen based on its probability. If the chosen product efficiency is 
greater than or equal to the efficiency of the standard level under 
consideration, the LCC and PBP calculation reveals that a consumer is 
not impacted by the standard level. By accounting for consumers who 
already purchase more-efficient products, DOE avoids overstating the 
potential benefits from increasing product efficiency.
---------------------------------------------------------------------------

    \34\ Crystal Ball\TM\ is commercially-available software tool to 
facilitate the creation of these types of models by generating 
probability distributions and summarizing results within Excel, 
available at www.oracle.com/middleware/technologies/crystalball.html 
(last accessed August 31, 2021).
---------------------------------------------------------------------------

    DOE calculated the LCC and PBP for all consumers of room ACs as if 
each were to purchase a new product in the expected year of required 
compliance with new or amended standards. Amended standards would apply 
to room ACs manufactured 3 years after the date on which any new or 
amended standard is published. (42 U.S.C. (m)(4)(A)(i)) For purposes of 
its analysis, DOE used 2026 as the first year of compliance with any 
amended standards for room ACs.
    Table IV.3 summarizes the approach and data DOE used to derive 
inputs to the LCC and PBP calculations. The subsections that follow 
provide further discussion. Details of the spreadsheet model, and of 
all the inputs to the LCC and PBP analyses, are contained in chapter 8 
of the NOPR TSD and its appendices.
[GRAPHIC] [TIFF OMITTED] TP07AP22.019


[[Page 20632]]


1. Product Cost
    To calculate consumer product costs, DOE multiplied the MPCs 
developed in the engineering analysis by the markups described 
previously (along with sales taxes). DOE used different markups for 
baseline products and higher-efficiency products because DOE applies an 
incremental markup to the increase in MSP associated with higher-
efficiency products.
    Economic literature and historical data suggest that the real costs 
of many products may trend downward over time according to ``learning'' 
or ``experience'' curves. Experience curve analysis implicitly includes 
factors such as efficiencies in labor, capital investment, automation, 
materials prices, distribution, and economies of scale at an industry-
wide level. To derive the learning rate parameter for room ACs that 
utilize single-speed compressors, DOE obtained historical Producer 
Price Index (``PPI'') data for room ACs from the Bureau of Labor 
Statistics (``BLS''). A PPI specific to ``room air-conditioners and 
dehumidifiers, except portable dehumidifiers'' was available for the 
time period between 1990 and 2009.\35\ After 2009, PPI data was only 
available for the broader product family of ``refrigeration and forced 
air heating equipment,'' which includes room ACs, spanning the years 
2010-2020.\36\ Inflation-adjusted price indices were calculated by 
dividing the PPI series by the gross domestic product index from Bureau 
of Economic Analysis for the same years. Using data from 1990-2020, the 
estimated learning rate (defined as the fractional reduction in price 
expected from each doubling of cumulative production) is 25 percent.
---------------------------------------------------------------------------

    \35\ Room air-conditioners and dehumidifiers, except portable 
dehumidifiers PPI series ID: PCU3334153334156; www.bls.gov/ppi/.
    \36\ Air-conditioning, refrigeration, and forced air heating 
equipment manufacturing, Primary Products PPI series ID: 
PCU333415333415P; www.bls.gov/ppi/.
---------------------------------------------------------------------------

    The Joint Commenters suggested an analysis with learning rates 
associated with specific technology options or components. (Joint 
Commenters, No. 20 at pp. 4-5)
    DOE considered the inclusion of variable-speed compressors as a 
technology option in EL 4 and EL 5. To develop future prices specific 
for that technology, DOE applied a different price trend to the 
controls portion of the variable-speed compressors that contributes to 
the price increments moving from EL 3 (an efficiency level achieved 
with the highest efficiency single-speed compressor) to EL 4 and EL 5. 
DOE used PPI data on ``semiconductors and related device 
manufacturing'' between 1967 and 2020 to estimate the historic price 
trend of electronic components in the control.\37\ The regression 
performed as an exponential trend line fit results in an R-square of 
0.99, with an annual price decline rate of 6.3 percent. See chapter 8 
of the NOPR TSD for further details on this topic.
---------------------------------------------------------------------------

    \37\ Semiconductors and related device manufacturing PPI series 
ID: PCU334413334413; www.bls.gov/ppi/.
---------------------------------------------------------------------------

    The Joint Commenters noted that DOE's estimate of the learning rate 
for room ACs is likely a conservative estimate of how prices will 
decline over time. (Joint Commenters, No. 20 at pp. 4-5)
    A retrospective analysis of the April 2011 Direct Final Rule for 
room ACs \38\ compared the room AC average model-level price changes 
based on web-scraped retail price data from 2013 to 2017 (ex-post data) 
and the price factor index for the corresponding period derived in the 
April 2011 Direct Final Rule (ex-ante data). The result shows that the 
ex-ante data and ex-post data share similar price declining trends, and 
thus provide independent validation of the experience curve methodology 
adopted by DOE in the rulemaking analysis. To account for the 
uncertainties in the experience curve estimation, DOE also considered 
two alternative product price forecasts for room ACs (a high price 
decline and a low price decline scenarios and estimated their impacts 
on the consumer NPV for various standard levels (see section IV.H.3 of 
this document for details).
---------------------------------------------------------------------------

    \38\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A 
Retrospective Analysis of the 2011 Direct Final Rule for Room Air 
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
---------------------------------------------------------------------------

    DOE requests comments on its assumption and methodology for 
determining equipment price trends.
2. Installation Cost
    Installation cost includes labor, overhead, and any miscellaneous 
materials and parts needed to install the product. As in the June 2020 
Preliminary Analysis, DOE found no evidence that installation costs 
would be impacted with increased efficiency levels and, thus, did not 
include installation costs in the LCC calculation.
3. Annual Energy Consumption
    For each sampled household or business, DOE determined the energy 
consumption for a room AC at different efficiency levels using the 
approach described previously in section IV.E of this document.
a. Rebound Effect
    Higher-efficiency room ACs reduce the operating costs for a 
consumer, which can lead to greater use of room ACs. A direct rebound 
effect occurs when a product that is made more efficient is used more 
intensively, such that the expected energy savings from the efficiency 
improvement may not fully materialize. At the same time, consumers 
benefit from increased utilization of products due to rebound. Overall 
consumer welfare (taking into account additional costs and benefits) is 
generally understood to increase from rebound. DOE did not find any 
data on the rebound effect that is specific to room ACs. In the April 
2011 Direct Final Rule, DOE estimated a rebound of 15 percent for room 
ACs for the NIA but did not include rebound in the LCC analysis. 76 FR 
22454, 22511. Given the uncertainty and lack of data specific to room 
ACs, DOE did not include the rebound effect in the LCC analysis for 
this NOPR. DOE does include rebound in the NIA for a conservative 
estimate of national energy savings and the corresponding impact to 
consumer NPV. As in the April 2011 Direct Final Rule, DOE used a 
rebound effect of 15 percent for room ACs. See sections IV.H.2 and 
IV.H.3 of this document for further details on how the rebound effect 
is applied in the NIA.
4. Energy Prices
    Because marginal electricity price more accurately captures the 
incremental savings associated with a change in energy use from higher 
efficiency, it provides a better representation of incremental change 
in consumer costs than average electricity prices. Therefore, DOE 
applied average electricity prices for the energy use of the product 
purchased at baseline efficiency, and marginal electricity prices for 
the incremental change in energy use associated with the other 
efficiency levels considered.
    DOE derived annual electricity prices in 2020 for each census 
division using data from EEI Typical Bills and Average Rates 
reports.\39\ For the residential sector, DOE used the EEI data to 
define a marginal price as the ratio of the change in the bill to the 
change in energy consumption. For the commercial sector, marginal 
prices depend on both the change in electricity consumption and the 
change in monthly

[[Page 20633]]

peak-coincident demand. DOE used the EEI data to estimate both marginal 
energy charges and marginal demand charges.
---------------------------------------------------------------------------

    \39\ Edison Electric Institute. Typical Bills and Average Rates 
Report. 2020. Winter 2020, Summer 2020: Washington, DC.
---------------------------------------------------------------------------

    DOE calculated weighted-average values for average and marginal 
price for the nine census divisions for both the residential and 
commercial sectors. As the EEI data are published separately for summer 
and winter, DOE calculated seasonal prices for each division and 
sector. See chapter 8 of the NOPR TSD for details.
    To estimate energy prices in future years, DOE multiplied the 
average regional energy prices by a projection of annual change in 
national-average residential and commercial energy price in AEO 
2021.\40\ AEO 2021 has an end year of 2050. To estimate electricity 
price trends after 2050, DOE used the average annual rate of change in 
electricity price from 2035 through 2050.
---------------------------------------------------------------------------

    \40\ Energy Information Administration. Annual Energy Outlook 
2021 with Projections to 2050. Washington, DC. Available at 
www.eia.gov/forecasts/aeo/.
---------------------------------------------------------------------------

    Rice suggested that consideration be given to showing energy cost 
information for both economy and cool mode settings to account for 
units with higher efficiency blower motor/fan assemblies that would 
have lower energy costs relative to less efficient blowers/fans in off-
cycle mode. (Rice, No. 25 at p. 3)
    As described in section IV.E of this document, DOE includes the 
energy contribution of fan-mode including time spent in off-cycle mode. 
DOE determines energy costs for the full range of product classes and 
efficiency levels.
5. Maintenance and Repair Costs
    Repair costs are associated with repairing or replacing product 
components that have failed in an appliance; maintenance costs are 
associated with maintaining the operation of the product. Typically, 
small incremental increases in product efficiency produce no, or only 
minor, changes in repair and maintenance costs compared to baseline 
efficiency products. In this NOPR analysis, DOE did not include 
maintenance costs in the LCC.
    In the June 2020 Preliminary Analysis, DOE assumed that repair 
frequencies are low and increase for the higher-capacity units due to 
more expensive equipment costs. DOE assumed that 1 percent of small-
sized units (below 8,000 Btu/h), 2 percent of medium-sized units (8,000 
to 20,000 Btu/h), and 3 percent of large-sized units (above 20,000 Btu/
h) are maintained or repaired each year. DOE assumed that an average 
service call and repair/maintenance takes about 1 hour for small and 
medium-sized units and 2 hours for large units, and that the average 
material cost is equal to one-half of the incremental equipment cost. 
DOE maintains these assumptions in the NOPR analysis.
6. Product Lifetime
    For room ACs, DOE developed a distribution of lifetimes from which 
specific values are assigned to the appliances in the samples. DOE 
conducted an analysis of actual lifetime in the field using a 
combination of historical shipments data, the stock of the considered 
appliances in the American Housing Survey, and responses in RECS on the 
age of the appliances in the homes. The data allowed DOE to estimate a 
survival function, which provides an average appliance lifetime. This 
analysis yielded a lifetime probability distribution with an average 
lifetime for room ACs of approximately 9 years. See chapter 8 of the 
NOPR TSD for further details.
7. Discount Rates
    In the calculation of the LCC, DOE applies discount rates 
appropriate to residential and commercial sectors to estimate the 
present value of future operating costs. DOE estimated a distribution 
of residential and commercial discount rates for room ACs based on 
consumer financing costs and the opportunity cost of consumer funds 
(for the residential sector) and cost of capital of publicly traded 
firms (for the commercial sector).
    For households, DOE applies weighted-average discount rates 
calculated from consumer debt and asset data, rather than marginal or 
implicit discount rates.\41\ DOE notes that the LCC does not analyze 
the appliance purchase decision, so the implicit discount rate is not 
relevant in this model. The LCC estimates net present value over the 
lifetime of the product, so the appropriate discount rate will reflect 
the general opportunity cost of household funds, taking this time scale 
into account. Given the long time horizon modeled in the LCC, the 
application of a marginal interest rate associated with an initial 
source of funds is inaccurate. Regardless of the method of purchase, 
consumers are expected to continue to rebalance their debt and asset 
holdings over the LCC analysis period, based on the restrictions 
consumers face in their debt payment requirements and the relative size 
of the interest rates available on debts and assets. DOE estimates the 
aggregate impact of this rebalancing using the historical distribution 
of debts and assets.
---------------------------------------------------------------------------

    \41\ The implicit discount rate is inferred from a consumer 
purchase decision between two otherwise identical goods with 
different first cost and operating cost. It is the interest rate 
that equates the increment of first cost to the difference in net 
present value of lifetime operating cost, incorporating the 
influence of several factors: Transaction costs; risk premiums and 
response to uncertainty; time preferences; interest rates at which a 
consumer is able to borrow or lend.
---------------------------------------------------------------------------

    To establish residential discount rates for the LCC analysis, DOE 
identified all relevant household debt or asset classes in order to 
approximate a consumer's opportunity cost of funds related to appliance 
energy cost savings. It estimated the average percentage shares of the 
various types of debt and equity by household income group using data 
from the Federal Reserve Board's Survey of Consumer Finances \42\ 
(``SCF'') for 1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019. 
Using the SCF and other sources, DOE developed a distribution of rates 
for each type of debt and asset by income group to represent the rates 
that may apply in the year in which amended standards would take 
effect. DOE assigned each sample household a specific discount rate 
drawn from one of the distributions. The average rate across all types 
of household debt and equity and income groups, weighted by the shares 
of each type, is 4.3 percent. See chapter 8 of the NOPR TSD for further 
details on the development of consumer discount rates.
---------------------------------------------------------------------------

    \42\ U.S. Board of Governors of the Federal Reserve System. 
Survey of Consumer Finances. 1995, 1998, 2001, 2004, 2007, 2010, 
2013, 2016, and 2019. (Last accessed August 20, 2021.) 
www.federalreserve.gov/econresdata/scf/scfindex.htm.
---------------------------------------------------------------------------

    For commercial-sector room ACs, DOE used the cost of capital to 
estimate the present value of cash flows to be derived from a typical 
company project or investment. Most companies use both debt and equity 
capital to fund investments, so the cost of capital is the weighted-
average cost to the firm of equity and debt financing. This corporate 
finance approach is referred to as the weighted-average cost of 
capital. DOE used currently available economic data in developing 
discount rates.
8. Energy Efficiency Distribution in the No-New-Standards Case
    To accurately estimate the share of consumers that would be 
affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the projected 
distribution (market shares) of product efficiencies under the no-new-
standards

[[Page 20634]]

case (i.e., the case without amended or new energy conservation 
standards).
    DOE utilized confidential 2019 shipments data disaggregated by 
product class and efficiency provided by AHAM in response to the June 
2020 Preliminary Analysis to estimate the efficiency distribution in 
2019. In the preliminary analysis, DOE assumed an annual 0.25 percent 
increase in shipment-weighted CEER to develop the efficiency 
distribution in 2026. The efficiency trend used in this NOPR is 
supported by a retrospective analysis of the April 2011 Direct Final 
Rule which used a similar efficiency trend.\43\ For this NOPR, DOE 
assumed this trend applied to efficiency levels with single-speed 
compressors (EL 0, EL 1, EL 2, and EL 3). DOE assumed the adoption of 
variable-speed technologies (EL 4 and EL 5) would follow a Bass 
diffusion curve which describes how new technologies diffuse into the 
consumer market.\44\ DOE assumed that shipments to variable-speed 
technologies would account for 5 percent of shipments in each product 
class by 2026. The estimated market shares for the no-new-standards 
case for room ACs in 2026 are shown in Table IV.4 through Table IV.6 of 
this document. See chapter 8 of the NOPR TSD for further information on 
the derivation of the efficiency distributions.
---------------------------------------------------------------------------

    \43\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A 
Retrospective Analysis of the 2011 Direct Final Rule for Room Air 
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
    \44\ Bass, F. M. A New Product Growth Model for Consumer 
Durables. Management Science. 1969. 15(5): pp. 215-227.
---------------------------------------------------------------------------

BILLING CODE 6450-01-P
[GRAPHIC] [TIFF OMITTED] TP07AP22.020


[[Page 20635]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.021

[GRAPHIC] [TIFF OMITTED] TP07AP22.022

BILLING CODE 6450-01-C
    DOE requests feedback on its approach to projecting the efficiency 
distribution in 2026.
9. Payback Period Analysis
    The payback period is the amount of time it takes the consumer to 
recover the additional installed cost of more-efficient products, 
compared to baseline products, through energy cost savings. Payback 
periods are expressed in years. Payback periods that exceed the life of 
the product mean that the increased total installed cost is not 
recovered in reduced operating expenses.
    The inputs to the PBP calculation for each efficiency level are the 
change in total installed cost of the product and the change in the 
first-year annual operating expenditures relative to the baseline. The 
PBP calculation uses the same inputs as the LCC analysis, except that 
discount rates are not needed.
    As noted previously, EPCA establishes a rebuttable presumption that 
a standard is economically justified if the Secretary finds that the 
additional cost to the consumer of purchasing a product complying with 
an energy conservation standard level will be less than three times the 
value of the first year's energy savings resulting from the standard, 
as calculated under the applicable test procedure. (42 U.S.C. 
6295(o)(2)(B)(iii)) For each considered efficiency level, DOE 
determined the value of the first year's energy savings by calculating 
the energy savings in accordance with the applicable DOE test 
procedure, and multiplying those savings by the average energy price 
projection for the year in which compliance with the amended standards 
would be required.

[[Page 20636]]

G. Shipments Analysis

    DOE uses projections of annual product shipments to calculate the 
national impacts of potential amended or new energy conservation 
standards on energy use, NPV, and future manufacturer cash flows.\45\ 
The shipments model takes an accounting approach, tracking market 
shares of each product class and the vintage of units in the stock. 
Stock accounting uses product shipments as inputs to estimate the age 
distribution of in-service product stocks for all years. The age 
distribution of in-service product stocks is a key input to 
calculations of both the NES and NPV, because operating costs for any 
year depend on the age distribution of the stock.
---------------------------------------------------------------------------

    \45\ DOE uses data on manufacturer shipments as a proxy for 
national sales, as aggregate data on sales are lacking. In general, 
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------

    Total shipments for room ACs are developed by considering the 
demand from replacements for units in stock that fail and the demand 
from first-time owners in existing households. DOE calculated shipments 
due to replacements using the retirement function developed for the LCC 
analysis. DOE calculated shipments due to first-time owners in existing 
households using estimates from room AC saturation in RECS 2015 and 
projections of housing stock from AEO 2021. See chapter 8 of the NOPR 
TSD for details.
    DOE considers the impacts on shipments from changes in product 
purchase price and operating cost associated with higher energy 
efficiency levels using a price elasticity and an efficiency 
elasticity. As in the June 2020 Preliminary Analysis, DOE employs a 
0.2-percent efficiency elasticity rate and a price elasticity of -0.45 
in its shipments model. These values are based on analysis of 
aggregated data for five residential appliances including room ACs.\46\ 
The market impact is defined as the difference between the product of 
price elasticity of demand and the change in price due to a standard 
level, and the product of the efficiency elasticity and the change in 
operating costs due to a standard level.
---------------------------------------------------------------------------

    \46\ Fujita, K. (2015) Estimating Price Elasticity using Market-
Level Appliance Data. Lawrence Berkeley National Laboratory, LBNL-
188289.
---------------------------------------------------------------------------

    ASAP and the Joint Commenters noted that the efficiency elasticity 
was omitted from chapter 9 of the preliminary TSD. (ASAP, Public 
Meeting Transcript, No. 18 at pp. 94-95; Joint Commenters, No. 20 at p. 
5) ASAP and the Joint Commenters encouraged DOE to confirm and clarify 
whether the efficiency elasticity is considered in calculating the 
standards-case shipments. (Joint Commenters, No. 20 at p. 5)
    Chapter 9 of the NOPR TSD has been updated to display the impact of 
the price and efficiency elasticity in calculating the standards-case 
shipments.
    AHAM recommended that DOE do as it generally does and rely on 
shipment-weighted data in its analysis and provided DOE data for 2019 
shipments by product class. (AHAM, No. 19 at p. 9)
    DOE appreciates the 2019 shipments by product class and efficiency 
level provided by AHAM and has updated the NOPR to reflect the AHAM 
data.
    NEEA noted that DOE's shipment projections are likely low and do 
not follow the market's historical trends--DOE's analysis showed a very 
small growth in annual shipments through 2052 to a peak of 
approximately 8.5 million units per year. NEEA stated that this slow 
growth trend does not match the historic growth seen in the room AC 
market. For the number of replacement units, NEEA recommended that DOE 
amend its analysis to consider early retirement of units driven by new 
features, such as increased efficiency and smart rooms ACs, which could 
increase the number of shipments. For new units, NEEA recommended that 
DOE consider an increasing market penetration factor to account for the 
growth of room AC use in climates where cooling has not been needed 
traditionally. (NEEA, No. 24 at pp. 5-6)
    DOE notes that between 2014 and 2019, room AC shipments have been 
approximately 7 million units with no clear indication of steady growth 
over that period. DOE determines the replacement market from lifetime 
estimates of room ACs. Early retirement of units to purchase more 
efficient and/or units with additional features are currently accounted 
for in the lifetime distribution. A retrospective analysis of the April 
2011 Direct Final Rule for room ACs,\47\ which also accounted for 
shipments due to replacements and first-time owners, generally found 
that DOE projections matched with AHAM shipments data in 2017 and 2018. 
DOE acknowledges that a warming climate could increase purchase of room 
ACs in climates where cooling has not been needed traditionally, but it 
is not aware of any data that would facilitate an accurate estimate of 
this future demand. DOE welcomes shipments data that include markets in 
addition to replacement and first-time user markets.
---------------------------------------------------------------------------

    \47\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A 
Retrospective Analysis of the 2011 Direct Final Rule for Room Air 
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
---------------------------------------------------------------------------

    Chapter 9 of the NOPR TSD provides additional details on the 
shipments analysis.
    DOE requests comment on its general methodology for estimating 
shipments.

