Document ID: EPA-HQ-OAR-2021-0208-0116
Agency: epa
Document Type: Proposed Rule
Title: Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions Standards
Posted Date: 2021-08-10T04:00Z

[Federal Register Volume 86, Number 151 (Tuesday, August 10, 2021)]
[Proposed Rules]
[Pages 43726-43811]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-16582]

[[Page 43725]]

Vol. 86

Tuesday,

No. 151

August 10, 2021

Part II

 Environmental Protection Agency

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40 CFR Parts 86 and 600

 Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas 
Emissions Standards; Proposed Rule

  Federal Register / Vol. 86 , No. 151 / Tuesday, August 10, 2021 / 
Proposed Rules  

[[Page 43726]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 86 and 600

[EPA-HQ-OAR-2021-0208; FRL 8469-02-OAR]
RIN 2060-AV13

Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse 
Gas Emissions Standards

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to 
revise the greenhouse gas (GHG) emissions standards for light-duty 
vehicles for 2023 and later model years to make the standards more 
stringent. On January 20, 2021, President Biden issued Executive Order 
13990 ``Protecting Public Health and the Environment and Restoring 
Science To Tackle the Climate Crisis'' directing EPA to consider 
whether to propose suspending, revising, or rescinding the standards 
previously revised under the ``The Safer Affordable Fuel-Efficient 
(SAFE) Vehicles Rule for Model Years 2021-2026 Passenger Cars and Light 
Trucks,'' promulgated in April 2020. The SAFE rule significantly 
weakened the standards established in 2012, which in part set GHG 
standards for model years 2021-25. EPA believes that in light of the 
significant contribution of light-duty vehicles to transportation 
sector GHG emissions, standards more stringent than those relaxed in 
the SAFE rule are appropriate under the Clean Air Act. EPA is proposing 
to revise the GHG standards to be more stringent than the SAFE rule 
standards in each model year from 2023 through 2026. EPA is also 
proposing to include several flexibilities to incentivize the 
production and sale of vehicles with zero and near-zero emissions 
technology to reduce compliance costs and to address the lead time of 
the proposed standards. In addition, EPA is proposing some technical 
amendments to clarify and streamline our regulations. Compliance with 
the proposed standards would be feasible at reasonable costs to 
manufacturers. The proposed revised standards would result in 
significant benefits for public health and welfare, primarily through 
substantial reductions in both GHG emissions and fuel consumption and 
associated fuel costs paid by drivers, and the benefits of the proposed 
standards would be far in excess of costs.

DATES: 
    Comments: Written comments must be received on or before September 
27, 2021.
    Public Hearing: EPA plans to hold a virtual public hearing on 
August 25, 2021. An additional session may be held on August 26th if 
necessary to accommodate the number of testifiers that sign-up to 
testify. Please refer to the separate Federal Register notice issued by 
EPA for public hearing details. The hearing notice is available at 
https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-revise-existing-national-ghg-emissions.

ADDRESSES: You may send comments, identified by Docket ID No. EPA-HQ-
OAR-2021-0208, 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-2021-0208 in the subject line of the message.
     Mail: U.S. Environmental Protection Agency, EPA Docket 
Center, OAR, Docket EPA-HQ-OAR-2021-0208, Mail Code 28221T, 1200 
Pennsylvania Avenue NW, Washington, DC 20460.
     Hand Delivery or Courier (by scheduled appointment only): 
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. EPA-HQ-OAR-2021-0208 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. Out of an abundance of caution for members of 
the public and our staff, the EPA Docket Center and Reading Room are 
closed to the public, with limited exceptions, to reduce the risk of 
transmitting COVID-19. Our Docket Center staff will continue to provide 
remote customer service via email, phone, and webform. We encourage the 
public to submit comments via https://www.regulations.gov/ or email, as 
there may be a delay in processing mail. Hand deliveries and couriers 
may be received by scheduled appointment only. For further information 
on EPA Docket Center services and the current status, please visit us 
online at https://www.epa.gov/dockets.
    EPA plans to hold a virtual public hearing for this rulemaking. 
Please refer to the separate Federal Register notice issued by EPA for 
public hearing details. The hearing notice is available at https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-revise-existing-national-ghg-emissions.

FOR FURTHER INFORMATION CONTACT: Tad Wysor, Office of Transportation 
and Air Quality, Assessment and Standards Division (ASD), Environmental 
Protection Agency, 2000 Traverwood Drive, Ann Arbor, MI 48105; 
telephone number: (734) 214-4332; email address: wysor.tad@epa.gov.

SUPPLEMENTARY INFORMATION: 

A. Public Participation

Written Comments

    EPA will keep the comment period open until September 27, 2021. All 
information will be available for inspection at the EPA Air Docket No. 
EPA-HQ-OAR-2021-0208. Submit your comments, identified by Docket ID No. 
EPA-HQ-OAR-2021-0208, 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. EPA 
may publish any comment received to its public docket. Do not submit to 
EPA's docket at https://www.regulations.gov 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. 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.
    EPA is temporarily suspending its Docket Center and Reading Room 
for public visitors, with limited exceptions, to reduce the risk of 
transmitting COVID-19. Our Docket Center staff will continue to provide 
remote customer

[[Page 43727]]

service via email, phone, and webform. We encourage the public to 
submit comments via https://www.regulations.gov/ as there may be a 
delay in processing mail. Hand deliveries or couriers will be received 
by scheduled appointment only. For further information and updates on 
EPA Docket Center services, please visit us online at https://www.epa.gov/dockets.
    EPA continues to carefully and continuously monitor information 
from the Centers for Disease Control and Prevention (CDC), local area 
health departments, and our Federal partners so that we can respond 
rapidly as conditions change regarding COVID-19.

Virtual Public Hearing

    EPA plans to hold a virtual public hearing on August 25, 2021. An 
additional session will be held on August 26th if necessary, to 
accommodate the number of testifiers that sign-up to testify. Please 
refer to the separate Federal Register notice issued by EPA for public 
hearing details. The hearing notice is available at https://www.epa.gov/regulations-emissions-vehicles-and-engines/proposed-rule-revise-existing-national-ghg-emissions. Please also refer to this 
website for any updates regarding the hearings. EPA does not intend to 
publish additional documents in the Federal Register announcing 
updates.

B. Does this action apply to me?

    This action affects companies that manufacture or sell passenger 
automobiles (passenger cars) and non-passenger automobiles (light 
trucks) as defined in 49 CFR part 523. Regulated categories and 
entities include:

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

    This list is not intended to be exhaustive, but rather provides a 
guide regarding entities likely to be regulated by this action. To 
determine whether particular activities may be regulated by this 
action, you should carefully examine the regulations. You may direct 
questions regarding the applicability of this action to the person 
listed in FOR FURTHER INFORMATION CONTACT.

Table of Contents

I. Executive Summary
    A. Purpose of This Proposed Rule and Legal Authority
    1. Proposal for Near-Term Standards Through Model Year 2026
    2. Why does EPA believe the proposed standards are appropriate 
under the CAA?
    3. Future Longer-Term Action to Further Reduce Light-Duty 
Vehicle Emissions in 2027 and Beyond
    B. Summary of Proposed Light-Duty Vehicle GHG Program
    1. Proposed Revised GHG Emissions Standards
    2. Proposed Compliance Incentives and Flexibilities
    C. Analytical Support for the Proposed Revised Standards
    1. Summary of Analyses for This Proposed Rule
    2. History of Similar Analyses
    D. Summary of Costs and Benefits of the Proposed Program
    E. How has EPA considered environmental justice in this 
proposal?
    F. Affordability and Equity
    G. What alternatives is EPA considering?
    1. Description of the Alternatives
    2. Summary of Costs and Benefits of the Alternatives
    3. Summary of the Proposal's Costs and Benefits Compared to the 
Alternatives
II. EPA Proposal for MY 2023-2026 Light-Duty Vehicle GHG Standards
    A. Proposed Model Year 2023-2026 GHG Standards for Light-Duty 
Vehicles, Light-Duty Trucks, and Medium Duty Passenger Vehicles
    1. What fleet-wide emissions levels correspond to the 
CO2 standards?
    2. What are the proposed CO2 attribute-based 
standards?
    3. EPA's Statutory Authority Under the CAA
    4. Averaging, Banking, and Trading Provisions for CO2 
Standards
    5. Certification, Compliance, and Enforcement
    6. On-Board Diagnostics Program Updates
    7. Stakeholder Engagement
    8. How do EPA's proposed standards relate to NHTSA's CAFE 
proposal and to California's GHG program?
    B. Additional Manufacturer Compliance Flexibilities
    1. Multiplier Incentives for Advanced Technology Vehicles
    2. Advanced Technology Incentives for Full-Size Pickups
    3. Off-Cycle Technology Credits
    4. Air Conditioning System Credits
    5. Natural Gas Vehicles Technical Correction
    C. What alternatives is EPA considering?
III. Technical Assessment of the Proposed CO2 Standards
    A. What approach did EPA use in analyzing potential standards?
    B. Projected Compliance Costs and Technology Penetrations
    1. GHG Targets and Compliance Levels
    2. Projected Compliance Costs per Vehicle
    3. Technology Penetration Rates
    C. Are the proposed standards feasible?
    D. How did EPA consider the two alternatives in choosing the 
proposed program?
IV. How would this proposal reduce GHG emissions and their 
associated effects?
    A. Impact on GHG Emissions
    B. Climate Change Impacts From GHG Emissions
    C. Global Climate Impacts and Benefits Associated With the 
Proposal's GHG Emissions Reductions
V. How would the proposal impact non-GHG emissions and their 
associated effects?
    A. Impact on Non-GHG Emissions
    B. Health and Environmental Effects Associated With Exposure to 
Non-GHG Pollutants Impacted by the Proposed Standards
    C. Air Quality Impacts of Non-GHG Pollutants
VI. Basis for the Proposed GHG Standards Under CAA Section 202(a)
    A. Consideration of Technological Feasibility and Lead Time
    1. Technological Readiness of the Auto Industry in Meeting 
Revised GHG Standards
    2. Opportunities Provided Through Credits and Incentives 
Provisions
    B. Consideration of Vehicle Costs of Compliance
    C. Consideration of Impacts on Consumers
    D. Consideration of Emissions of GHGs and Other Air Pollutants
    E. Consideration of Energy, Safety and Other Factors
    F. Balancing of Factors Under CAA 202(a)
VII. What are the estimated cost, economic, and other impacts of the 
proposal?
    A. Conceptual Framework for Evaluating Consumer Impacts
    B. Vehicle Sales Impacts
    C. Changes in Fuel Consumption

[[Page 43728]]

    D. Greenhouse Gas Emission Reduction Benefits
    E. Non-Greenhouse Gas Health Impacts
    F. Energy Security Impacts
    G. Impacts of Additional Driving
    H. Safety Considerations in Establishing GHG Standards
    I. Summary of Costs and Benefits
    J. Impacts on Consumers of Vehicle Costs and Fuel Savings
    K. Employment Impacts
    L. Environmental Justice
    1. GHG Impacts
    2. Non-GHG Impacts
    M. Affordability and Equity Impacts
VIII. Statutory and Executive Order Reviews
    A. Executive Order 12866: ``Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review''
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: ``Federalism''
    F. Executive Order 13175: ``Consultation and Coordination With 
Indian Tribal Governments''
    G. Executive Order 13045: ``Protection of Children From 
Environmental Health Risks and Safety Risks''
    H. Executive Order 13211: ``Energy Effects''
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: ``Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations''
IX. Statutory Provisions and Legal Authority

I. Executive Summary

A. Purpose of This Proposed Rule and Legal Authority

1. Proposal for Near-Term Standards Through Model Year 2026
    The Environmental Protection Agency (EPA) is proposing to revise 
existing national greenhouse gas (GHG) emissions standards for 
passenger cars and light trucks under section 202(a) of the Clean Air 
Act (CAA), 42 U.S.C. 7521(a). Section 202(a) requires EPA to establish 
standards for emissions of air pollutants from new motor vehicles 
which, in the Administrator's judgment, cause or contribute to air 
pollution which may reasonably be anticipated to endanger public health 
or welfare.
    This proposal also responds to Executive Order (E.O.) 13990, 
``Protecting Public Health and the Environment and Restoring Science To 
Tackle the Climate Crisis'' (Jan. 20, 2021), which directs EPA to 
consider taking the action proposed in this notice: \1\
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    \1\ 86 FR 7037, January 25, 2021.

    ``[T]he head of the relevant agency, as appropriate and 
consistent with applicable law, shall consider publishing for notice 
and comment a proposed rule suspending, revising, or rescinding the 
agency action[s set forth below] within the time frame specified.''
    ``Establishing Ambitious, Job-Creating Fuel Economy Standards: . 
. . `The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for 
Model Years 2021-2026 Passenger Cars and Light Trucks,' 85 FR 24174 
(April 30, 2020), by July 2021. . . . In considering whether to 
propose suspending, revising, or rescinding the latter rule, the 
agency should consider the views of representatives from labor 
unions, States, and industry.''

    The proposed program would revise the light-duty vehicle GHG 
standards previously revised by the SAFE rule and would build upon 
earlier EPA actions and supporting analyses that established or 
maintained stringent light-duty vehicle GHG emissions standards. For 
example, in 2012, EPA issued a final rule establishing light-duty 
vehicle GHG standards for model years (MYs) 2017-2025,\2\ which were 
supported in analyses accounting for compliance costs, lead time and 
other relevant factors.\3\ That rule and its analyses also accounted 
for the development and availability of advanced GHG emission-reducing 
technologies for gasoline-fueled vehicles, which demonstrated that the 
standards were appropriate under section 202(a) of the CAA.\4\ This 
proposed rule provides additional analysis that takes into 
consideration updated data and recent developments. Auto manufacturers 
are currently implementing an increasing array of advanced gasoline 
vehicle GHG emission-reducing technologies at a rapid pace throughout 
their vehicle fleets. Vehicle electrification technologies are also 
advancing rapidly, as battery costs have continued to decline, and 
automakers have announced an increasing diversity and volume of zero-
emission vehicle models. Meanwhile, in 2019, several auto manufacturers 
voluntarily entered into agreements with the State of California to 
comply with GHG emission reduction targets through MY 2026 across their 
national vehicle fleets (the ``California Framework Agreements'') that 
are more stringent than the EPA standards as revised by the SAFE rule. 
These developments further support EPA's decision to reconsider and 
propose revising the existing EPA standards to be more stringent, 
particularly in light of factors indicating that more stringent near-
term standards are feasible at reasonable cost and would achieve 
significantly greater GHG emissions reductions and public health and 
welfare benefits than the existing program. In developing this 
proposal, EPA has conducted outreach with a wide range of interested 
stakeholders, including labor unions, States, and industry as provided 
in E.O. 13990, and we will continue to engage with these and other 
stakeholders as part of our regulatory development process.
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    \2\ EPA's model year emission standards also apply in subsequent 
model years, unless revised, e.g., MY 2025 standards issued in the 
2012 rule also applied to MY 2026 and beyond.
    \3\ 77 FR 62624, October 15, 2012.
    \4\ Id.
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    This proposal is limited to MYs 2023-2026, given lead time 
considerations under the CAA, which is consistent with E.O. 13990's 
direction to review the SAFE rule standards. We have designed the 
proposed program based on our assessment that the proposed standards 
are reasonable and appropriate and will achieve a significant level of 
GHG reductions for MYs 2023-2026 vehicles, with the expectation that a 
future, longer-term program for MYs 2027 and later will build upon 
these near-term standards.
    EPA has set previous light-duty vehicle GHG emission standards in 
joint rulemakings where NHTSA also established CAFE standards. EPA has 
concluded that it is not necessary at this time for this EPA proposal 
to be done in a joint action with NHTSA. EPA has coordinated with 
NHTSA, both on a bilateral level as well as through the interagency 
review of the EPA proposal led by the Office of Management and Budget.
2. Why does EPA believe the proposed standards are appropriate under 
the CAA?
    EPA is proposing to revise GHG emissions standards for passenger 
cars and light trucks under its authority in section 202(a) of the CAA. 
Section 202(a) requires EPA to establish standards for emissions of 
pollutants from new motor vehicles which, in the Administrator's 
judgment, cause or contribute to air pollution which may reasonably be 
anticipated to endanger public health or welfare. Standards under 
section 202(a) take effect ``after such period as the Administrator 
finds necessary to permit the development and application of the 
requisite technology, giving appropriate consideration to the cost of 
compliance within such period.'' Thus, in establishing or revising 
section 202(a) standards designed to reduce air pollution that 
endangers public health and welfare, EPA also must consider issues of 
technological feasibility, compliance cost, and lead time. EPA also may 
consider other factors and in previous light-duty vehicle GHG standards 
rulemakings has considered the impacts of potential GHG standards

[[Page 43729]]

on the auto industry, fuel savings by consumers, oil conservation, 
energy security and other energy impacts, as well as other relevant 
considerations such as safety.
    As we describe in greater detail below, EPA has carefully 
considered the technological feasibility and cost of the proposed 
standards and the available lead time for manufacturers to comply with 
them, including existing and proposed flexibilities designed to 
facilitate compliance during the MYs 2023-2026 timeframe. Based on our 
analysis, we believe that the proposed standards, combined with 
proposed flexibilities that address lead time considerations resulting 
from relaxations in standards revised in the SAFE rule, are appropriate 
and justified under section 202(a) of the CAA. Our updated analysis for 
this proposal, as well as our earlier analyses of similar standards, 
supports the conclusion that the proposed standards are technologically 
feasible for the model years covered (MYs 2023-2026) and that the costs 
of compliance for manufacturers would be reasonable. The proposed 
standards would result in greater reductions in GHG emissions, as well 
as reductions in emissions of some criteria pollutants and air toxics, 
resulting in significant benefits for public health and welfare. We 
also show that the proposal would result in reduced vehicle operating 
costs for consumers and that the benefits of the proposed program would 
significantly exceed the costs.
    EPA has significantly updated its analysis for this rule. As 
discussed further below, we have updated a number of key inputs, such 
as, for example, certain technology costs and penetrations, to ensure 
they are up to date. Notably, the results of this updated analysis are 
generally in agreement with prior analyses, including those conducted 
for the SAFE rule. In particular, the costs that have been estimated 
for manufacturers to meet standards of a similar stringency to the 
proposed standards have been roughly consistent since EPA first 
estimated them in 2012. That is, although manufacturers have less lead 
time before these standards would be implemented than with previous 
rulemakings, the significant progress that has been made in 
implementing advanced gasoline technologies in the fleet (as well as 
advances in electric and hybrid vehicle technology) since 2012 means 
the proposed standards can be achieved at roughly the same cost as 
previous estimates, and additional lead time is unnecessary.
    When considering similar cost estimates in the SAFE rule, EPA 
identified some factors, primarily costs to manufacturers and upfront 
costs to consumers, as favoring reductions in stringency of the then-
existing standards, and other factors, such as reduced emissions that 
endanger public health and welfare and reduced operating costs for 
consumers, as favoring increased stringency (or a lower degree of 
reduced stringency). In balancing these factors in the SAFE rule, EPA 
placed greater weight on the former factors, and thereby decided to 
make EPA's GHG standards significantly less stringent. But the purpose 
of adopting standards under CAA section 202 is to address air pollution 
that may reasonably be anticipated to endanger public health and 
welfare. Indeed, reducing air pollution has traditionally been the 
focus of such standards. EPA has reconsidered how costs, lead time and 
other factors were weighed in the SAFE rule and is reaching a different 
conclusion as to the appropriate stringency of GHG standards. In light 
of the statutory purpose of section 202, the Administrator is placing 
greater weight on the emission reductions and resulting public health 
and welfare benefits, as well as the savings in vehicle operating costs 
for consumers, and proposing significantly more stringent standards for 
MYs 2023-2026 compared to the standards established by the SAFE rule. 
As discussed in Section III.A, the proposed standards take into 
consideration both the updated analysis for this rule and past EPA 
analyses conducted for similar GHG standards. We are revising decisions 
made in the SAFE final rule in accordance with Supreme Court decisions 
affirming that agencies are free to reconsider and revise their prior 
decisions where they provide a reasonable explanation for their revised 
decisions.\5\ In this rulemaking, the agency is changing its 2020 
position and restoring its previous approach by proposing to find, in 
light of the statutory purposes of the Clean Air Act and in particular 
of section 202(a), that it is more appropriate to place greater weight 
on the magnitude and benefits of reducing emissions that endanger 
public health and welfare, while continuing to consider compliance 
costs, lead time and other relevant factors.
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    \5\ See, e.g., Encino Motorcars, LLC v. Navarro, 136 S. Ct. 
2117, 2125 (2016); FCC v. Fox Television Stations, Inc., 556 U.S. 
502, 515 (2009).
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3. Future Longer-Term Action To Further Reduce Light-Duty Vehicle 
Emissions in 2027 and Beyond
    Addressing the climate crisis will require substantial reductions 
in GHG emissions from the transportation sector. The transportation 
sector is the largest U.S. source of GHG emissions, representing 29 
percent of total GHG emissions.\6\ Within the transportation sector, 
light-duty vehicles are the largest contributor, at 58 percent, and 
thus comprise 17 percent of total U.S. GHG emissions.\7\ GHG emissions 
have significant impacts on public health and welfare as evidenced by 
the well-documented scientific record and as set forth in EPA's 
Endangerment and Cause or Contribute Findings under Section 202(a) of 
the CAA.\8\ Additionally, major scientific assessments continue to be 
released that further advance our understanding of the climate system 
and the impacts that GHGs have on public health and welfare both for 
current and future generations, as discussed in Section IV.B, making it 
clear that continued emission reductions in the light-duty vehicle 
sector are needed beyond the model years covered by the standards 
proposed today.
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    \6\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-
2019 (EPA-430-R-21-005, published April 2021).
    \7\ 7 Ibid.
    \8\ 74 FR 66496, December 15, 2009; 81 FR 54422, August 15, 
2016.
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    This proposed action therefore serves as a critical building block 
for a comprehensive, multipollutant longer-term regulatory program 
implementing EPA's statutory authority under the CAA. We are at a 
pivotal moment in the history of the light-duty transportation sector--
a shift to zero-emission vehicle technologies is already underway, and 
it presents a strong potential for dramatic reductions in GHG and 
criteria pollutant emissions over the longer term. Major automakers as 
well as many global jurisdictions and U.S. states have announced plans 
to shift the light-duty fleet toward zero-emissions technology, as 
detailed below. EPA anticipates that the design of a future, longer-
term program beyond 2026 will incorporate accelerating advances in 
zero-emission technologies.
    A proliferation of recent announcements from automakers signals a 
rapidly growing shift in investment away from internal-combustion 
technologies and toward high levels of electrification. These automaker 
announcements are supported by continued advances in automotive 
electrification technologies, and further driven by the need to

[[Page 43730]]

compete in a global market as other countries implement aggressive 
zero-emission transportation policies. For example, in January 2021, 
General Motors announced plans to become carbon neutral by 2040, 
including an effort to shift its light-duty vehicles entirely to zero-
emissions by 2035.\9\ In March 2021, Volvo announced plans to make only 
electric cars by 2030,\10\ and Volkswagen announced that it expects 
half of its U.S. sales will be all-electric by 2030.\11\ In April 2021, 
Honda announced a full electrification plan to take effect by 2040, 
with 40 percent of North American sales expected to be fully electric 
or fuel cell vehicles by 2030, 80 percent by 2035 and 100 percent by 
2040.\12\ In May 2021, Ford announced that they expect 40 percent of 
their global sales will be all-electric by 2030.\13\ In June 2021, Fiat 
announced a move to all electric vehicles by 2030, and in July 2021 its 
parent corporation Stellantis announced an intensified focus on 
electrification across all of its brands.14 15 Also in July 
2021, Mercedes-Benz announced that all of its new architectures would 
be electric-only from 2025, with plans to become ready to go all-
electric by 2030 where possible.\16\
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    \9\ General Motors, ``General Motors, the Largest U.S. 
Automaker, Plans to be Carbon Neutral by 2040,'' Press Release, 
January 28, 2021.
    \10\ Volvo Car Group, ``Volvo Cars to be fully electric by 
2030,'' Press Release, March 2, 2021.
    \11\ Volkswagen Newsroom, ``Strategy update at Volkswagen: The 
transformation to electromobility was only the beginning,'' March 5, 
2021. Accessed June 15, 2021 at https://www.volkswagen-newsroom.com/en/stories/strategy-update-at-volkswagen-the-transformation-to-electromobility-was-only-the-beginning-6875.
    \12\ Honda News Room, ``Summary of Honda Global CEO Inaugural 
Press Conference,'' April 23, 2021. Accessed June 15, 2021 at 
https://global.honda/newsroom/news/2021/c210423eng.html.
    \13\ Ford Motor Company, ``Superior Value From EVs, Commercial 
Business, Connected Services is Strategic Focus of Today's 
`Delivering Ford+' Capital Markets Day,'' Press Release, May 26, 
2021.
    \14\ Stellantis, ``World Environment Day 2021--Comparing 
Visions: Olivier Francois and Stefano Boeri, in Conversation to 
Rewrite the Future of Cities,'' Press Release, June 4, 2021.
    \15\ Stellantis, ``Stellantis Intensifies Electrification While 
Targeting Sustainable Double-Digit Adjusted Operating Income Margins 
in the Mid-Term,'' Press Release, July 8, 2021.
    \16\ Mercedes-Benz, ``Mercedes-Benz prepares to go all-
electric,'' Press Release, July 22, 2021.
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    These announcements and others like them continue a pattern over 
the past several years of many manufacturers taking steps to 
aggressively pursue zero-emission technologies, introduce a wide range 
of zero-emission vehicle models, and reduce their reliance on the 
internal-combustion engine in various markets around the 
globe.17 18 These goals and investments have been coupled 
with a rapidly increasing availability of plug-in vehicle models in the 
U.S.\19\ For example, the number of all-electric vehicle (EV) and plug-
in hybrid electric vehicle (PHEV) models available for sale in the U.S. 
more than doubled from about 24 in MY 2015 to about 60 in MY 2021, with 
offerings in a growing range of vehicle segments.\20\ Recent model 
announcements indicate that this number will increase to more than 80 
models by MY 2023, with many more expected to reach production before 
the end of the decade.\21\ Many of the zero-emission vehicles already 
on the market today cost less to drive than conventional 
vehicles,22 23 offer improved performance and handling,\24\ 
and can be charged at a growing network of public chargers \25\ as well 
as at home.
---------------------------------------------------------------------------

    \17\ Environmental Defense Fund and M.J. Bradley & Associates, 
``Electric Vehicle Market Status--Update, Manufacturer Commitments 
to Future Electric Mobility in the U.S. and Worldwide,'' April 2021.
    \18\ International Council on Clean Transportation, ``The end of 
the road? An overview of combustion-engine car phase-out 
announcements across Europe,'' May 10, 2020.
    \19\ Muratori et al., ``The rise of electric vehicles--2020 
status and future expectations,'' Progress in Energy v3n2 (2021), 
March 25, 2021. Accessed July 15, 2021 at https://iopscience.iop.org/article/10.1088/2516-1083/abe0ad.
    \20\ Fueleconomy.gov, 2015 Fuel Economy Guide and 2021 Fuel 
Economy Guide.
    \21\ Environmental Defense Fund and M.J. Bradley & Associates, 
``Electric Vehicle Market Status--Update, Manufacturer Commitments 
to Future Electric Mobility in the U.S. and Worldwide,'' April 2021.
    \22\ Department of Energy Vehicle Technologies Office, 
Transportation Analysis Fact of the Week #1186, ``The National 
Average Cost of Fuel for an Electric Vehicle is about 60% Less than 
for a Gasoline Vehicle,'' May 17, 2021.
    \23\ Department of Energy Vehicle Technologies Office, 
Transportation Analysis Fact of the Week #1190, ``Battery-Electric 
Vehicles Have Lower Scheduled Maintenance Costs than Other Light-
Duty Vehicles,'' June 14, 2021.
    \24\ Consumer Reports, ``Electric Cars 101: The Answers to All 
Your EV Questions,'' November 5, 2020. Accessed June 8, 2021 at 
https://www.consumerreports.org/hybrids-evs/electric-cars-101-the-answers-to-all-your-ev-questions/.
    \25\ Department of Energy Alternative Fuels Data Center, 
Electric Vehicle Charging Station Locations. Accessed on May 19, 
2021 at https://afdc.energy.gov/fuels/electricity_locations.html#/find/nearest?fuel=ELEC.
---------------------------------------------------------------------------

    At the same time, an increasing number of global jurisdictions and 
U.S. states plan to take actions to shift the light-duty fleet toward 
zero-emissions technology. In 2020, California announced an intention 
to require increasing volumes of zero-emission vehicles to meet the 
goal that, by 2035, all new light-duty vehicles sold in the state be 
zero-emission vehicles.\26\ Massachusetts \27\ and New York \28\ are 
also poised to adopt similar targets and requirements to take effect by 
2035. Several other states may adopt similar provisions by 2050 as 
members of the International Zero-Emission Vehicle Alliance.\29\ 
Globally, at least 12 countries, as well as numerous local 
jurisdictions, have announced similar goals to shift all new passenger 
car sales to zero-emission vehicles in the coming years, including 
Norway (2025); the Netherlands, Denmark, Iceland, Ireland, Sweden, and 
Slovenia (2030); Canada and the United Kingdom (2035); France and Spain 
(2040); and Costa Rica (2050).30 31 Together, these 
countries represent approximately 13 percent of the global market for 
passenger cars,\32\ in addition to that represented by the 
aforementioned U.S. states and other global jurisdictions.
---------------------------------------------------------------------------

    \26\ State of California Office of the Governor, ``Governor 
Newsom Announces California Will Phase Out Gasoline-Powered Cars & 
Drastically Reduce Demand for Fossil Fuel in California's Fight 
Against Climate Change,'' Press Release, September 23, 2020.
    \27\ Commonwealth of Massachusetts, ``Request for Comment on 
Clean Energy and Climate Plan for 2030,'' December 30, 2020.
    \28\ New York State Senate, Senate Bill S2758, 2021-2022 
Legislative Session. January 25, 2021.
    \29\ ZEV Alliance, ``International ZEV Alliance Announcement,'' 
Dec. 3, 2015. Accessed on July 16, 2021 at http://www.zevalliance.org/international-zev-alliance-announcement/.
    \30\ International Council on Clean Transportation, ``Update on 
the global transition to electric vehicles through 2019,'' July 
2020.
    \31\ Reuters, ``Canada to ban sale of new fuel-powered cars and 
light trucks from 2035,'' June 29, 2021. Accessed July 1, 2021 from 
https://www.reuters.com/world/americas/canada-ban-sale-new-fuel-powered-cars-light-trucks-2035-2021-06-29/.
    \32\ International Council on Clean Transportation, ``Growing 
momentum: Global overview of government targets for phasing out new 
internal combustion engine vehicles,'' posted 11 November 2020, 
accessed April 28, 2021 at https://theicct.org/blog/staff/global-ice-phaseout-nov2020.
---------------------------------------------------------------------------

    EPA recognizes that in addition to substantially reducing GHG 
emissions, a longer-term rulemaking could also address criteria 
pollutant and air toxics emissions from the new light-duty vehicle 
fleet--especially important considerations during the transition to 
zero-emission vehicles. EPA expects that a future longer-term 
rulemaking will take critical steps to continue the trajectory of 
transportation emission reductions needed to protect public health and 
welfare. Achieving this trajectory with the help of increased fleet 
penetration of zero-emission vehicles would bring with it other 
advantages as well, such as potentially large reductions in roadway 
pollution and noise in overburdened communities, and potentially 
support for the future development of vehicle-to-grid services that 
could become a key enabler for increased utilization of

[[Page 43731]]

variable renewable energy sources, such as wind and solar, across the 
grid.\33\
---------------------------------------------------------------------------

    \33\ Department of Energy Electricity Advisory Committee, 
``Enhancing Grid Resilience with Integrated Storage from Electric 
Vehicles: Recommendations for the U.S. Department of Energy,'' June 
25, 2018.
---------------------------------------------------------------------------

B. Summary of Proposed Light-Duty Vehicle GHG Program

    EPA is proposing revised GHG standards that would begin in MY 2023 
and increase in stringency year over year through MY 2026. EPA proposes 
to increase the stringency of the standards from the average roughly 
1.5 percent year-over-year stringency increase of the relaxed SAFE 
standards to a nearly 10 percent proposed stringency increase in MY 
2023, followed by a nearly 5 percent proposed stringency increase in 
each MY from 2024 through 2026. EPA believes the 10 percent proposed 
increase in stringency in MY 2023 is appropriate given the 
technological investments industry has continued to make beyond what 
would be required to meet the SAFE rule revised standards, such as 
improvements being made in response to the California Framework 
Agreements, as well as the compliance flexibilities built into the 
program. Also, as discussed in Section I.G below, EPA requests comment 
on standards for MY 2026 that would result in fleet average target 
levels that are in the range of 5-10 g/mile lower (i.e., more 
stringent) than the levels proposed. This request for comments is in 
keeping with the additional lead time available for this out-year 
compared to MYs 2023-2025, and because EPA may determine that it is 
appropriate, particularly in light of the accelerating transition to 
electrified vehicles, to require additional reductions in this time 
frame. The proposed standards would achieve significant GHG and other 
emission reductions and related public health and welfare benefits, 
while providing consumers with lower operating costs resulting from 
significant fuel savings. Our analysis described in this notice 
demonstrates that the proposed standards are appropriate under section 
202(a) of the CAA, considering costs, technological feasibility, 
available lead time, and other factors. The proposed trajectory of 
increasing stringency from MYs 2023 to 2026 takes into account the 
credit-based emissions averaging, banking and trading flexibilities of 
the current program as well as additional flexibility provisions that 
we are proposing to ease the transition to more stringent standards. 
EPA also took into account manufacturers' ability to generate credits 
against the existing standards relaxed in the SAFE rule for MYs 2021 
and 2022, which we are not proposing to revise.
    In our design and analyses of the proposed program and our overall 
updated assessment of feasibility, EPA also took into account the 
decade-long light-duty vehicle GHG emission reduction program in which 
the auto industry has introduced a wide lineup of ever more fuel-
efficient, GHG-reducing technologies. The technological achievements 
already developed and applied to vehicles within the current new 
vehicle fleet will enable the industry to achieve the proposed 
standards even without the development of new technologies beyond those 
already widely available. Furthermore, in light of the design cycle 
timing for vehicles, EPA has basis to expect that the vehicles that 
automakers will be selling during the first years of the proposed MY 
2023-26 program were already designed before the less stringent SAFE 
standards were recently adopted. Further support that the technologies 
needed to meet the proposed standards do not need to be developed, but 
are already widely available and in use on vehicles, can be found in 
the fact that five vehicle manufacturers, representing about a third of 
U.S. auto sales, agreed in 2019 with the State of California that their 
nationwide fleets would meet GHG emission reduction targets more 
stringent than the applicable EPA standards beginning in model year 
2021. The fact that five automakers voluntarily entered into the 
California Framework Agreements also supports the feasibility of 
meeting standards at least as stringent as the emission reduction 
targets under the California Framework, which we describe in detail 
later in this preamble. We describe additional details of the proposal 
below and in later sections of the preamble as well as in the Draft 
Regulatory Impact Analysis (DRIA). We also describe and analyze both 
less stringent and more stringent alternatives, consistent with OMB 
Circular A-4.
    Although most automakers have launched ambitious plans to develop 
and produce increasing numbers of zero- and near-zero-emission 
vehicles, EPA recognizes that during the near-term timeframe of the 
proposed standards through MY 2026, the new vehicle fleet likely will 
continue to consist primarily of gasoline-fueled vehicles. In this 
preamble and in the DRIA, we provide our analyses supporting our 
assessment that the proposed standards for MYs 2023 through 2026 would 
be achievable primarily through the application of advanced gasoline 
vehicle technologies. We project that during the four-year ramping up 
of the stringency of the CO2 standards, the proposed 
standards could be met with gradually increasing sales of plug-in 
electric vehicles in the U.S., up to about 8 percent market share 
(including both electric vehicles (EVs) and plug-in hybrid electric 
vehicles (PHEVs)) by MY 2026. Given that EVs and PHEVs represented 
about 2 percent of the new vehicle market in MY 2019,\34\ this would 
represent a significant increase in penetration of these vehicles but 
one that we believe is reasonable given automaker announcements on 
increasing EV and PHEV production. We note later in this preamble in 
the discussion of the alternative levels of stringency that EPA is 
considering, that there may be the potential for higher levels of EV 
penetration by MY 2026, which could enable EPA to consider a more 
stringent standard for MY 2026. As described elsewhere in this 
preamble, we believe that, in conjunction with the proposed standards, 
the limited but focused incentives and flexibilities that we are 
proposing would support automakers' acceleration of their introduction 
and sales of advanced technologies, including zero and near-zero-
emission technologies.
---------------------------------------------------------------------------

    \34\ ``The 2020 EPA Automotive Trends Report, Greenhouse Gas 
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003, January 2021, p. 52.
---------------------------------------------------------------------------

1. Proposed Revised GHG Emissions Standards
i. Proposed Revised CO2 Targets
    As with EPA's previous light-duty GHG programs, EPA is proposing 
footprint-based standards curves for both passenger cars and trucks. 
Each manufacturer would have a unique standard for the passenger cars 
category and another for the truck category \35\ for each MY based on 
the sales-weighted footprint-based CO2 targets \36\ of the 
vehicles produced in that MY. Figure 1 shows EPA's proposed standards, 
expressed as average fleetwide GHG emissions targets (cars and trucks 
combined), projected through MY 2026. For comparison, the figure also 
shows the corresponding targets for the SAFE final rulemaking (FRM) and 
the 2012 FRM. The projected fleet targets for this proposed rule 
increase in stringency in

[[Page 43732]]

MY 2023 by about 10 percent (from the existing SAFE rule standards in 
MY 2022), followed by stringency increases thereafter of nearly 5 
percent year over year from MY 2024 through MY 2026. Also, as discussed 
in Section I.G, EPA requests comment on standards for MY 2026 that 
would result in fleet average target levels that are in the range of 5-
10 g/mile lower (i.e., more stringent) than the levels proposed. As 
with all EPA vehicle emissions standards, the proposed MY 2026 
standards would then remain in place for all subsequent MYs, unless and 
until they are revised in a subsequent rulemaking. Table 1 presents the 
estimates of EPA's proposed standards presented in Figure 1, again in 
terms of the projected overall industry fleetwide CO2-
equivalent emission compliance target levels. The industry fleet-wide 
estimates in Table 1 are projections based on modeling that EPA 
conducted for the proposed rule, taking into consideration projected 
fleet mix and footprints for each manufacturer's fleet in each model 
year. Table 2 presents projected industry fleet average year-over-year 
percent reductions comparing the existing standards under the SAFE rule 
and the proposed revised standards. See Section II.A below for a full 
discussion of the proposed standards and presentations of the footprint 
standards curves.
---------------------------------------------------------------------------

    \35\ Passenger cars include cars and smaller cross-overs and 
SUVs, while the truck category includes larger cross-overs and SUVs, 
minivans, and pickup trucks.
    \36\ Because compliance is based on the full range of vehicles 
in a manufacturer's car and truck fleets, with lower-emitting 
vehicles compensating for higher-emitting vehicles, the emission 
levels of specific vehicles within the fleet are referred to as 
targets, rather than standards.
---------------------------------------------------------------------------

BILLING CODE 6560-50-P
[GRAPHIC] [TIFF OMITTED] TP10AU21.000

BILLING CODE 6560-50-C

                 Table 1--Projected Industry Fleet-Wide CO2 Compliance Targets for MYs 2023-2026
                                                   [grams/mi]
----------------------------------------------------------------------------------------------------------------
                                      2022 *           2023            2024            2025           2026 **
----------------------------------------------------------------------------------------------------------------
Cars............................             180             165             157             149             142
Trucks..........................             260             232             221             210             199
Combined Cars and Trucks........             220             199             189             180             171
----------------------------------------------------------------------------------------------------------------
* SAFE rule targets included for reference.
** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/
  mile more stringent than the levels shown.
The combined car/truck CO2 targets are a function of assumed car/truck shares. For this illustration, we assume
  an approximately 50/50% split in MYs 2023-2026. See DRIA Chapter 2 for detail.

[[Page 43733]]

                                   Table 2--Projected Industry Fleet Average Target Year-Over-Year Percent Reductions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             SAFE rule                                       Proposal
                                                         -----------------------------------------------------------------------------------------------
                                                              Cars %         Trucks %       Combined %        Cars %         Trucks %       Combined %
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023....................................................             1.7             1.5             1.6             8.3            10.8             9.8
2024....................................................             1.1             1.2             1.2             4.8             4.7             4.7
2025....................................................             2.3             2.0             2.2             5.1             5.0             4.9
2026 *..................................................             1.8             1.6             1.7             4.7             5.2             5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The percentages shown do not include EPA's request for comments on MY 2026 standards that are 5-10 g/mile more stringent than proposed.

2. Proposed Compliance Incentives and Flexibilities
    The existing GHG program established in the 2010 and 2012 rules 
included several key flexibilities, such as credit programs and 
technology incentives that are discussed further in this proposal where 
EPA is requesting comment or proposing modifications.\37\ These 
include:
---------------------------------------------------------------------------

    \37\ See 75 FR 25324, May 7, 2010 and 77 FR 62624, Oct. 15, 
2012.

 Credit Averaging, Banking, and Trading (ABT) including credit 
carry-forward, credit carry-back, transferring credits between a 
manufacturer's car and truck fleets, and credit trading between 
manufacturers (MY 2012 and later)
 Off-cycle credits for GHG emissions reductions not captured on 
the test procedures used for fleet average compliance with the 
footprint-based standards (MY 2012 and later)
 Air conditioning credits for system efficiency improvements 
and reduced refrigerant leakage or use of low global warming potential 
refrigerants (MY 2012 and later)
 Multiplier incentives for advanced technology vehicles 
including electric vehicles, fuel cell vehicles, plug-in hybrids 
(ending after MY 2021)
 Multiplier incentives for natural gas fueled vehicles (MY 
2021-2026)
 Full-size pick-up incentives for hybridization or performance 
improvements equivalent to hybridization (ending after MY 2021)

    EPA is proposing a targeted set of extended or additional 
compliance flexibilities and incentives that we believe are appropriate 
given the stringency and lead time of the proposed standards. We are 
proposing four types of flexibilities/incentives, in addition to 
flexibilities/incentives that already will be available for these MYs 
under EPA's existing regulations: (1) A limited extension of carry-
forward credits generated in MYs 2016 through 2020; (2) an extension of 
the advanced technology vehicle multiplier credits for MYs 2022 through 
2025 with a cumulative credit cap; (3) restoration of the 2012 rule's 
full-size pickup truck incentives for strong hybrids or similar 
performance-based credit for MYs 2022 through 2025 (provisions which 
were removed in the SAFE rule); and (4) an increase of the off-cycle 
credits menu cap from 10 g/mile to 15 g/mile. EPA is also proposing to 
remove the multiplier incentives for natural gas fueled vehicles for 
MYs 2023-2026. We summarize these proposals below and provide details 
in Sections II.B and II.C below.
    The GHG program includes existing provisions initially established 
in the 2010 rule, which set the MY 2012-2016 GHG standards, for how 
credits may be used within the program. These averaging, banking, and 
trading (ABT) provisions include credit carry-forward, credit carry-
back (also called deficit carry-forward), credit transfers (within a 
manufacturer), and credit trading (across manufacturers). These ABT 
provisions define how credits may be used and are integral to the 
program. The current program limits credit carry-forward to 5 years. 
EPA is proposing a limited extension of credit carry-forward for 
credits generated in MYs 2016 through 2020. The proposal would change 
the credit carry-forward time limitation for MY 2016 credits from five 
to seven years and the carry-forward limit for MYs 2017-2020 from 5 to 
6 years, as shown in Table 3 below.

                                           Table 3--EPA Proposed Extension of Credit Carry-Forward Provisions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        MYs credits are valid under EPA's proposed extension
           MY credits are banked           -------------------------------------------------------------------------------------------------------------
                                              2016      2017      2018      2019      2020      2021      2022      2023      2024      2025      2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016......................................  ........        x         x         x         x         x         +         +   ........  ........  ........
2017......................................  ........  ........        x         x         x         x         x         +   ........  ........  ........
2018......................................  ........  ........  ........        x         x         x         x         x         +   ........  ........
2019......................................  ........  ........  ........  ........        x         x         x         x         x         +   ........
2020......................................  ........  ........  ........  ........  ........        x         x         x         x         x         +
2021......................................  ........  ........  ........  ........  ........  ........        x         x         x         x         x
--------------------------------------------------------------------------------------------------------------------------------------------------------
x = Current program. + = Proposed additional years.

    The existing GHG program also includes temporary incentives through 
MY 2021 that encourage the use of advanced technologies such as 
electric, hybrid, and fuel cell vehicles, as well as incentives for 
full-size pickups using strong hybridization or technologies providing 
similar emissions reductions to hybrid technology. The full-size pickup 
incentives originally were available through MY 2025, but the SAFE rule 
removed these incentives for MYs 2022 through 2025. When EPA 
established these incentives in the 2012 rule, EPA recognized that they 
would reduce the effective stringency of the standards, but believed 
that it was worthwhile to have a limited near-term

[[Page 43734]]

loss of emissions reduction benefits to increase the potential for far 
greater emissions reduction and technology diffusion benefits in the 
longer term.\38\ EPA believed that the temporary regulatory incentives 
would help bring low emission technologies to market more quickly than 
in the absence of incentives.\39\ With these same goals in mind for 
this program, EPA is proposing multiplier incentives from MY 2022 
though MY 2025 with a cap on multiplier credits and to reinstate the 
full-size pickup incentives removed from the program by the SAFE rule. 
These proposed incentives are intended as a temporary measure 
supporting the transition to zero-emission vehicles and to provide 
additional flexibility in meeting the MY 2023-2026 proposed standards, 
as further discussed in Section II.B.1.
---------------------------------------------------------------------------

    \38\ See Tables III-2 and III-3, 77 FR 62772, October 15, 2012.
    \39\ 77 FR 62812, October 15, 2012.
---------------------------------------------------------------------------

    EPA is also proposing to remove the extended multiplier incentives 
added by the SAFE rule from the GHG program after MY 2022. EPA is 
proposing to end multipliers for NGVs in this manner because NGVs are 
not a near-zero emissions technology and EPA believes multipliers are 
no longer necessary or appropriate for these vehicles. Any NGV 
multiplier credits generated in MY 2022 would be included under the 
proposed multiplier cap.
    The current program also includes credits for real-world emissions 
reductions not reflected on the test cycles used for measuring 
CO2 emissions for compliance with the fleet average 
standards. There are credits for using technologies that reduce GHG 
emissions that aren't captured on EPA tests (``off-cycle'' 
technologies) and improvements to air conditioning systems that 
increase efficiency and reduce refrigerant leakage. These credit 
opportunities do not sunset under the existing regulations, remaining a 
part of the program through MY 2026 and beyond unless the program is 
changed by regulatory action. EPA is proposing to modify an aspect of 
the off-cycle credits program to provide additional opportunities for 
manufacturers to generate credits by increasing the pre-defined menu 
credit cap from 10 to 15 g/mile. EPA is also proposing to modify some 
of the regulatory definitions that are used to determine whether a 
technology is eligible for the menu credits. EPA is not proposing 
changes to the air conditioning credits elements of the program.

C. Analytical Support for the Proposed Revised Standards

1. Summary of Analyses for This Proposed Rule
    All of EPA's analyses of the national light-duty vehicle GHG 
program over the past decade have been built on the same overall 
framework and produce the same types of results. Section III.A below 
explains this common EPA framework in more detail. In summary, it 
includes the following primary elements:
i. Analyzing Issues of Feasibility, Costs, and Lead Time
    As with our earlier analyses, EPA used a model to simulate the 
decision process of auto manufacturers in choosing among the emission 
reduction technologies available to incorporate in vehicles across 
their fleets. The models take into account both the projected costs of 
established and newer technologies and the relative ability of each of 
these technologies to reduce GHG emissions. This process identifies 
potential pathways for manufacturers to comply with a given set of GHG 
standards. EPA then estimates projected average and total costs for 
manufacturers to produce these vehicles to meet the standards under 
evaluation during the model years covered by the analysis.
    In addition to projecting the technological capabilities of the 
industry and estimating compliance costs for each of the four affected 
model years (MYs 2023-2026), EPA has considered the role of the 
averaging, banking, and trading system that has been available and 
extensively used by the industry since the beginning of the light-duty 
vehicle GHG program in model year 2012. Our analysis of the current and 
anticipated near-future usage of the GHG credit mechanisms (III.B.2 
below) reinforces the trends we identified in our other analyses 
showing widespread technological advancement in the industry at 
reasonable per-vehicle costs. Together, these analyses support EPA's 
conclusion under section 202(a) of the CAA that technologically 
feasible pathways are available at reasonable costs for automakers to 
comply with the proposed standards during each of the four model years. 
We discuss these analyses and their results further in Section III 
below.
ii. Analyzing the Projected Impacts of the Proposed Program
    We also estimate the GHG and non-GHG emission impacts (tailpipe and 
upstream) of the proposed standards. EPA then builds on the estimated 
changes in emissions and fuel consumption to calculate expected net 
economic impacts from these changes. Key economic inputs include: The 
social costs of GHGs; measures of health impacts from changes in 
criteria pollutant emissions; a value for the vehicle miles traveled 
``rebound effect;'' estimates of energy security impacts of changes in 
fuel consumption; and costs associated with crashes, noise, and 
congestion from additional rebound driving.
    Our overall analytical approach generates key results for the 
following metrics: Incremental costs per vehicle (industry-wide 
averages and by manufacturer); total vehicle technology costs for the 
auto industry; GHG emissions reductions and criteria pollutant 
emissions reductions; penetration of key GHG-reducing technologies 
across the fleet; consumer fuel savings; oil reductions; and net 
societal costs and benefits. We discuss these analyses in Sections III, 
IV, V, and VII below as well as in the DRIA.
2. History of Similar Analyses
    At several points during the past decade, EPA has performed 
detailed analyses to evaluate the technological feasibility, as well as 
to project program costs and benefits, of the national light-duty 
vehicle GHG emissions control program. Although the purposes of these 
analyses varied, and EPA used somewhat different modeling approaches 
and tools, in each case these analyses included assessments of the 
program in the later years of the standards, i.e., MYs 2022 through 
2025 or 2026. As we describe in more detail in Chapter 1 of the DRIA, 
EPA performed similar analyses in support of the 2011 proposal and 2012 
final rule establishing the original MY 2017-2025 light-duty vehicle 
GHG standards; in 2016-January 2017 in support of the Midterm 
Evaluation process and Determination concerning the MY 2022-2025 
standards; and in 2018 during the development of the SAFE proposed 
rule.
    It is notable that, although each analysis is based on projections 
from the then-available fleet data forward to model years 2025 or 2026, 
the results of each of these earlier analyses, as well as the updated 
analysis we have performed for our proposed standards, have all 
produced very similar results in several key metrics. For example, the 
estimated projected cost to manufacturers to implement similar 
standards in 2025-2026 has remained fairly consistent since 2012. Thus, 
while we believe the updated analysis presented in the DRIA provides 
strong support for the

[[Page 43735]]

feasibility and appropriateness of the proposed program, the consistent 
results from the earlier analyses further reinforce the robustness of 
our conclusions.

D. Summary of Costs and Benefits of the Proposed Program

    EPA estimates that this proposal would result in significant 
present-value net benefits of $86 billion to $140 billion (annualized 
net benefits of $4.2 billion to $7.3 billion)--that is, the total 
benefits far exceed the total costs of the program. Table 4 below 
summarizes EPA's estimates of total discounted costs, fuel savings, and 
benefits. The results presented here project the monetized 
environmental and economic impacts associated with the proposed 
standards during each calendar year through 2050. The proposal also 
would have significant benefits for consumers, as the fuel savings for 
American drivers would total $120 to $250 billion through 2050. With 
these fuel savings, consumers would benefit from reduced operating 
costs over the vehicle lifetime.
    The benefits include climate-related economic benefits from 
reducing emissions of GHGs that contribute to climate change, 
reductions in energy security externalities caused by U.S. petroleum 
consumption and imports, the value of certain particulate matter-
related health benefits (including premature mortality), the value of 
additional driving attributed to the rebound effect, and the value of 
reduced refueling time needed to fill a more fuel-efficient vehicle. 
The analysis also includes estimates of economic impacts stemming from 
additional vehicle use, such as the economic damages caused by crashes, 
congestion, and noise (from increased rebound driving). See the DRIA 
for more information regarding these estimates.

   Table 4--Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program for Calendar Years
                                                  Through 2050
                                      [Billions of 2018 dollars] a b c d e
----------------------------------------------------------------------------------------------------------------
                                                  Present value                       Annualized value
                                     ---------------------------------------------------------------------------
                                      3%  Discount rate  7%  Discount rate  3%  Discount rate  7%  Discount rate
----------------------------------------------------------------------------------------------------------------
Costs...............................               $240               $150                $12                $12
Fuel Savings........................                250                120                 13                9.9
Benefits............................                130                110                6.9                6.3
Net Benefits........................                140                 86                7.3                4.2
----------------------------------------------------------------------------------------------------------------
Notes:
a Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values
  are based on the stream of annual calendar year costs and benefits included in the analysis (2021-2050) and
  discounted back to year 2021.
b Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different
  estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates;
  95th percentile at 3% discount rate), which each increase over time. In this table, we show the benefits
  associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single central SC-GHG
  point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-
  GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the DRIA, a
  consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and
  lower, is also warranted when discounting intergenerational impacts.
c The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and
  2.5 percent) is used to calculate the present and annualized values of climate benefits for internal
  consistency, while all other costs and benefits are discounted at either 3% or 7%.
d Net benefits reflect the fuel savings plus benefits minus costs.
e Non-GHG impacts associated with the standards presented here do not include the full complement of health and
  environmental effects that, if quantified and monetized, would increase the total monetized benefits. Instead,
  the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts associated
  with reductions in PM2.5 exposure.

    A second way to present the net benefits of the proposal is using a 
vehicle MY lifetime basis. Table 5 and Table 6 summarize EPA's 
estimates of total discounted costs, fuel savings, and benefits through 
the full lifetime of vehicles projected to be sold in MYs 2023-2026. 
The estimated results presented here project the monetized 
environmental and economic impacts associated with the proposed 
standards. Note that standards continue at their MY2026 levels beyond 
MY2026 in any scenario. At both a 3% and 7% discount rate all model 
years show substantial fuel savings and net benefits.

