Document ID: EPA-HQ-OAR-2019-0210-0001
Agency: epa
Document Type: Notice
Title: Proposed Determinations of Light-Duty Vehicle Alternative Greenhouse Gas Emissions Standards for Small Volume Manufacturers
Posted Date: 2019-07-31T04:00Z

[Federal Register Volume 84, Number 147 (Wednesday, July 31, 2019)]
[Notices]
[Pages 37277-37282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16319]

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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OAR-2019-0210; FRL-9997-56-OAR]

Proposed Determinations of Light-Duty Vehicle Alternative 
Greenhouse Gas Emissions Standards for Small Volume Manufacturers

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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SUMMARY: EPA is requesting comment on proposed determinations of 
alternative light-duty vehicle greenhouse gas emissions standards for 
small volume manufacturers. The alternative standards are proposed 
pursuant to small volume manufacturer provisions in EPA's light-duty 
vehicle greenhouse gas regulations. Four small volume manufacturers 
have applied for alternative standards: Aston Martin, Ferrari, Lotus 
and McLaren. The alternative standards in these determinations cover 
model years 2017-2021.

DATES: Comments must be received on or before August 30, 2019.

ADDRESSES: You may send comments, identified by Docket ID No. EPA-HQ-
OAR-2019-0210, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov/ 
(our preferred method). Follow the online instructions for submitting 
comments.
     Email: a-and-r-Docket@epa.gov. Include Docket ID No. EPA-
HQ-OAR-2019-0210 in the subject line of the message.
     Fax: (202) 566-9744 Include Docket ID No. EPA-HQ-OAR-2019-
0210 on the cover of the fax.
     Mail: U.S. Environmental Protection Agency, EPA Docket 
Center, OAR, Docket EPA-HQ-OAR-2019-0210, Mail Code 28221T, 1200 
Pennsylvania Avenue NW, Washington, DC 20460.
     Hand Delivery/Courier: EPA Docket Center, WJC West 
Building, Room 3334, 1301 Constitution Avenue NW, Washington, DC 20004. 
The Docket Center's hours of operations are 8:30 a.m.-4:30 p.m., 
Monday-Friday (except Federal Holidays).

Instructions: All submissions received must include the Docket ID No. 
for this rulemaking. Comments received may be posted without change to 
https://www.regulations.gov/, including any personal information 
provided. For detailed instructions on sending comments and additional 
information on the rulemaking process, see the ``Public Participation'' 
heading of the SUPPLEMENTARY INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Christopher Lieske, Office of 
Transportation and Air Quality, Assessment and Standards Division, U.S. 
Environmental Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 
48105. Telephone: (734) 214-4584. Fax: (734) 214-4816. Email address: 
lieske.christopher@epa.gov.

SUPPLEMENTARY INFORMATION: 

I. Public Participation

    Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2019-
0210, at https://www.regulations.gov (our preferred method), or the 
other methods identified in the ADDRESSES section. Once submitted, 
comments cannot be edited or removed from the docket. 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 https://www.epa.gov/dockets/commenting-epa-dockets.

II. Background

    EPA's light-duty vehicle greenhouse gas (GHG) program for model 
years (MYs) 2012-2016 provided a conditional exemption for small volume 
manufacturers (SVMs) with annual U.S. sales of less than 5,000 vehicles 
due to unique feasibility issues faced by these SVMs.\1\ The exemption 
was conditioned on the manufacturer making a good faith effort to 
obtain credits from larger