H. National Impact Analysis

    The NIA assesses the NES and the NPV from a national perspective of 
total consumer costs and savings that would be expected to result from 
new or amended standards at specific efficiency levels.\48\ 
(``Consumer'' in this context refers to consumers of the product being 
regulated.) DOE calculates the NES and NPV for the potential standard 
levels considered based on projections of annual product shipments, 
along with the annual energy consumption and total installed cost data 
from the energy use and LCC analyses. For the present analysis, DOE 
projected the energy savings, operating cost savings, product costs, 
and NPV of consumer benefits over the lifetime of room ACs sold from 
2026 through 2055.
---------------------------------------------------------------------------

    \48\ The NIA accounts for impacts in the 50 states.
---------------------------------------------------------------------------

    DOE evaluates the impacts of new or amended standards by comparing 
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each 
product class in the absence of new or amended energy conservation 
standards. For this projection, DOE considers historical trends in 
efficiency and various forces that are likely to affect the mix of 
efficiencies over time. DOE compares the no-new-standards case with 
projections characterizing the market for each product class if DOE 
adopted new or amended standards at specific energy efficiency levels 
(i.e., the TSLs or standards cases) for that class. For the standards 
cases, DOE considers how a given standard would likely affect the 
market shares of products with efficiencies greater than the standard.
    DOE uses a spreadsheet model to calculate the energy savings and 
the national consumer costs and savings from each TSL. Interested 
parties can review DOE's analyses by changing various input quantities 
within the spreadsheet. The NIA spreadsheet model uses typical values 
(as opposed to probability distributions) as inputs.
    Table IV.7 summarizes the inputs and methods DOE used for the NIA 
analysis for the NOPR. Discussion of these inputs and methods follows 
the table.

[[Page 20637]]

See chapter 10 of the NOPR TSD for further details.
[GRAPHIC] [TIFF OMITTED] TP07AP22.023

1. Product Efficiency Trends
    A key component of the NIA is the trend in energy efficiency 
projected for the no-new-standards case and each of the standards 
cases. Section IV.F.7 of this document describes how DOE developed an 
energy efficiency distribution for the no-new-standards case (which 
yields a shipment-weighted average efficiency) for each of the 
considered product classes for the year of anticipated compliance with 
an amended or new standard. To project the trend in efficiency absent 
amended standards for room ACs over the entire shipments projection 
period, DOE assumed that market share for ELs with variable-speed 
technologies would follow a Bass diffusion curve, while the shipment-
weighted CEER for ELs with single-speed compressors would increase 
annually by 0.25 percent in CEER based on historical trends in 
shipment-weighted efficiency.\49\ The approach is further described in 
chapter 10 of the NOPR TSD.
---------------------------------------------------------------------------

    \49\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A 
Retrospective Analysis of the 2011 Direct Final Rule for Room Air 
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
---------------------------------------------------------------------------

    In its reference scenario, DOE assumed that variable-speed 
technologies would comprise 25 percent of the market by the end of the 
analysis period (2055). DOE also performed sensitivity scenarios 
assuming a low penetration of variable-speed technologies (10 percent 
of the market in 2055) and a high penetration of variable-speed 
technologies (50 percent of the market in 2055). The results of these 
scenarios can be found in appendix 10E of the NOPR TSD. DOE requests 
comment on its approach to projecting market share for variable-speed 
technologies over the course of the analysis period.
    For the standards cases, DOE used a ``roll-up'' scenario to 
establish the shipment-weighted efficiency for the year that standards 
are assumed to become effective in 2026. In the year of compliance, the 
market shares of products in the no-new-standards case that do not meet 
the standard under consideration would ``roll up'' to the minimum EL 
that meets the standard, and the market share of products above the 
standard would remain unchanged. As in the no-new-standards case, DOE 
assumed an annual increase of 0.25 percent in CEER over the analysis 
period for ELs with single-speed technology.
    The Joint Commenters noted that data on sales over the past decade 
suggest that the ``roll-up'' scenario considered by DOE may 
underestimate the savings from amended standards and suggested DOE 
consider reevaluating the use of the ``roll-up'' scenario for 
estimating the market distribution of each efficiency level following 
the adoption of a standard. (Joint Commenters, No. 20 at p. 5)
    DOE acknowledges multiple drivers in the room AC market, one of 
which is the amended standard process. Although DOE uses a roll-up to 
allocate market share by efficiency level in the year a standard is 
enacted, an efficiency trend is applied in subsequent years in the 
standards case to account for the observed historical trends in 
efficiency. See chapter 10 of the NOPR TSD for details.
2. National Energy Savings
    The national energy savings analysis involves a comparison of 
national energy consumption of the considered products between each 
potential standards case (TSL) and the case with no new or amended 
energy conservation standards. DOE calculated the national energy 
consumption by multiplying the number of units (stock) of each product 
(by vintage or age) by the unit energy consumption (also by vintage). 
DOE calculated annual NES based on the difference in national energy 
consumption for the no-new standards case and for each higher 
efficiency standard case. DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy (i.e., the energy consumed by power plants to 
generate site electricity) using annual conversion factors derived

[[Page 20638]]

from AEO 2021. Cumulative energy savings are the sum of the NES for 
each year over the timeframe of the analysis.
    Use of higher-efficiency products is occasionally associated with a 
direct rebound effect, which refers to an increase in utilization of 
the product due to the reduction in operating cost induced by improved 
efficiency. A direct rebound effect occurs when a product that is made 
more efficient is used more intensively, reducing expected energy 
savings from the efficiency improvement. At the same time, consumers 
can benefit from increased utilization of products due to the direct 
rebound effect. DOE did not find any data on the rebound effect 
specific to room ACs, but it applied a rebound effect of 15 percent as 
suggested by Sorrell et al.\50\ and was done in the April 2011 Direct 
Final Rule. The calculated NES at each efficiency level is therefore 
reduced by 15 percent. DOE also included the rebound effect in the NPV 
analysis accounting for the additional net benefit from increased room 
AC usage as described in section IV.H.3 of this document.
---------------------------------------------------------------------------

    \50\ Sorrell, S., J. Dimitropoulos, M. Sommerville. 2009. 
Empirical estimates of the direct rebound effect: A review. Energy 
Policy 37 (2009) 1356-1371.
---------------------------------------------------------------------------

    In 2011, in response to the recommendations of a committee on 
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy 
Efficiency Standards'' appointed by the National Academy of Sciences, 
DOE announced its intention to use FFC measures of energy use and 
greenhouse gas and other emissions in the national impact analyses and 
emissions analyses included in future energy conservation standards 
rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the 
approaches discussed in the August 18, 2011 notice, DOE published a 
statement of amended policy in which DOE explained its determination 
that EIA's National Energy Modeling System (``NEMS'') is the most 
appropriate tool for its FFC analysis and its intention to use NEMS for 
that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain, 
multi-sector, partial equilibrium model of the U.S. energy sector \51\ 
that EIA uses to prepare its Annual Energy Outlook. The FFC factors 
incorporate losses in production and delivery in the case of natural 
gas (including fugitive emissions) and additional energy used to 
produce and deliver the various fuels used by power plants. The 
approach used for deriving FFC measures of energy use and emissions is 
described in appendix 10B of the NOPR TSD.
---------------------------------------------------------------------------

    \51\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview 2009, DOE/EIA-0581(2009), October 2009. 
Available at www.eia.gov/forecasts/aeo/index.cfm.
---------------------------------------------------------------------------

    EEI suggested incorporating the AEO full-fuel-cycle conversion for 
DOE's next update. (EEI, Public Meeting Transcript, No. 18 at pp. 83-
84)
    For this NOPR analysis, DOE reports the full-fuel-cycle energy 
savings in its NIA using inputs from AEO 2021. See chapter 10 of the 
NOPR TSD for a full description.
3. Net Present Value Analysis
    The inputs for determining the NPV of the total costs and benefits 
experienced by consumers are (1) total annual installed cost, (2) total 
annual operating costs (energy costs and repair and maintenance costs), 
and (3) a discount factor to calculate the present value of costs and 
savings. DOE calculates net savings each year as the difference between 
the no-new-standards case and each standards case in terms of total 
savings in operating costs versus total increases in installed costs. 
DOE calculates operating cost savings over the lifetime of each product 
shipped during the projection period.
    As discussed in section IV.F.6 of this document, DOE developed room 
AC price trends based on historical PPI data. DOE applied the same 
trends to project prices for each product class at each considered 
efficiency level. By 2055, the end date of the analysis period, the 
average single-speed compressor room AC price is projected to drop 23 
percent and the variable-speed compressor room AC price is projected to 
drop about 37 percent relative to 2020. DOE's projection of product 
prices is described in appendix 10C of the NOPR TSD.
    To evaluate the effect of uncertainty regarding the price trend 
estimates, DOE investigated the impact of alternate product price 
projections on the consumer NPV for the considered TSLs for room ACs. 
In addition to the default price trend, DOE considered high and low 
product price sensitivity cases. In the high price scenario, DOE based 
the price decline of the non-variable speed controls portion on room AC 
PPI data limited to the period between the period 1990-2009, which 
shows a faster price decline relative to the full time series. For the 
variable-speed controls portion, DOE used a faster price decline 
derived from the lower bound of the 95 percent confidence interval 
fitting PPI data for semiconductors. In the low price decline scenario, 
DOE assumed a constant price for the non-variable-speed controls 
portion of the price and a slower price decline estimate for the 
variable-speed controls portion derived from the upper bound of the 95 
percent confidence interval fitting PPI data for semiconductors over 
the analysis period. The derivation of these price trends and the 
results of these sensitivity cases are described in appendix 10C of the 
NOPR TSD. The operating cost savings are energy cost savings, which are 
calculated using the estimated energy savings in each year and the 
projected price of electricity. To estimate energy prices in future 
years, DOE multiplied the average regional energy prices by the 
projection of annual national-average residential and commercial energy 
price changes in the Reference case from AEO 2021, which has an end 
year of 2050. For the years after 2050, DOE used the average annual 
rate of change in electricity price from 2035 through 2050. As part of 
the NIA, DOE also analyzed scenarios that used inputs from variants of 
the AEO 2021 Reference case that have lower and higher economic growth. 
Those cases have lower and higher energy price trends compared to the 
Reference case. NIA results based on these cases are presented in 
appendix 10C of the NOPR TSD.
    As described in section IV.H.2 of this document, DOE assumed a 15 
percent rebound from an increase in utilization of the product arising 
from the increase in efficiency (i.e., the direct rebound effect). In 
considering the consumer welfare gained due to the direct rebound 
effect, DOE accounted for change in consumer surplus attributed to 
additional cooling from the purchase of a more efficient unit. Overall 
consumer welfare is generally understood to be enhanced from rebound. 
The net consumer impact of the rebound effect is included in the 
calculation of operating cost savings in the consumer NPV results. See 
appendix 10F of the NOPR TSD for details on DOE's treatment of the 
monetary valuation of the rebound effect. DOE requests comments on its 
approach to monetizing the impact of the rebound effect.
    In calculating the NPV, DOE multiplies the net savings in future 
years by a discount factor to determine their present value. For this 
NOPR, DOE estimated the NPV of consumer benefits using both a 3-percent 
and a 7-percent real discount rate. DOE uses these discount rates in 
accordance with guidance provided by the Office of Management and 
Budget (``OMB'') to Federal agencies on the development of regulatory 
analysis.\52\ The discount rates

[[Page 20639]]

for the determination of NPV are in contrast to the discount rates used 
in the LCC analysis, which are designed to reflect a consumer's 
perspective. The 7-percent real value is an estimate of the average 
before-tax rate of return to private capital in the U.S. economy. The 
3-percent real value represents the ``social rate of time preference,'' 
which is the rate at which society discounts future consumption flows 
to their present value.
---------------------------------------------------------------------------

    \52\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis. September 17, 2003. Section E. Available at 
obamawhitehouse.archives.gov/omb/circulars_a004_a-4/ (last accessed 
June 15, 2021).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

    In analyzing the potential impact of new or amended energy 
conservation standards on consumers, DOE evaluates the impact on 
identifiable subgroups of consumers that may be disproportionately 
affected by a new or amended national standard. The purpose of a 
subgroup analysis is to determine the extent of any such 
disproportional impacts. DOE evaluates impacts on particular subgroups 
of consumers by analyzing the LCC impacts and PBP for those particular 
consumers from alternative standard levels. For this NOPR, DOE analyzed 
the impacts of the considered standard levels on two subgroups: (1) 
Low-income households and (2) senior-only households. The analysis used 
subsets of the 2015 RECS sample composed of households that meet the 
criteria for the two subgroups and shows the percentages of those both 
negatively and positively impacted. DOE used the LCC and PBP 
spreadsheet model to estimate the impacts of the considered efficiency 
levels on these subgroups for product classes with a sufficient sample 
size in 2015 RECS to perform a Monte Carlo analysis. Chapter 11 of the 
NOPR TSD describes the consumer subgroup analysis.

J. Manufacturer Impact Analysis

1. Overview
    DOE performed a MIA to estimate the impacts of amended energy 
conservation standards on manufacturers of room ACs. The MIA has both 
quantitative and qualitative aspects and includes analyses of projected 
industry cash flows, the INPV, investments in research and development 
(``R&D'') and manufacturing capital, and domestic manufacturing 
employment. Additionally, the MIA seeks to determine how amended energy 
conservation standards might affect manufacturing capacity and 
competition, as well as how standards contribute to overall regulatory 
burden. Finally, the MIA serves to identify any disproportionate 
impacts on manufacturer subgroups, including small business 
manufacturers.
    The quantitative part of the MIA primarily relies on the Government 
Regulatory Impact Model (``GRIM''), an industry cash flow model with 
inputs specific to this rulemaking. The key GRIM inputs include data on 
the industry cost structure, unit production costs, product shipments, 
manufacturer markups, and investments in R&D and manufacturing capital 
required to produce compliant products. The key GRIM outputs are the 
INPV, which is the sum of industry annual cash flows over the analysis 
period, discounted using the industry-weighted average cost of capital, 
and the impact to domestic manufacturing employment. The model uses 
standard accounting principles to estimate the impacts of more-
stringent energy conservation standards on a given industry by 
comparing changes in INPV and domestic manufacturing employment between 
a no-new-standards case and the various standards cases (TSLs). To 
capture the uncertainty relating to manufacturer pricing strategies 
following amended standards, the GRIM estimates a range of possible 
impacts under different manufacturer markup scenarios.
    The qualitative part of the MIA addresses manufacturer 
characteristics and market trends. Specifically, the MIA considers such 
factors as a potential standard's impact on manufacturing capacity, 
competition within the industry, the cumulative impact of other Federal 
product-specific regulations, and impacts on manufacturer subgroups. 
The complete MIA is outlined in chapter 12 of the NOPR TSD.
    DOE conducted the MIA for this proposed rulemaking in three phases. 
In Phase 1 of the MIA, DOE prepared a profile of the room AC 
manufacturing industry based on publicly available data and information 
from its market and technology assessment, engineering analysis, and 
shipments analysis. This preparation included a top-down analysis of 
room AC manufacturers that DOE used to derive preliminary financial 
parameters for the GRIM (e.g., materials, labor, overhead, and 
depreciation expenses; selling, general, and administrative expenses 
(``SG&A''); and R&D expenses). DOE also used public sources of 
information to further calibrate its initial characterization of the 
room AC manufacturing industry, including company filings of form 10-K 
from the SEC,\53\ corporate annual reports, the April 2011 Direct Final 
Rule, and the U.S. Census Bureau's Economic Census.\54\ DOE also relied 
on subscription-based resources such as reports from Dun & 
Bradstreet.\55\
---------------------------------------------------------------------------

    \53\ www.sec.gov/edgar/searchedgar/companysearch.html.
    \54\ www.census.gov/programs-surveys/qpc/data/tables.html.
    \55\ app.dnbhoovers.com.
---------------------------------------------------------------------------

    In Phase 2 of the MIA, DOE prepared a framework industry cash-flow 
analysis to quantify the potential impacts of amended energy 
conservation standards. The GRIM uses several factors to determine a 
series of annual cash flows starting with the announcement of the 
standard and extending over a 30-year period following the compliance 
date of the standard. These factors include annual expected revenues, 
costs of sales, SG&A and R&D expenses, taxes, and capital expenditures. 
In general, energy conservation standards can affect manufacturer cash 
flow in three distinct ways: (1) Creating a need for increased 
investment, (2) raising production costs per unit, and (3) altering 
revenue due to higher per-unit prices and changes in sales volumes.
    In addition, during Phase 2, DOE developed interview guides to 
distribute to manufacturers of room ACs in order to develop other key 
GRIM inputs, including product and capital conversion costs, and to 
gather additional information on the anticipated effects of energy 
conservation standards on revenues, direct employment, capital assets, 
industry competitiveness, and subgroup impacts.
    In Phase 3 of the MIA, DOE conducted structured, detailed 
interviews with representative manufacturers. During these interviews, 
DOE discussed engineering, manufacturing, procurement, and financial 
topics to validate assumptions used in the GRIM and to identify key 
issues or concerns. See section IV.J.3 of this document for a 
description of the key issues raised by manufacturers during the 
interviews. As part of Phase 3, DOE also evaluated subgroups of 
manufacturers that may be disproportionately impacted by amended 
standards or that may not be accurately represented by the average cost 
assumptions used to develop the industry cash flow analysis. Such 
manufacturer subgroups may include small business manufacturers, low-
volume manufacturers, niche players, and/or manufacturers exhibiting a 
cost structure that largely differs from the

[[Page 20640]]

industry average. DOE identified one subgroup for a separate impact 
analysis: Small business manufacturers. The small business subgroup is 
discussed in section VII.B of this document, ``Review under the 
Regulatory Flexibility Act'' and in chapter 12 of the NOPR TSD.
2. Government Regulatory Impact Model and Key Inputs
    DOE uses the GRIM to quantify the changes in cash flow due to 
amended standards that result in a higher or lower industry value. The 
GRIM uses a standard, annual discounted cash-flow analysis that 
incorporates manufacturer costs, markups, shipments, and industry 
financial information as inputs. The GRIM models changes in costs, 
distribution of shipments, investments, and manufacturer margins that 
could result from an amended energy conservation standard. The GRIM 
spreadsheet uses the inputs to arrive at a series of annual cash flows, 
beginning in 2021 (the base year of the MIA analysis) and continuing to 
2055. DOE calculated INPVs by summing the stream of annual discounted 
cash flows during this period. For manufacturers of room ACs, DOE used 
a real discount rate of 7.2 percent, which was derived from public 
financial data and then modified according to feedback received during 
manufacturer interviews.
    The GRIM calculates cash flows using standard accounting principles 
and compares changes in INPV between the no-new-standards case and each 
standards case. The difference in INPV between the no-new-standards 
case and a standards case represents the financial impact of the 
amended energy conservation standard on manufacturers. As discussed 
previously, DOE developed critical GRIM inputs using a number of 
sources, including publicly available data, results of the engineering 
analysis, and information gathered during the course of manufacturer 
interviews. The GRIM results are presented in section V.B.2 of this 
document. Additional details about the GRIM, the discount rate, and 
other financial parameters can be found in chapter 12 of the NOPR TSD.
a. Manufacturer Production Costs
    Manufacturing more efficient equipment is typically more expensive 
than manufacturing baseline equipment due to the use of more complex 
components, which are typically more costly than baseline components. 
The changes in the MPCs of covered products can affect the revenues, 
gross margins, and cash flow of the industry. DOE models the 
relationship between efficiency and MPCs as a part of its engineering 
analysis. For a complete description of the MPCs, see chapter 5 of the 
NOPR TSD.
b. Shipments Projections
    The GRIM estimates manufacturer revenues based on total unit 
shipment projections and the distribution of those shipments by product 
class and by efficiency level. Changes in sales volumes and efficiency 
mix over time can significantly affect manufacturer finances. For this 
analysis, the GRIM uses the NIA's annual shipment projections derived 
from the shipments analysis. See chapter 9 of the NOPR TSD for 
additional details on DOE's shipments projections.
c. Product and Capital Conversion Costs
    Amended energy conservation standards could cause manufacturers to 
incur conversion costs to bring their production facilities and 
equipment designs into compliance. DOE evaluated the level of 
conversion-related expenditures that would be needed to comply with 
each considered efficiency level in each product class. For the MIA, 
DOE classified these conversion costs into two major groups: (1) 
Product conversion costs, and (2) capital conversion costs. Product 
conversion costs are investments in research, development, testing, 
marketing, and other non-capitalized costs necessary to make product 
designs comply with amended energy conservation standards. Capital 
conversion costs are investments in property, plant, and equipment 
necessary to adapt or change existing production facilities such that 
new compliant product designs can be fabricated and assembled. All 
conversion-related investments occur between the year of publication of 
the final rule and the year by which manufacturers must comply with the 
new standard.
    To calculate the MPCs for room ACs at and above the baseline, DOE 
performed teardowns for representative units. The data generated from 
these analyses were then used to estimate the capital investments in 
equipment, tooling, and conveyor required of original equipment 
manufacturers (``OEMs'') at each efficiency level, taking into account 
such factors as product design, raw materials, purchased components, 
and fabrication method. Changes in equipment, tooling, and conveyer 
were used to estimate capital conversion costs. Additionally, capital 
conversion costs accounted for investments in appearance tooling made 
by manufacturers that are not OEMs.
    DOE relied on feedback from industry to evaluate the product 
conversion costs industry would likely incur at the considered standard 
levels. DOE integrated feedback from manufacturers, both OEM and non-
OEM, on redesign effort and staffing to estimate product conversion 
cost. Manufacturer numbers were aggregated to protect confidential 
information.
    The conversion cost figures used in the GRIM can be found in 
section V.B.2 of this document. For additional information on the 
capital and product conversion costs, see chapter 12 of the NOPR TSD.
d. Manufacturer Markup Scenarios
    MSPs include direct manufacturing production costs (i.e., labor, 
materials, and overhead estimated in DOE's MPCs) and all non-production 
costs (i.e., SG&A, R&D, and interest), along with profit. To calculate 
the MSPs in the GRIM, DOE applied non-production cost markups to the 
MPCs estimated in the engineering analysis for each product class and 
efficiency level. Modifying these markups in the standards case yields 
different sets of impacts on manufacturers. For the MIA, DOE modeled 
two standards-case manufacturer markup scenarios to represent 
uncertainty regarding the potential impacts on prices and profitability 
for manufacturers following the implementation of amended energy 
conservation standards: (1) A preservation of gross margin percentage 
markup scenario, and (2) a preservation of per-unit operating profit 
markup scenario. These scenarios lead to different manufacturer markup 
values that, when applied to the MPCs, result in varying revenue and 
cash flow impacts.
    Under the preservation of gross margin percentage scenario, DOE 
applied a single uniform ``gross margin percentage'' markup across all 
efficiency levels, which assumes that manufacturers would be able to 
maintain the same amount of profit as a percentage of revenues at all 
efficiency levels within a product class. As manufacturer production 
costs increase with efficiency, this scenario implies that the absolute 
dollar markup will increase as well. DOE assumed the industry-average 
manufacturer markup--which includes SG&A expenses, R&D expenses, 
interest, and profit--to be 1.26 for room ACs. Manufacturers tend to 
believe it is optimistic to assume that they would be able to maintain 
the same gross margin percentage markup as their production costs 
increase, particularly for minimally efficient products. Therefore, DOE 
assumes that this scenario represents a high bound to industry