Table 5--GHG Analysis of Lifetime Costs & Benefits To Meet the Proposed MYs 2023-2026 GHG Standards, 3% Discount
                                                      Rate
                                 [For vehicles produced in MY 2023-2026]a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $4.8            $3.6            $1.9           $0.68
2024............................................             5.9               7             3.6             4.7
2025............................................             6.7             8.6             4.4             6.2
2026............................................             8.1              13             7.2              12
                                                 ---------------------------------------------------------------
    Sum.........................................              26              33              17              24
----------------------------------------------------------------------------------------------------------------

[[Page 43736]]

 
                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.21            0.16            0.08           0.029
2024............................................            0.26             0.3            0.16             0.2
2025............................................            0.29            0.37            0.19            0.27
2026............................................            0.35            0.58            0.31            0.54
                                                 ---------------------------------------------------------------
    Sum.........................................             1.1             1.4            0.74               1
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 3% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

Table 6--GHG Analysis of Lifetime Costs & Benefits To Meet the Proposed MYs 2023-2026 GHG Standards, 7% Discount
                                                      Rate
                                 [For vehicles produced in MY 2023-2026]a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $4.4            $2.6            $1.7          -$0.14
2024............................................             5.5             4.7             3.3             2.4
2025............................................             6.1             5.5             3.9             3.4
2026............................................             7.3             8.2             6.2             7.2
                                                 ---------------------------------------------------------------
    Sum.........................................              23              21              15              13
----------------------------------------------------------------------------------------------------------------
                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.33            0.19           0.085          -0.053
2024............................................            0.41            0.35            0.16             0.1
2025............................................            0.45            0.41            0.19            0.15
2026............................................            0.55            0.62            0.31            0.38
                                                 ---------------------------------------------------------------
    Sum.........................................             1.7             1.6            0.75            0.58
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 7% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

E. How has EPA considered environmental justice in this proposal?

    Executive Orders 12898 (59 FR 7629, February 16, 1994) and 14008 
(86 FR 7619, February 1, 2021) direct federal agencies, to the greatest 
extent practicable and permitted by law, to make achieving 
environmental justice (EJ) part of their mission by identifying and 
addressing, as appropriate, disproportionately high and adverse human 
health or environmental effects of their programs, policies, and 
activities on minority populations and low-income populations in the 
United States. Chapter 8.3 discusses the potential environmental 
justice concerns associated with this proposal. EPA defines 
environmental justice as the fair treatment and meaningful

[[Page 43737]]

involvement of all people regardless of race, color, national origin, 
or income with respect to the development, implementation, and 
enforcement of environmental laws, regulations, and policies. Executive 
Order 14008 also calls on federal agencies to make achieving 
environmental justice part of their missions ``by developing programs, 
policies, and activities to address the disproportionately high and 
adverse human health, environmental, climate-related and other 
cumulative impacts on disadvantaged communities, as well as the 
accompanying economic challenges of such impacts.'' It declares a 
policy ``to secure environmental justice and spur economic opportunity 
for disadvantaged communities that have been historically marginalized 
and overburdened by pollution and under-investment in housing, 
transportation, water and wastewater infrastructure and health care.'' 
Under Executive Order 13563 (76 FR 3821), federal agencies may consider 
equity, human dignity, fairness, and distributional considerations, 
where appropriate and permitted by law.
    EPA's 2016 ``Technical Guidance for Assessing Environmental Justice 
in Regulatory Analysis'' provides recommendations on conducting the 
highest quality analysis feasible, recognizing that data limitations, 
time and resource constraints, and analytic challenges will vary by 
media and regulatory context. \40\
---------------------------------------------------------------------------

    \40\ ``Technical Guidance for Assessing Environmental Justice in 
Regulatory Analysis.'' Epa.gov, Environmental Protection Agency, 
https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf. (June 2016).
---------------------------------------------------------------------------

    EPA's mobile source regulatory program has historically reduced 
significant amounts of both GHG and non-GHG pollutants to the benefit 
of all U.S. residents, including populations that live near roads and 
in communities with EJ concerns. EJ concerns may arise in the context 
of this rulemaking in two key areas.
    First, minority populations and low-income populations may be 
especially vulnerable to the impacts of climate change. As discussed in 
Section IV.C, this proposed rulemaking would mitigate the impacts of 
climate change by achieving significant GHG emission reductions, which 
would benefit populations that may be especially vulnerable to various 
forms of damages associated with climate change.
    Second, in addition to significant climate-change benefits, the 
proposed standards would also impact non-GHG emissions. As discussed in 
Section VII.L.2, numerous studies have found that environmental hazards 
such as air pollution are more prevalent in areas where minority 
populations and low-income populations represent a higher fraction of 
the population compared with the general population. There is 
substantial evidence, for example, that people who live or attend 
school near major roadways are more likely to be of a racial minority, 
Hispanic ethnicity, and/or low socioeconomic status (see Section 
VII.L.2).
    We expect this proposed rule would result in both small reductions 
and small increases of non-GHG emissions. These effects could 
potentially impact communities with EJ concerns, though not necessarily 
immediately and not equally in all locations. For this proposal, the 
air quality information needed to perform a quantified analysis of the 
distribution of such impacts was not available. We therefore recommend 
caution when interpreting these broad, qualitative observations.
    We note that EPA intends to develop a future rule to control 
emissions of GHGs as well as criteria and air toxic pollutants from 
light-duty vehicles for MYs beyond 2026. We are considering how to 
project air quality impacts from the changes in non-GHG emissions for 
that future rulemaking (see Section V.C).

F. Affordability and Equity

    In addition to considering environmental justice impacts, we have 
examined the effects of the proposed standards on affordability of 
vehicles and transportation services for low-income households in 
Section VII.L of this Preamble and Chapter 8.4 of the DRIA. As with the 
effects of the proposed standards on vehicle sales discussed in Section 
VII.B, the effects of the proposed standards on affordability and 
equity depend in part on two countervailing effects: The increase in 
the up-front costs of new vehicles subject to more stringent standards, 
and the decrease in operating costs from reduced fuel consumption over 
time. The increase in up-front new vehicle costs has the potential to 
increase the prices of used vehicles, to make credit more difficult to 
obtain, and to make the least expensive new vehicles less desirable 
compared to used vehicles. The reduction in operating costs over time 
has the potential to mitigate or reverse all these effects. Lower 
operating costs on their own increase mobility (see DRIA Chapter 3.1 
for a discussion of rebound driving).
    While social equity involves issues beyond income and 
affordability, including race, ethnicity, gender, gender 
identification, and residential location, the potential effects of the 
proposed standards on lower-income households are of great importance 
for social equity and reflect these contrasting forces. The overall 
effects on vehicle ownership, including for lower-income households, 
depend heavily on the role of fuel consumption in vehicle sales 
decisions, as discussed in Section VII.M. At the same time, lower-
income households own fewer vehicles per household, are more likely to 
buy used vehicles than new, and spend more on fuel than on vehicles on 
an annual basis than higher-income households. In addition, for lower-
income households, fuel expenditures are a larger portion of household 
income, so the fuel savings that would result from this proposal may be 
more impactful to these consumers. Thus, the benefits of this proposal 
may be stronger for lower-income households even if they buy used 
vehicles: As vehicles meeting the proposed standards enter the used 
vehicle market, they will retain the fuel economy/GHG-reduction 
benefits, and associated fuel savings, while facing a smaller portion 
of the upfront vehicle costs. The reduction in operating costs may also 
increase access to transportation services, such as ride-hailing and 
ride-sharing, where the lower per-mile costs may play a larger role 
than up-front costs in pricing. As a result, lower-income consumers may 
be affected more from the reduction in operating costs than the 
increase in up-front costs.
    New electric vehicles currently have higher up-front costs and 
lower operating costs than gasoline vehicles and require access to 
charging infrastructure that may not be readily available to many. EPA 
has heard from some environmental justice groups and Tribes that 
limited access to electric vehicles and charging infrastructure can be 
a barrier for purchasing EVs. This proposal projects that the vast 
majority of vehicles produced in the time frame of the proposed 
standards will be gasoline-fueled vehicles (with EVs and PHEVs 
gradually increasing to about 8 percent total market share by MY 2026 
compared to about 4 percent in the No Action scenario, see DRIA Chapter 
4.1.3, Table 4-30). However, EPA will monitor and study affordability 
issues related to electric vehicles as their prevalence in the vehicle 
fleet increases.

G. What alternatives is EPA considering?

1. Description of the Alternatives
    Along with the proposed standards, EPA analyzed both a more 
stringent and a less stringent alternative. For the less stringent 
alternative, Alternative 1, EPA used the coefficients in the California

[[Page 43738]]

Framework for the 2.7 percent effective stringency level (as described 
in Section II.B.1) as the basis for the MY 2023 stringency level and 
the 2012 rule's MY 2025 standards as the basis for the MY 2026 
stringency level, with linear year-over-year reductions between the two 
points for MYs 2024 and 2025. EPA views the California Framework as a 
reasonable basis for the least stringent alternative that EPA would 
consider finalizing, since it represents a level of stringency that 
five manufacturers have already committed to achieving. EPA did not 
include incentive multipliers for Alternative 1, as doing so would only 
further reduce the effective stringency of this Alternative, and EPA 
views Alternative 1 as the lower end of stringency that it believes is 
appropriate through 2026.
    For the more stringent alternative, Alternative 2, EPA used the 
2012 rule standards as the basis for MY 2023-2025 targets, with the 
standards continuing to increase in stringency in a linear fashion for 
MY 2026. Alternative 2 adopts the 2012 rule stringency levels in MY 
2023 and follows the 2012 rule standard target levels through MY 2025. 
EPA extended the same linear average year-over-year trajectory for MYs 
2023-2025 to MY 2026 for the final standards under Alternative 2. As 
noted in Section II.A.1, EPA believes that it is important to continue 
to make progress in MY 2026 beyond the MY 2025 standard levels in the 
2012 rule. As with the proposal, Alternative 2 meets this objective. 
EPA did not include in Alternative 2 the proposed incentive multipliers 
with the proposed cumulative credit cap in MYs 2022-2025, which would 
have the effect of making Alternative 2 less stringent. As discussed in 
Section II.B.1, EPA is requesting comment on whether or not to include 
the proposed multipliers, and our request for comments extends to 
whether to include multipliers both for the proposal and for 
Alternative 2.\41\
---------------------------------------------------------------------------

    \41\ 41 See ``Benefits and Costs of the EPA Light-duty Vehicle 
GHG Proposal with and without Advanced Technology Multipliers,'' 
memorandum to Docket.
---------------------------------------------------------------------------

    As previously noted in Section I.B.2, EPA is proposing several 
modifications to program flexibilities. These proposed program changes, 
except for the advanced technology multipliers, would also apply to the 
alternatives. Table 7 below provides a list of the proposed 
flexibilities and their applicability to the proposed and alternative 
standards.

            Table 7--Applicability of Revised Flexibility Provisions to the Proposal and Alternatives
----------------------------------------------------------------------------------------------------------------
            Provision                       Proposal                Alternative 1             Alternative 2
----------------------------------------------------------------------------------------------------------------
Extension of credit carry-forward  Yes......................  Yes.....................  Yes.
 for MY 2016-2020 credits.
Advanced technology incentive      Yes......................  No......................  No.
 multipliers for MYs 2022-2025
 with cap.
Increase of off-cycle menu cap     Yes......................  Yes.....................  Yes.
 from 10 to 15 g/mile.
Reinstatement of full-size pickup  Yes......................  Yes.....................  Yes.
 incentives for strong hybrids or
 equivalent technologies for MYs
 2022-2025.
----------------------------------------------------------------------------------------------------------------
EPA's technical analysis, presented in Section III, consists of model runs using a model capable of reflecting
  some but not all of these provisions. The modeling includes consideration of advanced technology incentive
  multipliers for the proposal but not for the alternatives. The model runs also include the 15 grams per mile
  off-cycle menu cap as appropriate given the standards or targets to which a fleet being modeled is complying.
  Not included in the model runs are the full-size pickup truck technology incentive credit or the extension of
  the emissions credit carry-forward.

    The fleet average targets for the two alternatives compared to the 
proposed standards are provided in Table 8 below. EPA also requests 
comment on the level of stringency for MY 2026 for the alternatives and 
the proposed standards. Specifically, EPA requests comment on standards 
for MY 2026 that would result in fleet average target levels that are 
in the range of 5-10 g/mile lower (i.e., more stringent) than the 
levels shown for MY 2026 in Table 8. EPA is requesting specific comment 
on whether the level of stringency for MY 2026 should be greater in 
keeping with the additional lead time available for this out-year 
compared to MYs 2023-2025, and because EPA may determine that it is 
appropriate, particularly in light of the accelerating transition to 
electrified vehicles, to require additional reductions in this 
timeframe. As discussed in detail in Section A.3 of the Executive 
Summary, there has been a proliferation of recent announcements from 
automakers signaling a rapidly growing shift in investment away from 
internal-combustion technologies and toward high levels of 
electrification. EPA has also heard from a wide range of stakeholders 
over the past several months, including but not limited to the 
automotive manufacturers and the automotive suppliers, that the 
significant investments being made now to develop and launch new EV 
product offerings and in the expansion of EV charging infrastructure 
could enable higher levels of EV penetration to occur in the 
marketplace by the MY 2026 time frame than EPA has projected in this 
proposal for both the proposed MY 2026 standards and the Alternative 2 
MY 2026 standards. The information concerning the investment landscape 
potentially accelerating to an even greater extent of market 
penetration of EV products helps inform EPA's request for comment on 
the potential for a more stringent MY 2026 standard that would reflect 
this information and related considerations, including any additional 
information provided by commenters. In light of these stakeholder views 
and other available information, EPA is soliciting comment on the 
appropriateness of more stringent MY 2026 standards.

             Table 8--Projected Fleet Average Target Levels for Proposed Standards and Alternatives
                                                [CO2 grams/mile]
----------------------------------------------------------------------------------------------------------------
                                                                     Proposal      Alternative 1   Alternative 2
                           Model year                                projected       projected       projected
                                                                      targets         targets         targets
----------------------------------------------------------------------------------------------------------------
2021............................................................           * 223           * 223           * 224
2022............................................................           * 220           * 220           * 220

[[Page 43739]]

 
2023............................................................             199             203             195
2024............................................................             189             194             186
2025............................................................             180             185             177
2026 **.........................................................             171             177             169
----------------------------------------------------------------------------------------------------------------
* SAFE rule standards included here for reference.
** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/
  mile more stringent than the levels shown.

  [GRAPHIC] [TIFF OMITTED] TP10AU21.001
  
    As shown in Figure 2, the range of alternatives that EPA has 
analyzed is fairly narrow, with the proposed standard targets differing 
from the alternatives in any given MY in MYs 2023-2026 by 2 to 6 g/
mile, although EPA is requesting comment on a wider range of standards, 
particularly for MY 2026 as noted above. EPA believes this approach is 
reasonable and appropriate considering the relatively limited lead time 
for the proposed standards, especially for MYs 2023-2025, EPA's 
assessment of feasibility, the existing automaker commitments to meet 
the California Framework (representing about one-third of the auto 
market), the standards adopted in the 2012 rule; and the need to reduce 
GHG emissions. EPA provides a discussion of the feasibility of the 
proposed standard and alternatives and the selection of the proposed 
standards in Section III.D. The analysis of costs and benefits of 
Alternatives 1 and 2 is shown in the DRIA Chapters 4, 6, and 10. EPA 
requests comments on all aspects of Alternatives 1 and 2 or other 
alternatives roughly within the stringency range of the proposal and 
the Alternatives.
2. Summary of Costs and Benefits of the Alternatives
    EPA estimates that Alternative 1 would result in significant 
present-value net benefits of $76 billion to $130 billion (annualized 
net benefits of $4.1 billion to $6.6 billion)--that is, the total 
benefits far exceed the total costs of the program. Table 9 below 
summarizes EPA's estimates of total discounted costs, fuel savings, and 
benefits for Alternative 1. The results presented here project the 
monetized

[[Page 43740]]

environmental and economic impacts associated with the proposed 
standards during each calendar year through 2050. Alternative 1 also 
would have significant benefits for consumers, as the fuel savings for 
American drivers would total $98 billion to $200 billion through 2050. 
With these fuel savings, consumers would benefit from reduced operating 
costs over the vehicle lifetime.
    The benefits include climate-related economic benefits from 
reducing emissions of GHGs that contribute to climate change, 
reductions in energy security externalities caused by U.S. petroleum 
consumption and imports, the value of certain particulate matter-
related health benefits (including premature mortality), the value of 
additional driving attributed to the rebound effect, and the value of 
reduced refueling time needed to fill a more fuel-efficient vehicle. 
The analysis also includes estimates of economic impacts stemming from 
additional vehicle use, such as the economic damages caused by crashes, 
congestion, and noise (from increased rebound driving). See the DRIA 
for more information regarding these estimates.

Table 9--Monetized Discounted Costs, Benefits, and Net Benefits of Alternative 1 for Calendar Years Through 2050
                                      [Billions of 2018 dollars] a b c d e
----------------------------------------------------------------------------------------------------------------
                                                  Present value                       Annualized value
                                     ---------------------------------------------------------------------------
                                       3% Discount rate   7% Discount rate   3% Discount rate   7% Discount rate
----------------------------------------------------------------------------------------------------------------
Costs...............................               $190               $110               $9.5               $9.2
Fuel savings........................                200                 98                 10                7.9
Benefits............................                120                 93                  6                5.4
Net benefits........................                130                 76                6.6                4.1
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values
  are based on the stream of annual calendar year costs and benefits included in the analysis (2021-2050) and
  discounted back to year 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and
  2.5 percent) is used to calculate the present and annualized values of climate benefits for internal
  consistency, while all other costs and benefits are discounted at either 3% or 7%.
\d \ Net benefits reflect the fuel savings plus benefits minus costs.
\e\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

    A second way to present the net benefits of the proposal is using a 
vehicle MY lifetime basis. Table 10 and Table 11 summarize EPA's 
estimates of total discounted costs, fuel savings, and benefits through 
the full lifetime of vehicles projected to be sold in MYs 2023-2026 
under Alternative 1. The estimated results presented here project the 
monetized environmental and economic impacts associated with the 
Alternative 1 standards. Note that standards continue at their MY2026 
levels beyond MY2026 in any scenario. At both a 3% and 7% discount rate 
all model years show substantial fuel savings and net benefits.

  Table 10--GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 1 MYs 2023-2026 GHG Standards, 3%
                                                  Discount Rate
                                 [For vehicles produced in MY 2023-2026] a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $3.9            $3.4              $2            $1.5
2024............................................             4.9             6.5             3.7             5.3
2025............................................             5.6             7.7             4.5             6.5
2026............................................             6.4              10               6             9.7
                                                 ---------------------------------------------------------------
    Sum.........................................              21              28              16              23
----------------------------------------------------------------------------------------------------------------
                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.17            0.15           0.085           0.067
2024............................................            0.21            0.28            0.16            0.23
2025............................................            0.24            0.33            0.19            0.28
2026............................................            0.28            0.44            0.26            0.42
                                                 ---------------------------------------------------------------
    Sum.........................................             0.9             1.2             0.7               1
----------------------------------------------------------------------------------------------------------------
Notes:

[[Page 43741]]

 
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4, and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 3% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

  Table 11--GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 1 MYs 2023-2026 GHG Standards, 7%
                                                  Discount Rate
                                 [For Vehicles Produced in MY 2023-2026] a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $3.7            $2.4            $1.7            $0.4
2024............................................             4.7             4.3             3.2             2.8
2025............................................             5.1             4.9             3.8             3.6
2026............................................             5.6             6.2               5             5.6
                                                 ---------------------------------------------------------------
    Sum.........................................              19              18              14              12
----------------------------------------------------------------------------------------------------------------
                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.28            0.18           0.091         -0.0084
2024............................................            0.35            0.32            0.17            0.14
2025............................................            0.38            0.37             0.2            0.19
2026............................................            0.42            0.47            0.26            0.31
                                                 ---------------------------------------------------------------
    Sum.........................................             1.4             1.3            0.72            0.63
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 7% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

    EPA estimates that Alternative 2 would result in significant 
present value net benefits of $110 billion to $180 billion (annualized 
net benefits of $5.7 billion to $9.1 billion)--that is, the total 
benefits far exceed the total costs of the program. Table 12 below 
summarizes EPA's estimates of total discounted costs, fuel savings, and 
benefits for Alternative 2. The results presented here project the 
monetized environmental and economic impacts associated with the 
proposed standards during each calendar year through 2050. Alternative 
2 also would have significant benefits for consumers, as the fuel 
savings for American drivers would total $150 billion to $290 billion 
through 2050. With these fuel savings, consumers would benefit from 
reduced operating costs over the vehicle lifetime.
    The benefits include climate-related economic benefits from 
reducing emissions of GHGs that contribute to climate change, 
reductions in energy security externalities caused by U.S. petroleum 
consumption and imports, the value of certain particulate matter-
related health benefits (including premature mortality), the value of 
additional driving attributed to the rebound effect, and the value of 
reduced time needed to refuel a more fuel efficient vehicle. The 
analysis also includes estimates of economic impacts stemming from 
additional vehicle use, such as the economic damages caused by crashes, 
congestion, and noise (from increased rebound driving). See the DRIA 
for more information regarding these estimates.

[[Page 43742]]

  Table 12--Monetized Discounted Costs, Benefits, and Net Benefits of Alternative 2 for Calendar Years Through
                                                      2050
                                      [Billions of 2018 dollars] a b c d e
----------------------------------------------------------------------------------------------------------------
                                                  Present value                       Annualized value
                                     ---------------------------------------------------------------------------
                                       3% Discount rate   7% Discount rate   3% Discount rate   7% Discount rate
----------------------------------------------------------------------------------------------------------------
Costs...............................               $290               $180                $15                $14
Fuel Savings........................                290                150                 15                 12
Benefits............................                170                140                8.8                  8
Net Benefits........................                180                110                9.1                5.7
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values
  are based on the stream of annual calendar year costs and benefits included in the analysis (2021-2050) and
  discounted back to year 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and
  2.5 percent) is used to calculate the present and annualized values of climate benefits for internal
  consistency, while all other costs and benefits are discounted at either 3% or 7%.
\d\ Net benefits reflect the fuel savings plus benefits minus costs.
\e\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

    A second way to present the net benefits of the proposal is using a 
vehicle MY lifetime basis. Table 13 and Table 14 summarize EPA's 
estimates of total discounted costs, fuel savings, and benefits through 
the full lifetime of vehicles projected to be sold in MYs 2023-2026 
under Alternative 2. The estimated results presented here project the 
monetized environmental and economic impacts associated with the 
proposed standards. Note that standards continue at their MY2026 levels 
beyond MY2026 in any scenario. At both a 3% and 7% discount rate all 
model years show substantial fuel savings and net benefits.

  Table 13--GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 2 MY 2023-2026 GHG Standards, 3%
                                                  Discount Rate
                                 [For vehicles produced in MY 2023-2026] a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $6.8            $7.7            $4.6            $5.5
2024............................................             7.7             9.8             5.7             7.8
2025............................................             8.4              11             6.5             9.1
2026............................................             9.2              13             7.8              12
                                                 ---------------------------------------------------------------
    Sum.........................................              32              42              25              34
----------------------------------------------------------------------------------------------------------------
                                                Annualized values
----------------------------------------------------------------------------------------------------------------
2023............................................            $0.3           $0.33            $0.2           $0.24
2024............................................            0.33            0.42            0.25            0.34
2025............................................            0.37            0.48            0.28            0.39
2026............................................             0.4            0.57            0.34            0.51
                                                 ---------------------------------------------------------------
    Sum.........................................             1.4             1.8             1.1             1.5
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 3% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

[[Page 43743]]

  Table 14--GHG Analysis of Lifetime Costs & Benefits To Meet the Alternative 2 MY 2023-2026 GHG Standards, 7%
                                                  Discount Rate
                                 [For vehicles produced in MY 2023-2026] a b c d
                                               [Billions of 2018$]
----------------------------------------------------------------------------------------------------------------
                       MY                              Costs       Fuel savings      Benefits      Net benefits
----------------------------------------------------------------------------------------------------------------
                                                 Present values
----------------------------------------------------------------------------------------------------------------
2023............................................            $6.3            $5.4              $4            $3.1
2024............................................               7             6.5               5             4.4
2025............................................             7.4             7.1             5.5             5.2
2026............................................             7.9             8.2             6.6             6.9
                                                 ---------------------------------------------------------------
    Sum.........................................              29              27              21              20
----------------------------------------------------------------------------------------------------------------
                                                Annualized Values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.48             0.4            0.21            0.14
2024............................................            0.53            0.49            0.26            0.22
2025............................................            0.56            0.54            0.29            0.27
2026............................................            0.59            0.61            0.34            0.37
                                                 ---------------------------------------------------------------
    Sum.........................................             2.2               2             1.1               1
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four
  different estimates of the social cost of each greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5%
  discount rates; 95th percentile at 3% discount rate), which each increase over time. In this table, we show
  the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single
  central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated
  using all four SC-GHG estimates and present them later in this preamble. As discussed in Chapter 3.3 of the
  DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent
  and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate
  the present and annualized value of SC-GHGs for internal consistency, while all other costs and benefits are
  discounted at 7% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health
  and environmental effects that, if quantified and monetized, would increase the total monetized benefits.
  Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human health impacts
  associated with reductions in PM2.5 exposure.

3. Summary of the Proposal's Costs and Benefits Compared to the 
Alternatives
    Here we present the proposal's costs and benefits (as summarized 
previously in Section I.D) alongside the costs and benefits of the 
alternatives (as summarized previously in Section I.G.2).
    Table 15 below summarizes EPA's estimates of present value total 
discounted costs, fuel savings, and benefits. Table 16 below summarizes 
EPA's estimates of annualized values of the total discounted costs, 
fuel savings, and benefits. The results presented in these tables 
project the monetized environmental and economic impacts associated 
with the proposed standards during each calendar year through 2050. The 
benefits include climate-related economic benefits from reducing 
emissions of GHGs that contribute to climate change, reductions in 
energy security externalities caused by U.S. petroleum consumption and 
imports, the value of certain particulate matter-related health 
benefits (including premature mortality), the value of additional 
driving attributed to the rebound effect, and the value of reduced 
refueling time needed to fill a more fuel efficient vehicle. The 
analysis also includes estimates of economic impacts stemming from 
additional vehicle use, such as the economic damages caused by crashes, 
congestion, and noise (from increased rebound driving). See the DRIA 
for more information regarding these estimates.

 Table 15--Present Value Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program and Alternatives for Calendar Years Through 2050
                                                          [Billions of 2018 dollars] a b c d e
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            3% Discount rate                                         7% Discount rate
                                       -----------------------------------------------------------------------------------------------------------------
                                             Proposal        Alternative 1      Alternative 2         Proposal        Alternative 1      Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs.................................               $240               $190               $290               $150               $110               $180
Fuel Savings..........................                250                200                290                120                 98                150
Benefits..............................                130                120                170                110                 93                140
Net Benefits..........................                140                130                180                 86                 76                110
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values are based on the stream of annual
  calendar year costs and benefits included in the analysis (2021-2050) and discounted back to year 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different estimates of the social cost of each
  greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this
  table, we show the benefits associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single central SC-GHG point
  estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this
  preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2
  percent and lower, is also warranted when discounting intergenerational impacts.

[[Page 43744]]

 
\c\ The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and 2.5 percent) is used to calculate the
  present and annualized values of climate benefits for internal consistency, while all other costs and benefits are discounted at either 3% or 7%.
\d\ Net benefits reflect the fuel savings plus benefits minus costs.
\e\ Non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects that, if
  quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect
  only human health impacts associated with reductions in PM2.5 exposure.

  Table 16--Annualized Monetized Discounted Costs, Benefits, and Net Benefits of the Proposed Program and Alternatives for Calendar Years Through 2050
                                                          [Billions of 2018 dollars] a b c d e
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            3% Discount rate                                         7% Discount rate
                                       -----------------------------------------------------------------------------------------------------------------
                                             Proposal        Alternative 1      Alternative 2         Proposal        Alternative 1      Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Costs.................................                $12               $9.5                $15                $12               $9.2                $14
Fuel Savings..........................                 13                 10                 15                9.9                7.9                 12
Benefits..............................                6.9                  6                8.8                6.3                5.4                  8
Net Benefits..........................                7.3                6.6                9.1                4.2                4.1                5.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Values rounded to two significant figures; totals may not sum due to rounding. Present and annualized values are based on the stream of annual
  calendar year costs and benefits included in the analysis (2021-2050) and discounted back to year 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different estimates of the social cost of each
  greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this
  table, we show the benefits associated with the average SC-GHGs at a 3% discount rate but the Agency does not have a single central SC-GHG point
  estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this
  preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2
  percent and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions (SC-GHGs at 5, 3, and 2.5 percent) is used to calculate the
  present and annualized values of climate benefits for internal consistency, while all other costs and benefits are discounted at either 3% or 7%.
\d\ Net benefits reflect the fuel savings plus benefits minus costs.
\e\ Non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects that, if
  quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect
  only human health impacts associated with reductions in PM2.5 exposure.

    A second way to present the net benefits is using a vehicle MY 
lifetime basis. Table 17 and Table 18 summarize EPA's estimates of 
total discounted costs, fuel savings, and benefits through the full 
lifetime of vehicles projected to be sold in MYs 2023-2026. The 
estimated results presented here project the monetized environmental 
and economic impacts associated with the proposed standards. Note that 
standards continue at their MY2026 levels beyond MY2026 in any 
scenario. At both a 3% and 7% discount rate all model years show 
substantial fuel savings and net benefits.

          Table 17--Present Value GHG Analysis of Lifetime Costs & Benefits for MY 2023-2026 GHG Standards Under the Proposal and Alternatives
                                                     [For vehicles produced in MY 2023-2026] a b c d
                                                                   [Billions of 2018$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               3% Discount rate                            7% Discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Fuel                  Net                   Fuel                  Net
                               MY                                   Costs     savings    Benefits   benefits    Costs     savings    Benefits   benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Proposal
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023............................................................       $4.8       $3.6       $1.9      $0.68       $4.4       $2.6       $1.7     -$0.14
2024............................................................        5.9          7        3.6        4.7        5.5        4.7        3.3        2.4
2025............................................................        6.7        8.6        4.4        6.2        6.1        5.5        3.9        3.4
2026............................................................        8.1         13        7.2         12        7.3        8.2        6.2        7.2
                                                                 ---------------------------------------------------------------------------------------
    Sum.........................................................         26         33         17         24         23         21         15         13
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Alternative 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023............................................................       $3.9       $3.4         $2       $1.5       $3.7       $2.4       $1.7       $0.4
2024............................................................        4.9        6.5        3.7        5.3        4.7        4.3        3.2        2.8
2025............................................................        5.6        7.7        4.5        6.5        5.1        4.9        3.8        3.6
2026............................................................        6.4         10          6        9.7        5.6        6.2          5        5.6
                                                                 ---------------------------------------------------------------------------------------
    Sum.........................................................         21         28         16         23         19         18         14         12
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023............................................................       $6.8       $7.7       $4.6       $5.5       $6.3       $5.4         $4       $3.1

[[Page 43745]]

 
2024............................................................        7.7        9.8        5.7        7.8          7        6.5          5        4.4
2025............................................................        8.4         11        6.5        9.1        7.4        7.1        5.5        5.2
2026............................................................        9.2         13        7.8         12        7.9        8.2        6.6        6.9
                                                                 ---------------------------------------------------------------------------------------
    Sum.........................................................         32         42         25         34         29         27         21         20
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different estimates of the social cost of each
  greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. In this
  table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a single central SC-GHG point
  estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and present them later in this
  preamble. As discussed in Chapter 3.3 of the DRIA, a consideration of climate benefits calculated using discount rates below 3 percent, including 2
  percent and lower, is also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate the present and annualized value of SC-
  GHGs for internal consistency, while all other costs and benefits are discounted at 3% in this table.
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects that, if
  quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect
  only human health impacts associated with reductions in PM2.5 exposure.

            Table 18--Annualized GHG Analysis of Lifetime Costs & Benefits for MY 2023-2026 GHG Standards Under the Proposal and Alternatives
                                                     [For vehicles produced in MY 2023-2026] a b c d
                                                                   [Billions of 2018$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             3% Discount rate                             7% Discount rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Fuel                  Net                   Fuel                   Net
                              MY                                  Costs     savings    Benefits   benefits    Costs     savings    Benefits    benefits
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Proposal
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023..........................................................      $0.21      $0.16      $0.08     $0.029      $0.33      $0.19     $0.085      -$0.053
2024..........................................................       0.26        0.3       0.16        0.2       0.41       0.35       0.16          0.1
2025..........................................................       0.29       0.37       0.19       0.27       0.45       0.41       0.19         0.15
2026..........................................................       0.35       0.58       0.31       0.54       0.55       0.62       0.31         0.38
                                                               -----------------------------------------------------------------------------------------
    Sum.......................................................        1.1        1.4       0.74          1        1.7        1.6       0.75         0.58
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Alternative 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023..........................................................      $0.17      $0.15     $0.085     $0.067      $0.28      $0.18     $0.091     -$0.0084
2024..........................................................       0.21       0.28       0.16       0.23       0.35       0.32       0.17         0.14
2025..........................................................       0.24       0.33       0.19       0.28       0.38       0.37        0.2         0.19
2026..........................................................       0.28       0.44       0.26       0.42       0.42       0.47       0.26         0.31
                                                               -----------------------------------------------------------------------------------------
    Sum.......................................................        0.9        1.2        0.7          1        1.4        1.3       0.72         0.63
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Alternative 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023..........................................................       $0.3      $0.33       $0.2      $0.24      $0.48       $0.4      $0.21        $0.14
2024..........................................................       0.33       0.42       0.25       0.34       0.53       0.49       0.26         0.22
2025..........................................................       0.37       0.48       0.28       0.39       0.56       0.54       0.29         0.27
2026..........................................................        0.4       0.57       0.34       0.51       0.59       0.61       0.34         0.37
                                                               -----------------------------------------------------------------------------------------
    Sum.......................................................        1.4        1.8        1.1        1.5        2.2          2        1.1            1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ The lifetime costs and benefits of each MY vehicle are discounted back to 2021.
\b\ Climate benefits are based on reductions in CO2, CH4 and N2O emissions and are calculated using four different estimates of the social cost of each
  greenhouse gas (SC-GHG model average at 2.5%, 3%, and 5% discount rates; 95th percentile at 3% discount rate), which each increase over time. For the
  presentational purposes of this table, we show the benefits associated with the average SC-GHGs at a 3% discount rate, but the Agency does not have a
  single central SC-GHG point estimate. We emphasize the importance and value of considering the benefits calculated using all four SC-GHG estimates and
  present them later in this preamble. As discussed in Chapter 3.3 of the RIA, a consideration of climate benefits calculated using discount rates below
  3 percent, including 2 percent and lower, are also warranted when discounting intergenerational impacts.
\c\ The same discount rate used to discount the value of damages from future GHG emissions is used to calculate the present and annualized value of SC-
  GHGs for internal consistency, while all other costs and benefits are discounted at 3% in this table.

[[Page 43746]]

 
\d\ Non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects that, if
  quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect
  only human health impacts associated with reductions in PM2.5 exposure.

II. EPA Proposal for MY 2023-2026 Light-Duty Vehicle GHG Standards

A. Proposed Model Year 2023-2026 GHG Standards for Light-Duty Vehicles, 
Light-Duty Trucks, and Medium Duty Passenger Vehicles

    As noted, the transportation sector is the largest U.S. source of 
GHG emissions, making up 29 percent of all emissions.\42\ Within the 
transportation sector, light-duty vehicles are the largest contributor, 
58 percent, to transportation GHG emissions in the U.S.\43\ EPA has 
concluded that more stringent standards are appropriate in light of our 
reassessment of the need to reduce GHG emissions, technological 
feasibility, costs, lead time, and other factors. The program that EPA 
is proposing through MY 2026 in this notice does not represent the 
level of GHG reductions that will ultimately be achievable and 
appropriate for the light-duty sector, but it does serve as an 
important stepping off point for a longer-term program beyond 2026. The 
following section provides the details of EPA's proposed standards and 
related provisions, followed by a discussion of the alternatives EPA 
considered. EPA requests comments on all of the proposed provisions and 
alternatives.
---------------------------------------------------------------------------

    \42\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-
2019 (EPA-430-R-21-005, published April 2021).
    \43\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-
2019 (EPA-430-R-21-005, published April 2021).
---------------------------------------------------------------------------

    EPA is proposing revised, more stringent standards to control the 
emissions of greenhouse gases (GHGs) from MY 2023 and later light-duty 
vehicles.\44\ Carbon dioxide (CO2) is the primary greenhouse 
gas resulting from the combustion of vehicular fuels. The standards 
regulate CO2 on a gram per mile (g/mile) basis, which EPA 
defines by separate footprint curves for a manufacturer's car and truck 
fleets.\45\ Based on complying with these proposed standards, the 
industry-wide average emissions target for new light-duty vehicles is 
projected to be 171 g/mile of CO2 in MY 2026.\46\ Also, as 
discussed in Section II.C below, EPA is requesting comment on standards 
for MY 2026 that are in the range of 5-10 g/mile lower (i.e., more 
stringent) than the levels proposed, resulting in fleet average target 
levels that are in the range of 166-161 g/mile. EPA is not proposing to 
change existing averaging, banking, and trading program elements, 
except for a proposed limited extension of credit carry-forward for one 
or two years for credits generated in MYs 2016-2020, as discussed in 
Section II.B.4. The proposed standards would apply to passenger cars, 
light-duty trucks, and medium-duty passenger vehicles (MDPVs).\47\ As 
an overall group, they are referred to in this preamble as light-duty 
vehicles or simply as vehicles. In this preamble, passenger cars may be 
referred to simply as ``cars,'' and light-duty trucks and MDPVs as 
``light trucks'' or ``trucks.''
---------------------------------------------------------------------------

    \44\ See Sections III and VI for a discussion of lead time.
    \45\ Footprint curves are graphical representations of the 
algebraic formulae defining the emission standards in the regulatory 
text.
    \46\ The reference to CO2 here refers to 
CO2 equivalent reductions, as this level includes some 
reductions in emissions of greenhouse gases other than 
CO2, from refrigerant leakage, as one part of the A/C 
related reductions.
    \47\ As with the previous GHG emissions standards, EPA will 
continue to use the same vehicle category definitions as in the CAFE 
program. MDPVs are grouped with light trucks for fleet average 
compliance determinations.
---------------------------------------------------------------------------

    As discussed in section II.B, EPA is proposing several revised 
provisions that would allow manufacturers to generate credits or that 
provide additional incentives for use of advanced emission reduction 
technologies. These include ``off-cycle'' credits for technologies that 
reduce CO2 emissions during off-cycle operation that are not 
reasonably accounted for by the 2-cycle tests used for compliance 
purposes. EPA is proposing to increase the existing credit cap for 
menu-based credits from 10 g/mile to 15 g/mile and is proposing a 
number of program revisions and clarifications to address issues that 
have been identified as EPA has implemented the program. In addition, 
EPA is proposing to extend multiplier incentives for EVs, PHEVs, and 
FCVs, with a cumulative cap on credits. Multiplier incentives allow 
these low-emitting vehicles to count as more than one vehicle in a 
manufacturer's compliance calculation. EPA is proposing to eliminate 
multiplier incentives for natural gas vehicles adopted in the SAFE rule 
after MY 2022. EPA is also proposing to reinstate full size pick-up 
truck incentives through MY 2025 for vehicles that meet efficiency 
performance criteria or include strong hybrid technology at a minimum 
level of production volumes. The SAFE rule removed the full-size pickup 
incentives for MYs 2022-2025.
    The current program includes several program elements that will 
remain in place, without change. EPA is not proposing to change the 
fundamental structure of the standards, which are based on the 
footprint attribute with separate footprint curves for cars and trucks. 
EPA is not proposing to change the existing CH4 and 
N2O emissions standards. EPA is not proposing changes to the 
program structure in terms of vehicle certification, compliance, and 
enforcement. These aspects of the program continue to function as 
intended and EPA does not currently believe changes are needed. EPA is 
continuing to use tailpipe-only values to determine vehicle GHG 
emissions, without accounting for upstream emissions (EVs and PHEVs 
will continue to use 0 g/mile through MY 2026). EPA is also not 
proposing changes to current program opportunities to earn credits 
toward the fleet-wide average CO2 standards for improvements 
to air conditioning systems. The current A/C credits program provides 
credits for improvements to address both hydrofluorocarbon (HFC) 
refrigerant direct losses (i.e., system ``leakage'') and indirect 
CO2 emissions related to the increased load on the engine 
(also referred to as ``A/C efficiency'' related emissions).
1. What fleet-wide emissions levels correspond to the CO2 
standards?
    EPA is proposing revised more stringent standards for MYs 2023-2026 
that are projected to result in an industry-wide average target for the 
light-duty fleet of 171 g/mile of CO2 in MY 2026. The 
proposed standards are designed to reach the same level of stringency 
as the California Framework emission reduction targets in MY 2023, and 
then ramp down in a linear fashion with year over year average 
stringency increases of 4.7-5.0 percent. For MY 2026, the proposal goes 
beyond the 2012 rule level of stringency for MY 2025, by about 3 
percent more stringent, making the proposed MY 2026 standard the most 
stringent vehicle GHG standard that EPA has proposed to date. EPA 
believes that is possible and worthwhile to make additional progress in 
MY 2026 by surpassing the level of stringency of the original MY 2025 
standards established nine years ago in the 2012 rule. EPA is proposing 
an ambitious and reasonable approach that would take the initial steps 
towards making needed

[[Page 43747]]

reductions in GHG emissions. EPA does not propose any change to the 
approach of having separate standards for cars and light trucks under 
existing program definitions.
    The industry fleet average and car/truck year-over-year percent 
reductions for the proposed standards compared to the existing SAFE 
rule standards are provided in Table 19 below. For passenger cars, the 
proposed footprint curves call for reducing CO2 by 8.3 
percent in MY 2023 followed by year over year reductions of 4.7 to 5.1 
percent from the MY 2023 passenger car standard through MY 2026. For 
light-duty trucks, the proposed footprint curves standards would 
require reducing CO2 by 10.8 percent in MY 2023 followed by 
year over year reductions of 4.7 to 5.2 percent on average from the MY 
2023 light-duty truck standard through MY 2026.

                                   Table 19--Projected Industry Fleet Average Target Year-Over-Year Percent Reductions
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             SAFE rule                                       Proposal
                                                         -----------------------------------------------------------------------------------------------
                                                             Cars (%)       Trucks (%)     Combined (%)      Cars (%)       Trucks (%)     Combined (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023....................................................             1.7             1.5             1.6             8.3            10.8             9.8
2024....................................................             1.1             1.2             1.2             4.8             4.7             4.7
2025....................................................             2.3             2.0             2.2             5.1             5.0             4.9
2026....................................................             1.8             1.6             1.7           * 4.7           * 5.2           * 5.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
* The percentages shown do not include EPA's request for comments on MY 2026 standards that are 5-10 g/mile more stringent than proposed.

    For light-trucks, EPA is proposing to change the upper right 
cutpoints of the CO2-footprint curves (i.e., the footprint 
sizes in sq. ft. at which the CO2 standards level off as 
flat CO2 target values for larger vehicle footprints. See 
Figure 5 below). The SAFE rule altered these cutpoints and EPA is now 
proposing to restore them to the original upper right cutpoints 
initially established in the 2012 rule, for MYs 2023-2026, essentially 
requiring increasingly more stringent CO2 targets at the 
higher footprint range up to the revised cutpoint levels. The shapes of 
the curves and the cutpoints are discussed in Section II.A.2.
    The 171 g/mile estimated industry-wide target for MY 2026 noted 
above is based on EPA's current fleet mix projections for MY 2026 
(approximately 50 percent cars and 50 percent trucks, with only slight 
variations from MY 2023-2026). As discussed below, the final fleet 
average standards for each manufacturer ultimately will depend on each 
manufacturer's actual rather than projected production in each MY from 
MY 2023 to MY 2026 under the sales-weighted footprint-based standard 
curves for the car and truck regulatory classes. In the 2012 rule, EPA 
estimated that the fleet average target would be 163 g/mile in MY 2025 
based on the projected fleet mix for MY 2025 (67 percent car and 33 
percent trucks) based on information available at the time of the 2012 
rulemaking. Primarily due to the historical and ongoing shift in fleet 
mix that included more crossover and small and mid-size SUVs and fewer 
passenger cars, EPA's projection in the Midterm Evaluation (MTE) 
January 2017 Final Determination for the original MY 2025 fleet average 
target level increased to 173 g/mile.\48\ EPA has again updated its 
fleet mix projections and now projects that the original 2012 rule MY 
2025 footprint curves standards would result in an industry-wide fleet 
average target level of 177 g/mile. The projected fleet average targets 
under the 2012 rule, using the updated fleet mix projections and the 
projected fleet average targets for the proposal are provided in Table 
20 below. Figure 3 below, based on the values in Table 20, shows the 
proposed standards target levels along with estimated targets for the 
2012 rule, SAFE rule, and California Framework for comparison.\49\
---------------------------------------------------------------------------

    \48\ ``Final Determination on the Appropriateness of the Model 
Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards 
under the Midterm Evaluation,'' EPA-420-R-17-001, January 2017.
    \49\ For comparison purposes, the California Framework estimates 
are based on a scenario in which all manufacturers meet the 
California Framework in MYs 2021-2026 (not only the manufacturers 
that agreed to the California Framework).

 Table 20--Fleet Average Target Projections for the Proposed Standards Compared to Updated Fleet Average Target
                        Projections for the 2012 Rule, SAFE Rule and California Framework
                                                [CO2 grams/mile]
----------------------------------------------------------------------------------------------------------------
                                                                     2012 Rule       SAFE rule      California
                                                     Proposal        projected       projected       framework
                       MY                            projected        targets         targets        projected
                                                      targets        (updated)       (updated)        targets
----------------------------------------------------------------------------------------------------------------
2021............................................           * 223             214             223             214
2022............................................           * 220             205             220             206
2023............................................             199             195             216             199
2024............................................             189             186             214             191
2025............................................             180             177             209             184

[[Page 43748]]

 
2026............................................           * 171             177             205             177
----------------------------------------------------------------------------------------------------------------
* Projected targets under the SAFE rule standards.
** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/
  mile more stringent than the level shown.

  [GRAPHIC] [TIFF OMITTED] TP10AU21.002
  
    EPA's standards are based in part on EPA's projection of average 
industry wide CO2-equivalent emission reductions from A/C 
improvements, where the footprint curves are made numerically more 
stringent by an amount equivalent to this projection of A/C refrigerant 
leakage credits.\50\ Including this projection of A/C credits for 
purposes of setting GHG standards levels is consistent with the 2012 
rule and the SAFE rule.
---------------------------------------------------------------------------

    \50\ The total A/C adjustment is 18.8 g/mile for cars and 24.4 
g/mile for trucks.
---------------------------------------------------------------------------

    Table 21 below shows overall fleet average target levels for both 
cars and light trucks that are projected over the implementation period 
of the proposed standards. A more detailed manufacturer by manufacturer 
break down of the projected target and achieved levels is provided in 
Section III.B.1 below. The actual fleet-wide average g/mile level that 
would be achieved in any year for cars and trucks will depend on the 
actual production of vehicles for that year, as well as the use of the 
various credit and averaging, banking, and trading provisions. For 
example, in any year, manufacturers would be able to generate credits 
from cars and use them for compliance with the truck standard, or vice 
versa. In Section V, EPA discusses the year-by-year estimate of 
emissions reductions that are projected to be achieved by the proposed 
standards.
    In general, the schedule of the proposed standards allows an 
incremental phase-in to the MY 2026 level and reflects consideration of 
the appropriate lead time for manufacturers to take actions necessary 
to meet the

[[Page 43749]]

proposed standards.\51\ The technical feasibility of the standards is 
discussed in Section III below and in the DRIA. Note that MY 2026 is 
the final MY in which the proposed standards become more stringent. The 
MY 2026 CO2 standards would remain in place for later MYs, 
unless and until revised by EPA in a future rulemaking for those MYs.
---------------------------------------------------------------------------

    \51\ As discussed in Section III, EPA has used the Corporate 
Average Fuel Economy (CAFE) Compliance and Effects Modeling System 
(CCEMS) to support the technical assessment. Among the ways EPA has 
considered lead time in the proposal is by using the constraints 
built into the CCEMS model which are designed to represent lead-time 
constraints, including the use of redesign and refresh cycles. See 
CCEMS Model Documentation on web page https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system and contained in the docket for this rule.
---------------------------------------------------------------------------

    EPA has estimated the overall fleet-wide CO2 emission 
levels that correspond with the attribute-based footprint standards, 
based on projections of the composition of each manufacturer's fleet in 
each year of the program. As noted above, EPA estimates that, on a 
combined fleet-wide national basis, the 2026 MY standards would result 
in a level of 171 g/mile CO2. The derivation of the 171 g/
mile estimate is described in Section III.A. EPA aggregated the 
estimates for individual manufacturers based on projected production 
volumes into the fleet-wide averages for cars, trucks, and the entire 
fleet, shown in Table 21.\52\ As discussed above, the combined fleet 
estimates are based on projected fleet mix of cars and trucks that 
varies over the MY 2023-2026 timeframe. This fleet mix distribution can 
also be found in Section III.A.
---------------------------------------------------------------------------

    \52\ Due to rounding during calculations, the estimated fleet-
wide CO2 target levels may vary by plus or minus 1 gram.

            Table 21--Estimated Fleet-Wide CO2 Target Levels Corresponding to the Proposed Standards
----------------------------------------------------------------------------------------------------------------
                                                                   Cars CO2 (g/   Trucks CO2 (g/   Fleet CO2 (g/
                           Model year                                  mile)           mile)           mile)
----------------------------------------------------------------------------------------------------------------
2023............................................................             165             232             199
2024............................................................             157             221             189
2025............................................................             149             210             180
2026 and later *................................................             142             199             171
----------------------------------------------------------------------------------------------------------------
** EPA is also requesting comment on MY 2026 standards that would result in fleet average levels that are 5-10 g/
  mile more stringent than the levels shown.

    As shown in Table 21, fleet-wide CO2 emission target 
levels for cars under the proposed standards are projected to decrease 
from 165 to 142 g/mile between MY 2023 and MY 2026. Similarly, fleet-
wide CO2 target levels for trucks are projected to decrease 
from 232 to 199 g/mile. These numbers do not reflect the effects of 
flexibilities and credits in the program.\53\ The estimated fleetwide 
achieved values can be found in Section V.
---------------------------------------------------------------------------

    \53\ Nor do they reflect flexibilities under the ABT program.
---------------------------------------------------------------------------

    As noted above, EPA is proposing standards that set increasingly 
stringent levels of CO2 control from MY 2023 though MY 2026. 
Applying the CO2 footprint curves applicable in each MY to 
the vehicles (and their footprint distributions) expected to be sold in 
each MY produces progressively more stringent estimates of fleet-wide 
CO2 emission standards. EPA believes manufacturers can 
achieve the proposed standards' important CO2 emissions 
reductions through the application of available control technology at 
reasonable cost, as well as the use of program flexibilities.
    The existing program includes several provisions that we are not 
proposing to change and so would continue during the implementation 
timeframe of this proposed rule. Consistent with the requirement of CAA 
section 202(a)(1) that standards be applicable to vehicles ``for their 
useful life,'' the proposed MY 2023-2026 vehicle standards will apply 
for the useful life of the vehicle.\54\ Also, EPA is not proposing any 
changes to the test procedures over which emissions are measured and 
weighted to determine compliance with the GHG standards. These 
procedures are the Federal Test Procedure (FTP or ``city'' test) and 
the Highway Fuel Economy Test (HFET or ``highway'' test). While EPA may 
consider requiring the use of test procedures other than the 2-cycle 
test procedures in a future rulemaking, EPA is not considering any test 
procedure changes in this rulemaking.
---------------------------------------------------------------------------

    \54\ The GHG emission standards apply for a useful life of 10 
years or 120,000 miles for LDVs and LLDTs and 11 years or 120,000 
miles for HLDTs and MDPVs. See 40 CFR 86.1805-17.
---------------------------------------------------------------------------

    EPA has analyzed the feasibility of achieving the proposed 
CO2 standards through the application of currently available 
technologies, based on projections of the technology and technology 
penetration rates to reduce emissions of CO2, during the 
normal redesign process for cars and trucks, taking into account the 
effectiveness and cost of the technology. The results of the analysis 
are discussed in detail in Section III below and in the DRIA. EPA also 
presents the overall estimated costs and benefits of the proposed car 
and truck CO2 standards in Section VII.I.
2. What are the proposed CO2 attribute-based standards?
    As with the existing GHG standards, EPA is proposing separate car 
and truck standards--that is, vehicles defined as cars would have one 
set of footprint-based curves, and vehicles defined as trucks would 
have a different set.\55\ In general, for a given footprint, the 
CO2 g/mile target \56\ for trucks is higher than the target 
for a car with the same footprint. The curves are described 
mathematically in EPA's regulations by a family of piecewise linear 
functions (with respect to vehicle footprint) that gradually and 
continually ramp down from the MY 2022 curves established in the SAFE 
rule. EPA's proposed minimum and maximum footprint targets and the 
corresponding cutpoints are provided below in Table 22 for MYs 2023-
2026 along with the slope and intercept defining the linear function 
for footprints falling between the minimum and maximum footprint 
values. For footprints falling between the minimum and maximum, the 
targets are calculated as follows: Slope x Footprint + Intercept = 
Target. Figure 4 and Figure 5 provide the existing MY 2021-2022 and 
proposed MY 2023-2026 footprint curves graphically for both car and 
light trucks, respectively.
---------------------------------------------------------------------------

    \55\ See 49 CFR part 523. Generally, passenger cars include cars 
and smaller cross-overs and SUVs, while the truck category includes 
larger cross-overs and SUVs, minivans, and pickup trucks.
    \56\ Because compliance is based on a sales-weighting of the 
full range of vehicles in a manufacturer's car and truck fleets, the 
foot-print based CO2 emission levels of specific vehicles 
within the fleet are referred to as targets, rather than standards.

[[Page 43750]]

                                           Table 22--Proposed Footprint-Based CO2 Standard Curve Coefficients
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Car                                        Truck
                                                                 ---------------------------------------------------------------------------------------
                                                                     2023       2024       2025       2026       2023       2024       2025       2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
MIN CO2 (g/mi)..................................................      145.6      138.6      131.9      125.6      181.1      172.1      163.5      155.4
MAX CO2 (g/mi)..................................................      199.1      189.5      180.3      171.6      312.1      296.5      281.8      267.8
Slope (g/mi/ft2)................................................       3.56       3.39       3.23       3.07       3.97       3.77       3.58       3.41
Intercept (g/mi)................................................       -0.4       -0.4       -0.3       -0.3       18.4       17.4       16.6       15.8
MIN footprint (ft2).............................................         41         41         41         41         41         41         41         41
MAX footprint (ft2).............................................         56         56         56         56         74         74         74         74
--------------------------------------------------------------------------------------------------------------------------------------------------------

BILLING CODE 6560-01-P
[GRAPHIC] [TIFF OMITTED] TP10AU21.003

[[Page 43751]]

[GRAPHIC] [TIFF OMITTED] TP10AU21.004

BILLING CODE 6560-01-C
    The shapes of the proposed MY 2023-2026 car curves are similar to 
the MY 2022 curve. By contrast, the proposed MY 2023-2026 truck curves 
return to the cutpoint of 74.0 sq ft originally established in the 2012 
rule, but changed in the SAFE rule.\57\ The gap between the 2022 curves 
and the 2023 curves is indicative of the design of the proposed 
standards as described earlier, where the gap between the MY 2022 and 
MY 2023 curves is roughly double the gap between the curves for MYs 
2024-2026.
---------------------------------------------------------------------------

    \57\ 77 FR 62781.
---------------------------------------------------------------------------

3. EPA's Statutory Authority Under the CAA
i. Standards-Setting Authority Under CAA Section 202(a)
    Title II of the Clean Air Act (CAA) provides for comprehensive 
regulation of mobile sources, authorizing EPA to regulate emissions of 
air pollutants from all mobile source categories. Pursuant to these 
sweeping grants of authority, when setting GHG standards for light-duty 
vehicles, EPA considers such issues as technology effectiveness, 
technology cost (per vehicle, per manufacturer, and per consumer), the 
lead time necessary to implement the technology, and--based on these 
considerations--the feasibility and practicability of potential 
standards; as weel as the impacts of potential standards on emissions 
reductions of both GHGs and non-GHGs; the impacts of standards on oil 
conservation and energy security; the impacts of standards on fuel 
savings by consumers; the impacts of standards on the auto industry; 
other energy impacts; and other relevant factors such as impacts on 
safety.
    Pursuant to Title II of the Clean Air Act, EPA has taken a 
comprehensive, integrated approach to mobile source emission control 
that has produced benefits well in excess of the costs of regulation. 
In developing the Title II program, the Agency's historic, initial 
focus was on personal vehicles since that category represented the 
largest source of mobile source emissions.
    Title II emission standards have stimulated the development of a 
broad set of advanced automotive technologies, such as on-board 
computers and fuel injection systems, which have been the building 
blocks of automotive designs and have yielded not only lower pollutant 
emissions, but improved vehicle performance, reliability, and 
durability. In response to EPA's adoption of Title II emission 
standards for GHGs from light-duty vehicles in 2010 and later, 
manufacturers have continued to significantly ramp up their development 
and application of a wide range of new and improved technologies, 
including more fuel-efficient engine designs, transmissions, 
aerodynamics, and tires, air conditioning systems that contribute to 
lower GHG emissions, and various levels of electrified vehicle 
technologies.
    This proposed rule implements a specific provision from Title II, 
section 202(a). Section 202(a)(1) of the CAA, 42 U.S.C. 7521(a)(1), 
states that ``the Administrator shall by regulation prescribe (and from 
time to time revise) . . . standards applicable to the emission of any 
air pollutant from any class or classes of new motor vehicles . . . 
which in his judgment cause, or contribute to, air pollution which may 
reasonably be anticipated to endanger public health or welfare.'' Once 
EPA makes the appropriate endangerment and cause or contribute 
findings,\58\ then section 202(a) authorizes EPA to issue standards 
applicable to emissions of those pollutants. Indeed, EPA's obligation 
to do so is mandatory. See Coalition for Responsible Regulation v.