[[Page 37278]]

volume manufacturers. For the MY 2017-2025 light-duty vehicle GHG 
program, EPA proposed, took public comment on, and finalized specific 
regulations allowing SVMs to petition EPA for alternative standards, 
again recognizing that the primary program standards may not be 
feasible for SVMs and could drive these manufacturers from the U.S. 
market.\2\ EPA acknowledged that SVMs may face a greater challenge in 
meeting CO2 standards compared to large manufacturers 
because they only produce a few vehicle models, mostly focused on high 
performance sports cars and luxury vehicles. SVMs have limited product 
lines across which to average emissions, and the few vehicles they 
produce often have very high CO2 levels on a per vehicle 
basis. EPA also noted that the total U.S. annual vehicle sales of SVMs 
are much less than 1 percent of total sales of all manufacturers and 
contribute minimally to total vehicular GHG emissions, and foregone GHG 
reductions from SVMs likewise are a small percentage of total industry-
wide reductions. EPA received only supportive public comments on 
allowing alternative standards for SVMs, including from SVMs, their 
trade associations, and dealers.\3\ EPA adopted a regulatory pathway 
for SVMs to apply for alternative GHG emissions standards for MYs 2017 
and later, based on information provided by each SVM on factors such as 
technical feasibility, cost, and lead time.\4\
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    \1\ 75 FR 25419-25421, May 7, 2010.
    \2\ 77 FR 62789-62795, October 15, 2012.
    \3\ Docket No. EPA-HQ-OAR-2010-0799.
    \4\ 40 CFR 86.1818-12(g).
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    The regulations outline eligibility criteria and a framework for 
establishing SVM alternative standards. Manufacturer average annual 
U.S. sales must remain below 5,000 vehicles to be eligible for SVM 
alternative standards.\5\ The regulations specify the requirements for 
supporting technical data and information that a manufacturer must 
submit to EPA as part of its application.\6\
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    \5\ 40 CFR 86.1818-12(g)(1).
    \6\ 40 CFR 86.1818-12(g)(4).
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    The regulations specify that an SVM applying for an alternative 
standard provide the following technical information:
     The CO2 reduction technologies employed by the 
manufacturer on each vehicle model, or projected to be employed, 
including information regarding the cost and CO2-reducing 
effectiveness. Include technologies that improve air conditioning 
efficiency and reduce air conditioning system leakage, and any ``off-
cycle'' technologies that potentially provide benefits outside the 
operation represented by the Federal Test Procedure (FTP) and the 
Highway Fuel Economy Test (HFET).
     An evaluation of comparable models from other 
manufacturers, including CO2 results and air conditioning 
credits generated by the models.
     A discussion of the CO2-reducing technologies 
employed on vehicles offered outside of the U.S. market but not 
available in the U.S., including a discussion as to why those vehicles 
and/or technologies are not being used to achieve CO2 
reductions for vehicles in the U.S. market.
     An evaluation, at a minimum, of the technologies projected 
by the EPA in a final rulemaking as those technologies likely to be 
used to meet greenhouse gas emission standards and the extent to which 
those technologies are employed or projected to be employed by the 
manufacturer.
     The most stringent CO2 level estimated to be 
feasible for each model, in each model year, and the technological 
basis for this estimate.
     For each model year, a projection of the lowest feasible 
sales-weighted fleet average CO2 value, separately for 
passenger automobiles and light trucks, and an explanation 
demonstrating that these projections are reasonable.
     A copy of any application, data, and related information 
submitted to the National Highway Traffic Safety Administration (NHTSA) 
in support of a request for alternative Corporate Average Fuel Economy 
standards filed under 49 CFR part 525.
    SVMs may apply for alternative standards for up to five model years 
at a time. The GHG standards that EPA establishes for MY 2017 may 
optionally be met by the manufacturers in MYs 2015-2016.\7\ SVMs may 
use the averaging, banking, and trading provisions to meet the 
alternative standards, but may not trade credits to another 
manufacturer.\8\ The process for approving an SVM application includes 
a public comment period of 30 days after which EPA will issue a final 
determination establishing alternative standards for the manufacturer, 
as appropriate.\9\
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    \7\ See 40 CFR 86.1818-12(g). Manufacturers may opt to comply 
with their MY 2017 standard in MYs 2015 and 2016 retroactively in 
lieu of the Temporary Leadtime Alternative Allowance Standards used 
in these model years.
    \8\ 40 CFR 86.1818-12(g)(6).
    \9\ 40 CFR 86.1818-12(g)(5).
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    SVMs have applied for alternative standards due to continued 
concern regarding their abilities to meet the primary program GHG 
standards. Given that the current production MY for most manufacturers 
is 2019, with MY 2020 starting soon, these alternative standards, if 
adopted, will provide immediate relief for SVMs as authorized under the 
regulation. The GHG program also allows for a 3-year carry-back 
provision, which is within the timeframe of this notice and the MYs 
under consideration.
    The Energy Policy and Conservation Act (EPCA), governing the 
establishment of Corporate Average Fuel Economy (CAFE) standards, 
contains separate small volume manufacturer alternative standards 
provisions that are administered by the National Highway Traffic Safety 
Administration (NHTSA) independent of EPA's SVM alternative standards 
provisions.\10\ Under EPCA's CAFE provisions, SVMs meeting the CAFE 
eligibility criteria may petition NHTSA for less stringent alternative 
CAFE standards. Manufacturers generally are also able to pay fines in 
lieu of meeting the CAFE standards, which is not an option in EPA's GHG 
program under the Clean Air Act. While eligible SVMs may apply for 
alternative standards under the CAFE program, and some of the SVMs 
covered by this decision document have applied for alternative CAFE 
standards, none of those SVMs have been granted alternative CAFE 
standards for MYs 2017-2021.\11\
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    \10\ 49 U.S.C. 32902(d). Implementing regulations may be found 
in 49 CFR part 525. EISA limits eligibility to manufacturers with 
worldwide production of fewer than 10,000 passenger cars.
    \11\ See https://one.nhtsa.gov/cafe_pic/CAFE_PIC_Mfr_LIVE.html.
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III. Manufacturer Requested GHG Standards

