Document ID: EPA-HQ-OAR-2015-0827-11383
Agency: epa
Document Type: Notice
Title: Mid-Term Evaluation of Greenhouse Gas Emissions Standards for Model Year 2022-2025 Light-duty Vehicles
Posted Date: 2018-04-13T04:00Z

[Federal Register Volume 83, Number 72 (Friday, April 13, 2018)]
[Notices]
[Pages 16077-16087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07364]

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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OAR-2015-0827; FRL-9976-61-OAR]

Mid-Term Evaluation of Greenhouse Gas Emissions Standards for 
Model Year 2022-2025 Light-Duty Vehicles

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice; withdrawal.

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SUMMARY: In this notice, the Environmental Protection Agency (EPA) 
Administrator has reconsidered the previous Final Determination of the 
Mid-term Evaluation of greenhouse gas emission standards for model year 
2022-2025 light-duty vehicles. The Administrator determines that the 
current standards are based on outdated information, and that more 
recent information suggests that the current standards may be too 
stringent. The Administrator thus concludes that the standards are not 
appropriate in light of the record before EPA and, therefore, should be 
revised as appropriate. EPA is also withdrawing the previous Final 
Determination issued by the agency on January 12, 2017, with this 
notice. EPA, in partnership with the National Highway Traffic Safety 
Administration, will initiate a notice and comment rulemaking in a 
forthcoming Federal Register notice to further consider appropriate 
standards for model year 2022-2025 light-duty vehicles, as appropriate. 
On March 22, 2017, EPA published a Federal Register notice providing 
its intention to reconsider the Final Determination of the Mid-term 
Evaluation of greenhouse gas emissions standards for model year 2022-
2025 light-duty vehicles, this notice was published jointly with the 
Department of Transportation (DOT). On August 21, 2017, EPA and DOT 
jointly published a Federal Register notice providing a 45-day public 
comment period on the reconsideration and EPA held a public hearing on 
September 6, 2017.

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. Introduction

    In this notice, the Administrator of the Environmental Protection 
Agency (EPA) is making a new determination of the Mid-term Evaluation 
(MTE) of greenhouse gas (GHG) emission standards for model year (MY) 
2022-2025 light-duty vehicles. The Administrator determines that the 
standards are not appropriate in light of the record before EPA, and 
therefore, should be revised as appropriate. EPA is also withdrawing 
the January 12, 2017 Final Determination (January 2017 Determination) 
with this notice. EPA, in partnership with the National Highway Traffic 
Safety Administration (NHTSA), will initiate a notice and comment 
rulemaking in a forthcoming Federal Register notice to further consider 
appropriate standards for MY 2022-2025 light-duty vehicles, as 
appropriate.

[[Page 16078]]

    The Administrator makes this finding due to the significant record 
that has been developed since the January 2017 Determination. Many of 
the key assumptions EPA relied upon in its January 2017 Determination, 
including gas prices and the consumer acceptance of advanced technology 
vehicles, were optimistic or have significantly changed and thus no 
longer represent realistic assumptions. For example, fuel price 
estimates used by EPA in the original rulemaking are very different 
from recent EIA forecasts. EPA needs to update these estimates in the 
analysis and more accurately reflect changes in US oil production. 
Economic inputs such as the social cost of carbon, the rebound effect, 
and energy security valuation should also be updated to be consistent 
with the literature and empirical evidence.
    EPA has also both developed and received additional data and 
assessments since the January 2017 Determination regarding technology 
effectiveness and technology costs which warrant additional 
consideration.
    In making this finding, the Administrator has also considered that 
the reach and success of the program established in the 2012 rulemaking 
is significantly limited when consumers cannot afford new cars. New 
information and data provided show the potential significant negative 
effects of higher vehicle costs.
    Based on our review and analysis of the comments and information 
submitted, and EPA's own analysis, the Administrator believes that the 
current GHG emission standards for MY 2022-2025 light-duty vehicles 
presents challenges for auto manufacturers due to feasibility and 
practicability, raises potential concerns related to automobile safety, 
and results in significant additional costs on consumers, especially 
low-income consumers. On the whole, the Administrator believes the MY 
2022-2025 GHG emission standards are not appropriate and, therefore, 
should be revised as appropriate. EPA, in partnership with NHTSA, will 
further explore the appropriate degree and form of changes to the 
program through a notice and comment rulemaking process. This 
Determination is not a final agency action. As EPA explained in the 
2012 final rule establishing the MTE process, a determination to 
maintain the current standards would be a final agency action, but a 
determination that the standards are not appropriate would lead to the 
initiation of a rulemaking to adopt new standards, and it is the 
conclusion of that rulemaking that would constitute a final agency 
action and be judicially reviewable as such.\1\
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    \1\ 77 FR 62784, (Federal Register, Vol 77, No 199, pp 62784-
62785).
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II. Background