[[Page 43752]]

EPA, 684 F.3d 102, 126-27 (D.C. Cir. 2012); Massachusetts v. EPA, 549 
U.S. 497, 533 (2007). Moreover, EPA's mandatory legal duty to 
promulgate these emission standards derives from ``a statutory 
obligation wholly independent of DOT's mandate to promote energy 
efficiency.'' Massachusetts, 549 U.S. at 532. Consequently, EPA has no 
discretion to decline to issue greenhouse gas standards under section 
202(a), or to defer issuing such standards due to NHTSA's regulatory 
authority to establish fuel economy standards. Rather, ``[j]ust as EPA 
lacks authority to refuse to regulate on the grounds of NHTSA's 
regulatory authority, EPA cannot defer regulation on that basis.'' 
Coalition for Responsible Regulation, 684 F.3d at 127.
---------------------------------------------------------------------------

    \58\ EPA did so in 2009 for the group of six well-mixed 
greenhouse gases--carbon dioxide, methane, nitrous oxide, 
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride--which 
taken in combination endanger both the public health and the public 
welfare of current and future generations. EPA further found that 
the combined emissions of these greenhouse gases from new motor 
vehicles and new motor vehicle engines contribute to greenhouse gas 
air pollution that endangers public health and welfare. 74 FR 66496 
(Dec. 15, 2009).
---------------------------------------------------------------------------

    Any standards under CAA section 202(a)(1) ``shall be applicable to 
such vehicles . . . for their useful life.'' Emission standards set by 
EPA under CAA section 202(a)(1) are technology-based, as the levels 
chosen must be premised on a finding of technological feasibility. 
Thus, standards promulgated under CAA section 202(a) are to take effect 
only ``after such period as the Administrator finds necessary to permit 
the development and application of the requisite technology, giving 
appropriate consideration to the cost of compliance within such 
period.'' CAA section 202(a)(2); see also NRDC v. EPA, 655 F. 2d 318, 
322 (D.C. Cir. 1981). EPA must consider costs to those entities which 
are directly subject to the standards. Motor & Equipment Mfrs. Ass'n 
Inc. v. EPA, 627 F. 2d 1095, 1118 (D.C. Cir. 1979). Thus, ``the 
[s]ection 202(a)(2) reference to compliance costs encompasses only the 
cost to the motor-vehicle industry to come into compliance with the new 
emission standards, and does not mandate consideration of costs to 
other entities not directly subject to the proposed standards.'' See 
Coalition for Responsible Regulation, 684 F.3d at 128.
    EPA is afforded considerable discretion under section 202(a) when 
assessing issues of technical feasibility and availability of lead time 
to implement new technology. Such determinations are ``subject to the 
restraints of reasonableness,'' which ``does not open the door to 
`crystal ball' inquiry.'' NRDC, 655 F. 2d at 328, quoting International 
Harvester Co. v. Ruckelshaus, 478 F. 2d 615, 629 (D.C. Cir. 1973). 
However, ``EPA is not obliged to provide detailed solutions to every 
engineering problem posed in the perfection of [a particular device]. 
In the absence of theoretical objections to the technology, the agency 
need only identify the major steps necessary for development of the 
device, and give plausible reasons for its belief that the industry 
will be able to solve those problems in the time remaining. The EPA is 
not required to rebut all speculation that unspecified factors may 
hinder `real world' emission control.'' NRDC, 655 F. 2d at 333-34. In 
developing such technology-based standards, EPA has the discretion to 
consider different standards for appropriate groupings of vehicles 
(``class or classes of new motor vehicles''), or a single standard for 
a larger grouping of motor vehicles. NRDC, 655 F.2d at 338. Finally, 
with respect to regulation of vehicular greenhouse gas emissions, EPA 
is not ``required to treat NHTSA's . . . regulations as establishing 
the baseline for the [section 202(a) standards].'' Coalition for 
Responsible Regulation, 684 F.3d at 127 (noting that the section 202(a) 
standards provide ``benefits above and beyond those resulting from 
NHTSA's fuel-economy standards.'')
    Although standards under CAA section 202(a)(1) are technology-
based, they are not based exclusively on technological capability. EPA 
has the discretion to consider and weigh various factors along with 
technological feasibility, such as the cost of compliance (section 
202(a)(2)), lead time necessary for compliance (section 202(a)(2)), 
safety (see NRDC, 655 F. 2d at 336 n. 31) \59\ and other impacts on 
consumers, and energy impacts associated with use of the technology. 
See George E. Warren Corp. v. EPA, 159 F.3d 616, 623-624 (D.C. Cir. 
1998) (ordinarily permissible for EPA to consider factors not 
specifically enumerated in the Act).
---------------------------------------------------------------------------

    \59\ Since its earliest Title II regulations, EPA has considered 
the safety of pollution control technologies. See 45 FR 14496, 14503 
(1980) (``EPA would not require a particulate control technology 
that was known to involve serious safety problems. If during the 
development of the trap-oxidizer safety problems are discovered, EPA 
would reconsider the control requirements implemented by this 
rulemaking'').
---------------------------------------------------------------------------

    In addition, EPA has clear authority to set standards under CAA 
section 202(a) that are technology-forcing when EPA considers that to 
be appropriate, but EPA is not required to do so (as distinguished from 
standards under provisions such as section 202(a)(3) and section 
213(a)(3)). Section 202(a) of the CAA does not specify the degree of 
weight to apply to each factor, and EPA accordingly has discretion in 
choosing an appropriate balance among factors. See Sierra Club v. EPA, 
325 F.3d 374, 378 (D.C. Cir. 2003) (even where a provision is 
technology-forcing, the provision ``does not resolve how the 
Administrator should weigh all [the statutory] factors in the process 
of finding the `greatest emission reduction achievable' ''); NPRA v. 
EPA, 287 F.3d 1130, 1135 (D.C. Cir. 2002) (EPA decisions, under CAA 
provision authorizing technology-forcing standards, based on complex 
scientific or technical analysis are accorded particularly great 
deference); see also Husqvarna AB v. EPA, 254 F. 3d 195, 200 (D.C. Cir. 
2001) (great discretion to balance statutory factors in considering 
level of technology-based standard, and statutory requirement ``to 
[give appropriate] consideration to the cost of applying . . . 
technology'' does not mandate a specific method of cost analysis); 
Hercules Inc. v. EPA, 598 F. 2d 91, 106 (D.C. Cir. 1978) (``In 
reviewing a numerical standard we must ask whether the agency's numbers 
are within a zone of reasonableness, not whether its numbers are 
precisely right''); Permian Basin Area Rate Cases, 390 U.S. 747, 797 
(1968) (same); Federal Power Commission v. Conway Corp., 426 U.S. 271, 
278 (1976) (same); Exxon Mobil Gas Marketing Co. v. FERC, 297 F. 3d 
1071, 1084 (D.C. Cir. 2002) (same).
ii. Testing Authority
    Under section 203 of the CAA, sales of vehicles are prohibited 
unless the vehicle is covered by a certificate of conformity. EPA 
issues certificates of conformity pursuant to section 206 of the CAA, 
based on (necessarily) pre-sale testing conducted either by EPA or by 
the manufacturer. The Federal Test Procedure (FTP or ``city'' test) and 
the Highway Fuel Economy Test (HFET or ``highway'' test) are used for 
this purpose. Compliance with standards is required not only at 
certification but throughout a vehicle's useful life, so that testing 
requirements may continue post-certification. Useful life standards may 
apply an adjustment factor to account for vehicle emission control 
deterioration or variability in use (section 206(a)).
    EPA establishes the test procedures under which compliance with the 
CAA GHG standards is measured. EPA's testing authority under the CAA is 
broad and flexible. EPA has also developed tests with additional cycles 
(the so-called 5-cycle tests) which are used for purposes of fuel 
economy labeling and are also used in the EPA program for extending 
off-cycle credits under the light-duty vehicle GHG program.

[[Page 43753]]

iii. Compliance and Enforcement Authority
    EPA oversees testing, collects and processes test data, and 
performs calculations to determine compliance with CAA standards. CAA 
standards apply not only at certification but also throughout the 
vehicle's useful life. The CAA provides for penalties should 
manufacturers fail to comply with their fleet average standards, and 
there is no option for manufacturers to pay fines in lieu of compliance 
with the standards. Under the CAA, penalties for violation of a fleet 
average standard are typically determined on a vehicle-specific basis 
by determining the number of a manufacturer's highest emitting vehicles 
that cause the fleet average standard violation. Penalties for 
reporting requirements under Title II of the CAA apply per day of 
violation, and other violations apply on a per vehicle, or a per part 
or component basis. See CAA sections 203(a) and 205(a) and 40 CFR 19.4.
    Section 207 of the CAA grants EPA broad authority to require 
manufacturers to remedy vehicles if EPA determines there are a 
substantial number of noncomplying vehicles. In addition, section 205 
of the CAA authorizes EPA to assess penalties of up to $48,762 per 
vehicle for violations of various prohibited acts specified in the CAA. 
In determining the appropriate penalty, EPA must consider a variety of 
factors such as the gravity of the violation, the economic impact of 
the violation, the violator's history of compliance, and ``such other 
matters as justice may require.'' The CAA does not authorize vehicle 
manufacturers to pay fines in lieu of meeting emission standards.
4. Averaging, Banking, and Trading Provisions for CO2 
Standards
i. Background
    Averaging, banking, and trading (ABT) is an important compliance 
flexibility and ABT has been built into various highway engine and 
vehicle programs (and nonroad engines and equipment programs) to 
support emissions standards that through the introduction of new 
technologies, result in reductions in air pollution. The light-duty ABT 
program for GHG standards includes existing provisions initially 
established in the 2010 rule for how credits may be generated and used 
within the program.\60\ These provisions include credit carry-forward, 
credit carry-back (also called deficit carry-forward), credit transfers 
(within a manufacturer), and credit trading (across manufacturers).
---------------------------------------------------------------------------

    \60\ 40 CFR 86.1865-12.
---------------------------------------------------------------------------

    Credit carry-forward refers to banking (saving) credits for future 
use, after satisfying any needs to offset prior MY debits within a 
vehicle category (car fleet or truck fleet). Credit carry-back refers 
to using credits to offset any deficit in meeting the fleet average 
standards that had accrued in a prior MY. A manufacturer may have a 
deficit at the end of a MY (after averaging across its fleet using 
credit transfers between cars and trucks)--that is, a manufacturer's 
fleet average level may fail to meet the required fleet average 
standard for the MY. The CAA does not expressly limit the duration of 
such credit provisions, and in the MY 2012-2016 and 2017-2025 programs, 
EPA chose to adopt 5-year credit carry-forward (generally, with an 
exception noted below) and 3-year credit carry-back provisions as a 
reasonable approach that maintained consistency between the EPA GHG and 
NHTSA's CAFE provisions.\61\ While some stakeholders had suggested that 
light-duty GHG credits should have an unlimited credit life, EPA did 
not adopt that suggestion for the light-duty GHG program because it 
would pose enforcement challenges and could lead to some manufacturers 
accumulating large banks of credits that could interfere with the 
program's goal to develop and transition to progressively more advanced 
emissions control technologies in the future.
---------------------------------------------------------------------------

    \61\ The EPCA/EISA statutory framework for the CAFE program 
limits credit carry-forward to 5 years and credit carry-back to 3 
years.
---------------------------------------------------------------------------

    Although the credit carry-forward and carry-back provisions 
generally remained in place for MY 2017 and later standards, EPA 
finalized provisions allowing all unused (banked) credits generated in 
MY 2010-2016 (but not MY 2009 early credits) to be carried forward 
through MY 2021. See Sec.  86.1865-12(k)(6)(ii); 77 FR 62788 October 
15, 2012. This is the normal 5-year carry-forward for MY 2016 and later 
credits but provides additional carry-forward years for credits 
generated in MYs 2010-2015. Extending the life of MY 2010-2015 credits 
provided greater flexibility for manufacturers in using the credits. 
This provision was intended to facilitate the transition to 
increasingly stringent standards through MY 2021 by helping 
manufacturers resolve lead time issues they might face in the early MYs 
of the program. This extension of credit carry-forward also provided 
additional incentive for manufacturers to generate credits earlier, for 
example in MYs 2014 and 2015, thereby encouraging the earlier use of 
additional CO2 reducing technologies.
    Transferring credits in the EPA program refers to exchanging 
credits between the two averaging sets--passenger cars and light 
trucks--within a manufacturer. For example, credits accrued by 
overcompliance with a manufacturer's car fleet average standard can be 
used to offset debits accrued due to that manufacturer not meeting the 
truck fleet average standard in a given year. (Put another way, a 
manufacturer's car and truck fleets are, in essence, a single averaging 
set in the EPA program). Finally, accumulated credits may be traded to 
another manufacturer. Credit trading has occurred on a regular basis in 
EPA's vehicle program.\62\ Manufacturers acquiring credits may offset 
credit shortfalls and bank credits for use toward future compliance 
within the carry-forward constraints of the program.
---------------------------------------------------------------------------

    \62\ EPA provides general information on credit trades annually 
as part of its annual Automotive Trends and GHG Compliance Report. 
The latest report is available at: https://www.epa.gov/automotive-trends and the docket for this rulemaking.
---------------------------------------------------------------------------

    The ABT provisions are an integral part of the vehicle GHG program 
and the agency expects that manufacturers will continue to utilize 
these provisions into the future. EPA's annual Automotive Trends Report 
provides details on the use of these provisions in the GHG program.\63\ 
ABT allows EPA to consider standards more stringent than we would 
otherwise consider by giving manufacturers an important tool to resolve 
lead time and feasibility issues. EPA believes the targeted extension 
of credit carry-forward that we are proposing, discussed below, is 
appropriate considering the stringency and implementation timeframe of 
the proposed standards.
---------------------------------------------------------------------------

    \63\ ``The 2020 EPA Automotive Trends Report, Greenhouse Gas 
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021.
---------------------------------------------------------------------------

ii. Extended Credit Carry-Forward Proposal
    As in the transition to more stringent standards under the 2012 
rule, EPA recognizes that auto manufacturers are again facing a 
transition to more stringent standards with our MY 2023-2026 standards 
proposal. We also recognize that the stringency increase from MY 2022 
to MY 2023 is the steepest step in our proposed program with relatively 
limited lead time. Therefore, we believe it is again appropriate in the 
current context to provide a targeted, limited amount of additional 
flexibility to carry-forward

[[Page 43754]]

credits into the 2023-2026 MYs, to ease the manufacturers' transition 
to these more stringent standards.
    EPA is proposing to temporarily increase the number of years that 
MY 2016-2020 vintage credits that may be carried-forward to provide 
additional flexibility for manufacturers in the transition to more 
stringent standards. EPA proposes to increase credit carry-forward for 
MY 2016 credits by two years such that they would not expire until 
after MY 2023. For MY 2017-2020 credits, EPA proposes to extend the 
credit life by one year, so that those banked credits can be used 
through MYs 2023-2026, depending on the MY in which the credits are 
banked. For MY 2021 and later credits, EPA is not proposing any 
modification to credit carry-forward in this notice. Credit carry-
forward would return to the normal 5 years in the existing ABT 
regulations. Table 23 below provides an illustration of the proposed 
credit carry-forward provisions.

                                                          Table 23--Proposed Extension of Credit Carry-Forward for MY 2016-2020 Credits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     MYs credits are valid under EPA's proposed extension
                  MY  credits  are  banked                   -----------------------------------------------------------------------------------------------------------------------------------
                                                                 2016        2017        2018        2019        2020        2021        2022        2023        2024        2025        2026
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2016........................................................  ..........          x           x           x           x           x           +           +   ..........  ..........  ..........
2017........................................................  ..........  ..........          x           x           x           x           x           +   ..........  ..........  ..........
2018........................................................  ..........  ..........  ..........          x           x           x           x           x           +   ..........  ..........
2019........................................................  ..........  ..........  ..........  ..........          x           x           x           x           x           +   ..........
2020........................................................  ..........  ..........  ..........  ..........  ..........          x           x           x           x           x           +
2021........................................................  ..........  ..........  ..........  ..........  ..........  ..........          x           x           x           x           x
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
x = Current program. + = Proposed additional years.

    Extending the life for MY 2016-2020 credits provides greater 
flexibility for manufacturers in using the credits they have generated 
through overcompliance with the stringent standards in those MYs. These 
credits would help manufacturers to ease the transition to the more 
stringent proposed standards. Providing the extended credit carry-
forward will help some manufacturers to lower overall costs and address 
any potential lead time issues they may face during these MYs, 
especially in the first year of the proposed standards (MY 2023).
    EPA is proposing to extend credit life only for credits generated 
against standards established in the 2012 rule for MYs 2016-2020. EPA 
views these credits as a reflection of manufacturers' having achieved 
reductions beyond and earlier than those required by the standards. EPA 
is not proposing to extend credit life for credits generated in MYs 
2021-2022 against the SAFE standards, as we view these credits as 
windfall credits, accumulated by manufacturers mostly because of the 
large reduction in the stringency of standards under the SAFE rule, as 
compared to the 2012 rule standards previously in effect, rather than 
for technology-based actions taken by a manufacturer to reduce fleet 
emissions.
    As noted above, there is precedent for extending credit carry-
forward temporarily beyond five years to help manufacturers transition 
to more stringent standards. In the 2012 rule, EPA extended carry-
forward for MY 2010-2015 credits to MY 2021 for similar reasons, to 
provide more flexibility for a limited time during a transition to more 
stringent standards.\64\ ABT is an important compliance flexibility and 
has been built into various highway engine and vehicle programs to 
support emissions standards programs that through the introduction of 
new technologies result in reductions in air pollution. While the 
normal five-year credit life in the light-duty GHG program is generally 
sufficient to address the need for manufacturer flexibility while 
considering the practical challenges of properly tracking credits over 
an extended period of time for compliance and enforcement purposes, 
there are occasions--such as when the industry is transitioning to 
significantly more stringent standards--where more flexibility is 
appropriate. As noted above, ABT allows EPA to consider standards more 
stringent than we would otherwise consider by giving manufacturers an 
important tool to resolve lead time and feasibility issues, and EPA 
believes the targeted extension of credit life that we are proposing is 
appropriate given the stringency and implementation timeframe of the 
proposed standards.
---------------------------------------------------------------------------

    \64\ 77 FR 62788.
---------------------------------------------------------------------------

5. Certification, Compliance, and Enforcement
    EPA established comprehensive vehicle certification, compliance, 
and enforcement provisions for the GHG standards as part of the 
rulemaking establishing the initial GHG standards for MY 2012-2016 
vehicles.\65\ Manufacturers have been using these provisions since MY 
2012 and EPA is not proposing or seeking comment on changes in the 
areas of certification, compliance, or enforcement.
---------------------------------------------------------------------------

    \65\ See 75 FR 25468-25488 and 77 FR 62884-62887 for a 
description of these provisions. See also ``The 2020 EPA Automotive 
Trends Report, Greenhouse Gas Emissions, Fuel Economy, and 
Technology since 1975,'' EPA-420-R-21-003 January 2021 for 
additional information regarding EPA compliance determinations.
---------------------------------------------------------------------------

6. On-Board Diagnostics Program Updates
    EPA regulations state that onboard diagnostics (OBD) systems must 
generally detect malfunctions in the emission control system, store 
trouble codes corresponding to detected malfunctions, and alert 
operators appropriately. EPA adopted (as a requirement for an EPA 
certificate) the 2013 California Air Resources Board (CARB) OBD 
regulation, with certain additional provisions, clarifications and 
exceptions, in the Tier 3 Motor Vehicle Emission and Fuel Standards 
final rulemaking (40 CFR 86.1806-17; 79 FR 23414, April 28, 2014). 
Since that time, CARB has made several updates to their OBD regulations 
and continues to consider changes periodically.\66\ Manufacturers may 
find it difficult to meet both the 2013 OBD regulation adopted in the 
EPA regulations and the currently applicable CARB OBD regulation on the 
same vehicles. This may result in different calibrations being required 
for vehicles sold in states subject to Federal OBD (2013 CARB OBD) and 
vehicles sold in states subject to current CARB OBD.
---------------------------------------------------------------------------

    \66\ See https://ww2.arb.ca.gov/our-work/programs/obd-board-diagnostic-program/obd-workshops.
---------------------------------------------------------------------------

    To provide clarity and regulatory certainty to manufacturers, EPA 
is proposing a limited regulatory change to

[[Page 43755]]

streamline OBD requirements. Under the proposed change, EPA could find 
that a manufacturer met OBD requirements for purposes of the EPA 
certification process if the manufacturer could show that the vehicles 
meet newer CARB OBD regulations than the 2013 CARB regulation which 
currently establishes the core OBD requirements for EPA certification 
and that the OBD system meets the intent of the EPA regulation, 
including provisions that are in addition to or different from the 
applicable CARB regulation. The intent of the proposed provision is to 
allow manufacturers to produce vehicles with one OBD system (software, 
calibration, and hardware) for all 50 states.
7. Stakeholder Engagement
    In developing this proposal, EPA conducted outreach with a wide 
range of stakeholders, including auto manufacturers, automotive 
suppliers, labor groups, state/local governments, environmental and 
public interest groups, public health professionals, consumer groups, 
and other organizations. We also coordinated extensively with the 
California Air Resources Board as we considered this proposal. 
Consistent with Executive Order 13990, in developing this proposal EPA 
has considered the views from labor unions, states, and industry, as 
well as other stakeholders.
    EPA looks forward to hearing from all stakeholders through comments 
on this proposal and during the public hearing. Looking ahead, we also 
plan to continue engagement with interested stakeholders as we embark 
on a future rulemaking to set standards beyond 2026, so diverse views 
can continue to be considered in our development of a longer-term 
program.
8. How do EPA's proposed standards relate to NHTSA's CAFE proposal and 
to California's GHG program?
i. EPA and NHTSA Rulemaking Coordination
    In Executive Order 13990, President Biden directed NHTSA and EPA to 
consider whether to propose suspending, revising, or rescinding the 
SAFE Rule standards for MYs 2021-2026.\67\ Both agencies have 
determined that it is appropriate to propose revisions to their 
respective standards; EPA is proposing to revise its GHG standards and, 
in a separate rulemaking action, NHTSA will propose to revise its CAFE 
standards. Since 2010, EPA and NHTSA have adopted fuel economy and 
greenhouse gas standards in joint rulemakings. In the 2010 joint rule, 
EPA and NHTSA explained the purpose of the joint rulemaking effort was 
to develop a coordinated and harmonized approach to implementing the 
two agencies' statutes. The joint rule approach was one appropriate 
mechanism for the agencies to coordinate closely, given the common 
technical issues both agencies needed to consider and the importance of 
avoiding inconsistency between the programs. However, in light of 
additional experience as the GHG and CAFE standards have co-existed 
since the 2010 rule and the agencies have engaged in several joint 
rulemakings, EPA has concluded that, while it remains committed to 
ensuring that GHG emissions standards for light duty vehicles are 
coordinated with fuel economy standards for those vehicles, it is 
unnecessary for EPA to do so specifically through a joint rulemaking.
---------------------------------------------------------------------------

    \67\ 86 FR 7037, January 25, 2021.
---------------------------------------------------------------------------

    In reaching this conclusion, EPA notes that the agencies have 
different statutory mandates and their respective programs have always 
reflected those differences. As the Supreme Court has noted ``EPA has 
been charged with protecting the public's `health' and `welfare,' a 
statutory obligation wholly independent of DOT's mandate to promote 
energy efficiency.'' \68\ The agencies have recognized these different 
mandates, and the fact that they have produced different analytical 
approaches and standards. For example, since EPA's responsibility is to 
address air pollution, it sets standards not only for carbon dioxide 
(measured as grams per mile), but also for methane and nitrous oxide. 
Even more significantly, EPA regulates leakage of fluorocarbons from 
air conditioning units by providing a credit against the tailpipe 
CO2 standard for leakage reduction and adjusting those 
standards numerically downwards to reflect the anticipated availability 
of those credits. NHTSA, given its responsibility for fuel economy 
(measured as miles per gallon), does not have these elements in the 
CAFE program. There have always been other differences between the 
programs as well, which generally can be traced back to differences in 
statutory mandates.
---------------------------------------------------------------------------

    \68\ Massachusetts v. EPA, 549 U.S. at 532.
---------------------------------------------------------------------------

    Finally, EPA notes that EPA may coordinate with NHTSA, and has done 
so, regardless of the formality of joint rulemaking. EPA has consulted 
significantly with NHTSA in the development of this proposal. 
Consultation is the usual approach Congress specifies when it 
recognizes that EPA and another agency share expertise and equities in 
an area. Indeed, the Clean Air Act does not require joint rulemaking 
for its many provisions that require EPA's consultation with other 
agencies on topics such as the impacts of ozone-depleting substances on 
the atmosphere, renewable fuels, the importance of visibility on public 
lands, regulation of aerospace coatings, and federal procurement. For 
example, for aircraft emissions standards, where EPA sets the standards 
in consultation with the Federal Aviation Administration (FAA), and FAA 
implements the standards, the two agencies may undertake, and have 
undertaken, separate rulemakings. Likewise, when EPA revises tests 
procedures for NHTSA's fuel economy standards, those rules are not done 
as joint rulemaking (unless they were included as part of a larger 
joint rulemaking on GHG and fuel economy standards). Thus, EPA 
concludes that joint rulemaking is unnecessary, particularly to the 
extent it was originally intended to ensure that the agencies work 
together and coordinate their rules.
ii. California GHG Program
    California has long been a partner in reducing light-duty vehicle 
emissions, often leading the nation by setting more stringent standards 
before similar standards are adopted by EPA. This historically has been 
the case with GHG emissions standards in past federal rulemakings, 
where California provided technical support to EPA's nationwide 
programs. Prior to EPA's 2010 rule establishing the first nationwide 
GHG standards for MY 2012-2016 vehicles, California had adopted GHG 
standards for MYs 2009-2016.\69\ After EPA adopted its standards in the 
2012 rule for MYs 2017-2025, California also adopted similar standards 
for these MYs.\70\ California also assisted and worked with EPA in the 
development of the 2016 Draft Technical Assessment Report for the Mid-
term Evaluation,\71\ issued jointly by EPA, CARB and NHTSA, that served 
as an important technical basis for EPA's original January 2017 Final 
Determination that the standards adopted in the 2012 rule

[[Page 43756]]

for MYs 2022-2025 remained appropriate. California also conducted its 
own Midterm Review that arrived at a similar conclusion.\72\
---------------------------------------------------------------------------

    \69\ https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/lev-program/low-emission-vehicle-greenhouse-gas.
    \70\ The California Air Resources Board (CARB) received a waiver 
of Clean Air Act preemption on January 9, 2013 (78 FR 2211) for its 
Advanced Clean Car (ACC) program. CARB's ACC program includes the 
MYs 2017-2025 greenhouse gas (GHG) standards as well as regulations 
for zero-emission vehicle (ZEV) sales requirements and California's 
low emission vehicle (LEV) III requirements.
    \71\ Draft Technical Assessment Report: Midterm Evaluation of 
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate 
Average Fuel Economy Standards for Model Years 2022-2025, EPA-420-D-
16-900 July 2016.
    \72\ https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/advanced-clean-cars-midterm-review.
---------------------------------------------------------------------------

    In August 2018, EPA and NHTSA jointly issued the SAFE rule 
proposal, which included an EPA proposal to withdraw CARB's Advanced 
Clean Car (ACC) waiver as it related to California GHG emission 
standards and ZEV sales requirements (that would preclude California 
from enforcing its own program) as well as a proposal to sharply reduce 
the stringency of the national standards.\73\ In September 2019, EPA 
and NHTSA then jointly issued a final SAFE ``Part One'' rule, which 
included a final EPA action withdrawing CARB's ACC waiver as it related 
to California GHG emission standards and ZEV sales requirements.\74\ In 
response to the SAFE rule proposal, California and five auto 
manufacturers entered into identical agreements commonly referred to as 
the California Framework Agreements. The Framework Agreements included 
GHG emission reduction targets for MYs 2021-2026 that in terms of 
stringency are about halfway between the original 2012 rule standards 
and those adopted in the final SAFE rule. The Framework Agreements also 
included additional flexibilities such as additional incentive 
multipliers for advanced technologies, off-cycle credits, and full-size 
pickup strong hybrid incentives. These flexibilities are discussed 
further in Section II.B, below.
---------------------------------------------------------------------------

    \73\ EPA's waiver for CARB's Advanced Clean Car regulations is 
at 78 FR 2211 (January 9, 2013). The SAFE NPRM is at 83 FR 42986 
(August 24, 2018).
    \74\ 84 FR 51310 (Sept. 27, 2019).
---------------------------------------------------------------------------

    EPA has considered California standards in past vehicle standards 
rules as we considered the factors of feasibility, costs of compliance 
and lead time. The California Framework Agreement provisions, and the 
fact that five automakers representing about a third of U.S. vehicle 
sales voluntarily committed to them, at a minimum provide a clear 
indication of manufacturers' capabilities to produce cleaner vehicles 
than required by the SAFE rule standards in the implementation 
timeframe of this proposed rule.\75\ The Framework Agreements' 
emissions reduction targets therefore served as one starting point for 
EPA's assessment of potential standards and other provisions for the 
proposal. EPA conducted extensive outreach with the California Air 
Resources Board, Framework manufacturers, and manufacturers that have 
not entered into California Framework Agreements, along with numerous 
other stakeholders in developing this proposed rule, as further 
described in Section II.A.7. As discussed further below, EPA is 
proposing standards that are equivalent to the stringency of the 
California Framework Agreements emission reduction targets in MY 2023 
and increasingly more stringent than the Framework Agreements from MY 
2024 through 2026.
---------------------------------------------------------------------------

    \75\ The five California Framework Agreements may be found in 
the docket for this rulemaking and at: https://ww2.arb.ca.gov/news/framework-agreements-clean-cars.
---------------------------------------------------------------------------

    In a separate but related action, on April 28, 2021, EPA issued a 
Notice of Reconsideration for the previous withdrawal of the California 
ACC waiver, requesting comments on whether the withdrawal should be 
rescinded, which would reinstate the waiver.\76\ EPA conducted a 
virtual public hearing on June 2, 2021 and the comment period closed on 
July 6, 2021. EPA is currently reviewing comments, after which EPA 
plans to take final action.
---------------------------------------------------------------------------

    \76\ 80 FR 22421 (April 28, 2021).
---------------------------------------------------------------------------

B. Additional Manufacturer Compliance Flexibilities

    As discussed previously in Section II.A.4, the ABT provisions, 
including credit carry-forward and carry-back provisions, define how 
credits may be used and are an important part of the program. The 
program also includes several additional credit and incentive program 
elements that allow manufacturer flexibility in deciding how to comply 
with the standards laid out in Section II.A. This section provides an 
overview of those provisions as well as areas where EPA is proposing 
changes or is seeking comment.
    The current GHG program includes temporary incentives through MY 
2021 that encourage the use of advanced technologies such as all 
electric, plug-in hybrid, and fuel cell vehicles, as well as incentives 
for full-size pickups using either strong hybridization or technologies 
providing similar emissions reductions. When EPA established these 
incentives in the 2012 rule, EPA recognized that temporary regulatory 
incentives would reduce the overall emission reductions required by the 
standards, but the agency believed that it was worthwhile to have a 
limited short-term loss of emission reductions to increase the 
potential for far-greater emissions reductions in the longer run.\77\ 
EPA understood that the temporary regulatory incentives may help bring 
some technologies to market more quickly than in the absence of 
incentives.\78\ EPA continues to believe that temporary regulatory 
incentives will help accomplish those goals, which supported those 
incentives in the 2012 rule. As such, EPA is proposing to increase and 
extend multiplier incentives though MY 2025 and to reinstate the full-
size pickup incentives that were removed from the program by the SAFE 
rule for MYs 2022-2025. Also, EPA is proposing to remove the multiplier 
incentives for natural gas vehicles for MYs 2023-2026 established by 
the SAFE rule. Multipliers and full-size pickup incentives are 
discussed in Sections II.B.1 and II.B.2, respectively.
---------------------------------------------------------------------------

    \77\ See Tables III-2 and III-3, 77 FR 62772, October 15, 2012.
    \78\ 77 FR 62812, October 15, 2012.
---------------------------------------------------------------------------

    The current program also includes credits for real-world emissions 
reductions not reflected on the test cycles used for measuring 
CO2 emissions for compliance with the fleet average GHG 
standards. Credits for using technologies that reduce emissions that 
are not captured on EPA tests (``off-cycle'' technologies) and 
improvements to air conditioning (A/C) systems that increase efficiency 
and reduce refrigerant leakage (``A/C credits'') are discussed below in 
sections II.B.3 and II.B.1, respectively. These credit opportunities 
currently do not sunset, remaining a part of the program through MY 
2026 and beyond unless the program is changed as part of a future 
regulatory action. EPA is not proposing any changes for the A/C credits 
but is proposing to modify the off-cycle credit program.
    The use of the optional credit and incentive provisions has varied, 
and EPA continues to expect it to vary, from manufacturer to 
manufacturer. However, most manufacturers are currently using at least 
some of the flexibilities.\79\ Although a manufacturer's use of the 
credit and incentive provisions is optional, EPA projects that the 
proposed standards would be met fleet-wide by using a combination of 
reductions in tailpipe CO2 and some use of the optional 
credit and incentive provisions. These projections are discussed in 
Section III, below and in the Draft RIA.
---------------------------------------------------------------------------

    \79\ See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas 
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021 for additional information regarding manufacturer 
use of program flexibilities.

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

[[Page 43757]]

1. Multiplier Incentives for Advanced Technology Vehicles
i. Background
    In the 2012 rule, EPA included incentives for advanced technologies 
to promote the commercialization of technologies that have the 
potential to transform the light-duty vehicle sector by achieving zero 
or near-zero GHG emissions in the longer term, but which faced major 
near-term market barriers. EPA recognized that providing temporary 
regulatory incentives for certain advanced technologies would decrease 
the overall GHG emissions reductions associated with the program in the 
near term, by reducing the effective stringency of the standards in 
years in which the incentives were available, to the extent the 
incentives were used. However, in setting the 2017-2025 standards, EPA 
believed it was worthwhile to forego modest additional emissions 
reductions in the near term in order to lay the foundation for much 
larger GHG emissions reductions in the longer term. EPA also believed 
that the temporary regulatory incentives may help bring some 
technologies to market more quickly than in the absence of 
incentives.\80\
---------------------------------------------------------------------------

    \80\ See 77 FR 62811 et seq.
---------------------------------------------------------------------------

    EPA established multiplier incentives for MYs 2017-2021 electric 
vehicles (EVs), plug-in hybrid electric vehicles (PHEVs), fuel cell 
vehicles (FCVs), and natural gas vehicles (NGVs).\81\ The multiplier 
allows a vehicle to ``count'' as more than one vehicle in the 
manufacturer's compliance calculation. Table 24 provides the 
multipliers for the various vehicle technologies included in the 2012 
final rule for MY 2017-2021 vehicles.\82\ Since the GHG performance for 
these vehicle types is significantly better than that of conventional 
vehicles, the multiplier provides a significant benefit to the 
manufacturer. EPA chose the magnitude of the multiplier levels to be 
large enough to provide a meaningful incentive, but not be so large as 
to provide a windfall for vehicles that still would have been produced 
even at lower multiplier levels. The multipliers for EVs and FCVs were 
larger because these technologies faced greater market barriers.
---------------------------------------------------------------------------

    \81\ 77 FR 62810, October 15, 2012.
    \82\ 77 FR 62813-62816, October 15, 2012.

Table 24--Incentive Multipliers for EV, FCV, PHEVs, and NGVs Established
                              in 2012 Rule
------------------------------------------------------------------------
                                                     EVs and   PHEVs and
                    Model years                        FCVs       NGVs
------------------------------------------------------------------------
2017-2019.........................................        2.0        1.6
2020..............................................       1.75       1.45
2021..............................................        1.5        1.3
------------------------------------------------------------------------

    EPA requested comments in the SAFE rule proposal on increasing and/
or extending CNG multiplier incentives. After considering comments, EPA 
adopted a multiplier of 2.0 for MYs 2022-2026 NGVs, noting that no NGVs 
were being sold by auto manufacturers at that time. EPA did not extend 
multipliers for other vehicle types in the SAFE rule, as the SAFE 
standards did not contemplate the extensive use of these technologies 
in the future so there was no need to continue the incentives.
ii. Proposed Multiplier Extension and Cap
    EPA is proposing to extend multipliers for EVs, PHEVs, and FCVs for 
MYs 2022-2025, but with a cap to limit the magnitude of resulting 
emissions reduction losses and to provide a means to more definitively 
project the impact of the multipliers on the overall stringency of the 
program. Although EPA chose not to include additional multipliers in 
the SAFE rule except for natural gas vehicles, EPA is now proposing 
standards significantly more stringent than in the SAFE rule and 
therefore EPA believes limited additional multiplier incentives are 
appropriate for the purposes of encouraging manufacturers to accelerate 
the introduction of zero and near-zero emissions vehicles and 
maintaining momentum for that market transition. EPA requests comment 
on all aspects of the proposed extension of multipliers, including the 
proposed multiplier levels, model years when multipliers are available, 
and the size and structure of the multiplier credit cap.
    Given that the previously established multipliers only run through 
MY 2021, EPA proposes to start the new multipliers in MY 2022 to 
provide continuity for the incentives over MYs 2021-2025. The 
multipliers would function in the same way as they have in the past, 
allowing manufacturers to count eligible vehicles as more than one 
vehicle in their fleet average calculations. The levels of the proposed 
multipliers, shown in Table 25 below, are the same as those contained 
in the California Framework Agreements for MY 2022-2025. EPA is 
proposing to sunset the multipliers after MY 2025, rather than 
extending them to MY 2026, because EPA has always intended them to be a 
temporary part of the program to incentivize technology in the near-
term. Sunsetting the multipliers in MY 2025 helps signal that EPA does 
not intend to include multipliers in its proposal for standards for MY 
2027 and later MYs, where these technologies are likely to be integral 
to the feasibility of the standards, as the goal of a long-term program 
would be to quickly transition the light-duty fleet to zero-emission 
technology, in which case ``incentives'' would no longer be 
appropriate. As zero-emissions technologies become more mainstream, EPA 
believes it is appropriate to transition away from multiplier 
incentives. EPA also believes sunsetting multipliers would simplify 
programmatically a transition to a more stringent program for MY 2027. 
The MY 2025 sunset date combined with the cap, discussed below, begins 
the process of transitioning away from auto manufacturers' ability to 
make use of the incentive multipliers. While EPA is proposing to end 
multipliers after MY 2025 for these reasons, EPA requests comments on 
whether it would be more appropriate to allow multiplier credits to be 
generated in MY 2026 without an increase in the cap. This may provide 
an additional incentive for manufacturers who have not yet produced 
advanced technology vehicles by MY 2026 to do so but could also 
potentially complicate transitioning to MY 2027 standards for some 
manufacturers.

                         Table 25--EPA Proposed Multiplier Incentives for MYs 2022-2025
----------------------------------------------------------------------------------------------------------------
             Model years                     EVs and FCVs                             PHEVs
----------------------------------------------------------------------------------------------------------------
2022-2024............................  2.0....................  1.6.
2025.................................  1.75...................  1.45.
2026+................................  1.0 (no multiplier       1.0 (no multiplier credits).
                                        credits).
----------------------------------------------------------------------------------------------------------------

[[Page 43758]]

    EPA believes that an important element of this incentive program is 
to limit the potential effect of the multipliers on reducing the 
effective stringency of the standards. Therefore, EPA proposes to cap 
the credits generated by a manufacturer's use of the multipliers to the 
Megagram (Mg) equivalent of 2.5 g/mile for their car and light truck 
fleets per MY for MYs 2022-2025 or 10.0 g/mile on a cumulative 
basis.\83\ Above the cap, the multiplier is effectively a value of 
1.0--in other words, after a manufacturer reaches the cap, the 
multiplier is no longer available and has no further effect on credit 
calculations. A manufacturer would sum the Mg values calculated for 
each of its car and light truck fleets at the end of a MY into a single 
cap value that would serve as the overall multiplier cap for the 
combined car and light truck fleets for that MY. This approach would 
limit the effect on stringency of the standards for manufacturers that 
use the multipliers to no greater than 2.5 g/mile less stringent each 
year on average over MYs 2022-2025. EPA proposes that manufacturers 
would be able to choose how to apply the cap within the four-year span 
of MYs 2022-2025 to best fit their product plans. Manufacturers may opt 
to use values other than 2.5 g/mile in the cap calculation as long as 
the sum of those values over MYs 2022-2025 does not exceed 10.0 g/mile 
(e.g., 0.0, 2.5, 2.5, 5.0 g/mile in MYs 2022-2025).
---------------------------------------------------------------------------

    \83\ Proposed Multiplier Credit Cap [Mg] = (2.5 g/mile CO2 x VMT 
x Actual Annual Production)/1,000,000 calculated annually for each 
fleet and summed. Manufacturers may use values higher than 2.5 g/
mile in the calculation as long as the sum of the cumulative values 
over MYs 2022-2025 does not exceed 10.0 g/mile. The vehicle miles 
traveled (VMT) used in credit calculations in the GHG program, as 
specified in the regulations, are 195,264 miles for cars and 225,865 
for trucks. See 40 CFR 86.1866-12. See also 40 CFR 86.1866-12(c) for 
the calculation of multiplier credits to be compared to the cap.
---------------------------------------------------------------------------

    In the 2012 rule, EPA did not cap the use of multipliers. At that 
time, the advanced technologies incentivized by the multipliers were in 
their relative infancy and EPA believed it was appropriate to encourage 
manufacturers to continue to develop and introduce those vehicles for 
the long-term benefits of the program. We are now in a transitional 
period where manufacturers are actively increasing their zero-emission 
vehicle offerings. In MY 2019, almost all manufacturers made use of 
advanced technology credits.\84\ EPA believes extending the multipliers 
is important to encourage manufacturers to accelerate bringing these 
technologies to the market to help sustain market momentum for the 
long-term. However, EPA also believes that if left uncapped, the 
multiplier credits have the potential to lead to stagnation or even 
backsliding for internal combustion engine vehicles for some 
manufacturers in the near-term as sales of advanced technology vehicles 
continue to increase. If EPA were to consider a significantly more 
generous cap or even uncapped credits, EPA would tighten the standards 
beyond the levels EPA is proposing to rebalance the overall stringency 
of the program. Therefore, as under the California Framework 
Agreements, EPA is proposing to extend multiplier credits but also to 
include a multiplier cap to balance these considerations.
---------------------------------------------------------------------------

    \84 \ See ``The 2020 EPA Automotive Trends Report, Greenhouse 
Gas Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-
21-003 January 2021.
---------------------------------------------------------------------------

    The proposed cap differs from and limits the effective stringency 
loss more than the cap contained in the California Framework 
Agreements. The cumulative cap in the Framework Agreements is based on 
the area between the 2.7 percent and 3.7 percent year over year 
reduction in the standards from MY 2021 levels, as shown for an average 
fleet in Figure 6 below. This is equivalent to 27 percent (1%/3.7%) of 
the total increase in stringency from MY 2021 through MY 2026 in the 
Framework Agreements.
BILLING CODE 6560-50-P

[[Page 43759]]

[GRAPHIC] [TIFF OMITTED] TP10AU21.005

    EPA is proposing a cap that extends over fewer MYs and is less 
generous than the cap in the California Framework Agreements. The EPA 
proposed cap would provide additional flexibility in the near term, as 
shown in Figure 7. This is equivalent to about 6 percent of the total 
increase in stringency relative to the MY 2021 level from MY 2021 
through MY 2026.

[[Page 43760]]

[GRAPHIC] [TIFF OMITTED] TP10AU21.006

BILLING CODE 6560-50-C
    To estimate the potential impact of multipliers on the tons of 
CO2 reduction provided by the proposed program, EPA modeled 
scenarios with and without multipliers. As shown, EPA estimates that 
the proposed multipliers, if fully utilized by manufacturers, would 
result in roughly 46 MMT (596 minus 550 MMT) fewer tons of 
CO2 reduced over the lifetimes of MY 2021-2026 vehicles.\85\ 
We have also analyzed the impact of the advanced technology multipliers 
on BEV and PHEV penetration rates and have found that the impact on the 
fleet is less than 0.5 percent in any MY 2023 through 2026 (see RIA 
Chapter 4.1.3). EPA believes such an approach represents a reasonable 
balance of providing an incentive for advanced technology vehicles in 
the timeframe of the rulemaking while limiting the impact on effective 
stringency of the proposed program. EPA requests comment on the 
proposed extension of multipliers, including the proposed multiplier 
levels, model years when multipliers are available, size and structure 
of the multiplier credit cap. EPA also requests comments on whether the 
proposed extension of multipliers is appropriate in light of the 
stringency level of the proposed standards or whether there should be 
no multipliers beyond those in the current program that are scheduled 
to end after MY 2021.
---------------------------------------------------------------------------

    \85\ EPA analyzed the MY 2021-2026 timeframe to allow for a more 
direct comparison of the estimated emissions loss in tons of the 
proposed multipliers and cap with the impact of the California 
Framework multiplier cap.
---------------------------------------------------------------------------

iii. Natural Gas Vehicle Multipliers
    As noted above, the SAFE rule did not extend multipliers for 
advanced technology vehicles but did extend and increase multiplier 
incentives for dual-fuel and dedicated natural gas vehicles (NGVs). The 
current regulations include a multiplier of 2.0, uncapped, for MY 2022-
2026 NGVs. In the SAFE rule, EPA said it was extending the multipliers 
for NGVs because ``NGVs could be an important part of the overall 
light-duty vehicle fleet mix, and such offerings would enhance the 
diversity of potentially cleaner alternative fueled vehicles available 
to consumers.'' \86\ After further considering the issue, EPA now 
proposes to remove the extended multiplier incentives added by the SAFE 
rule from the GHG program after MY 2022. EPA is proposing to end 
multipliers for NGVs in this manner because NGVs are not a near-zero 
emissions technology and EPA no longer believes it is appropriate to 
incentivize these vehicles to encourage manufacturers to introduce them 
in the light-duty vehicle market. EPA does not view NGVs as a pathway 
for significant vehicle GHG emissions reductions in the future. Any NGV 
multiplier credits generated in MY 2022 would be included under the 
proposed multiplier cap. There are no NGVs currently offered by 
manufacturers in the light-duty market and EPA is unaware of any plans 
to introduce NGVs, so EPA does not expect the removal of multipliers 
for NGVs to have an impact on manufacturers' ability to meet 
standards.\87\ EPA requests comment on its proposed treatment of 
multipliers for NGVs including whether they should be eliminated 
altogether for MYs 2023-2026 as proposed or retained partially or at a 
lower level for MYs 2023-2025.
---------------------------------------------------------------------------

    \86\ 85 FR 25211.
    \87\ The last vehicle to be offered, a CNG Honda Civic, was 
discontinued after MY 2015. It had approximately 20 percent lower 
CO2 than the gasoline Civic. For more recent advanced 
internal combustion engines, the difference may be less than 20% due 
to lower emissions of the gasoline-fueled vehicles.
---------------------------------------------------------------------------

2. Advanced Technology Incentives for Full-Size Pickups
    In the 2012 rule, EPA included a per-vehicle credit provision for 
manufacturers that hybridize a significant number of their full-size

[[Page 43761]]

pickup trucks or use other technologies that comparably reduce 
CO2 emissions. EPA's goal was to incentivize the penetration 
into the marketplace of low-emissions technologies for these pickups. 
The incentives were intended to provide an opportunity in the program's 
early years to begin penetration of advanced technologies into this 
category of vehicles, which face unique challenges in the costs of 
applying advanced technologies due to the need to maintain vehicle 
utility and meet consumer expectations. In turn, the introduction of 
low-emissions technologies in this market segment creates more 
opportunities for achieving the more stringent later year standards. 
Under the existing program, full-size pickup trucks using mild hybrid 
technology are eligible for a per-truck 10 g/mile CO2 credit 
during MYs 2017-2021.\88\ Full-size pickup trucks using strong hybrid 
technology are eligible for a per-truck 20 g/mile CO2 credit 
during MYs 2017-2021, if certain minimum production thresholds are 
met.\89\ EPA established definitions in the 2012 rule for full-size 
pickup and mild and strong hybrid for the program.\90\
---------------------------------------------------------------------------

    \88\ As with multiplier credits, full-size pickup credits are in 
Megagrams (Mg). Full-size pickup credits are derived by multiplying 
the number of full-size pickups produced with the eligible 
technology by the incentive credit (either 10 or 20 g/mile) and a 
vehicle miles traveled (VMT) value for trucks of 225,865, as 
specified in the regulations. The resulting value is divided by 
1,000,000 to convert it from grams to Mg. EPA is not proposing a cap 
for these credits and they are only available for full-size pickups, 
rather than the entire fleet, so the calculation is simpler than 
that for multiplier credits.
    \89\ 77 FR 62825, October 15, 2012.
    \90\ 77 FR 62825, October 15, 2012. Mild and strong hybrid 
definitions as based on energy flow to the high-voltage battery 
during testing. Both types of vehicles must have start/stop and 
regenerative braking capability. Mild hybrid is a vehicle where the 
recovered energy over the Federal Test Procedure is at least 15 
percent but less than 65 percent of the total braking energy. Strong 
hybrid means a hybrid vehicle where the recovered energy over the 
Federal Test Procedure is at least 65 percent of the total braking 
energy.
---------------------------------------------------------------------------

    Alternatively, manufacturers may generate performance-based credits 
for full-size pickups. This performance-based credit is 10 g/mile 
CO2 or 20 g/mile CO2 for full-size pickups 
achieving 15 percent or 20 percent, respectively, better CO2 
performance than their footprint-based targets in a given MY.\91\ This 
second option incentivizes other, non-hybrid, advanced technologies 
that can reduce pickup truck GHG emissions and fuel consumption at 
rates comparable to strong and mild hybrid technology. These 
performance-based credits have no specific technology or design 
requirements; automakers can use any technology or set of technologies 
as long as the vehicle's CO2 performance is at least 15 or 
20 percent below the vehicle's footprint-based target. However, a 
vehicle cannot receive both hybrid and performance-based credits, since 
that would be double-counting.
---------------------------------------------------------------------------

    \91\ 77 FR 62826, October 15, 2012. For additional discussion of 
the performance requirements, see Section 5.3.4 of the ``Joint 
Technical Support Document: Final Rulemaking for 2017-2025 Light-
duty Vehicle Greenhouse Gas Emission Standards and Corporate Average 
Fuel Economy Standards'' for the Final Rule,'' EPA-420-R-12-901, 
August 2012.
---------------------------------------------------------------------------

    Access to any of these large pickup credits requires that the 
technology be used on a minimum percentage of a manufacturer's full-
size pickups. These minimum percentages, established in the 2012 final 
rule, are set to encourage significant penetration of these 
technologies, leading to long-term market acceptance. Meeting the 
penetration threshold in one MY does not ensure credits in subsequent 
years; if the production level in a MY drops below the required 
threshold, the credit is not earned for that MY. The required 
penetration levels are shown in Table 26 below.\92\
---------------------------------------------------------------------------

    \92\ 40 CFR 86.1870-12.

