Document ID: EPA-HQ-OAR-2017-0755-0001
Agency: epa
Document Type: Proposed Rule
Title: Light-duty Vehicle GHG Program Technical Amendments
Posted Date: 2018-10-01T04:00Z

[Federal Register Volume 83, Number 190 (Monday, October 1, 2018)]
[Proposed Rules]
[Pages 49344-49352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21195]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 86

[EPA-HQ-OAR-2017-0755; FRL-9984-54-OAR]
RIN 2060-AT75

Light-Duty Vehicle GHG Program Technical Amendments

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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

SUMMARY: EPA is proposing two technical corrections to the light-duty 
vehicle greenhouse gas (GHG) emissions standards regulations finalized 
in the 2012 rulemaking that established standards for model years 2017-
2025 light-duty vehicles. First, EPA proposes to correct regulations 
pertaining to how auto manufacturers must calculate credits for the GHG 
program's optional advanced technology incentives. The regulations 
currently in place result in auto manufacturers receiving fewer credits 
than the agency intended for electric vehicles, plug-in hybrid electric 
vehicles, fuel cell electric vehicles, and natural gas fueled vehicles. 
Auto manufacturers requested through a petition letter submitted 
jointly by the Auto Alliance and Global Automakers in June 2016 that 
EPA correct the regulations to provide the intended level of credits 
for these technologies. Second, the regulations regarding how 
manufacturers must calculate certain types of off-cycle credits contain 
an error and are inconsistent with the 2012 final rule preamble, 
raising implementation concerns for some manufacturers. The proposed 
amendments would clarify the calculation methodology in the 
regulations. Both of these corrections allow the program to be 
implemented as originally intended. The proposed corrections are not 
expected to result in any additional regulatory burdens or costs.

DATES: 
    Comments: Written comments must be received on or before October 
31, 2018. If EPA receives a request for a

[[Page 49345]]

public hearing by October 9, 2018, we will publish information related 
to the timing and location of the hearing and a new deadline for public 
comment.
    Public Hearing: EPA will not hold a public hearing on this matter 
unless a request is received by the person identified in the FOR 
FURTHER INFORMATION CONTACT section of this preamble by October 9, 
2018. If EPA receives such a request, we will publish information 
related to the timing and location of the hearing and a new deadline 
for public comment.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2017-0755, at http://www.regulations.gov. Follow the online 
instructions for submitting comments. Once submitted, comments cannot 
be edited or removed from Regulations.gov. The EPA may publish any 
comment received to its public docket. Do not submit electronically any 
information you consider to be Confidential Business Information (CBI) 
or other information whose disclosure is restricted by statute. 
Multimedia submissions (audio, video, etc.) must be accompanied by a 
written comment. The written comment is considered the official comment 
and should include discussion of all points you wish to make. The EPA 
will generally not consider comments or comment contents located 
outside of the primary submission (i.e. on the web, cloud, or other 
file sharing system). For additional submission methods, the full EPA 
public comment policy, information about CBI or multimedia submissions, 
and general guidance on making effective comments, please visit http://www2.epa.gov/dockets/commenting-epa-dockets.

FOR FURTHER INFORMATION CONTACT: Christopher Lieske, Office of 
Transportation and Air Quality (OTAQ), Assessment and Standards 
Division (ASD), Environmental Protection Agency, 2000 Traverwood Drive, 
Ann Arbor, MI 48105; telephone number: (734) 214-4584; email address: 
[email protected]; fax number: 734-214-4816.

SUPPLEMENTARY INFORMATION: 

I. General Information

A. Does this action apply to me?

    This action affects companies that manufacture or sell new light-
duty vehicles, light-duty trucks, and medium-duty passenger vehicles, 
as defined under EPA's CAA regulations.\1\ Regulated categories and 
entities include:
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    \1\ ``Light-duty vehicle,'' ``light-duty truck,'' and ``medium-
duty passenger vehicle'' are defined in 40 CFR 86.1803-01. 
Generally, the term ``light-duty vehicle'' means a passenger car, 
the term ``light-duty truck'' means a pick-up truck, sport-utility 
vehicle, or minivan of up to 8,500 lbs gross vehicle weight rating, 
and ``medium-duty passenger vehicle'' means a sport-utility vehicle 
or passenger van from 8,500 to 10,000 lbs gross vehicle weight 
rating. Medium-duty passenger vehicles do not include pick-up 
trucks.

------------------------------------------------------------------------
                                 NAICS
           Category              codes       Examples of potentially
                                  \A\           regulated entities
------------------------------------------------------------------------
Industry......................   336111  Motor Vehicle Manufacturers.
                                 336112
Industry......................   811111  Commercial Importers of
                                 811112   Vehicles and Vehicle
                                 811198   Components.
                                 423110
Industry......................   335312  Alternative Fuel Vehicle
                                 811198   Converters.
------------------------------------------------------------------------
\A\ North American Industry Classification System (NAICS).