    The 2012 rulemaking establishing the National Program for federal 
GHG emissions and corporate average fuel economy (CAFE) standards for 
MY 2017-2025 light-duty vehicles included a regulatory requirement for 
the EPA to conduct a Mid-term Evaluation (MTE) of the GHG standards 
established for MY 2022-2025.\2\ EPA included this self-required 
reevaluation due to the long time frame at issue in setting standards 
for MYs 2022-2025, and given NHTSA's obligation to conduct a de novo 
rulemaking in order to establish final standards for vehicles for those 
model years.\3\ EPA's regulations at 40 CFR 86.1818-12(h) state that 
``in making the determination as to whether the existing standards are 
appropriate, the Administrator shall consider the information available 
on the factors relevant to setting greenhouse gas emission standards 
under section 202(a) of the Clean Air Act for model years 2022-2025, 
including but not limited to:
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    \2\ 40 CFR 86.1818-12(h).
    \3\ 77 FR 62784.
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    1. The availability and effectiveness of technology, and the 
appropriate lead time for introduction of technology;
    2. The cost on the producers or purchasers of new motor vehicles or 
new motor vehicle engines;
    3. The feasibility and practicability of the standards;
    4. The impact of the standards on reduction of emissions, oil 
conservation, energy security, and fuel savings by consumers;
    5. The impact of the standards on the automobile industry;
    6. The impacts of the standards on automobile safety;
    7. The impact of the greenhouse gas emission standards on the 
Corporate Average Fuel Economy standards and a national harmonized 
program; and
    8. The impact of standards on other relevant factors.'' \4\
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    \4\ 40 CFR 86.1818-12(h)(1).
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    EPA regulations on the MTE process required EPA to issue a Final 
Determination no later than April 1, 2018 on whether the GHG standards 
for MY 2022-2025 light-duty vehicles remain appropriate under section 
202(a) of the Clean Air Act.\5\ The regulations also required the 
issuance of a draft Technical Assessment Report (TAR) by November 15, 
2017, an opportunity for public comment on the draft TAR, and, before 
making a Final Determination, an opportunity for public comment on 
whether the GHG standards for MY 2022-2025 remain appropriate. In July 
2016, the draft TAR was issued for public comment jointly by the EPA, 
NHTSA, and the California Air Resources Board (CARB).\6\ Following the 
draft TAR, EPA published a Proposed Determination for public comment on 
December 6, 2016 and provided less than 30 days for public comments 
over major holidays.\7\ EPA published the January 2017 Determination on 
EPA's website and regulations.gov finding that the MY 2022-2025 
standards remained appropriate.\8\
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    \5\ Id.; see also 77 FR 62624 (October 15, 2012).
    \6\ 81 FR 49217 (July 27, 2016).
    \7\ 81 FR 87927 (December 6, 2016).
    \8\ Docket item EPA-HQ-OAR-2015-0827-6270 (EPA-420-R-17-001).
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    On March 15, 2017, President Trump announced a restoration of the 
original mid-term review timeline. The President made clear in his 
remarks, ``[i]f the standards threatened auto jobs, then commonsense 
changes'' would be made in order to protect the economic viability of 
the U.S. automotive industry.'' \9\ In response to the President's 
direction, EPA announced in a March 22, 2017,\10\ Federal Register 
notice, its intention to reconsider the Final Determination of the MTE 
of GHGs emissions standards for MY 2022-2025 light-duty vehicles. The 
Administrator stated that EPA would coordinate its reconsideration with 
the rulemaking process to be undertaken by NHTSA regarding CAFE 
standards for cars and light trucks for the same model years.
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    \9\ See https://www.whitehouse.gov/briefings-statements/remarks-president-trump-american-center-mobility-detroit-mi/.
    \10\ 82 FR 14671 (March 22, 2017).
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    On August 21, 2017,\11\ EPA published a notice in the Federal 
Register announcing the opening of a 45-day public comment period and 
inviting stakeholders to submit any additional comments, data, and 
information they believed were relevant to the Administrator's 
reconsideration of the January 2017 Determination. EPA held a public 
hearing in Washington, DC on September 6, 2017.\12\ EPA received more 
than 290,000 comments in response to the August 21, 2017 notice.\13\
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    \11\ 82 FR 39551 (August 21, 2017).
    \12\ 82 FR 39976 (August 23, 2017).
    \13\ The public comments, public hearing transcript, and other 
information relevant to the Mid-term Evaluation are available in 
docket EPA-HQ-OAR-2015-0827.

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[[Page 16079]]

III. The Administrator's Assessment of Factors Relevant to the 
Appropriateness of the MY 2022-2025 GHG Emission Standards

    In the following sections, the Administrator provides his 
assessment on why the current standards for MY 2022-2025 are not 
appropriate based on the regulatory provisions found in 40 CFR 86.1818-
12(h). The Administrator considered the complete record, including all 
comments provided on the reconsideration, in his determination.

Factor 1: The Availability and Effectiveness of Technology, and the 
Appropriate Lead Time for Introduction of Technology; and Factor 3: The 
Feasibility and Practicability of the Standards

    The Administrator finds, based on the record, including new data 
and information provided since January 2017, that the January 2017 
Determination was optimistic in its assumptions and projections with 
respect to the availability and effectiveness of technology and the 
feasibility and practicability of the standards. Accordingly, the 
Administrator now determines that the MY 2022-2025 GHG emissions 
standards may not be feasible or practicable and there is greater 
uncertainty as to whether technology will be available to meet the 
standards on the timetable established in the regulations. This is a 
result of: (1) The changes in trends of electrification since the 
January 2017 Determination; (2) reliance on future technology advances; 
and (3) the acceptance rate of the necessary technology by consumers.
a. The Changes in Trends of Electrification Since the January 2017 
Determination
    The agency's January 2017 Determination was completed at a time 
when the trends and data associated with MY 2012-2015 showed that the 
majority of the major car-manufacturing companies were ``over-
complying'' with their relative GHG compliance requirements and 
building up credits. EPA's latest data \14\ alongside new reports and 
data submitted by stakeholders \15\ show that starting in MY 2016 many 
companies, for the first time, had to rely on credits in order to 
comply with the program, and predicts this will occur again for Model 
Year 2017. While these companies did remain in compliance, they are 
relying on banked credits which suggests that it may be increasingly 
difficult for them to comply going forward as they use up their supply 
of credits. Additionally, the stringency curve dramatically increases 
at around the same time these credits could run out, further 
complicating the feasibility of compliance for MY 2022-2025.
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    \14\ EPA, Greenhouse Gas Emission Standards for Light-Duty 
Vehicles--Manufacturer Performance Report for the 2016 Model Year, 
Office of Transportation and Air Quality, EPA-420-R-18-002, January 
2018, https://www.epa.gov/regulations-emissions-vehicles-and-engines/greenhouse-gas-ghg-emission-standards-light-duty-vehicles.
    \15\ See e.g., Analysis of EPA Vehicle Technology Walks in Prior 
Final Determination Response to Comments (Alliance Attachment 2); 
Evaluation of the Environmental Protection Agency's Lumped Parameter 
Model Informed Projections from the Proposed Determination (Novation 
Analytics, September 2017) (Alliance Attachment 3); and Critical 
Assessment of Certain Technical and Economic Assumptions Made in 
EPA's Final Determination on the Appropriateness of the Model Year 
2022-2025 Light-Duty Vehicle Greenhouse Gas Emission Standards under 
the Midterm Evaluation (Trinity Consultants, NERA Economic 
Consulting, October 2017) (Alliance Attachment 6).
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    The figure below shows that since a peak in 2013, electrified 
light-vehicle (LV) sales have decreased both as a total and as a 
percentage of all light-vehicle sales. This calls into question EPA 
assumptions for the 2012 rulemaking and the January 2017 Determination 
that sales of electrified LVs will be sufficient to support compliance 
with the MY 2022-2025 standards.
    Multiple commenters also questioned the feasibility of the 
standards due to flagging consumer demand for fuel-efficient vehicles 
including electric vehicles. The Alliance of Automobile Manufacturers 
(Alliance) stated that the level of technology modeled by EPA is 
insufficient to meet the standards and that the actual level of 
technology needed is misaligned with market realities. Global 
Automakers similarly charged that ``decline in vehicle sales, lower gas 
prices, an increased preference for light trucks over cars, and 
sluggish demand for high fuel economy vehicles--are taking place as the 
stringency of the standards increase at an unprecedented rate. There 
is, simply put, a misalignment between the increasing stringency of the 
standards and the decreasing consumer demand for fuel efficiency'' and 
that ``revised findings would support the conclusion that adjustments 
to the regulations are needed.'' Global Automakers submitted the figure 
below to show the sluggish demand for electrification in the U.S. 
market from 1999 through early 2016.

