[Federal Register Volume 89, Number 121 (Monday, June 24, 2024)]
[Rules and Regulations]
[Pages 52540-52954]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12864]
[[Page 52539]]
Vol. 89
Monday,
No. 121
June 24, 2024
Part II
Department of Transportation
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National Highway Traffic Safety Administration
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49 CFR Parts 523, 531 et al.
Corporate Average Fuel Economy Standards for Passenger Cars and Light
Trucks for Model Years 2027 and Beyond and Fuel Efficiency Standards
for Heavy-Duty Pickup Trucks and Vans for Model Years 2030 and Beyond;
Final Rule
Federal Register / Vol. 89, No. 121 / Monday, June 24, 2024 / Rules
and Regulations
[[Page 52540]]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Parts 523, 531, 533, 535, 536, and 537
[NHTSA-2023-0022]
RIN 2127-AM55
Corporate Average Fuel Economy Standards for Passenger Cars and
Light Trucks for Model Years 2027 and Beyond and Fuel Efficiency
Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030
and Beyond
AGENCY: National Highway Traffic Safety Administration (NHTSA).
ACTION: Final rule.
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SUMMARY: NHTSA, on behalf of the Department of Transportation (DOT), is
finalizing Corporate Average Fuel Economy (CAFE) standards for
passenger cars and light trucks that increase at a rate of 2 percent
per year for passenger cars in model years (MYs) 2027-31, 0 percent per
year for light trucks in model years 2027-28, and 2 percent per year
for light trucks in model years 2029-31. NHTSA is also finalizing fuel
efficiency standards for heavy-duty pickup trucks and vans (HDPUVs) for
model years 2030-32 that increase at a rate of 10 percent per year and
model years 2033-35 that increase at a rate of 8 percent per year.
DATES: This rule is effective August 23, 2024.
ADDRESSES: For access to the dockets or to read background documents or
comments received, please visit https://www.regulations.gov, and/or
Docket Management Facility, M-30, U.S. Department of Transportation,
West Building, Ground Floor, Rm. W12-140, 1200 New Jersey Avenue SE,
Washington, DC 20590. The Docket Management Facility is open between 9
a.m. and 4 p.m. Eastern time, Monday through Friday, except Federal
holidays.
FOR FURTHER INFORMATION CONTACT: For technical and policy issues,
Joseph Bayer, CAFE Program Division Chief, Office of Rulemaking,
National Highway Traffic Safety Administration, 1200 New Jersey Avenue
SE, Washington, DC 20590; email: [email protected]. For legal
issues, Rebecca Schade, NHTSA Office of Chief Counsel, National Highway
Traffic Safety Administration, 1200 New Jersey Avenue SE, Washington,
DC 20590; email: [email protected].
SUPPLEMENTARY INFORMATION:
Table of Acronyms and Abbreviations
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Abbreviation Term
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AAA............................... American Automobile Association.
AALA.............................. American Automotive Labeling Act.
AAPC.............................. The American Automotive Policy
Council.
ABT............................... Average, Banking, and Trading.
AC................................ Air conditioning.
ACC............................... Advanced Clean Cars.
ACEEE............................. American Council for an Energy
Efficient Economy.
ACF............................... Advanced Clean Fleets.
ACME.............................. Adaptive Cylinder Management Engine.
ACT............................... Advanced Clean Trucks.
ADEAC............................. advanced cylinder deactivation.
ADEACD............................ advanced cylinder deactivation on a
dual overhead camshaft engine.
ADEACS............................ advanced cylinder deactivation on a
single overhead camshaft engine.
ADSL.............................. Advanced diesel engine.
AEO............................... Annual Energy Outlook.
AER............................... All-Electric Range.
AERO.............................. Aerodynamic improvements.
AFV............................... Alternative fuel vehicle.
AHSS.............................. advanced high strength steel.
AIS............................... Abbreviated Injury Scale.
AMPC.............................. Advanced Manufacturing Production
Tax Credit.
AMTL.............................. Advanced Mobility Technology
Laboratory.
ANL............................... Argonne National Laboratory.
ANSI.............................. American National Standards
Institute.
APA............................... Administrative Procedure Act.
AT................................ traditional automatic transmissions.
AVE............................... Alliance for Vehicle Efficiency.
AWD............................... All-Wheel Drive.
BEA............................... Bureau of Economic Analysis.
BEV............................... Battery electric vehicle.
BGEPA............................. Bald and Golden Eagle Protection
Act.
BIL............................... Bipartisan Infrastructure Law.
BISG.............................. Belt Mounted integrated starter/
generator.
BMEP.............................. Brake Mean Effective Pressure.
BNEF.............................. Bloomberg New Energy Finance.
BPT............................... Benefit-Per-Ton.
BSFC.............................. Brake-Specific Fuel Consumption.
BTW............................... Brake and Tire Wear.
CAA............................... Clean Air Act.
CAFE.............................. Corporate Average Fuel Economy.
CARB.............................. California Air Resources Board.
CBD............................... Center for Biological Diversity.
CBI............................... Confidential Business Information.
CEA............................... Center for Environmental
Accountability.
CEGR.............................. Cooled Exhaust Gas Recirculation.
CEQ............................... Council on Environmental Quality.
CFR............................... Code of Federal Regulations.
CH4............................... Methane.
[[Page 52541]]
CI................................ Compression Ignition.
CNG............................... Compressed Natural Gas.
CO................................ Carbon Monoxide.
CO2............................... Carbon Dioxide.
COVID............................. Coronavirus disease of 2019.
CPM............................... Cost Per Mile.
CR................................ Compression Ratio.
CRSS.............................. Crash Report Sampling System.
CUV............................... Crossover Utility Vehicle.
CVC............................... Clean Vehicle Credit.
CVT............................... Continuously Variable Transmissions.
CY................................ Calendar year.
CZMA.............................. Coastal Zone Management Act.
DCT............................... Dual Clutch Transmissions.
DD................................ Direct Drive.
DEAC.............................. Cylinder Deactivation.
DEIS.............................. Draft Environmental Impact
Statement.
DFS............................... Dynamic Fleet Share.
DMC............................... Direct Manufacturing Cost.
DOE............................... Department of Energy.
DOHC.............................. Dual Overhead Camshaft.
DOI............................... Department of the Interior.
DOT............................... Department of Transportation.
DPM............................... Diesel Particulate Matter.
DR................................ Discount Rate.
DSLI.............................. Advanced diesel engine with
improvements.
DSLIAD............................ Advanced diesel engine with
improvements and advanced cylinder
deactivation.
E.O............................... Executive Order.
EFR............................... Engine Friction Reduction.
EIA............................... U.S. Energy Information
Administration.
EIS............................... Environmental Impact Statement.
EISA.............................. Energy Independence and Security
Act.
EJ................................ Environmental Justice.
EPA............................... U.S. Environmental Protection
Agency.
EPCA.............................. Energy Policy and Conservation Act.
EPS............................... Electric Power Steering.
ERF............................... effective radiative forcing.
ESA............................... Endangered Species Act.
ESS............................... Energy Storage System.
ETDS.............................. Electric Traction Drive System.
EV................................ Electric Vehicle.
FCC............................... Fuel Consumption Credits.
FCEV.............................. Fuel Cell Electric Vehicle.
FCIV.............................. Fuel Consumption Improvement Value.
FCV............................... Fuel Cell Vehicle.
FE................................ Fuel Efficiency.
FEOC.............................. Foreign Entity of Concern.
FHWA.............................. Federal Highway Administration.
FIP............................... Federal Implementation Plan.
FMVSS............................. Federal Motor Vehicle Safety
Standards.
FMY............................... Final Model Year.
FRIA.............................. Final Regulatory Impact Analysis.
FTA............................... Free Trade Agreement.
FTP............................... Federal Test Procedure.
FWCA.............................. Fish and Wildlife Conservation Act.
FWD............................... Front-Wheel Drive.
FWS............................... U.S. Fish and Wildlife Service.
GCWR.............................. Gross Combined Weight Rating.
GDP............................... Gross Domestic Product.
GES............................... General Estimates System.
GGE............................... Gasoline Gallon Equivalents.
GHG............................... Greenhouse Gas.
GM................................ General Motors.
gpm............................... gallons per mile.
GREET............................. Greenhouse gases, Regulated
Emissions, and Energy use in
Transportation.
GVWR.............................. Gross Vehicle Weight Rating.
HATCI............................. Hyundai America Technical Center,
Inc.
HCR............................... High-Compression Ratio.
HD................................ Heavy-Duty.
HDPUV............................. Heavy-Duty Pickups and Vans.
HEG............................... High Efficiency Gearbox.
HEV............................... Hybrid Electric Vehicle.
HFET.............................. Highway Fuel Economy Test.
HVAC.............................. Heating, Ventilation, and Air
Conditioning.
[[Page 52542]]
IACC.............................. improved accessories.
IAV............................... IAV Automotive Engineering, Inc.
ICCT.............................. The International Council on Clean
Transportation.
ICE............................... Internal Combustion Engine.
IIHS.............................. Insurance Institute for Highway
Safety.
IPCC.............................. Intergovernmental Panel on Climate
Change.
IQR............................... Interquartile Range.
IRA............................... Inflation Reduction Act.
IWG............................... Interagency Working Group.
LD................................ Light-Duty.
LDB............................... Low Drag Brakes.
LDV............................... Light-Duty Vehicle.
LE................................ Learning Effects.
LEV............................... Low-Emission Vehicle.
LFP............................... Lithium Iron Phosphate.
LIB............................... Lithium-Ion Batteries.
LIVC.............................. Late Intake Valve Closing.
LT................................ Light truck.
MAX............................... maximum values.
MBTA.............................. Migratory Bird Treaty Act.
MD................................ Medium-Duty.
MDHD.............................. Medium-Duty Heavy-Duty.
MDPCS............................. Minimum Domestic Passenger Car
Standard.
MDPV.............................. Medium-Duty Passenger Vehicle.
MEMA.............................. Motor & Equipment Manufacturer's
Association.
MIN............................... minimum values.
MMTCO2............................ Million Metric Tons of Carbon
Dioxide.
MMY............................... Mid-Model Year.
MOU............................... Memorandum of Understanding.
MOVES............................. Motor Vehicle Emission Simulator
(including versions 3 and 4).
MPG............................... Miles Per Gallon.
mph............................... Miles Per Hour.
MR................................ Mass Reduction.
MSRP.............................. Manufacturer Suggested Retail Price.
MY................................ Model Year.
NAAQS............................. National Ambient Air Quality
Standards.
NACFE............................. North American Council for Freight
Efficiency.
NADA.............................. National Automotive Dealers
Association.
NAICS............................. North American Industry
Classification System.
NAS............................... National Academy of Sciences.
NCA............................... Nickel Cobalt Aluminum.
NEMS.............................. National Energy Modeling System.
NEPA.............................. National Environmental Policy Act.
NESCCAF........................... Northeast States Center for a Clean
Air Future.
NEVI.............................. National Electric Vehicle
Infrastructure.
NHPA.............................. National Historic Preservation Act.
NHTSA............................. National Highway Traffic Safety
Administration.
NMC............................... Nickel Manganese Cobalt.
NOX............................... Nitrogen Oxide.
NPRM.............................. Notice of Proposed Rulemaking.
NRC............................... National Research Council.
NRDC.............................. Natural Resource Defense Council.
NREL.............................. National Renewable Energy
Laboratory.
NTTAA............................. National Technology Transfer and
Advancement Act.
NVH............................... Noise-Vibration-Harshness.
NVO............................... Negative Valve Overlap.
NVPP.............................. National Vehicle Population Profile.
OEM............................... Original Equipment Manufacturer.
OHV............................... Overhead Valve.
OMB............................... Office of Management and Budget.
OPEC.............................. Organization of the Petroleum
Exporting Countries.
ORNL.............................. Oak Ridge National Laboratories.
PC................................ Passenger Car.
PEF............................... Petroleum Equivalency Factor.
PHEV.............................. Plug-in Hybrid Electric Vehicle.
PM................................ Particulate Matter.
PM2.5............................. fine particulate matter.
PMY............................... Pre-Model Year.
PPC............................... Passive Prechamber Combustion.
PRA............................... Paperwork Reduction Act of 1995.
PRIA.............................. Preliminary Regulatory Impact
Analysis.
PS................................ Power Split.
REMI.............................. Regional Economic Models, Inc.
RFS............................... Renewable Fuel Standard.
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RIN............................... Regulation identifier number.
ROD............................... Record of Decision.
ROLL.............................. Tire rolling resistance.
RPE............................... Retail Price Equivalent.
RPM............................... Rotations Per Minute.
RRC............................... Rolling Resistance Coefficient.
RWD............................... Rear Wheel Drive.
SAE............................... Society of Automotive Engineers.
SAFE.............................. Safer Affordable Fuel-Efficient.
SBREFA............................ Small Business Regulatory
Enforcement Fairness Act.
SC................................ Social Cost.
SCC............................... Social Cost of Carbon.
SEC............................... Securities and Exchange Commission.
SGDI.............................. Stoichiometric Gasoline Direct
Injection.
SHEV.............................. Strong Hybrid Electric Vehicle.
SI................................ Spark Ignition.
SIP............................... State Implementation Plan.
SKIP.............................. refers to skip input in market data
input file.
SO2............................... Sulfur Dioxide.
SOC............................... State of Charge.
SOHC.............................. Single Overhead Camshaft.
SOX............................... Sulfur Oxide.
SPR............................... Strategic Petroleum Reserve.
SUV............................... Sport Utility Vehicle.
SwRI.............................. Southwest Research Institute.
TAR............................... Technical Assessment Report.
TSD............................... Technical Support Document.
UAW............................... United Automobile, Aerospace &
Agricultural Implement Workers of
America.
UF................................ Utility Factor.
UMRA.............................. Unfunded Mandates Reform Act of
1995.
VCR............................... Variable Compression Ratio.
VMT............................... Vehicle Miles Traveled.
VOC............................... Volatile Organic Compounds.
VSL............................... Value of a Statistical Life.
VTG............................... Variable Turbo Geometry.
VTGE.............................. Variable Turbo Geometry (Electric).
VVL............................... Variable Valve Lift.
VVT............................... Variable Valve Timing.
WF................................ Work Factor.
ZEV............................... Zero Emission Vehicle.
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Does this action apply to me?
This final rule affects companies that manufacture or sell new
passenger automobiles (passenger cars), non-passenger automobiles
(light trucks), and heavy-duty pickup trucks and vans (HDPUVs), as
defined under NHTSA's Corporate Average Fuel Economy (CAFE) and medium
and heavy duty (MD/HD) fuel efficiency (FE) regulations.\1\ Regulated
categories and entities include:
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\1\ ``Passenger car,'' ``light truck,'' and ``heavy-duty pickup
trucks and vans'' are defined in 49 CFR part 523.
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NAICS codes Examples of potentially
Category \a\ regulated entities
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Industry....................... 335111 Motor Vehicle
336112 Manufacturers.
Industry....................... 811111 Commercial Importers of
811112 Vehicles and Vehicle
811198 Components.
423110
Industry....................... 335312 Alternative Fuel
336312 Vehicle Converters.
336399
811198
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\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 persons
listed in FOR FURTHER INFORMATION CONTACT.
Table of Contents
I. Executive Summary
II. Overview of the Final Rule
A. Summary of the NPRM
[[Page 52544]]
B. Public Participation Opportunities and Summary of Comments
C. Changes to the CAFE Model in Light of Public Comments and New
Information
D. Final Standards--Stringency
E. Final Standards--Impacts
1. Light Duty Effects
2. Heavy Duty Pickup Trucks and Vans Effects
F. Final Standards Are Maximum Feasible
G. Final Standards Are Feasible in the Context of EPA's Final
Standards and California's Standards
III. Technical Foundation for Final Rule Analysis
A. Why is NHTSA conducting this analysis?
1. What are the key components of NHTSA's analysis?
2. How do requirements under EPCA/EISA shape NHTSA's analysis?
3. What updated assumptions does the current model reflect as
compared to the 2022 final rule and the 2023 NPRM?
B. What is NHTSA analyzing?
C. What inputs does the compliance analysis require?
1. Technology Options and Pathways
2. Defining Manufacturers' Current Technology Positions in the
Analysis Fleet
3. Technology Effectiveness Values
4. Technology Costs
5. Simulating Existing Incentives, Other Government Programs,
and Manufacturer ZEV Deployment Plans
a. Simulating ZEV Deployment Unrelated to NHTSA's Standards
b. IRA Tax Credits
6. Technology Applicability Equations and Rules
D. Technology Pathways, Effectiveness, and Cost
1. Engine Paths
2. Transmission Paths
3. Electrification Paths
4. Road Load Reduction Paths
a. Mass Reduction
b. Aerodynamic Improvements
c. Low Rolling Resistance Tires
5. Simulating Air Conditioning Efficiency and Off-Cycle
Technologies
E. Consumer Responses to Manufacturer Compliance Strategies
1. Macroeconomic and Consumer Behavior Assumptions
2. Fleet Composition
a. Sales
b. Scrappage
3. Changes in Vehicle Miles Traveled (VMT)
4. Changes to Fuel Consumption
F. Simulating Emissions Impacts of Regulatory Alternatives
G. Simulating Economic Impacts of Regulatory Alternatives
1. Private Costs and Benefits
a. Costs to Consumers
(1) Technology Costs
(2) Consumer Sales Surplus
(3) Ancillary Costs of Higher Vehicle Prices
b. Benefits to Consumers
(1) Fuel Savings
(2) Refueling Benefit
(3) Additional Mobility
2. External Costs and Benefits
a. Costs
(1) Congestion and Noise
(2) Fuel Tax Revenue
b. Benefits
(1) Climate Benefits
(a) Social Cost of Greenhouse Gases Estimates
(b) Discount Rates for Climate Related Benefits
(c) Comments and Responses About the Agency's Choice of Social
Cost of Carbon Estimates and Discount Rates
(2) Reduced Health Damages
(3) Reduction in Petroleum Market Externalities
(4) Changes in Labor Use and Employment
3. Costs and Benefits Not Quantified
H. Simulating Safety Effects of Regulatory Alternatives
1. Mass Reduction Impacts
2. Sales/Scrappage Impacts
3. Rebound Effect Impacts
4. Value of Safety Impacts
IV. Regulatory Alternatives Considered in This Final Rule
A. General Basis for Alternatives Considered
B. Regulatory Alternatives Considered
1. Reference Baseline/No-Action Alternative
2. Alternative Baseline/No-Action Alternative
3. Action Alternatives for Model Years 2027-2032 Passenger Cars
and Light Trucks
a. Alternative PC1LT3
b. Alternative PC2LT002--Final Standards
c. Alternative PC2LT4
d. Alternative PC3LT5
e. Alternative PC6LT8
f. Other Alternatives Suggested by Commenters for Passenger Car
and LT CAFE Standards
4. Action Alternatives for Model Years 2030-2035 Heavy-Duty
Pickups and Vans
a. Alternative HDPUV4
b. Alternative HDPUV108--Final Standards
c. Alternative HDPUV10
d. Alternative HDPUV14
V. Effects of the Regulatory Alternatives
A. Effects on Vehicle Manufacturers
1. Passenger Cars and Light Trucks
2. Heavy-Duty Pickups and Vans
B. Effects on Society
1. Passenger Cars and Light Trucks
2. Heavy-Duty Pickups and Vans
C. Physical and Environmental Effects
1. Passenger Cars and Light Trucks
2. Heavy-Duty Pickups and Vans
D. Sensitivity Analysis, Including Alternative Baseline
1. Passenger Cars and Light Trucks
2. Heavy-Duty Pickups and Vans
VI. Basis for NHTSA's Conclusion That the Standards Are Maximum
Feasible
A. EPCA, as Amended by EISA
1. Lead Time
a. Passenger Cars and Light Trucks
b. Heavy-Duty Pickups and Vans
2. Separate Standards for Passenger Cars, Light Trucks, and
Heavy-Duty Pickups and Vans, and Minimum Standards for Domestic
Passenger Cars
3. Attribute-Based and Defined by a Mathematical Function
4. Number of Model Years for Which Standards May Be Set at a
Time
5. Maximum Feasible Standards
a. Passenger Cars and Light Trucks
(1) Technological Feasibility
(2) Economic Practicability
(3) The Effect of Other Motor Vehicle Standards of the
Government on Fuel Economy
(4) The Need of the U.S. To Conserve Energy
(a) Consumer Costs and Fuel Prices
(b) National Balance of Payments
(c) Environmental Implications
(d) Foreign Policy Implications
(5) Factors That NHTSA Is Prohibited From Considering
(6) Other Considerations in Determining Maximum Feasible CAFE
Standards
b. Heavy-Duty Pickups and Vans
(1) Appropriate
(2) Cost-Effective
(3) Technologically Feasible
B. Comments Regarding the Administrative Procedure Act (APA) and
Related Legal Concerns
C. National Environmental Policy Act
1. Environmental Consequences
a. Energy
(1) Direct and Indirect Impacts
(2) Cumulative Impacts
b. Air Quality
(1) Direct and Indirect Impacts
(a) Criteria Pollutants
(b) Toxic Air Pollutants
(c) Health Impacts
(2) Cumulative Impacts
(a) Criteria Pollutants
(b) Toxic Air Pollutants
(c) Health Impacts
c. Greenhouse Gas Emissions and Climate Change
(1) Direct and Indirect Impacts
(a) Greenhouse Gas Emissions
(b) Climate Change Indicators (Carbon Dioxide Concentration,
Global Mean Surface Temperature, Sea Level, Precipitation, and Ocean
pH)
(2) Cumulative Impacts
(a) Greenhouse Gas Emissions
(b) Climate Change Indicators (Carbon Dioxide Concentration,
Global Mean Surface Temperature, Sea Level, Precipitation, and Ocean
pH)
(c) Health, Societal, and Environmental Impacts of Climate
Change
(d) Qualitative Impacts Assessment
2. Conclusion
D. Evaluating the EPCA/EISA Factors and Other Considerations To
Arrive at the Final Standards
1. Passenger Cars and Light Trucks
2. Heavy-Duty Pickups and Vans
3. Severability
VII. Compliance and Enforcement
A. Background
B. Overview of Enforcement
1. Light Duty CAFE Program
a. Determining Compliance
b. Flexibilities
c. Civil Penalties
2. Heavy-Duty Pickup Trucks and Vans
a. Determining Compliance
b. Flexibilities
c. Civil Penalties
C. Changes Made by This Final Rule
[[Page 52545]]
1. Elimination of OC and AC Efficiency FCIVs for BEVs in the
CAFE Program
2. Addition of a Utility Factor for Calculating FCIVs for PHEVs
3. Phasing Out OC FCIVs by MY 2033
4. Elimination of the 5-Cycle and Alternative Approval Pathways
for CAFE
5. Requirement To Respond To Requests for Information Regarding
Off-Cycle Requests Within 60 Days for LDVs for MYs 2025 and 2026
6. Elimination of OC Technology Credits for Heavy-Duty Pickup
Trucks and Vans Starting in Model Year 2030
7. Technical Amendments for Advanced Technology Credits
8. Technical Amendments to Part 523
a. 49 CFR 523.2 Definitions
b. 49 CFR 523.3 Automobile
c. 49 CFR 523.4 Passenger Automobile
d. 49 CFR 523.5 Non-Passenger Automobile
e. 49 CFR 523.6 Heavy-Duty Vehicle
f. 49 CFR 523.8 Heavy-Duty Vocational Vehicle
9. Technical Amendments to Part 531
a. 49 CFR 531.1 Scope
b. 49 CFR 531.4 Definitions
c. 49 CFR 531.5 Fuel Economy Standards
10. Technical Amendments to Part 533
a. 49 CFR 533.1 Scope
b. 49 CFR 533.4 Definitions
11. Technical Amendments to Part 535
a. 49 CFR 535.4 Definitions
b. 49 CFR 535.7 Average, Banking, and Trading (ABT) Credit
Program
12. Technical Amendments to Part 536
13. Technical Amendments to Part 537
a. 49 CFR 537.2 Scope
b. 49 CFR 537.3 Applicability
c. 49 CFR 537.4 Definitions
d. 49 CFR 537.7 Pre-Model Year and Mid-Model Year Reports
D. Non-Fuel Saving Credits or Flexibilities
E. Additional Comments
1. AC FCIVs
2. Credit Transfer Cap AC
3. Credit Trading Between HDPUV and Light Truck Fleets
4. Adjustment for Carry Forward and Carryback Credits
5. Increasing Carryback Period
6. Flex Fuel Vehicle Incentives
7. Reporting
8. Petroleum Equivalency Factor for HDPUVs
9. Incentives for Fuel Cell Electric Vehicles
10. EV Development
11. PHEV in HDPUV
VIII. Regulatory Notices and Analyses
A. Executive Order 12866, Executive Order 13563, and Executive
Order 14094
B. DOT Regulatory Policies and Procedures
C. Executive Order 14037
D. Environmental Considerations
1. National Environmental Policy Act (NEPA)
2. Clean Air Act (CAA) as Applied to NHTSA's Final Rule
3. National Historic Preservation Act (NHPA)
4. Fish and Wildlife Conservation Act (FWCA)
5. Coastal Zone Management Act (CZMA)
6. Endangered Species Act (ESA)
7. Floodplain Management (Executive Order 11988 and DOT Order
5650.2)
8. Preservation of the Nation's Wetlands (Executive Order 11990
and DOT Order 5660.1a)
9. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle
Protection Act (BGEPA), Executive Order 13186
10. Department of Transportation Act (Section 4(f))
11. Executive Order 12898: ``Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations''; Executive Order 14096: ``Revitalizing Our Nation's
Commitment to Environmental Justice for All''
12. Executive Order 13045: ``Protection of Children From
Environmental Health Risks and Safety Risks''
E. Regulatory Flexibility Act
F. Executive Order 13132 (Federalism)
G. Executive Order 12988 (Civil Justice Reform)
H. Executive Order 13175 (Consultation and Coordination With
Indian Tribal Governments)
I. Unfunded Mandates Reform Act
J. Regulation Identifier Number
K. National Technology Transfer and Advancement Act
L. Department of Energy Review
M. Paperwork Reduction Act
N. Congressional Review Act
I. Executive Summary
NHTSA, on behalf of the Department of Transportation, is finalizing
new corporate average fuel economy (CAFE) standards for passenger cars
and light trucks for model years 2027-2031,\2\ setting forth augural
standards for MY 2032,\3\ and finalizing new fuel efficiency standards
for heavy-duty pickup trucks and vans \4\ (HDPUVs) for model years
2030-2035. This final rule responds to NHTSA's statutory obligation to
set CAFE and HDPUV standards at the maximum feasible level that the
agency determines vehicle manufacturers can achieve in each MY, in
order to improve energy conservation.\5\ Improving energy conservation
by raising CAFE and HDPUV standard stringency not only helps consumers
save money on fuel, but also improves national energy security and
reduces harmful emissions.
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\2\ Passenger cars are generally sedans, station wagons, and
two-wheel drive crossovers and sport utility vehicles (CUVs and
SUVs), while light trucks are generally four-wheel drive sport
utility vehicles, pickups, minivans, and passenger/cargo vans.
``Passenger car'' and ``light truck'' are defined more precisely at
49 CFR part 523.
\3\ MY 2032, is ``augural,'' as in the 2012 final rule that
established CAFE standards for MYs 2017 and beyond. The 2012 final
rule citation is 77 FR 62624 (Oct. 15, 2012).
\4\ HDPUVs are generally Class 2b/3 work trucks, fleet SUVs,
work vans, and cutaway chassis-cab vehicles. ``Heavy-duty pickup
trucks and vans'' are more precisely defined at 49 CFR part 523.
\5\ See 49 U.S.C. 32902.
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Based on the information currently before us, NHTSA estimates that
relative to the reference baseline \6\ this final rule will reduce
gasoline consumption by 64 billion gallons relative to reference
baseline levels for passenger cars and light trucks and will reduce
fuel consumption by approximately 5.6 billion gallons relative to
reference baseline levels for HDPUVs through calendar year 2050. If
compared to the alternative baseline, which has lower levels of
electric vehicle penetration than the reference baseline, fuel savings
will be greater at approximately 115 billion gallons.\7\ Reducing
gasoline consumption has multiple benefits--it improves our nation's
energy security, it saves consumers money, and reduces harmful
pollutant emissions that lead to adverse human and environmental health
outcomes and climate change. NHTSA estimates that relative to the
reference baseline, this final rule will reduce carbon dioxide
(CO2) emissions by 659 million metric tons for passenger
cars and light trucks, and by 55 million metric tons for HDPUVs through
calendar year 2050. Again, these relative reductions are greater if the
rule is compared to the alternative baseline, but demonstrating a
similar level of absolute carbon dioxide emissions.\8\ While consumers
could pay more for new vehicles upfront, we estimate that they would
save money on fuel costs over the lifetimes of those new vehicles--in
the reference baseline analysis lifetime fuel savings exceed modeled
regulatory costs by roughly $247, on average, for passenger car and
light truck buyers of MY 2031 vehicles, and roughly $491, on average,
for HDPUV buyers of MY 2038 vehicles. By comparison, in the No ZEV
alternative baseline analysis, lifetime fuel savings exceed modeled
regulatory costs by roughly $400, on average, for passenger car and
light truck buyers of MY 2031 vehicles. Net benefits for the preferred
[[Page 52546]]
alternative for passenger cars and light trucks are estimated to be
$35.2 billion at a 3 percent discount rate (DR),\9\ and $30.8 billion
at a 7 percent DR, and for HDPUVs, net benefits are estimated to be
$13.6 billion at a 3 percent DR, and $11.8 billion at a 7 percent DR.
Net benefits are higher if the final rules are assessed relative to the
alternative baseline, estimated to be $44.9 billion at a 3 percent DR
and $39.8 billion at 7 percent DR.\10\ (For simplicity, however, all
projections presented in this document use the reference baseline
unless otherwise stated.)
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\6\ NHTSA performed an analysis considering an alternative
baseline, referenced herein as the ``No ZEV alternative baseline.''
The alternative baseline does not assume manufacturers will
consider, or preemptively react to, or voluntarily deploy electric
vehicles consistent with any of the California light-duty vehicle
Zero Emission Vehicle programs (specifically, ACC I and ACC II)
during any of the model years simulated in the analysis, regardless
of the fact that ACC I is a legally binding program, and regardless
of manufacturer commitments to deploy electric vehicles consistent
with ACC II. See TSD Chapter 1.4.2, RIA 3.2, and Section IV.B.2 of
this document for further discussion.
\7\ Under the CAFE standards finalized in this rule, the
absolute amount of fuel use predicted through CY 2050 only differs
by 1.4 percent between the reference and alternative baseline
analysis.
\8\ There is a 1 percent difference between the absolute volume
of carbon dioxide (measured in million metric tons, or mmt) produced
through CY 2050 in the reference baseline analysis and alternative
baseline analysis under the final standards.
\9\ The Social Cost of Greenhouse Gases (SC-GHG) assumed a 2
percent discount rate for the net benefit values discussed here.
\10\ While the absolute fuel consumption and carbon dioxide
emissions are similar when the final standards are applied over both
baselines considered, the higher net benefits for the alternative
baseline are a result of a larger portion of the reduced fuel use
and reduced carbon dioxide being attributed to the CAFE standards
rather than to the baseline.
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The record for this action is comprised of the notice of proposed
rulemaking (NPRM) and this final rule, a Technical Support Document
(TSD), a Final Regulatory Impact Assessment (FRIA), and a Draft and
Final EIS, along with extensive analytical documentation, supporting
references, and many other resources. Most of these resources are
available on NHTSA's website,\11\ and other references not available on
NHTSA's website can be found in the rulemaking docket, the docket
number of which is listed at the beginning of this preamble.
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\11\ See NHTSA. 2023. Corporate Average Fuel Economy. Available
at: https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy. (Accessed: Feb. 23, 2024).
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The final rule considers a range of regulatory alternatives for
each fleet, consistent with NHTSA's obligations under the
Administrative Procedure Act (APA), National Environmental Policy Act
(NEPA), and E.O. 12866. Specifically, NHTSA considered five regulatory
alternatives for passenger cars and light trucks, as well as the No-
Action Alternative. Each alternative is labeled for the type of vehicle
and the rate of increase in fuel economy stringency based on changes
for each model year, for example, PC1LT3 represents a 1 percent
increase in Passenger Car standards and a 3 percent increase in Light
Truck standards. We include four regulatory alternatives for HDPUVs,
each representing different possible rates of year-over-year increase
in the stringency of new fuel economy and fuel efficiency standards, as
well as the No-Action Alternative. For example, HDPUV4 represents a 4
percent increase in fuel efficiency standards applicable to HDPUVs. The
regulatory alternatives are as follows: \12\
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\12\ In a departure from recent CAFE rulemaking trends, we have
applied different rates of stringency increase to the passenger car
and the light truck fleets in different model years, because the
record indicated that different rates of fuel economy were possible.
Rather than have both fleets increase their respective standards at
the same rate, light truck standards increase at a different rate
than passenger car standards in the first two years of the program.
This is consistent with NHTSA's obligation to set maximum feasible
CAFE standards separately for passenger cars and light trucks (see
49 U.S.C. 32902), which gives NHTSA discretion, by law, to set CAFE
standards that increase at different rates for cars and trucks.
Section VI of this preamble also discusses in greater detail how
this approach carries out NHTSA's responsibility under the Energy
Policy and Conservation Act (EPCA) to set maximum feasible standards
for both passenger cars and light trucks.
\13\ Percentages in the table represent the year over year
reduction in gal/mile applied to the mpg values on the target
curves. The reduction in gal/mile results in an increased mpg.
[GRAPHIC] [TIFF OMITTED] TR24JN24.000
[[Page 52547]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.001
After assessing these alternatives against the reference baseline
and the alternative baseline, and evaluating numerous sensitivity
cases, NHTSA is finalizing stringency increases at 2 percent per year
for passenger cars for MYs 2027 through 2031, and at 0 percent per year
for light trucks for MYs 2027 and 2028, and 2 percent per year for MYs
2029-2031. NHTSA is also setting forth an augural MY 2032 standard that
increases at a rate of 2 percent for both passenger cars and light
trucks. NHTSA is finalizing stringency increases at 10 percent per year
for HDPUVs for MYs 2030-2032, and 8 percent per year for MYs 2033-2035.
The regulatory alternatives representing these final stringency
increases are called ``PC2LT002'' for passenger cars and light trucks,
and ``HDPUV108'' for HDPUVs. These standards are also referred to
throughout the rulemaking documents as the ``preferred alternative'' or
``final standards.'' NHTSA concludes that these levels are the maximum
feasible for these model years as discussed in more detail in Section
VI of this preamble, and in particular given the statutory constraints
that prevent NHTSA from considering the fuel economy of battery
electric vehicles (BEVs) in determining maximum feasible CAFE
standards.\15\
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\14\ For HDPUVs, the different regulatory alternatives are also
defined in terms of percent-increases in stringency from year to
year, but in terms of fuel consumption reductions rather than fuel
economy increases, so that increasing stringency appears to result
in standards going down (representing a direct reduction in fuel
consumed) over time rather than up. Also, unlike for the passenger
car and light truck standards, because HDPUV standards are measured
using a fuel consumption metric, year-over-year percent changes do
actually represent gallon/mile differences across the work-factor
range.
\15\ 49 U.S.C. 32902(h) states that when determining what levels
of CAFE standards are maximum feasible, NHTSA ``(1) may not consider
the fuel economy of dedicated automobiles [including battery-
electric vehicles]; (2) shall consider dual fueled automobiles to be
operated only on gasoline or diesel fuel; and (3) may not consider,
when prescribing a fuel economy standard, the trading, transferring,
or availability of credits under section 32903.''
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NHTSA notes that due to the statutory constraints that prevent
NHTSA from considering the fuel economy of dedicated alternative fueled
vehicles, the full (including electric-only operation) fuel economy of
dual-fueled alternative fueled vehicles, and the availability of over-
compliance credits when determining what standards are maximum
feasible, many aspects of our analysis are different from what they
would otherwise be without the statutory restrictions--in particular,
the technologies chosen to model possible compliance options, the
estimated costs, benefits, and achieved levels of fuel economy, as well
as the current and projected adoption of alternative fueled vehicles.
NHTSA evaluates the results of that constrained analysis by weighing
the four enumerated statutory factors to determine which standards are
maximum feasible, as discussed in Section VI.A.5.
For passenger cars and light trucks, NHTSA notes that the final
year of standards, MY 2032, is ``augural,'' as in the 2012 final rule
which established CAFE standards for model years 2017 and beyond.
Augural standards mean that they are NHTSA's best estimate of what the
agency would propose, based on the information currently before it, if
the agency had authority to set CAFE standards for more than five model
years in one action. The augural standards do not, and will not, have
any effect in themselves and are not binding unless adopted in a
subsequent rulemaking. Consistent with past practice, NHTSA is
including augural standards for MY 2032 to give its best estimate of
what those standards would be to provide as much predictability as
possible to manufacturers and to be consistent with the time frame of
the Environmental Protection Agency (EPA) standards for greenhouse gas
(GHG) emissions from motor vehicles. Due to statutory lead time
constraints for HDPUV standards, NHTSA's final rule for HDPUV standards
must begin with MY 2030. There is no restriction on the number of model
years for which NHTSA may set HDPUV standards, so none of the HDPUV
standards are augural.
The CAFE standards remain vehicle-footprint-based, like the current
CAFE standards in effect since MY 2011, and the HDPUV standards remain
work-factor-based, like the HDPUV standards established in the 2011
``Phase 1'' rulemaking used in the 2016 ``Phase 2'' rulemaking. The
footprint of a vehicle is the area calculated by multiplying the
wheelbase times the track width, essentially the rectangular area of a
vehicle measured from tire to tire where the tires hit the ground. The
work factor (WF) of a vehicle is a unit established to measure payload,
towing capability, and whether or not a vehicle has four-wheel drive.
This means that the standards are defined by mathematical equations
that represent linear functions relating vehicle footprint to fuel
economy targets for passenger cars and light trucks,\16\ and relating
WF to fuel consumption targets for HDPUVs.
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\16\ Generally, passenger cars have more stringent targets than
light trucks regardless of footprint, and smaller vehicles will have
more stringent targets than larger vehicles, because smaller
vehicles are generally more fuel efficient. No individual vehicle or
vehicle model need meet its target exactly, but a manufacturer's
compliance is determined by how its average fleet fuel economy
compares to the average fuel economy of the targets of the vehicles
it manufactures.
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The target curves for passenger cars, light trucks, and
compression-ignition and spark-ignition HDPUVs are set forth in
Sections II and IV; curves for model years prior to the years of the
rulemaking time frame are included in the figures for context. NHTSA
[[Page 52548]]
underscores that the equations and coefficients defining the curves are
the CAFE and HDPUV standards, and not the mpg and gallon/100-mile
estimates that the agency currently estimates could result from
manufacturers complying with the curves. We provide mpg and gallon/100-
mile estimates for ease of understanding after we illustrate the
footprint curves, but the equations and coefficients are the actual
standards. NHTSA is also finalizing new minimum domestic passenger car
CAFE standards (MDPCS) for model years 2027-2031 as required by the
Energy Policy and Conservation Act of 1975 (EPCA), as amended by the
EISA, and applied to vehicles defined as manufactured in the United
States. Section 32902(b)(4) of 49 U.S.C. requires NHTSA to project the
minimum domestic standard when it promulgates passenger car standards
for a MY; these standards are shown in Table I-3 below. NHTSA retains
the 1.9 percent offset first used in the 2020 final rule, reflecting
prior differences between passenger car footprints originally forecast
by the agency and passenger car footprints as they occurred in the real
world, such that the minimum domestic passenger car standard is as
shown in the table below.
[GRAPHIC] [TIFF OMITTED] TR24JN24.002
Recognizing that many readers think about CAFE standards in terms
of the mpg values that the standards are projected to eventually
require, NHTSA currently estimates that the standards would require
roughly 50.4 mpg in MY 2031, on an average industry fleet-wide basis,
for passenger cars and light trucks. NHTSA notes both that real-world
fuel economy is generally 20-30 percent lower than the estimated
required CAFE level stated above,\17\ and also that the actual CAFE
standards are the footprint target curves for passenger cars and light
trucks. This last note is important, because it means that the ultimate
fleet-wide levels will vary depending on the mix of vehicles that
industry produces for sale in those model years. NHTSA also calculates
and presents ``estimated achieved'' fuel economy levels, which differ
somewhat from the estimated required levels for each fleet, for each
year.\18\ NHTSA estimates that the industry-wide average fuel economy
achieved in MY 2031 for passenger cars and light trucks combined could
increase from about 52.1 mpg under the No-Action Alternative to 52.5
mpg under the standards.
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\17\ CAFE compliance is evaluated per 49 U.S.C. 32904(c) Testing
and Calculation Procedures, which states that the EPA Administrator
(responsible under EPCA/EISA for measuring vehicle fuel economy)
shall use the same procedures used for model year 1975 (weighted 55
percent urban cycle and 45 percent highway cycle) or comparable
procedures. Colloquially, this is known as the 2-cycle test. The
``real-world'' or 5-cycle evaluation includes the 2-cycle tests, and
three additional tests that are used to adjust the city and highway
estimates to account for higher speeds, air conditioning use, and
colder temperatures. In addition to calculating vehicle fuel
economy, EPA is responsible for providing the fuel economy data that
is used on the fuel economy label on all new cars and light trucks,
which uses the ``real-world'' values. In 2006, EPA revised the test
methods used to determine fuel economy estimates (city and highway)
appearing on the fuel economy label of all new cars and light trucks
sold in the U.S., effective with 2008 model year vehicles.
\18\ NHTSA's analysis reflects that manufacturers nearly
universally make the technological improvements prompted by CAFE
standards at times that coincide with existing product ``refresh''
and ``redesign'' cycles, rather than applying new technology every
year regardless of those cycles. It is significantly more cost-
effective to make fuel economy-improving technology updates when a
vehicle is being updated. See TSD 2.2.1.7 for additional discussion
about manfacturer refresh and redesign cycles.
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[[Page 52549]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.003
To the extent that manufacturers appear to be over-complying in our
analysis with required fuel economy levels in the passenger car fleet,
NHTSA notes that this is due to the inclusion of several all-electric
manufacturers in the reference baseline analysis, which affects the
overall average achieved levels. Manufacturers with more traditional
fleets do not over-comply at such high levels in our analysis, and our
analysis considers the compliance paths for both manufacturer groups.
In contrast, while it looks like some manufacturers are falling short
of required fuel economy levels in the light truck fleet (and choosing
instead to pay civil penalties), NHTSA notes that this appears to be an
economic decision by a relatively small number of companies. In
response to comments from vehicle manufacturers, in particular
manufacturers that commented that they cannot stop manufacturing large
fuel inefficient light trucks while also transitioning to manufacturing
electric vehicles, NHTSA has reconsidered light truck stringency levels
and notes that manufacturers no longer face CAFE civil penalties as
modeled in the NPRM. Please see Section VI.D of this preamble for more
discussion on these topics and how the agency has considered them in
determining maximum feasible standards for this final rule.
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\19\ There is no actual legal requirement for combined passenger
car and light truck fleets, but NHTSA presents information this way
in recognition of the fact that many readers will be accustomed to
seeing such a value.
\20\ The MY 2022 baseline fleet that was used from 2022 NHTSA
Pre-Model Year (PMY) data consists of 38% passenger car and 62%
light truck.
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For HDPUVs, NHTSA currently projects that the standards would
require, on an average industry fleet-wide basis for the HDPUV fleet,
roughly 2.851 gallons per 100 miles in MY 2035.\21\ HDPUV standards are
attribute-based like passenger car and light truck standards, so here,
too, ultimate fleet-wide levels will vary depending on what industry
produces for sale.
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\21\ The HDPUV standards measure compliance in direct fuel
consumption and uses gallons consumed per 100 miles of operation as
a metric. See 49 CFR 535.6.
[GRAPHIC] [TIFF OMITTED] TR24JN24.004
For all fleets, average requirements and average achieved CAFE and
HDPUV fuel efficiency levels would ultimately depend on manufacturers'
and consumers' responses to standards, technology developments,
economic conditions, fuel prices, and other factors.
[[Page 52550]]
Our technical analysis for this final rule keeps the same general
framework as past CAFE and HDPUV rules, but as applied to the most up-
to-date fleet available at the time of the analysis. NHTSA has updated
technologies considered in our analysis (removing technologies which
are already universal or nearly so and technologies which are exiting
the fleet, adding certain advanced engine technologies); \22\ updated
macroeconomic input assumptions, as with each round of rulemaking
analysis; improved user control of various input parameters; updated
our approach to modeling manufacturers' expected compliance with
states' Zero Emission Vehicle (ZEV) programs and deployment of
additional electric vehicles consistent with manufacturer commitments;
accounted for changes to DOE's Petroleum Equivalency Factor (PEF),\23\
for the reference baseline assumptions; expanded accounting for Federal
incentives such as Inflation Reduction Act programs; expanded
procedures for estimating new vehicle sales and fleet shares; updated
inputs for projecting aggregate light-duty Vehicle Miles Traveled
(VMT); and added various output values and options.\24\
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\22\ See TSD Chapter 1.1 for a complete list of technologies
added or removed from the analysis.
\23\ For more information on DOE's final rule, see 89 FR 22041
(Mar. 29, 2024). For more information on how DOE's revised PEF
affects NHTSA's results in this final rule, please see Chapter 9 of
the FRIA.
\24\ See TSD Chapter 1.1 for a detailed discussion of analysis
updates.
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NHTSA concludes, as we explain in more detail below, that
Alternative PC2LT002 is the maximum feasible alternative that
manufacturers can achieve for model years 2027-2031 passenger cars and
light trucks, based on a variety of reasons. Energy conservation is
still paramount, for the consumer benefits, energy security benefits,
and environmental benefits that it provides. Moreover, although the
vehicle fleet is undergoing a significant transformation now and in the
coming years, for reasons other than the CAFE standards, NHTSA believes
that a significant percentage of the on-road (and new) vehicle fleet
may remain propelled by internal combustion engines (ICEs) through
2031. NHTSA believes that the final standards will encourage
manufacturers producing those ICE vehicles during the standard-setting
time frame to achieve significant fuel economy, improve energy
security, and reduce harmful pollution by a large amount. At the same
time, NHTSA is finalizing standards that our estimates project will
continue to save consumers money and fuel over the lifetime of their
vehicles while being economically practicable and technologically
feasible for manufacturers to achieve.
Although all of the other alternatives, except for the no-action
alternative, would conserve more energy and provide greater fuel
savings benefits and certain pollutant emissions reductions, NHTSA's
statutorily-constrained analysis currently estimates that those
alternatives may not be achievable for many manufacturers in the
rulemaking time frame.\25\ Additionally, the analysis indicates
compliance with those more stringent alternatives would impose
significant costs (under the constrained analysis) on individual
consumers without corresponding fuel savings benefits large enough to,
on average, offset those costs. Within that framework, NHTSA's analysis
suggests that the more stringent alternatives could push more
technology application than would be economically practicable, given
anticipated reference baseline activity that will already be consuming
manufacturer resources and capital and the constraints of planned
manufacturer redesign cycles. In contrast to all other action
alternatives, except for the no-action alternative, Alternative
PC2LT002 comes at a cost we believe the market can bear without
creating consumer acceptance or sales issues, appears to be much more
achievable, and will still result in consumer net benefits on average.
The alternative also achieves large fuel savings benefits and
significant reductions in emissions compared to the no-action
alternative. NHTSA concludes Alternative PC2LT002 is the appropriate
choice given this record.
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\25\ See Section VI for a complete discussion.
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For HDPUVs, NHTSA concludes, as explained in more detail below,
that Alternative HDPUV108 is the maximum feasible alternative that
manufacturers can achieve for model years 2030-2035 HDPUVs. It has been
seven years since NHTSA revisited HDPUV standards, and our analysis
suggests that there is much opportunity for cost-effective improvements
in this segment, broadly speaking. At the same time, we recognize that
these vehicles are primarily used to conduct work for a large number of
businesses. Although Alternatives HDPUV10 and HDPUV14 would conserve
more energy and provide greater fuel savings benefits and
CO2 emissions reductions, they are more costly than
HDPUV108, and NHTSA currently estimates that Alternative HDPUV108 is
the most cost-effective under a variety of metrics and at either a 3
percent or a 7 percent DR, while still being appropriate and
technologically feasible. NHTSA is allowed to consider electrification
in determining maximum feasible standards for HDPUVs. As a result,
NHTSA concludes that HDPUV108 is the appropriate choice given the
record discussed in more detail below, and we believe it balances
EPCA's overarching objective of energy conservation while remaining
cost-effective and technologically feasible.
For passenger cars and light trucks, NHTSA estimates that this
final rule would reduce average fuel outlays over the lifetimes of MY
2031 vehicles by about $639 per vehicle relative to the reference
baseline, while increasing the average cost of those vehicles by about
$392 over the reference baseline, at a 3 percent discount rate; this
represents a difference of $247. With climate benefits discounted at 2
percent and all other benefits and costs discounted at 3 percent, when
considering the entire CAFE fleet for model years 1983-2031, NHTSA
estimates $24.5 billion in monetized costs and $59.7 billion in
monetized benefits attributable to the standards, such that the present
value of aggregate net monetized benefits to society would be $35.2
billion.\26\ Again, the net benefits are larger if the final rule is
assessed relative to the alternative baseline.
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\26\ These values are from our ``model year'' analysis,
reflecting the entire fleet from MYs 1983-2031, consistent with past
practice. Model year and calendar year perspectives are discussed in
more detail below in this section.
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For HDPUVs, NHTSA estimates that this final rule could reduce
average fuel outlays over the lifetimes of MY 2038 vehicles by about
$717 per vehicle, while increasing the average cost of those vehicles
by about $226 over the reference baseline, at a 3 percent discount
rate; this represents a difference of $491. With climate benefits
discounted at 2 percent and all other benefits and costs discounted at
3 percent, when considering the entire on-road HDPUV fleet for calendar
years 2022-2050, NHTSA estimates $3.4 billion in monetized costs and
$17 billion in monetized benefits attributable to the standards, such
that the present value of aggregate net monetized benefits to society
would be $13.6 billion.\27\
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\27\ These values are from our ``calender year'' analysis,
reflecting the on-the-road fleet from CYs 2022-2050. Model year and
calendar year perspectives are discussed in more detail below in
this section.
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These assessments do not include important unquantified effects,
such as energy security benefits, equity and distributional effects,
and certain air quality benefits from the reduction of
[[Page 52551]]
toxic air pollutants and other emissions, among other things, so the
net benefit estimate is a conservative one.\28\ In addition, the power
sector emissions modeling reflected in this analysis is subject to
uncertainty and may be conservative to the extent that other components
that influence energy markets, such as recently finalized Federal rules
and additional modeled policies like Federal tax credits, are
incorporated in those estimates. That said, NHTSA performed additional
modeling to test the sensitivity of those estimates and found that in
the context of total emissions, any changes from using different power
sector forecasts are extremely small. This is discussed in more detail
in FRIA Chapter 9.
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\28\ These cost and benefit estimates are based on many
different and uncertain inputs, and NHTSA has conducted several
dozen sensitivity analyses varying individual inputs to evaluate the
effect of that uncertainty. For example, while NHTSA's reference
baseline analysis constrains the application of high compression
ratio engines to some vehicles based on performance and other
considerations, we also conducted a sensitivity analysis that
removed all of those constraints. Results of this and other
sensitivity analyses are discussed in Section V of this preamble, in
Chapter 9 of the FRIA, and (if large or otherwise significant) in
Section VI.D of this preamble.
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Table I-6 presents aggregate benefits and costs for new vehicle
buyers and for the average individual new vehicle buyer.
[GRAPHIC] [TIFF OMITTED] TR24JN24.005
NHTSA recognizes that EPA has recently issued a final rule to set
new multi-pollutant emissions standards for model years 2027 and later
light-duty (LD) and medium-duty vehicles (MDV).\29\ EPA describes its
final rule as building upon EPA's final standards for Federal GHG
emissions standards for passenger cars and light trucks for model years
2023 through 2026 and leverages advances in clean car technology to
unlock benefits to Americans ranging from reducing pollution, to
improving public health, to saving drivers money through reduced fuel
and maintenance costs.\30\ EPA's standards phase in over model years
2027 through 2032.\31\
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\29\ Multi-Pollutant Emissions Standards for Model Years 2027
and Later Light-Duty and Medium-Duty Vehicles; Final Rule, 89 FR
27842 (Apr. 18, 2024).
\30\ Id.
\31\ Id.
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NHTSA coordinated with EPA in developing our final rule to avoid
inconsistencies and produce requirements that are consistent with
NHTSA's statutory authority. The final rules nevertheless differ in
important ways. First, NHTSA's final rule, consistent with its
statutory authority and mandate under EPCA/EISA, focuses on improving
vehicle fuel economy and not directly on reducing vehicle emissions--
though reduced emissions are a follow-on effect of improved fuel
economy. Second, the biggest difference between the two final rules is
due to EPCA/EISA's statutory prohibition against NHTSA considering the
fuel economy of dedicated alternative fueled vehicles, including BEVs,
and including the full fuel economy of dual-fueled alternative fueled
vehicles in determining the maximum feasible fuel economy level that
manufacturers can achieve for passenger cars and light trucks, even
though manufacturers may use BEVs and dual-fueled alternative fuel
vehicles (AFV) like PHEVs to comply with CAFE standards. EPA is not
prohibited from considering BEVs or PHEVs as a compliance option. EPA's
final rule is informed by, among other considerations, trends in the
automotive industry (including the proliferation of announced
investments by automakers in electrifying their fleets), tax incentives
under the Inflation Reduction Act (IRA), and other factors in the
rulemaking record that are leading to a rapid transition in the
automotive industry toward less-pollutant-emitting vehicle
technologies. NHTSA, in contrast, may not consider BEVs as a compliance
option for the passenger car and light truck fleets even though
manufacturers may, in fact, use BEVs to comply with CAFE standards.
This constraint means that not only are NHTSA's stringency rates of
increase
[[Page 52552]]
different from EPA's but also the shapes of our standards are different
based upon the different scopes.
Recognizing these statutory restrictions and their effects on
NHTSA's analysis (and that EPA's analysis and decisions are not subject
to such constraints) NHTSA sought to optimize the effectiveness of the
final CAFE standards consistent with our statutory factors. Our
statutorily constrained simulated industry response shows a reasonable
path forward to compliance with CAFE standards, but we want to stress
that our analysis simply shows feasibility and does not dictate a
required path to compliance. Because the standards are performance-
based, manufacturers are always free to apply their expertise to find
the appropriate technology path that best meets all desired outcomes.
Indeed, as explained in greater detail later on in this final rule, it
is entirely possible and reasonable that a vehicle manufacturer will
use technology options to meet NHTSA's standards that are significantly
different from what NHTSA's analysis for this final rule suggests given
the statutory constraints under which it operates. NHTSA has ensured
that these final standards take account of statutory objectives and
constraints while minimizing compliance costs.
As discussed before, NHTSA does not face the same statutory
limitations in setting standards for HDPUVs as it does in setting
standards for passenger cars and light trucks. This allows NHTSA to
consider a broader array of technologies in setting maximum feasible
standards for HDPUVs. However, we are still considerate of factors that
allow these vehicles to maintain utility and do work for the consumer
when we set the standards.
Additionally, NHTSA has considered and accounted for the electric
vehicles that manufacturers' have indicated they intend to deploy in
our analysis, as part of the analytical reference baseline.\32\ Some of
this deployment would be consistent with manufacturer compliance with
California's Advanced Clean Cars (ACC) I and Advanced Clean Trucks
(ACT). We find that manufacturers will comply with ZEV requirements in
California and a number of other states in the absence of CAFE
standards, and accounting for that expected compliance allows us to
present a more realistic picture of the state of fuel economy even in
the absence of changes to the CAFE standards. In the proposal, we also
included the main provisions of California's Advanced Clean Cars II
program (ACC II), which California has adopted but which has not been
granted a Clean Air Act preemption waiver by EPA. Because ACC II has
not been granted a waiver, we have not included it in our analysis as a
legal requirement applying to manufacturers. However, manufacturers
have indicated that they intend to deploy additional electric vehicles
regardless of whether the waiver is granted, and our analysis reflects
these vehicles. Reflecting this expected deployment of electric
vehicles for non-CAFE compliance reasons in the analysis improves the
accuracy of this reference baseline in reflecting the state of the
world without the revised CAFE standards, and thus the information
available to decision-makers in their decision as to what standards are
maximum feasible, and to the public. However, in order to ensure that
the analysis is robust to other possible futures, NHTSA also prepared
an alternative baseline--one that reflected none of these electric
vehicles (No ZEV Alternative Baseline). The net benefits of the
standards are larger under this alternative baseline than they are
under the reference baseline, and the technology deployment scenario is
reasonable under the alternative baseline, further reinforcing NHTSA's
conclusion that the final standards are reasonable, appropriate, and
maximum feasible regardless of the deployment of electric vehicles that
occurs independent of the standards.
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\32\ Specifically, we include the main provisions of the ACC I
and ACT programs, and additional electric vehicles automakers have
indicated to NHTSA that they intend to deploy, as discussed further
below in Section III.
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NHTSA notes that while the current estimates of costs and benefits
are important considerations and are directed by E.O. 12866, cost-
benefit analysis provides only one informative data point in addition
to the host of considerations that NHTSA must balance by statute when
determining maximum feasible standards. Specifically, for passenger
cars and light trucks, NHTSA is required to consider four statutory
factors--technological feasibility, economic practicability, the effect
of other motor vehicle standards of the Government on fuel economy, and
the need of the United States to conserve energy. For HDPUVs, NHTSA is
required to consider three statutory factors--whether standards are
appropriate, cost-effective, and technologically reasonable--to
determine whether the standards it adopts are maximum feasible.\33\ As
will be discussed further below, NHTSA concludes that Alternatives
PC2LT002 and HDPUV108 are maximum feasible on the basis of these
respective factors, and the cost-benefit analysis, while informative,
is not one of the statutorily-required factors. NHTSA also considered
several dozen sensitivity cases varying different inputs and concluded
that even when varying inputs resulted in changes to net benefits or
(on rare occasions) changed the relative order of regulatory
alternatives in terms of their net benefits, those changes were not
significant enough to outweigh our conclusion that Alternatives
PC2LT002 and HDPUV108 are maximum feasible.
---------------------------------------------------------------------------
\33\ 49 U.S.C. 32902(k).
---------------------------------------------------------------------------
NHTSA further notes that CAFE and HDPUV standards apply only to new
vehicles, meaning that the costs attributable to new standards are
``front-loaded'' because they result primarily from the application of
fuel-saving technology to new vehicles. By contrast, the impact of new
CAFE and HDPUV standards on fuel consumption and energy savings, air
pollution, and GHGs--and the associated benefits to society--occur over
an extended time, as drivers buy, use, and eventually scrap these new
vehicles. By accounting for many model years and extending well into
the future to 2050, our analysis accounts for these differing patterns
in impacts, benefits, and costs. Given the front-loaded costs versus
longer-term benefits, it is likely that an analysis extending even
further into the future would find additional net present benefits.
The bulk of our analysis for passenger cars and light trucks
presents a ``model year'' (MY) perspective rather than a ``calendar
year'' (CY) perspective. The MY perspective considers the lifetime
impacts attributable to all passenger cars and light trucks produced
prior to MY 2032, accounting for the operation of these vehicles over
their entire lives (with some MY 2031 vehicles estimated to be in
service as late as 2050). This approach emphasizes the role of the
model years for which new standards are being finalized, while
accounting for the potential that the standards could induce some
changes in the operation of vehicles produced prior to MY 2027 (for
passenger cars and light trucks), and that, for example, some
individuals might choose to keep older vehicles in operation, rather
than purchase new ones.
The calendar year perspective we present includes the annual
impacts attributable to all vehicles estimated to be in service in each
calendar year for which our analysis includes a representation of the
entire registered passenger car, light truck, and HDPUV fleet. For this
final rule, this calendar
[[Page 52553]]
year perspective covers each of calendar years 2022-2050, with
differential impacts accruing as early as MY 2022.\34\ Compared to the
MY perspective, the calendar year perspective includes model years of
vehicles produced in the longer term, beyond those model years for
which standards are being finalized.
---------------------------------------------------------------------------
\34\ For a presentation of effects by calendar year, please see
Chapter 8.2.4.6 of the FRIA.
---------------------------------------------------------------------------
The tables below summarize estimates of selected impacts viewed
from each of these two perspectives, for each of the regulatory
alternatives considered in this final rule, relative to the reference
baseline.
---------------------------------------------------------------------------
\35\ FRIA Chapter 1, Figure 1-1 provides a graphical comparison
of energy sources and their relative change over the standard
setting years.
\36\ The additional electricity use during regulatory years is
attributed to an increase in the number of PHEVs; PHEV fuel economy
is only considered in charge-sustaining (i.e., gasoline-only) mode
in the compliance analysis, but electricity consumption is computed
for the effects analysis.
[GRAPHIC] [TIFF OMITTED] TR24JN24.006
[GRAPHIC] [TIFF OMITTED] TR24JN24.007
[[Page 52554]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.008
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\37\ Climate benefits are based on changes (reductions) in
CO2, CH4, and N2O emissions and are
calculated using three different estimates of the SCC, SC-
CH4, and SC-N2O. Each estimate assumes a
different discount rate (1.5 percent, 2 percent, and 2.5 percent).
For the presentational purposes of this table and other similar
summary tables, we show the benefits associated with the SC-GHG at a
2 percent discount rate. See Section III.G of this preamble for more
information.
\38\ For this and similar tables in this section, net benefits
may differ from benefits minus costs due to rounding.
\39\ Climate benefits are based on changes (reductions) in
CO2, CH4, and N2O emissions and are
calculated using three different estimates of the SCC, SC-
CH4, and SC-N2O. Each estimate assumes a
different discount rate (1.5 percent, 2 percent, and 2.5 percent).
For the presentational purposes of this table and other similar
summary tables, we show the benefits associated with the SC-GHG at a
2 percent discount rate. See Section III.G of this preamble for more
information.
\40\ See https://www.whitehouse.gov/omb/information-regulatory-affairs/reports/ for examples of how this reporting is used by the
Federal Government.
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[[Page 52555]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.009
Our net benefit estimates are likely to be conservative both
because (as discussed above) our analysis only extends to MY 2031 and
calendar year 2050 (LD) and calendar year 2050 (HDPUV), and because
there are additional important health, environmental, and energy
security benefits that could not be fully quantified or monetized.
Finally, for purposes of comparing the benefits and costs of CAFE and
HDPUV standards to the benefits and costs of other Federal regulations,
policies, and programs under the Regulatory Right-to-Know Act,\40\ we
have computed ``annualized'' benefits and costs relative to the
reference baseline, as follows:
---------------------------------------------------------------------------
\41\ Climate benefits are based on changes (reductions) in
CO2, CH4, and N2O emissions and are
calculated using three different estimates of the SCC, SC-
CH4, and SC-N2O. Each estimate assumes a
different discount rate (1.5 percent, 2 percent, and 2.5 percent).
For the presentational purposes of this table and other similar
summary tables, we show the benefits associated with the SC-GHG at a
2 percent discount rate. See Section III.G of this preamble for more
information.
\42\ For this and similar tables in this section, net benefits
may differ from benefits minus costs due to rounding.
---------------------------------------------------------------------------
[[Page 52556]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.010
[GRAPHIC] [TIFF OMITTED] TR24JN24.011
[[Page 52557]]
It is also worth emphasizing that, although NHTSA is prohibited
from considering the availability of certain flexibilities in making
our determination about the levels of CAFE standards that would be
maximum feasible, manufacturers have a variety of flexibilities
available to aid their compliance. Section VII of this preamble
summarizes these flexibilities and what NHTSA has finalized for this
final rule. NHTSA is finalizing changes to these flexibilities as shown
in Table I-13 and Table I-14.
---------------------------------------------------------------------------
\43\ Climate benefits are based on changes (reductions) in
CO2, CH4, and N2O emissions and are
calculated using three different estimates of the SCC, SC-
CH4, and SC-N2O. Each estimate assumes a
different discount rate (1.5 percent, 2 percent, and 2.5 percent).
For the presentational purposes of this table and other similar
summary tables, we show the benefits associated with the SC-GHG at a
2 percent discount rate. See Section III.G of this preamble for more
information.
---------------------------------------------------------------------------
BILLING CODE 4910-59-P
[[Page 52558]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.012
[[Page 52559]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.013
BILLING CODE 4910-59-C
The following sections of this preamble discuss the technical
foundation for the agency's analysis, the regulatory alternatives
considered in this final rule, the estimated effects of the regulatory
alternatives, the basis for NHTSA's conclusion that the standards are
maximum feasible, and NHTSA's approach to compliance and enforcement.
The extensive record supporting NHTSA's conclusion is documented in
this preamble, in the TSD, the FRIA, the Final EIS, and the additional
materials on NHTSA's website and in the rulemaking docket.
II. Overview of the Final Rule
A. Summary of the NPRM
In the NPRM, NHTSA proposed new fuel economy standards for LDVs for
[[Page 52560]]
model years 2027-2031 and new fuel efficiency standards for HDPUVs for
model years 2030-2035. NHTSA also set forth proposed augural standards
for LDVs for model year 2032. NHTSA explained that it was proposing the
standards in response to the agency's statutory mandate to improve
energy conservation and reduce the nation's energy dependence on
foreign sources. NHTSA also explained that the proposal was also
consistent with Executive Order (E.O.) 14037, ``Strengthening American
Leadership in Clean Cars and Trucks,'' (August 5, 2021),\44\ which
directed the Secretary of Transportation (by delegation, NHTSA) to
consider beginning work on rulemakings under the Energy Independence
and Security Act of 2007 (EISA) to establish new fuel economy standards
for LDVs beginning with model year 2027 and extending through at least
model year 2030, and to establish new fuel efficiency standards for
HDPUVs beginning with model year 2028 and extending through at least
model year 2030,\45\ consistent with applicable law.\46\
---------------------------------------------------------------------------
\44\ E.O. 14037 of Aug 5, 2021 (86 FR 43583).
\45\ Due to statutory lead time constraints for HDPUV standards,
NHTSA's proposal for HDPUV standards must begin with model year
2030.
\46\ See 49 U.S.C. Chapter 329, generally.
---------------------------------------------------------------------------
NHTSA discussed the fact that EPA issued a proposal to set new
multi-pollutant emissions standards for model years 2027 and later for
light-duty and medium-duty vehicles. NHTSA explained that we
coordinated with EPA in developing our proposal to avoid
inconsistencies and produce requirements that are consistent with
NHTSA's statutory authority. The proposals nevertheless differed in
important ways, described in detail in the NPRM. EPA has since issued a
final rule associated with its proposal,\47\ and the interaction
between EPA's final standards and NHTSA's final standards is discussed
in more detail below.
---------------------------------------------------------------------------
\47\ 89 FR 27842 (Apr. 18, 2024).
---------------------------------------------------------------------------
NHTSA also explained that it had considered and accounted for
manufacturers' expected compliance with California's Advanced Clean
Cars (ACC I) program and Advanced Clean Trucks (ACT) regulations in our
analysis, as part of the analytical reference baseline.\48\ We stated
that manufacturers will comply with current ZEV requirements in
California and a number of other states in the absence of CAFE
standards, and accounting for that expected compliance allows us to
present a more realistic picture of the state of fuel economy even in
the absence of changes to the CAFE standards. NHTSA also incorporated
deployment of electric vehicles that would be consistent with
California's ACC II program, which has not received a preemption waiver
from EPA. However, automakers have indicated their intent to deploy
electric vehicles consistent with the levels that would be required
under ACCII if a waiver were to be granted, and as such its inclusion
similarly makes the reference baseline more accurate. Reflecting
expected compliance with the current ZEV programs and manufacturer
deployment of EVs consistent with levels that would be required under
the ACC II program in the analysis helps to improve the accuracy of the
reference baseline in reflecting the state of the world without the
revised CAFE standards, and thus the information available to
policymakers in their decision as to what standards are maximum
feasible and to the public in commenting on those standards. NHTSA also
described several other improvements and updates it made to the
analysis since the 2022 final rule based on NHTSA analysis, new data,
and stakeholder meetings for the NPRM.
---------------------------------------------------------------------------
\48\ Specifically, we include the main provisions of the ACC I,
ACC II, (as currently submitted to EPA), and ACT programs, as
discussed further below in Section III.C.5.a.
---------------------------------------------------------------------------
NHTSA proposed fuel economy standards for model years 2027-2032
(model year 2032 being proposed augural standards) that increased at a
rate of 2 percent per year for both passenger cars and 4 percent per
year for light trucks, and fuel efficiency standards for model years
2030-2035 that increased at a rate of 10 percent per year for HDPUVs.
NHTSA also took comment on a wide range of alternatives, including no-
action alternatives for both light duty vehicles and HDPUVs (retaining
the 2022 passenger car and light truck standards and the 2016 final
rule for HDPUV standards) and updates to the compliance flexibilities.
The proposal was accompanied by a Preliminary Regulatory Impact
Analysis (PRIA), a Draft Environmental Impact Statement (Draft EIS),
Technical Support Document (TSD) and the CAFE Model software source
code and documentation, all of which were also subject to comment in
their entirety and all of which received significant comments.
NHTSA tentatively concluded that Alternative PC2LT4 was maximum
feasible for LDVs for model years 2027-2031 and Alternative HDPUV10 was
maximum feasible for HDPUVs for model years 2030-2035. NHTSA explained
that average requirements and achieved CAFE levels would ultimately
depend on manufacturers' and consumers' responses to standards,
technology developments, economic conditions, fuel prices, and other
factors. NHTSA estimated that the proposal would reduce gasoline
consumption by 88 billion gallons relative to reference baseline levels
for LDVs, and by approximately 2.6 billion gallons relative to
reference baseline levels for HDPUVs through calendar year 2050. NHTSA
also estimated that the proposal would reduce carbon dioxide
(CO2) emissions by 885 million metric tons for LDVs, and by
22 million metric tons for HDPUVs through calendar year 2050.
In terms of economic effects, NHTSA estimated that while consumers
would pay more for new vehicles upfront, they would save money on fuel
costs over the lifetimes of those new vehicles--lifetime fuel savings
exceed modeled regulatory costs by roughly $100, on average, for model
year 2032 LDVs, and by roughly $300, on average, for buyers of model
year 2038 HDPUVs. NHTSA estimated that net benefits for the preferred
alternative for LDVs would be $16.8 billion at a 3 percent discount
rate, and $8.4 billion at a 7 percent discount rate, and for the
preferred alternative for HDPUVs would be $2.2 billion at a 3 percent
discount rate, and $1.4 billion at a 7 percent discount rate.
NHTSA also addressed the question of harmonization with other motor
vehicle standards of the Government that affect fuel economy. Even
though NHTSA and EPA issued separate rather than joint notices, NHTSA
explained that it had worked closely with EPA in developing the
respective proposals, and that the agencies had sought to minimize
inconsistency between the programs where doing so was consistent with
the agencies' respective statutory mandates. NHTSA emphasized that
differences between the proposals, especially as regards programmatic
flexibilities, were not new in the proposal, and that differences were
often a result of the different statutory frameworks. NHTSA reminded
readers that since the agencies had begun regulating concurrently in
2010, these differences have meant that manufacturers have had (and
will have) to plan their compliance strategies considering both the
CAFE standards and the GHG standards and assure that they are in
compliance with both. NHTSA was also confident that industry would
still be able to build a single fleet of vehicles to meet both the
NHTSA and EPA standards. NHTSA sought comment broadly on all aspects of
the proposal.
[[Page 52561]]
B. Public Participation Opportunities and Summary of Comments
The NPRM was published on NHTSA's website on July 28, 2023, and
published in the Federal Register on August 17, 2023,\49\ beginning a
60-day comment period. The agency left the docket open for considering
late comments to the extent practicable. A separate Federal Register
notice, published on August 25, 2023,\50\ announced a virtual public
hearing taking place on September 28 and 29, 2023. Approximately 155
individuals and organizations signed up to participate in the hearing.
The hearing started at 9:30 a.m. EDT on September 28th and ended at
approximately 5:00 p.m., completing the entire list of participants
within a single day,\51\ resulting in a 141-page transcript.\52\ The
hearing also collected many pages of comments from participants, in
addition to the hearing transcript, all of which were submitted to the
docket for the rule.
---------------------------------------------------------------------------
\49\ 88 FR 56128 (Aug. 17, 2023).
\50\ 88 FR 58232 (Aug. 25, 2023).
\51\ A recording of the hearing is provided on NHTSA's website.
Avilable at: https://www.nhtsa.gov/events/cafe-standards-public-hearing-september-2023. (Acccessed: Jan. 29, 2024).
\52\ The transcript, as captured by the stenographer or
captioning folks to their best of abilities, is available in the
docket for this rule.
---------------------------------------------------------------------------
Including the 2,269 comments submitted as part of the public
hearings, NHTSA's docket received a total of 63,098 comments, with tens
of thousands of comments submitted by individuals and over 100 deeply
substantive comments that included many attachments submitted by
stakeholder organizations. NHTSA also received five comments on its
Draft EIS to the separate EIS docket NHTSA-2022-0075, in addition to 17
comments on the EIS scoping notice that informed NHTSA's preparation of
the Draft EIS.
Many commenters supported the proposal. Commenters supporting the
proposal emphasized the importance of increased fuel economy for
consumers, as well as cited concerns about climate change, which are
relevant to the need of the United States to conserve energy.
Commenters also expressed the need for harmonization and close
coordination between NHTSA, EPA, and DOE for their respective programs.
Many citizens, environmental groups, some States and localities, and
some vehicle manufacturers stated strong support for NHTSA finalizing
the most stringent alternative.
Many manufacturers urged NHTSA to consider the impact of EPA's
standards as well as the impact of DOE's Petroleum Equivalency Factor
(PEF) rule on fleet compliance (discussed in more detail below). Many
manufacturers supported alignment with EPA's and DOE's standards.
Manufacturers were also supportive of keeping the footprint-based
standards for LD vehicles and work factor-based standards for HDPUVs.