               Table 26--Penetration Rate Requirements by Model Year for Full-Size Pickup Credits
                                                [% of production]
----------------------------------------------------------------------------------------------------------------
                                       2017            2018            2019            2020            2021
----------------------------------------------------------------------------------------------------------------
Strong hybrid...................              10              10              10              10              10
Mild Hybrid.....................              20              30              55              70              80
20% better performance..........              10              10              10              10              10
15% better performance..........              15              20              28              35              40
----------------------------------------------------------------------------------------------------------------

    Under the 2012 rule, the strong hybrid/20% better performance 
incentives initially extended out through MY 2025, the same as the 10 
percent production threshold. However, the SAFE rule removed these 
incentives after MY 2021. The mild hybrid/15% better performance 
incentive was not affected by the SAFE rule, as those provisions end 
after MY 2021. EPA proposes to reinstate the full-size pickup credits 
as they existed before the SAFE rule, for MYs 2022 through 2025. While 
no manufacturer has yet claimed these credits, the rationale for 
establishing them in the 2012 rule remains valid. At the time of the 
SAFE rule, EPA did not envision significantly more stringent standards 
in the future and so did not believe the incentives were useful. In the 
context of this proposal that includes significantly more stringent 
standards for MY 2023-2026, EPA believes these full-size pickup truck 
credits are appropriate to further incentivize advanced technologies 
penetrating this particularly challenging segment of the market. As 
with the original program, EPA is limiting this incentive to full-size 
pickups rather than broadening it to other vehicle types. Introducing 
advanced technologies with very low CO2 emissions in the 
full-size pickup market segment remains a challenge due to the need to 
preserve the towing and hauling capabilities of the vehicles. The full-
size pickup credits incentivize advanced technologies into the full-
size pickup truck segment to help address cost, utility, and consumer 
acceptance challenges. EPA requests comments on whether or not to 
reinstate the previously existing full-size pickup strong hybrid/20% 
better performance incentives and the proposed approach for doing so. 
EPA notes for this proposal our analysis does not include the impacts 
of this incentive on the projected GHG emissions, costs, benefits and 
other program effects. EPA requests comment on the potential impacts of 
the full-size pickup incentive credit, and whether, and how, EPA should 
take the projected effects into account in the final rulemaking.
    In the 2012 rule, EPA included a provision that prevents a 
manufacturer from using both the full-size pickup performance-based 
credit pathway and the multiplier credits for the same vehicles. This 
would prevent, for example, an EV full-size pickup from generating both 
credits. EPA did not include the same restriction for vehicles 
qualifying for the full-size pickup

[[Page 43762]]

hybrid credit pathway. For example, a PHEV could qualify for both the 
strong hybrid credit and the multiplier credits under the prior 
regulations as they were established in the 2012 rule. With our 
proposal to extend the multiplier credits and reinstate the full-size 
pickup credit, EPA believes allowing both credits would in a sense be 
double-counting and inappropriate. Therefore, EPA proposes to modify 
the regulations such that manufacturers may choose between the two 
credits in instances where full-size pickups qualify for both but may 
not use both credits for the same vehicles. A manufacturer may choose 
to use the full-size pickup strong hybrid credit, for example, if the 
manufacturer either has reached the multiplier credit cap or intends to 
do so with other qualifying vehicles. Or a manufacturer may instead 
decide to forego the strong hybrid credit in cases where the 
manufacturer does not expect to reach the multiplier cap and the 
multiplier provides more credits than the strong hybrid credit. EPA 
requests comments on this approach to avoid double-counting of credits, 
by restricting the use of the two types of credits for the same 
vehicles.
3. Off-Cycle Technology Credits
i. Background
    Starting with MY 2008, EPA started employing a ``five-cycle'' test 
methodology to measure fuel economy for purposes of new car window 
stickers (labels) to give consumers better information on the fuel 
economy they could more reasonably expect under real-world driving 
conditions.\93\ However, for GHG compliance, EPA continues to use the 
established ``two-cycle'' (city and highway test cycles, also known as 
the FTP and HFET) test methodology.\94\ As learned through development 
of the ``five-cycle'' methodology and prior rulemakings, there are 
technologies that provide real-world GHG emissions improvements, but 
whose improvements are not fully reflected on the ``two-cycle'' test. 
EPA established the off-cycle credit program to provide an appropriate 
level of CO2 credit for technologies that achieve 
CO2 reductions, but may not otherwise be chosen as a GHG 
control strategy, as their GHG benefits are not measured on the 
specified 2-cycle test. For example: High efficiency lighting is not 
measured on the EPA 2-cycle tests because lighting is not turned on as 
part of the test procedure but reduces CO2 emissions by 
decreasing the electrical load on the alternator and engine. The key 
difference between the credits discussed below and the incentives 
discussed in the previous two sections is that off-cycle credits--as 
well as A/C credits, discussed in the next section--represent real-
world emissions reductions if appropriately sized and therefore their 
use should not result in deterioration of program benefits, and should 
not be viewed as cutting into the effective stringency of the program.
---------------------------------------------------------------------------

    \93\ https://www.epa.gov/vehicle-and-fuel-emissions-testing/dynamometer-drive-schedules. See also 75 FR 25439 for a discussion 
of 5-cycle testing.
    \94\ The city and highway test cycles, commonly referred to 
together as the ``2-cycle tests'' are laboratory compliance tests 
are effectively required by law for CAFE, and also used for 
determining compliance with the GHG standards. 49 U.S.C. 32904(c).
---------------------------------------------------------------------------

    Under EPA's existing regulations, there are three pathways by which 
a manufacturer may accrue off-cycle technology credits.\95\ The first 
pathway is a predetermined list or ``menu'' of credit values for 
specific off-cycle technologies that was effective starting in MY 
2014.\96\ This pathway allows manufacturers to use credit values 
established by EPA for a wide range of off-cycle technologies, with 
minimal or no data submittal or testing requirements. The menu includes 
a fleetwide cap on credits of 10 g/mile to address the uncertainty of a 
one-size-fits-all credit level for all vehicles and the limitations of 
the data and analysis used as the basis of the menu credits. A second 
pathway allows manufacturers to use 5-cycle testing to demonstrate and 
justify off-cycle CO2 credits.\97\ The additional emissions 
tests allow emission benefits to be demonstrated over some elements of 
real-world driving not captured by the GHG compliance tests, including 
high speeds, rapid accelerations, and cold temperatures. Under this 
pathway, manufacturers submit test data to EPA, and EPA determines 
whether there is sufficient technical basis to approve the off-cycle 
credits. The third pathway allows manufacturers to seek EPA approval, 
through a notice and comment process, to use an alternative methodology 
other than the menu or 5-cycle methodology for determining the off-
cycle technology CO2 credits.\98\ This option is only 
available if the benefit of the technology cannot be adequately 
demonstrated using the 5-cycle methodology.
---------------------------------------------------------------------------

    \95\ See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas 
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021 for information regarding the use of each pathway 
by manufacturers.
    \96\ See 40 CFR 86.1869-12(b).
    \97\ See 40 CFR 86.1869-12(c).
    \98\ See 40 CFR 86.1869-12(d).
---------------------------------------------------------------------------

ii. EPA Proposal To Increase Menu Credit Cap
    EPA has received comments from manufacturers on multiple occasions 
requesting that EPA increase the menu credit cap. Previously, EPA has 
opted not to increase the cap for several reasons.\99\ First, the cap 
is necessary given the uncertainty in the menu values for any given 
vehicle. Menu credits are values EPA established to be used across the 
fleet rather than vehicle-specific values. When EPA established the 
menu credits in the 2012 rule, EPA included a cap because of the 
uncertainty inherent in using limited data and modeling as the basis of 
a single credit value for either cars or trucks. While off-cycle 
technologies should directionally provide an off-cycle emissions 
reduction, quantifying the reductions and setting an appropriate credit 
values based on limited data was difficult. Manufacturers wanting to 
generate credits beyond the cap may do so by bringing in their own test 
data as the basis for the credits. Credits established under the second 
and third pathways do not count against the menu cap. Also, until 
recently most manufacturers still had significant headroom under the 
cap allowing them to continue to introduce additional menu 
technologies.\100\ Finally, during the implementation of the program, 
EPA has expended significantly more effort than anticipated on 
scrutinizing menu credits to determine if a manufacturer's technology 
approach was eligible under the technology definitions contained in the 
regulations. This further added to concerns about whether the 
technology could reasonably be expected to provide the real-world 
benefits that credits are meant to represent. For these reasons, EPA 
has been reluctant to consider increasing the cap.
---------------------------------------------------------------------------

    \99\ 85 FR 25237.
    \100\ See ``The 2020 EPA Automotive Trends Report, Greenhouse 
Gas Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-
21-003 January 2021 for information on the use of menu credits.
---------------------------------------------------------------------------

    EPA may make changes to the test procedures for the GHG program in 
the future that could change the need for an off-cycle credits program, 
but there are no such test procedure changes proposed in this rule. 
Off-cycle credits, therefore, will likely remain an important source of 
emissions reductions under the program, at least through MY 2026. Off-
cycle technologies are often more cost effective than other available 
technologies that reduce vehicle GHG emissions over the 2-cycle tests 
and

[[Page 43763]]

manufacturer use of the program continues to grow. Off-cycle credits 
reduce program costs and provide additional flexibility in terms of 
technology choices to manufacturers which has resulted in many 
manufacturers using the program. Multiple manufacturers were at or 
approaching the 10 g/mile credit cap in MY 2019.\101\ Also, in the SAFE 
rule, EPA added menu credits for high efficiency alternators but did 
not increase the credit cap for the reasons noted above.\102\ While 
adding the technology to the menu has the potential to reduce the 
burden associated with the credits for both manufacturers and EPA, it 
further exacerbates the credit cap issue for some manufacturers.
---------------------------------------------------------------------------

    \101\ In MY 2019, Ford, FCA, and Jaguar Land Rover reached the 
10 g/mile cap and three other manufacturers were within 3 g/mile of 
the cap. See ``The 2020 EPA Automotive Trends Report, Greenhouse Gas 
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021.
    \102\ 85 FR 25236.
---------------------------------------------------------------------------

    After considering the above points further in the context of the 
proposed standards, EPA is proposing to increase the cap on menu-based 
credits from the current 10 g/mile to 15 g/mile beginning as early as 
MY 2020. As a companion to increasing the credit cap, though, EPA is 
also proposing modifications to some of the off-cycle technology 
definitions to improve program implementation and to better accomplish 
the goal of the off-cycle credits program: To ensure emissions 
reductions occur in the real-world from the use of the off-cycle 
technologies. Manufacturers wanting to claim menu credits between 10 
and 15 g/mile in MYs 2020-2022 would need to meet all revised 
technology definitions across both the car and truck fleets. For MYs 
2023 and later, the revised definitions would apply exclusively, and 
the current definitions would no longer be used in the program. EPA is 
proposing this approach as a reasonable transition to the new 
definitions.
    EPA is proposing not to require the use of the revised definitions 
prior to MY 2023 for manufacturers not opting into the 15 g/mile credit 
cap. Requiring their use for MYs 2020 and earlier for all manufacturers 
would potentially affect credits already awarded to manufacturers, 
causing significant problems in program implementation and manufacturer 
plans to comply with the proposed MY 2023-2026 standards. Similarly, MY 
2021 is underway, and some manufacturers are already producing MY 2022 
vehicles. EPA believes credits that were generated in a manner 
consistent with the applicable regulatory definitions in place at the 
time the vehicles were produced should continue to be allowed in 
compliance determinations for the proposed MY 2023-2026 standards. The 
10 g/mile cap EPA adopted to address uncertainties around the menu 
credits, including the definitions, is acting as intended and the 
proposed approach of allowing menu credits beyond the 10 g/mile cap 
only for manufacturers meeting the revised definitions is the 
appropriate approach until the 15 g/mile menu cap and revised 
definitions are fully implemented in MY 2023. EPA views the proposed 
definition updates as refinements to the ongoing off-cycle program to 
improve its implementation and help ensure that the program produces 
real-world benefits as intended and believes that it is reasonable to 
make these updates in parallel with the proposed cap increase. 
Manufacturers that utilized technologies in MY 2020 that meet the 
proposed revised definitions, in addition to the unchanged current 
definitions, would be able to claim menu credits up to the 15 g/mile 
cap.
    EPA requests comment on whether the menu credit cap should be 
increased to 15 g/mile, EPA's proposed approach for implementing the 
increased credit cap, including the start date of MY 2020, as well as 
the proposed application of revised technology definitions, discussed 
below. EPA specifically requests comment on whether an increased credit 
cap, if finalized, should begin in MY 2020 as proposed or a later MY 
such as MY 2021, 2022, or 2023. Commenters supporting off-cycle 
provisions that differ from EPA's proposal are encouraged to address 
how such differences could be implemented to improve real-world 
emissions benefits and how such provisions could be effectively 
implemented.
iii. EPA Proposed Modifications to Menu Technology Definitions
    Some stakeholders have previously raised concerns about whether the 
off-cycle credit program produces the real-world emissions reductions 
as intended, or results in a loss of emissions benefits.\103\ EPA 
shares these concerns, as noted above, and believes it is important to 
address to the extent possible the issues that the agency has 
experienced in implementing the menu credits, alongside proposing to 
raise the menu cap. EPA believes that raising the menu cap is 
appropriate so long as the agency can improve the program and 
reasonably expect the use of menu technologies to provide real-world 
emissions reductions, consistent with the intent of the program. 
Providing additional opportunities for menu credits may allow for more 
emissions reductions sooner and at a lower cost than would otherwise be 
possible under a program without off-cycle credits. Indeed, the 
additional credits are fully incorporated as an element of the cost and 
feasibility analysis of the proposed standards. With that in mind, EPA 
proposes to modify the menu definitions discussed below to coincide 
with increasing the menu cap.
---------------------------------------------------------------------------

    \103\ 85 FR 25237.
---------------------------------------------------------------------------

    The existing menu technologies and associated credits are provided 
below in Table 27 and Table 28 for reference.\104\
---------------------------------------------------------------------------

    \104\ See 40 CFR 86.1869-12(b). See also ``Joint Technical 
Support Document: Final Rulemaking for 2017-2025 Light-duty Vehicle 
Greenhouse Gas Emission Standards and Corporate Average Fuel Economy 
Standards for the Final Rule,'' EPA-420-R-12-901, August 2012, for 
further information on the definitions and derivation of the credits 
values.

Table 27--Existing Off-Cycle Technologies and Credits for Cars and Light
                                 Trucks
------------------------------------------------------------------------
                                  Credit for cars g/   Credit for light
           Technology                     mi              trucks g/mi
------------------------------------------------------------------------
High Efficiency Alternator (at   1.0................  1.0.
 73%; scalable).
High Efficiency Exterior         1.0................  1.0.
 Lighting (at 100W).
Waste Heat Recovery (at 100W;    0.7................  0.7.
 scalable).
Solar Roof Panels (for 75W,      3.3................  3.3.
 battery charging only).
Solar Roof Panels (for 75W,      2.5................  2.5.
 active cabin ventilation plus
 battery charging).
Active Aerodynamic Improvements  0.6................  1.0.
 (scalable).
Engine Idle Start-Stop with      2.5................  4.4.
 heater circulation system.

[[Page 43764]]

 
Engine Idle Start-Stop without   1.5................  2.9.
 heater circulation system.
Active Transmission Warm-Up....  1.5................  3.2.
Active Engine Warm-Up..........  1.5................  3.2.
Solar/Thermal Control..........  Up to 3.0..........  Up to 4.3.
------------------------------------------------------------------------

 Table 28--Off-Cycle Technologies and Credits for Solar/Thermal Control
                 Technologies for Cars and Light Trucks
------------------------------------------------------------------------
                                                       Truck credit (g/
   Thermal control technology     Car credit (g/mi)           mi)
------------------------------------------------------------------------
Glass or Glazing...............  Up to 2.9..........  Up to 3.9.
Active Seat Ventilation........  1.0................  1.3.
Solar Reflective Paint.........  0.4................  0.5.
Passive Cabin Ventilation......  1.7................  2.3.
Active Cabin Ventilation.......  2.1................  2.8.
------------------------------------------------------------------------

a. Passive Cabin Ventilation
    Some manufacturers have claimed the passive cabin ventilation 
credits based on the addition of software logic to their HVAC system 
that sets the interior climate control outside air/recirculation vent 
to the open position when the power to vehicle is turned off at higher 
ambient temperatures. The manufacturers have claimed that the opening 
of the vent allows for the flow of ambient temperature air into the 
cabin. While opening the vent may ensure that the interior of the 
vehicle is open for flow into the cabin, no other action is taken to 
improve the flow of heated air out of the vehicle. This technology 
relies on the pressure in the cabin to reach a sufficient level for the 
heated air in the interior to flow out through body leaks or the body 
exhausters to open and vent heated air out of the cabin.
    The credits for passive cabin ventilation were determined based on 
an NREL study that strategically opened a sunroof to allow for the 
unrestricted flow of heated air to exit the interior of the vehicle 
while combined with additional floor openings to provide a minimally 
restricted entry for cooler ambient air to enter the cabin. The 
modifications that NREL performed on the vehicle reduced the flow 
restrictions for both heated cabin air to exit the vehicle and cooler 
ambient air to enter the vehicle, creating a convective airflow path 
through the vehicle cabin.
    Analytical studies performed by manufacturers to evaluate the 
performance of the open dash vent demonstrate that while the dash vent 
may allow for additional airflow of ambient temperature air entering 
the cabin, it does not reduce the existing restrictions on heated cabin 
air exiting the vehicle, particularly in the target areas of the 
occupant's upper torso. That hotter air generally must escape through 
restrictive (by design to prevent water and exhaust fumes from entering 
the cabin) body leaks and occasional venting of the heated cabin air 
through the body exhausters. While this may provide some minimal 
reduction in cabin temperatures, this open dash vent technology is not 
as effective as the combination of vents used by the NREL researchers 
to allow additional ambient temperature air to enter the cabin and also 
to reduce the restriction of heated air exiting the cabin.
    As noted in the Joint Technical Support Document: Final Rulemaking 
for 2017-2025 Light-Duty Vehicle Greenhouse Gas Emission Standards and 
Corporate Average Fuel Economy Standards, pg. 584, ``For passive 
ventilation technologies, such as opening of windows and/or sunroofs 
and use of floor vents to supply fresh air to the cabin (which enhances 
convective airflow), (1.7 grams/mile for LDVs and 2.3 grams/mile for 
LDTs) a cabin air temperature reduction of 5.7 [deg]C can be 
realized.'' The passive cabin ventilation credit values were based on 
achieving the 5.7 [deg]C cabin temperature reduction.
    The Agency has decided to revise the passive cabin ventilation 
definition to make it consistent with the technology used to generate 
the credit value. The Agency continues to allow for innovation as the 
definition includes demonstrating equivalence to the methods described 
in the Joint TSD.
    EPA proposes to revise the definition of passive cabin ventilation 
to only include methods that create and maintain convective airflow 
through the body's cabin by opening windows or a sunroof, or equivalent 
means of creating and maintaining convective airflow, when the vehicle 
is parked outside in direct sunlight.
    Current systems claiming the passive ventilation credit by opening 
the dash vent would not meet the updated definition. Manufacturers 
seeking to claim credits for the open dash vent system will be eligible 
to petition the Agency for credits for this technology using the 
alternative EPA approved method outlined in Sec.  86.1869-12(d).
b. Active Engine and Transmission Warm-Up
    In the NPRM for the 2012 rule (76 FR 74854) EPA proposed capturing 
waste heat from the exhaust and using that heat to actively warm-up 
targeted parts of the engine and the transmission fluid. The exhaust 
waste heat from an internal combustion engine is heat that is not being 
used as it is exhausted to the atmosphere.
    In the 2012 Final Rule (77 FR 62624), the Agency revised the 
definitions for active engine and transmission warm-up by replacing 
exhaust waste heat with the waste heat from the vehicle. As noted in 
the Joint TSD, pages 5-98 and 5-99, the Alliance of Automobile 
Manufacturers and Volkswagen recommended the definition be broadened to 
account for other methods of warm-up besides exhaust heat such as a 
secondary coolant loop.
    EPA concluded that other methods, in addition to waste heat from 
the exhaust, that could provide similar performance--such as coolant 
loops or direct heating elements--may prove to be more effective 
alternative to direct exhaust heat. Therefore, the Agency

[[Page 43765]]

expanded the definition in the 2012 Final Rule.
    In the 2012 Final Rule the Agency also required two unique heat 
exchanger loops--one for the engine and one for the transmission--for a 
manufacturer to claim both the Active Engine Warm-up and Active 
Transmission Warm-up credits. EPA stated in the Joint TSD that 
manufacturers utilizing a single heat exchanging loop would need to 
demonstrate that the performance of the single loop would be equivalent 
to two dedicated loops in order for the manufacturer to claim both 
credits, and that this test program would need to be performed using 
the alternative method off-cycle GHG credit application described in 
Sec.  86.1869-12(d).
    All Agency analysis regarding active engine and transmission warm-
up through the 2012 Final Rule (77 FR 62624) was performed assuming the 
waste heat utilized for these technologies would be obtained directly 
from the exhaust prior to being released into the atmosphere and not 
from any engine-coolant-related loops. At this time no manufacturer has 
introduced an exhaust waste heat exchanger to be used to warm up the 
engine or transmission. The systems in use are engine-coolant-loop-
based and are taking heat from the coolant to warm-up the engine oil 
and transmission fluid.
    EPA provided additional clarification on the use of waste heat from 
the engine coolant in preamble to SAFE rule (85 FR 24174). EPA focused 
on systems using heat from the exhaust as a primary source of waste 
heat because that heat would be available quickly and also would be 
exhausted by the vehicle and otherwise unused (85 FR 25240). Heat from 
the engine coolant already may be used by design to warm up the 
internal engine oil and components. That heat is traditionally not 
considered ``waste heat'' until the engine reaches normal operating 
temperature and subsequently requires it to be cooled in the radiator 
or other heat exchanger.
    EPA allowed for the possible use of other sources of heat such as 
engine coolant circuits, as the basis for the credits as long as those 
methods would ``provide similar performance'' as extracting the heat 
directly from the exhaust system and would not compromise how the 
engine systems would heat up normally absent the added heat source. 
However, the SAFE rule also allowed EPA to require manufacturers to 
demonstrate that the system is based on ``waste heat'' or heat that is 
not being preferentially used by the engine or other systems to warm up 
other areas like engine oil or the interior cabin. Systems using waste 
heat from the coolant do not qualify for credits if their operation 
depends on, and is delayed by, engine oil temperature or interior cabin 
temperature. As the engine and transmission components are warming up, 
the engine coolant and transmission oil typically do not have any 
``waste'' heat available for warming up anything else on the vehicle 
since they are both absorbing any heat from combustion cylinder walls 
or from friction between moving parts in order to achieve normal 
operating temperatures. During engine and transmission warm-up, the 
only waste heat source in a vehicle with an internal combustion engine 
is the engine exhaust, as the transmission and coolant have not reached 
warmed-up operating temperature and therefore do not have any heat to 
share (85 FR 25240).
    EPA proposes to revise the menu definitions of active engine and 
transmission warm-up to no longer allow systems that capture heat from 
the coolant circulating in the engine block to qualify for the Active 
Engine and Active Transmission warm-up menu credits. EPA would allow 
credit for coolant systems that capture heat from a liquid-cooled 
exhaust manifold if the system is segregated from the coolant loop in 
the engine block until the engine has reached fully warmed-up 
operation. The Agency would also allow system design that captures and 
routes waste heat from the exhaust to the engine or transmission, as 
this was the basis for these two credits as originally proposed in the 
proposal for the 2012 rule. EPA's proposed approach would help ensure 
that the level of menu credit is consistent with the technology design 
envisioned by EPA when it established the credit in the 2012 rule.
    Manufacturers seeking to utilize their existing systems that 
capture coolant heat before the engine is fully warmed-up and transfer 
this heat to the engine oil and transmission fluid would remain 
eligible to seek credits through the alternative method application 
process outlined in Sec.  86.1869-12(d). EPA expects that these 
technologies may provide some benefit. But, as noted above since these 
system designs remove heat that is needed to warm-up the engine the 
Agency expects that these technologies will be less effective than 
those that capture and utilize exhaust waste heat.
iv. Clarification Regarding Use of Menu Credits
    Finally, EPA proposes to clarify that manufacturers claiming 
credits for a menu technology must use the menu pathway rather than 
claim credits through the public process or 5-cycle testing pathways. 
EPA views this as addressing a potential loophole around the menu cap. 
As is currently the case, a new technology that represents an 
advancement compared to the technology represented by the menu credit--
that is, by providing significantly more emissions reductions than the 
menu credit technology--would be eligible for the other two pathways.
4. Air Conditioning System Credits
    There are two mechanisms by which A/C systems contribute to the 
emissions of GHGs: Through leakage of hydrofluorocarbon refrigerants 
into the atmosphere (sometimes called ``direct emissions'') and through 
the consumption of fuel to provide mechanical power to the A/C system 
(sometimes called ``indirect emissions'').\105\ The high global warming 
potential of the previously most common automotive refrigerant, HFC-
134a, means that leakage of a small amount of refrigerant will have a 
far greater impact on global warming than emissions of a similar amount 
of CO2. The impacts of refrigerant leakage can be reduced 
significantly by systems that incorporate leak-tight components, or, 
ultimately, by using a refrigerant with a lower global warming 
potential. The A/C system also contributes to increased tailpipe 
CO2 emissions through the additional work required to 
operate the compressor, fans, and blowers. This additional power demand 
is ultimately met by using additional fuel, which is converted into 
CO2 by the engine during combustion and exhausted through 
the tailpipe. These emissions can be reduced by increasing the overall 
efficiency of an A/C system, thus reducing the additional load on the 
engine from A/C operation, which in turn means a reduction in fuel 
consumption and a commensurate reduction in GHG emissions.
---------------------------------------------------------------------------

    \105\ 40 CFR 1867-12 and 40 CFR 86.1868-12.
---------------------------------------------------------------------------

    Manufacturers may generate credits for improved A/C systems to help 
them comply with the CO2 fleet average standards since the 
MY 2012 and later MYs. Because A/C credits represent a low-cost and 
effective technology pathway, EPA expected manufacturers to generate 
both A/C refrigerant and efficiency credits, and EPA accounted for 
those credits in developing the final CO2 standards for the 
2012 and SAFE rules, by adjusting the standards to make them more 
stringent. EPA believes it is important to encourage manufacturers to 
continue to implement low GWP refrigerants or low leak systems. Thus, 
EPA is not proposing

[[Page 43766]]

any changes for its A/C credit provisions and is taking the same 
approach in adjusting the level of the proposed standards to reflect 
the use of the A/C credits. However, if EPA were to remove the 
refrigerant credits from the program, the proposed standards would need 
to be adjusted or increased by the amount of the credit to reflect its 
elimination from the program.
5. Natural Gas Vehicles Technical Correction
    In the SAFE proposal, EPA sought comment on whether it should adopt 
additional incentives for natural gas-fueled light-duty vehicles.\106\ 
After considering comments, EPA finalized additional incentive 
multipliers for MYs 2022-2026 natural gas vehicles.\107\ EPA also 
received comments recommending that EPA adopt an additional incentive 
for natural gas vehicles in the form of a 0.15 multiplicative factor 
that would be applied to the CO2 emissions measured from the 
vehicle when tested on natural gas. Commenters recommended the 0.15 
factor as an appropriate way to account for the potential use of 
renewable natural gas (RNG) in the vehicles.\108\
---------------------------------------------------------------------------

    \106\ 83 FR 43464, August 24, 2018.
    \107\ 85 FR 25211, April 30, 2020.
    \108\ 85 FR 25210-25211.
---------------------------------------------------------------------------

    EPA decided not to adopt the additional 0.15 factor incentive, as 
discussed in the preamble to the SAFE Rule.\109\ EPA provided a 
detailed rationale for its decision not to implement a 0.15 factor 
recommended by commenters in the SAFE Rule.\110\ EPA is not revisiting 
or reopening its decision regarding the 0.15 factor. However, the 
regulatory text adopted in the SAFE rule contains an inadvertent 
clerical error that conflicts with EPA's decision and rationale in the 
final SAFE rule preamble and provides an option for manufacturers to 
use this additional incentive in MYs 2022-2026 by multiplying the 
measured CO2 emissions measured during natural gas operation 
by the 0.15 factor.\111\ EPA is proposing narrow technical amendments 
to its regulations to correct this clerical error by removing the 
option to use the 0.15 factor in MY 2022 (as discussed in Section 
II.B.1.iii, EPA is proposing to eliminate multipliers for NGVs after MY 
2022). This will ensure the regulations are consistent with the 
decision and rationale in the SAFE final rule. EPA likely would not 
have granted credits under the erroneous regulatory text if such 
credits were sought by a manufacturer because the intent of the agency 
was clear in the preamble text. In addition, natural gas vehicles are 
not currently offered by any manufacturer and EPA is not aware of any 
plans to do so. Therefore, there are no significant impacts associated 
with the correction of this clerical error.
---------------------------------------------------------------------------

    \109\ 85 FR 25211.
    \110\ Ibid.
    \111\ See 40 CFR 600.510-12(j)(2)(v) and (j)(2)(vii)(A).
---------------------------------------------------------------------------

C. What alternatives is EPA considering?

    Along with the proposed standards, EPA analyzed both a more 
stringent and a less stringent alternative. For the less stringent 
alternative, Alternative 1, EPA used the coefficients in the California 
Framework for the 2.7 percent effective stringency level (as described 
previously in Section II.B.1) as the basis for the MY 2023 stringency 
level and the 2012 rule MY 2025 standards as the basis for the MY 2026 
stringency level, with linear year-over-year reductions between the two 
points for MYs 2024 and 2025. EPA views the California Framework as a 
reasonable basis for the least stringent alternative that EPA would 
consider finalizing, since it represents a level of stringency that 
five manufacturers have already committed to achieving. EPA did not 
include incentive multipliers for Alternative 1, as doing so would only 
further reduce the effective stringency of this Alternative, and EPA 
views Alternative 1 as the lower end of stringency that it believes is 
appropriate through MY 2026.
    For the more stringent alternative, Alternative 2, EPA used the 
2012 rule standards as the basis for MY 2023-2025 targets, with the 
standards continuing to increase in stringency in a linear fashion for 
MY 2026. Alternative 2 adopts the 2012 rule stringency levels in MY 
2023 and follows the 2012 rule standard target levels through MY 2025. 
EPA extended the same linear average year-over-year trajectory for MYs 
2023-2025 to MY 2026 for the final standards under Alternative 2. As 
noted in Section II.A.1, EPA believes it is important to continue to 
make progress in MY 2026 beyond the MY 2025 standard levels in the 2012 
rule. As with the proposal, Alternative 2 meets this objective. EPA 
also did not include in Alternative 2 the proposed incentive 
multipliers with the proposed cumulative credit cap in MYs 2022-2025, 
which would have the effect of making Alternative 2 less stringent. As 
noted in Section II.B.1, EPA is requesting comment on whether or not to 
include the proposed multipliers, and our request for comments extends 
to whether to include multipliers both for the proposal and for 
Alternative 2.
    The fleet average targets for the two alternatives compared to the 
proposed standards are provided in Table 29 below. EPA also requests 
comment on the level of stringency for MY 2026 for the alternatives and 
the proposed standards. Specifically, EPA requests comment on standards 
for MY 2026 that would result in fleet average target levels that are 
in the range of 5-10 g/mile lower (i.e., more stringent) than the 
levels shown for MY 2026 in Table 29. EPA is requesting specific 
comment on whether the level of stringency for MY 2026 should be 
greater in keeping with the additional lead time available for this 
out-year compared to MYs 2023-2025, and because EPA may determine that 
it is appropriate, particularly in light of the accelerating transition 
to electrified vehicles, to require additional reductions in this time 
frame. As discussed in detail in Section A.3 of the Executive Summary, 
there has been a proliferation of recent announcements from automakers 
signaling a rapidly growing shift in investment away from internal-
combustion technologies and toward high levels of electrification. EPA 
has also heard from a wide range of stakeholders over the past several 
months, including but not limited to the automotive manufacturers and 
the automotive suppliers, that the significant investments being made 
now to develop and launch new EV product offerings and in the expansion 
of EV charging infrastructure could enable higher levels of EV 
penetration to occur in the marketplace by the MY 2026 time frame than 
EPA has projected as the basis for both the proposed MY 2026 standards 
and the Alternative 2 MY 2026 standards. The information concerning the 
investment landscape potentially accelerating to an even greater extent 
of market penetration of EV products is the basis on which EPA is 
relying in soliciting comment on the potential for a more stringent MY 
2026 standard that would reflect this information and related 
considerations, including any additional information provided by 
commenters.

[[Page 43767]]

             Table 29--Projected Fleet Average Target Levels for Proposed Standards and Alternatives
                                                [CO2 grams/mile]
----------------------------------------------------------------------------------------------------------------
                                                              Proposal        Alternative 1      Alternative 2
                       Model year                        projected targets  projected targets  projected targets
----------------------------------------------------------------------------------------------------------------
2021...................................................              * 223              * 223              * 224
2022...................................................              * 220              * 220              * 220
2023...................................................                199                203                195
2024...................................................                189                194                186
2025...................................................                180                185                177
2026 **................................................                171                177                169
----------------------------------------------------------------------------------------------------------------
* SAFE rule standards included here for reference.
** EPA is also requesting comment on MY 2026 standards and alternatives that would result in fleet average
  levels that are 5-10 g/mile more stringent than the levels shown.

  [GRAPHIC] [TIFF OMITTED] TP10AU21.007
  
    As shown in Figure 8, the range of alternatives that EPA is 
considering is fairly narrow, with the proposed standard targets 
differing from the alternatives in any given MY in MYs 2023-2026 by 2 
to 6 g/mile, notwithstanding EPA's request for comment on more 
stringent standards for MY 2026 standards noted above. EPA believes 
this approach is reasonable and appropriate considering the relatively 
short lead time for the proposed standards, especially for MYs 2023-
2025; our assessment of feasibility, the existing automaker commitments 
to meet the California Framework (representing about one-third of the 
auto market), the standards adopted in the 2012 rule; and the need to 
reduce GHG emissions. EPA provides a discussion of the feasibility of 
the proposed standard and alternatives and the selection of the 
proposed standards in Section III.D. The analysis of costs and benefits 
of Alternatives 1 and 2 is shown in the DRIA Chapters 4, 6, and 10. EPA 
requests comments on all aspects of Alternatives 1 and 2 or other 
alternatives roughly within the stringency range of the proposal and 
the Alternatives.

III. Technical Assessment of the Proposed CO2 Standards

    Section II provided a description of EPA's proposed standards and 
related program elements and industry-wide estimates of projected GHG 
emissions targets. This Section III provides an overview of EPA's 
technical assessment of the proposed standards including the approach 
EPA used for its analysis,

[[Page 43768]]

EPA's projected target levels by manufacturer, projected per vehicle 
cost for each manufacturer, EPA's projections of EV and PHEV technology 
penetration rates, and a discussion of why EPA believes the proposed 
standards are technologically feasible, drawing from these analyses. 
Finally, this section discusses the alternative standards EPA analyzed 
in developing the proposal. The DRIA presents further details of the 
analysis including a full assessment of technology penetration rate and 
cost projections. EPA discusses the basis for our proposed standards 
under CAA section 202(a) in Section VI, and Section VII presents 
aggregate cost and benefit projections as well as other program 
impacts.

a. What approach did EPA use in analyzing potential standards?

    The proposed standards are based on the extensive light-duty GHG 
technical analytical record developed over the past dozen years, as 
represented by the EPA supporting analyses for the 2010 and 2012 final 
rules, the Mid-Term Evaluation (including the Draft TAR, Proposed 
Determination and Final Determinations), as well as the updated 
analysis for this proposed rule and the supporting analysis for the 
SAFE rule. The updated analysis for this proposed rule is intended to 
allow direct comparison to the analysis used in the SAFE FRM and is not 
intended to be the sole technical basis of the proposed standards. 
EPA's extensive record is consistent and makes clear that GHG standards 
at the level of stringency and in the time frame of this proposed rule 
are feasible at reasonable costs and result in significant GHG emission 
reductions and public health and welfare benefits. The updated analysis 
also shows that, consistent with past analyses, when modeling standards 
of similar stringency to those set forth in the 2012 rule, the results 
are similar to those results presented previously. In particular, the 
estimated costs for manufacturers to meet standards similar to those 
proposed have been roughly consistent since EPA first estimated them in 
2012. The DRIA Chapter 1 further discusses and synthesizes EPA's record 
supporting stringent GHG standards through the MY 2025/2026 time frame.
    To confirm that these past analyses continue to provide valid 
results for consideration by the Administrator in selecting the most 
appropriate level of stringency and other aspects of the proposed 
standards, we have conducted an updated analysis of the proposed 
standards. In the past, EPA has traditionally used its OMEGA 
(Optimization Model for reducing Emissions of Greenhouse gases from 
Automobiles) model as the basis for setting light-duty GHG emissions 
standards. EPA's OMEGA model was not used to support the analysis of 
the GHG standards for the SAFE FRM; instead, NHTSA's Corporate Average 
Fuel Economy (CAFE) Compliance and Effects Modeling System (CCEMS) 
model was used.
    In considering modeling tools to support the analysis for today's 
proposed GHG standards, EPA has chosen to use the peer reviewed CCEMS 
model and to use the same version of that model used in support of the 
SAFE FRM. EPA has made this choice specific to this proposal for the 
purpose of enabling direct comparison to the SAFE FRM analysis, which 
addressed a model-year timespan consistent with this proposal.
    Given that the SAFE FRM was published only a year ago, direct 
comparisons between the analysis presented here and the analysis 
presented in support of the SAFE FRM are made more direct if the same 
modeling tool is used. For example, CCEMS has categorizations of 
technologies and model output formats that are distinct to the model, 
so continuing use of CCEMS for this proposal facilitates comparisons to 
the SAFE FRM. Also, by using the same modeling tool as used in the SAFE 
rule, we can more clearly illustrate the influence of some of the key 
updates to the inputs used in the SAFE FRM. EPA believes that using 
that same tool, with changes to some of the critical inputs as 
discussed below (see Table 30), provides a better apples-to-apples 
comparison and serves to strengthen the basis for why we are proposing 
changes to the standards.
    Some public comments received on the SAFE NPRM argued that EPA 
should use its own modeling tools to support the EPA action. In 
addition to the reasoning described above on the value of comparing 
results to the SAFE FRM, our decision here to utilize the CCEMS model 
as an appropriate tool for this analysis is informed by our 
consideration of the significant revisions made to the model between 
the SAFE proposal and the SAFE FRM and carried over here, and by the 
opportunity this analysis provides to incorporate additional updates to 
key inputs and assumptions.
    Other commenters expressed concerns about technical issues with the 
NPRM analysis. During EPA's own review and after consideration of 
public comments, we concluded that a number of these concerns were well 
founded, and potentially significant enough to merit revisions to the 
analysis. Some key revisions made for the SAFE FRM version of the CCEMS 
model include changes to the decision logic for technology application 
by manufacturers and changes related to the SAFE NPRM's unrealistic 
changes in VMT associated with the scrappage modeling. Similarly, a 
number of revisions were also made to the model inputs for the SAFE 
FRM, including the adjustment of some technology effectiveness values.
    In considering what revisions to the analysis were needed from the 
SAFE NRPM to the SAFE FRM, and from the SAFE FRM to this proposal, we 
are careful to make a distinction between the model and the inputs. As 
stated in the SAFE FRM preamble, ``[I]nputs do not define models; 
models use inputs. Therefore, disagreements about inputs do not 
logically extend to disagreements about models. Similarly, while models 
determine resulting outputs, they do so based on inputs.'' \112\ To 
illustrate, while CCEMS and OMEGA are different models, they both 
provide comparable results when comparable inputs are used. For 
example, as discussed in Chapter 1.2.2 of the DRIA, EPA's OMEGA model 
runs conducted for the MTE show a MY2025 technology cost for the 2012 
rule relative to the SAFE FRM of between $922 to $1,228 per vehicle, 
depending on the specific analysis. Thus, the MY2025 per vehicle costs 
of $942 (see RIA Chapter 4.1.2.1) from CCEMS modeling runs for this 
proposal relative to a full fleet meeting the SAFE FRM are comparable 
to our past analyses of standards for the similar level of stringency 
and are within the bounds of previous EPA analyses and sensitivity 
studies conducted for the MTE using OMEGA (see DRIA Chapter 1.2.2).
---------------------------------------------------------------------------

    \112\ See 85 FR 24218.
---------------------------------------------------------------------------

    Throughout the development of the SAFE FRM, EPA had significant 
input on revisions to the analysis and EPA considered the FRM version 
of the CCEMS model, given changes made in response to public comments 
and our own input, to be an effective modeling tool for purposes of 
assessing standards through the MY 2026 timeframe.
    While we believe the SAFE FRM model and inputs, together with the 
key changes that we have made since the SAFE FRM, are appropriate for 
the particular analysis at hand in assessing standards through MY2026, 
we welcome comments on other changes to the inputs that may be more 
appropriate for use in the final rule.

[[Page 43769]]

    Finally, EPA recognizes that in the Revised Final Determination 
\113\ and the SAFE rule, the agency expressed concerns that were based 
at least in part on comments from certain stakeholders about 
uncertainties, lack of rigor and certain technical issues in the 
analyses used for the 2016 Proposed Determination and 2017 Final 
Determination. However, EPA has reconsidered those criticisms, as well 
as the prior analyses, and concludes that the prior concerns expressed 
do not undermine the utility and relevance of the prior analyses for 
this rulemaking. Our consideration of such analyses is reasonable 
because EPA no longer agrees with those concerns and/or because the 
concerns raised technical issues that we believe do not significantly 
impact the analyses. Additionally, the updated modeling for this 
rulemaking addresses many of the concerns previously identified.
---------------------------------------------------------------------------

    \113\ See 83 FR 16077.
---------------------------------------------------------------------------

    For use in future vehicle standards analyses, EPA is developing an 
updated version of its OMEGA model. This updated model, OMEGA2, is 
being developed to better account for the significant evolution over 
the past decade in vehicle markets, technologies, and mobility 
services. In particular, the recent advancements in battery electric 
vehicles (BEVs), and their introduction into the full range of market 
segments provides strong evidence that vehicle electrification can play 
a central role in achieving greater levels of emissions reduction in 
the future. In developing OMEGA2, EPA is exploring the interaction 
between consumer and producer decisions when modeling compliance 
pathways and the associated technology penetration into the vehicle 
fleet. OMEGA2 also is being designed to have expanded capability to 
model a wider range of GHG program options than are possible using 
existing tools, which will be especially important for the assessment 
of policies that are designed to address future GHG reduction goals. 
While the OMEGA2 model is not available for use in this proposal, we 
plan to begin peer review of the draft model in the fall of 2021.
    As noted, to allow for direct comparison to the analytical results 
used to support the recent SAFE FRM, our updated analysis is based on 
the same version of the CCEMS model that was used for the SAFE FRM. The 
CCEMS model was extensively documented by NHTSA for the SAFE FRM and 
the documentation also applies to the updated analysis for this 
proposed rule.\114\ While the CCEMS model itself remains unchanged from 
the version used in the SAFE rule, EPA has made the following changes 
(shown in Table 30) to the inputs for this analysis. Additional 
information concerning the changes in model inputs can be found in the 
sections of the preamble and DRIA cited in the table. EPA invites 
public comment on the input changes noted below, as well as on whether 
there are other input choices that EPA should consider making for the 
final rule. In offering comments on the modeling inputs, EPA encourages 
stakeholders to provide technical support for any suggestions in 
changes to modeling inputs.
---------------------------------------------------------------------------

    \114\ See CCEMS Model Documentation on web page https://www.nhtsa.gov/corporate-average-fuel-economy/compliance-and-effects-modeling-system.

Table 30--Changes Made to CCEMS Model Inputs for This Proposal, Relative
                        to the SAFE FRM Analysis
------------------------------------------------------------------------
            Input file                             Changes
------------------------------------------------------------------------
parameters file...................  Global social cost of carbon $/ton
                                     values in place of domestic values
                                     (see DRIA Chapter 3.3).
                                    Inclusion of global social cost of
                                     methane (CH4) and nitrous oxide
                                     (N2O) $/ton values (see Section
                                     IV).
                                    Updated PM2.5 cost factors (benefit
                                     per ton values, see Section VII.E).
                                    Rebound effect of -0.10 rather than
                                     0.20 (see DRIA Chapter 3.1).
                                    AEO2021 fuel prices (expressed in
                                     2018 dollars) rather than AEO2019.
                                    Updated energy security cost per
                                     gallon factors (see Section VII.F).
                                    Congestion cost factors of 6.34/6.34/
                                     5.66 (car/van-SUV/truck) cents/mile
                                     rather than 15.4/15/4/13.75 (see
                                     RIA Chapter 5).
                                    Discounting values to calendar year
                                     2021 rather than calendar year
                                     2019.
                                    The following fuel import and
                                     refining inputs have been changed
                                     based on AEO2021 (see DRIA Chapter
                                     3.2):
                                      Share of fuel savings leading to
                                    lower fuel imports:
                                      Gasoline 7%; E85 19%; Diesel 7%
                                    rather than 50%; 7.5%; 50%.
                                      Share of fuel savings leading to
                                    reduced domestic fuel refining:
                                      Gasoline 93%; E85 25.1%; Diesel
                                    93% rather than 50%; 7.5%; 50%.
                                      Share of reduced domestic refining
                                    from domestic crude:
                                      Gasoline 9%; E85 2.4%; Diesel 9%
                                    rather than 10%; 1.5%; 10%.
                                      Share of reduced domestic refining
                                    from imported crude:
                                      Gasoline 91%; E85 24.6%; Diesel
                                    91% rather than 90%; 13.5%; 90%.
technology file...................  High compression ratio level 2
                                     (HCR2, sometimes referred to as
                                     Atkinson cycle) technology
                                     allowance set to TRUE for all
                                     engines beginning in 2018 (see DRIA
                                     Chapter 2).
market file.......................  On the Engines sheet, we allow high
                                     compression ratio level 1 (HCR1)
                                     and HCR2 technology on all 6-
                                     cyclinder and smaller engines
                                     rather than allowing it on no
                                     engines (see DRIA Chapter 2).
                                    Change the off-cycle credit values
                                     on the Credits and Adjustments
                                     sheet to 15 grams/mile for 2020
                                     through 2026 (for the CA Framework)
                                     or to 15 gram/mile for 2023 through
                                     2026 (for the proposed option)
                                     depending on the model run.
------------------------------------------------------------------------

    Consistent with the SAFE FRM, EPA is using the MY2017 base year 
fleet, which is projected to a future fleet based on the CCEMS model's 
sales, scrappage, and fleet mix responses to the standards being 
analyzed. When performing compliance analyses, EPA will often attempt 
to utilize the most recent base year data that is available as 
finalized compliance data, which at the time of this analysis was for 
MY2019. It is important to note that because the model applies 
technologies to future vehicles for all alternatives being analyzed, 
including the ``No Action'' scenario, the vintage of the base year 
normally will not have a significant impact on the model results for

[[Page 43770]]

projected fleets. There might be additional reason to update the base 
year fleet in cases where a broad shift has occurred in vehicle power-
to-weight ratios, since that can impact the incremental cost 
effectiveness of emissions-reducing technologies. EPA's annual 
Automotive Trends Report \115\ shows only a modest increase 
(approximately 3 percent) in the average vehicle power-to-weight ratio 
between MYs 2017 and 2019, and therefore we have concluded that the 
MY2017 base year remains a sound basis for this analysis. EPA requests 
comment on the use of the MY2017 base year fleet and whether it would 
be more appropriate to update the base year fleet for the final rule, 
for example by using a base year fleet reflecting the most recent final 
compliance data. Accordingly, we are using the data contained in the 
SAFE FRM market file (the base year fleet) except as described in Table 
30 and splitting the market file into separate California Framework OEM 
(FW-OEM) and non-Framework OEM (NonFW-OEM) fleets for some model runs. 
Note that the scrappage model received many negative comments in 
response to the SAFE NPRM, but changes made for the FRM version of the 
CCEMS model were responsive to the identified issues involving sales 
and VMT results of the SAFE NPRM version of the CCEMS model.\116\
---------------------------------------------------------------------------

    \115\ See Table 3.1, U.S. Environmental Protection Agency 
(2021). 2020 EPA Automotive Trends Report: Greenhouse Gas Emissions, 
Fuel Economy, and Technology since 1975. EPA-420-R-21-003.
    \116\ See 85 FR 24647.
---------------------------------------------------------------------------

    As mentioned, for some model runs we have split the fleet in two, 
one fleet consisting of California Framework OEMs (FW-OEMs) and the 
other consisting of the non-Framework OEMs (NonFW-OEMs). This was done 
because the FW-OEMs would be meeting more stringent emission reduction 
targets (as set in the scenarios file) and would have access to more 
(15 g/mi rather than 10 g/mi) off-cycle credits (as set in the market 
and scenarios file) and more advanced technology incentive multipliers, 
while the NonFW-OEMs would be meeting less stringent standards and 
would have access to 10 g/mi off-cycle credits and would not have 
access to any advanced technology multipliers. For such model runs, a 
post-processing step was necessary to properly sales-weight the two 
sets of model outputs into a single fleet of results. This post-
processing tool is in the docket for this rule.\117\
---------------------------------------------------------------------------

    \117\ See EPA_CCEMS_PostProcessingTool, Release 0.3.1 July 21, 
2021.
---------------------------------------------------------------------------

    Importantly, our primary model runs consist of a ``No Action'' 
scenario and an ``action'' scenario. The results, or impact of our 
proposed standards, are measured relative to the no action scenario. 
Our No Action scenario consists of the Framework OEMs (roughly 29 
percent of fleet sales) meeting the Framework emission reduction 
targets and the Non-Framework OEMs (roughly 71 percent of fleet sales) 
meeting the SAFE FRM standards. Our action scenario consists of the 
whole fleet meeting our proposed standards for MYs 2023 and later. 
Throughout this preamble, our ``No Action scenario'' refers to this 
Framework-OEM/NonFramework-OEM compliance split. EPA may consider a 
different No Action scenario for the final rule. For example, currently 
the No Action baseline includes the California Framework Agreement 
emission targets for those automakers who have committed to them, but 
does not include California's GHG or ZEV standards, because California 
does not currently have a waiver to enforce those standards. If, after 
consideration of public comment, EPA were to rescind the withdrawal of 
California's Advanced Clean Car waiver, then it might be appropriate to 
update the No Action scenario to reflect California's GHG and ZEV 
standards. EPA seeks comment on potential adjustments to the No Action 
scenario.
    In our updated analysis, as indicated in Table 18, we are using a 
vehicle-miles-traveled (VMT) rebound effect of 10 percent. The 10 
percent value has been used in EPA supporting analyses for the 2010 and 
2012 final rules as well as the MTE. The SAFE rule used a VMT rebound 
effect of 20 percent. Our assessment indicates that a rebound effect of 
10 percent is appropriate and supported by the body of research on the 
rebound effect for light-duty vehicle driving, as described further in 
the DRIA Chapter 3.1. We are requesting comment on the use of the 10 
percent VMT rebound value, or an alternative value such as 5 or 15 
percent, for our analysis of the MY2023 through 2026 standards.
    EPA has chosen to change a select number of the SAFE FRM model 
inputs, as listed in Table 30, largely because we concluded that other 
potential updates, regardless of their potential merit, such as the 
continued use of the MY2017 base year fleet, would not have a 
significant impact on the assessment of the proposed standards. In 
addition, while the technology effectiveness estimates used in the 
CCEMS model to support the SAFE FRM could have been updated with more 
recent engine maps, the incremental effectiveness values are of primary 
importance within the CCEMS model and, while the maps are somewhat 
dated, the incremental effectiveness values derived from them are in 
rough agreement with incremental values derived from more up-to-date 
engine maps (see DRIA Chapter 2). Likewise, while the electrified 
vehicle battery costs used in the SAFE FRM could have been lower based 
on EPA's latest assessment, we concluded that updating those costs for 
this proposal would not have a notable impact on overall cost 
estimates, although we may consider doing so for the final rule. The 
past EPA analyses described above generally have estimated EV 
penetrations of less than 5 percent, and electrification continues to 
play a relatively modest role in our projections of compliance paths 
for the proposed standards. In contrast to the model inputs unchanged 
from the SAFE rule as described above, the treatment of HCR1 and HCR2 
technologies in the CCEMS model, specifically a broader availability of 
those technologies as a compliance choice within the model, was 
considered by EPA to be significant and we made an update to the 
model's inputs relative to the SAFE FRM. We made that choice because 
these are a very cost-effective ICE technology that is in-use today and 
ready for broader application. In short, there are many modeling inputs 
that EPA has chosen not to change out of the very large number of 
inputs required to run a model as complex as the CCEMS model, but there 
are others we have updated with most of those updated because of the 
way they value the effects of emissions on public health. EPA seeks 
comment on our choice of modeling inputs, including whether additional 
inputs should be modified for the final rule analysis.

B. Projected Compliance Costs and Technology Penetrations

1. GHG Targets and Compliance Levels
    The proposed curve coefficients were presented in Table 22. Here we 
present the projected fleet targets for each manufacturer. These 
targets are projected based on each manufacturer's car/truck fleets and 
their sales weighted footprints. As such, each manufacturer has a set 
of targets unique to them. The projected targets are shown by 
manufacturer for MYs 2023 through 2026 in Table 31 for cars, Table 32 
for trucks, and Table 33 for the combined fleets.\118\
---------------------------------------------------------------------------

    \118\ Note that these targets are projected based on both 
projected future sales in applicable MYs and our proposed standards; 
after the standards are finalized the targets will change depending 
on each manufacturer's actual sales.

[[Page 43771]]

                                              Table 31--Car Targets
                                                 [CO2 gram/mile]
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW.............................................             166             158             150             143
Daimler.........................................             173             165             157             149
FCA.............................................             169             161             153             146
Ford............................................             167             159             151             144
General Motors..................................             166             158             151             143
Honda...........................................             163             155             147             140
Hyundai Kia-H...................................             165             157             149             142
Hyundai Kia-K...................................             164             156             149             142
JLR.............................................             174             166             158             150
Mazda...........................................             163             155             147             140
Mitsubishi......................................             151             143             136             130
Nissan..........................................             164             156             148             141
Subaru..........................................             160             152             145             138
Tesla...........................................             191             182             173             165
Toyota..........................................             162             154             147             140
Volvo...........................................             172             164             156             148
VWA.............................................             160             152             145             138
                                                 ---------------------------------------------------------------
    Total.......................................             165             157             149             142
----------------------------------------------------------------------------------------------------------------

                                             Table 32--Truck Targets
                                                 [CO2 gram/mile]
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW.............................................             219             208             198             188
Daimler.........................................             225             214             203             193
FCA.............................................             233             222             211             200
Ford............................................             246             234             222             211
General Motors..................................             252             239             228             216
Honda...........................................             215             205             195             185
Hyundai Kia-H...................................             214             203             193             183
Hyundai Kia-K...................................             217             206             196             186
JLR.............................................             221             210             199             190
Mazda...........................................             206             196             186             177
Mitsubishi......................................             194             184             175             166
Nissan..........................................             225             214             203             193
Subaru..........................................             197             187             178             169
Tesla...........................................  ..............  ..............  ..............  ..............
Toyota..........................................             227             216             205             195
Volvo...........................................             222             211             200             190
VWA.............................................             218             207             196             187
                                                 ---------------------------------------------------------------
    Total.......................................             232             221             210             199
----------------------------------------------------------------------------------------------------------------

                                        Table 33--Combined Fleet Targets
                                                 [CO2 gram/mile]
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW.............................................             187             178             169             161
Daimler.........................................             195             186             177             168
FCA.............................................             221             210             200             190
Ford............................................             215             205             195             185
General Motors..................................             215             204             195             185
Honda...........................................             185             176             167             159
Hyundai Kia-H...................................             168             160             152             145
Hyundai Kia-K...................................             177             169             161             153
JLR.............................................             211             200             190             181
Mazda...........................................             176             167             159             151
Mitsubishi......................................             168             160             152             145
Nissan..........................................             185             176             167             159
Subaru..........................................             187             178             169             161
Tesla...........................................             191             182             173             165
Toyota..........................................             194             185             176             167
Volvo...........................................             205             195             185             176
VWA.............................................             179             171             162             155
                                                 ---------------------------------------------------------------

[[Page 43772]]

 
    Total.......................................             198             189             180             171
----------------------------------------------------------------------------------------------------------------

    The modeled achieved CO2-equivalent (CO2e) 
levels for the proposed standards are shown in Table 34 for cars, Table 
35 for trucks, and Table 36 for the combined fleets. These values were 
produced by the modeling analysis and represent the projected 
certification emissions values for possible compliance approaches with 
the proposed standards for each manufacturer. These achieved values, 
shown as averages over the respective car, truck and combined fleets, 
include the 2-cycle tailpipe emissions based on the modeled application 
of emissions-reduction technologies minus the modeled application of 
off-cycle credit technologies and the full A/C efficiency credits. The 
values also reflect any application of the proposed advanced technology 
multipliers, up to the cap. Hybrid pickup truck incentive credits were 
not modeled (the CCEMS version used does not have this capability) and 
are therefore not included in the achieved values.
    Comparing the target and achieved values, it can be seen that some 
manufacturers are projected to have achieved values that are over 
target (higher emissions) on trucks, and under target (lower emissions) 
on cars, and vice versa for other manufacturers. This is a feature of 
the unlimited credit transfer provision, which results in a compliance 
determination that is based on the combined car and truck fleet credits 
rather than a separate determination of each fleet's compliance. The 
application of technologies is influenced by the relative cost-
effectiveness of technologies among each manufacturer's vehicles, which 
explains why different manufacturers exhibit different compliance 
approaches in the modeling results. For the combined fleet, the 
achieved values are typically close to, or slightly under the target 
values, which would represent the banking of credits that can be 
carried over into other model years. For all manufacturers, the total 
achieved values for MYs 2023 to 2026 are within -1 to +3 grams/mile of 
the total target values. This indicates that overall, the modeled fleet 
tracks the standards very closely from year-to-year. Note that an 
achieved value for a manufacturer's combined fleet that is above the 
target in a given model year does not indicate a likely failure to 
comply with the standards, since the model includes the GHG program 
credit banking provisions that allow credits from one year to be 
carried into another year.