[[Page 16080]]

[GRAPHIC] [TIFF OMITTED] TN13AP18.000

    The Alliance stated that ``[i]nformation on compliance trends, 
including the feasibility of meeting the standards, projections on 
compliance, and the credit system are increasingly indicating that it 
is not feasible--taking all technology, cost, product cycle, and 
practical market factors into account--to meet the standards as they 
are currently set.'' For example, Figure 2 below shows that significant 
vehicle electrification, specifically strong hybrids, would be needed 
to meet the standards, contrary to the agency's assertion in the 
January 2017 Determination.
[GRAPHIC] [TIFF OMITTED] TN13AP18.001

    Global Automakers, the Alliance, and individual automakers provided 
detailed information on a variety of technologies that EPA projected 
could be used to meet the MY 2022 through 2025 standards. Regarding the 
need for electrification, the Alliance asserts that advanced internal 
combustion engine technologies alone will not meet MY 2025 standards 
and that the need for greater electrification than EPA originally 
projected means that issues unique to electrification must be 
considered. The Alliance further

[[Page 16081]]

provided that presently only electric vehicles (e.g., strong hybrid, 
plug-in hybrid (PHEV), or electric vehicle (EV)) meet MY 2025 
standards, even with credit assumptions, and that those vehicles make 
up a minimal amount of the market share indicating a less than adequate 
acceptance by consumers. Despite automakers continuing to offer an 
increasing amount of advance technology vehicles for sale, consumer 
adoption remains very low. These comments provide data that raises 
concerns about EPA's 2017 Determination.
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    \16\ The Alliance submitted this figure in color with the upper 
shaded portion in red as indicated in the note in the figure.
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    Toyota provided comment that ``compliance with the current 
requirements through the 2025 MY require gasoline hybrid electric 
vehicles or more sophisticated forms of vehicle electrification at 
sales volumes significantly higher than the agencies' estimates and at 
levels the market is unable or unwilling to support absent significant 
changes in market signals.'' Toyota further provided that they continue 
to disagree with EPA's past assessment that lighter, more aerodynamic 
vehicles powered by less expensive conventional gasoline powertrains 
will be sufficient to comply with the standards. Fiat Chrysler 
Automobiles (FCA) similarly indicated, ``FCA continues to provide data 
that shows more technology is necessary than the agencies have assumed 
for 2022-2025MY compliance. The advanced technologies needed, including 
higher levels of electrification will negatively affect affordability, 
lowering sales, and ultimately impacting jobs.'' Mercedes Benz 
estimated that it will need more than 25 percent battery electric 
vehicles (BEVs) and around 5 percent PHEVs in its fleet to meet the 
standards in MY 2025, noting that these estimates are significantly 
higher than the 7 percent BEV and 3 percent PHEV shares projected by 
EPA for the overall fleet. One commenter stated that they believe 
standards can be met with only small increases in the efficiency of 
fossil fuel engines.
    EPA also received comments from several non-governmental 
organizations stating that the existing record supports the previous 
determination. Several commenters also provided technical information 
and/or analysis. The Union of Concerned Scientists (UCS) provided that 
they do not believe the auto manufacturers are correct about the degree 
of electrification that they claim will be necessary to meet the 
standards.
    Several commenters supported extending incentives for advanced 
technologies. The Alliance recommended that EPA extend the advanced 
technology multiplier incentives beyond MY 2021 and that manufacturers 
should not be held responsible for upstream power plant emissions 
(i.e., manufacturers should be allowed to use the 0 g/mile emissions 
factor for electric powered vehicles rather than having to account for 
upstream electricity generation emissions). Toyota similarly commented 
that EPA should extend the current advanced technology sales multiplier 
and 0 g/mi allowance through MY 2025. Mercedes Benz requested that EPA 
extend the multipliers through at least MY 2025 to support further 
commercialization of electric and hybrid vehicles. Jaguar Land Rover 
supported the reconsideration of the final determination as a way ``to 
enable a future final determination that provides incentives for very 
clean technologies.''
    NGV America urged the agency provide a level playing field for 
natural gas vehicles. As stated in their comments, ``Regulatory 
incentives currently in place for vehicle manufacturers provide no 
benefit for renewable natural gas and include requirements that prevent 
automakers from realizing benefit from selling natural gas vehicles,'' 
including the driving range requirement on alternative fuel that is 
required for natural gas vehicles but not for electric vehicles.
    Several commenters also supported flexibilities for advanced 
technology vehicles. CALSTART stated that to spur the EV market, the 
agencies could consider maintaining the current credits for full zero 
emission vehicles, and delay the upstream emissions factors for such 
vehicles. Securing America's Future Energy (SAFE) commented in support 
of extending the advanced technology credits out to MY 2025 to help 
facilitate and accelerate the transition to energy sources other than 
oil. Edison Electric Institute and California Electric Transportation 
Coalition also commented in support of extending the advanced 
technology credits. The National Coalition for Advanced Transportation 
(NCAT) commented that to the extent that EPA seeks to make adjustments 
to increase flexibility, it urges the agency to recognize and support 
the role of EVs and other advanced technology vehicles.
    The Alliance and Toyota commented that the current full size pick-
up truck incentives should be available to all light-duty trucks. They 
further commented that the program's sales volume thresholds should be 
removed because they discourage the application of technology, since 
manufacturers cannot be confident of achieving the sales thresholds.
    Based on consideration of the information provided, the 
Administrator believes that it would not be practicable to meet the MY 
2022-2025 emission standards without significant electrification and 
other advanced vehicle technologies that lack a requisite level of 
consumer acceptance.
b. Reliance on Future Technology
    EPA received comments from the auto manufacturers that EPA should 
exclude technologies that are protected by intellectual property rights 
and have not been introduced and certified to Tier 3 emissions 
requirements. Specifically, the Alliance stated that EPA should exclude 
from its technology assessments dynamic skip fire, variable compression 
ratio engines, Mazda's SkyActiv X, and other technologies that are 
protected by intellectual property rights and have not been introduced 
and certified to Tier 3 emissions requirements. Toyota's information 
stated that ``[n]ot yet implemented technologies, such as advanced 
cylinder deactivation and 48V mild hybrid systems, can play a role in 
improving efficiency and reducing CO2 emissions moving 
forward; however, we do not project these technologies as sufficient to 
meet the 2025 MY requirements.''
    Regarding the use of Atkinson cycle engines, the Alliance commented 
that the EPA analysis oversimplified and did not consider the financial 
consequence of aggressive penetration. New information from Global 
Automakers provided that ``it is difficult to maintain confidence in 
the agency's optimism about the wide consumer acceptance, supply 
availability, safety and learning for new, unproven technologies such 
as the broad application of naturally aspirated Atkinson cycle 
engines.''
    In general, the Alliance, Global Automakers and others found that 
EPA's modeling overestimates the role conventional technologies can 
play in meeting future standards and that industry believes more strong 
hybrids and plug-in electric vehicles will be needed to meet current 
standards, raising concerns about cost and affordability. Both the 
Alliance and Global Automakers submitted detailed information regarding 
various aspects of EPA modeling, raising several technical issues, and 
submitted several new studies in support of their comments.\17\
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    \17\ See ``Analysis of EPA Vehicle Technology Walks in Prior 
Final Determination Response to Comments'' (Alliance Attachment 2), 
``Evaluation of the Environmental Protection Agency's Lumped 
Parameter Model Informed Projections from the Proposed 
Determination'' (Novation Analytics, September 2017) (Alliance 
Attachment 3), and ``Critical Assessment of Certain Technical and 
Economic Assumptions Made in EPA's Final Determination on the 
Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle 
Greenhouse Gas Emission Standards under the Midterm Evaluation'' 
(Trinity Consultants, NERA Economic Consulting, October 2017) 
(Alliance Attachment 6).