[[Page 20641]]

profitability under an amended energy conservation standard.
    In the preservation of operating profit scenario, as the cost of 
production goes up under a standards case, manufacturers are generally 
required to reduce their markups to a level that maintains base-case 
operating profit. DOE implemented this scenario in the GRIM by lowering 
the manufacturer markups at each TSL to yield approximately the same 
earnings before interest and taxes in the standards case as in the no-
new-standards case in the year after the compliance date of the amended 
standards. The implicit assumption behind this manufacturer markup 
scenario is that the industry can only maintain its operating profit in 
absolute dollars after the standard. A comparison of industry financial 
impacts under the two markup scenarios is presented in section V.B.2.a 
of this document.
3. Manufacturer Interviews
    DOE interviewed manufacturers representing approximately 40 percent 
of the basic models in DOE's Compliance Certification Database 
(``CCD''). Participants included OEMs and importers.
    In interviews, DOE asked manufacturers to describe their major 
concerns regarding potential increases in energy conservation standards 
for room ACs. The following section highlights manufacturer concerns 
that helped inform the projected potential impacts of an amended 
standard on the industry. Manufacturer interviews are conducted under 
non-disclosure agreements (``NDAs''), so DOE does not document these 
discussions in the same way that it does public comments in the comment 
summaries and DOE's responses throughout the rest of this document.
a. Compressor Availability
    For the June 2020 Preliminary Analysis, DOE selected EL 3 levels to 
represent an intermediate efficiency between EL 2 (the ENERGY STAR 
level) and EL 4 (the max-tech level) \56\ that could be reached with 
single-speed compressor designs for all product classes. 85 FR 36512. 
In interviews, manufacturers raised concerns about the ability to meet 
the preliminary analysis' CEER values at EL 3 without the use of 
variable-speed compressors. Manufacturers asserted that the single-
speed compressors necessary to meet the preliminary analysis EL 3 
levels are not available to all manufacturers and encouraged DOE to 
base EL 3 on compressors that are widely available on the market.
---------------------------------------------------------------------------

    \56\ For the June 2020 Preliminary Analysis, DOE analyzed five 
efficiency levels as part of its engineering analysis. In response 
to stakeholder comments to the preliminary analysis, DOE analyzed an 
additional efficiency level in the NOPR engineering analysis between 
EL 3 and the max-tech level (EL 4 in the preliminary analysis, now 
EL 5 for this NOPR).
---------------------------------------------------------------------------

b. Physical Design Constraints
    Manufacturers noted that through-the-wall (``TTW'') products are 
designed to fit specific sleeve sizes and the market requires 
replacement products to fit existing sleeves. Additionally, window 
units are constrained by average window dimensions. Further, 
manufacturers noted that they design the boxed product to meet either 
50 pound (``lb'') or 150 lb weight thresholds, reflecting requirements 
related to worker safety standards, parcel delivery service thresholds, 
and customer utility. Manufacturers noted that maintaining existing 
product dimensions is an important feature to their end-users, 
particularly in the replacement market.
c. Cost Increases and Component Shortages
    Manufacturers noted that recent increases in raw material prices, 
escalating shipping and transportation costs, and limited component 
availability all affect manufacturer production costs. As a result, 
cost estimates based on historic 5-year averages would underestimate 
current production costs.
4. Discussion of MIA Comments
    In response to the June 2020 Preliminary Analysis, interested 
parties submitted written comments addressing several topics including 
cumulative regulatory burden.
    AHAM and GEA commented that DOE should include proposed changes to 
both standards and refrigerants, as well as the economic impact of U.S. 
tariffs on Chinese imports, when determining the cumulative regulatory 
burden placed on manufacturers. AHAM and GEA also urged DOE to 
incorporate the financial results of cumulative regulatory burden 
analysis into the GRIM to account for the time and resources needed to 
comply with concurrent regulations. (AHAM, No. 19 at pp. 12 and 17-19; 
GEA No. 26 at p. 2)
    DOE analyzes cumulative regulatory burden pursuant to 10 CFR part 
430, subpart C, appendix A. Pursuant to appendix A, the Department will 
recognize and consider the overlapping effects on manufacturers of new 
or revised DOE standards and other Federal regulatory actions affecting 
the same products or equipment. The results of this analysis can be 
found in section V.B.2.e of this document. DOE endeavors to provide 
analyses that take market conditions and the effect of other Federal 
regulatory actions into account, such as the U.S. tariffs on Chinese 
imports and the transition to alternative refrigerants. DOE 
incorporates these factors into their range of analyses, including the 
market and technology assessment, screening analysis, engineering 
analysis, energy usage analysis, NIA, and MIA.
    In consideration of AHAM's comment on the possibility that 
California may prohibit HFCs and the resulting transition to 
alternative refrigerants (AHAM, No. 40 at p. 12), DOE evaluated 
potential impacts of CARB's proposed 750 GWP limit on the energy 
efficiency of new room ACs. This State regulation is specific to the 
products regulated by this NOPR and would require redesign of the 
covered product. Based on interviews and through review of market data, 
DOE found that all but one OEM is producing R-32 room AC models. 
Additionally, based on interview feedback, all OEMs intend to 
transition entirely to R-32 room ACs by 2023 regardless of DOE actions 
related to the energy conservation standards for room ACs. Thus, DOE 
did not consider the redesign costs related to R-32 to be conversion 
costs, as the change in refrigerant is independent of DOE actions 
related to any amended energy conservation standards.
    DOE is aware of one OEM still in the process of redesigning room 
ACs to make use of R-32 and to comply with the requirements in 
Underwriters Laboratories (``UL'') Standard UL 60335-2-40, ``Household 
and Similar Electrical Appliances--Safety--Part 2-40: Particular 
Requirements for Electrical Heat Pumps, Air-Conditioners and 
Dehumidifiers'' (``UL 60335-2-40'') for their products that are 
manufactured in-house. To account for these investments, DOE 
incorporated an estimate of the on-going costs for that business into 
its GRIM.
    Regarding U.S. tariffs on Chinese imports, tariff levels have 
escalated in recent years. At the time of the April 2011 Direct Final 
Rule, most room ACs imported into the U.S. were manufactured in China. 
Since that time, the Section 301 tariffs on room ACs increased to 10 
percent in September 2018 and to 25 percent in May 2019.\57\

[[Page 20642]]

As result of tariffs, as noted by AHAM, ``some manufacturers have had 
to shift production to other countries to avoid the tariffs.'' (AHAM, 
No. 19 at pp. 18-19) DOE understands that these products are now made 
in countries in East Asia and Southeast Asia not subject to Section 301 
tariffs. However, due to uncertainty about the exact countries of 
origin, DOE's engineering analysis continues to rely on data based on a 
Chinese point of origin. To revise MPCs to account for points of origin 
outside of China, DOE would require information on the countries of 
manufacture and 5-year averages for key inputs, such as fully burdened 
production labor wage rates and local raw material prices, used to 
develop MPCs.
---------------------------------------------------------------------------

    \57\ The Office of the United States Trade Representative 
(``USTR'') released a list of Chinese imports subject to new tariffs 
on September 18, 2018. The tariffs were set at 10 percent and had an 
effective date of September 24, 2018. Room ACs fall under Harmonized 
Tariffs Schedule (``HTS'') code 8415.10.30, ``Window or wall type 
air conditioning machines, self[hyphen]contained,'' and were subject 
to those tariffs. The USTR press release on the adoption of the 
tariffs and the affected imports can be found at: ustr.gov/about-us/policy-offices/press-office/press-releases/2018/september/ustr-finalizes-tariffs-200. The Notice of Modification of Section 301 can 
be found at: ustr.gov/sites/default/files/enforcement/301Investigations/83%20FR%2047974.pdf.
    Initially, the tariffs on room ACs were set to increase to 25 
percent on January 1, 2019. The increase was delayed in subsequent 
negotiations. Ultimately the USTR raised tariffs on room ACs to 25 
percent on May 10, 2019. The USTR press release on the increase in 
tariffs can be found at: ustr.gov/sites/default/files/enforcement/301Investigations/83%20FR%2047974.pdf. The Notice of Modification of 
Section 301 can be found at: ustr.gov/sites/default/files/enforcement/301Investigations/84_FR_20459.pdf.
---------------------------------------------------------------------------

    To better model the impact of Section 301 tariffs on room AC 
products that continue to be manufactured in China, DOE requires 
additional information about the portion of products still manufactured 
in China and how the tariffs are absorbed by the entities along the 
room AC value chain, such as the foreign OEMs, U.S. importers, 
retailers, and consumers. Increases in retail price may affect consumer 
purchasing decisions, as captured by the price sensitivity modeled in 
the shipments analysis.
    Additional details about cumulative regulatory burden and requests 
for comment can be found in section V.B.2.d of this document.

K. Emissions Analysis

    The emissions analysis consists of two components. The first 
component estimates the effect of potential energy conservation 
standards on power sector and site (where applicable) combustion 
emissions of CO2, NOX, SO2, and Hg. 
The second component estimates the impacts of potential standards on 
emissions of two additional greenhouse gases, CH4 and 
N2O, as well as the reductions to emissions of other gases 
due to ``upstream'' activities in the fuel production chain. These 
upstream activities comprise extraction, processing, and transporting 
fuels to the site of combustion.
    The analysis of power sector emissions of CO2, 
NOX, SO2, and Hg uses marginal emissions factors 
that were derived from data in AEO 2021, as described in section IV.M 
of this document. Details of the methodology are described in the 
appendices to chapters 13 and 15 of the NOPR TSD.
    Power sector emissions of CO2, CH4, and 
N2O are estimated using Emission Factors for Greenhouse Gas 
Inventories published by the EPA.\58\ The FFC upstream emissions are 
estimated based on the methodology described in chapter 15 of the NOPR 
TSD. The upstream emissions include both emissions from extraction, 
processing, and transportation of fuel, and ``fugitive'' emissions 
(direct leakage to the atmosphere) of CH4 and 
CO2.
---------------------------------------------------------------------------

    \58\ www.epa.gov/sites/production/files/2016-09/documents/emission-factors_nov_2015_v2.pdf (last accessed June 14, 2021).
---------------------------------------------------------------------------

    The emissions intensity factors are expressed in terms of physical 
units per megawatt-hours (``MWh'') or million British thermal units 
(``MMBtu'') of site energy savings. Total emissions reductions are 
estimated using the energy savings calculated in the national impact 
analysis.
1. Air Quality Regulations Incorporated in DOE's Analysis
    DOE's no-new-standards case for the electric power sector reflects 
the AEO 2021, which incorporates the projected impacts of existing air 
quality regulations on emissions. AEO 2021 generally represents current 
legislation and environmental regulations, including recent government 
actions that were in place at the time of preparation of AEO 2021, 
including the emissions control programs discussed in the following 
paragraphs.\59\
---------------------------------------------------------------------------

    \59\ For further information, see the Assumptions to AEO 2021 
report that sets forth the major assumptions used to generate the 
projections in the Annual Energy Outlook. Available at www.eia.gov/outlooks/aeo/assumptions/ (last accessed June 14, 2021).
---------------------------------------------------------------------------

    SO2 emissions from affected electric generating units 
(``EGUs'') are subject to nationwide and regional emissions cap-and-
trade programs. Title IV of the Clean Air Act sets an annual emissions 
cap on SO2 for affected EGUs in the 48 contiguous States and 
the District of Columbia (D.C.). (42 U.S.C. 7651 et seq.) 
SO2 emissions from numerous States in the eastern half of 
the United States are also limited under the Cross-State Air Pollution 
Rule (``CSAPR''). 76 FR 48208 (Aug. 8, 2011). CSAPR requires these 
States to reduce certain emissions, including annual SO2 
emissions, and went into effect as of January 1, 2015.\60\ AEO 2021 
incorporates implementation of CSAPR, including the update to the CSAPR 
ozone season program emission budgets and target dates issued in 2016, 
81 FR 74504 (Oct. 26, 2016). Compliance with CSAPR is flexible among 
EGUs and is enforced through the use of tradable emissions allowances. 
Under existing EPA regulations, any excess SO2 emissions 
allowances resulting from the lower electricity demand caused by the 
adoption of an efficiency standard could be used to permit offsetting 
increases in SO2 emissions by another regulated EGU.
---------------------------------------------------------------------------

    \60\ CSAPR requires states to address annual emissions of 
SO2 and NOX, precursors to the formation of 
fine particulate matter (PM2.5) pollution, in order to 
address the interstate transport of pollution with respect to the 
1997 and 2006 PM2.5 National Ambient Air Quality 
Standards (``NAAQS''). CSAPR also requires certain states to address 
the ozone season (May-September) emissions of NOX, a 
precursor to the formation of ozone pollution, in order to address 
the interstate transport of ozone pollution with respect to the 1997 
ozone NAAQS. 76 FR 48208 (Aug. 8, 2011). EPA subsequently issued a 
supplemental rule that included an additional five states in the 
CSAPR ozone season program; 76 FR 80760 (Dec. 27, 2011) 
(Supplemental Rule).
---------------------------------------------------------------------------

    However, beginning in 2016, SO2 emissions began to fall 
as a result of implementation of the Mercury and Air Toxics Standards 
(``MATS'') for power plants. 77 FR 9304 (Feb. 16, 2012). In the MATS 
final rule, EPA established a standard for hydrogen chloride as a 
surrogate for acid gas hazardous air pollutants (``HAP''), and also 
established a standard for SO2 (a non-HAP acid gas) as an 
alternative equivalent surrogate standard for acid gas HAP. The same 
controls are used to reduce HAP and non-HAP acid gas; thus, 
SO2 emissions are being reduced as a result of the control 
technologies installed on coal-fired power plants to comply with the 
MATS requirements for acid gas. To continue operating, coal power 
plants must have either flue gas desulfurization or dry sorbent 
injection systems installed. Both technologies, which are used to 
reduce acid gas emissions, also reduce SO2 emissions. 
Because of the emissions reductions under the MATS, it is unlikely that 
excess SO2 emissions allowances resulting from the lower 
electricity demand would be needed or used to permit offsetting 
increases in SO2 emissions by another regulated EGU. 
Therefore, energy conservation standards that decrease electricity

[[Page 20643]]

generation would generally reduce SO2 emissions. DOE 
estimated SO2 emissions reduction using emissions factors 
based on AEO2021.
    CSAPR also established limits on NOX emissions for 
numerous States in the eastern half of the United States. Energy 
conservation standards would have little effect on NOX 
emissions in those States covered by CSAPR emissions limits if excess 
NOX emissions allowances resulting from the lower 
electricity demand could be used to permit offsetting increases in 
NOX emissions from other EGUs. In such case, NOX 
emissions would remain near the limit even if electricity generation 
goes down. A different case could possibly result, depending on the 
configuration of the power sector in the different regions and the need 
for allowances, such that NOX emissions might not remain at 
the limit in the case of lower electricity demand. In this case, energy 
conservation standards might reduce NOX emissions in covered 
States. Despite this possibility, DOE has chosen to be conservative in 
its analysis and has maintained the assumption that standards will not 
reduce NOX emissions in States covered by CSAPR. Energy 
conservation standards would be expected to reduce NOX 
emissions in the States not covered by CSAPR. DOE used AEO 2021 data to 
derive NOX emissions factors for the group of States not 
covered by CSAPR.
    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps and, as such, DOE's energy conservation 
standards would be expected to slightly reduce Hg emissions. DOE 
estimated mercury emissions reduction using emissions factors based on 
AEO 2021, which incorporates the MATS.

L. Monetizing Emissions Impacts

    As part of the development of this proposed rule, for the purpose 
of complying with the requirements of Executive Order 12866, DOE 
considered the estimated monetary benefits from the reduced emissions 
of CO2, CH4, N2O, NOX, and 
SO2 that are expected to result from each of the TSLs 
considered. In order to make this calculation analogous to the 
calculation of the NPV of consumer benefit, DOE considered the reduced 
emissions expected to result over the lifetime of products shipped in 
the projection period for each TSL. This section summarizes the basis 
for the values used for monetizing the emissions benefits and presents 
the values considered in this NOPR.
    On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-
30087) granted the federal government's emergency motion for stay 
pending appeal of the February 11, 2022, preliminary injunction issued 
in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of 
the Fifth Circuit's order, the preliminary injunction is no longer in 
effect, pending resolution of the federal government's appeal of that 
injunction or a further court order. Among other things, the 
preliminary injunction enjoined the defendants in that case from 
``adopting, employing, treating as binding, or relying upon'' the 
interim estimates of the social cost of greenhouse gases--which were 
issued by the Interagency Working Group on the Social Cost of 
Greenhouse Gases on February 26, 2021--to monetize the benefits of 
reducing greenhouse gas emissions. In the absence of further 
intervening court orders, DOE will revert to its approach prior to the 
injunction and present monetized benefits where appropriate and 
permissible under law. DOE requests comment on how to address the 
climate benefits and other non-monetized effects of the proposal.
1. Monetization of Greenhouse Gas Emissions
    For the purpose of complying with the requirements of Executive 
Order 12866, DOE estimates the monetized benefits of the reductions in 
emissions of CO2, CH4, and N2O by 
using a measure of the social cost (``SC'') of each pollutant (e.g., 
SC-GHGs). These estimates represent the monetary value of the net harm 
to society associated with a marginal increase in emissions of these 
pollutants in a given year, or the benefit of avoiding that increase. 
These estimates are intended to include (but are not limited to) 
climate-change-related changes in net agricultural productivity, human 
health, property damages from increased flood risk, disruption of 
energy systems, risk of conflict, environmental migration, and the 
value of ecosystem services. DOE exercises its own judgment in 
presenting monetized climate benefits as recommended by applicable 
Executive orders and guidance, and DOE would reach the same conclusion 
presented in this proposed rulemaking in the absence of the social cost 
of greenhouse gases, including the February 2021 Interim Estimates 
presented by the Interagency Working Group on the Social Cost of 
Greenhouse Gases. DOE exercises its own judgment in presenting 
monetized climate benefits as recommended by applicable Executive 
Orders, and DOE would reach the same conclusion presented in this 
notice in the absence of the social cost of greenhouse gases, including 
the February 2021 Interim Estimates presented by the Interagency 
Working Group on the Social Cost of Greenhouse Gases.
    DOE estimated the global social benefits of CO2, 
CH4, and N2O reductions (i.e., SC-GHGs) using the 
estimates presented in the Technical Support Document: Social Cost of 
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive 
Order 13990 published in February 2021 by the Interagency Working Group 
on the Social Cost of Greenhouse Gases (IWG) (IWG, 2021). The SC-GHGs 
is the monetary value of the net harm to society associated with a 
marginal increase in emissions in a given year, or the benefit of 
avoiding that increase. In principle, SC-GHGs includes the value of all 
climate change impacts, including (but not limited to) changes in net 
agricultural productivity, human health effects, property damage from 
increased flood risk and natural disasters, disruption of energy 
systems, risk of conflict, environmental migration, and the value of 
ecosystem services. The SC-GHGs therefore, reflects the societal value 
of reducing emissions of the gas in question by one metric ton. The SC-
GHGs is the theoretically appropriate value to use in conducting 
benefit-cost analyses of policies that affect CO2, 
N2O and CH4 emissions. As a member of the IWG involved in 
the development of the February 2021 SC-GHG TSD), the DOE agrees that 
the interim SC-GHG estimates represent the most appropriate estimate of 
the SC-GHG until revised estimates have been developed reflecting the 
latest, peer-reviewed science.
    The SC-GHGs estimates presented here were developed over many 
years, using transparent process, peer-reviewed methodologies, the best 
science available at the time of that process, and with input from the 
public. Specifically, in 2009, an interagency working group (IWG) that 
included the DOE and other executive branch agencies and offices was 
established to ensure that agencies were using the best available 
science and to promote consistency in the social cost of carbon (SC-
CO2) values used across agencies. The IWG published SC-CO2 
estimates in 2010 that were developed from an ensemble of three widely 
cited integrated assessment models (IAMs) that estimate global climate 
damages using highly aggregated representations of climate processes 
and the global economy combined into a single modeling framework. The 
three IAMs were run using a common set of input assumptions in each 
model for future