Manufacturers and others were also supportive of continuing the HD
Phase 2 approach for HDPUVs by having separate standards for
compression ignition (CI) and spark ignition (SI) vehicles, as well as
continuing to use a zero fuel consumption value for alternative fuel
vehicles such as battery electric vehicles.
In other areas, commenters expressed mixed views on the compliance
and flexibilities proposed in the notice. Manufacturers were supportive
of maintaining the Minimum Domestic Passenger Car Standard (MDPCS)
offset relative to the standards. Most manufacturers and suppliers did
not support phasing out off-cycle and AC efficiency fuel consumption
improvement values (FCIVs), whereas NGOs and electric vehicle
manufacturers supported removing all flexibilities. Many fuel and
alternative fuel associations opposed the regulation due to lack of
consideration for other types of fuels in NHTSA's analysis.
NHTSA also received several comments on subjects adjacent to the
rule but beyond the agency's authority to influence. NHTSA has reviewed
all comments and accounted for them where legally possible in the
modeling and qualitatively, as discussed below and throughout the rest
of the preamble and in the TSD.
NHTSA received a range of comments about the interaction between
DOE's Petroleum Equivalency Factor (PEF) proposal and NHTSA's CAFE
proposal, mainly from vehicle manufacturers. Several stakeholders
commented in support of the proposed PEF,\53\ while others commented
that the PEF should remain at the pre-proposal level, or even
increase.\54\ The American Automotive Policy Council (AAPC), the policy
organization that represents the ``Detroit Three'' or D3--Ford, General
Motors, and Stellantis--commented that DOE's proposed PEF reduction
inappropriately devalues electrification, and accordingly ``a devalued
PEF yields a dramatic deficiency in light-duty trucks, that make up 83%
of the D3's product portfolio.'' \55\ The AAPC also commented that
``NHTSA's inclusion of the existing PEF for EVs in 2026 creates an
artificially high CAFE compliance baseline, and the proposed PEF post-
2027 removes the only high-leverage compliance tool available to auto
manufacturers.'' \56\ Relatedly, as part of their comments generally
opposing DOE's proposed PEF level, other automakers provided
alternative values for the PEF,\57\ or supported a phase-in of the PEF
to better allow manufacturers to restructure their product mix.\58\
Other stakeholders urged NHTSA to delay the CAFE rule until DOE adopts
a revised PEF,\59\ or stated that NHTSA should reopen comments on its
proposal following final DOE action on the PEF.\60\ Finally, some
commenters recommended that NHTSA apply a PEF to the HDPUV segment.\61\
---------------------------------------------------------------------------
\53\ Toyota, Docket No. NHTSA-2023-0022-61131, at 9-12; Arconic,
Docket No. NHTSA-2023-0022-48374, at 2.
\54\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 2.
\55\ AAPC, Docket No. NHTSA-2023-0022-60610, at 3-5.
\56\ Id.
\57\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 2.
\58\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 2;
Volkswagen, Docket No. NHTSA-2023-0022-58702, at 7; Porsche, Docket
No. NHTSA-2023-0022-59240, at 7; GM, Docket No. NHTSA-2023-0022-
60686, at 6. (e.g., ``In the event that the proposed lower PEF is
adopted with a 3-year delay (i.e., lower PEF starts in the 2030
model year), GM could support the NHTSA CAFE Preferred Alternative;
however, we note that there are likely to be substantial CAFE/GHG
alignment issues starting in 2030.'').
\59\ NAM, Docket No. NHTSA-2023-0022-59289, at 2.
\60\ The Alliance, Docket No. NHTSA-2023-0022-60652, at 5-6.
\61\ MECA Clean Mobility, Docket No. NHTSA-2023-0022-63053, at
4-5; The Aluminum Association, Docket No. NHTSA-2023-0022-58486, at
3; Arconic Corporation, Docket No. NHTSA-2023-0022-48374, at 2.
---------------------------------------------------------------------------
Regarding comments that were supportive of or opposing the new PEF,
those comments are beyond the scope of this rulemaking. By statute, DOE
is required to determine the PEF value and EPA is required to use DOE's
value for calculation of a vehicle's CAFE value.\62\ NHTSA has no
control over the selection of the PEF value or fuel economy calculation
procedures; accordingly, the PEF value is just one input among many
inputs used in NHTSA's analysis. While NHTSA was in close coordination
with DOE during the pendency of the PEF update process, stakeholder
comments about the PEF value and whether the value should be phased in
were addressed in DOE's final rule.\63\
---------------------------------------------------------------------------
\62\ 49 U.S.C. 32904.
\63\ 89 FR 22041 (March 29, 2024).
---------------------------------------------------------------------------
As NHTSA does not take a position on the PEF value, the agency
believes it was appropriate to use the most up-to-date input assumption
at each stage of
[[Page 52562]]
the analysis to provide stakeholders the best information about the
effects of different levels of CAFE standards. NHTSA also included
sensitivity analyses in the NPRM with DOE's pre-proposal PEF value so
that all stakeholders had notice of and the opportunity to comment on a
scenario where the PEF did not change.\64\ NHTSA accordingly disagrees
that the agency needed to reopen comments on the proposal following
final DOE action on the PEF.
---------------------------------------------------------------------------
\64\ PRIA, Chapter 9.
---------------------------------------------------------------------------
NHTSA agrees with AAPC that when a manufacturer's portfolio
consists predominantly of lower fuel economy light trucks, as in the
particular case of the D3, averaging the fuel economy of those vehicles
with high fuel economy BEVs would help them comply with fuel economy
standards more so than if BEVs had a lower fuel economy due to a lower
PEF. However, this concern is somewhat ameliorated by the changes in
DOE's final PEF rule, including a gradual reduction of the fuel content
factor.\65\ Furthermore NHTSA has determined that the final standards
are the maximum feasible fuel economy level that manufacturers can
achieve even without producing additional electric vehicles. And, NHTSA
disagrees that including in the modeling the old PEF in 2026 and prior
and the new PEF in 2027 and beyond ``removes the only high-leverage
compliance tool available to auto manufacturers'' (emphasis added), as
there are several compliance tools available to manufacturers,
including increasing the fuel economy of their ICE vehicles. As
discussed further in Section VI, NHTSA believes that the standards
finalized in this rule explicitly contemplate the concerns expressed by
and the capability of all manufacturers.
---------------------------------------------------------------------------
\65\ 89 FR 22041, at 22050 (March 29, 2024) (``After careful
consideration of the comments, DOE concludes that removing the fuel
content factor will, over the long term, further the statutory goals
of conserving all forms of energy while considering the relative
scarcity and value to the United States of all fuels used to
generate electricity. This is because, as explained in the 2023 NOPR
and in more detail below, by significantly overvaluing the fuel
savings effects of EVs in a mature EV market with CAFE standards in
place, the fuel content factor will disincentivize both increased
production of EVs and increased deployment of more efficient ICE
vehicles. Hence, the fuel content factor results in higher petroleum
use than would otherwise occur.'').
---------------------------------------------------------------------------
NHTSA will not use a PEF for HDPUV compliance at this time. NHTSA
will continue to use the framework that was put in place by the HD
Phase 2 rule, and in coordination with EPA's final rule, by using zero
upstream energy consumption for compliance calculations (note that
NHTSA does consider upstream effects of electricity use in its effects
modeling). Any potential future action on developing PEF for HDPUV
compliance would most likely occur in a standalone future rulemaking
after NHTSA has a more thorough opportunity to consider the costs and
benefits of such an approach and all stakeholders can present feedback
on the issue.
NHTSA also received a range of comments about BEV infrastructure.
Comments covered both the amount and quality of BEV charging
infrastructure and the state of electric grid infrastructure. Some
stakeholders, including groups representing charging station providers
and electricity providers, commented that although additional
investments will be required to support future demand for public
chargers and the electricity required for BEV charging, their
preparation and planning for the BEV transition is already
underway.\66\ Many stakeholders emphasized the role of a robust public
charging network to facilitate the BEV transition,\67\ and broadly
urged the Administration to work amongst the agencies and with
automakers, utilities, and other interested parties to ensure that BEV
charging infrastructure buildout, including developing minimum
standards for public charging efficiency, and BEV deployment happen
hand in hand.\68\
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\66\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29-70.
\67\ Climate Hawks Civic Action, Docket No. NHTSA-2023-0022-
61094, at 2059; U.S. Chamber of Commerce, Docket No. NHTSA-2023-
0022-61069, at 5-6.
\68\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29-70; MEMA,
Docket No. NHTSA-2023-0022-59204, at 10; NAM, Docket No. NHTSA-2023-
0022-59203-A1, at 1.
---------------------------------------------------------------------------
In contrast, some stakeholders emphasized the current lack of
public BEV charging infrastructure as a barrier to EV adoption.\69\
Stakeholders also highlighted mechanical problems with existing
charging stations,\70\ which they stated contributes to dissatisfaction
with public charging stations among electric vehicle owners.\71\ Other
stakeholders commented that the country's electricity transmission
infrastructure is not currently in a position to support the expected
electricity demand from the BEV transition and may not be in the future
for several reasons,\72\ such as the lack of materials needed to expand
and upgrade the grid.\73\ To combat those concerns, other stakeholders
recommended that administration officials and congressional leaders
prioritize policies that would strengthen transmission systems and
infrastructure and speed up their growth.\74\ Stakeholders also
recommended that NHTSA capture some elements of charging and grid
infrastructure issues in its analysis,\75\ and outside of the analysis
and this rulemaking, identify ways to assist in the realization of
adequate BEV infrastructure.\76\
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\69\ U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-61069,
at 5; NATSO et al., Docket No. NHTSA-2023-0022-61070, at 5-7.
\70\ ACI, Docket No. NHTSA-2023-0022-50765, at 4; CFDC et al,
Docket No. NHTSA-2023-0022-62242, at 16; NADA, NHTSA-2023-0022-
58200, at 10.
\71\ CFDC et al, Docket No. NHTSA-2023-0022-62242, at 16.
\72\ NAM, Docket No. NHTSA-2023-0022-59289, at 3; ACI, Docket
No. NHTSA-2023-0022-50765, at 4; Missouri Corn Growers Association,
Docket No. NHTSA-2023-0022-58413, at 2; NCB, Docket No. NHTSA-2023-
0022-53876, at 1; AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 41;
NATSO et al., Docket No. NHTSA-2023-0022-61070, at 8; West Virginia
Attorney General's Office, Docket No. NHTSA-2023-0022-63056, at 12-
13; MOFB, Docket No. NHTSA-2023-0022-61601, at 2.
\73\ AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 41.
\74\ NAM, Docket No. NHTSA-2023-0022-59203, at 3.
\75\ For example, some stakeholders stated that technologies
like direct current fast chargers (DCFCs) should be prioritized in
publicly funded projects and infrastructure decisions, and should be
considered to varying extents in NHTSA's analysis. See, e.g., MEMA,
Docket No. NHTSA-2023-0022-59204, at 6-7; Alliance for Vehicle
Efficiency (AVE), Docket No. NHTSA-2023-0022-60213, at 7; AFPM,
Docket No. NHTSA-2023-0022-61911, at 47. Stakeholders also
recommended, as an example, NHTSA account for the long lead time for
critical grid infrastructure upgrades. MEMA, Docket No. NHTSA-2023-
0022-59204-A1, at 3.
\76\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 3-5.
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NHTSA acknowledges and appreciates all the comments received on
charging infrastructure, which include both broad comments on future
grid infrastructure needs, as well as increased deployment of reliable
and convenient charging stations. NHTSA agrees with commenters in that
infrastructure is an important aspect of a successful transition to
BEVs in the future. We also agree that infrastructure improvements are
necessary and directly related to keeping pace with projected levels of
BEV supply and demand as projected by other agencies and independent
forecasters.
With that said, NHTSA projects that manufacturers will deploy a
wide variety of technologies to meet the final CAFE standards that
specifically are not BEVs, considering NHTSA's statutory limitations.
As discussed further throughout this preamble, NHTSA does not consider
adoption of BEVs in the LD fleet beyond what is already in the
reference baseline. Results in Chapter 8 of the FRIA show increased
technology penetrations of more efficient
[[Page 52563]]
conventional ICEs, increased penetration of advanced transmissions,
increased mass reduction technologies, and other types of
electrification such as mild and strong hybrids.
In addition, as discussed further below, NHTSA has coordinated with
DOE and EPA while developing this final rule, as requested by
commenters. Experts at NHTSA's partner agencies have found that the
grid and associated charging infrastructure could handle the increase
in BEVs related to both EPA's light- and medium-duty vehicle multi-
pollutant rule and the HD Phase 3 GHG rule \77\--significantly more
BEVs than NHTSA projects in the LD and HDPUV reference baselines
examined in this rule. Thus, infrastructure beyond what is planned for
buildout in the rulemaking timeframe, accounting not only for
electricity generation and distribution, but considering load-balancing
management measures, as well, to improve grid operations, would not be
required. It should also be noted that expert projections show an order
of magnitude increase in available (domestic) public charging ports
between the release of the final rule and the rulemaking timeframe,\78\
not accounting for the additional availability of numerous residential
and depot chargers. Battery energy storage integration with DC fast
chargers can further expedite deployment of necessary infrastructure,
reducing lead time for distribution upgrades while increasing the
likelihood of meeting public charging needs in the next decade.\79\ The
National Electric Vehicle Infrastructure (NEVI) program is also
investing $5 billion in federal funding to deploy a national network of
public EV chargers.\80\ Additionally, federally funded charging
stations are required to adhere to a set of nationally recognized
standards, such as a minimum of 97% annual-uptime,\81\ which is
anticipated to greatly improve charging reliability concerns of today.
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\77\ National Renewable Energy Laboratory, Lawrence Berkeley
National Laboratory, Kevala Inc., and U.S. Department of Energy.
2024. Multi-State Transportation Electrification Impact Study:
Preparing the Grid for Light-, Medium-, and Heavy-Duty Electric
Vehicles. DOE/EE-2818, U.S. Department of Energy, (Accessed: May 1,
2024); EPA GHG final rule. RIA Chapter 5.3.
\78\ Rho Motion. EV Charging Quarterly Outlook--Quarter 1 2024.
Proprietary data. Subscription information available at: https://rhomotion.com/.
\79\ Poudel, S., et al. Innovative Charging Solutions for
Deploying the National Charging Network: Technoeconomic Analysis.
United States.
\80\ U.S Department of Transportation, Federal Highway
Administration. March 5, 2024. National Electric Vehicle
Infrastructure (NEVI) Program. Available at: https://www.fhwa.dot.gov/environment/nevi/. (Accessed: May 9, 2024).
\81\ U.S. Department of Transportation, Federal Highway
Administration. Feb. 28, 2023. National Electric Vehicle
Infrastructure Standards and Requirements. Available at: https://www.federalregister.gov/documents/2023/02/28/2023-03500/national-electric-vehicle-infrastructure-standards-and-requirements.
(Accessed: May 1, 2024).
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For the HDPUV analysis, NHTSA does consider adoption of BEVs in the
standard setting years, and we do see an uptake of BEVs; however, the
population of the HDPUV fleet is extremely small, consisting of fewer
than 1 million vehicles, compared to the LD fleet that consists of over
14 million vehicles. This means that any potential impact of HDPUV BEV
adoption on the electric grid would be similarly small. We also want to
note that the adoption of these HDPUV BEVs is driven primarily by
factors other than NHTSA's standards, including the market demand for
increased fuel efficiency and state ZEV programs, as shown in detail in
Section V of this preamble and FRIA Chapter 8.3.2. However, as with LD
standards examined in this rule, most manufacturers could choose to
meet the preferred standards with limited BEVs. There are still
opportunities in the advanced engines, advanced transmissions, and
strong hybrid technologies that could be used to meet the HDPUV
preferred standards starting in model year 2030.
Although NHTSA does not consider BEVs in its analysis of CAFE
stringency, and there is minimal BEV adoption driven by the HDPUV FE
standards, NHTSA coordinated with both DOE and EPA on many of the
challenges raised by commenters to understand how the infrastructure
will be developing and improving in the future. Our review of efforts
taking place under the NEVI Program and consultation with DOE and EPA
leads us to conclude that (1) there will be sufficient EV
infrastructure to support the vehicles included in the light-duty
reference baseline and in the HDPUV analysis; and (2) it is reasonable
to anticipate that the power sector can continue to manage and improve
the electricity distribution system to support the increase in BEVs.
DOE and EPA conducted analyses that evaluate potential grid impacts of
LD and HD fleet that contain significantly more BEVs than NHTSA's
light-duty reference baseline and HDPUV fleets. Their analyses conclude
that the implementation of EPA's LD and HD rules can be achieved. DOE
and EPA found that sufficient electric grid charging and infrastructure
\82\ can be deployed, numerous federal programs are providing funding
to upgraded charging and grid infrastructure, and managed charging and
innovative charging solutions can reduce needed grid updates.\83\ The
analyses conducted for this assessment of the power sector section
covered multiple inputs and assumptions across EPA and DOE tools, such
as PEV adoption and EVSE access and utilization, to make sure that all
aspects of the grid scenarios modeled are analyzed through 2050 between
the no action and action alternative in EPA's rule.
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\82\ See discussion at EPA, Regulatory Impact Analysis, Multi-
Pollutant Emissions Standards for Model Years 2027 and Later Light-
Duty and Medium-Duty Vehicles, Chapter 5.4.5. Available at https://www.epa.gov/system/files/documents/2024-03/420r24004.pdf (last
accessed May 22, 2024).
\83\ See id.
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NHTSA also received several comments regarding critical materials
used to make EV batteries. In support of its comments that the EV
supply chain is committed to supporting full electrification, ZETA
provided a thorough recitation of policy drivers supporting critical
minerals development, projected demand for critical minerals, and
ongoing investments and support from its members for critical mineral
production, refining, and processing.\84\ Similarly, stakeholders
commented about different federal and industry programs, incentives,
and investments to promote the production and adoption of electric
vehicles.\85\ Similar to comments on EV infrastructure, many
stakeholders commented that federal agencies should work together to
ensure a reliable supply chain for critical minerals.\86\
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\84\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29-39.
\85\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Appendix at 36-39; ICCT, Docket No. NHTSA-2023-0022-54064, at 2, 7.
\86\ NAM, Docket No. NHTSA-2023-0022-59203, at 1.
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Other stakeholders commented about several critical minerals issues
they perceived to be barriers to a largescale transition to EVs.\87\
Stakeholders commented generally on a limited or unavailable supply of
certain critical minerals,\88\ and more specifically the
[[Page 52564]]
lack of mineral extraction and production in the United States, stating
that domestic production of critical minerals is insufficient to meet
projected demands.\89\ Stakeholders also commented on the potential
environmental impact of mining critical minerals,\90\ particularly as
vehicle manufacturers produce EVs with increasing battery pack
sizes.\91\ Other stakeholders commented that all of these factors
(including costs and environmental impact) should be considered in
NHTSA's analysis.\92\ Finally, several stakeholders commented on how
critical minerals' energy security issues interact with NHTSA's
balancing factors to set maximum feasible standards and those comments
are addressed in Section VI.5; other stakeholders commented on how
critical minerals sourcing interacts with NHTSA's assumptions about tax
credits and those comments are addressed in Section III.C.
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\87\ ACI, Docket No. NHTSA-2023-0022-50765, at 4-7; RFAet al,
Docket No. NHTSA-2023-0022-57625, at 2; NAM, Docket No. NHTSA-2023-
0022-59203, at 3; AHUA, Docket No. NHTSA-2023-0022-58180, at 6-7;
CFDC et al, Docket No. NHTSA-2023-0022-62242, at 22-23; West
Virginia Attorney General's Office et al., Docket No. NHTSA-2023-
0022-63056, at 13-14.; Valero, Docket No. NHTSA-2023-0022-58547;
Mario Loyola and Steven G. Bradbury, Docket No. NHTSA-2023-0022-
61952, at 10; MCGA, Docket No. NHTSA-2023-0022-60208; The Alliance,
Docket No. NHTSA-2023-0022-60652.
\88\ Nissan, Docket No. NHTSA-2023-0022-60696, at 7; AVE, Docket
No. NHTSA-2023-0022-60213, at 3-4.
\89\ ACI, Docket No. NHTSA-2023-0022-50765, at 5; API, Docket
No. NHTSA-2023-0022-60234, at 4; AFPM, Docket No. NHTSA-2023-0022-
61911, at 2-11.
\90\ ACE, Docket No. NHTSA-2023-0022-60683, at 2-3.
\91\ ACI, Docket No. NHTSA-2023-0022-50765.
\92\ ACE, Docket No. NHTSA-2023-0022-60683, at 3; MECA, Docket
No. NHTSA-2023-0022-63053, at 8.
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We appreciate the commenters' feedback in this area and believe
that the comments are important to note. However, as we have discussed
earlier in this section, the CAFE standards final rulemaking analysis
does not include adoption of BEVs beyond what is represented in the
reference baseline. We do allow adoption of BEVs in the HDPUV fleet, as
EPCA/EISA does not limit consideration of HDPUV technologies in the
same way as LD technologies; however, as discussed above, BEV adoption
is driven primarily by reasons other than NHTSA's fuel efficiency
standards and the number of vehicles that adopt BEV technology in our
analysis is relatively (compared to the LD fleet) small. That said,
NHTSA believes that commenters' concerns are either currently addressed
or are being actively addressed by several public and private
endeavors.
NHTSA, in coordination with DOE and EPA, reviewed current supply
chain and updated analyses on critical materials. In particular, the
DOE, through Argonne National Laboratory, conducted an updated
assessment of developing and securing mineral supply for the U.S.
electric vehicle industry, the Securing Critical Minerals report.\93\
The Argonne study focuses on five materials identified in a previous
assessment,\94\ including lithium, nickel, cobalt, graphite, and
manganese.\95\ The study collects and examines potential domestic
sources of materials, as well as sources outside the U.S. including
Free Trade Agreement (FTA) partners, members of the Mineral Security
Partnership (MSP), economic allies without FTAs (referred to as ``Non-
FTA countries'' in the Argonne study), and Foreign Entity of Concern
(FEOC) sources associated with covered nations, to support domestic
critical material demand from anticipated electric vehicle penetration.
The assessment considers geological resources and current international
development activities that contribute to the understanding of mineral
supply security as jurisdictions around the world seek to reduce
emissions. The study also highlights current activities that are
intended to expand a secure supply chain for critical minerals both
domestically and among U.S. allies and partner nations; and considers
the potential to meet U.S. demand with domestic and other secure
sources. The DOE Securing Critical Minerals report concluded that the
U.S. is ``well-positioned to meet its lithium demand through domestic
production.'' In the near- and medium-term there is sufficient capacity
in FTA and MSP countries to meet demand for nickel and cobalt; however,
the U.S. will likely need to rely at least partly on non-FTA counties
given expected competition for these minerals from other countries'
decarbonization goals. In the near-term, meeting U.S. demand with
natural graphite supply from domestic FTA and MSP sources is unlikely.
In the medium-term, there is potential for new capacity in both FTA and
non-FTA countries, and for synthetic graphite production to scale. The
U.S. can rely on FTA and MSP partners, as well as other economic and
defense partners, to fill supply gaps; countries with which the U.S.
has good trade relations are anticipated to have the ability to assist
the U.S. in securing the minerals needed to meet EV and ESS (energy
storage system) deployment targets set by the Biden Administration.\96\
NHTSA considers Argonne's assessment to be thorough and up to date. In
addition, it should be noted that DOE's assessments consider critical
minerals and battery components to support more than ten million EVs by
2035 97 98--significantly more than we project in our
reference baseline.
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\93\ Barlock, T. et al. Securing Critical Materials for the U.S.
Electric Vehicle Industry: A Landscape Assessment of Domestic and
International Supply Chains for Five Key Battery Materials. United
States. Available at: https://doi.org/10.2172/2319240. (Accessed:
May 1, 2024).
\94\ Department of Energy, July 2023. Critical Materials
Assessment. Available at: https://www.energy.gov/sites/default/files/2023-07/doe-critical-material-assessment_07312023.pdf.
(Accessed: May 1, 2024).
\95\ The 2023 DOE Critical Minerals Assessment classifies
manganese as ``non critical'', as reflected in the Securing Critical
Minerals report referenced.
\96\ Associated with the implementation of the BIL and IRA.
\97\ See Figure 14 in Barlock, T.A. et al. February 2024.
Securing Critical Materials for the U.S. Electric Vehicle Industry.
ANL-24/06. Final Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024).
\98\ See in Gohlke, D. et al. March 2024. Quantification of
Commercially Planned Battery Component Supply in North America
through 2035. ANL-24/14. Final Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187735.pdf (Accessed: June 3,
2024).
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NHTSA also received a wide variety of comments on alternative fuels
including ethanol and biofuels. A group of commenters representing
ethanol and biofuel producers objected to NHTSA's handling of BEVs in
the analysis, in part because of their views on NHTSA's ability to
consider those vehicles under 49 U.S.C. 32902(h), raised energy
security concerns with reduced demand for and reliance on U.S.-produced
alternative fuels as a result of these regulations, and commented that
BEVs would increase reliance on foreign supply chains.\99\ Other
commenters shared similar sentiments regarding alternative fuels. These
commenters stated that NHTSA failed to consider other fuels like
ethanol and biofuels as a way to improve fuel economy in the analysis
as part of a holistic approach to reducing the U.S.'s gasoline
consumption, and therefore the proposed rule was arbitrary.\100\
Commenters also stated that NHTSA did not consider the Renewable Fuel
Standard (RFS) regulation in this rulemaking, and argued that NHTSA's
failure to do so was arbitrary.\101\ Finally, commenters recommended
that NHTSA consider high octane renewable fuels as a way to improve
fuel economy for conventional ICEs.\102\
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\99\ BSC, Docket No. NHTSA-2023-0022-50824 at 1; MME, Docket No.
NHTSA-2023-0022-50861 at 2; WPE, Docket No. NHTSA-2023-0022-52616 at
2; POET, Docket No. NHTSA-2023-0022-61561 at 6; SIRE, Docket No.
NHTSA-2023-0022-57940 at 2.
\100\ Growth Energy, Docket No. NHTSA-2023-0022-61555 at 1;
KCGA, Docket No. NHTSA-2023-0022-59007 at 5; POET, Docket No. NHTSA-
2023-0022-61561 at 5; Toyota, Docket No. NHTSA-2023-0022-61131 at 2;
Commenwealth Agri Energy LLC, Docket No. NHTSA-2023-0022-61599 at 3;
MEMA, Docket No. NHTSA-2023-0022-59204 at 3; AFPM, Docket No. NHTSA-
2023-0022-61911 at 25.
\101\ Growth Energy, Docket No. NHTSA-2023-0022-61555 at 2.
\102\ NCB, Docket No. NHTSA-2023-0022-53876 at 2; CFDC et al.,
Docket No. NHTSA-2023-0022-62242 at 17-20; NATSO et al., Docket No.
NHTSA-2023-0022-61070 at 9.
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[[Page 52565]]
NHTSA believes that fuel producers' comments about NHTSA's
purported inability to consider BEVs under 49 U.S.C. 32902(h) are
somewhat misguided, considering that EPCA's definition of ``alternative
fuel'' in 49 U.S.C. 32901 also includes ethanol, other alcohols, and
fuels derived from biological materials, among other fuels.\103\ This
means that if NHTSA were to adopt the fuel producers' interpretation of
49 U.S.C. 32902(h) to restrict BEV adoption in the reference baseline,
NHTSA would have to take an analogous approach to limit the agency's
consideration of vehicles fueled by other alternative fuels, for
example, ethanol, in the reference baseline. This is because 49 U.S.C.
32902(h) does not just place guardrails on NHTSA's consideration of
manufacturers producing BEVs in response to CAFE standards, but all
dedicated alternative fueled automobiles, and fuels produced by the
commenters here are, as listed above, considered alternative fuels.
NHTSA does consider some alternative-fueled vehicle adoption in the
reference baseline where that adoption is driven for reasons other than
NHTSA's standards (see Section IV), and the commenters do mention the
RFS as a driver of the increased use of renewable alternative fuels
like ethanol and biofuels. However, the RFS is a regulation that
increases the use of renewable fuels to replace petroleum derived fuels
in motor gasoline, and to the extent that EPA has approved the use of
E15 in all model year 2001 and newer gasoline vehicles produced for the
U.S. market, we account for that in our analysis. NHTSA also considers
flexible fuel vehicles (FFVs) that exist in the reference baseline
fleet in the analysis, however FFVs are also subject to the
restrictions in 49 U.S.C. 32902(h)(2).\104\ NHTSA applies the same CAFE
Model restrictions in the standard-setting analysis to FFVs that apply
to PHEVs to ensure that the agency is not improperly considering the
alternative-fueled operation of dual-fueled vehicles when setting CAFE
standards.\105\
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\103\ 49 U.S.C. 32901(a)(1).
\104\ 49 U.S.C. 32901(a)(9); 49 U.S.C. 32902(h)(2).
\105\ CAFE Model Documentation, S5.
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There is also a practical consideration that while blending ethanol
or biofuels with gasoline has the potential to reduce U.S. reliance on
petroleum, renewable fuels like ethanol and biofuels decrease fuel
economy.\106\ The fuel economy of FFVs operating on high-ethanol blends
are worse than when operating on conventional gasoline, because
although ethanol has a higher octane rating than petroleum gasoline, it
is less energy dense. For example, a model year 2022 Ford F150 4WD
achieves a real world combined 20 mpg rating on conventional gas versus
15 mpg on alternative E85 fuel.\107\ FFVs do see a compliance boost in
the CAFE program with a 0.15 multiplier,\108\ however, again NHTSA's
consideration of those vehicles' fuel economy values to set higher fuel
economy standards is limited by 49 U.S.C. 32902(h)(2).
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\106\ Fueleconomy.gov. New Flex-fuel Vehicles for model year
2012 to model year 2025. Available at: https://www.fueleconomy.gov/feg/flextech.shtml. (Accessed: Apr. 12, 2024).
\107\ DOE Alternative Fuels Data Center. Ethanol E85 Vehicles
for model year 2022-2024. Available at: https://afdc.energy.gov/vehicles/search/data. (Accessed: Apr. 12, 2024).
\108\ 40 CFR 600.510-12(c)(2)(v).
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Regarding comments about energy security, we discuss this further
in preamble Section VI. As mentioned above, commenters suggested that
consideration of BEVs also impacts NHTSA's statutory considerations of
energy security. However, NHTSA does not consider BEVs in its standard-
setting, and notes that this final rule is not a BEV mandate, as
claimed by some commenters. Results in preamble Section V and FRIA
Chapter 8 show that manufacturers have a wide variety of technology
options to meet both LD and HDPUV standards, and the paths to
compliance modeled in this analysis represent only a possible path, and
not a required path. NHTSA does not mandate any one technology that
manufacturers must use, hence why we have evaluated an array of
technologies for manufacturers to use for meeting the standards. As
with other technologies in the analysis, nothing prevents manufacturers
from using FFVs or other dedicated alternative fueled vehicles to
comply with CAFE standards.
Finally, NHTSA received a wide variety of comments on compliance
aspects of the CAFE program. Although most of them have been summarized
and discussed in Section VII of this preamble, we received comments
regarding the fuel economy utility factor (UF) compliance calculation
for plug-in hybrids. Mitsubishi commented that NHTSA failed to account
for EPA's proposal to update the UF calculation for the combined fuel
economy for PHEVs, stating that ``[t]he result is that NHTSA
overestimated the value of PHEV CAFE compliance and underestimated the
costs of achieving compliance.'' \109\ On the other hand, ICCT and the
Strong PHEV Coalition supported NHTSA using EPA's new proposed UF
approach for the rulemaking analysis.\110\ MECA supported NHTSA's
continued use of SAE J2841 and recommended that, at a minimum, we
should not reduce the UF from the current levels.\111\
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\109\ Mitsubishi, Docket No. NHTSA-2023-0022-61637 at 4.
\110\ ICCT, Docket No. NHTSA-2023-0022-54064 at 25; Strong PHEV
Colaition, Docket No. NHTSA-2023-0022-60193 at 6.
\111\ MECA, Docket No. NHTSA-2023-0022-63053, at 6.
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We appreciate stakeholders providing comments to NHTSA on PHEV fuel
economy calculations. While in the CAFE modeling NHTSA uses SAE J2841
to calculate PHEV fuel economy, for CAFE compliance, NHTSA must use
EPA's test procedures.\112\ This means that EPA will report fuel
economy values to NHTSA beginning in model year 2031 consistent with
the new PHEV UF finalized in EPA's final rule. NHTSA chose to use SAE
J841 as a simplifying assumption in the model for this analysis to
reduce analytical complexity and based on a lack of readily available
data from manufacturers; however, choosing to use SAE J2841 versus
another PHEV UF results in functionally no difference in NHTSA's
standard setting analysis because for the purpose of setting fuel
economy standards, NHTSA cannot consider the electric portion of PHEV
operation, per statute.\113\ For more detailed discussion of modeled
PHEV fuel economy values, see TSD Chapter 3.3.
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\112\ 40 CFR 600.116-12: Special procedures related to electric
vehicles and hybrid electric vehicles.
\113\ U.S.C 32902(h)(2).
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Discussion and responses to other comments can be found throughout
this preamble in areas applicable to the comment received.
Nearly every aspect of the NPRM analysis and discussion received
some level of comment by at least one commenter. Overall, the comments
received included both broad assessments and pointed analyses, and the
agency appreciates the level of engagement of commenters in the public
comment process and the information and opinions provided.
C. Changes to the CAFE Model in Light of Public Comments and New
Information
Comments received to the NPRM were considered carefully within the
statutory authority provided by the law, because they are critical for
[[Page 52566]]
understanding stakeholders' positions, as well as for gathering
additional information that can help to inform the agency about aspects
or effects of the proposal that the agency may not have considered at
the time of the proposal was issued. The views, data, requests, and
suggestions contained in the comments help us to form solutions and
make appropriate adjustments to our proposals so that we may be better
assured that the final standards we set are reasonable for the
rulemaking time frame. For this final rule, the agency made substantive
changes resulting directly from the suggestions and recommendations
from commenters, as well as new information obtained since the time the
proposal was developed, and corrections both highlighted by commenters
and discovered internally. These changes reflect DOT's long-standing
commitment to ongoing refinement and improvement of its approach to
estimating the potential impacts of new CAFE standards. Through further
consideration and deliberation, and also in response to many public
comments received since then, NHTSA has made a number of changes to the
CAFE Model since the 2023 NPRM, including those that are listed below
and detailed in Section II and III, as well as in the TSD and FRIA that
accompany this final rule.
D. Final Standards--Stringency
NHTSA is establishing new CAFE standards for passenger cars (PCs)
and light trucks (LTs) produced for model years 2027-2031, setting
forth augural CAFE standards for PCs and LTs for model year 2032, and
establishing fuel efficiency standards for HDPUVs for model years 2030-
2035. Passenger cars are generally sedans, station wagons, and two-
wheel drive crossovers and sport utility vehicles (CUVs and SUVs),
while light trucks are generally 4WD sport utility vehicles, pickups,
minivans, and passenger/cargo vans.\114\ NHTSA is establishing
standards (represented by alternative PC2LT002, which is the preferred
alternative in our analysis) that increase in stringency at 2 percent
per year for PCs produced for model years 2027-2031 (and setting forth
augural standards that would increase by another 2 percent for PCs
produced in model year 2032), at 0 percent per year for LTs produced in
model years 2027-2028 and 2 percent per year for LTs produced in model
years 2029-2031 (and setting forth augural standards that would
increase by another 2 percent for LTs produced in model year 2032).
Passenger car and light truck standards are all attribute-based. NHTSA
is setting CAFE standards defined by a mathematical function of vehicle
footprint,\115\ which has an observable correlation with fuel economy.
The final standards, and regulatory alternatives, take the form of fuel
economy targets expressed as functions of vehicle footprint, which are
separate for PCs and LTs. Section IV below discusses NHTSA's continued
reliance on footprint as the relevant attribute for PCs and LTs in this
final rule.
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\114\ ``Passenger car'' and ``light truck'' are defined at 49
CFR part 523.
\115\ Vehicle footprint is roughly measured as the rectangle
that is made by the four points where the vehicle's tires touch the
ground. Generally, passenger cars have more stringent targets than
light trucks regardless of footprint, and smaller vehicles will have
more stringent targets than larger vehicles. No individual vehicle
or vehicle model need meet its target exactly, but a manufacturer's
compliance is determined by how its average fleet fuel economy
compares to the average fuel economy of the targets of the vehicles
it manufactures.
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The target curves for the final passenger car and light truck
standards are as follows; curves for model years 2024-2026 are included
in the figures for context. NHTSA underscores that the equations and
coefficients defining the curves are, in fact, the CAFE standards, and
not the mpg numbers that the agency estimates could result from
manufacturers complying with the curves. Because the estimated mpg
numbers are an effect of the final standards, they are presented in
Section II.E. To give context to what the passenger car footprint curve
is showing in Figure II-1, for model year 2024, the target for the
smallest footprint passenger cars is 55.4 mpg, and the target for the
largest footprint passenger cars is 41.5 mpg. For model year 2031, the
smallest footprint passenger cars have a target of 74.1 mpg and the
largest passenger cars have a target of 55.4 mpg.
[[Page 52567]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.014
To give context to what the light truck footprint curve is showing
in Figure II-2, the smallest footprint truck fuel economy target is
44.5 mpg, and the largest truck fuel economy target is 26.7 mpg. And in
model year 2031, the smallest truck footprint target is 57.1 mpg, and
the largest truck footprint target is 34.3 mpg.
[[Page 52568]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.015
NHTSA has also amended the minimum domestic passenger car standard
(MDPCS) for model years 2027-2031 and set forth an augural MDPCS for
model year 2032. Section 32902(b)(4) of 49 U.S.C. requires NHTSA to
project the MDPCS when it promulgates passenger car standards for a
model year, as a result the MDPCSs are established as specific mpg
values. NHTSA retains the 1.9-percent offset to the MDPCS, first used
in the 2020 final rule, to account for recent projection errors as part
of estimating the total passenger car fleet fuel economy.\116\ The
final MDPCS for model years 2027-2031 and the augural MDPCS for model
year 2032 for the preferred alternative are presented in Table II-1.
---------------------------------------------------------------------------
\116\ Section VI.A.2 (titled ``Separate Standards for Passenger
Cars, Light Trucks, and Heavy-Duty Pickups and Vans, and Minimum
Standards for Domestic Passenger Cars'') discusses the basis for the
offset.
[GRAPHIC] [TIFF OMITTED] TR24JN24.016
Heavy-duty pickup trucks and vans are work vehicles that have GVWR
between 8,501 pounds to 14,000 pounds (known as Class 2b through 3
vehicles) manufactured as complete vehicles by a single or final stage
manufacturer or manufactured as incomplete vehicles as designated by a
manufacturer.\117\ The majority of these HDPUVs are \3/4\-ton and 1-ton
pickup trucks, 12- and 15-passenger vans, and large work vans that are
sold by vehicle manufacturers as complete vehicles, with no secondary
manufacturer making substantial modifications prior to registration and
use. The final standards, represented by alternative HDPUV108 in
NHTSA's analysis, increases at a rate of 10 percent per year for model
years 2030-2032 and 8 percent per year for model years 2033-2035. The
final standards, like the proposed standards, are defined by a linear
work factor target function with two sets of sub-configurations with
one for spark ignition (SI) that represents gasoline, CNG, strong
hybrids, and PHEVs and the other for compression ignition (CI) that
represents diesels, BEVs and FCEVs. The target linear curves for HDPUV
are still in the same units as in Phase 2 final rule in gallons per 100
miles and for context both the
[[Page 52569]]
SI and CI curves are shown for model years 2026-2035.
---------------------------------------------------------------------------
\117\ See 49 CFR 523.7, 40 CFR 86.1801-12, 40 CFR 86.1819-17, 40
CFR 1037.150.
\118\ The passenger car, light truck, and HDPUV target curve
function coefficients are defined in Equation IV-1, Equation IV-2,
and Equation IV-3, respectively. See Final TSD Chapter 1.2.1 for a
complete discussion about the footprint and work factor curve
functions and how they are calculated.
\119\ The passenger car, light truck, and HDPUV target curve
function coefficients are defined in Equation IV-1, Equation IV-2,
and Equation IV-3, respectively. See Final TSD Chapter 1.2.1 for a
complete discussion about the footprint and work factor curve
functions and how they are calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.017
[GRAPHIC] [TIFF OMITTED] TR24JN24.018
[GRAPHIC] [TIFF OMITTED] TR24JN24.019
[[Page 52570]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.020
E. Final Standards--Impacts
As for past CAFE rulemakings, NHTSA has used the CAFE Model to
estimate the effects of this final rule's light duty CAFE and HDPUV
fuel efficiency standards and of other regulatory alternatives under
consideration. Some inputs to the CAFE Model are derived from other
models, such as Argonne National Laboratory's Autonomie vehicle
simulation tool and Argonne's GREET fuel-cycle emissions analysis
model, the U.S. Energy Information Administration's (EIA's) National
Energy Modeling System (NEMS), and EPA's Motor Vehicle Emissions
Simulator (MOVES) vehicle emissions model. Especially given the scope
of NHTSA's analysis, these inputs involve a number of uncertainties.
NHTSA underscores that all results of today's analysis simply represent
the agency's best estimates based on the information currently before
us and on the agency's reasonable judgment.
1. Light Duty Effects
NHTSA estimates that this final rule would increase the eventual
average of manufacturers' CAFE requirements to about 50.4 mpg by 2031
rather than, under the No-Action Alternative (i.e., the baseline
standards issued in 2023 ending with model year 2026 standards carried
forward indefinitely), about 46.9 mpg. For passenger cars, the
standards in 2031 are estimated to require 65.1 mpg, and for light
trucks, 45.2 mpg. This compares with 58.8 mpg and 42.6 mpg for cars and
trucks, respectively, under the No-Action Alternative.
[GRAPHIC] [TIFF OMITTED] TR24JN24.021
The model year 2032 augural CAFE standard is estimated to require a
fleet average fuel economy of 51.4 mpg rather than, under the No-Action
Alternative, about 46.9 mpg. For passenger cars, the average in 2032 is
estimated to require 66.4 mpg, and for the light trucks, 46.2 mpg.
[[Page 52571]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.022
Because manufacturers do not comply exactly with each standard in
each model year, but rather focus their compliance efforts when and
where it is most cost-effective to do so, ``estimated achieved'' fuel
economy levels differ somewhat from ``estimated required'' levels for
each fleet, for each year. NHTSA estimates that the industry-wide
average fuel economy achieved in model year 2031 could increase from
about 52.1 mpg under the No-Action Alternative to 52.5 mpg under the
final rule's standards.
[GRAPHIC] [TIFF OMITTED] TR24JN24.023
The augural achieved CAFE level in model year 2032 is estimated to
be 53.5 mpg rather than, under the No-Action Alternative, about 53 mpg.
For passenger cars, the fleet average in 2032 is estimated to achieve
72.3 mpg, and for light trucks 47.3 mpg.
[GRAPHIC] [TIFF OMITTED] TR24JN24.024
NHTSA's analysis estimates manufacturers' potential responses to
the combined effect of CAFE standards and separate (reference baseline,
model years 2024-2026) CO2 standards, ZEV programs, and fuel
prices. Together, the regulatory programs are more binding (i.e.,
require more of manufacturers) than any single program considered in
isolation, and today's analysis, like past analyses, shows some
estimated overcompliance with the final CAFE standards for both the
passenger car and light truck fleets.
NHTSA measures and reports benefits and costs from increasing fuel
economy and efficiency standards from two different perspectives.
First, the agency's ``model year'' perspective focuses on benefits and
costs of establishing alternative CAFE standards for model years 2027
through 2031 (and fuel efficiency standards for HDPUVs for model years
2030 through 2035), and measures these over each separate model year's
entire lifetime. The calendar year perspective we present includes the
annual impacts attributable to all vehicles estimated to be in service
in each calendar year for which our analysis includes a representation
of the entire registered passenger car, light truck, and HDPUV fleet.
For this final rule, this calendar year perspective covers each of
calendar years 2022-2050, with differential impacts accruing as early
as MY 2022.\120\ Compared to the model year perspective, the calendar
year perspective includes model years of vehicles produced in the
longer term, beyond those model years for which standards are being
finalized. The strengths and limitations of each accounting perspective
is discussed in detail in FRIA Chapter 5.
---------------------------------------------------------------------------
\120\ For a presentation of effects by calendar year, please see
Chapter 8.2.4.6 of the FRIA.
---------------------------------------------------------------------------
The table below summarizes estimates of selected impacts viewed
from each of these two perspectives, for each of the regulatory
alternatives considered in this final rule, relative to the reference
baseline.
[[Page 52572]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.025
NHTSA estimates for the final standards are compared to levels of
gasoline and electricity consumption NHTSA projects would occur under
the No-Action Alternative (i.e., the reference baseline) as shown in
Table II-8.\123\
---------------------------------------------------------------------------
\121\ FRIA Chapter 1, Figure 1-1 provides a graphical comparison
of energy sources and their relative change over the standard
setting years.
\122\ The additional electricity use during regulatory years is
attributed to an increase in the number of PHEVs; PHEV fuel economy
is only considered in charge-sustaining (i.e., gasoline-only) mode
in the compliance analysis, but electricity consumption is computed
for the effects analysis.
\123\ While NHTSA does not condider electrification in its
analysis during the rulemaking time frame, the analysis still
reflects application of electric vehicles in the baseline fleet and
during the model years, such that electrification (and thus,
electricity consumption) increases in NHTSA's is not considering it
in our decision-making.
---------------------------------------------------------------------------
NHTSA's analysis also estimates total annual consumption of fuel by
the entire on-road light-duty fleet from calendar year 2022 through
calendar year 2050. On this basis, gasoline and electricity consumption
by the U.S. light-duty vehicle fleet evolves as shown in Figure II-5
and Figure II-6, each of which shows projections for the No-Action
Alternative, PC2LT002 (the Preferred Alternative), PC1LT3, PC2LT4,
PC3LT5, and PC6LT8.
[GRAPHIC] [TIFF OMITTED] TR24JN24.026
[[Page 52573]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.027
Accounting for emissions from both vehicles and upstream energy
sector processes (e.g., petroleum refining and electricity generation),
which are relevant to NHTSA's evaluation of the need of the United
States to conserve energy, NHTSA estimates that the final rule would
reduce greenhouse gas emissions by about 659 million metric tons of
carbon dioxide (CO2), about 825 thousand metric tons of
methane (CH4), and about 24 thousand metric tons of nitrous
oxide (N2O).
[GRAPHIC] [TIFF OMITTED] TR24JN24.028
Emissions reductions accrue over time, as the example for
CO2 emissions shows in Figure II-7.
[[Page 52574]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.029
For the ``standard setting'' analysis, the FRIA accompanying
today's notice provides additional detail regarding projected criteria
pollutant emissions and health effects, as well as the inclusion of
these impacts in today's benefit-cost analysis. For the
``unconstrained'' or ``EIS'' analysis, the Final EIS accompanying
today's notice presents much more information regarding projected
criteria pollutant emissions, as well as model-based estimates of
corresponding impacts on several measures of urban air quality and
public health. As mentioned above, these estimates of criteria
pollutant emissions are based on a complex analysis involving
interacting simulation techniques and a myriad of input estimates and
assumptions. Especially extending well past 2050, the analysis involves
a multitude of uncertainties.
To illustrate the effectiveness of the technology added in response
to today's final rule, Table II-10 presents NHTSA's estimates for
increased vehicle cost and lifetime fuel expenditures. For more
detailed discussion of these and other results related to LD final
standards, see Section V below.
[GRAPHIC] [TIFF OMITTED] TR24JN24.030
With the SC-GHG discounted at 2.0 percent and other benefits and
costs discounted at 3 percent, NHTSA estimates that monetized costs and
benefits could be approximately $24.5 billion and $59.7 billion,
respectively, such that the present value of aggregate monetized net
benefits to society could be approximately $35.2 billion. With the SC-
GHG discounted at 2.0 percent and other benefits and costs discounted
at 7 percent, NHTSA estimates approximately $16.2 billion in monetized
costs and $47.0 billion in monetized benefits could be attributable to
vehicles produced during and prior to model year 2031 over the course
of their lives, such that the present value of aggregate net monetized
benefits to society could be approximately $30.8 billion.
[[Page 52575]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.031
[GRAPHIC] [TIFF OMITTED] TR24JN24.032
[GRAPHIC] [TIFF OMITTED] TR24JN24.033
[[Page 52576]]
2. Heavy Duty Pickup Trucks and Vans Effects
NHTSA estimates that the final rule would increase HDPUV fuel
efficiency standards to about 2.851 gals/100 mile by 2035 rather than,
under the No-Action Alternative (i.e., the baseline standards issued in
2016 final rule for Phase 2 ending with model year 2029 standards
carried forward indefinitely), about 5.023 gals/100mile. Unlike the
light-duty CAFE program, NHTSA may consider AFVs when setting maximum
feasible standards for HDPUVs. Additionally, for purposes of
calculating average fuel efficiency for HDPUVs, NHTSA considers EVs,
fuel cell vehicles, and the proportion of electric operation of EVs and
PHEVs that is derived from electricity that is generated from sources
that are not onboard the vehicle to have a fuel efficiency value of 0
gallons/mile. NHTSA estimates that the final rule would achieve an
average fuel efficiency 2.565 gals/100 mile by 2035 rather than, under
the No-Action Alternative, about 2.716 gals/100 mile.
[GRAPHIC] [TIFF OMITTED] TR24JN24.034
NHTSA estimates that over the lives of vehicles subject to these
final HDPUV standards, the final standards would save about 5.6 billion
gallons of gasoline and increase electricity consumption (as the
percentage of electric vehicles increases over time) by about 56 TWh (a
5.4 percent increase), compared to levels of gasoline and electricity
consumption NHTSA projects would occur under the reference baseline
standards (i.e., the No-Action Alternative) as shown in Table II-15.
[GRAPHIC] [TIFF OMITTED] TR24JN24.035
NHTSA's analysis also estimates total annual consumption of fuel by
the entire on-road HDPUV fleet from calendar year 2022 through calendar
year 2050. On this basis, gasoline and electricity consumption by the
U.S. HDPUV fleet evolves as shown in Figure II-8 and Figure II-9, each
of which shows projections for the No-Action Alternative, HDPUV4,
HDPUV108 (the Preferred Alternative), HDPUV10, and HDPUV14.
[[Page 52577]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.036
[GRAPHIC] [TIFF OMITTED] TR24JN24.037
Accounting for emissions from both vehicles and upstream energy
sector processes (e.g., petroleum refining and electricity generation),
which are relevant to NHTSA's evaluation of the need of the United
States to conserve energy, NHTSA estimates that the final HDPUV
standards would reduce greenhouse gas emissions by about 55 million
metric tons of carbon dioxide (CO2), about 65 thousand
metric tons of methane (CH4), and about 3 thousand metric
tons of nitrous oxide (N2O).
[[Page 52578]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.038
NHTSA's analysis also estimates annual emissions attributable to
the entire on-road HDPUV fleet from calendar year 2022 through calendar
year 2050. Also accounting for both vehicles and upstream processes,
NHTSA estimates that CO2 emissions from the HDPUV standards
could evolve over time as shown in Figure II-10.
[GRAPHIC] [TIFF OMITTED] TR24JN24.039
To illustrate the effectiveness of the technology added to HDPUVs
in response to today's final rule and the overall societal effects of
the HDPUV standards, Table II-17 presents NHTSA's estimates for
increased vehicle cost and lifetime fuel expenditures and Table II-18
summarizes the benefit-cost analysis. For more detailed discussion of
these and other results related to HDPUV final standards, see Preamble
Section V and Section VI below.
[GRAPHIC] [TIFF OMITTED] TR24JN24.040
[[Page 52579]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.041
F. Final Standards Are Maximum Feasible
NHTSA's conclusion, after consideration of the factors described
below and information in the administrative record for this action, is
that 2 percent increases in stringency for passenger cars for model
years 2027-2031, 0 percent increases in stringency for light trucks in
model years 2027-2028, and 2 percent increases in stringency for model
years 2029-2031 for light trucks (Alternative PC2LT002) are maximum
feasible. The Department of Transportation is deeply committed to
working aggressively to improve energy conservation and reduce
environmental harms and economic and security risks associated with
energy use. NHTSA has concluded that Alternative PC2LT002 is
technologically feasible, is economically practicable (based on
manageable average per-vehicle cost increases, minimal effects on
sales, and estimated increases in employment, among other
considerations), and is complementary to other motor vehicle standards
of the Government on fuel economy that are simultaneously applicable
during model years 2027-2031, as described in more detail below.
After consideration of the technical capabilities, economic
practicability, statutory requirements, and the Phase 2 final
standards, NHTSA has concluded that a 10 percent increase in model
years 2030-2032 and an 8 percent increase in model years 2033-2035 for
the HDPUV fleet (HDPUV108) is maximum feasible. NHTSA's analysis shows
that current Phase 2 standards do not require significant technological
improvements through model year 2029, though we expect to see
additional fuel efficient technology penetration in model years 2030
through 2035, which can be viewed in more detail in FRIA Chapter 8.
Considering our statutory requirements, we have reduced the stringency
to 8 percent increases in model years 2033-2035.
See preamble Section VI for more discussion on how we determined
that the final CAFE and HDPUV standards are maximum feasible.
G. Final Standards Are Feasible in the Context of EPA's Final Standards
and California's Standards
The NHTSA and EPA final rules remain coordinated despite being
issued as separate regulatory actions. NHTSA is finalizing CAFE
standards that represent the maximum feasible under our program's
statutory constraints, which differ to varying degrees by vehicle
classification and model year from the GHG standards set forth by the
EPA. Overall, EPA's GHG standards, developed under their program's
authorities, place a higher degree of stringency on manufacturers in
part because of their ability to consider all vehicle technologies,
including alternative fueled vehicles, in setting standards. As with
past rules, NHTSA's and EPA's programs also differ in other respects,
such as programmatic flexibilities. Accordingly, NHTSA's coordination
with EPA was limited to areas where each agency's statutory framework
allowed some level of harmonization. These differences mean that
manufacturers have had (and will continue to have) to plan their
compliance strategies considering both the CAFE standards and the GHG
standards to ensure that they maintain compliance with both. Because
NHTSA and EPA are regulating the same vehicles and manufacturers will
use many of the same technologies to meet each set of standards, NHTSA
performed appropriate analyses to quantify the differences and their
impacts. Auto manufacturers have shown a consistent historical ability
to manage compliance strategies that account for the concurrent
implementation of multiple regulatory programs. Past experience with
these programs indicates that each manufacturer will optimize its
compliance strategy around whichever standard is most binding for its
fleet of vehicles. If different agencies' standards are more binding
for some companies in certain years, this does not mean that
manufacturers must build multiple fleets of vehicles, but rather that
they will have to be more strategic about how they build their fleet.
More detailed discussion of this issue can be found in Section VI.A of
this preamble. Critically, NHTSA has concluded that it is feasible for
manufacturers to meet the NHTSA standards in a regulatory framework
that includes the EPA standards.
NHTSA has also considered and accounted for manufacturers' expected
compliance with California's ZEV program (ACC I and ACT) and its
adoption by other states in developing the reference baseline for this
final rule. We have also accounted for the Framework Agreements between
manufacturers who have committed to meeting those Agreements. Finally,
we accounted for additional ZEV deployment that manufacturers have
[[Page 52580]]
committed to undertake, which would be consistent with the requirements
of ACC II. NHTSA's assessment regarding the inclusion of ZEVs in the
reference baseline is detailed in Preamble Section III.C.5 and Section
IV.B.1, and well as in Chapter 3.1 of the accompanying FRIA.
NHTSA also conducted an analysis using an alternative baseline,
under which NHTSA removed not only the electric vehicles that would be
deployed to comply with ACC I, but also those that would be deployed
consistent with manufacturer commitments to deploy additional electric
vehicles regardless of legal requirements, consistent with the levels
under ACC II. NHTSA describes this as the ``No ZEV alternative
baseline.'' For further reading on this alternative baseline, see RIA
Chapters 3 and 8 and Preamble Section IV.B for comparison of the
baselines.
III. Technical Foundation for Final Rule Analysis
A. Why is NHTSA conducting this analysis?
NHTSA is finalizing CAFE standards that will increase at 2 percent
per year for passenger cars during MYs 2027 through 2031, and for light
trucks, standards that will not increase beyond the MY 2026 standards
in MYs 2027 through 2028, thereafter increasing at 2 percent per year
for MYs 2029 through 2031. The final HDPUV standards will increase at
10 percent per year during MYs 2030 through 2032, and then increase at
8 percent for MYs 2033 through 2035. NHTSA estimates these stringency
increases in the passenger car and light truck fleets will reduce
gasoline consumption through calendar year 2050 by about 64 billion
gallons and increase electricity consumption by about 333 terawatt-
hours (TWh). The stringency increases in the HDPUV fleet will reduce
gasoline consumption by about 5.6 billion gallons and increase
electricity consumption by about 56 TWh through calendar year 2050.
Accounting for emissions from both vehicles and upstream energy sector
processes (e.g., petroleum refining and electricity generation), NHTSA
estimates that the CAFE standards will reduce greenhouse gas emissions
by about 659 million metric tons of carbon dioxide (CO2),
about 825 thousand metric tons of methane (CH4), and about
23.5 thousand metric tons of nitrous oxide (N20). The HDPUV
standards are estimated to further reduce greenhouse gas emissions by
55 million metric tons of CO2, 65 thousand metric tons of
CH4 and 3 thousand metric tons of N20.
When NHTSA promulgates new regulations, it generally presents an
analysis that estimates the impacts of those regulations, and the
impacts of other regulatory alternatives. These analyses derive from
statutes such as the Administrative Procedure Act (APA) and NEPA, from
E.O.s (such as E.O. 12866 and 13563), and from other administrative
guidance (e.g., Office of Management and Budget (OMB) Circular A-4).
For CAFE and HDPUV standards, EPCA, as amended by EISA, contains a
variety of provisions that NHTSA seeks to account for analytically.
Capturing all of these requirements analytically means that NHTSA
presents an analysis that spans a meaningful range of regulatory
alternatives, that quantifies a range of technological, economic, and
environmental impacts, and that does so in a manner that accounts for
EPCA/EISA's various express requirements for the CAFE and HDPUV
programs (e.g., passenger cars and light trucks must be regulated
separately; the standard for each fleet must be set at the maximum
feasible level in each MY; etc.).
NHTSA's standards are thus supported by, although not dictated by,
extensive analysis of potential impacts of the regulatory alternatives
under consideration. Together with this preamble, a TSD, a FRIA, and a
Final EIS, provide a detailed enumeration of related methods,
estimates, assumptions, and results. These additional analyses can be
found in the rulemaking docket for this final rule \124\ and on NHTSA's
website.\125\
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\124\ Docket No. NHTSA-2023-0022, which can be accessed at
https://www.regulations.gov.
\125\ See NHTSA. 2023. Corporate Average Fuel Economy. Available
at: https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy. (Accessed: Feb. 23, 2024).
---------------------------------------------------------------------------
This section provides further detail on the key features and
components of NHTSA's analysis. It also describes how NHTSA's analysis
has been constructed specifically to reflect governing law applicable
to CAFE and HDPUV standards (which may vary between programs). Finally,
the discussion reviews how NHTSA's analysis has been expanded and
improved in response to comments received on the 2023 proposal,\126\ as
well as additional work conducted over the last year. The analysis for
this final rule aided NHTSA in implementing its statutory obligations,
including the weighing of various considerations, by reasonably
informing decision-makers about the estimated effects of choosing
different regulatory alternatives.
---------------------------------------------------------------------------
\126\ 88 FR 56128 (Aug. 17, 2023).
---------------------------------------------------------------------------
1. What are the key components of NHTSA's analysis?
NHTSA's analysis makes use of a range of data (i.e., observations
of things that have occurred), estimates (i.e., things that may occur
in the future), and models (i.e., methods for making estimates). Two
examples of data include (1) records of actual odometer readings used
to estimate annual mileage accumulation at different vehicle ages and
(2) CAFE compliance data used as the foundation for the ``analysis
fleets'' containing, among other things, production volumes and fuel
economy/fuel efficiency levels of specific configurations of specific
vehicle models produced for sale in the U.S. Two examples of estimates
include (1) forecasts of future Gross Domestic Product (GDP) growth
used, with other estimates, to forecast future vehicle sales volumes
and (2) technology cost estimates, which include estimates of the
technologies' ``direct cost,'' marked up by a ``retail price
equivalent'' (RPE) factor used to estimate the ultimate cost to
consumers of a given fuel-saving technology, and an estimate of ``cost
learning effects'' (i.e., the tendency that it will cost a manufacturer
less to apply a technology as the manufacturer gains more experience
doing so).
NHTSA uses the CAFE Compliance and Effects Modeling System (usually
shortened to the ``CAFE Model'') to estimate manufacturers' potential
responses to new CAFE, HDPUV, and GHG standards and to estimate various
impacts of those responses. DOT's Volpe National Transportation Systems
Center (often simply referred to as the ``Volpe Center'') develops,
maintains, and applies the model for NHTSA. NHTSA has used the CAFE
Model to perform analyses supporting every CAFE rulemaking since 2001.
The 2016 rulemaking regarding HDPUV fuel efficiency standards, NHTSA's
most recent HDPUV rulemaking, also used the CAFE Model for analysis.
The basic design of the CAFE Model is as follows: The system first
estimates how vehicle manufacturers might respond to a given regulatory
scenario, and from that potential compliance solution, the system
estimates what impact that response will have on fuel consumption,
emissions, safety impacts, and economic externalities. In a highly
summarized form, TSD Figure 1-1 shows the basic categories of CAFE
Model procedures and the sequential logical flow between different
stages of the modeling.\127\ The diagram does not present specific
model inputs or
[[Page 52581]]
outputs, as well as many specific procedures and model interactions.
The model documentation accompanying this final rule presents these
details.\128\
---------------------------------------------------------------------------
\127\ TSD Chapter 1, see Figure 1-1: CAFE Model Procedures and
Logical Flow.
\128\ CAFE Model Documentation for 2024 FRM.
---------------------------------------------------------------------------
More specifically, the model may be characterized as an integrated
system of models. For example, one model estimates manufacturers'
responses, another estimates resultant changes in total vehicle sales,
and still another estimates resultant changes in fleet turnover (i.e.,
scrappage). Additionally, and importantly, the model does not determine
the form or stringency of the standards. Instead, the model applies
inputs specifying the form and stringency of standards to be analyzed
and produces outputs showing the impacts of manufacturers working to
meet those standards, which become part of the basis for comparing
different potential stringencies. A regulatory scenario, meanwhile,
involves specification of the form, or shape, of the standards (e.g.,
flat standards, or linear or logistic attribute-based standards), scope
of passenger car, light truck, and HDPUV regulatory classes, and
stringency of the CAFE or HDPUV standards for each MY to be analyzed.
For example, a regulatory scenario may define CAFE or HDPUV standards
for a particular class of vehicles that increase in stringency by a
given percent per year for a given number of consecutive years.
Manufacturer compliance simulation and the ensuing effects
estimation, collectively referred to as compliance modeling, encompass
numerous subsidiary elements. Compliance simulation begins with a
detailed user-provided initial forecast of the vehicle models offered
for sale during the simulation period.\129\ The compliance simulation
then attempts to bring each manufacturer into compliance with the
standards defined by the regulatory scenario contained within an input
file developed by the user.\130\
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\129\ Because the CAFE Model is publicly available, anyone can
develop their own initial forecast (or other inputs) for the model
to use. The DOT-developed Market Data Input file that contains the
forecast for this final rule is available on NHTSA's website at
https://www.nhtsa.gov/corporate-average-fuel-economy/cafe-compliance-and-effects-modeling-system.
\130\ With appropriate inputs, the model can also be used to
estimate impacts of manufacturers' potential responses to new
CO2 standards and to California's ZEV program.
---------------------------------------------------------------------------
Estimating impacts involves calculating resultant changes in new
vehicle costs, estimating a variety of costs (e.g., for fuel) and
effects (e.g., CO2 emissions from fuel combustion) occurring
as vehicles are driven over their lifetimes before eventually being
scrapped, and estimating the monetary value of these effects.
Estimating impacts also involves consideration of consumer responses--
e.g., the impact of vehicle fuel economy/efficiency, operating costs,
and vehicle price on consumer demand for passenger cars, light trucks,
and HDPUVs. Both basic analytical elements involve the application of
many analytical inputs. Many of these inputs are developed outside of
the model and not by the model. For example, the model applies fuel
prices; it does not estimate fuel prices.
NHTSA also uses EPA's Motor Vehicle Emission Simulator (MOVES)
model to estimate ``vehicle'' or ``downstream'' emission factors for
criteria pollutants,\131\ and uses four Department of Energy (DOE) and
DOE-sponsored models to develop inputs to the CAFE Model, including
three developed and maintained by DOE's Argonne National Laboratory
(Argonne). The agency uses the DOE Energy Information Administration's
(EIA's) National Energy Modeling System (NEMS) to estimate fuel
prices,\132\ and uses Argonne's Greenhouse gases, Regulated Emissions,
and Energy use in Transportation (GREET) model to estimate emissions
rates from fuel production and distribution processes.\133\ DOT also
sponsored DOE/Argonne to use Argonne's Autonomie full-vehicle modeling
and simulation system to estimate the fuel economy/efficiency impacts
for over a million combinations of technologies and vehicle types.\134\
The TSD and FRIA describe details of our use of these models. In
addition, as discussed in the Final EIS accompanying this final rule,
DOT relied on a range of models to estimate impacts on climate, air
quality, and public health. The Final EIS discusses and describes the
use of these models.
---------------------------------------------------------------------------
\131\ See https://www.epa.gov/moves. This final rule uses
version MOVES4 (the latest version at the time of analysis),
available at https://www.epa.gov/moves/latest-version-motor-vehicle-emission-simulator-moves.
\132\ See https://www.eia.gov/outlooks/aeo/. This final rule
uses fuel prices estimated using the Annual Energy Outlook (AEO)
2023 version of NEMS (see https://www.eia.gov/outlooks/aeo/tables_ref.php.).
\133\ Information regarding GREET is available at https://greet.es.anl.gov/. This final rule uses the R&D GREET 2023 version.
\134\ As part of the Argonne simulation effort, individual
technology combinations simulated in Autonomie were paired with
Argonne's BatPaC model to estimate the battery cost associated with
each technology combination based on characteristics of the
simulated vehicle and its level of electrification. Information
regarding Argonne's BatPaC model is available at https://www.anl.gov/cse/batpac-model-software. In addition, the impact of
engine technologies on fuel consumption, torque, and other metrics
was characterized using GT-POWER simulation modeling in combination
with other engine modeling that was conducted by IAV Automotive
Engineering, Inc. (IAV). The engine characterization ``maps''
resulting from this analysis were used as inputs for the Autonomie
full-vehicle simulation modeling. Information regarding GT-POWER is
available at https://www.gtisoft.com/gt-power/.
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To prepare for the analysis that supports this final rule, DOT has
refined and expanded the CAFE Model through ongoing development.
Examples of such changes, some informed by past external comment, made
since 2022 include: \135\
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\135\ A more detailed list can be found in Chapter 1.1 of the
TSD.
Updated analysis fleet
Addition of HDPUVs, and associated required updates across
entire model
Updated technologies considered in the analysis
[cir] Addition of HCRE, HCRD and updated diesel technology models \136\
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\136\ See technologies descriptions in TSD Chapter 3.
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[cir] Removal of EFR, DSLIAD, manual transmissions, AT6L2, EPS, IACC,
LDB, SAX, and some P2 combinations \137\
---------------------------------------------------------------------------
\137\ See technologies description in 87 FR 25710 (May 2, 2022).
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User control of additional input parameters
Updated modeling approach to manufacturers' expected
compliance with states' ZEV programs
Expanded accounting for Federal incentives, such as the IRA
Expanded procedures for estimating new vehicle sales and fleet
shares
VMT coefficient updates
In response to feedback, interagency meetings, comments from
stakeholders, as well as continued development, DOT has made additional
changes to the CAFE Model for the final rule. Since the 2023 NPRM, DOT
has made the following changes to the CAFE Model and inputs, including:
\138\
---------------------------------------------------------------------------
\138\ A more detailed list of updates can be found in Chapter
1.1 of the TSD.
Updated battery costs for electrified technologies
Updated different phase-in penetration for different BEV
ranges
Updated ZEV State shares, credit values and projected ZEV
requirements to inform the reference baseline
Reclassified Rivian and Ford vehicles from HDPUV to LD based
on official certification data submission
Allow the user to directly input AC efficiency, AC leakage and
off cycle credit limits for each MY, separately for conventional ICE
vehicles and electric vehicles
Addressed issues with when road load technologies are applied
to the fleet
[[Page 52582]]
Updated and expanded model reporting capabilities
Updated IRA Tax Credit implementation
Updated input factors for economic models
Updated input factors for the safety models
Updated emission modeling
These changes reflect DOT's long-standing commitment to ongoing
refinement of its approach to estimating the potential impacts of new
CAFE and HDPUV standards.\139\ The TSD elaborates on these changes to
the CAFE Model, as well as changes to inputs to the model for this
analysis.
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\139\ A list accounting of major updates since the CAFE Model
was developed in 2001 can be found in Chapter 1.1 of the TSD.
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NHTSA underscores that this analysis uses the CAFE Model in a
manner that explicitly accounts for the fact that in producing a single
fleet of vehicles for sale in the United States, manufacturers make
decisions that consider the combination of CAFE/HDPUV standards, EPA
GHG standards, and various policies set at sub-national levels (e.g.,
ZEV regulatory programs, set by California and adopted by many other
states). These regulations have important structural and other
differences that affect the strategy a manufacturer could pursue in
designing a fleet that complies with each of the above. As explained,
NHTSA's analysis reflects a number of statutory and regulatory
requirements applicable to CAFE/HDPUV and EPA GHG standard-setting. As
stated previously, NHTSA coordinated with EPA and DOE to optimize the
effectiveness of NHTSA's standards while minimizing compliance costs,
informed by public comments from all stakeholders and consistent with
the statutory factors.
2. How do requirements under EPCA/EISA shape NHTSA's analysis?
EPCA contains multiple requirements governing the scope and nature
of CAFE standard setting. Some of these have been in place since EPCA
was first signed into law in 1975, and some were added in 2007, when
Congress passed EISA and amended EPCA. EISA also gave NHTSA authority
to set standards for HDPUVs, and that authority was generally less
constrained than for CAFE standards. NHTSA's modeling and analysis to
inform standard setting is guided and shaped by these statutory
requirements. EPCA/EISA requirements regarding the technical
characteristics of CAFE and HDPUV standards and the analysis thereof
include, but are not limited to, the following:
Corporate Average Standards: Section 32902 of 49 U.S.C. requires
standards for passenger cars, light trucks, and HDPUVs to be corporate
average standards, applying to the average fuel economy/efficiency
levels achieved by each corporation's fleets of vehicles produced for
sale in the U.S.\140\ The CAFE Model calculates the CAFE and
CO2 levels of each manufacturer's fleets based on estimated
production volumes and characteristics, including fuel economy/
efficiency levels, of distinct vehicle models that could be produced
for sale in the U.S.
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\140\ This differs from certain other types of vehicle
standards, such as safety standards. For example, every vehicle
produced for sale in the U.S. must, on its own, meet all applicable
Federal motor vehicle safety standards (FMVSS), but no vehicle
produced for sale must, on its own, meet Federal fuel economy or
efficiency standards. Rather, each manufacturer is required to
produce a mix of vehicles that, taken together, achieve an average
fuel economy/efficiency level no less than the applicable minimum
level.
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Separate Standards for Passenger Cars, Light Trucks, and HDPUVs:
Section 32902 of 49 U.S.C. requires the Secretary of Transportation to
set CAFE standards separately for passenger cars and light trucks and
allows the Secretary to prescribe separate standards for different
classes of heavy-duty (HD) vehicles like HDPUVs. The CAFE Model
accounts separately for differentiated standards and compliance
pathways for passenger cars, light trucks, and HDPUVs when it analyzes
CAFE/HDPUV or GHG standards.
Attribute-Based Standards: Section 32902 of 49 U.S.C. requires the
Secretary of Transportation to define CAFE standards as mathematical
functions expressed in terms of one or more vehicle attributes related
to fuel economy, and NHTSA has extended this approach to HDPUV
standards as well through regulation. This means that for a given
manufacturer's fleet of vehicles produced for sale in the U.S. in a
given regulatory class and MY, the applicable minimum CAFE requirement
(or maximum HDPUV fuel consumption requirement) is computed based on
the applicable mathematical function, and the mix and attributes of
vehicles in the manufacturer's fleet. The CAFE Model accounts for such
functions and vehicle attributes explicitly.
Separately Defined Standards for Each Model Year: Section 32902 of
49 U.S.C. requires the Secretary of Transportation (by delegation,
NHTSA) to set CAFE standards (separately for passenger cars and light
trucks) \141\ at the maximum feasible levels in each MY. Fuel
efficiency levels for HDPUVs must also be set at the maximum feasible
level, in tranches of (at least) 3 MYs at a time. The CAFE Model
represents each MY explicitly, and accounts for the production
relationships between MYs.\142\
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\141\ Chaper 329 of title 49 of the U.S. Code uses the term
``non-passenger automobiles,'' while NHTSA uses the term ``light
trucks'' in its CAFE regulations. The terms' meanings are identical.
\142\ For example, a new engine first applied to a given mode/
configuration in MY 2027 will most likely persist in MY 2028 of that
same vehicle model/configuration, in order to reflect the fact that
manufacturers do not apply brand-new engines to a given vehicle
model every single year. The CAFE Model is designed to account for
these real-world factors.
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Separate Compliance for Domestic and Imported Passenger Car Fleets:
Section 32904 of 49 U.S.C. requires the EPA Administrator to determine
CAFE compliance separately for each manufacturer's fleets of domestic
passenger cars and imported passenger cars, which manufacturers must
consider as they decide how to improve the fuel economy of their
passenger car fleets.\143\ The CAFE Model accounts explicitly for this
requirement when simulating manufacturers' potential responses to CAFE
standards, and combines any given manufacturer's domestic and imported
cars into a single fleet when simulating that manufacturer's potential
response to GHG standards (because EPA does not have separate standards
for domestic and imported passenger cars).