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[[Page 16082]]

    Other commenters were more optimistic about the availability of 
advanced technologies. Suppliers provided comments about specific 
technologies available to meet the standards. The Motor and Equipment 
Manufacturers Association (MEMA) commented that suppliers continue to 
improve a myriad of technologies as industry pushes innovation--
specifically, more capable 48-volt systems, higher efficiency turbo 
engines, various advances in thermal management and control 
technologies, and new composites and materials for improved light-
weighting. Manufacturers of Emission Controls Association (MECA) noted 
that automakers have announced plans to adopt 48-volt mild hybrids at a 
faster rate than originally planned and commented on new technologies 
that will be in production prior to 2021 but were not considered in the 
draft TAR, including dynamic cylinder deactivation, variable 
compression ratio and electric boost. MECA gave an example that dynamic 
cylinder deactivation combined with 48-volt systems which they stated 
has the potential to improve fuel economy by up to 20 percent. One 
commenter stated that they believe existing standards are achievable 
now without expensive or ``boutique'' technologies and are becoming 
even more cost-effective as time passes.\18\ Other commenters performed 
analyses of the technical feasibility of meeting the MY2025 
standards,\19\ including analyses of a number of engine and other 
technologies that they believe EPA did not fully consider.
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    \18\ See comments in the docket from the Advanced Engine Systems 
Institute.
    \19\ See ``Efficiency Technology and Cost Assessment for the 
U.S. 2025-2030 Light-Duty Vehicles'' (International Council on Clean 
Transportation, March 2017, Attachment 5 to ICCT comments), 
``Technical Assessment of CO2 Emission Reductions for 
Passenger Vehicles in the Post-2025 Timeframe'' (Environmental 
Defense Fund).
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    Based on EPA's review of the comments and information received 
since the January 2017 Determination, technologies continue to develop. 
Some technologies, such as continuously variable transmissions, have 
been adopted in many more vehicle applications than originally 
anticipated by EPA in the 2012 rulemaking and have continued to 
demonstrate potential further improvements in efficiency. Other 
technologies such as the dual clutch transmissions EPA projected in the 
2012 rulemaking have not gained significant customer acceptance and as 
such, have proven difficult for manufacturers to deploy. A third 
category, of recently adopted technologies such as dynamic skip fire 
(2019 Chevrolet Silverado) and variable compression ratio engines (2019 
Infiniti QX50), may have the potential to offer additional technology 
pathways to aid future compliance. As such, it is appropriate that the 
EPA continue to evaluate these and other technology developments in the 
forthcoming rulemaking.
    Some commenters supported strengthening the standards in any future 
reconsideration and at a minimum retaining the standards due to certain 
new information and analysis available since the rule was adopted in 
2012. For example, one commenter stated that they believe the costs of 
compliance are declining and believes that final compliance costs will 
be less than initially estimated.
    To note, ethanol producers and agricultural organizations commented 
in support of high octane blends from clean sources as a way to enable 
GHG reducing technologies such as higher compression ratio engines. 
They provided information suggesting that mid-level (e.g., E30) high 
octane ethanol blends should be considered as part of the Mid-term 
Evaluation and that EPA should consider requiring that mid-level blends 
be made available at service stations. The petroleum industry noted 
that high octane fuel is available today for vehicles that require it 
and commented that EPA has no basis for including octane number as a 
factor in the Mid-term Evaluation because it was not considered in the 
prior rulemakings or the draft TAR. The Alliance and Global Automakers 
commented that higher octane gasoline enables opportunities for use of 
more energy-efficient technologies (e.g., higher compression ratio 
engines, improved turbocharging, optimized engine combustion) and that 
manufacturers would support a transition to higher octane gasoline, but 
do not advocate any sole pathway for producing increased octane.
    Several state and local governments commented on the 
appropriateness of the MY 2022-2025 standards. CARB referenced its 
independent midterm review completed in March 2017 where it found the 
MY 2022-2025 GHG emission standards to be appropriate and that the 
latest information continues to support maintain or strengthening the 
current standards.\20\
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    \20\ CARB, Advanced Clean Cars Midterm Review, Resolution 17-3 
(March 24, 2017), available at: https://www.arb.ca.gov/msprog/acc/mtr/res17-3.pdf; CARB, California's Advanced Clean Cars Midterm 
Review, Summary Report for the Technical Analysis of the Light Duty 
Vehicle Standards (January 18, 2017) (p. ES-3), available at: 
https://www.arb.ca.gov/msprog/acc/mtr/acc_mtr_finalreport_full.pdf. 
See CARB comments at docket item EPA-HQ-OAR-2015-0827-9197.
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    Other state government agencies stated that the standards are 
appropriate, continue to apply, and that they believe compliance will 
be even easier than expected with newer conventional technologies.
    The Aluminum Association provided new studies regarding the use of 
aluminum in light-weighting and noted additional forthcoming studies 
which could inform EPA's reconsideration, commenting that the aluminum 
industry continues to provide and improve light-weighting solutions to 
help meet rigorous GHG and fuel efficiency regulations without 
sacrificing safety.
    EPA has given careful consideration to these comments and agrees 
that these commenters have identified both current and promising 
technologies that may be able to deliver significant improvements in 
reducing GHG emissions once fully deployed. However, EPA also 
recognizes that there is significant uncertainty both in the pace of 
development of these technologies and in the degree of efficiency 
improvements they will ultimately be able to deliver. EPA believes that 
this uncertainty further supports its determination to reconsider the 
current standards through a subsequent rulemaking.
c. The Acceptance of the Necessary Technologies by Consumers
    In addition to the issues related to new technologies needing to be 
developed to meet the MY 2022-2025 emission standards, consumers' 
preferences must change to ensure that the current standards can be 
met--that is, consumers will need to be willing to purchase vehicles 
with new technologies. However, as shown below, consumers' preferences 
are not necessarily aligned to meet emission standards and there is 
uncertainty on this issue that merits further consideration. Consumers' 
preferences are driven by many factors and fuel economy is merely one 
factor that increases and decreases based on the price of gasoline.
    The Alliance and Global Automakers state that the standards will be 
effective only if people buy a mix of vehicles that