B. What action is the Agency taking?

    EPA is proposing two technical corrections to the light-duty 
vehicle greenhouse gas (GHG) emissions standards regulations finalized 
in the 2012 rulemaking that established standards for model years 2017-
2025 light-duty vehicles. First, EPA proposes to correct an error in 
the regulations pertaining to how auto manufacturers must calculate 
credits for the GHG program's optional advanced technology incentives. 
The regulations currently in place result in auto manufacturers 
receiving fewer credits than the agency intended for electric vehicles, 
plug-in hybrid electric vehicles, fuel cell electric vehicles, and 
natural gas fueled vehicles. Auto manufacturers requested through a 
petition letter submitted jointly by the Auto Alliance and Global 
Automakers in June 2016 that EPA correct the regulations to provide the 
intended level of credits for these technologies. Second, the 
regulations regarding how manufacturers must calculate certain types of 
off-cycle credits contain an error and are inconsistent with the 2012 
final rule preamble, raising implementation concerns for some 
manufacturers. The proposed amendments would clarify the calculation 
methodology in the regulations. Both of these corrections allow the 
program to be implemented as originally intended. The corrections are 
described in detail in Section III below.

C. What is the Agency's authority for taking this action?

    EPA is proposing technical amendments to provisions of the light-
duty vehicle GHG regulations under section 202 (a) of the Clean Air Act 
(CAA) ((42 U.S.C. 7521 (a)).

D. What are the incremental costs and benefits of this action?

    The proposed corrections are not expected to result in any 
significant changes in regulatory burdens, costs, or benefits.

II. Public Participation

A. How do I prepare and submit information?

    Direct your submittals to Docket ID No EPA-HQ-OAR-2017-0755. EPA's 
policy is that all submittals received will be included in the public 
docket without change and may be made available online at 
www.regulations.gov, including any personal information provided, 
unless the submittal includes information claimed to be Confidential 
Business Information (CBI) or other information whose disclosure is 
restricted by statute.
    Do not submit information to the docket that you consider to be CBI 
or otherwise protected through www.regulations.gov. The 
www.regulations.gov website is an ``anonymous access'' system, which 
means EPA will not know your identity or contact information unless you 
provide it in the body of your submittal. If you submit an electronic 
submittal, EPA recommends that you include your name and other contact 
information in the body of your submittal and with any disk or CD-ROM 
you submit. Electronic files should avoid the use of special 
characters, any form of encryption, and be free of any defects or 
viruses. For additional information about EPA's public docket visit the 
EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.

B. Submitting CBI

    Do not submit this information to EPA through www.regulations.gov 
or email. Clearly mark the part or all of the information that you 
claim to be CBI. For CBI information in a disk or CD ROM that you mail 
to EPA, mark the outside of the disk or CD ROM as CBI and then identify 
electronically within the disk or CD ROM the specific information that 
is claimed as CBI). In addition to one complete version of the comment 
that includes information claimed as CBI, a copy of the comment that 
does not contain the information claimed as CBI must be submitted for 
inclusion in the public docket. Information so marked will not be 
disclosed except in accordance with procedures set forth in 40 CFR part 
2.

C. Tips for Preparing Your Comments

    When submitting comments, remember to:

[[Page 49346]]

     Identify the action by docket number and other identifying 
information (subject heading, Federal Register date and page number).
     Explain why you agree or disagree; suggest alternatives 
and substitute language for your requested changes.
     Describe any assumptions and provide any technical 
information and/or data that you used.
     If you estimate potential costs or burdens, explain how 
you arrived at your estimate in sufficient detail to allow for it to be 
reproduced.
     Provide specific examples to illustrate your concerns, and 
suggest alternatives.
     Explain your views as clearly as possible, avoiding the 
use of profanity or personal threats.
     Make sure to submit your comments by the comment period 
deadline identified in the DATES section above.

III. Proposed Provisions

    This proposed rule would correct two technical provisions in the 
regulations for the model year (MY) 2017-2025 greenhouse gas (GHG) 
emissions standards. The first correction addresses how manufacturers 
must apply advanced technology vehicle multipliers during credit 
calculations in order to ensure that credits are calculated as EPA 
intended in the 2012 final rule. The second correction addresses how 
manufacturers must calculate off-cycle credits under the program's 5-
cycle credit calculation methodology. EPA views these items as 
technical amendments that correct and clarify the regulations and are 
not changes in how the program functions. Therefore, neither of these 
technical amendments introduce or remove any requirements on automobile 
manufacturers, nor do these changes impose additional regulatory costs 
or benefits. We describe each of these changes in the following 
sections. We note that in the recent ``Safer Affordable Fuel-Efficient 
(SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light 
Trucks'' issued by EPA and the National Highway Traffic Safety 
Administration (NHTSA) regarding GHG and Corporate Average Fuel Economy 
(CAFE) standards for Model Years (MY) 2021 to 2026 (see 83 FR 42986, 
August 24, 2018), the agencies are broadly seeking comment on various 
incentives and flexibilities, including the availability and scope of 
advanced technology multipliers and off-cycle credits for those model 
years. Today's proposal would correct the application of advanced 
technology vehicle multipliers for MYs 2017 through 2021, and an off-
cycle credit calculation methodology for MY 2012 and later vehicles.