---------------------------------------------------------------------------
\143\ There is no such requirement for light trucks or HDPUVs.
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Minimum CAFE Standards for Domestic Passenger Car Fleets: Section
32902 of 49 U.S.C. requires that domestic passenger car fleets meet a
minimum standard, which is calculated as 92 percent of the industry-
wide average level required under the applicable attribute-based CAFE
standard, as projected by the Secretary at the time the standard is
promulgated. The CAFE Model accounts explicitly for this requirement
when simulating manufacturer compliance with CAFE standards and sets
this requirement aside when simulating manufacturer compliance with GHG
standards.
Civil Penalties for Noncompliance: Section 32912 of 49 U.S.C. (and
implementing regulations) prescribes a rate (in dollars per tenth of a
mpg) at which the Secretary is to levy civil penalties if a
manufacturer fails to comply with a passenger car or light truck CAFE
standard for a given fleet in a given MY, after considering available
credits. Some manufacturers have historically chosen to pay civil
penalties rather than achieve full numerical compliance across all
fleets.\144\ The
[[Page 52583]]
CAFE Model calculates civil penalties (adjusted for inflation) for CAFE
shortfalls and provides means to estimate that a manufacturer might
stop adding fuel-saving technologies once continuing to do so would
effectively be more ``expensive'' (after accounting for fuel prices and
buyers' willingness to pay for fuel economy) than paying civil
penalties. The CAFE Model does not allow civil penalty payment as an
option for EPA's GHG standards or NHTSA's HDPUV standards.\145\
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\144\ NHTSA does not assume willingness to pay civil penalties
for manufacturers who have commented publicly that they will not pay
civil penalties in the rulemaking time frame, MY 2027 to MY 2031.
\145\ While civil penalties are an option in the HDPUV fleet
manufacturers have not exercised this option in the real world.
Additionally, the penalties for noncompliance are significantly
higher, and thus manufacturers will try to avoid paying them.
Setting the model to disallow civil penalties acts to best simulate
this behavior. If the model does find no option other than ``paying
a civil penalty'' in the HDPUV fleet, this cost should be considered
a proxy for credit purchase.
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Dual-Fueled and Dedicated Alternative Fuel Vehicles: For purposes
of calculating passenger car and light truck CAFE levels used to
determine compliance, 49 U.S.C. 32905 and 32906 specify methods for
calculating the fuel economy levels of vehicles operating on
alternative fuels to gasoline or diesel, such as electricity. In some
cases, after MY 2020, methods for calculating AFV fuel economy are
governed by regulation. The CAFE Model can account for these
requirements explicitly for each vehicle model. However, 49 U.S.C.
32902 prohibits consideration of the fuel economy of dedicated
Alternative Fuel Vehicles (AFVs), and requires that the fuel economy of
dual-fueled AFVs' fuel economy, such as plug-in electric vehicles
(EVs), be calculated as though they ran only on gasoline or diesel,
when NHTSA determines the maximum feasible fuel economy level that
manufacturers can achieve, in a given year for which NHTSA is
establishing CAFE standards. The CAFE Model therefore has an option to
be run in a manner that excludes the additional application of
dedicated AFVs and counts only the gasoline fuel economy of dual-fueled
AFVs, in MYs for which maximum feasible standards are under
consideration. As allowed under NEPA for analysis appearing in
Environmental Impact Statements (EIS) that help inform decision makers
about the environmental impacts of CAFE standards, the CAFE Model can
also be run without this analytical constraint. The CAFE Model does
account for dedicated and dual-fueled AFVs when simulating
manufacturers' potential responses to EPA's GHG standards because the
Clean Air Act (CAA), under which the EPA derives its authority to set
GHG standards for motor vehicles, contains no restrictions in using
AFVs for compliance. There are no specific statutory directions in EISA
with regard to dedicated and dual-fueled AFV fuel efficiency for
HDPUVs, so the CAFE Model reflects relevant regulatory provisions by
calculating fuel consumption directly per 49 U.S.C. 32905 and 32906
specified methods.
ZEV Regulatory Programs: The CAFE Model can simulate manufacturers'
compliance with state-level ZEV programs applicable in California and
``Section 177'' \146\ states. This approach involves identifying
specific vehicle model/configurations that could be replaced with BEVs
and converting to BEVs only enough sales count of the vehicle models to
meet the manufacturer's compliance obligations under state-level ZEV
programs, before beginning to consider the potential that other
technologies could be applied toward compliance with CAFE, HDPUV, or
GHG standards.
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\146\ The term ``Section 177'' states refers to states which
have elected to adopt California's standards in lieu of Federal
requirements, as allowed under section 177 of the CAA.
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Creation and Use of Compliance Credits: Section 32903 of 49 U.S.C.
provides that manufacturers may earn CAFE ``credits'' by achieving a
CAFE level beyond that required of a given passenger car or light truck
fleet in a given MY and specifies how these credits may be used to
offset the amount by which a different fleet falls short of its
corresponding requirement. These provisions allow credits to be
``carried forward'' and ``carried back'' between MYs, transferred
between regulated classes (domestic passenger cars, imported passenger
cars, and light trucks), and traded between manufacturers. However,
credit use for passenger car and light truck compliance is also subject
to specific statutory limits. For example, CAFE compliance credits can
be carried forward a maximum of five MYs and carried back a maximum of
three MYs. Also, EPCA/EISA caps the amount of credits that can be
transferred between passenger car and light truck fleets and prohibits
manufacturers from applying traded or transferred credits to offset a
failure to achieve the applicable minimum standard for domestic
passenger cars. The CAFE Model can simulate manufacturers' potential
use of CAFE credits carried forward from prior MYs or transferred from
other fleets.\147\ Section 32902 of 49 U.S.C. prohibits consideration
of manufacturers' potential application of CAFE compliance credits when
determining the maximum feasible fuel economy level that manufacturers
can achieve for their fleets of passenger cars and light trucks. The
CAFE Model can be operated in a manner that excludes the application of
CAFE credits for a given MY under consideration for standard setting,
and NHTSA operated the model with that constraint for the purpose of
determining the appropriate CAFE standard for passenger cars and light
trucks. No such statutory restrictions exist for setting HDPUV
standards. For modeling EPA's GHG standards, the CAFE Model does not
limit transfers because the CAA does not limit them. Insofar as the
CAFE Model can be exercised in a manner that simulates trading of GHG
compliance credits, such simulations treat trading as unlimited.\148\
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\147\ The CAFE Model does not explicitly simulate the potential
that manufacturers would carry CAFE or GHG credits back (i.e.,
borrow) from future model years, or acquire and use CAFE compliance
credits from other manufacturers. At the same time, because EPA has
elected not to limit credit trading, the CAFE Model can be exercised
(for purposes of evaluating GHG standards) in a manner that
simulates unlimited (a.k.a. ``perfect'') GHG compliance credit
trading throughout the industry (or, potentially, within discrete
trading ``blocs''). Given these dynamics, and given also the fact
that the agency has yet to resolve some of the analytical challenges
associated with simulating use of these flexibilities, the agency
has decided to support this final rule with a conservative analysis
that sets aside the potential that manufacturers would depend widely
on borrowing and trading--not to mention that, for purposes of
determining maximum feasible CAFE standards, statute prohibits NHTSA
from considering the trading, transferring, or availability of
credits (see 49 U.S.C. 32902(h)). While compliance costs in real
life may be somewhat different from what is modeled in the
rulemaking record as a result of this decision, that is broadly true
no matter what, and the agency does not believe that the difference
would be so great that it would change the policy outcome.
Furthermore, a manufacturer employing a trading strategy would
presumably do so because it represents a lower-cost compliance
option. Thus, the estimates derived from this modeling approach are
likely to be conservative in this respect, with real-world
compliance costs likely being lower.
\148\ To avoid making judgments about possible future trading
activity, the model simulates trading by combining all manufacturers
into a single entity, so that the most cost-effective choices are
made for the fleet as a whole.
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Statutory Basis for Stringency: Section 32902 of 49 U.S.C. requires
the Secretary of Transportation (by delegation, NHTSA) to set CAFE
standards for passenger cars and light trucks at the maximum feasible
levels that manufacturers can achieve in a given MY, considering
technological feasibility, economic practicability, the need of the
United States to conserve energy, and the impact of other motor vehicle
standards of the Government on fuel economy. For HDPUV standards, which
must also achieve the maximum
[[Page 52584]]
feasible improvement, the similar yet distinct factors of
appropriateness, cost-effectiveness, and technological feasibility must
be considered. EPCA/EISA authorizes the Secretary of Transportation (by
delegation, NHTSA) to interpret these factors, and as the Department's
interpretation has evolved, NHTSA has continued to expand and refine
its qualitative and quantitative analysis to account for these
statutory factors. For example, one of the ways that economic
practicability considerations are incorporated into the analysis is
through the technology effectiveness determinations: the Autonomie
simulations reflect the agency's conservative assumption that it would
not be economically practicable (nor, for HDPUVs, appropriate for
vehicles with different use cases) for a manufacturer to ``split'' an
engine shared among many vehicle model/configurations into myriad
versions each optimized to a single vehicle model/configuration.
National Environmental Policy Act: NEPA requires NHTSA to consider
the environmental impacts of its actions in its decision-making
processes, including for CAFE standards. The Final EIS accompanying
this final rule documents changes in emission inventories as estimated
using the CAFE Model, but also documents corresponding estimates--based
on the application of other models documented in the Final EIS--of
impacts on the global climate, on air quality, and on human health.
Other Aspects of Compliance: Beyond these statutory requirements
applicable to DOT, EPA, or both are a number of specific technical
characteristics of CAFE, HDPUV, and/or GHG regulations that are also
relevant to the construction of this analysis, like the ``off-cycle''
technology fuel economy/emissions improvements that apply for both CAFE
and GHG compliance. Although too little information is available to
account for these provisions explicitly in the same way that NHTSA has
accounted for other technologies, the CAFE Model includes and makes use
of inputs reflecting NHTSA's expectations regarding the extent to which
manufacturers may earn such credits, along with estimates of
corresponding costs. Similarly, the CAFE Model includes and makes use
of inputs regarding credits EPA has elected to allow manufacturers to
earn toward GHG levels (not CAFE or HDPUV) based on the use of air
conditioner refrigerants with lower global warming potential, or on the
application of technologies to reduce refrigerant leakage. In addition,
the CAFE Model accounts for EPA ``multipliers'' for certain AFVs, based
on current regulatory provisions or on alternative approaches. Although
these are examples of regulatory provisions that arise from the
exercise of discretion rather than specific statutory mandate, they can
materially impact outcomes.
3. What updated assumptions does the current model reflect as compared
to the 2022 final rule and the 2023 NPRM?
Besides the updates to the CAFE Model described above, any analysis
of regulatory actions that will be implemented several years in the
future, and whose benefits and costs accrue over decades, requires a
large number of assumptions. Over such time horizons, many, if not
most, of the relevant assumptions in such an analysis are inevitably
uncertain. Each successive CAFE and HDPUV analysis seeks to update
assumptions to better reflect the current state of the world and the
best current estimates of future conditions.
A number of assumptions have been updated since the 2022 final rule
and the 2023 NPRM. As discussed below, NHTSA continues to use a MY 2022
reference fleet for passenger cars and light trucks and continues to
use an updated HDPUV analysis fleet (the last HDPUV analysis fleet was
built in 2016). NHTSA has also updated estimates of manufacturers'
compliance credit ``holdings,'' updated fuel price projections to
reflect the U.S. EIA's 2023 Annual Energy Outlook (AEO), updated
projections of GDP and related macroeconomic measures, and updated
projections of future highway travel. While NHTSA would have made these
updates as a matter of course, we note that the ongoing global economic
recovery and the ongoing war in Ukraine have impacted major analytical
inputs such as fuel prices, GDP, vehicle production and sales, and
highway travel. Many inputs remain uncertain, and NHTSA has conducted
sensitivity analyses around many inputs to attempt to capture some of
that uncertainty. These and other updated analytical inputs are
discussed in detail in the TSD and FRIA.
Additionally, as discussed in the TSD,\149\ NHTSA calculates the
climate benefits resulting from anticipated reductions in emissions of
each of three GHGs, CO2, CH4, and N2O,
using estimates of the social costs of greenhouse gases (SC-GHG) values
reported in a recent report from EPA (henceforward referred to as the
``2023 EPA SC-GHG Report'').\150\ In the 2022 final rule and the 2023
NPRM, NHTSA used SC-GHG values recommended by the federal Interagency
Working Group (IWG) on the SC-GHG for interim use until updated
estimates are available. In this final rule, NHTSA has elected to use
the updated values in the 2023 EPA SC-GHG Report to reflect the most
recent scientific evidence on the cost of climate damages resulting
from emission of GHGs. Those estimates of costs per ton of emissions
(or benefits per ton of emissions reductions) are greater than those
applied in the analysis supporting the 2022 final rule or the 2023
NPRM. Even still, the estimates NHTSA is now using are not able to
fully quantify and monetize a number of important categories of climate
damages; because of those omitted damages and other methodological
limits, DOT believes its values for SC-GHG are conservative
underestimates.
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\149\ See TSD Chapter 6.2.1
\150\ EPA 2023. EPA Report on the Social Cost of Greenhouse
Gases: Estimates Incorporating Recent Scientific Advances. National
Center for Environmental Economics, Office of Policy, Climate Change
Division, Office of Air and Radiation. Washington, DC. Available at:
https://www.epa.gov/environmental-economics/scghg. (Accessed: Mar.
22, 2024) (hereinafter, ``2023 EPA SC-GHG Report'').
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B. What is NHTSA analyzing?
NHTSA is analyzing the effects of different potential CAFE and
HDPUV standards on industry, consumers, society, and the world at
large. These different potential standards are identified as regulatory
alternatives, and amongst the regulatory alternatives, NHTSA identifies
which ones the agency is selecting. As in the past several CAFE
rulemakings and in the Phase 2 HDPUV rulemaking, NHTSA is establishing
attribute-based CAFE and HDPUV standards defined by either a
mathematical function of vehicle footprint (which has an observable
correlation with fuel economy) or a towing-and-hauling-based WF,
respectively.\151\ EPCA, as amended by EISA, expressly requires that
CAFE standards for passenger cars and light trucks be based on one or
more vehicle attributes related to fuel economy, and be expressed in
the form of a mathematical function.\152\ The statute gives NHTSA
discretion as to how to structure standards for HDPUVs, and NHTSA
continues to believe that attribute-based standards expressed as a
mathematical function remain appropriate for those vehicles as well,
[[Page 52585]]
given their similarity in many ways to light trucks. Thus, the
standards (and the regulatory alternatives) for passenger cars and
light trucks take the form of fuel economy targets expressed as
functions of vehicle footprint (the product of vehicle wheelbase and
average track width) that are separate for passenger cars and light
trucks, and the standards and alternatives for HDPUVs take the form of
fuel consumption targets expressed as functions of vehicle WF (which is
in turn a function of towing and hauling capabilities).
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\151\ Vehicle footprint is the vehicle's wheelbase times average
track width (or more simply, the length and width beween the
vehicle's four wheels). The HDPUV FE towing-and-hauling-based work
factor (WF) metric is based on a vehicle's payload and towing
capabilities, with an added adjustment for 4-wheel drive vehicles.
\152\ 49 U.S.C. 32902(a)(3)(A).
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For passenger cars and light trucks, under the footprint-based
standards, the function defines a fuel economy performance target for
each unique footprint combination within a car or truck model type.
Using the functions, each manufacturer thus will have a CAFE average
standard for each year that is almost certainly unique to each of its
fleets,\153\ based upon the footprint and production volumes of the
vehicle models produced by that manufacturer. A manufacturer will have
separate footprint-based standards for cars and for trucks, consistent
with 49 U.S.C. 32902(b)'s direction that NHTSA must set separate
standards for cars and for trucks. The functions are mostly sloped, so
that generally, larger vehicles (i.e., vehicles with larger footprints)
will be subject to lower mpg targets than smaller vehicles. This is
because smaller vehicles are generally more capable of achieving higher
levels of fuel economy, mostly because they tend not to have to work as
hard (and therefore to require as much energy) to perform their driving
task. Although a manufacturer's fleet average standard could be
estimated throughout the MY based on the projected production volume of
its vehicle fleet (and are estimated as part of EPA's certification
process), the standards with which the manufacturer must comply are
determined by its final model year (FMY) production figures. A
manufacturer's calculation of its fleet average standards, as well as
its fleets' average performance at the end of the MY, will thus be
based on the production-weighted average target and performance of each
model in its fleet.\154\
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\153\ EPCA/EISA requires NHTSA and EPA to separate passenger
cars into domestic and import passenger car fleets for CAFE
compliance purposes (49 U.S.C. 32904(b)), whereas EPA combines all
passenger cars into one fleet for GHG compliance purposes.
\154\ As discussed in prior rulemakings, a manufacturer may have
some vehicle models that exceed their target and some that are below
their target. Compliance with a fleet average standard is determined
by comparing the fleet average standard (based on the production-
weighted average of the target levels for each model) with fleet
average performance (based on the production-weighted average of the
performance of each model). This is inherent in the statutory
structure of CAFE, which requires NHTSA to set corporate average
standards.
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For passenger cars, consistent with prior rulemakings, NHTSA is
defining fuel economy targets as shown in Equation III-1.
[GRAPHIC] [TIFF OMITTED] TR24JN24.042
Where:
TARGETFE is the fuel economy target (in mpg) applicable to a
specific vehicle model type with a unique footprint combination,
a is a minimum fuel economy target (in mpg),
b is a maximum fuel economy target (in mpg),
c is the slope (in gallons per mile (or gpm) per square foot) of a
line relating fuel consumption (the inverse of fuel economy) to
footprint, and
d is an intercept (in gpm) of the same line.
Here, MIN and MAX are functions that take the minimum and maximum
values, respectively, of the set of included values. For example,
MIN[40, 35] = 35 and MAX(40, 25) = 40, such that MIN[MAX(40, 25), 35] =
35.
For the Preferred Alternative, this equation is represented
graphically as the curves in Figure III-1.
[[Page 52586]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.043
For light trucks, also consistent with prior rulemakings, NHTSA is
defining fuel economy targets as shown in Equation III-2.
[GRAPHIC] [TIFF OMITTED] TR24JN24.044
Where:
TARGETFE is the fuel economy target (in mpg) applicable to a
specific vehicle model type with a unique footprint combination,
a, b, c, and d are as for passenger cars, but taking values specific
to light trucks,
e is a second minimum fuel economy target (in mpg),
f is a second maximum fuel economy target (in mpg),
g is the slope (in gpm per square foot) of a second line relating
fuel consumption (the inverse of fuel economy) to footprint, and
h is an intercept (in gpm) of the same second line.
For the Preferred Alternative, this equation is represented
graphically as the curves in Figure III-2.
[[Page 52587]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.045
Although the general model of the target function equation is the
same for passenger cars and light trucks, and the same for each MY, the
parameters of the function equation differ for cars and trucks. The
actual parameters for both the Preferred Alternative and the other
regulatory alternatives are presented in Section IV.
The required CAFE level applicable to a passenger car (either
domestic or import) or light truck fleet in a given MY is determined by
calculating the production-weighted harmonic average of fuel economy
targets applicable to specific vehicle model configurations in the
fleet, as shown in Equation III-3.
[GRAPHIC] [TIFF OMITTED] TR24JN24.046
Where:
CAFErequired is the CAFE level the fleet is required to achieve,
i refers to specific vehicle model/configurations in the fleet,
PRODUCTIONi is the number of model configuration i produced for sale
in the U.S., and
TARGETFE, i is the fuel economy target (as defined above) for model
configuration i.
For HDPUVs, NHTSA has previously set attribute-based standards, but
used a work-based metric as the attribute rather than footprint. Work-
based measurements such as payload and towing capability are key among
the parameters that characterize differences in the design of these
vehicles, as well as differences in how the vehicles will be used.
Since NHTSA has been regulating HDPUVs, these standards have been based
on a work factor (WF) attribute that combines the vehicle's payload and
towing capabilities, with an added adjustment for 4-wheel drive
vehicles. Again, while NHTSA is not required by statute to set HDPUV
standards that are attribute-based and that are described by a
mathematical function, NHTSA continues to believe that doing so is
reasonable and appropriate for this segment of vehicles, consistent
with prior HDPUV standard-setting rulemakings. NHTSA is continuing the
use of the work-based attribute and gradually increasing stringency
(which for HDPUVs means that standards appear to decline, as compared
to passenger car and light truck standards where increasing stringency
means that standards appear to increase. This is because HDPUV
standards are based on fuel consumption, which is the inverse of fuel
economy,\155\ the metric that NHTSA
[[Page 52588]]
is statutorily required to use when setting standards for light-duty
vehicle (LDV) fuel use). NHTSA defines HDPUV fuel efficiency targets as
shown in Equation III-4.
---------------------------------------------------------------------------
\155\ For additional information, see the National Academies of
Sciences, Engineering, and Medicine. 2011. Assessment of Fuel
Economy Technologies for Light-Duty Vehicles. The National Academies
Press. Washington, DC. Available at: https://nap.nationalacademies.org/catalog/12924/assessment-of-fuel-economy-technologies-for-light-duty-vehicles. (Accessed: Feb. 23, 2024).
Fuel economy is a measure of how far a vehicle will travel with a
gallon (or unit) of fuel and is expressed in mpg. Fuel consumption
is the inverse of fuel economy. It is the amount of fuel consumed in
driving a given distance. Fuel consumption is a fundamental
engineering measure that is directly related to fuel consumed per
100 miles and is useful because it can be employed as a direct
measure of volumetric fuel savings.
[GRAPHIC] [TIFF OMITTED] TR24JN24.047
---------------------------------------------------------------------------
Where:
c is the slope (in gal/100-miles/WF)
d is the y-intercept (in gal/100-miles)
WF = Work Factor = [0.75 x (Payload Capacity + Xwd)] + [0.25 x Towing
Capacity]
Where:
Xwd = 4wd adjustment = 500 lbs. if the vehicle group is equipped
with 4WD and all-wheel drive, otherwise equals 0 lbs. for 2wd
Payload Capacity = GVWR (lbs.)-Curb Weight (lbs.) (for each vehicle
group)
Towing Capacity = GCWR \156\ (lbs.)-GVWR (lbs.) (for each vehicle
group)
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\156\ Gross Combined Weight Rating.
For the Preferred Alternative, this equation is represented
graphically as the curves in Figure III-3 and Figure III-4.
[GRAPHIC] [TIFF OMITTED] TR24JN24.048
[[Page 52589]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.049
Similar to the standards for passenger cars and light trucks, NHTSA
(and EPA) have historically set HDPUV standards such that each
manufacturer's fleet average standard is based on production volume-
weighting of target standards for all vehicles, which are based on each
vehicle's WF as explained above. Thus, for HDPUVs, the required fuel
efficiency level applicable in a given MY is determined by calculating
the production-weighted harmonic average of subconfiguration targets
applicable to specific vehicle model configurations in the fleet, as
shown in Equation III-5.
[GRAPHIC] [TIFF OMITTED] TR24JN24.050
Where:
Subconfiguration Target Standardi = fuel consumption standard for
each group of vehicles with the same payload, towing capacity, and
drive configuration (gallons per 100 miles), and
Volumei = production volume of each unique subconfiguration of a
model type based upon payload, towing capacity, and drive
configuration.
Chapter 1 of the TSD contains a detailed description of the use of
attribute-based standards, generally, for passenger cars, light trucks,
and HDPUVs, and explains the specific decision, in past rules and for
the current final rule, to continue to use vehicle footprint as the
attribute over which to vary passenger car and light truck stringency,
and WF as the attribute over which to vary HDPUV stringency. That
chapter also discusses the policy and approach in selecting the
specific mathematical functions.\157\
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\157\ See TSD Chapter 1.2.
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Commenters expressed several concerns regarding the implementation
of the fuel economy footprint target curves used for passenger cars and
light trucks in this rule. Most concerns fell into one of four
categories: the use of alternate or additional factors in generating
the curves, the shape of the attribute curve, consideration of how
footprint changes may be expressed or used by manufacturers, and
considerations of changes made by the EPA in its own rulemaking.
Regarding the use of alternate or additional factors in generating
the curves, Rivian commented that NHTSA should reconsider the National
Academy of Sciences (NAS) recommendation for multi-attribute standards
for CAFE and requested that the agency ``more fully describe why'' the
alternative approach to including electrification as another attribute
described in the MYs 2024-2026 proposal ``would be inconsistent with
its current legal authority.'' \158\
---------------------------------------------------------------------------
\158\ Rivian, Docket No. NHTSA-2023-0022-59765, at 3-4.
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In the 2021 NAS Report, the committee recommended that if Congress
did not act to remove the prohibition at 49 U.S.C. 32902(h) on
considering the fuel economy of dedicated AFVs (like BEVs) in
determining maximum feasible CAFE standards, then the Secretary (by
delegation, NHTSA) should consider accounting for the fuel economy
[[Page 52590]]
benefits of ZEVs by ``setting the standard as a function of a second
attribute in addition to footprint--for example, the expected market
share of ZEVs in the total U.S. fleet of new light-duty vehicles--such
that the standards increase as the share of ZEVs in the total U.S.
fleet increases.'' \159\ NHTSA remains concerned that adding
electrification, specifically, as part of a multi-attribute approach to
standards may be inconsistent with our current legal authority. The 49
U.S.C. 32902(h) prohibition against considering the fuel economy of
electric vehicles applies to the determination of maximum feasible
standards. The attribute-based target curves are themselves the
standards. NHTSA therefore does not see how the fuel economy of
electric vehicles could be incorporated as an attribute forming the
basis of the standards. Moreover, NHTSA further explored and received
comments on this issue in the final rule setting standards for MYs
2024-2026.\160\ While NHTSA considered this recommendation carefully as
part of that rulemaking, NHTSA ultimately agreed with many commenters
that including electrification as an attribute on which to base fuel
economy standards for that rulemaking could introduce lead time
concerns and uncertainty for industry needing to adjust their
compliance strategies.
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\159\ National Academies of Sciences, Engineering, and Medicine.
2021. Assessment of Technologies for Improving Fuel Economy of
Light-Duty Vehicles--2025-2035. The National Academies Press.
Washington, DC at 5. Available at: https://www.nationalacademies.org/our-work/assessment-of-technologies-for-improving-fuel-economy-of-light-duty-vehicles-phase-3. (Accessed
Feb. 7, 2024) (hereinafter, ``2021 NAS Report''). Summary
Recommendation 5, at 368.
\160\ 87 FR 25753.
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The Center for Environmental Accountability (CEA) also commented on
considering the use of acceleration as an additional attribute in the
attribute based standard function.\161\ The CEA was concerned with
capturing the potential trade off manufacturers may make between
improved vehicle performance or improved fuel economy. NHTSA provides
discussion and reasoning for the agency's approach to performance
trade-offs in Section III.C.3 and believes the approach of maintaining
performance neutrality is a reasonable method for accounting for the
variety of possible manufacturer decisions. Furthermore, to date, every
time NHTSA has considered options for which attribute(s) to select, the
agency has concluded that a properly designed footprint-based approach
provides the best means of achieving the basic policy goals (i.e., by
increasing the likelihood of improved fuel economy across the entire
fleet of vehicles) involved in applying an attribute-based
standard.\162\
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\161\ CEA, Docket No. NHTSA-2023-0022-61918, at 22.
\162\ See TSD Chapter 1.2.3.1; NHTSA. Mar. 2022. TSD Final
Rulemaking for Model Years 2024-2026 Light-Duty Corporate Average
Fuel Economy Standards. Chapter 1.2.3; 85 FR 24249-24257 (April 30,
2020).
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Other commenters expressed concern about the possible influence of
the shape, slope or cutpoints of the footprint curve on real-world
vehicle footprint size. The Institute for Policy Integrity (IPI) and
the Natural Resources Defense Council (NRDC) both argued that NHTSA
should flatten the footprint curves to discourage upsizing, because
larger vehicles consume more energy.\163\ NRDC also stated that ``NHTSA
should further reduce the footprint of the cutpoint for light trucks
based on pickup certification.'' \164\ Other commenters expressed
similar concerns.\165\
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\163\ IPI, Docket No. NHTSA-2023-0022-60485, at 1; Joint NGOs,
Docket No. NHTSA-2023-0022-61944-A2, at 30-34.
\164\ Joint NGOs, Docket No. NHTSA-2023-0022-60485, at 34.
\165\ SELC, Docket No NHTSA-2023-0022-60224, at 7; Climate Hawks
Civic Action, Docket No NHTSA-2023-0022-61094, at 1042; MEMA, Docket
No. NHTSA-2023-0022-59204, at 8-9; ACEEE, Docket No NHTSA-2023-0022-
60684, at 3; CBD et al., Docket No. NHTSA-2023-0022-61944-A2, at 41.
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NHTSA appreciates these comments but based on the detailed
discussion presented in Chapter 1.2.3.1 of the TSD, NHTSA is retaining
the same curve shapes for passenger car and light truck standards in
this final rule that NHTSA has used over the past several rulemakings--
that is, at this time NHTSA is not changing the shape of the existing
footprint curves. Based on the analysis of data presented by the EPA
Trends Report discussed in the TSD,\166\ vehicle footprint size, by
vehicle category, has in fact changed very little over the last decade.
By sales-weighted average, the data examined showed that sedans and
wagons increased their footprints the most, about 3.4% or a 2 ft\2\
increase, over 10 years. For context, a 1.5 ft\2\ increase in overall
footprint increase would equate to about a 2 inch increase in the track
width of a MY 2022 Toyota Corolla.\167\ NHTSA's assessment in the TSD
shows that over the 10 years it took for manufacturers to increase
sedan footprint by 3.4% on average, the fuel economy consequence was
approximately a 3% reduction in the MY 2022 fuel economy target for a
Toyota Corolla, compared to if it had retained its MY 2012 footprint
size. Spread over each of those 10 years, the footprint increases for
the example Corolla resulted in fuel economy targets that were lowered
by approximately 0.3% per year. While NHTSA agrees that this number is
greater than zero, for context, the fuel economy standard improvement
from MY 2023 to MY 2024 will require approximately an 8% increase in
fuel economy--in other words, the increases in CAFE stringency are
decidedly outpacing manufacturers' current ability, or plans, to upsize
individual vehicle footprints to obtain lower targets.
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\166\ 2023 EPA Technology Trends Report.
\167\ The MY 2022 Corolla has a wheelbase of about 106 inches,
adding 2 inches to the track width would add approximately 212
square inches or 1.47 square feet to the footprint of the vehicle.
See the Market Data Input File for data on the 2022 Corolla
wheelbase.
---------------------------------------------------------------------------
NHTSA notes, however, that while increases in footprint size by
vehicle category are small, there is a separate phenomenon of aggregate
footprint increase for the entire fleet, which NHTSA found to be about
5.4% over the same time period. This is due not to changes in
individual vehicle size or vehicle-class-level size, but to changes in
fleet share. The fleet share of generally-smaller-footprint sedans and
wagons decreased by nearly 28.4% over 10 years, while the fleet share
of generally-larger-footprint trucks, SUVs, and pickups increased by
29.5%. Simply put, manufacturers are selling more larger trucks and
fewer smaller cars than they were 10 years ago--which is different from
individual vehicle models (or vehicle classes) themselves increasing in
size, as one might expect if the shape of the footprint curves or the
use of footprint as an attribute were incentivizing upsizing. This
evidence leads us to conclude that the use of footprint as an attribute
and the current slopes and cutoff points for the existing curves for
passenger car and light truck CAFE standards do not lead to
manufacturers significantly altering the size of their vehicles, within
vehicle classes.
In contrast, Mitsubishi argued that the current shape of the
curves, and particularly the passenger car curve, discouraged
manufacture of smaller footprint vehicles. As Mitsubishi stated,
Mitsubishi holds a unique position in the industry as the
manufacturer with the smallest fleet-average vehicle footprint. As
such, Mitsubishi also has the strictest GHG and CAFE standard among
vehicle manufacturers. Despite having one of the highest fleet-
average fuel economy ratings and the lowest fleet GHG emissions of
any mass-market vehicle manufacturer, Mitsubishi has accrued CAFE
and GHG deficits in recent years, while other manufacturers with
lower CAFE and higher GHG fleet emissions have accrued credits.
While we understand the math that delivers this result, we question
whether this outcome
[[Page 52591]]
is what the program set out to achieve. Mitsubishi supports the
reevaluation of the shape and slope of the footprint curves to
ensure fleetwide fuel economy increases and GHG reductions are done
in a neutral manner.\168\
---------------------------------------------------------------------------
\168\ Mitsubishi, Docket No. NHTSA-2023-0022-61637 at 7.
NHTSA is aware of Mitsubishi's unique position in the industry as a
manufacturer of smaller, highly fuel-efficient, affordably-priced
vehicles and is sympathetic to these comments. Unfortunately, the
standard is designed for the overall industry rather than for
individual manufacturers. The format of NHTSA's standards, with target
goals based on footprint, instead allows each manufacturer's compliance
obligation to vary with their sales mix. This can cause difficulty for
some manufacturers if their vehicles' average fuel economy does not
meet the required average of their footprint targets. Mitsubishi is
correct that the current curve shapes do not incentivize manufacturers
to build smaller cars--but neither does NHTSA find, as discussed above,
that they particularly incentivize manufacturers to build larger cars,
perhaps contrary to expectation. Unfortunately, the overall structure
of the target curves places Mitsubishi--like all other manufacturers--
in a position where it must balance its need to increase the fuel
economy of its fleet with marketing increasing vehicle costs to its
consumer base.
IPI suggested that NHTSA add the use of increased footprint size as
a potential compliance strategy used during the simulation of
manufacturer behavior, stating that ``This upsizing could be modeled
either directly as a vehicle-level change (i.e., a technology change)
or approximated by applying a specific level of sales-weighted average
increase to the vehicle class level. In the former case, NHTSA could
include footprint technology options, such as increased footprint size
by 0%, 5%, 7.5%, 10%, 15%, and 20%, much like NHTSA treats mass-
reduction technologies.'' \169\
---------------------------------------------------------------------------
\169\ IPI, Docket No. NHTSA-2023-0022-60485, at 16-18.
---------------------------------------------------------------------------
NHTSA disagrees that additional modeling approaches are required to
capture the behavior of the manufacturers that appears to lead to
increasing fleet footprint. The analysis of the EPA's Trends Data,
discussed above and provided in detail in TSD Chapter 1.2.3.1,
indicates that over the last 10 years vehicle footprint size has seen
only small changes within vehicle classes. Sedans and wagons showed the
greatest sales-weighted average increase between MY 2012 and MY 2022 at
a 3.4% increase, minivans saw a 2.1% increase, car SUVs (or crossovers)
saw a 1.6% increase, truck SUVs saw a 0.9% increase, and pickups saw
the smallest increase at 0.5%. The increase in sales-weighted average
footprint size for the aggregate fleet instead appears driven by a
change in fleet shares between passenger cars and light trucks--a
behavior that is captured by the CAFE model and is discussed in TSD
Chapter 4.2.1.3, Modeling Changes in Fleet Mix.
Several commenters expressed concern that NHTSA had not followed
EPA's proposed approach to reconfiguring their attribute-based
CO2 standard functions. Mitsubishi stated, ``Unlike the EPA,
NHTSA did not propose any changes to the slope or cut-points for the
passenger car or light truck curves.'' \170\ The Motor & Equipment
Manufacturer's Association (MEMA) offered similar comments, stating,
``NHTSA should follow EPA's lead in flattening the curves to further
improve the fuel efficiency of the overall fleet and limit upsizing.''
\171\ Other commenters also expressed concern about the departure in
target curve shape between EPA's proposed standards and NHTSA proposed
standards, arguing that NHTSA should have considered the same factors
EPA used in their determinations.\172\
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\170\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 7.
\171\ MEMA, Docket No. NHTSA-2023-0022-59204, at 8.
\172\ CBD et al., Docket No. NHTSA-2023-0022-61944, at 41; IPI,
Docket No. NHTSA-2023-0022-60485, at 16-18; ACEEE, Docket No. NHTSA-
2023-0022-60684, at 3.
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NHTSA has explained our position on changing curve shape based on
addressing concerns about upsizing above. That said, NHTSA is aware
that EPA recently issued a final rule changing the shapes of its
CO2 standards curves for passenger cars and light-duty
trucks, as compared to its prior set of standards. EPA explained that
it chose to make the slopes of both curves, especially the car curves,
flatter than those of prior rulemakings, stating that:
When emissions reducing technology is applied, such as advanced
ICE, or HEV or PHEV or BEV electrification technologies, the
relationship between increased footprint and tailpipe emissions is
reduced. From a physics perspective, a positive footprint slope for
ICE vehicles makes sense because as a vehicle's size increases, its
mass, road loads, and required power (and corresponding vehicle-
based CO2 emissions) will increase accordingly [and its
fuel economy will correspondingly decrease accordingly]. Moreover,
as the emissions control technology becomes increasingly more
effective, the relationship between tailpipe emissions and footprint
decreases proportionally; in the limiting case of vehicles with 0 g/
mile tailpipe emissions such as BEVs, there is no relationship at
all between tailpipe emissions and footprint.\173\
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\173\ 2024 EPA Final Rule, section II.C.2.ii, 89 FR 27842.
Since the Supreme Court's decision in Massachusetts v. EPA, NHTSA
and EPA have both employed equivalent footprint-based CAFE and
CO2 target curves for PCs and LTs. In this final rule, NHTSA
cannot reasonably promulgate target curves that are flatter, like EPA's
new curves based on EPA's rationale, for two main reasons. First, EPA
altered their curves based on considering the effects of emission
reduction technologies such as PHEVs and BEVs as viable solutions to
meet their standards. Given that the target curves are the CAFE
standards, and given that 49 U.S.C. 32902(h) prohibits consideration of
BEVs or even the electric only operation of PHEVs in determining
maximum feasible CAFE standards, NHTSA does not believe that the law
permits us to base target curve shapes in CAFE-standard-driven
increases on the presence (i.e., the fuel economy) of BEVs or the use
of the electric operation of PHEVs in the vehicle fleets. Second, even
if NHTSA could consider BEVs and full use of PHEV technology in
developing target curve shapes, NHTSA would not consider them the same
way as EPA does. BEV compliance values in the CAFE program are
determined, per statute, using DOE's Petroleum Equivalency Factor.
Moreover, the calculated equivalent fuel economies still vary with
vehicle footprint and, in general, larger vehicles have lower
calculated equivalent fuel economies. They are not the fuel-economy-
equivalent of 0 g/mi, which would be infinite fuel economy. NHTSA,
therefore, cannot adopt EPA's rationale that curve slopes should become
flatter in response to increasing numbers of BEVs because our statutory
requirements for how BEV fuel economy is calculated necessarily differ
from how EPA chooses to calculate CO2 emissions for BEVs.
NHTSA understands that this divergence in curve shape creates
inconsistency between the programs, but NHTSA does not agree that the
agency currently has authority to harmonize with EPA's new approach to
curve shape.
Regarding the fuel consumption work factor target curves proposed
for HDPUVs, stakeholders expressed two types of comments. First, a
group of commenters expressed support for the continued use of the work
factor attribute, and second, some stakeholders
[[Page 52592]]
expressed concern over NHTSA maintaining separate diesel and gasoline
compliance curves.
On the use of the work factor attribute, the Alliance stated, ``We
agree with NHTSA's conclusion that work factor is a reasonable and
appropriate attribute for setting fuel consumption standards. Work
factor effectively captures the intent of these vehicles, which is to
perform work, and has a strong correlation to fuel consumption.'' \174\
These sentiments were echoed by other commenters.\175\ NHTSA agrees
with the stakeholders, and after considering these comments, the agency
has once again concluded that the work factor approach established in
the 2011 ``Phase 1'' rulemaking and continued in the 2016 ``Phase 2''
rulemaking is reasonable and appropriate.
---------------------------------------------------------------------------
\174\ The Alliance, Docket No. NHTSA-2023-0022-60652, at 52-64.
\175\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 12;
Cummins, Inc., Docket No. NHTSA-2023-0022-60204, at 2; GM, Docket
No. NHTSA-2023-0022-60686, at 7.
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On the continued use of separate diesel and gasoline curves for the
HDPUV standards, the American Council for an Energy-Efficient Economy
(ACEEE) commented, ``In further alignment with EPA, NHTSA should
eliminate the different standards for diesel and gasoline (i.e.,
compression-ignition and spark-ignition) HDPUVs.'' \176\ ACEEE argued
further that ``Given NHTSA's acknowledgement of the emergence of van
electrification and its history of alignment with EPA for HDPUVs,
raising the stringency of the gasoline standards to match that of the
diesel standards should be feasible.'' \177\
---------------------------------------------------------------------------
\176\ ACEEE, Docket No. NHTSA-2023-022-60684-A1, at 8.
\177\ ACEEE, Docket No. NHTSA-2023-022-60684-A1, at 8.
---------------------------------------------------------------------------
ACEEE requested that NHTSA align with EPA by developing a single
standard curve for both SI and CI HDPUVs for MYs 2027 through 2032. As
mentioned in the NPRM, NHTSA is statutorily required to provide at
least four full MYs of lead time and three full MYs of regulatory
stability for its HDPUV fuel consumption standards. As such, we are
unable to align with EPA's change to its standard due to an
insufficient amount of lead time. However, we believe the regulatory
stability of the current HDPUV fuel consumption standards provide
enough stability for the industry to continue to develop technologies
needed to meet our standards. In addition, we believe retaining
separate CI and SI curves will better balance NHTSA's statutory
factors.\178\
---------------------------------------------------------------------------
\178\ U.S.C. 32920(k)(2).
---------------------------------------------------------------------------
C. What inputs does the compliance analysis require?
The first step in our analysis of the effects of different levels
of fuel economy standards is the compliance simulation. When we say,
``compliance simulation'' throughout this rulemaking, we mean the CAFE
Model's simulation of how vehicle manufacturers could comply with
different levels of CAFE standards by adding fuel economy-improving
technology to an existing fleet of vehicles.\179\ At the most basic
level, a model is a set of equations, algorithms,\180\ or other
calculations that are used to make predictions about a complex system,
such as the environmental impact of a particular industry or activity.
A model may consider various inputs, such as emissions data, technology
costs, or other relevant factors, and use those inputs to generate
output predictions.
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\179\ When we use the phrase ``the model'' throughout this
section, we are referring to the CAFE Model. Any other model will be
specifically named.
\180\ See Merriam-Webster, ``algorithm.'' Broadly, an algorithm
is a step-by-step procedure for solving a problem or accomplishing
some end. More specifically, an algorithm is a procedure for solving
a mathematical problem (as of finding the greatest common divisor)
in a finite number of steps that frequently involves repetition of
an operation.
---------------------------------------------------------------------------
One important note about models is that a model is only as good as
the data and assumptions that go into it. We attempt to ensure that the
technology inputs and assumptions that go into the CAFE Model to
project the effects of different levels of CAFE standards are based on
sound science and reliable data, and that our reasons for using those
inputs and assumptions are transparent and understandable to
stakeholders. This section and the following section discuss at a high
level how we generate the technology inputs and assumptions that the
CAFE Model uses for the compliance simulation.\181\ The TSD, CAFE Model
Documentation, CAFE Analysis Autonomie Model Documentation,\182\ and
other technical reports supporting this final rule discuss our
technology inputs and assumptions in more detail.
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\181\ As explained throughout this section, our inputs are a
specific number or datapoint used by the model, and our assumptions
are based on judgment after careful consideration of available
evidence. An assumption can be an underlying reason for the use of a
specific datapoint, function, or modeling process. For example, an
input might be the fuel economy value of the Ford Mustang, whereas
the assumption is that the Ford Mustang's fuel economy value
reported in Ford's CAFE compliance data should be used in our
modeling.
\182\ The Argonne report is titled ``Vehicle Simulation Process
to Support the Analysis for MY 2027 and Beyond CAFE and MY 2030 and
Beyond HDPUV FE Standards;'' however, for ease of use and
consistency with the TSD, it is referred to as ``CAFE Analysis
Autonomie Documentation.''
---------------------------------------------------------------------------
We incorporate technology inputs and assumptions either directly in
the CAFE Model or in the CAFE Model's various input files. The heart of
the CAFE Model's decisions about how to apply technologies to
manufacturer's vehicles to project how the manufacturer could meet CAFE
standards is the compliance simulation algorithm. The compliance
simulation algorithm is several equations that direct the model to
apply fuel economy-improving technologies to vehicles in a way that
estimates how manufacturers might apply those technologies to their
vehicles in the real world. The compliance simulation algorithm
projects a cost-effective pathway for manufacturers to comply with
different levels of CAFE standards, considering the technology present
on manufacturer's vehicles now, and what technology could be applied to
their vehicles in the future. Embedded directly in the CAFE Model is
the universe of technology options that the model can consider and some
rules about the order in which it can consider those options and
estimates of how effective fuel economy improving-technology is on
different types of vehicles, like on a sedan or a pickup truck.
Technology inputs and assumptions are also located in all four of
the CAFE Model Input Files. The Market Data Input File is a Microsoft
Excel file that characterizes the analysis automotive fleet used as the
starting point for CAFE modeling. There is one Excel row describing
each vehicle model and model configuration manufactured in the United
States in a MY (or years), and input and assumption data that links
that vehicle to technology, economic, environmental, and safety
effects. Next, the Technologies Input File identifies approximately six
dozen technologies we use in the analysis, uses phase-in caps to
identify when and how widely each technology can be applied to specific
types of vehicles, provides most of the technology costs (only battery
costs for electrified vehicles are provided in a separate file), and
provides some of the inputs involved in estimating impacts on vehicle
fuel consumption and weight. The Scenarios Input File provides the
coefficient values defining the standards for each regulatory
alternative,\183\ and other
[[Page 52593]]
relevant information applicable to modeling each regulatory scenario.
This information includes, for example, the estimated value of select
tax credits from the IRA, which provide Federal technology incentives
for electrified vehicles, and the PEF, which is a value that the
Secretary of Energy determines under EPCA that applies to EV fuel
economy values.\184\ Finally, the Parameters Input File contains mainly
economic and environmental data, as well as data about how fuel economy
credits and California's Zero Emissions Vehicle program credits are
simulated in the model.
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\183\ The coefficient values are defined in TSD Chapter 1.2.1
for both the CAFE and HDPUV FE standards.
\184\ See 49 U.S.C. 32904(a)(2), 89 FR 22041 (March 29, 2024).
---------------------------------------------------------------------------
We generate these technology inputs and assumptions in several
ways, including by and through evaluating data submitted by vehicle
manufacturers pursuant to their CAFE reporting obligations;
consolidating public data on vehicle models from manufacturer websites,
press materials, marketing brochures, and other publicly available
information; collaborative research, testing, and modeling with other
Federal agencies, like the DOE's Argonne National Laboratory; research,
testing, and modeling with independent organizations, like IAV GmbH
Ingenieurgesellschaft Auto und Verkehr (IAV), Southwest Research
Institute (SwRI), NAS, and FEV North America; determining that work
done for prior rules is still relevant and applicable; considering
feedback from stakeholders on prior rules, in meetings conducted before
the commencement of this rule, and feedback received during the comment
period for this final rule; and using our own engineering judgment.
When we say ``engineering judgment'' throughout this rulemaking, we are
referring to decisions made by a team of engineers and analysts. This
judgment is based on their experience working in the automotive
industry and other relevant fields, and assessment of all the data
sources described above. Most importantly, we use engineering judgment
to assess how best to represent vehicle manufacturer's potential
responses to different levels of CAFE standards within the boundaries
of our modeling tools, as ``a model is meant to simplify reality in
order to make it tractable.'' \185\ In other words, we use engineering
judgment to concentrate potential technology inputs and assumptions
from millions of discrete data points from hundreds of sources to three
datasets integrated in the CAFE Model and four input files. How the
CAFE Model decides to apply technology, i.e., the compliance simulation
algorithm, has also been developed using engineering judgment,
considering some of the same factors that manufacturers consider when
they add technology to vehicles in the real world.
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\185\ Chem. Mfrs. Ass'n v. E.P.A., 28 F.3d 1259, 1264-65 (D.C.
Cir. 1994) (citing Milton Friedman. 1953. The Methodology of
Positive Economics. Essays in Positive Economics 3, at 14-15).
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While upon first read this discussion may seem oversimplified, we
believe that there is value in all stakeholders being able to
understand how the analysis uses different sets of technology inputs
and assumptions and how those inputs and assumptions are based on real-
world factors. This is so that all stakeholders have the appropriate
context to better understand the specific technology inputs and
assumptions discussed later and in detail in all of the associated
technical documentation.
1. Technology Options and Pathways
We begin the compliance analysis by defining the range of fuel
economy-improving technologies that the CAFE Model could add to a
manufacturer's vehicles in the United States market.\186\ These are
technologies that we believe are representative of what vehicle
manufacturers currently use on their vehicles, and that vehicle
manufacturers could use on their vehicles in the timeframe of the
standards (MYs 2027 and beyond for the LD analysis and MYs 2030 and
beyond for the HDPUV analysis). The technology options include basic
and advanced engines, transmissions, electrification, and road load
technologies, which include mass reduction (MR), aerodynamic
improvement (AERO), and tire rolling resistance (ROLL) reduction
technologies. Note that while EPCA/EISA constrains our ability to
consider the possibility that manufacturers would comply with CAFE
standards by implementing some electrification technologies when making
decisions about the level of CAFE standards that is maximum feasible,
there are several reasons why we must accurately model the range of
available electrification technologies. These are discussed in more
detail in Section III.D and in Section VI.
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\186\ 40 CFR 86.1806-17--Onboard diagnostics; 40 CFR 86.1818-
12--Greenhouse gas emission standards for light-duty vehicles,
light-duty trucks, and medium-duty passenger vehicles; Commission
Directive 2001/116/EC--European Union emission regulations for new
LDVs--including passenger cars and light commercial vehicles (LCV).
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We require several data elements to add a technology to the range
of options that the CAFE Model can consider; those elements include a
broadly applicable technology definition, estimates of how effective
that technology is at improving a vehicle's fuel economy value on a
range of vehicles (e.g., sedan through pickup truck, or HD pickup truck
and HD van), and the cost to apply that technology on a range of
vehicles. Each technology we select is designed to be representative of
a wide range of specific technology applications used in the automotive
industry. For example, in MY 2022, eleven vehicle brands under five
vehicle manufacturers \187\ used what we call a ``downsized
turbocharged engine with cylinder deactivation.'' While we might expect
brands owned by the same manufacturer to use similar technology on
their engines, among those five manufacturers, the engine systems will
likely be very different. Some manufacturers may also have been making
those engines longer than others, meaning that they have had more time
to make the system more efficient while also making it cheaper, as they
make gains learning the development improvement and production process.
If we chose to model the best performing, cheapest engine and applied
that technology across vehicles made by all automotive manufacturers,
we would likely be underestimating the cost and underestimating the
technology required for the entire automotive industry to achieve
higher levels of CAFE standards. The reverse would be true if we
selected a system that was less efficient and more expensive. So, in
reality, some manufacturers' systems may perform better or worse than
our modeled systems, and some may cost more or less than our modeled
systems. However, selecting representative technology definitions for
our analysis will ensure that, on balance, we capture a reasonable
level of costs and benefits that would result from any manufacturer
applying the technology.
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\187\ Ford, General Motors (GM), Honda, Stellantis, and VWA
represent the following 11 brands: Acura, Alfa Romeo, Audi, Bentley,
Buick, Cadillac, Chevrolet, Ford, GMC, Lamborghini, and Porsche.
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We have been refining the LD technology options since first
developing the CAFE Model in the early 2000s. ``Refining'' means both
adding and removing technology options depending on technology
availability now and projected future availability in the United States
market, while balancing a reasonable amount of modeling and analytical
complexity. Since the last analysis we have reduced the number of LD
ICE technology options but have refined the options, so they better
reflect the diversity of
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engines in the current fleet. Our technology options also reflect an
increase in diversity for hybridization and electrification options,
though we utilize these options in a manner that is consistent with
statutory constraints. In addition to better representing the current
fleet, this reflects consistent feedback from vehicle manufacturers who
have told us that they will reduce investment in ICEs while increasing
investment in hybrid and plug-in BEV options.\188\
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\188\ 87 FR 25781 (May 2, 2022); Docket Submission of Ex Parte
Meetings Prior to Publication of the Corporate Average Fuel Economy
Standards for Passenger Cars and Light Trucks for Model Years 2027-
2032 and Fuel Efficiency Standards for Heavy-Duty Pickup Trucks and
Vans for Model Years 2030-2035 Notice of Proposed Rulemaking
memorandum, which can be found under References and Supporting
Material in the rulemaking Docket No. NHTSA-2023-0022.
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Feedback on the past several CAFE rules has also centered
thematically on the expected scope of future electrified vehicle
technologies and how we should consider future developments in our
analysis. We have received feedback that we cannot consider BEV options
and even so, our costs underestimate BEV costs when we do consider them
in, for example, the reference baseline. We have also received comments
that we should consider more electrified vehicle options and our costs
overestimate future costs. Consistent with our interpretation of EPCA/
EISA, discussed further in Section III.D and VI, we include several LD
electrified technologies to appropriately represent the diversity of
current and anticipated future technology options while ensuring our
analysis remains consistent with statutory limitations. In addition,
this ensures that our analysis can appropriately capture manufacturer
decision making about their vehicle fleets for reasons other than CAFE
standards (e.g., other regulatory programs and manufacturing
decisions).
The technology options also include our judgment about which
technologies will not be available in the rulemaking timeframe. There
are several reasons why we may have concluded that it was reasonable to
exclude a technology from the options we consider. As with past
analyses, we did not include technologies unlikely to be feasible in
the rulemaking timeframe, engines technologies designed for markets
other than the United States market that are required to use unique
gasoline,\189\ or technologies where there were not appropriate data
available for the range of vehicles that we model in the analysis (i.e.
technologies that are still in the research and development phase but
are not ready for mass market production). Each technology section
below and Chapter 3 of the TSD discusses these decisions in detail.
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\189\ In general, most vehicles produced for sale in the United
States have been designed to use ``Regular'' gasoline, or 87 octane.
See EIA. 2022. Octane in Depth. Last revised: Nov. 17, 2022.
Available at: https://www.eia.gov/energyexplained/gasoline/octane-in-depth.php. (Accessed: Feb. 23, 2024), for more information.
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The HDPUV technology options also represent a diverse range of both
internal combustion and electrified powertrain technologies. We last
used the CAFE Model for analyzing HDPUV standards in the Phase 2 Medium
and Heavy-Duty Greenhouse Gas and Fuel Efficiency joint rules with EPA
in 2016.\190\ Since issuing that rule, we refined the ICE technology
options based on trends on vehicles in the fleet and updated technology
cost and effectiveness data. The HDPUV options also reflect more
electrification and hybridization options in that real-world fleet.
However, the HDPUV technology options are also less diverse than the LD
technology options, for several reasons. The HDPUV fleet is
significantly smaller than the LD fleet, with five manufacturers
building a little over 25 nameplates in one thousand vehicle model
configurations,\191\ compared with the 20 LDV manufacturers building
more than 250 nameplates in the range of over two thousand
configurations. Also, by definition, the HDPUV fleet only includes two
vehicle types: HD pickup trucks and work vans.\192\ These vehicle types
have focused applications, which includes transporting people and
moving equipment and supplies. As discussed in more detail below, these
vehicles are built with specific technology application, reliability,
and durability requirements in order to do work.\193\ We believe the
range of HDPUV technology options appropriately and reasonably
represents the smaller range of technology options available currently
and for application in future MYs for the United States market.
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\190\ 81 FR 73478 (Oct. 25, 2016); NHTSA. 2023. CAFE Compliance
and Effects Modeling System. Corporate Average Fuel Economy.
Available at: https://www.nhtsa.gov/corporate-average-fuel-economy/cafe-compliance-and-effects-modeling-system. (Accessed: Feb. 27,
2024).
\191\ In this example, a HDPUV ``nameplate'' could be the
``Sprinter 2500'', as in the Mercedes-Benz Sprinter 2500. The
vehicle model configurations are each unique variants of the
Sprinter 2500 that have an individual row in our Market Data Input
File, which are divided generally based on compliance fuel
consumption value and WF.
\192\ For the proposal, vehicles were divided between the LD and
HDPUV fleets solely on their gross vehicle weight rating (GVWR)
being above or below 8,500 lbs. We revisited the distribution of
vehicles in this final rule to include the distinction for MDPVs.
\193\ ``Work'' includes hauling, towing, carrying cargo, or
transporting people, animals, or equipment.
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Note, however, that for both the LD and HDPUV analyses, the CAFE
Model does not dictate or predict the technologies manufacturers must
use to comply; rather, the CAFE Model outlines a technology pathway
that manufacturers could use to meet the standards cost-effectively.
While we estimate the costs and benefits for different levels of CAFE
standards estimating technology application that manufacturers could
use in the rulemaking timeframe, it is entirely possible and reasonable
that a vehicle manufacturer will use different technology options to
meet our standards than the CAFE Model estimates and may even use
technologies that we do not include in our analysis. This is because
our standards do not mandate the application of any particular
technology. Rather, our standards are performance-based: manufacturers
can and do use a range of compliance solutions that include technology
application, shifting sales from one vehicle model or trim level to
another,\194\ and even paying civil penalties. That said, we are
confident that the 75 LD technology options and 30 HDPUV technology
options included in the analysis (in particular considering that for
each technology option, the analysis includes distinct technology cost
and effectiveness values for fourteen different types of vehicles,
resulting in about a million different technology effectiveness and
cost data points) strike a reasonable balance between the diversity of
technology used by an entire industry and simplifying reality in order
to make modeling tractable.
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\194\ Manufacturers could increase their production of one type
of vehicle that has higher fuel economy level, like the hybrid
version of a conventional vehicle model, to meet the standards. For
example, Ford has conventional, hybrid, and electric versions of its
F-150 pickup truck, and Toyota has conventional, hybrid, and plug-in
hybrid versions of its RAV4 sport utility vehicle.
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Chapter 3 of the TSD and Section III.D below describe the
technologies that we used for the LD and HDPUV analyses. Each
technology has a name that loosely corresponds to its real-world
technology equivalent. We abbreviate the name to a short easy signifier
for the CAFE Model to read. We organize those technologies into groups
based on technology type: basic and advanced engines, transmissions,
electrification, and road load technologies, which include MR,
aerodynamic improvement, and low rolling resistance tire technologies.
[[Page 52595]]
We then organize the groups into pathways. The pathways instruct
the CAFE Model how and in what order to apply technology. In other
words, the pathways define technologies that are mutually exclusive
(i.e., that cannot be applied at the same time), and define the
direction in which vehicles can advance as the model evaluates which
technologies to apply. The respective technology chapters in the TSD
and Section 4 of the CAFE Model Documentation for the final rule
include a visual of each technology pathway. In general, the paths are
tied to ease of implementation of additional technology and how closely
related the technologies are.
As an example, our ``Turbo Engine Path'' consists of five different
engine technologies that employ different levels of turbocharging
technology. A turbocharger is essentially a small turbine that is
driven by exhaust gases produced by the engine. As these gases flow
through the turbocharger, they spin the turbine, which in turn spins a
compressor that pushes more air into an engine's cylinder. Having more
air in the engine's cylinder allows the engine to burn more fuel, which
then creates more power, without needing a physically larger engine. In
our analysis, an engine that uses a turbocharger ``downsizes,'' or
becomes smaller. The smaller engine can use less fuel to do the same
amount of work as the engine did before it used a turbocharger and was
downsized. Allowing basic engines to be downsized and turbocharged
instead of just turbocharged keeps the vehicle's utility and
performance constant so that we can measure the costs and benefits of
different levels of fuel economy improvements, rather than the change
in different vehicle attributes. This concept is discussed further,
below.
Grouping technologies on pathways also tells the model how to
evaluate technologies; continuing this example, a vehicle can only have
one engine, so if a vehicle has one of the Turbo engines the model will
evaluate which more advanced Turbo technology to apply. Or, if it is
more cost-effective to go beyond the Turbo pathway, the model will
evaluate whether to apply more advanced engine technologies and
hybridization path technology.
Then, the arrows between technologies instruct the model on the
order in which to evaluate technologies on a pathway. This ensures that
a vehicle that uses a more advanced technology cannot downgrade to a
less advanced version of the technology, or that a vehicle would switch
to technology that was significantly technically different. As an
example, if a vehicle in the compliance simulation begins with a TURBOD
engine--a turbocharged engine with cylinder deactivation--it cannot
adopt a TURBO0 engine.\195\ Similarly, this vehicle with a TURBOD
engine cannot adopt an ADEACD engine.\196\ As an example of our
rationale for ordering technologies on the technology tree, an engine
could potentially be changed from TURBO0 to TURBO2 without redesigning
the engine block or requiring significantly different expertise to
design and implement. A change to ADEACD would likely require a
different engine block that might not be possible to fit in the engine
bay of the vehicle without a complete redesign and different technical
expertise requiring years of research and development. This change,
which would strand capital and break parts sharing, is why the advanced
engine paths restrict most movement between them. The concept of
stranded capital is discussed further in Section III.C.6. The model
follows instructions pursuant to the direction of arrows between
technology groups and between technologies on the same pathway.
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\195\ TURBO0 is the baseline turbocharged engine and TURBOD is
TURBO0 with the addition of cylinder deactivation (DEAC). See
chapter 3 of the TSD for more discussion on engine technologies.
\196\ ADEACD is a dual overhead camshaft engine with advanced
cylindar deactivation. See chapter 3 of the TSD for more discussion
on engine technologies.
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We also consider two categories of technology that we could not
simulate as part of the CAFE Model's technology pathways. ``Off-cycle''
and air conditioning (AC) efficiency technologies improve vehicle fuel
economy, but the benefit of those technologies cannot be captured using
the fuel economy test methods that we must use under EPCA/EISA.\197\ As
an example, manufacturers can claim a benefit for technology like
active seat ventilation and solar reflective surface coatings that make
the cabin of a vehicle more comfortable for the occupants, who then do
not have to use other less efficient accessories like heat or AC.
Instead of including off-cycle and AC efficiency technologies in the
technology pathways, we include the improvement as a defined benefit
that gets applied to a manufacturer's entire fleet instead of to
individual vehicles. The defined benefit that each manufacturer
receives in the analysis for using off-cycle and AC efficiency
technology on their vehicles is located in the Market Data Input File.
See Chapter 3.7 of the TSD for more discussion in how off-cycle and AC
efficiency technologies are developed and modeled.
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\197\ See 49 U.S.C. 32904(c) (``Testing and calculation
procedures. . . . the Administrator shall use the same procedures
for passenger automobiles the Administrator used for model year 1975
(weighted 55 percent urban cycle and 45 percent highway cycle), or
procedures that give comparable results.'').
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To illustrate, throughout this section we will follow the
hypothetical vehicle mentioned above that begins the compliance
simulation with a TURBOD engine. Our hypothetical vehicle, Generic
Motors' Ravine Runner F Series, is a roomy, top of the line sport
utility vehicle (SUV). The Ravine Runner F Series starts the compliance
simulation with technologies from most technology pathways;
specifically, after looking at Generic Motors' website and marketing
materials, we determined that it has technology that loosely fits
within the following technologies that we consider in the CAFE Model:
it has a turbocharged engine with cylinder deactivation, a fairly
advanced 10-speed automatic transmission, a 12V start-stop system, the
least advanced tire technology, a fairly aerodynamic vehicle body, and
it employs a fairly advanced level of MR. We track the technologies on
each vehicle using a ``technology key'', which is the string of
technology abbreviations for each vehicle. Again, the vehicle
technologies and their abbreviations that we consider in this analysis
are shown in Table II-1 and Table II-2 above. The technology key for
the Ravine Runner F Series is ``TURBOD; AT10L2; SS12V; ROLL0; AERO5;
MR3.''
2. Defining Manufacturers' Current Technology Positions in the Analysis
Fleet
The Market Data Input File is one of four Excel input files that
the CAFE Model uses for compliance and effects simulation. The Market
Data Input File's ``Vehicles'' tab (or worksheet) houses one of the
most significant compilations of technology inputs and assumptions in
the analysis, which is a characterization of an analysis fleet of
vehicles to which the CAFE Model adds fuel economy-improving
technology. We call this fleet the ``analysis fleet.'' The analysis
fleet includes a number of inputs necessary for the model to add fuel
economy-improving technology to each vehicle for the compliance
analysis and to calculate the resulting impacts for the effects
analysis.
The ``Vehicles'' tab contains a separate row for each vehicle
model. For LD, vehicle models are vehicles that share the same
certification fuel economy value and vehicle footprint, and for HDPUVs
they are vehicles that
[[Page 52596]]
share the same certification fuel consumption and WF. This means that
vehicle models with different configurations that affect the vehicle's
certification fuel economy or fuel consumption value will be
distinguished in separate rows in the Vehicles tab. For example, our
Ravine Runner example vehicle comes in three different configurations--
the Ravine Runner FWD, Ravine Runner AWD, and Ravine Runner F Series--
which would result in three separate rows.
In each row we also designate a vehicle's engine, transmission, and
platform codes.\198\ Vehicles that have the same engine, transmission,
or platform code are deemed to ``share'' that component in the CAFE
Model. Parts sharing helps manufacturers achieve economies of scale,
deploy capital efficiently, and make the most of shared research and
development expenses, while still presenting a wide array of consumer
choices to the market. The CAFE Model was developed to treat vehicles,
platforms, engines, and transmissions as separate entities, which
allows the modeling system to concurrently evaluate technology
improvements on multiple vehicles that may share a common component.
Sharing also enables realistic propagation, or ``inheriting,'' of
previously applied technologies from an upgraded component down to the
vehicle ``users'' of that component that have not yet realized the
benefits of the upgrade. For additional information about the initial
state of the fleet and technology evaluation and inheriting within the
CAFE Model, please see Section 2.1 and Section 4.4 of the CAFE Model
Documentation.
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\198\ Each numeric engine, transmission, or platform code
designates important information about that vehicle's technology;
for example, a vehicle's six-digit Transmission Code includes
information about the manufacturer, the vehicle's drive
configuration (i.e., front-wheel drive, all-wheel drive, four-wheel
drive, or rear-wheel drive), transmission type, number of gears
(e.g., a 6-speed transmission has six gears), and the transmission
variant.
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Figure III-5 below shows how we separate the different
configurations of the Ravine Runner. We can see by the Platform Codes
that these Ravine Runners all share the same platform, but only the
Ravine Runner FWD and Ravine Runner AWD share an engine. Even so, all
three certification fuel economy values are different, which is common
of vehicles that differ in drive type (drive type meaning whether the
vehicle has all-wheel drive (AWD), four-wheel drive (4WD), front-wheel
drive (FWD), or rear-wheel drive). While it would certainly be easier
to aggregate vehicles by model, ensuring that we capture model variants
with different fuel economy values improves the accuracy of our
analysis and the potential that our estimated costs and benefits from
different levels of standards are appropriate. We include information
about other vehicle technologies at the farthest right side of the
Vehicles tab, and in the ``Engines'', ``Transmissions'', and
``Platforms'' worksheets, as discussed further below.
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\199\ Note that not all data columns are shown in this example
for brevity.
[GRAPHIC] [TIFF OMITTED] TR24JN24.051
[[Page 52597]]
Moving from left to right on the Vehicles tab, after including
general information about vehicles and their compliance fuel economy
value, we include sales and manufacturer's suggested retail price
(MSRP) data, regulatory class information (i.e., domestic passenger
car, import passenger car, light truck, MDPV, HD pickup truck, or HD
van), and information about how we classify vehicles for the
effectiveness and safety analyses. Each of these data points are
important to different parts of the compliance and effects analysis, so
that the CAFE Model can accurately average the technologies required
across a manufacturer's regulatory classes for each class to meet its
CAFE standard, or the impacts of higher fuel economy standards on
vehicle sales.
In addition, we include columns indicating if a vehicle is a ``ZEV
Candidate,'' which means that the vehicle could be made into a zero
emissions vehicle (ZEV) at its first redesign opportunity in order to
simulate a manufacturer's compliance with California's ACC I or ACT
program, or manufacturer deployment of electric vehicles on a voluntary
basis consistent with ACC II, which is discussed further below.
Next, we include vehicle information necessary for applying
different types of technology; for example, designating a vehicle's
body style means that we can appropriately apply aerodynamic
technology, and designating starting curb weight values means that we
can more accurately apply MR technology. Importantly, this section also
includes vehicle footprint data (because we set footprint-based
standards).
We also set product design cycles, which are the years when the
CAFE Model can apply different technologies to vehicles. Manufacturers
often introduce fuel saving technologies at a ``redesign'' of their
product or adopt technologies at ``refreshes'' in between product
redesigns. As an example, the redesigned third generation Chevrolet
Silverado was released for the 2019 MY, and featured a new platform,
updated drivetrain, increased towing capacity, reduced weight, improved
safety and expanded trim levels, to name a few improvements. For MY
2022, the Chevrolet Silverado received a refresh (or facelift as it is
commonly called), with an updated interior, infotainment, and front-end
appearance.\200\ Setting these product design cycles ensures that the
CAFE Model provides manufacturers with a realistic duration of product
stability between refresh and redesign cycles, and during these
stability windows we assume no new fuel saving technology introductions
for a given model.
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\200\ GM Authority. 2022 Chevy Silverado. Available at: https://gmauthority.com/blog/gm/chevrolet/silverado/2022-chevrolet-silverado/. (Accessed May 31, 2023).
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During modeling, all improvements from technology application are
initially realized on a component and then propagated (or inherited)
down to the vehicles that share that component. As such, new component-
level technologies are initially evaluated and applied to a platform,
engine, or transmission during their respective redesign or refresh
years. Any vehicles that share the same redesign and/or refresh
schedule as the component apply these technology improvements during
the same MY. The rest of the vehicles inherit technologies from the
component during their refresh or redesign year (for engine- and
transmission-level technologies), or during a redesign year only (for
platform-level technologies). Please see Section 4.4 of the CAFE Model
Documentation for additional information about technology evaluation
and inheriting within the CAFE Model. We did receive comments on the
refresh and redesign cycles employed in the CAFE Model, and those are
discussed in detail below in Section III.C.6.
The CAFE Model also considers the potential safety effect of MR
technologies and crash compatibility of different vehicle types. MR
technologies lower the vehicle's curb weight, which may change crash
compatibility and safety, depending on the type of vehicle. We assign
each vehicle in the Market Data Input File a ``safety class'' that best
aligns with the CAFE Model's analysis of vehicle mass, size, and
safety, and include the vehicle's starting curb weight.\201\
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\201\ Vehicle curb weight is the weight of the vehicle with all
fluids and components but without the drivers, passengers, and
cargo.
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The CAFE Model includes procedures to consider the direct labor
impacts of manufacturers' response to CAFE regulations, considering the
assembly location of vehicles, engines, and transmissions, the percent
U.S. content (that reflects percent U.S. and Canada content), and the
dealership employment associated with new vehicle sales. Estimated
labor information, by vehicle, is included in the Market Data Input
File. Sales volumes included in and adapted from the market data also
influence total estimated direct labor projected in the analysis. See
Chapter 6.2.5 of the TSD for further discussion of the labor
utilization analysis.
We then assign the CAFE Model's range of technologies to individual
vehicles. This initial linkage of vehicle technologies is how the CAFE
Model knows how to advance a vehicle down each technology pathway.
Assigning CAFE Model technologies to individual vehicles is dependent
on the mix of information we have about any particular vehicle and
trends about how a manufacturer has added technology to that vehicle in
the past, equations and models that translate real-world technologies
to their counterparts in our analysis (e.g., drag coefficients and body
styles can be used to determine a vehicle's AERO level), and our
engineering judgment.
As discussed further below, we use information directly from
manufacturers to populate some fields in the Market Data Input File,
like vehicle horsepower ratings and vehicle weight. We also use
manufacturer data as an input to various other models that calculate
how a manufacturer's real-world technology equates to a technology
level in our model. For example, we calculate initial MR, aerodynamic
drag reduction, and ROLL levels by looking at industry-wide trends and
calculating--through models or equations--levels of improvement for
each technology. The models and algorithms that we use are described
further below and in detail in Chapter 3 of the TSD. Other fields, like
vehicle refresh and redesign years, are projected forward based on
historic trends.
Let us return to the Ravine Runner F Series with the technology key
``TURBOD; AT10L2, SS12V; ROLL0; AERO5; MR3.'' Generic Motor's publicly
available spec sheet for the Ravine Runner F Series says that the
Ravine Runner F Series uses Generic Motor's Turbo V6 engine with
proprietary Adaptive Cylinder Management Engine (ACME) technology. ACME
improves fuel economy and lowers emissions by operating the engine
using only three of the engine's cylinders in most conditions and using
all six engine cylinders when more power is required. Generic Motors
uses this engine in several of their vehicles, and the specifications
of the engine can be found in the Engines Tab of the Market Data Input
File, under a six-digit engine code.\202\
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\202\ Like the Transmission Codes discussed above, the Engine
Codes include information identifying the manufacturer, engine
displacement (i.e., how many liters the engine is), whether the
engine is naturally aspirated or force inducted (e.g.,
turbocharged), and whether the engine has any other unique
attributes.
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[[Page 52598]]
This is a relatively easy engine to assign based on publicly
available specification sheets, but some technologies are more
difficult to assign. Manufacturers use different trade names or terms
for different technology, and the way that we assign the technology in
our analysis may not necessarily line up with how a manufacturer
describes the technology. We must use some engineering judgment to
determine how discrete technologies in the market best fit the
technology options that we consider in our analysis. We discuss factors
that we use to assign each vehicle technology in the individual
technology subsections below.
In addition to the Vehicles Tab that houses the analysis fleet, the
Market Data Input File includes information that affects how the CAFE
Model might apply technology to vehicles in the compliance simulation.