[[Page 16083]]

is sufficiently fuel-efficient on average to meet the standards, but 
that current trends do not indicate an acceptance by consumers of the 
increased costs and tradeoffs in other desirable vehicle attributes 
that are needed to comply with more stringent GHG standards going 
forward. The only MY 2017 vehicles that could comply with the MY 2025 
standard have a very low consumer acceptance rate today and make up 
less than 5 percent of the total market share (see Figure 2 above). 
Despite the auto industry providing an increasing number of battery-
electric vehicle models and plug-in hybrid electric vehicle models, 
combined national sales of these vehicles still account for just over 
one percent of the market. According to data submitted by the Global 
Automakers, sales of hybrids peaked in 2013 at 3.1 percent, but only 
accounted for 2 percent of the market in 2016.
    The Alliance, Global Automakers, Mercedes-Benz, and National Corn 
Growers Association expressed concerns about low adoption rates of 
electrified vehicles (strong hybrids, PHEVs, and EVs). Global 
Automakers stated that customers are not buying electrified vehicles at 
a rate sufficient for compliance. Mitsubishi and Mercedes-Benz pointed 
to low gasoline prices and limited infrastructure for electric vehicle 
charging as an additional obstacle for electric vehicle adoption. 
Mitsubishi considered the standards unachievable if consumers are not 
willing to buy more electrification in their vehicles.
    Some commenters countered that consumers do prioritize fuel economy 
that sales numbers decreased because of the cyclical nature of the 
industry, and that there is enough flexibility in the market to meet 
consumer needs. Also, a number of commenters asserted that there is a 
growing understanding and acceptance of electrification in vehicles, 
pointing to an increased percentage of EV sales and automakers 
announcing plans for electrification. Contrary to these comments, as 
shown in Figure 1, EV sales have decreased and when looking at very 
small numbers, percentage growth may be misleading.
    A further issue is the growing preference for light duty trucks 
over cars. In 2012, the car and light truck shares were projected to be 
67 percent to 33 percent respectively for MY 2025. According to EPA's 
2017 Fuel Economy Trends Report, the split in MY 2016 was 55 percent 
cars and 45 percent trucks. With regard to MY 2016 compliance, the 
Alliance commented that the large shift in consumer buying patterns 
toward the light-truck fleet has negatively impacted industry 
compliance because the light-truck standards were relatively more 
demanding during this period of time.
    Several commenters expressed concern over potential adverse effects 
on other vehicle attributes due to the standards. The Alliance, Global 
Automakers, and other stakeholders noted that consumers consider a wide 
range of features in their purchase decisions. Mercedes-Benz cited low 
sales of its S550E PHEV which, though more efficient than its internal 
combustion engine counterpart, had slower acceleration and reduced 
trunk space. The National Automobile Dealers Association (NADA) and 
International Union, United Automobile, Aerospace and Agricultural 
Implement Workers of America (UAW) noted that consumers' preferences 
vary with time and market conditions, such as fuel prices. The 
Alliance, Global Automakers, and Mitsubishi stated that current low gas 
prices make the standards more difficult to achieve. The Alliance and 
NADA pointed to a recent study from Resources for the Future that found 
greater willingness to pay for performance than for fuel economy, and 
the potential for misestimating willingness to pay if not taking into 
account other vehicle attributes.\21\ Global Automakers expressed 
concern that, if EPA cannot calculate consumers' willingness to pay for 
attributes, it may overestimate the probability of success for the 
standards. One commenter stated that consumers slightly undervalue or 
fully value future fuel savings while other commenters cited a poll in 
Ohio supporting achieving an average of 40 mpg in 2025. Consumers Union 
cited research that found that fuel economy is the top factor that 
consumers want to be improved in their next vehicle.
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    \21\ To note, there are numerous peer-reviewed studies related 
to this subject and many of them are available in the docket 
associated with this action. EPA intends to summarize and assess the 
studies on this topic as part of the forthcoming rulemaking.
---------------------------------------------------------------------------

    Commenters shared perspectives on the current and projected state 
of the vehicle market and demand. Global Automakers commented that 
overall vehicle sales have leveled off, and it believes that sales may 
decline in coming years. CFA noted that vehicle models with larger fuel 
economy improvements had larger sales increases while sales for those 
with lower improvements had lower increases. EPA intends to continue to 
consider vehicle sales and the potential impact of the EPA standards on 
vehicle sales as a relevant factor in the forthcoming rulemaking.
    Various comments raised questions about how to predict the impacts 
of the standards on vehicle sales. The Alliance and NADA argued that 
EPA has not yet conducted an ``appropriate analysis'' of the sales 
impacts of the standards, and NADA asks the agencies to ``fully 
understand'' consumer vehicle purchase decisions. The Alliance 
referenced work by Ford suggesting that the standards would reduce 
sales volumes by four percent using cost estimates from the draft TAR. 
Other commenters provided that neither EPA nor NHTSA has found vehicle 
demand modeling methods robust enough to predict sales impacts; and EDF 
stated EPA and NHTSA could consider using a static forecast (that is, 
assuming market shares to be unaffected by the standards).
    Auto industry and dealer comments discussed implications for 
vehicle fleet turnover. The Alliance noted that low fleet turnover 
would reduce the effectiveness of the GHG program. NADA suggested that 
the GHG program should seek to maximize fleet turnover.
    Several commenters discussed a study by researchers at Indiana 
University. The Indiana University's `Total Cost of Ownership' analysis 
found that the MY2017-2025 standards would decrease sales using a 
``2016 perspective'' but that it would increase sales when using inputs 
from the 2012 final rulemaking. Some commenters raised concerns related 
to the study related to future benefits of improved fuel economy and 
different assumptions in consumer willingness to pay. Graham, a 
coauthor of the IU study, supported the assumptions of the report in a 
response to those comments.
    EPA agrees that impacts on new vehicle sales and fleet turnover are 
important factors that were not adequately considered in the January 
2017 Determination. As noted above, if new vehicle sales are lower than 
expected because of higher prices, or lack of consumer acceptance of 
advanced technologies, significant share of projected GHG reductions 
and fuel saving gains on a fleet-wide basis may not be realized. EPA 
intends to more fully consider these potential actions in the 
forthcoming rulemaking. EPA intends to explore new analytical tools to 
look at new vehicle sales and fleet turnover as part of its decision-
making record for the new rule.