A. Clarification of the Advanced Technology Multiplier Regulations

    As part of the MY 2017-2025 rule, EPA adopted temporary incentive 
multipliers for battery electric vehicles (BEVs), plug-in hybrid 
electric vehicles (PHEVs), fuel cell vehicles (FCVs), and compressed 
natural gas (CNG) vehicles.\2\ The multipliers allow manufacturers to 
count these lower CO2 emitting vehicles as more than one 
vehicle in their fleet average compliance calculations. For example, 
the 2.0 multiplier for MY 2017 BEVs would allow a manufacturer to count 
every MY 2017 BEV produced as two vehicles produced. The multipliers 
established in the MY 2017-2025 rule are shown in Tables 1 and 2 below.
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    \2\ 77 FR 62812-62816 (October 15, 2012) and 40 CFR 86.1866-
12(b).
    \3\ 40 CFR 86.1866-12(b)(1).
    \4\ 40 CFR 86.1866-12(b)(2).

    Table 1--The Production Multipliers, by Model Year, for Electric
                   Vehicles and Fuel Cell Vehicles \3\
------------------------------------------------------------------------
                                                              Production
                         Model year                           multiplier
------------------------------------------------------------------------
2017.......................................................          2.0
2018.......................................................          2.0
2019.......................................................          2.0
2020.......................................................         1.75
2021.......................................................          1.5
------------------------------------------------------------------------

 Table 2--The Production Multipliers, by Model Year, for Plug-In Hybrid
Electric Vehicles, Dedicated Natural Gas Vehicles, and Dual-Fuel Natural
                            Gas Vehicles \4\
------------------------------------------------------------------------
                                                              Production
                         Model year                           multiplier
------------------------------------------------------------------------
2017.......................................................          1.6
2018.......................................................          1.6
2019.......................................................          1.6
2020.......................................................         1.45
2021.......................................................          1.3
------------------------------------------------------------------------

    EPA and NHTSA received a joint petition from the Alliance of 
Automobile Manufacturers and the Association of Global Automakers on 
June 20, 2016 regarding various aspects of the CAFE and GHG 
programs.\5\ Item 8 of the petition, titled ``Correct the Multiplier 
for BEVs, PHEVs, FCVs, and CNGs,'' correctly notes that ``the equation 
through which the number of earned credits is calculated is 
inaccurately stated in the regulations'' and that credits would be 
inadvertently lost due to the error. EPA is proposing to modify the 
regulations so that the credits are calculated correctly in all cases. 
The calculations are done separately for the passenger car and light 
truck fleets. These advanced vehicle technology multipliers do not 
apply to the NHTSA CAFE program.
---------------------------------------------------------------------------

    \5\ ``Petition for Direct Final Rule with Regard to Various 
Aspects of the Corporate Average Fuel Economy Program and the 
Greenhouse Gas Program,'' Alliance of Automobile Manufacturers and 
the Association of Global Automakers, June 20, 2016.
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    The current regulations regarding the application of the 
multipliers state that ``[T]the actual production of qualifying 
vehicles may be multiplied by the applicable value according to the 
model year, and the result, rounded to the nearest whole number, may be 
used to represent the production of qualifying vehicles when 
calculating average carbon-related exhaust emissions under Sec.  
600.512 of this chapter.'' \6\ The following shows the application of 
this regulatory text in equation form: \7\

    \6\ See 40 CFR 86.1866-12(b)(3).
    \7\ The descriptions of the terms in the above equations have 
been simplified somewhat for illustrative purposes compared to the 
proposed regulations. See the proposed language at 40 CFR 86.1866-
12(b) for the proposed detailed regulatory provisions.
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CO2 Credits = (S-E adj) x VLM x P / 1,000,000 
[Megagrams]
[GRAPHIC] [TIFF OMITTED] TP01OC18.005

Where:

S = Production weighted fleet average standard
Eadj = Production weighted fleet average carbon related 
exhaust emissions (CREE) with the multiplier(s) applied to the 
advanced technology production in the CREE average value calculation
VLM = Vehicle lifetime miles (195,264 for cars and 225,865 for light 
trucks)

[[Page 49347]]

P = Annual total vehicle production (for either cars or light 
trucks)
Target = Model type footprint target
Volume = Model type vehicle production
Volumeadj = Model type vehicle production with 
multiplier(s) applied to advanced technology vehicle production

    Under the current regulations at 40 CFR 86.1865-12(k)(4), the 
multiplier for advanced technology production is applied by modifying 
the way the CREE \8\ (Eadj in the equation above) is 
calculated. The petitioners noted that applying the multiplier only to 
Eadj does not produce the intended credit. The petitioners 
provided an example of the incorrect calculation for a manufacturer 
producing 5,000 battery electric vehicles (BEVs), which have a CREE of 
zero, showing that such a manufacturer would not receive any additional 
credits from the multiplier because the Eadj term would 
remain zero (regardless of the multiplier or how many vehicles were 
produced) and the fleet average standard term (i.e., the footprint-
based standard) remains unchanged because the multiplier does not 
affect the fleet average standard calculation.
---------------------------------------------------------------------------

    \8\ Vehicle and fleet average compliance is based on a 
combination of CO2, hydrocarbon (HC), and carbon monoxide 
(CO) emissions. This is consistent with the carbon balance 
methodology used to determine fuel consumption for the labeling and 
CAFE programs. The GHG regulations account for these total carbon 
emissions appropriately and refer to the sum of these emissions as 
the ``carbon related exhaust emissions'' (CREE).
---------------------------------------------------------------------------