Specifically, the Market Data Input File's ``Manufacturers'' tab
includes a list of vehicle manufacturers considered in the analysis and
several pieces of information about their economic and compliance
behavior. First, we determine if a manufacturer ``prefers fines,''
meaning that historically in the LD fleet, we have observed this
manufacturer paying civil penalties for failure to meet CAFE
standards.\203\ We might designate a manufacturer as not preferring
fines if, for example, they have told us that paying civil penalties
would be a violation of provisions in their corporate charter. For the
NPRM analysis, we assumed that all manufacturers were willing to pay
fines in MYs 2022-2026, and that in MY 2027 and beyond, only the
manufacturers that had historically paid fines would continue to pay
fines. We sought comment on fine payment preference assumptions. Jaguar
Land Rover NA commented that they do ``not view fine payment as an
appropriate compliance route or as a flexibility in the regulation.''
\204\ In response to JLR's comment, NHTSA has changed their fine
preference in the analysis from ``prefer fines'' to ``not prefer
fines'' for MYs 2027 and beyond. Ford and the Alliance also commented
on not using fines for HDPUV compliance.\205\ Both commenters agreed
with NHTSA's approach of not including fines in the HDPUV analysis.
NHTSA maintained the same approach from the NPRM for this final rule
and intends to do so in the future.
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\203\ See 49 U.S.C. 32912.
\204\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 5.
\205\ Ford, Docket No. NHTSA-2023-0022-60837, at 8; The
Alliance, Docket No. NHTSA-2023-0022-60652-A5, at 63-64.
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However, as further discussed below in regard to the CAFE Model's
compliance simulation algorithm in Section III.C.6, note that the model
will still apply technologies for these manufacturers if it is cost-
effective to do so, as defined by several variables.
Next, we designate a ``payback period'' for each manufacturer. The
payback period represents an assumption that consumers are willing to
buy vehicles with more fuel economy technology because the fuel economy
technology will save them money on gas in the long run. For the past
several CAFE Model analyses we have assumed that in the absence of CAFE
or other regulatory standards, manufacturers would apply technology
that ``pays for itself''--by saving the consumer money on fuel--in 2.5
years. While the amount of technology that consumers are willing to pay
for is subject to much debate, we continue to assume a 2.5-year payback
period based on what manufacturers have told us they do, and on
estimates in the available literature. This is discussed in detail in
Section III.E below, and in the TSD and FRIA.
We also designate in the Market Data Input File the percentage of
each manufacturer's sales that must meet Advanced Clean Car I
requirements in certain states, and percentages of sales that
manufacturers are expected to produce consistent with levels that would
be required under the Advanced Clean Cars II program, if it were to be
granted a Clean Air Action preemption waiver. Section 209(a) of the CAA
generally preempts states from adopting emission control standards for
new motor vehicles; however, Congress created an exemption program in
section 209(b) that allows the State of California to seek a waiver of
preemption. EPA must grant the waiver unless the Agency makes one of
three statutory findings.\206\ Under CAA section 177, other States can
adopt and enforce standards identical those approved under California's
section 209(b) waiver.
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\206\ See 87 FR 14332 (March 14, 2022). (``The CAA section
209(b) waiver is limited ``to any State which has adopted standards
. . . for the control of emissions from new motor vehicles or new
motor vehicle engines prior to March 30, 1966,'' and California is
the only State that had standards in place before that date.'').
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Finally, we include estimated CAFE compliance credit banks for each
manufacturer in several years through 2021, which is the year before
the compliance simulation begins. The CAFE Model does not explicitly
simulate credit trading between and among vehicle manufacturers, but we
estimate how manufacturers might use compliance credits in early MYs.
This reflects manufacturers' tendency to use regulatory credits as an
alternative to applying technology.\207\
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\207\ Note, this is just an observation about manufacturers'
tendency to use regulatory credits rather than to apply technology;
in accordance with 49 U.S.C. 32902(h), the CAFE Model does not
simulate a manufacturer's potential credit use during the years for
which we are setting new CAFE standards.
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Before we begin building the Market Data Input File for any
analysis, we must consider what MY vehicles will comprise the analysis
fleet. There is an inherent time delay in the data we can use for any
particular analysis because we must set LD CAFE standards at least 18
months in advance of a MY if the CAFE standards increase,\208\ and
HDPUV fuel efficiency standards at least 4 full MYs in advance if the
standards increase.\209\ In addition to the requirement to set
standards at least 18 months in advance of a MY, we must propose
standards with enough time to allow the public to comment on the
proposed standards and meaningfully evaluate that feedback and
incorporate it into the final rule in accordance with the APA.\210\
This means that the most recent data we have available to generate the
analysis fleet necessarily falls behind the MY fleets of vehicles for
which we generate standards.
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\208\ 49 U.S.C. 32902(a).
\209\ 49 U.S.C. 32902(k)(3)(A).
\210\ 5 U.S.C. 553.
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Using recent data for the analysis fleet is more likely to reflect
the current vehicle fleet than older data. Recent data will inherently
include manufacturer's realized decisions on what fuel economy-
improving technology to apply, mix shifts in response to consumer
preferences (e.g., more recent data reflects manufacturer and consumer
preference towards larger vehicles),\211\ and industry sales volumes
that incorporate substantive macroeconomic events (e.g., the impact of
the Coronavirus disease of 2019 (COVID) or microchip shortages). We
considered that using an analysis fleet year that has been impacted by
these transitory shocks may not represent trends in future years;
however, on balance, we believe that updating to using the most
complete set of available fleet data provides the most accurate
analysis fleet for the CAFE Model to calculate compliance and effects
of different levels of future fuel economy
[[Page 52599]]
standards. Also, using recent data decreases the likelihood that the
CAFE Model selects compliance pathways for future standards that affect
vehicles already built in previous MYs.\212\
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\211\ See EPA. 2023. The 2023 EPA Automotive Trends Report,
Greenhouse Gas Emissions, Fuel Economy, and Technology since 1975.
EPA-420-R-23-033. at 14-19. hereinafter the 2023 EPA Automotive
Trends Report.
\212\ For example, in this analysis the CAFE Model must apply
technology to the MY 2022 fleet from MYs 2023-2026 for the
compliance simulation that begins in MY 2027 (for the light-duty
fleet), and from MYs 2023-2029 for the compliance simulation that
begins in MY 2030 (for the HDPUV fleet). While manufacturers have
already built MY 2022 and later vehicles, the most current, complete
dataset with regulatory fuel economy test results to build the
analysis fleet at the time of writing remains MY 2022 data for the
light-duty fleet, and a range of MYs between 2014 and 2022 for the
HDPUV fleet.
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At the time we start building the analysis fleet, data that we
receive from vehicle manufacturers in accordance with EPCA/EISA,\213\
and our CAFE compliance regulations in advance of or during an ongoing
MY,\214\ offers the best snapshot of vehicles for sale in the US in a
MY. These pre-model year (PMY) and mid-model year (MMY) reports include
information about individual vehicles at the vehicle configuration
level. We use the vehicle configuration, certification fuel economy,
sales, regulatory class, and some additional technology data from these
reports as the starting point to build a ``row'' (i.e., a vehicle
configuration, with all necessary information about the vehicle) in the
Market Data Input File's Vehicle's Tab. Additional technology data come
from publicly available information, including vehicle specification
sheets, manufacturer press releases, owner's manuals, and websites. We
also generate some assumptions in the Market Data Input File for data
fields where there is limited data, like refresh and redesign cycles
for future MYs, and technology levels for certain road load reduction
technologies like MR and aerodynamic drag reduction.
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\213\ 49 U.S.C. 32907(a)(2).
\214\ 49 CFR part 537.
---------------------------------------------------------------------------
For this analysis, the LD analysis fleet consists of every vehicle
model in MY 2022 in nearly every configuration that has a different
compliance fuel economy value, which results in more than 2,000
individual rows in the Vehicles Tab of the Market Data Input File. The
HDPUV fleet consists of vehicles produced in between MYs 2014 and 2022,
which results in a little over 1100 individual rows in the HDPUV Market
Data Input File. We used a combination of MY data for that fleet
because of data availability, but the resulting dataset is a robust
amalgamation that provides a reasonable starting point for the much
smaller fleet.
Rivian and ZETA commented that some of Rivian's vehicles were mis-
classified between the light-duty and HDPUV analysis fleets.\215\ NHTSA
was aware that some manufacturer's vehicles were erroneously included
in the HDPUV fleet rather than the LD fleet. NHTSA stated in the TSD
that ``for this NPRM, vehicles were divided between light-duty and
HDPUV solely on GVWR being above or below 8,500 lbs.'' and that ``the
following will be reassigned to the LD fleet in the final rule: all
Rivian vehicles.'' Per Rivian's further clarification, NHTSA has
reassigned all of Rivian's vehicles in accordance with their comments.
NHTSA has also reassigned Ford F150 Lightnings and some Ford Transit
Wagons to the LD fleet.
---------------------------------------------------------------------------
\215\ Rivian, Docket No. NHTSA-2023-0022-59765, at 5-8; ZETA,
Docket No. NHTSA-2023-0022-60508, at 28.
---------------------------------------------------------------------------
The Ford vehicles moved represent 3,199 total sales out of 1.6
million LD and 319.5 thousand HDPUV sales. The re-classification of
Ford's and Rivian's vehicles does not materially affect the analysis
results. Ford's vehicles moved represented a very small volume of
either fleet, and each regulatory class is regulated based on average
performance thus resulting in minor differences of manufacturer's
compliance position in each analysis. Moving Rivian's vehicles does not
materially affect the analysis results either because they always
exceed the regulatory standards, in either fleet. Their vehicles are
all electric and outperform the standards every year, regardless of
which fleet they find themselves in. Their vehicles will have different
technologies available to them in the LD fleet and thus the actual
solution will vary. The average costs and pollutant levels of each
regulatory class will have changed subtly as a result of moving the
vehicles from one fleet to another, but their changes were also
affected by the different preferred alternative. The only circumstance
in which Rivian's inclusion in one fleet or another could materially
sway the outcome is if we modeled credit trading between manufacturers,
which is an analysis that EPCA/EISA restricts NHTSA from doing, as
discussed further elsewhere in this preamble.
Furthermore, Rivian, ZETA, and Tesla commented about the lack of
inclusion of Rivian's Class 2b vans and Tesla's Cybertruck.\216\ Rivian
stated that in the case of the HDPUV program, ``omitting Rivian's Class
2b vans could have material implications for the agency's final''
regulation. Rivian also further explained these comments to the agency
in a meeting on October 12, 2023.\217\ Tesla's Cybertruck is a 2023 or
2024 MY vehicle and the compliance data for that vehicle--which is
essential to accurately characterizing the vehicle in the analysis
fleet--was not available to the agency at the time of analysis.
Rivian's electric delivery van launched in MY 2022 but the compliance
data was not available to NHTSA at the time of fleet development.
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\216\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29; Rivian,
Docket No. NHTSA-2023-0022-59765, at 7-8; Tesla, Docket No. NHTSA-
2023-0022-60093, at 6.
\217\ Docket Memo of Ex Parte Meeting with Rivian.
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NHTSA does not believe that the HDPUV analysis would change
materially with the inclusion of Rivian's Class 2b vans or Tesla's
Cybertruck. Both manufacturers would be able to demonstrate compliance
with any stringency in that analysis, and their inclusion would not
affect other manufacturers' ability to comply with their standards.
This is because, once again, the analysis does not perform any form of
credit trading between manufacturers and thus would not have allowed
for other manufacturers to comply with higher stringencies. While NHTSA
does examine the industry average performance when setting standards,
NHTSA also looks at individual manufacturer performance with the
standards as well. NHTSA discusses the results of the final HDPUV
analysis in Section V. NHTSA will be happy to include all available
manufacturers in any future analysis fleets if compliance data is
available at the time the fleet is being developed.
The next section discusses how our analysis evaluates how adding
additional fuel economy-improving technology to a vehicle in the
analysis fleet will improve that vehicle's fuel economy value. Put
another way, the next section answers the question, how do we estimate
how effective any given technology is at improving a vehicle's fuel
economy value?
3. Technology Effectiveness Values
How does the CAFE Model know how effective any particular
technology is at improving a vehicle's fuel economy value? Accurate
technology effectiveness estimates require information about: (1) the
vehicle type and size; (2) the other technologies on the vehicle and/or
being added to the vehicle at the same time; and (3) and how the
vehicle is driven. Any oversimplification of these complex factors
could make the effectiveness estimates less accurate.
To build a database of technology effectiveness estimates that
includes these factors, we partner with the DOE's Argonne National
Laboratory (Argonne).
[[Page 52600]]
Argonne has developed and maintains a physics-based full-vehicle
modeling and simulation tool called Autonomie that generates technology
effectiveness estimates for the CAFE Model.
What is physics-based full-vehicle modeling and simulation? A model
is a mathematical representation of a system, and simulation is the
behavior of that mathematical representation over time. The Autonomie
model is a mathematical representation of an entire vehicle, including
its individual technologies such as the engine and transmission,
overall vehicle characteristics such as mass and aerodynamic drag, and
the environmental conditions, such as ambient temperature and
barometric pressure.
We simulate a vehicle model's behavior over the ``two-cycle'' tests
that are used to measure vehicle fuel economy.\218\ For readers
unfamiliar with this process, measuring a vehicle's fuel economy on the
two-cycle tests is like running a car on a treadmill following a
program--or more specifically, two programs. The ``programs'' are the
``urban cycle,'' or Federal Test Procedure (abbreviated as ``FTP''),
and the ``highway cycle,'' or Highway Fuel Economy Test (abbreviated as
``HFET''). For the FTP drive cycle the vehicle meets certain speeds at
certain times during the test, or in technical terms, the vehicle must
follow the designated ``speed trace.'' \219\ The FTP is meant roughly
to simulate stop and go city driving, and the HFET is meant roughly to
simulate steady flowing highway driving at about 50 miles per hour
(mph). We also use the Society of Automotive Engineers (SAE)
recommended practices to simulate hybridized and EV drive cycles,\220\
which involves the test cycles mentioned above and additional test
cycles to measure battery energy consumption and range.
---------------------------------------------------------------------------
\218\ We are statutorily required to use the two-cycle tests to
measure vehicle fuel economy in the CAFE program. See 49 U.S.C.
32904(c) (``Testing and calculation procedures . . . . the
Administrator shall use the same procedures for passenger
automobiles the Administrator used for model year 1975 (weighted 55
percent urban cycle and 45 percent highway cycle), or procedures
that give comparable results.'').
\219\ EPA. 2023. Emissions Standards Reference Guide. EPA
Federal Test Procedure (FTP). Available at: https://www.epa.gov/emission-standards-reference-guide/epa-federal-test-procedure-ftp.
(Accessed: Feb. 27, 2024).
\220\ SAE. 2023. Recommended Practice for Measuring the Exhaust
Emissions and Fuel Economy of Hybrid-Electric Vehicles, Including
Plug-in Hybrid Vehicles. SAE Standard J1711. Rev. Feb 2023.; SAE.
2021. Battery Electric Vehicle Energy Consumption and Range Test
Procedure. SAE Standard J1634. Rev. April 2021.
---------------------------------------------------------------------------
Measuring every vehicle's fuel economy values using the same test
cycles ensures that the fuel economy certification results are
repeatable for each vehicle model, and comparable across all of the
different vehicle models. When performing physical vehicle cycle
testing, sophisticated test and measurement equipment calibrated
according to strict industry standards further ensures repeatability
and comparability of the results. This can include dynamometers,
environmental conditions, types and locations of measurement equipment,
and precise testing procedures. These physical tests provide the
benchmarking empirical data used to develop and verify Autonomie's
vehicle control algorithms and simulation results. Autonomie's inputs
are discussed in more detail later in this section.
Finally, ``physics-based'' simply refers to the mathematical
equations underlying the modeling and simulation--the simulated vehicle
models and all of the sub-models that make up specific vehicle
components and the calculated fuel used on simulated test cycles are
calculated mathematical equations that conform to the laws of physics.
Full-vehicle modeling and simulation was initially developed to
avoid the costs of designing and testing prototype parts for every new
type of technology. For example, Generic Motors can use physics-based
computer modeling to determine the fuel economy penalty for adding a
4WD, rugged off-road tire trim level of the Ravine Runner to its
lineup. The Ravine Runner, modeled with its new drivetrain and off-road
tires, can be simulated on a defined test route and under defined test
conditions and compared against the initial Ravine Runner simulated
without the change. Full-vehicle modeling and simulation allows Generic
Motors to consider and evaluate different designs and concepts before
building a single prototype for any potential technology change.
Full vehicle modeling and simulation is also essential to measuring
how all technologies on a vehicle interact. For example, if technology
A improves a particular vehicle's fuel economy by 5% and technology B
improves a particular vehicle's fuel economy by 10%, an analysis using
single or limited point estimates may erroneously assume that applying
both of these technologies together would achieve a simple additive
fuel economy improvement of 15%. Single point estimates generally do
not provide accurate effectiveness values because they do not capture
complex relationships among technologies. Technology effectiveness
often differs significantly depending on the vehicle type (e.g., sedan
versus pickup truck) and the way in which the technology interacts with
other technologies on the vehicle, as different technologies may
provide different incremental levels of fuel economy improvement if
implemented alone or in combination with other technologies. As stated
above, any oversimplification of these complex factors could lead to
less accurate technology effectiveness estimates.
In addition, because manufacturers often add several fuel-saving
technologies simultaneously when redesigning a vehicle, it is difficult
to isolate the effect of adding any one individual technology to the
full vehicle system. Modeling and simulation offer the opportunity to
isolate the effects of individual technologies by using a single or
small number of initial vehicle configurations and incrementally adding
technologies to those configurations. This provides a consistent
reference point for the incremental effectiveness estimates for each
technology and for combinations of technologies for each vehicle type.
Vehicle modeling also reduces the potential for overcounting or
undercounting technology effectiveness.
Argonne does not build an individual vehicle model for every single
vehicle configuration in our LD and HDPUV Market Data Input Files. This
would be nearly impossible, because Autonomie requires very detailed
data on hundreds of different vehicle attributes (like the weight of
the vehicle's fuel tank, the weight of the vehicle's transmission
housing, the weight of the engine, the vehicle's 0-60 mph time, and so
on) to build a vehicle model, and for practical reasons we cannot
acquire 4000 vehicles and obtain these measurements every time we
promulgate a new rule (and we cannot acquire vehicles that have not yet
been built). Rather, Argonne builds a discrete number of vehicle models
that are representative of large portions of vehicles in the real
world. We refer to the vehicle model's type and performance level as
the vehicle's ``technology class.'' By assigning each vehicle in the
Market Data Input File a ``technology class,'' we can connect it to the
Autonomie effectiveness estimate that best represents how effective the
technology would be on the vehicle, taking into account vehicle
characteristics like type and performance metrics. Because each vehicle
technology class has unique characteristics, the effectiveness of
technologies and combinations of technologies is different for each
technology class.
[[Page 52601]]
There are ten technology classes for the LD analysis: small car
(SmallCar), small performance car (SmallCarPerf), medium car (MedCar),
medium performance car (MedCarPerf), small SUV (SmallSUV), small
performance SUV (SmallSUVPerf), medium SUV (MedSUV), medium performance
SUV (MedSUVPerf), pickup truck (Pickup), and high towing pickup truck
(PickupHT). There are four technology classes for the HDPUV analysis,
based on the vehicle's ``weight class.'' An HDPUV that weighs between
8,501 and 10,000 pounds is in ``Class 2b,'' and an HDPUV that weighs
between 10,001 and 14,000 pounds is in ``Class 3.'' Our four HDPUV
technology classes are Pickup2b, Pickup3, Van2b, and Van3.
We use a two-step process that involves two algorithms to give
vehicles a ``fit score'' that determines which vehicles best fit into
each technology class. At the first step we determine the vehicle's
size, and at the second step we determine the vehicle's performance
level. Both algorithms consider several metrics about the individual
vehicle and compare that vehicle to other vehicles in the analysis
fleet. This process is discussed in detail in TSD Chapter 2.2.
Consider our Ravine Runner F Series, which is a medium-sized
performance SUV. The exact same combination of technologies on the
Ravine Runner F Series will operate differently in a compact car or
pickup truck because they are different vehicle sizes. Our Ravine
Runner F Series also achieves slightly better performance metrics than
other medium-sized SUVs in the analysis fleet. When we say,
``performance metrics,'' we mean power, acceleration, handing, braking,
and so on, but for the performance fit score algorithm, we consider the
vehicle's estimated 0-60 mph time compared to an initial 0-60 mph time
for the vehicle's technology class. Accordingly, the ``technology
class'' for the Ravine Runner F Series in our analysis is
``MedSUVPerf''.
Table III-1 shows how vehicles in different technology classes that
use the exact same fuel economy technology have very different absolute
fuel economy values. Note that, as discussed further below, the
Autonomie absolute fuel economy values are not used directly in the
CAFE Model; we calculate the ratio between two Autonomie absolute fuel
economy values (one for each technology key for a specific technology
class) and apply that ratio to an analysis fleet vehicle's starting
fuel economy value.
[GRAPHIC] [TIFF OMITTED] TR24JN24.052
Let us also return to the concept of what we call technology
synergies. Again, depending on the technology, when two technologies
are added to the vehicle together, they may not result in an additive
fuel economy improvement. This is an important concept to understand
because in Section III.D, below, we present technology effectiveness
estimates for every single combination of technology that could be
applied to a vehicle. In some cases, technology effectiveness estimates
show that a combined technology has a different effectiveness estimate
than if the individual technologies were added together individually.
However, this is expected and not an error. Continuing our example from
above, turbocharging technology and DEAC technology both improve fuel
economy by reducing the engine displacement, and accordingly burning
less fuel. Turbocharging allows a larger naturally aspirated engine to
be reduced in size or displacement while still doing the same amount of
work, and its fuel efficiency improvements are, in part, due to the
reduced displacement. DEAC effectively makes an engine with a
particular displacement intermittently offer some of the fuel economy
benefits of a smaller-displacement engine by deactivating cylinders
when the work demand does not require the full engine displacement and
reactivating them as-needed to meet higher work demands; the greater
the displacement of the deactivated cylinders, the greater the fuel
economy benefit. Therefore, a manufacturer upgrading to an engine that
uses both a turbocharger and DEAC technology, like the TURBOD engine in
our example above, would not see the full combined fuel economy
improvement from that specific combination of technologies. Table III-2
shows a vehicle's fuel economy value when using the first-level DEAC
technology and when using the first-level turbocharging technology,
compared to our vehicle that uses both of those technologies combined
with a TURBOD engine.
[[Page 52602]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.053
As expected, the percent improvement in Table III-2 between the
first and second rows is 1.7% and between the third and fourth rows is
0.3%, even though the only difference within the two sets of technology
keys is the DEAC technology (note that we only compare technology keys
within the same technology class). This is because there are complex
interactions between all fuel economy-improving technologies. We model
these individual technologies and groups of technologies to reduce the
uncertainty and improve the accuracy of the CAFE Model outputs.
Some technology synergies that we discuss in Section III.D include
advanced engine and hybrid powertrain technology synergies. As an
example, we do not see a particularly high effectiveness improvement
from applying advanced engines to existing parallel strong hybrid
(i.e., P2) architectures.\221\ In this instance, the P2 powertrain
improves fuel economy, in part, by allowing the engine to spend more
time operating at efficient engine speed and load conditions. This
reduces the advantage of adding advanced engine technologies, which
also improve fuel economy, by broadening the range of speed and load
conditions for the engine to operate at high efficiency. This
redundancy in fuel savings mechanism results in a lower effectiveness
when the technologies are added to each other. Again, we intend and
expect that different combinations of technologies will provide
different effectiveness improvements on different vehicle types. These
examples all illustrate relationships that we can only observe using
full vehicle modeling and simulation.
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\221\ A parallel strong hybrid powertrain is fundamentally
similar to a conventional powertrain but adds one electric motor to
improve efficiency. TSD Chapter 3 shows all of the parallel strong
hybrid powertrain options we model in this analysis.
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Just as our CAFE Model analysis requires a large set of technology
inputs and assumptions, the Autonomie modeling uses a large set of
technology inputs and assumptions. Figure III-6 below shows the suite
of fuel consumption input data used in the Autonomie modeling to
generate the fuel consumption input data we use in the CAFE Model.
[GRAPHIC] [TIFF OMITTED] TR24JN24.054
[[Page 52603]]
What are each of these inputs? For full vehicle benchmarking,
vehicles are instrumented with sensors and tested both on the road and
on chassis dynamometers (i.e., the car treadmills used to calculate
vehicle's fuel economy values) under different conditions and duty
cycles. Some examples of full vehicle benchmark testing we did in
conjunction with our partners at Argonne in anticipation of this rule
include a 2019 Chevrolet Silverado, a 2021 Toyota Rav4 Prime, a 2022
Hyundai Sonata Hybrid, a 2020 Tesla Model 3, and a 2020 Chevrolet
Bolt.\222\ We produced a report for each vehicle benchmarked which can
be found in the docket. As discussed further below, that full vehicle
benchmarking data are used as inputs to the engine modeling and
Autonomie full vehicle simulation modeling. Component benchmarking is
like full vehicle benchmarking, but instead of testing a full vehicle,
we instrument a single production component or prototype component with
sensors and test it on a similar duty cycle as a full vehicle. Examples
of components we benchmark include engines, transmissions, axles,
electric motors, and batteries. Component benchmarking data are used as
an input to component modeling, where a production or prototype
component is changed in fit, form and/or function and modeled in the
same scenario. As an example, we might model a decrease in the size of
holes in fuel injectors to see the fuel atomization impact or see how
it affects the fuel spray angle.
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\222\ For all Argonne National Labs full vehicle benchmarking
reports, see Docket No. NHTSA-2023-0022-0010.
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We use a range of models to do the component modeling for our
analysis. As shown in Figure III-6, battery pack modeling using
Argonne's BatPaC Model and engine modeling are two of the most
significant component models used to generate data for the Autonomie
modeling. We discuss BatPaC in detail in Section II.D, but briefly,
BatPaC is the battery pack modeling tool we use to estimate the cost of
vehicle battery packs based on the materials chemistry, battery design,
and manufacturing design of the plants manufacturing the battery packs.
Engine modeling is used to generate engine fuel map models that
define the fuel consumption rate for an engine equipped with specific
technologies when operating over a variety of engine load and engine
speed conditions. Some performance metrics we capture in engine
modeling include power, torque, airflow, volumetric efficiency, fuel
consumption, turbocharger performance and matching, pumping losses, and
more. Each engine map model has been developed ensuring the engine will
still operate under real-world constraints using a suite of other
models. Some examples of these models that ensure the engine map models
capture real-world operating constraints include simulating heat
release through a predictive combustion model, knock characteristics
through a kinetic fit knock model,\223\ and using physics-based heat
flow and friction models, among others. We simulate these constraints
using data gathered from component benchmarking, and engineering and
physics calculations.
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\223\ Engine knock occurs when combustion of some of the air/
fuel mixture in the cylinder does not result from propagation of the
flame front ignited by the spark plug, but one or more pockets of
air/fuel mixture explodes outside of the envelope of the normal
combustion front. Engine knock can result in unsteady operation and
damage to the engine.
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The engine map models are developed by creating a base, or root,
engine map and then modifying that root map, incrementally, to isolate
the effects of the added technologies. The LD engine maps, developed by
IAV using their GT-Power modeling tool and the HDPUV engine maps,
developed by SwRI using their GT-Power modeling tool, are based on
real-world engine designs. One important feature of both the LD and
HDPUV engine maps is that they were both developed using a knock model.
As noted above, a knock model ensures that any engine size or
specification that we model in the analysis does not result in engine
knock, which could damage engine components in a real-world vehicle.
Although the same engine map models are used for all vehicle technology
classes, the effectiveness varies based on the characteristics of each
class. For example, as discussed above, a compact car with a
turbocharged engine will have a different effectiveness value than a
pickup truck with the same engine technology type. The engine map model
development and specifications are discussed further in Chapter 3 of
the TSD.
Argonne also compiles a database of vehicle attributes and
characteristics that are reasonably representative of the vehicles in
that technology class to build the vehicle models. Relevant vehicle
attributes may include a vehicle's fuel efficiency, emissions,
horsepower, 0-60 mph acceleration time, and stopping distance, among
others, while vehicle characteristics may include whether the vehicle
has all-wheel-drive, 18-inch wheels, summer tires, and so on. Argonne
identified representative vehicle attributes and characteristics for
both the LD and HDPUV fleets from publicly available information and
automotive benchmarking databases such as A2Mac1,\224\ Argonne's
Downloadable Dynamometer Database (D\3\),\225\ EPA compliance and fuel
economy data,\226\ EPA's guidance on the cold start penalty on 2-cycle
tests,\227\ the 21st Century Truck Partnership,\228\ and industry
partnerships.\229\ The resulting vehicle technology class baseline
assumptions and characteristics database consists of over 100 different
attributes like vehicle height and width and weights for individual
vehicle parts.
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\224\ A2Mac1: Automotive Benchmarking. (Proprietary data).
Available at: https://www.a2mac1.com. (Accessed: May 31, 2023).
A2Mac1 is subscription-based benchmarking service that conducts
vehicle and component teardown analyses. Annually, A2Mac1 removes
individual components from production vehicles such as oil pans,
electric machines, engines, transmissions, among the many other
components. These components are weighed and documented for key
specifications which is then available to their subscribers.
\225\ Argonne National Laboratory. 2023. Downloadable
Dynamometer Database (D\3\). Argonne National Laboratory, Energy
Systems Division. Available at: https://www.anl.gov/es/downloadable-dynamometer-database. (Accessed: Feb. 27, 2024).
\226\ EPA. 2023. Data on Cars Used for Testing Fuel Economy. EPA
Compliance and Fuel Economy Data. Available at: https://www.epa.gov/compliance-and-fuel-economy-data/data-cars-used-testing-fuel-economy. (Accessed: Feb. 27, 2024).
\227\ EPA PD TSD at 2-265-2-266.
\228\ DOE. 2019. 21st Century Truck Partnership Research
Blueprint. Available at: https://www.energy.gov/sites/default/files/2019/02/f59/21CTPResearchBlueprint2019_FINAL.pdf. (Accessed: Feb.
27, 2024); DOE. 2023. 21st Century Truck Partnership. Available at:
https://www.energy.gov/eere/vehicles/21st-century-truck-partnership.
(Accessed: Feb. 23, 2024); National Academies of Sciences,
Engineering, and Medicine. 2015. Review of the 21st Century Truck
Partnership, Third Report. The National Academies Press. Washington,
DC. Available at: https://nap.nationalacademies.org/catalog/21784/review-of-the-21st-century-truck-partnership-third-report.
(Accessed: Feb. 23, 2024).
\229\ North American Council for Freight Efficiency. Research
and analysis. https://www.nacfe.org/research/overview/. (Accessed:
Feb. 23, 2024).
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Argonne then assigns ``reference'' technologies to each vehicle
model. The reference technologies are the technologies on the first
step of each CAFE Model technology pathway, and they closely (but do
not exactly) correlate to the technology abbreviations that we use in
the CAFE Model. As an example, the first Autonomie vehicle model in the
``MedSUVPerf'' technology class starts out with the least advanced
engine, which is ``DOHC'' (a dual overhead cam engine) in the CAFE
Model, or ``eng01'' in the Autonomie modeling. The vehicle has the
least advanced transmission, AT5, the least
[[Page 52604]]
advanced MR level, MR0, the least advanced aerodynamic body style,
AERO0, and the least advanced ROLL level, ROLL0. The first vehicle
model is also defined by initial vehicle attributes and characteristics
that consist of data from the suite of sources mentioned above. Again,
these attributes are meant to reasonably represent the average of
vehicle attributes found on vehicles in a certain technology class.
Then, just as a vehicle manufacturer tests its vehicles to ensure
they meet specific performance metrics, Autonomie ensures that the
built vehicle model meets its performance metrics. We include
quantitative performance metrics in our Autonomie modeling to ensure
that the vehicle models can meet real-world performance metrics that
consumers observe and that are important for vehicle utility and
customer satisfaction. The four performance metrics that we use in the
Autonomie modeling for light duty vehicles are low-speed acceleration
(the time required to accelerate from 0-60 mph), high-speed passing
acceleration (the time required to accelerate from 50-80 mph),
gradeability (the ability of the vehicle to maintain constant 65 mph
speed on a six percent upgrade), and towing capacity for light duty
pickup trucks. We have been using these performance metrics for the
last several CAFE Model analyses, and vehicle manufacturers have
repeatedly agreed that these performance metrics are representative of
the metrics considered in the automotive industry.\230\ Argonne
simulates the vehicle model driving the two-cycle tests (i.e., running
its treadmill ``programs'') to ensure that it meets its applicable
performance metrics (e.g., our MedSUVPerf does not have to meet the
towing capacity performance metric because it is not a pickup truck).
For HDPUVs, Autonomie examines sustainable maximum speed at 6 percent
grade, start/launch capability on grade, and maximum sustainable grade
at highway cruising speed, before examining towing capability to look
for the maximum possible vehicle weight over 40 mph in gradeability.
This process ensures that the vehicle can satisfy the gradeability
requirement (over 40 mph) with additional payload mass to the curb
weight. These metrics are based on commonly used metrics in the
automotive industry, including SAE J2807 tow requirements.\231\
Additional details about how we size light duty and HDPUV powertrains
in Autonomie to meet defined performance metrics can be found in the
CAFE Analysis Autonomie Documentation.
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\230\ See, e.g., NHTSA-2021-0053-1492, at 134 (``Vehicle design
parameters are never static. With each new generation of a vehicle,
manufacturers seek to improve vehicle utility, performance, and
other characteristics based on research of customer expectations and
desires, and to add innovative features that improve the customer
experience. The Agencies have historically sought to maintain the
performance characteristics of vehicles modeled with fuel economy-
improving technologies. Auto Innovators encourages the Agencies to
maintain a performance-neutral approach to the analysis, to the
extent possible. Auto Innovators appreciates that the Agencies
continue to consider highspeed acceleration, gradeability, towing,
range, traction, and interior room (including headroom) in the
analysis when sizing powertrains and evaluating pathways for road-
load reductions. All of these parameters should be considered
separately, not just in combination. (For example, we do not support
an approach where various acceleration times are added together to
create a single ``performance'' statistic. Manufacturers must
provide all types of performance, not just one or two to the
detriment of others.)'').
\231\ See SAE. 2020. Performance Requirements for Determining
Tow-Vehicle Gross Combination Weight Rating and Trailer Weight
Rating. SAE J2807, Available at: https://www.sae.org/standards/content/j2807_202002/.
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If the vehicle model does not initially meet one of the performance
metrics, then Autonomie's powertrain sizing algorithm increases the
vehicle's engine power. The increase in power is achieved by increasing
engine displacement (which is the measure of the volume of all
cylinders in an engine), which might involve an increase in the number
of engine cylinders, which may lead to an increase in the engine
weight. This iterative process then determines if the baseline vehicle
with increased engine power and corresponding updated engine weight
meets the required performance metrics. The powertrain sizing algorithm
stops once all the baseline vehicle's performance requirements are met.
Some technologies require extra steps for performance optimization
before the vehicle models are ready for simulation. Specifically, the
sizing and optimization process is more complex for the electrified
vehicles, which includes hybrid electric vehicle (HEVs) and plug-in
hybrid electric vehicles (PHEVs), compared to vehicles with only ICEs,
as discussed further in the TSD. As an example, a PHEV powertrain that
can travel a certain number of miles on its battery energy alone
(referred to as all-electric range (AER), or as performing in electric-
only mode) is also sized to ensure that it can meet the performance
requirements of the SAE standardized drive cycles mentioned above in
electric-only mode.
Every time a vehicle model in Autonomie adopts a new technology,
the vehicle weight is updated to reflect the weight of the new
technology. For some technologies, the direct weight change is easy to
assess. For example, when a vehicle is updated to a higher geared
transmission, the weight of the original transmission is replaced with
the corresponding transmission weight (e.g., the weight of a vehicle
moving from a 6-speed automatic (AT6) to an 8-speed automatic (AT8)
transmission is updated based on the 8-speed transmission weight). For
other technologies, like engine technologies, calculating the updated
vehicle weight is more complex. As discussed earlier, modeling a change
in engine technology involves both the new technology adoption and a
change in power (because the reduction in vehicle weight leads to lower
engine loads, and a resized engine). When a vehicle adopts new engine
technology, the associated weight change to the vehicle is accounted
for based on a regression analysis of engine weight versus power.\232\
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\232\ See Merriam-Webster, ``regression analysis'' is the use of
mathematical and statistical techniques to estimate one variable
from another especially by the application of regression
coefficients, regression curves, regression equations, or regression
lines to empirical data. In this case, we are estimating engine
weight by looking at the relationship between engine weight and
engine power.
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In addition to using performance metrics that are commonly used by
automotive manufacturers, we instruct Autonomie to mimic real-world
manufacturer decisions by only resizing engines at specific intervals
in the analysis and in specific ways. When a vehicle manufacturer is
making decisions about how to change a vehicle model to add fuel
economy-improving technology, the manufacturer could entirely
``redesign'' the vehicle, or the manufacturer could ``refresh'' the
vehicle with relatively more minor technology changes. We discuss how
our modeling captures vehicle refreshes and redesigns in more detail
below, but the details are easier to understand if we start by
discussing some straightforward yet important concepts. First, most
changes to a vehicle's engine happen when the vehicle is redesigned and
not refreshed, as incorporating a new engine in a vehicle is a 10- to
15-year endeavor at a cost of $750 million to $1 billion.\233\ But,
manufacturers will use that same basic engine, with only minor changes,
across multiple vehicle models. We
[[Page 52605]]
model engine ``inheriting'' from one vehicle to another in both the
Autonomie modeling and the CAFE Model. During a vehicle ``refresh'',
one vehicle may inherit an already redesigned engine from another
vehicle that shares the same platform. In the Autonomie modeling, when
a new vehicle adopts fuel saving technologies that are inherited, the
engine is not resized (i.e., the properties from the reference vehicle
are used directly). While this may result in a small change in vehicle
performance, manufacturers have repeatedly and consistently told us
that the high costs for redesign and the increased manufacturing
complexity that would result from resizing engines for small technology
changes preclude them from doing so. In addition, when a manufacturer
applies MR technology (i.e., makes the vehicle lighter), the vehicle
can use a less powerful engine because there is less weight to move.
However, Autonomie will only use a resized engine at certain MR
application levels, as a representation of how manufacturers update
their engine technologies. Again, this is intended to reflect
manufacturer's comments that it would be unreasonable and unaffordable
to resize powertrains for every unique combination of technologies. We
have determined that our rules about performance neutrality and
technology inheritance result in a fleet that is essentially
performance neutral.
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\233\ 2015 NAS Report, at 256. It's likely that manufacturers
have made improvements in the product lifetime and development
cycles for engines since this NAS report and the report that the NAS
relied on, but we do not have data on how much. We believe that it
is still reasonable to conclude that generating an all new engine or
transmission design with little to no carryover from the previous
generation would be a notable investment.
---------------------------------------------------------------------------
Why is it important to ensure that the vehicle models in our
analysis maintain consistent performance levels? The answer involves
how we measure the costs and benefits of different levels of fuel
economy standards. In our analysis, we want to capture the costs and
benefits of vehicle manufacturers applying fuel economy-improving
technologies to their vehicles. For example, say a manufacturer that
adds a turbocharger to their engine without downsizing the engine, and
then directs all of the additional engine work to additional vehicle
horsepower instead of vehicle fuel economy improvements. If we modeled
increases or decreases in performance because of fuel economy-improving
technology, that increase in performance has a monetized benefit
attached to it that is not specifically due to our fuel economy
standards. By ensuring that our vehicle modeling remains performance
neutral, we can better ensure that we are reasonably capturing the
costs and benefits due only to potential changes in the fuel economy
standards.
For the NPRM, we analyzed the change in low speed acceleration (0-
60 mph) time for four scenarios: (1) MY 2022 under the no action
scenario (i.e., No-Action Alternative), (2) MY 2022 under the Preferred
Alternative, (3) MY 2032 under the no action scenario, and (4) MY 2032
under the Preferred Alternative.\234\ Using the MY 2022 analysis fleet
sales volumes as weights, we calculated the weighted average 0-60 mph
acceleration time for the analysis fleet in each of the four above
scenarios. We identified that the analysis fleet under no action
standards in MY 2032 had a 0.5002 percent worse 0-60 mph acceleration
time than under the Preferred Alternative, indicating there is minimal
difference in performance between the alternatives. Although we did not
conduct the same analysis for the final rule preferred standard, we are
confident that the difference in performance time would be
insignificant, similar to the NPRM analysis, because the preferred
standard falls between the no action and the proposal.
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\234\ The baseline reference for both the No-Action Alternative
and the Preferred Alternative is MY 2022 fleet performance.
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Autonomie then adopts one single fuel saving technology to the
initial vehicle model, keeping everything else the same except for that
one technology and the attributes associated with it. Once one
technology is assigned to the vehicle model and the new vehicle model
meets its performance metrics, the vehicle model is used as an input to
the full vehicle simulation. This means that Autonomie simulates
driving the optimized vehicle models for each technology class on the
test cycles we described above. As an example, the Autonomie modeling
could start with 14 initial vehicle models (one for each technology
class in the LD and HDPUV analysis). Those 14 initial vehicle models
use a 5-speed automatic transmission (AT5).\235\ Argonne then builds 14
new vehicle models; the only difference between the 14 new vehicle
models and the first set of vehicle models is that the new vehicle
models have a 6-speed automatic transmission (AT6). Replacing the AT5
with an AT6 would lead either to an increase or decrease in the total
weight of the vehicle because each technology class includes different
assumptions about transmission weight. Argonne then ensures that the
new vehicle models with the 6-speed automatic transmission meet their
performance metrics. Now we have 28 different vehicle models that can
be simulated on the two-cycle tests. This process is repeated for each
technology option and for each technology class. This results in
fourteen separate datasets, each with over 100,000 results, that
include information about a vehicle model made of specific fuel
economy-improving technology and the fuel economy value that the
vehicle model achieved driving its simulated test cycles.
---------------------------------------------------------------------------
\235\ Note that although both the LD and HDPUV analyses include
a 5-speed automatic transmission, the characteristics of those
transmissions differ between the two analyses.
---------------------------------------------------------------------------
We condense the million-or-so datapoints from Autonomie into three
datasets used in the CAFE Model. These three datasets include (1) the
fuel economy value that each modeled vehicle achieved while driving the
test cycles, for every technology combination in every technology class
(converted into ``fuel consumption'', which is the inverse of fuel
economy; fuel economy is mpg and fuel consumption is gallons per mile);
(2) the fuel economy value for PHEVs driving those test cycles, when
those vehicles drive on gasoline-only in order to comply with statutory
constraints; and (3) optimized battery costs for each vehicle that
adopts some sort of electrified powertrain (this is discussed in more
detail below).
Now, how does this information translate into the technology
effectiveness data that we use in the CAFE Model? An important feature
of this analysis is that the fuel economy improvement from each
technology and combinations of technologies should be accurate and
relative to a consistent reference point. We use the absolute fuel
economy values from the full vehicle simulations only to determine the
relative fuel economy improvement from adding a set of technologies to
a vehicle, but not to assign an absolute fuel economy value to any
vehicle model or configuration. For this analysis, the absolute fuel
economy value for each vehicle in the analysis fleet is based on CAFE
compliance data. For subsequent technology changes, we apply the
incremental fuel economy improvement values from one or more
technologies to the analysis fleet vehicle's fuel economy value to
determine the absolute fuel economy achieved for applying the
technology change. Accordingly, when the CAFE Model is assessing how to
cost-effectively add technology to a vehicle in order to improve the
vehicle's fuel economy value, the CAFE Model calculates the difference
in the fuel economy value from an Autonomie modeled vehicle with less
technology and an Autonomie modeled vehicle with more technology. The
relative difference between the two Autonomie modeled vehicles' fuel
economy values is applied to the actual fuel economy
[[Page 52606]]
value of a vehicle in the CAFE Model's analysis fleet.
Let's return to our Ravine Runner F Series, which has a starting
fuel economy value of just over 26 mpg and a starting technology key
``TURBOD; AT10L2; SS12V; ROLL0; AERO5; MR3.'' The equivalent Autonomie
vehicle model has a starting fuel economy value of just over 30.8 mpg
and is represented by the technology descriptors Midsize_SUV, Perfo,
Micro Hybrid, eng38, AUp, 10, MR3, AERO1, ROLL0. In 2028, the CAFE
Model determines that Generic Motors needs to redesign the Ravine
Runner F Series to reach Generic Motors' new light truck CAFE standard.
The Ravine Runner F Series now has lots of new fuel economy-improving
technology--it is a parallel strong HEV with a TURBOE engine, an
integrated 8-speed automatic transmission, 30% improvement in ROLL, 20%
aerodynamic drag reduction, and 10% lighter glider (i.e., mass
reduction). Its new technology key is now P2TRBE, ROLL30, AERO20, MR3.
Table III-3 shows how the incremental fuel economy improvement from the
Autonomie simulations is applied to the Ravine Runner F Series'
starting fuel economy value.
[GRAPHIC] [TIFF OMITTED] TR24JN24.055
Note that the fuel economy values we obtain from the Autonomie
modeling are based on the city and highway test cycles (i.e., the two-
cycle test) described above. This is because we are statutorily
required to measure vehicle fuel economy based on the two-cycle
test.\236\ In 2008, EPA introduced three additional test cycles to
bring fuel economy ``label'' values from two-cycle testing in line with
the efficiency values consumers were experiencing in the real world,
particularly for hybrids. This is known as 5-cycle testing. Generally,
the revised 5-cycle testing values have proven to be a good
approximation of what consumers will experience while driving,
significantly better than the previous two-cycle test values. Although
the compliance modeling uses two-cycle fuel economy values, we use the
``on-road'' fuel economy values, which are the ratio of 5-cycle to 2-
cycle testing values (i.e., the CAFE compliance values to the ``label''
values) \237\ to calculate the value of fuel savings to the consumer in
the effects analysis. This is because the 5-cycle test fuel economy
values better represent fuel savings that consumers will experience
from real-world driving. For more information about these calculations,
please see Section 5.3.2 of the CAFE Model Documentation, and our
discussion of the effects analysis later in this section.
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\236\ 49 U.S.C. 32904(c) (EPA ``shall measure fuel economy for
each model and calculate average fuel economy for a manufacturer
under testing and calculation procedures prescribed by the
Administrator. However, except under section 32908 of this title,
the Administrator shall use the same procedures for passenger
automobiles the Administrator used for model year 1975 (weighted 55
percent urban cycle and 45 percent highway cycle), or procedures
that give comparable results.'').
\237\ We apply a certain percent difference between the 2-cycle
test value and 5-cycle test value to represent the gap in compliance
fuel economy and real-world fuel economy.
---------------------------------------------------------------------------
In sum, we use Autonomie to generate physics-based full vehicle
modeling and simulation technology effectiveness estimates. These
estimates ensure that our modeling captures differences in technology
effectiveness due to (1) vehicle size and performance relative to other
vehicles in the analysis fleet; (2) other technologies on the vehicle
and/or being added to the vehicle at the same time; and (3) and how the
vehicle is driven. This modeling approach also comports with the NAS
2015 recommendation to use full vehicle modeling supported by the
application of lumped improvements at the sub-model level.\238\ The
approach allows the isolation of technology effects in the analysis
supporting an accurate assessment.
---------------------------------------------------------------------------
\238\ 2015 NAS report, at 292.
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In our analysis, ``technology effectiveness values'' are the
relative difference between the fuel economy value for one Autonomie
vehicle model driving the two-cycle tests, and a second Autonomie
vehicle model that uses new technology driving the two-cycle tests. We
add the difference between two Autonomie-generated fuel economy values
to a vehicle in the Market Data Input File's CAFE compliance fuel
economy value. We then calculate the costs and benefits of different
levels of fuel economy standards using the incremental improvement
required to bring an analysis fleet vehicle model's fuel economy value
to a level that contributes to a manufacturer's fleet meeting its CAFE
standard.
In the next section, Technology Costs, we describe the process of
generating costs for the Technologies Input File.
4. Technology Costs
We estimate present and future costs for fuel-saving technologies
based on a vehicle's technology class and engine size. In the
Technologies Input File, there is a separate tab for each technology
class that includes unique costs for that class (depending on the
technology), and a separate tab for each engine size that also contains
unique engine costs for each engine size. These
[[Page 52607]]
technology cost estimates are based on three main inputs. First, we
estimate direct manufacturing costs (DMCs), or the component and labor
costs of producing and assembling a vehicle's physical parts and
systems. DMCs generally do not include the indirect costs of tools,
capital equipment, financing costs, engineering, sales, administrative
support or return on investment. We account for these indirect costs
via a scalar markup of DMCs, which is termed the RPE. Finally, costs
for technologies may change over time as industry streamlines design
and manufacturing processes. We estimate potential cost improvements
from improvements in the manufacturing process with learning effects
(LEs). The retail cost of technology in any future year is estimated to
be equal to the product of the DMC, RPE, and LE. Considering the retail
cost of equipment, instead of merely DMCs, is important to account for
the real-world price effects of a technology, as well as market
realities. Each of these technology cost components is described
briefly below and in the following individual technology sections, and
in detail in Chapters 2 and 3 of the TSD.
DMCs are the component and assembly costs of the physical parts and
systems that make up a complete vehicle. We estimate DMCs for
individual technologies in several ways. Broadly, we rely in large part
on costs estimated by the NHTSA-sponsored 2015 NAS study on the Cost,
Effectiveness, and Deployment of Fuel Economy Technologies for LDVs and
other NAS studies on fuel economy technologies; BatPaC, a publicly
available battery pack modeling software developed and maintained by
Argonne, NHTSA-sponsored teardown studies, and our own analysis of how
much advanced MR technology (i.e., carbon fiber) is available for
vehicles now and in the future; confidential business information
(CBI); and off-cycle and AC efficiency costs from the EPA Proposed
Determination TSD.\239\ While DMCs for fuel-saving technologies reflect
the best estimates available today, technology cost estimates will
likely change in the future as technologies are deployed and as
production is expanded. For emerging technologies, we use the best
information available at the time of the analysis and will continue to
update cost assumptions for any future analysis.
---------------------------------------------------------------------------
\239\ EPA. 2016. Proposed Determination on the Appropriateness
of the Model Year 2022-2025 Light-Duty Vehicle Greenhouse Gas
Emissions Standards under the Midterm Evaluation: Technical Support
Document. Assessment and Standards Division, Office of
Transportation and Air Quality. Available at: https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P100Q3L4.pdf. (Accessed: Feb. 27, 2024).
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Our direct costs include materials, labor, and variable energy
costs required to produce and assemble the vehicle; however, direct
costs do not include production overhead, corporate overhead, selling
costs, or dealer costs, which all contribute to the price consumers
ultimately pay for the vehicle. These components of retail prices are
illustrated in Table III-4 below.
[GRAPHIC] [TIFF OMITTED] TR24JN24.056
To estimate total consumer costs (i.e., both direct and indirect
costs), we multiply a technology's DMCs by an indirect cost factor to
represent the average price for fuel-saving technologies at retail. The
factor that we use is the RPE, and it is the most commonly used to
estimate indirect costs of producing a motor vehicle. The RPE markup
factor is based on an examination of historical financial data
contained in 10-K reports filed by manufacturers with the Securities
and Exchange Commission (SEC). It represents the ratio between the
retail
[[Page 52608]]
price of motor vehicles and the direct costs of all activities that
manufacturers engage in.
For more than three decades, the retail price of motor vehicles has
been, on average, roughly 50 percent above the direct cost expenditures
of manufacturers.\240\ This ratio has been remarkably consistent,
averaging roughly 1.5 with minor variations from year to year over this
period. At no point has the RPE markup based on 10-K reports exceeded
1.6 or fallen below 1.4.\241\ During this time frame, the average
annual increase in real direct costs was 2.5 percent, and the average
annual increase in real indirect costs was also 2.5 percent. The RPE
averages 1.5 across the lifetime of technologies of all ages, with a
lower average in earlier years of a technology's life, and, because of
LEs on direct costs, a higher average in later years. Many automotive
industry stakeholders have either endorsed the 1.5 markup,\242\ or have
estimated alternative RPE values. As seen in Table III-5 all estimates
range between 1.4 and 2.0, and most are in the 1.4 to 1.7 range.
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\240\ Rogozhin, A. et al. 2009. Automobile Industry Retail Price
Equivalent and Indirect Cost Multipliers. EPA. RTI Project Number
0211577.002.004. Triangle Park, N.C.; Spinney, B.C. et al. 1999.
Advanced Air Bag Systems Cost, Weight, and Lead Time Analysis
Summary Report. Contract NO. DTNH22-96-0-12003. Task Orders--001,
003, and 005. Washington, DC.
\241\ Based on data from 1972-1997 and 2007. Data were not
available for intervening years but results for 2007 seem to
indicate no significant change in the historical trend.
\242\ Chris Nevers, Vice President, Energy & Environment,
Alliance of Automobile Manufacturers via Regulations.gov. Docket No.
EPA-HQ-OAR-2018-0283-6186, at 143.
\243\ Duleep, K.G. 2008. Analysis of Technology Cost and Retail
Price. Presentation to Committee on Assessment of Technologies for
Improving LDV Fuel Economy. January 25, 2008, Detroit, MI.; Jack
Faucett Associates. 1985. Update of EPA's Motor Vehicle Emission
Control Equipment Retail Price Equivalent (RPE) Calculation Formula.
September 4, 1985. Chevy Chase, MD.; McKinsey & Company. 2003.
Preface to the Auto Sector Cases. New Horizons--Multinational
Company Investment in Developing Economies. San Francisco, CA.; NRC.
2002. Effectiveness and Impact of Corporate Average Fuel Economy
Standards. The National Academies Press. Washington, DC Available
at: https://nap.nationalacademies.org/catalog/10172/effectiveness-and-impact-of-corporate-average-fuel-economy-cafe-standards.
(Accessed: Apr. 5, 2024).; NRC. 2011. Assessment of Fuel Economy
Technologies for LDVs. The National Academies Press. Washington, DC;
NRC. 2015. Cost, Effectiveness, and Deployment of Fuel Economy
Technologies in LDVs. The National Academies Press. Washington, DC;
Sierra Research, Inc. 2007. Study of Industry-Average Mark-Up
Factors used to Estimate Changes in Retail Price Equivalent (RPE)
for Automotive Fuel Economy and Emissions Control Systems. Sierra
Research Inc. Sacramento, CA; Vyas, A. et al. 2000. Comparison of
Indirect Cost Multipliers for Vehicle Manufacturing. Center for
Transportation Research. ANL. Argonne, Ill.
[GRAPHIC] [TIFF OMITTED] TR24JN24.057
An RPE of 1.5 does not imply that manufacturers automatically mark
up each vehicle by exactly 50 percent. Rather, it means that, over
time, the competitive marketplace has resulted in pricing structures
that average out to this relationship across the entire industry.
Prices for any individual model may be marked up at a higher or lower
rate depending on market demand. The consumer who buys a popular
vehicle may, in effect, subsidize the installation of a new technology
in a less marketable vehicle. But, on average, over time and across the
vehicle fleet, the retail price paid by consumers has risen by about
$1.50 for each dollar of direct costs incurred by manufacturers. Based
on our own evaluation and the widespread use and acceptance of the RPE
by automotive industry stakeholders, we have determined that the RPE
provides a reasonable indirect cost markup for use in our analysis. A
detailed discussion of indirect cost methods and the basis for our use
of the RPE to reflect these costs, rather than other indirect cost
markup methods, is available in the FRIA for the 2020 final rule.\244\
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\244\ NHTSA and EPA. 2020. FRIA: The Safer Affordable Fuel-
Efficient (SAFE) Vehicles Rule for Model Year 2021-2026 Passenger
Cars and Light Trucks. Available at: https://www.nhtsa.gov/sites/nhtsa.gov/files/documents/final_safe_fria_web_version_200701.pdf.
(Accessed: Mar. 29, 2024).
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Finally, manufacturers make improvements to production processes
over time, which often result in lower costs. ``Cost learning''
reflects the effect of experience and volume on the cost of production,
which generally results in better utilization of resources, leading to
higher and more efficient production. As manufacturers gain experience
through production, they refine production techniques, raw material and
component sources, and assembly methods to maximize efficiency and
reduce production costs.
We estimated cost learning by considering methods established by
T.P. Wright and later expanded upon by J.R. Crawford. Wright, examining
aircraft production, found that every doubling of cumulative production
of airplanes resulted in decreasing labor hours at a fixed percentage.
This fixed percentage is commonly referred to as the progress rate or
progress ratio, where a lower rate implies faster learning as
cumulative production increases. J.R. Crawford expanded upon Wright's
learning curve theory to develop a single unit cost model, which
estimates the cost of the nth unit produced given the following
information is known: (1) cost to produce the first unit; (2)
cumulative
[[Page 52609]]
production of n units; and (3) the progress ratio.
Consistent with Wright's learning curve, most technologies in the
CAFE Model use the basic approach by Wright, where we estimate
technology cost reductions by applying a fixed percentage to the
projected cumulative production of a given fuel economy technology in a
given MY.\245\ We estimate the cost to produce the first unit of any
given technology by identifying the DMC for a technology in a specific
MY. As discussed above and in detail below and in Chapter 3 of the TSD,
our technology DMCs come from studies, teardown reports, other publicly
available data, and feedback from manufacturers and suppliers. Because
different studies or cost estimates are based on costs in specific MYs,
we identify the ``base'' MYs for each technology where the learning
factor is equal to 1.00. Then, we apply a progress ratio to back-
calculate the cost of the first unit produced. The majority of
technologies in the CAFE Model use a progress ratio (i.e., the slope of
the learning curve, or the rate at which cost reductions occur with
respect to cumulative production) of approximately 0.89, which is
derived from average progress ratios researched in studies funded and/
or identified by NHTSA and EPA.\246\ Many fuel economy technologies
that have existed in vehicles for some time will have a gradual sloping
learning curve implying that cost reductions from learning is moderate
and eventually becomes less steep toward MY2050. Conversely, newer
technologies have an initial steep learning curve where cost reduction
occurs at a high rate. Mature technologies will generally have a
flatter curve and may not incur much cost reduction, if at all, from
learning. For an illustration showing various slopes of learning
curves, see TSD Chapter 2.4.4.
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\245\ We use statically projected cumulative volume production
estimates beause the CAFE Model does not support dynamic projections
of cumulative volume at this time.
\246\ Simons, J.F. 2017. Cost and Weight Added By the Federal
Motor Vehicle Safety Standards for MY 1968-2012 Passenger Cars and
LTVs. Report No. DOT HS 812 354. NHTSA. Washington DC at 30-33.;
Argote, L. et al. 1997. The Acquisition and Depreciation of
Knowledge in a Manufacturing Organization--Turnover and Plant
Productivity. Working Paper. Graduate School of Industrial
Administration, Carnegie Mellon University; Benkard, C.L. 2000.
Learning and Forgetting--The Dynamics of Aircraft Production. The
American Economic Review. Vol. 90(4): at 1034-54; Epple, D. et al.
1991. Organizational Learning Curves--A Method for Investigating
Intra-Plant Transfer of Knowledge Acquired through Learning by
Doing. Organization Science. Vol. 2(1): at 58-70; Epple, D. et al.
1996. An Empirical Investigation of the Microstructure of Knowledge
Acquisition and Transfer through Learning by Doing. Operations
Research. Vol. 44(1): at 77-86; Levitt, S.D. et al. 2013. Toward an
Understanding of Learning by Doing--Evidence from an Automobile
Assembly Plant. Journal of Political Economy. Vol. 121(4): at 643-
81.
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We assign groups of similar technologies or technologies of similar
complexity to each learning curve. While the grouped technologies
differ in operating characteristics and design, we chose to group them
based on market availability, complexity of technology integration, and
production volume of the technologies that can be implemented by
manufacturers and suppliers. In general, we consider most base and
basic engine and transmission technologies to be mature technologies
that will not experience any additional improvements in design or
manufacturing. Other basic engine technologies, like VVL, SGDI, and
DEAC, do decrease in costs through around MY 2036, because those were
introduced into the market more recently. All advanced engine
technologies follow the same general pattern of a gradual reduction in
costs until MY 2036, when they plateau and remain flat. We expect the
cost to decrease as production volumes increase, manufacturing
processes are improved, and economies of scale are achieved. We also
assigned advanced engine technologies that are based on a singular
preceding technology to the same learning curve as that preceding
technology. Similarly, the more advanced transmission technologies
experience a gradual reduction in costs through MY 2031, when they
plateau and remain flat. Lastly, we estimate that the learning curves
for road load technologies, with the exception of the most advanced MR
level (which decreases at a fairly steep rate through MY 2040, as
discussed further below and in Chapter 3.4 of the TSD), will decrease
through MY 2036 and then remain flat.
We use the same cost learning rates for both LD and HDPUV
technologies. This approach was used in the HDPUV analysis in the Phase
2 HD joint rule with EPA,\247\ and we believe that this is an
appropriate assumption to continue to use for this analysis. While the
powertrains in HDPUVs do have a higher power output than LD
powertrains, the designs and technology used will be very similar.
Although most HDPUV components will have higher operating loads and
provide different effectiveness values than LD components, the overall
designs are similar between the technologies. The individual technology
design and effectiveness differences between LD and HDPUV technologies
are discussed below and in Chapter 3 of the TSD.
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\247\ See MDHD Phase 2 FRIA at 2-56, noting that gasoline
engines used in Class 2b and Class 3 pickup trucks and vans include
the engines offered in a manufacturer's light-duty truck
counterparts, as well as engines specific to the Class 2b and Class
3 segment, and describing that the the technology definitions are
based on those described in the LD analysis, but the effectiveness
values are different.
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For technologies that have been in production for many years, like
some engine and transmission technologies, this approach produces
reasonable estimates that we can compare against other studies and
publicly available data. Generating the learning curve for battery
packs for BEVs in future MYs is significantly more complicated, and we
discuss how we generated those learning curves in Section III.D and in
detail in Chapter 3.3 of the TSD. Our battery pack learning curves
recognize that there are many factors that could potentially lower
battery pack costs over time outside of the cost reductions due to
improvements in manufacturing processes due to knowledge gained through
experience in production.
Table III-6 shows how some of the technologies on the MY 2022
Ravine Runner Type F decrease in cost over several years. Note that
these costs are specifically applicable to the MedSUVPerf class, and
other technology classes may have different costs for the same
technologies. These costs are pulled directly from the Technology Costs
Input File, meaning that they include the DMC, RPE, and learning.
[[Page 52610]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.058
5. Simulating Existing Incentives, Other Government Programs, and
Manufacturer ZEV Deployment Plans
Similar to the regulations that we are enacting, other government
actions have the ability to influence the technology manufacturers
apply to their vehicles. For the purposes of this analysis, we
incorporate manufacturers' expected response to two other government
actions into our analysis: state ZEV requirements and Federal tax
credits. We also include ZEV deployment that manufacturers have
committed to execute even though it goes beyond any government's legal
requirements.
a. Simulating ZEV Deployment Unrelated to NHTSA's Standards
The California Air Resources Board (CARB) has developed various
programs to control emissions of criteria pollutants and GHGs from
vehicles sold in California. CARB does so in accordance with the
federal CAA; CAA section 209(a) generally preempts states from adopting
emission control standards for new motor vehicles; \248\ however,
Congress created an exemption program in CAA section 209(b) that allows
the State of California to seek a waiver of preemption related to
adopting or enforcing motor vehicle emissions standards.\249\ EPA must
grant the waiver unless the Agency makes one of three statutory
findings.\250\ Under CAA section 177, other States can adopt and
enforce standards identical to those approved under California's
Section 209(b) waiver and other specified criteria in section 177 are
met.\251\ States that do so are sometimes referred to as section 177
states, in reference to section 177 of the CAA. Since 1990, CARB has
included a version of a Zero-Emission Vehicle (ZEV) program as part of
its package of standards that control smog-causing pollutants and GHG
emissions from passenger vehicles sold in California,\252\ and several
states have adopted those ZEV program requirements. This section
focuses on the way we modeled manufacturers' expected compliance with
these ZEV program requirements as well as additional electric vehicle
deployment that manufacturers have indicated they will undertake. See
Section IV.B.1 for a discussion of the role of these electric vehicles
in the reference baseline and associated comments and responses.
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\248\ 42 U.S.C. 7543(a).
\249\ 42 U.S.C. 7543(b).
\250\ See 87 FR 14332 (March 14, 2022). (``The CAA section
209(b) waiver is limited ``to any State which has adopted standards
. . . for the control of emissions from new motor vehicles or new
motor vehicle engines prior to March 30, 1966,'' and California is
the only State that had standards in place before that date.'').
NHTSA notes that EPA has not yet granted a waiver of preemption for
the ACC II program, and NHTSA does not prejudge EPA's
decisionmaking. Nonetheless, NHTSA believes it is reasonable to
consider ZEV sales volumes that manufacturers will produce
consistent with what would be required to comply with ACC II as part
of our consideration of actions that occur in the absence of fuel
economy standards, because manufacturers have indicated that they
intend to deploy those vehicles regardless of whether a waiver is
granted.
\251\ 42 U.S.C. 7507.
\252\ CARB. Zero-Emission Vehicle Program. Available at: https://ww2.arb.ca.gov/our-work/programs/zero-emission-vehicle-program/about. (Accessed: Mar. 19, 2024).
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There are currently two operative ZEV regulations that we consider
in our analysis: ACC I (LD ZEV requirements through MY 2025) \253\ and
Advanced Clean Trucks (ACT) (requirements for trucks in Classes 2b
through 8, from MYs 2024-2035).\254\ California has adopted a third ZEV
regulation, ACC II (LD ZEV requirements for MYs 2026-2035).\255\ EPA is
evaluating a petition for a waiver of Clean Air Act preemption for ACC
II,\256\ but has not granted it. While ACC II is currently
unenforceable while the waiver request is under consideration by EPA--
in contrast to ACC I and ACT, which have already received waiver
approvals--manufacturers have indicated that they intend to deploy
additional electric vehicles consistent with (or beyond) what ACC II
would require for compliance if a waiver were to be granted. We have
therefore modeled compliance with ACC II as a proxy for these
additional electric vehicles that manufacturers have committed to
deploying in the reference baseline or No-Action Alternative. As
discussed further below, we also developed a sensitivity case and an
alternative baseline that included, respectively, some or none of the
electric vehicles that would be expected to enter the fleet under ACC
I, ACT, and manufacturer deployment commitments consistent with ACC II
in order to ensure that our standards satisfy the statutory factors
regardless of which baseline turns out to be the most accurate.
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\253\ 13 CCR 1962.2.
\254\ CARB. 2019. Final Regulation Order: Advanced Clean Trucks
Regulation. Available at: https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2019/act2019/fro2.pdf. (Accessed: Mar. 29, 2024).
\255\ CARB. Advanced Clean Cars II. https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/advanced-clean-cars-ii.
\256\ 88 FR 88908 (Dec. 26, 2023), Notice of opportunity for
public hearing and comment on California Air Resources Board ACCII
Waiver Request.
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In the NPRM, we stated that we are confident that manufacturers
will comply with the ZEV programs because they have previously complied
with state ZEV programs, and they have made announcements of new ZEVs
demonstrating an intent to comply with the requirements going forward.
The American Fuel & Petrochemical Manufacturers (AFPM) objected to the
use of the word ``confident'' given their concerns about manufacturers'
ability to comply with ZEV standards.\257\ Valero and Kia commented
that CARB historically has eased compliance for manufacturers by
allowing for compliance via changing compliance dates, stringencies,
and ZEV definitions.\258\ Valero also commented that our inclusion of
ACT was premature given its 2024 start date and stated their doubts
about its technological feasibility.\259\
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\257\ AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 34.
\258\ Valero, Docket No. NHTSA-2023-0022-58547-A4, at 2; Valero,
Docket No. NHTSA-2023-0022-58547-A5, at 2. Kia, Docket No. NHTSA-
2023-0022-58542-A1, at 4-5.
\259\ Valero, Docket No. NHTSA-2023-0022-58547-A5, at 4.
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We focus on including the provisions that CARB and other states
currently have in place in their regulations and that have received a
Clean Air Act
[[Page 52611]]
preemption waiver from EPA, and we have taken this into account by
having incorporated changing standards and compliance landscapes in our
past and current rulemakings. Valero further cited risks of ZEV
programs such as varying compliance challenges across OEMs, consumer
preferences, and affordability concerns, as well as general uncertainty
in predicting future ZEV sales.\260\ NHTSA observes that companies have
historically complied with California waivers and notes that even
though industry entities such as Valero have previously made such
comments about ZEV programs, historically, manufacturers have complied.
Further, NHTSA notes that manufacturers have indicated that they intend
to deploy electric vehicles consistent with the requirements of not
just ACC I and ACT, but also ACC II. In this analysis, NHTSA has not
assumed that the ACC II waiver will be granted. However, in the
reference baseline, NHTSA has included electric vehicle deployment
consistent with stated manufacturer plans to deploy such vehicles--and
that level would result in full compliance with the ACC II
program.\261\ Furthermore, many of the ZEVs that can earn credits from
CARB are already present in the 2022 analysis fleet, leading the
modeled MY 2022 analysis fleet to achieve 100% compliance with that
years' ACC I requirement in MY 2022 (per CARB, the total ending year
credit balances significantly exceed the annual credit
requirements).\262\ NHTSA models manufacturers' compliance with ACC I
and ACT and the additional electric vehicle deployment that
manufacturers have announced they intend to execute because accounting
for technology improvements that manufacturers would make even in the
absence of CAFE standards allows NHTSA to gain a more accurate
understanding of the effects of the final rule. Importantly, as noted
above, NHTSA also developed an alternative baseline, the No ZEV
alternative baseline, to test whether the standards remain consistent
with the statutory factors regardless of the level of electrification
that occurs in the reference baseline. NHTSA also modeled the HDPUV
program assuming the ACT program was not included in the reference
baseline, even though EPCA/EISA contains no limitations on the
consideration of alternative fueled vehicles in that program.
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\260\ Valero, Docket No. NHTSA-2023-0022-58547-A5, at 5-6.
\261\ For example, Stellantis has publicly committed to
deployment levels consistent with California's electrification
targets. See, https://www.gov.ca.gov/2024/03/19/stellantis-partners-with-california-on-clean-car-standards/.
\262\ CARB. Annual ZEV Credits Disclosure Dashboard. Available
at: https://ww2.arb.ca.gov/applications/annual-zev-credits-disclosure-dashboard. (Accessed Mar. 28, 2024).
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The Zero Emission Transportation Association commented that NHTSA
should include CARB's Advanced Clean Fleets (ACF) regulation as part of
its modeling. We do not include the Advanced Clean Fleets regulation in
our modeling at this time, due to the small number of HDPUV Class 2b/3
vehicles that would be affected by this regulation in the rulemaking
time frame,\263\ and due to the analytical complexity of modeling this
small amount of vehicles. We will continue to monitor this program to
determine whether it should be featured in future analyses.
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\263\ CARB. Advanced Clean Fleets Regulation Summary. Available
at: https://ww2.arb.ca.gov/resources/fact-sheets/advanced-clean-fleets-regulation-summary. (Accessed Mar. 28, 2024).
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This is the fourth analysis where we have modeled compliance with
the ACC program (and now the ACT program) requirements in the CAFE
Model. In the MY 2024-2026 final rule, we received feedback from
commenters agreeing or disagreeing with the modeling inclusion of the
ZEV programs at all, however, the only past substantive comments on the
ZEV program modeling methodology have been requesting the inclusion of
more states that signed on to adopt California's standards in our
analysis. As noted below, the inclusion or exclusion of states in the
analysis depends on which states have signed on to the programs at the
time of our analysis. While we are aware of legal challenges to some
states' adoption of the ZEV programs, it is beyond the scope of this
rulemaking to evaluate the likelihood of success of those challenges.
For purposes of our analysis, what is important is predicting, using a
reasonable assessment, how the fleet will evolve in the future. The
following discussion provides updates to our modeling methodology for
the ZEV programs in the analysis.
The ACC I and ACT programs require that increasing levels of
manufacturers' sales in California and section 177 states in each MY be
ZEVs, specifically BEVs, PHEVs, FCEVs.\264\ BEVs, PHEVs, and FCEVs each
contribute a ``value'' towards a manufacturer's annual ZEV requirement,
which is a product of the manufacturer's production volume sold in a
ZEV state, multiplied by a ``percentage requirement.'' The percentage
requirements increase in each year so that a greater portion of a
manufacturer's fleet sold in ZEV states in a particular MY must be
ZEVs. For example, a manufacturer selling 100,000 vehicles in
California and 10,000 vehicles in Connecticut (both states that have
ZEV programs) in MY 2025 must ensure that 22,000 ZEV credits are earned
by California vehicles and 2,200 ZEV credits are earned by Connecticut
vehicles. In MYs 2026 through 2030 of the ACC II program (if granted a
waiver) would allow manufacturers to apply a capped amount of credits
to the percentage requirement. In response to various commenters
mentioning the pooled credits route, we added this option to our
modeling, slightly scaling down the percent requirement assumed to be
met by ZEV sales; this corresponds to the maximum pooled credits that
would be allowed by CARB under ACC II, if granted a waiver.
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\264\ CARB. 2022. Final Regulation Order: Amendments to Section
1962.2, Title 13, California Code of Regulations. Available at:
https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2022/accii/acciifro1962.2.pdf. (Accessed: Mar. 29, 2024).
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At the time of our analysis, seventeen states in addition to
California have either formally signed on to the ACC I or ACC II
standards or are in the process of adopting them.\265\ Although a few
states are adopting these requirements in future MYs, for the ease of
modeling we include in the unified ACC II group every state that has
regulations in place to adopt or is already in the process of adopting
the requirements by the time of our analysis at the start of December
2023. A variety of commenters expressed concern with our NPRM approach
of considering all the states as a group that adopted the programs in
all the model years that CARB outlined. Hyundai noted in their comments
that Nevada, Minnesota, and Virginia are ``unlikely to adopt ACC II.''
Commenters such as the AFPM and Nissan stated that several states have
adopted only some model years of ACC II. NHTSA notes that its analysis
does not assume legal enforcement of ACC II because it has not been
granted a preemption waiver, but that manufacturers have nonetheless
indicated they intend to deploy electric vehicles during these model
years at levels that would be consistent with ACC II in both California
and other states. However, to be appropriately conservative, NHTSA has
updated its approach to reflect the
[[Page 52612]]
variety in model years to which states have committed and in response
to comments, we now include different state sales share groups in our
modeling. Splitting these groups based on model years in which they
have indicated their participation also allows us to distinguish
between assumed future ACC I compliance and the deployment that
manufacturers have indicated they are intending to execute that would
be consistent with ACC II. The seventeen states included in our light-
duty ZEV analysis have adopted ACC I and/or ACC II in at least one
model year.