[[Page 20644]]

population, economic, and CO2 emissions growth, as well as 
equilibrium climate sensitivity (ECS)--a measure of the globally 
averaged temperature response to increased atmospheric CO\2\ 
concentrations. These estimates were updated in 2013 based on new 
versions of each IAM. In August 2016 the IWG published estimates of the 
social cost of methane (SC-CH4) and nitrous oxide (SC-N2O) using 
methodologies that are consistent with the methodology underlying the 
SC-CO2 estimates. The modeling approach that extends the IWG 
SC-CO2 methodology to non-CO2 GHGs has undergone multiple stages of 
peer review. The SC-CH4 and SC-N2O estimates were developed by Marten 
et al. (2015) and underwent a standard double-blind peer review process 
prior to journal publication. In 2015, as part of the response to 
public comments received to a 2013 solicitation for comments on the SC-
CO2 estimates, the IWG announced a National Academies of Sciences, 
Engineering, and Medicine review of the SC-CO2 estimates to offer 
advice on how to approach future updates to ensure that the estimates 
continue to reflect the best available science and methodologies. In 
January 2017, the National Academies released their final report, 
Valuing Climate Damages: Updating Estimation of the Social Cost of 
Carbon Dioxide, and recommended specific criteria for future updates to 
the SC-CO2 estimates, a modeling framework to satisfy the specified 
criteria, and both near-term updates and longer-term research needs 
pertaining to various components of the estimation process (National 
Academies, 2017). Shortly thereafter, in March 2017, President Trump 
issued Executive Order 13783, which disbanded the IWG, withdrew the 
previous TSDs, and directed agencies to ensure SC-CO2 estimates used in 
regulatory analyses are consistent with the guidance contained in OMB's 
Circular A-4, ``including with respect to the consideration of domestic 
versus international impacts and the consideration of appropriate 
discount rates'' (E.O. 13783, Section 5(c)).
    On January 20, 2021, President Biden issued Executive Order 13990, 
which re-established the IWG and directed it to ensure that the U.S. 
Government's estimates of the social cost of carbon and other 
greenhouse gases reflect the best available science and the 
recommendations of the National Academies (2017). The IWG was tasked 
with first reviewing the SC-GHG estimates currently used in Federal 
analyses and publishing interim estimates within 30 days of the E.O. 
that reflect the full impact of GHG emissions, including by taking 
global damages into account. The interim SC-GHG estimates published in 
February 2021, specifically the SC-CH4 estimates, are used here to 
estimate the climate benefits for this proposed rulemaking. The E.O. 
instructs the IWG to undertake a fuller update of the SC-GHG estimates 
by January 2022 that takes into consideration the advice of the 
National Academies (2017) and other recent scientific literature.
    The February 2021 SC-GHG TSD provides a complete discussion of the 
IWG's initial review conducted under E.O. 13990. In particular, the IWG 
found that the SC-GHG estimates used under E.O. 13783 fail to reflect 
the full impact of GHG emissions in multiple ways. First, the IWG found 
that a global perspective is essential for SC-GHG estimates because it 
fully captures climate impacts that affect the United States and which 
have been omitted from prior U.S.-specific estimates due to 
methodological constraints. Examples of omitted effects include direct 
effects on U.S. citizens, assets, and investments located abroad, 
supply chains, and tourism, and spillover pathways such as economic and 
political destabilization and global migration. In addition, assessing 
the benefits of U.S. GHG mitigation activities requires consideration 
of how those actions may affect mitigation activities by other 
countries, as those international mitigation actions will provide a 
benefit to U.S. citizens and residents by mitigating climate impacts 
that affect U.S. citizens and residents. If the United States does not 
consider impacts on other countries, it is difficult to convince other 
countries to consider the impacts of their emissions on the United 
States. As a member of the IWG involved in the development of the 
February 2021 SC-GHG TSD, DOE agrees with this assessment and, 
therefore, in this proposed rule DOE centers attention on a global 
measure of SC-CH4. This approach is the same as that taken in DOE 
regulatory analyses from 2012 through 2016. Prior to that, in 2008 DOE 
presented Social Cost of Carbon (SCC) estimates based on values the 
Intergovernmental Panel on Climate Change (IPCC) identified in 
literature at that time. As noted in the February 2021 SC-GHG TSD, the 
IWG will continue to review developments in the literature, including 
more robust methodologies for estimating a U.S.-specific SC-GHG value, 
and explore ways to better inform the public of the full range of 
carbon impacts. As a member of the IWG, DOE will continue to follow 
developments in the literature pertaining to this issue.
    Second, the IWG found that the use of the social rate of return on 
capital (7 percent under current OMB Circular A-4 guidance) to discount 
the future benefits of reducing GHG emissions inappropriately 
underestimates the impacts of climate change for the purposes of 
estimating the SC-GHG. Consistent with the findings of the National 
Academies (2017) and the economic literature, the IWG continued to 
conclude that the consumption rate of interest is the theoretically 
appropriate discount rate in an intergenerational context (IWG 2010, 
2013, 2016a, 2016b), and recommended that discount rate uncertainty and 
relevant aspects of intergenerational ethical considerations be 
accounted for in selecting future discount rates. As a member of the 
IWG involved in the development of the February 2021 SC-GHG TSD, DOE 
agrees with this assessment and will continue to follow developments in 
the literature pertaining to this issue.
    While the IWG works to assess how best to incorporate the latest, 
peer reviewed science to develop an updated set of SC-GHG estimates, it 
set the interim estimates to be the most recent estimates developed by 
the IWG prior to the group being disbanded in 2017. The estimates rely 
on the same models and harmonized inputs and are calculated using a 
range of discount rates. As explained in the February 2021 SC-GHG TSD, 
the IWG has recommended that agencies to revert to the same set of four 
values drawn from the SC-GHG distributions based on three discount 
rates as were used in regulatory analyses between 2010 and 2016 and 
subject to public comment. For each discount rate, the IWG combined the 
distributions across models and socioeconomic emissions scenarios 
(applying equal weight to each) and then selected a set of four values 
recommended for use in benefit-cost analyses: An average value 
resulting from the model runs for each of three discount rates (2.5 
percent, 3 percent, and 5 percent), plus a fourth value, selected as 
the 95th percentile of estimates based on a 3 percent discount rate. 
The fourth value was included to provide information on potentially 
higher-than-expected economic impacts from climate change. As explained 
in the February 2021 SC-GHG TSD, and DOE agrees, this update reflects 
the immediate need to have an operational SC-GHG for use in regulatory 
benefit-cost analyses and other applications that was developed using a 
transparent process, peer-reviewed methodologies, and the science 
available at the time of that process. Those estimates were

[[Page 20645]]

subject to public comment in the context of dozens of proposed 
rulemakings as well as in a dedicated public comment period in 2013.
    DOE's derivations of the SC-GHG (i.e., SC-CO2, SC-
N2O, and SC-CH4) values used for this NOPR are 
discussed in the following sections, and the results of DOE's analyses 
estimating the benefits of the reductions in emissions of these 
pollutants are presented in section V.B.6 of this document.
a. Social Cost of Carbon
    The SC-CO2 values used for this NOPR were generated 
using the values presented in the 2021 update from the IWG's February 
2021 TSD. Table IV.8 shows the updated sets of SC-CO2 
estimates from the latest interagency update in 5-year increments from 
2020 to 2050. The full set of annual values used is presented in 
Appendix 14A of the NOPR TSD. For purposes of capturing the 
uncertainties involved in regulatory impact analysis, DOE has 
determined it is appropriate to include all four sets of SC-
CO2 values, as recommended by the IWG.\61\
---------------------------------------------------------------------------

    \61\ For example, the February 2021 TSD discusses how the 
understanding of discounting approaches suggests that discount rates 
appropriate for intergenerational analysis in the context of climate 
change may be lower than 3 percent.
[GRAPHIC] [TIFF OMITTED] TP07AP22.024

    In calculating the potential global benefits resulting from reduced 
CO2 emissions, DOE used the values from the 2021 interagency 
report, adjusted to 2020$ using the implicit price deflator for gross 
domestic product (``GDP'') from the Bureau of Economic Analysis. For 
each of the four sets of SC-CO2 cases specified, the values 
for emissions in 2020 were $14, $51, $76, and $152 per metric ton 
avoided (values expressed in 2020$). DOE derived values after 2050 
based on the trend in 2020-2050 in each of the four cases in the IWG 
update. DOE derived values from 2051 to 2070 based on estimates 
published by EPA.\62\ These estimates are based on methods, 
assumptions, and parameters identical to the 2020-2050 estimates 
published by the IWG. DOE derived values after 2070 based on the trend 
in 2060-2070 in each of the four cases in the IWG update.
---------------------------------------------------------------------------

    \62\ See EPA, Revised 2023 and Later Model Year Light-Duty 
Vehicle GHG Emissions Standards: Regulatory Impact Analysis, 
Washington, DC, December 2021. Available at: https://www.epa.gov/system/files/documents/2021-12/420r21028.pdf (last accessed January 
13, 2022).
---------------------------------------------------------------------------

    DOE multiplied the CO2 emissions reduction estimated for 
each year by the SC-CO2 value for that year in each of the 
four cases. To calculate a present value of the stream of monetary 
values, DOE discounted the values in each of the four cases using the 
specific discount rate that had been used to obtain the SC-
CO2 values in each case. See chapter 13 for the annual 
emissions reduction. See appendix 14A for the annual SC-CO2 
values.
b. Social Cost of Methane and Nitrous Oxide
    The SC-CH4 and SC-N2O values used for this 
NOPR were generated using the values presented in the 2021 update from 
the IWG.\63\ Table IV.9 shows the updated sets of SC-CH4 and 
SC-N2O estimates from the latest interagency update in 5-
year increments from 2020 to 2050. The full set of annual values used 
is presented in appendix 14A of the NOPR TSD. To capture the 
uncertainties involved in regulatory impact analysis, DOE has 
determined it is appropriate to include all four sets of SC-
CH4 and SC-N2O values, as recommended by the IWG.
---------------------------------------------------------------------------

    \63\ Interagency Working Group on Social Cost of Greenhouse 
Gases, Technical Support Document: Social Cost of Carbon, Methane, 
and Nitrous Oxide.
    Interim Estimates Under Executive Order 13990, Washington, DC, 
February 2021.
    www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf?source=email.

---------------------------------------------------------------------------

[[Page 20646]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.025

    DOE multiplied the CH4 and N2O emissions 
reduction estimated for each year by the SC-CH4 and SC-
N2O estimates for that year in each of the cases. To 
calculate a present value of the stream of monetary values, DOE 
discounted the values in each of the cases using the specific discount 
rate that had been used to obtain the SC-CH4 and SC-
N2O estimates in each case. See chapter 13 of the NOPR TSD 
for the annual emissions reduction. See appendix 14A of the NOPR TSD 
for the annual SC-CH4 and SC-N2O values.
2. Monetization of Other Air Pollutants
    For this NOPR, DOE estimated the monetized value of NOX 
and SO2 emissions reductions from electricity generation 
using the latest benefit-per-ton estimates for that sector from the 
EPA's Benefits Mapping and Analysis Program.\64\ DOE used EPA's values 
for PM2.5-related benefits associated with NOX 
and SO2 and for ozone-related benefits associated with 
NOX for 2025, 2030, 2035 and 2040, calculated with discount 
rates of 3 percent and 7 percent. DOE used linear interpolation to 
define values for the years not given in the 2025 to 2040 period; for 
years beyond 2040 the values are held constant. DOE derived values 
specific to the sector for room ACs using a method described in 
appendix 14B of the NOPR TSD.
---------------------------------------------------------------------------

    \64\ Estimating the Benefit per Ton of Reducing PM2.5 
Precursors from 21 Sectors. www.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-21-sectors.
---------------------------------------------------------------------------

    DOE multiplied the emissions reduction (in tons) in each year by 
the associated $/ton values, and then discounted each series using 
discount rates of 3 percent and 7 percent as appropriate.
    The SCoC Commenters presented reasons why DOE should, as it has in 
the past, monetize the full climate benefits of greenhouse gas 
emissions reductions, using the best available estimates, which were 
derived by the Interagency Working Group on the Social Cost of 
Greenhouse Gases. The SCoC Commenters also stated that DOE should 
factor these benefits into its choice of the maximum efficiency level 
that is economically justified, consistent with its statutory 
requirement to assess the national need to conserve energy under the 
Energy Policy and Conservation Act. (SCoC, No. 21 at p. 1)
    On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-
30087) granted the federal government's emergency motion for stay 
pending appeal of the February 11, 2022, preliminary injunction issued 
in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of 
the Fifth Circuit's order, the preliminary injunction is no longer in 
effect, pending resolution of the federal government's appeal of that 
injunction or a further court order. Among other things, the 
preliminary injunction enjoined the defendants in that case from 
``adopting, employing, treating as binding, or relying upon'' the 
interim estimates of the social cost of greenhouse gases--which were 
issued by the Interagency Working Group on the Social Cost of 
Greenhouse Gases on February 26, 2021--to monetize the benefits of 
reducing greenhouse gas emissions. In the absence of further 
intervening court orders, DOE will revert to its approach prior to the 
injunction and present monetized benefits where appropriate and 
permissible under law.

M. Utility Impact Analysis

    The utility impact analysis estimates several effects on the 
electric power generation industry that would result from the adoption 
of new or amended energy conservation standards. The utility impact 
analysis estimates the changes in installed electrical capacity and 
generation that would result for each TSL. The analysis is based on 
published output from the NEMS associated with AEO 2021. NEMS produces 
the AEO Reference case, as well as a number of side cases that estimate 
the economy-wide impacts of changes to energy supply and demand. For 
the current analysis, impacts are quantified by comparing the levels of 
electricity sector generation, installed capacity, fuel consumption and 
emissions in the AEO 2021 Reference case and various side cases. 
Details of the methodology are provided in the appendices to chapters 
13 and 15 of the NOPR TSD.
    The output of this analysis is a set of time-dependent coefficients 
that capture the change in electricity generation, primary fuel 
consumption, installed capacity and power sector emissions due to a 
unit reduction in demand for a given end use. These coefficients are 
multiplied by the stream of electricity savings calculated in the NIA 
to provide estimates of selected utility impacts of potential new or 
amended energy conservation standards.

N. Employment Impact Analysis

    DOE considers employment impacts in the domestic economy as one 
factor in selecting a proposed standard. Employment impacts from new or 
amended energy conservation standards include both direct and indirect 
impacts. Direct employment impacts are any changes in the number of 
production and non-production employees of manufacturers of the 
products subject to standards.\65\ The

[[Page 20647]]

MIA addresses those impacts. Indirect employment impacts are changes in 
national employment that occur due to the shift in expenditures and 
capital investment caused by the purchase and operation of more-
efficient appliances. Indirect employment impacts from standards 
consist of the net jobs created or eliminated in the national economy, 
other than in the manufacturing sector being regulated, caused by (1) 
reduced spending by consumers on energy, (2) reduced spending on new 
energy supply by the utility industry, (3) increased consumer spending 
on the products to which the new standards apply and other goods and 
services, and (4) the effects of those three factors throughout the 
economy.
---------------------------------------------------------------------------

    \65\ As defined in the U.S. Census Bureau's 2016 Annual Survey 
of Manufactures, production workers include ``Workers (up through 
the line-supervisor level) engaged in fabricating, processing, 
assembling, inspecting, receiving, packing, warehousing, shipping 
(but not delivering), maintenance, repair, janitorial, guard 
services, product development, auxiliary production for plant's own 
use (e.g., power plant), record keeping, and other closely 
associated services (including truck drivers delivering ready-mixed 
concrete)'' Non-production workers are defined as ``Supervision 
above line-supervisor level, sales (including a driver salesperson), 
sales delivery (truck drivers and helpers), advertising, credit, 
collection, installation, and servicing of own products, clerical 
and routine office functions, executive, purchasing, finance, legal, 
personnel (including cafeteria, etc.), professional and technical.''
---------------------------------------------------------------------------

    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the Labor Department's BLS. BLS 
regularly publishes its estimates of the number of jobs per million 
dollars of economic activity in different sectors of the economy, as 
well as the jobs created elsewhere in the economy by this same economic 
activity. Data from BLS indicate that expenditures in the utility 
sector generally create fewer jobs (both directly and indirectly) than 
expenditures in other sectors of the economy.\66\ There are many 
reasons for these differences, including wage differences and the fact 
that the utility sector is more capital-intensive and less labor-
intensive than other sectors. Energy conservation standards have the 
effect of reducing consumer utility bills. Because reduced consumer 
expenditures for energy likely lead to increased expenditures in other 
sectors of the economy, the general effect of efficiency standards is 
to shift economic activity from a less labor-intensive sector (i.e., 
the utility sector) to more labor-intensive sectors (e.g., the retail 
and service sectors). Thus, the BLS data suggest that net national 
employment may increase due to shifts in economic activity resulting 
from energy conservation standards.
---------------------------------------------------------------------------

    \66\ See U.S. Department of Commerce-Bureau of Economic 
Analysis. Regional Multipliers: A User Handbook for the Regional 
Input-Output Modeling System (RIMS II). 1997. U.S. Government 
Printing Office: Washington, DC. Available at www.bea.gov/scb/pdf/regional/perinc/meth/rims2.pdf.
---------------------------------------------------------------------------

    DOE estimated indirect national employment impacts for the standard 
levels considered in this NOPR using an input/output model of the U.S. 
economy called Impact of Sector Energy Technologies version 4 
(``ImSET'').\67\ ImSET is a special-purpose version of the ``U.S. 
Benchmark National Input-Output'' (``I-O'') model, which was designed 
to estimate the national employment and income effects of energy-saving 
technologies. The ImSET software includes a computer-based I-O model 
having structural coefficients that characterize economic flows among 
187 sectors most relevant to industrial, commercial, and residential 
building energy use.
---------------------------------------------------------------------------

    \67\ Livingston, O.V., S.R. Bender, M.J. Scott, and R.W. 
Schultz. ImSET 4.0: Impact of Sector Energy Technologies Model 
Description and User Guide. 2015. Pacific Northwest National 
Laboratory: Richland, WA. PNNL-24563.
---------------------------------------------------------------------------

    DOE notes that ImSET is not a general equilibrium forecasting 
model, and that the uncertainties involved in projecting employment 
impacts, especially changes in the later years of the analysis. Because 
ImSET does not incorporate price changes, the employment effects 
predicted by ImSET may over-estimate actual job impacts over the long 
run for this rule. Therefore, DOE used ImSET only to generate results 
for near-term timeframes, where these uncertainties are reduced. For 
more details on the employment impact analysis, see chapter 16 of the 
NOPR TSD.

V. Analytical Results and Conclusions

    The following section addresses the results from DOE's analyses 
with respect to the considered energy conservation standards for room 
ACs. It addresses the TSLs examined by DOE, the projected impacts of 
each of these levels if adopted as energy conservation standards for 
room ACs, and the standards levels that DOE is proposing to adopt in 
this NOPR. Additional details regarding DOE's analyses are contained in 
the NOPR TSD supporting this document.

A. Trial Standard Levels

    In general, DOE typically evaluates potential amended standards for 
products and equipment by grouping individual efficiency levels for 
each class into TSLs. Use of TSLs allows DOE to identify and consider 
manufacturer cost interactions between the product classes, to the 
extent that there are such interactions, and market cross elasticity 
from consumer purchasing decisions that may change when different 
standard levels are set. DOE analyzed the benefits and burdens of five 
TSLs for room ACs. DOE developed TSLs that combine efficiency levels 
for each analyzed product class. DOE presents the results for the TSLs 
in this document, while the results for all efficiency levels that DOE 
analyzed are in the NOPR TSD.
    Table V.1 presents the TSLs and the corresponding efficiency levels 
that DOE has identified for potential amended energy conservation 
standards for room ACs. TSL 5 represents the max-tech energy efficiency 
for all product classes and corresponds to EL 5. TSL 4 corresponds to 
EL 4 for all product classes, consistent with the implementation of 
commercially available variable-speed compressors based on the current 
availability of variable speed compressors at cooling capacities >= 
8,000 Btu/h. However, as of 2022, there are no models commercially 
available that incorporate variable-speed compressors for cooling 
capacities less than 8,000 Btu/h, and the uncertainties of the 
possibilities of incorporating variable-speed compressors in smaller 
units may have the potential to eliminate room ACs with the smallest 
cooling capacities from the market. TSL 3, therefore, is constructed 
with EL 4 for product classes with cooling capacities >= 8,000 Btu/h, 
corresponding to the inclusion of commercially available variable-speed 
compressors, and EL 3 for cooling capacities < 8,000 Btu/h, 
corresponding to the incorporation of maximum energy efficient single-
speed compressors. TSL 2 corresponds to EL 3 for all product classes 
and represents room ACs with the maximum energy efficient single-speed 
compressor. TSL 1 corresponds to EL 2 for all product classes and 
represents the current ENERGY STAR level.
BILLING CODE 6450-01-P

[[Page 20648]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.026

    DOE constructed the TSLs for this NOPR to include ELs 
representative of ELs with similar characteristics (i.e., using similar 
technologies and/or efficiencies, and having roughly comparable 
equipment availability). The use of representative ELs provided for 
greater distinction between the TSLs. While representative ELs were 
included in the TSLs, DOE considered all efficiency levels as part of 
its analysis but did not include all efficiency levels in the TSLs.\68\ 
DOE did not consider a TSL with EL 1 because DOE's projected efficiency 
distribution indicated a significant portion of the market would meet 
or exceed EL 1 in the no-new-standards case by the compliance year 
leading to smaller national energy savings and lower LCC savings for a 
standard set at EL 1 relative to EL 2. As such, the least efficient 
level considered for TSLs in this NOPR is EL 2.
---------------------------------------------------------------------------

    \68\ Efficiency levels that were analyzed for this NOPR are 
discussed in section IV.C.3 of this document. Results by efficiency 
level are presented in the NOPR TSD chapters 8, 10, and 12.
---------------------------------------------------------------------------

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on room AC consumers by looking 
at the effects that potential amended standards at each TSL would have 
on the LCC and PBP. DOE also examined the impacts of potential 
standards on selected consumer subgroups. These analyses are discussed 
in the following sections.
a. Life-Cycle Cost and Payback Period
    In general, higher-efficiency products affect consumers in two 
ways: (1) Purchase price increases and (2) annual operating costs 
decrease. Inputs used for calculating the LCC and PBP include total 
installed costs (i.e., product price plus installation costs), and 
operating costs (i.e., annual energy use, energy prices, energy price 
trends, repair costs, and maintenance costs). The LCC calculation also 
uses product lifetime and a discount rate. Chapter 8 of the NOPR TSD 
provides detailed information on the LCC and PBP analyses.
    Table V.2 through Table V.25 show the LCC and PBP results for the 
TSLs considered for each product class. In the first of each pair of 
tables, the simple payback is measured relative to the baseline 
product. In the second of each pair of tables, impacts are measured 
relative to the efficiency distribution in the no-new-standards case in 
the compliance year (see section IV.F.8 of this document). Because some 
consumers purchase products with higher efficiency in the no-new-
standards case, the average savings are less than the difference 
between the average LCC of the baseline product and the average LCC at 
each TSL. The savings refer only to consumers who are affected by a 
standard at a given TSL. Those who already purchase a product

[[Page 20649]]

with efficiency at or above a given TSL are not affected. Consumers for 
whom the LCC increases at a given TSL experience a net cost.
[GRAPHIC] [TIFF OMITTED] TP07AP22.027

[GRAPHIC] [TIFF OMITTED] TP07AP22.028

[GRAPHIC] [TIFF OMITTED] TP07AP22.029


[[Page 20650]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.030

[GRAPHIC] [TIFF OMITTED] TP07AP22.031

[GRAPHIC] [TIFF OMITTED] TP07AP22.032


[[Page 20651]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.033

[GRAPHIC] [TIFF OMITTED] TP07AP22.034

[GRAPHIC] [TIFF OMITTED] TP07AP22.035


[[Page 20652]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.036

[GRAPHIC] [TIFF OMITTED] TP07AP22.037

[GRAPHIC] [TIFF OMITTED] TP07AP22.038


[[Page 20653]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.039

[GRAPHIC] [TIFF OMITTED] TP07AP22.040

[GRAPHIC] [TIFF OMITTED] TP07AP22.041


[[Page 20654]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.042

[GRAPHIC] [TIFF OMITTED] TP07AP22.043

[GRAPHIC] [TIFF OMITTED] TP07AP22.044


[[Page 20655]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.045

[GRAPHIC] [TIFF OMITTED] TP07AP22.046

[GRAPHIC] [TIFF OMITTED] TP07AP22.047


[[Page 20656]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.048

[GRAPHIC] [TIFF OMITTED] TP07AP22.049

[GRAPHIC] [TIFF OMITTED] TP07AP22.050

b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered TSLs on low-income households and senior-only households for 
product classes with a sufficient sample size in RECS to perform a 
Monte Carlo analysis. DOE was unable to conduct a consumer subgroup 
analysis for Product Classes 4, 5a, 5b, and 9 for either low-income 
households or senior-only households due to insufficient sample size 
and does not report results for those product classes.\69\ Table V.26 
through Table V.41 compare the average LCC savings, PBP, percent of 
consumers negatively impacted, and percent of consumers positively 
impacted at each efficiency level for the consumer subgroups, along 
with corresponding values for the entire residential consumer sample 
for product classes with a sufficient sample size. In most cases, the 
values for low-income households and senior-only households at the 
considered efficiency levels are not substantially different from the 
average for all households. Chapter 11 of the NOPR TSD presents the 
complete LCC and PBP results for the subgroups.
---------------------------------------------------------------------------

    \69\ Product Classes 4, 5a, 5b, and 9 account for approximately 
9 percent of the total room AC market.