    Example 1 below shows the calculation of credits without the 
multiplier and Example 1a shows the calculation with the incorrect 
application of the multiplier using the 5,000 BEV example, assuming a 
footprint-based standard of 210 g/mile and a multiplier of 2.0.
Example 1a: Calculation of Credits Without the Multiplier
CO2 Credits = (210-0) x 195,264 x 5,000 / 1,000,000 = 
205,027 Megagrams

Example 1b: Incorrect Application of the Multiplier Under Current 
Regulations
CO2 Credits = (210-0) x 195,264 x 5,000 / 1,000,000 = 
205,027 Megagrams

Where the production weighted fleet average carbon related exhaust 
emissions, or Eadj, with the multiplier applied is 
calculated as follows:
[GRAPHIC] [TIFF OMITTED] TP01OC18.006

    In order for the calculation to produce the correct result, the 
multiplier must be applied not only to the advanced technology vehicle 
production in the CREE average value, Eadj, calculation but 
also to the advanced technology vehicle production in the average 
standard calculation and the advanced technology vehicle production 
portions of the total production. The calculation of credits in 
megagrams with the multiplier correctly applied is represented by the 
following equations:

[GRAPHIC] [TIFF OMITTED] TP01OC18.007

Where:

Sadj = Production weighted fleet average standard with 
the multiplier(s) applied to the advanced technology vehicle 
production in the footprint target calculation
Eadj = Production weighted fleet average CREE with the 
multiplier(s) applied to the advanced technology production in the 
CREE value calculation
VLM = Vehicle lifetime miles (195,264 for cars and 225,865 for light 
trucks)
Padj = Annual vehicle production with the multiplier(s) 
applied to the advanced technology vehicle production
Target = Model type footprint target
Volumeadj = Model type vehicle production with 
multiplier(s) applied to advanced technology vehicle production

    Using the corrected methodology, manufacturers would determine the 
additional credits associated with using the multiplier(s) by 
calculating fleet credits with and without the multiplier applied (the 
credits without the multiplier applied are shown below as term C). The 
credits calculated without the multiplier would be subtracted from the 
credits calculated with the multiplier with the difference reflecting 
the additional credits attributable to the multiplier.

Credits due to multiplier = (Sadj-Eadj) x VLM x Padj / 1,000,000 - C 
[Megagrams]

    Applying the above corrected equation to Example 1 produces the 
expected credits due to the multiplier. As shown using Example 1 from 
above, the correct application of the 2.0 multiplier doubles the 
resulting credit in this example, which is what EPA intended and 
manufacturers expected when the program was finalized.
Example 1a: Calculation of Credits Without the Multiplier
CO2 Credits(C) = (210-0) x 195,264 x 5,000 / 1,000,000 = 
205,027 Megagrams

Example 1c: Correct Application of the Multiplier
CO2 CreditsM = (210-0) x 195,264 x (5,000 x 2.0) / 1,000,000 
= 410,054 Megagrams

    Where the production weighted fleet average standard and fleet 
average carbon related exhaust emissions, or CREEavg, are calculated 
with the multiplier as follows:

[[Page 49348]]

[GRAPHIC] [TIFF OMITTED] TP01OC18.008

    And finally, the credits due to application of the multiplier are:

Credits due to multiplier = 410,054-205,027 = 205,027

Example 2 below provides an example calculation for a fleet that 
consists of both conventional and advanced technology vehicles. The 
example consists of a fleet mix of two conventional vehicle models, one 
plug-in hybrid electric (PHEV) model, and one battery electric vehicle 
(BEV) model, where the PHEV multiplier is 1.6 and the EV multiplier is 
2.0.

                                          Table 3--Example 2 Fleet Mix
----------------------------------------------------------------------------------------------------------------
                                                                     Footprint
                  Vehicle model                     Production    target (CO2 g/   CREE (CO2 g/     Multiplier
                                                                        mi)             mi)
----------------------------------------------------------------------------------------------------------------
Conventional 1..................................          10,000             300             320             N/A
Conventional 2..................................           8,000             210             210             N/A
PHEV............................................           5,000             210              50             1.6
BEV.............................................           5,000             210               0             2.0
                                                 ---------------------------------------------------------------
    Total.......................................          28,000  ..............  ..............  ..............
----------------------------------------------------------------------------------------------------------------

Example 2a: Calculation of Credits for Mixed Fleet With No Multiplier
CO2 Credits(C) = (242-183) x 195,264 x 28,000 / 1,000,000 = 
322,576 Megagrams

    Where the production weighted fleet average standard (S) and fleet 
average CREE (E) terms are calculated as follows:
[GRAPHIC] [TIFF OMITTED] TP01OC18.009

Example 2b: Incorrect Application of the Multiplier Under Current 
Regulations
CO2 Credits = (242-147) x 195,264 x 28,000 / 1,000,000 = 
519,402 Megagrams

Where the production weighted fleet average Standard (S) and adjusted 
CREE with the multiplier applied (Eadj) are calculated as 
follows:
[GRAPHIC] [TIFF OMITTED] TP01OC18.010