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\265\ California, Colorado, Connecticut, Delaware, Maine,
Maryland, Massachusetts, Minnesota, Nevada, New York, New Jersey,
New Mexico, Oregon, Rhode Island, Vermont, Virginia, and Washington.
See California Air Resource Board. States that have Adopted
California's Vehicle Standards under Section 177 of the Federal
Clean Air Act. Available at: https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/states-have-adopted-californias-vehicle-regulations (Accessed: Mar. 26, 2024).
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Some commenters such as the Center for Environmental Accountability
and Nissan stated that many of the states included in our ZEV modeling
had not actually adopted the ZEV programs.\266\ NHTSA disagrees; we
include all states that have regulations in place to adopt or are
already in the process of adopting ACC I, ACC II, or ACT, based on
information available at the time of the analysis.\267\ Our final ZEV
state assumptions are also consistent with those tracked by CARB on
their website at the time of writing.\268\ This included adding states
to our analysis that were not present in the NPRM ZEV modeling.
Commenters such as ACEEE and the American Lung Association requested
that we make these updates to the ZEV states list.\269\ We added the
state of Colorado into our analysis, based on new information and their
comment indicating their commitment to all three ZEV programs.\270\
Similarly, eleven states including California have formally adopted the
ACT standards at the time of analysis. As this group is smaller and has
somewhat less variety in start dates than the ACC I/ACC II states, we
model ACT state shares without breaking out specific model year start
dates.\271\
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\266\ CEA, Docket No. NHTSA-2023-0022-61918-A1, at 9; Nissan,
Docket No. NHTSA-2023-0022-60696, at 4.
\267\ See ZEV states docket reference folder. NHTSA-2023-0022.
\268\ CARB. 2024. States that have Adopted California's Vehicle
Regulations. Available at: https://ww2.arb.ca.gov/our-work/programs/advanced-clean-cars-program/states-have-adopted-californias-vehicle-regulations. (Accessed: Mar. 26, 2024).
\269\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 11; ALA,
Docket No, NHTSA-2023-0022-60091, at 3.
\270\ RFA et al, Docket No. NHTSA-2023-0022-57625, at 1.
\271\ California, Colorado, Connecticut, Maryland,
Massachusetts, New Jersey, New Mexico, New York, Oregon, Vermont and
Washington. We include Connecticut as their House passed the
legislation instructing their Department of Energy and Environmental
Protection to adopt ACT. See Electric Trucks Now. 2023. States are
Embracing Electric Trucks. Available at: https://www.electrictrucksnow.com/states. (Accessed: Mar. 29, 2024); Vermont
Biz. 2022. Vermont adopts rules for cleaner cars and trucks.
Available at: https://vermontbiz.com/news/2022/november/24/vermont-adopts-rules-cleaner-cars-and-trucks. (Accessed: May 31, 2023);
North Carolina Environmental Quality. Advanced Clean Trucks: Growing
North Carolina's Clean Energy Economy. Available at: https://deq.nc.gov/about/divisions/air-quality/motor-vehicles-and-air-quality/advanced-clean-trucks (Accessed: May 31, 2023); Connecticut
HB 5039. 2022. An Act Concerning Medium and Heavy-Duty Vehicle
Emission Standards. Available at: https://www.cga.ct.gov/2022/fc/pdf/2022HB-05039-R000465-FC.pdf (Accessed: May 31, 2023).
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It is also important to note in the context of all the above
comments on ZEV adoption that NHTSA developed an alternative baseline,
the No ZEV alternative baseline, in order to evaluate whether the
standards are consistent with the statutory factors regardless of the
amount of electrification that occurs in the absence of NHTSA's
standards during the standard setting years. NHTSA further evaluated
sensitivity cases, that one could certainly consider as additional
alternative baselines, that precluded electric vehicles from being
added to the fleet between Model Years 2027-2035; between 2027-2050;
and 2022-2050.
It is important to note that not all section 177 states have
adopted the ACC II or ACT program components. Furthermore, more states
have formally adopted the ACC II program than the ACT program, so the
discussion in the following sections will call states that have opted
in ``ACC I/ACC II states'' or ``ACT states.'' Separately, many states
signed a memorandum of understanding (MOU) in 2020 to indicate their
intent to work collaboratively towards a goal of turning 100% of MD and
HD vehicles into ZEVs in the future. For the purposes of CAFE analysis,
we include only those states that have formally adopted the ACT in our
modeling as ``ACT states.'' States that have signed the MOU but not
formally adopted the ACT program are referred to as ``MOU states'' and
are not included in CAFE modeling. When the term ``ZEV programs'' is
used hereafter, it refers to both the ACC II and ACT programs.
Incorporating ACC I and ACT as applicable legal requirements and
ACC II as a proxy for additional electric vehicle deployment expected
to occur regardless of the NHTSA standards into the model includes
converting vehicles that have been identified as potential ZEV
candidates into BEVs at the vehicle's ZEV application year so that a
manufacturer's fleet meets its required ZEV credit requirements. We
focused on BEVs as ZEV conversions, rather than PHEVs or FCEVs,
because, as for 2026-2035, manufacturers cannot earn more than 20% of
their ZEV credits through PHEV sales. Similarly, PHEVs receive a
smaller number of credits than BEVs and FCEVs under ACC I, and those
with lower all-electric range values would receive a smaller number of
credits under ACC II if it became legally enforceable. We determined
that including PHEVs in the ZEV modeling would have introduced
unnecessary complication to the modeling and would have provided
manufacturers little benefit in the modeled program. In addition,
although FCEVs can earn the same number of credits as BEVs, we chose to
focus on BEV technology pathways since FCEVs are generally less cost-
effective than BEVs and most manufacturers have not been producing them
at high volumes. However, any PHEVs and FCEVs already present in the
CAFE Model analysis fleets receive ZEV credits in our modeling.
Total credits are calculated by multiplying the credit value each
ZEV receives by the vehicle's volume. In the ACC I program, until 2025,
each full ZEV can earn up to 4 credits. In the ACC II program, from
2026 onwards, each full ZEV would earn one credit value per vehicle,
while partial ZEVs (PHEVs) would earn credits based on their AER, if
ACC II became legally enforceable. In the context of this section,
``full ZEVs'' refers to BEVs and FCEVs, as PHEVs can receive a smaller
number of credits than other ZEVs, as discussed above. Based on
comments from CARB and the Strong PHEV Coalition,\272\ we adjusted the
number of ZEV credits received by PHEV50s in our analysis to 1 full
credit under the ACC II proxy after determining with Argonne that the
range of all the PHEVs marked as ``PHEV50s'' in our analysis fleet was
sufficient to receive the full ZEV credit. Credit targets in the ACT
program (referred to as deficits) are calculated by multiplying sales
by percentage requirement and weight class multiplier. Each HDPUV full
ZEV in the 2b/3 class earns 0.8 credits and each near-zero emissions
vehicle (called PHEVs in the CAFE Model) earns 0.75 credits.\273\ We
adjusted some of the explanations in this section and the TSD
accompanying this rule in response to a comment from CARB requesting
that we very clearly distinguish between the number of credits earned
between different vehicle types and programs.\274\
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\272\ Strong PHEV Coalition, Docket No. NHTSA-2023-0022-60193,
at 4-5; States and Cities, NHTSA-2023-0022-61904-A2, at 46.
\273\ CARB. 2022. Final Regulation Order: Advanced Clean Trucks
Regulation. Available at: https://www.cga.ct.gov/2022/fc/pdf/2022HB-05039-R000465-FC.pdf. (Accessed: Feb. 27, 2024).
\274\ States and Cities, Docket No. NHTSA-2023-0022-61904-A2, at
46.
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[[Page 52613]]
The CAFE Model is designed to present outcomes at a national scale,
so the ZEV programs analysis considers the states as a group as opposed
to estimating each state's ZEV credit requirements individually.
However, in response to comments discussed above, we adjusted our ZEV
modeling to reflect states' varying commitments to the ACC I and ACC II
programs in different model years. To capture the appropriate volumes
subject to the ACT requirements and that would be deployed consistent
with ACC II, we still calculated each manufacturer's total market share
in ACC II or ACT states but also expanded the market share inputs to
vary across model year according to how many states had opted into the
program in each year between 2022 and 2035. We used Polk's National
Vehicle Population Profile (NVPP) from January 2022 to calculate these
percentages.\275\ These data include vehicle characteristics such as
powertrain, fuel type, manufacturer, nameplate, and trim level, as well
as the state in which each vehicle is sold. At the time of the data
snapshot, MY 2021 data from the NVPP contained the most current
estimate of new vehicle market shares for most manufacturers, and best
represented the registered vehicle population on January 1, 2022. We
assumed that this source of new registrations data was the best
approximation of new sales given the data options. For MY 2021 vehicles
in the latest NVPP, the ACC II State group at its largest makes up
approximately 38% of the total LD sales in the United States. The ACT
state groups comprise approximately 22% of the new Class 2b and 3
(HDPUV) vehicle market in the U.S.\276\ We based the volumes used for
the ZEV credit target calculation on each manufacturer's future assumed
market share in ACC II and ACT states. We made this assumption after
examining three past years of market share data and determining that
the geographic distribution of manufacturers' market shares remained
fairly constant.
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\275\ National Vehicle Population Profile (NVPP). 2022. Includes
content supplied by IHS Markit. Copyright R.L. Polk & Co., 2022. All
rights reserved. Available at: https://repository.duke.edu/catalog/caad9781-5438-4d65-b908-bf7d97a80b3a. (Accessed: Feb. 27, 2024).
\276\ We consulted with Polk and determined that their NVPP data
set that included vehicles in the 2b/3 weight class provided the
most fulsome dataset at the time of analysis, recognizing that the
2b/3 weight class includes both 2b/3 HD pickups and vans and other
classes within 2b/3 segment. While we determined that this dataset
was the best option for the analysis, it does not contain all Class
3 pickups and vans sold in the United States.
---------------------------------------------------------------------------
We calculated total credits required for ACT compliance and
consistent with ACC II implementation by multiplying the percentages
from each program's ZEV requirement schedule by the ACC II or ACT state
volumes.\277\ For the first set of ACC I requirements covering 2022
(the first modeled year in our analysis) through 2025, the percentage
requirements start at 14.5% and ramp up in increments to 22 percent by
2025.\278\ For ACC II, the potential percentage requirements start at
35% in MY 2026 and would ramp up to 100% in MY 2035 and subsequent
years if it became legally enforceable.\279\ For ACT Class 2b-3 Group
vehicles (equivalent to HDPUVs in our analysis), the percentage
requirements start at 5% in MY 2024 and increase to 55% in MYs 2035 and
beyond.\280\ We then multiply the resulting national sales volume
predictions by manufacturer by each manufacturer's total market share
in the ACC II or ACT states to capture the appropriate volumes in the
ZEV credits calculation. Credits consistent with ACC II by
manufacturer, per year, are determined within the CAFE Model by
multiplying the ACC II state volumes by CARB's ZEV credit percentage
requirement for each program respectively. In the first five years of
the ACC II program (as currently submitted to EPA), MYs 2026-2030, CARB
would allow for a pooled credits allowance, capped at a specific
percentage per year (which decreases in later years). We accounted for
this in the final rule in response to comments by reducing the percent
requirement in those years by the maximum pooled credit allowance.
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\277\ Note that the ACT credit target calculation includes a
vehicle class-specific weight modifier.
\278\ 13 CCR 1962.2(b).
\279\ 13 CCR 1962.4.
\280\ 13 CCR 1963.1(b).
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To ensure that the ACT credit requirements are met in the reference
baseline and deployment consistent with ACC II is reflected in the
reference baseline in each modeling scenario, we add ZEV candidate
vehicles to the reference baseline. We flag ZEV candidates in the
`vehicles' worksheet in the Market Data Input File, which is described
above and in detail in TSD Chapter 2.5. Although we identify the ZEV
candidates in the Market Data Input File, the actual conversion from
non-ZEV to ZEV vehicles occurs within the CAFE Model. The CAFE Model
converts a vehicle to a ZEV during the specified ZEV application year.
We flag ZEV candidates in two ways: using reference vehicles with
ICE powertrains or using PHEVs already in the existing fleet. When
using ICE powertrains as reference vehicles, we create a duplicate row
(which we refer to as the ZEV candidate row) in the Market Data Input
File's Vehicles tab for the ZEV version of the original vehicle,
designated with a unique vehicle code. The ZEV candidate row specifies
the relevant electrification technology level of the ZEV candidate
vehicle (e.g., BEV1, BEV2, and so on), the year that the
electrification technology is applied,\281\ and zeroes out the
candidate vehicle's sales volume. We identify all ICE vehicles with
varying levels of technology up to and including strong hybrid electric
vehicles (SHEVs) with rows that have 100 sales or more as ZEV
candidates. The CAFE Model moves the sales volume from the reference
vehicle row to the ZEV candidate row on an as-needed basis, considering
the MY's ZEV credit requirements. When using existing PHEVs within the
fleet as a starting point for identifying ZEV candidates, we base our
determination of ZEV application years for each model based on
expectations of manufacturers' future EV offerings. The entire sales
volume for that PHEV model row is converted to BEV on the application
year. This approach allows for only the needed additional sales volumes
to flip to ZEVs, based on the ACC II and ACT targets, and keeps us from
overestimating ZEVs in future years. The West Virginia Attorney
General's Office commented that ``NHTSA programmed the CAFE model to
assume that manufacturers will turn every internal combustion engine
vehicle into a ZEV at the `first redesign opportunity.' '' \282\ This
comment is a misunderstanding of the ZEV candidate modeling, where the
model will shift only the necessary volumes to comply with the ZEV
programs into ZEVs. As we stated in the NPRM and repeated above, this
approach allows for only the needed additional sales volumes to flip to
ZEVs, based on the ACC II and ACT targets, and keeps us from
overestimating ZEVs in future years. See TSD Chapter 2.5 for more
details on our ZEV program modeling.
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\281\ The model turns all ZEV candidates into BEVs in 2023, so
sales volumes can be shifted from the reference vehicle row to the
ZEV candidate row as necessary.
\282\ West Virginia AG et al., Docket No. NHTSA-2023-0022-63056-
A1, at 4.
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We identify LD ZEV candidates by duplicating every row with 100 or
more sales that is not a PHEV, BEV, or FCEV. We refer to the original
rows as `reference vehicles.' Although PHEVs are all ZEV candidates, we
do not duplicate those rows as we focus the CAFE Model's simulation of
the ACC II and ACT programs on BEVs. However, any PHEVs already in the
analysis fleet or made by the model will still receive
[[Page 52614]]
the appropriate ZEV credits. While flagging the ZEV candidates, we
identified each one as a BEV1, BEV2, BEV3, and BEV4 (BEV technology
types based on range), based partly on their price, market segment, and
vehicle features. For instance, we assumed luxury cars would have
longer ranges than economy cars. We also assigned AWD/4WD variants of
vehicles shorter BEV ranges when appropriate. See TSD Chapter 3.3 for
more detailed information on electrification options for this analysis.
The CAFE Model assigns credit values per vehicle depending on whether
the vehicle is a ZEV in a MY prior to 2026 or after, due to the change
in value after the update of the standards from ACC II (as currently
submitted to EPA).
We follow a similar process in assigning HDPUV ZEV candidates as in
assigning LD ZEV candidates. We duplicate every van row with 100 or
more sales and duplicate every pickup truck row with 100 or more sales
provided the vehicle model has a WF less than 7,500 and a diesel- or
gasoline-based range lower than 500 miles based on their rated fuel
efficiency and fuel tank size. This is consistent with our treatment of
HDPUV technology applicability rules, which are discussed below in
Section III.D and in TSD Chapter 3.3. Note that the model can still
apply PHEV technology to HDPUVs because of CAFE standards, and like the
LD analysis, any HDPUVs turned into PHEVs will receive credit in the
ZEV program. When identifying ZEV candidates, we assign each candidate
as either a BEV1 or a BEV2 based on their price, market segment, and
other vehicle attributes.
The CAFE Model brings manufacturers into compliance with ACC II (as
currently submitted to EPA) and ACT first in the reference baseline,
solving for the technology compliance pathway used to meet increasing
ZEV standards. Valero commented on the BEV sales shift in the HDPUV
analysis being too large for ACT compliance purposes.\283\ Our ZEV
modeling structure is designed to only convert ZEV candidates if needed
for the ACT program requirements. However, the CAFE Model also
incorporates many other factors into its technology and CAFE compliance
pathways decisions, technology payback, including technology costs and
sizing requirements based on vehicle performance. See the TSD Chapter
3.3 and Preamble Section III.D for further discussion of
electrification pathways and sales volume results.
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\283\ Valero, Docket No. NHTSA-2023-0022-58547-A8, at 3.
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In the proposal, we did not include two provisions of the ZEV
regulations in our modeling. First, while the ACC II program (as
currently submitted to EPA) includes compliance options for providing
reduced-price ZEVs to community mobility programs and for selling used
ZEVs (known as ``environmental justice vehicle values''), these are
focused on a more local level than we could reasonably represent in the
CAFE Model. The data for this part of the program are also not
available from real world application. Second, under ACC II (as
currently submitted to EPA), CARB would allow for some banking of ZEV
credits and credit pooling.\284\ In the proposal, we did not assume
compliance with ZEV requirements through banking of credits when
simulating the program in the CAFE Model and focused instead on
simulating manufacturer's deployment of ZEV consistent with ACC II
fully through the production of new ZEVs, after conversations with
CARB. In past rules, we assumed 80% compliance through vehicle
requirements and the remaining 20% with banked credits.\285\ In this
rule, due to the complicated nature of accounting for the entire credit
program, we focus only on incorporating CARB's allowance (as outlined
in the ACC II program currently submitted to EPA) for manufacturers to
use pooled credits in MYs 2026-2030 as part of their ZEV compliance in
our modeling. Based on guidance from CARB in the NPRM and assessment of
CARB's responses to manufacturer comments, we expect impacts of banked
credit provisions on overall volumes to be small.\286\
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\284\ CARB. 2022. Final Regulation Order: Section 1962.4, Title
13, California Code of Regulations. Available at: https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2022/accii/acciifro1962.4.pdf. (Accessed: Feb. 27, 2024).
\285\ CAFE TSD 2024-2026. Pg. 129.
\286\ CARB. 2022. Final Statement of Reasons for Rulemaking,
Including Summary of Comments and Agency Response. Appendix C:
Summary of Comments to ZEV Regulation and Agency Response. Available
at: https://ww2.arb.ca.gov/sites/default/files/barcu/regact/2022/accii/fsorappc.pdf. (Accessed: Feb. 27, 2024).
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TSD Chapter 2.5.1 includes more information about the process we
use to simulate ACT program compliance and ZEV deployment consistent
with ACC II in this analysis.
b. IRA Tax Credits
The IRA included several new and expanded tax credits intended to
encourage the adoption of clean vehicles.\287\ At the proposal stage,
the agency was presented with three questions on how to incorporate the
IRA. First, identifying which credits should be modeled. Next,
determining the responses of consumers and producers to the subsidies.
And finally determining which vehicles would qualify and how to value
the credits. In its proposal, NHTSA modeled two provisions of the IRA.
The first was the Advanced manufacturing production tax credit (AMPC).
This provision provides a $35 per kWh tax credit for manufacturers of
battery cells and an additional $10 per kWh for manufacturers of
battery modules (all applicable to manufacture in the United
States).\288\ The second provision modeled in the proposal was the
Clean vehicle credit (Sec. 30D),\289\ which provides up to $7,500
toward the purchase of clean vehicles with critical minerals extracted
or processed in the United States or a country with which the United
States has a free trade agreement or recycled in North America, and
battery components manufactured or assembled in North America.\173\
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\287\ Public Law No: 117-169.
\288\ 26 U.S.C. 45X. If a manufacturer produces a battery module
without battery cells, they are eligible to claim up to $45 per kWh
for the battery module. Two other provisions of the AMPC are not
modeled at this time; (i) a credit equal to 10 percent of the
manufacturing cost of electrode active materials, (ii) a credit
equal to 10 percent of the manufacturing cost of critical minerals
for battery production. We are not modeling these credits directly
because of how we estimate battery costs and to avoid the potential
to double count the tax credits if they are included into other
analyses that feed into our inputs. For a full account of the credit
and any limitations, please refer to the statutory text.
\289\ 26 U.S.C. 30D. For a full account of the credit and any
limitations, please refer to the statutory text.
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After NHTSA developed its methodology for incorporating the IRA tax
credits into its analysis for the proposal, the Treasury Department
clarified that leased vehicles qualify for the Credit for qualified
commercial clean vehicles (Sec. 45W) and that the credit could be
calculated based off of the DOE's Incremental Purchase Cost Methodology
and Results for Clean Vehicles report for at least calendar year 2023
as a safe harbor, rather than having the taxpayer estimate the actual
cost differential.\290\ As a result, EPA modified their approach to
modeling the IRA tax credits prior to finalizing their Multi-Pollutant
Emissions Standards for Model Years 2027 and Later Light-Duty and
Medium-Duty Vehicles proposal,
[[Page 52615]]
however NHTSA was unable to incorporate a similar methodology in time
for its proposal.
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\290\ See Internal Revenue Service. 2022. Frequently asked
questions related to new, previously-owned and qualified commercial
clean Vehicle credits. Q4 and Q8. Available at: https://www.irs.gov/pub/taxpros/fs-2022-42.pdf. (Accessed: Apr. 1, 2024).
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NHTSA noted in the proposal that there are several other provisions
of the IRA related to clean vehicles that were excluded from the
analysis, including the Previously-owned Clean Vehicle credit,\291\ the
Qualifying Advanced Energy Project credit (48C),\292\ IRA Sec. 50142
Advanced Technology Vehicle Manufacturing Loan Program, IRA Sec. 50143
Domestic Manufacturing Conversion Grants, IRA Sec. 70002 USPS Clean
Fleets, and IRA Sec. 13404 Alternative Fuel Vehicle Refueling Property
Credit. As NHTSA noted in the proposal, these credits and grants
incentivize clean vehicles through avenues the CAFE Model is currently
unable to consider as they typically affect a smaller subset of the
vehicle market and may influence purchasing decisions through means
other than price, e.g., through expanded charging networks. NHTSA also
does not model individual state tax credits or rebate programs. Unlike
ZEV requirements which are uniform across states that adopt them, state
clean vehicle tax credits and rebates vary from jurisdiction to
jurisdiction and are subject to more uncertainty than their Federal
counterparts.\293\ Tracking sales by jurisdiction and modeling each
program's individual compliance program would require significant
revisions to the CAFE Model and likely provide minimal changes in the
net outputs of the analysis.
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\291\ 26 U.S.C. 25E. For a full account of the credit and any
limitations, please refer to the statutory text.
\292\ 26 U.S.C. 48C. For a full account of the credit and any
limitations, please refer to the statutory text.
\293\ States have additional mechanisms to amend or remove tax
incentives or rebates. Sometimes, even after these programs are
enacted, uncertainty persists, see e.g. Farah, N. 2023. The Untimely
Death of America's `Most Equitable' EV Rebate. Last Revised: Jan.
30, 2023. Available at: https://www.eenews.net/articles/the-untimely-death-of-americas-most-equitable-ev-rebate/. (Accessed: May
31, 2023).
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NHTSA sought comment from the public about which credits should be
included in its analysis, and in particular whether the agency should
include Sec. 45W. Rivian and the American Council for an Energy
Efficient Economy (ACEEE) both suggested that NHTSA also include Sec.
45W in its analysis, to avoid underestimating the impact of the IRA on
reference baseline technology adoption.\294\ NHTSA did not receive any
comments recommending either removing the AMPC or Sec. 30D from its
analysis, or advocating for other credits, Federal or State, to be
included.
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\294\ Rivian, Docket No. NHTSA-2023-0022-28017, at 1; ACEEE,
Docket No. NHTSA-2023-0022-60684, at 9.
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For the Final Rule, NHTSA models three of the IRA provisions in its
analysis. NHTSA is again modeling the AMPC and, based on the
recommendations of commenters and guidance from the Treasury Department
indicating that Sec. 45W applies to leased personal vehicles,\295\
NHTSA decided to jointly model Sec. 30D and Sec. 45W (collectively,
the Clean Vehicle Credits or ``CVCs'').\296\ Both credits are available
at the time of sale and provide up to $7,500 towards the purchase of
light-duty and HDPUV PHEVs, BEVs, and FCEVs placed in service before
the end of 2032. Sec. 30D is only available to purchasers of vehicles
assembled in North America and which meet certain sourcing requirements
for critical minerals and battery components manufactured in North
America.\297\ Sec. 45W is available for commercial purchasers of
vehicles covered by this rule for a purpose other than resale. The
credit value is the lesser of the incremental cost to purchase a
comparable ICE vehicle or 15 percent of the cost basis for PHEVs or 30
percent of the cost basis for FCEVs and BEVs, up to $7,500 for vehicles
with GVWR less than 14,000. Since only one of the CVCs may be claimed
for purchasing a given vehicle, NHTSA modeled them jointly, employing a
methodology similar to EPA's approach.
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\295\ See, e.g., Katten. Treasury Releases Guidance on Electric
Vehicle Tax Credits (Jan. 3, 2023), available at https://katten.com/treasury-releases-guidance-on-electric-vehicle-tax-credits.
\296\ 26 U.S.C. 45W. For a full account of the credit and any
limitations, please refer to the statutory text.
\297\ There are vehicle price and consumer income limitations on
Sec. 30D as well. See Congressional Research Service. 2022. Tax
Provisions in the Inflation Reduction Act of 2022 (H.R. 5376).
Available at: https://crsreports.congress.gov/product/pdf/R/R47202/6. (Accessed: May 31, 2023).
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Interactions between producers and consumers in the marketplace
tend to ensure that subsidies like the AMPC and the CVCs, regardless of
whether they are initially paid to producers or consumers, are
ultimately shared between the two groups. In the proposal, NHTSA
assumed that manufacturers and consumers would each capture half the
dollar value of each credit. NHTSA sought comment on its modeling
assumptions related to how it modeled tax credits in the proposal. The
Institute for Policy Integrity (IPI) suggested that NHTSA's assumptions
about the incidence of tax credits were not compatible with its
assumptions about the pass-through of changes in technology costs to
consumers.\298\ AFPM commented that IRA tax credits may be eliminated
or modified, and that manufacturers may not pass the cost savings from
the AMPC through to consumers.\299\ NHTSA acknowledged uncertainty over
its pass-through assumptions in its proposal and ran sensitivity cases
which varied the degree to which these incentives are shared between
consumers and manufacturers. NHTSA believes that changing the
production quantities of these vehicles is a complex process that
involves developing new supply chains and significant changes in
production processes. As a result, NHTSA believes that manufacturers
are likely to experience some motivation to recover these costs by
attempting to capture some portion of IRA credits, for example, by
raising prices of qualifying vehicles in response to availability of
the 30D credit. On the other hand, NHTSA does not believe it is likely
that manufacturers will be able to raise prices for these vehicles
enough to fully capture the amount of credit in this way. NHTSA
believes that the tax credits are likely to be a salient factor in the
purchase decisions of consumers who purchase eligible vehicles and the
Sec. 30D credits have strict price eligibility constraints, which
likely limits the ability of manufacturers to raise prices enough to
fully capture the credits for vehicles whose sticker prices are close
to the limit. NHTSA notes that the overall new vehicle market supply
curve is the sum of all individual vehicle supply curves, which are
presumed to be upward sloping. This means that the overall new vehicle
supply curve will be more elastic than individual vehicle supply curves
at all price levels. This means that any effective tax or subsidy that
only hits a subset of vehicles will have a greater incidence on the
producer. Finally, unlike technology improvements, the Sec. 30D
credits have income limits for eligibility. Thus, the effective price
for buyers of these vehicles is not uniform since some potential buyers
will be above this income limit and will not qualify for the credit
(and may not wish to lease a vehicle in order to claim the Sec. 45W
credit). Since manufacturers cannot set different MSRP's based on the
customer's income, the sticker prices they choose may reflect a balance
between raising prices and not losing market share from potential
customers who do not qualify for the credits. As
[[Page 52616]]
a result, NHTSA believes that its split incidence of the credits
represents a reasonable approach to modeling this policy. We believe
that a similar logic applies to the AMPC where manufacturers operating
in a competitive market will not be able to fully capture the tax
credit. Many suppliers and OEMs work closely together through
contractual agreements and partnerships, and these close connections
promote fair pricing arrangements that prevent any one party from
capturing the full value of the credit. With regard to the future
existence of these tax credits, NHTSA conducted sensitivity analysis of
a case in which the tax credits are not included in the analysis but
does not believe that this should be treated as the central analysis
since these incentives are currently being claimed and are scheduled to
be available in the years that NHTSA analyzed.
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\298\ IPI, Docket No. NHTSA-2023-0022-60485, at 23-24.
\299\ AFPM, Docket No. NHTSA-2023-0022-61911, at 2.
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For this analysis, the agency maintained its assumption from the
proposal that manufacturers and consumers will each capture half of the
dollar value of the AMPC and CVCs. The agency assumes that
manufacturers' shares of both credits will offset part of the cost to
supply models that are eligible for the credits--PHEVs, BEVs, and
FCEVs. The subsidies reduce the costs of eligible vehicles and increase
their attractiveness to buyers (however, in the LD fleet, the tax
credits do not alter the penetration rate of BEVs in the regulatory
alternatives).\300\ Because the AMPC credit scales with battery
capacity, NHTSA staff determined average battery energy capacity by
powertrain (e.g., PHEV, BEV, FCEV) for passenger cars, light trucks,
and HDPUVs based on Argonne simulation outputs. For a more detailed
discussion of these assumptions, see TSD Chapter 2.3.2. In the proposal
NHTSA explained that it was unable to explicitly account for all of the
eligibility requirements of Sec. 30D and the AMPC, such as the
location of final assembly and battery production, the origin of
critical minerals, and the income restrictions of Sec. 30D.\301\
Instead, we account for these restraints through the credit schedules
that are constructed in part based off of these factors and allow all
PHEVs, BEVs, and FCEVs produced and sold during the time frame that tax
credits are offered to be eligible for those credits subject to the
MSRP restrictions discussed above.
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\300\ In Table 9-4 of the FRIA, both the reference case (labeled
``RC'') and the no tax credit case (``No EV tax credits'') show a
32.3% penetration rate for BEVs in the baseline and preferred
alternative.
\301\ See 88 FR 56179 (Aug. 17, 2023) for a more detailed
explanation of the process used for the proposal.
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To account for the agency's inability to dynamically model sourcing
requirements and income limits for Sec. 30D, NHTSA used projected
values of the average value of Sec. 30D and the AMPC for the proposal.
The projections increased throughout the analysis due to the
expectation that gradual improvements in supply chains over time would
allow more vehicles to qualify for the credits. Commenters suggested
that NHTSA's assumed values for the Sec. 30D credit were too
optimistic and did not reflect limitations that manufacturers face in
adjusting their supply chains and component manufacturing processes to
produce vehicles that qualify for the credit.\302\ Similarly, some
commenters argued that NHTSA did not adequately explain how it arrived
at the credit estimates, did not offer any data to support the
estimates, and failed to properly account for foreign entities of
concern.\303\
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\302\ CFDC et al., Docket No. NHTSA-2023-0022-62242, at 13-15;
NATSO et al., Docket No. NHTSA-2023-0022-61070, at 4-5; UAW, Docket
No. NHTSA-2023-0022-63061, at 3-4.
\303\ CFDC et al, Docket No. NHTSA-2023-0022-62242-A1, at 3.
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To address the concerns raised by commenters, NHTSA is using an
independent report performed by DOE for the Final Rule that provides
combined values of the CVCs.\304\ These values consider the latest
information of EV penetration rates, EV retail prices, the share of US
EV sales that meet the critical minerals and battery component
requirements, the share of vehicles that exclude suppliers that are
``Foreign Entities of Concern'', and lease rates for vehicles that
qualify for the Sec. 45W CVC. The DOE projections are the most
detailed and rigorous projections of credit availability that NHTSA is
aware of at this time. According to DOE's analysis the average credit
value for the CVCs across all PHEV, BEV, and FCEV sales in a given year
will never reach its full $7,500 value for all vehicles, and instead
project a maximum average credit value of $6,000. NHTSA is using the
same projection for the average AMPC credit per kwh as in the proposal.
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\304\ U.S. Department of Energy.2024. Estimating Federal Tax
Incentives for Heavy Duty Electric Vehicle Infrastructure and for
Acquiring Electric Vehicles Weighing Less Than 14,000 Pounds.
Memorandum, March 11, 2024.
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Similar to the proposal, the CAFE Model's approach to analyzing the
effects of the CVCs includes a statutory restriction. The CAFE Model
accounts for the MSRP restrictions of the Sec. 30D by assuming that
the CVCs cannot be applied to cars with an MSRP above $55,000 or other
vehicles with an MSRP above $80,000, since these are ineligible for
Sec. 30D. Sec. 45W does not have the same MSRP restrictions, however
since NHTSA is unable to model the CVCs separately at this time, the
agency had to choose whether to model the restriction for both CVCs or
not to model the restriction at all. NHTSA chose to include the
restriction for both CVCs to be conservative.\305\ See Chapter 2.5.2 of
the TSD for additional details on how NHTSA implements the IRA tax
credits.
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\305\ Bureau of Transportation Statisitics. New and Used
Passenger Car and Light Truck Sales and Leases. Avaliable at:
https://www.bts.gov/content/new-and-used-passenger-car-sales-and-leases-thousands-vehicles. (Accessed: Apr. 2, 2024).
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As the agency was coordinating with EPA and DOE on tax credits,
NHTSA discovered that it was using nominal values for tax credits in
the proposal instead of real dollars. NHTSA uses real dollars for
future costs and benefits, such as technology costs in future model
years. Including the tax credits as nominal dollars instead of real
dollars artificially raises the value of the credits in respect to
other costs. For the Final Rule, NHTSA has converted the DOE
projections to real dollars.
As explained in the proposal, the CAFE model projects vehicles in
model year cohorts rather than on a calendar year basis. Given that
model years and calendar years can be misaligned, e.g., a MY 24 vehicle
could be sold in calendar years 2023, 2024, or even 2025, choosing
which calendar year a model year falls into is important for assigning
tax credits which are phased-out during the analytical period. In the
proposal, NHTSA assumed that the majority of vehicles of a given model
year would be sold in the calendar year that preceded it, e.g., MY 2024
would largely be sold in calendar year 2023. NHTSA also noted at the
time that there was a possible incentive for manufacturers to pull-up
sales in the last calendar years that tax credits are available. NHTSA
reanalyzed the timing of new vehicle sales and new vehicle
registrations and determined that for the Final Rule it was appropriate
to change its assumption that credits available in a given calendar
year be available to all vehicles sold in the following model year.
Instead, NHTSA decided to model vehicles in a given model year as
eligible for credits available in the same calendar year. As a result,
NHTSA applies the credits to MYs 2023-2032 in the analysis for both
LDVs and HDPUVs.
[[Page 52617]]
6. Technology Applicability Equations and Rules
How does the CAFE Model decide how to apply technology to the
analysis fleet of vehicles? We described above that the CAFE Model
projects cost-effective ways that vehicle manufacturers could comply
with CAFE standards, subject to limits that ensure that the model
reasonably replicates manufacturer's decisions in the real-world. This
section describes the equations the CAFE Model uses to determine how to
apply technology to vehicles, including whether technologies are cost-
effective, and why we believe the CAFE Model's calculation of potential
compliance pathways reasonably represents manufacturers' decision-
making. This section also gives a high-level overview of real-world
limitations that vehicle manufacturers face when designing and
manufacturing vehicles, and how we include those in the technology
inputs and assumptions in the analysis.
The CAFE Model begins by looking at a manufacturer's fleet in a
given MY and determining whether the fleet meets its CAFE standard. If
the fleet does not meet its standard, the model begins the process of
applying technology to vehicles. We described above how vehicle
manufacturers use the same or similar engines, transmissions, and
platforms across multiple vehicle models, and we track vehicle models
that share technology by assigning Engine, Transmission, and Platform
Codes to vehicles in the analysis fleet. As an example, the Ford 10R80
10-speed transmission is currently used in the following Ford Motor
Company vehicles: 2017-present Ford F-150, 2018-present Ford Mustang,
2018-present Ford Expedition/Lincoln Navigator, 2019-present Ford
Ranger, 2020-present Ford Explorer/Lincoln Aviator, and the 2020-
present Ford Transit.\306\ The CAFE Model first determines whether any
technology should be ``inherited'' from an engine, transmission, or
platform that currently uses the technology to a vehicle that is due
for a refresh or redesign. Using the Ford 10R80 10-speed transmission
analysis as applied to the CAFE Model, the above models would be linked
using the same Transmission Code. Even though the vehicles might be
eligible for technology applications in different years because each
vehicle model is on a different refresh or redesign cycle, each vehicle
could potentially inherit the 10R80 10-speed transmission. The model
then again evaluates whether the manufacturer's fleet complies with its
CAFE standard. If it does not, the model begins the process of
evaluating what from our universe of technologies could be applied to
the manufacturer's vehicles.
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\306\ DOE. 2013. Light-Duty Vehicles Technical Requirements and
Gaps for Lightweight and Propulsion Materials. Final Report.
Available at: https://www.energy.gov/eere/vehicles/articles/workshop-reportlight-duty-vehicles-technical-requirements-and-gaps.
(Accessed: Feb. 27, 2024).
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The CAFE Model applies the most cost-effective technology out of
all technology options that could potentially be applied. To determine
whether a particular technology is cost-effective, the model will
calculate the ``effective cost'' of multiple technology options and
choose the option that results in the lowest ``effective cost.'' The
``effective cost'' calculation is actually multiple calculations, but
we only describe the highest levels of that logic here; interested
readers can consult the CAFE Model Documentation for additional
information on the calculation of effective cost. Equation III-6 shows
the CAFE Model's effective cost calculation for this analysis.
[GRAPHIC] [TIFF OMITTED] TR24JN24.059
Where:
TechCostTotal: the total cost of a candidate technology evaluated on
a group of selected vehicles;
TaxCreditsTotal: the cumulative value of additional vehicle and
battery tax credits (or, Federal Incentives) resulting from
application of a candidate technology evaluated on a group of
selected vehicles;
FuelSavingsTotal: the value of the reduction in fuel consumption
(or, fuel savings) resulting from application of a candidate
technology evaluated on a group of selected vehicles;
[Delta]Fines: the change in manufacturer's fines in the analysis
year if the CAFE compliance program is being evaluated, or zero if
evaluating compliance with CO2 standards;
[Delta]ComplianceCredits: the change in manufacturer's compliance
credits in the analysis year, which depending on the compliance
program being evaluated, corresponds to the change in CAFE credits
(denominated in thousands of gallons) or the change in
CO2 credits (denominated in metric tons); and
EffCost: the calculated effective cost attributed to application of
a candidate technology evaluated on a group of selected vehicles.
For the effective cost calculation, the CAFE Model considers the
total cost of a technology that could be applied to a group of
connected vehicles, just as a vehicle manufacturer might consider what
new technologies it has that are ready for the market, and which
vehicles should and could receive the upgrade. Next, like the
technology costs, the CAFE Model calculates the total value of Federal
incentives (for this analysis, Federal tax credits) available for a
technology that could be applied to a group of vehicles and subtracts
that total incentive from the total technology costs. For example, even
though we do not consider the fuel economy of LD BEVs in our standard-
setting analysis, we do account for the costs of vehicles that
manufacturers may build in response to California's ACC I program (and
in the HDPUV analysis, the ACT program), and additional electric
vehicles that manufacturers have committed to deploy (consistent with
ACC II), as part of our evaluation of how the world would look without
our regulation, or more simply, the regulatory reference baseline. If
the CAFE Model is evaluating whether to build a BEV outside of the MYs
for which NHTSA is setting standards (if applicable in the modeling
scenario), it starts with the total technology cost for a group of BEVs
and subtracts the total value of the tax credits that could be applied
to that group of vehicles.
The total fuel savings calculation is slightly more complicated.
Broadly, when considering total fuel savings from switching from one
technology to another, the CAFE Model must calculate the total fuel
cost for the vehicle before application of a technology and subtract
the total fuel cost for the vehicle after calculation of that
technology. The total fuel cost for a given vehicle depends on both the
price of gas (or gasoline
[[Page 52618]]
equivalent fuel) and the number of miles that a vehicle is driven,
among other factors. As technology is applied to vehicles in groups,
the total fuel cost is then multiplied by the sales volume of a vehicle
in a MY to equal total fuel savings. This equation also includes an
assumption that consumers are likely to buy vehicles with fuel economy-
improving technology that pays for itself within 2.5 years, or 30
months. Finally, in the numerator, we subtract the change in a
manufacturer's expected fines before and after application of a
specific technology. Then, the result from the sequence above is
divided by the change in compliance credits, which means a
manufacturer's credits earned (expressed as thousands of gallons for
the purposes of effective cost calculation) in a compliance category
before and after the application of a technology to a group of
vehicles.
The effective cost calculation has evolved over successive CAFE
Model iterations to become increasingly more complex; however,
manufacturers' decision-making regarding what fuel economy-improving
technology to add to vehicles has also become increasingly more
complex. We believe this calculation appropriately captures a number of
manufacturers implicit or explicit considerations.
The model accounts explicitly for each MY, applying technologies
when vehicles are scheduled to be redesigned or freshened and carrying
forward technologies between MYs once they are applied. The CAFE Model
accounts explicitly for each MY because manufacturers actually ``carry
forward'' most technologies between MYs, tending to concentrate the
application of new technology to vehicle redesigns or mid-cycle
``freshenings,'' and design cycles vary widely among manufacturers and
specific products. Comments by manufacturers and model peer reviewers
to past CAFE rules have strongly supported explicit year-by-year
simulation. The multi-year planning capability, simulation of ``market-
driven overcompliance,'' and EPCA credit mechanisms increase the
model's ability to simulate manufacturers' real-world behavior,
accounting for the fact that manufacturers will seek out compliance
paths for several MYs at a time, while accommodating the year-by-year
requirement. This same multi-year planning structure is used to
simulate responses to standards defined in grams CO2/mile
and utilizing the set of specific credit provisions defined under EPA's
program, when applicable in the modeling scenario.\307\
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\307\ In this analysis, EPA's MYs 2022-2026 standards are
included in the baseline, as discussed in more detail in Section IV.
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In addition to the model's technology application decisions
pursuant to the compliance simulation algorithm, there are also several
technology inputs and assumptions that work together to determine which
technologies the CAFE Model can apply. The technology pathways,
discussed in detail above, are one significant way that we instruct the
CAFE Model to apply technology. Again, the pathways define technologies
that are mutually exclusive (i.e., that cannot be applied at the same
time), and define the direction in which vehicles can advance as the
modeling system evaluates specific technologies for application. Then,
the arrows between technologies instruct the model on the order in
which to evaluate technologies on a pathway, to ensure that a vehicle
that uses a more fuel-efficient technology cannot downgrade to a less
efficient option.
In addition to technology pathway logic, we have several technology
applicability rules that we use to better replicate manufacturers'
decision-making. The ``skip'' input--represented in the Market Data
Input File as ``SKIP'' in the appropriate technology column
corresponding to a specific vehicle model--is particularly important
for accurately representing how a manufacturer applies technologies to
their vehicles in the real world. This tells the model not to apply a
specific technology to a specific vehicle model. SKIP inputs are used
to simulate manufacturer decisions with cost-benefit in mind, including
(1) parts and process sharing; (2) stranded capital; and (3)
performance neutrality.
First, parts sharing includes the concepts of platform, engine, and
transmission sharing, which are discussed in detail in Section II.C.2
and Section II.C.3, above. A ``platform'' refers to engineered
underpinnings shared on several differentiated vehicle models and
configurations. Manufacturers share and standardize components,
systems, tooling, and assembly processes within their products (and
occasionally with the products of another manufacturer) to manage
complexity and costs for development, manufacturing, and assembly.
Detailed discussion for this type of SKIP is provided in the ``adoption
features'' section for different technologies, if applicable, in
Chapter 3 of the TSD.
Similar to vehicle platforms, manufacturers create engines that
share parts. For instance, manufacturers may use different piston
strokes on a common engine block or bore out common engine block
castings with different diameters to create engines with an array of
displacements. Head assemblies for different displacement engines may
share many components and manufacturing processes across the engine
family. Manufacturers may finish crankshafts with the same tools to
similar tolerances. Engines on the same architecture may share pistons,
connecting rods, and the same engine architecture may include both six-
and eight-cylinder engines. One engine family may appear on many
vehicles on a platform, and changes to that engine may or may not carry
through to all the vehicles. Some engines are shared across a range of
different vehicle platforms. Vehicle model/configurations in the
analysis fleet that share engines belonging to the same platform are
identified as such, and we also may apply a SKIP to a particular engine
technology where we know that a manufacturer shares an engine
throughout several of their vehicle models, and the engine technology
is not appropriate for any of the platforms that share the same engine.
It is important to note that manufacturers define common engines
differently. Some manufacturers consider engines as ``common'' if the
engines share an architecture, components, or manufacturing processes.
Other manufacturers take a narrower definition, and only assume
``common'' engines if the parts in the engine assembly are the same. In
some cases, manufacturers designate each engine in each application as
a unique powertrain. For example, a manufacturer may have listed two
engines separately for a pair that share designs for the engine block,
the crank shaft, and the head because the accessory drive components,
oil pans, and engine calibrations differ between the two. In practice,
many engines share parts, tooling, and assembly resources, and
manufacturers often coordinate design updates between two similar
engines. We consider engines together (for purposes of coding,
discussed in Section III.C.2 above, and for SKIP application) if the
engines share a common cylinder count and configuration, displacement,
valvetrain, and fuel type, or if the engines only differed slightly in
compression ratio (CR), horsepower, and displacement.
Parts sharing also includes the concept of sharing manufacturing
lines (the systems, tooling, and assembly
[[Page 52619]]
processes discussed above), since manufacturers are unlikely to build a
new manufacturing line to build a completely new engine. A new engine
that is designed to be mass manufactured on an existing production line
will have limits in number of parts used, type of parts used, weight,
and packaging size due to the weight limits of the pallets, material
handling interaction points, and conveyance line design to produce one
unit of a product. The restrictions will be reflected in the usage of a
SKIP of engine technology that the manufacturing line would not
accommodate.
SKIPs also relate to instances of stranded capital when
manufacturers amortize research, development, and tooling expenses over
many years, especially for engines and transmissions. The traditional
production life cycles for transmissions and engines have been a decade
or longer. If a manufacturer launches or updates a product with fuel-
saving technology, and then later replaces that technology with an
unrelated or different fuel-saving technology before the equipment and
research and development investments have been fully paid off, there
will be unrecouped, or stranded, capital costs. Quantifying stranded
capital costs accounts for such lost investments. One design where
manufacturers take an iterative redesign approach, as described in a
recent SAE paper,\308\ is the MacPherson strut suspension. It is a
popular low-cost suspension design and manufacturers use it across
their fleet. As we observed previously, manufacturers may be shifting
their investment strategies in ways that may alter how stranded capital
could be considered. For example, some suppliers sell similar
transmissions to multiple manufacturers. Such arrangements allow
manufacturers to share in capital expenditures or amortize expenses
more quickly. Manufacturers share parts on vehicles around the globe,
achieving greater scale and greatly affecting tooling strategies and
costs.
---------------------------------------------------------------------------
\308\ Pilla, S. et al. 2021. Parametric Design Study of
McPherson Strut to Stabilizer Bar Link Bracket Weld Fatigue Using
Design for Six Sigma and Taguchi Approach. SAE Technical Paper 2021-
01-0235. Available at: https://doi.org/10.4271/2021-01-0235.
(Accessed: Feb. 27, 2024).
---------------------------------------------------------------------------
As a proxy for stranded capital, the CAFE Model accounts for
platform and engine sharing and includes redesign and refresh cycles
for significant and less significant vehicle updates. This analysis
continues to rely on the CAFE Model's explicit year-by-year accounting
for estimated refresh and redesign cycles, and shared vehicle platforms
and engines, to moderate the cadence of technology adoption and thereby
limit the implied occurrence of stranded capital and the need to
account for it explicitly. In addition, confining some manufacturers to
specific advanced technology pathways through technology adoption
features acts as a proxy to indirectly account for stranded capital.
Adoption features specific to each technology, if applied on a
manufacturer-by-manufacturer basis, are discussed in each technology
section. We discuss comments received on refresh and redesign cycles,
parts-sharing, and SKIP logic below.
The National Resources Defense Council (NRDC) commented about
several aspects of the redesign and refresh cycles included in the
model. NRDC commented that we did not clearly explain why
manufacturers' historic redesign cadences ``are representative of what
manufacturers `can' do if required,'' citing EPCA's command that each
standard we set be the ``maximum feasible'' standard. NRDC gave several
examples, like that ``NHTSA's historical data show that Ford and GM
have redesigned heavier pickups every 6 years on average, Draft TSD at
2-29, but show Toyota taking 9 years on average.'' NRDC stated that
``[i]f it is feasible and practicable for two full-line manufacturers
to redesign on a 6-year cadence, it is unclear why it is infeasible for
others to do so as well.'' NRDC continued on to state that ``[t]he
disparity between assumed redesign cycles for different automakers also
appears to violate NHTSA's interpretation of `economic practicability,'
which ``has long abandoned the `least capable manufacturer' approach.
88 FR at 56,314.'' NRDC also took issue with our interpretation that
redesign cycles help us to account for stranded capital costs, which we
do not explicitly include in our modeling, stating that ``[t]he
possibility of even considerable stranded capital for some automakers-a
reduced probability given the considerable lead time to MY2031 here-is
not a per se `harsh' economic consequence for the `industry,' . . .
that might render standards not economically practicable.'' NRDC
requested that an alternative with reduced time between redesigns/
refreshes should be modeled to compare the sensitivity of key
metrics.\309\ NRDC also expressed that NHTSA's sensitivity case
allowing for annual redesigns is not instructive and questioned the
reasons for including it and not a more realistic case.
---------------------------------------------------------------------------
\309\ Joint NGOs, Docket No. NHTSA-2023-0022-61944.
---------------------------------------------------------------------------
NHTSA agrees with NRDC that refresh and redesign cycles are a
significant input to the CAFE Model, and we understand that using
refresh and redesign cycles to represent stranded capital that
otherwise would be difficult to quantify has been a longstanding point
of disagreement between the agency and NRDC. NHTSA continues to believe
that the resources manufacturers spend on new vehicle technologies--
including developing, testing, and deploying those technologies--
represents a significant amount of capital, although that number may be
declining because, like both NHTSA and NRDC mentioned, manufacturers
are taking advantage of sharing suppliers and sharing parts (which
NHTSA does model).
While NHTSA does observe different trends in development cycles for
different manufacturers, the adoption of new technologies, particularly
for major and advanced components, continues to require multiple years
of investment before being deployed to production models. Table 2-9 in
the TSD contains information about the percentage of a manufacturer's
vehicle fleet that is expected to be redesigned. The contents reflect
that each manufacturer has their own development schedules, which vary
due to multiple factors including technological adoption trends and
consumer acceptance in specific market segments.\310\ \311\ We also
show the average redesign schedules for each technology class in the
TSD, which similarly bears out this trend. On the other hand, as
discussed further in Section VI, vehicle manufacturers in comment to
the proposal reiterated that their ability to spend resources improving
ICE vehicles between now and MY 2031 are limited in light of the need
to spend resources on the BEV transition. NHTSA understands this to
mean that the potential for the negative consequences of stranding
capital is an even more important consideration to manufacturers than
it may have been in previous rules. For purposes of this analysis, we
believe that our refresh and redesign cycles are reasonable, for the
reasons discussed in more detail below. If NHTSA were to reevaluate
refresh/
[[Page 52620]]
redesign cycles, it would be as part of a future rulemaking action, in
which all stakeholders would have the opportunity to comment.
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\310\ An example of this is Nissan's Variable Compression Ratio
engine that was first introduced in 2019 Infinity QX50 before it was
expanded to other Nissan products few years later.
\311\ Kojima, S. et al. 2018. Development of a New 2L Gasoline
VC-Turbo Engine with the World's First Variable Compression Ratio
Technology. SAE Technical Paper 2018-01-0371, Available at: https://doi.org/10.4271/2018-01-0371. (Accessed: Apr. 5, 2024).
---------------------------------------------------------------------------
That said, we disagree that the way that we apply refresh and
redesign cycles in the model is contrary to EPCA and we disagree with
the examples that NRDC provided to illustrate that point. Allowing some
manufacturers to have longer product redesign cycles does not conflict
with our statement that we should not be setting standards with
reference to a least capable manufacturer. There are several reasons
why a manufacturer could be the ``least capable'' in fuel economy space
that have nothing to do with its vehicles' refresh or redesign cycles.
Using the example of manufacturers that NRDC provided, NHTSA's analysis
estimates that under the preferred alternative in MY 2031, Ford's light
truck fleet achieves a fuel economy level of 42.6 mpg, exactly meeting
their standard, GM's light truck fleet achieves a fuel economy level of
40.9 mpg, falling short of their standard by 0.9 mpg, while Toyota's
light truck fleet achieves a fuel economy level of 50.2 mpg, exceeding
their standard by 3.7 mpg.\312\ Each manufacturer takes a different
approach to redesigning its pickup trucks--Ford and GM every six years
and Toyota every nine years--but on a fleet average basis, which is the
relevant metric when considering fuel economy standards, each
manufacturer's pickup design cycles are not indicative of their fleets'
performance.
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\312\ As a reminder, each manufacturer has a different projected
standard based on the footprints and sales volumes of the vehicles
it sells.
---------------------------------------------------------------------------
NRDC also stated that using historical average redesign cadences
``can obscure significant variation about the average,'' \313\ using as
an example the design window for the Ram 1500 and the Ram 1500 Classic
in their comment--stating that ``[i]t is not clear how the automaker
can feasibly update the 1500 every six years but not upgrade the 1500
Classic any faster than every 9 years.'' The most recent redesign of
the Ram 1500 Classic was in 2009 and it will continue to be sold as-is
for the 2024 model year.\314\ Ram did update the 1500 in 2019 with a
BISG system, but for reasons unique to Ram they decided to keep making
the existing 1500 Classic. Since the manufacturer chose to keep the
same product for 15 years, we cannot assume there would be a ``lost''
redesign window for this particular product. Note that the Ram 1500
Classic example is an extremely fringe example with a handful of other
vehicles; as we showed in the Draft TSD and again in the Final TSD
accompanying this rule, on average across the industry, manufacturers
redesign vehicles every 6.6 years.
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\313\ We assume that NRDC means that using an average obscures
large deviations from the average, but since we assign refresh and
redesigns on a model level, not just at a manufacturer level, we can
see where the deviations occur, and as discussed below in regards to
this example, we believe these generally represent a small fraction
of the fleet.
\314\ Fitzgerald, J. 2024 The Ancient Ram 1500 Classic Returns
for Another Year, Car and Driver. Last revised: Jan 5, 2024.
Available at: https://www.caranddriver.com/news/a46297349/2024-ram-1500-classic-confirmed/. (Accessed: Apr. 5, 2024).
---------------------------------------------------------------------------
NRDC also commented about the interaction between redesign cycles
and shared components, citing the Dodge Challenger as example of when
``a vehicle may go into a redesign window, yet not have major
components such as engines upgraded, because the leader vehicle for
that engine [the Ram 1500 Classic] has not yet entered its redesign
window. NHTSA believes that NRDC's Dodge Challenger/Ram example to
support using alternative redesign assumptions is an incomplete
understanding of how the CAFE Model considers leader-follower
relationships and redesigns. The CAFE Model considers each component
separately when determining the most cost-effective path to compliance.
Sticking to engines, the Dodge Challenger can accept four different
engines, one of which is not used in any Ram truck.
NHTSA does consider the effect of reducing the time between
redesigns and refreshes through a sensitivity case, the ``annual
redesigns case,'' \315\ which, as mentioned above, NRDC also took issue
with. Perhaps we were not clear enough in the PRIA about the relative
importance of this sensitivity case to our decision making, so we will
clarify here. When we look at the annual redesign sensitivity case, we
are examining the most extreme case of potential redesigns, explicitly
not counting for the development, integration and manufacturing costs
associated with such a cadence. Thus, this scenario is instructive of
the upper bound of potential benefits under the assumption of
unrestrained expenditures for vehicle design. While we agree that there
are model outliers that could conceivably redesign closer to the
average of six years, or even on an accelerated schedule of five years,
we do not believe that we would see redesigns occurring, for example,
any faster than three or four years. This is why we include planned
vehicle refreshes in the modeling as well. Thus, the annual redesigns
case is instructive because it shows us that any further refining of
our redesign cadences (i.e., on a scale between what we currently use
and what we might consider reasonable for a lower bound schedule, which
presumably would not be any shorter than the refresh schedule) would
not have a significant impact on the analysis.
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\315\ See FRIA Chapter 9.2.2.1, Redesign Schedules.
---------------------------------------------------------------------------
Like we maintain in other aspects of our analysis, some
manufacturers' redesign cycles may be shorter than we model, and some
manufacturers' redesign cycles may be longer than we model. We believe
that it is reasonable to, on average, have our analysis reflect the
capability of the industry. NHTSA will continue to follow industry
trends in vehicle refresh and redesigns--like moving sales volume of an
ICE model to a hybrid model, for example, or evaluating which
technologies are now more frequently being applied during refreshes
than redesigns--and consider how the refresh and redesign inputs could
be updated in future analyses.\316\
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\316\ Just as vehicle manufacturers must spend significant
resources to develop, test, and deploy new vehicle technologies,
NHTSA must spend a significant amount of time (generally longer than
that permitted in one CAFE rulemaking cycle) to develop, test, and
deploy any new significant model update. We would also like, as
mentioned above, for any update to our approach to redesign
schedules to be subject to public comment for stakeholder feedback.
---------------------------------------------------------------------------
NHTSA also received two comments related to parts sharing. The
Institute for Policy Integrity (IPI) at New York University School of
Law commented that ``NHTSA assumes that manufacturers apply the same
costly technology to multiple models that share the same vehicle
platform (i.e., the car's essential design, engineering, and production
components), while also (as noted above) maintaining their market
shares irrespective of these cost changes.'' IPI stated that this
assumption ``restricts manufacturers from optimizing their technology
strategies,'' which leads the model to overstate compliance costs.
Similarly, NRDC argued that ``NHTSA should reevaluate categorical
restrictions on upgrading shared components on separate paths.'' NRDC
included several examples of components shared on vehicles that it
thought resulted in a vehicle not being updated with additional
technology.
While the CAFE Model considers part sharing by manufacturers across
vehicle platforms, this assumption is based on real-world observations
of the latest vehicle markets (See TSD 2.2, The Market Data Input
File). As mentioned in TSD Chapter 2.2.1, manufacturers are expected to
share parts across platforms to take advantage of economies of scale.
These factors prevent the CAFE Model
[[Page 52621]]
from predicting the adoption of unreasonably costly technologies across
vehicle fleets.
While use of parts sharing by the CAFE Model is described as a
restriction, we do not believe this is an accurate characterization. By
considering upgrades across all vehicles that share a particular
component, we are able to capture the total volume of that component in
a way analogous to the manufacturers. If a potential upgrade is not
cost-effective in the aggregate, it is unlikely that it would be cost-
effective for a subset with a smaller volume.
IPI points to Mazda's MY 2032 estimated per-vehicle technology
costs under alternative PC6LT8 as an example of an unrealistic outcome
resulting from parts sharing. NHTSA maintains that this is an accurate
projection of the effects of that regulatory alternative. The high per-
vehicle costs in this specific case are due to a confluence of factors.
The CAFE Model calculates the least expensive total regulatory cost,
which includes both technology costs and fines. Mazda's preference to
avoid fines in MY 2032 means that they would spend more on technology
in order to comply with the standards. As a manufacturer, Mazda has an
uncommonly high level of platform commonality, which means that
investments in platform technology are likely to be propagated
throughout their fleet in order to amortize costs more quickly. Their
relatively small sales volume also drives up the per-vehicle costs.
Taken together, these explain why the projected technology cost for
Mazda is high, yet it is still within the same order of magnitude as
some of Mazda's peer manufacturers (see FRIA Chapter 8). In the next
most stringent regulatory alternative, Mazda's per-vehicle costs are
projected to be in the middle of the pack compared to their peers.
NRDC also gave the example that the Dodge Challenger ``will be
prevented from upgrading to any high-compression ratio (HCR) engine,
because the [sales] leader Classic 1500 is categorically excluded from
upgrading to an HCR engine in the CAFE model because it is a pickup
truck'' as another example of the pitfalls of part sharing. NHTSA
believes that this is a misreading of how the CAFE Model handles
upgrade paths for shared components. The model restricts certain
upgrade paths on the component level based on technology paths defined
in TSD Chapter 3 and in this case, both the 1500 and the Challenger are
only prevented from upgrading to a non-hybrid HCR engine. In the
specific NRDC example, Engine Code 123602, a DOHC engine meant for high
torque, was selected by Stellantis for, amongst other models, a pickup
truck (Ram 1500 Classic) and a high-performance car (Dodge Challenger).
HCR engines have higher efficiency at the cost of lower torque and
lower power density, making them an unsuitable replacement for either
model or any other model in this engine family. TSD Chapter 2.2.1,
Characterizing Vehicles and their Technology Content has further
information on how the CAFE Model applies SKIP logic. Also see TSD
Chapter 3.1.1.2.3 for more information about HCR and Atkinson cycle
engines.
NRDC also cited [an] ``example of an engine-sharing family in its
2018 fuel economy standards proposal included the Chevy Equinox SUV,
which shared a 6-cylinder engine with the Colorado and Canyon pickups
(along with other vehicles)'' that in later years ``did not maintain
engine sharing.'' NHTSA stands by its position that historical data
show manufacturers typically maintain parts commonality. The MY 2018
Chevy Equinox was available with two engines, a 4-cylinder and 6-
cylinder, both naturally aspirated. The 4-cylinder variant was shared
with the GMC Terrain and several Buick models which have since been
discontinued, but not with the Chevy Colorado or GMC Canyon pickup
trucks. This lineage was replaced by a choice of 1.5L or 2.0L 4-
cylinder turbo engines in MY 2020 and now a single 1.5L 4-cylinder
turbo in MY 2022. This engine is still shared between the Chevy Equinox
and the GMC Terrain. In contrast, the Colorado and Canyon Pickups
continue to use naturally aspirated engines in the 4-cylinder and 6-
cylinder varieties, but these 4-cylinder engines are from a different
lineage that were never shared with the Equinox. Instead of showing an
example of manufacturers fracturing an existing engine family, this
example validates our approach of considering technology upgrades at
the component level.
Finally, we ensure that our analysis is performance neutral because
the goal is to capture the costs and benefits of vehicle manufacturers
adding fuel economy-improving technology because of CAFE standards, and
not to inappropriately capture costs and benefits for changing other
vehicle attributes that may have a monetary value associated with
them.\317\ This means that we ``SKIP'' some technologies where we can
reasonably assume that the technology would not be able to maintain a
performance attribute for the vehicle, and where our simulation over
test cycles may not capture the technology limitation.
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\317\ See, e.g., 87 FR 25887, citing EPA, Consumer Willingness
to Pay for Vehicle Attributes: What is the Current State of
Knowledge? (2018)). Importantly, the EPA-commissioned study ``found
very little useful consensus'' on how consumers value various
vehicle attributes, which they concluded were of little value in
informing policy decisions.
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For example, prior to the development of SAE J2807, manufacturers
used internal rating methods for their vehicle towing capacity.
Manufacturers switched to the SAE tow rating standard at the next
redesign of their respective vehicles so that they could mitigate costs
via parts sharing and remain competitive in performance. Usually, the
most capable powertrain configuration will also have the highest towing
capacity and can be reflected in using this input feature. Separately,
we also ensure that the analysis is performance neutral through other
inputs and assumptions, like developing our engine maps assuming use
with a fuel grade most commonly available to consumers.\318\ Those
assumptions are discussed throughout this section, and in Chapters 2
and 3 of the TSD. Technology ``phase-in caps'' and the ``phase-in start
years'' are defined in the Technology Cost Input File and offer a way
to gradually ``phase-in'' technology that is not yet fully mature to
the analysis. They apply to the manufacturer's entire estimated
production and, for each technology, define a share of production in
each MY that, once exceeded, will stop the model from further applying
that technology to that manufacturer's fleet in that MY.
---------------------------------------------------------------------------
\318\ See, e.g., 85 FR 24386. Please see the 2020 final rule for
a significant discussion of how manufacturers consider fuel grades
available to consumers when designing engines (including specific
engine components).
---------------------------------------------------------------------------
The influence of these inputs varies with regulatory stringency and
other model inputs. For example, setting the inputs to allow immediate
100 percent penetration of a technology will not guarantee any
application of the technology if stringency increases are low and the
technology is not at all cost effective. Also, even if these are set to
allow only very slow adoption of a technology, other model aspects and
inputs may nevertheless force more rapid application than these inputs,
alone, would suggest (e.g., because an engine technology propagates
quickly due to sharing across multiple vehicles, or because BEV
application must increase quickly in response to ZEV requirements). For
this analysis, nearly all of these inputs are set at levels that do not
limit the simulation at all.
[[Page 52622]]
This analysis also applies phase-in caps and corresponding start
years to prevent the simulation from showing unlikely rates of applying
battery-electric vehicles (BEVs), such as showing that a manufacturer
producing very few BEVs in MY 2022 could plausibly replace every
product with a 300- or 400-mile BEV by MY 2026. Also, this analysis
applies phase-in caps and corresponding start years intended to ensure
that the simulation's plausible application of the highest included
levels of MR (20 percent reductions of vehicle ``glider'' weight) do
not, for example, outpace plausible supply of raw materials and
development of entirely new manufacturing facilities.
These model logical structures and inputs act together to produce
estimates of ways each manufacturer could potentially shift to new
fuel-saving technologies over time, reflecting some measure of
protection against rates of change not reflected in, for example,
technology cost inputs. This does not mean that every modeled solution
would necessarily be economically practicable. Using technology
adoption features like phase-in caps and phase-in start years is one
mechanism that can be used so that the analysis better represents the
potential costs and benefits of technology application in the
rulemaking timeframe.
D. Technology Pathways, Effectiveness, and Cost
The previous section discussed, at a high level, how we generate
the technology inputs and assumptions used in the CAFE Model. We do
this in several ways: by evaluating data submitted by vehicle
manufacturers; consolidating publicly available data, press materials,
marketing brochures, and other information; collaborative research,
testing, and modeling with other Federal agencies; research, testing,
and modeling with independent organizations; determining that work done
for prior rules is still relevant and applicable; considering feedback
from stakeholders on prior rules and meetings conducted prior to the
commencement of this rulemaking; and using our own engineering
judgment.
This section discusses the specific technology pathways,
effectiveness, and cost inputs and assumptions used in the compliance
analysis. As an example, interested readers learned in the previous
section that the starting point for estimating technology costs is an
estimate of the DMC--the component and assembly costs of the physical
parts and systems that make up a complete vehicle--for any particular
technology; in this section, readers will learn that our transmission
technology DMCs are based on estimates from the NAS.
After spending over a decade refining the technology pathways,
effectiveness, and cost inputs and assumptions used in successive CAFE
Model analyses, we have developed guiding principles to ensure that the
CAFE Model's compliance analysis results in impacts that we would
reasonably expect to see in the real world. These guiding principles
are as follows:
Technologies will have complementary or non-complementary
interactions with the full vehicle technology system. The fuel economy
improvement from any individual technology must be considered in
conjunction with the other fuel economy-improving technologies applied
to the vehicle, because technologies added to a vehicle will not result
in a simple additive fuel economy improvement from each individual
technology. In particular, we expect this result from engine and other
powertrain technologies that improve fuel economy by allowing the ICE
to spend more time operating at efficient engine speed and load
conditions, or from combinations of engine technologies that work to
reduce the effective displacement of the engine.
The effectiveness of a technology depends on the type of vehicle
the technology is being applied to. When we talk about ``vehicle type''
in our analysis, we're referring to our vehicle technology classes--
e.g., a small car, a medium performance SUV, or a pickup truck, among
other classes. A small car and a medium performance SUV that use the
exact same technology will start with very different fuel economy
values; so, when the exact same technology is added to both of those
vehicles, the technology will provide a different effectiveness
improvement on both of those vehicles.
The cost and effectiveness values for each technology should be
reasonably representative of what can be achieved across the entire
industry. Each technology model employed in the analysis is designed to
be representative of a wide range of specific technology applications
used in industry. Some manufacturers' systems may perform better or
worse than our modeled systems and some may cost more or less than our
modeled systems; however, employing this approach will ensure that, on
balance, the analysis captures a reasonable level of costs and benefits
that would result from any manufacturer applying the technology.
A consistent reference point for cost and effectiveness values must
be identified before assuming that a cost or effectiveness value could
be employed for any individual technology. For example, as discussed
below, this analysis uses a set of engine map models that were
developed by starting with a small number of engine configurations, and
then, in a very systematic and controlled process, adding specific
well-defined technologies to create a new map for each unique
technology combination. Again, providing a consistent reference point
to measure incremental technology effectiveness values ensures that we
are capturing accurate effectiveness values for each technology
combination.
The following sections discuss the engine, transmission,
electrification, MR, aerodynamic, ROLL, and other vehicle technologies
considered in this analysis. The following sections discuss:
How we define the technology in the CAFE Model,\319\
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\319\ Note, due to the diversity of definitions industry
sometimes employs for technology terms, or in describing the
specific application of technology, the terms defined here may
differ from how the technology is defined in the industry.
---------------------------------------------------------------------------
How we assigned the technology to vehicles in the analysis
fleet used as a starting point for this analysis,
Any adoption features applied to the technology, so the
analysis better represents manufacturers' real-world decisions,
The technology effectiveness values, and
Technology cost.
Please note that the following technology effectiveness sections
provide examples of the range of effectiveness values that a technology
could achieve when applied to the entire vehicle system, in conjunction
with the other fuel economy-improving technologies already in use on
the vehicle. To see the incremental effectiveness values for any
particular vehicle moving from one technology key to a more advanced
technology key, see the CAFE Model Fuel Economy Adjustment Files that
are installed as part of the CAFE Model Executable File, and not in the
input/output folders. Similarly, the technology costs provided in each
section are examples of absolute costs seen in specific MYs, for
specific vehicle classes. Please refer to the Technologies Input File
to see all absolute technology costs used in the analysis across all
MYs.
For the LD analysis we show two sets of technology effectiveness
charts for each technology type, titled ``Unconstrained'' and
``Standard Setting.'' For the Standard Setting charts, effectiveness
values reflect the application of 49 U.S.C. 32902(h)
[[Page 52623]]
considerations to the technologies; for example, PHEV technologies only
show the effectiveness achieved when operating in a gasoline only mode
(charge sustaining mode). The Unconstrained charts show the
effectiveness values modeled for the technologies without the 49 U.S.C;
32902(h) constraints; when unconstrained, PHEV technologies show
effectiveness for their full dual fuel use functionality. The standard
setting values are used during the standard setting years being
assessed in this analysis, and the unconstrained values are used for
all other years.
1. Engine Paths
ICEs convert chemical energy in fuel to useful mechanical power.
The chemical energy in the fuel is released and converted to mechanical
power by being oxidized, or burned, inside the engine. The air/fuel
mixture entering the engine and the burned fuel/exhaust by-products
leaving the engine are the working fluids in the engine. The engine
power output is a direct result of the work interaction between these
fluids and the mechanical components of the engine.\320\ The generated
mechanical power is used to perform useful work, such as vehicle
propulsion. For a complete discussion on fundamentals of engine
characteristics, such as torque, torque maps, engine load, power
density, brake mean effective pressure (BMEP), combustion cycles, and
components, please refer to Heywood 2018.\321\
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\320\ Heywood, John B. Internal Combustion Engine Fundamentals.
McGraw-Hill Education, 2018. Chapter 1.
\321\ Heywood, John B. Internal Combustion Engine Fundamentals.
McGraw-Hill Education, 2018.
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We classify the extensive variety of both LD and HDPUV vehicle ICE
technologies into discrete Engine Paths. These paths are used to model
the most representative characteristics, costs, and performance of the
fuel economy-improving engine technologies most likely available during
the rulemaking time frame. The paths are intended to be representative
of the range of potential performance levels for each engine
technology. In general, the paths are tied to ease of implementation of
additional technology and how closely related the technologies are. The
technology paths for LD and HDPUV can be seen in Chapter 3.1.1 of the
TSD.
The LD Engine Paths have been selected and refined over a period of
more than ten years, based on engines in the market, stakeholder
comments, and our engineering judgment, subject to the following
factors: we included technologies most likely available during the
rulemaking time frame and the range of potential performance levels for
each technology, and excluded technologies unlikely to be feasible in
the rulemaking timeframe, technologies unlikely to be compatible with
U.S. fuels, or technologies for which there was not appropriate data
available to allow the simulation of effectiveness across all vehicle
technology classes in this analysis.
For technologies on the HDPUV Engine Paths, we revisited work done
for the HDPUV analysis in the Phase 2 rulemaking. We have updated our
HDPUV Engine Paths based on that work, the availability of technology
in the HDPUV analysis fleet, and technologies we believe will be
available in the rulemaking timeframe. The HDPUV fleet is significantly
smaller than the LD fleet with the majority of vehicles being produced
by only three manufacturers, General Motors, Ford, and Stellantis.
These vehicles include work trucks and vans that are focused on
transporting people and moving equipment and supplies and tend to be
more focused on a common need than that of vehicles in the LD fleet,
which includes everything from sports cars to commuter cars and pickup
trucks. The engine options between the two fleets are different in the
real world and are accordingly different in the analysis. HDPUVs are
work vehicles and their engines must be able to handle additional work
such as higher payloads, towing, and additional stop and go demands.