    Four manufacturers have applied for SVM alternative standards: 
Aston Martin, Ferrari, Lotus and McLaren.\12\ Each manufacturer 
provided an application to EPA that contains confidential business 
information (CBI). Each manufacturer also provided a public version of 
its application with the CBI removed, which EPA has placed in the 
public docket established for this proceeding. As part of their 
applications, the SVMs requested specific alternative GHG standards for 
five model years starting with MY 2017 based on their unique projected 
product mix. Table 1 below provides the

[[Page 37279]]

standards requested by the manufacturers.
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    \12\ Ferrari was previously owned by Fiat Chrysler Automobiles 
(FCA) and petitioned EPA for operationally independent status under 
40 CFR 86.1838-01(d). In a separate decision EPA granted this status 
to Ferrari starting with the 2012 model year, allowing Ferrari to be 
treated as an SVM under EPA's GHG program. Ferrari has since become 
an independent company and is no longer owned by FCA.

                                  Table 1--Manufacturer Requested GHG Standards
                                                    [g/mile]
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          Manufacturer               MY 2017 *        MY 2018         MY 2019         MY 2020         MY 2021
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Aston Martin....................             431             396             380             374             376
Ferrari.........................             421             408             395             386             377
Lotus...........................             361             361             344             341             308
McLaren.........................             372             372             368             360             334
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* Manufacturers may optionally meet MY 2017 standards in MYs 2015-2016 (40 CFR 86.1818-12(g).