                                          Table 34--Car Achieved Levels
                                                [CO2e gram/mile]
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW.............................................             173             168             168             131
Daimler.........................................             184             169             166             168
FCA.............................................             183             178             178             171
Ford............................................             168             160             159             151
General Motors..................................             152             136             133             132
Honda...........................................             161             161             161             130
Hyundai Kia-H...................................             162             147             146             145
Hyundai Kia-K...................................             138             134             134             137
JLR.............................................             217             162             158             165
Mazda...........................................             156             156             156             146
Mitsubishi......................................             136             136             129             129
Nissan..........................................             165             153             147             147
Subaru..........................................             193             193             193             174
Tesla...........................................             -20             -20             -20             -20
Toyota..........................................             161             143             135             133
Volvo...........................................             185             185             184             145
VWA.............................................             146             144             143             135
                                                 ---------------------------------------------------------------
    Total.......................................             161             150             147             141
----------------------------------------------------------------------------------------------------------------

                                         Table 35--Truck Achieved Levels
                                                [CO2e gram/mile]
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW.............................................             220             210             156             161
Daimler.........................................             206             206             151             126
FCA.............................................             218             217             217             207
Ford............................................             245             234             234             216
General Motors..................................             270             261             245             224
Honda...........................................             212             210             210             210
Hyundai Kia-H...................................             222             129             129             140
Hyundai Kia-K...................................             225             209             209             209
JLR.............................................             210             210             176             187
Mazda...........................................             177             177             177             176

[[Page 43773]]

 
Mitsubishi......................................             194             194             185             185
Nissan..........................................             220             218             198             192
Subaru..........................................             187             187             187             168
Tesla...........................................  ..............  ..............  ..............  ..............
Toyota..........................................             239             231             224             204
Volvo...........................................             181             180             176             183
VWA.............................................             240             200             173             122
                                                 ---------------------------------------------------------------
    Total.......................................             233             226             218             203
----------------------------------------------------------------------------------------------------------------

                                    Table 36--Combined Fleet Achieved Levels
                                                [CO2e gram/mile]
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW.............................................             192             184             163             143
Daimler.........................................             194             185             159             150
FCA.............................................             211             210             210             200
Ford............................................             215             205             205             190
General Motors..................................             220             208             197             185
Honda...........................................             183             181             182             164
Hyundai Kia-H...................................             166             146             145             145
Hyundai Kia-K...................................             160             153             153             156
JLR.............................................             212             200             172             182
Mazda...........................................             162             162             162             155
Mitsubishi......................................             159             160             152             152
Nissan..........................................             184             175             164             163
Subaru..........................................             189             189             189             170
Tesla...........................................             -20             -20             -20             -20
Toyota..........................................             199             186             179             168
Volvo...........................................             182             182             179             170
VWA.............................................             178             163             153             131
                                                 ---------------------------------------------------------------
    Total.......................................             197             188             183             172
----------------------------------------------------------------------------------------------------------------

2. Projected Compliance Costs per Vehicle
    EPA has performed an updated assessment of the estimated per 
vehicle costs for manufacturers to meet the proposed MY2023-2026 
standards. The car costs per vehicle from this analysis are shown in 
Table 37, followed by truck costs in Table 38 and combined fleet costs 
in Table 39.\119\
---------------------------------------------------------------------------

    \119\ As shown in Table 23, Tesla incurs nearly $400 in costs 
per vehicle despite being a pure electric vehicle maker (0 grams/
mile) and despite there being no upstream emissions accounting under 
the proposal. The costs shown for Tesla represent the costs of 15 
grams/mile of off-cycle credit.
---------------------------------------------------------------------------

    As shown in these tables, the combined cost for car and truck 
fleets, averaged over all manufacturers, increases from MY 2023 to MY 
2026 as the proposed standards become more stringent. The costs for 
trucks tend to be somewhat higher than for cars--many technology costs 
scale with engine and vehicle size--but it is important to note that 
the absolute emissions, and therefore emissions reductions, also tend 
to be higher for trucks. Projected costs for individual manufacturers 
vary based on the composition of vehicles produced. The estimated costs 
for California Framework Agreement manufacturers in MY 2026 range from 
approximately $500-$850 dollars per vehicle--because the proposed 
standards are more stringent than the Framework emission reduction 
targets--and fall within the wider cost range of non-Framework 
manufacturers. The estimated costs for Framework manufacturers are 
somewhat lower than the overall industry average costs of approximately 
$1,000 per vehicle in MY 2026.

                       Table 37--Car Costs per Vehicle Relative to the No Action Scenario
                                                 [2018 dollars]
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW *...........................................             $64             $40             $42            $254
Daimler.........................................              37             414             490             487
FCA.............................................             465             525             511             823
Ford *..........................................              22             234             228             458
General Motors..................................             662           1,351           1,354           1,512
Honda *.........................................              39              44              43             766
Hyundai Kia-H...................................             457             845             847             878

[[Page 43774]]

 
Hyundai Kia-K...................................             395             406             396             416
JLR.............................................            -510           1,075           1,076           1,006
Mazda...........................................             510             522             517             745
Mitsubishi......................................             870             860             993             985
Nissan..........................................             614             825             940             912
Subaru..........................................             403             397             392             710
Tesla...........................................             398             393             387             382
Toyota..........................................             470             822             958             979
Volvo *.........................................             212             210             222             211
VWA *...........................................             158             168             177             185
                                                 ---------------------------------------------------------------
    Total.......................................             383             643             682             846
----------------------------------------------------------------------------------------------------------------
* Framework Manufacturer.

                       Table 38--Truck Cost per Vehicle Relative to the No Action Scenario
                                                 [2018 dollars]
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW *...........................................            $270            $264          $1,080          $1,037
Daimler.........................................           1,641           1,582           2,964           4,233
FCA.............................................           1,074           1,022             974           1,423
Ford *..........................................              34             279             267             500
General Motors..................................             786             977           1,350           2,100
Honda *.........................................              25              64              63              62
Hyundai Kia-H...................................             398           3,370           3,170           2,995
Hyundai Kia-K...................................             435             482             475             468
JLR.............................................             752             740           2,140           2,007
Mazda...........................................             787             783             777             788
Mitsubishi......................................             440             434             599             592
Nissan..........................................             556             590             978           1,178
Subaru..........................................             415             410             404             808
Tesla...........................................               0               0               0               0
Toyota..........................................             440             590             763           1,081
Volvo *.........................................           1,193           1,140           1,040             997
VWA *...........................................              35           1,028           1,595           2,148
                                                 ---------------------------------------------------------------
    Total.......................................             546             682             855           1,232
----------------------------------------------------------------------------------------------------------------
* Framework Manufacturer.

                   Table 39--Fleet Average Cost per Vehicle Relative to the No Action Scenario
                                                 [2018 dollars]
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW *...........................................            $145            $129            $459            $566
Daimler.........................................             727             917           1,567           2,123
FCA.............................................             957             927             886           1,309
Ford *..........................................              29             261             252             485
General Motors..................................             733           1,138           1,353           1,854
Honda *.........................................              33              52              52             467
Hyundai Kia-H...................................             454           1,006             997           1,015
Hyundai Kia-K...................................             404             424             413             426
JLR.............................................             471             813           1,904           1,784
Mazda...........................................             591             599             595             758
Mitsubishi......................................             697             688             833             825
Nissan..........................................             595             746             954           1,005
Subaru..........................................             412             406             401             783
Tesla...........................................             398             393             387             382
Toyota..........................................             456             709             863           1,033
Volvo *.........................................             860             827             766             731
VWA *...........................................             116             456             656             853
                                                 ---------------------------------------------------------------
    Total.......................................             465             663             771           1,044
----------------------------------------------------------------------------------------------------------------
* Framework Manufacturer.

[[Page 43775]]

    Overall, EPA estimates the average costs of today's proposal at 
$1,044 per vehicle in MY2026 relative to meeting the No Action scenario 
in MY2026. As discussed in Section VII, there are benefits resulting 
from these costs including savings to consumers in the form of lower 
fuel costs.
3. Technology Penetration Rates
    In this section we discuss the projected new sales technology 
penetration rates from EPA's updated analysis for the proposed 
standards. Additional detail on this topic can be found in the DRIA. 
EPA's assessment for the proposal, consistent with past EPA 
assessments, shows that the proposed standards can largely be met with 
increased sales of advanced gasoline vehicle technologies, and 
relatively low penetration rates of electrified vehicle technology.
    Table 40, Table 41, and Table 42 show the EPA projected penetration 
rates of BEV+PHEV technology under today's proposal with the remaining 
share being traditional or advanced ICE technology. Values shown 
reflect absolute values of fleet penetration and are not increments 
from the No Action scenario or other standards. It is important to note 
that this is a projection and represents one out of many possible 
compliance pathways for the industry. The proposed standards are 
performance-based and do not mandate any specific technology for any 
manufacturer or any vehicles. As the proposed standards become more 
stringent over MYs 2023 to 2026, the projected penetration of 
electrified vehicles increases by approximately 4 percent over this 4-
year period (from 3.6 percent to 7.8 percent), reaching nearly 8 
percent of overall vehicle production in MY2026. While this is not an 
insignificant change, it is notable that we estimate that over 92 
percent of new light-duty vehicle sales will continue to utilize ICE 
technology under our updated analysis. This conclusion that ICE 
vehicles will continue to play an important role in meeting GHG 
standards is consistent with EPA's prior analyses for this timeframe.

                      Table 40--Car BEV+PHEV Penetration Rates Under the Proposed Standards
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW.............................................            8.4%            8.4%            8.4%           19.5%
Daimler.........................................             7.2             8.0             8.0             8.0
FCA.............................................             4.3             6.3             6.2             6.2
Ford............................................             7.7             9.3             9.6             9.6
General Motors..................................             6.1            12.2            12.1            13.3
Honda...........................................             0.1             0.1             0.1            12.7
Hyundai Kia-H...................................             0.3             3.4             3.8             3.8
Hyundai Kia-K...................................             9.2             9.2             9.1             9.1
JLR.............................................             0.5            11.2            11.2            11.2
Mazda...........................................             0.0             0.0             0.0             0.0
Mitsubishi......................................             0.0             0.0             0.0             0.0
Nissan..........................................             1.0             1.2             1.2             1.2
Subaru..........................................             0.0             0.0             0.0             0.0
Tesla...........................................           100.0           100.0           100.0           100.0
Toyota..........................................             2.6             4.0             4.4             4.4
Volvo...........................................             0.0             0.0             0.0            16.6
VWA.............................................            15.4            15.5            15.5            17.2
                                                 ---------------------------------------------------------------
    Total.......................................             4.6             6.3             6.4             8.4
----------------------------------------------------------------------------------------------------------------

                     Table 41--Truck BEV+PHEV Penetration Rates Under the Proposed Standards
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW.............................................            4.3%            4.3%            8.9%            8.9%
Daimler.........................................            28.8            28.8            38.3            39.6
FCA.............................................             5.6             5.6             5.6             5.6
Ford............................................             1.8             4.8             4.8             7.3
General Motors..................................             2.3             3.7             5.0            11.0
Honda...........................................             0.0             0.0             0.0             0.0
Hyundai Kia-H...................................             0.0            20.6            20.6            20.6
Hyundai Kia-K...................................             0.0             0.0             0.0             0.0
JLR.............................................            13.0            13.0            24.6            24.6
Mazda...........................................             0.0             0.0             0.0             0.0
Mitsubishi......................................             0.0             0.0             0.0             0.0
Nissan..........................................             0.0             0.0             3.7             5.9
Subaru..........................................             0.0             0.0             0.0             0.0
Tesla...........................................             0.0             0.0             0.0             0.0
Toyota..........................................             0.0             0.0             1.9             1.9
Volvo...........................................            15.6            15.6            17.3            17.3
VWA.............................................             1.2            20.8            20.8            39.5
                                                 ---------------------------------------------------------------
    Total.......................................             2.6             4.0             5.1             7.2
----------------------------------------------------------------------------------------------------------------

                     Table 42--Fleet BEV+PHEV Penetration Rates Under the Proposed Standards
----------------------------------------------------------------------------------------------------------------
                                                       2023            2024            2025            2026
----------------------------------------------------------------------------------------------------------------
BMW.............................................            6.8%            6.8%            8.6%           15.2%

[[Page 43776]]

 
Daimler.........................................            16.5            17.0            21.2            21.8
FCA.............................................             5.3             5.7             5.7             5.7
Ford............................................             4.1             6.5             6.7             8.2
General Motors..................................             3.9             7.4             8.0            12.0
Honda...........................................             0.1             0.1             0.1             7.3
Hyundai Kia-H...................................             0.2             4.5             4.9             4.9
Hyundai Kia-K...................................             6.9             6.9             6.8             6.8
JLR.............................................            10.2            12.6            21.7            21.7
Mazda...........................................             0.0             0.0             0.0             0.0
Mitsubishi......................................             0.0             0.0             0.0             0.0
Nissan..........................................             0.6             0.8             2.1             2.8
Subaru..........................................             0.0             0.0             0.0             0.0
Tesla...........................................           100.0           100.0           100.0           100.0
Toyota..........................................             1.3             2.0             3.1             3.1
Volvo...........................................            10.3            10.3            11.5            17.0
VWA.............................................            10.7            17.3            17.3            24.7
                                                 ---------------------------------------------------------------
    Total.......................................             3.6             5.1             5.8             7.8
----------------------------------------------------------------------------------------------------------------

C. Are the proposed standards feasible?

    The proposed standards are based on the extensive light-duty GHG 
technical analytical record developed over the past dozen years, as 
represented by the EPA supporting analyses for the 2010 and 2012 final 
rules, the Mid-Term Evaluation (including the Draft TAR, Proposed 
Determination and Final Determinations), as well as the updated 
analysis for this proposed rule and the supporting analysis for the 
SAFE rule.\120\ Our conclusion that the proposed program is 
technologically feasible is based in part on a projection that the 
standards will be met using the same advances in light-duty vehicle 
engine technologies, transmission technologies, electric drive systems, 
aerodynamics, tires, and vehicle mass reduction that have gradually 
entered the light-duty vehicle fleet over the past decade and that are 
already in place in today's vehicles. This conclusion is also supported 
by the analysis performed by NHTSA that served as the basis for the 
SAFE final rule. In the SAFE final rule, the NHTSA analysis showed that 
the 2012 CO2 standards could be met primarily with 
improvements in gasoline vehicle and hybrid technology and with only 6 
percent penetration of EV+PHEV, which is very similar to today's 
projection.\121\ The feasibility of the proposed standards does not 
rely on dramatically increased penetration of electric vehicles into 
the fleet during the 2023-2026 model years. Our updated analysis 
projects that the proposed standards can be met with a gradually 
increasing market share of EVs and PHEVs up to approximately 8 percent 
by MY 2026 (see Section III.B.3 of this preamble and the following 
paragraph).
---------------------------------------------------------------------------

    \120\ Although the MTE 2018 Revised Final Determination 
``withdrew'' the 2017 Final Determination, the D.C. Circuit Court 
has noted that EPA did ``not erase[ ] the Draft Technical Assessment 
Report, Technical Support Document, or any of the other prior 
evidence [EPA] collected.'' California v. EPA, 940 F.3d 1342, 1351 
(D.C. Cir. 2019).
    \121\ See the SAFE Final Rule preamble: ``The levels of 
electrified vehicle technologies projected in this final rule to 
meet the baseline Alternative (the previous GHG standards) differ 
slightly from those projected in the 2017 Final Determination. In 
this final rule, EPA projects a combined strong and mild hybrid 
penetration of 16 percent (compared to 20 percent in the 2017 Final 
Determination), with the share of mild hybrids somewhat lower (7 
percent compared to 18 percent in the 2017 Final Determination) and 
the share of strong hybrids higher (9 percent compared to 2 percent 
in the 2017 Final Determination). EPA projects a total level of 
plug-in vehicles of 6 percent, similar to the 5 percent total 
projected in the 2017 Final Determination, but with a slightly 
different mix of plug-in hybrid electric vehicles (0.4 percent 
compared to 2 percent in the 2017 Final Determination) and dedicated 
electric vehicles (5.7 percent compared to 3 percent in the 2017 
Final Determination). 85 FR 25107, April 30, 2020.
---------------------------------------------------------------------------

    The percentage share of specific MY2015 to MY2020 engine and 
transmission technologies are summarized from EPA Automotive Trends 
Report data within Chapter 2.2 of the DRIA. The introduction of GHG 
reducing technologies has been steadily increasing within the light-
duty vehicle fleet. As of MY2020, more than half of light-duty gasoline 
spark ignition engines now use direct injection (GDI) engines and more 
than a third are turbocharged. Nearly half of all light-duty vehicles 
have planetary automatic transmissions with 8 or more gear ratios, and 
one-quarter are using continuously variable transmissions (CVT). The 
sales of vehicles with 12V start/stop systems has increased from 
approximately 7 percent to approximately 42 percent between MY2015 and 
MY2020. Significant levels of powertrain electrification of all types 
(HEV, PHEV, and EV) have increased more than 3-fold from MY2015 to 
MY2020. In MY2015, hybrid electric vehicles accounted for approximately 
2.4 percent of vehicle sales, which increased to approximately 6.5 
percent of vehicle sales in MY2020. Sales of plug-in hybrid electric 
vehicles (PHEVs) and battery electric vehicles (EVs) together comprised 
0.7 percent of vehicle sales in MY2015 and increased to about 2 percent 
of sales for MY2019.\122\ The pace of introduction of new EV and PHEV 
models is rapidly increasing. For example, the number of EV and PHEV 
models available for sale in the U.S. has more than doubled from about 
24 in MY 2015 to about 60 in MY 2021.\123\ Even in the absence of more 
stringent standards, manufacturers have indicated that the number of EV 
and PHEV models will increase to more than 80 by MY 2023, with many 
more expected to reach production before the end of the decade.\124\ 
Although our analysis projects that approximately 8 percent of new 
vehicles meeting the MY 2026 proposed standards would be EVs or PHEVs, 
it is possible that an even higher percentage may be electrified during 
the time period of our proposed MY 2023-2026 standards, when taking 
into account the pace at which new EV and PHEV models are being 
announced for introduction by automakers, under

[[Page 43777]]

current policy, over the next three to five years.\125\
---------------------------------------------------------------------------

    \122\ ``The 2020 EPA Automotive Trends Report, Greenhouse Gas 
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003, January 2021.
    \123\ Fueleconomy.gov, 2015 Fuel Economy Guide and 2021 Fuel 
Economy Guide.
    \124\ Environmental Defense Fund and M.J. Bradley & Associates, 
``Electric Vehicle Market Status--Update, Manufacturer Commitments 
to Future Electric Mobility in the U.S. and Worldwide,'' April 2021.
    \125\ Rhodium Group, ``Pathways to Build Back Better: Investing 
in Transportation Decarbonization,'' May 13, 2021.
---------------------------------------------------------------------------

    EPA believes that the proposed program is technologically feasible 
based on our projection that the standards can be met largely with the 
kinds of advanced gasoline vehicle technologies already in place in 
vehicles within today's new vehicle fleet and relies on a penetration 
of plug-in electric vehicles into the fleet during the 2023-2026 model 
years that is commensurate with current trends in the industry. This 
conclusion, which is supported by EPA's updated analysis, is consistent 
with EPA's past analyses of standards similar to those proposed in this 
notice, see Section III.B and Chapter 2 of the DRIA. The analysis 
confirms EPA's previous conclusions that a wide variety of emission 
reducing technologies are already available at reasonable costs for 
manufacturers to incorporate into their vehicles within the timeframe 
of the proposed standards.

D. How did EPA consider the two alternatives in choosing the proposed 
program?

    In Section II.C, we described two alternative stringency levels 
that we considered in developing the level of stringency of the 
proposed program--Alternative 1 (less stringent than the proposed 
program) and Alternative 2 (more stringent). All three potential 
programs would incorporate year-over-year increases in GHG stringency, 
with varying starting stringencies in MY2023, and varying ending 
stringencies in MY2026, and with fairly linear increases in stringency 
between MY2023 and 2026 that would essentially follow the same slope as 
the 2012 program. All three potential programs would also result, by 
MY2026, in standards at least as stringent as the last year (MY2025) of 
the 2012 program. See Figure 8 and Table 16 in Section II.C.
    In determining the stringency of the proposed standards, our 
primary focus was on the first and last model years of the proposed 
program, 2023 and 2026. Some stakeholders have encouraged EPA to 
propose standards that would closely follow the stringency levels of 
the California Framework Agreements, or that would represent less 
stringent standards (between the California Framework emission 
reduction targets and the relaxed standards of the SAFE rule). In 
Section VI below, we discuss why we believe the auto industry's 
technological achievements over the past decade, and the availability 
of a range of existing and proposed compliance flexibilities, puts 
automakers in a strong position to meet the proposed revised standards 
for model years 2023 through 2026 on a year-by-year trajectory close to 
the standards in the 2012 program. Given our conclusion that standards 
more stringent than those in Alternative 1 are clearly feasible 
considering available technology and compliance costs, and in light of 
the critical national need to quickly and substantially reduce light-
duty GHG emissions, we believe at this time that a program of the 
stringency of Alternative 1 (and any less stringent alternative) would 
not be appropriate given EPA's consideration of the public health and 
welfare benefits of potential standards. Nonetheless, we invite comment 
on Alternative 1 and may consider it in determining the standards for 
the final rule.
    Similarly, we considered the implications of a more stringent 
program in Alternative 2. In this alternative program, the standards 
would more quickly return to the 2012 program's trajectory, in model 
year 2023. While we believe, given the combination of factors discussed 
in Section VI, reaching the 2012 program's levels in 2023 may be 
feasible industrywide, we are proposing a slightly less stringent 
standard for that first year to provide a more gradual transition to 
the 2012 trajectory.
    All three alternative programs after MY2023 would essentially 
follow the same slope of increasing year-over-year stringency of the 
2012 program. For Alternative 1, this would mean that the standards 
would reach the model year 2025 level of the 2012 rule (the final 
increase in stringency of the 2012 program) in model year 2026, 
resulting in a less stringent program compared to the 2012 rule until 
MY2026. Chapter 5.1.1.2 of the DRIA shows the associated lower amount 
of GHG reductions achieved under Alternative 1 compared to the 
proposal. Again, given the urgent need for GHG reductions to address 
the climate challenge, we believe Alternative 1 does not go far enough 
and would be inappropriate, as discussed above.
    For Alternative 2, the standards by MY2025 would nearly match the 
stringency level of the MY2025 standards in the 2012 rule and would 
continue to increase in stringency for one additional year in MY2026. 
Consistent with EPA's previous discussions regarding feasibility, 
compliance costs, and lead time, we believe that Alternative 2 may be 
feasible. Several arguments can be made in support of Alternative 2 
that are similar to those that support the proposed standards. In terms 
of technology penetrations, Alternative 2 projects that nearly 10 
percent of the fleet would need to be made up of EV/PHEVs compared with 
about 8 percent for the proposed standards. See Table 4-23, and Table 
4-28 of the DRIA. Several automakers have made public announcements 
regarding electrification of the light-duty fleet, particularly 
regarding the latter years of the proposed program. These electrified 
products will provide a significant contribution to the ability of 
these manufacturers to comply with more stringent standards. However, 
EPA recognizes that the additional penetration of electrification by 
2026 could be challenging for any manufacturers that are not currently 
investing in advanced technologies, such as EVs, for this timeframe, 
although with additional investment and product development, or greater 
reliance on the emissions ABT program including credit trading, this 
level of stringency may be achievable. EPA also recognizes Alternative 
2 is more stringent than the proposal in MY2023, and EPA believes a 
lower level of stringency increase for 2023 may be appropriate taking 
into consideration lead time.
    Projected costs and technology penetrations associated with 
Alternatives 1 and 2 are available in Chapter 4 of the DRIA.
    We invite comment on our assessment of Alternatives.

IV. How would this proposal reduce GHG emissions and their associated 
effects?

A. Impact on GHG Emissions

    EPA used the CCEMS to estimate GHG emissions inventories including 
tailpipe emissions from light-duty cars and trucks and the upstream 
emissions associated with the fuels used to power those vehicles (both 
at the refinery and the electricity generating unit). The upstream 
emission factors used in the modeling are identical to those used for 
the SAFE FRM and were generated using the DOE/Argonne GREET model as 
described in the SAFE FRM (See DRIA Chapter 5.1.1, referencing the SAFE 
FRM).
    The resultant annual GHG inventory estimates are shown in Table 43 
for the calendar years 2023 through 2050. The table shows our proposed 
program would result in net GHG reductions compared to the No Action 
scenario. The CO2, CH4 and N2O 
emissions

[[Page 43778]]

reductions from the proposed program total 2,205 MMT, 2.7 MMT and 0.072 
MMT, respectively, by 2050.

                              Table 43--Estimated GHG Impacts of the Proposed Standards Relative to the No Action Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Emission impacts relative to no action               Percent change from no action
                                                         -----------------------------------------------------------------------------------------------
                          Year                             CO2 (million
                                                           metric tons)     CH4 (metric     N2O (metric       CO2 (%)         CH4 (%)         N2O (%)
                                                                               tons)           tons)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023....................................................              -4          -4,821            -105               0               0               0
2024....................................................              -7          -8,560            -200               0               0               0
2025....................................................             -11         -13,412            -330              -1              -1              -1
2026....................................................             -17         -21,154            -534              -1              -1              -1
2027....................................................             -25         -30,702            -785              -2              -2              -1
2028....................................................             -33         -41,019          -1,051              -2              -2              -2
2029....................................................             -42         -51,607          -1,325              -3              -3              -2
2030....................................................             -50         -62,014          -1,591              -4              -3              -3
2031....................................................             -58         -72,138          -1,847              -4              -4              -3
2032....................................................             -66         -81,872          -2,096              -5              -5              -4
2033....................................................             -74         -91,079          -2,332              -6              -5              -4
2034....................................................             -81         -99,597          -2,555              -6              -6              -5
2035....................................................             -86        -106,981          -2,739              -7              -6              -5
2036....................................................             -92        -113,813          -2,915              -7              -7              -6
2037....................................................             -97        -119,952          -3,090              -8              -7              -6
2038....................................................            -101        -125,292          -3,245              -8              -7              -6
2039....................................................            -105        -129,675          -3,368              -9              -8              -7
2040....................................................            -108        -133,346          -3,474              -9              -8              -7
2041....................................................            -110        -136,405          -3,564              -9              -8              -7
2042....................................................            -112        -138,441          -3,630              -9              -8              -7
2043....................................................            -113        -140,060          -3,693              -9              -9              -7
2044....................................................            -114        -141,230          -3,745             -10              -9              -8
2045....................................................            -115        -141,929          -3,790             -10              -9              -8
2046....................................................            -116        -142,314          -3,826             -10              -9              -8
2047....................................................            -116        -142,870          -3,872             -10              -9              -8
2048....................................................            -116        -142,942          -3,901             -10              -9              -8
2049....................................................            -117        -143,167          -3,938             -10              -9              -8
2050....................................................            -117        -143,681          -4,001             -10              -9              -8
                                                         -----------------------------------------------------------------------------------------------
    Sum.................................................          -2,205      -2,720,073         -71,543              -6              -6              -5
--------------------------------------------------------------------------------------------------------------------------------------------------------

B. Climate Change Impacts From GHG Emissions

    Elevated concentrations of GHGs have been warming the planet, 
leading to changes in the Earth's climate including changes in the 
frequency and intensity of heat waves, precipitation, and extreme 
weather events, rising seas, and retreating snow and ice. The changes 
taking place in the atmosphere as a result of the well-documented 
buildup of GHGs due to human activities are changing the climate at a 
pace and in a way that threatens human health, society, and the natural 
environment. While EPA is not making any new scientific or factual 
findings with regard to the well-documented impact of GHG emissions on 
public health and welfare in support of this proposal, EPA is providing 
some scientific background on climate change to offer additional 
context for this rulemaking and to increase the public's understanding 
of the environmental impacts of GHGs.
    Extensive additional information on climate change is available in 
the scientific assessments and the EPA documents that are briefly 
described in this section, as well as in the technical and scientific 
information supporting them. One of those documents is EPA's 2009 
Endangerment and Cause or Contribute Findings for Greenhouse Gases 
Under Section 202(a) of the CAA (74 FR 66496, December 15, 2009). In 
the 2009 Endangerment Finding, the Administrator found under section 
202(a) of the CAA that elevated atmospheric concentrations of six key 
well-mixed GHGs--CO2, methane (CH4), nitrous 
oxide (N2O), HFCs, perfluorocarbons (PFCs), and sulfur 
hexafluoride (SF6)--``may reasonably be anticipated to 
endanger the public health and welfare of current and future 
generations'' (74 FR 66523). The 2009 Endangerment Finding, together 
with the extensive scientific and technical evidence in the supporting 
record, documented that climate change caused by human emissions of 
GHGs (including HFCs) threatens the public health of the U.S. 
population. It explained that by raising average temperatures, climate 
change increases the likelihood of heat waves, which are associated 
with increased deaths and illnesses (74 FR 66497). While climate change 
also increases the likelihood of reductions in cold-related mortality, 
evidence indicates that the increases in heat mortality will be larger 
than the decreases in cold mortality in the United States (74 FR 
66525). The 2009 Endangerment Finding further explained that compared 
with a future without climate change, climate change is expected to 
increase tropospheric ozone pollution over broad areas of the United 
States, including in the largest metropolitan areas with the worst 
tropospheric ozone problems, and thereby increase the risk of adverse 
effects on public health (74 FR 66525). Climate change is also expected 
to cause more intense hurricanes and more frequent and intense storms 
of other types and heavy precipitation, with impacts on other areas of 
public health, such as the potential for increased deaths, injuries, 
infectious and waterborne diseases, and stress-related disorders (74 FR 
66525). Children, the elderly, and the poor are among the most 
vulnerable to these climate-related health effects (74 FR 66498).

[[Page 43779]]

    The 2009 Endangerment Finding also documented, together with the 
extensive scientific and technical evidence in the supporting record, 
that climate change touches nearly every aspect of public welfare \126\ 
in the United States with resulting economic costs, including: Changes 
in water supply and quality due to changes in drought and extreme 
rainfall events; increased risk of storm surge and flooding in coastal 
areas and land loss due to inundation; increases in peak electricity 
demand and risks to electricity infrastructure; and the potential for 
significant agricultural disruptions and crop failures (though offset 
to some extent by carbon fertilization). These impacts are also global 
and may exacerbate problems outside the United States that raise 
humanitarian, trade, and national security issues for the United States 
(74 FR 66530).
---------------------------------------------------------------------------

    \126\ The CAA states in section 302(h) that ``[a]ll language 
referring to effects on welfare includes, but is not limited to, 
effects on soils, water, crops, vegetation, manmade materials, 
animals, wildlife, weather, visibility, and climate, damage to and 
deterioration of property, and hazards to transportation, as well as 
effects on economic values and on personal comfort and well-being, 
whether caused by transformation, conversion, or combination with 
other air pollutants.'' 42 U.S.C. 7602(h).
---------------------------------------------------------------------------

    In 2016, the Administrator similarly issued Endangerment and Cause 
or Contribute Findings for greenhouse gas emissions from aircraft under 
section 231(a)(2)(A) of the CAA (81 FR 54422, August 15, 2016). In the 
2016 Endangerment Finding, the Administrator found that the body of 
scientific evidence amassed in the record for the 2009 Endangerment 
Finding compellingly supported a similar endangerment finding under CAA 
section 231(a)(2)(A), and also found that the science assessments 
released between the 2009 and the 2016 Findings ``strengthen and 
further support the judgment that GHGs in the atmosphere may reasonably 
be anticipated to endanger the public health and welfare of current and 
future generations'' (81 FR 54424).
    Since the 2016 Endangerment Finding, the climate has continued to 
change, with new observational records being set for several climate 
indicators such as global average surface temperatures, GHG 
concentrations, and sea level rise. Additionally, major scientific 
assessments continue to be released that further advance our 
understanding of the climate system and the impacts that GHGs have on 
public health and welfare both for current and future generations.
    These updated observations and projections document the rapid rate 
of current and future climate change both globally and in the United 
States.127 128 129 130
---------------------------------------------------------------------------

    \127\ USGCRP, 2018: Impacts, Risks, and Adaptation in the United 
States: Fourth National Climate Assessment, Volume II [Reidmiller, 
D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. 
Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research 
Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018. 
https://nca2018.globalchange.gov.
    \128\ Roy, J., P. Tschakert, H. Waisman, S. Abdul Halim, P. 
Antwi-Agyei, P. Dasgupta, B. Hayward, M. Kanninen, D. Liverman, C. 
Okereke, P.F. Pinho, K. Riahi, and A.G. Suarez Rodriguez, 2018: 
Sustainable Development, Poverty Eradication and Reducing 
Inequalities. In: Global Warming of 1.5[deg]C. An IPCC Special 
Report on the impacts of global warming of 1.5 [deg]C above pre-
industrial levels and related global greenhouse gas emission 
pathways, in the context of strengthening the global response to the 
threat of climate change, sustainable development, and efforts to 
eradicate poverty [Masson-Delmotte, V., P. Zhai, H.-O. P[ouml]rtner, 
D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. Moufouma-Okia, C. 
P[eacute]an, R. Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X. 
Zhou, M.I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, and T. 
Waterfield (eds.)]. In Press. https://www.ipcc.ch/sr15/chapter/chapter-5.
    \129\ National Academies of Sciences, Engineering, and Medicine. 
2019. Climate Change and Ecosystems. Washington, DC: The National 
Academies Press. https://doi.org/10.17226/25504.
    \130\ NOAA National Centers for Environmental Information, State 
of the Climate: Global Climate Report for Annual 2020, published 
online January 2021, retrieved on February 10, 2021, from https://www.ncdc.noaa.gov/sotc/global/202013.
---------------------------------------------------------------------------

C. Global Climate Impacts and Benefits Associated With the Proposal's 
GHG Emissions Reductions

    Transportation is the largest source of GHG emissions in the United 
States, making up 29 percent of all emissions. Within the 
transportation sector, light-duty vehicles are the largest contributor, 
58 percent, to transportation GHG emissions in the U.S, and 17 percent 
of all emissions.\131\ Reducing GHG emissions, including the four GHGs 
affected by the proposed program, will contribute toward the goal of 
holding the increase in the global average temperature to well below 2 
[deg]C above pre-industrial levels, and subsequently reducing the 
probability of severe climate change related impacts including heat 
waves, drought, sea level rise, extreme climate and weather events, 
coastal flooding, and wildfires. While EPA did not conduct modeling to 
specifically quantify changes in climate impacts resulting from this 
proposal in terms of avoided temperature change or sea-level rise, we 
did quantify the climate benefits by monetizing the emission reductions 
through the application of the social cost of greenhouse gases (SC-
GHGs), as described in Section VII.D.
---------------------------------------------------------------------------

    \131\ Inventory of U.S. Greenhouse Gas Emissions and Sinks: 
1990-2019 (EPA-430-R-21-005, published April 2021).
---------------------------------------------------------------------------

V. How would the proposal impact non-GHG emissions and their associated 
effects?

A. Impact on Non-GHG Emissions

    The model runs that EPA conducted estimated the inventories of non-
GHG air pollutants resulting from tailpipe emissions from light-duty 
cars and trucks, and the upstream emissions associated with the fuels 
used to power those vehicles (both at the refinery and the electricity 
generating unit). The tailpipe emissions of PM2.5, 
NOX, VOCs, CO and SO2 are estimated using 
emission factors from EPA's Midterm model. The emission factors used 
are identical to those used in the SAFE FRM. The upstream emissions are 
then calculated using emission factors applied to the gallons of liquid 
fuels projected to be consumed and the kilowatt hours of electricity 
projected to be consumed. The upstream emission factors used in the 
modeling are identical to those used for the SAFE FRM and were 
generated using the DOE/Argonne GREET model as described in the SAFE 
FRM.
    On the whole, the proposed standards reduce non-GHG emissions. 
Table 44 presents the annual tailpipe and upstream inventory impacts 
for years 2023 through 2050 and Table 45 presents the net annual 
inventory impacts for those same years. Specifically, we project 
reductions in emissions of non-GHG pollutants from upstream sources, 
except for SO2. For tailpipe emissions we project initial 
increases from most non-GHG pollutants, except SO2, followed 
by decreases in all non-GHG pollutants over time. The increases in non-
GHG tailpipe emissions are due to increased driving, and the increases 
in upstream SO2 are due to increased EGU emissions.

[[Page 43780]]

                        Table 44--Estimated Non-GHG Emission Impacts of the Proposed Standards Relative to the No Action Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Upstream (U.S. tons)                              Tailpipe emissions (U.S. tons)
                   Year                   --------------------------------------------------------------------------------------------------------------
                                             PM2.5       NOX        SO2        VOC         CO       PM2.5       NOX        SO2        VOC         CO
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023.....................................        -56       -628        -36     -1,211       -334         17      1,037        -24      1,345      12,884
2024.....................................        -97     -1,040        282     -2,245       -539         37      2,385        -45      3,255      29,814
2025.....................................       -150     -1,570        699     -3,595       -802         50      3,270        -72      4,501      41,380
2026.....................................       -236     -2,454      1,183     -5,699     -1,251         58      4,032       -114      5,583      50,655
2027.....................................       -342     -3,546      1,730     -8,279     -1,807         57      4,356       -166      6,183      52,764
2028.....................................       -457     -4,747      2,167    -11,023     -2,429         40      4,010       -220      5,817      43,400
2029.....................................       -575     -5,973      2,611    -13,840     -3,065         24      3,656       -276      5,491      34,336
2030.....................................       -690     -7,182      2,963    -16,588     -3,699          5      3,072       -331      4,889      21,673
2031.....................................       -806     -8,419      3,094    -19,228     -4,342        -16      2,359       -383      4,105       7,504
2032.....................................       -917     -9,601      3,248    -21,779     -4,952        -41      1,506       -433      3,137      -8,754
2033.....................................     -1,023    -10,726      3,340    -24,183     -5,533        -70        573       -480      2,048     -26,420
2034.....................................     -1,121    -11,756      3,468    -26,425     -6,058       -101       -401       -525        904     -44,195
2035.....................................     -1,207    -12,685      3,364    -28,315     -6,542       -128     -1,265       -561       -116     -59,229
2036.....................................     -1,286    -13,520      3,349    -30,084     -6,969       -156     -2,094       -596     -1,085     -74,202
2037.....................................     -1,355    -14,232      3,506    -31,727     -7,319       -188     -2,951       -629     -2,088     -90,292
2038.....................................     -1,416    -14,846      3,646    -33,163     -7,616       -219     -3,746       -657     -3,021    -105,517
2039.....................................     -1,466    -15,374      3,601    -34,301     -7,878       -246     -4,394       -679     -3,809    -117,461
2040.....................................     -1,508    -15,804      3,594    -35,264     -8,085       -272     -4,963       -699     -4,502    -127,860
2041.....................................     -1,544    -16,174      3,571    -36,067     -8,264       -295     -5,463       -714     -5,091    -138,174
2042.....................................     -1,569    -16,411      3,581    -36,619     -8,371       -316     -5,901       -726     -5,600    -147,394
2043.....................................     -1,588    -16,573      3,706    -37,098     -8,429       -336     -6,304       -735     -6,065    -156,119
2044.....................................     -1,602    -16,679      3,831    -37,464     -8,458       -356     -6,662       -743     -6,472    -164,134
2045.....................................     -1,610    -16,714      4,022    -37,729     -8,443       -374     -6,983       -749     -6,834    -171,092
2046.....................................     -1,615    -16,711      4,249    -37,913     -8,381       -390     -7,269       -753     -7,153    -177,417
2047.....................................     -1,622    -16,708      4,571    -38,172     -8,310       -408     -7,590       -759     -7,507    -185,213
2048.....................................     -1,624    -16,659      4,821    -38,284     -8,219       -424     -7,855       -762     -7,801    -191,667
2049.....................................     -1,627    -16,620      5,110    -38,450     -8,129       -440     -8,138       -766     -8,100    -198,645
2050.....................................     -1,632    -16,556      5,686    -38,781     -8,000       -460     -8,501       -774     -8,475    -207,606
--------------------------------------------------------------------------------------------------------------------------------------------------------

                        Table 45--Estimated Non-GHG Emission Impacts of the Proposed Standards Relative to the No Action Scenario
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            Upstream (U.S. tons)                               Tailpipe emissions (U.S. tons)
                                          --------------------------------------------------------------------------------------------------------------
                   Year                                                                            PM2.5 (%)   NOX (%)    SO2 (%)
                                             PM2.5       NOX        SO2        VOC         CO                                        VOC (%)     CO (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023.....................................        -40        409        -59        134      12,550          0          0          0          0          0
2024.....................................        -60      1,345        237      1,010      29,275          0          0          0          0          0
2025.....................................       -101      1,700        627        907      40,578          0          0          0          0          0
2026.....................................       -179      1,578      1,068       -116      49,405          0          0          1          0          0
2027.....................................       -285        810      1,565     -2,096      50,956         -1          0          1          0          0
2028.....................................       -417       -737      1,947     -5,207      40,971         -1          0          1          0          0
2029.....................................       -550     -2,316      2,334     -8,349      31,271         -1          0          1         -1          0
2030.....................................       -685     -4,109      2,632    -11,699      17,974         -2         -1          1         -1          0
2031.....................................       -822     -6,060      2,711    -15,123       3,162         -2         -1          1         -2          0
2032.....................................       -959     -8,095      2,815    -18,642     -13,706         -3         -1          1         -2          0
2033.....................................     -1,093    -10,153      2,860    -22,136     -31,953         -3         -1          1         -3          0
2034.....................................     -1,222    -12,156      2,943    -25,522     -50,254         -3         -2          1         -3         -1
2035.....................................     -1,335    -13,949      2,802    -28,431     -65,771         -4         -2          1         -4         -1
2036.....................................     -1,442    -15,614      2,753    -31,169     -81,171         -4         -3          1         -4         -1
2037.....................................     -1,543    -17,183      2,877    -33,815     -97,611         -4         -3          1         -5         -1
2038.....................................     -1,635    -18,592      2,989    -36,184    -113,133         -5         -3          2         -5         -2
2039.....................................     -1,712    -19,769      2,921    -38,110    -125,338         -5         -4          1         -6         -2
2040.....................................     -1,779    -20,767      2,895    -39,766    -135,945         -5         -4          1         -6         -2
2041.....................................     -1,839    -21,637      2,857    -41,158    -146,438         -5         -4          1         -7         -2
2042.....................................     -1,885    -22,312      2,856    -42,219    -155,765         -6         -5          1         -7         -3
2043.....................................     -1,924    -22,877      2,971    -43,164    -164,548         -6         -5          2         -7         -3
2044.....................................     -1,958    -23,341      3,088    -43,935    -172,591         -6         -5          2         -8         -3
2045.....................................     -1,984    -23,697      3,273    -44,563    -179,535         -6         -5          2         -8         -3
2046.....................................     -2,005    -23,979      3,496    -45,066    -185,798         -6         -5          2         -8         -3
2047.....................................     -2,031    -24,298      3,812    -45,678    -193,523         -6         -5          2         -8         -4
2048.....................................     -2,047    -24,515      4,060    -46,086    -199,886         -6         -6          2         -9         -4
2049.....................................     -2,067    -24,758      4,344    -46,550    -206,774         -7         -6          2         -9         -4
2050.....................................     -2,093    -25,057      4,912    -47,256    -215,607         -7         -6          2         -9         -4
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 43781]]

B. Health and Environmental Effects Associated With Exposure to Non-GHG 
Pollutants Impacted by the Proposed Standards

    Along with reducing GHG emissions, these proposed standards would 
also have an impact on non-GHG (criteria and air toxic pollutant) 
emissions from vehicles and non-GHG emissions that occur during the 
extraction, transport, distribution and refining of fuel and from power 
plants. The non-GHG emissions that would be impacted by the proposed 
standards contribute, directly or via secondary formation, to 
concentrations of pollutants in the air which affect human and 
environmental health. These pollutants include particulate matter, 
ozone, nitrogen oxides, sulfur oxides, carbon monoxide and air toxics. 
Chapter 7 of the DRIA includes more detailed information about the 
health and environmental effects associated with exposure to these non-
GHG pollutants. This includes pollutant specific health effect 
information, discussion of exposure to the mixture of traffic-related 
pollutants in the near road environment, and effects of particulate 
matter and gases on visibility, effects of ozone on ecosystems, and the 
effect of deposition of pollutants from the atmosphere to the surface.

C. Air Quality Impacts of Non-GHG Pollutants

    Photochemical air quality modeling is necessary to accurately 
project levels of most criteria and air toxic pollutants, including 
ozone and PM. Air quality models use mathematical and numerical 
techniques to simulate the physical and chemical processes that affect 
air pollutants as they disperse and react in the atmosphere. Based on 
inputs of meteorological data and source information, these models are 
designed to characterize primary pollutants that are emitted directly 
into the atmosphere and secondary pollutants that are formed through 
complex chemical reactions within the atmosphere. Photochemical air 
quality models have become widely recognized and routinely utilized 
tools in regulatory analysis for assessing the impacts of control 
strategies.
    Section V.A of the preamble presents projections of the changes in 
non-GHG emissions due to the proposed standards. Section VII.E 
describes the monetized non-GHG health impacts of this proposal which 
are estimated using a reduced-form benefit-per-ton approach. The 
atmospheric chemistry related to ambient concentrations of 
PM2.5, ozone and air toxics is very complex, and making 
predictions based solely on emissions changes is extremely difficult. 
However, based on the magnitude of the emissions changes predicted to 
result from the proposed standards, we expect that there will be very 
small changes in ambient air quality in most places. The changes in 
tailpipe and upstream non-GHG emissions that were inputs to the air 
quality modeling analysis for the 2012 rule were larger than the 
changes in non-GHG emissions projected for this proposal. The air 
quality modeling for the 2012 rule projected very small impacts across 
most of the country, with the direction of the small impact (increase 
or decrease) dependent on location.\132\ For the next phase of LD GHG 
standards to be considered in a separate, future rulemaking for model 
years 2027 and beyond, we expect that impacts may be considerably 
larger and are considering how best to project air quality impacts from 
changes in non-GHG emissions.
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    \132\ Insert 2012 rule RIA ref, EPA-420-R-12-016.
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VI. Basis for the Proposed GHG Standards Under CAA Section 202(a)

    In this section, EPA discusses the basis for our proposed standards 
under our authority in CAA section 202(a), how we are balancing the 
factors considered in our assessment that the proposed standards are 
appropriate, and how this balancing of factors differs from that used 
in the SAFE rule. This section draws from information presented 
elsewhere in this preamble, including EPA's statutory authority in 
Section II, our presentation of compliance costs and technology 
penetrations in Section III, GHG emissions impacts in Section IV, non-
GHG emissions impacts in Section V, and the total costs and benefits of 
the proposal in Section VII.
    EPA has considered the technological feasibility and cost of the 
proposed standards, available lead time for manufacturers, and other 
relevant factors under section 202(a) of the CAA. Based on our 
analyses, discussed in greater detail in other sections of this 
preamble and in Chapter 2 of the DRIA, we believe that the proposed 
standards are reasonable and appropriate. Greater reductions in GHG 
emissions from light duty vehicles over these model years are both 
feasible and warranted as a step to reduce the impacts of climate 
change on public health and welfare. In addition, the proposal would 
achieve reductions in emissions of some criteria pollutants and air 
toxics that would achieve benefits for public health and welfare. Our 
analysis for this proposed rule, as well as our earlier analyses of 
similar standards, supports the conclusion that the proposed model 
years 2023-2026 standards are technologically feasible and the costs of 
compliance for manufacturers are reasonable. In addition, we project 
that there would be a net savings to consumers over the lifetime of 
vehicles meeting the proposed standards, which we think is a more 
significant consideration, particularly for lower-income consumers, 
than the anticipated increase in cost for new vehicles. Importantly, 
the benefits of the proposed program would significantly exceed the 
costs.

A. Consideration of Technological Feasibility and Lead Time

1. Technological Readiness of the Auto Industry in Meeting Revised GHG 
Standards
    The technological readiness of the auto industry to meet the 
proposed revised standards for model years 2023-2026 is best understood 
in the context of the decade-long light-duty vehicle GHG emission 
reduction program in which the auto industry has introduced a wide 
lineup of ever more fuel-efficient, GHG-reducing technologies. Over 
this time period, the industry has been planning for increasingly 
stringent GHG emissions requirements. The result has been the 
widespread and continual introduction of new and improved GHG-reducing 
technologies across the industry, many of which were in the early 
stages of development at the beginning of the EPA program in 2012. (See 
Section III.A of this preamble and Chapter 2 of the DRIA for a 
discussion of technological progression, status of technology 
penetration, and our assessment of continuing technology penetration 
across the fleet.)
    The technological achievements already developed and applied to 
vehicles within the current new vehicle fleet will enable the industry 
to achieve the proposed standards even without the development of new 
technologies beyond those already widely available. Rather, in response 
to the increased stringency of the proposed standards compared to 
existing standards, automakers would be expected to adopt these 
technologies at an increasing pace across more of their vehicle fleets. 
In other words, the technologies needed to meet the proposed standards 
are already widely available and in use on vehicles--there is no need 
for development of new technologies for the time frame of these 
proposed standards. Instead, compliance with the proposed standards 
will necessitate

[[Page 43782]]

greater implementation and pace of technology penetration through 
MY2026 using existing GHG reduction technologies. In addition, as we 
discuss further below, our assessment shows that a large portion of the 
current fleet (MY2021 vehicles), across a wide range of vehicle 
segments, already meets their proposed MY2023 footprint-based 
CO2 targets.
    The availability of current models across a range of vehicle 
segments meeting the standards is notable because EPA recognizes that 
auto design and development is a multi-year process, which imposes some 
constraints on the ability of manufacturers to immediately redesign 
vehicles with new technologies. However, EPA also understands that this 
multi-year process means that the industry's product plans developed in 
response to EPA's 2012 GHG standards rulemaking for MYs 2017-2025 has 
largely continued, notwithstanding the SAFE rule that was published on 
April 30, 2020 and that did not relax standards until MY 2021. In their 
past comments on EPA's light-duty GHG programs, some automakers broadly 
stated that they generally require about five years to design, develop, 
and produce a new vehicle model.\133\ Under that schedule, it would 
follow that in most cases the vehicles that automakers will be selling 
during the first years of the proposed MY 2023-26 program were already 
designed under the original, more stringent GHG standards finalized in 
2012 for those model years. At the time of this proposal, the relaxed 
GHG standards under the SAFE rule have been in place for little more 
than one year. During this time, the ability of the industry to commit 
to revised plans based on the SAFE rule's relaxed standards, especially 
for MYs 2023 and later, has been highly uncertain in light of pending 
litigation,\134\ and concern was regularly expressed across the auto 
industry over the uncertain future of the SAFE standards. In fact, due 
in part to this uncertainty, five automakers voluntarily agreed to more 
stringent national emission reduction targets under the California 
Framework Agreements (discussed further below). Therefore, the 
automakers' own past comments regarding product plan development and 
the regulatory and litigation history of the GHG standards since 2012 
support EPA's expectation that automakers remain largely on track in 
terms of technological readiness within their product plans to meet the 
approximate trajectory of increasingly stringent standards initially 
promulgated in 2012. Although we do not believe that automakers have 
significantly changed their product plans in response to the SAFE final 
rule issued in 2020, any that did would have done so relatively 
recently and there is reason to expect that, for any automakers that 
changed their plans after the SAFE rule, the automakers' earlier plans 
could be reinstated or adapted with little change. We also note that 
some automakers may have adopted product plans to overcomply with the 
prior, more stringent standards, with the intention of selling credits 
to other automakers. For these automakers, the proposed standards of 
this rule, if adopted, would reduce or eliminate the sudden disruption 
to product plans caused by the SAFE rule. EPA invites comment on the 
impact of EPA's current and recent rulemakings on automakers' product 
plans. It is important to note that we have considered the need for 
manufacturers to transition from the SAFE standards (or the California 
Framework emission reduction targets) to standards that are closer in 
stringency to the 2012 standards and we have structured the proposed 
standards (including the proposed footprint curves as well as the 
combination of flexibility and credit options) to be less stringent 
than the 2012 standards for model years 2023, 2024, and 2025.
---------------------------------------------------------------------------

    \133\ For example, in its comments on the 2012 rule, Ford stated 
that manufacturers typically begin to firm up their product plans 
roughly five years in advance of actual production. (Docket OAR-
2009-0472-7082.1, p. 10.)
    \134\ Competitive Enterprise Institute v. NHTSA, D.C. Cir. No. 
20-1145 (and consolidated cases brought by several states, 
localities, environmental and public organizations, and others), 
filed on May 1, 2020 and later dates.
---------------------------------------------------------------------------

    EPA considers this an important aspect of its analysis that 
mitigates concerns about lead time for manufacturers to meet the 
proposed standards beginning with the 2023 model year. We see no reason 
to expect that the major GHG-reducing technologies that automakers have 
already developed and introduced, or have already been planning for 
near-term implementation, will not be available for model year 2023-
2026 vehicles. Thus, in contrast to the situation that existed prior to 
EPA's adoption of the initial light-duty GHG standards in the 2012 
rule, automakers now have had the benefit of at least 8 to 9 years of 
planning and development in preparation for meeting the proposed 
standards.
    Another important factor in considering the feasibility of the 
proposed standards is the fact that five automakers voluntarily entered 
into the California Framework Agreements with the California Air 
Resources Board, first announced in July 2019, to meet more stringent 
GHG emission reduction targets nationwide than the relaxed standards in 
the SAFE rule.\135\ These voluntary actions by automakers that 
collectively represent approximately one-third of the U.S. vehicle 
market speak directly to the feasibility of meeting standards at least 
as stringent as the emission reduction targets under the California 
Framework Agreements. As discussed in Section II.A.5, the California 
Framework Agreements were a key consideration in our development and 
assessment of the proposed EPA standards.
---------------------------------------------------------------------------

    \135\ https://ww2.arb.ca.gov/resources/documents/framework-agreements-clean-cars (last updated on May 22, 2021).
---------------------------------------------------------------------------

    It is important to note that our conclusion that the proposed 
program is technologically feasible is based in part on a projection 
that the standards will be met largely with the kinds of advanced 
gasoline vehicle technologies already in place in vehicles within 
today's fleet and does not rely on a significant penetration of 
electric vehicles into the fleet during the 2023-2026 model years. As 
discussed above, EPA modeled auto manufacturers' decisions in choosing 
among available emission reduction technologies to incorporate in their 
vehicles, taking into account both the projected costs and 
effectiveness of the technologies. This updated analysis is consistent 
with EPA's past analyses of standards similar to those proposed in this 
notice, see Section III.B and Chapter 2 of the DRIA. The analysis 
demonstrates that a wide variety of emission reducing technologies are 
already available for manufacturers to incorporate into their gasoline 
vehicles within the time frame of the proposed standards.
    We recognize that although the technology penetration rates that we 
project in this rulemaking are generally similar to the technology 
penetration rates that we projected in the SAFE rulemaking, in the SAFE 
rulemaking EPA concluded that the projected level of advanced 
technologies was ``too high from a consumer-choice perspective'' and 
ultimately could lead to automakers changing the vehicle types they 
offer.\136\ EPA currently does not believe this is an accurate 
assessment or one that deserves weight that could overcome EPA's expert 
assessment of the appropriate standards under section 202 of the CAA. 
Rather, EPA's judgment is that the history of the significant 
developments in automotive offerings over the last ten years supports 
the conclusion that automakers are capable of deploying a

[[Page 43783]]

wide range of advanced technologies across the entire vehicle fleet, 
and that consumers remain interested and willing to purchase vehicles 
with advanced technologies. Reinforcing this updated judgement, the 
recent announcements of BEV light-duty trucks and the introduction of 
hybrid minivans and pickups exemplify such a trend, and EPA sees no 
reason why the standards proposed in this rule would fundamentally 
alter it.
---------------------------------------------------------------------------

    \136\ 85 FR 25116.
---------------------------------------------------------------------------

    Our updated analysis projects that about 8 percent of vehicles 
meeting the MY 2026 proposed standards would be EV/PHEVs (See Section 
III.B.3). Given manufacturers' public announcements about their 
ambitious plans to transition fleets to electrified vehicles, we 
believe it is possible that an even higher percentage of the industry-
wide fleet could be electrified during the time period of our proposed 
model year 2023-2026 standards. Moreover, EPA is committed to 
encouraging the rapid development and broad acceptance of zero-emission 
vehicles, and we are proposing incentives to support this transition 
(see Section II.B.2). Any acceleration in electric vehicle penetration 
would be beneficial and would further expand the technology choices 
available to manufacturers to meet the proposed standards.
2. Opportunities Provided Through Credits and Incentives Provisions
    In considering feasibility of the proposed standards EPA also 
considers the impact of available compliance flexibilities on 
automakers' compliance options. As we discuss above, the advanced 
technologies that automakers are continuing to incorporate in vehicle 
models today directly contribute to each company's compliance plan 
(i.e., these vehicle models have lower GHG emissions). In addition, 
automakers widely utilize the program's established ABT provisions 
which provide a variety of flexible paths to plan compliance (See more 
detail in Section II.A.4). EPA's annual Automotive Trends Report 
illustrates how different automakers have chosen to make use of the GHG 
program's various credit features.\137\ It is clear that manufacturers 
are widely utilizing the various credit programs available, and we have 
every expectation that manufacturers will continue to take advantage of 
the compliance flexibilities and crediting programs to their fullest 
extent, thereby providing them with additional powerful tools in 
finding the lowest cost compliance solutions in light of the proposed 
revised standards.
---------------------------------------------------------------------------

    \137\``The 2020 EPA Automotive Trends Report, Greenhouse Gas 
Emissions, Fuel Economy, and Technology issue 1975,'' EPA-420-R-21-
003 January 2021.
---------------------------------------------------------------------------