This results in HDPUVs often requiring larger, more robust, and more
powerful engines. As a result of the HDPUV's smaller fleet size and
narrowed focus, fewer engines and engine technologies are developed or
used in this fleet. That said, we believe that the range of
technologies included in the HDPUV Engine Paths and Electrification/
Hybrid/Electrics Path discussed in Section III.D.3 of this preamble
presents a reasonable representation of powertrain options available
for HDPUVs now and in the rulemaking time frame.
The Engine Paths begin with one of the three base engine
configurations: dual over-head camshaft (DOHC) engines have two
camshafts per cylinder head (one operating the intake valves and one
operating the exhaust valves), single over-head camshaft (SOHC) engines
have a single camshaft, and over-head valve (OHV) engines also have a
single camshaft located inside of the engine block (south of the valves
rather than over-head) connected to a rocker arm through a push rod
that actuates the valves. DOHC and SOHC engine configurations are
common in the LD fleet, while OHV engine configurations are more common
in the HDPUV fleet.
The next step along the Engine Paths is at the Basic Engine Path
technologies. These include variable valve lift (VVL), stoichiometric
gasoline direct injection (SGDI), and a basic level of cylinder
deactivation (DEAC). VVL dynamically adjusts how far the valve opens
and reduces fuel consumption by reducing pumping losses and optimizing
airflow over broader range of engine operating conditions. Instead of
injecting fuel at lower pressures and before the intake valve, SGDI
injects fuel directly into the cylinder at high pressures allowing for
more precise fuel delivery while providing a cooling effect and
allowing for an increase in the CR and/or more optimal spark timing for
improved efficiency. DEAC disables the intake and exhaust valves and
turns off fuel injection and spark ignition on select cylinders which
effectively allows the engine to operate temporarily as if it were
smaller while also reducing pumping losses to improve efficiency. New
for the NPRM and carried into this final rule analysis is that variable
valve timing (VVT) technology is integrated in all non-diesel engines,
so we do not have a separate box for it on the Basic Engine Path. For
the LD analysis, VVL, SGDI, and DEAC can be applied to an engine
individually or in combination with each other, and for the HDPUV
analysis, SGDI and DEAC can be applied individually or in combination.
Moving beyond the Basic Engine Path technologies are the
``advanced'' engine technologies, which means that applying the
technology--both in our analysis and in the real world--would require
significant changes to the structure of the engine or an entirely new
engine architecture. The advanced engine technologies represent the
application of alternate combustion cycles, various applications of
forced induction technologies, or advances in cylinder deactivation.
Advanced cylinder deactivation (ADEAC) systems, also known as
rolling or dynamic cylinder deactivation systems, allow the engine to
vary the percentage of cylinders deactivated and the sequence in which
cylinders are deactivated. Depending on the engine's speed and
associated torque requirements, an engine might have most cylinders
deactivated (e.g., low torque conditions as with slower speed driving)
or it might have all cylinders activated (e.g., high torque conditions
as
[[Page 52624]]
with merging onto a highway).\322\ An engine operating at low speed/low
torque conditions can then save fuel by operating as if it is only a
fraction of its total displacement. We model two ADEAC technologies,
advanced cylinder deactivation on a single overhead camshaft engine
(ADEACS), and advanced cylinder deactivation on a dual overhead
camshaft engine (ADEACD).
---------------------------------------------------------------------------
\322\ See for example, Dynamic Skip Fire, Tula Technology, DSF
in real world situations, https://www.tulatech.com/combustion-engine/. Our modeled ADEAC system is not based on this specific
system, and therefore the effectiveness improvement will be
different in our analysis than with this system, however, the theory
still applies.
---------------------------------------------------------------------------
Forced induction gasoline engines include both supercharged and
turbocharged downsized engines, which can pressurize or force more air
into an engine's intake manifold when higher power output is needed.
The raised pressure results in an increased amount of airflow into the
cylinder supporting combustion, increasing the specific power of the
engine. The first-level turbocharged downsized technology (TURBO0)
engine represents a basic level of forced air induction technology
being applied to a DOHC engine. Cooled exhaust gas recirculation (CEGR)
systems take engine exhaust gasses and passes them through a heat
exchanger to reduce their temperature, and then mixes them with
incoming air in the intake manifold to reduce peak combustion
temperature and effect fuel efficiency and emissions. We model the base
TURBO0 turbocharged engine with the addition of cooled exhausted
recirculation (TURBOE), basic cylinder deactivation (TURBOD), and
advanced cylinder deactivation (TURBOAD). Advancing further into the
Turbo Engine Path leads to engines that have higher BMEP, which is a
function of displacement and power. The higher the BMEP, the higher the
engine performance. We model two levels of advanced turbocharging
technology (TURBO1 and TURBO2) that run increasingly higher
turbocharger boost levels, burning more fuel and making more power for
a given displacement. As discussed above, we pair turbocharging with
engine downsizing, meaning that the turbocharged downsized engines in
our analysis improve vehicle fuel economy by using less fuel to power
the smaller engine while maintaining vehicle performance.
NHTSA received a limited number of comments on forced induction
gasoline engines. The comments seemed to highlight some
misunderstandings of our forced induction pathway rather than the
technology itself and how it was applied in our analysis for this
rulemaking. In discussing the turbocharged pathway NRDC commented, ``.
. . NHTSA has not appropriately considered the relative efficiency of
these engines with respect to each other when designing its technology
pathways. As a result, the technology pathway does not reasonably
reflect an appropriate consideration of the full availability of
turbocharged engine improvements.''
NRDC assumed that the pathways are in order from least effective to
most effective,\323\ however, this is not how the technologies are
arranged in the pathway. The technology pathways represent an increase
in the level or combinations of technologies being applied, with lower
levels at the top and higher levels at the bottom of the path. Chapter
3.1.1 of the TSD shows the technology pathways for visualization
purposes, however the CAFE Model could apply any cost-effective
combinations of technologies from those given pathways. Levels of
improvement are dependent upon the vehicle class and the technology
combinations. As a reminder, we stated in the NPRM section describing
the technology pathways just before the figure of the technology tree
that ``[i]n general, the paths are tied to ease of implementation of
additional technology and how closely related the technologies are.''
\324\ An example of how this applies to the TURBO family of
technologies is described below. To the extent that the verbiage around
the technology tree was confusing, we will endeavor to make that
clearer moving forward. The pathways are not aligned from ``least
effective'' to ``most effective'' because assuming so would ignore
several important considerations, including how technologies interact
on a vehicle, how technologies interact on vehicles of different sizes
that have different power requirements, and how hardware changes may be
required for a particular technology (see above, ``ease of
implementation of additional technology,'' and the related example
below that describes how once a manufacturer downsizes an engine
accompanying the application of a turbocharger, it would most likely
not then re-upsize the engine to add a less advanced turbocharger). The
interaction of these technology combinations is discussed in more
details in TSD Chapter 2.
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\323\ NRDC, Docket No. NHTSA-2023-0022-61944-A2, at 13.
\324\ 88 FR 56159 (Aug. 17, 2023).
---------------------------------------------------------------------------
While we have modeled TURBO0 with cooled EGR (TURBOE) and with DEAC
(TURBOD), NRDC is correct that we do not apply these technologies to
TURBO1 or TURBO2; this decision was intentional and not a lapse in
engineering judgment, as NRDC seems to imply. We define TURBO1 in our
analysis by adding VVL to the TURBO0 engine, and TURBO2 is our highest
turbo downsized engine with a high BMEP. The benefits of cooled EGR and
DEAC on TURBO1 and TURBO2 technologies would occur at high engine
speeds and loads, which do not occur on the two-cycle tests. Because
technology effectiveness in our analysis is measured based on the delta
in improvements in vehicles' two-cycle test fuel consumption values,
adding cooled EGR and DEAC to TURBO1 and TURBO2 would provide little
effectiveness improvement in our analysis with a corresponding increase
in cost that we do not believe manufacturers would adopt in the real
world. These complex interactions among technologies are effectively
captured in our modeling and this is an example of why we do not simply
add effectiveness values from different technologies together.\325\
This potential for added costs with limited efficiency benefit is also
an example of why we do not order our technology tree from least to
most effective technology, and we choose to include particular
technologies on the technology tree and not others. For more discussion
on interactions among individual technologies in the full vehicle
simulations, see TSD Chapter 2.
---------------------------------------------------------------------------
\325\ NHTSA-2021-0053-0007-A3, at 15; NHTSA-2021-0053-0002-A9,
at 21-23.
---------------------------------------------------------------------------
NRDC also believes the model is improperly constrained because it
cannot apply lower levels of technology over higher levels, which
results in a situation where vehicles in the analysis fleet that have
been assigned higher levels of turbocharging technology cannot adopt
what NRDC alleges to be a more efficient turbocharged engine
technology. For example, the model does not allow a vehicle assigned a
TURBO2 technology to adopt a TURBOE technology. A vehicle in the
analysis fleet that is assigned the TURBO2 technology tells us a
manufacturer made the decision to either skip over or move on from
lower levels of force induction technology. Moving backwards in the
technology tree from TURBO2 to any of the lower turbo technologies
would require the engine to be upsized to meet the same performance
metrics as the analysis fleet vehicle. As discussed further in Section
III.C.6, we ensure the vehicles in our analysis meet similar
performance
[[Page 52625]]
levels after the application of fuel economy-improving technology
because we want to measure the costs and benefits of manufacturers
responding to CAFE standards in our analysis, and not the costs or
benefits related to changing performance metrics in the fleet. Moving
from a higher to a lower turbo technology works counter to saving fuel
as the engine would grow in displacement requiring more fuel, adding
frictional losses, and increasing weight and cost. While fuel economy
is important to manufacturers, it is not the only parameter that drives
engine or technology selection, and it goes against the industry trends
for downsized engines.\326\ Accordingly, we believe that our Turbo
engine pathway appropriately captures the ways manufacturers might
apply increasing levels of turbocharging technology to their vehicles.
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\326\ 2023 EPA Trends Report.
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In this analysis, high compression ratio (HCR) engines represent a
class of engines that achieve a higher level of fuel efficiency by
implementing a high geometric CR with varying degrees of late intake
valve closing (LIVC) (i.e., closing the intake valve later than usual)
using VVT, and without the use of an electric drive motor.\327\ These
engines operate on a modified Atkinson cycle allowing for improved fuel
efficiency under certain engine load conditions but still offering
enough power to not require an electric motor; however, there are
limitations on how HCR engines can apply LIVC and the types of vehicles
that can use this technology. The way that each individual manufacturer
implements a modified Atkinson cycle will be unique, as each
manufacturer must balance not only fuel efficiency considerations, but
emissions, on-board diagnostics, and safety considerations that
includes the vehicle being able to operate responsively to the driver's
demand.
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\327\ Late intake valve closing (LIVC) is a method manufacturers
use to reduce the effective compression ratio and allow the
expansion ratio to be greater than the compression ratio resulting
in improved fuel economy but reduced power density. Further
technical discussion on HCR and Atkinson Engines are discussed in
TSD Chapter 3.1.1.2.3. See the 2015 NAS report, Appendix D, for a
short discussion on thermodynamic engine cycles.
---------------------------------------------------------------------------
We define HCR engines as being naturally aspirated, gasoline, SI,
using a geometric CR of 12.5:1 or greater,\328\ and able to dynamically
apply various levels of LIVC based on load demand. An HCR engine uses
less fuel for each engine cycle, which increases fuel economy, but
decreases power density (or torque). Generally, during high loads--when
more power is needed--the engine will use variable valve actuation to
reduce the level of LIVC by closing the intake valve earlier in the
compression stroke (leaving more air/fuel mixture in the combustion
chamber), increasing the effective CR, reducing over-expansion, and
sacrificing efficiency for increased power density.\329\ However, there
is a limit to how much the air-fuel mixture can be compressed before
ignition in the HCR engine due to the potential for engine knock \330\
Engine knock can be mitigated in HCR engines with higher octane fuel,
however, the fuel specified for use in most vehicles is not this higher
octane fuel. Conversely, at low loads the engine will typically
increase the level of LIVC by closing the intake valve later in the
compression stroke, reducing the effective CR, increasing the over-
expansion, and sacrificing power density for improved efficiency. By
closing the intake valve later in the compression stroke (i.e.,
applying more LIVC), the engine's displacement is effectively reduced,
which results in less air and fuel for combustion and a lower power
output.\331\ Varying LIVC can be used to mitigate, but not eliminate,
the low power density issues that can constrain the application of an
Atkinson-only engine.
---------------------------------------------------------------------------
\328\ Note that even if an engine has a compression ratio of
12.5:1 or greater, it does not necessarily mean it is an HCR engine
in our analysis, as discussed below. We look at a number of factors
to perform baseline engine assignments.
\329\ Variable valve actuation is a general term used to
describe any single or combination of VVT, VVL, and variable valve
duration used to dynamically alter an engines valvetrain during
operation.
\330\ Engine knock in spark ignition engines occurs when
combustion of some of the air/fuel mixture in the cylinder does not
result from propagation of the flame front ignited by the spark
plug, but one or more pockets of air/fuel mixture explodes outside
of the envelope of the normal combustion front.
\331\ Power = (force x displacement)/time.
---------------------------------------------------------------------------
When we say, ``lower power density issues,'' this translates to a
low torque density,\332\ meaning that the engine cannot create the
torque required at necessary engine speeds to meet load demands. To the
extent that a vehicle requires more power in a given condition than an
engine with low power density can provide, that engine would experience
issues like engine knock for the reasons discussed above, but more
importantly, an engine designer would not allow an engine application
where the engine has the potential to operate in unsafe conditions in
the first place. Instead, a manufacturer could significantly increase
an engine's displacement (i.e., size) to overcome those low power
density issues,\333\ or could add an electric motor and battery pack to
provide the engine with more power, but a far more effective pathway
would be to apply a different type of engine technology, like a
downsized, turbocharged engine.\334\
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\332\ Torque = radius x force.
\333\ But see the 2023 EPA Trends Report at 48 (``As vehicles
have moved towards engines with a lower number of cylinders, the
total engine size, or displacement, is also at an all-time low.''),
and the discussion below about why we do not believe manufacturers
will increase the displacement of HCR engines to make the necessary
power because of the negative impacts it has on fuel efficiency.
\334\ See, e.g., Toyota Newsroom. 2023. 2024 Toyota Tacoma Makes
Debut on the Big Island, Hawaii. Available at: https://pressroom.toyota.com/2024-toyota-tacoma-makes-debut-on-the-big-island-hawaii/. (Accessed: Feb. 28, 2024). The 2024 Toyota Tacoma
comes in 8 ``grades,'' all of which use a turbocharged engine.
---------------------------------------------------------------------------
Vehicle manufacturers' intended performance attributes for a
vehicle--like payload and towing capability, features for off-road use,
and other attributes that affect aerodynamic drag and rolling
resistance--dictate whether an HCR engine can be a suitable technology
choice for that vehicle.\335\ As vehicles require higher payloads and
towing capacities,\336\ or experience road load increases from larger
all-terrain tires, a less aerodynamic design, or experience driveline
losses for AWD and 4WD configurations, more engine torque is required
at all engine speeds. Any time more engine torque is required the
application of HCR technology becomes less effective and more
limited.\337\ For these reasons, and to
[[Page 52626]]
maintain a performance-neutral analysis and as discussed further below,
we limit non-hybrid and non-plug-in-hybrid HCR engine application to
certain categories of vehicles.\338\ Also for these reasons, HCR
engines are not found in the HDPUV analysis fleet nor are they
available as an engine option in the HDPUV analysis.
---------------------------------------------------------------------------
\335\ Supplemental Comments of Toyota Motor North America, Inc.,
Notice of Proposed Rulemaking: Safer Affordable Fuel-Efficient
Vehicles Rule, Docket ID Numbers: NHTSA-2018-0067 and EPA-HQ-OAR-
2018-0283, at 6; Feng, R. et al. 2016. Investigations of Atkinson
Cycle Converted from Conventional Otto Cycle Gasoline Engine. SAE
Technical Paper 2016-01-0680. Available at: https://www.sae.org/publications/technical-papers/content/2016-01-0680/. (Accessed: Feb.
28, 2024).
\336\ See Tucker, S. 2023. What Is Payload: A Complete Guide.
Kelly Blue Book. Last revised: Feb. 2, 2023. Availale at: https://www.kbb.com/car-advice/payload-guide/#link3. (Accessed: Feb. 28,
2024). (``Roughly speaking, payload capacity is the amount of weight
a vehicle can carry, and towing capacity is the amount of weight it
can pull. Automakers often refer to carrying weight in the bed of a
truck as hauling to distinguish it from carrying weight in a trailer
or towing.'').
\337\ Supplemental Comments of Toyota Motor North America, Inc.,
Notice of Proposed Rulemaking: Safer Affordable Fuel-Efficient
Vehicles Rule, Docket ID Numbers: NHTSA-2018-0067 and EPA-HQ-OAR-
2018-0283. (``Tacoma has a greater coefficient of drag from a larger
frontal area, greater tire rolling resistance from larger tires with
a more aggressive tread, and higher driveline losses from 4WD.
Similarly, the towing, payload, and off road capability of pick-up
trucks necessitate greater emphasis on engine torque and horsepower
over fuel economy. This translates into engine specifications such
as a larger displacement and a higher stroke-to-bore ratio. . . .
Tacoma's higher road load and more severe utility requirements push
engine operation more frequently to the less efficient regions of
the engine map and limit the level of Atkinson operation . . . This
endeavor is not a simple substitution where the performance of a
shared technology is universal. Consideration of specific vehicle
requirements during the vehicle design and engineering process
determine the best applicable powertrain.'').
\338\ To maintain performance neutrality when sizing powertrains
and selecting technologies we perform a series of simulations in
Automime which are further discussed in the TSD Chapter 2.3.4 and in
the CAFE Analysis Autonomie Documentation. The concept of
performance neutrality is discussed in detail above in Section
II.C.3, Technology Effectiveness Values, and additional reasons why
we maintain a performance neutral analysis are discussed in Section
II.C.6, Technology Applicability Equations and Rules.
---------------------------------------------------------------------------
For this analysis, our HCR Engine Path includes three technology
options: (1) a first-level Atkinson-enabled engine (HCR) with VVT and
SGDI, (2) an Atkinson enabled engine with cooled exhaust gas
recirculation (HCRE), and finally, (3) the Atkinson enabled engine with
DEAC (HCRD). This updated family of HCR engine map models also reflects
our statement in NHTSA's May 2, 2022 final rule that a single engine
that employs an HCR, CEGR, and DEAC ``is unlikely to be utilized in the
rulemaking timeframe based on comments received from the industry
leaders in HCR technology application.'' \339\
---------------------------------------------------------------------------
\339\ 87 FR 25796 (May 2, 2022).
---------------------------------------------------------------------------
These three HCR Engine Path technology options (HCR, HCRE, HCRD)
should not be confused with the hybrid and plug-in hybrid electric
pathway options that also utilize HCR engines in combination with an P2
hybrid powertrain (i.e., P2HCR, P2HCRE, PHEV20H, and PHEV50H); those
hybridization path options are discussed in Section III.D.3, below. In
contrast, Atkinson engines in our powersplit hybrid powertrains
(SHEVPS, PHEV20PS, and PHEV50PS) for this analysis run the Atkinson
Cycle full time but are connected to an electric motor. The full-time
Atkinson engines are also discussed in Section III.D.3.
The Miller cycle is another alternative combustion cycle that
effectively uses an extended expansion stroke, similar to the Atkinson
cycle but with the application of forced induction, to improve fuel
efficiency. Miller cycle-enabled engines have a similar trade-off in
power density as Atkinson engines; the lower power density requires a
larger volume engine in comparison to an Otto cycle-based turbocharged
system for similar applications.\340\ To address the impacts of the
extended expansion stroke on power density during high load operating
conditions, the Miller cycle operates in combination with a forced
induction system. In our analysis, the first-level Miller cycle-enabled
engine includes the application of variable turbo geometry technology
(VTG), or what is also known as a variable-geometry turbocharger. VTG
technology allows for the adjustment of key geometric characteristics
of the turbocharging system, thus allowing adjustment of boost profiles
and response based on the engine's operating needs. The adjustment of
boost profile during operation increases the engine's power density
over a broader range of operating conditions and increases the
functionality of a Miller cycle-based engine. The use of a variable
geometry turbocharger also supports the use of CEGR. The second level
of VTG engine technology in our analysis (VTGE) is an advanced Miller
cycle-enabled system that includes the application of at least a 40V-
based electronic boost system. An electronic boost system has an
electric motor added to assist the turbocharger; the motor assist
mitigates turbocharger lag and low boost pressure by providing the
extra boost needed to overcome the torque deficit at low engine speeds.
---------------------------------------------------------------------------
\340\ National Academies of Sciences, Engineering, and Medicine.
2021. Assessment of Technologies for Improving Light-Duty Vehicle
Fuel Economy 2025-2035. The National Academies Press: Washington,
DC. Section 4. Available at: https://doi.org/10.17226/26092.
(Accessed: Feb. 28, 2024). [hereinafter 2021 NAS report].
---------------------------------------------------------------------------
Variable compression ratio (VCR) engines work by changing the
length of the piston stroke of the engine to optimize the CR and
improve thermal efficiency over the full range of engine operating
conditions. Engines that use VCR technology are currently in production
as small displacement turbocharged in-line four-cylinder, high BMEP
applications.
Diesel engines have several characteristics that result in better
fuel efficiency over traditional gasoline engines, including reduced
pumping losses due to lack of (or greatly reduced) throttling, high
pressure direct injection of fuel, a combustion cycle that operates at
a higher CR, and a very lean air/fuel mixture relative to an
equivalent-performance gasoline engine. However, diesel technologies
require additional systems to control NOX emissions, such as
a NOX adsorption catalyst system or a urea/ammonia selective
catalytic reduction system. We included two levels of diesel engine
technology in both the LD and HDPUV analyses: the first-level diesel
engine technology (ADSL) is a turbocharged diesel engine, and the more
advanced diesel engine (DSLI) adds DEAC to the ADSL engine technology.
The diesel engine maps are new for this analysis. The LD diesel engine
maps and HD van engine maps are based on a modern 3.0L turbo-diesel
engine, and the HDPUV pickup truck engine maps are based on a larger
6.7L turbo-diesel engine.
Finally, compressed natural gas (CNG) systems are ICEs that run on
natural gas as a fuel source. The fuel storage and supply systems for
these engines differ tremendously from gasoline, diesel, and flex fuel
vehicles.\341\ The CNG engine option has been included in past
analyses; however, the LD and HDPUV analysis fleets do not include any
dedicated CNG vehicles. As with the last analyses, CNG engines are
included as an analysis fleet-only technology and are not applied to
any vehicle that did not already include a CNG engine.
---------------------------------------------------------------------------
\341\ Flexible fuel vehicles (FLEX) are designed to run on
gasoline or gasoline-ethanol blends of up to 85 percent ethanol.
---------------------------------------------------------------------------
We received several comments that gave examples of vehicle
technologies that work in various ways to improve fuel efficiency, some
of which we use in our analysis and some we do not. MECA gave us
several examples of fuel efficiency technologies that we use in our
analysis such as cylinder deactivation, VVT and VVL, VTG, and
VTGe.\342\ MECA also discussed technologies we do not use in the
analysis such as turbo compounding. Similarly, ICCT gave examples of
technology such as negative valve overlap in-cylinder fuel reforming
(NVO), passive prechamber combustion (PPC), and high energy ignition,
that we also did not use in this analysis.\343\
---------------------------------------------------------------------------
\342\ MECA Clean Mobility, Docket No. NHTSA-2023-0022-63053, at
11.
\343\ ICCT, Docket No. NHTSA-2023-0022-54064, at 17.
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These technologies are in various stages of development and some
like PPC are in very limited production; however, we did not include
them in the analysis as we do not believe these technologies will gain
enough adoption during the rulemaking timeframe. We had discussed this
topic in detail in the 2022 final rule and we do not think that there
has been any significant development since than that would indicate
that manufacturers would pursue these costly technologies.\344\ If
anything, manufacturers have indicated that they are willing to
continue to research and develop more cost effective electrification
technologies such as strong hybrids and PHEVs to meet
[[Page 52627]]
current and future regulations from multiple agencies.
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\344\ 87 FR 25784.
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The Alliance for Vehicle Efficiency commented that they want to see
stronger support for hydrogen combustion and fuel cell vehicles in the
HDPUV fleet.\345\ Hydrogen powertrain technology has been in
development for years and there are several roadblocks to more
mainstream adoption such as system packaging, infrastructure,
technology reliability and durability, and costs to name a few. While
hydrogen powertrain technology has the possibility to provide improved
efficiency and even with funding support from the IRA, these
technologies still do not show up in the HDPUV fleet today and we do
not believe the technology will gain enough market penetration in the
rule making timeframe for us to include them in the pathway to
compliance.
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\345\ AVE, Docket No. NHTSA-2023-0022-60213, at 6.
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The first step in assigning engine technologies to vehicles in the
LD and HDPUV analysis fleets is to use data for each manufacturer to
determine which vehicle platforms share engines. Within each
manufacturer's fleet, we develop and assign unique engine codes based
on configuration, technologies applied, displacement, CR, and power
output. While the process for engine assignments is the same between
the LD and HDPUV analyses, engine codes are not shared between the two
fleets, and engine technologies are not shared between the fleets, for
the reasons discussed above. We also assign engine technology classes,
which are codes that identify engine architecture (e.g., how many
cylinders the engine has, whether it is a DOHC or SOHC, and so on) to
accurately account for engine costs in the analysis.
When we assign engine technologies to vehicles in the analysis
fleets, we must consider the actual technologies on a manufacturer's
engine and compare those technologies to the engine technologies in our
analysis. We have just over 270 unique engine codes in the LD analysis
fleet and just over 20 unique engine codes in the HDPUV fleet, meaning
that for both analysis fleets, we must identify the technologies
present on those almost 300 unique engines in the real world, and make
decisions about which of our approximately 40 engine map models (and
therefore engine technology on the technology tree) \346\ best
represents those real-world engines. When we consider how to best fit
each of those 300 engines to our 40 engine technologies and engine map
models, we use specific technical elements contained in manufacturer
publications, press releases, vehicle benchmarking studies, technical
publications, manufacturer's specification sheets, and occasionally CBI
(like the specific technologies, displacement, CR, and power mentioned
above), and engineering judgment. For example, in the LD analysis, an
engine with a 13.0:1 CR is a good indication that an engine would be
considered an HCR engine in our analysis, and some engines that achieve
a slightly lower CR, e.g., 12.5, may be considered an HCR engine
depending on other technology on the engine, like inclusion of SGDI,
increased engine displacement compared to other competitors, a high
energy spark system, and/or reduction of engine parasitic losses
through variable or electric oil and water pumps. Importantly, we never
assign engine technologies based on one factor alone; we use data and
engineering judgment to assign complex real-world engines to their
corresponding engine technologies in the analysis. We believe that our
initial characterization of the fleet's engine technologies reasonably
captures the current state of the market while maintaining a reasonable
amount of analytical complexity. Also, as a reminder, in addition to
the 40 engine map models used in the Engine Paths Collection, we have
over 20 additional potential powertrain technology assignments
available in the Hybrid/Electric Paths Collection.
---------------------------------------------------------------------------
\346\ We assign each engine code technology that most closely
corresponds to an engine map; for most technologies, one box on the
technology tree corresponds to one engine map that corresponds to
one engine code.
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Engine technology adoption in the model is defined through a
combination of technology path logic, refresh and redesign cycles,
phase-in capacity limits,\347\ and SKIP logic. How does technology path
logic define technology adoption? Once an engine design moves to the
advanced engine tree it is not allowed to move to alternate advanced
engine trees. For example, any LD basic engine can adopt one of the
TURBO engine technologies, but vehicles that have turbocharged engines
in the analysis fleet will stay on the Turbo Engine Path to prevent
unrealistic engine technology change in the short timeframe considered
in the rulemaking analysis. This represents the concept of stranded
capital, which as discussed above, is when manufacturers amortize
research, development, and tooling expenses over many years. Besides
technology path logic, which applies to all manufacturers and
technologies, we place additional constraints on the adoption of VCR
and HCR technologies.
---------------------------------------------------------------------------
\347\ Although we did apply phase-in caps for this analysis, as
discussed in Chapter 3.1.1 of the TSD, those phase-in caps are not
binding because the model has several other less advanced
technologies available to apply first at a lower cost, as well as
the redesign schedules. As discussed in TSD Chapter 2.2, 100 percent
of the analysis fleet will not redesign by 2023, which is the last
year that phase-in caps could apply to the engine technologies
discussed in this section. Please see the TSD for more information
on engine phase-in caps.
---------------------------------------------------------------------------
VCR technology requires a complete redesign of the engine, and in
the analysis fleet, only two models have incorporated this technology.
VCR engines are complex, costly by design, and address many of the same
efficiency losses as mainstream technologies like turbocharged
downsized engines, making it unlikely that a manufacturer that has
already started down an incongruent technology path would adopt VCR
technology. Because of these issues, we limited adoption of the VCR
engine technology to original equipment manufacturers (OEMs) that have
already employed the technology and their partners. We do not believe
any other manufacturers will invest to develop and market this
technology in their fleet in the rulemaking time frame.
HCR engines are subject to three limitations. This is because, as
we have recognized in past analyses,\348\ HCR engines excel in lower
power applications for lower load conditions, such as driving around a
city or steady state highway driving without large payloads. Thus,
their adoption is more limited than some other technologies.
---------------------------------------------------------------------------
\348\ The discussions at 83 FR 43038 (Aug. 24, 2018), 85 FR
24383 (April 30, 2020), 86 FR 49568 and 49661 (September 3, 2021),
and 87 FR 25786 and 25790 (May 2, 2022) are adopted herein by
reference.
---------------------------------------------------------------------------
First, we do not allow vehicles with 405 or more horsepower, and
(to simulate parts sharing) vehicles that share engines with vehicles
with 405 or more horsepower, to adopt HCR engines due to their
prescribed power needs being more demanding and likely not supported by
the lower power density found in HCR-based engines.\349\ Because LIVC
essentially reduces the engine's displacement, to make more power and
keep the same levels of LIVC, manufacturers would need to increase the
displacement of the engine to make the necessary power. We do not
believe manufacturers will increase the displacement of their engines
to accommodate HCR technology adoption because as displacement
increases so does friction, pumping losses, and fuel consumption. This
bears out in industry
[[Page 52628]]
trends: total engine size (or displacement) is at an all-time low, and
trends show that industry focus on turbocharged downsized engine
packages are leading to their much higher market penetration.\350\
Separately, as seen in the analysis fleet, manufacturers generally use
HCR engines in applications where the vehicle's power requirements fall
significantly below our horsepower threshold. In fact, the average
horsepower for the sales weighted average of vehicles in the analysis
fleet that use HCR Engine Path technologies is 179 hp, demonstrating
that HCR engine use has indeed been limited to lower-hp applications,
and well below our 405 hp threshold. In fringe cases where a vehicle
classified as having higher load requirements does have an HCR engine,
it is coupled to a hybrid system.\351\
---------------------------------------------------------------------------
\349\ Heywood, John B. Internal Combustion Engine Fundamentals.
McGraw-Hill Education, 2018. Chapter 5.
\350\ See 2023 EPA Trends Report at 48, 78.
\351\ See the Market Data Input File. As an example, the
reported total system horsepower for the Ford Maverick HEV is also
191 hp, well below our 405 hp threshold. See also the Lexus LC/LS
500h: the Lexus LC/LS 500h also uses premium fuel to reach this
performance level.
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Second, to maintain a performance-neutral analysis,\352\ we exclude
pickup trucks and (to simulate parts sharing) \353\ vehicles that share
engines with pickup trucks from receiving HCR engines that are not
accompanied by an electrified powertrain. In other words, pickup trucks
and vehicles that share engines with pickup trucks can receive HCR-
based engine technologies in the Hybridization Paths Collection of
technologies. We exclude pickup trucks and vehicles that share engines
with pickup trucks from receiving HCR engines that are not accompanied
by an electrified powertrain because these often-heavier vehicles have
higher low speed torque needs, higher base road loads, increased
payload and towing requirements,\354\ and have powertrains that are
sized and tuned to perform this additional work above what passenger
cars are required to conduct. Again, vehicle manufacturers' intended
performance attributes for a vehicle--like payload and towing
capability, intention for off-road use, and other attributes that
affect aerodynamic drag and rolling resistance--dictate whether an HCR
engine can provide a reasonable fuel economy improvement for that
vehicle.\355\ For example, road loads are comprised of aerodynamic
loads, which include vehicle frontal area and its drag coefficient,
along with tire rolling resistance that attribute to higher engine
loads as vehicle speed increases.\356\ We assume that a manufacturer
intending to apply HCR technology to their pickup truck or vehicle that
shares an engine with a pickup truck would do so in combination with an
electric system to assist with the vehicle's load needs, and indeed the
only manufacturer that has an HCR-like engine (in terms of how we model
HCR engines in this analysis) in its pickup truck in the analysis fleet
has done so.
---------------------------------------------------------------------------
\352\ As discussed in detail in Section III.C.3 and III.C.6
above, we maintain a performance-neutral analysis to capture only
the costs and benefits of manufacturers adding fuel economy-
improving technology to their vehicles in response to CAFE
standards.
\353\ See Section III.C.6.
\354\ See SAE. Performance Requirements for Determining Tow-
Vehicle Gross Combination Weight Rating and Trailer Weight Rating.
Surface Vehicle Recommended Practice J2807. Issued: Apr. 2008.
Revised Feb. 2020.; Reed, T. 2015. SAE J207 Tow Tests--The Standard.
Motortrend. Published: Jan 16, 2015. Available at: https://www.motortrend.com/how-to/1502-sae-j2807-tow-tests-the-standard/.
(Accessed: Feb. 28, 2024). When we say ``increased payload and
towing requirements,'' we are referring to a literal defined set of
requirements that manufacturers follow to ensure the manufacturer's
vehicle can meet a set of performance measurements when building a
tow-vehicle in order to give consumers the ability to ``cross-shop''
between different manufacturer's vehicles. As discussed in detail
above in Section III.C.3 and III.C.6, we maintain a performance
neutral analysis to ensure that we are only accounting for the costs
and benefits of manufacturers adding technology in response to CAFE
standards. This means that we will apply adoption features, like the
HCR application restriction, to a vehicle that begins the analysis
with specific performance measurements, like a pickup truck, where
application of the specific technology would likely not allow the
vehicle to meet the manufacturer's baseline performance
measurements.
\355\ The Joint NGOs ask NHTSA to stop quoting a 2018 Toyota
comment explaining why we do not allow HCR engines in pickup trucks,
stating that we are misinterpreting Toyota's purpose in explaining
that the Tacoma and Camry achieve different effectiveness
improvements using their HCR engines. We disagree. Toyota's comment
is still relevent for this final rule as the limitations of the
technology have not changed, which Toyota describes in the context
of comparing why the technology provides a benefit in the Camry that
we should not expect to see in the Tacoma. Note that Toyota also
submitted a second set of supplemental comments (NHTSA-2018-0067-
12431) that similarly confirm our understanding of the most
important concept to our decision to limit HCR adoption on pickup
trucks, which is that Atkinson operation is limited on pickup
trucks. See Supplemental Comments of Toyota Motor North America,
Inc., NHTSA-2018-0067-12376 (``Tacoma has a greater coefficient of
drag from a larger frontal area, greater tire rolling resistance
from larger tires with a more aggressive tread, and higher driveline
losses from 4WD. Similarly, the towing, payload, and off road
capability of pick-up trucks necessitate greater emphasis on engine
torque and horsepower over fuel economy. This translates into engine
specifications such as a larger displacement and a higher stroke-to-
bore ratio. . . . Tacoma's higher road load and more severe utility
requirements push engine operation more frequently to the less
efficient regions of the engine map and limit the level of Atkinson
operation . . . This endeavor is not a simple substitution where the
performance of a shared technology is universal. Consideration of
specific vehicle requirements during the vehicle design and
engineering process determine the best applicable powertrain.'').
\356\ 2015 NAS Report at 207-242.
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Finally, we restrict HCR engine application for some manufacturers
that are heavily performance-focused and have demonstrated a
significant commitment to power dense technologies such as turbocharged
downsizing.\357\ When we say, ``significant commitment to power dense
technologies,'' we mean that their fleets use near 100% turbocharged
downsized engines. This means that no vehicle manufactured by these
manufacturers can receive an HCR engine. Again, we implement this
adoption feature to avoid an unquantified amount of stranded capital
that would be realized if these manufacturers switched from one
technology to another.
---------------------------------------------------------------------------
\357\ There are three manufacturers that met the criteria (near
100 percent turbo downsized fleet, and future hybrid systems are
based on turbo-downsized engines) described and were excluded: BMW,
Daimler, and Jaguar Land Rover.
---------------------------------------------------------------------------
Note, however, that these adoption features only apply to vehicles
that receive HCR engines that are not accompanied by an electrified
powertrain. A P2 hybrid system that uses an HCR engine overcomes the
low-speed torque needs using the electric motor and thus has no
restrictions or SKIPs applied.
We received a limited number of comments disagreeing with the HCR
restrictions we have in place,\358\ \359\ \360\ most of which had been
received in previous rulemakings. To avoid repetition, previous
discussions located in prior related documents are adopted here by
reference.\361\
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\358\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-A2, at 13.
\359\ ICCT, Docket No. NHTSA-2023-0022-54064, at 22.
\360\ States and Cities, Docket No. NHTSA-2023-0022-61904-A2, at
29.
\361\ 86 FR 74236 (December 29, 2021), 87 FR 25710 (May 2,
2022), Final Br. for Resp'ts, Nat. Res. Def. Council v. NHTSA, Case
No. 22-1080, ECF No. 2000002 (D.C. Cir. May 19, 2023).
---------------------------------------------------------------------------
We realize that engine technology, vehicle type, and their
applications are always evolving,\362\ and we agree with both the
States and Cities and the Joint NGOs that the Hyundai Santa Cruz,
unibody pickup truck with a 4-cylinder HCR engine, is one example of a
pickup
[[Page 52629]]
truck with a non-hybrid HCR engine.\363\ However, we disagree that the
Santa Cruz is comparable in capability to other pickup models like the
Tacoma, Colorado, and Canyon, and that those pickup models should
therefore be able to adopt non-hybrid HCR technology as well. Small
unibody pickup trucks like the Santa Cruz and the Ford Maverick do not
have the same capabilities and functionality as a body-on-frame pickup
like the Toyota Tacoma.\364\ We believe our current restrictions for
HCR are reasonable and appropriate and we have not been presented with
any new information that would suggest otherwise. Our stance on this
issue has also borne out in real-world trends. Manufacturers who had
the potential to use HCR technologies for high utility capable vehicles
like Toyota Tacoma and Mazda CX-90 (replacing CX-9) have incorporated
turbocharged engines. We do not believe HCR in its current state can
provide enough fuel efficiency benefit for us to remove our current HCR
restrictions; however, this by no means precludes manufacturers from
developing and deploying HCR technology for future iterations of their
pickup trucks.
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\362\ NRDC and the Joint NGOs have disagreed with our HCR
restrictions in the past and while we have made attempts to better
explain our position on HCR technology and where we believe it is
appropriate, our justification has remained the same. We do not
believe the HCR technology is applicable to these types of vehicles
because of the nature of how the technology works and removing the
restrictions would present an unrealistic pathway to compliance for
manufacturer that is not maximum feasible.
\363\ The Joint NGOs also give the example of the hybrid-HCR
Ford Maverick as a reason why we should remove HCR restrictions from
other pickup trucks; however we believe that whether an HCR can be
applied to a pickup truck and whether a hybrid-HCR can be applied to
a pickup truck are two separate questions. There does not seem to be
a disagreement between the Joint NGOs and NHTSA that pickup trucks
can adopt hybrid-HCR engines in the analysis.
\364\ We have provided the specification of 2022 Ford Maverick,
Toyota Tacoma, and Hyundai Santa Cruz in the docket accompying this
final rule. See also Cargurus. 2023 Toyota Tacoma vs 2023 Ford
Maverick: Cargurus Comparison. 2023. Available at: https://www.cargurus.com/Cars/articles/2023-toyota-tacoma-vs-2023-ford-maverick-comparison. (Accessed: Mar. 1, 2024). (``This is an
incredibly tightly fought contest, as evidenced by the fact that
CarGurus experts awarded both the 2023 Tacoma and 2023 Maverick
identical overall scores of 7.3 out of 10. However, making a
recommendation is easy on account of these trucks not being direct
competitors. Where the Tacoma is a midsize truck that's designed for
supreme offroad ability, the Maverick is a compact truck that's more
at home in the city. So the choice here comes down to how much you
value the Tacoma's ruggedness, extra carrying capacity and
reputation for reliability over the Maverick's significantly lower
price and running costs.'').
---------------------------------------------------------------------------
We would also like to emphasize in response to the Joint NGOs that
manufacturers do not pursue technology pathways because we model them
in our analysis supporting setting CAFE and HDPUV standards. We have
stated multiple times that we give an example of a low-cost compliance
pathway, and no manufacturer has to comply with the pathway as we have
modeled it. In fact, it is more than likely they will not follow the
technology pathways we project in our standard-setting analysis because
of the standard setting restrictions we have in place. Also, we do not
allege that manufacturers cannot use different technologies than we
model in our analysis to meet their standard, we just do not believe
that manufacturers will abandon investments in one technology pathway
for another, particularly with respect to HCR technology for pickup
trucks and high horsepower vehicles. If we were to model unrealistic
pathways to compliance, manufacturers would incur more cost, and/or see
less efficiency improvement than we estimate for any given level of
CAFE standards, resulting in a standard that is more stringent than
maximum feasible. For this and other reasons we endeavor to model our
best estimates of a low-cost pathway to compliance.
We conducted a sensitivity case in which we removed all HCR
restrictions, which is titled ``Limited HCR skips'' and is described in
more detail in Chapter 9.2.2.4 of the RIA. By MY 2031 in this
sensitivity case, we see a 7.5% increase in HCR technology penetration,
but it corresponds with an additional 3 billion gallons of gasoline and
27 million metric tons more CO2 when compared to the reference
baseline. The limited HCR skips sensitivity has a total social cost
that is $500 million less than the reference baseline, however, the
2.50% discount rate of the net social benefits is $100 million more
than the reference baseline. This sensitivity shows that without the
HCR restrictions we use more gasoline and we do not see an appreciable
societal benefit. With that, and in lieu of no new developments in HCR
technology we have left our HCR restrictions in place for the final
rule but will continue to monitor and assess the technology for future
rulemakings.\365\
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\365\ See Chapter 9.2.2.4 of the Final RIA for discussion and
data on the Limited HCR skips sensitivity, where we removed all HCR
restrictions and compared the results to our reference case
analysis.
---------------------------------------------------------------------------
How effective an engine technology is at improving a vehicle's fuel
economy depends on several factors such as the vehicle's technology
class and any additional technology that is being added or removed from
the vehicle in conjunction with the new engine technology, as discussed
in Section III.C, above. The Autonomie model's full vehicle simulation
results provide most of the effectiveness values that we use as inputs
to the CAFE Model. For a full discussion of the Autonomie modeling see
Chapter 2.4 of the TSD and the CAFE Analysis Autonomie Documentation.
The Autonomie modeling uses engine map models as the primary inputs for
simulating the effects of different engine technologies.
Engine maps provide a three-dimensional representation of engine
performance characteristics at each engine speed and load point across
the operating range of the engine. Engine maps have the appearance of
topographical maps, typically with engine speed on the horizontal axis
and engine torque, power, or BMEP on the vertical axis. A third engine
characteristic, such as brake-specific fuel consumption (BSFC), is
displayed using contours overlaid across the speed and load map. The
contours provide the values for the third characteristic in the regions
of operation covered on the map. Other characteristics typically
overlaid on an engine map include engine emissions, engine efficiency,
and engine power. We refer to the engine maps developed to model the
behavior of the engines in this analysis as engine map models.
The engine map models we use in this analysis are representative of
technologies that are currently in production or are expected to be
available in the rulemaking timeframe. We develop the engine map models
to be representative of the performance achievable across industry for
a given technology, and they are not intended to represent the
performance of a single manufacturer's specific engine. We target a
broadly representative performance level because the same combination
of technologies produced by different manufacturers will have
differences in performance, due to manufacturer-specific designs for
engine hardware, control software, and emissions calibration.
Accordingly, we expect that the engine maps developed for this analysis
will differ from engine maps for manufacturers' specific engines.
However, we intend and expect that the incremental changes in
performance modeled for this analysis, due to changes in technologies
or technology combinations, will be similar to the incremental changes
in performance observed in manufacturers' engines for the same changes
in technologies or technology combinations.
IAV developed most of the LD engine map models we use in this
analysis. IAV is one of the world's leading automotive industry
engineering service partners with an over 35-year history of performing
research and development for powertrain components, electronics,
[[Page 52630]]
and vehicle design.\366\ Southwest Research Institute (SwRI) developed
the LD diesel and HDPUV engine maps for this analysis. SwRI has been
providing automotive science, technology, and engineering services for
over 70 years.\367\ Both IAV and SwRI developed our engine maps using
the GT-POWER(copyright) Modeling tool (GT-POWER). GT-POWER is a
commercially available, industry standard, engine performance
simulation tool. GT-POWER can be used to predict detailed engine
performance characteristics such as power, torque, airflow, volumetric
efficiency, fuel consumption, turbocharger performance and matching,
and pumping losses.\368\
---------------------------------------------------------------------------
\366\ IAV Automotive Engineering. Available at: https://www.iav.com/en. (Accessed: Feb. 28, 2024).
\367\ Southwest Research Institite. Available at: https://www.swri.org. (Accessed: Feb. 28, 2024).
\368\ For additional information on the GT-POWER tool please see
https://www.gtisoft.com/gt-suite-applications/propulsion-systems/gt-power-engine-simulation-software.
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Just like Argonne optimizes a single vehicle model in Autonomie
following the addition of a singular technology to the vehicle model,
our engine map models were built in GT-POWER by incrementally adding
engine technology to an initial engine--built using engine test data,
component test data, and manufacturers' and suppliers' technical
publications--and then optimizing the engine to consider real-world
constraints like heat, friction, and knock. One of the basic
assumptions we make when developing our engine maps is using 87 octane
gasoline because it is the most common octane rating engines are
designed to operate on and it is going to be the test fuel
manufacturers will have to use for EPA fuel economy testing.\369\ We
use a small number of initial engine configurations with well-defined
BSFC maps, and then, in a very systematic and controlled process, add
specific well-defined technologies to optimize a BSFC map for each
unique technology combination. This could theoretically be done through
engine or vehicle testing, but we would need to conduct tests on a
single engine, and each configuration would require physical parts and
associated engine calibrations to assess the impact of each technology
configuration, which is impractical for the rulemaking analysis because
of the extensive design, prototype part fabrication, development, and
laboratory resources that are required to evaluate each unique
configuration. We and the automotive industry use modeling as an
approach to assess an array of technologies with more limited testing.
Modeling offers the opportunity to isolate the effects of individual
technologies by using a single or small number of initial engine
configurations and incrementally adding technologies to those initial
configurations. This provides a consistent reference point for the BSFC
maps for each technology and for combinations of technologies that
enables us to carefully identify and quantify the differences in
effectiveness among technologies.
---------------------------------------------------------------------------
\369\ 79 FR 23414 (April 28, 2014).
---------------------------------------------------------------------------
We received several comments regarding the use and benefits of
high-octane and low carbon fuels in our analysis. The Missouri Corn
Growers Association commented, ``[t]he proposed rule, along with
NHTSA's larger policy vision around vehicles ignores the widely diverse
range of powertrain and liquid fuel options that could be more widely
deployed to improve energy conservation . . . .'' \370\ They go on to
discuss the benefits of high-octane low carbon ethanol blended fuels
and when combined with higher technology engines. Both the Alliance for
Vehicle Efficiency \371\ and the Defour Group \372\ had similar
comments on high octane low carbon fuels, particularly when used with
HCR technology.
---------------------------------------------------------------------------
\370\ Missouri Corn Growers Association, Docket No. NHTSA-2023-
0022-58413 at 3.
\371\ AVE, Docket No. NHTSA-2023-0022-60213, at 6.
\372\ Defour Group, Docket No. NHTSA-2023-0022-59777, at 11.
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While we agree that a higher-octane fuel can work to improve engine
fuel efficiency, we do not include it in our analysis. Our engine maps
were developed with the use of 87 octane Tier 3 fuel,\373\ which
represents the most commonly available fuel used by consumers.\374\ As
we have stated previously, regulation of fuels is outside the scope of
NHTSA's authority.\375\ Accordingly, we made no updates to the fuel
assumed used in the engine map models.
---------------------------------------------------------------------------
\373\ See TSD Chapter 3.1 for a detailed discussion on engine
map model assumptions.
\374\ DOE. Selecting the Right Octane Fuel. Available at:
https://www.fueleconomy.gov/feg/
octane.shtml#:~:text=You%20should%20use%20the%20octane%20rating%20req
uired%20for,others%20are%20designed%20to%20use%20higher%20octane%20fu
el. (Accessed: Mar. 27, 2024).
\375\ 49 U.S.C. 32904(c).
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Before use in the Autonomie analysis, both IAV and SwRI validated
the generated engine maps against a global database of benchmarked
data, engine test data, single cylinder test data, prior modeling
studies, technical studies, and information presented at
conferences.\376\ IAV and SwRI also validated the effectiveness values
from the simulation results against detailed engine maps produced from
the Argonne engine benchmarking programs, as well as published
information from industry and academia.\377\ This ensures reasonable
representation of simulated engine technologies. Additional details and
assumptions that we use in the engine map modeling are described in
detail in Chapter 3.1 of the TSD and the CAFE Analysis Autonomie Model
Documentation chapter titled ``Autonomie--Engine Model.''
---------------------------------------------------------------------------
\376\ Friedrich, I. et al. 2006. Automatic Model Calibration for
Engine-Process Simulation with Heat-Release Prediction. SAE
Technical Paper 2006-01-0655. Available at: https://doi.org/10.4271/2006-01-0655. (Accessed: Feb. 28, 2024); Rezaei, R. et al. 2012.
Zero-Dimensional Modeling of Combustion and Heat Release Rate in DI
Diesel Engines. SAE International Journal Of Engines. Vol. 5(3): at
874-85. Available at: https://doi.org/10.4271/2012-01-1065.
(Accessed: Feb. 28, 2024); Berndt, R. et al. 2015. Multistage
Supercharging for Downsizing with Reduced Compression Ratio. 2015.
MTZ Worldwide. Vol. 76: at 10-11. Available at: https://link.springer.com/article/10.1007/s38313-015-0036-4. (Accessed: May
31, 2023); Neukirchner, H. et al. 2014. Symbiosis of Energy Recovery
and Downsizing. 2014. MTZ Worldwide. Vol. 75: at 4-9. Available at:
https://link.springer.com/article/10.1007/s38313-014-0219-4.
(Accessed: May 31, 2023).
\377\ Bottcher, L., & Grigoriadis, P. 2019. ANL--BSFC Map
Prediction Engines 22-26. IAV. Available at: https://lindseyresearch.com/wp-content/uploads/2021/09/NHTSA-2021-0053-0002-20190430_ANL_Eng-22-26-Updated_Docket.pdf. (Accessed: May 31, 2023);
Reinhart, T. 2022. Engine Efficiency Technology Study. Final Report.
SwRI Project No. 03.26457.
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Note that we never apply absolute BSFC levels from the engine maps
to any vehicle model or configuration for the rulemaking analysis. We
only use the absolute fuel economy values from the full vehicle
Autonomie simulations to determine incremental effectiveness for
switching from one technology to another technology. The incremental
effectiveness is then applied to the absolute fuel economy or fuel
consumption value of vehicles in the analysis fleet, which are based on
CAFE or FE compliance data. For subsequent technology changes, we apply
incremental effectiveness changes to the absolute fuel economy level of
the previous technology configuration. Therefore, for a technically
sound analysis, it is most important that the differences in BSFC among
the engine maps be accurate, and not the absolute values of the
individual engine maps.
While the fuel economy improvements for most engine technologies in
the analysis are derived from the database of Autonomie full-vehicle
simulation results, the analysis incorporates a handful of what we
refer to as analogous effectiveness values. We use these when we do not
have an engine map model for a particular
[[Page 52631]]
technology combination. To generate an analogous effectiveness value,
we use data from analogous technology combinations for which we do have
engine map models and conduct a pairwise comparison to generate a data
set of emulated performance values for adding technology to an initial
application. We only use analogous effectiveness values for four
technologies that are all SOHC technologies. We determined that the
effectiveness results using these analogous effectiveness values
provided reasonable results. This process is discussed further in
Chapter 3.1.4.2 of the TSD.
The engine technology effectiveness values for all vehicle
technology classes can be found in Chapter 3.1.4. of the TSD. These
values show the calculated improvement for upgrading only the listed
engine technology for a given combination of other technologies. In
other words, the range of effectiveness values seen for each specific
technology (e.g., TURBO1) represents the addition of the TURBO1
technology to every technology combination that could select the
addition of TURBO1.
These values are derived from the Argonne Autonomie simulation
dataset and the righthand side Y-axis shows the number of Autonomie
simulations that achieve each percentage effectiveness improvement
point. The dashed line and grey shading indicate the median and 1.5X
interquartile range (IQR), which is a helpful metric to use to identify
outliers. Comparing these histograms to the box and whisker plots
presented in prior CAFE program rule documents, it is much easier to
see that the number of effectiveness outliers is extremely small.
We received a comment from the International Council on Clean
Transportation (ICCT) regarding the application of the engine sizing
algorithm, and when it is applied in relation to vehicle road load
improvement technologies. ICCT stated that, ``NHTSA continues to only
downsize engines for large changes in tractive load,'' which they
assume artificially increases the overall performance of the fleet.
These are incorrect assumptions and chapter 2.3.4 of the TSD discusses
our approach of sizing powertrains by iteratively going through both
low and high speed acceleration performance loops and adjusting
powertrain size as needed based on the performance neutrality
requirements.\378\
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\378\ CAFE Analysis Autonomie Documentation chapters titled
``Vehicle and Component Assumptions'' and ``Vehicle Sizing
Process.''
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We disagree with the comment implying that engine resizing is
required for every technology change on a vehicle platform. We believe
that this would artificially inflate effectiveness relative to cost.
Manufacturers have repeatedly and consistently conveyed that the costs
for redesign and the increased manufacturing complexity resulting from
continual resizing engine displacement for small technology changes
preclude them from doing so. NHTSA believes that it would not be
reasonable or cost-effective to expect resizing powertrains for every
unique combination of technologies, and even less reasonable and cost-
effective for every unique combination of technologies across every
vehicle model due to the extreme manufacturing complexity that would be
required to do so.\379\ In addition, a 2011 NAS report stated that
``[f]or small (under 5 percent [of curb weight]) changes in mass,
resizing the engine may not be justified, but as the reduction in mass
increases (greater than 10 percent [of curb weight]), it becomes more
important for certain vehicles to resize the engine and seek secondary
mass reduction opportunities.'' \380\
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\379\ For more details, see comments and discussion in the 2020
Rulemaking Preamble Section VI.B.3.(a)(6) Performance Neutrality.
\380\ National Research Council. 2011. Assessment of Fuel
Economy Technologies for Light-Duty Vehicles. The National Academies
Press. Washington, DC at 107. Available at: https://doi.org/10.17226/12924. (Accessed: Apr. 5, 2024) (hereinafter, 2011 NAS
Report).
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We also believe that ICCT's comment regarding Autonomie's engine
resizing process is further addressed by Autonomie's powertrain
calibration process. We do agree that the powertrain should be re-
calibrated for every unique technology combination and this calibration
is performed as part of the transmission shift initializer
routine.\381\ Autonomie runs the shift initializer routine for every
unique Autonomie full vehicle model configuration and generates
customized transmission shift maps. The algorithms' optimization is
designed to balance minimization of energy consumption and vehicle
performance.
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\381\ See FRM CAFE Analysis Autonomie Documentation at Paragraph
4.4.5.2.
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ICCT also submitted a comment regarding the validity of the
continued use of our engine map models. ICCT stated that, ``[a]lthough
NHTSA scales its MY2010 hybrid Atkinson engine map to match the thermal
efficiency of the MY2017 Toyota Prius, this appears to have been the
only update made to the several engine maps that underpin all base and
advanced engine technologies. The remaining engine maps are still
primarily based on outdated engines (e.g., from MY2011, 2013 and 2014
vehicles). Even with the updated hybrid engine, the newest Toyota Prius
demonstrates an additional 10% improvement over the outgoing variant,
due in part to improvements in engine efficiency.'' ICCT also took
issue with NHTSA not using two of EPA's engine map models, and for the
perceived lack of effectiveness benefit for adding cylinder
deactivation technology to turbocharged and HCR engines.
We disagree with statements that our engine maps are outdated. Many
of the engine maps were developed specifically to support analysis for
the current rulemaking timeframe. The engine map models encompass
engine technologies that are present in the analysis fleet and
technologies that could be applied in the rulemaking timeframe. In many
cases those engine technologies are mainstream today and will continue
to be during the rulemaking timeframe. For example, the engines on some
MY 2022 vehicles in the analysis fleet have technologies that were
initially introduced ten or more years ago. Having engine maps
representative of those technologies is important for the analysis. The
most basic engine technology levels also provide a useful consistent
starting point for the incremental improvements for other engine
technologies. The timeframe for the testing or modeling is unimportant
because time by itself doesn't impact engine map data. A given engine
or model will produce the same BSFC map regardless of when testing or
modeling is conducted. Simplistic discounting of engine maps based on
temporal considerations alone could result in discarding useful
technical information.
We also disagree with ICCT's example that our hybrid engine map
models are outdated and have even been provided comments that our
hybrid effectiveness values exceed reasonable thermal efficiency.\382\
This is further discussed in the III.D.3 of this preamble. Finally, we
responded to ICCT's criticisms that we did not employ EPA's engine map
models in the 2020 final rule for MYs 2021-2026 standards, where we
showed that our modeled engines provided similar incremental
effectiveness values as the EPA engine map models.\383\ As far as we
are aware, ICCT has not provided additional information
[[Page 52632]]
showing that our engine map models are not reasonably similar to (if
not providing a better effectiveness improvement than, in the case of
the benchmarked Honda engine) EPA's engine map models.
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\382\ Supplemental Comments of Toyota Motor North America, Inc.,
Notice of Proposed Rulemaking: Safer Affordable Fuel-Efficient
Vehicles Rule, Docket No. NHTSA-2018-0067 and EPA-HQ-OAR-2018-0283.
\383\ 85 FR 24397-8 (April 30, 2020).
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Finally, in regard to engine effectiveness modeling, ICCT commented
that ``[t]he modeled benefit of adding cylinder deactivation (DEAC) to
turbocharged and HCR engines appears to be only about 25% of the
benefit of adding DEAC to the base engine. While DEAC added to turbo or
HCR engines will have lower pumping loss reductions than when added to
base naturally aspirated engines, DEAC can still be expected to provide
significant pumping loss reductions while enabling the engine to
operate in a more thermally efficient region of the engine map.''
In the NPRM we gave an example of the effects of adding DEAC to a
turbocharged engine and discussed more about how fuel-efficient
technologies have complex interactions and the effectiveness values of
technology cannot be simply added together.\384\ Turbocharging and DEAC
both work to reduce engine pumping losses and when working together
they often provide a fuel-efficiency improvement greater then when they
are working independently; however, much of these improvement happen in
the same regions of engine operation where one or the other technology
has a dominate effect which overshadows the benefits of the other. In
other words, the benefits of the technologies are overlapping in the
similar regions where the engine operates. These complex interactions
among technologies are captured in our engine modeling.
---------------------------------------------------------------------------
\384\ 88 FR 56167 (August 17, 2023). This example is also given
in section III.C.3 of this preamble.
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The engine costs in our analysis are the product of engine DMCs,
RPE, the LE, and updating to a consistent dollar year. We sourced
engine DMCs from multiple sources, but primarily from the 2015 NAS
report.\385\ For VTG and VTGE technologies (i.e., Miller Cycle), we
used cost data from a FEV technology cost assessment performed for
ICCT,\386\ aggregated using individual component and system costs from
the 2015 NAS report. We considered costs from the 2015 NAS report that
referenced a Northeast States Center for a Clean Air Future (NESCCAF)
2004 report,\387\ but believe the reference material from the FEV
report provides more updated cost estimates for the VTG technology.
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\385\ 2015 NAS Report, Table S.2, at 7-8.
\386\ Isenstadt, A. et al. 2016. Downsized, Boosted Gasoline
Engines. Working Paper. ICCT 2016-22. Available at: https://theicct.org/wp-content/uploads/2021/06/Downsized-boosted-gasoline-engines_working-paper_ICCT_27102016_1.pdf. (Accessed: May 31, 2023).
\387\ NESCCAF. 2004. Reducing Greenhouse Gas Emissions from
Light-Duty Motor Vehicles. Available at: http://www.nesccaf.org/documents/rpt040923ghglightduty.pdf. (Accessed: May 31, 2023).
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All engine technology costs start with a base engine cost, and then
additional technology costs are based on cylinder and bank count and
configuration; the DMC for each engine technology is a function of unit
cost times either the number of cylinders or number of banks, based on
how the technology is applied to the system. The total costs for all
engine technologies in all MYs across all vehicle classes can be found
in the Technologies Input file.
2. Transmission Paths
Transmissions transmit torque generated by the engine from the
engine to the wheels. Transmissions primarily use two mechanisms to
improve fuel efficiency: (1) a wider gear range, which allows the
engine to operate longer at higher efficiency speed-load points; and
(2) improvements in friction or shifting efficiency (e.g., improved
gears, bearings, seals, and other components), which reduce parasitic
losses.
We only model automatic transmissions in both the LD and HDPUV
analyses. The four subcategories of automatic transmissions that we
model in the LD analysis include traditional automatic transmissions
(AT), dual clutch transmissions (DCT), continuously variable
transmissions (CVT and eCVT), and direct drive (DD) transmissions.\388\
We also include high efficiency gearbox (HEG) technology improvements
as options to the transmission technologies (designated as L2 or L3 in
our analysis to indicate level of technology improvement).\389\ There
has been a significant reduction in manual transmissions over the years
and they made up less than 1% of the vehicles produced in MY 2022.\390\
Due to the trending decline of manual transmissions and their current
low production volumes, we have removed manual transmissions from this
analysis and have assigned vehicles using manual transmissions as DCTs
in the analysis fleet.
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\388\ Note that eCVT and DD transmissions are only coupled with
electrified drivetrains and are therefore not included as a
standalone transmission option on the CAFE Model's technology
pathways.
\389\ See 2015 NAS Report, at 191. HEG improvements for
transmissions represent incremental advancements in technology that
improve efficiency, such as reduced friction seals, bearings and
clutches, super finishing of gearbox parts, and improved
lubrication. These advancements are all aimed at reducing frictional
and other parasitic loads in transmissions to improve efficiency. We
consider three levels of HEG improvements in this analysis based on
the National Academy of Sciences (NAS) 2015 recommendations, and CBI
data.
\390\ 2023 EPA Automotive Trends Report.
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We only model ATs in the HDPUV analysis because, except for DD
transmissions that are only included as part of an electrified
drivetrain, all HDPUV fleet analysis vehicles use ATs. In addition,
from an engineering standpoint, DCTs and CVTs are not suited for HDPUV
work requirements, as discussed further below. The HDPUV automatic
transmissions work in the same way as the LD ATs and are labeled the
same, but they are sized and mapped, in the Autonomie effectiveness
modeling,\391\ to account for the additional work, durability, and
payload these vehicles are designed to conduct. The HDPUV transmissions
are sized with larger clutch packs, higher hydraulic line pressures,
different shift schedules, larger torque converter and different lock
up logic, and stronger components when compared to their LD
counterparts. Chapter 3.2.1 of the TSD discusses the technical
specifications of the four different AT subtypes in more detail. The LD
and HDPUV transmission technology paths are shown in Chapter 3.2.3 of
the TSD.
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\391\ Autonomie Input and Assumptions Description Files.
---------------------------------------------------------------------------
To assign transmission technologies to vehicles in the analysis
fleets, we identify which Autonomie transmission model is most like a
vehicle's real-world transmission, considering the transmission's
configuration, costs, and effectiveness. Like with engines, we use
manufacturer CAFE compliance submissions and publicly available
information to assign transmissions to vehicles and determine which
platforms share transmissions. To link shared transmissions in a
manufacturer's fleet, we use transmission codes that include
information about the manufacturer, drive configuration, transmission
type, and number of gears. Just like manufacturers share transmissions
in multiple vehicles, the CAFE Model will treat transmissions as
``shared'' if they share a transmission code and transmission
technologies will be adopted together.
While identifying an AT's gear count is fairly easy, identifying
HEG levels for ATs and CVTs is more difficult. We reviewed the age of
the transmission design, relative performance versus previous designs,
and technologies incorporated to assign an HEG level. There are no HEG
Level 3 automatic transmissions in either the LD or the
[[Page 52633]]
HDPUV analysis fleets. For the LD analysis we found all 7-speed, all 9-
speed, all 10-speed, and some 8-speed automatic transmissions to be
advanced transmissions operating at HEG Level 2 equivalence. We
assigned eight-speed automatic transmissions and CVTs newly introduced
for the LD market in MY 2016 and later as HEG Level 2. All other
automatic transmissions are assigned to their respective transmission's
initial technology level (i.e., AT6, AT8, and CVT). For DCTs, the
number of gears in the assignments usually match the number of gears
listed by the data sources, with some exceptions (we assign dual-clutch
transmissions with seven and nine gears to DCT6 and DCT8 respectively).
We assigned vehicles in either the LD or HDPUV analyses fleets with a
fully electric powertrain a DD transmission. We assigned any vehicle in
the LD analysis fleet with a power-split hybrid (SHEVPS) powertrain an
electronic continuously variable transmission (eCVT). Finally, we
assigned the limited number of manual transmissions in the LD fleet as
DCTs, as we did not model manual transmissions in Autonomie for this
analysis.
Most transmission adoption features are instituted through
technology path logic (i.e., decisions about how less advanced
transmissions of the same type can advance to more advanced
transmissions of the same type). Technology pathways are designed to
prevent ``branch hopping''--changes in transmission type that would
correspond to significant changes in transmission architecture--for
vehicles that are relatively advanced on a given pathway. For example,
any automatic transmission with more than five gears cannot move to a
dual-clutch transmission. We also prevent ``branch hopping'' as a proxy
for stranded capital, which is discussed in more detail in Section
III.C and Chapter 2.6 of the TSD.
For the LD analysis, the automatic transmission path precludes
adoption of other transmission types once a platform progresses past an
AT8. We use this restriction to avoid the significant level of stranded
capital loss that could result from adopting a completely different
transmission type shortly after adopting an advanced transmission,
which would occur if a different transmission type were adopted after
AT8 in the rulemaking timeframe. Vehicles that did not start out with
AT7L2 transmissions cannot adopt that technology in the model. It is
likely that other vehicles will not adopt the AT7L2 technology, as
vehicles that have moved to more advanced automatic transmissions have
overwhelmingly moved to 8-speed and 10-speed transmissions.\392\
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\392\ 2023 EPA Automotive Trends Report, at 71, Figure 4.24.
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CVT adoption is limited by technology path logic and is only
available in the LD fleet analysis and therefore, not in the technology
path for the HDPUV analysis. Vehicles that do not originate with a CVT
or vehicles with multispeed transmissions beyond AT8 in the analysis
fleet cannot adopt CVTs. Vehicles with multispeed transmissions greater
than AT8 demonstrate increased ability to operate the engine at a
highly efficient speed and load. Once on the CVT path, the platform is
only allowed to apply improved CVT technologies. Due to the limitations
of current CVTs, discussed in TSD Chapter 3.2, this analysis restricts
the application of CVT technology on LDVs with greater than 300 lb.-ft
of engine torque. This is because of the higher torque (load) demands
of those vehicles and CVT torque limitations based on durability
constraints. We believe the 300 lb.-ft restriction represents an
increase over current levels of torque capacity that is likely to be
achieved during the rule making timeframe. This restriction aligns with
CVT application in the analysis fleet, in that CVTs are only witnessed
on vehicles with under 280 lb.-ft of torque.\393\ Additionally, this
restriction is used to avoid stranded capital. Finally, the analysis
allows vehicles in the analysis fleet that have DCTs to apply an
improved DCT and allows vehicles with an AT5 to consider DCTs.
Drivability and durability issues with some DCTs have resulted in a low
relative adoption rate over the last decade. This is also broadly
consistent with manufacturers' technology choices.\394\ DCTs are not a
selectable technology for the HDPUV analysis.
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\393\ Market Data Input File.
\394\ 2023 EPA Automotive Trends Report, at 77, Figure 4.24.
---------------------------------------------------------------------------
Autonomie models transmissions as a sequence of mechanical torque
gains. The torque and speed are multiplied and divided, respectively,
by the current ratio for the selected operating condition. Furthermore,
torque losses corresponding to the torque/speed operating point are
subtracted from the torque input. Torque losses are defined based on a
three-dimensional efficiency lookup table that has the following
inputs: input shaft rotational speed, input shaft torque, and operating
condition. We populate transmission template models in Autonomie with
characteristics data to model specific transmissions.\395\
Characteristics data are typically tabulated data for transmission gear
ratios, maps for transmission efficiency, and maps for torque converter
performance, as applicable. Different transmission types require
different quantities of data. The characteristics data for these models
come from peer-reviewed sources, transmission and vehicle testing
programs, results from simulating current and future transmission
configurations, and confidential data obtained from OEMs and
suppliers.\396\ We model HEG improvements by modeling improvements to
the efficiency map of the transmission. As an example, the AT8 model
data comes from a transmission characterization study.\397\ The AT8L2
has the same gear ratios as the AT8, however, we improve the gear
efficiency map to represent application of the HEG level 2
technologies. The AT8L3 models the application of HEG level 3
technologies using the same principle, further improving the gear
efficiency map over the AT8L2 improvements. Each transmission (15 for
the LD analysis and 6 for the HDPUV analysis) is modeled in Autonomie
with defined gear ratios, gear efficiencies, gear spans, and unique
shift logic for the technology configuration the transmission is
applied to. These transmission maps are developed to represent the gear
counts and span, shift and torque converter lockup logic, and
efficiencies that can be seen in the fleet, along with upcoming
technology improvements, all while balancing key attributes such as
drivability, fuel economy, and performance neutrality. This modeling is
discussed in detail in Chapter 3.2 of the TSD and the CAFE Analysis
Autonomie Documentation chapter titled ``Autonomie--Transmission
Model.''
---------------------------------------------------------------------------
\395\ Autonomie Input and Assumptions Description Files.
\396\ Downloadable Dynamometer Database: https://www.anl.gov/energy-systems/group/downloadable-dynamometer-database. (Accessed:
May 31, 2023).; Kim, N. et al. 2014. Advanced Automatic Transmission
Model Validation Using Dynamometer Test Data. SAE 2014-01-1778. SAE
World Congress: Detroit, MI.; Kim, N. et al. 2014. Development of a
Model of the Dual Clutch Transmission in Autonomie and Validation
With Dynamometer Test Data. International Journal of Automotive
Technologies. Vol. 15(2): pp 263-71.
\397\ CAFE Analysis Autonomie Documentation chapter titled
``Autonomie--Transmission Model.''
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The effectiveness values for the transmission technologies, for all
LD and HDPUV technology classes, are shown in Chapter 3.2.4 of the TSD.
Note that the effectiveness for the AT5, eCVT, and DD technologies is
not shown. The DD and eCVT transmissions do not have
[[Page 52634]]
standalone effectiveness values because those technologies are only
implemented as part of electrified powertrains. The AT5 has no
effectiveness values because it is a reference-point technology against
which all other transmission technologies are compared.
Our transmission DMCs come from the 2015 NAS report and studies
cited therein. The LD costs are taken almost directly from the 2015 NAS
report adjusted to the current dollar year or for the appropriate
number of gears. We applied a 20% cost increase for HDPUV transmissions
based on comparing the additional weight, torque capacity, and
durability required in the HDPUV segment. Chapter 3.2 of the TSD
discusses the specific 2015 NAS report costs used to generate our
transmission cost estimates, and all transmission costs across all MYs
can be found in CAFE Model's Technologies Input file. We have used the
2015 NAS report transmission costs for the last several LD CAFE Model
analyses (since reevaluating all transmission costs for the 2020 final
rule) and have received no comments or feedback on these costs. We
again sought comment on our approach to estimating all transmission
costs, but in particular on HDPUV transmission costs for this analysis,
in addition to any publicly available data from manufacturers or
reports on the cost of HDPUV transmissions. We received no comments or
feedback on these costs, so we continue to use the NPRM estimates for
the analysis supporting this final rule.
3. Electrification Paths
The electrification paths include a set of technologies that share
common electric powertrain components, like batteries and electric
motors, for certain vehicle functions that were traditionally powered
by combustion engines. While all vehicles (including conventional ICE
vehicles) use batteries and electric motors in some form, some
component designs and powertrain architectures contribute to greater
levels of electrification than others, allowing the vehicle to be less
reliant on gasoline or other fuel.
Several stakeholders commented about general topics related to
electrification technologies like the perceived merits or disadvantages
of electric vehicles,\398\ OEM investments in electric vehicles,\399\
and infrastructure and supply chain considerations around electric
vehicles.\400\ Additional comments stated that hybrids are ``popular,
cost effective'' \401\ and that dozens of new electric vehicle models
having reached ``twice as many as before the pandemic'' \402\ with
highly efficient electric vehicle technology \403\ that ``is scalable
and increasingly accessible.'' \404\ Stakeholders stated that
``[n]early every automaker has publicly committed to transitioning
model line-ups to new technologies with substantially less fuel
consumption'' \405\ and more electrified vehicles will enter the market
``with the goal of making these mobility options more accessible for
everyone . . . offering a diverse portfolio of EVs to meet varying
customer needs.'' \406\ Insofar as our electrification technology
penetration rates reach into the rulemaking timeframe, several other
commenters stated that our future electrification penetration rates are
not realistic due to limitations/uncertainty with battery material
acquisition, manufacturing/production, and the current state of
infrastructure \407\ \408\ \409\ and are expecting PHEVs to ``play a
more prominent role over the near to mid-term.'' \410\ On the other
hand, ICCT stated that our penetration rates of electrification
technologies in the no action and action alternatives ``are reasonable
and feasible.'' \411\
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\398\ See, e.g., OCT, NHTSA-2023-0022-51242; ZETA, NHTSA-2023-
0022-60508; ACI, NHTSA-2023-0022-50765; West Virginia AG et al.,
NHTSA-2023-0022-63056; Heritage Foundation, NHTSA-2023-0022-61952.