---------------------------------------------------------------------------

[[Page 20657]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.051

[GRAPHIC] [TIFF OMITTED] TP07AP22.052

[GRAPHIC] [TIFF OMITTED] TP07AP22.053


[[Page 20658]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.054

[GRAPHIC] [TIFF OMITTED] TP07AP22.055

[GRAPHIC] [TIFF OMITTED] TP07AP22.056


[[Page 20659]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.057

[GRAPHIC] [TIFF OMITTED] TP07AP22.058

[GRAPHIC] [TIFF OMITTED] TP07AP22.059


[[Page 20660]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.060

[GRAPHIC] [TIFF OMITTED] TP07AP22.061

[GRAPHIC] [TIFF OMITTED] TP07AP22.062


[[Page 20661]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.063

[GRAPHIC] [TIFF OMITTED] TP07AP22.064

[GRAPHIC] [TIFF OMITTED] TP07AP22.065


[[Page 20662]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.066

c. Rebuttable Presumption Payback
    As discussed in section II.A of this document, EPCA establishes a 
rebuttable presumption that an energy conservation standard is 
economically justified if the increased purchase cost for a product 
that meets the standard is less than three times the value of the 
first-year energy savings resulting from the standard. (42 U.S.C. 
6295(o)(2)(B)(iii)) In calculating a rebuttable presumption payback 
period for each of the considered TSLs, DOE used discrete values, and, 
as required by EPCA, based the energy use calculation on the DOE test 
procedure for room ACs. In contrast, the PBPs presented in section 
V.B.1.a of this document were calculated using distributions that 
reflect the range of energy use in the field.
    Table V.42 presents the rebuttable-presumption payback periods for 
the considered TSLs for room ACs. While DOE examined the rebuttable-
presumption criterion, it considered whether the standard levels 
considered for the NOPR are economically justified through a more 
detailed analysis of the economic impacts of those levels, pursuant to 
42 U.S.C. 6295(o)(2)(B)(i), that considers the full range of impacts to 
the consumer, manufacturer, Nation, and environment. The results of 
that analysis serve as the basis for DOE to definitively evaluate the 
economic justification for a potential standard level, thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification.
[GRAPHIC] [TIFF OMITTED] TP07AP22.067


[[Page 20663]]


2. Economic Impacts on Manufacturers
    DOE performed an MIA to estimate the impact of amended energy 
conservation standards on manufacturers of room ACs. The following 
section describes the expected impacts on manufacturers at each 
considered TSL. Chapter 12 of the NOPR TSD explains the analysis in 
further detail.
a. Industry Cash Flow Analysis Results
    In this section, DOE provides GRIM results from the analysis, which 
examines changes in the industry that would result from a standard. The 
following tables summarize the estimated financial impacts of potential 
amended energy conservation standards on manufacturers of room ACs, as 
well as the conversion costs that DOE estimates manufacturers of room 
ACs would incur at each TSL.
    The impact of potential amended energy conservation standards were 
analyzed under two markup scenarios: (1) The preservation of gross 
margin percentage; and (2) the preservation of operating profit, as 
discussed in section IV.J.2.d of this document. The preservation of 
gross margin percentage scenario provides the upper bound while the 
preservation of operating profits scenario results in the lower (or 
more severe) bound to impacts of potential amended standards on 
industry.
    Each of the modeled scenarios results in a unique set of cash flows 
and corresponding INPV for each TSL. INPV is the sum of the discounted 
cash flows to the industry from the base year through the end of the 
analysis period (2021-2055). The ``change in INPV'' results refer to 
the difference in industry value between the no-new-standards case and 
standards case at each TSL. To provide perspective on the short-run 
cash flow impact, DOE includes a comparison of free cash flow between 
the no-new-standards case and the standards case at each TSL in the 
year before amended standards would take effect. This figure provides 
an understanding of the magnitude of the required conversion costs 
relative to the cash flow generated by the industry in the no-new-
standards case.
    Conversion costs are one-time investments for manufacturers to 
bring their manufacturing facilities and product designs into 
compliance with potential amended standards. As described in section 
IV.J.2.c of this document, conversion cost investments occur between 
the year of publication of the final rule and the year by which 
manufacturers must comply with the new standard. The conversion costs 
can have a significant impact on the short-term cash flow on the 
industry and generally result in lower free cash flow in the period 
between the publication of the final rule and the compliance date of 
potential amended standards. Conversion costs are independent of the 
manufacturer markup scenarios and are not presented as a range in this 
analysis.
[GRAPHIC] [TIFF OMITTED] TP07AP22.068

BILLING CODE 6450-01-C
    At TSL 1, the standard is set to existing ENERGY STAR levels (EL 2) 
for all product classes. DOE estimates the change in INPV to be minimal 
under both manufacturer markup scenarios. INPV is expected to range 
from -0.8 percent to -0.5 percent. At this level, free cash flow is 
estimated to decrease by 8.0 percent compared to the no-new-standards 
case value of $72.6 million in the year 2025, the year before the 
standards year. DOE's shipments analysis estimates approximately 75 
percent of current shipments meet this level. At TSL 1, DOE does not 
expect industry to adopt new or larger chassis sizes. Capital 
conversion costs may be necessary for incremental updates in tooling. 
Product conversion costs are driven by specification, sourcing, and 
testing of more efficient compressors. DOE estimates capital conversion 
costs of $10.6 million and product conversion costs of $3.0 million. 
Conversion costs total $13.6 million.
    At TSL 2, the standard reflects an efficiency level attainable by 
units with the most efficient R-32 single-speed compressor on the 
market, in combination with other design options,

[[Page 20664]]

for all product classes (EL 3). DOE estimates the change in INPV to 
range from -2.5 percent to -0.3 percent. At this level, free cash flow 
is estimated to decrease by 17.3 percent compared to the base-case 
value in the year before the standards year. DOE's shipments analysis 
estimates approximately 30 percent of current shipments meet this 
level. At TSL 2, DOE does not expect industry to adopt new or larger 
chassis designs. Capital conversion costs may be necessitated by the 
incorporation of additional design options, such as the inclusion of 
sub-cooling. Product conversion costs are driven by the need to 
redesign models to incorporate more efficient single-speed compressors 
as well as other design options. DOE estimates capital conversion costs 
of $24.3 million and product conversion costs of $4.8 million. 
Conversion costs total $29.1 million.
    At TSL 3, the standard varies based by product class. For product 
classes with cooling capacities less than 8,000 Btu/h, the standard 
reflects an efficiency level attainable by units with the most 
efficient R-32 single-speed compressor on the market (EL 3) in 
combination with other design options. For product classes with cooling 
capacities greater than or equal to 8,000 Btu/h, the standard reflects 
an efficiency level consistent with the implementation commercially 
available variable-speed compressors (EL 4). DOE estimates the change 
in INPV to range from -6.0 percent to 7.8 percent. At this level, free 
cash flow is estimated to decrease by 11.7 percent compared to the 
base-case value in the year before the standards year. DOE's shipments 
analysis estimates approximately 1 percent of current shipments meet 
this level.
    At this level, DOE does not expect industry to adopt new or larger 
chassis designs. For product classes with cooling capacities greater 
than or equal to the 8,000 Btu/h threshold, additional capital 
conversion costs may be necessary to adjust appearance tooling. DOE 
anticipates greater redesign efforts and product conversion costs as 
manufacturers move these products to variable-speed compressor designs. 
DOE estimates capital conversion costs of $6.2 million and product 
conversion costs of $16.6 million. Conversion costs total $22.8 
million.
    In interviews and through review of market data, DOE found that all 
but one OEM currently produce R-32 room AC models. Additionally, based 
on interview feedback, all OEMs intend to entirely transition to R-32 
room ACs by 2023 regardless of DOE actions related to the energy 
conservation standards for room ACs. Thus, DOE did not consider the 
redesign costs related to R-32 as conversion costs that are the result 
of any amended energy conservation standards. However, DOE does take 
costs associated with the transition to low-GWP refrigerants into 
account in its modeling of the GRIM, as discussed in the cumulative 
regulatory burden portion of this notice in section V.B.2.d of this 
document.
    At TSL 4, the standard reflects the efficiency consistent with the 
implementation of commercially available variable-speed compressors for 
all product classes (EL 4). DOE estimates the change in INPV to range 
from -10.4 percent to 15.4 percent. At this level, free cash flow is 
estimated to decrease by 13.5 percent compared to the base-case value 
in the year before the standards year. DOE's shipments analysis 
estimates that less than 1 percent of current shipments meet this 
level. At this level, DOE does not expect industry to adopt new or 
larger chassis designs. Capital conversion costs may be necessary for 
adjustments in appearance tooling. Compared to lower ELs, DOE 
anticipates significantly greater redesign efforts and product 
conversion costs as manufacturers move all products to variable-speed 
compressor designs. Based on DOE's CCD, DOE estimates that OEMs would 
need to redesign all product platforms to meet the efficiency levels 
required by TSL 4. DOE estimates capital conversion costs of $6.0 
million and product conversion costs of $20.7 million. Conversion costs 
total $26.7 million.
    At TSL 5, the standard reflects max-tech efficiency (EL 5) for all 
product classes. DOE estimates the change in INPV to range from -43.5 
percent to -8.2 percent. At this level, free cash flow is estimated to 
decrease by 291.7 percent compared to the base-case value in the year 
before the standards year. In DOE's review of the market, no models 
currently meet this level. DOE estimates capital conversion costs of 
$455.0 million and product conversion costs of $20.8 million. 
Conversion costs total $475.9 million.\70\
---------------------------------------------------------------------------

    \70\ Capital conversion costs and product conversion costs may 
not sum to total due to independent rounding.
---------------------------------------------------------------------------

    At this level, DOE expects significant changes to chassis size for 
both window and TTW units. As a result, capital conversion costs 
increase significantly as manufacturers adjust equipment and tooling to 
accommodate new dimensions. As with EL 4, DOE anticipates significant 
redesign efforts and product conversion costs as manufacturers move all 
products to variable-speed compressor designs. OEMs would need to 
redesign all product platforms to meet the efficiency levels required 
by TSL 5.
    At TSL 5, the large conversion costs result in a free cash flow 
dropping below zero in the years before the standard year. The negative 
free cash flow calculation indicates manufacturers may need to access 
cash reserves or outside capital to finance conversion efforts.
b. Direct Impacts on Employment
    DOE's research indicates no room ACs are currently made in domestic 
production facilities. DOE expects that amended standards would have no 
impact on domestic production employment, which would remain at zero. 
Manufacturers maintain offices in the United States to handle design, 
marketing, technical support, and other business needs. Large changes 
in total annual shipments may lead to companies reducing their non-
production room AC staff. However, DOE's shipments model does not 
forecast substantial changes in total annual shipments for the 
standards case. If total shipments remain relatively steady DOE would 
not expect any change to non-production employment as a result of 
amended standards. See section IV.G of this document for additional 
details on DOE's shipments analysis.
c. Impacts on Manufacturing Capacity
    In interviews, manufacturers noted that the majority of room ACs 
are manufactured overseas by high-volume manufacturers producing 
product for a range of international markets. Manufacturers had few 
concerns about production line constraints below the max-tech level. 
However, at the max-tech level, some manufacturers noted concerns about 
having sufficient technical resources to oversee the redesign and 
testing of all room AC products to incorporate variable-speed 
technology.
    Additionally, DOE notes that the most efficient variable-speed 
compressors that were implemented in the NOPR analysis are offered by 
only a single manufacturer. Based on public information, DOE was unable 
to determine the availability and pricing of these compressors. Given 
the lack of information regarding availability of these highest 
efficiency variable-speed compressors and the limited number of 
variable-speed compressors rated at or near the efficiency of 
compressors considered for the max-tech efficiency level, there may not 
be sufficient availability of the highest efficiency variable-speed 
compressors to meet the

[[Page 20665]]

entire industry's production capacity needs at all cooling capacities 
of room ACs at EL 5.
d. Impacts on Subgroups of Manufacturers
    Using average cost assumptions to develop industry cash-flow 
estimates may not capture the differential impacts among subgroups of 
manufacturers. Small manufacturers, niche players, or manufacturers 
exhibiting a cost structure that differs substantially from the 
industry average could be affected disproportionately. DOE investigated 
small businesses as a manufacturer subgroup that could be 
disproportionally impacted by energy conservation standards and could 
merit additional analysis. DOE did not identify any other adversely 
impacted manufacturer subgroups for this proposed rulemaking based on 
the results of the industry characterization.
    DOE analyzes the impacts on small businesses in a separate analysis 
in section VII.B of this document as part of the Regulatory Flexibility 
Analysis. For a discussion of the impacts on the small business 
manufacturer subgroup, see the Regulatory Flexibility Analysis in 
section VI.B of this document and chapter 12 of the NOPR TSD.
e. Cumulative Regulatory Burden
    One aspect of assessing manufacturer burden involves looking at the 
cumulative impact of multiple DOE standards and the product-specific 
regulatory actions of other Federal agencies that affect the 
manufacturers of a covered product or equipment. While any one 
regulation may not impose a significant burden on manufacturers, the 
combined effects of several existing or impending regulations may have 
serious consequences for some manufacturers, groups of manufacturers, 
or an entire industry. Assessing the impact of a single regulation may 
overlook this cumulative regulatory burden. In addition to energy 
conservation standards, other regulations can significantly affect 
manufacturers' financial operations. Multiple regulations affecting the 
same manufacturer can strain profits and lead companies to abandon 
product lines or markets with lower expected future returns than 
competing products. For these reasons, DOE conducts an analysis of 
cumulative regulatory burden as part of its rulemakings pertaining to 
appliance efficiency. DOE requests information regarding the impact of 
cumulative regulatory burden on manufacturers of room ACs associated 
with multiple DOE standards or product-specific regulatory actions of 
other Federal agencies.
    DOE evaluates product-specific regulations that will take effect 
approximately 3 years before or after the 2026 compliance date of any 
amended energy conservation standards for room ACs. This information is 
presented in Table V.44.
BILLING CODE 6450-01-P

[[Page 20666]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.069

BILLING CODE 6450-01-C
    In addition to the Federal, product-specific cumulative regulatory 
burden described above, DOE considered the impacts of other factors in 
its review of burdens that could lead to industry constraints.
    CARB's proposed 750 GWP limit for new room air conditioning 
equipment:

[[Page 20667]]

    DOE evaluated potential impacts of CARB's proposed 750 GWP limit 
for new room ACs that would take effect in 2023.\71\ This proposed 
State regulation is specific to the products regulated by this NOPR. 
Based on manufacturer interviews, DOE understands that all OEMs and 
major manufacturers intend to transition their complete portfolio of 
room AC offerings for the U.S. market to R-32 refrigerant to meet 
CARB's proposed requirement by 2023. DOE's research and testing 
indicates that the transition to R-32 would likely not have a negative 
impact on product efficiency.
---------------------------------------------------------------------------

    \71\ ww3.arb.ca.gov/board/res/2020/res20-37.pdf.
---------------------------------------------------------------------------

    DOE is aware of one OEM still in the process of redesigning room 
ACs to make use of R-32, including compliance with the relevant safety 
standard UL 60335-2-40.\72\ The on-going effort to transition its room 
AC product lines to make use of R-32 requires a level of investment 
beyond the typical annual R&D expenditures. To account for these 
investments, both the product development to make use of R-32 and 
product updates to meet UL 60335-2-40, DOE has attempted to incorporate 
the on-going cost into its GRIM. DOE did not receive any quantitative 
estimates of the cost of the transition to R-32. For modeling purposes, 
DOE assumed that the transition to R-32 would require a doubling of R&D 
expenditures (2.2 percent of revenue) annually in the period between 
the base year and the compliance of the analysis for that business. 
This value is based on qualitative statements made by the OEM.
---------------------------------------------------------------------------

    \72\ UL 60335-2-40 includes safety requirements for the use of 
flammable refrigerants in the covered product. Standard for 
Household and Similar Electrical Appliances--Safety--Part 2-40: 
Requirements for Electrical Heat Pumps, Air-Conditioners and 
Dehumidifiers. UL 60335-2-40, Edition 3:2019. Northbrook, IL: 
Underwriters' Laboratories.
---------------------------------------------------------------------------

    DOE requests comment on the magnitude of costs associated with 
transitioning room AC models to low-GWP refrigerants, such as R-32, 
along with the associated UL costs that would be incurred between the 
publication of this NOPR and the proposed compliance date of amended 
standards. Quantification and categorization of these costs, such as 
engineering efforts, testing lab time, UL certification costs, and 
capital investments, would enable DOE to refine its analysis.
    Section 301 tariffs on certain Chinese goods:
    Regarding U.S. tariffs on Chinese imports, tariff levels have 
escalated in recent years. At the time of the April 2011 Direct Final 
Rule, most room ACs imported into the United States were manufactured 
in China. Since that time, as discussed above, the Section 301 tariffs 
on room ACs increased to 10 percent in September 2018 and to 25 percent 
in May 2019. As result of tariffs, as noted by AHAM, ``some 
manufacturers have had to shift production to other countries to avoid 
the tariffs.'' (AHAM, No. 19 at pp. 18-19) DOE understands that these 
products are now made in countries in East Asia and Southeast Asia not 
subject to Section 301 tariffs. However, due to uncertainty about the 
exact countries of origin, DOE's engineering analysis continues to rely 
on data based on a Chinese point of origin. To revise MPCs to account 
for points of origin outside of China, DOE would require information on 
the countries of manufacture and 5-year averages for key inputs used to 
develop manufacturer production costs, such as fully-burdened 
production labor wage rates and local raw material prices.
    To better model the impact of Section 301 tariffs on room ACs that 
continue to be manufactured in China, DOE requires additional 
information about the portion of products still manufactured there and 
how the tariffs are absorbed by the entities along the room AC value 
chain, such as the foreign OEMs, U.S. importers, retailers, and 
consumers. Increases in retail price may affect consumer purchasing 
decisions, as captured by the price sensitivity modeled in the 
shipments analysis.
    DOE requests comment on the percentage of room ACs manufactured 
outside of China and the countries of origin, as well as information on 
the country-specific fully-burdened labor rates and key raw material 
prices.
    DOE requests comment on the impact of tariffs on pricing at each 
step in the distribution chain, as well as the percentage change in 
retail price paid by the consumer as result of Section 301 tariffs.
3. National Impact Analysis
    This section presents DOE's estimates of the national energy 
savings and the NPV of consumer benefits that would result from each of 
the TSLs considered as potential amended standards.
a. Significance of Energy Savings
    To estimate the energy savings attributable to potential amended 
standards for room ACs, DOE compared their energy consumption under the 
no-new-standards case to their anticipated energy consumption under 
each TSL. The savings are measured over the entire lifetime of products 
purchased in the 30-year period that begins in the year of anticipated 
compliance with amended standards (2026-2055). Table V.45 presents 
DOE's projections of the national energy savings for each TSL 
considered for room ACs. The savings were calculated using the approach 
described in section IV.H.2 of this document.
[GRAPHIC] [TIFF OMITTED] TP07AP22.070

    OMB Circular A-4 \73\ requires agencies to present analytical 
results, including separate schedules of the monetized benefits and 
costs that show the type and timing of benefits and costs. Circular A-4 
also directs agencies to consider the variability of key elements 
underlying the estimates of benefits and costs. For this proposed 
rulemaking, DOE undertook a sensitivity analysis using 9 years, rather 
than 30 years, of product shipments.