[[Page 49349]]

Example 2c: Calculation of Credits for Mixed Fleet Using Corrected 
Multiplier Methodology
CO2 Credits with multipler = (235-147) x 195,264 x 36,000 / 
1,000,000 = 618,596 Megagrams

    Where the production weighted fleet average Sadj and 
Eadj terms and the Padj terms, are calculated 
using the multiplier as follows:
[GRAPHIC] [TIFF OMITTED] TP01OC18.011

Padj = 10,000 + 8,000 + (5,000 x 1.6) + (5,000 x 2.0) = 36,000

    Under the proposed regulations, manufacturers would use the above 
approach to calculate Megagrams of credits with and without the 
multipliers applied and report the difference to EPA as the credits 
attributed to the use of the advanced technology multipliers. In the 
above Example 2, the credits attributable to the multipliers are 
618,596-322,576 = 296,020. The previously established incorrect 
methodology, which applies the multiplier only to the CREE term, would 
provide fewer credits (519,402-322,576 = 196,826 Mg) for this example.
    The descriptions of the terms in the above equations have been 
simplified somewhat for illustrative purposes compared to the proposed 
regulations. See the proposed language at 40 CFR 86.1866-12(b) for the 
proposed detailed regulatory provisions. Previously, Sec.  86.1866-
12(b)(3) simply modified the CREE term in the equation in Sec.  
86.1865-12(k)(4) to incorporate the multiplier. Now, since the 
multiplier should have been applied as discussed above, EPA proposes to 
revise the regulations to add additional steps to the calculation 
process. First, manufacturers would use the new equation to calculate 
the total number of credits generated with multipliers included. Then, 
manufacturers would subtract from that calculation the credits 
calculated without the multipliers applied, using the equation that 
already exists in Sec.  86.1865-12(k)(4). The result provides the 
credit attributable to the multipliers to be reported to EPA as part of 
the credits portion of the year end compliance report.
    The advanced technology multiplier incentive is available starting 
with the 2017 model year. Manufacturers are required to report all 
credit information by May 1 of the year following the end of the model 
year, which, for model year 2017, is May 1, 2018. EPA recognizes that 
the timing of this rulemaking precludes the ability to finalize the 
multiplier-based credits by the deadline, and, given this, the 
submissions made by manufacturers on or before May 1, 2018 will be 
evaluated using the current incorrect multiplier. For the 2017 model 
year reporting, EPA has asked that manufacturers enter all their test 
data as they normally would (which needs to be done for CAFE 
calculations anyway), and that reports be submitted on time, with fleet 
credits calculated from the values as determined by EPA's current 
regulatory calculation. After the regulations proposed today are 
finalized, EPA will allow manufacturers to request through EPA's online 
system, used by manufacturers to submit data to EPA for vehicle 
emissions certification and compliance purposes, that the EPA system 
recalculate the manufacturer's fleet performance based on the corrected 
values. EPA does not expect this to be burdensome, as the necessary 
data for the recalculation will have previously been submitted 
electronically by the manufacturer.

B. Off-Cycle Credit Calculations Based On the 5-Cycle Methodology

    EPA's GHG emissions standards allow manufacturers to generate 
credits toward compliance through the application of off-cycle 
technologies. In model years 2017 and later, fuel economy off-cycle 
credits equivalent to EPA CO2 credits are also available in 
the CAFE program. Off-cycle technologies are those that result in real-
world emissions reductions that are not fully captured on the 2-cycle 
emissions tests used for compliance with the GHG standards (i.e., the 
city and highway test cycles). EPA originally adopted the off-cycle 
credits program as part of the rulemaking establishing the MY 2012-2016 
standards.\9\ EPA later modified the off-cycle program in the MY 2017-
2025 final rule.\10\ One of the methodologies for manufacturers to 
demonstrate off-cycle emissions reductions is by conducting 5-cycle 
testing \11\ with and without the off-cycle technology applied (i.e., 
A/B testing).\12\ The original program did not allow off-cycle credits 
for technologies that showed significant benefits on the 2-cycle 
segment of the 5-cycle test. The regulations established by the MY 
2012-2016 rule stated that the ``CO2-reducing impact of the 
technology must not be significantly measurable over the Federal Test 
Procedure and the Highway Fuel Economy Test.'' \13\ As such, the 
regulations did not require manufacturers to subtract 2-cycle 
reductions from the 5-cycle benefits when deriving the off-cycle credit 
because the 2-cycle benefit would necessarily be negligible.
---------------------------------------------------------------------------

    \9\ 75 FR 25438-25440 (May 7, 2010) and 75 FR 25697-25698.
    \10\ 77 FR 62726-62738, 77 FR 62832-62840, and 40 CFR 86.1869-
12.
    \11\ The 5-cycle methodology is currently used to determine fuel 
economy label values. EPA established the 5-cycle test methods to 
better represent real-world factors impacting fuel economy, 
including higher speeds and more aggressive driving, colder 
temperature operation, and the use of air conditioning.
    \12\ 77 FR 62837.
    \13\ 75 FR 25698.
---------------------------------------------------------------------------