\399\ Nissan, NHTSA-2023-0022-60696; GM, NHTSA-2023-0022-60686;
ZETA, NHTSA-2023-0022-60508.
\400\ See Section II.B for a discusssion of comments related to
infrastructure and supply chain considerations.
\401\ Consumer Reports, Docket No. NHTSA-2023-0022-61101-A2, at
1.
\402\ ZETA, Docket No. NHTSA-2023-0022-60508, (citing their
reference #294 ``Global EV Outlook 2023 Catching up with climate
ambitions,'' IEA, (2023)).
\403\ OCT, Docket No. NHTSA-2023-0022-51242-A1, at 4.
\404\ Lucid, Docket No. NHTSA-2023-0022-50594-A1, at 2.
\405\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 8.
\406\ Nissan, Docket No. NHTSA-2023-0022-60696-A1, at 3.
\407\ West Virginia AG et al, Docket No. NHTSA-2023-0022-63056-
A1, at 13-14.
\408\ MECA, Docket No. NHTSA-2023-0022-63053-A1, at 8.
\409\ AFPM, Docket No. NHTSA-2023-0022-61911-A1, at 37.
\410\ Toyota, Docket No. NHTSA-2023-0022-61131-A1, at 8.
\411\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 12
(referring to ``NHTSA's estimates of battery-electric and plug-in
hybrid electric vehicle penetration rates under the No Action and
four ``action'' alternatives'').
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NHTSA thanks commenters for expressing their opinions and
submitting relevant data on topics surrounding electrification
technology adoption. We endeavor to reasonably model technologies that
manufacturers use to respond to our standards, other government
standards, and consumer preferences, and we believe that the inputs and
assumptions that we selected to represent electrification technologies
results in reasonable outcomes. The grounds for building the foundation
to determine appropriate electrification technology effectiveness and
cost values (therefore resulting in appropriate technology penetration
rates) as these technologies affect the reference baseline and out
years was based on numerous well-thought-out inputs and assumptions.
Although time and resources limit consideration of each and every
individual electrification technology, NHTSA focused on key inputs and
assumptions (e.g., the costs of batteries and applicability of specific
electrified technologies for vehicles that do extensive work in the
HDPUV fleet) to provide reasonable results for compliance pathways.
While we recognize that stakeholders identified issues that they
believed to be impediments to electrification technology adoption in
particular fleets or market segments, we feel confident that we took
the appropriate approach to determining the technologies applicable for
vehicles in this analysis and that we capture many of these
considerations explicitly in the analysis or qualitatively in
additional technical support for this final rule. We have provided
details of the inputs and assumptions in the TSD accompanying this
final rule and provided more information to support our responses to
comments throughout Section II and III of this preamble.
Unlike with other technologies in the analysis, including other
electrification technologies, Congress placed specific limitations on
how we consider the fuel economy of alternative fueled vehicles (such
as PHEVs, BEVs, and FCEVs) when setting CAFE standards.\412\ We
implement these restrictions in the CAFE Model by using fuel economy
values that assume ``charge sustaining'' (gasoline-only) PHEV
operation,\413\ and by restricting technologies that convert a vehicle
to a BEV or a FCEV from being
[[Page 52635]]
applied during ``standard-setting'' years.\414\ However, there are
several reasons why we must still accurately model PHEVs, BEVs, and
FCEVs in the analysis; these reasons are discussed in detail throughout
this preamble and, in particular, in Sections IV and VI. In brief: we
must consider the existing fleet fuel economy level in calculating the
maximum feasible fuel economy level that manufacturers can achieve in
future years. Accurately calculating the pre-existing fleet fuel
economy level is crucial because it marks the starting point for
determining what further efficiency gains will be feasible during the
rulemaking timeframe. As discussed in detail above and in TSD Chapter
2.2, PHEVs, BEVs, and FCEVs currently exist in manufacturer's fleets
and count towards manufacturer's reference baseline compliance fuel
economy values.
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\412\ 49 U.S.C. 32902(h)(1), (2). In determining maximum
feasible fuel economy levels, ``the Secretary of Transportation--(1)
may not consider the fuel economy of dedicated automobiles; [and]
(2) shall consider dual fueled automobiles to be operated only on
gasoline or diesel fuel.''
\413\ We estimated two sets of technology effectivness values
using the Argonne full vehicle simulations: one set does not include
the electrificaiton portion of PHEVs, and one set includes the
combined fuel economy for both ICE operation and electric operation.
\414\ CAFE Model Documentation at S4.6 Technology Fuel Economy
Improvements.
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In addition to accurately capturing an analysis, or initial, fleet
of vehicles in a given MY, we must capture a regulatory ``no action''
reference baseline in each MY; that is, the regulatory reference
baseline captures what the world will be like if our rule is not
adopted, to accurately capture the costs and benefits of CAFE
standards. The ``no-action'' reference baseline includes our
representation of the existing fleet of vehicles (i.e., the LD and
HDPUV analysis fleets) and (with some restrictions) our representation
of manufacturer's fleets in the absence of our standards. Specifically,
we assumed that in the absence of LD CAFE and HDPUV FE standards,
manufacturers will produce certain BEVs to comply with California's ACC
I and ACT program. We further assumed, consistent with manufacturer
comments, that they will (regardless of legal requirements) produce
additional BEVs consistent with the levels that would be required by
California's ACC II program, were it to be granted a Clean Air Act
preemption waiver. Accounting for electrified vehicles that
manufacturers produced in response to state regulatory requirements or
will produce for their own reasons improves the accuracy of the
analysis of the costs and benefits of additional technology added to
vehicles in response to CAFE standards, while adhering to the statutory
prohibition against considering the fuel economy gains that could be
achieved if manufacturers create new dedicated automobiles to comply
with the CAFE standards.
Next, the costs and benefits of CAFE standards do not end in the
MYs for which we are setting standards. Vehicles produced in standard-
setting years, e.g., MYs 2027 through MY 2031 in this analysis, will
continue to have effects for years after they are produced as the
vehicles are sold and driven. To accurately capture the costs and
benefits of vehicles subject to the standards in future years, the CAFE
Model projects compliance through MY 2050. Outside of the standard-
setting years, we model the extent to which manufacturers could produce
electrified vehicles, in order to improve the accuracy and realism of
our analysis in situations where statute does not prevent us from doing
so. Finally, due to NEPA requirements, we do consider the effects of
electrified vehicle adoption in the CAFE Model under a ``real-world''
scenario where we lift EPCA/EISA's restrictions on our decision-making.
On the basis of our NEPA analysis, we can consider the actual
environmental impacts of our actions in the decision-making process,
subject to EPCA's constraints.\415\
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\415\ 40 CFR 1500.1(a).
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For those reasons, we must still accurately model electrified
vehicles. That said, PHEVs, BEVs, and FCEVs only represent a portion of
the electrified technologies that we include in the analysis. We
discuss the range of modeled electrified technologies below and in
detail in Chapter 3.3.1 of the TSD.
Among the simpler configurations with the fewest electrification
components, micro HEV technology (SS12V) uses a 12-volt system that
simply restarts the engine from a stop. Mild HEVs use a 48-volt belt
integrated starter generator (BISG) system that restarts the engine
from a stop and provides some regenerative braking functionality.\416\
Mild HEVs are often also capable of minimal electric assist to the
engine on take-off.
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\416\ See 2015 NAS Report, at 130. (``During braking, the
kinetic energy of a conventional vehicle is converted into heat in
the brakes and is thus lost. An electric motor/generator connected
to the drivetrain can act as a generator and return a portion of the
braking energy to the battery for reuse. This is called regenerative
braking. Regenerative braking is most effective in urban driving and
in the urban dynamometer driving schedule (UDDS) cycle, in which
about 50 percent of the propulsion energy ends up in the brakes (NRC
2011, 18).'').
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Strong hybrid-electric vehicles (SHEVs) have higher system voltages
compared to mild hybrids with BISG systems and are capable of engine
start/stop, regenerative braking, electric motor assist of the engine
at higher speeds, and power demands with the ability to provide limited
all-electric propulsion. Common SHEV powertrain architectures,
classified by the interconnectivity of common electrified vehicle
components, include both a series-parallel architecture by power-split
device (SHEVPS) as well as a parallel architecture (P2).\417\ P2s--
although enhanced by the electrification components, including just one
electric motor--remains fundamentally similar to a conventional
powertrain.\418\ In contrast, SHEVPS is considerably different than a
conventional powertrain; SHEVPSs use two electric motors, which allows
the use of a lower-power-density engine. This results in a higher
potential for fuel economy improvement compared to a P2, although the
SHEVPS' engine power density is lower.\419\ Or, put another way, ``[a]
disadvantage of the power split architecture is that when towing or
driving under other real-world conditions, performance is not
optimum.'' \420\ In contrast, ``[o]ne of the main reasons for using
parallel hybrid architecture is to enable towing and meet maximum
vehicle speed targets.'' \421\ This is an important distinction to
understand why we allow certain types of vehicles to adopt P2
powertrains and not SHEVPS powertrains, and to understand why we
include only P2 strong hybrid architectures in the HDPUV analysis. Both
concepts are discussed further below.
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\417\ Readers familiar with the last CAFE Model analysis may
remember this category of powertrains referred to as ``SHEVP2s.''
Now that the SHEVP2 pathway has been split into three pathways based
on the paired ICE technology, we refer to this broad category of
technologies as ``P2s.''
\418\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting
the Right Hybrid Architecture. SAE International Journal of
Alternative Power. Vol. 6(1). Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023) (Parallel hybrids
architecture typically adds the electrical system components to an
existing conventional powertrain).
\419\ Id.
\420\ 2015 NAS report, at 134.
\421\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting
the Right Hybrid Architecture. SAE International Journal of
Alternative Power. Vol. 6(1). Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023).
---------------------------------------------------------------------------
Plug-in hybrids (PHEVs) utilize a combination gasoline-electric
powertrain, like that of a SHEV, but have the ability to plug into the
electric grid to recharge the battery, like that of a BEV; this
contributes to all-electric mode capability in both blended and non-
blended PHEVs.\422\ The analysis
[[Page 52636]]
includes PHEVs with an all-electric range (AER) of 20 and 50 miles to
encompass the range of PHEV AER in the market today. BEVs have an all-
electric powertrain and use only batteries for the source of propulsion
energy. BEVs with ranges of 200 to more than 350 miles are used in the
analysis. Finally, FCEVs are another form of electrified vehicle that
have a fully electric powertrain that uses a fuel cell system to
convert hydrogen fuel into electrical energy. See TSD Chapter 3.3 for
more information on every electrification technology considered in the
analysis, including its acronym and a brief description. For brevity,
we refer to technologies by their acronyms in this section.
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\422\ Some PHEVs operate in charge-depleting mode (i.e.,
``electric-only'' operation--depleting the high-voltage battery's
charge) before operating in charge-sustaining mode (similar to
strong hybrid operation, the gasoline and electric powertrains work
together), while other (blended) PHEVs switch between charge-
depleting mode and charge-sustaining mode during operation.
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Readers familiar with previous LD CAFE analyses will notice that we
have increased the number of engine options available for strong
hybrid-electric vehicles and plug-in hybrid-electric vehicles. As
discussed above, this better represents the diversity of different
hybrid architectures and engine options available in the real world for
SHEVs and PHEVs, while still maintaining a reasonable level of
analytical complexity. In addition, we now refer to the BEV options as
BEV1, BEV2, BEV3, and BEV4, rather than by their range assignments as
in the previous analysis, to accommodate using the same model code for
the LD and HDPUV analyses. Note that BEV1 and BEV2 have different range
assignments in the LD and HDPUV analyses; further, within the HDPUV
fleet, different range assignments exist for HD pickups and HD vans.
In the CAFE Model, HDPUVs only have one SHEV option and one PHEV
option.\423\ The P2 architecture supports high payload and high towing
requirements versus other types of hybrid architecture,\424\ which are
important considerations for HDPUV commercial operations. The
mechanical connection between the engine, transmission, and P2 hybrid
systems enables continuous power flow to be able to meet high towing
weights and loads at the cost of system efficiency. We do not allow
engine downsizing in this setup in so that when the battery storage
system is depleted, the vehicle is still able to operate while
achieving its original performance. We picked the P2 architecture for
HDPUV SHEVs because, although there are currently no SHEV HDPUVs in the
market on which to base a technology choice, we believe that the P2
strong hybrid architecture would more likely be picked than other
architecture options, such as ones with power-split powertrains. This
is because, as discussed above, the P2 architecture ``can be integrated
with existing conventional powertrain systems that already meet the
additional attribute requirements of these large vehicle segments.''
\425\
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\423\ Note that while the HDPUV PHEV option is labeled
``PHEV50H'' in the technology pathway, it actually uses a basic
engine. This is so the same technology pathway can be used in the LD
and HDPUV CAFE Model analyses.
\424\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting
the Right Hybrid Architecture. SAE International Journal of
Alternative Power, Vol. 6(1): at 68-76. Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023). (Using
current powersplit design approaches, critical attribute
requirements of larger vehicle segments, including towing
capability, performance and higher maximum vehicle speeds, can be
difficult and in some cases impossible to meet. Further work is
needed to resolve the unique challenges of adapting powersplit
systems to these larger vehicle applications. Parallel architectures
provide a viable alternative to powersplit for larger vehicle
applications because they can be integrated with existing
conventional powertrain systems that already meet the additional
attribute requirements of these large vehicle segments).
\425\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting
the Right Hybrid Architecture. SAE International Journal of
Alternative Power. Vol. 6(1): at 68-76. Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023).
---------------------------------------------------------------------------
We only include one HDPUV PHEV option as there are no PHEVs in the
HDPUV analysis fleet,\426\ and there are no announcements from major
manufacturers that indicate this a pathway that they will pursue in the
short term (i.e., the next few years).\427\ We believe this is in part
because PHEVs, which are essentially two separate powertrains combined,
can decrease HDPUV capability by increasing the curb weight of the
vehicle and reducing cargo capacity. A manufacturer's ability to use
PHEVs in the HDPUV segment is highly dependent on the load requirements
and the duty cycle of the vehicle. However, in the right operation,
HDPUV PHEVs can have a cost-effective advantage over their conventional
counterparts.\428\ More specifically, there would be a larger fuel
economy benefit the more the vehicle could rely on its electric
operation, with partial help from the ICE; examples of duty cycles
where this would be the case include short delivery applications or
construction trucks that drive between work sites in the same city.
Accordingly, we do think that PHEVs can be a technology option for
adoption in the rulemaking timeframe. We picked a 50-mile AER for this
segment based on discussions with experts at Argonne, who were also
involved in DOE projects and provided guidance for this segment.\429\
Additional information about each technology we considered is located
in Chapter 3.3.1 of the TSD.
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\426\ National Renewable Energy Laboratory, Lawrence Berkeley
National Laboratory, Kevala Inc., and U.S. Department of Energy.
2024. Multi-State Transportation Electrification Impact Study:
Preparing the Grid for Light-, Medium-, and Heavy-Duty Electric
Vehicles. DOE/EE-2818, U.S. Department of Energy, 2024.
\427\ We recognize that there are some third-party companies
that have converted HDPUVs into PHEVs, however, HDPUV incomplete
vehicles that are retrofitted with electrification technology in the
aftermarket are not regulated under this rulemaking unless the
manufacturer optionally chooses to certify them as a complete
vehicle. See 49 CFR 523.7.
\428\ For the purpose of the Fuel Efficiency regulation, HDPUVs
are assessed on the 2-cycle test procedure similar to the LDVs. The
GVWR does not exceed 14,000 lbs in this segment. NREL. 2023.
Electric and Plug-in Hybrid Electric Vehicle Publications. Available
at: https://www.nrel.gov/transportation/fleettest-publications-electric.html. (Accessed: May 31, 2023); Birky, A. et al. 2017.
Electrification Beyond Light Duty: Class 2b-3 Commercial Vehicles.
Final Report. ORNL/TM-2017/744. Available at: https://doi.org/10.2172/1427632. (Accessed: May 31, 2023).
\429\ DOE. 2023. 21st Century Truck Partnership. Vehicle
Technologies Office. Available at: https://www.energy.gov/eere/vehicles/21st-century-truck-partnership. (Accessed: May 31, 2023);
Islam, E. et al. 2022. A Comprehensive Simulation Study to Evaluate
Future Vehicle Energy and Cost Reduction Potential. Final Report.
ANL/ESD-22/6. Available at: https://publications.anl.gov/anlpubs/2023/11/179337.pdf. (Accessed: Mar. 14, 2024).
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We sought comment on the range of electrification path technologies
and received comment from stakeholders regarding electrified powertrain
options for both the light-duty and HDPUV fleets.
Two commenters \430\ repeatedly referenced a Roush report \431\ and
suggested that we should include more-capable, higher output 48-volt
mild hybrid systems beyond P0 mild hybrids in our modeling, such as
``P2, P3, or P4 configurations'' \432\ which offer additional benefits
of ``electric power take-offs'' \433\ (i.e., launch assist) or ``slow-
speed electric driving'' \434\ on the vehicle's drive axle(s). It was
also noted in comment that P2 mild hybrids mated with more advanced
engine technologies have the ability to increase system
efficiency.\435\
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\430\ ICCT, Docket No. NHTSA-2023-0022-54064; John German,
Docket No. NHTSA-2023-0022-53274.
\431\ Roush. 2021. Gasoline Engine Technologies for Revised 2023
and Later Model Year Light-Duty Vehicle Greenhouse Gas Emission
Standards. Final Report at 11. Sept. 24, 2021. Available at: https://downloads.regulations.gov/EPA-HQ-OAR-2021-0208-0210/attachment_2.pdf. (Accessed: Apr. 5, 2024).
\432\ John German, Docket No. NHTSA-2023-0022-53274-A1, at 6-7.
\433\ MECA, Docket No. NHTSA-2023-0022-63053-A1, at 13.
\434\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 20.
\435\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 20-21; John
German, Docket No. NHTSA-2023-0022-53274-A1, at 6-7; MECA, Docket
No. NHTSA-2023-0022-63053-A1, at 12-14.
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[[Page 52637]]
We agree with the commenters that these mild hybrid configurations,
such as P2 (mild) and P4, could offer better improvements compared to
P0 mild hybrids. Non-P0 powertrains, however, require significant
changes to the powertrain and would require a higher capacity battery--
both leading to increase powertrain cost; this is similar to what we
observed in past rulemakings with the (P1) CISG system, with the non-P0
mild hybrid not being a cost-effective way for manufacturers to meet
standards in the rulemaking time frame. Accordingly, we did not include
additional mild hybrid technology for this final rule but will consider
mild hybrid advancements, such as P2 through P4, in future analysis if
they become more prevalent in the U.S. market.
To extent possible, for any analyses conducted for any new
rulemaking, we update as much of the technical aspects as possible with
available data and time allotted. For example, we have significantly
expanded our strong hybrid and plug-in hybrid offering for adopting in
the rulemaking time frame, we have also updated our full vehicle
modeling \436\ based on the testing of Toyota RAV4 Prime,\437\ Nissan
Leaf,\438\ and Chevy Bolt,\439\ for HDPUV we worked with SwRI to
develop a new engine map for P2 Hybrids.
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\436\ Islam, E. S. et al. 2023. Vehicle Simulation Process to
Support the Analysis for MY 2027 and Beyond CAFE and MY 2030 and
Beyond HDPUV FE Standards. Report No. DOT HS 813 431. NHTSA.
\437\ Iliev, S. et al. 2022. Vehicle Technology Assessment,
Model Development, and Validation of a 2021 Toyota RAV4 Prime.
Report No. DOT HS 813 356. NHTSA.
\438\ Jehlik, F. et al. 2022. Vehicle Technology Assessment,
Model Development, and Validation of a 2019 Nissan Leaf Plus. Report
No. DOT HS 813 352. NHTSA.
\439\ Jehlik, F. et al. 2022. Vehicle Technology Assessment,
Model Development, and Validation of a 2020 Chevrolet Bolt. Report
No. DOT HS 813 351. NHTSA.
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We also received a handful of comments on technologies considered
for the HDPUV analysis. ICCT commended ``NHTSA for incorporating
[hybrid technologies, including PHEVs] into its modeling of the HD
pickup and van fleet.'' \440\ We received related supportive comment on
PHEVs for HDPUV from MECA stating, ``[p]lug-in hybrids (PHEVs) can be
practical for light and medium- duty trucks (e.g., Class 1 through 3)
that do not travel long distances or operate for long periods of time
without returning to a central location.'' \441\
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\440\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 25.
\441\ MECA, Docket No. NHTSA-2023-0022-63053-A1, at 14.
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NHTSA appreciates the comment and MECA's technological insight.
NHTSA thanks other commenters, such as ICCT, for support of our
underlying assumptions and providing insight into technology trends.
Related to the electrified HDPUV fleet, AFPM stated that we ``do
not distinguish between the less costly lower range BEV1 and BEV2
options, and the much more costly and virtually unavailable higher
range BEV3 and BEV4 options'' for HDPUVs and that ``NHTSA should adjust
its modeling to fully assess the real feasibility (and cost) of the
BEVs that commercial HDPUV fleet operators really need.'' \442\
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\442\ AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 88.
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We believe that AFPM misunderstood our proposal documents. As was
clear in the NPRM and outlined in TSD Chapter 3.3, there are no BEV3 or
BEV4 options for HDPUVs. This is because we ensure that BEVs (and all
vehicles) are modeled to meet sizing and utility (such as towing and
hauling) requirements as described in Autonomie Model
Documentation.\443\ Additionally, we do not allow high towing capable
vehicles to be fully converted BEVs as they have utility requirements
that far exceed driving range of BEVs. These and other considerations
of vehicle's capabilities and utility have been further discussed in
the TSD Chapter 3.3. However, NHTSA disagrees with AFPM that BEV HDPUVs
analyzed by NHTSA for this rule have a more limited carrying capacity
than their ICE counterparts. NHTSA examined HDPUV BEV configurations in
conjunction with Argonne and meetings with stakeholders prior to
finalizing inputs for the CAFE Model analysis and does not believe that
battery pack sizes will limit cargo capacity for HDPUVs (as opposed to
what may be seen for larger MD/HD vehicles). This is especially true
with the relatively lower total mileage ranges needed for HDPUV
delivery vehicles, which generally operate in a more limited spatial
area (as opposed again to the long-distance requirements and larger
cargo area needed with larger MD/HD vehicles). To reflect these
considerations, NHTSA only modeled two HDPUV range configurations for
HDPUVs (termed ``BEV1'' and ``BEV2''). NHTSA disagrees that we should
adjust our HDPUV modeling as we have conducted analysis based on
available data on technologies and capabilities of vehicles within the
fleet but appreciates AFPM's comment nonetheless; NHTSA has not made
any changes to electrification pathways in the model for HDPUVs for
this rulemaking.
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\443\ Islam, E.S. et al. 2023. Vehicle Simulation Process to
Support the Analysis for MY 2027 and Beyond CAFE and MY 2030 and
Beyond HDPUV FE Standards. Report No. DOT HS 813 431. NHTSA. See the
``HDPUV Specifications'' section, at 137-38.
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We received comment from Alliance for Vehicle Efficiency (AVE)
relating to the inclusion of FCEVs in the analysis, stating that,
``NHTSA dismisses [FCEV] chances for meaningful market penetration''
and that they encourage ``NHTSA to fully assess the fuel economy
benefits that hydrogen vehicles could achieve and how these vehicles
could become cost-effective solutions for manufacturers.'' \444\ We
disagree--not only have we assessed each powertrain technology
specifically for this analysis (which includes FCEVs), our market
penetration for FCEVs is aligned with market projections during the
rulemaking time frame.\445\
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\444\ AVE, Docket No. NHTSA-2023-0022-60213-A1, at 6.
\445\ Rho Motion. EV Battery subscriptions. Available at:
https://rhomotion.com/. (Accessed: Mar. 12, 2024).
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As described in TSD Chapter 3.3, we assigned electrification
technologies to vehicles in the LD and HDPUV analysis fleets using
manufacturer-submitted CAFE compliance information, publicly available
technical specifications, marketing brochures, articles from reputable
media outlets, and data from Wards Intelligence.\446\ TSD Chapter 3.3.2
shows the penetration rates of electrification technologies in the LD
and HDPUV analysis fleets, respectively. Over half the LD analysis
fleet has some level of electrification, with the vast majority--over
50 percent of the fleet--being micro hybrids; BEV3 (>275 miles; <=350
miles) is the most common LD BEV technology. The HDPUV analysis fleet
has only a conventional non-electrified powertrain, currently; however,
the first year of HDPUV standards in this analysis is MY 2030, and we
expect additional electrification technologies to be applied in the
fleet before then. Like the other technology pathways, as the CAFE
Model adopts electrification technologies for vehicles, more advanced
levels of electrification technologies will supersede all prior levels,
while certain technologies within each level are mutually exclusive.
The only adoption feature applicable to micro (SS12V) and mild (BISG)
hybrid technology is path logic; vehicles can only adopt micro and mild
hybrid
[[Page 52638]]
technology if the vehicle did not already have a more advanced level of
electrification.
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\446\ Wards Intelligence. 2022. U.S. Car and Light Truck
Specifications and Prices, '22 Model Year. Available at: https://wardsintelligence.informa.com/WI966023/US-Car-and-Light-Truck-Specifications-and-Prices-22-Model-Year. (Accessed: May 31, 2023).
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The adoption features that we apply to strong hybrid technologies
include path logic, powertrain substitution, and vehicle class
restrictions. Per the technology pathways, SHEVPS, P2x, P2TRBx, and the
P2HCRx technologies are considered mutually exclusive. In other words,
when the model applies one of these technologies, the others are
immediately disabled from future application. However, all vehicles on
the strong hybrid pathways can still advance to one or more of the
plug-in technologies, when applicable in the modeling scenario (i.e.,
allowed in the model).
When the model applies any strong hybrid technology to a vehicle,
the transmission technology on the vehicle is superseded; regardless of
the transmission originally present, P2 hybrids adopt an advanced 8-
speed automatic transmission (AT8L2), and PS hybrids adopt a
continuously variable transmission via power-split device (eCVT). When
the model applies the P2 technology, the model can consider various
engine options to pair with the P2 architecture according to existing
engine path constraints--taking into account relative cost
effectiveness. For SHEVPS technology, the existing engine is replaced
with a full time Atkinson cycle engine.\447\ For P2s, we picked the 8-
speed automatic transmission to supersede the vehicle's incoming
transmission technology. This is because most P2s in the market use an
8-speed automatic transmission,\448\ therefore it is representative of
the fleet now. We also think that 8-speed transmissions are
representative of the transmissions that will continue to be used in
these hybrid vehicles, as we anticipate manufacturers will continue to
use these ``off-the-shelf'' transmissions based on availability and
ease of incorporation in the powertrain. The eCVT (power-split device)
is the transmission for SHEVPSs and is therefore the technology we
picked to supersede the vehicle's prior transmission when adopting the
SHEVPS powertrain.
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\447\ Designated Eng26 in the list of engine map models used in
the analysis. See TSD Chapter 3.1.1.2.3 for more information.
\448\ We are aware that some Hyundai vehicles use a 6-speed
transmission and some Ford vehicles use a 10-speed transmission, but
we have observed that the majority of P2s use an 8-speed
transmission.
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SKIP logic is also used to constrain adoption for SHEVPS and
PHEV20/50PS technologies. These technologies are ``skipped'' for
vehicles with engines \449\ that meet one of the following conditions:
the engine belongs to an excluded manufacturer; \450\ the engine
belongs to a pickup truck (i.e., the engine is on a vehicle assigned
the ``pickup'' body style); the engine's peak horsepower is more than
405 hp; or if the engine is on a non-pickup vehicle but is shared with
a pickup. The reasons for these conditions are similar to those for the
SKIP logic that we apply to HCR engine technologies, discussed in more
detail in Section III.D.1. In the real world, performance vehicles with
certain powertrain configurations cannot adopt the technologies listed
above and maintain vehicle performance without redesigning the entire
powertrain.
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\449\ This refers to the engine assigned to the vehicle in the
2022 analysis fleet.
\450\ Excluded manufacturers included BMW, Daimler, and Jaguar
Land Rover.
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It may be helpful to understand why we do not apply SKIP logic to
P2s and to understand why we do apply SKIP logic to SHEVPSs. Remember
the difference between P2 and SHEVPS architectures: P2 architectures
are better for ``larger vehicle applications because they can be
integrated with existing conventional powertrain systems that already
meet the additional attribute requirements'' of large vehicle
segments.\451\ No SKIP logic applies to P2s because we believe that
this type of electrified powertrain is sufficient to meet all of the
performance requirements for all types of vehicles. Manufacturers have
proven this now with vehicles like the Ford F-150 Hybrid and Toyota
Tundra Hybrid.\452\ In contrast, ``[a] disadvantage of the power split
architecture is that when towing or driving under other real-world
conditions, performance is not optimum.'' \453\ If we were to size (in
the Autonomie simulations) the SHEVPS motors and engines to achieve not
``not optimum'' performance, the electric motors would be
unrealistically large (on both a size and cost basis), and the
accompanying engine would also have to be a very large displacement
engine, which is not characteristic of how vehicle manufacturers apply
SHEVPS ICEs in the real-world. Instead, for vehicle applications that
have particular performance requirements--defined in our analysis as
vehicles with engines that belong to an excluded manufacturer, engines
belonging to a pickup truck or shared with a pickup truck, or the
engine's peak horsepower is more than 405hp--those vehicles can adopt
P2 architectures that should be able to handle the vehicle's
performance requirements.
---------------------------------------------------------------------------
\451\ Kapadia, J. et al. 2017. Powersplit or Parallel--Selecting
the Right Hybrid Architecture. SAE International Journal of
Alternative Power. Vol. 6(1). Available at: https://doi.org/10.4271/2017-01-1154. (Accessed: May 31, 2023).
\452\ SAE International. 2021. 2022 Toyota Tundra: V8 Out, Twin-
Turbo Hybrid Takes Over. Last revised: September 22, 2021. Available
at: https://www.sae.org/news/2021/09/2022-toyota-tundra-gains-twin-turbo-hybrid-power. (Accessed: May 30, 2023); SAE International.
2020. Hybridization the Highlight of Ford's All-New 2021 F-150. Last
revised: June 30, 2020. Available at: https://www.sae.org/news/2020/06/2021-ford-f-150-reveal. (Accessed: May 30, 2023).
\453\ 2015 NAS report, at 134.
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NHTSA received general comments from ICCT related to the strong
hybrid technology pathway restrictions. ICCT suggested that the
analysis should allow strong ``hybridization on all vehicle types''
\454\ in the analysis, without further elaboration on what of the above
explanation they disagreed with or any technical justification for
making their proposed change. To be clear, strong hybridization is
allowed on all vehicle types. However, we allow different types of
strong hybrid powertrains to be applied to different types of vehicles
for the reasons discussed above. We believe that allowing SHEVPS and P2
powertrains to be applied subject to the base vehicle's performance
requirements is a reasonable approach to maintaining a performance-
neutral analysis.
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\454\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 18.
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LD PHEV adoption is limited only by technology path logic; however,
in the HDPUV analysis, PHEV technology is not available in the model
until MY 2025 for HD vans and MY 2027 for HD pickups. As discussed
above, there are no PHEVs in the HDPUV analysis fleet and there are no
announcements from major manufacturers that indicate this a pathway
that they will pursue in the short term; that said, we do believe this
is a technology that could be beneficial for very specific HDPUV
applications. However, the technology is fully available for adoption
by HDPUVs in the rulemaking timeframe (i.e., MYs 2030 and beyond). We
sought comment on this assumption, and any other information available
from manufacturers or other stakeholders on the potential that original
equipment manufacturers will implement PHEV technology prior to MY 2025
for HD vans, and prior to MY 2027 for HD pickups. We did not receive
any specific comments on this request and so we finalized the NPRM
assumptions for PHEV availability in the HDPUV fleet.
The engine and transmission technologies on a vehicle are
superseded when PHEV technologies are applied. For example, the model
[[Page 52639]]
applies an AT8L2 transmission with all PHEV20T/50T plug-in
technologies, and the model applies an eCVT transmission for all
PHEV20PS/50PS and PHEV20H/50H plug-in technologies in the LD fleet and
for more details on different system combinations of electrification
see TSD Chapter 3.3. A vehicle adopting PHEV20PS/50PS receives a hybrid
full Atkinson cycle engine, and a vehicle adopting PHEV20H/PHEV50H
receives an HCR engine. For PHEV20T/50T, the vehicle receives a TURBO1
engine.
Adoption of BEVs and FCEVs is limited by both path logic and phase-
in caps. They are applied as end-of-path technologies that supersede
previous levels of electrification. Phase-in caps, which are defined in
the CAFE Model Input Files, are percentages that represent the maximum
rate of increase in penetration rate for a given technology. They are
accompanied by a phase-in start year, which determines the first year
the phase-in cap applies. Together, the phase-in cap and start year
determine the maximum penetration rate for a given technology in a
given year; the maximum penetration rate equals the phase-in cap times
the number of years elapsed since the phase-in start year. Note that
phase-in caps do not inherently dictate how much a technology is
applied by the model. Rather, they represent how much of the fleet
could have a given technology by a given year.
Because a BEV1 costs less and has slightly higher effectiveness
values than other advanced electrification technologies,\455\ the model
will have vehicles adopt it first, until it is restricted by the phase-
in cap. However, this only applies during non-standard setting years as
well as when the analysis is simulated for the EIS. The standard
setting simulations do not consider BEVs; thus, phase-in caps are not
applicable throughout this timeframe. TSD Chapter 3.3.3 shows the
phase-in caps, phase-in year, and maximum penetration rate through 2050
for BEV and FCEV technologies.
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\455\ This is because BEV1 uses fewer batteries and weighs less
than BEVs with greater ranges.
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The LD BEV1 phase-in cap is informed by manufacturers' tendency to
move away from low-range passenger vehicle offerings in part because of
potential consumer concern with range anxiety.\456\ In some cases, the
advertised range on EVs may not reflect the actual real-world range in
cold and hot ambient temperatures and real-world driving conditions,
affecting the utility of these lower range vehicles.\457\ Many
manufacturers, including comments from General Motors,\458\ as
discussed further below, have told us that the portion of consumers
willing to accept a vehicle with the lowest modeled range is small,
with manufacturers targeting range values well above BEV1 range.
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\456\ Pratt, D. 2021. How Much Do Cold Temperatures Affect an
Electric Vehicle's Driving Range? Consumer Reports. Last Revised:
Dec. 19, 2021. Available at: https://www.consumerreports.org/hybrids-evs/how-much-do-cold-temperatures-affect-an-evs-driving-range-a5751769461. (Accessed: May 31, 2023); 2022 EPA Trends Report
at 60; IEA. 2022. Trends in Electric Light-Duty Vehicles. Available
at: https://www.iea.org/reports/global-ev-outlook-2022/trends-in-electric-light-duty-vehicles. (Accessed: May 31, 2023).
\457\ AAA. 2019. AAA Electric Vehicle Range Testing. Last
Revised: Feb. 2019. Available at: https://www.aaa.com/AAA/common/AAR/files/AAA-Electric-Vehicle-Range-Testing-Report.pdf. (Accessed:
May 31, 2023).
\458\ GM, Docket No. NHTSA-2023-0022-60686.
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Furthermore, the average BEV range has steadily increased over the
past decade,\459\ due to battery technological progress increasing
energy density as well as batteries becoming more cost effective. EPA
observed in its 2023 Automotive Trends Report that ``the average range
of new EVs has climbed substantially. In MY 2022, the average new EV is
305 miles, or more than four times the range of an average EV in
2011.'' \460\ Based on the cited examples and basis described in this
section, the maximum growth rate for LD BEV1s in the model is set
accordingly low to less than 0.1 percent per year. While this rate is
significantly lower than that of the other BEV technologies, the BEV1
phase-in cap allows the penetration rate of low-range BEVs to grow by a
multiple of what is currently observed in the market.
---------------------------------------------------------------------------
\459\ DOE. 2023. Vehicle Technologies Office Fact of the Week
(FOTW) #1290, In Model Year 2022, the Longest-Range EV Reached 520
Miles on a Single Charge. Published: May 15, 2023. Available at:
https://www.energy.gov/eere/vehicles/articles/fotw-1290-may-15-2023-model-year-2022-longest-range-ev-reached-520-miles. (Accessed: Mar.
13, 2024). See also DOE, Vehicle Technologies Office. FOTW #1234,
April 18, 2022: Volumetric Energy Density of Lithium-ion Batteries
Increased by More than Eight Times Between 2008 and 2020. Available
at: https://www.energy.gov/eere/vehicles/articles/fotw-1234-april-18-2022-volumetric-energy-density-lithium-ion-batteries. (Accessed:
Mar. 13, 2024).
\460\ 2023 EPA Automotive Trends Report, at 64.
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For higher BEV ranges (such as that for BEV2 for both LD and
HDPUVs), phase-in caps are intended to conservatively reflect potential
challenges in the scalability of BEV manufacturing and implementing BEV
technology on many vehicle configurations, including larger vehicles.
In the short term, the penetration of BEVs is largely limited by
battery material acquisition and manufacturing.\461\ Incorporating
battery packs with the capacity to provide greater electric range also
poses its own engineering challenges. Heavy batteries and large packs
may be difficult to integrate for many vehicle configurations and
require vehicle structure modifications. Pickup trucks and large SUVs,
in particular, require higher levels of stored energy as the number of
passengers and/or payload increases, for towing and other high-torque
applications. In the LD analysis, we use the LD BEV3 and BEV4 phase-in
caps to reflect these transitional challenges. For HDPUV analysis, we
use similar phase-in caps for the BEV1 and BEV2 to control for
realities of adoption of electrified technologies in work vehicles.
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\461\ See, e.g., BNEF. 2022. China's Battery Supply Chain Tops
BNEF Ranking for Third Consecutive Time, with Canada a Close Second.
Bloomberg New Energy Finance. Last Revised: Nov. 12, 2022. Available
at: https://about.bnef.com/blog/chinas-battery-supply-chain-tops-bnef-ranking-for-third-consecutive-time-with-canada-a-close-second/.
(Accessed: May 31, 2023).
---------------------------------------------------------------------------
Recall that BEV phase-in caps are a tool that we use in the
simulations to allow the model to build higher-range BEVs (when the
modeling scenario allows, as in outside of standard-setting years),
because if we did not, the model would only build BEV1s, as they are
the most cost-effective BEV technology. Based on the analysis provided
above, we believe there is a reasonable justification for different BEV
phase-in caps based on expected BEV ranges in the future. We sought
comment on the BEV phase-in caps for the LD and HDPUV analyses, and we
received comment from several stakeholders that asked us to reevaluate
our phase-in caps for BEVs: \462\ one comment from General Motors
asserted a specific issue with the penetration rates of short-range
BEVs, stating, ``[t]he agency assumes a very large portion of the
market will adopt BEVs with less than 300-mile range'' \463\ and that
we should adjust ``phase-in caps to recognize that 100% of the market
is unlikely to adopt BEVs with 300 miles range or less.'' \464\
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\462\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 1-4; MEMA,
Docket No. NHTSA-2023-0022-59204-A1, at 8; Valero, Docket No. NHTSA-
2023-0022-58547-A2, at 10.
\463\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 3.
\464\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 1-8.
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We have modified the values of our phase-in caps for LD BEVs, as
shown above in TSD Chapter 3.3.3, to ``produce more realistic
compliance pathways that project higher shares of longer-range BEVs and
restrict or eliminate the projection of shorter-range BEVs in some
applications;'' \465\ the broad LD
[[Page 52640]]
phase-in cap values adjust shorter-range BEV prevelance in the fleet.
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\465\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 2.
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MEMA commented that phase-in caps constrain ``the ability of the
industry to pursue all compliance options'' and ``keep the production
volume of BEV/FCEV technologies low.'' It was suggested that a delayed
launch of some technologies (like BEVs and FCEVs, when they're more
advanced) would be more practical.\466\ Similarly, we also received
comment from Valero on HDPUV phase-in caps for BEVs, which stated,
``NHTSA sets phase-in caps at unrealistically high values that ignore
the actual penetration rates in the 2022 baseline fleet. Furthermore,
NHTSA's application of fleetwide phase-in caps fails to account for the
unique penetration hurdles of each tech class within the HDPUV fleet--
Van 2b, Van 3, Pickup 2b, and Pickup 3.'' \467\
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\466\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 8.
\467\ Valero, Docket No. NHTSA-2023-0022-58547-A2, at 10.
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NHTSA disagrees, in general, that phase-in caps are constraining,
as these limitations are applied based on market availability, cost,
and consumer acceptance in the rulemaking timeframe. Our internal
research, discussions with stakeholders, and other outreach has led us
to not be too optimistic on these crucial technologies, but we believe
the phase-in caps represent a reasonable middle ground between allowing
for the application of technology at reasonable levels. The details of
phase-in caps are discussed this further in TSD Chapter 3.3.3.4.
NHTSA also disagrees with the argument that HDPUV BEV penetration
from the underlying phase-in caps is unrealistic, for a few reasons.
First, NHTSA's HDPUV HDPUV analysis fleet contains vehicles that span a
range of model years prior to and including MY 2022 vehicles, based on
the most up-to-date compliance data we had at the time of modeling.
Between the earliest MY vehicle in the analysis fleet and the first MY
for which we are setting standards, MY 2030, in the absence of phase-in
caps, the model will pick a cost-effective pathway for compliance that
manufacturers themselves may not have selected, and we want the years
prior to the first analysis year to reasonably reflect reality. There
are already annoucements of HDPUV BEV production and sales that are not
captured in the HDPUV analysis fleet but can be observed in the
analysis years.\468\ Second, as discussed further in Section VI, NHTSA
understands that there could be uncertatinty in looking out eight to
thirteen MYs in the future; this affects new vehicle technology
adoption, and so we applied some conservatatism in setting phase-in
caps. Finally, when applying technologies to the HDPUVs, we considered
the applications of the vehicle and what could be the limiting factors
in allowing more advanced technologies to apply. For example, we
maintain the engine size when a vehicle adopts PHEV technologies, and
we do not allow HD pickups with work factors greater than 7500 and
higher than 500 mile range to adopt BEVs, further discussed in TSD
Chapters 2.3.2 and 3.3. However, we understand unique technological
barriers to each of the HDPUV vehicle types, and we will continue to
monitor this space and consider updating the phase-in cap modeling
approach in the future.
---------------------------------------------------------------------------
\468\ See, e.g., https://www.ford.com/commercial-trucks/e-transit/models/cargo-van/; https://media.stellantisnorthamerica.com/newsrelease.do?id=25617&mid=1538; https://news.gm.com/newsroom.detail.html/Pages/news/us/en/2023/nov/1116-brightdrop.html.
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The phase-in cap for FCEVs is assigned based on existing market
share as well as historical trends in FCEV production for LDVs and
HDPUVs. FCEV production share in the past five years has been extremely
low and the lack of fueling infrastructure remains a limiting factor
\469\--we set the phase-in cap accordingly.\470\ As with BEV1, however,
the phase-in cap still allows for the market share of FCEVs to grow
several times over.
---------------------------------------------------------------------------
\469\ DOE. 2023. Hydrogen Refueling Infrastructure Development.
Alternative Fuels Data Center. Available at: https://afdc.energy.gov/fuels/hydrogen_infrastructure.html. (Accessed: May
31, 2023).
\470\ 2023 EPA Automotive Trends Report, at 61, Figure 4.15.
---------------------------------------------------------------------------
Autonomie determines the effectiveness of each electrified
powertrain type by modeling the basic components, or building blocks,
for each powertrain, and then combining the components modularly to
determine the overall efficiency of the entire powertrain. The
components, or building blocks, that contribute to the effectiveness of
an electrified powertrain in the analysis include the vehicle's
battery, electric motors, power electronics, and accessory loads.
Autonomie identifies components for each electrified powertrain type
and then interlinks those components to create a powertrain
architecture. Autonomie then models each electrified powertrain
architecture and provides an effectiveness value for each architecture.
For example, Autonomie determines a BEV's overall efficiency by
considering the efficiencies of the battery (including charging
efficiency), the electric traction drive system (the electric machine
and power electronics), and mechanical power transmission devices.\471\
Or, for a PHEV, Autonomie combines a very similar set of components to
model the electric portion of the hybrid powertrain and then also
includes the ICE and related power for transmission components.\472\
Argonne uses data from their Advanced Mobility Technology Laboratory
(AMTL) to develop Autonomie's electrified powertrain models. The
modeled powertrains are not intended to represent any specific
manufacturer's architecture but act as surrogates predicting
representative levels of effectiveness for each electrification
technology. We discuss the procedures for modeling each of these sub-
systems in detail in the TSD and in the CAFE Analysis Autonomie
Documentation and include a brief summary below.
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\471\ Iliev, S. et al. 2023. Vehicle Technology Assessment,
Model Development, and Validation of a 2021 Toyota RAV4 Prime.
Report No. DOT HS 813 356. National Highway Traffic Safety
Administration.
\472\ See the CAFE Analysis Autonomie Documentation.
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The fundamental components of an electrified powertrain's
propulsion system--the electric motor and inverter--ultimately
determine the vehicle's performance and efficiency. For this analysis,
Autonomie employed a set of electric motor efficiency maps created by
Oak Ridge National Laboratory (ORNL), one for a traction motor and an
inverter, the other for a motor/generator and inverter.\473\ Autonomie
also uses test data validations from technical publications to
determine the peak efficiency of BEVs and FCEVs. The electric motor
efficiency maps, created from production vehicles like the 2007 Toyota
Camry hybrid, 2011 Hyundai Sonata hybrid, and 2016 Chevrolet Bolt,
represent electric motor efficiency as a function of torque and motor
rotations per minute (RPM). These efficiency maps provide nominal and
maximum speeds, as well as a maximum torque curve. Argonne uses the
maps to determine the efficiency characteristics of the motors, which
includes some of the losses due to power transfer through the electric
machine.\474\ Specifically, Argonne scales the efficiency maps,
specific to powertrain type, to have total system peak efficiencies
ranging from
[[Page 52641]]
96-98 percent \475\--such that their peak efficiency value corresponds
to the latest state-of-the-art technologies, opposed to retaining dated
system efficiencies (90-93 percent).\476\
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\473\ ORNL. 2008. Evaluation of the 2007 Toyota Camry Hybrid
Synergy Drive System; ORNL. 2011. Annual Progress Report for the
Power Electronics and Electric Machinery Program.
\474\ CAFE Analysis Autonomie Documentation chapter titled
``Vehicle and Component Assumptions--Electric Machines--Electric
Machine Efficiency Maps.''
\475\ CAFE Analysis Autonomie Documentation chapter titled
``Vehicle and Component Assumptions--Electric Machines--Electric
Machine Peak Efficiency Scaling.''
\476\ ORNL. 2008. Evaluation of the 2007 Toyota Camry Hybrid
Synergy Drive System; ORNL. 2011. Annual Progress Report for the
Power Electronics and Electric Machinery Program.
---------------------------------------------------------------------------
Beyond the powertrain components, Autonomie also considers electric
accessory devices that consume energy and affect overall vehicle
effectiveness, such as headlights, radiator fans, wiper motors, engine
control units, transmission control units, cooling systems, and safety
systems. In real-world driving and operation, the electrical accessory
load on the powertrain varies depending on how the driver uses certain
features and the condition in which the vehicle is operating, such as
for night driving or hot weather driving. However, for regulatory test
cycles related to fuel economy, the electrical load is repeatable
because the fuel economy regulations control for these factors.
Accessory loads during test cycles do vary by powertrain type and
vehicle technology class, since distinctly different powertrain
components and vehicle masses will consume different amounts of energy.
The analysis fleets consist of different vehicle types with varying
accessory electrical power demand. For instance, vehicles with
different motor and battery sizes will require different sizes of
electric cooling pumps and fans to optimally manage component
temperatures. Autonomie has built-in models that can simulate these
varying sub-system electrical loads. However, for this analysis, we use
a fixed (by vehicle technology class and powertrain type), constant
power draw to represent the effect of these accessory loads on the
powertrain on the 2-cycle test. We intend and expect that fixed
accessory load values will, on average, have similar impacts on
effectiveness as found on actual manufacturers' systems. This process
is in line with the past analyses.\477\ \478\ For this analysis, we
aggregate electrical accessory load modeling assumptions for the
different powertrain types (electrified and conventional) and
technology classes (both LD and HDPUV) from data from the Draft TAR,
EPA Proposed Determination,\479\ data from manufacturers,\480\ research
and development data from DOE's Vehicle Technologies Office,\481\ \482\
\483\ and DOT-sponsored vehicle benchmarking studies completed by
Argonne's AMTL.
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\477\ Technical Assessment Report (July 2016), Chapter 5.
\478\ EPA Proposed Determination TSD (November 2016), at 2-270.
\479\ EPA Proposed Determination TSD (November 2016), at 2-270.
\480\ Alliance of Automobile Manufacturers (now Alliance for
Automotive Innovation) Comments on Draft TAR, at 30.
\481\ DOE. 2023. Electric Drive Systems Research and
Development. Vehicle Technologies Office. Available at: https://www.energy.gov/eere/vehicles/vehicle-technologies-office-electric-drive-systems. (Accessed: Mar. 13, 2024).
\482\ Argonne. 2023. Advanced Mobility Technology Laboratory
(AMTL). Available at: https://www.anl.gov/es/advanced-mobility-technology-laboratory. (Accessed: Mar. 13, 2024).
\483\ DOE's lab years are ten years ahead of manufacturers'
potential production intent (e.g., 2020 Lab Year is MY 2030).
---------------------------------------------------------------------------
Certain technologies' effectiveness for reducing fuel consumption
requires optimization through the appropriate sizing of the powertrain.
Autonomie uses sizing control algorithms based on data collected from
vehicle benchmarking,\484\ and the modeled electrification components
are sized based on performance neutrality considerations. This analysis
iteratively minimizes the size of the powertrain components to maximize
efficiency while enabling the vehicle to meet multiple performance
criteria. The Autonomie simulations use a series of resizing algorithms
that contain ``loops,'' such as the acceleration performance loop (0-60
mph), which automatically adjusts the size of certain powertrain
components until a criterion, like the 0-60 mph acceleration time, is
met. As the algorithms examine different performance or operational
criteria that must be met, no single criterion can degrade; once a
resizing algorithm completes, all criteria will be met, and some may be
exceeded as a necessary consequence of meeting others.
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\484\ CAFE Analysis Autonomie Documentation chapter titled
``Vehicle Sizing Process--Vehicle Powertrain Sizing Algorithms--
Light-Duty Vehicles--Conventional Vehicle Sizings Algorithm.''; CAFE
Analysis Autonomie Documentation chapter titled ``Vehicle Sizing
Process--Vehicle Powertrain Sizing Algorithms--Heavy-Duty Pickups
and Vans--Conventional Vehicle Sizings Algorithm.''
---------------------------------------------------------------------------
Autonomie applies different powertrain sizing algorithms depending
on the type of vehicle considered because different types of vehicles
not only contain different powertrain components to be optimized, but
they must also operate in different driving modes. While the
conventional powertrain sizing algorithm must consider only the power
of the engine, the more complex algorithm for electrified powertrains
must simultaneously consider multiple factors, which could include the
engine power, electric machine power, battery power, and battery
capacity. Also, while the resizing algorithm for all vehicles must
satisfy the same performance criteria, the algorithm for some electric
powertrains must also allow those electrified vehicles to operate in
certain driving cycles, like the US06 cycle, without assistance of the
combustion engine and ensure the electric motor/generator and battery
can handle the vehicle's regenerative braking power, all-electric mode
operation, and intended range of travel.
To establish the effectiveness of the technology packages,
Autonomie simulates the vehicles' performance on compliance test
cycles.\485\ For vehicles with conventional powertrains and micro
hybrid powertrains, Autonomie simulates the vehicles using the 2-cycle
test procedures and guidelines.\486\ For mild HEVs and strong HEVs,
Autonomie simulates the same 2-cycle test, with the addition of
repeating the drive cycles until the final state of charge (SOC) is
approximately the same as the initial SOC, a process described in SAE
J1711; SAE J1711 also provides test cycle guidance for testing specific
to plug-in HEVs.\487\ PHEVs have a different range of modeled
effectiveness during ``standard setting'' CAFE Model runs, in which the
PHEV operates under a ``charge sustaining'' (gasoline-only) mode--
similar to how SHEVs function--compared to ``EIS'' runs, in which the
same PHEV operates under a ``charge depleting'' mode--similar to how
BEVs function. For BEVs and FCEVs, Autonomie simulates vehicles
performing the test cycles per guidance provided in SAE J1634.\488\
---------------------------------------------------------------------------
\485\ EPA. 2023. How Vehicles are Tested. Available at: https://www.fueleconomy.gov/feg/how_tested.shtml. (Accessed: May 31, 2023);
EPA. 2017. EPA Test Procedures for Electric Vehicles and Plug-in
Hybrids. Draft Summary. Available at: https://www.fueleconomy.gov/feg/pdfs/EPA%20test%20procedure%20for%20EVs-PHEVs-11-14-2017.pdf.
(Accessed: May 31, 2023); CAFE Analysis Autonomie Documentation,
Chapter titled `Test Procedure and Energy Consumption Calculations.'
\486\ 40 CFR part 600.
\487\ PHEV testing is broken into several phases based on SAE
J1711: charge-sustaining on the city and HWFET cycle, and charge-
depleting on the city and HWFET cycles.
\488\ SAE. 2017. Battery Electric Vehicle Energy Consumption and
Range Test Procedure. SAE J1634. Available at: https://www.sae.org/standards/content/j1634_202104/. (Accessed: Apr. 5, 2024).
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Chapters 2.4 and 3.3 of the TSD and the CAFE Analysis Autonomie
Documentation chapter titled ``Test Procedure and Energy Consumption
Calculations'' discuss the components
[[Page 52642]]
and test cycles used to model each electrified powertrain type; please
refer to those chapters for more technical details on each of the
modeled technologies discussed in this section.
The range of effectiveness for the electrification technologies in
this analysis is a result of the interactions between the components
listed above and how the modeled vehicle operates on its respective
test cycle. This range of values will result in some modeled
effectiveness values being close to real-world measured values, and
some modeled values that will depart from measured values, depending on
the level of similarity between the modeled hardware configuration and
the real-world hardware and software configurations. The range of
effectiveness values for the electrification technologies applied in
the LD fleets are shown in TSD Figure 3-23 and Figure 3-24.
Effectiveness values for electrification technologies in the HDPUV
fleet are shown in TSD Figure 3-25.
Some advanced engine technologies indicate low effectiveness values
when paired with hybrid architectures. The low effectiveness results
from the application of advanced engines to existing P2 architectures.
This effect is expected and illustrates the importance of using the
full vehicle modeling to capture interactions between technologies, and
capture instances of both complimentary technologies and non-
complimentary technologies. When developing our hybrid engine maps, we
consider the engine, engine technologies, electric motor power, and
battery pack size. We calibrate our hybrid engine maps to operate in
their respective hybrid architecture most effectively and to allow the
electric machine to provide propulsion or assistance in regions of the
engine map that are less efficient. As the model sizes the powertrain
for any given application, it considers all these parameters as well as
performance neutrality metrics to provide the most efficient solution.
In this instance, the P2 powertrain improves fuel economy, in part, by
allowing the engine to spend more time operating at efficient engine
speed and load conditions. This reduces the advantage of adding
advanced engine technologies, which also improve fuel economy, by
broadening the range of speed and load conditions for the engine to
operate at high efficiency. This redundancy in fuel savings mechanism
results in a lower effectiveness when the technologies are added to
each other.
We received limited comment on ways to improve our strong hybrid
effectiveness modeling in the analysis. Toyota commented that our
strong hybrid fuel economy improvements are ``unrealistic'' because of
``ICE and hybrid powertrains approaching the limits of diminishing
returns''; Toyota also noted and disagreed with the associated rolling
resistance and aerodynamic advancements producing ``such dramatic fuel
efficiency gains.'' \489\ Conversely, ICCT commented that our hybrid
engine effectiveness is ``outdated'' and that ``NHTSA assumes no
additional hybrid powertrain improvements,'' \490\ mentioning ``every
subsequent generation of Toyota's hybrid system significantly improves
upon the prior generation's efficiency.'' \491\ A similar commenter
suggested that we mischaracterize ``how hybrid systems can improve
engine efficiency,'' \492\ also referencing a Roush report.\493\
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\489\ Toyota, Docket No. NHTSA-2023-0022-61131-A1, at 18.
\490\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 18.
\491\ ICCT, Docket No.NHTSA-2023-0022-54064-A1, at 18.
\492\ John German, Docket No. NHTSA-2023-0022-53274-A1, at 7-8.
\493\ Roush report on Gasoline Engine Technologies for Improved
Efficiency (Roush 2021 LDV), page 12.
---------------------------------------------------------------------------
We disagree with comment that the electrification technology
represented in this analysis is ``outdated'' or ``unrealistic''--the
majority of the technologies were developed specifically to support
analysis for this rulemaking time frame. For example, the hybrid
Atkinson engine peak thermal efficiency was updated based on 2017
Toyota Prius engine data.\494\ Toyota stated that their current hybrid
engines achieve 41 percent thermal efficiency, which aligns with our
modeling.\495\ Similarly, the electric machine peak efficiency for
FCEVs and BEVs is 98 percent and based on the 2016 Chevy Bolt.\496\
Specifically, Argonne scales the efficiency maps, specific to
powertrain type, to have total system peak efficiencies ranging from
96-98 percent \497\--such that their peak efficiency value corresponds
to the latest state-of-the-art technologies, as opposed to retaining
dated system efficiencies (90-93 percent).\498\ The 2016 maps scaled to
peak efficiency are equivalent to (if not exceed) efficiencies seen in
vehicles today and in the future. Although the base references for
these technologies are from a few years ago, we have worked with
Argonne to update individual inputs to reflect the latest improvements.
Accordingly, we have made no changes to the electric machine efficiency
maps for this final rule analysis.
---------------------------------------------------------------------------
\494\ Atkinson Engine Peak Efficiency is based on 2017 Prius
peak efficiency and scaled up to 41 percent. Autonomie Model
Documentation at 138. See, ANL--All
Assumptions_Summary_NPRM_022021.xlsx, ANL--Summary of Main Component
Performance Assumptions_NPRM_022021.xlsx, Argonne Autonomie Model
Documentation_NPRM.pdf and ANL--Data Dictionary_NPRM_022021.XLSX.,
which can be found in the rulemaking docket (NHTSA-2023-0022) by
filtering for Supporting & Related Material.
\495\ Carney, D. 2018. Toyota unveils more new gasoline ICEs
with 40% thermal efficiency. SAE. April 4, 2018. Available at:
https://www.sae.org/news/2018/04/toyota-unveils-more-new-gasoline-ices-with-40-thermal-efficiency. (Accessed Dec. 21, 2021).
\496\ Momen, F. et al. 2016. Electrical propulsion system design
of Chevrolet Bolt battery electric vehicle. 2016 IEEE Energy
Conversion Congress and Exposition (ECCE) at 1-8. Available at:,
doi: 10.1109/ECCE.2016.7855076.
\497\ See CAFE Analysis Autonomie Documentation, chapter titled
`Electric Machine Peak Efficiency Scaling.'
\498\ Burress, T.A. et al. 2008. Evaluation of the 2007 Toyota
Camry Hybrid Synergy Drive System. Oak Ridge National Laboratory.
ORNL/TM-2007/190. Available at: https://www.osti.gov/biblio/928684/.
(Accessed: Dec. 6, 2023).; Oak Ridge National Laboratory. ORNL/TM-
2011/263. Available at: https://digital.library.unt.edu/ark:/67531/metadc845565/m2/1/high_res_d/1028161.pdf. (Accessed: Feb. 9, 2024).
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We also received comments on the interaction between vehicle
weights in the Autonomie modeling and vehicle weights when
transitioning to BEVs in the real world. Commenters spoke to EV
batteries ``creating a heavier product'' \499\ and that ``some of these
electric vehicles will exceed 8,500 lbs. GVWR, even though they are
substitutes for comparable internal combustion engine products that
certify as light trucks'' to meet customer demands.\500\ Another
comment from Ford requested that NHTSA reconsider the classification of
MDPVs in lieu of LTs that could have weights that would force them into
the HDPUV regulatory class, but still have characteristics of the light
truck regulatory class.\501\
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\499\ ACI, Docket No. NHTSA-2023-0022-50765-A1, at 5.
\500\ GM, Docket No. NHTSA-2023-0022-60686-A2, at 4.
\501\ Ford, Docket No. NHTSA-2023-0022-60837-A1, at 7.
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In regard to reclassifying or offering credits for MDPVs, NHTSA is
bound by statute as to how these vehicles are classified for the
purpose of CAFE program, and we discuss this concept further in
response to these comments and other similar comments in Section VII of
this preamble.
In regard to concerns that heavy vehicles could fall out of the
light truck fleet into the HDPUV fleet because of the weight of
batteries, and in response to comments we received on the MYs 2024-2026
analysis, for the NPRM and continued into this final rule analysis we
coordinated with Argonne to
[[Page 52643]]
conduct the Autonomie modeling in a way that maintained the vehicle
regulatory class when a vehicle was upgraded to a BEV. This process was
described further in the Autonomie Model Documentation.\502\ In some
cases, this means some range was sacrificed, but we believe that is a
tradeoff that manufacturers could make in the real world. In addition,
we believe this situation where a vehicle would hop regulatory classes
with the addition of a heavy battery pack only affects a very small
subset of vehicles. While some manufacturers are choosing to make very
large BEVs,\503\ other manufacturers have chosen to focus their efforts
on BEVs with smaller battery packs.\504\ Our review of the MY 2022
market shows that these novelty vehicles that could toe regulatory
class lines are being manufactured in lower volumes and that these
moving to the HDPUV regulatory classes may have limited impact on
manufacturer compliance.
---------------------------------------------------------------------------
\502\ See Vehicle Technical Specification in Autonomie Model
Documentation.
\503\ GM Newsroom. An Exclusive Special Edition: 2024 GMC HUMMER
EV Omega Edition Has Landed. Available at: https://news.gm.com/newsroom.detail.html/content/Pages/news/us/en/2023/may/0505-hummer.html. (Accesed Mar. 28, 2024).
\504\ Martinez, M. Ford delays 3-row EVs as focus shifts to
smaller, affordable products, sources say, Auto News (March 19,
2024). Available at: https://www.autonews.com/cars-concepts/ford-shifts-3-row-evs-smaller-affordable-models. (Accessed: Apr. 5,
2024).
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When the CAFE Model turns a vehicle powered by an ICE into an
electrified vehicle, it must remove the parts and costs associated with
the ICE (and, potentially, the transmission) and add the costs of a
battery pack and other non-battery electrification components, such as
the electric motor and power inverter. To estimate battery pack costs
for this analysis, we need an estimate of how much battery packs cost
now (i.e., a ``base year'' cost), and estimates of how that cost could
reduce over time (i.e., the ``learning effect.''). The general concept
of learning effects is discussed in detail in Section III.C and in
Chapter 2 of the TSD, while the specific learning effect we applied to
battery pack costs in this analysis is discussed below. We estimate
base year battery pack costs for most electrification technologies
using BatPaC, which is an Argonne model designed to calculate the cost
of EV battery packs.
Traditionally, a user would use BatPaC to cost a battery pack for a
single vehicle, and the user would vary factors such as battery cell
chemistry, battery power and energy, battery pack interconnectivity
configurations, battery pack production volumes, and/or charging
constraints, just to name a few, to see how those factors would
increase or decrease the cost of the battery pack. However, several
hundreds of thousands of simulated vehicles in our analysis have
electrified powertrains, meaning that we would have to run individual
BatPaC simulations for each full vehicle simulation that requires a
battery pack. This would have been computationally intensive and
impractical. Instead, Argonne staff builds ``lookup tables'' with
BatPaC that provide battery pack manufacturing costs, battery pack
weights, and battery pack cell capacities for vehicles with varying
power requirements modeled in our large-scale simulation runs.
Just like with other vehicle technologies, the specifications of
different vehicle manufacturer's battery packs are extremely diverse.
We, therefore, endeavored to develop battery pack costs that reasonably
encompass the cost of battery packs for vehicles in each technology
class.
In conjunction with our partners at Argonne working on the CAFE
analysis Autonomie modeling, we referenced BEV outlook reports,\505\
vehicle teardown reports,\506\ and stakeholder discussions \507\ to
determine common battery pack chemistries for each modeled
electrification technology. The CAFE Analysis Autonomie Documentation
chapter titled ``Battery Performance and Cost Model--BatPaC Examples
from Existing Vehicles in the Market'' includes more detail about the
reports referenced for this analysis.\508\ For mild hybrids, we used
the LFP-G \509\ chemistry because power and energy requirements for
mild hybrids are very low, the charge and discharge cycles (or need for
increased battery cycle life) are high, and the battery raw materials
are much less expensive than a nickel manganese cobalt (NMC)-based cell
chemistry. We used NMC622-G \510\ for all other electrified vehicle
technology base (MY 2022) battery pack cost calculations. While we made
this decision at the time of modeling based on the best available
information, while also considering feedback on prior rules,\511\ more
recent data affirms that BEV batteries using NMC622 cathode chemistries
are still a significant part of the market.\512\ We recognize there is
ongoing research and development with battery cathode chemistries that
may have the potential to reduce costs and increase battery
capacity.\513\ In
[[Page 52644]]
particular, we are aware of a recent shift by manufacturers to
transition to lithium iron phosphate (LFP) chemistry-based battery
packs as prices for materials used in battery cells fluctuate (see
additional discussion below); however, we believe that based on
available data,\514\ NMC622 is more representative for our MY 2022 base
year battery costs than LFP, and any additional cost reductions from
manufacturers switching to LFP chemistry-based battery packs in years
beyond 2022 are accounted for in our battery cost learning effects. The
learning effects estimate potential cost savings for future battery
advancements (a learning rate applied to the battery pack DMC), this
final rule includes a dynamic NMC/LFP cathode mix over each future
model year, as discussed in more detail below. As discussed above, the
battery chemistry we use is intended to reasonably represent what is
used in the MY 2022 U.S. fleet, the DMC base year for our BatPaC
calculations.
---------------------------------------------------------------------------
\505\ Rho Motion. EV Battery subscriptions. Available at:
https://rhomotion.com/. (Accessed: Mar. 12, 2024); BNEF. 2023.
Electric Vehicle Outlook 2023. Available at: https://about.bnef.com/electric-vehicle-outlook/. (Accessed: May 31, 2023); Benchmark
Mineral Intelligence. Cathode, Anode, and Gigafactories
subscriptions. Available at: https://benchmarkminerals.com/.
(Accessed: Mar. 12, 2024); Bibra, E. et al. 2022. Global EV Outlook
2022--Securing Supplies For an Electric Future. International Energy
Agency. Available at: https://iea.blob.core.windows.net/assets/ad8fb04c-4f75-42fc-973a-6e54c8a4449a/GlobalElectricVehicleOutlook2022.pdf. (Accessed: May 31, 2023).
\506\ Hummel, P. et al. 2017. UBS Evidence Lab Electric Car
Teardown--Disruption Ahead? UBS. Available at: https://neo.ubs.com/shared/d1ZTxnvF2k. (Accessed: May 31, 2023); A2Mac1: Automotive
Benchmarking. (Proprietary data). Available at: https://portal.a2mac1.com/. (Accessed: May 31, 2023).
\507\ See Ex Parte Meetings Prior to Publication of the
Corporate Average Fuel Economy Standards for Passenger Cars and
Light Trucks for Model Years 2027-2032 and Fuel Efficiency Standards
for Heavy-Duty Pickup Trucks and Vans for Model Years 2030-2035
Notice of Proposed Rulemaking memorandum, which can be found in the
rulemaking Docket (NHTSA-2023-0022) by filtering for References and
Supporting Material.
\508\ CAFE Analysis Autonomie Documentation chapter titled
``Battery Performance and Cost Model--BatPac Examples from Existing
Vehicles in the Market.''
\509\ Lithium Iron Phosphate (LiFePO4) cathode and
Graphite anode.
\510\ Lithium Nickel Manganese Cobalt Oxide
(LiNiMnCoO2) cathode and Graphite anode.
\511\ Stakeholders had commented on both the 2020 and 2022 final
rules that batteries using NMC811 chemistry had either recently come
into or were imminently coming into the market, and therefore we
should have selected NMC811 as the appropriate chemistry for
modeling battery pack costs.
\512\ Rho Motion. Seminar Series Live, Q1 2023--Seminar
Recordings. Emerging Battery Technology Forum. February 7, 2023.
Available at: https://rhomotion.com/rho-motion-seminar-series-live-q1-2023-seminar-recordings. (Accessed: May 31, 2023). More
specifically, the monthly weighted average global EV battery cathode
chemistry across all vehicle classes shows that 19% use NMC622 and
20% use NMC811+, representing a fairly even split. Even though we
considered domestic battery production rather than global battery
production for the analysis supporting this final rule, NMC622 is
still prevalent even at a global level. Note that this seminar video
is no longer publicly available to non-subscribers. See Rho Motion.
EV Battery subscriptions. Available at: https://rhomotion.com/.
(Accessed: Mar. 12, 2024); Benchmark Mineral Intelligence. Lithium-
ion Batteries & Cathode monthly & quarterly subscriptions. Available
at: https://benchmarkminerals.com/. (Accessed: Mar. 12, 2024).
\513\ Slowik, P. et. al. 2022. Assessment of Light-Duty Electric
Vehicle Costs and Consumer Benefits in the United States in the
2022-2035 Time Frame. International Council on Clean Transportation.
Available at: https://theicct.org/wp-content/uploads/2022/10/ev-cost-benefits-2035-oct22.pdf. (Accessed: May 31, 2023); Batteries
News. 2022. Solid-State NASA Battery Beats The Model Y 4680 Pack at
Energy Density by Stacking all Cells in One Case. Last revised: Oct.
20, 2022. Available at: https://batteriesnews.com/solid-state-nasa-battery-beats-model-y-4680-pack-energy-density-stacking-cells-one-case/. (Accessed: May 31, 2023); Sagoff, J. 2023. Scientists Develop
More Humane, Environmentally Friendly Battery Material. ANL.
Available at: https://www.anl.gov/article/scientists-develop-more-humane-environmentally-friendly-battery-material. (Accessed: May 31,
2023); IEA. 2023. Global EV Outlook 2023. Available at https://www.iea.org/reports/global-ev-outlook-2023. (Accessed: May 31,
2023); Motavalli, J. 2023. SAE International. Can solid-state
batteries commercialize by 2030? Nov. 9, 2023. Available at: https://www.sae.org/news/2023/11/solid-state-battery-status. (Accessed:
Mar. 12, 2024).
\514\ Rho Motion. EV Battery subscriptions. Available at:
https://rhomotion.com/. (Accessed: Mar. 12, 2024); IEA. 2023. Global
EV Outlook 2023.. Available at https://www.iea.org/reports/global-ev-outlook-2023. (Accessed: Mar. 12, 2024). As of IEA's 2023 Global
EV Outlook report, ``around 95% of the LFP batteries for electric
LDVs went to vehicles produced in China, and BYD [a Chinese EV
manufacturer] alone represents 50% of demand. Tesla accounted for
15%, and the share of LFP batteries used by Tesla increased from 20%
in 2021 to 30% in 2022. Around 85% of the cars with LFP batteries
manufactured by Tesla were manufactured in China, with the remainder
being manufactured in the United States with cells imported from
China. In total, only around 3% of electric cars with LFP batteries
were manufactured in the United States in 2022.'' This is not to say
that as of 2022 there were no current production or use of vehicle
battery packs with LFP-based chemistries in the U.S., but rather
that based on available data, we are more certain that NMC622 was a
reasonable chemistry selection for our 2022 base year battery costs.
---------------------------------------------------------------------------
We also looked at vehicle sales volumes in MY 2022 to determine a
reasonable base production volume assumption.\515\ In practice, a
single battery plant can produce packs using different cell chemistries
with different power and energy specifications, as well as battery pack
constructions with varying battery pack designs--different cell
interconnectivities (to alter overall pack power end energy) and
thermal management strategies--for the same base chemistry. However, in
BatPaC, a battery plant is assumed to manufacture and assemble a
specific battery pack design, and all cost estimates are based on one
single battery plant manufacturing only that specific battery pack. For
example, if a manufacturer has more than one BEV in its vehicle lineup
and each uses a specific battery pack design, a BatPaC user would
include manufacturing volume assumptions for each design separately to
represent each plant producing each specific battery pack. As a
consequence, we examined battery pack designs for vehicles sold in MY
2022 to determine a reasonable manufacturing plant production volume
assumption. We considered each assembly line designed for a specific
battery pack and for a specific BEV as an individual battery plant.
Since battery technologies and production are still evolving, it is
likely to be some time before battery cells can be treated as commodity
where the specific numbers of cells are used for varying battery pack
applications and all other metrics remain the same.
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\515\ See Chapter 2.2.1.1 of the TSD for more information on
data we use for MY 2022 sales volumes.
---------------------------------------------------------------------------
Similar to previous rulemakings, we used BEV sales as a starting
point to analyze potential base modeled battery manufacturing plant
production volume assumptions. Since actual production data for
specific battery manufacturing plants are extremely hard to obtain and
the battery cell manufacturer is not always the battery pack
manufacturer,\516\ we calculated an average production volume per
manufacturer metric to approximate BEV production volumes for this
analysis. This metric was calculated by taking an average of all BEV
battery energies reported in vehicle manufacturer's PMY 2022 reports
\517\ and dividing by the averaged sales-weighted energy per-vehicle;
the resulting volume was then rounded to the nearest 5,000.