    The GHG credit program was designed to recognize that automakers 
typically have a multi-year redesign cycle and not every vehicle will 
be redesigned every year to add GHG-reducing technology. Moreover, when 
GHG-reducing technology is added, it will generally not achieve 
emissions reductions corresponding exactly to a single year-over-year 
change in stringency of the standards. Instead, in any given model 
year, some vehicles will be ``credit generators,'' over-performing 
compared to the footprint-based CO2 target in that model 
year, while other vehicles will be ``debit generators'' and under-
performing against their footprint-based targets. Together, an 
automaker's mix of credit-generator and debit-generator vehicles 
contribute to its sales-weighted fleet average CO2 
performance, compared to its standard, for that year. If a 
manufacturer's sales-weighted fleet CO2 performance is 
better than its fleet average standard at the end of the model year, 
those credits can be banked for the automaker's future use in certain 
years (under the credit carry-forward provisions) or sold to other 
manufacturers (under the credit trading provisions). Likewise, if a 
manufacturer's sales-weighted fleet CO2 performance falls 
short of its fleet average standard at the end of a model year, the 
automaker can use banked credits or purchase credits to meet the 
standard. Furthermore, in recognition of the possibility that a 
manufacturer might comply with a standard for a given model year with 
credits earned in a future model year (under the allowance for ``credit 
carryback''), a manufacturer may also choose to carry a deficit forward 
up to three years before showing compliance with that model year.
    EPA has examined manufacturer certification data to assess the 
extent to which model year 2021 vehicles already being produced and 
sold today would be credit generators compared to the proposed model 
year 2023 targets (accounting for projected off-cycle and air 
conditioning credits). As detailed in Chapter 2.4 of the DRIA, 
automakers are selling approximately 216 vehicle models (60 percent of 
them are advanced gasoline technology vehicles) that would be credit 
generators compared to the proposed model year 2023 targets, and they 
appear in nearly all light-duty vehicle market segments. This 
information supports our conclusion about the feasibility of vehicles 
with existing technologies meeting the proposed MY2023 standards. We 
also considered the ability of MY2021 vehicles to generate credits 
based on the MY2021 and MY2022 standards relaxed in the SAFE rule. Of 
the 1370 distinct MY2021 vehicle models, EPA's analysis (DRIA, Chapter 
2.4) indicates that 355 of these models are credit generators for 
MY2021, with most of those also generating credits for the MY2022 SAFE 
standards (25 percent of today's new vehicle fleet offerings). This 
represents an opportunity for manufacturers to build their credit banks 
for both MY 2021 and MY2022 and carry those credits forward to help 
meet the MY2023-2026 proposed standards. These data demonstrate the 
opportunities for manufacturers to sell more of the credit-generator 
vehicles as another available strategy to generate credits that will 
help them comply with the proposed model year 2023 and later standards. 
Our analysis clearly shows this could be done within vehicle segments 
to maintain consumer choice (we would not expect that overall car/truck 
fleet mix would shift), as credit-generating vehicles exist across 
vehicle segments, representing 95 percent of vehicle sales. Under the 
fleet-average based standards, manufacturers have multiple feasible 
paths to compliance, including varying sales volumes of credit 
generating vehicles,\138\ adopting GHG-reducing technologies, and 
implementing other credit and incentive provisions including those 
proposed in this notice.
---------------------------------------------------------------------------

    \138\ E.g., When fuel economy standards were not footprint-
based, less efficient vehicles were priced higher than more 
efficient vehicles to encourage sales of the latter. Austin, D., and 
T. Dinan (2004). ``Clearing the air: The costs and consequences of 
higher CAFE standards and increased gasoline taxes.'' Journal of 
Environmental Economics and Management 50: 562-582. Greene, D., P. 
Patterson, M. Singh, and J. Li (2005). ``Feebates, rebates, and gas-
guzzler taxes: A study of incentives for increased fuel economy.'' 
Energy Policy 33: 757-775 found that automakers were more likely to 
add technology than use pricing mechanisms to achieve standards. 
Whitefoot, K., M. Fowlie, and S. Skerlos (2017). ``Compliance by 
Design: Influence of Acceleration Trade-offs on CO2 
Emissions and Costs of Fuel Economy and Greenhouse Gas 
Regulations.'' Environmental Science and Technology 51: 10307-10315 
find evidence consistent with automakers using trade-offs with 
acceleration as yet another path to comply with fuel economy 
standards.
---------------------------------------------------------------------------

    EPA further considered the issue of generating credits against the 
MY2021 and MY2022 SAFE standards in the context of lead time. In 
discussions during development of this proposed rule, some stakeholders 
suggested that EPA should limit automakers' ability to generate credits 
against the relaxed SAFE standards or discount the value of such 
credits. These stakeholders argue that the nominal 1.5 percent year-
over-

[[Page 43784]]

year stringency increase of the SAFE standards barely keeps up with a 
``business as usual'' scenario of industry GHG emissions 
improvements.\139\ EPA has considered that argument. EPA also 
considered the recent performance of the auto industry in meeting the 
GHG standards; in MY2019 the industry-wide average performance was 7 g/
mi above the industry-wide average standard and compliance was achieved 
by many manufacturers through applying banked credits.\140\ In light of 
the implementation timeframe of the proposed revised standards 
beginning in model year 2023, we are proposing to continue allowing 
manufacturers to generate credits against the SAFE standards in model 
years 2021 and 2022. We are not proposing to shorten the existing 5-
year credit carry-forward provision for credits generated in model 
years 2021 and 2022, so those credits can be carried forward under the 
existing regulations to facilitate the transition from the SAFE 
standards to the proposed more stringent standards. However, EPA seeks 
comment on whether there should be any restrictions placed on credits 
generated in model years 2021 and 2022, for example, discounting of 
MY2021 and MY2022 credits, given the relaxed stringency of the SAFE 
standards in those model years.
---------------------------------------------------------------------------

    \139\ We note that the 2020 SAFE FRM presented a 0 percent year-
over-year alternative for MYs 2021-2026. In that scenario with no 
stringency change, the modeled fleet improved fuel economy by 0.9 
percent per year from 38.3 mpg in 2021 to 40.0 mpg in 2026. (see 
2020 SAFE FRIA, Table I-19, Alternative 1)
    \140\ Trends Report, Figure ES-8.
---------------------------------------------------------------------------

    In addition, EPA is proposing a targeted set of extended credit and 
compliance flexibility options for manufacturers, specifically designed 
to further address any potential concerns of manufacturers about 
stringency and lead time under the proposed standards (as explained in 
detail in Section II.B.3 and II.C). These proposals include a limited 
extension of credit carry-forward, such that credits from model years 
2016-2020 would be available to carry forward for one (or two, in the 
case of 2016 credits) additional model year(s) for compliance in model 
years 2023-2026; an extension of the off-cycle credit menu cap from 10 
grams/mile to 15 grams/mile to provide additional credit to 
manufacturers who install technologies that reduce GHG emissions that 
are not captured on EPA's GHG certification tests; and two forms of 
incentive credits for applying advanced technologies in the 
manufacturer's vehicle fleet (i.e., an extension of incentive 
multipliers for EV, PHEV and FCV vehicles, and extra credits for full-
size pickup trucks that utilize strong hybrid technology or achieve 
similar performance-based GHG reductions). Collectively, these proposed 
flexibilities provide additional strategies manufacturers can use to 
smooth their path to compliance with the proposed revised standards. In 
fact, these additional credits and incentives provisions were an 
important factor in EPA's consideration of the appropriate level of 
stringency for this proposal, and they provide additional support for 
our consideration of revised standards even more stringent than if we 
were not including these provisions in the proposed program.
    Just as the fleet average standard approach of the light duty 
vehicle GHG program allows manufacturers to design a compliance 
strategy relying on the sale of both credit-generating vehicles and 
debit generating vehicles in a single year, the credit banking and 
trading provisions of the program allow manufacturers to design a 
compliance strategy relying on overcompliance and undercompliance in 
different years, or even by different manufacturers. Credit trading is 
a compliance flexibility provision that allows one vehicle manufacturer 
to purchase credits from another, accommodating the ability of 
manufacturers to make strategic choices in planning for and reacting to 
normal fluctuations in an automotive business cycle. When credits are 
available for less than the marginal cost of compliance, EPA would 
anticipate that an automaker might choose to adopt a compliance 
strategy relying on credits.\141\ As shown in the most recent EPA 
Trends Report, more than 10 vehicle firms collectively have 
participated in 70 credit trading transactions since the inception of 
the EPA program through Model Year 2019, including many of the largest 
automotive firms.\142\ EPA does not believe that the fact that 
automakers have adopted a compliance strategy relying on credits 
(whether banked or purchased) is per se evidence that standards are not 
appropriate under section 202.
---------------------------------------------------------------------------

    \141\ ``FCA historically pursued compliance with fuel economy 
and greenhouse gas regulations in the markets where it operated 
through the most cost effective combination of developing, 
manufacturing and selling vehicles with better fuel economy and 
lower GHG emissions, purchasing compliance credits, and, as allowed 
by the U.S. federal Corporate Average Fuel Economy (``CAFE'') 
program, paying regulatory penalties. The cost of each of these 
components of FCA's strategy has increased and is expected to 
continue to increase in the future. The compliance strategy for the 
combined company is currently being assessed by Stellantis 
management.'' Stellantis N.V. (2020). ``Annual Report and Form 20-F 
for the year ended December 31, 2020.''
    \142\ EPA 2020 Trends Report, page 110 and Figure 5.15.
---------------------------------------------------------------------------

    EPA recognizes that several industry stakeholders suggested in 
comments on the MTE and SAFE rule that underperformance compared to 
CO2 targets indicated the standards were overly stringent, 
EPA previously stated that a declining credit balance indicated future 
compliance would be more difficult, and EPA was taking into 
consideration the unwillingness of manufacturers to design a compliance 
strategy around purchasing credits. However, as explained above, EPA 
does not believe a declining credit balance is evidence the standards 
are infeasible or less feasible than anticipated. EPA believes the more 
accurate view is that manufacturers are able and willing to purchase 
credits, as well as use banked credits, as part of their compliance 
strategies and that significant use of credits for compliance is 
indicative of EPA's flexibilities working as intended, to offer a wide 
array of compliance strategies which reduce overall costs of 
compliance.
    In summary, there is ample evidence that, in addition to the 
demonstration of technological feasibility resulting from the ``head 
start'' that automakers have toward complying with the proposed 
standards, there are a wide range of credit and flexibility strategies, 
as well as fleet mix strategies, that manufacturers can marshal to 
enable them to comply with the proposed standards.

B. Consideration of Vehicle Costs of Compliance

    In addition to technological feasibility and lead time, EPA has 
considered the cost for the auto industry to comply with the proposed 
revised standards. See section III.B and Chapter 2 of the DRIA for our 
analysis of compliance costs. As shown in Section III.B.2 and Chapter 
4.1.2 of the DRIA, the average per-vehicle cost for a MY2026 vehicle is 
$1,044 compared to the No Action scenario. Average per-vehicle costs 
rise from $465 in MY2023 to $771 in MY2025. The $1,044 average per-
vehicle cost is consistent with prior EPA analyses (see DRIA Chapter 
1.2). EPA has also evaluated costs by manufacturer (see Section 
III.B.2) and finds the range of costs to be similarly consistent with 
findings from prior analyses.
    The estimated costs to meet the proposed standards are lower than 
those projected in the 2012 rule, which EPA estimated at about $1,200 
(see DRIA Table 1-4). EPA found in the 2012 rule that these (higher) 
costs were reasonable, even without considering

[[Page 43785]]

the fuel savings, which more than offsets these costs. See 77 FR 62663-
62665, 62880, and 62922. This decrease in estimated per-vehicle cost 
since the 2012 rule is not surprising--technology to achieve 
environmental improvements has often proved to be less costly than 
EPA's initial estimates.\143\
---------------------------------------------------------------------------

    \143\ Anderson, John F and Sherwood, ``Comparison of EPA and 
Other Estimates of Mobile Source Rule Costs to Actual Price 
Changes,'' SAE paper 2003-1-1980.
---------------------------------------------------------------------------

    As part of these cost estimates, we project significant increases 
in the use of advanced gasoline technologies (including mild and strong 
hybrids), comprising more than 92 percent of the fleet. (See Section 
III.B.3). EPA has considered the feasibility of the standards under 
several different assumptions about future fuel prices, technology 
application or credit trading (see DRIA Chapters 4 and 10), which shows 
very small variations in average per-vehicle cost or technology 
penetration mix. Our conclusion that there are multiple ways the 
MY2023-2026 standards can be met given the wide range of technologies 
at reasonable cost, and predominantly with advanced gasoline engine and 
vehicle technologies, holds true across all these scenarios.
    These cost estimates are in the same range as EPA's earlier 
analyses of similarly stringent GHG standards including the model year 
2023 and later timeframe. (See Chapter 1 of the DRIA). EPA concludes 
that the per-vehicle costs of the proposed standards are reasonable.

C. Consideration of Impacts on Consumers

    Another important consideration for EPA is the impact of the 
proposed standards on consumers. EPA concludes that the proposed 
standards would be beneficial for consumers because the lower operating 
costs from significant fuel savings would offset the upfront vehicle 
costs. Total fuel savings for consumers through 2050 are estimated at 
$120 billion to $250 billion (7 percent and 3 percent discount rates, 
see Section VII.I, Table 40). Thus, the proposal would result in 
significant savings for consumers, as further described in Section 
VII.J.
    The Administrator also carefully considered the affordability 
impacts of these proposed standards, especially considering Executive 
Order 14008 and EPA's increasing focus on environmental justice and 
equity. EPA examined the impacts of the proposed standards on the 
affordability of new and used cars and trucks in Section VII.M of this 
preamble and Chapter 8.3 of the DRIA. Because lower-income households 
spend more on gasoline than on vehicle purchases, the effects of 
reduced operating costs may be especially important for these 
households.
    EPA recognizes that in the SAFE rulemaking we placed greater weight 
on the upfront costs of vehicles, and little weight on total cost of 
ownership. In part, that rulemaking explained that approach on the 
ground that ``[n]ew vehicle purchasers are not likely to place as much 
weight on fuel savings that will be realized by subsequent owners.'' 
\144\ However, in light of changes in policy priorities (including 
concern about accounting for benefits to lower-income households), EPA 
now believes in assessing the benefits of these standards it is more 
appropriate to consider the total fuel savings of the vehicle, over its 
lifetime, including those fuel savings that may accrue to later owners. 
Disregarding those benefits, which often accrue to lower income 
households, who more often purchase used cars, would provide a less 
accurate picture of total benefits to society. Likewise, EPA has 
reconsidered the weight placed in the SAFE rulemaking on promoting 
fleet turnover as a standalone factor and is now considering the 
influence of turnover in the context of the full range effects of the 
proposed standards. While recognizing that standards can influence 
purchasing decisions, EPA currently believes that, for the range of 
appropriate emissions standards, the emissions reductions from more 
stringent standards far outweigh any temporary effect from delayed 
purchases.
---------------------------------------------------------------------------

    \144\ 85 FR 25114.
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D. Consideration of Emissions of GHGs and Other Air Pollutants

    An essential factor that EPA considered in determining the 
appropriate level of the proposed standards is the reductions in 
emissions that would result from the program. This primarily includes 
reductions in vehicle GHG emissions, given the increased urgency of the 
climate crisis. We also considered the effects of the proposed 
standards on criteria pollutant and air toxics emissions and associated 
public health and welfare impacts.
    The GHG emissions reductions from our proposed standards are 
projected to exceed 2,200 MMT of CO2, 2.7 MMT of 
CH4 and 71,000 metric tons of N2O, as the fleet 
turns over year-by-year to new vehicles that meet the proposed 
standards, in an analysis through 2050. See Section IV.A, Table 29. The 
monetized benefit of these GHG reductions is estimated at $22 billion 
to $280 billion across a range of discount rates and values for the 
social cost of carbon (see Section VII.I). These GHG reductions are 
important to continued progress in addressing climate change. In fact, 
EPA believes that we will need to achieve far deeper GHG reductions 
from the light-duty sector in future years beyond the compliance 
timeframe for the proposed standards, which is why we will be 
initiating a rulemaking in the near future to establish more stringent 
standards after model year 2026.
    The criteria pollutant emissions reductions expected to result from 
the proposed standards are also a factor considered by the 
Administrator. The proposed standards would result in emissions 
reductions of some criteria pollutants and air toxics and associated 
benefits for public health and welfare. Public health benefits are 
estimated to total $3.3 billion to $8 billion (7 percent and 3 percent 
discount rates, see Section VII.H, Table 38). EPA finds that this 
proposal is important in reducing the public health impacts of air 
pollution.

E. Consideration of Energy, Safety and Other Factors

    EPA also evaluated the impacts of the proposed standards on energy, 
in terms of fuel consumption and energy security. This proposal is 
projected to reduce U.S. gasoline consumption by 291 million barrels 
through 2050 (see Section VII.C). EPA considered the impacts of this 
projected reduction in fuel consumption on energy security, 
specifically the avoided costs of macroeconomic disruption (See Section 
VII.F). We estimate the energy security benefits of the proposal in 
2050 at $6.1 billion to $13 billion (7 percent and 3 percent discount 
rate, see Section VII.H. Table 37). EPA considers this proposal to be 
beneficial from an energy security perspective.
    Section 202(a)(4)(A) of the CAA specifically prohibits the use of 
an emission control device, system or element of design that will cause 
or contribute to an unreasonable risk to public health, welfare, or 
safety. EPA has a long history of considering the safety implications 
of its emission standards,\145\ up to and including the more recent 
light-duty GHG regulations: The 2010 rule which established the MY2012-
2016 light-duty vehicle GHG

[[Page 43786]]

standards, the 2012 rule which first established MY2017-2025 light-duty 
vehicle GHG standards, the MTE 2016 Proposed Determination and the 2020 
SAFE rule. The relationship between GHG emissions standards and safety 
is multi-faceted, and can be influenced not only by control 
technologies, but also by consumer decisions about vehicle ownership 
and use. EPA has estimated the impacts of this proposal on safety by 
accounting for changes in new vehicle purchase, changes in vehicle 
scrappage, fleet turnover, and VMT, and changes in vehicle weight as an 
emissions control strategy. EPA finds that under this proposal, the 
estimated risk of fatal and non-fatal injuries per distance traveled 
will remain virtually unchanged (see Section VII.H). This proposal also 
projects that as the costs of driving declines due to the improvement 
in fuel economy, consumers overall will choose to drive more miles 
(this is the ``VMT rebound'' effect). As a result of this personal 
decision by consumers to drive more due to the reduce cost of driving, 
EPA also projects this will result in an increase in accidents, 
injuries, and fatalities. EPA recognizes that in the SAFE rulemaking 
EPA placed emphasis on the estimated total number of fatal and non-
fatal injuries. However, EPA currently believes it is more appropriate 
to consider the risk of injuries per mile traveled. EPA requests 
comment on what role these negative impacts due to consumers' decision 
to drive additional miles should play in EPA's standard-setting 
decision-making.
---------------------------------------------------------------------------

    \145\ See, e.g., 45 FR 14496, 14503 (1980) (``EPA would not 
require a particulate control technology that was known to involve 
serious safety problems.'').
---------------------------------------------------------------------------

F. Balancing of Factors Under CAA 202(a)

    Under section 202(a) EPA has statutory authority providing 
considerable discretion in setting or revising vehicle emission 
standards with adequate lead time for the development and application 
of technology to meet the standards. EPA's proposed standards properly 
implement this statutory provision, as discussed above. As discussed 
throughout this preamble, the emission reduction technologies needed to 
meet the proposed standards are already available at reasonable cost, 
and a significant fraction of new vehicles today already meets these 
standards. Moreover, the flexibilities already available under EPA's 
existing regulations, including fleet average standards and the ABT 
program--in effect enabling manufacturers to spread the compliance 
requirement for any particular model year across multiple model years--
and the additional flexibilities being proposed in this notice further 
support EPA's conclusion that the proposed standards provide sufficient 
time for the development and application of technology, giving 
appropriate consideration to cost.
    EPA recognizes that the cost and technology penetration estimates 
in this rule are similar to the estimates in the SAFE rulemaking and 
that the Administrator is balancing the factors considered differently 
than in the SAFE rule to reach his conclusion about what standards are 
appropriate to propose. In the SAFE rulemaking, EPA promulgated relaxed 
GHG standards that were projected to result in increases in GHG and 
criteria pollutant emissions and adverse public health impacts (e.g., 
increases in premature mortality and illnesses due to increased air 
pollution). The SAFE rulemaking was the most significant weakening of 
mobile source emissions standards in EPA's history. It is particularly 
notable that the rationale for the revision was not that the standards 
had turned out to be technologically infeasible or, even that they 
would impose unexpectedly high costs on society. As we have noted, the 
estimated costs for more stringent standards in the SAFE rulemaking 
were not significantly different from the costs estimated in 2012, or 
for this rulemaking. Rather, in balancing the factors under 
consideration for the SAFE rulemaking, EPA placed greatest weight on 
reducing the cost of compliance on the regulated industry and the 
upfront (but not total) cost to consumers, and placed little weight on 
reductions in GHGs and other pollutants, contrary to EPA's traditional 
approach to adopting standards under section 202.
    Although EPA continues to believe that the Administrator has 
significant discretion to weigh various factors under Section 202, the 
Administrator now notes that the purpose of adopting standards under 
that provision of the Clean Air Act is to address air pollution that 
may reasonably be anticipated to endanger public health and welfare and 
that reducing air pollution has traditionally been the focus of such 
standards. In this action, the Administrator is proposing more 
stringent standards based on a balancing of the factors under 
consideration different from that in the SAFE rulemaking, a balancing 
that the Administrator believes is more consistent with Congressional 
intent and the goals of the Clean Air Act.\146\ Taking into 
consideration the importance of reducing GHG emissions and the primary 
purpose of CAA section 202 to reduce the threat posed to human health 
and the environment by air pollution, the Administrator finds it is 
appropriate to place greater weight on reducing emissions and to adopt 
standards that, when implemented, would result in significant 
reductions of light duty vehicle emissions both the near term and over 
the longer term. As discussed above and the DRIA Chapter 1.2.2, EPA has 
updated the analyses for this rule. The updated analysis shows several 
key analytical results that are similar to those from the SAFE final 
rule. EPA concludes that the Administrator's current approach to 
considering the relevant factors would fully support the proposed 
standards even if they were based solely on the technical record and 
conclusions that were used to set standards in the final SAFE rule.
---------------------------------------------------------------------------

    \146\ See, e.g., CAA sections 101(a)(2) (finding that ``the 
increasing use of motor vehicles[ ] has resulted in mounting dangers 
to the public health and welfare''); 101(b)(1) (declaring one 
purpose of the CAA is ``to protect and enhance the quality of the 
Nation's air resources, so as to promote the public health and 
welfare''); 101(c) (``a primary goal of this chapter is to encourage 
or otherwise promote reasonable Federal . . . actions . . . for 
pollution prevention'').
---------------------------------------------------------------------------

    Finally, EPA estimates net benefits of this proposal in 2050 at $93 
billion to $150 billion (7 percent and 3 percent discount rates, with 3 
percent SC-GHG) (see Section VII.H). In comparison, the SAFE rule 
estimated net benefits at $16.1 billion to negative $13.1 billion (7 
percent and 3 percent discount rates, respectively)--in other words, 
the SAFE rule estimated net costs to society under a 3 percent discount 
rate. Our conclusion that the estimated benefits considerably exceed 
the estimated costs of the proposed program reinforces our view that 
the proposed standards represent an appropriate weighing of the 
statutory factors and other relevant considerations.
    In summary, after consideration of a number of relevant factors, 
given the technical feasibility of the proposed standards, the moderate 
costs per vehicle, the savings to consumers in fuel costs over the 
lifetime of the vehicle, the very significant reductions in GHG 
emissions and fuel consumption, and the significantly greater 
quantified benefits compared to quantified costs, EPA believes that the 
proposed standards are appropriate under EPA's section 202(a) 
authority.

VII. What are the estimated cost, economic, and other impacts of the 
proposal?

    This Section VII discusses EPA's assessment of a variety of impacts 
related to the proposed standards, including impacts on vehicle sales, 
fuel

[[Page 43787]]

consumption, energy security, additional driving, and safety. It 
presents an overview of EPA's estimates of GHG reduction benefits and 
non-GHG health impacts. This Section VII presents a summary of 
aggregate costs, drawing from the per-vehicle cost estimates presented 
in Section III, and estimated program benefits. Finally, the section 
discusses EPA's assessment of the potential impacts on consumers and 
employment impacts. The DRIA presents further details of the analyses 
presented in this Section VII.

A. Conceptual Framework for Evaluating Consumer Impacts

    A significant question in analyzing consumer impacts from vehicle 
GHG standards has been why there have appeared to be existing 
technologies that, if adopted, would reduce fuel consumption enough to 
pay for themselves in short periods, but which were not widely adopted. 
If the benefits to vehicle buyers outweigh the costs to those buyers of 
the new technologies, conventional economic principles suggest that 
automakers would provide them, and people would buy them. Yet 
engineering analyses have identified a number of technologies whose 
costs are quickly covered by their fuel savings, such as downsized-
turbocharged engines, gasoline direct injection, and improved 
aerodynamics, that were not widely adopted before the issuance of 
standards, but which were adopted rapidly afterwards.\147\ Why did 
markets fail, on their own, to adopt these technologies? This question, 
termed the ``energy paradox'' or ``energy efficiency gap,'' \148\ has 
been discussed in detail in previous rulemakings.\149\ As discussed in 
more detail in DRIA Chapter 8.1.1, EPA has evaluated whether the 
efficiency gap exists, as well as potential explanations for why the 
gap might exist.
---------------------------------------------------------------------------

    \147\ U.S. Environmental Protection Agency (2021). 2020 EPA 
Automotive Trends Report: Greenhouse Gas Emissions, Fuel Economy, 
and Technology since 1975, Chapter 4. EPA-420-R-21-003, https://www.epa.gov/automotive-trends/download-automotive-trends-report#Full%20Report, accessed 4/15/2021.
    \148\ Jaffe, A.B., and Stavins, R.N. (1994). ``The Energy 
Paradox and the Diffusion of Conservation Technology.'' Resource and 
Energy Economics 16(2): 91-122.
    \149\ 75 FR 25510-25513; 77 FR 62913-62917; U.S. Environmental 
Protection Agency (2016), Proposed Determination on the 
Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle 
Greenhouse Gas Emissions Standards under the Midterm Evaluation, 
EPA-420-R-16-020, Appendix B.1.2; 85 FR 24603-24613.
---------------------------------------------------------------------------

    Whether the efficiency gap exists depends on the assessment of fuel 
savings relative to technology costs and ``hidden costs,'' i.e., any 
adverse effects on other vehicle attributes. In the Midterm 
Evaluation,\150\ EPA evaluated both the costs and the effectiveness for 
reducing fuel consumption (and GHG emissions) of technologies used to 
meet the emissions standards to date; the agency found that the 
estimates used in the original rulemakings were generally correct.
---------------------------------------------------------------------------

    \150\ https://www.epa.gov/regulations-emissions-vehicles-and-engines/midterm-evaluation-light-duty-vehicle-greenhouse-gas.
---------------------------------------------------------------------------

    EPA also examined the relationship between the presence of fuel-
saving technologies and negative evaluations of vehicle operating 
characteristics, such as performance and noise, in auto reviews and 
found that the presence of the technologies was more often correlated 
with positive evaluations than negative ones.\151\ Preliminary work 
with data from recent purchasers of new vehicles found similar 
results.\152\ While these studies cannot prove that the technologies 
pose no problems to other vehicle attributes, they suggest that it is 
possible to implement the technologies without imposing hidden costs.
---------------------------------------------------------------------------

    \151\ Helfand, G., et al. (2016). ``Searching for Hidden Costs: 
A Technology-Based Approach to the Energy Efficiency Gap in Light-
Duty Vehicles.'' Energy Policy 98: 590-606; Huang, H., et al. 
(2018). ``Re-Searching for Hidden Costs: Evidence from the Adoption 
of Fuel-Saving Technologies in Light-Duty Vehicles.'' Transportation 
Research Part D 65: 194-212.
    \152\ Huang, H., G. Helfand, and K. Bolon (2018a). ``Consumer 
Satisfaction with New Vehicles Subject to Greenhouse Gas and Fuel 
Economy Standards.'' Presentation at the Society for Benefit-Cost 
Analysis annual conference, March. https://benefitcostanalysis.org/docs/G.4_Huang_Slides.pdf, accessed 4/7/2021.
---------------------------------------------------------------------------

    EPA has also evaluated the relationship between performance and 
fuel economy, in light of research arguing that fuel consumption must 
come at the expense of other vehicle attributes.\153\ Research in 
progress from Watten et al. (2021) \154\ distinguishes between 
technologies that improve, or do not adversely affect, both performance 
and fuel economy and technologies that reduce engine displacement, 
which does trade off improved fuel economy for performance. Following 
Moskalik et al. (2018),\155\ Watten et al. observe that the ``marginal 
rate of attribute substitution'' between power and fuel economy has 
changed substantially over time. In particular, it has become 
relatively more costly to improve efficiency by reducing power, and 
relatively less costly to add technologies that improve efficiency. 
These technology improvements do not reduce power and in some cases may 
enhance it. It supports the concept that automakers take consumer 
preferences into account in identifying where to add technology.
---------------------------------------------------------------------------

    \153\ Knittel, C.R. (2011). ``Automobiles on Steroids: Product 
Attribute Trade-Offs and Technological Progress in the Automobile 
Sector.'' American Economic Review 101(7): pp. 3368-3399; Klier, T. 
and Linn, J. (2016). ``The Effect of Vehicle Fuel Economy Standards 
on Technology Adoption.'' Journal of Public Economics 133: 41-63; 
McKenzie, D. and Heywood, J. B. (2015). ``Quantifying efficiency 
technology improvements in U.S. cars from 1975-2009.'' Applied 
Energy 157: 918-928.
    \154\ Watten, A., S. Anderson, and G. Helfand (2021). 
``Attribute Production and Technical Change: Rethinking the 
Performance and Fuel Economy Trade-off for Light-duty Vehicles.'' 
Working paper.
    \155\ Moskalik, A., K. Bolon, K. Newman, and J. Cherry (2018). 
``Representing GHG Reduction Technologies in the Future Fleet with 
Full Vehicle Simulation.'' SAE Technical Paper 2018-01-1273. 
doi:10.4271/2018-01-1273.
---------------------------------------------------------------------------

    EPA cannot reject the observation that the energy efficiency gap 
has existed for light-duty vehicles--that is, it appears that markets 
on their own have not led to adoption of a number of technologies whose 
fuel savings quickly outweigh the costs in the absence of standards. As 
discussed in DRIA Chapter 8.1.1.2, EPA has previously identified a 
number of hypotheses to explain this apparent market failure.\156\ Some 
relate to consumer behavior, such as putting little emphasis on future 
fuel savings compared to up-front costs (a form of ``myopic loss 
aversion''), not having a full understanding of potential cost savings, 
or not prioritizing fuel consumption in the complex process of 
selecting a vehicle. Other potential explanations relate to automaker 
behaviors that grow out of the large fixed costs of investments 
involved with switching to new technologies, as well as the complex and 
uncertain processes involved in technological innovation and adoption.
---------------------------------------------------------------------------

    \156\ 75 FR 25510-25513; 77 FR 62913-62917; U.S. Environmental 
Protection Agency (2016), Proposed Determination on the 
Appropriateness of the Model Year 2022-2025 Light-Duty Vehicle 
Greenhouse Gas Emissions Standards under the Midterm Evaluation, 
EPA-420-R-16-020, Appendix B.1.2; 85 FR 24603-24613.
---------------------------------------------------------------------------

    It is challenging to identify which of these hypotheses for the 
efficiency gap explain its apparent existence. On the consumer side, 
EPA has explored the evidence on how consumers evaluate fuel economy in 
their vehicle purchase decisions.\157\ As noted, there does not

[[Page 43788]]

appear to be consensus in that literature on that behavior; the 
variation in estimates is very large. Even less research has been 
conducted on producer-side behavior. The reason there continues to be 
limited adoption of cost-effective fuel-saving technologies before the 
implementation of more stringent standards remains an open question. 
Yet, more stringent standards have been adopted without apparent 
disruption to the vehicle market after they become effective.\158\
---------------------------------------------------------------------------

    \157\ U.S. Environmental Protection Agency (2010). ``How 
Consumers Value Fuel Economy: A Literature Review.'' EPA-420-R-10-
008, https://cfpub.epa.gov/si/si_public_file_download.cfm?p_download_id=499454&Lab=OTAQ (accessed 
4/15/2021); U.S. Environmental Protection Agency (2018). ``Consumer 
Willingness to Pay for Vehicle Attributes: What is the Current State 
of Knowledge?'' EPA-420-R-18-016, https://cfpub.epa.gov/si/si_public_file_download.cfm?p_download_id=536423&Lab=OTAQ (accessed 
4/15/2021); Greene, D., A. Hossain, J. Hofmann, G. Helfand, and R. 
Beach (2018). ``Consumer Willingness to Pay for Vehicle Attributes: 
What Do We Know?'' Transportation Research Part A 118: 258-279.
    \158\ ``The 2020 EPA Automotive Trends Report, Greenhouse Gas 
Emissions, Fuel Economy, and Technology since 1975,'' EPA-420-R-21-
003 January 2021. See Table 2-1 for total vehicle production by 
model year.
---------------------------------------------------------------------------

B. Vehicle Sales Impacts

    As discussed in Section III.A EPA utilized the CCEMS model for this 
analysis. The FRIA for the SAFE rule (starting p. 871) describes the 
approach used in the model for estimating vehicle sales impacts. First, 
it projects future new vehicle sales in the reference case based on 
projections of macroeconomic variables. Second, it applies an 
elasticity of -1 (that is, a one percent increase in price produces a 
one percent decrease in the quantity sold) to the change in net price, 
where net price is the difference in technology costs less an estimate 
of the change in fuel costs over 2.5 years. This approach assumes that 
both automakers and vehicle buyers take into consideration the fuel 
savings that buyers might expect to accrue over the first 2.5 years of 
vehicle ownership.
    As discussed in Section VII.C, and in more detail in DRIA Chapter 
8.1.1.2, there does not yet appear to be consensus around the role of 
fuel consumption in vehicle purchase decisions, and the assumption that 
2.5 years of fuel consumption is the right number for both automakers 
and vehicle buyers deserves further evaluation. As noted there, Greene 
et al. (2018) provides a reference value of $1,150 for the value of 
reducing fuel costs by $0.01/mile over the lifetime of an average 
vehicle; for comparison, 2.5 years of fuel savings is only about 30 
percent of that value, or about $334.\159\ This $334 is within the 
large standard deviation in Greene et al. (2018) for the willingness to 
pay to reduce fuel costs, but it is far lower than both the mean of 
$1,880 (160 percent of that value) and the median of $990 (85 percent 
of that value) per one cent per mile in the paper. On the other hand, 
the 2015 NAS report (cited in the 2021 NAS report) observed that 
automakers ``perceive that typical consumers would pay upfront for only 
one to four years of fuel savings'' (pp. 9-10),\160\ a range of values 
within that identified in Greene et al. (2018) for consumer response, 
but well below the median or mean. Thus, it appears possible that 
automakers operate under a different perception of consumer willingness 
to pay for additional fuel economy than how consumers actually behave. 
The CCEMS model does not differentiate between automaker perception and 
consumer perception of the value of additional fuel economy in its 
sales modeling.
---------------------------------------------------------------------------

    \159\ See Greene et al. (2018), Footnote 157. Greene et al. 
(2018) cite a ballpark value of reducing driving costs by $0.01/mile 
as $1150, but does not provide enough detail to replicate their 
analysis perfectly. The 30% estimate is calculated by assuming, 
following assumptions in Greene et al. (2018), that a vehicle is 
driven 15,000 miles per year for 13.5 years, 10% discount rate. 
Those figures produce a ``present value of miles'' of 108,600; thus, 
a $0.01/mile change in the cost of driving would be worth $1086. In 
contrast, saving $0.01/mile for 2.5 years using these assumptions is 
worth about $318, or 29% of the value over 13.5 years. Multiplying 
Greene et al.'s 29 percent to $1150 = $334.
    \160\ National Research Council (2015). Cost, Effectiveness, and 
Deployment of Fuel Economy Technologies for Light-Duty Vehicles. 
Washington, DC: The National Academies Press. https://doi.org/10.17226/21744, p. 9-10.
---------------------------------------------------------------------------

    In addition, setting the elasticity of demand at -1 in the SAFE 
FRIA was based on literature more than 25 years old. EPA is currently 
working to review more recent estimates of the elasticity of demand for 
new vehicles. A smaller elasticity would not change the direction of 
sales effects, but it would reduce the magnitude of the effects.
    The CCEMS model also makes use of a dynamic fleet share model (SAFE 
FRIA p. 877) that estimates, separately, the shares of passenger cars 
and light trucks based on vehicle characteristics, and then adjusts 
them so that the market shares sum to one. The model also includes the 
effects of the standards on vehicle scrappage based on a statistical 
analysis (FRIA starting p. 926). The model looks for associations 
between vehicle age, change in new vehicle prices, fuel prices, cost 
per mile of driving, and macroeconomic measures and the scrappage rate, 
with different equations for cars, SUVs/vans, and pickups. EPA's 
project to review new vehicle demand elasticities also includes a 
review of the literature on the relationship between new and used 
vehicle markets and scrappage.
    For this proposal, EPA is maintaining these assumptions for its 
modeling. We also examine a sensitivity case using an elasticity of -
0.4. We hope to complete our work on both the vehicle demand elasticity 
and scrappage in time to be able to consider it for use in analyses 
that will be developed for the final rule.
    With the modeling assumptions that both automakers and vehicle 
buyers consider 2.5 years of future fuel consumption in the purchase 
decision and that the demand elasticity is -1, vehicle sales would 
decrease by roughly 2 percent compared to sales in the SAFE rule, as 
discussed in more detail in DRIA Chapter 8.1.4. In contrast, when 
modeled using a demand elasticity of -0.4, sales decrease by between 
0.5 and 1 percent. If, however, automakers underestimate consumers' 
valuation of fuel economy, then sales may increase relative to the 
baseline under the proposed standards.

C. Changes in Fuel Consumption

    The proposed standards will reduce not only GHG emissions but also 
fuel consumption. Reducing fuel consumption is a significant means of 
reducing GHG emissions from the transportation fleet. Table 46 shows 
the estimated fuel consumption changes under the proposed standards 
relative to the No Action scenario and include rebound effects, credit 
usage and advanced technology multiplier use.
    The largest changes in fuel consumption come from gasoline, which 
follows from our projection that improvements to gasoline vehicles will 
be the primary way that manufacturers meet the proposed standards. By 
2050, our proposal would reduce gasoline consumption by more than 290 
million barrels--a nearly 10 percent reduction in U.S. gasoline 
consumption. Since only about 8 percent of the fleet is projected to be 
either EV or PHEV by MY2026 to meet the proposed standards, we project 
smaller changes in the electricity to fuel these vehicles.

[[Page 43789]]

                         Table 46--Change in Fuel Consumption From the Light-Duty Fleet
----------------------------------------------------------------------------------------------------------------
                                                     Gasoline       Percent of      Electricity     Percent of
                                                     (million        2020 U.S.       (gigawatt       2020 U.S.
                                                     barrels)       consumption       hours)        consumption
----------------------------------------------------------------------------------------------------------------
2023............................................              -9            -0.3             929             0.0
2026............................................             -43            -1.5           6,798             0.2
2030............................................            -124            -4.2          19,017             0.5
2035............................................            -211            -7.2          30,735             0.8
2040............................................            -263            -8.9          38,228             1.0
2050............................................            -291            -9.9          48,122             1.3
----------------------------------------------------------------------------------------------------------------
Notes: One barrel (BBL) contains 42 gallons of gasoline; according to the Energy Information Administration
  (EIA), US gasoline consumption in 2020 was 123.49 billion gallons (see https://www.eia.gov/tools/faqs/faq.php?id=23&t=10, last accessed July 19, 2021), roughly 16 percent less (due to the coronavirus pandemic)
  than the highest consumption on record (2018). According to the Department of Energy, there are 0.031 kWh of
  electricity per gallon gasoline equivalent, the metric reported by the CCEMS model for electricity consumption
  and used here to convert to kWh. According to statista.com, the US consumed 3,802 terawatt hours of
  electricity in 2020.

    With changes in fuel consumption come associated changes in the 
amount of time spent refueling vehicles. Consistent with the 
assumptions used in the SAFE FRM (and presented in Table 47), the costs 
of time spent refueling are calculated as the total amount of time the 
driver of a typical vehicle would spend refueling multiplied by the 
value of their time. If less time is spent refueling vehicles under the 
proposed standards, then a refueling time savings would be incurred.

                          Table 47--CCEMS Inputs Used To Estimate Refueling Time Costs
----------------------------------------------------------------------------------------------------------------
                                                                       Cars          Vans/SUVs        Pickups
----------------------------------------------------------------------------------------------------------------
  Fixed Component of Average Refueling Time in Minutes (by Fuel
                              Type)
----------------------------------------------------------------------------------------------------------------
Gasoline........................................................             3.5             3.5             3.5
Ethanol-85......................................................             3.5             3.5             3.5
Diesel..........................................................             3.5             3.5             3.5
Electricity.....................................................             3.5             3.5             3.5
Hydrogen........................................................               0               0               0
Compressed Natural Gas..........................................               0               0               0
Average Tank Volume Refueled....................................              65              65              65
Value of Travel Time per Vehicle (2018 $/hour)..................           20.46           20.79           20.79
----------------------------------------------------------------------------------------------------------------

D. Greenhouse Gas Emission Reduction Benefits

    EPA estimated the climate benefits for this proposed rulemaking 
using measures of the social cost of three GHGs: Carbon, methane, and 
nitrous oxide. While the program also accounts for reduction in HFCs 
through the AC credits program, EPA has not quantified the associated 
emission reductions. The social cost of each gas (i.e., the social cost 
of carbon (SC-CO2), methane (SC-CH4), and nitrous oxide (SC-N2O)) is 
the monetary value of the net harm to society associated with a 
marginal increase in emissions in a given year, or the benefit of 
avoiding that increase. Collectively, these values are referenced as 
the ``social cost of greenhouse gases'' (SC-GHG). In principle, SC-GHG 
includes the value of all climate change impacts, including (but not 
limited to) changes in net agricultural productivity, human health 
effects, property damage from increased flood risk and natural 
disasters, disruption of energy systems, risk of conflict, 
environmental migration, and the value of ecosystem services. The SC-
GHG therefore, reflects the societal value of reducing emissions of the 
gas in question by one metric ton.
    We estimate the global social benefits of CO2, CH4, and N2O 
emission reductions expected from this proposed rule using the SC-GHG 
estimates presented in the February 2021 Technical Support Document 
(TSD): Social Cost of Carbon, Methane, and Nitrous Oxide Interim 
Estimates under E.O. 13990 (IWG 2021). These SC-GHG estimates are 
interim values developed under E.O. 13990 for use in benefit-cost 
analyses until an improved estimate of the impacts of climate change 
can be developed based on the best available climate science and 
economics. As discussed in Section 3.3 of the RIA, these interim SC-GHG 
estimates have a number of limitations, including that the models used 
to produce them do not include all of the important physical, 
ecological, and economic impacts of climate change recognized in the 
climate-change literature and that several model input assumptions are 
outdated. As discussed in the February 2021 TSD, the Interagency 
Working Group on the Social Cost of Greenhouse Gases (IWG) finds that, 
taken together, the limitations suggest that these SC-GHG estimates 
likely underestimate the damages from GHG emissions. The IWG is 
currently working on a comprehensive update of the SC-GHG estimates (to 
be released by January 2022 under E.O. 13990) taking into consideration 
recommendations from the National Academies of Sciences, Engineering 
and Medicine, recent scientific literature, public comments received on 
the February 2021 TSD and other input from experts and diverse 
stakeholder groups. We request comment on this approach to estimating 
social benefits of GHG in this rulemaking in light of the ongoing 
interagency process. See Section VII.I for a summary of the monetized 
GHG benefits and Section 3.3 of the RIA for more on the application of 
SC-GHG estimates.

E. Non-Greenhouse Gas Health Impacts

    It is important to quantify the health and environmental impacts 
associated with the proposed program because a failure to adequately 
consider ancillary impacts could lead to an incorrect assessment of a 
program's costs and

[[Page 43790]]

benefits. Moreover, the health and other impacts of exposure to 
criteria air pollutants and airborne toxics tend to occur in the near 
term, while most effects from reduced climate change are likely to 
occur over a time frame of several decades or longer. Ideally, human 
health benefits would be estimated based on changes in ambient 
PM2.5 and ozone as determined by full-scale air quality 
modeling. However, the projected non-GHG emissions impacts associated 
with the proposal would be expected to contribute to very small changes 
in ambient air quality (see Preamble Section V.C for more detail).
    In lieu of air quality modeling, we use a reduced-form benefit-per-
ton (BPT) approach to inform our assessment of health impacts, which is 
conceptually consistent with EPA's use of BPT estimates in several 
previous RIAs.161 162 In this approach, the 
PM2.5-related BPT values are the total monetized human 
health benefits (the sum of the economic value of the reduced risk of 
premature death and illness) that are expected from reducing one ton of 
directly-emitted PM2.5 or PM2.5 precursor such as 
NOX or SO2. We note, however, that the complex, 
non-linear photochemical processes that govern ozone formation prevent 
us from developing reduced-form ozone BPT values. This is an important 
limitation to recognize when using the BPT approach.
---------------------------------------------------------------------------

    \161\ U.S. Environmental Protection Agency (U.S. EPA). 2012. 
Regulatory Impact Analysis for the Final Revisions to the National 
Ambient Air Quality Standards for Particulate Matter. EPA452/R-12-
003. Office of Air Quality Planning and Standards, Health and 
Environmental Impacts Division, Research Triangle Park, NC. 
December. Available at: http://www.epa.gov/ttnecas1/regdata/RIAs/finalria.pdf.
    \162\ U.S. Environmental Protection Agency (U.S. EPA). 2014. 
Regulatory Impact Analysis for the Proposed Carbon Pollution 
Guidelines for Existing Power Plants and Emission Standards for 
Modified and Reconstructed Power Plants. EPA-542/R-14-002. Office of 
Air Quality Planning and Standards, Research Triangle Park, NC. 
June. Available at http://www.epa.gov/ttnecas1/regdata/RIAs/111dproposalRIAfinal0602.pdf.
---------------------------------------------------------------------------

    For tailpipe emissions, we apply national PM2.5-related 
BPT values that were recently derived for the ``Onroad Light Duty 
Vehicle'' sector.\163\ The onroad light-duty vehicle BPT values were 
derived using detailed mobile sector source-apportionment air quality 
modeling, and apply EPA's existing method for using reduced-form tools 
to estimate PM2.5-related benefits.164 165 
Compared to values that EPA has used in the past,\166\ these BPT values 
provide better resolution by mobile sector and geographic area, two 
features that make them especially useful for quantifying the benefits 
of reducing emissions from the onroad light-duty sector.
---------------------------------------------------------------------------

    \163\ Wolfe, P.; Davidson, K.; Fulcher, C.; Fann, N.; Zawacki, 
M.; Baker, K. R. 2019. Monetized Health Benefits Attributable to 
Mobile Source Emission Reductions across the United States in 2025. 
Sci. Total Environ. 650, 2490-2498. https://doi.org/10.1016/J.SCITOTENV.2018.09.273. Also see https://www.epa.gov/benmap/mobile-sector-source-apportionment-air-quality-and-benefits-ton.
    \164\ Zawacki, M.; Baker, K. R.; Phillips, S.; Davidson, K.; 
Wolfe, P. 2018. Mobile Source Contributions to Ambient Ozone and 
Particulate Matter in 2025. Atmos. Environ. 188, 129-141.
    \165\ Fann, N.; Fulcher, C. M.; Baker, K. 2013. The Recent and 
Future Health Burden of Air Pollution Apportioned across U.S. 
Sectors. Environ. Sci. Technol. 47 (8), 3580-3589. https://doi.org/10.1021/es304831q.
    \166\ US EPA, 2018. Technical Support Document: Estimating the 
Benefit per Ton of Reducing PM2.5 Precursors from 17 
Sectors. 2018. Office of Air Quality Planning and Standards. 
Research Triangle Park, NC.
---------------------------------------------------------------------------

    To monetize the PM2.5-related impacts of upstream 
emissions, we apply BPT values that were developed for the refinery 
sector.\167\ While total upstream emissions also include electricity 
generating unit sources, petroleum extraction, storage and transport 
sources, as well as sources upstream from the refinery, the modeling 
tool used to support this analysis only provides estimates of upstream 
emissions impacts aggregated across all sources. Furthermore, we assume 
the majority of upstream emission reductions associated with the 
proposal would be related to domestic onsite refinery emissions and 
domestic crude production, because the fleet penetration of electric 
vehicles attributed to the proposed standards is relatively small 
(i.e., the change in electric vehicle penetration is projected to 
change from 4 percent in the No Action case to 8 percent under the 
proposed standards). We therefore believe for purposes of this proposed 
rule it is appropriate to apply the refinery values to all upstream 
emissions. We solicit comment on this approach and any alternative 
approaches that we should adopt for the final rule.
---------------------------------------------------------------------------

    \167\ U.S. Environmental Protection Agency (U.S. EPA). 2018. 
Technical Support Document: Estimating the Benefit per Ton of 
Reducing PM2.5 Precursors from 17 Sectors. 2018. Office 
of Air Quality Planning and Standards. Research Triangle Park, NC.
---------------------------------------------------------------------------

    EPA bases its benefits analyses on peer-reviewed studies of air 
quality and health effects and peer-reviewed studies of the monetary 
values of public health and welfare improvements. Very recently, EPA 
updated its approach to estimating the benefits of changes in 
PM2.5 and ozone.168 169 These updates were based 
on information drawn from the recent 2019 PM2.5 and 2020 
Ozone Integrated Science Assessments (ISAs), which were reviewed by the 
Clean Air Science Advisory Committee (CASAC) and the 
public.170 171 Unfortunately, EPA has not had an opportunity 
to update its BPT estimates to reflect these updates in time for this 
proposal. Instead, we use PM2.5 BPT estimates that are based 
on the review of the 2009 PM ISA \172\ and include a mortality risk 
estimate derived from the Krewski et al. (2009) \173\ analysis of the 
American Cancer Society (ACS) cohort and nonfatal illnesses consistent 
with benefits analyses performed for the analysis of the final Tier 3 
Vehicle Rule,\174\ the final 2012 PM NAAQS Revision,\175\ and the final 
2017-2025 Light-duty Vehicle GHG Rule.\176\ We expect this lag in 
updating our BPT

[[Page 43791]]

estimates to have only a minimal impact on total PM benefits, since the 
underlying mortality risk estimate based on the Krewski study is 
identical to an updated PM2.5 mortality risk estimate 
derived from an expanded analysis of the same ACS cohort.\177\ The 
Agency is currently working to update its BPT estimates to reflect 
these recent updates for use in future rulemaking analyses. More 
information on the BPT approach to valuing PM-related benefits can be 
found in RIA Chapter 7.2 that accompanies this proposal.
---------------------------------------------------------------------------

    \168\ U.S. Environmental Protection Agency (U.S. EPA). 2021. 
Regulatory Impact Analysis for the Final Revised Cross-State Air 
Pollution Rule (CSAPR) Update for the 2008 Ozone NAAQS. EPA-452/R-
21-002. March.
    \169\ U.S. Environmental Protection Agency (U.S. EPA). 2021. 
Estimating PM2.5- and Ozone-Attributable Health Benefits. 
Technical Support Document (TSD) for the Final Revised Cross-State 
Air Pollution Rule Update for the 2008 Ozone Season NAAQS. EPA-HQ-
OAR-2020-0272. March.
    \170\ U.S. Environmental Protection Agency (U.S. EPA). 2019. 
Integrated Science Assessment (ISA) for Particulate Matter (Final 
Report, 2019). U.S. Environmental Protection Agency, Washington, DC, 
EPA/600/R-19/188, 2019.
    \171\ U.S. Environmental Protection Agency (U.S. EPA). 2020. 
Integrated Science Assessment (ISA) for Ozone and Related 
Photochemical Oxidants (Final Report). U.S. Environmental Protection 
Agency, Washington, DC, EPA/600/R-20/012, 2020.
    \172\ U.S. Environmental Protection Agency (U.S. EPA). 2009. 
Integrated Science Assessment for Particulate Matter (Final Report). 
EPA-600-R-08-139F. National Center for Environmental Assessment--RTP 
Division, Research Triangle Park, NC. December. Available at: http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=216546.
    \173\ Krewski D., M. Jerrett, R.T. Burnett, R. Ma, E. Hughes, Y. 
Shi, et al. 2009. Extended Follow-Up and Spatial Analysis of the 
American Cancer Society Study Linking Particulate Air Pollution and 
Mortality. HEI Research Report, 140, Health Effects Institute, 
Boston, MA.
    \174\ U.S. Environmental Protection Agency. (2014). Control of 
Air Pollution from Motor Vehicles: Tier 3 Motor Vehicle Emission and 
Fuel Standards Final Rule: Regulatory Impact Analysis, Assessment 
and Standards Division, Office of Transportation and Air Quality, 
EPA-420-R-14-005, March 2014. Available on the internet: http://www3.epa.gov/otaq/documents/tier3/420r14005.pdf.
    \175\ U.S. Environmental Protection Agency. (2012). Regulatory 
Impact Analysis for the Final Revisions to the National Ambient Air 
Quality Standards for Particulate Matter, Health and Environmental 
Impacts Division, Office of Air Quality Planning and Standards, EPA-
452-R-12-005, December 2012. Available on the internet: http://www3.epa.gov/ttnecas1/regdata/RIAs/finalria.pdf.
    \176\ U.S. Environmental Protection Agency (U.S. EPA). (2012). 
Regulatory Impact Analysis: Final Rulemaking for 2017-2025 Light-
Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average 
Fuel Economy Standards, Assessment and Standards Division, Office of 
Transportation and Air Quality, EPA-420-R-12-016, August 2012. 
Available on the internet at: http://www3.epa.gov/otaq/climate/documents/420r12016.pdf.
    \177\ Turner, MC, Jerrett, M, Pope, A, III, Krewski, D, Gapstur, 
SM, Diver, WR, Beckerman, BS, Marshall, JD, Su, J, Crouse, DL and 
Burnett, RT (2016). Long-term ozone exposure and mortality in a 
large prospective study. Am J Respir Crit Care Med 193(10): 1134-
1142.
---------------------------------------------------------------------------

    The PM-related BPT estimates used in this analysis are provided in 
Table 48. We multiply these BPT values by projected national changes in 
NOX, SO2 and directly-emitted PM2.5, 
in tons, to estimate the total PM2.5-related monetized human 
health benefits associated with the proposed program. As the table 
indicates, these values differ among pollutants and depend on their 
original source, because emissions from different sources can result in 
different degrees of population exposure and resulting health impacts. 
The BPT values for emissions of non-GHG pollutants from both onroad 
light-duty vehicle use and upstream sources such as fuel refineries 
will increase over time. These projected increases reflect rising 
income levels, which increase affected individuals' willingness to pay 
for reduced exposure to health threats from air pollution. The BPT 
values also reflect future population growth and increased life 
expectancy, which expands the size of the population exposed to air 
pollution in both urban and rural areas, especially among older age 
groups with the highest mortality risk.\178\
---------------------------------------------------------------------------

    \178\ For more information about income growth adjustment 
factors and EPA's population projections, please refer to the 
following: https://www.epa.gov/sites/production/files/2015-04/documents/benmap-ce_user_manual_march_2015.pdf.