Factor 2: The Cost on the Producers or Purchasers of New Motor Vehicles 
or New Motor Vehicle Engines

    The cost on the producers (e.g., suppliers, auto manufacturers), 
intermediaries (e.g., auto dealers), and purchasers (e.g., consumers, 
car drivers) can be rather significant based on the standards set. For 
consumers, especially

[[Page 16084]]

low-income consumers, moderate increases to the cost of cars can result 
in significant impacts to disposable income.
    Both the Alliance and Global Automakers identified areas where EPA 
underestimated costs. The Alliance identified three areas related to 
technology cost that it believes need further assessment: Direct 
technology costs, indirect cost multipliers, and cost learning 
curves.\22\ Global Automakers asserted that EPA's modeling has 
consistently underestimated the costs associated with technologies and 
the amount of technology needed, commenting that a quality check at 
every step of the process needs to be done with real-world data that 
has been supplied by manufacturers.
---------------------------------------------------------------------------

    \22\ See ``Critical Assessment of Certain Technical and Economic 
Assumptions Made in EPA's Final Determination on the Appropriateness 
of the Model Year 2022-2025 Light-Duty Vehicle Greenhouse Gas 
Emission Standards under the Midterm Evaluation'' (Trinity 
Consultants, NERA Economic Consulting, October 2017) (Alliance 
Attachment 6).
---------------------------------------------------------------------------

    The January 2017 Determination did not give appropriate 
consideration to the effect on low-income consumers. The Administrator 
believes that affordability of new cars across the income spectrum, and 
especially among low-income consumers, is an important factor, both 
because of its equity impacts and because of its potential impacts on 
the total energy savings delivered by the standards. In its new 
rulemaking, EPA plans to thoroughly assess the impacts of the standards 
on affordability and reconsider the importance of this factor in 
selecting an appropriate level of the standard.
    The Alliance, Mitsubishi, and Vermont Energy Investment Corporation 
(VEIC) recommended that EPA revisit affordability concerns. The 
Alliance and Global noted that average vehicle transactions prices have 
increased. The Alliance stated that consumers do not change the 
fraction of their budgets for transportation; if vehicles become more 
expensive, they will have to buy less expensive vehicles with fewer 
features. Global Automakers expected price increases to lead some low-
income households to switch from buying new to used vehicles, and some 
to be forced out of the market entirely. The Alliance reiterated that 
the standards have a disproportionate negative impact on low-income 
households. Mitsubishi expressed concern that it would have to add 
electrification to already efficient low-priced vehicles and the 
increased price could drive buyers to less efficient used vehicles. 
NADA and Graham expressed concerns that potential buyers will not be 
able to get loans large enough to cover the increased vehicle prices. 
Mercedes-Benz pointed out that up to half its sales in some markets are 
leased; the payback period for technologies to meet the standards may 
exceed the typical three-year leasing period, and low residual values 
for advanced technologies could further increase lease payments.
    The Alliance stated that the standards have a disproportionate 
negative impact on low-income households. Other commenters stated that 
the standards will have a larger proportionate benefit for low-income 
households and referenced a Greene and Welch study.\23\ VEIC requested 
that the agencies consider that relaxing the standards will increase 
ownership costs on lower-income drivers. EDF did not find adverse 
effects on affordability and note that the standards will lead to used 
vehicle purchasers having more fuel efficient choices.
---------------------------------------------------------------------------

    \23\ D.L. Greene and J.G. Welch (2017), ``The impact of 
increased fuel economy for light-duty vehicles on the distribution 
of income in the United States: A Retrospective and Prospective 
Analysis.'' March 2017. University of Tennessee, Knoxville.
---------------------------------------------------------------------------

    On the issue of consumer affordability, some stakeholders commented 
that EPA standards are not making new vehicles less affordable, citing 
a Synapse Energy Economics report prepared for Consumers Union. The 
report noted a wider range for vehicle prices at the upper end, due to 
higher-end vehicles receiving more features, at the same time that the 
prices of entry-level vehicles have stayed roughly the same for the 
past 10 years.
    EPA concludes that affordability concerns and their impact on new 
vehicle sales should be more thoroughly assessed, further supporting 
its determination to initiate a new rulemaking for the 2022-2025 
standards.

Factor 4: The Impact of the Standards on Reduction of Emissions, Oil 
Conservation, Energy Security, and Fuel Savings by Consumers

    The impact of the standards on emissions, oil conservation, energy 
security, and fuel savings to consumers are significantly affected by 
many assumptions including but not limited to: (1) The consumer 
adoption of new lower emitting cars; (2) cost of fuel; and (3) the 
rebound effects.
    Slower or decreased consumer adoption of new lower emitting cars, 
as mentioned above, would result in decreased effectiveness of the 
program. As consumer preference changes and/or the cost of new cars 
increases, consumers may be less willing to purchase new vehicles and 
thus phase out the higher-emitting older cars. Because of the potential 
decrease in adoption of newer cars the reduction of emissions from the 
standards may be less than originally thought. The same logic can be 
applied to oil conservation. EPA believes that this issue raises enough 
concern to warrant consideration in the future rulemaking.
    With respect to cost of fuel, for example, the lifetime fuel 
savings to consumers can change by almost 200 percent per vehicle based 
on the assumption on gas prices according to the 2016 Proposed 
Determination (Table IV.12). This significant effect on consumer 
savings due to fuel prices can in turn affect both consumer demand for 
fuel-efficient vehicles and their driving behavior generally, both of 
which significantly affect impacts on emissions, oil conservation and 
energy security. Figure 3 below shows the fuel price projections EPA 
used in the 2012 final rule, the January 2017 Determination, and the 
current projections from the Energy Information Administration's Annual 
Energy Outlook (AEO). As can be seen from the figure, the 2012 rule 
projected significantly higher fuel prices than current EIA 
projections, while the 2017 Final Determination used similar 
projections to EIA. Lower fuel prices mean lower incentives for 
consumers to purchase fuel efficient vehicles, because the fuel cost 
savings they get from doing so are also lower. Thus, the projections 
for fuel cost savings in the 2012 rule may have been optimistic, which 
increases the challenge manufacturers face in making fuel-efficient 
vehicles attractive to consumers. This consideration supports EPA's 
determination that the current standards are inappropriate and should 
be reconsidered in a new rulemaking.