    In May 2017, subsequent to submitting a request for SVM alternative 
standards, Lotus was acquired by Zhejiang Geely Holding Group (Geely) 
which also owns Volvo Car Company. Under the SVM regulations regarding 
eligibility,\13\ Lotus remains eligible for alternative standards for 
MY 2017. However, it is possible that Lotus will no longer be eligible 
for SVM standards starting in MY 2018 as Lotus may exceed the 5,000 
vehicles eligibility threshold under the aggregation provisions of the 
regulations, based upon sales volume figures and other information 
provided by the manufacturer for MY 2018 which has not yet been 
finalized. While EPA is proposing alternative standards for Lotus 
through MY 2021, in order to use the alternative standards for MYs 
2018-2021 Lotus would need to either demonstrate that they remain 
eligible for SVM alternative standards under the aggregation provisions 
or apply and be granted operational independence status.\14\ EPA is not 
including any determination of SVM eligibility for Lotus for MY 2018 
and beyond in this proposed determination notice.
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    \13\ 40 CFR 86.1818-12(g)(1)(i).
    \14\ 40 CFR 86.1838-01(d).
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    The regulations require SVMs to submit information, including cost 
information, to EPA as part of their applications, as detailed above. 
Each SVM provided its technical basis for the requested standards 
including a discussion of technologies that could and could not be 
feasibly applied to their vehicles in the time frame of the standards. 
As noted above, the non-CBI information provided by the SVMs is 
included in the docket for this proceeding. However, much of the data 
and information provided by the manufacturers regarding future vehicles 
and technology projections is claimed as CBI and not included in the 
public versions of the applications.\15\
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    \15\ For more information about how EPA addresses claims of 
Confidential Business Information, see 40 CFR part 2, subpart B.
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    The MY 2017-2025 light-duty GHG program includes opportunities to 
generate air conditioning and off-cycle emissions reduction credits 
that can be used as part of a manufacturer's strategy in meeting 
standards. Each SVM provided EPA with an estimate of its plans for use 
of air conditioning and off-cycle credits in addition to their 
CO2 emissions measured over the 2-cycle compliance test (FTP 
and HFET) for each model year and these credits are reflected in the 
performance levels each manufacturer has projected. The breakdown of 
each manufacturer's use of credits was submitted as CBI by the 
manufacturers and not included in the public materials.
    The alternative standards would be unique for each manufacturer and 
the regulations providing for 5-year credit carry-forward and 3-year 
credit carry-back provisions would apply. As noted above, SVMs would 
not be able to trade (i.e., sell) credits to other manufacturers but 
would be able to purchase credits from other manufacturers not in the 
SVM alternative standards program. The standards would be manufacturer 
fleet averages, but not footprint based, as manufacturers did not 
request footprint-based standards and EPA believes the level of 
complexity added by making the unique SVM standards footprint based is 
not warranted given the manufacturers' limited product offerings. For 
example, the number of base vehicle models in SVMs' fleets range from 
one to four models. Also, in setting unique standards for SVMs, the 
product plans of each manufacturer are necessarily considered by EPA in 
the standard setting and so footprint-based standards are unnecessary.

IV. EPA Proposed Determinations of SVM Alternative Standards

    The SVM alternative standards provisions in the MY 2017-2025 rule 
provide for a case-by-case approach reflecting the unique product 
offerings of each manufacturer. The preamble to the 2012 final rule 
discusses how EPA would set SVM standards, including several factors to 
consider in determining what CO2 standards are appropriate 
for a given SVM's fleet. These factors include the level of technology 
applied to date by the manufacturer, the manufacturer's projections for 
the application of additional technology, CO2 reducing 
technologies being employed by other manufacturers including on 
vehicles with which the SVM competes directly and the CO2 
levels of those vehicles, cost information, and the technological 
feasibility and reasonableness of employing additional technology not 
projected by the manufacturer in the time-frame for which standards are 
being established. EPA also considers opportunities to generate A/C and 
off-cycle credits that are available to the manufacturer. Lead time is 
a key consideration both for the initial years of the SVM standard, 
where lead time would be shorter (or in fact has passed, as discussed 
below), and for the later years where manufacturers would have more 
time to achieve additional CO2 reductions.\16\
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    \16\ 77 FR 62792, October 15, 2012.
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    The goal of the program is to ensure that SVMs make continued 
improvements to reduce GHG emissions, while recognizing that they might 
not be able to meet the primary program standards due to their limited 
product lines and the types of vehicles they produce.\17\ With this 
program goal in mind, EPA has considered the technical, cost, and other 
information provided by each SVM regarding its unique product plan 
strategy, and the alternative standards requested by the SVMs.
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    \17\ 77 FR 62790, October 15, 2012.
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    The CO2 emissions for vehicles produced by SVMs are 
currently well above their primary program GHG targets but they are not 
out of step with some other vehicles produced by large volume 
manufacturers, as shown in Figure 1 below. As we discussed above, 
although emissions may be comparable in some cases to vehicles produced 
by