[[Page 20668]]

The choice of a 9-year period is a proxy for the timeline in EPCA for 
the review of certain energy conservation standards and potential 
revision of and compliance with such revised standards.\74\ The review 
timeframe established in EPCA is generally not synchronized with the 
product lifetime, product manufacturing cycles, or other factors 
specific to room ACs. Thus, such results are presented for 
informational purposes only and are not indicative of any change in 
DOE's analytical methodology. The NES sensitivity analysis results 
based on a 9-year analytical period are presented in Table V.46. The 
impacts are counted over the lifetime of room ACs purchased in 2026-
2034.
---------------------------------------------------------------------------

    \73\ U.S. Office of Management and Budget. Circular A-4: 
Regulatory Analysis. September 17, 2003. https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/.
    \74\ Section 325(m) of EPCA requires DOE to review its standards 
at least once every 6 years, and requires, for certain products, a 
3-year period after any new standard is promulgated before 
compliance is required, except that in no case may any new standards 
be required within 6 years of the compliance date of the previous 
standards. While adding a 6-year review to the 3-year compliance 
period adds up to 9 years, DOE notes that it may undertake reviews 
at any time within the 6 year period and that the 3-year compliance 
date may yield to the 6-year backstop. A 9-year analysis period may 
not be appropriate given the variability that occurs in the timing 
of standards reviews and the fact that for some products, the 
compliance period is 5 years rather than 3 years.
[GRAPHIC] [TIFF OMITTED] TP07AP22.071

b. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the TSLs considered for room ACs. In 
accordance with OMB's guidelines on regulatory analysis,\75\ DOE 
calculated NPV using both a 7-percent and a 3-percent real discount 
rate. Table V.47 shows the consumer NPV results with impacts counted 
over the lifetime of products purchased in 2026-2055.
---------------------------------------------------------------------------

    \75\ U.S. Office of Management and Budget. Circular A-4: 
Regulatory Analysis. September 17, 2003. https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/.
[GRAPHIC] [TIFF OMITTED] TP07AP22.072

    The NPV results based on the aforementioned 9-year analytical 
period are presented in Table V.48. The impacts are counted over the 
lifetime of products purchased in 2026-2034. As mentioned previously, 
such results are presented for informational purposes only and are not 
indicative of any change in DOE's analytical methodology or decision 
criteria.
[GRAPHIC] [TIFF OMITTED] TP07AP22.073

    The previous results reflect the use of a default trend to estimate 
the change in price for room ACs over the analysis period (see section 
IV.F.6 of this document). DOE also conducted a sensitivity analysis 
that considered one scenario with a low price decline and one scenario 
with a higher rate of price decline than the reference case. The 
results of these alternative cases are presented in appendix 10C of the 
NOPR TSD. In the high-price-decline case, the NPV of consumer benefits 
is higher than in the default case. In the fixed price case, the NPV of 
consumer benefits is lower than in the default case.
c. Indirect Impacts on Employment
    It is estimated that amended energy conservation standards for room 
ACs would reduce energy expenditures for consumers of those products, 
with the resulting net savings being redirected to other forms of 
economic activity. These

[[Page 20669]]

expected shifts in spending and economic activity could affect the 
demand for labor. As described in section IV.N of this document, DOE 
used an input/output model of the U.S. economy to estimate indirect 
employment impacts of the TSLs that DOE considered. There are 
uncertainties involved in projecting employment impacts, especially 
changes in the later years of the analysis. Therefore, DOE generated 
results for near-term timeframes (2026-2035), where these uncertainties 
are reduced.
    The results suggest that the proposed standards would be likely to 
have a negligible impact on the net demand for labor in the economy. 
The net change in jobs is so small that it would be imperceptible in 
national labor statistics and might be offset by other, unanticipated 
effects on employment. Chapter 16 of the NOPR TSD presents detailed 
results regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
    As discussed in section III.E.1.d of this document, DOE has 
tentatively concluded that the standards proposed in this NOPR would 
not lessen the utility or performance of the room ACs under 
consideration in this proposed rulemaking.
5. Impact of Any Lessening of Competition
    DOE considered any lessening of competition that would be likely to 
result from new or amended standards. As discussed in section III.E.1.e 
of this document, the Attorney General determines the impact, if any, 
of any lessening of competition likely to result from a proposed 
standard, and transmits such determination in writing to the Secretary, 
together with an analysis of the nature and extent of such impact. To 
assist the Attorney General in making this determination, DOE has 
provided DOJ with copies of this NOPR and the accompanying TSD for 
review. DOE will consider DOJ's comments on the proposed rule in 
determining whether to proceed to a final rule. DOE will publish and 
respond to DOJ's comments in that document. DOE invites comment from 
the public regarding the competitive impacts that are likely to result 
from this proposed rule. In addition, stakeholders may also provide 
comments separately to DOJ regarding these potential impacts. See the 
ADDRESSES section for information to send comments to DOJ.
6. Need of the Nation To Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts (costs) of energy production. Reduced electricity 
demand due to energy conservation standards is also likely to reduce 
the cost of maintaining the reliability of the electricity system, 
particularly during peak-load periods. Chapter 15 of the NOPR TSD 
presents the estimated impacts on electricity generating capacity, 
relative to the no-new-standards case, for the TSLs that DOE considered 
in this proposed rulemaking.
    Energy conservation resulting from potential energy conservation 
standards for room ACs is expected to yield environmental benefits in 
the form of reduced emissions of certain air pollutants and greenhouse 
gases. Table V.49 provides DOE's estimate of cumulative emissions 
reductions expected to result from the TSLs considered in this 
rulemaking. The emissions were calculated using the multipliers 
discussed in section IV.K of this document. DOE reports annual 
emissions reductions for each TSL in chapter 13 of the NOPR TSD.
BILLING CODE 6450-01-P
[GRAPHIC] [TIFF OMITTED] TP07AP22.074


[[Page 20670]]


    As part of the analysis for this rulemaking, DOE estimated monetary 
benefits likely to result from the reduced emissions of CO2 
that DOE estimated for each of the considered TSLs for room ACs. 
Section IV.L of this document discusses the SC-CO2 values 
that DOE used. Table V.50 presents the value of CO2 
emissions reduction at each TSL.
[GRAPHIC] [TIFF OMITTED] TP07AP22.075

    As discussed in section IV.L.1.b of this document, DOE estimated 
monetary benefits likely to result from the reduced emissions of 
CH4 and N2O that DOE estimated for each of the 
considered TSLs for room ACs. Table V.51 presents the value of the 
CH4 emissions reduction at each TSL, and Table V.52 presents 
the value of the N2O emissions reduction at each TSL.
[GRAPHIC] [TIFF OMITTED] TP07AP22.076

[GRAPHIC] [TIFF OMITTED] TP07AP22.077

    DOE is well aware that scientific and economic knowledge about the 
contribution of CO2 and other GHG emissions to changes in 
the future global climate and the potential resulting damages to the 
world economy continues to evolve rapidly. Thus, any value placed on 
reduced GHG emissions in this proposed rulemaking is subject to change. 
That said, because of omitted damages, DOE agrees with the IWG that 
these estimates most likely underestimate the climate benefits of 
greenhouse gas reductions. DOE, together with other Federal agencies,

[[Page 20671]]

will continue to review methodologies for estimating the monetary value 
of reductions in CO2 and other GHG emissions. This ongoing 
review will consider the comments on this subject that are part of the 
public record for this and other rulemakings, as well as other 
methodological assumptions and issues. DOE notes that the proposed 
standards would be economically justified even without inclusion of 
monetized benefits of reduced GHG emissions.
    DOE also estimated the monetary value of the economic benefits 
associated with SO2 emissions reductions anticipated to 
result from the considered TSLs for room ACs. The dollar-per-ton values 
that DOE used are discussed in section IV.L.2 of this document. Table 
V.53 presents the present value for SO2 for each TSL 
calculated using 7-percent and 3-percent discount rates.
[GRAPHIC] [TIFF OMITTED] TP07AP22.078

    DOE also estimated the monetary value of the economic benefits 
associated with NOX emissions reductions anticipated to 
result from the considered TSLs for room ACs. The dollar-per-ton values 
that DOE used are discussed in section IV.L.2 of this document. Table 
V.54 presents the present value for NOX emissions reduction 
for each TSL calculated using 7-percent and 3-percent discount rates.
[GRAPHIC] [TIFF OMITTED] TP07AP22.079

    The benefits of reduced CO2, CH4, and 
N2O emissions are collectively referred to as climate 
benefits. The benefits of reduced SO2 and NOX 
emissions are collectively referred to as health benefits. For the time 
series of estimated monetary values of reduced emissions, see chapter 
14 of the NOPR TSD.
7. Other Factors
    The Secretary of Energy, in determining whether a standard is 
economically justified, may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No 
other factors were considered in this analysis.
8. Summary of National Economic Impacts
    Table V.55 presents the NPV values that result from adding the 
monetized estimates of the potential economic, climate, and health 
benefits resulting from reduced GHG, SO2, and NOX 
emissions to the NPV of consumer benefits calculated for each TSL 
considered in this rulemaking. The consumer benefits are domestic U.S. 
monetary savings that occur as a result of purchasing the covered room 
ACs, and are measured for the lifetime of products shipped in 2026-
2055. The climate benefits associated with reduced GHG emissions 
resulting from the adopted standards are global benefits, and are also 
calculated based on the lifetime of room ACs shipped in 2026-2055. The 
climate benefits associated with four SC-GHG estimates are shown. DOE 
does not have a single central SC-GHG point estimate and it emphasizes 
the importance and value of considering the benefits calculated using 
all four SC-GHG estimates.
BILLING CODE 6450-01-C

[[Page 20672]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.080

    The national operating cost savings are domestic U.S. monetary 
savings that occur as a result of purchasing the covered room ACs, and 
are measured for the lifetime of products shipped in 2026-2055. The 
benefits associated with reduced GHG emissions achieved as a result of 
the adopted standards are also calculated based on the lifetime of room 
ACs shipped in 2026-2055.

C. Conclusion

    When considering new or amended energy conservation standards, the 
standards that DOE adopts for any type (or class) of covered product 
must be designed to achieve the maximum improvement in energy 
efficiency that the Secretary determines is technologically feasible 
and economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining 
whether a standard is economically justified, the Secretary must 
determine whether the benefits of the standard exceed its burdens by, 
to the greatest extent practicable, considering the seven statutory 
factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or 
amended standard must also result in significant conservation of 
energy. (42 U.S.C. 6295(o)(3)(B))
    For this NOPR, DOE considered the impacts of amended standards for 
room ACs at each TSL, beginning with the maximum technologically 
feasible level, to determine whether that level was economically 
justified. Where the max-tech level was not justified, DOE then 
considered the next most efficient level and undertook the same 
evaluation until it reached the highest efficiency level that is both 
technologically feasible and economically justified and saves a 
significant amount of energy. DOE refers to this process as the ``walk-
down'' analysis.
    To aid the reader as DOE discusses the benefits and/or burdens of 
each TSL, tables in this section present a summary of the results of 
DOE's quantitative analysis for each TSL. In addition to the 
quantitative results presented in the tables, DOE also considers other 
burdens and benefits that affect economic justification. These include 
the impacts on identifiable subgroups of consumers who may be 
disproportionately affected by a national standard and impacts on 
employment.
    DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy 
savings in the absence of government intervention. Much of this 
literature attempts to explain why consumers appear to undervalue 
energy efficiency improvements. There is evidence that consumers 
undervalue future energy savings as a result of (1) a lack of 
information, (2) a lack of sufficient salience of the long-term or 
aggregate benefits, (3) a lack of sufficient savings to warrant 
delaying or altering purchases, (4) excessive focus on the short term, 
in the form of inconsistent weighting of future energy cost savings 
relative to available returns on other investments, (5) computational 
or other difficulties associated with the evaluation of relevant 
tradeoffs, and (6) a divergence in incentives (for example, between 
renters and owners, or builders and purchasers). Having less than 
perfect foresight and a high degree of uncertainty about the future, 
consumers may trade off these types of investments at a higher than 
expected rate between current consumption and uncertain future energy 
cost savings.
    In DOE's current regulatory analysis, potential changes in the 
benefits and costs of a regulation due to changes in consumer purchase 
decisions are included in two ways. First, if consumers forego the 
purchase of a product in the standards case, this decreases sales for 
product manufacturers, and the impact on manufacturers attributed to 
lost revenue is included in the MIA. Second, DOE accounts for energy 
savings attributable only to products actually used by consumers in the 
standards case; if a standard decreases the number of products 
purchased by consumers, this decreases the potential energy savings 
from an energy conservation standard. DOE provides estimates of 
shipments and changes in the volume of product purchases in chapter 9 
of the NOPR TSD. However, DOE's current analysis does not explicitly 
control for heterogeneity in consumer preferences, preferences across 
subcategories of products or specific features, or consumer price 
sensitivity variation according to household income.\76\
---------------------------------------------------------------------------

    \76\ P.C. Reiss and M.W. White. Household Electricity Demand, 
Revisited. Review of Economic Studies. 2005. 72(3): pp. 853-883. 
doi: 10.1111/0034-6527.00354.
---------------------------------------------------------------------------

    While DOE is not prepared at present to provide a fuller 
quantifiable framework for estimating the benefits and costs of changes 
in consumer purchase decisions due to an energy conservation standard, 
DOE is committed to developing a framework that can support empirical 
quantitative tools for improved assessment of the consumer welfare 
impacts of appliance standards. DOE has posted a paper that discusses 
the issue of consumer welfare impacts of appliance energy conservation 
standards, and potential enhancements to the methodology by which these 
impacts are defined and estimated in the regulatory process.\77\ DOE 
welcomes comments on how to more fully assess the potential impact of 
energy conservation standards on consumer choice and how to quantify 
this impact in its regulatory analysis in future rulemakings.
---------------------------------------------------------------------------

    \77\ Sanstad, A.H. Notes on the Economics of Household Energy 
Consumption and Technology Choice. 2010. Lawrence Berkeley National 
Laboratory. www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf (last accessed June 16, 2021).

---------------------------------------------------------------------------

[[Page 20673]]

1. Benefits and Burdens of TSLs Considered for Room AC Standards
    Table V.56 and Table V.57 summarize the quantitative impacts 
estimated for each TSL for room ACs. The national impacts are measured 
over the lifetime of room ACs purchased in the 30-year period that 
begins in the anticipated year of compliance with amended standards 
(2026-2055). The energy savings, emissions reductions, and value of 
emissions reductions refer to full-fuel-cycle results. DOE exercises 
its own judgment in presenting monetized climate benefits as 
recommended in applicable Executive Orders and DOE would reach the same 
conclusion presented in this notice in the absence of the social cost 
of greenhouse gases, including the February 2021 Interim Estimates 
presented by the Interagency Working Group on the Social Cost of 
Greenhouse Gases. The efficiency levels contained in each TSL are 
described in section V.A of this document.
BILLING CODE 6450-01-P

[[Page 20674]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.081


[[Page 20675]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.082


[[Page 20676]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.083


[[Page 20677]]


[GRAPHIC] [TIFF OMITTED] TP07AP22.084

BILLING CODE 6450-01-C
    DOE first considered TSL 5, which represents the max-tech 
efficiency levels. TSL 5 would save an estimated 3.44 quads of energy, 
an amount DOE considers significant. Under TSL 5, the NPV of consumer 
benefit would be $9.64 billion using a discount rate of 7 percent, and 
$22.59 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 5 are 120.7 Mt of 
CO2, 46.5 thousand tons of SO2, 169.5 thousand 
tons of NOX, 0.3 tons of Hg, 831.3 thousand tons of 
CH4, and 1.2 thousand tons of N2O. The estimated 
monetary value of the GHG emissions reduction (associated with the 
average SC-GHG at a 3-percent discount rate) at TSL 5 is $5.75 billion. 
The estimated monetary value of the health benefits from reduced 
SO2 and NOX emissions at TSL 5 is $4.19 billion 
using a 7-percent discount rate and $9.88 billion using a 3-percent 
discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
health benefits from reduced SO2 and NOX 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated combined monetized NPV at TSL 
5 is $19.58 billion. Using a 3-percent discount rate for all consumer 
and emissions benefits and costs, the estimated combined monetized NPV 
at TSL 5 is $38.22 billion. The estimated total monetized NPV is 
provided for additional information; however, DOE primarily relies upon 
the consumer NPV when determining whether a standard level is 
economically justified.
    At TSL 5, the shipment-weighted average LCC savings is $133.84. The 
simple payback period is 3.4 years. The fraction of consumers 
experiencing a net LCC cost is 33 percent.
    At TSL 5, the projected change in manufacturer INPV ranges from a 
decrease of $470.1 million to a decrease of $88.4 million, which 
corresponds to decreases of 43.5 percent and 8.2 percent, respectively. 
At this level, free cash flow is estimated to decrease by 291.7 percent 
compared to the base-case value in the year before the standards year. 
Conversion costs total $475.9 million.
    As discussed in sections IV.C.1-2 of this document, DOE believes 
there is uncertainty regarding the estimated compressor cost and 
availability of the highest efficiency variable-speed compressors 
across the full range of capacities at TSL 5, particularly in the 
smaller capacity room ACs. These uncertainties stem from the fact that 
the efficiency level for TSL 5 is obtained by using the highest 
efficiency variable-speed compressors that are currently available to 
be incorporated into room ACs at the time the analysis was competed. In 
addition, variable speed compressors representing these efficiencies 
are manufactured by just one manufacturer. It is unclear whether the 
highest efficiency variable-speed compressors will be available to all 
manufacturers of room ACs since there is only a single supplier at this 
time. In addition, these highest efficiency variable-speed compressors 
are not currently available in the full range of capacities, which 
could limit the current product offerings by manufacturers. 
Furthermore, due to the single supplier for these highest efficiency 
variable-speed compressors and their unknown manufacturing volume and 
potential bottlenecks for ramp-up manufacturing capabilities, there is 
a likelihood that there may not be sufficient supply to meet the demand 
of the market for the full range of cooling capacities for room ACs, 
should TSL 5 be selected. This may have the potential to eliminate room 
ACs of certain cooling capacities from the market as well impact the 
overall number of room ACs available on the market should TSL 5 be 
selected.
    The Secretary tentatively concludes that at TSL 5 for room ACs, the 
benefits of energy savings, positive NPV of consumer benefits, emission 
reductions, and the estimated monetary value of the climate and health 
benefits would be outweighed by the impacts on manufacturers, including 
the conversion costs and profit margin impacts that could result in a 
large reduction in INPV, and the potential for product unavailability 
due to limitations in key components such as the highest efficiency 
variable-speed compressors necessary to reach the max-tech efficiency 
levels. Consequently, the Secretary has tentatively concluded that TSL 
5 is not economically justified.
    Then DOE considered TSL 4. TSL 4 would save an estimated 1.86 quads 
of energy, an amount DOE considers significant. Under TSL 4, the NPV of 
consumer benefit would be $5.21 billion using a discount rate of 7 
percent, and $12.21 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 4 are 65.6 Mt of 
CO2, 25.2 thousand tons of SO2, 91.9 thousand 
tons of NOX, 0.1 tons of Hg, 449.7 thousand tons of 
CH4, and 0.6 thousand tons of N2O. The estimated 
monetary value of the GHG emissions reduction (associated with the 
average SC-GHG at a 3-percent discount rate) at TSL 4 is $3.15 billion. 
The estimated monetary value of the health benefits from reduced 
SO2 and NOX emissions at TSL 4 is $2.36 billion 
using a 7-percent discount rate and $5.44 billion using a 3-percent 
discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
health benefits from reduced SO2 and NOX

[[Page 20678]]

emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated combined monetized NPV at TSL 
4 is $10.73 billion. Using a 3-percent discount rate for all consumer 
and emissions benefits and costs, the estimated combined monetized NPV 
at TSL 4 is $20.81 billion. The estimated total monetized NPV is 
provided for additional information; however, DOE primarily relies upon 
the consumer NPV when determining whether a standard level is 
economically justified.
    At TSL 4, the shipment-weighted average LCC impact is a savings of 
$76.04. The shipment-weighted simple payback period is 3.6 years. The 
fraction of consumers experiencing a net LCC cost is 36 percent.
    At TSL 4, the projected change in manufacturer INPV ranges from a 
decrease of $112.9 million to an increase of $166.5 million, which 
corresponds to a decrease of 10.4 percent and an increase of 15.4 
percent, respectively. At this level, free cash flow is estimated to 
decrease by 13.5 percent compared to the base-case value in the year 
before the standards year. Conversion costs total $26.7 million.
    TSL 4 represents commercially available room ACs that implement 
variable-speed compressors, based on models with cooling capacities 
greater than 8,000 Btu/h. However, for room ACs with the smallest 
cooling capacities (i.e., less than 8,000 Btu/h), uncertainties exist 
regarding both the availability of variable-speed compressors that can 
be integrated into these smaller-size units and the feasibility of 
incorporating these variable-speed compressors with related components 
into a more space-constrained chassis than for larger-capacity room 
ACs. There are no models commercially available that incorporate 
variable-speed compressors for cooling capacities less than 8,000 Btu/
h, and the uncertainties may have the potential to eliminate room ACs 
with the smallest cooling capacities from the market, should TSL 4 be 
selected. While there are similarly no room ACs currently on the market 
with variable-speed compressors at cooling capacities greater than 
22,000 Btu/h, other air conditioning products with such cooling 
capacities (e.g., mini-split air conditioners) do exist in the U.S. 
market, thereby not giving rise to the same uncertainties as for the 
smallest cooling capacities.
    The Secretary tentatively concludes that at TSL 4 for room ACs, the 
benefits of energy savings, positive NPV of consumer benefits, emission 
reductions, and the estimated monetary value of the climate and health 
benefits would be outweighed by the impacts on manufacturers, including 
the conversion costs and profit margin impacts that could result in a 
reduction in INPV and potential unavailability of key components for 
small-capacity product classes. Consequently, the Secretary has 
tentatively concluded that TSL 4 is not economically justified.
    DOE then considered TSL 3, which would save an estimated 1.40 quads 
of energy, an amount DOE considers significant. Under TSL 3, the NPV of 
consumer benefit would be $4.83 billion using a discount rate of 7 
percent, and $10.56 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 3 are 49.5 Mt of 
CO2, 19.1 thousand tons of SO2, 69.4 thousand 
tons of NOX, 0.1 tons of Hg, 339.3 thousand tons of 
CH4, and 0.5 thousand tons of N2O. The estimated 
monetary value of the climate benefits from reduced GHG emissions 
(associated with the average SC-GHG at a 3-percent discount rate) at 
TSL 3 is $2.39 billion. The estimated monetary value of the health 
benefits from reduced SO2 and NOX emissions at 
TSL 3 is $1.82 billion using a 7-percent discount rate and $4.14 
billion using a 3-percent discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
SO2 reduction benefits, and NOX reduction 
benefits, and the 3-percent discount rate for GHG social costs, the 
estimated combined monetized NPV at TSL 3 is $9.05 billion. Using a 3-
percent discount rate for all consumer and emissions benefits and 
costs, the estimated combined monetized NPV at TSL 3 is $17.10 billion. 
The estimated total monetized NPV is provided for additional 
information; however, DOE primarily relies upon the consumer NPV when 
determining whether a standard level is economically justified.
    At TSL 3, the shipment-weighted average LCC impact is a savings of 
$85.64. The shipment-weighted simple payback period is 1.7 years. The 
fraction of consumers experiencing a net LCC cost is 16 percent.
    At TSL 3, the projected change in manufacturer INPV ranges from a 
decrease of $64.5 million to an increase of $84.1 million, which 
corresponds to a decrease of 6.0 percent and an increase of 7.8 
percent, respectively. At this level, free cash flow is estimated to 
decrease by 11.7 percent compared to the base-case value in the year 
before the standards year. Conversion costs total $22.8 million.
    After considering the analysis and weighing the benefits and 
burdens, the Secretary has tentatively concluded that a standard set at 
TSL 3 for room ACs would be economically justified. At this TSL, the 
average LCC savings for room AC consumers is positive. An estimated 16 
percent of room AC consumers would experience a net cost. The FFC 
national energy savings are significant and the NPV of consumer 
benefits is positive using both a 3-percent and 7-percent discount 
rate. Notably, the benefits to consumers vastly outweigh the cost to 
manufacturers. At TSL 3, the NPV of consumer benefits, even measured at 
the more conservative discount rate of 7 percent, is over 75 times 
higher than the maximum estimated manufacturers' loss in INPV. The 
positive LCC savings--a different way of quantifying consumer 
benefits--reinforces this conclusion. The standard levels at TSL 3 are 
economically justified even without weighing the estimated monetary 
value of emissions reductions. When those monetized climate benefits 
from GHG emissions reductions and health benefits from SO2 
and NOX emissions reductions are included--representing 
$2.39 billion in climate benefits (associated with the average SC-GHG 
at a 3-percent discount rate), and $4.14 billion (using a 3-percent 
discount rate) or $1.82 billion (using a 7-percent discount rate) in 
health benefits--the rationale becomes stronger still.
    As stated, DOE conducts a ``walk-down'' analysis to determine the 
TSL that represents the maximum improvement in energy efficiency that 
is technologically feasible and economically justified as required 
under EPCA. The walk-down is not a comparative analysis, as a 
comparative analysis would result in the maximization of net benefits 
instead of energy savings that are technologically feasible and 
economically justified and would be contrary to the statute. 86 FR 
70892, 70908. Although DOE has not conducted a comparative analysis to 
select the proposed energy conservation standards, DOE notes that as 
compared to TSL 4 and TSL 5, TSL 3 has higher average LCC savings, 
smaller percentages of consumer experiencing a net cost, a lower 
maximum decrease in INPV, and lower manufacturer conversion costs.
    Accordingly, the Secretary has tentatively concluded that TSL 3 
would offer the maximum improvement in efficiency that is 
technologically feasible and economically justified and would result in 
the significant conservation of energy. Although results are presented 
here in terms of TSLs, DOE analyzes and evaluates all possible ELs for 
each product class in its