[[Page 16085]]

[GRAPHIC] [TIFF OMITTED] TN13AP18.002

    With respect to the rebound effect (the increase in driving 
resulting from a lower marginal cost of driving due to greater fuel 
efficiency), EPA received a range of views and assessments in the 
recent public comments. Higher rebound values mean that consumers are 
inherently driving more due to the increase in fuel efficiency of the 
vehicle and this impact will offset the reduction of emissions, oil 
conservation, energy security, and fuel savings by customers. EPA 
believes it is important to fully consider the effects of a rebound 
effect to project an accurate assessment of the projected fuel savings, 
and EPA intends to do so in its new rulemaking.
    With respect to energy security, the situation of the United States 
is dramatically different than it was at the time the 2012 standards 
were promulgated, and even significantly different from its situation 
in 2016 when the draft TAR was developed.
    Regarding emissions, some state and local government commenters 
pointed to the co-benefits of GHG standards as important criteria 
pollutant control measures. For example, NACAA commented that the 
standards would lead to oxides of nitrogen (NOx) reduction that 
contribute to attainment and maintenance of the 2008 and 2015 ozone and 
2012 fine particulate matter National Ambient Air Quality Standards 
(NAAQS) and other air benefits. While EPA agrees that there are co-
benefits from these standards, EPA notes that the standards are 
supposed to be based on GHG emissions and that while co-benefits exist 
with respect to emissions such as criteria pollutants, using GHG 
emission standards as criteria pollutant control measures is likely a 
less efficient mechanism to decrease criteria pollutants and those 
issues are already handled through the NAAQS implementation processes.
    Based on the information provided above, the Administrator believes 
that there is strong basis for concern that the current emission 
standards from MY 2022--2025 may not produce the same level of benefits 
that was projected in the January 2017 Determination. This further 
supports the Administrator's determination to withdraw the prior 
Determination and initiate a rulemaking to reconsider the current 
standards.

Factor 5: The Impact of the Standards on the Automobile Industry

    The Administrator finds, based on the current record, that the 
standards potentially impose unreasonable per vehicle costs resulting 
in decreased sales and potentially significant impact to both 
automakers and auto dealers. Trinity Consulting & NERA Economic 
Consulting (TC/NERA) \24\ found that the MY 2022-2025 standards would 
reduce vehicle sales over those four model years from 65 million to 
63.7 million, a reduction of 1.3 million vehicles, due to higher 
vehicle prices.
---------------------------------------------------------------------------

    \24\ Trinity Consultants & NERA Economic Consulting, Critical 
Assessment of Certain Technical And Economic Assumptions Made in 
EPA'S Final Determination On the Appropriateness of the Model Year 
2022-2025 Light-duty Vehicle Greenhouse Gas Emission Standards Under 
the Midterm Evaluation 2 (Oct. 2017).
---------------------------------------------------------------------------

    EPA also recognizes significant unresolved concerns regarding the 
impact of the current standards on United States auto industry 
employment. The Center for Automotive Research (CAR),\25\ a nonprofit

[[Page 16086]]

automotive research center, developed a cost-benefit study referenced 
by multiple commenters that estimated employment losses up to 1.13 
million due to the standards if the standards increased prices by 
$6,000 per vehicle. Other stakeholders submitted comments critical of 
the CAR report.
---------------------------------------------------------------------------

    \25\ McAlinden et al., Center for Automotive Research (2016). 
The Potential Effects of the 2017-2025 EPA/NHTSA GHG/Fuel Economy 
Mandates on the U.S. Economy. http://www.cargroup.org/publication/the-potential-effects-of-the-2017-2025-epanhtsa-ghgfuel-economy-mandates-on-the-u-s-economy/.
---------------------------------------------------------------------------

    Commenters expressed differing points of view on the potential 
effects of the standards on employment and the macroeconomy and 
predicting the exact effect of the GHG emission standards on the 
macroeconomy is rather difficult.
    Some commenters pointed to negative effects on the economy and 
employment due to higher costs from the standards. The Alliance 
commented that each job in the auto sector creates 6.5 additional jobs, 
and stated that auto sector employment is generally related to vehicle 
sales, which is expected to decline. The Alliance, Global Automakers, 
and FCA expressed concern that cost increases associated with the MY 
2022-2025 standards could reduce sales and employment, and put downward 
pressure on the macroeconomy. The Alliance and Global Automakers argued 
that reduced revenues from a sales drop due to the standards would 
reduce spending on research and development.
    Other commenters stated that the standards could lead to 
macroeconomic and employment benefits through their effects on 
innovation. Commenters also stated that innovation and investment 
resulting from the standards have contributed to the recovery of the 
auto industry and the wider economy. Some commenters stated that 
reopening the standards increases uncertainties that may reduce 
investments in advanced technologies.
    The UAW, while not objecting to a reevaluation of the standards, 
stated that EPA should ensure that the regulations recognize the long-
term importance of manufacturing a diverse fleet of motor vehicles in 
the United States by American workers and radically weakening the 
standards will adversely impact investments in key technologies and put 
domestic manufacturers behind in making fuel-saving technologies being 
used to meet the standards. Some commenters stated they believe there 
would be positive effects on employment from the standards through 
their effects on investments.
    The automotive supplier commenters discussed their views on the 
importance of the standards in maintaining the competitive advantage 
U.S. companies currently have in the global marketplace. For example, 
MEMA commented that reducing the stringency of the standards in the 
U.S. increases the likelihood that work on these emissions-reducing 
technologies would shift to other markets.
    A number of commenters cited Carley et al.,\26\ which included a 
study of the macroeconomic impacts of the standards, conducted by 
researchers at Indiana University. The study found that the short-term 
effects of the standards are negative, but the long-term effects of the 
standards are positive for employment but will not overtake the 
negative effects until at least 2025. Several commenters identified 
concerns in the Carley et.al. analysis that contributed to short-term 
negative effects. Graham, a coauthor of the report, responded to these 
comments by supporting the IU report assumptions.
---------------------------------------------------------------------------

    \26\ Sanjay Carley, Denvil Duncan, John D. Graham, Saba Siddiki, 
and Nikolaos Zirogiannis. ``A Macroeconomic Study of Federal and 
State Automotive Regulations,'' Indiana University School of Public 
and Environmental Affairs, March 2017.
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    EPA finds that a more rigorous analysis of job gains and losses is 
needed to determine the net effects of alternate levels of the 
standards on employment and believes this is an important factor to 
consider in adopting appropriate standards. EPA intends to include such 
an analysis as part of the basis for the new rule.