[[Page 37280]]

other manufacturers, SVMs have the additional challenge of not being 
able to average emissions across a diverse product line, as is the case 
for larger manufacturers. The SVM alternative standards help provide a 
level playing field between the SVMs and large manufacturers that 
produce vehicles in the same market segments. The SVM models are 
indicated by the ``+'' markers. Given their higher baseline 
CO2 emissions, these high performance and luxury vehicles 
are likely to continue to have higher CO2 levels relative to 
the industry-wide fleet average as the fleetwide standards become more 
stringent.
[GRAPHIC] [TIFF OMITTED] TN31JY19.009

    For the first four model years of the program, MYs 2017-2020, EPA 
is proposing to adopt the manufacturers' requested alternative 
standards. These model years are completed, underway, or close to 
underway (MY 2020 can start as early as January 2, 2019) and therefore 
lead-time is a primary consideration. Based on the absence of or very 
minimal lead-time available for these model years and EPA's review of 
the manufacturers' submissions and assessment of the capability of each 
product and its associated technology adoption, EPA believes this 
approach is appropriate for MYs 2017-2020.
    For MY 2021, EPA considered the levels requested by the 
manufacturers and compared them to levels each SVM would achieve under 
an approach where the manufacturers achieved year-over-year reductions 
from their MY 2017 baseline through MY 2021, analogous to the overall 
declining fleetwide standards in the primary program. The primary 
program standards for passenger cars are equivalent to approximately 
five percent year-over-year improvements. Although the regulations do 
not mandate a specific year-over-year percent reduction for SVMs, EPA 
considered an approach based on a minimum level of steady improvement 
of three percent year-over-year emissions reduction from each SVM's 
baseline CO2 levels. This pace of change is not as 
aggressive as the annual improvement in the passenger car standards in 
the primary program, but EPA believes it represents a reasonable 
minimum pace of meaningful improvements for SVMs, given the SVMs' 
limited product lines and limited ability to average among high and low 
emitting vehicle models. Historically, EPA has set standards designed 
to reduce emissions while providing vehicle manufacturers compliance 
flexibility through averaging. Table 2 below provides the projected 
CO2 levels for each manufacturer based on three percent 
annual improvements, using MY 2017 as the baseline or starting model 
year.

                         Table 2--Three Percent Annual Improvement From MY 2017 Baseline
                                                    [g/mile]
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                   Model year                      Aston Martin       Ferrari          Lotus          McLaren
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2017 Baseline...................................             431             421             361             372
2018............................................             418             408             350             361
2019............................................             406             396             340             350
2020............................................             393             384             329             340
2021............................................             382             373             320             329
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[[Page 37281]]

    Table 3 below compares the levels projected for MY 2021 under the 
three percent per year reductions with the levels requested by the 
manufacturers. For Aston Martin and Lotus, their requested standards 
for MY 2021 are more stringent than the levels represented by the three 
percent year-over-year reductions, as shown in Table 3. EPA believes 
that the requested MY 2021 standards for Aston Martin and Lotus are 
appropriate, and no adjustment is needed.
    For Ferrari and McLaren, EPA believes that the MY 2021 standards 
should reflect the 3 percent year-over-year reductions shown in Table 
3. This approach would require Ferrari and McLaren to achieve a MY 2021 
standard that is minimally more stringent than that requested by the 
manufacturers. The differences are small, 5 g/mile or less, and based 
on EPA's review of the information provided by the manufacturers, EPA 
believes this additional emissions reduction can be achieved through 
the use of credits, including air conditioning and off-cycle credits, 
and the use of program flexibilities including credit carry-forward and 
credit carry-back within the lead-time available. EPA believes that MY 
2021 standards based on 3 percent year-over-year reductions represent 
reasonable progress over time for SVMs as discussed above and a 
reasonable balance between the program goal of GHG reductions and the 
degree of challenge the standards pose to SVMs, based on EPA's 
assessment of the information, including cost information, provided to 
the agency.