                                                     Table 48--PM2.5-Related Benefit-per-Ton Values
                                                                       [2018$] \a\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Onroad light duty vehicles \b\                        Upstream Sources\c\
                                                         -----------------------------------------------------------------------------------------------
                          Year                             Direct PM2.5                                    Direct PM2.5
                                                                                SO2             NOX                             SO2             NOX
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Estimated Using a 3 Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020....................................................        $600,000        $150,000          $6,400        $380,000         $81,000          $8,100
2025....................................................         660,000         170,000           6,900         420,000          90,000           8,800
2030....................................................         740,000         190,000           7,600         450,000          98,000           9,600
2035....................................................         830,000         210,000           8,400  ..............  ..............  ..............
2040....................................................         920,000         230,000           9,000  ..............  ..............  ..............
2045....................................................       1,000,000         250,000           9,600  ..............  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Estimated Using a 7 Percent Discount Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020....................................................         540,000         140,000           5,800         350,000          74,000           7,300
2025....................................................         600,000         150,000           6,200         380,000          80,000           7,900
2030....................................................         660,000         170,000           6,800         410,000          88,000           8,600
2035....................................................         750,000         190,000           7,500  ..............  ..............  ..............
2040....................................................         830,000         210,000           8,200  ..............  ..............  ..............
2045....................................................         900,000         230,000           8,600  ..............  ..............  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ The benefit-per-ton estimates presented in this table are based on estimates derived from the American Cancer Society cohort study (Krewski et al.,
  2009). They also assume either a 3 percent or 7 percent discount rate in the valuation of premature mortality to account for a twenty-year segmented
  premature mortality cessation lag.
\b\ Benefit-per-ton values for onroad light duty vehicles were estimated for the years 2020, 2025, 2030, 2035, 2040, and 2045. We hold values constant
  for intervening years (e.g., the 2020 values are assumed to apply to years 2021-2024; 2025 values for years 2026-2029; and 2045 values for years 2046
  and beyond).
\c\ Benefit-per-ton values for upstream sources were estimated only for the years 2020, 2025 and 2030. We hold values constant for intervening years and
  2030 values are applied to years 2031 and beyond.
\d\ We assume for the purpose of this analysis that total ``upstream emissions'' are most appropriately monetized using refinery sector benefit per-ton
  values.

    The monetized PM2.5 health impacts of the proposed 
standards are presented in Table 54. Using PM2.5-related BPT 
estimates to monetize the non-GHG impacts of the proposed standards 
omits ozone-related impacts, unquantified PM-related health impacts, as 
well as other impacts associated with reductions in exposure to air 
toxics, ecosystem benefits, and visibility improvement. Section V of 
this preamble provides a qualitative description of both the health and 
environmental effects of the non-GHG pollutants impacted by the 
proposed program.

F. Energy Security Impacts

    This proposal is designed to require reductions in the GHG 
emissions of light-duty vehicles (LDV) and thereby reduce fuel 
consumption. In turn, this proposed LDV GHG (2023-2026) proposal would 
help to reduce U.S. petroleum imports. A reduction of U.S. petroleum 
imports reduces both financial and strategic risks caused by potential 
sudden disruptions in the supply of imported petroleum to the U.S., 
thus increasing U.S. energy security.
    In order to understand the energy security implications of reducing 
U.S. oil imports, EPA has worked with Oak Ridge National Laboratory 
(ORNL), which has developed approaches for evaluating the social costs 
and energy security implications of oil use. When conducting this 
analysis, ORNL considers the full cost of importing petroleum into the 
U.S. The full economic cost (i.e., oil security premiums, as labeled 
below) is defined to include two components in addition

[[Page 43792]]

to the purchase price of petroleum itself. These are: (1) The higher 
costs/benefits for oil imports resulting from the effect of changes in 
U.S. demand on the world oil price (i.e., the ``demand'' or 
``monopsony'' costs/benefits); and (2) the risk of reductions in U.S. 
economic output and disruption to the U.S. economy caused by sudden 
disruptions in the supply of imported oil to the U.S. (i.e., the 
avoided macroeconomic disruption/adjustment costs).
    For this proposed rule, EPA is using oil security premiums 
estimated using ORNL's methodology, which incorporates oil price 
projections and energy market and economic trends from the EIA's Annual 
Energy Outlook (AEO). For this analysis, we are using oil security 
premiums based on AEO 2018, but for the final rule we intend to update 
this analysis to AEO 2021. We only consider the avoided macroeconomic 
disruption/adjustment costs oil security premiums (i.e., labeled 
macroeconomic oil security premiums below), since the monopsony impacts 
of this proposed rule are considered transfer payments. See previous 
EPA GHG vehicle rules for a discussion of the monopsony oil security 
premiums.\179\ In addition, EPA and ORNL have worked together to revise 
the oil security premiums based upon recent energy security literature 
(see Chapter 3.2.5 of the DRIA accompanying this proposed rule for how 
the macroeconomic oil security premiums have been updated based upon a 
review of recent energy security literature on this topic). We do not 
consider military cost impacts from this proposed rule due to 
methodological issues in quantifying these impacts (see Chapter 3.2.3 
of the DRIA for a review of the literature on the military costs 
impacts of U.S. oil import reductions).
---------------------------------------------------------------------------

    \179\ See Energy Security Impacts. Effect of Oil Use on the 
Long-Run Oil Price. Section 10. 5.2.1. pp.10-25. 2016. Draft 
Technical Assessment Report: Midterm Evaluation of Light-Duty 
Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel 
Economy Standards for Model Years 2022-2025. EPA-420-D-16-900.
---------------------------------------------------------------------------

    To calculate the energy security benefits of this proposed rule, 
EPA is using the ORNL oil security premium methodology with: (1) 
Estimated oil savings calculated by EPA and (2) an oil import reduction 
factor of 91 percent, which shows how much U.S. oil imports are reduced 
from changes in U.S. oil consumption. Each of these assumptions is 
discussed in more detail in Chapter 3.2 of the accompanying DRIA. Below 
EPA presents the macroeconomic oil security premiums used for the 
proposed standards for selected years from 2023-2050 in Table 49.

  Table 49--Macroeconomic Oil Security Premiums for Selected Years From
                                2023-2050
                            [2018$/Barrel] *
------------------------------------------------------------------------
                                                    Macroeconomic oil
                  Year (range)                      security premiums
                                                         (range)
------------------------------------------------------------------------
2023...........................................      $3.63 ($1.22-$6.13)
2026...........................................      $3.78 ($1.17-$6.37)
2030...........................................      $3.99 ($1.13-$6.74)
2035...........................................      $4.30 ($1.14-$7.35)
2040...........................................      $4.66 ($1.26-$7.96)
2050...........................................      $5.57 ($1.89-$9.53)
------------------------------------------------------------------------
* Top values in each cell are the midpoints, the values in parentheses
  are the 90 percent confidence intervals.

G. Impacts of Additional Driving

    As discussed in Chapter 3.1 of the RIA, the assumed rebound effect 
might occur when an increase in vehicle fuel efficiency encourages 
people to drive more as a result of the lower cost per mile of driving. 
Along with the safety considerations associated with increased vehicle 
miles traveled (described in Section VII.H of this preamble), 
additional driving can lead to other costs and benefits that can be 
monetized.
    The increase in travel associated with the rebound effect produces 
additional benefits to vehicle drivers, which reflect the value of the 
added (or more desirable) social and economic opportunities that become 
accessible with additional travel. Consistent with assumptions used in 
the SAFE FRM, this analysis estimates the economic benefits from 
increased rebound-effect driving as the owner/operator surplus from the 
additional accessibility it provides.
    The equation for the calculation of the Drive Value:

Drive Value = (1/2) (VMTrebound) [($/mile)NoAction-($/
mile)Action]

    The economic value of the increased owner/operator surplus provided 
by added driving is one half of the product of the decline in vehicle 
operating costs per vehicle-mile and the resulting increase in the 
annual number of miles driven. Because it depends on the extent of 
improvement in fuel consumption, the value of benefits from increased 
vehicle use changes by model year and varies among alternative 
standards.
    In contrast to the benefits of additional driving are the costs 
associated with that driving. If net operating costs of the vehicle 
decline, then we expect a positive rebound effect. Increased vehicle 
use associated with a positive rebound effect also contributes to 
increased traffic congestion and highway noise. Depending on how the 
additional travel is distributed throughout the day and where it takes 
place, additional vehicle use can contribute to traffic congestion and 
delays by increasing traffic volumes on facilities that are already 
heavily traveled during peak periods. These added delays impose higher 
costs on other road users in the form of increased travel time and 
operating expenses. Because drivers do not take these external costs 
into account in deciding when and where to travel, they must be 
accounted for separately as a cost of the added driving associated with 
the rebound effect.
    EPA relies on estimates of congestion and noise costs developed by 
the Federal Highway Administration to estimate the increased external 
costs caused by added driving due to the rebound effect. EPA employed 
estimates from this source previously in the analysis accompanying the 
light-duty 2010 and 2012 vehicle rulemakings and the 2016 Draft TAR and 
Proposed Determination. We continue to find them appropriate for this 
analysis after reviewing the procedures used by FHWA to develop them 
and considering other available estimates of these values.
    FHWA's congestion cost estimates focus on freeways because non-
freeway effects are less serious due to lower traffic volumes and 
opportunities to re-route around the congestion. EPA, however, applied 
the congestion cost to the overall VMT. The results of this analysis 
potentially overestimate the congestions costs associated with 
increased vehicle use, and thus lead to a conservative estimate of net 
benefits.
    EPA has used FHWA's ``Middle'' estimates for marginal congestion 
and noise costs caused by increased travel from vehicles. This approach 
is consistent with the methodology used in our prior analyses. The 
values used are shown in Table 50.
    These congestion costs differ from those used in the SAFE FRM and, 
as stated, are consistent with those used in the 2016 Draft TAR and the 
2016 Proposed Determination. For this proposal, EPA has chosen not to 
adopt the approach from the SAFE FRM where scaling factors were used to 
adjust the underlying FHWA congestion cost estimates. In particular, 
EPA now finds that scaling the marginal per-mile congestion costs by 
the change in VMT per lane-mile on U.S. highways from 1997 to 2017 does 
not account for changes in average speeds and improved road design, and 
may have the potential to over-estimate costs. We

[[Page 43793]]

are continuing to use the FHWA congestion estimates without scaling, 
consistent with the SAFE NPRM and prior EPA rulemakings, and adjusting 
to measure in 2018 dollars. EPA invites comments on the congestion cost 
values and methodology.

          Table 50--Costs Associated With Congestion and Noise
                     [2018 Dollars per vehicle mile]
------------------------------------------------------------------------
                                       Passenger
                                         cars      Van/SUVs     Pickups
------------------------------------------------------------------------
Congestion..........................      0.0634      0.0634      0.0566
Noise...............................      0.0009      0.0009      0.0009
------------------------------------------------------------------------

H. Safety Considerations in Establishing GHG Standards

    Consistent with previous light-duty GHG analyses, EPA has assessed 
the potential of the proposed MY 2023-2026 standards to affect vehicle 
safety. EPA applied the same historical relationships between mass, 
size, and fatality risk that were established and documented in the 
SAFE rulemaking. These relationships are based on the statistical 
analysis of historical crash data, which included an analysis performed 
by using the most recently available crash studies based on data for 
model years 2007 to 2011. EPA used the findings of this analysis to 
estimate safety impacts of the modeled mass reductions over the 
lifetimes of new vehicles in response to MY 2023-2026 standards. As in 
initially promulgating the GHG standards, the MTE Proposed 
Determination and this proposal, EPA's assessment is that manufacturers 
can achieve the MY 2023-2026 standards while using modest levels of 
mass reduction as one technology option among many. On the whole, EPA 
considers safety impacts in the context of all projected health impacts 
from the proposal including public health benefits from the projected 
reductions in air pollution.
    The projected change in risk of fatal and non-fatal injuries is 
influenced by changes in fleet mix (car/truck share), vehicle scrappage 
rates, distribution of VMT among vehicles in the fleet and vehicle 
mass. Because the empirical analysis described previously did not 
produce any mass-safety coefficients with a statistically significant 
difference from zero, we analyzed safety results over the range of 
coefficient values. We project that the effect of the proposed 
standards on annual fatalities per billion miles driven ranges from a 
decrease of 0.25 percent to an increase of 0.38 percent, with a central 
estimate of a 0.07 percent increase.\180\
---------------------------------------------------------------------------

    \180\ These fatality risk values are the average of changes in 
annual risk through 2050. The range of values is based on the 5% to 
95% confidence interval of mass-safety coefficients presented in the 
SAFE FRM.
---------------------------------------------------------------------------

    In addition to changes in risk, EPA also considered the projected 
impact of the proposed standards on the absolute number of fatal and 
non-fatal injuries. The majority of the fatalities projected would 
result from the projected increased driving--i.e., people choosing to 
drive more due to the lower operating costs of more efficient vehicles. 
Our cost-benefit analysis accounts for both the value of this 
additional driving and its associated risk, which we assume are 
considerations in the decision to drive. The risk valuation associated 
with this increase in driving partially offsets the associated increase 
in societal costs due to increased fatalities and non-fatal injuries.
    This analysis projects that there will be an increase in vehicle 
miles traveled (VMT) under the proposed standards of 449 billion miles 
compared to the No Action scenario through 2050 (an increase of about 
0.5 percent). EPA estimates that vehicle safety, in terms of risk 
measured as the total fatalities per the total distance traveled over 
this period, will remain almost unchanged at 4.642 fatalities per 
billion miles under the proposal, compared to 4.640 fatalities per 
billion miles for the no-action scenario. EPA has also estimated, over 
the same 30 year period, that total fatalities will increase by 2,288, 
with 1,952 deaths attributed to increased driving and 336 deaths 
attributed to the increase in fatality risk. In other words, 
approximately 85 percent of the change in fatalities under these 
proposed standards is due to projected increases in VMT and mobility 
(i.e., people driving more). Our analysis also considered the increase 
in non-fatal injuries. Consistent with the SAFE FRM, EPA assumed that 
non-fatal injuries scale with fatal injuries.
    EPA also estimated the societal costs of these safety impacts using 
assumptions consistent with the SAFE FRM (see Table 51.) Specifically, 
we are continuing to use the cost associated with each fatality of 
$10.4 million. We have also continued to use a scalar of approximately 
1.6 applied to fatality costs to estimate non-fatal injury costs. In 
addition, we have accounted for the driver's inherent valuation of risk 
when making the decision to drive more due to rebound. This risk 
valuation partially offsets the fatal and non-fatal injury costs 
described previously, and, consistent with the SAFE FRM, is calculated 
as 90 percent of the fatal and non-fatal injury costs due to rebound to 
reflect the fact that consumers do not fully evaluate the risks 
associated with this additional driving.

I. Summary of Costs and Benefits

    This section presents a summary of costs, benefits, and net 
benefits of the proposed program. Table 51 shows the estimated annual 
monetized costs of the proposed program for the indicated calendar 
years. The table also shows the present-values (PV) of those costs and 
the annualized costs for the calendar years 2021-2050 using both 3 
percent and 7 percent discount rates.\181\ The table includes an 
estimate of foregone consumer sales surplus, which measures the loss in 
benefits attributed to consumers who would have purchased a new vehicle 
in the absence of the proposed standards.
---------------------------------------------------------------------------

    \181\ For the estimation of the stream of costs and benefits, we 
assume that after implementation of the proposed MY 2023-2026 
standards, the 2026 standards apply to each year thereafter.

[[Page 43794]]

                                                  Table 51--Costs Associated With the Proposed Program
                                                               [Billions of 2018 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Foregone
                                                                 consumer                                                        Non-fatal
                        Calendar year                             sales      Technology   Congestion   Noise ($)     Fatality   crash costs  Total costs
                                                                surplus a    costs ($)       ($)                    costs ($)       ($)          ($)
                                                                   ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023.........................................................         0.26          6.7        0.046      0.00073         0.16         0.26          7.4
2026.........................................................         0.64           15         0.19        0.003         0.61            1           18
2030.........................................................         0.43           14         0.59       0.0095         0.58         0.96           17
2035.........................................................         0.28           12            1        0.017          0.2         0.33           14
2040.........................................................         0.21           11          1.3        0.021       -0.038       -0.062           12
2050.........................................................         0.16          9.9          1.3        0.021      -0.0093       -0.015           11
PV, 3%.......................................................          5.7          210           15         0.24          4.5          7.6          240
PV, 7%.......................................................          3.7          130          7.3         0.12          3.4          5.6          150
Annualized, 3%...............................................         0.29           11         0.75        0.012         0.23         0.39           12
Annualized, 7%...............................................          0.3           10         0.59       0.0095         0.27         0.45           12
--------------------------------------------------------------------------------------------------------------------------------------------------------
a ``Foregone Consumer Sales Surplus'' refers to the difference between a vehicle's price and the buyer's willingness to pay for the new vehicle; the
  impact reflects the reduction in new vehicle sales described in Section VII.B. See Section 8 of CAFE_Model_Documentation_FR_2020.pdf in the docket for
  more information.

    Table 52 shows the undiscounted annual monetized fuel savings of 
the proposed program. The table also shows the present- and annualized-
values of those fuel savings for the same calendar years using both 3 
percent and 7 percent discount rates. The net benefits calculations use 
the aggregate value of fuel savings (calculated using pre-tax fuel 
prices) since savings in fuel taxes do not represent a reduction in the 
value of economic resources utilized in producing and consuming fuel. 
Note that the fuel savings shown in Table 52 result from reductions in 
fleet-wide fuel use and include rebound effects, credit usage and 
advanced technology multiplier use. Thus, fuel savings grow over time 
as an increasing fraction of the fleet is projected to meet the 
proposed standards.

                           Table 52--Fuel Savings Associated With the Proposed Program
                                           [Billions of 2018 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                    Retail fuel      Fuel tax      Pre-tax fuel
                          Calendar year                             savings ($)     savings ($)     savings ($)
----------------------------------------------------------------------------------------------------------------
2023............................................................            0.78             0.2            0.58
2026............................................................             3.5            0.95             2.6
2030............................................................              12             2.7             8.9
2035............................................................              21             4.4              17
2040............................................................              28             5.4              23
2050............................................................              32             5.6              26
PV, 3%..........................................................             310              62             250
PV, 7%..........................................................             150              32             120
Annualized, 3%..................................................              16             3.2              13
Annualized, 7%..................................................              12             2.5             9.9
----------------------------------------------------------------------------------------------------------------
Note: Electricity expenditure increases are included.

    Table 53 presents estimated annual monetized benefits from non-
emission sources for the indicated calendar years. The table also shows 
the present- and annualized-value of those benefits for the calendar 
years 2021-2050 using both 3 percent and 7 percent discount rates.

                                  Table 53--Benefits From Non-Emission Sources
                                           [Billions of 2018 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                      Energy        Total  non-
                  Calendar year                     Drive value   Refueling time     security        emission
                                                        ($)         savings ($)    benefits ($)    benefits ($)
----------------------------------------------------------------------------------------------------------------
2023............................................           0.065          -0.019            0.03           0.076
2026............................................            0.25           -0.12            0.15            0.28
2030............................................            0.83           -0.15            0.46             1.1
2035............................................             1.6            -0.1            0.83             2.3
2040............................................             2.1          -0.017             1.1             3.2
2050............................................             2.3             0.1             1.5             3.9
PV, 3%..........................................              23           -0.94              13              35
PV, 7%..........................................              11           -0.72             6.1              17
Annualized, 3%..................................             1.2          -0.048            0.64             1.8

[[Page 43795]]

 
Annualized, 7%..................................            0.92          -0.058            0.49             1.4
----------------------------------------------------------------------------------------------------------------
* See Section VII.G, Section VII.C and Section VII.F for more on drive value, refueling time and energy
  security, respectively.

    Table 54 presents estimated annual monetized benefits from non-GHG 
emission sources for the indicated calendar years. The table also shows 
the present- and annualized-values of those benefits for the calendar 
years 2021-2050 using both 3 percent and 7 percent discount rates.

                                                   Table 54--PM2.5-Related Emission Reduction Benefits
                                                             [Billions of 2018 dollars] a b
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Tailpipe benefits ($)           Upstream benefits ($)       Total PM2.5-related benefits
                                                         ----------------------------------------------------------------               ($)
                      Calendar year                                                                                      -------------------------------
                                                               3% DR           7% DR           3% DR           7% DR           3% DR           7% DR
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023....................................................          -0.013          -0.012           0.029           0.027           0.016           0.015
2026....................................................          -0.047          -0.042           0.014           0.015          -0.033          -0.028
2030....................................................           0.035           0.032           0.089           0.084            0.12            0.12
2035....................................................            0.23            0.21            0.34            0.31            0.57            0.52
2040....................................................            0.46            0.41            0.48            0.44            0.94            0.85
2050....................................................            0.74            0.67            0.34            0.31             1.1            0.98
PV......................................................             4.3             1.6             4.5               2             8.8             3.6
Annualized..............................................            0.22            0.13            0.23            0.16            0.45            0.29
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\a\ Note that the non-GHG impacts associated with the standards presented here do not include the full complement of health and environmental effects
  that, if quantified and monetized, would increase the total monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that
  reflect only human health impacts associated with reductions in PM2.5 exposure.
\b\ Calendar year non-GHG benefits presented in this table assume either a 3 percent or 7 percent discount rate in the valuation of PM-related premature
  mortality to account for a twenty-year segmented cessation lag. Note that annual benefits estimated using a 3 percent discount rate were used to
  calculate the present and annualized values using a 3 percent discount rate and the annual benefits estimated using a 7 percent discount rate were
  used to calculate the present and annualized values using a 7 percent discount rate.

    Table 55 shows the benefits of reduced GHG emissions, and 
consequently the annual quantified benefits (i.e., total GHG benefits), 
for each of the four interim social cost of GHG (SC-GHG) values 
estimated by the interagency working group. As discussed in the RIA 
Chapter 3.3, there are some limitations to the SC-GHG analysis, 
including the incomplete way in which the integrated assessment models 
capture catastrophic and non-catastrophic impacts, their incomplete 
treatment of adaptation and technological change, uncertainty in the 
extrapolation of damages to high temperatures, and assumptions 
regarding risk aversion.

                     Table 55--Climate Benefits From Reductions in Greenhouse Gas Emissions
                                           [Billions of 2018 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                    Discount rate and statistic
                                                 ---------------------------------------------------------------
                  Calendar year                                                    2.5% Average       3% 95th
                                                  5% Average ($)  3% Average ($)        ($)       percentile ($)
----------------------------------------------------------------------------------------------------------------
2023............................................           0.063            0.21            0.31            0.63
2026............................................            0.31               1             1.5               3
2030............................................               1             3.2             4.6             9.5
2035............................................               2               6             8.5              18
2040............................................             2.8             8.1              11              25
2050............................................             3.9              10              14              31
PV..............................................              22              91             140             280
Annualized......................................             1.4             4.7             6.7              14
----------------------------------------------------------------------------------------------------------------
Notes:
The present value of reduced GHG emissions is calculated differently than other benefits. The same discount rate
  used to discount the value of damages from future emissions (SC-GHGs at 5, 3, 2.5 percent) is used to
  calculate the present value of SC-GHGs for internal consistency. Annual benefits shown are undiscounted
  values.

[[Page 43796]]

    Table 56 presents estimated annual net benefits for the indicated 
calendar years. The table also shows the present and annualized value 
of those net benefits for the calendar years 2021-2050 using both 3 
percent and 7 percent discount rates. The table includes the benefits 
of reduced GHG emissions (and consequently the annual net benefits) for 
each of the four SC-GHG values considered by EPA. We estimate that the 
total benefits of the proposed program far exceed the costs and would 
result in a net present value of benefits that ranges between $17-330 
billion, depending on which SC-GHG and discount rate is assumed.

  Table 56--Net Benefits (Emission Benefits + Non-Emission Benefits + Fuel Savings - Costs) Associated With the
                                                Proposed Program
                                         [Billions of 2018 dollars] a b
----------------------------------------------------------------------------------------------------------------
                                                                                                   Net benefits,
                                                   Net benefits,   Net benefits,   Net benefits,   with climate
                                                   with climate    with climate    with climate   benefits based
                  Calendar year                   benefits based  benefits based  benefits based  on 3% discount
                                                  on 5% discount  on 3% discount      on 2.5%       rate, 95th
                                                     rate ($)        rate ($)      discount rate  percentile SC-
                                                                                        ($)           GHG ($)
----------------------------------------------------------------------------------------------------------------
2023............................................            -6.6            -6.5            -6.4            -6.1
2026............................................             -14             -14             -13             -12
2030............................................            -5.8            -3.7            -2.3             2.7
2035............................................             7.6              12              14              24
2040............................................              17              22              26              39
2050............................................              23              30              34              51
PV, 3%..........................................              73             140             190             330
PV, 7%..........................................              17              86             140             270
Annualized, 3%..................................             4.1             7.3             9.4              17
Annualized, 7%..................................               1             4.2             6.3              14
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ The present value of reduced GHG emissions is calculated differently than other benefits. The same discount
  rate used to discount the value of damages from future emissions (SC-GHG at 5, 3, 2.5 percent) is used to
  calculate present value of SC-GHGs for internal consistency, while all other costs and benefits are discounted
  at either 3% or 7%. Annual costs and benefits shown are undiscounted values.
\b\ Note that the non-GHG impacts associated with the standards presented here do not include the full
  complement of health and environmental effects that, if quantified and monetized, would increase the total
  monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human
  health impacts associated with reductions in PM2.5 exposure.

    EPA also conducted a separate analysis of the total benefits over 
the model year lifetimes of the 2023 through 2026 model year vehicles. 
In contrast to the calendar year analysis presented in Table 51 through 
Table 56 the model year lifetime analysis below shows the impacts of 
the proposed program on vehicles produced during each of the model 
years 2023 through 2026 over the course of their expected lifetimes. 
The net societal benefits over the full lifetimes of vehicles produced 
during each of the four model years are shown in Table 57 and Table 58 
at both 3 percent and 7 percent discount rates, respectively. Similar 
to the calendar year analysis, the net benefits would exceed the costs 
of the program.

     Table 57--Monetized Vehicle Program Costs, Fuel Savings, Benefits, and Net Benefits Associated With the
                              Lifetimes of 2023-2026 Model Year Light-Duty Vehicles
                                    [Billions, 2018$; 3% discount rate] a b c
----------------------------------------------------------------------------------------------------------------
                                                                   Fuel savings                    Net benefits
                       MY                            Costs ($)          ($)        Benefits ($)         ($)
----------------------------------------------------------------------------------------------------------------
                                                 Present-Values
----------------------------------------------------------------------------------------------------------------
2023............................................             4.8             3.6     0.89 to 4.5    -0.29 to 3.3
2024............................................             5.9               7      1.8 to 8.8      2.8 to 9.8
2025............................................             6.7             8.6         2 to 11       3.9 to 13
2026............................................             8.1              13       3.6 to 17       8.8 to 22
                                                 ---------------------------------------------------------------
    Sum.........................................              26              33       8.2 to 41        15 to 48
----------------------------------------------------------------------------------------------------------------
                                                Annualized-Values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.21            0.16   0.044 to 0.19      -0.0072 to
                                                                                                            0.14
2024............................................            0.26             0.3   0.086 to 0.38    0.13 to 0.43
2025............................................            0.29            0.37     0.1 to 0.46    0.18 to 0.55
2026............................................            0.35            0.58    0.17 to 0.73     0.4 to 0.96
                                                 ---------------------------------------------------------------
    Sum.........................................             1.1             1.4      0.4 to 1.8     0.71 to 2.1
----------------------------------------------------------------------------------------------------------------
Notes:

[[Page 43797]]

 
\a\ Model year values are discounted to 2021; the ``Sum'' represents those discounted values summed across model
  years.
\b\ The range of benefits and net benefits reflects the low to high range of SC-GHG values. The same discount
  rate used to discount the value of damages from future GHG emissions is used to calculate net present value of
  SC-GHGs for internal consistency, while all other costs and benefits are discounted at 3 percent in this
  table.
\c\ Note that the non-GHG impacts associated with the standards presented here do not include the full
  complement of health and environmental effects that, if quantified and monetized, would increase the total
  monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human
  health impacts associated with reductions in PM2.5 exposure.

 Table 58--Monetized Costs, Fuel Savings, Benefits, and Net Benefits Associated With the Lifetimes of 2023-2026
                                         Model Year Light-Duty Vehicles
                                    [Billions, 2018$; 7% discount rate] a b c
----------------------------------------------------------------------------------------------------------------
                                                                   Fuel savings                    Net benefits
                       MY                            Costs ($)          ($)        Benefits ($)         ($)
----------------------------------------------------------------------------------------------------------------
                                                 Present-Values
----------------------------------------------------------------------------------------------------------------
2023............................................             4.4             2.6     0.72 to 4.3     -1.1 to 2.5
2024............................................             5.5             4.7      1.4 to 8.4     0.54 to 7.6
2025............................................             6.1             5.5       1.6 to 10        1 to 9.7
2026............................................             7.3             8.2       2.6 to 16       3.6 to 17
                                                 ---------------------------------------------------------------
    Sum.........................................              23              21       6.3 to 39         4 to 37
----------------------------------------------------------------------------------------------------------------
                                                Annualized-Values
----------------------------------------------------------------------------------------------------------------
2023............................................            0.33            0.19    0.048 to 0.2       -0.089 to
                                                                                                           0.061
2024............................................            0.41            0.35   0.092 to 0.39   0.029 to 0.32
2025............................................            0.45            0.41     0.1 to 0.47   0.064 to 0.43
2026............................................            0.55            0.62    0.18 to 0.74    0.25 to 0.81
                                                 ---------------------------------------------------------------
    Sum.........................................             1.7             1.6     0.42 to 1.8     0.25 to 1.6
----------------------------------------------------------------------------------------------------------------
Notes:
\a\ Model year values are discounted to 2021; the ``Sum'' represents those discounted values summed across model
  years.
\b\ The range of benefits and net benefits reflects the low to high range of SC-GHG values. The same discount
  rate used to discount the value of damages from future GHG emissions is used to calculate net present value of
  SC-GHGs for internal consistency, while all other costs and benefits are discounted at 7 percent in this
  table.
\c\ Note that the non-GHG impacts associated with the standards presented here do not include the full
  complement of health and environmental effects that, if quantified and monetized, would increase the total
  monetized benefits. Instead, the non-GHG benefits are based on benefit-per-ton values that reflect only human
  health impacts associated with reductions in PM2.5 exposure.

J. Impacts on Consumers of Vehicle Costs and Fuel Savings

    Although the primary purpose of this regulatory action is to reduce 
GHG emissions, the impact of the proposed EPA standards on consumers is 
an important consideration for EPA. This chapter discusses the impact 
of the proposed standards on consumer net costs for purchasing and 
fueling vehicles. For further discussion of impacts on vehicle sales, 
see Section VII.B; for impacts on affordability, see Section VII.M.
    EPA estimates that the average cost of a new MY 2026 vehicle will 
increase by $1,044 due to the proposed standards, while we estimate 
that the average per-mile fuel cost in the first year will decrease by 
0.59 cents.\182\ Over time, reductions in fuel consumption will offset 
the increase in upfront costs. For instance, EPA estimates that, over 
the lifetime of a MY 2026 vehicle,\183\ the reduction in fuel costs 
will exceed the increase in vehicle costs by $883, using a 3 percent 
discount rate.\184\
---------------------------------------------------------------------------

    \182\ See U.S. Environmental Protection Agency, ``Fuel Savings 
Offset to Vehicle Costs_20210610.xlsx,'' in the docket for this and 
the other calculations in this section. Fuel prices are based on 
AEO2021 and change over time; for the Reference Case, the average 
retail fuel price for years 2026-2036 ranged from $2.53 to $2.98/
gallon (2020$) for gasoline and $0.118 to $0.119/kWh of electricity 
(2020$). U.S. Energy Information Administration (EIA), U.S. 
Department of Energy (DOE), Annual Energy Outlook, 2021. For the 
analysis involving 5-year ownership periods, we use the fuel costs 
associated with the initial year of purchase for each owner, i.e., 
2026, 2031, 2036. The analysis includes the program flexibilities of 
credit banking, fleet averaging, advanced technology multipliers, 
and air conditioning and off-cycle credits.
    \183\ The CCEMS models vehicles over a 40 year lifetime; 
however, it includes scrappage rates such that fewer and fewer 
vehicles of any vintage remain on the road year after year, and 
those vehicles that remain are driven fewer and fewer miles year 
after year.
    \184\ The EPA Guidelines for Preparing Economic Analysis, 
Chapter 6.4, suggests that a 3 percent discount rate is appropriate 
for calculations involving consumption, instead of the opportunity 
cost of capital. Here, the discount rate is applied, beginning in 
2026 when the vehicle is purchased new, to the stream of fuel costs 
over the vehicle lifetime. U.S. Environmental Protection Agency 
(2010). ``Guidelines for Preparing Economic Analysis,'' Chapter 6. 
https://www.epa.gov/sites/production/files/2017-09/documents/ee-0568-06.pdf, accessed 6/14/2021.
---------------------------------------------------------------------------

    Another way to look at the effects on vehicle buyers is to examine 
how the costs are distributed among new and used vehicle owners. 
Because depreciation occurs over the lifetime of the vehicle, the net 
purchase cost to an owner will depend on the vehicle age when it was 
bought, and, if sold, the length of time that the vehicle was owned. A 
study from Argonne National Laboratory provides estimates for the 
depreciation of light-duty vehicles by age, as summarized in Table 
59.\185\ If the additional cost of fuel-saving technology depreciates 
at the same rates, then a person who buys a new vehicle and sells it 
after 5 years would incur 60 percent of the upfront costs (100 percent 
of the original value, less 40 percent paid back). Analogously, the 
person who buys the vehicle at age 5 would incur 20 percent of those 
costs (40 percent, less 20 percent paid back), and the purchaser of the 
10-year-old vehicle would face a net 10 percent of the cost of the 
technology after it is sold five

[[Page 43798]]

years later at vehicle age 15. A person purchasing a new vehicle, 
driving the average fleetwide VMT for the given age and facing the fuel 
prices used in this analysis, would face an estimated net cost of $204, 
shown in Table 60, which reflects fuel savings that offset 70 percent 
of the depreciation cost. The buyer of that 5-year-old used vehicle 
would see an estimated reduction in net cost--that is, a net saving--of 
$230, while the buyer of that same 10-year-old used vehicle would see 
an estimated reduction of net cost of $314. In general, the purchasers 
of older vehicles will see a greater portion of their depreciation 
costs offset by fuel savings.
---------------------------------------------------------------------------

    \185\ Argonne National Laboratory (2021). ``Comprehensive Total 
Cost of Ownership Quantification for Vehicles with Different Size 
Classes and Powertrains.'' ANL/ESD-21/4, Figure ES-2. https://publications.anl.gov/anlpubs/2021/05/167399.pdf, accessed 6/8/2021.

                                                Table 59--Depreciation Estimates for Light Duty Vehicles
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Vehicle age                    1                2                3                4                5                10               15
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fraction of original value                   0.70             0.61             0.53            0.475             0.40             0.20             0.10
 retained........................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated by Argonne National Laboratory using Edmunds data for MY2013-2019 vehicles (see figure ES-2).\185\

  Table 60--Impact of Proposed Standards on Depreciation and Fuel Costs
              for MY 2026 Vehicle Over 5 Years of Ownership
------------------------------------------------------------------------
                                                            Portion of
                                              Vehicle      depreciation
                                           depreciation    costs offset
                                             plus fuel        by fuel
                                             costs ($)      savings (%)
------------------------------------------------------------------------
Vehicle Purchased New...................             204              70
Vehicle Purchased at Age 5..............           (230)             197
Vehicle Purchased at Age 10.............           (314)             365
------------------------------------------------------------------------
Calculated using analysis VMT assumptions for proposed standards, using
  a 3% discount rate from year of purchase.

    Because the use of vehicles varies widely across vehicle owners, 
another way to estimate the effects of the standards is to examine the 
``break even'' number of miles--that is, the number of miles driven 
that would result in fuel savings matching the increase in up-front 
costs. For example, if operating costs of a MY 2026 vehicle decrease by 
0.59 cents per mile due to reduced fuel consumption, the upfront costs 
(when purchased new) would be recovered after 177,000 miles of driving, 
excluding discounting.\186\ As this measure makes clear, the financial 
effect on a new vehicle owner depends on the amount that the vehicle is 
driven. Mobility service providers, such as taxis or ride-sharing 
services, are likely to accumulate miles more quickly than most people 
who use their vehicles for personal use. As discussed in Section VII.M, 
the lower per-mile cost for these vehicles may reduce the importance of 
up-front costs in the charge for mobility as a service, and thus 
further enable use of that service.
---------------------------------------------------------------------------

    \186\ This estimate is calculated as the increase in cost, 
$1044, divided by the reduced per-mile cost, $0.0059, to get miles 
until cost is recovered.
---------------------------------------------------------------------------

    Table 61 shows, for purchasers of different-age MY 2026 vehicles, 
how the degree to which fuel savings offset depreciation costs will 
depend on vehicle use levels.\187\ Cost recovery is again higher for 
older vehicles, and faster for vehicles that accumulate VMT more 
quickly. For example, a consumer who purchases a 5-year old used MY2026 
vehicle would recover their vehicle costs through fuel savings after 
only 31,000 miles of driving.
---------------------------------------------------------------------------

    \187\ The up-front costs for each purchaser are based on the 
cost to the owner based on the depreciated price for the vehicle's 
age, with recovery of some further depreciated cost after 5 years of 
ownership. Cost recovery per mile is $0.0059, and is multiplied by 
the number of miles in the second column. The remaining columns are 
cost recovery divided by the relevant cost. Discounting is not used 
to abstract from the VMT occurring during a specified timeframe.

  Table 61--Proportion of Depreciation Costs Offset by Fuel Savings, for New and Used Vehicle Purchasers, for a
                                                 MY2026 Vehicle
----------------------------------------------------------------------------------------------------------------
                                                                                                   When vehicle
                                                                   When vehicle    When vehicle    purchased at
                                                                   purchased new  purchased at 5   10 years old
                                                                        (%)        years old (%)        (%)
----------------------------------------------------------------------------------------------------------------
Portion of vehicle depreciation cost    At 10,000 miles.........               9              32              69
 offset by fuel savings (own vehicle    At 50,000 miles.........              47             161             347
 for 5 years).                          At 100,000 miles........              94             322             693
Miles where fuel savings fully offset   Owned vehicle for 5              106,000          31,000          14,000
 the vehicle owner's depreciation cost.  years.
                                        Owned vehicle for full           177,000          62,000          28,000
                                         remaining lifetime.
----------------------------------------------------------------------------------------------------------------

    Thus, the financial effects on a vehicle buyer depend on how much 
that person drives, as well as whether the vehicle is bought new or 
used. Importantly, all people receive the

[[Page 43799]]

benefits of reduced GHG emissions, the primary focus of this rule.

K. Employment Impacts

    If the U.S. economy is at full employment, even a large-scale 
environmental regulation is unlikely to have a noticeable impact on 
aggregate net employment.\188\ Instead, labor would primarily be 
reallocated from one productive use to another, and net national 
employment effects from environmental regulation would be small and 
transitory (e.g., as workers move from one job to another).\189\ 
Affected sectors may nevertheless experience transitory effects as 
workers change jobs. Some workers may retrain or relocate in 
anticipation of new requirements or require time to search for new 
jobs, while shortages in some sectors or regions could bid up wages to 
attract workers. These adjustment costs can lead to local labor 
disruptions. Even if the net change in the national workforce is small, 
localized reductions in employment may adversely impact individuals and 
communities just as localized increases may have positive impacts.
---------------------------------------------------------------------------

    \188\ Full employment is a conceptual target for the economy 
where everyone who wants to work and is available to do so at 
prevailing wages is actively employed. The unemployment rate at full 
employment is not zero.
    \189\ Arrow et al. (1996). ``Benefit-Cost Analysis in 
Environmental, Health, and Safety Regulation: A Statement of 
Principles.'' American Enterprise Institute, The Annapolis Center, 
and Resources for the Future. See discussion on bottom of p. 6. In 
practice, distributional impacts on individual workers can be 
important, as discussed later in this section.
---------------------------------------------------------------------------

    If the economy is operating at less than full employment, economic 
theory does not clearly indicate the direction or magnitude of the net 
impact of environmental regulation on employment; it could cause either 
a short-run net increase or short-run net decrease.\190\ At the level 
of individual companies, employers affected by environmental regulation 
may increase their demand for some types of labor, decrease demand for 
other types of labor, or for still other types, not change it at all. 
The uncertain direction of labor impacts is due to the different 
channels by which regulations affect labor demand.
---------------------------------------------------------------------------

    \190\ Schmalensee, Richard, and Stavins, Robert N. ``A Guide to 
Economic and Policy Analysis of EPA's Transport Rule.'' White paper 
commissioned by Excelon Corporation, March 2011.
---------------------------------------------------------------------------

    Morgenstern et al. (2002) \191\ decompose the labor consequences in 
a regulated industry facing increased abatement costs into three 
separate components. First, there is a demand effect caused by higher 
production costs raising market prices. Higher prices reduce 
consumption (and production), reducing demand for labor within the 
regulated industry. Second, there is a cost effect where, as production 
costs increase, plants use more of all inputs, including labor, to 
produce the same level of output. Third, there is a factor-shift effect 
where post-regulation production technologies may have different labor 
intensities. Other researchers use different frameworks along a similar 
vein.\192\
---------------------------------------------------------------------------

    \191\ Morgenstern, R.D.; Pizer, W.A.; and Shih, J.-S. (2002). 
``Jobs Versus the Environment: An Industry-Level Perspective.'' 
Journal of Environmental Economics and Management 43: 412-436. 2002.
    \192\ Berman, E. and Bui, L. T. M. (2001). ``Environmental 
Regulation and Labor Demand: Evidence from the South Coast Air 
Basin.'' Journal of Public Economics 79(2): 265-295; 
Desch[ecirc]nes, O. (2018). ``Balancing the Benefits of 
Environmental Regulations for Everyone and the Costs to Workers and 
Firms.'' IZA World of Labor 22v2. https://wol.iza.org/uploads/articles/458/pdfs/environmental-regulations-and-labor-markets.pdf, 
accessed 4/19/2021.
---------------------------------------------------------------------------

    DRIA Chapter 8.2 discusses the calculation of employment impacts in 
the model used for this analysis. The estimates include effects on 
three sectors: Automotive dealers, final assembly labor and parts 
production, and fuel economy technology labor. The first two of these 
are examples of Morgenstern et al.'s (2002) demand-effect employment, 
while the third reflects cost-effect employment. For automotive 
dealers, the model estimates the hours involved in each new vehicle 
sale. To estimate the labor involved in final assembly, the model used 
average labor hours per vehicle at a sample of U.S. assembly plants, 
adjusted by the ratio of vehicle assembly manufacturing employment to 
employment for total vehicle and equipment manufacturing for new 
vehicles. Finally, for fuel economy technology labor, DOT calculated 
the average revenue per job-year for automakers.
    EPA's assessment of employment impacts, in DRIA Chapter 8.2.3, 
using the sales assumptions of both automakers and consumers using 2.5 
years of fuel consumption in vehicle decisions and a demand elasticity 
of -1, shows initial very small decreases in employment of 0.1 percent, 
followed by small positive gains (less than 1 percent) in employment 
due to the labor involved in producing the technologies needed to meet 
the proposed standards. If, instead, we use the sensitivity analysis 
with a demand elasticity of -0.4, employment is higher for both the no-
action alternative and the proposed standards. Between the no-action 
alternative and the proposal, with an elasticity of -0.4, the 
employment impacts are positive, rising to about a 2 percent increase. 
If automakers underestimate consumers' valuation of fuel economy, as 
noted in Section VII.B, then demand-effect employment is likely to be 
higher, and employment impacts are likely to be more positive.
    Note that these are employment impacts in the directly regulated 
sector, plus the impacts for automotive dealers. These do not include 
economy-wide labor impacts. As discussed earlier, economy-wide impacts 
on employment are generally driven by broad macroeconomic effects. It 
also does not reflect employment effects due to reduced spending on 
fuel consumption. Those changes may lead to some reductions in 
employment in gas stations, and some increases in other sectors to 
which people reallocate those expenditures.
    Electrification of the vehicle fleet is likely to affect both the 
number and the nature of employment in the auto and parts sectors and 
related sectors, such as providers of charging infrastructure. Because 
this proposal projects relatively minor increases in penetration of 
plug-in electric vehicles, from 4.6 percent in MY 2023 to 8.4 percent 
in MY 2026 (see Table 42), we do not predict major changes in the 
composition of employment in these sectors for MYs 2023-2026. EPA will 
continue to assess changes in employment as electrification of the auto 
industry proceeds.

L. Environmental Justice

    Executive Order 12898 (59 FR 7629, February 16, 1994) establishes 
federal executive policy on environmental justice. It directs federal 
agencies, to the greatest extent practicable and permitted by law, to 
make achieving environmental justice part of their mission by 
identifying and addressing, as appropriate, disproportionately high and 
adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States. EPA defines environmental justice as 
the fair treatment and meaningful involvement of all people regardless 
of race, color, national origin, or income with respect to the 
development, implementation, and enforcement of environmental laws, 
regulations, and policies.\193\
---------------------------------------------------------------------------

    \193\ Fair treatment means that ``no group of people should bear 
a disproportionate burden of environmental harms and risks, 
including those resulting from the negative environmental 
consequences of industrial, governmental and commercial operations 
or programs and policies.'' Meaningful involvement occurs when ``(1) 
potentially affected populations have an appropriate opportunity to 
participate in decisions about a proposed activity [e.g., 
rulemaking] that will affect their environment and/or health; (2) 
the public's contribution can influence [the EPA's rulemaking] 
decision; (3) the concerns of all participants involved will be 
considered in the decision-making process; and (4) [the EPA will] 
seek out and facilitate the involvement of those potentially 
affected'' A potential EJ concern is defined as ``the actual or 
potential lack of fair treatment or meaningful involvement of 
minority populations, low-income populations, tribes, and indigenous 
peoples in the development, implementation and enforcement of 
environmental laws, regulations and policies.'' See ``Guidance on 
Considering Environmental Justice During the Development of an 
Action.'' Environmental Protection Agency, www.epa.gov/environmentaljustice/guidanceconsidering-environmental-justice-duringdevelopment-action. See also https://www.epa.gov/environmentaljustice.

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[[Page 43800]]

    Executive Order 14008 (86 FR 7619, February 1, 2021) also calls on 
Agencies to make achieving environmental justice part of their missions 
``by developing programs, policies, and activities to address the 
disproportionately high and adverse human health, environmental, 
climate-related and other cumulative impacts on disadvantaged 
communities, as well as the accompanying economic challenges of such 
impacts.'' It also declares a policy ``to secure environmental justice 
and spur economic opportunity for disadvantaged communities that have 
been historically marginalized and overburdened by pollution and under-
investment in housing, transportation, water and wastewater 
infrastructure and health care.'' Under Executive Order 13563 (76 FR 
3821), federal agencies may consider equity, human dignity, fairness, 
and distributional considerations, where appropriate and permitted by 
law.
    EPA's 2016 ``Technical Guidance for Assessing Environmental Justice 
in Regulatory Analysis'' provides recommendations on conducting the 
highest quality analysis feasible, recognizing that data limitations, 
time and resource constraints, and analytic challenges will vary by 
media and regulatory context.\194\
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    \194\ ``Technical Guidance for Assessing Environmental Justice 
in Regulatory Analysis.'' Epa.gov, Environmental Protection Agency, 
https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf.
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    When assessing the potential for disproportionately high and 
adverse health or environmental impacts of regulatory actions on 
minority populations, low-income populations, tribes, and/or indigenous 
peoples, EPA strives to answer three broad questions: (1) Is there 
evidence of potential EJ concerns in the baseline (the state of the 
world absent the regulatory action)? Assessing the baseline will allow 
EPA to determine whether pre-existing disparities are associated with 
the pollutant(s) under consideration (e.g., if the effects of the 
pollutant(s) are more concentrated in some population groups). (2) Is 
there evidence of potential EJ concerns for the regulatory option(s) 
under consideration? Specifically, how are the pollutant(s) and its 
effects distributed for the regulatory options under consideration? 
And, (3) Do the regulatory option(s) under consideration exacerbate or 
mitigate EJ concerns relative to the baseline? It is not always 
possible to quantitatively assess these questions.
    EPA's 2016 Technical Guidance does not prescribe or recommend a 
specific approach or methodology for conducting an environmental 
justice analysis, though a key consideration is consistency with the 
assumptions underlying other parts of the regulatory analysis when 
evaluating the baseline and regulatory options. Where applicable and 
practicable, the Agency endeavors to conduct such an analysis. Going 
forward, EPA is committed to conducting environmental justice analysis 
for rulemakings based on a framework similar to what is outlined in 
EPA's Technical Guidance, in addition to investigating ways to further 
weave environmental justice into the fabric of the rulemaking process. 
EPA greatly values input from EJ stakeholders and communities and looks 
forward to engagement as we consider the impacts of light-duty vehicle 
emissions.
1. GHG Impacts
    In 2009, under the Endangerment and Cause or Contribute Findings 
for Greenhouse Gases Under Section 202(a) of the Clean Air Act 
(``Endangerment Finding''), the Administrator considered how climate 
change threatens the health and welfare of the U.S. population. As part 
of that consideration, she also considered risks to minority and low-
income individuals and communities, finding that certain parts of the 
U.S. population may be especially vulnerable based on their 
characteristics or circumstances. These groups include economically and 
socially disadvantaged communities; individuals at vulnerable 
lifestages, such as the elderly, the very young, and pregnant or 
nursing women; those already in poor health or with comorbidities; the 
disabled; those experiencing homelessness, mental illness, or substance 
abuse; and/or Indigenous or minority populations dependent on one or 
limited resources for subsistence due to factors including but not 
limited to geography, access, and mobility.
    Scientific assessment reports produced over the past decade by the 
U.S. Global Change Research Program (USGCRP),195 196 the 
Intergovernmental Panel on Climate Change 
(IPCC),197 198 199 200 and the National Academies of 
Science, Engineering, and Medicine 201 202 add more evidence 
that

[[Page 43801]]

the impacts of climate change raise potential environmental justice 
concerns. These reports conclude that poorer or predominantly non-White 
communities can be especially vulnerable to climate change impacts 
because they tend to have limited adaptive capacities and are more 
dependent on climate-sensitive resources such as local water and food 
supplies, or have less access to social and information resources. Some 
communities of color, specifically populations defined jointly by 
ethnic/racial characteristics and geographic location, may be uniquely 
vulnerable to climate change health impacts in the United States. In 
particular, the 2016 scientific assessment on the Impacts of Climate 
Change on Human Health \203\ found with high confidence that 
vulnerabilities are place- and time-specific, lifestages and ages are 
linked to immediate and future health impacts, and social determinants 
of health are linked to greater extent and severity of climate change-
related health impacts.
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    \195\ USGCRP, 2018: Impacts, Risks, and Adaptation in the United 
States: Fourth National Climate Assessment, Volume II [Reidmiller, 
D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. 
Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research 
Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018.
    \196\ USGCRP, 2016: The Impacts of Climate Change on Human 
Health in the United States: A Scientific Assessment. Crimmins, A., 
J. Balbus, J.L. Gamble, C.B. Beard, J.E. Bell, D. Dodgen, R.J. 
Eisen, N. Fann, M.D. Hawkins, S.C. Herring, L. Jantarasami, D.M. 
Mills, S. Saha, M.C. Sarofim, J. Trtanj, and L. Ziska, Eds. U.S. 
Global Change Research Program, Washington, DC, 312 pp. http://dx.doi.org/10.7930/J0R49NQX.
    \197\ Oppenheimer, M., M. Campos, R. Warren, J. Birkmann, G. 
Luber, B. O'Neill, and K. Takahashi, 2014: Emergent risks and key 
vulnerabilities. In: Climate Change 2014: Impacts, Adaptation, and 
Vulnerability. Part A: Global and Sectoral Aspects. Contribution of 
Working Group II to the Fifth Assessment Report of the 
Intergovernmental Panel on Climate Change [Field, C.B., V.R. Barros, 
D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E. Bilir, M. Chatterjee, 
K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma, E.S. Kissel, A.N. 
Levy, S. MacCracken, P.R. Mastrandrea, and L.L. White (eds.)]. 
Cambridge University Press, Cambridge, United Kingdom and New York, 
NY, USA, pp. 1039-1099.
    \198\ Porter, J.R., L. Xie, A.J. Challinor, K. Cochrane, S.M. 
Howden, M.M. Iqbal, D.B. Lobell, and M.I. Travasso, 2014: Food 
security and food production systems. In: Climate Change 2014: 
Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral 
Aspects. Contribution of Working Group II to the Fifth Assessment 
Report of the Intergovernmental Panel on Climate Change [Field, 
C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. Mastrandrea, T.E. 
Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. Genova, B. Girma, 
E.S. Kissel, A.N. Levy, S. MacCracken, P.R. Mastrandrea, and L.L. 
White (eds.)]. Cambridge University Press, Cambridge, United Kingdom 
and New York, NY, USA, pp. 485-533.
    \199\ Smith, K.R., A. Woodward, D. Campbell-Lendrum, D.D. 
Chadee, Y. Honda, Q. Liu, J.M. Olwoch, B. Revich, and R. Sauerborn, 
2014: Human health: Impacts, adaptation, and co-benefits. In: 
Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: 
Global and Sectoral Aspects. Contribution of Working Group II to the 
Fifth Assessment Report of the Intergovernmental Panel on Climate 
Change [Field, C.B., V.R. Barros, D.J. Dokken, K.J. Mach, M.D. 
Mastrandrea, T.E. Bilir, M. Chatterjee, K.L. Ebi, Y.O. Estrada, R.C. 
Genova, B. Girma, E.S. Kissel, A.N. Levy, S. MacCracken, P.R. 
Mastrandrea, and L.L. White (eds.)]. Cambridge University Press, 
Cambridge, United Kingdom and New York, NY, USA, pp. 709-754.
    \200\ IPCC, 2018: Global Warming of 1.5[deg]C. An IPCC Special 
Report on the impacts of global warming of 1.5[deg]C above pre-
industrial levels and related global greenhouse gas emission 
pathways, in the context of strengthening the global response to the 
threat of climate change, sustainable development, and efforts to 
eradicate poverty [Masson-Delmotte, V., P. Zhai, H.-O. P[ouml]rtner, 
D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. Moufouma-Okia, C. 
P[eacute]an, R. Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X. 
Zhou, M.I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, and T. 
Waterfield (eds.)]. In Press.
    \201\ National Research Council. 2011. America's Climate 
Choices. Washington, DC: The National Academies Press. https://doi.org/10.17226/12781.
    \202\ National Academies of Sciences, Engineering, and Medicine. 
2017. Communities in Action: Pathways to Health Equity. Washington, 
DC: The National Academies Press. https://doi.org/10.17226/24624.
    \203\ USGCRP, 2016: The Impacts of Climate Change on Human 
Health in the United States: A Scientific Assessment.
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i. Effects on Specific Populations of Concern
    Individuals living in socially and economically disadvantaged 
communities, such as those living at or below the poverty line or who 
are experiencing homelessness or social isolation, are at greater risk 
of health effects from climate change. This is also true with respect 
to people at vulnerable lifestages, specifically women who are pre- and 
perinatal, or are nursing; in utero fetuses; children at all stages of 
development; and the elderly. Per the Fourth National Climate 
Assessment, ``Climate change affects human health by altering exposures 
to heat waves, floods, droughts, and other extreme events; vector-, 
food- and waterborne infectious diseases; changes in the quality and 
safety of air, food, and water; and stresses to mental health and well-
being.'' \204\ Many health conditions such as cardiopulmonary or 
respiratory illness and other health impacts are associated with and 
exacerbated by an increase in GHGs and climate change outcomes, which 
is problematic as these diseases occur at higher rates within 
vulnerable communities. Importantly, negative public health outcomes 
include those that are physical in nature, as well as mental, 
emotional, social, and economic.
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    \204\ Ebi, K.L., J.M. Balbus, G. Luber, A. Bole, A. Crimmins, G. 
Glass, S. Saha, M.M. Shimamoto, J. Trtanj, and J.L. White-Newsome, 
2018: Human Health. In Impacts, Risks, and Adaptation in the United 
States: Fourth National Climate Assessment, Volume II [Reidmiller, 
D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. 
Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research 
Program, Washington, DC, USA, pp. 539-571. doi: 10.7930/
NCA4.2018.CH14.
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    To this end, the scientific assessment literature, including the 
aforementioned reports, demonstrates that there are myriad ways in 
which these populations may be affected at the individual and community 
levels. Individuals face differential exposure to criteria pollutants, 
in part due to the proximities of highways, trains, factories, and 
other major sources of pollutant-emitting sources to less-affluent 
residential areas. Outdoor workers, such as construction or utility 
crews and agricultural laborers, who frequently are comprised of 
already at-risk groups, are exposed to poor air quality and extreme 
temperatures without relief. Furthermore, individuals within EJ 
populations of concern face greater housing and clean water insecurity 
and bear disproportionate economic impacts and health burdens 
associated with climate change effects. They have less or limited 
access to healthcare and affordable, adequate health or homeowner 
insurance. Finally, resiliency and adaptation are more difficult for 
economically disadvantaged communities: They have less liquidity, 
individually and collectively, to move or to make the types of 
infrastructure or policy changes to limit or reduce the hazards they 
face. They frequently are less able to self-advocate for resources that 
would otherwise aid in resiliency and hazard reduction and mitigation.
    The assessment literature cited in EPA's 2009 and 2016 Endangerment 
Findings, as well as Impacts of Climate Change on Human Health, also 
concluded that certain populations and life stages, including children, 
are most vulnerable to climate-related health effects. The assessment 
literature produced from 2016 to the present strengthens these 
conclusions by providing more detailed findings regarding related 
vulnerabilities and the projected impacts youth may experience. These 
assessments--including the Fourth National Climate Assessment (2018) 
and The Impacts of Climate Change on Human Health in the United States 
(2016)--describe how children's unique physiological and developmental 
factors contribute to making them particularly vulnerable to climate 
change. Impacts to children are expected from heat waves, air 
pollution, infectious and waterborne illnesses, and mental health 
effects resulting from extreme weather events. In addition, children 
are among those especially susceptible to allergens, as well as health 
effects associated with heat waves, storms, and floods. Additional 
health concerns may arise in low-income households, especially those 
with children, if climate change reduces food availability and 
increases prices, leading to food insecurity within households.
    The Impacts of Climate Change on Human Health \203\ also found that 
some communities of color, low-income groups, people with limited 
English proficiency, and certain immigrant groups (especially those who 
are undocumented) live with many of the factors that contribute to 
their vulnerability to the health impacts of climate change. While 
difficult to isolate from related socioeconomic factors, race appears 
to be an important factor in vulnerability to climate-related stress, 
with elevated risks for mortality from high temperatures reported for 
Black or African American individuals compared to White individuals 
after controlling for factors such as air conditioning use. Moreover, 
people of color are disproportionately exposed to air pollution based 
on where they live, and disproportionately vulnerable due to higher 
baseline prevalence of underlying diseases such as asthma, so climate 
exacerbations of air pollution are expected to have disproportionate 
effects on these communities.
    Native American Tribal communities possess unique vulnerabilities 
to climate change, particularly those impacted by degradation of 
natural and cultural resources within established reservation 
boundaries and threats to traditional subsistence lifestyles. Tribal 
communities whose health, economic well-being, and cultural traditions 
depend upon the natural environment will likely be affected by the 
degradation of ecosystem goods and services associated with climate 
change. The IPCC indicates that losses of customs and historical 
knowledge may cause communities to be less resilient or adaptable.\205\ 
The Fourth National Climate Assessment (2018) noted that while 
Indigenous peoples are diverse and will be impacted by the climate 
changes universal to all Americans, there are several ways in which 
climate change uniquely threatens Indigenous peoples' livelihoods and 
economies.\206\