Factor 6: The Impacts of the Standards on Automobile Safety

    EPA and NHTSA considered some potential safety impacts in the 2012 
rulemaking, and EPA considers safety to be an important factor in the 
reconsideration of the MY 2022-2025 standards. For example, fleet 
turnover is important to an overall safety analysis, as newer cars tend 
to be safer and more efficient than older cars due to safety technology 
innovation and regulatory requirements. EPA intends to further assess 
the scope of its safety analysis in the upcoming rulemaking to examine 
the possible impacts of fleet turnover on safety. The Administrator 
finds that this safety analysis is an additional reason to undertake 
the forthcoming rulemaking.

Factor 7: The Impact of the Greenhouse Gas Emission Standards on the 
Corporate Average Fuel Economy Standards and a National Harmonized 
Program

    Many stakeholders commented on the importance of maintaining a 
National Program for GHG emissions and CAFE standards, and stakeholders 
urged EPA and NHTSA to continue coordinating with the California Air 
Resources Board. For example, Global Automakers commented, 
``Harmonization between the federal and California programs must be 
maintained. EPA, NHTSA and California need to work together to maintain 
the One National Program as all parties committed to at its 
inception.'' Toyota commented that its ultimate objective ``remains a 
true, single national standard governing fuel economy and greenhouse 
gas emissions in the future.'' Nissan and Mitsubishi similarly 
commented that harmonization between federal and California programs 
must be maintained, urging California, EPA and NHTSA to work together.
    Automotive suppliers also commented on the importance of 
maintaining the National Program. For example, the MEMA stated ``[t]he 
One National Program provides industry stakeholders with economies of 
scale and increases domestic investment in emissions-reducing and fuel-
efficiency technologies and jobs. Anything that falls short of a 
National Program will fail to provide the long-term planning certainty 
the industry needs to make the long-term business and technology 
investment decisions to meet MYs 2022-2025 standards and beyond.'' The 
International Union, United Automobile, Aerospace and Agricultural 
Implement Workers of America (UAW) commented that all stakeholders 
should work towards a single National Program and that ``California and 
non-governmental organizations must have a seat at the table along with 
manufacturers and workers.''
    EPA believes that a national harmonized program is very important 
and will continue to work toward maintaining a national harmonized 
program through MY 2025 and beyond. To that end, EPA, in collaboration 
with NHTSA, will initiate a notice and comment rulemaking in a 
forthcoming Federal Register notice to further consider appropriate 
standards for MY 2022-2025 light-duty vehicles, as appropriate. This 
coordination will ensure that GHG emission standards and CAFE standards 
are as aligned as much as possible given EPA and NHTSA's different 
statutory authorities.
    EPA and NHTSA have been communicating with stakeholders, including 
CARB and automobile manufacturers, to try and ensure that a national 
harmonized program remains intact to minimize unnecessary cost and 
burdens in the development of the notice and comment rulemaking.

[[Page 16087]]

Factor 8: The Impact of Standards on Other Relevant Factors

    The January 2017 Determination also identified regulatory certainty 
as an additional relevant factor that was considered as part of the 
determination. EPA understands that automakers and suppliers plan many 
years in advance.\27\ Given such long lead times, regulatory certainty 
can increase the efficiency of business planning and investment cycles. 
The Administrator agrees that regulatory certainty is extremely 
important, but is reconsidering its conclusion that maintaining the 
current standards is the best way to provide such certainty.
---------------------------------------------------------------------------

    \27\ To note, some commenters raised concerns that reevaluating 
the standards increases uncertainty that might reduce investment in 
advanced technologies that could hurt jobs and United States 
competitiveness. As mentioned below, EPA disagrees with this concern 
as NHTSA must still complete a rulemaking for MY 2022-2025.
---------------------------------------------------------------------------

    Furthermore, industry cannot effectively plan for compliance with 
the current MY 2022-2025 GHG standards until it knows the outcome of 
the upcoming NHTSA rulemaking for MY 2022-2025 CAFE standards. Any 
regulatory certainty potentially provided by the January 2017 
Determination is not supported by the fact that NHTSA had not yet begun 
their statutorily required rulemaking process, and EPA did not know at 
that time whether NHTSA would establish coordinated requirements. EPA 
now believes that the greatest potential regulatory certainty is 
provided in the long run by undertaking a new rulemaking, in 
partnership with NHTSA, and ensuring that the resulting standards are 
harmonized to the greatest degree possible.

IV. Revised Determination

    Even with the wide range in perspectives, it is clear that many of 
the key assumptions EPA relied upon in its January 2017 Determination, 
including gas prices, and the consumer acceptance of advanced 
technology vehicles, were optimistic or have significantly changed. EPA 
has also both developed and received additional data and assessments 
since the January 2017 Determination regarding technology effectiveness 
and technology costs which warrant additional consideration. In 
addition, the reach and success of the program is significantly limited 
when consumers do not purchase new vehicles with low GHG emissions, 
either because they are priced out of them or are unwilling to spend 
additional money on advanced fuel-saving technologies.
    Based on our review and analysis of the comments and information 
submitted, the Administrator believes that the current GHG program for 
MY 2022-2025 vehicles presents difficult challenges for auto 
manufacturers and adverse impacts on consumers. On the whole, the 
Administrator believes the MY 2022-2025 GHG emission standards are not 
appropriate and, therefore, should be revised as appropriate. EPA, in 
partnership with NHTSA, will further explore the appropriate degree and 
form of changes to the program through a notice and comment rulemaking 
process.
    As stated above, in this notice, the Administrator has determined 
that the standards are not appropriate in light of the record before 
EPA, and therefore, should be revised as appropriate. EPA is also 
withdrawing the January 2017 Determination with this notice. EPA, in 
partnership with NHTSA, will initiate a notice and comment rulemaking 
in a forthcoming Federal Register notice to further consider 
appropriate standards for MY 2022-2025 light-duty vehicles. This notice 
concludes EPA's MTE under 40 CFR 86.1818-12(h). Finally, EPA notes, as 
discussed above, that this revised determination is not a final agency 
action, as explained in the 2012 final rule. The effect of this action 
is rather to initiate a rulemaking process whose outcome will be a 
final agency action. Until that rulemaking has been completed, the 
current standards remain in effect and there is no change in the legal 
rights and obligations of any stakeholders.

    Dated: April 2, 2018.
E. Scott Pruitt,
Administrator.
[FR Doc. 2018-07364 Filed 4-12-18; 8:45 am]
BILLING CODE 6560-50-P