    The program as revised by the MY 2017-2025 rule allows for the 
possibility that some qualifying technologies could have a small 2-
cycle benefit but a larger off-cycle benefit. The 2012 rule stated 
``EPA is removing the ``not significantly measurable over the

[[Page 49350]]

2-cycle test'' criteria'' allowing for credits for qualifying off-cycle 
technologies ``providing small reductions on the 2-cycle tests but 
additional significant reductions off-cycle.'' \14\ EPA stated ``[t]he 
intent of the off-cycle provisions is to provide an incentive for 
CO2 and fuel consumption reducing off-cycle technologies 
that would otherwise not be developed because they do not offer a 
significant 2- cycle benefit and that the program would ``encourage 
innovative strategies for reducing CO2 emissions beyond 
those measured by the 2-cycle test procedures.'' \15\ It is plain from 
the proposed and final rules that the revised off-cycle credit program 
was intended to provide credits for the incremental benefit of the off-
cycle technology that was not captured on the 2-cycle test. For 
example, EPA provided extensive discussion of how it developed the 
standards based on its evaluation of various technologies and their 
effectiveness as demonstrated on the 2-cycle test.\16\ EPA further 
stated that the off-cycle credits were intended to recognize GHG 
reductions in excess of the benefits already reflected in the 
standards.\17\ For the menu credits for waste heat recovery and active 
aerodynamics, for example, EPA derived the credits by estimating the 5-
cycle benefit and then subtracting out the 2-cycle benefit.\18\
---------------------------------------------------------------------------

    \14\ 77 FR 62835.
    \15\ 77 FR 62832.
    \16\ 76 FR 74942 (December 1, 2011) & 77 FR 62726.
    \17\ 77 FR 62650 and 77 FR 62836.
    \18\ Joint Technical Support Document: Final Rulemaking for 
2017-2025 Light-Duty Vehicle Greenhouse Gas Emission Standards and 
Corporate Average Fuel Economy Standards, August 2012, EPA-420-R-12-
901 pp. 5-65 and 5-82.
---------------------------------------------------------------------------

    However, EPA inadvertently did not make the associated change in 
the regulations to require that the 2-cycle benefit be subtracted from 
the 5-cycle benefit for those off-cycle credits which are based on a 
manufacturer-specific 5-cycle technology demonstration. This could lead 
to double counting of the 2-cycle benefit of the technology, which is 
also included in the 2-cycle tailpipe emissions results of the vehicle 
used to determine compliance with the standards. EPA made clear in the 
final rule that such ``windfall credits'' would be inappropriate.\19\ 
This issue has been raised by manufacturers seeking clarification from 
the agency. EPA is addressing this oversight and the potential double-
counting issue by proposing to change the regulations such that the 2-
cycle benefit is subtracted from the 5-cycle benefit of the off-cycle 
technology. EPA is proposing to add to the regulations the equation 
below to ensure that credits derived from the 5-cycle methodology are 
calculated properly. See the proposed regulatory language in 40 CFR 
86.1869-12(c) for the complete proposed regulatory text.
---------------------------------------------------------------------------

    \19\ 77 FR 62836.
---------------------------------------------------------------------------

    Under the proposed regulatory correction, manufacturers would 
calculate the off-cycle credit in grams per mile using the following 
formula, rounding the result to the nearest 0.1 grams/mile:

Credit = (A-B)-(C-D)

Where:

Credit = the off-cycle benefit of the technology or technologies 
being evaluated, subject to EPA approval
A = the 5-cycle adjusted combined city/highway carbon-related 
exhaust emission value for the vehicle without the off-cycle 
technology;
B = 5-cycle adjusted combined city/highway carbon-related exhaust 
emission value for the vehicle with the off-cycle technology;
C = 2-cycle unadjusted combined city/highway carbon-related exhaust 
emissions value for the vehicle without the off-cycle technology; 
and
D = 2-cycle unadjusted combined city/highway carbon-related exhaust 
emissions value for the vehicle with the off-cycle technology.

IV. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is a significant regulatory action that was submitted 
to the Office of Management and Budget (OMB) for review. This action is 
a ``significant regulatory action'' because it raises policy issues. 
Any changes made in response to OMB recommendations have been 
documented in the docket.
    This proposed rule merely clarifies and corrects existing 
regulatory language. EPA does not believe there will not be costs 
associated with this rule. Also, this proposed rule is not anticipated 
to create additional burdens to the existing requirements. As such, a 
regulatory impact evaluation or analysis is unnecessary.

B. Executive Order 13771: Reducing Regulations and Controlling 
Regulatory Costs

    This action is not expected to be subject to Executive Order 13771 
because this proposed rule merely clarifies and corrects existing 
regulatory language and is not expected to result in costs or 
additional burdens.

C. Paperwork Reduction Act (PRA)

    This proposed action would not impose any new information 
collection burden under the PRA, since it merely clarifies and corrects 
existing regulatory language. OMB has previously approved the 
information collection activities contained in the existing regulations 
and has assigned OMB control number of 2060-0104.