[[Page 20679]]

analysis. For room ACs with cooling capacities greater than or equal to 
8,000 Btu/h, TSL 3 corresponds to EL 4, the highest efficiency level 
below max-tech, incorporating commercially available variable-speed 
compressors. The variable-speed compressor required to achieve the max-
tech efficiency level is currently available from only a single 
manufacturer, leading to the likelihood there may not be sufficient 
supply at that efficiency level to meet the demand of the market for 
the full range of cooling capacities for room ACs. For room ACs with 
cooling capacities less than 8,000 Btu/h, TSL 3 corresponds to EL 3, 
incorporating the maximum available energy efficient single-speed 
compressors. Both EL 4 and EL 5 for room ACs with cooling capacities 
less than 8,000 Btu/h incorporate variable-speed compressors based off 
of modeling of available compressors for models with cooling capacities 
greater than or equal to 8,000 Btu/h. Uncertainties exist at those 
efficiency levels regarding both the availability of variable-speed 
compressors that can be integrated into these smaller-size units and 
the feasibility of incorporating these variable-speed compressors with 
related components into a more space-constrained chassis than for 
larger-capacity room ACs. There are no models commercially available 
that incorporate variable-speed compressors for cooling capacities less 
than 8,000 Btu/h. The proposed standard levels at TSL 3 results in 
positive LCC savings for all product classes, significantly reduce the 
number of consumers experiencing a net cost, and reduce the decrease in 
INPV and conversion costs to the point where DOE has tentatively 
concluded they are economically justified, as discussed for TSL 3 in 
the preceding paragraphs.
    Therefore, based on the previous considerations, DOE proposes to 
adopt the energy conservation standards for room ACs at TSL 3. The 
proposed amended energy conservation standards for room ACs, which are 
expressed as CEER and include the rounded cooling capacity product 
class descriptions discussed in section IV.A.1 of this document, are 
shown in Table V.58.
BILLING CODE 6450-01-P
[GRAPHIC] [TIFF OMITTED] TP07AP22.085

2. Annualized Benefits and Costs of the Proposed Standards
    The benefits and costs of the proposed standards can also be 
expressed in terms of annualized values. The annualized net benefit is 
(1) the annualized national economic value (expressed in 2020$) of the 
benefits from operating products that meet the proposed standards 
(consisting primarily of operating cost savings from using less energy, 
minus increases in product purchase costs, and (2) the annualized 
monetary value of the

[[Page 20680]]

benefits of GHGs, NOX, and SO2 emission 
reductions.
    Table V.59 shows the annualized values for room ACs under TSL 3, 
expressed in 2020$. The results under the primary estimate are as 
follows.
    Using a 7-percent discount rate for consumer benefits and costs and 
health benefits from reduced SO2 and NOX, and the 
3-percent discount rate case for climate benefits from reduced GHG 
emissions, the estimated cost of the proposed standards for room ACs is 
$216.9 million per year in increased equipment costs, while the 
estimated annual benefits are $727.5 million in reduced operating 
costs, $137.5 million in climate benefits, and $192.1 million in 
monetized health benefits. In this case, the net monetized benefit 
amounts to $840.2 million per year.
    Using a 3-percent discount rate for all benefits and costs, the 
estimated cost of the proposed standards for room ACs is $190.1 million 
per year in increased equipment costs, while the estimated annual 
benefits are $796.7 million in reduced operating costs, $137.5 million 
in climate benefits, and $237.9 million in monetized health benefits. 
In this case, the net monetized benefit amounts to $982.0 million per 
year.

[[Page 20681]]

[GRAPHIC] [TIFF OMITTED] TP07AP22.086

BILLING CODE 6450-01-C

[[Page 20682]]

VI. Cooling Capacity Verification

    DOE is proposing to add the cooling capacity of room ACs to 10 CFR 
429.134 to help regulated entities understand how DOE will determine 
the product class that applies to a given basic model in the context of 
an enforcement investigation. DOE is proposing a similar approach that 
it has adopted for portable air conditioners, packaged terminal air 
conditioners and heat pumps, and dehumidifiers. More specifically, DOE 
is going to compare the mean of the tested cooling capacity from the 
units of a given basic model that DOE has tested for enforcement 
rounded to the nearest hundred to the certified cooling capacity by the 
manufacturer. DOE will use the certified cooling capacity of the 
manufacturer if the mean of the DOE tested units is within 5 percent of 
the certified cooling capacity. If the manufacturer does not have a 
valid certification, including if the certified cooling capacity was 
incorrectly certified, or the certified cooling capacity is found to be 
outside of the 5 percent tolerance, DOE will use the rounded mean of 
the DOE tested units within the enforcement sample to determine the 
applicable product class and energy conservation standard for this 
particular basic model. DOE believes these proposed provisions provide 
additional clarity and transparency to the enforcement process. The 
proposal can be found in 10 CFR 429.134 and DOE seeks comment on this 
approach.

VII. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Section 1(b)(1) of Executive Order (``E.O.'') 12866, ``Regulatory 
Planning and Review,'' 58 FR 51735 (Oct. 4, 1993), requires each agency 
to identify the problem that it intends to address, including, where 
applicable, the failures of private markets or public institutions that 
warrant new agency action, as well as to assess the significance of 
that problem. The problems that the proposed standards set forth in 
this NOPR are intended to address are as follows:

    (1) Insufficient information and the high costs of gathering and 
analyzing relevant information leads some consumers to miss 
opportunities to make cost-effective investments in energy 
efficiency.
    (2) In some cases, the benefits of more-efficient equipment are 
not realized due to misaligned incentives between purchasers and 
users. An example of such a case is when the equipment purchase 
decision is made by a building contractor or building owner who does 
not pay the energy costs.
    (3) There are external benefits resulting from improved energy 
efficiency of appliances and equipment that are not captured by the 
users of such products. These benefits include externalities related 
to public health, environmental protection, and national energy 
security that are not reflected in energy prices, such as reduced 
emissions of air pollutants and greenhouse gases that impact human 
health and global warming.

    The Administrator of the Office of Information and Regulatory 
Affairs (``OIRA'') in the OMB has determined that the proposed 
regulatory action is a significant regulatory action under section 
(3)(f) of Executive Order 12866. Accordingly, pursuant to section 
6(a)(3)(B) of the Order, DOE has provided to OIRA: (i) The text of the 
draft regulatory action, together with a reasonably detailed 
description of the need for the regulatory action and an explanation of 
how the regulatory action will meet that need; and (ii) An assessment 
of the potential costs and benefits of the regulatory action, including 
an explanation of the manner in which the regulatory action is 
consistent with a statutory mandate. DOE has included these documents 
in the rulemaking record.
    In addition, the Administrator of OIRA has determined that the 
proposed regulatory action is an ``economically'' significant 
regulatory action under section (3)(f)(1) of E.O. 12866. Accordingly, 
pursuant to section 6(a)(3)(C) of the Order, DOE has provided to OIRA 
an assessment, including the underlying analysis, of benefits and costs 
anticipated from the regulatory action, together with, to the extent 
feasible, a quantification of those costs; and an assessment, including 
the underlying analysis, of costs and benefits of potentially effective 
and reasonably feasible alternatives to the planned regulation, and an 
explanation why the planned regulatory action is preferable to the 
identified potential alternatives. These assessments can be found in 
the technical support document for this proposed rulemaking.
    DOE has also reviewed this regulation pursuant to E.O. 13563, 
issued on January 18, 2011. 76 FR 3281 (Jan. 21, 2011). E.O. 13563 is 
supplemental to and explicitly reaffirms the principles, structures, 
and definitions governing regulatory review established in E.O. 12866. 
To the extent permitted by law, agencies are required by E.O. 13563 to 
(1) propose or adopt a regulation only upon a reasoned determination 
that its benefits justify its costs (recognizing that some benefits and 
costs are difficult to quantify); (2) tailor regulations to impose the 
least burden on society, consistent with obtaining regulatory 
objectives, taking into account, among other things, and to the extent 
practicable, the costs of cumulative regulations; (3) select, in 
choosing among alternative regulatory approaches, those approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety, and other advantages; distributive impacts; 
and equity); (4) to the extent feasible, specify performance 
objectives, rather than specifying the behavior or manner of compliance 
that regulated entities must adopt; and (5) identify and assess 
available alternatives to direct regulation, including providing 
economic incentives to encourage the desired behavior, such as user 
fees or marketable permits, or providing information upon which choices 
can be made by the public.
    DOE emphasizes as well that E.O. 13563 requires agencies to use the 
best available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible. In its guidance, OIRA has 
emphasized that such techniques may include identifying changing future 
compliance costs that might result from technological innovation or 
anticipated behavioral changes. For the reasons stated in the preamble, 
this NOPR is consistent with these principles, including the 
requirement that, to the extent permitted by law, benefits justify 
costs and that net benefits are maximized.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis (``IRFA'') 
for any rule that by law must be proposed for public comment, unless 
the agency certifies that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
As required by E.O. 13272, ``Proper Consideration of Small Entities in 
Agency Rulemaking,'' 67 FR 53461 (Aug. 16, 2002), DOE published 
procedures and policies on February 19, 2003, to ensure that the 
potential impacts of its rules on small entities are properly 
considered during the rulemaking process. 68 FR 7990. DOE has made its 
procedures and policies available on the Office of the General 
Counsel's website (energy.gov/gc/office-general-counsel).
    DOE reviewed this proposed rule under the provisions of the 
Regulatory Flexibility Act and the procedures and policies published on 
February 19, 2003. DOE certifies that the proposed

[[Page 20683]]

rule, if adopted, would not have significant economic impact on a 
substantial number of small entities. The factual basis of this 
certification is set forth in the following paragraphs.
    In accordance with EPCA, DOE is publishing this NOPR as part of the 
legislated 6-year review of energy conservation standards for room ACs. 
(42 U.S.C. 6295(m)) The current room AC energy conservation standards 
were implemented by a direct final rule published on April 21, 2011 (76 
FR 22454) and subsequently confirmed on August 24, 2011. 76 FR 52854. 
Compliance with those standards has been required since June 1, 2014. 
76 FR 52852. Pursuant to EPCA, any new or amended energy conservation 
standard must be designed to achieve the maximum improvement in energy 
efficiency that DOE determines is technologically feasible and 
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new 
or amended standard must result in a significant conservation of 
energy. (42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later 
than 6 years after issuance of any final rule establishing or amending 
a standard, DOE must publish either a notice of determination that 
standards for the product do not need to be amended, or a notice of 
proposed rulemaking including new proposed energy conservation 
standards (proceeding to a final rule, as appropriate). (42 U.S.C. 
6295(m))
    For manufacturers of room ACs, the Small Business Administration 
(``SBA'') has set a size threshold, which defines those entities 
classified as ``small businesses'' for the purposes of the statute. DOE 
used the SBA's small business size standards to determine whether any 
small entities would be subject to the requirements of the rule. (See 
13 CFR part 121.) The size standards are listed by North American 
Industry Classification System (``NAICS'') code and industry 
description and are available at www.sba.gov/document/support--table-size-standards. Manufacturing of room ACs is classified under NAICS 
333415, ``Air-Conditioning and Warm Air Heating Equipment and 
Commercial and Industrial Refrigeration Equipment Manufacturing.'' The 
SBA sets a threshold of 1,250 employees or fewer for an entity to be 
considered as a small business for this category.
    To estimate the number of companies that could be small business 
manufacturers of products covered by this proposed rulemaking, DOE 
conducted a market survey using public information and subscription-
based company reports to identify potential small manufacturers. DOE's 
research involved DOE's Compliance Certification Database 
(``CCD''),\78\ California Energy Commission's Modernized Appliance 
Efficiency Database System (``MAEDbS''),\79\ ENERGY STAR Product 
Finder,\80\ individual company websites, and market research tools 
(e.g., reports from Dun & Bradstreet \81\) to create a list of 
companies that manufacture, produce, import, or assemble the products 
covered by this rulemaking. DOE also asked stakeholders and industry 
representatives if they were aware of any other small manufacturers 
during manufacturer interviews and at DOE public meetings.
---------------------------------------------------------------------------

    \78\ regulations.doe.gov/certification-data/#q=Product_Group_s%3A*.
    \79\ cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx.
    \80\ energystar.gov/productfinder/.
    \81\ app.dnbhoovers.com.
---------------------------------------------------------------------------

    DOE identified eight OEMs of room AC products sold in the United 
States. Upon initial review, one OEM was identified as a small 
manufacturer based in the United States. However, in August 2021, a 
large manufacturer acquired the small manufacturer.\82\ Following that 
acquisition, no domestic room AC OEMs qualify as a small business. 
Given the lack of small entities with a direct compliance burden, DOE 
certifies that the proposed rule would not have ``a significant 
economic impact on a substantial number of small entities.'' DOE 
requests comment on this certification conclusion.
---------------------------------------------------------------------------

    \82\ https://www.rheem.com/about/news-releases/rheem-acquires-friedrich-air-conditioning (published August 30, 2021).
---------------------------------------------------------------------------

    DOE has submitted a certification and supporting statement of 
factual basis to the Chief Counsel for Advocacy of the Small Business 
Administration for review under 5 U.S.C. 605(b).

C. Review Under the Paperwork Reduction Act

    Manufacturers of room ACs must certify to DOE that their products 
comply with any applicable energy conservation standards. In certifying 
compliance, manufacturers must test their products according to the DOE 
test procedures for room ACs, including any amendments adopted for 
those test procedures. DOE has established regulations for the 
certification and recordkeeping requirements for all covered consumer 
products and commercial equipment, including room ACs. 76 FR 12422 
(Mar. 7, 2011); 80 FR 5099 (Jan. 30, 2015). The collection-of-
information requirement for the certification and recordkeeping is 
subject to review and approval by OMB under the Paperwork Reduction Act 
(``PRA''). This requirement has been approved by OMB under OMB control 
number 1910-1400. Public reporting burden for the certification is 
estimated to average 35 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the PRA, unless that collection of information displays 
a currently valid OMB Control Number.

D. Review Under the National Environmental Policy Act of 1969

    DOE is analyzing this proposed regulation in accordance with the 
National Environmental Policy Act of 1969 (``NEPA'') and DOE's NEPA 
implementing regulations (10 CFR part 1021). DOE's regulations include 
a categorical exclusion for rulemakings that establish energy 
conservation standards for consumer products or industrial equipment. 
10 CFR part 1021, subpart D, appendix B5.1. DOE anticipates that this 
rulemaking qualifies for categorical exclusion B5.1 because it is a 
rulemaking that establishes energy conservation standards for consumer 
products or industrial equipment, none of the exceptions identified in 
categorical exclusion B5.1(b) apply, no extraordinary circumstances 
exist that require further environmental analysis, and it otherwise 
meets the requirements for application of a categorical exclusion. See 
10 CFR 1021.410. DOE will complete its NEPA review before issuing the 
final rule.

E. Review Under Executive Order 13132

    E.O. 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), imposes 
certain requirements on Federal agencies formulating and implementing 
policies or regulations that preempt State law or that have federalism 
implications. The Executive order requires agencies to examine the 
constitutional and statutory authority supporting any action that would 
limit the policymaking discretion of the States and to carefully assess 
the necessity for such actions. The Executive order also requires 
agencies to have an accountable process to ensure meaningful and timely 
input by State and local officials in the development of regulatory 
policies that have federalism implications. On March 14, 2000, DOE

[[Page 20684]]

published a statement of policy describing the intergovernmental 
consultation process it will follow in the development of such 
regulations. 65 FR 13735. DOE has examined this proposed rule and has 
tentatively determined that it would not have a substantial direct 
effect on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. EPCA governs 
and prescribes Federal preemption of State regulations as to energy 
conservation for the products that are the subject of this proposed 
rule. States can petition DOE for exemption from such preemption to the 
extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297) 
Therefore, no further action is required by Executive Order 13132.

F. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of E.O. 12988, ``Civil 
Justice Reform,'' imposes on Federal agencies the general duty to 
adhere to the following requirements: (1) Eliminate drafting errors and 
ambiguity, (2) write regulations to minimize litigation, (3) provide a 
clear legal standard for affected conduct rather than a general 
standard, and (4) promote simplification and burden reduction. 61 FR 
4729 (Feb. 7, 1996). Regarding the review required by section 3(a), 
section 3(b) of E.O. 12988 specifically requires that executive 
agencies make every reasonable effort to ensure that the regulation: 
(1) Clearly specifies the preemptive effect, if any, (2) clearly 
specifies any effect on existing Federal law or regulation, (3) 
provides a clear legal standard for affected conduct while promoting 
simplification and burden reduction, (4) specifies the retroactive 
effect, if any, (5) adequately defines key terms, and (6) addresses 
other important issues affecting clarity and general draftsmanship 
under any guidelines issued by the Attorney General. Section 3(c) of 
Executive Order 12988 requires executive agencies to review regulations 
in light of applicable standards in section 3(a) and section 3(b) to 
determine whether they are met or it is unreasonable to meet one or 
more of them. DOE has completed the required review and determined 
that, to the extent permitted by law, this proposed rule meets the 
relevant standards of E.O. 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (``UMRA'') 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, section 201 (codified at 2 U.S.C. 
1531). For a proposed regulatory action likely to result in a rule that 
may cause the expenditure by State, local, and Tribal governments, in 
the aggregate, or by the private sector of $100 million or more in any 
one year (adjusted annually for inflation), section 202 of UMRA 
requires a Federal agency to publish a written statement that estimates 
the resulting costs, benefits, and other effects on the national 
economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal 
agency to develop an effective process to permit timely input by 
elected officers of State, local, and Tribal governments on a proposed 
``significant intergovernmental mandate,'' and requires an agency plan 
for giving notice and opportunity for timely input to potentially 
affected small governments before establishing any requirements that 
might significantly or uniquely affect them. On March 18, 1997, DOE 
published a statement of policy on its process for intergovernmental 
consultation under UMRA. 62 FR 12820. DOE's policy statement is also 
available at energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
    Although this proposed rule does not contain a Federal 
intergovernmental mandate, it may require expenditures of $100 million 
or more in any one year by the private sector. Such expenditures may 
include: (1) Investment in research and development and in capital 
expenditures by room AC manufacturers in the years between the final 
rule and the compliance date for the new standards and (2) incremental 
additional expenditures by consumers to purchase higher-efficiency room 
ACs, starting at the compliance date for the applicable standard.
    Section 202 of UMRA authorizes a Federal agency to respond to the 
content requirements of UMRA in any other statement or analysis that 
accompanies the proposed rule. (2 U.S.C. 1532(c)) The content 
requirements of section 202(b) of UMRA relevant to a private sector 
mandate substantially overlap the economic analysis requirements that 
apply under section 325(o) of EPCA and Executive Order 12866. The 
SUPPLEMENTARY INFORMATION section of this NOPR and the TSD for this 
proposed rule respond to those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. (2 U.S.C. 1535(a)) DOE is required to select from those 
alternatives the most cost-effective and least burdensome alternative 
that achieves the objectives of the proposed rule unless DOE publishes 
an explanation for doing otherwise, or the selection of such an 
alternative is inconsistent with law. As required by 42 U.S.C. 6295(m), 
this proposed rule would establish amended energy conservation 
standards for room ACs that are designed to achieve the maximum 
improvement in energy efficiency that DOE has determined to be both 
technologically feasible and economically justified, as required by 42 
U.S.C. 6295(o)(2)(A) and 42 U.S.C. 6295(o)(3)(B). A full discussion of 
the alternatives considered by DOE is presented in chapter 17 of the 
TSD for this proposed rule.

H. Review Under the Treasury and General Government Appropriations Act, 
1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any rule that may affect family well-being. 
This proposed rule would not have any impact on the autonomy or 
integrity of the family as an institution. Accordingly, DOE has 
concluded that it is not necessary to prepare a Family Policymaking 
Assessment.