[[Page 43802]]

In addition, there can institutional barriers to their management of 
water, land, and other natural resources that could impede adaptive 
measures.
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    \205\ Porter et al., 2014: Food security and food production 
systems.
    \206\ Jantarasami, L.C., R. Novak, R. Delgado, E. Marino, S. 
McNeeley, C. Narducci, J. Raymond-Yakoubian, L. Singletary, and K. 
Powys Whyte, 2018: Tribes and Indigenous Peoples. In Impacts, Risks, 
and Adaptation in the United States: Fourth National Climate 
Assessment, Volume II [Reidmiller, D.R., C.W. Avery, D.R. 
Easterling, K.E. Kunkel, K.L.M. Lewis, T.K. Maycock, and B.C. 
Stewart (eds.)]. U.S. Global Change Research Program, Washington, 
DC, USA, pp. 572-603. doi: 10.7930/NCA4.2018.CH15.
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    For example, Indigenous agriculture in the Southwest is already 
being adversely affected by changing patterns of flooding, drought, 
dust storms, and rising temperatures leading to increased soil erosion, 
irrigation water demand, and decreased crop quality and herd sizes. The 
Confederated Tribes of the Umatilla Indian Reservation in the Northwest 
have identified climate risks to salmon, elk, deer, roots, and 
huckleberry habitat. Housing and sanitary water supply infrastructure 
are vulnerable to disruption from extreme precipitation events.
    NCA4 noted that Indigenous peoples often have disproportionately 
higher rates of asthma, cardiovascular disease, Alzheimer's, diabetes, 
and obesity, which can all contribute to increased vulnerability to 
climate-driven extreme heat and air pollution events. These factors 
also may be exacerbated by stressful situations, such as extreme 
weather events, wildfires, and other circumstances.
    NCA4 and IPCC AR5 \207\ also highlighted several impacts specific 
to Alaskan Indigenous Peoples. Coastal erosion and permafrost thaw will 
lead to more coastal erosion, exacerbated risks of winter travel, and 
damage to buildings, roads, and other infrastructure--these impacts on 
archaeological sites, structures, and objects that will lead to a loss 
of cultural heritage for Alaska's Indigenous people. In terms of food 
security, the NCA discussed reductions in suitable ice conditions for 
hunting, warmer temperatures impairing the use of traditional ice 
cellars for food storage, and declining shellfish populations due to 
warming and acidification. While the NCA also noted that climate change 
provided more opportunity to hunt from boats later in the fall season 
or earlier in the spring, the assessment found that the net impact was 
an overall decrease in food security.
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    \207\ Porter et al., 2014: Food security and food production 
systems.
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2. Non-GHG Impacts
    In addition to significant climate change benefits, the proposed 
standards would also impact non-GHG emissions. In general, we expect 
small non-GHG emissions reductions from the combination of ``upstream'' 
emissions sources related to extracting, refining, transporting, and 
storing petroleum fuels. We also expect small increases in emissions 
from upstream electricity generating units (EGUs). A possible increase 
in emissions from coal- and NG-fired electricity generation to meet 
increased EV electricity demand could result in adverse EJ impacts. For 
on-road light duty vehicles, the proposed standards would reduce total 
non-GHG emissions, though we expect small increases in some non-GHG 
emissions in the years immediately following implementation of the 
proposal, followed by growing decreases in emissions in later years. 
This is due to our assumptions about increased ``rebound'' driving. See 
Table 44 for more detail on the estimated non-GHG emissions impacts of 
the proposal.208 As discussed in Section I.A.3 of the 
Executive Summary, future EPA regulatory actions that would result in 
increased zero-emission vehicles and cleaner energy generation would 
more significantly change the non-GHG impacts of transportation and 
electricity generation, and those impacts will be analyzed in more 
detail in those future actions.
    There is evidence that communities with EJ concerns are 
disproportionately impacted by the non-GHG emissions associated with 
this proposal.\209\ Numerous studies have found that environmental 
hazards such as air pollution are more prevalent in areas where 
minority populations and low-income populations represent a higher 
fraction of the population compared with the general 
population.210 211 212 Consistent with this evidence, a 
recent study found that most anthropogenic sources of PM2.5, 
including industrial sources, and light- and heavy-duty vehicle 
sources, disproportionately affect people of color.\213\
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    \209\ Mohai, P.; Pellow, D.; Roberts Timmons, J. (2009) 
Environmental justice. Annual Reviews 34: 405-430. https://doi.org/10.1146/annurev-environ-082508-094348.
    \210\ Rowangould, G.M. (2013) A census of the near-roadway 
population: public health and environmental justice considerations. 
Trans Res D 25: 59-67. http://dx.doi.org/10.1016/j.trd.2013.08.003.
    \211\ Marshall, J.D., Swor, K.R.; Nguyen, N.P (2014) 
Prioritizing environmental justice and equality: diesel emissions in 
Southern California. Environ Sci Technol 48: 4063-4068. https://doi.org/10.1021/es405167f.
    \212\ Marshall, J.D. (2000) Environmental inequality: air 
pollution exposures in California's South Coast Air Basin. Atmos 
Environ 21: 5499-5503. https://doi.org/10.1016/j.atmosenv.2008.02.005.
    \213\ C.W. Tessum, D.A. Paolella, S.E. Chambliss, J.S. Apte, 
J.D. Hill, J.D. Marshall, PM2.5 polluters 
disproportionately and systemically affect people of color in the 
United States. Sci. Adv. 7, eabf4491 (2021).
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    Analyses of communities in close proximity to upstream sources, 
such as EGUs, have found that a higher percentage of communities of 
color and low-income communities live near these sources when compared 
to national averages.\214\ Vulnerable populations near upstream 
refineries may experience potential disparities in pollution-related 
health risk from that source.\215\ We expect that small increases in 
non-GHG emissions from EGUs and small reductions in petroleum-sector 
emissions would lead to small changes in exposure to these non-GHG 
pollutants for people living in the communities near these facilities.
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    \214\ See 80 FR 64662, 64915-64916 (October 23, 2015).
    \215\ U.S. EPA (2014). Risk and Technology Review--Analysis of 
Socio-Economic Factors for Populations Living Near Petroleum 
Refineries. Office of Air Quality Planning and Standards, Research 
Triangle Park, North Carolina. January.
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    There is also substantial evidence that people who live or attend 
school near major roadways are more likely to be of a racial minority, 
Hispanic ethnicity, and/or low socioeconomic status.216 217 
We would expect that communities near roads will benefit from 
reductions of non-GHG pollutants as fuel efficiency improves and the 
use of zero-emission vehicles (such as full battery electric vehicles) 
increases, though increased rebound driving may offset some of these 
emission reductions, especially in the years immediately after 
finalization of the proposed standards.
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    \216\ Tian, N.; Xue, J.; Barzyk. T.M. (2013) Evaluating 
socioeconomic and racial differences in traffic-related metrics in 
the United States using a GIS approach. J Exposure Sci Environ 
Epidemiol 23: 215-222.
    \217\ Boehmer, T.K.; Foster, S.L.; Henry, J.R.; Woghiren-
Akinnifesi, E.L.; Yip, F.Y. (2013) Residential proximity to major 
highways--United States, 2010. Morbidity and Mortality Weekly Report 
62(3): 46-50.
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    Although proximity to an emissions source is a useful indicator of 
potential exposure, it is important to note that the impacts of 
emissions from both upstream and tailpipe sources are not limited to 
communities in close proximity to these sources. The effects of 
potential increases and decreases in emissions from the sources 
affected by this proposal might also be felt many miles away, including 
in communities with EJ concerns. The spatial extent of these impacts 
from upstream and tailpipe sources depend on a range of interacting and 
complex factors including the amount of pollutant emitted, atmospheric 
chemistry and meteorology.

[[Page 43803]]

    In summary, we expect this proposed rule would result in both small 
reductions and small increases of non-GHG emissions. These effects 
could potentially impact communities with EJ concerns, though not 
necessarily immediately and not equally in all locations. For this 
proposal, the air quality information needed to perform a quantified 
analysis of the distribution of such impacts was not available. We 
therefore recommend caution when interpreting these broad, qualitative 
observations. We note that EPA intends to develop a future rule to 
control emissions of GHGs as well as criteria and air toxic pollutants 
from light-duty vehicles for model years beyond 2026. We are 
considering how to project air quality impacts from the changes in non-
GHG emissions for that future rulemaking (see Section V.C). EPA is also 
seeking comment on how to conduct an EJ analysis of the non-GHG impacts 
associated with mobile source rulemakings, including how EV penetration 
in the future fleet would affect these impacts.

M. Affordability and Equity Impacts

    The impacts of the proposed standards on social equity depend in 
part on their effects on the affordability of vehicles and 
transportation services, especially for lower-income households. Access 
to transportation improves the ability of people, including those with 
low income, to pursue jobs, education, health care, and necessities of 
daily life such as food and housing. This section discusses how these 
standards might affect affordability of vehicles. We acknowledge that 
vehicles, especially household ownership of vehicles, are only a 
portion of the larger issues concerning access to transportation and 
mobility services, which also takes into consideration public 
transportation and land use design. Though these issues are 
inextricably linked, the following discussion focuses on effects 
related to private vehicle ownership and use. We also acknowledge that 
the emissions of vehicles, both local pollutants and GHGs, can have 
disproportionate impacts on lower-income and minority communities; see 
Preamble Section I.E for further discussion of these topics. Finally, 
we note that social equity involves issues beyond income and 
affordability, including race, ethnicity, gender, gender 
identification, and residential location; EPA will continue to examine 
such impacts and seeks comment on the impact of this proposal on 
additional dimensions of equity.
    Affordability is not a well-defined concept in academic literature. 
As discussed in Cassidy et al. (2016),\218\ researchers have generally 
applied the term to necessities such as food, housing, or energy, and 
have identified some themes related to:
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    \218\ Cassidy, A., G. Burmeister, and G. Helfand. ``Impacts of 
the Model Year 2017-2025 Light-Duty Vehicle Greenhouse Gas Emission 
Standards on Vehicle Affordability.'' Working paper.

    Instead of focusing on the traditional economic concept of 
willingness to pay, any consideration of affordability must also 
consider the ability to pay for a socially defined minimum level of 
a good, especially of a necessity.
    Although the ability to pay is often based on the proportion of 
income devoted to expenditures on a particular good, this ratio 
approach is widely criticized for not considering expenditures on 
other possibly necessary goods, quality differences in the good, and 
heterogeneity of consumer preferences for the good.
    Assessing affordability should take into account both the short-
term costs and long-term costs associated with consumption of a 
particular good.

    As noted in Cassidy et al. (2016), there is very little literature 
applying the concept of affordability to transportation, much less to 
vehicle ownership. It is not clear how to identify a socially 
acceptable minimum level of transportation service. However, it seems 
reasonable that some minimum level of transportation services is 
necessary to enable households access to employment, education, and 
basic services such as buying food. It also seems reasonable to assume 
that transportation requirements vary substantially across populations 
and geographic locations, and it is not clear when consumption of 
transportation moves from being a necessity to optional. Normatively 
defining the minimum adequate level of transportation consumption is 
difficult given the heterogeneity of consumer preferences and living 
situations. As a result, it is challenging to define how much residual 
income should remain with each household after transportation 
expenditures. It is therefore not surprising that academic and policy 
literature have largely avoided attempting to define transportation 
affordability.
    We are following the approach in the 2016 EPA Proposed 
Determination for the Midterm Evaluation \219\ of considering four 
questions that relate to the effects of the LDV GHG standards on new 
vehicle affordability: How the standards affect lower-income 
households; how the standards affect the used vehicle market; how the 
standards affect access to credit; and how the standards affect the 
low-priced vehicle segment. See DRIA Chapter 8.3 for further detail.
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    \219\ U.S. Environmental Protection Agency (2016). Proposed 
Determination on the Appropriateness of the Model Year 2022-2025 
Light-Duty Vehicle Greenhouse Gas Emissions Standards under the 
Midterm Evaluation, Chapter 4.3.3. EPA-420-R-16-020. https://nepis.epa.gov/Exe/ZyPDF.cgi? Dockey=P100Q3DO.pdf, accessed 4/26/
2021.
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    The effects of the standards on lower-income households depend on 
the responses not just to up-front costs but also to the reduction in 
fuel and operating costs associated with the standards. These responses 
will affect not only the sales of new vehicles, as discussed in 
Sections 0 and VII.B, but also the prices of used vehicles as well as 
the costs associated with ride-hailing and ride-sharing services. A 
recent study notes that lower-income households spend more on gasoline 
as a proportion of their income than higher-income households.\220\ In 
addition, the Proposed Determination, Appendix B.1.6, observed that 
lower-income households spend more on gasoline than on either new or 
used vehicles, and more on used vehicles than new ones, suggesting the 
importance of operating costs for these households. If the per-mile 
costs of services such as ride hailing and ride sharing decrease to 
reflect lower operating costs, those who do not own vehicles may 
benefit.
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    \220 \ Vaidyanathan, S., P. Huether, and B. Jennings (2021). 
``Understanding Transportation Energy Burdens.'' Washington, DC: 
American Council for an Energy-Efficient White Paper. https://www.aceee.org/white-paper/2021-05/understanding-transportation-energy-burdens, accessed 5/24/2021.
---------------------------------------------------------------------------

    If sales of new vehicles decrease, then prices of used vehicles, 
which are disproportionately purchased by lower-income households, 
would be expected to increase; the reverse would happen if new vehicle 
sales increase. These effects in the used vehicle market also affect 
how long people hold onto their used vehicles. This effect, sometimes 
termed the ``Gruenspecht effect'' after Gruenspecht (1982),\221\ would 
lead to both slower adoption of vehicles subject to the new standards, 
and more use of older vehicles not subject to the new standards, with 
associated higher emissions, if new vehicle sales decrease. The 
Gruenspecht effect, therefore, may have the additional consequence of 
increased concentrations of older vehicles in some communities in the 
short term, and may delay benefits associated with advanced vehicle 
technologies for those communities. As discussed in Section VII.B, new 
vehicle

[[Page 43804]]

sales are projected to show a roughly 2 percent decrease from sales 
under the SAFE rule; that value depends on the uncertain assumption 
that vehicle buyers consider just a small share of future fuel 
consumption in the purchase decision. EPA is working with RTI 
International to understand better the connections between the new and 
the used vehicle market. Changes in the new vehicle market are expected 
not only to have immediate effects on the prices of used vehicles, but 
also to affect the market over time, as the supply of used vehicles in 
the future depends on how many new vehicles are sold.
---------------------------------------------------------------------------

    \221\ Gruenspecht, H. (1982). ``Differentiated Regulation: The 
Case of Auto Emissions Standards.'' American Economic Review 72: 
328-331.
---------------------------------------------------------------------------

    Access to credit is a potential barrier to purchase of vehicles 
whose up-front costs have increased; access may also be affected by 
race, ethnicity, gender, gender identity, residential location, 
religion, or other factors. If lenders are not willing to provide 
financing for buyers who face higher prices, perhaps because the 
potential buyers are hitting a maximum on the debt-to-income ratio 
(DTI) that lenders are willing to accept, then those buyers may not be 
able to purchase new vehicles. On the other hand, some lenders give 
discounts on loans to purchase more fuel-efficient vehicles.\222\ 
Subsidies exist from the federal government, and some state 
governments, for plug-in electric vehicles.\223\ In addition, as 
documented in the Midterm Evaluation,\224\ the DTI does not appear to 
be a fixed obstacle for access to finance; from 2007 to 2015, 28 
percent of lower-income households and 7 percent of higher-income 
households who both had a DTI of over 36 percent and purchased at least 
one new vehicle financed their vehicle purchases.
---------------------------------------------------------------------------

    \222\ Helfand, Gloria (2021). ``Memorandum: Lending Institutions 
that Provide Discounts for more Fuel Efficient Vehicles.'' U.S. EPA 
Office of Transportation and Air Quality, Memorandum to the Docket.
    \223\ U.S. Department of Energy and U.S. Environmental 
Protection Agency. ``Federal Tax Credits for New All-Electric and 
Plug-in Hybrid Vehicles.'' https://www.fueleconomy.gov/feg/taxevb.shtml, accessed 4/28/2021.
    \224\ See Note 219, Chapter 4.3.3.4.
---------------------------------------------------------------------------

    Low-priced vehicles may be considered an entry point for people 
into buying new vehicles instead of used ones; automakers may seek to 
entice people to buy new vehicles through a low price point. It is 
possible that higher costs associated with proposed standards could 
affect the ability of automakers to maintain vehicles in this value 
segment. At the same time, this segment historically tended to include 
more fuel-efficient vehicles that assisted automakers in achieving CAFE 
standards.\225\ The footprint-based standards, by encouraging 
improvements in GHG emissions and fuel economy across the vehicle 
fleet, reduce the need for low-priced vehicles to be a primary means of 
compliance with the standards. This change in incentives for the 
marketing of this segment may contribute to the increases in the prices 
of vehicles previously in this category. Low-priced vehicles still 
exist; the Chevrolet Spark, for example, is listed as starting at 
$13,400.\226\ At the same time, this segment is gaining more content, 
such as improved entertainment systems and electric windows; they may 
be developing an identity as a desirable market segment without regard 
to their previous purpose in enabling the sales of less efficient 
vehicles and compliance with CAFE standards.\227\ Whether this segment 
continues to exist, and in what form, may depend on the marketing plans 
of manufacturers: Whether benefits are greater from offering basic new 
vehicles to first-time new-vehicle buyers, or from making small 
vehicles more attractive by adding more desirable features to them.
---------------------------------------------------------------------------

    \225\ Austin, D., and T. Dinan (2005). ``Clearing the Air: The 
Costs and Consequences of Higher CAFE Standards and Increased 
Gasoline.'' Journal of Environmental Economics and Management 50(3): 
562-82; Kleit, A. (2004). ``Impacts of Long-Range Increases in the 
Fuel Economy (CAFE) Standard.'' Economic Inquiry 42(2): 279-294.
    \226\ Motortrend (2021). ``These Are the 10 Cheapest Cars You 
Can Buy in 2021.'' https://www.motortrend.com/features-collections/top-10-cheapest-new-cars/, accessed 4/28/2021; Chevrolet Spark, 
https://www.chevrolet.com/cars/spark, accessed 5/27/2021.
    \227\ See Note 218.
---------------------------------------------------------------------------

    New electric vehicles currently have higher up-front costs and 
lower operating costs than gasoline vehicles and require access to 
charging infrastructure that may not be readily available to many. This 
proposal does not project major penetration of electric vehicles in 
response to the proposed standards, from 3.6 percent in MY 2023 to 7.8 
percent in MY 2026 (see Table 42). EPA will monitor and study 
affordability issues related to electric vehicles as their prevalence 
in the vehicle fleet increases.
    In sum, as with the effects of the proposed standards on vehicle 
sales discussed in Section VII.B, the effects of the standards on 
affordability depend on two countervailing effects: The increase in the 
up-front costs of the vehicles, and the decrease in operating costs. 
The increase in up-front costs has the potential to increase the prices 
of used vehicles, to make credit more difficult to obtain, and to make 
the least expensive new vehicles less desirable compared to used 
vehicles. The reduction in operating costs has the potential to 
mitigate or reverse all these effects. Lower operating costs on their 
own increase mobility (see DRIA Chapter 3.1 for a discussion of rebound 
driving). It is possible that lower-income households may benefit more 
from the reduction in operating costs than the increase in up-front 
costs, because they own fewer vehicles per household, spend more on 
fuel than on vehicles on an annual basis, and those fuel expenditures 
represent a higher fraction of their household income.
    See DRIA Chapter 8.3 for more detailed discussion of these issues.

VIII. Statutory and Executive Order Reviews

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

    This action is an economically significant regulatory action that 
was submitted to the Office of Management and Budget (OMB) for review. 
Any changes made in response to OMB recommendations have been 
documented in the docket. EPA prepared an analysis of the potential 
costs and benefits associated with this action. This analysis is in the 
Draft Regulatory Impact Analysis, which can be found in the docket for 
this rule, and is briefly summarized in Section VII of this preamble.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden 
under the PRA. OMB has previously approved the information collection 
activities contained in the existing regulations and has assigned OMB 
control number 2127-0019. This proposed rule changes the level of the 
existing emission standards and revises several existing credit 
provisions, but imposes no new information collection requirements.

C. Regulatory Flexibility Act

    I certify that this action will not have a significant economic 
impact on a substantial number of small entities under the RFA. This 
action will not impose any requirements on small entities. EPA's 
existing regulations exempt from the GHG standards any manufacturer, 
domestic or foreign, meeting Small Business Administration's size 
definitions of small business in 13 CFR 121.201. EPA is not proposing 
any changes to the provisions for small businesses under this proposal, 
and thus they would

[[Page 43805]]

remain exempt. For additional discussion see chapter 9 of the DRIA.

D. Unfunded Mandates Reform Act

    This proposed rule contains no federal mandates under UMRA, 2 
U.S.C. 1531-1538, for State, local, or tribal governments. The proposed 
rule would impose no enforceable duty on any State, local or tribal 
government. This proposed rule would contain a federal mandate under 
UMRA that may result in expenditures of $100 million or more for the 
private sector in any one year. Accordingly, the costs and benefits 
associated with the proposed rule are discussed in Section VII and in 
the DRIA, which are in the docket for this rule.
    This action is not subject to the requirements of section 203 of 
UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments.

E. Executive Order 13132: ``Federalism''

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government.

F. Executive Order 13175: ``Consultation and Coordination With Indian 
Tribal Governments''

    This action does not have tribal implications as specified in 
Executive Order 13175. Thus, Executive Order 13175 does not apply to 
this action. However, EPA plans to continue engaging with our tribal 
stakeholders in the development of this rulemaking by offering a tribal 
workshop and offering government-to-government consultation upon 
request.

G. Executive Order 13045: ``Protection of Children From Environmental 
Health Risks and Safety Risks''

    With respect to GHG emissions, EPA has determined that this rule 
will not have disproportionate impacts on children (62 FR 19885, April 
23, 1997). This rule will reduce emissions of potent GHGs, which as 
noted earlier in Section I.E of this preamble, will reduce the effects 
of climate change, including the public health and welfare effects on 
children.
    GHGs contribute to climate change and the GHG emissions reductions 
resulting from implementation of this proposal would further improve 
children's health. The assessment literature cited in EPA's 2009 and 
2016 Endangerment Findings concluded that certain populations and life 
stages, including children, the elderly, and the poor, are most 
vulnerable to climate-related health effects. The assessment literature 
since 2016 strengthens these conclusions by providing more detailed 
findings regarding these groups' vulnerabilities and the projected 
impacts they may experience. These assessments describe how children's 
unique physiological and developmental factors contribute to making 
them particularly vulnerable to climate change. Impacts to children are 
expected from heat waves, air pollution, infectious and waterborne 
illnesses, and mental health effects resulting from extreme weather 
events. In addition, children are among those especially susceptible to 
most allergic diseases, as well as health effects associated with heat 
waves, storms, and floods. Additional health concerns may arise in low-
income households, especially those with children, if climate change 
reduces food availability and increases prices, leading to food 
insecurity within households. More detailed information on the impacts 
of climate change to human health and welfare is provided in Section 
IV.B of this preamble.
    We expect this proposed rule would, on net, result in both small 
reductions and small increases in non-GHG emissions that could impact 
children, though not necessarily immediately and not equally in all 
locations. However, with respect to non-GHG emissions, EPA has 
concluded that it is not practicable to determine whether there would 
be disproportionate impacts on children. EPA intends to develop another 
rule to further reduce emissions of GHGs from light-duty vehicles for 
model years beyond 2026. We are considering how to project air quality 
and health impacts from the changes in non-GHG emissions for that 
future rulemaking (see Section V.C).

H. Executive Order 13211: ``Energy Effects''

    This action is not a ``significant energy action'' because it is 
not likely to have a significant adverse effect on the supply, 
distribution, or use of energy. EPA has outlined the energy effects in 
Table 5-7 of the Regulatory Impact Analysis (RIA), which is available 
in the docket for this action and is briefly summarized here.
    This action proposes to reduce CO2 for passenger cars and light 
trucks under revised GHG standards, which will result in significant 
reductions of the consumption of petroleum, will achieve energy 
security benefits, and have no adverse energy effects. Because the GHG 
emission standards result in significant fuel savings, this rule 
encourages more efficient use of fuels. Table 5-7 in the RIA shows 291 
million barrels of gasoline per year will be saved in 2050, which can 
be summarized as a net reduction of 797,260 barrels of gasoline per day 
in 2050.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the NTTAA, 15 U.S.C. 272 note, directs federal 
agencies to use voluntary consensus standards (VCSs) in their 
regulatory activities unless to do so would be ``inconsistent with 
applicable law or otherwise impractical.'' VCSs are technical 
standards, which include materials specifications, test methods, 
sampling protocols, business practices and management systems developed 
or adopted by voluntary consensus standards bodies (VCSBs), both 
domestic and international. These bodies plan, develop, establish or 
coordinate voluntary consensus standards using agreed-upon procedures.
    In addition, the statute encourages agencies to consult with VCSBs 
and participate in the development of such standards when compatible 
with agency missions, authorities, priorities and budget resources. The 
use of VCSs, whenever practicable and appropriate, is intended to 
achieve the following goals:
     To eliminate the cost to the government of developing its 
own standards and decrease the cost of goods procured and the burden of 
complying with agency regulation;
     To provide incentives and opportunities to establish 
standards that serve national needs;
     To encourage long-term growth for U.S. enterprises and 
promote efficiency and economic competition through harmonization of 
standards; and
     To further the policy of reliance upon the private sector 
to supply government needs for goods and services.
    The requirements apply to the use of VCSs in ``regulatory and 
procurement activities.'' Regulations that do not establish or involve 
technical standards do not trigger the NTTAA requirements, but it is 
recommended that agencies provide a brief explanation for why the NTTAA 
does not apply.
    Note that agencies retain broad discretion in deciding when to use 
VCSs; however, agencies are required to justify the use of government-
unique standards when potentially applicable VCSs are available. The 
NTTAA also does not affect the agency's authority to determine 
substantive standards as

[[Page 43806]]

opposed to technical standards (see guidance from the Office of 
Management and Budget (OMB) at http://www.whitehouse.gov/omb/circulars_a119.
    This rulemaking involves technical standards. The Agency conducted 
a search to identify potentially applicable voluntary consensus 
standards. For CO2, emissions, we identified no such 
standards. For CO2 emissions, EPA is therefore collecting 
data over the same tests that are used for the current CO2 
standards and for the CAFE program. This will minimize the amount of 
testing done by manufacturers, since manufacturers are already required 
to run these tests. For A/C credits, EPA is using the test specified in 
40 CFR 1066.845. EPA knows of no voluntary consensus standard for the 
A/C test.
    We are proposing to amend 40 CFR 86.1 to reference SAE J1711, 
Recommended Practice for Measuring the Exhaust Emissions and Fuel 
Economy of Hybrid-Electric Vehicles, Including Plug-in Hybrid Vehicles, 
Revised June 2010. The regulation already has rulemaking provisions at 
40 CFR 86.1866-12(b) that include references to SAE J1711. We rely on 
the published procedure to describe test methods related to measuring 
exhaust emissions from hybrid-electric vehicles. The proposed amendment 
would complete the administrative steps needed to properly accomplish 
this incorporation by reference. The referenced recommended practice 
may be obtained from SAE International on the internet at www.sae.org, 
by email at CustomerService@sae.org, or by calling 877-606-7323 or 724-
776-4970.

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

    For this proposed action, EPA is only able to qualitatively 
evaluate the extent to which this action may result in 
disproportionately high and adverse human health or environmental 
effects on minority populations, low income populations, and/or 
indigenous peoples, as specified in Executive Order 12898 (59 FR 7629, 
February 16, 1994). With respect to GHG emissions, EPA has determined 
that this rule will benefit all U.S. populations, including minority 
populations, low-income populations and/or indigenous peoples. While 
this proposed rule would substantially reduce GHG emissions, future 
impacts of climate change are still expected in the baseline and will 
likely be unevenly distributed in ways that uniquely impact these 
communities. EPA has not quantitatively assessed these effects.
    For non-GHG pollutants EPA has concluded that it is not practicable 
given the timing of this proposed action to determine the extent to 
which effects on minority populations, low-income populations and/or 
indigenous peoples are differentially distributed. We expect this 
proposed rule would result in both small reductions and small increases 
of non-GHG emissions that could impact communities with EJ concerns, 
though not necessarily immediately and not equally in all locations. It 
was not practicable to develop the air quality information needed to 
perform a quantified analysis of the distribution of such non-GHG 
impacts. EPA intends to develop a future rule to further reduce 
emissions of GHGs from light-duty vehicles for model years beyond 2026. 
We are considering how to project air quality impacts from the changes 
in non-GHG emissions for that future rulemaking (see Section V.C). EPA 
is taking comment on the types of effects that are important to 
consider from an EJ perspective as well as ways in which such effects 
could be quantitatively evaluated for future rulemakings. Section VII.L 
describes how we considered environmental justice in this action.

IX. Statutory Provisions and Legal Authority

    Statutory authority for this proposed rule is found in section 
202(a) (which authorizes standards for emissions of pollutants from new 
motor vehicles which emissions cause or contribute to air pollution 
which may reasonably be anticipated to endanger public health or 
welfare), 202(d), 203-209, 216, and 301 of the Clean Air Act, 42 U.S.C. 
7521(a), 7521(d), 7522-7525, 7541-7543, 7550, and 7601.

List of Subjects

40 CFR Part 86

    Environmental protection, Administrative practice and procedure, 
Confidential business information, Incorporation by reference, 
Labeling, Motor vehicle pollution, Reporting and recordkeeping 
requirements.

40 CFR Part 600

    Environmental protection, Administrative practice and procedure, 
Electric power, Fuel economy, Labeling, Reporting and recordkeeping 
requirements.

Michael S. Regan,
Administrator.

    For the reasons set out in the preamble, we propose to amend title 
40, chapter I of the Code of Federal Regulations as set forth below.

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

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

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

0
2. Amend Sec.  86.1 by redesignating paragraphs (g)(3) through (27) as 
(g)(4) through (28) and adding new paragraph (g)(3) to read as follows:

Sec.  86.1  Incorporation by reference.

* * * * *
    (g) * * *
    (3) SAE J1711, Recommended Practice for Measuring the Exhaust 
Emissions and Fuel Economy of Hybrid-Electric Vehicles, Including Plug-
in Hybrid Vehicles, Revised June 2010, IBR approved for Sec.  86.1866-
12(b).
* * * * *
0
3. Amend Sec.  86.1806-17 by revising paragraph (a) introductory text 
to read as follows:

Sec.  86.1806-17  Onboard diagnostics.

* * * * *
    (a) Vehicles must comply with the 2013 OBD requirements adopted for 
California as described in this paragraph (a). California's 2013 OBD-II 
requirements are part of Title 13, Sec.  1968.2 of the California Code 
of Regulations, approved on July 31, 2013 (incorporated by reference in 
Sec.  86.1). We may approve your request to certify an OBD system 
meeting a later version of California's OBD requirements if you 
demonstrate that it complies with the intent of this section. The 
following clarifications and exceptions apply for vehicles certified 
under this subpart:
* * * * *
0
4. Amend Sec.  86.1818-12 by revising paragraph (c)(2)(i) and (3)(i) to 
read as follows:

Sec.  86.1818-12  Greenhouse gas emission standards for light-duty 
vehicles, light-duty trucks, and medium-duty passenger vehicles.

* * * * *
    (c) * * *
    (2) * * *
    (i) Calculation of CO2 target values for passenger automobiles. A 
CO2 target value shall be determined for each passenger 
automobile as follows:
    (A) For passenger automobiles with a footprint of less than or 
equal to 41 square feet, the gram/mile CO2 target value 
shall be selected for the appropriate model year from the following 
table:

[[Page 43807]]

                Table 1 to Sec.   86.1818-12(c)(2)(i)(A)
------------------------------------------------------------------------
                                                            CO2 target
                       Model year                          value (grams/
                                                               mile)
------------------------------------------------------------------------
2012....................................................           244.0
2013....................................................           237.0
2014....................................................           228.0
2015....................................................           217.0
2016....................................................           206.0
2017....................................................           195.0
2018....................................................           185.0
2019....................................................           175.0
2020....................................................           166.0
2021....................................................           161.8
2022....................................................           159.0
2023....................................................           145.6
2024....................................................           138.6
2025....................................................           131.9
2026 and later..........................................           125.6
------------------------------------------------------------------------

    (B) For passenger automobiles with a footprint of greater than 56 
square feet, the gram/mile CO2 target value shall be 
selected for the appropriate model year from the following table:

                Table 2 to Sec.   86.1818-12(c)(2)(i)(B)
------------------------------------------------------------------------
                                                            CO2 target
                       Model year                          value (grams/
                                                               mile)
------------------------------------------------------------------------
2012....................................................           315.0
2013....................................................           307.0
2014....................................................           299.0
2015....................................................           288.0
2016....................................................           277.0
2017....................................................           263.0
2018....................................................           250.0
2019....................................................           238.0
2020....................................................           226.0
2021....................................................           220.9
2022....................................................           217.3
2023....................................................           199.1
2024....................................................           189.5
2025....................................................           180.3
2026 and later..........................................           171.6
------------------------------------------------------------------------

    (C) For passenger automobiles with a footprint that is greater than 
41 square feet and less than or equal to 56 square feet, the gram/mile 
CO2 target value shall be calculated using the following 
equation and rounded to the nearest 0.1 grams/mile, except that for any 
vehicle footprint the maximum CO2 target value shall be the 
value specified for the same model year in paragraph (c)(2)(i)(B) of 
this section:

Target CO2 = [a x f] + b

Where:

f is the vehicle footprint, as defined in Sec.  86.1803; and a and b 
are selected from the following table for the appropriate model 
year:

                Table 3 to Sec.   86.1818-12(c)(2)(i)(C)
------------------------------------------------------------------------
                   Model year                          a           b
------------------------------------------------------------------------
2012............................................        4.72        50.5
2013............................................        4.72        43.3
2014............................................        4.72        34.8
2015............................................        4.72        23.4
2016............................................        4.72        12.7
2017............................................        4.53         8.9
2018............................................        4.35         6.5
2019............................................        4.17         4.2
2020............................................        4.01         1.9
2021............................................        3.94         0.2
2022............................................        3.88        -0.1
2023............................................        3.56        -0.4
2024............................................        3.39        -0.4
2025............................................        3.23        -0.3
2026 and later..................................        3.07        -0.3
------------------------------------------------------------------------

* * * * *
    (3) * * *
    (i) Calculation of CO2 target values for light trucks. A 
CO2 target value shall be determined for each light truck as 
follows:
    (A) For light trucks with a footprint of less than or equal to 41 
square feet, the gram/mile CO2 target value shall be 
selected for the appropriate model year from the following table:

                Table 4 to Sec.   86.1818-12(c)(3)(i)(A)
------------------------------------------------------------------------
                                                            CO2 target
                       Model year                          value (grams/
                                                               mile)
------------------------------------------------------------------------
2012....................................................           294.0
2013....................................................           284.0
2014....................................................           275.0
2015....................................................           261.0
2016....................................................           247.0
2017....................................................           238.0
2018....................................................           227.0
2019....................................................           220.0
2020....................................................           212.0
2021....................................................           206.5
2022....................................................           203.0
2023....................................................           181.1
2024....................................................           172.1
2025....................................................           163.5
2026 and later..........................................           155.4
------------------------------------------------------------------------

    (B) For light trucks with a footprint that is greater than 41 
square feet and less than or equal to the maximum footprint value 
specified in the table below for each model year, the gram/mile 
CO2 target value shall be calculated using the following 
equation and rounded to the nearest 0.1 grams/mile, except that for any 
vehicle footprint the maximum CO2 target value shall be the 
value specified for the same model year in paragraph (c)(3)(i)(D) of 
this section:

Target CO2 = (a x f) + b

Where:

f is the footprint, as defined in Sec.  86.1803; and a and b are 
selected from the following table for the appropriate model year:

                                    Table 5 to Sec.   86.1818-12(c)(3)(i)(B)
----------------------------------------------------------------------------------------------------------------
                                                                      Maximum
                           Model year                                footprint           a               b
----------------------------------------------------------------------------------------------------------------
2012............................................................            66.0            4.04           128.6
2013............................................................            66.0            4.04           118.7
2014............................................................            66.0            4.04           109.4
2015............................................................            66.0            4.04            95.1
2016............................................................            66.0            4.04            81.1
2017............................................................            50.7            4.87            38.3
2018............................................................            60.2            4.76            31.6
2019............................................................            66.4            4.68            27.7
2020............................................................            68.3            4.57            24.6
2021............................................................            68.3            4.51            21.5
2022............................................................            68.3            4.44            20.6
2023............................................................            74.0            3.97            18.4
2024............................................................            74.0            3.77            17.4
2025............................................................            74.0            3.58            16.6
2026 and later..................................................            74.0            3.41            15.8
----------------------------------------------------------------------------------------------------------------

    (C) For light trucks with a footprint that is greater than the 
minimum footprint value specified in the table below and less than or 
equal to the maximum footprint value specified in the table below for 
each model year, the

[[Page 43808]]

gram/mile CO2 target value shall be calculated using the 
following equation and rounded to the nearest 0.1 grams/mile, except 
that for any vehicle footprint the maximum CO2 target value 
shall be the value specified for the same model year in paragraph 
(c)(3)(i)(D) of this section:

Target CO2 = (a x f) + b

Where:

f is the footprint, as defined in Sec.  86.1803; and a and b are 
selected from the following table for the appropriate model year:

                                    Table 6 to Sec.   86.1818-12(c)(3)(i)(C)
----------------------------------------------------------------------------------------------------------------
                                                      Minimum         Maximum
                   Model year                        footprint       footprint           a               b
----------------------------------------------------------------------------------------------------------------
2017............................................            50.7            66.0            4.04            80.5
2018............................................            60.2            66.0            4.04            75.0
----------------------------------------------------------------------------------------------------------------

    (D) For light trucks with a footprint greater than the minimum 
value specified in the table below for each model year, the gram/mile 
CO2 target value shall be selected for the appropriate model 
year from the following table:

                Table 7 to Sec.   86.1818-12(c)(3)(i)(D)
------------------------------------------------------------------------
                                                                CO2
               Model year                     Minimum       targetvalue
                                             footprint     (grams/mile)
------------------------------------------------------------------------
2012....................................            66.0           395.0
2013....................................            66.0           385.0
2014....................................            66.0           376.0
2015....................................            66.0           362.0
2016....................................            66.0           348.0
2017....................................            66.0           347.0
2018....................................            66.0           342.0
2019....................................            66.4           339.0
2020....................................            68.3           337.0
2021....................................            68.3           329.4
2022....................................            68.3           324.1
2023....................................            74.0           312.1
2024....................................            74.0           296.5
2025....................................            74.0           281.8
2026 and later..........................            74.0           267.8
------------------------------------------------------------------------

* * * * *
0
5. Amend Sec.  86.1865-12 by revising paragraphs (k)(2), (3), and (6) 
to read as follows:

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

* * * * *
    (k) * * *
    (2) There are no property rights associated with CO2 
credits generated under this subpart. Credits are a limited 
authorization to emit the designated amount of emissions. Nothing in 
this part or any other provision of law shall be construed to limit 
EPA's authority to terminate or limit this authorization through a 
rulemaking.
    (3) Each manufacturer must comply with the reporting and 
recordkeeping requirements of paragraph (l) of this section for 
CO2 credits, including early credits. The averaging, banking 
and trading program is enforceable as provided in paragraphs 
(k)(7)(ii), (k)(9)(iii), and (l)(1)(vi) of this section through the 
certificate of conformity that allows the manufacturer to introduce any 
regulated vehicles into U.S. commerce.
* * * * *
    (6) Unused CO2 credits generally retain their full value 
through five model years after the model year in which they were 
generated. Credits remaining at the end of the fifth model year after 
the model year in which they were generated may not be used to 
demonstrate compliance for later model years. The following particular 
provisions apply for passenger cars and light trucks:
    (i) Unused CO2 credits from the 2016 model year shall 
retain their full value through the 2023 model year. Credits from the 
2016 model year that remain at the end of the 2023 model year may not 
be used to demonstrate compliance for later model years.
    (ii) Unused CO2 credits from the 2017 through 2020 model 
years shall retain their full value through six model years after the 
model year in which they were generated. Credits remaining from these 
model years after six model years may not be used to demonstrate 
compliance for later model years.
* * * * *
0
6. Amend Sec.  86.1866-12 by--
0
a. Revising paragraphs (b) introductory text and (b)(1).
0
b. Removing paragraph (b)(2)(i).
0
c. Redesignating paragraph (b)(2)(ii) as paragraph (b)(2).
0
d. Adding paragraph (c)(3).
    The addition reads as follows:

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

* * * * *
    (b) For electric vehicles, plug-in hybrid electric vehicles, fuel 
cell vehicles, dedicated natural gas vehicles, and dual-fuel natural 
gas vehicles as those terms are defined in Sec.  86.1803-01, that are 
certified and produced for U.S. sale in the specified model years and 
that meet the additional specifications in this section, the 
manufacturer may use the production multipliers in this paragraph (b) 
when determining additional credits for advanced technology vehicles. 
Full size pickup trucks eligible for and using a

[[Page 43809]]

production multiplier are not eligible for the strong hybrid-based 
credits described in Sec.  86.1870-12(a)(2) or the performance-based 
credits described in Sec.  86.1870-12(b).
    (1) The following production multipliers apply for model year 2017 
through 2025 vehicles:

                                       Table 1 to Sec.   86.1866-12(b)(1)
----------------------------------------------------------------------------------------------------------------
                                                         Electric vehicles   Plug-in  hybrid     Dedicated and
                       Model year                          and fuel cell         electric      dual-fuel natural
                                                              vehicles           vehicles         gas vehicles
----------------------------------------------------------------------------------------------------------------
2017...................................................                2.0                1.6                1.6
2018...................................................                2.0                1.6                1.6
2019...................................................                2.0                1.6                1.6
2020...................................................               1.75               1.45               1.45
2021...................................................                1.5                1.3                1.3
2022...................................................                2.0                1.6                2.0
2023-2024..............................................                2.0                1.6                1.0
2025...................................................               1.75               1.45                1.0
----------------------------------------------------------------------------------------------------------------
* (No multiplier credits)

* * * * *
    (c) * * *
    (3) Multiplier-based credits for model years 2022 through 2025 may 
not exceed credit caps, as follows:
    (i) Calculate a nominal annual credit cap in Mg using the following 
equation, rounded to the nearest whole number:
[GRAPHIC] [TIFF OMITTED] TP10AU21.026

Where:
Pauto = total number of certified passenger automobiles the 
manufacturer produced in a given model year for sale in any state or 
territory of the United States.
    Ptruck = total number of certified light trucks (including MDPV) 
the manufacturer produced in a given model year for sale in any 
state or territory of the United States.
    (ii) Calculate an annual g/mile equivalent value for the 
multiplier-based credits using the following equation, rounded to 
the nearest 0.1 g/mile:

[GRAPHIC] [TIFF OMITTED] TP10AU21.027

Where:
annual credits = a manufacturer's total multiplier-based credits in 
a given model year from all passenger automobiles and light trucks 
as calculated under this paragraph (c).

    (iii) Calculate a cumulative g/mile equivalent value for the 
multiplier-based credits in 2022 through 2025 by adding the annual g/
mile equivalent values calculated under paragraph (c)(3)(ii) of this 
section.
    (iv) The cumulative g/mile equivalent value may not exceed 10.0 in 
any year.
    (v) The annual credit report must include for every model year from 
2022 through 2025, as applicable, the calculated values for the nominal 
annual credit cap in Mg and the cumulative g/mile equivalent value.
0
7. Revise the section heading for Sec.  86.1868-12 to read as follows:

Sec.  86.1868-12  CO2 credits for improving the efficiency of air 
conditioning systems.

* * * * *
0
8. Amend Sec.  86.1869-12 by revising the section heading and 
paragraphs (b)(2), (4)(v), (vi), and (x), and (d)(2)(ii)(A) to read as 
follows:

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

* * * * *
    (b) * * *
    (2) The maximum allowable decrease in the manufacturer's combined 
passenger automobile and light truck fleet average CO2 
emissions attributable to use of the default credit values in paragraph 
(b)(1) of this section is 10 g/mi through model year 2022, and 15 g/mi 
for model years 2023 and later, except that manufacturers may use 15 g/
mi in model years 2020 through 2022 if they meet the definitions in 
paragraphs (b)(4)(v)(B), (vi)(B), and (x)(B) of this section. If the 
total of the CO2 g/mi credit values from paragraph (b)(1) of 
this section does not exceed 10 or 15 g/mi (as applicable) for any 
passenger automobile or light truck in a manufacturer's fleet, then the 
total off-cycle credits may be calculated according to paragraph (f) of 
this section. If the total of the CO2 g/mi credit values 
from paragraph (b)(1) of this section exceeds 10 or 15 g/mi (as 
applicable) for any passenger automobile or light truck in a 
manufacturer's fleet, then the gram per mile decrease for the combined 
passenger automobile and light truck fleet must be determined according 
to paragraph (b)(2)(ii) of this section to determine whether the 
applicable limitation has been exceeded.
    (i) Determine the gram per mile decrease for the combined passenger 
automobile and light truck fleet using the following formula:
[GRAPHIC] [TIFF OMITTED] TP10AU21.008

[[Page 43810]]

Where:

Credits = The total of passenger automobile and light truck credits, 
in Megagrams, determined according to paragraph (f) of this section 
and limited to those credits accrued by using the default gram per 
mile values in paragraph (b)(1) of this section.
ProdC = The number of passenger automobiles produced by 
the manufacturer and delivered for sale in the U.S.
ProdT = The number of light trucks produced by the 
manufacturer and delivered for sale in the U.S.

    (ii) If the value determined in paragraph (b)(2)(i) of this section 
is greater than 10 or 15 grams per mile (as applicable), the total 
credits, in Megagrams, that may be accrued by a manufacturer using the 
default gram per mile values in paragraph (b)(1) of this section shall 
be determined using the following formula:
[GRAPHIC] [TIFF OMITTED] TP10AU21.009

Where:

ProdC = The number of passenger automobiles produced by 
the manufacturer and delivered for sale in the U.S.
ProdT = The number of light trucks produced by the 
manufacturer and delivered for sale in the U.S.

    (iii) If the value determined in paragraph (b)(2)(i) of this 
section is not greater than 10 or 15 grams per mile (as applicable), 
then the credits that may be accrued by a manufacturer using the 
default gram per mile values in paragraph (b)(1) of this section do not 
exceed the allowable limit, and total credits may be determined for 
each category of vehicles according to paragraph (f) of this section.
    (iv) If the value determined in paragraph (b)(2)(i) of this section 
is greater than 10 or 15 grams per mile (as applicable), then the 
combined passenger automobile and light truck credits, in Megagrams, 
that may be accrued using the calculations in paragraph (f) of this 
section must not exceed the value determined in paragraph (b)(2)(ii) of 
this section. This limitation should generally be done by reducing the 
amount of credits attributable to the vehicle category that caused the 
limit to be exceeded such that the total value does not exceed the 
value determined in paragraph (b)(2)(ii) of this section.
* * * * *
    (4) * * *
    (v) Active transmission warm-up means one of the following:
    (A) Through model year 2019, and optionally for model years 2020-
2022, active transmission warm-up means a system that uses waste heat 
from the vehicle to quickly warm the transmission fluid to an operating 
temperature range using a heat exchanger, increasing the overall 
transmission efficiency by reducing parasitic losses associated with 
the transmission fluid, such as losses related to friction and fluid 
viscosity.
    (B) Starting in model year 2023, and optionally for model years 
2020-2022, active transmission warm-up means a system that uses waste 
heat from the vehicle's exhaust to warm the transmission fluid to an 
operating temperature range using a dedicated heat exchanger. Active 
transmission warm-up may also include coolant systems that capture heat 
from a liquid-cooled exhaust manifold if the system is segregated from 
the coolant loop in the engine block.
    (vi) Active engine warm-up means one of the following:
    (A) Through model year 2019, and optionally for model years 2020-
2022, active engine warm-up means a system that uses waste heat from 
the vehicle to warm up targeted parts of the engine so that it reduces 
engine friction losses and enables closed-loop fuel control more 
quickly.
    (B) Starting in model year 2023, and optionally for model years 
2020-2022, active engine warm-up means a system that uses waste heat 
from the vehicle's exhaust to warm up targeted parts of the engine so 
that it reduces engine friction losses and enables closed-loop fuel 
control more quickly. Active engine warm-up may also include coolant 
systems that capture heat from a liquid-cooled exhaust manifold if the 
system is segregated from the coolant loop in the engine block.
* * * * *
    (x) Passive cabin ventilation means one of the following:
    (A) Through model year 2019, and optionally for model years 2020-
2022, passive cabin ventilation means ducts, devices, or methods that 
utilize convective airflow to move heated air from the cabin interior 
to the exterior of the vehicle.
    (B) Starting in model year 2023, and optionally for model years 
2020-2022, passive cabin ventilation means methods that create and 
maintain convective airflow through the body's cabin by opening windows 
or sunroof when the vehicle is parked outside in direct sunlight.
* * * * *
    (d) * * *
    (2) * * *
    (ii) * * *
    (A) A citation to the appropriate previously approved methodology, 
including the appropriate Federal Register Notice and any subsequent 
EPA documentation of the Administrator's decision;
* * * * *
0
9. Amend Sec.  86.1870-12 by revising the section heading and 
paragraphs (a)(2) and (b)(2) to read as follows:

Sec.  86.1870-12  CO2 credits for qualifying full-size light pickup 
trucks.

* * * * *
    (a) * * *
    (2) Full size pickup trucks that are strong hybrid electric 
vehicles and that are produced in the 2017 through 2025 model years are 
eligible for a credit of 20 grams/mile. To receive this credit in a 
model year, the manufacturer must produce a quantity of strong hybrid 
electric full size pickup trucks such that the proportion of production 
of such vehicles, when compared to the manufacturer's total production 
of full size pickup trucks, is not less than 10 percent in that model 
year. Full size pickup trucks earning credits under this paragraph 
(a)(2) may not earn credits based on the production multipliers 
described in Sec.  86.1866-12(b).
* * * * *
    (b) * * *
    (2) Full size pickup trucks that are produced in the 2017 through 
2025 model years and that achieve carbon-related exhaust emissions less 
than or equal to the applicable target value determined in Sec.  
86.1818-12(c)(3) multiplied by 0.80 (rounded to the nearest gram/mile) 
in a model year are eligible for a credit of 20 grams/mile. A pickup 
truck that qualifies for this credit in a model year may claim this 
credit for a maximum of four subsequent model years (a total of five 
consecutive model years) if the carbon-related exhaust emissions of 
that pickup truck do not increase relative to the emissions in the 
model year in which the pickup truck

[[Page 43811]]

first qualified for the credit. This credit may not be claimed in any 
model year after 2025. To qualify for this credit in a model year, the 
manufacturer must produce a quantity of full size pickup trucks that 
meet the emission requirements of this paragraph (b)(2) such that the 
proportion of production of such vehicles, when compared to the 
manufacturer's total production of full size pickup trucks, is not less 
than 10 percent in that model year. A pickup truck that qualifies for 
this credit in a model year and is subject to a major redesign in a 
subsequent model year such that it qualifies for the credit in the 
model year of the redesign may be allowed to qualify for an additional 
five years (not to go beyond the 2025 model year) with EPA approval. 
Use good engineering judgment to determine whether a pickup truck has 
been subject to a major redesign.
* * * * *
0
10. Revise the section heading of Sec.  86.1871-12 to read as follows:

Sec.  86.1871-12   Optional early CO2 credit programs.

* * * * *

PART 600--FUEL ECONOMY AND GREENHOUSE GAS EXHAUST EMISSIONS OF 
MOTOR VEHICLES

0
11. The authority citation for part 600 continues to read as follows:

    Authority:  49 U.S.C. 32901-23919q, Pub. L. 109-58.

0
12. Amend Sec.  600.510-12 by revising paragraphs (j)(2)(v) 
introductory text and (vii)(A) introductory text to read as follows:

Sec.  600.510-12   Calculation of average fuel economy and average 
carbon-related exhaust emissions.

* * * * *
    (j) * * *
    (2) * * *
    (v) For natural gas dual fuel model types, for model years 2012 
through 2015, the arithmetic average of the following two terms; the 
result rounded to the nearest gram per mile:
* * * * *
    (vii)(A) This paragraph (j)(2)(vii) applies to model year 2016 and 
later natural gas dual fuel model types. Model year 2021 and later 
natural gas dual fuel model types may use a utility factor of 0.5 or 
the utility factor prescribed in this paragraph (j)(2)(vii).
* * * * *
[FR Doc. 2021-16582 Filed 8-9-21; 8:45 am]
 BILLING CODE 6560-50-P