D. Regulatory Flexibility Act (RFA)

    I certify that this proposed action would not have a significant 
economic impact on a substantial number of small entities under the 
RFA. In making this determination, the impact of concern is any 
significant adverse economic impact on small entities. An agency may 
certify that a rule will not have a significant economic impact on a 
substantial number of small entities if the rule relieves regulatory 
burden, has no net burden or otherwise has a positive economic effect 
on the small entities subject to the rule. This proposed rule merely 
clarifies and corrects existing regulatory language. We therefore 
anticipate no costs and therefore no regulatory burden associated with 
this proposed rule. Further, small entities are generally exempt from 
the light-duty vehicles greenhouse gas standards unless the small 
entity voluntarily opts into the program. See 40 CFR 86.1801-12(j). We 
have therefore concluded that this proposed action will have no net 
regulatory burden for all directly regulated small entities.

E. Unfunded Mandates Reform Act (UMRA)

    This proposed action does not contain any unfunded mandate as 
described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or 
uniquely affect small governments. The proposed action imposes no 
enforceable duty on any state, local or tribal governments. 
Requirements for the private sector do not exceed $100 million in any 
one year.

F. Executive Order 13132: Federalism

    This proposed action does not have federalism implications. It will 
not have substantial direct effects 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.

G. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    This proposed action does not have tribal implications as specified 
in

[[Page 49351]]

Executive Order 13175. This rule only corrects and clarifies regulatory 
provisions that apply to light-duty vehicle manufacturers. Tribal 
governments would be affected only to the extent they purchase and use 
regulated vehicles. Thus, Executive Order 13175 does not apply to this 
action.

H. Executive Order 13045: Protection of Children From Environmental 
Health Risks and Safety Risks

    This proposed action is not subject to Executive Order 13045 
because it is not economically significant as defined in Executive 
Order 12866, and because the EPA does not believe the environmental 
health or safety risks addressed by this action present a 
disproportionate risk to children. This proposed rule merely corrects 
and clarifies previously established regulatory provisions.

I. Executive Order 13211: Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution or Use

    This proposed action is not subject to Executive Order 13211, 
because it is not a significant regulatory action under Executive Order 
12866.

J. National Technology Transfer and Advancement Act (NTTAA)

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 104-113, 12(d) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures, and business practices) that are developed or adopted by 
voluntary consensus standards bodies. NTTAA directs agencies to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards.
    This proposed action modifies existing regulations to correct 
errors in the regulations and therefore involves technical standards 
previously established by EPA. The amendments to the regulations do not 
involve the application of new technical standards. EPA is continuing 
to use the technical standards previously established in its rules 
regarding the light-duty vehicle GHG standards for MYs 2017-2025. See 
77 FR 62960.

K. Executive Order 12898: Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    The EPA believes that this action is not subject to Executive Order 
12898 (59 FR 7629, February 16, 1994) because it does not establish an 
environmental health or safety standard. This proposed regulatory 
action makes technical corrections to a previously established 
regulatory action and as such does not have any impact on human health 
or the environment.

List of Subjects in 40 CFR Part 86

    Administrative practice and procedure, Confidential business 
information, Labeling, Motor vehicle pollution, Reporting and 
recordkeeping requirements.

    Dated: September 18, 2018.
Andrew R. Wheeler,
Acting Administrator.

    For the reasons set forth in the preamble, the Environmental 
Protection Agency is proposing to amend part 86 of title 40, Chapter I 
of the Code of Federal Regulations as follows:

PART 86--CONTROL OF EMISSIONS FROM NEW AND IN-USE HIGHWAY VEHICLES 
AND ENGINES

0
1. The authority citation for part 86 continues to read as follows:

    Authority: 42 U.S.C. 7401-7671q.

0
2. Section 86.1865-12 is amended by redesignating paragraph (k)(5)(v) 
as paragraph (k)(5)(vi) and by adding paragraph (k)(5)(v), to read as 
follows:

Sec.  86.1865-12  How to comply with the fleet average CO2 standards.

* * * * *
    (k) * * *
    (5) * * *
    (v) Advanced technology vehicle credits earned according to the 
provisions of Sec.  86.1866-12(b)(3).
* * * * *
0
3. Section 86.1866-12 is amended by revising paragraphs (b) 
introductory text and (b)(3) to read as follows:

Sec.  86.1866-12   CO2 credits for advanced technology vehicles.

* * * * *
    (b) For electric vehicles, plug-in hybrid electric vehicles, fuel 
cell vehicles, dedicated natural gas vehicles, and dual-fuel natural 
gas vehicles as those terms are defined in Sec.  86.1803-01, that are 
certified and produced for U.S. sale in the 2017 through 2021 model 
years and that meet the additional specifications in this section, the 
manufacturer may use the production multipliers in this paragraph (b) 
to determine additional credits for advanced technology vehicles. Full 
size pickup trucks eligible for and using a production multiplier are 
not eligible for the performance-based credits described in Sec.  
86.1870-12(b).
* * * * *
    (3) Calculate credits for advanced technology vehicles for a given 
model year, and separately for passenger automobiles and light trucks, 
using the following equation. No credits are earned if the result is a 
negative value.