I. Review Under Executive Order 12630

    Pursuant to E.O. 12630, ``Governmental Actions and Interference 
with Constitutionally Protected Property Rights,'' 53 FR 8859 (Mar. 15, 
1988), DOE has determined that this proposed rule would not result in 
any takings that might require compensation under the Fifth Amendment 
to the U.S. Constitution.

J. Review Under the Treasury and General Government Appropriations Act, 
2001

    Section 515 of the Treasury and General Government Appropriations 
Act, 2001 (44 U.S.C. 3516 note) provides for Federal agencies to review 
most disseminations of information to the public under information 
quality guidelines established by each agency pursuant to general 
guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 
(Feb. 22, 2002), and DOE's guidelines were published at 67

[[Page 20685]]

FR 62446 (Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, Improving 
Implementation of the Information Quality Act (April 24, 2019), DOE 
published updated guidelines which are available at www.energy.gov/sites/prod/files/2019/12/f70/DOE%20Final%20Updated%20IQA%20Guidelines%20Dec%202019.pdf. DOE has 
reviewed this NOPR under the OMB and DOE guidelines and has concluded 
that it is consistent with applicable policies in those guidelines.

K. Review Under Executive Order 13211

    E.O. 13211, ``Actions Concerning Regulations That Significantly 
Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 (May 22, 
2001), requires Federal agencies to prepare and submit to OIRA at OMB, 
a Statement of Energy Effects for any proposed significant energy 
action. A ``significant energy action'' is defined as any action by an 
agency that promulgates or is expected to lead to promulgation of a 
final rule, and that (1) is a significant regulatory action under 
Executive Order 12866, or any successor order; and (2) is likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any proposed significant energy action, 
the agency must give a detailed statement of any adverse effects on 
energy supply, distribution, or use should the proposal be implemented, 
and of reasonable alternatives to the action and their expected 
benefits on energy supply, distribution, and use.
    DOE has tentatively concluded that this regulatory action, which 
proposes amended energy conservation standards for room ACs, is not a 
significant energy action because the proposed standards are not likely 
to have a significant adverse effect on the supply, distribution, or 
use of energy, nor has it been designated as such by the Administrator 
at OIRA. Accordingly, DOE has not prepared a Statement of Energy 
Effects on this proposed rule.

L. Information Quality

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (``OSTP''), issued its Final Information 
Quality Bulletin for Peer Review (``the Bulletin''). 70 FR 2664 (Jan. 
14, 2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as ``scientific information 
the agency reasonably can determine will have, or does have, a clear 
and substantial impact on important public policies or private sector 
decisions.'' 70 FR 2664, 2667.
    In response to OMB's Bulletin, DOE conducted formal peer reviews of 
the energy conservation standards development process and the analyses 
that are typically used and has prepared a report describing that peer 
review.\83\ Generation of this report involved a rigorous, formal, and 
documented evaluation using objective criteria and qualified and 
independent reviewers to make a judgment as to the technical/
scientific/business merit, the actual or anticipated results, and the 
productivity and management effectiveness of programs and/or projects. 
DOE has determined that the peer-reviewed analytical process continues 
to reflect current practice, and the Department followed that process 
for developing energy conservation standards in the case of the present 
rulemaking.
---------------------------------------------------------------------------

    \83\ The 2007 ``Energy Conservation Standards Rulemaking Peer 
Review Report'' is available at the following website: energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report-0.
---------------------------------------------------------------------------

VIII. Public Participation

A. Attendance at the Webinar

    The time, date, and location of the webinar are listed in the DATES 
and ADDRESSES sections at the beginning of this document. If no 
participants register for the webinar then it will be cancelled. 
Webinar registration information, participant instructions, and 
information about the capabilities available to webinar participants 
will be published on DOE's website: https://www1.eere.energy.gov/buildings/appliance_standards/standards.aspx?productid=52. Participants 
are responsible for ensuring their systems are compatible with the 
webinar software.

B. Procedure for Submitting Prepared General Statements for 
Distribution

    Any person who has an interest in the topics addressed in this 
document, or who is representative of a group or class of persons that 
has an interest in these issues, may request an opportunity to make an 
oral presentation at the webinar. Requests may be sent by email to the 
Appliance and Equipment Standards Program, U.S. Department of Energy, 
Building Technologies Office, Mailstop EE-5B 1000 Independence Avenue 
SW, Washington, DC 20585-0121, or 
[email protected]. Persons who wish to speak 
should include with their request a computer file in WordPerfect, 
Microsoft Word, PDF, or text (ASCII) file format that briefly describes 
the nature of their interest in this rulemaking and the topics they 
wish to discuss. Such persons should also provide a daytime telephone 
number where they can be reached.
    Persons requesting to speak should briefly describe the nature of 
their interest in this rulemaking and provide a telephone number for 
contact. DOE requests persons selected to make an oral presentation to 
submit an advance copy of their statements at least two weeks before 
the webinar. At its discretion, DOE may permit persons who cannot 
supply an advance copy of their statement to participate, if those 
persons have made advance alternative arrangements with the Building 
Technologies Office. As necessary, requests to give an oral 
presentation should ask for such alternative arrangements.

C. Conduct of the Public Meeting

    DOE will designate a DOE official to preside at the webinar/public 
meeting and may also use a professional facilitator to aid discussion. 
The meeting will not be a judicial or evidentiary-type public hearing, 
but DOE will conduct it in accordance with section 336 of EPCA. (42 
U.S.C. 6306) A court reporter will be present to record the proceedings 
and prepare a transcript. DOE reserves the right to schedule the order 
of presentations and to establish the procedures governing the conduct 
of the webinar/public meeting. There shall not be discussion of 
proprietary information, costs or prices, market share, or other 
commercial matters regulated by U.S. anti-trust laws. After the 
webinar/public meeting, interested parties may submit further comments 
on the proceedings, as well as on any aspect of the rulemaking, until 
the end of the comment period.
    The public meeting will be conducted in an informal, conference 
style. DOE will present summaries of comments received before the 
webinar/public meeting, allow time for prepared general statements by 
participants, and encourage all interested parties to share their views 
on issues affecting this proposed rulemaking. Each participant will be 
allowed to make a general statement (within time limits

[[Page 20686]]

determined by DOE), before the discussion of specific topics. DOE will 
allow, as time permits, other participants to comment briefly on any 
general statements.
    At the end of all prepared statements on a topic, DOE will permit 
participants to clarify their statements briefly. Participants should 
be prepared to answer questions by DOE and by other participants 
concerning these issues. DOE representatives may also ask questions of 
participants concerning other matters relevant to this rulemaking. The 
official conducting the webinar/public meeting will accept additional 
comments or questions from those attending, as time permits. The 
presiding official will announce any further procedural rules or 
modification of the previous procedures that may be needed for the 
proper conduct of the webinar/public meeting.
    A transcript of the webinar/public meeting will be included in the 
docket, which can be viewed as described in the Docket section at the 
beginning of this document and will be accessible on the DOE website. 
In addition, any person may buy a copy of the transcript from the 
transcribing reporter.

D. Submission of Comments

    DOE will accept comments, data, and information regarding this 
proposed rule before or after the public meeting, but no later than the 
date provided in the DATES section at the beginning of this proposed 
rule. Interested parties may submit comments, data, and other 
information using any of the methods described in the ADDRESSES section 
at the beginning of this document.
    Submitting comments via www.regulations.gov. The 
www.regulations.gov web page will require you to provide your name and 
contact information. Your contact information will be viewable to DOE 
Building Technologies staff only. Your contact information will not be 
publicly viewable except for your first and last names, organization 
name (if any), and submitter representative name (if any). If your 
comment is not processed properly because of technical difficulties, 
DOE will use this information to contact you. If DOE cannot read your 
comment due to technical difficulties and cannot contact you for 
clarification, DOE may not be able to consider your comment.
    However, your contact information will be publicly viewable if you 
include it in the comment itself or in any documents attached to your 
comment. Any information that you do not want to be publicly viewable 
should not be included in your comment, nor in any document attached to 
your comment. Otherwise, persons viewing comments will see only first 
and last names, organization names, correspondence containing comments, 
and any documents submitted with the comments.
    Do not submit to www.regulations.gov information for which 
disclosure is restricted by statute, such as trade secrets and 
commercial or financial information (hereinafter referred to as 
Confidential Business Information (``CBI'')). Comments submitted 
through www.regulations.gov cannot be claimed as CBI. Comments received 
through the website will waive any CBI claims for the information 
submitted. For information on submitting CBI, see the Confidential 
Business Information section.
    DOE processes submissions made through www.regulations.gov before 
posting. Normally, comments will be posted within a few days of being 
submitted. However, if large volumes of comments are being processed 
simultaneously, your comment may not be viewable for up to several 
weeks. Please keep the comment tracking number that www.regulations.gov 
provides after you have successfully uploaded your comment.
    Submitting comments via email. Comments and documents submitted via 
email also will be posted to www.regulations.gov. If you do not want 
your personal contact information to be publicly viewable, do not 
include it in your comment or any accompanying documents. Instead, 
provide your contact information in a cover letter. Include your first 
and last names, email address, telephone number, and optional mailing 
address. The cover letter will not be publicly viewable as long as it 
does not include any comments.
    Include contact information each time you submit comments, data, 
documents, and other information to DOE. No telefacsimiles (``faxes'') 
will be accepted.
    Comments, data, and other information submitted to DOE 
electronically should be provided in PDF (preferred), Microsoft Word or 
Excel, WordPerfect, or text (ASCII) file format. Provide documents that 
are not secured, that are written in English, and that are free of any 
defects or viruses. Documents should not contain special characters or 
any form of encryption and, if possible, they should carry the 
electronic signature of the author.
    Campaign form letters. Please submit campaign form letters by the 
originating organization in batches of between 50 to 500 form letters 
per PDF or as one form letter with a list of supporters' names compiled 
into one or more PDFs. This reduces comment processing and posting 
time.
    Confidential Business Information. Pursuant to 10 CFR 1004.11, any 
person submitting information that he or she believes to be 
confidential and exempt by law from public disclosure should submit via 
email two well-marked copies: one copy of the document marked 
``confidential'' including all the information believed to be 
confidential, and one copy of the document marked ``non-confidential'' 
with the information believed to be confidential deleted. DOE will make 
its own determination about the confidential status of the information 
and treat it according to its determination.
    It is DOE's policy that all comments may be included in the public 
docket, without change and as received, including any personal 
information provided in the comments (except information deemed to be 
exempt from public disclosure).

E. Issues on Which DOE Seeks Comment

    Although DOE welcomes comments on any aspect of this proposal, DOE 
is particularly interested in receiving comments and views of 
interested parties concerning the following issues:
    (1) DOE seeks comment on the proposal to not make any changes to 
room AC product classes. See section IV.A.1 of this document.
    (2) DOE seeks comment on whether evaporator air recirculation 
should be included in the engineering analysis. See section IV.A.2.a of 
this document.
    (3) DOE seeks comment on the updated single-speed compressor 
maximum efficiency estimates. See section IV.A.2.b of this document.
    (4) DOE seeks comment on the approach to alternative refrigerants 
in this engineering analysis. See section IV.A.2.c of this document.
    (5) DOE seeks comment on the technologies screened out in the NOPR 
screening analysis. See section IV.B.1 of this document.
    (6) DOE requests comment on the new efficiency level (EL 4) in the 
engineering analysis. See section IV.C.1.b of this document.
    (7) DOE seeks comment on the approach to design EL 3 as the level 
reached by the most efficient single-speed room ACs. See section 
IV.C.1.b of this document.
    (8) DOE requests comment on the incremental MPCs from the NOPR 
engineering analysis. See section IV.C.3 of this document.
    (9) DOE welcomes feedback on its approach to estimating fan-only 
use

[[Page 20687]]

operating hours and any additional data that can be provided to 
estimate the amount of time spent in fan-only mode. See section IV.E of 
this document.
    (10) DOE requests feedback on its approach to calculating the 
energy-use of variable-speed compressors and would welcome field 
metered data to further investigate the varying amounts of energy use 
due to single-speed and variable-speed units. See section IV.E of this 
document.
    (11) DOE requests comments on its assumption and methodology for 
determining equipment price trends. See section IV.F.1 of this 
document.
    (12) DOE requests feedback on its approach to projecting the 
efficiency distribution in 2026. See section IV.F.8 of this document.
    (13) DOE welcomes shipments data that include markets in addition 
to replacement and first-time user markets. See section IV.G of this 
document.
    (14) DOE requests comment on its general methodology for estimating 
shipments. See section IV.G of this document.
    (15) DOE requests comment its approach to projecting market share 
for variable-speed technologies over the course of the analysis period. 
See section IV.H.1 of this document.
    (16) DOE requests comment on its approach to monetizing the impact 
of the rebound effect in standards cases. See section IV.H.3 of this 
document.
    (17) DOE requests comment on the magnitude of costs associated with 
transitioning room AC models to low-GWP refrigerants, such as R-32, 
along with the associated UL costs that would be incurred between the 
publication of this NOPR and the proposed compliance date of amended 
standards. Quantification and categorization of associated costs, such 
as engineering efforts, test lab time, UL certification costs, and 
capital investments, would enable DOE to refine its analysis. See 
section V.B.2.d of this document.
    (18) DOE requests information regarding the impact of cumulative 
regulatory burden on manufacturers of room ACs associated with multiple 
DOE standards or product-specific regulatory actions of other Federal 
agencies. See section V.B.2.d of this document.
    (19) DOE requests comment on the percentage of room ACs 
manufactured outside of China and the countries of origin, as well as 
information on the country-specific fully-burdened labor rates and key 
raw material prices.
    (20) DOE requests comment on the impact of tariffs on pricing at 
each step in the distribution chain, as well as the percentage change 
in retail price paid by the consumer as a result of Section 301 
tariffs. See section V.B.2.e of this document.
    (21) DOE requests comment on the certification conclusion.
    Additionally, DOE welcomes comments on other issues relevant to the 
conduct of this rulemaking that may not specifically be identified in 
this document.

IX. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this notice of 
proposed rulemaking.

List of Subjects

10 CFR Part 429

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Household appliances, Reporting and 
recordkeeping requirements.

10 CFR Part 430

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Household appliances, Imports, 
Intergovernmental relations, Small businesses.

Signing Authority

    This document of the Department of Energy was signed on March 28, 
2022, by Kelly J. Speakes-Backman, Principal Deputy Assistant Secretary 
for Energy Efficiency and Renewable Energy, pursuant to delegated 
authority from the Secretary of Energy. That document with the original 
signature and date is maintained by DOE. For administrative purposes 
only, and in compliance with requirements of the Office of the Federal 
Register, the undersigned DOE Federal Register Liaison Officer has been 
authorized to sign and submit the document in electronic format for 
publication, as an official document of the Department of Energy. This 
administrative process in no way alters the legal effect of this 
document upon publication in the Federal Register.

    Signed in Washington, DC, on March 31, 2022.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.

    For the reasons set forth in the preamble, DOE proposes to amend 
parts 429 and 430 of chapter II, subchapter D, of title 10 of the Code 
of Federal Regulations, as set forth below:

PART 429--CERTIFICATION, COMPLIANCE, AND ENFORCEMENT FOR CONSUMER 
PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT

0
1. The authority citation for part 429 continues to read as follows:

    Authority:  42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.

0
2. Section 429.134 is amended by adding paragraph(s) to read as 
follows:


Sec.  429.134   Product-specific enforcement provisions.

* * * * *
    (s) Room air conditioners. Verification of cooling capacity. DOE 
will measure the cooling capacity of each unit DOE tests pursuant to 
the test requirements of 10 CFR part 430. DOE will calculate the mean 
of the test results, rounded to the nearest hundred, and compare it to 
the value of cooling capacity certified by the manufacturer for the 
basic model. The certified cooling capacity will be considered valid 
only if the basic model is properly certified pursuant to this part, 
and the rounded mean from testing pursuant to this section is within 
five percent of the cooling capacity reported in the manufacturer's 
most recent valid certification report at the time of DOE's assessment 
test.
    (1) If the certified cooling capacity is valid, DOE will use the 
certified cooling capacity as the basis for identifying the correct 
product class for the basic model and the minimum combined energy 
efficiency ratio allowed for the basic model.
    (2) If the certified cooling capacity is not valid, DOE will use 
the mean measured cooling capacity of the units in the sample, rounded 
to the nearest hundred, as the basis for identifying the correct 
product class for the basic model and the minimum combined energy 
efficiency ratio allowed for the basic model.

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

0
3. The authority citation for part 430 continues to read as follows:

    Authority:  42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.

0
4. Section 430.32 is amended by revising paragraph (b) to read as 
follows:


Sec.  430.32   Energy and water conservation standards and their 
compliance dates.

* * * * *
    (b) Room air conditioners.
    The following standards remain in effect from June 1, 2014 until 
[date 3 years after publication of the final rule]:

[[Page 20688]]



------------------------------------------------------------------------
                                                        Combined energy
                   Equipment class                      efficiency ratio
------------------------------------------------------------------------
(1) Without reverse cycle, with louvered sides, and                 11.0
 with a certified cooling capacity * less than 6,000
 Btu/h...............................................
(2) Without reverse cycle, with louvered sides and                  11.0
 with a certified cooling capacity of 6,000 to 7,999
 Btu/h...............................................
(3) Without reverse cycle, with louvered sides and                  10.9
 with a certified cooling capacity of 8,000 to 13,999
 Btu/h...............................................
(4) Without reverse cycle, with louvered sides and                  10.7
 with a certified cooling capacity of 14,000 to
 19,999 Btu/h........................................
(5)(A) Without reverse cycle, with louvered sides and                9.4
 with a certified cooling capacity of 20,000 Btu/h to
 27,999 Btu/h........................................
(5)(B) Without reverse cycle, with louvered sides and                9.0
 with a certified cooling capacity of 28,000 Btu/h or
 more................................................
(6) Without reverse cycle, without louvered sides,                  10.0
 and with a certified cooling capacity less than
 6,000 Btu/h.........................................
(7) Without reverse cycle, without louvered sides and               10.0
 with a certified cooling capacity of 6,000 to 7,999
 Btu/h...............................................
(8)(A) Without reverse cycle, without louvered sides                 9.6
 and with a certified cooling capacity of 8,000 to
 10,999 Btu/h........................................
(8)(B) Without reverse cycle, without louvered sides                 9.5
 and with a certified cooling capacity of 11,000 to
 13,999 Btu/h........................................
(9) Without reverse cycle, without louvered sides and                9.3
 with a certified cooling capacity of 14,000 to
 19,999 Btu/h........................................
(10) Without reverse cycle, without louvered sides                   9.4
 and with a certified cooling capacity of 20,000 Btu/
 h or more...........................................
(11) With reverse cycle, with louvered sides, and                    9.8
 with a certified cooling capacity less than 20,000
 Btu/h...............................................
(12) With reverse cycle, without louvered sides, and                 9.3
 with a certified cooling capacity less than 14,000
 Btu/h...............................................
(13) With reverse cycle, with louvered sides, and                    9.3
 with a certified cooling capacity of 20,000 Btu/h or
 more................................................
(14) With reverse cycle, without louvered sides, and                 8.7
 with a certified cooling capacity of 14,000 Btu/h or
 more................................................
(15) Casement-Only...................................                9.5
(16) Casement-Slider.................................               10.4
------------------------------------------------------------------------
* The certified cooling capacity is determined by the manufacturer in
  accordance with 10 CFR 429.15(a)(3).

    The following standards apply to products manufactured starting 
[Date 3 years after publication of the final rule]:

------------------------------------------------------------------------
                                                        Combined energy
                   Equipment class                      efficiency ratio
------------------------------------------------------------------------
(1) Without reverse cycle, with louvered sides, and                 13.1
 with a certified cooling capacity* less than 6,000
 Btu/h...............................................
(2) Without reverse cycle, with louvered sides and                  13.7
 with a certified cooling capacity of 6,000 to 7,900
 Btu/h...............................................
(3) Without reverse cycle, with louvered sides and                  16.0
 with a certified cooling capacity of 8,000 to 13,900
 Btu/h...............................................
(4) Without reverse cycle, with louvered sides and                  16.0
 with a certified cooling capacity of 14,000 to
 19,900 Btu/h........................................
(5)(A) Without reverse cycle, with louvered sides and               13.8
 with a certified cooling capacity of 20,000 Btu/h to
 27,900 Btu/h........................................
(5)(B) Without reverse cycle, with louvered sides and               13.2
 with a certified cooling capacity of 28,000 Btu/h or
 more................................................
(6) Without reverse cycle, without louvered sides,                  12.8
 and with a certified cooling capacity less than
 6,000 Btu/h.........................................
(7) Without reverse cycle, without louvered sides and               12.8
 with a certified cooling capacity of 6,000 to 7,900
 Btu/h...............................................
(8)(A) Without reverse cycle, without louvered sides                14.1
 and with a certified cooling capacity of 8,000 to
 10,900 Btu/h........................................
(8)(B) Without reverse cycle, without louvered sides                13.9
 and with a certified cooling capacity of 11,000 to
 13,900 Btu/h........................................
(9) Without reverse cycle, without louvered sides and               13.7
 with a certified cooling capacity of 14,000 to
 19,900 Btu/h........................................
(10) Without reverse cycle, without louvered sides                  13.8
 and with a certified cooling capacity of 20,000 Btu/
 h or more...........................................
(11) With reverse cycle, with louvered sides, and                   14.4
 with a certified cooling capacity less than 20,000
 Btu/h...............................................
(12) With reverse cycle, without louvered sides, and                13.7
 with a certified cooling capacity less than 14,000
 Btu/h...............................................
(13) With reverse cycle, with louvered sides, and                   13.7
 with a certified cooling capacity of 20,000 Btu/h or
 more................................................
(14) With reverse cycle, without louvered sides, and                12.8
 with a certified cooling capacity of 14,000 Btu/h or
 more................................................
(15) Casement-Only...................................               13.9
(16) Casement-Slider.................................               15.3
------------------------------------------------------------------------
* The certified cooling capacity is determined by the manufacturer in
  accordance with 10 CFR 429.15(a)(3).

* * * * *
[FR Doc. 2022-07141 Filed 4-6-22; 8:45 am]
BILLING CODE 6450-01-P`