                                                   Table 3--Comparison of Three Percent per Year Reductions With SVM's Projections for MY 2021
                                                                                            [g/mile]
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                                                            Aston Martin     Aston Martin       Ferrari                                                             McLaren
                       Model year                            requested       3% per year       requested      Ferrari 3% per  Lotus requested    Lotus 3% per      requested      McLaren 3% per
                                                             standards        reduction        standards     year  reduction     standards     year  reduction     standards     year  reduction
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2021....................................................             376              382              377              373              308              320              334              329
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    In the proposed ``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, EPA 
proposed revised less stringent GHG standards for MYs 2021-2026; the 
agencies also took public comment on a wide range of alternative 
stringencies.\18\ EPA recognizes that the three percent annual 
improvement approach for SVM alternative standards for MY 2021 
described above differs from the approach for the primary program for 
MY 2021 in the SAFE Vehicles proposed rule where EPA has proposed to 
retain the MY 2020 standards for MYs 2021-2026. However, the proposed 
SVM alternative standards for MY 2021 would remain significantly less 
stringent than the primary program standards the SVMs would be required 
to meet under the proposed SAFE Vehicles standards and represent 
significant relief for the SVMs even if the SAFE Vehicles proposal is 
adopted. EPA acknowledges that the standard requested by Aston Martin 
for MY 2021 is 2 g/mile less stringent than the standard requested for 
MY 2020, but believes the standard requested for MY 2021 is appropriate 
since the MYs 2017-2021 standards represent steady progress overall for 
Aston Martin with total reductions of 55 g/mile over those five model 
years. For Aston Martin, similar to the SAFE proposal, we are not 
proposing more stringent standards, or even flatlined standards for MY 
2021, because of the significant reductions projected by Aston Martin 
to occur prior to MY 2021.
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    \18\ 83 FR 42986, August 24, 2018.
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V. Summary of Draft Alternative SVM Standards

    A summary of the draft case-by-case alternative SVM standards and 
associated per-manufacturer GHG reductions is provided in Table 4. As 
discussed above, the draft MY 2017-2020 standards are the 
manufacturers' requested alternative standards due to lead time 
concerns. For Aston Martin and Lotus, the draft MY 2021 standards also 
are their requested standards. The MY 2018-2021 standards for Lotus are 
conditional based on its ability to either demonstrate that it remains 
eligible for SVM alternative standards under the program's aggregation 
provisions or apply and be granted operational independence status, as 
discussed in Section III above. For Ferrari and McLaren, the draft MY 
2021 standards are based on three percent year-over-year reductions 
from their respective MY 2017 baseline. EPA requests comment on the 
draft standards shown in Table 4 and the approach used to derive the 
standards discussed in Section IV above.

                     Table 4--Summary of Draft Standards and Per-Manufacturer GHG Reductions
                                                    [g/mile]
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                                                   Aston Martin       Ferrari          Lotus          McLaren
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MY 2017.........................................             431             421             361             372
MY 2018.........................................             396             408             361             372
MY 2019.........................................             380             395             344             368
MY 2020.........................................             374             386             341             360
MY 2021.........................................             376             373             308             329
g/mile Reduction................................              55              48              53              43
% Reduction (MY2017 to MY2021)..................           12.8%           11.4%           14.7%           11.6%
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    EPA notes that in the SAFE Vehicles proposed rule referenced above, 
the agencies proposed to eliminate credits based on air conditioning 
refrigerant controls and requested comment on eliminating off-cycle 
credits beginning in MY 2021. If EPA finalizes any program changes that 
would restrict the use of those credits in MY 2021 where

[[Page 37282]]

the SVM compliance is predicated on the use of those credit provisions, 
SVMs would have the option of applying for a further revised 
alternative standard for MY 2021.

    Dated: July 24, 2019.
Andrew R. Wheeler,
Administrator.
[FR Doc. 2019-16319 Filed 7-30-19; 8:45 am]
 BILLING CODE 6560-50-P