Credits due to the multiplier = ((Sadj-Eadj) x 
Padj x VLM / 1,000,000)-C

Where:
Sadj = adjusted CO2 standard calculated 
according to the method described in Sec.  86.1818-12(c) or (d) and 
rounded to the nearest whole number. For the purpose of this 
calculation, the actual production of qualifying vehicles under this 
section must be multiplied by the applicable production multiplier, 
and the result shall be rounded to the nearest whole number.
Eadj = adjusted production-weighted fleet average carbon-
related exhaust emissions calculated according to the method 
described in Sec.  600.510-12(j) and rounded to the nearest whole 
number. For the purpose of this calculation, the actual production 
of qualifying vehicles under this section must be multiplied by the 
applicable production multiplier, and the result shall be rounded to 
the nearest whole number.
Padj = total adjusted production of passenger automobiles 
or light trucks, where the actual production of qualifying vehicles 
under this section must be multiplied by the applicable production 
multiplier and the result shall be rounded to the nearest whole 
number.
VLM = vehicle lifetime miles, which for passenger automobiles shall 
be 195,264 and for light trucks shall be 225,865; and
C = The credits calculated according to Sec.  86.1865-12(k)(4), 
without use of multipliers, in whole megagrams.

0
4. Section 86.1869-12 is amended by revising paragraphs (c)(1) through 
(c)(3) to read as follows:

Sec.  86.1869-12   CO2 credits for off-cycle CO2-reducing technologies.

* * * * *
    (c) * * *
    (1) Testing without the off-cycle technology installed and/or 
operating.
    (i) Determine carbon-related exhaust emissions over the FTP, the 
HFET, the US06, the SC03, and the cold temperature FTP test procedures 
according to the test procedure provisions specified in 40 CFR part 600 
subpart B and using the calculation procedures specified in Sec.  
600.113-12 of this chapter. Run each of these tests a

[[Page 49352]]

minimum of three times without the off-cycle technology installed and 
operating and average the per phase (bag) results for each test 
procedure.
    (ii) Calculate the FTP and HFET carbon-related exhaust emissions 
from the FTP and HFET averaged per phase results.
    (iii) Calculate the combined city/highway carbon-related exhaust 
emission value from the FTP and HFET values determined in paragraph 
(c)(1)(ii) of this section, where the FTP value is weighted 55% and the 
HFET value is weighted 45%. The resulting value is the 2-cycle 
unadjusted combined city/highway carbon-related exhaust emissions value 
for the vehicle without the off-cycle technology.
    (iv) Calculate the 5-cycle weighted city/highway combined carbon-
related exhaust emissions from the averaged per phase results, where 
the 5-cycle city value is weighted 55% and the 5-cycle highway value is 
weighted 45%. The resulting value is the 5-cycle adjusted combined 
city/highway carbon-related exhaust emission value for the vehicle 
without the off-cycle technology.
    (2) Testing with the off-cycle technology installed and/or 
operating.
    (i) Determine carbon-related exhaust emissions over the FTP, the 
HFET, the US06, the SC03, and the cold temperature FTP test procedures 
according to the test procedure provisions specified in 40 CFR part 600 
subpart B and using the calculation procedures specified in Sec.  
600.113-12 of this chapter. Run each of these tests a minimum of three 
times with the off-cycle technology installed and operating and average 
the per phase (bag) results for each test procedure.
    (ii) Calculate the FTP and HFET carbon-related exhaust emissions 
from the FTP and HFET averaged per phase results.
    (iii) Calculate the combined city/highway carbon-related exhaust 
emission value from the FTP and HFET values determined in paragraph 
(c)(2)(ii) of this section, where the FTP value is weighted 55% and the 
HFET value is weighted 45%. The resulting value is the 2-cycle 
unadjusted combined city/highway carbon-related exhaust emissions value 
for the vehicle with the off-cycle technology.
    (iv) Calculate the 5-cycle weighted city/highway combined carbon-
related exhaust emissions from the averaged per phase results, where 
the 5-cycle city value is weighted 55% and the 5-cycle highway value is 
weighted 45%. The resulting value is the 5-cycle adjusted combined 
city/highway carbon-related exhaust emission value for the vehicle with 
the off-cycle technology.
    (3) Calculate the off-cycle credit in grams per mile using the 
following formula, rounding the result to the nearest 0.1 grams/mile:

Credit = (A-B)-(C-D)

Where:

Credit = the off-cycle benefit of the technology or technologies 
being evaluated, subject to EPA approval
A = the 5-cycle adjusted combined city/highway carbon-related 
exhaust emission value for the vehicle without the off-cycle 
technology calculated in paragraph (c)(1)(iv) of this section;
B = 5-cycle adjusted combined city/highway carbon-related exhaust 
emission value for the vehicle with the off-cycle technology 
calculated in paragraph (c)(2)(iv) of this section;
C = 2-cycle unadjusted combined city/highway carbon-related exhaust 
emissions value for the vehicle without the off-cycle technology 
calculated in paragraph (c)(1)(iii) of this section; and
D = 2-cycle unadjusted combined city/highway carbon-related exhaust 
emissions value for the vehicle with the off-cycle technology 
calculated in paragraph (c)(2)(iii) of this section.
* * * * *
[FR Doc. 2018-21195 Filed 9-28-18; 8:45 am]
 BILLING CODE 6560-50-P