Manufacturers are not required to report gross battery pack sizes for
the PMY report, so we estimated pack size for each vehicle based on
publicly available data, like manufacturer's announced specifications.
This process was repeated for all other electrified vehicle
technologies. We believe this gave us a reasonable base year plant
production volume--especially in the absence of actual production
data--since the PMY data from manufacturers already includes accurate
related data, such as vehicle model and estimated sales information
metrics.\518\ Our final battery manufacturing plant production volume
assumptions for different electrification technologies are as follows:
mild hybrid and strong hybrids are manufactured assuming 200,000 packs,
PHEVs are manufactured assuming 20,000 packs, and BEVs are manufactured
assuming 60,000 packs.
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\516\ Lithium-Ion Battery Supply Chain for E-Drive Vehicles in
the United States: 2010-2020, ANL/ESD-21/3; Gohlke, D. et al. 2024.
Quantification of Commercially Planned Battery Component Supply in
North America through 2035. Final Report. ANL-24/14. Available at:
https://publications.anl.gov/anlpubs/2024/03/187735.pdf. (Accessed:
Apr. 5, 2024).
\517\ 49 CFR 537.7.
\518\ NHTSA used publicly available range and pack size
information and linked the information to vehicle models.
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We believe it was reasonable to consider U.S. sales for purposes of
this calculation rather than global sales based on the best available
data we had at the time of modeling and based on our understanding of
how manufacturers design BEVs for particular markets.\519\ \520\ A
manufacturer may have previously sold the same vehicle with different
battery packs in two different markets, but as the outlook for battery
materials and global economic events dynamically shift, manufacturers
could take advantage of significant design overlap and other synergies
like from vertical integration to introduce lower-cost battery packs in
markets that it previously perceived had different design
requirements.\521\ To the extent that manufacturers' costs are based
more closely on global volumes of battery packs produced, our base year
battery pack production volume assumption could potentially be
conservative; however, as discussed further below, our base year MY
2022 battery pack costs fall well within the range of reasonable
estimates based on 2023 data. We sought comment on our
[[Page 52645]]
approach to calculating base year cost estimates, and we also sought
comment from manufacturers and other stakeholders on how vehicle and
battery manufacturers take advantage of design overlap across markets
to maintain cost reduction progress in battery technology; we did not
receive comment on either of these particular issues.
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\519\ As an example, a manufacturer might design a BEV to suit
local or regional duty cycles (i.e., how the vehicle is driven day-
to-day) due to local geography and climate, customer preferences,
affordability, supply constraints, and local laws. This is one
factor that goes into chemistry selection, as different battery
chemistries affect a vehicle's range capability, rate of
degradation, and overall vehicle mass.
\520\ Rho Motion. EV Battery subscriptions. Available at:
https://rhomotion.com/. (Accessed: Mar. 12, 2024).
\521\ As an example, some U.S. Tesla Model 3 and Model Y battery
packs use a nickel cobalt aluminum (Lithium Nickel Manganese Cobalt
Aluminum Oxide cathode with Graphite anode, commonly abbreviated as
NCA)-based cell, while the same vehicles for sale in China use LFP-
based packs. However, Tesla has introduced LFP-based battery packs
to some Model 3 vehicles sold in the U.S., showing how manufacturers
can take advantage of experience in other markets to introduce
different battery technology in the United States. See Electric
Vehicle Database. 2023. Tesla Model 3 Standard Range Plus LFP.
Available at: https://ev-database.uk/car/1320/Tesla-Model-3-Standard-Range-Plus-LFP. (Accessed: May 31, 2023). See the Tesla
Model 3 Owner's Manual for additional considerations regarding LFP-
based batteries, at https://www.tesla.com/ownersmanual/model3/en_jo/GUID-7FE78D73-0A17-47C4-B21B-54F641FFAEF4.html.
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As mentioned above, our BatPaC lookup tables provide $/kWh battery
pack costs based on vehicle power and energy requirements. As an
example, a midsized SUV with mid-level road load reduction technologies
might require a 110-120kWh energy and 200-210kW power battery pack.
From our base year BatPaC cost estimates, that vehicle might have a
battery pack that costs around $123/kWh. Note that the total cost of a
battery pack increases the higher the power/energy requirements,
however the cost per kWh decreases. This represents the cost of
hardware that is needed in all battery packs but is deferred across
more kW/kWh in larger packs, which reduces the per kW/kWh cost. Table
3-78 in TSD Chapter 3.3.5 shows an example of the BatPaC-based lookup
tables for the BEV3 SUV through pickup technology classes.
Note that the values in the table above should not be considered
the total battery $/kWh costs that are used for vehicles in the
analysis in future MYs. As detailed below, battery costs are also
projected to decrease over time as manufacturers improve production
processes, shift battery chemistries, and make other technological
advancements. In addition, select modeled tax credits further reduce
our estimated costs; additional discussion of those tax credits is
located throughout this preamble, TSD Chapter 2.3, and the FRIA
Chapters 8 and 9.
The CAFE Analysis Autonomie Documentation details other specific
assumptions that Argonne used to simulate battery packs and their
associated base year costs for the full vehicle simulation modeling,
including updates to the battery management unit costs, and the range
of power and energy requirements used to bound the lookup tables.\522\
Please refer to the CAFE Analysis Autonomie Documentation and Chapter
3.3 of the TSD for further information about how we used BatPaC to
estimate base year battery costs. The full range of BatPaC-generated
battery DMCs is located in the file ANL--Summary of Main Component
Performance Assumptions_NPRM_2206. Note again that these charts
represent the DMC using a dollar per kW/kWh metric; battery absolute
costs used in the analysis by technology key can be found in the CAFE
Model Battery Costs File.
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\522\ CAFE Analysis Autonomie Documentation chapter titled
``Battery Performance and Cost Model--Use of BatPac in Autonomie.''
---------------------------------------------------------------------------
Our method of estimating future battery costs has three fundamental
components: (1) an estimate of MY 2022 battery pack costs (i.e., our
base year costs generated in the BatPaC model (version 5.0, March 2022
release) to estimate battery pack costs for specific vehicles,
depending on factors such as pack size and power requirements,
discussed above), (2) future learning rates estimated using a learning
curve,\523\ and (3) the effect of changes in the cost of key minerals
on battery pack costs, which are discussed below.
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\523\ See Wene, C. 2000. Experience Curves for Energy Technology
Policy. International Energy Agency, OECD. Paris. Available at:
https://doi.org/10.1787/9789264182165-en. (Accessed: May 31, 2023).
The concept of a learning curve was initially developed to describe
cost reduction due to improvements in manufacturing processes from
knowledge gained through experience in production; however, it has
since been recognized that other factors make important
contributions to cost reductions associated with cumulative
production. We discuss this concept further, in Section II.C.
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For the proposal, NHTSA estimated learning rates using a study by
Mauler et al.,\524\ in which the authors fit a central tendency curve
to 237 published estimates of lithium-ion battery costs. To reflect the
combination of fluctuating mineral costs and an increase in demand in
the near-term, NHTSA also held the battery pack cost learning curve
constant between MYs 2022 and 2025. We explained that this was a
conservative assumption that was also employed by EPA in their proposed
rule (and now final rule, as discussed further below) for light duty
vehicles and medium duty vehicles beginning in MY 2027 at NPRM Preamble
Section II.D.3 and Draft Technical Support Document Chapter 3.3.5.3.1.
The assumption reflected increased lithium costs since 2020 that were
not expected to decline appreciably to circa 2020 levels until
additional capacity (mining, materials processing, and cell production)
comes on-line,\525\ although prices had already fallen from 2022 highs
at the time the NPRM was published. NHTSA stated that a continuation of
high prices for a few years followed by a decrease to near previous
levels is reasonable because world lithium resources are more than
sufficient to supply a global EV market and higher prices should
continue to induce investment in lithium mining and refining.\526\
\527\ NHTSA stated that the resulting battery cost estimates provided a
reasonable representation of potential future costs across the
industry, based on the information available to us at the time of the
analysis for this proposal was completed. We also included a summary of
current and future battery cost estimates from other government
agencies, consulting firms, and manufacturers to both highlight the
uncertainties in estimating future battery costs and to show that our
estimated costs fell reasonably within the range of projections.\528\
NHTSA also examined several battery sensitivity cases that showed
examples of how changing different battery pack assumptions could
change battery pack costs over time. NHTSA also reminded commenters
that because of NHTSA's inability to consider manufacturers building
BEVs in response to CAFE standards during standard-setting years, net
social costs and benefits do not change significantly between battery
cost sensitivity cases, and similarly would not change significantly if
much lower battery costs were used.
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\524\ Mauler, L. et al.. Battery Cost Forecasting: A Review Of
Methods And Results With An Outlook To 2050. Energy and
Environmental Science: at 4712-4739.
\525\ Trading Economics. 2023. Lithium. Available at: https://tradingeconomics.com/commodity/lithium. (Accessed: May 31, 2023).
\526\ Barlock, T.A. et al. February 2024. Securing Critical
Materials for the U.S. Electric Vehicle Industry. ANL-24/06. Final
Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024); U.S. Geological Survey. 2023.
Lithium Statistics and Information. Available at: https://www.usgs.gov/centers/national-minerals-information-center/lithium-statistics-and-information. (Accessed: May 31, 2023).
\527\ According to 2021 estimates from the U.S. Geological
Survey (USGS), global lithium resources are currently four times as
large as global reserves. Lithium resources and reserves have both
grown over time as production has increased. These resources and
reserves, however, are not evenly distributed geographically.
Bolivia (24%), Argentina (22%), Chile (11%), the United States
(10%), Australia (8%) and China (6%) together hold four-fifths of
the world's lithium resources. USGS defines ``resources'' as a
concentration of naturally occurring solid, liquid, or gaseous
material in or on the Earth's crust in such form and amount that
economic extraction of a commodity from the concentration is
currently or potentially feasible. USGS defines ``reserves'' as the
part of the reserve base that could be economically extracted or
produced at the time of determination. USGS defines ``reserve base''
as the part of an identified resource that meets specified minimum
physical and chemical criteria related to mining and production
practices, including those for grade, quaality, thickness, and
depth. See https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-lithium.pdf for USGS's 2021 estimates and https://pubs.usgs.gov/periodicals/mcs2022/mcs2022-appendixes.pdf for USGS definitions.
\528\ 88 FR 56219-20 (Aug. 17, 2023).
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NHTSA also noted ongoing conversations with DOE and EPA on battery
costs,\529\ and sought comment on a variety of topics surrounding
future battery costs. We sought comment in
[[Page 52646]]
particular from vehicle and battery manufacturers on any additional
data they could submit (preferably publicly) to further the
conversation about battery pack costs in the later part of this decade
through the early 2030s. In addition, we sought comment on all aspects
of our methodology for modeling base year and future year battery pack
costs, and welcomed data or other information that could inform our
approach for the final rulemaking. We specifically sought comment on
how the performance metrics may change in response to shifts in
chemistries used in vehicle models driven by global policies affecting
battery supply chain development, total global production and
associated learning rates, and related sensitivity analyses. Finally,
NHTSA also recognized the uncertainty in critical minerals prices into
the near future and sought comment on representation of mineral costs
in the learning curve, and any other feedback relevant to incorporating
these considerations into our modeling framework.
---------------------------------------------------------------------------
\529\ 88 FR 56222 (Aug. 17, 2023).
---------------------------------------------------------------------------
We received comments from several stakeholders regarding general
trends and forecasts in battery costs, our battery cost curves, and
underlying battery cost assumptions. Some stakeholders cited outside
sources they said supported our battery cost values, and other
stakeholders cited outside sources they claimed showed our battery cost
values were too low. ZETA stated generally that, ``[o]verall, the cost
of lithium-ion batteries declined substantially between 2008 and 2022,
down to $153 per kWh,'' \530\ citing DOE's estimates \531\ as well as
Benchmark Minerals information. ICCT commented that ``there is evidence
available to support lower BEV costs than NHTSA has modeled'' and that
automakers ``are investing heavily in BEV R&D and manufacturing
capacity and are achieving higher production volumes with more advanced
technologies at lower costs.'' \532\ ICCT continued to cite their
research from 2022,\533\ also referenced by NHTSA in the NPRM, stating,
``[c]ontinued technological advancements and increased battery
production volumes mean that pack-level battery costs are expected to
decline to about $105/kWh by 2025 and $74/kWh by 2030.''
---------------------------------------------------------------------------
\530\ ZETA, Docket No. NHTSA-2023-0022-60508-A1, at 16-17.
\531\ DOE. Office of Energy Efficiency & Renewable Energy. 2023.
FOTW #1272, January 9, 2023: Electric Vehicle Battery Pack Costs in
2022 Are Nearly 90% Lower than in 2008, according to DOE Estimates.
Available at: https://www.energy.gov/eere/vehicles/articles/fotw-1272-january-9-2023-electric-vehicle-battery-pack-costs-2022-are-nearly. (Accessed: Apr. 5, 2024).
\532\ ICCT, Docket No. NHTSA-2023-0022-54064-A1, at 12.
\533\ Slowik, P. et al. 2022. Assessment of Light-Duty Electric
Vehicle Costs and Consumer Benefits in the United States in the
2022-2035 Time Frame. International Council on Clean Transportation.
Available at: https://theicct.org/wp-content/uploads/2022/10/ev-cost-benefits-2035-oct22.pdf. (Accessed: Feb. 12, 2024).
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NHTSA appreciates the extensive data on declining EV battery costs
provided by ZETA, and we believe that the provided data and lines up
with our estimates from the NPRM and now this final rule reasonably
well. NHTSA agrees with ICCT that there is evidence to support lower
BEV costs than what was modeled in the NPRM. NHTSA has since, in
collaboration with DOE/Argonne and EPA, modified the battery learning
curve used in this analysis, which ultimately reflects lower future
battery costs compared to the NPRM. The methodology that NHTSA employed
is discussed further below and in TSD Chapter 3.3.
On the other hand, comments from POET highlighted a BNEF reference
from 2022, stating that our optimistic learning curve is contradictory
to BNEF's analysis \534\--citing ``demand continues to grow, battery
producers and automakers are scrambling to secure key metals such as
lithium and nickel, battling high prices and tight supply'' \535\ and
stating we should ``not rely on battery back [sic] learning curves,
which have significant uncertainties.'' \536\ Additional commenters
stated that battery cost reduction curves have flattened and costs
``rose 7 percent in 2022'' \537\ with AFPM stating further, ``BEV
makers will need to increase prices by 25% to account for rising
battery prices,'' citing a March 2022 Bloomberg article on Morgan
Stanley projections; \538\ Valero commented that some ``forecasters
have made na[iuml]ve predictions that the cost declines will
continue,'' \539\ with Clean Fuels Development Coalition in agreement
stating that the decline in battery costs ``isn't realistic.'' \540\
Valero commented that our ``learning curve analysis ignores a host of
pressures that will be pushing average battery prices higher between
now and 2032,'' which include ``batteries that can power longer-range
EVs'' and ``battery suppliers that can access lithium and other key raw
materials at an affordable price.''
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\534\ POET, Docket No. NHTSA-2023-0022-61561-A1, at 17-18.
\535\ POET cites the older BNEF article from July 2022 instead
of December 2022: BNEF. 2022. The Race to Net Zero: The Pressures of
the Battery Boom in Five Charts. Last revised: July 21, 2022.
Available at: https://about.bnef.com/blog/race-to-net-zero-the-pressures-of-the-battery-boom-in-five-charts/. (Accessed: Mar. 12,
2024).
\536\ POET, Docket No. NHTSA-2023-0022-61561-A1, at 17-18.
\537\ CFDC et al., Docket No. NHTSA-2023-0022-62242-A1, at 13;
Valero, Docket No. NHTSA-2023-0022-58547-A4, at 4; AFPM, Docket No.
NHTSA-2023-0022-61911-A2, at 47.
\538\ Thornhill, J. 2022. Morgan Stanley Flags EV Demand
destruction as Lithium Soars. Bloomberg. Chart 7. Available at:
https://www.bloomberg.com/news/articles/2022-03-25/morgan-stanley-flags-ev-demand-destruction-as-lithium-soars. (Accessed: Apr. 5,
2024).
\539\ Valero, Docket No. NHTSA-2023-0022-58547-A4, at 4.
\540\ CFDC et al., Docket No. NHTSA-2023-0022-62242-A1, at 13.
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NHTSA disagrees with commenters that battery costs will continue to
plateau indefinitely or increase in the rulemaking timeframe and
believes that battery costs will continue to trend downward in the mid-
and long-term. BNEF has since continued to predict a reduction in
lithium-ion battery pack price since the BNEF article referenced in
POET's comments, stating ``[l]ithium prices reached a high point at the
end of 2022, but fears that prices would remain high have largely
subsided since then and prices are now falling again.'' \541\ This is
in agreement with expert interagency projections from our working group
with DOE/Argonne and EPA,\542\ in addition to other recent trends \543\
and expert projections \544\ \545\ However, NHTSA does agree that
mineral prices have remained elevated during the time of this
rulemaking, which is reflected in us continuing to incorporate a
learning plateau from MY 2022 to MY 2025 as we did in the NPRM--holding
our battery learning rate constant to account for potential fluctuating
mineral prices.\546\
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\541\ BloombergNEF. November 23, 2023. Lithium-Ion Battery Pack
Prices Hit Record Low of $139/kWh. Available at: https://about.bnef.com/blog/lithium-ion-battery-pack-prices-hit-record-low-of-139-kwh/. (Accessed: Mar. 12, 2024).
\542\ ANL. 2024. Cost Analysis and Projections for U.S.-
Manufactured Automotive Lithium-ion Batteries. ANL/CSE-24/1.
Available at: https://publications.anl.gov/anlpubs/2024/01/187177.pdf. (Accessed: Mar. 12, 2024).
\543\ Benchmark Mineral Intelligence. Cathode & Anode monthly
subscriptions. Available at: https://benchmarkminerals.com/.
(Accessed: Mar. 12, 2024).
\544\ Benchmark Mineral Intelligence. ``Lithium ion cell prices
fall below $100 per kWh: Battery market--2023 in Review.'' Dec. 21
2023. Available at: https://source.benchmarkminerals.com/video/watch/lithium-ion-cell-prices-fall-below-100-per-kwh-battery-market-2023-in-review. (Accessed: Apr. 10, 2024.)
\545\ Liu, S. and Patton, D. 2023. China Lithium Price Poised
for Further Decline in 2024.--Analysts. Reuters, December 19, 2023.
Available at: https://www.reuters.com/markets/commodities/china-lithium-price-poised-further-decline-2024-analysts-2023-12-01/.
(Accessed: Apr. 5, 2024).
\546\ Trading Economics. Commodity: Lithium. Available at:
https://tradingeconomics.com/commodity/lithium. (Accessed: Apr. 10,
2024); Barlock, T.A. et al. 2024. Securing Critical Materials for
the U.S. Electric Vehicle Industry. ANL-24/06. Final Report.
Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024). Benchmark Mineral
Intelligence. 2023. Lithium price decline casts shadow over long-
term supply prospects--2023 in review. Dec. 22, 2023. Available at:
https://source.benchmarkminerals.com/article/lithium-price-decline-casts-shadow-over-long-term-supply-prospects-2023-in-review.
(Accessed: Apr. 10, 2024.)
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[[Page 52647]]
We have also considered many of these challenges identified by
Valero to the extent possible for this final rule. In addition to
continuing the learning curve plateau from MY 2022 to MY 2025 to
account for materials-related uncertainties, mentioned above, we worked
with DOE/Argonne and EPA to conduct an analysis that confirms the
availability of raw materials for batteries, such as lithium.\547\
While the analysis from DOE is exogenous to our CAFE Model analysis for
the final rule, it does confirm that the availability of battery
materials necessary to support the BEVs projected to be built in
NHTSA's reference baseline projection as a function of ZEV programs or
expected manufacturer production at levels consistent with ACC II
levels.
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\547\ Barlock, T.A. et al. February 2024. Securing Critical
Materials for the U.S. Electric Vehicle Industry. ANL-24/06. Final
Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024).
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We received additional comment from Valero stating, ``NHTSA should
not embed chemistry changes into the `learning effect.' NHTSA should
instead forecast between now and 2032 what fraction of new vehicles
will have one battery design versus another and develop cost estimates
for each battery design,'' \548\ citing that the only major change in
chemistry is likely towards LFP. We also received related comment from
Rivian stating, ``we encourage the agency to elaborate on the extent to
which it considered battery cell chemistry trends as they relate
specifically to the HDPUV fleet'' \549\ and that it was unclear whether
the NMC battery chemistry applied to the HDPUV fleet, specifically that
the ``logic of applying LFP in this market is so compelling that it
could become the chemistry of choice in the very near term.''
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\548\ Valero, Docket No. NHTSA-2023-0022-58547-A4, at 5-6.
\549\ Rivian, Docket No. NHTSA-2023-0022-59765-A1, at 16.
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We thank Valero and Rivian for providing comment and agree that LFP
should be considered in our battery learning curve. Since our NPRM, we
have updated our learning curves to accommodate these concerns--
including in the HDPUV fleet. NHTSA and EPA worked with DOE/Argonne to
distinguish a battery learning curve that is dynamic over the
rulemaking period in the following ways: (1) there is a unique learning
curve for each powertrain type (HEV or PHEV/BEV) and vehicle type
(compact passenger car through the HDPUV space), which is based
primarily on battery pack energy and power for the specific vehicle;
\550\ (2) there is now a weighted mix between cathode chemistries (NMC
vs LFP) throughout the rulemaking period to accommodate the increased
prevalence of LFP in the market.\551\ NHTSA continues to collaborate
with other agencies in developing battery-related metrics for
rulemakings that are reflective of industry.
---------------------------------------------------------------------------
\550\ Autonomie full vehicle model simulation data was used to
determine average battery pack energy across vehicle segments. For
details of how Autonomie Full Vehicle Model simulations was used for
this rulemaking see TSD Chapter 2.4.
\551\ Referred to as a ``composite correlation equation''
earlier in this section.
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Finally, we received comment from POET on our battery cost curves
where they cited comments on EPA's recent ``vehicle GHG proposed rule''
where POET commented that they found ``substantial learning related to
the production of BEV componentry has already occurred in the light-
duty vehicle sector as evidenced by the current mass production of BEVs
and further learning curve benefits would therefore be expected to be
much smaller than those assumed by U.S. EPA.'' \552\ Further, POET
stated that NHTSA ``should not rely on battery pack learning curves
that have significant uncertainties to increase the stringency of the
CAFE regulations.'' POET gave no further guidance on how our battery
learning curve could be changed to account for these uncertainties.
---------------------------------------------------------------------------
\552\ POET, Docket No. NHTSA-2023-0022-61561-A1, at 18.
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While we agree that there have been advancements in the battery
production process, those advancements have been captured in our
BatPaC-based circa-MY 2022 battery costs as well as our future battery
costs. The BatPaC model is used to set our base year battery costs as
well as our battery learning curve, which are dependent on vehicle/
powertrain metrics as well as battery-related parameters (such as
chemistry, production volume, production efficiency, labor rates,
equipment costs and material costs, to name a few). Additionally, we
examined several battery cost sensitivity cases, which explore
variations of battery cost DMCs as well as material costs; more
information on these sensitivities can be found in RIA Chapter 9.2.2
and the Final Rule Battery Costs Docket Memo. We believe our BatPaC-
based circa-MY 2022 battery costs and future costs via the learning
curve have been developed in a transparent way that involved feedback
from stakeholders and expertise from leading government experts on
battery-related issues. Despite high-granularity with modeling, there
are still inherent uncertainties with modeling any metric (such as fuel
prices, for instance); however, just because something is uncertain
doesn't mean we shouldn't model it--this is why we sought comment from
stakeholders on our inputs and assumptions and have incorporated that
feedback in the final rule analysis as discussed in more detail.
For this analysis, to reflect the evolution of battery
manufacturing, comments from stakeholders, and for better alignment of
battery assumptions between government agencies, the Department of
Energy and Argonne, with significant input from NHTSA and EPA,
developed battery cost correlation equations from BatPaC for use in
both the NHTSA CAFE and EPA GHG analyses.\553\ These cost equations--
developed for use through MY 2035--were tailored for different vehicle
segments,\554\ different levels of electrification,\555\ and
anticipated plant production volumes.\556\ These equations represent
cost improvements achieved from advanced manufacturing, pack design,
and cell design with current and anticipated future battery
chemistries,\557\ design parameters,
[[Page 52648]]
forecasted market prices, and vehicle technology penetration. Please
see Argonne's Cost Analysis and Projections for U.S.-Manufactured
Automotive Lithium-ion Batteries report for a more detailed discussion
of the inputs and assumptions that were used to generate these cost
equations.\558\ The methodology outlined in the report is largely the
same that we used in previous rules, which utilized the most up-to-date
BatPaC model to estimate future battery costs based on current
chemistries, production volumes, and projected material prices.
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\553\ ANL. 2024. Cost Analysis and Projections for U.S.-
Manufactured Automotive Lithium-ion Batteries. ANL/CSE-24/1.
Available at: https://publications.anl.gov/anlpubs/2024/01/187177.pdf. (Accessed: Mar. 12, 2024); EPA. Final Rule: Multi-
Pollutant Emissions Standards for Model Years 2027 and Later Light-
Duty and Medium-Duty Vehicles. 2024. Available at: https://www.epa.gov/regulations-emissions-vehicles-and-engines/regulations-greenhouse-gas-emissions-passenger-cars-and. See EPA's RIA section
2.5.2.1 Battery cost modeling methodology.
\554\ The vehicle classes considered in this project include
compact cars, midsize cars, midsize SUVs, and pickup trucks.
\555\ The levels of electrification considered in this project
include light-duty HEVs, PHEVs, and BEVs (~250 and ~300 mile ranges)
as well as medium/heavy-duty BEVs.
\556\ Production volumes were determined for each vehicle class
and type for each model year. See, U.S. Department of Energy.
Argonne National Laboratory. Cost Analysis and Projections for U.S.-
Manufactured Automotive Lithium-ion Batteries. ANL/CSE-24/1.
Equation 1 and Table 13. Available at: https://www.osti.gov/biblio/2280913/. (Accessed: Jan. 25, 2024).
\557\ Battery cathode chemistries considered in this project
include nickel-based materials (NMC622, NMC811, NMC95, and LMNO) as
well as lower-cost LFP cathodes; varying percentages of silicon
content (5%, 15%, and 35%) within a graphite anode were considered,
as well.
\558\ ANL. 2024. Cost Analysis and Projections for U.S.-
Manufactured Automotive Lithium-ion Batteries. ANL/CSE-24/1.
Available at: https://publications.anl.gov/anlpubs/2024/01/187177.pdf. (Accessed: Mar. 12, 2024).
---------------------------------------------------------------------------
Similar to our past BatPaC-based estimates for a battery learning
curve, the employed learning curve explicitly assumes particular
battery chemistry is used; unlike in previous rulemakings, however, a
dynamic NMC/LFP mix has been incorporated into the learning curve in
collaboration with EPA and DOE/Argonne, which is discussed in more
detail below. We believe that during the rulemaking time frame, based
on ongoing research and discussions with stakeholders,\559\ the
industry will continue to employ lithium-ion NMC as the predominant
battery cell chemistry for the near-term but will transition more fully
to advanced high-nickel battery chemistries \560\ like NMC811 or less-
costly cell chemistries like LFP-G during the middle or end of the
decade--i.e., during the rulemaking timeframe. We acknowledge there are
other battery cell chemistries currently being researched that reduce
the use of cobalt, use solid opposed to liquid electrolyte, use of
silicon-dominant anodes or lithium-metal anodes, or even eliminate use
of lithium in the cell altogether; \561\ however, at this time, we are
limiting battery chemistry to NMC622, NMC811, and LFP for this
rulemaking but will continue to monitor work from DOE and related
government agencies as well as other developments in the advancement of
battery cell chemistries.\562\
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\559\ Docket Submission of Ex Parte Meetings Prior to
Publication of the Corporate Average Fuel Economy Standards for
Passenger Cars and Light Trucks for Model Years 2027-2032 and Fuel
Efficiency Standards for Heavy-Duty Pickup Trucks and Vans for Model
Years 2030-2035 Notice of Proposed Rulemaking memorandum, which can
be found under References and Supporting Material in the rulemaking
Docket No. NHTSA-2023-0022.
\560\ Panayi, A. 2023. Into the Next Phase, the EV Market
Towards 2030--The TWh year: The Outlook for the EV & Battery Markets
in 2023. RhoMotion. Available at: https://rhomotion.com/rho-motion-seminar-series-live-q1-2023-seminar-recordings. (Accessed: May 31,
2023).
\561\ Slowik, P. et al. 2022. Assessment of Light-Duty Electric
Vehicle Costs and Consumer Benefits in the United States in the
2022-2035 Time Frame. International Council on Clean Transportation.
Available at: https://theicct.org/wp-content/uploads/2022/10/ev-cost-benefits-2035-oct22.pdf. (Accessed: May 31, 2023); Batteries
News. 2022. Solid-State NASA Battery Beats The Model Y 4680 Pack at
Energy Density by Stacking all Cells in One Case. Last revised:
October 20, 2022. Available at: https://batteriesnews.com/solid-state-nasa-battery-beats-model-y-4680-pack-energy-density-stacking-cells-one-case/. (Accessed: May 31, 2023).
\562\ Barlock, T.A. et al. February 2024. Securing Critical
Materials for the U.S. Electric Vehicle Industry. ANL-24/06. Final
Report. Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: Apr. 5, 2024).
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As discussed above, due to the potential increasing prevalence of
LFP displacing NMC cathodes in the U.S. EV market,\563\ especially in
the rulemaking years, NHTSA uses a dynamic NMC/LFP mix between the
battery cost correlation equations, referred to as a composite
correlation equation; LFP market projections \564\ used for the mix are
noted in TSD Chapter 3.3. LFP market share starts at 1 percent in MY
2021 and grows to 19 percent in MY 2028. For the model years that the
composite cost equation covers (for MYs through 2035), NMC battery
cathode chemistry is assumed for the remaining market share. Note the
composite cost equation only corresponds with BEV and PHEV
electrification technologies and not HEV or FCEV electrification
technologies. For more information on the development of battery
learning curves, please see TSD Chapter 3.3.5.3.1.
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\563\ Gohlke, D. et al. March 2024. Quantification of
Commercially Planned Battery Component Supply in North America
through 2035. Final Report. ANL-24/14. Available at: https://publications.anl.gov/anlpubs/2024/03/187735.pdf. (Accessed: Apr. 5,
2024).
\564\ A composite learning curve (used for PHEV and BEV battery
cost projections) was developed, in coordination with DOE/ANL and
EPA, to include a North American market mix of NMC and LFP
chemistries (dynamic, over time); the NMC/LFP market presence
projections values were based on (averaged, rounded, and smoothed)
Rho Motion and Benchmark Mineral Intelligence proprietary data.
---------------------------------------------------------------------------
Beyond the extent of the battery cost correlation equation,
starting in MY 2036, a constant 1.5% learning rate was used through MY
2050.\565\ NHTSA used this constant rate due to uncertainty associated
with reducing the cost of the pack below the cost of the raw material
to build the pack in that far out time frame.
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\565\ Like in our other parts of this analyses, there are
uncertainties associated with predicting estimated costs beyond
2035. Additionally, like our estimated learning curves for other
technologies beyond this time frame, we used a similar convervative
estimate continue learning down technology costs without having to
fall below the costs of raw material to make the components.
---------------------------------------------------------------------------
As there are inherent uncertainties in projecting future technology
costs such as battery pack due to several factors, including the timing
of the analysis used to support this final rule, we performed several
battery-related cost sensitivity analyses. These include cases
increasing the battery pack DMCs by 25%, decreasing the battery pack
DMC by 15%, high and low mineral costs, and a curve we used for the
NPRM. These results are presented in Chapter 9 of the FRIA. One
important point that these sensitivity case results emphasize is that
because of NHTSA's inability to consider manufacturers building BEVs
and consider the combined fuel economy of PHEVs in response to CAFE
standards during standard-setting years (i.e., MYs 2027-2031 for this
final rule), net social costs and benefits do not change significantly
between battery cost sensitivity cases, and similarly would not change
significantly if much lower battery costs were used.
Additional discussion in TSD Chapter 3 shows that our projected
costs fall fairly well in the middle of the range of other costs
projected by various studies and organizations for future years.\566\
Using the same approach as the rest of our analysis--that our costs
should represent an average achievable performance across the
industry--we believe that the battery DMCs with the learning curve
applied provide a reasonable representation of potential future costs
across the industry, based on the information available to us at the
time of the analysis for this final rule was completed. RIA chapter
9.2.2 shows how our reference and sensitivity case cost projections
change over time using different base year and learning assumptions.
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\566\ TSD Chapter 3.3, Figure 3-32: Comparing Battery Pack Cost
Estimates from Multiple Sources.
---------------------------------------------------------------------------
We received two other comments suggesting the price of BEVs are not
accurately accounted for in our analysis. CEA and the Corn Growers
Associations stated that NHTSA bases its technology costs on nominal
prices or MSRP, which do not reflect actual costs to
manufacturers.\567\ \568\ Both commenters stated that this does not
reflect reality, as vehicle manufacturers have been reportedly cross-
subsidizing electric vehicle costs to different extents since
introducing their electrified vehicles.
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\567\ CFDC et al, Docket No. NHTSA-2023-0022-62242-A1, at 11.
\568\ CEA, Docket No. NHTSA-2023-0022-61918-A1, at 24.
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NHTSA disagrees with these comments and believes that a fundamental
misunderstanding of how technology costs are calculated in the analysis
could have led to this mistake
[[Page 52649]]
in the commenters' comprehension of this issue. While all of these
concepts were described in detail in the NPRM and Draft TSD (and now
this final rule and Final TSD), we will summarize the relevant concepts
here. Please see Final TSD Chapter 2.4., Technology Costs, for more
detailed information. Our technology costs are from real price
teardowns and ground up assembly costs of the component being added to
the vehicle.\569\ When vehicles adopt technologies in the reference
baseline or in response to standards in the analysis, the costs for
those technologies are based on the incremental addition of the ground
up costs to the reference price, which in this case is the vehicle
price. Note that we determine the direct manufacturing costs of the
components first, then apply a retail price equivalent markup to that
cost before incrementally applying the technology cost to the vehicle
price.\570\ TSD Chapter 3.3 discusses in detail in how we have
developed the ground up costs for BEV batteries and components, and TSD
Chapter 2.4 discusses how we account for direct manufacturing costs and
retail costs.
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\569\ See, e.g., Final TSD, Chapter 2.4.1 (``The analysis uses
agency-sponsored tear-down studies of vehicles and parts to estimate
the DMCs of individual technologies, in addition to independent
tear-down studies, other publications, and CBI.'').
\570\ See, e.g., Final TSD, Chapter 2.4.2, Table 2-24: Retail
Price Components, and the discussion of our methodology to estimate
indirect costs.
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We also received several comments related to electric vehicle
maintenance \571\ and battery replacement costs.\572\ For more
information on repair/maintenance costs, please see Preamble Section
III.G.3.
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\571\ Consumer Reports, Docket No. NHTSA-2023-0022-61101-A2, at
11-12.
\572\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952-A1,
at 12-13; ACI, Docket No. NHTSA-2023-0022-50765-A1, at 2-4; AFPM,
Docket No. NHTSA-2023-0022-61911-A2, at 51.
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While batteries and relative battery components are the biggest
cost driver of electrification, non-battery electrification components,
such as electric motors, power electronics, and wiring harnesses, also
add to the total cost required to electrify a vehicle. Different
electrified vehicles have variants of non-battery electrification
components and configurations to accommodate different vehicle classes
and applications with respective designs; for instance, some BEVs may
be engineered with only one electric motor and some BEVs may be
engineered with two or even four electric motors within their
powertrain to provide all wheel drive function. In addition, some
electrified vehicle types still include conventional powertrain
components, like an ICE and transmission.
For all electrified vehicle powertrain types, we group non-battery
electrification components into four major categories: electric motors
(or e-motors), power electronics (generally including the DC-DC
converter, inverter, and power distribution module), charging
components (charger, charging cable, and high-voltage cables), and
thermal management system(s). We further group the components into
those comprising the electric traction drive system (ETDS), and all
other components. Although each manufacturer's ETDS and power
electronics vary between the same electrified vehicle types and between
different electrified vehicle types, we consider the ETDS for this
analysis to be comprised of the e-motor and inverter, power
electronics, and thermal system.
When researching costs for different non-battery electrification
components, we found that different reports vary in components
considered and cost breakdown. This is not surprising, as vehicle
manufacturers use different non-battery electrification components in
different vehicles systems, or even in the same vehicle type, depending
on the application. In order of the component categories discussed
above, we examined the following cost teardown studies discussed in TSD
3.3.5 on Table 3-82. Using the best available estimate for each
component from the different reports captures components in most
manufacturer's systems but not all; we believe, however, that this is a
reasonable metric and approach for this analysis, given the non-
standardization of electrified powertrain designs and subsequent
component specifications. Other sources we used for non-battery
electrification component costs include an EPA-sponsored FEV teardown
of a 2013 Chevrolet Malibu ECO with eAssist for some BISG component
costs,\573\ which we validated against a 2019 Dodge Ram eTorque
system's publicly available retail price,\574\ and the 2015 NAS
report.\575\ Broadly, our total BISG system cost, including the
battery, fairly matches these other cost estimates.
---------------------------------------------------------------------------
\573\ FEV. 2014. Light Duty Vehicle Technology Cost Analysis
2013 Chevrolet Malibu ECO with eAssist BAS Technology Study. FEV
P311264. Contract no. EP-C-12-014, WA 1-9.
\574\ Colwell, K.C. 2019. The 2019 Ram 1500 eTorque Brings Some
Hybrid Tech, If Little Performance Gain, to Pickups. Last revised:
Mar. 14, 2019. Available at: https://www.caranddriver.com/reviews/a22815325/2019-ram-1500-etorque-hybrid-pickup-drive. (Accessed: May
31, 2023).
\575\ 2015 NAS report, at 305.
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While the majority of electric vehicle cost comments related to
batteries, we did receive three comments pertaining to non-battery
electrification costs or electrification costs more generally. The
Strong PHEV Coalition asserted that despite agreeing with other costs
in the analysis,\576\ our PHEV50 transmission costs (as shown in the
Draft TSD Table 3-89) ``disagrees with ANL's previous studies which
show a transmission for about $1600 less than shown in the draft
technical support document,'' \577\ referencing an Argonne Light Duty
Vehicle Techno-Economic Analysis \578\ and quoted, ``ANL shows a PHEV
transmission cost of $793.'' Additionally, the Strong PHEV Coalition
stated, ``several additional technical modifications can lower the cost
of PHEVs that most analyses do not consider,'' without providing
further specifics.
---------------------------------------------------------------------------
\576\ Strong PHEV Coalition, Docket No. NHTSA-2023-0022-60193-
A1, at 3.
\577\ Strong PHEV Coalition, Docket No. NHTSA-2023-0022-60193-
A1, at 7.
\578\ ANL--ESD-2110 Report--BEAN Tool--Light Duty Vehicle
Techno-Economic Analysis. Available at: https://publications.anl.gov/anlpubs/2021/10/171713.pdf. (Accessed: Apr. 5,
2024).
---------------------------------------------------------------------------
Upon inspection of the cited Argonne reference, the stated $793
value (or any PHEV50 transmission specific value) could not be found in
documentation (in neither the Part One light-duty section nor the Part
Two medium-heavy duty section); the only information on PHEV
transmissions in the document relates to the number of transmission
gears, and the only component-specific costs live in the medium-heavy
duty section (without a specific transmission cost given).\579\ We use
the cost of the AT8L2 transmission as a cost proxy for the hybrid
transmission architecture in P2 hybrid systems and CVTL2 transmission
architecture in SHEVPS hybrid systems, whose DMCs are based on
estimates from Table 8A.2a of the 2015 NAS report; these transmissions
are used for other powertrain configurations in the analysis and
represents costs that have been agreed on by industry today.\580\
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\579\ NHTSA coordinated with Argonne about this reference and
Argonne confirmed that the $793 value is not directly provided in
their report.
\580\ 2015 NAS report, at 298-99.
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John German argued that our power-split hybrid costs are
``incomprehensively high compared with both NHTSA's own previous
estimates and with independent cost assessments.'' \581\ John German
claimed that the teardown study conducted by FEV North America,
Inc.\582\ ``on 2013
[[Page 52650]]
hybrids found mid-size car powersplit hybrid direct manufacturing cost
(DMC) is about $2,050--far below the estimated DMC of $2,946 for
electrical components alone in Table 3-89 of the proposed rule TSD that
excludes the battery cost.'' \583\
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\581\ John German, Docket No. NHTSA-2023-0022-53274-A1, at 2.
\582\ The 2013 FEV study for ICCT is titled ``Light-Duty Vehicle
Technology Cost Analysis European Vehicle Market Updated Indirect
Cost Multiplier (ICM) Methodology'' and can be downloaded from
ICCT's website.
\583\ Mid-size car emphasized. Note that our DMC is in 2021$.
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NHTSA has responded to this comment in prior rules, extensively
detailing the agency's reasons for not relying on particular FEV
studies to estimate hybrid costs.\584\ Upon further examination of the
FEV document, the ``Net Incremental Direct Manufacturing Cost'' for a
midsize passenger car for power-split HEVs was stated as
``[euro]2,230'' \585\ (or approximately $2,943 in 2012$ and about
$3,474 in 2021$). Taking a different approach, converting John German's
stated value of $2,050 into Euros (which is approximately [euro]1,553,
used to search within the FEV study), it is found that this is a value
that is listed for a subcompact power-split hybrid in Table E-5 titled
``Power-Split Hybrid Electric Vehicle Case Study Results Eastern Europe
Labor Rate Substitution.'' As detailed extensively in the documentation
supporting our analysis, we consider ten vehicle classes, and we
believe a subcompact vehicle is only likely to represent vehicles
covering a small portion of the vehicles we consider.
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\584\ 85 FR 24431-2, 85 FR 42513-4 (April 30, 2020), 87 FR
25801-2 (May 2, 2022).
\585\ John German's Table A.3 shows that this cost includes not
only the electric machines but also the battery, high-voltage
cables, etc. Recall that our quoted cost excludes the battery.
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Further, the commenter oversimplifies a technology walk between
powertrains in a given model year, stating a 2023 Toyota Camry ``SE
list price is $27,960 and SE hybrid is $30,390, for an increment of
$2,430. If RPE is 1.5, then DMC is $1,620.'' As discussed in more
detail in Final TSD Chapter 2.4 and referenced in a comment response
above, we do not use vehicle prices to estimate technology costs,
rather we estimate technology costs from the ground-up. For a more-
accurate representation of a technology walk from a conventional
powertrain to a power-split powertrain, see RIA Chapter 4.\586\ We have
not made any changes to power-split hybrid costs for this final rule.
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\586\ Memorandum to Docket No. NHTSA-2023-0022, Electrification
Technology Cost Walk in Support of the Corporate Average Fuel
Economy Standards for Passenger Cars and Light Trucks for Model
Years 2027 and Beyond and Fuel Efficiency Standards for Heavy-Duty
Pickup Trucks and Vans for Model Years 2030 and Beyond.
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As discussed earlier in Section III.C, our technology costs account
for three variables: retail price equivalence (RPE), which is 1.5 times
the DMC, the technology learning curve, and the adjustment of the
dollar value to 2021$ for this analysis. While HDPUVs have larger non-
battery electrification componentry than LDVs, the cost calculation
methodology is identical, in that the $/kW metric is the same, but the
absolute costs are higher. As a result, HDPUVs and LDVs share the same
non-battery electrification DMCs.
For the non-battery electrification component learning curves, in
both the LD and HDPUV fleets, we used cost information from Argonne's
2016 Assessment of Vehicle Sizing, Energy Consumption, and Cost through
Large-Scale Simulation of Advanced Vehicle Technologies report.\587\
The report provides estimated cost projections from the 2010 lab year
to the 2045 lab year for individual vehicle components.\588\ We
considered the component costs used in electrified vehicles and
determined the learning curve by evaluating the year over year cost
change for those components. Argonne published a 2020 and a 2022
version of the same report; however, those versions did not include a
discussion of the high and low-cost estimates for the same
components.\589\ Our learning estimates generated using the 2016 report
align in the middle of these two ranges, and therefore we continue to
apply the learning curve estimates based on the 2016 report. There are
many sources that we could have picked to develop learning curves for
non-battery electrification component costs, however given the
uncertainty surrounding extrapolating costs out to MY 2050, we believe
these learning curves provide a reasonable estimate.
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\587\ Moawad, A. et al. 2016. Assessment of Vehicle Sizing,
Energy Consumption and Cost Through Large Scale Simulation of
Advanced Vehicle Technologies. ANL/ESD-15/28. Available at: https://www.osti.gov/biblio/1245199. (Accessed: May 31, 2023).
\588\ DOE's lab year equates to five years after a model year,
e.g., DOE's 2010 lab year equates to MY 2015. ANL/ESD-15/28 at 116.
\589\ Islam, E. et al. 2020. Energy Consumption and Cost
Reduction of Future Light-Duty Vehicles through Advanced Vehicle
Technologies: A Modeling Simulation Study Through 2050. ANL/ESD-19/
10. Available at: https://publications.anl.gov/anlpubs/2020/08/161542.pdf. (Accessed: May 31, 2023); Islam, E. et al. 2022. A
Comprehensive Simulation Study to Evaluate Future Vehicle Energy and
Cost Reduction Potential. ANL/ESD-22/6. Available at: https://publications.anl.gov/anlpubs/2023/11/179337.pdf. (Accessed: Mar. 14,
2024).
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In summary, we calculate total electrified powertrain costs by
summing individual component costs, which ensures that all technologies
in an electrified powertrain appropriately contribute to the total
system cost. We combine the costs associated with the ICE (if
applicable) and transmission, non-battery electrification components
like the electric machine, and battery pack to create a full-system
cost. Chapter 3.3.5.4 of the TSD presents the total costs for each
electrified powertrain option, broken out by the components we
discussed throughout this section. In addition, the chapter discusses
where to find each of the component costs in the CAFE Model's various
input files.
4. Road Load Reduction Paths
No car or truck uses energy (whether gas or otherwise) 100%
efficiently when it is driven down the road. If the energy in a gallon
of gas is thought of as a pie, the amount of energy ultimately
available from that gallon to propel a car or truck down the road would
only be a small slice. So where does the lost energy go? Most of it is
lost due to thermal and frictional loses in the engine and drivetrain
and drag from ancillary systems (like the air conditioner, alternator
generator, various pumps, etc.). The rest is lost to what engineers
call road loads. For the most part, road loads include wind resistance
(or aerodynamics), drag in the braking system, and rolling resistance
from the tires. At low speeds, aerodynamic losses are very small, but
as speeds increases these loses rapidly become dramatically higher than
any other road load. Drag from the brakes in most cars is practically
negligible. ROLL losses can be significant: at low speeds ROLL losses
can be more than aerodynamic losses. Whatever energy is left after
these road loads are spent on accelerating the vehicle anytime a its
speed increases. This is where reducing the mass of a vehicle is
important to efficiency because the amount of energy to accelerate the
vehicle is always directly proportional to a vehicle's mass. All else
being equal, reduce a car's mass and better fuel economy is guaranteed.
However, keep in mind that at freeway speeds, aerodynamics plays a more
dominant role in determining fuel economy than any other road load or
than vehicle mass.
We include three road load reducing technology paths in this
analysis: the MR Path, Aerodynamic Improvements (AERO) Path, and ROLL
Path. For all three vehicle technologies, we assign analysis fleet
technologies and identify adoption features based on the vehicle's body
style. The LD fleet body styles we include in the analysis are
convertible,
[[Page 52651]]
coupe, sedan, hatchback, wagon, SUV, pickup, minivan, and van. The
HDPUV fleet body styles include chassis cab, cutaway, fleet SUV, work
truck, and work van. Figure III-7 and Figure III-8 show the LD and
HDPUV fleet body styles used in the analysis.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR24JN24.060
[GRAPHIC] [TIFF OMITTED] TR24JN24.061
[[Page 52652]]
BILLING CODE 4910-59-C
As expected, the road load forces described above operate
differently based on a vehicle's body style, and the technology
adoption features and effectiveness values reflect this. The following
sections discuss the three Road Load Reduction Paths.
a. Mass Reduction
MR is a relatively cost-effective means of improving fuel economy,
and vehicle manufacturers are expected to apply various MR technologies
to meet fuel economy standards. Vehicle manufacturers can reduce
vehicle mass through several different techniques, such as modifying
and optimizing vehicle component and system designs, part
consolidation, and adopting materials that are conducive to MR
(advanced high strength steel (AHSS), aluminum, magnesium, and plastics
including carbon fiber reinforced plastics).
We received multiple comments on how this analysis evaluated mass
reduction as a possible pathway for manufacturers to use to meet the
standards. Raw aluminum supplier Arconic, the Aluminum Association, the
American Chemistry Council and the California Attorney General
commented generally about the benefits of mass reduction to increasing
fuel economy.\590\ Stakeholders also commented broadly about mass
reduction technology given the current state of the vehicle fleet and
anticipated future fleet technology transitions. Even given the
effectiveness of mass reduction as a pathway to CAFE compliance as well
as tightening CAFE standards, multiple aluminum industry members noted
that the average mass of vehicles continues to increase. They also
noted that there are limited indications of adoption of aluminum
primary structure in the fleet and that this will not change by 2032.
They also pointed out that significant average mass increases are at
least partially being driven by the higher masses associated with BEVs
and their heavy batteries. Furthermore, they called on BEV
manufacturers to use more aluminum to offset the higher masses
associated with the batteries in these vehicles. Similarly, the States
and Cities commented with research showing that potential fuel economy
improvements from mass reduction have not been fully realized because
manufacturers add weight back to the vehicle for other reasons, and
because of increasing vehicle footprints.\591\ Additional discussion of
how NHTSA considers various materials in the mass reduction analysis
are given below and in TSD Chapter 3.4, and NHTSA's discussion of
vehicle footprint trends is located in TSD Chapter 1.
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\590\ States and Cities, Docket No. NHTSA-2023-0022-61904; ACC,
Docket No. NHTSA-2023-0022-60215; Arconic, Docket No. NHTSA-2023-
0022-48374; Aluminum Association, Docket No. NHTSA-2023-0022-58486.
\591\ States and Cities, Docket No. NHTSA-2023-0022-61904.
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For the LD fleet portion of this analysis, we considered five
levels of MR technology (MR1-MR5) that include increasing amounts of
advanced materials and MR techniques applied to the vehicle's
glider.\592\ The subsystems that may make up a vehicle glider include
the vehicle body, chassis, interior, steering, electrical accessory,
brake, and wheels systems. We accounted for mass changes associated
with powertrain changes separately.\593\ We considered two levels of MR
(MR1-MR2) and an initial level (MR0) for the HDPUV fleet. We use fewer
levels because vehicles within the HD fleets are built for a very
different duty cycle \594\ than those in the LD fleet and tend to be
larger and heavier. Moreover, there are different vehicle parameters,
like towing capacity, that drive vehicle mass in the HD fleet rather
than, for example, NVH (noise, vibration, and harshness) performance in
the LD fleet. Similarly, HDPUV MR is assumed to come from the
glider,\595\ and powertrain MR occurs during the Autonomie modeling.
Our estimates of how manufacturers could reach each level of MR
technology in the LD and HDPUV analyses, including a discussion of
advanced materials and MR techniques, can be found in Chapter 3.4 of
the TSD.
---------------------------------------------------------------------------
\592\ Note that in the previous analysis associated with the MYs
2024-2026 final rule, there was a sixth level of mass reduction
available as a pathway to compliance. For this analysis, this
pathway was removed because it relied on extensive use of carbon
fiber composite technology to an extent that is only found in
purpose-built racing cars and a few hundred road legal sports cars
costing hundreds of thousands of dollars. TSD Chapter 3.4 provides
additional discussion on the decision to include five mass reduction
levels in this analysis.
\593\ Glider mass reduction can sometimes enable a smaller
engine while maintaining performance neutrality. Smaller engines
typically weigh less than bigger ones. We captured any changes in
the resultant fuel savings associated with powertrain mass reduction
and downsizing via the Autonomie simulation. Autonomie calculates a
hypothetical vehicle's theoretical fuel mileage using a mass
reduction to the vehicle curb weight equal to the sum of mass
savings to the glider plus the mass savings associated with the
downsized powertrain.
\594\ HD vans that are used for package delivery purposes are
frequently loaded to GVWR. However, LD passenger cars are never
loaded to GVWR. Operators of HD vans have an economic motivation to
load their vehicles to GVWR. In contrast studies show that between
38% and 82% of passenger cars are used soley to transport their
drivers. (Bureau of Transportation Studies, 2011, FHWA Publication
No. FHWA-PL-18-020, 2019).
\595\ We also assumed that an HDPUV glider comprises 71 percent
of a vehicle's curb weight, based on a review of mass reduction
technologies in the 2010 Transportation Research Board and National
Research Council's ``Technologies and Approaches to Reducing the
Fuel Consumption of Medium- and Heavy-Duty Vehicles.'' See
Transportation Research Board and National Research Council. 2010.
Technologies and Approaches to Reducing the Fuel Consumption of
Medium- and Heavy-Duty Vehicles. Washington, DC: The National
Academies Press. At page 120-121. Available at: https://nap.nationalacademies.org/12845/. (Accessed: May 31, 2023).
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A coalition of NGOs stated that achieving the highest degree of
mass reduction, MR5, can be achieved in the mainstream fleet with
aluminum alone and carbon fiber technology is not necessary.\596\ We
disagree with this conclusion. While aluminum technology can be a
potent mass reduction pathway, it does have its limitations. First,
aluminum, does not have a fatigue endurance limit. That is, with
aluminum components there is always some combination of stress and
cycles when failure occurs. Automotive design engineering teams will
dimension highly stressed cross sections to provide an acceptable
number of cycles to failure. But this often comes at mass savings
levels that fall short of what would be expected purely based on
density specific strength and stiffness properties for aluminum.
---------------------------------------------------------------------------
\596\ National Resource Defense Council et al., Docket No.
NHTSA-2023-0022-61944.
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Looking at real data, the mostly aluminum (cab and bed are made
from aluminum), 2021 Ford F150 achieves less than a 14 percent mass
reduction compared to its 2014 all-steel predecessor.\597\ This is an
especially pertinent comparison because both vehicles have the same
footprint within a 2% margin and presumably were engineered to similar
duty cycles given that they both came from the same manufacturer. Per
our regression analysis, the Ford F-150 achieves MR3. As mentioned in
the TSD Chapter 3.4, a body in white structure made almost entirely
from aluminum is roughly required to get to MR4. It may be possible to
achieve MR5 without the use of carbon fiber, but the resultant vehicle
would not achieve performance parity with customer expectations in
terms of crash safety, noise and vibration levels, and interior
content. The discontinued Lotus Elise is an example of an aluminum and
fiberglass car that achieved MR5 but represents an
[[Page 52653]]
extremely niche vehicle application that is unlikely to translate to
mainstream, high-volume models. Therefore, it is entirely reasonable to
assume that carbon fiber ``hang on'' panels and closures would be
necessary to achieve MR5 at performance parity.
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\597\ Ford. 2021 F-150 Technical Specifications. Available at:
https://media.ford.com/content/dam/fordmedia/North%20America/US/product/2021/f150/pdfs/2021-F-150-Technical-Specs.pdf. (Accessed on
Mar. 21, 2024); Ford. 2014 F-150 Technical Specifications. Available
at: https://media.ford.com/content/dam/fordmedia/North%20America/US/2014_Specs/2014_F150_Specs.pdf. (Accessed on Mar. 21, 2024).
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There were also comments from the NGO coalition regarding the mass
reduction section in the NAS study. The commenters noted that the NAS
study relies on very little application of carbon fiber technology to
achieve their highest level of mass reduction technology. NHTSA would
like to note that the NAS study espouses a maximum level of mass
reduction of approximately 14.5% using composites (e.g., fiberglass)
and carbon fiber technology only in closures structures (e.g., doors,
hoods, and decklids) and hang-on panels (e.g., fenders). This is the
``alternative scenario 2'' in the NAS study. This is similar
lightweighting technology application strategy to what our analysis
roughly associates with MR5, but MR5 requires a 20% mass reduction. In
this scenario, we are allotting more mass reduction potential for the
same carbon fiber technology application than the NAS study does.
We assigned MR levels to vehicles in both the LD and HDPUV analysis
fleets by using regression analyses that consider a vehicle's body
design \598\ and body style, in addition to several vehicle design
parameters, like footprint, power, bed length (for pickup trucks), and
battery pack size (if applicable), among other factors. We have been
improving on the LD regression analysis since the 2016 Draft Technical
Assessment Report (TAR) and continue to find that it reasonably
estimates MR technology levels of vehicles in the analysis fleet. We
developed a similar regression for the HDPUV fleet for this analysis
using the factors described above and other applicable HDPUV attributes
and found that it similarly appropriately assigns initial MR technology
levels to analysis fleet vehicles. Chapter 3.4 of the TSD contains a
full description of the regression analyses used for each fleet and
examples of results of the regression analysis for select vehicles.
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\598\ The body design categories we used are 3-box, 2-box, HD
pickup, and HD van. A 3-box can be explained as having a box in the
middle for the passenger compartment, a box in the front for the
engine and a box in the rear for the luggage compartment. A 2-box
has a box in front for the engine and then the passenger and luggage
box are combined into a single box.
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NHTSA received comments from a coalition of NGOs that the mass
reduction regression curves used in the analysis for quantifying
analysis fleet mass reduction overestimates the application mass
reduction technology in the fleet.\599\ They believe that the mass
reduction modeling used by Argonne National Lab for estimating
powertrain weight in the Autonomie vehicle simulations more accurately
reflects how much mass reduction technology is really in the fleet, and
stated that we should be using those regression models for the analysis
instead. Although we would like to repeat the NGO's calculations to
that led them to this opinion, they did not provide enough detail on
its methodology and calculations for NHTSA to confirm its accuracy.
Consequently, we are only able to respond with general concepts here.
---------------------------------------------------------------------------
\599\ National Resource Defense Council et al., Docket No.
NHTSA-2023-0022-61944.
---------------------------------------------------------------------------
NHTSA disagrees that the methods used by Autonomie to calculate the
MR analysis fleet starting levels would lead to a better analysis than
our regression. There are multiple reasons for this. First, Autonomie
relies on data collected by the subscription benchmarking database
A2Mac1 and other limited sources. As much as NHTSA and Argonne rely on
data from A2Mac1 for learning about technical aspects of the fleet, it
is not representative data for the entire US fleet. Whereas the CAFE
mass reduction regressions use data from all vehicles and multiple trim
levels in the US fleet (examples discussed above and further in TSD
Chapter 3.4), A2Mac1 is limited in the number of vehicles it can
teardown in a given year and thus only makes small samples from the US
fleet. Using the entire fleet for the regression analysis provides a
more accurate snapshot of how vehicles compare to one another when it
comes to assigning MR levels to vehicles in the analysis fleets.
Second, the NGOs claim that it is better to arrive at a glider weight
by taking the average powertrain weight for a given technology class
and subtracting that value from the curb weight of all vehicles in the
fleet with that same tech class. We calculate a percentage for the
powertrain of the curb weight based on the average powertrain mass for
all of the technology classes. We then multiply this same percentage
(which for the current fleet is 71%) by the curb weight of each vehicle
in the fleet to arrive at the glider share. We did not use bespoke
powertrain percentages for each corresponding technology class in the
fleet because it will most likely not make a substantial difference in
how MR is applied. Third, it must also be noted that Autonomie's glider
share percent does not take into account sales weighting because
Autonomie simulates every possible combination of vehicles and
powertrains. By taking into account sales volumes, our analysis does a
better job of representing the actual fleet.
The Joint NGOs also commented that the regression model we used for
calculating MR for analysis fleet vehicles is invalid because it was
developed using prior model year fleets. We disagree. The regression
relies on establishing correlations between various vehicle parameters
and the mass of a vehicle. For the most part, these correlations
reflect physics and automotive design practices that have not changed
substantially since these regressions were developed and updated. For
example, one parameter correlated in the regression is rear wheel drive
(RWD) vs. front wheel drive (FWD). The regression accurately predicts
that going from RWD to FWD will save mass. The mass change associated
in going from RWD to FWD arises from the elimination of a drive
driveshaft and a discrete differential housing (unless the vehicle is
mid or rear engine, which is rare in the fleet). This mass change is
expected in the same way today as it would have been when the
regression was developed. As a second example, another parameter that
we correlate in the regression is convertible vs. non-convertible.
Convertibles tend to be heavier than, say, sedans because they do not
have the upper load path created by having a sedan's roof rail and C-
(or D-) pillars. Consequently, manufacturers must compensate by
reinforcing the floor pan to account for the lack of a primary load
path. This results in higher mass for convertibles. Between when we
developed the regression and today, the physics and fundamentals of
this structural dynamic have not changed. Hence the regression we use
in this regard is still valid today.
There are several ways we ensure that the CAFE Model considers MR
technologies like manufacturers might apply them in the real world.
Given the degree of commonality among the vehicle models built on a
single platform, manufacturers do not have complete freedom to apply
unique technologies to each vehicle that shares the same platform.
While some technologies (e.g., low rolling resistance tires) are very
nearly ``bolt-on'' technologies, others involve substantial changes to
the structure and design of the vehicle, and therefore often
necessarily affect all vehicle models that share that platform. In most
cases, MR technologies are applied to platform level components and
therefore the same design and components are used on all vehicle models
that share the
[[Page 52654]]
platform. Each vehicle in the analysis fleet is associated with a
specific platform family. A platform ``leader'' in the analysis fleet
is a vehicle variant of a given platform that has the highest level of
MR technology in the analysis fleet. As the model applies technologies,
it will ``level up'' all variants on a platform to the highest level of
MR technology on the platform. For example, if a platform leader is
already at MR3 in MY 2022, and a ``follower'' starts at MR0 in MY 2022,
the follower will get MR3 at its next redesign (unless the leader is
redesigned again before that time, and further increases the MR level
associated with that platform, then the follower would receive the new
MR level).
In addition to leader-follower logic for vehicles that share the
same platform, we also restrict MR5 technology to platforms that
represent 80,000 vehicles or fewer. The CAFE Model will not apply MR5
technology to platforms representing high volume sales, like a
Chevrolet Traverse, for example, where hundreds of thousands of units
are sold per year. We use this particular adoption feature and the
80,000-unit threshold in particular, to model several relevant
considerations. First, we assume that MR5 would require carbon fiber
technology.\600\ There is high global demand from a variety of
industries for a limited supply of carbon fibers; specifically,
aerospace, military/defense, and industrial applications demand most of
the carbon fiber currently produced. Today, only about 10 percent of
the global dry fiber supply goes to the automotive industry, which
translates to the global supply base only being able to support
approximately 70,000 cars.\601\ In addition, the production process for
carbon fiber components is significantly different than for traditional
vehicle materials. We use this adoption feature as a proxy for stranded
capital (i.e., when manufacturers amortize research, development, and
tooling expenses over many years) from leaving the traditional
processes, and to represent the significant paradigm change to tooling
and equipment that would be required to support molding carbon fiber
panels. There are no other adoption features for MR in the LD analysis,
and no adoption features for MR in the HDPUV analysis.
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\600\ See the Final TSD for CAFE Standards for MYs 2024-2026,
and Chapter 3.4 of the TSD accompanying this rulemaking for more
information about carbon fiber.
\601\ Sloan, J. 2020. Carbon Fiber Suppliers Gear up for Next
Generation Growth. Last revised: Jan. 1, 2016. Available at: https://www.compositesworld.com/articles/carbon-fiber-suppliers-gear-up-for-next-gen-growth. (Accessed: May 31, 2023).
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In the Autonomie simulations, MR technology is simulated as a
percentage of mass removed from the specific subsystems that make up
the glider. The mass of subsystems that make up the vehicle's glider is
different for every technology class, based on glider weight data from
the A2Mac1 database \602\ and two NHTSA-sponsored studies that examined
light-weighting a passenger car and light truck. We account for MR from
powertrain improvements separately from glider MR. Autonomie considers
several components for powertrain MR, including engine downsizing, and,
fuel tank, exhaust systems, and cooling system light-weighting.\603\
With regard to the LDV fleet, the 2015 NAS report suggested an engine
downsizing opportunity exists when the glider mass is light-weighted by
at least 10 percent. The 2015 NAS report also suggested that 10 percent
light-weighting of the glider mass alone would boost fuel economy by 3
percent and any engine downsizing following the 10 percent glider MR
would provide an additional 3 percent increase in fuel economy.\604\
The NHTSA light-weighting studies applied engine downsizing (for some
vehicle types but not all) when the glider weight was reduced by 10
percent. Accordingly, the analysis limits engine resizing to several
specific incremental technology steps; important for this discussion,
engines in the analysis are only resized when MR of 10 percent or
greater is applied to the glider mass, or when one powertrain
architecture replaces another architecture. For the HDPUV analysis, we
do not allow engine downsizing at any MR level. This is because HDPUV
designs are sized with the maximum GVWR and GCWR in mind, as discussed
earlier in this section. We are objectively controlling the vehicles'
utility and performance by this method in Autonomie. For example, if
more MR technology is applied to a HD van, the payload capacity
increases while maintaining the same maximum GVWR and GCWR.\605\ The
lower laden weight enables these vehicles to improve fuel efficiency by
increased capacity. A summary of how the different MR technology levels
improve fuel consumption is shown in TSD Chapter 3.4.4.
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\602\ A2Mac1: Automotive Benchmarking. Available at: https://portal.a2mac1.com/. (Accessed: May 31, 2023). The A2Mac1 database
tool is widely used by industry and academia to determine the bill
of materials (a list of the raw materials, sub-assemblies, parts,
and quantities needed to manufacture an end-product) and mass of
each component in the vehicle system.
\603\ Although we do not acount for mass reduction in
transmissions, we do reflect design improvements as part of mass
reduction when going from, for example, an older AT6 to a newer AT8
that has similar if not lower mass.
\604\ NRC. 2015. Cost, Effectiveness, and Deployment of Fuel
Economy Technologies for Light-Duty Vehicles. The National Academies
Press: Washington DC. Available at: https://doi.org/10.17226/21744.
(Accessed: May 31, 2023).
\605\ Transportation Research Board and National Research
Council. 2010. Technologies and Approaches to Reducing the Fuel
Consumption of Medium- and Heavy-Duty Vehicles. The National
Academies Press: Washington, DC at 116. Available at: https://nap.nationalacademies.org/12845/. (Accessed: May 31, 2023).
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Our MR costs are based on two NHTSA light-weighting studies--the
teardown of a MY 2011 Honda Accord and a MY 2014 Chevrolet Silverado
pickup truck \606\--and the 2021 NAS report.\607\ The costs for MR1-MR4
rely on the light-weighting studies, while the cost of MR5 references
the carbon fiber costs provided in the 2021 NAS report. The same cost
curves are used for the HDPUV analysis; however, we used linear
interpolation to shift the HDPUV MR2 curve (by roughly a factor of 20)
to account for the fact that MR2 in the HDPUV analysis represents a
different level than MR2 in the LD analysis. Unlike the other
technologies in our analysis that have a fixed technology cost (for
example, it costs about $3,000 to add a AT10L3 transmission to a LD SUV
or pickup truck in MY 2027), the cost of MR is calculated on a dollar
per pound saved basis based on a vehicle's starting weight. Put another
way, for a given vehicle platform, an initial mass is assigned using
the aforementioned regression model. The amount of mass to reach each
of the five levels of MR is calculated by the CAFE Model based on this
number and then multiplied by the dollar per pound saved figure for
each of the five MR levels. The dollar per pound saved figure increases
at a nearly linear rate going from MR0 to M4. However, this figure
increases steeply going from MR4 to MR5 because the technology cost to
realize the associated mass savings level is an order of magnitude
larger. This dramatic increase is reflected by all three studies we
relied on for MR costing, and we believe that it reasonably represents
what manufacturers would expect to pay for including increasing amounts
of
[[Page 52655]]
carbon fiber on their vehicles. For the HDPUV analysis, there is also a
significant cost increase from MR1 to MR2. This is because the MR going
from MR1 to MR2 in the HDPUV fleet analysis is a larger step than going
from MR1 to MR2 for the LD fleet analysis--5% to 7.5% off the glider
compared to 1.4% to 13%.
---------------------------------------------------------------------------
\606\ Singh, H. 2012. Final Report, Mass Reduction for Light-
Duty Vehicles for Model Years 2017-2025. DOT HS 811 666.; Singh, H.
et al. 2018. Mass Reduction for Light-Duty Vehicles for Model Years
2017-2025. DOT HS 812 487.
\607\ This analysis applied the cost estimates per pound derived
from passenger cars to all passenger car segments, and the cost
estimates per pound derived from full-size pickup trucks to all
light-duty truck and SUV segments. The cost estimates per pound for
carbon fiber (MR5) were the same for all segments.
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Like past analyses, we considered several options for MR technology
costs. Again, we determined that the NHTSA-sponsored studies accounted
for significant factors that we believe are important to include our
analysis, including materials considerations (material type and gauge,
while considering real-world constraints such as manufacturing and
assembly methods and complexity), safety (including the Insurance
Institute for Highway Safety's (IIHS) small overlap tests), and
functional performance (including towing and payload capacity, noise,
vibration, and harshness (NVH)), and gradeability in the pickup truck
study.
We received comments that the costs used in the analysis to achieve
MR5 are high, both because of the way that we calculated MR5 costs, and
how we applied updated costs in the model.\608\ Regarding the price of
carbon fiber technology, considering a 4-5 year time horizon, we
believe that our prices are conservative when taking into account
rising energy costs to pyrolyze acrylic fibers to carbon fibers and
considering all the costs car manufacturers much shoulder on developing
processes to turn the dry fibers into reliable structural components.
The recent NAS study confirms our pricing.\609\ It explicitly indicates
an average price (over the time period of interest, 2027-2030) for
carbon fiber materials as approximately $8.25 per pound saved and a
manufacturing cost for carbon fiber reinforced polymer components of
$13 per pound saved. Multiply the sum of these tow numbers by an RPE of
1.5 (direct and indirect and net income) results in roughly $32 per
pound saved which is the figure listed in the Technologies Input File
used for the CAFE model for 2027.
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\608\ National Resource Defense Council et al., Docket No.
NHTSA-2023-0022-61944.
\609\ 2021 NAS report, at 7-242-3.
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Regarding the comment that NHTSA misapplied the MR5 costs in the
model, on further review NHTSA agrees that not all MR5 pounds saved
will be saved with carbon fiber and that cost should be adjusted to
include carbon fiber costs proportional to the materials' use in total
pounds saved. We would like to investigate using an incremental or
bracketed approach (think US tax structure but with pounds saved and
cost) in a future analysis where the costs associated with carbon fiber
technology will only be applied to the incremental mass reduction in
going from one level of MR to another. We did not make that change for
this final rule analysis, however. This is a relatively involved change
in the model, which we did not have time to implement and QA/QC in the
time available to complete the analysis associated with this final
rule. That said, we do not believe that this change would result in a
significant change in the analysis for the reasons listed below and are
comfortable that the analysis associated with this final rule still
reasonably represents manufacturer's decision-making, effectiveness,
and cost associated with applying the highest levels of mass reduction
technology.
First, we limited application of MR5 in the analysis to represent
the limited volume of available dry carbon fiber and the resultant high
costs of the raw materials. This constraint is described above and in
more detail in TSD Chapter 3. The CAFE Model assumes that there is not
enough carbon fiber readily available to support vehicle platforms with
more than 80,000 vehicles sold per year. We believe this volume
constraint does more to limit the application of MR5 technology in the
analysis than does its high price. Even if we used a lower price, this
dominant constraint would still be volume. Second, we do not believe
that that a lower price would prove to be a competitive pathway to
compliance for exotic materials technology compared to other less
expensive technologies with higher effectiveness. The MR5 effectiveness
as applied to the vehicle in this analysis considers the total effect
of reducing that level of mass from the vehicle, from the vehicle's
starting MR level. As an example, while the cost of going from MR0 or
MR1 to MR5 may be slightly overstated (but still limited in total
application by the volume cap), the cost of going from MR4 to MR5 is
not. NHTSA will continue to consider the balance of carbon fiber and
other advanced materials for mass reduction to meet MR5 levels and
update that value in future rules.
b. Aerodynamic Improvements
The energy required for a vehicle to overcome wind resistance, or
more formally what is known as aerodynamic drag, ranges from minimal at
low speeds to incredibly significant at highway speeds.\610\ Reducing a
vehicle's aerodynamic drag is, therefore, an effective way to reduce
the vehicle's fuel consumption. Aerodynamic drag is characterized as
proportional to the frontal area (A) of the vehicle and a factor called
the coefficient of drag (Cd). The coefficient of drag
(Cd) is a dimensionless value that represents a moving
object's resistance against air, which depends on the shape of the
object and flow conditions. The frontal area (A) is the cross-sectional
area of the vehicle as viewed from the front. Aerodynamic drag of a
vehicles is often expressed as the product of the two values,
CdA, which is also known as the drag area of a vehicle. The
force imposed by aerodynamic drag increases with the square of vehicle
velocity, accounting for the largest contribution to road loads at
higher speeds.\611\
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\610\ 2015 NAS Report, at 207.
\611\ See, e.g., Pannone, G. 2015. Technical Analysis of Vehicle
Load Reduction Potential for Advanced Clean Cars, Final Report.
April 2015. Available at: https://ww2.arb.ca.gov/sites/default/files/2020-04/13_313_ac.pdf. (Accessed: May 31, 2023). The graph on
page 20 shows how at higher speeds the aerodyanmic force becomes the
dominant load force.
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Manufacturers can reduce aerodynamic drag either by reducing the
drag coefficient or reducing vehicle frontal area, which can be
achieved by passive or active aerodynamic technologies. Passive
aerodynamics refers to aerodynamic attributes that are inherent to the
shape and size of the vehicle. Passive attributes can include the shape
of the hood, the angle of the windscreen, or even overall vehicle ride
height. Active aerodynamics refers to technologies that variably deploy
in response to driving conditions. Example of active aerodynamic
technologies are grille shutters, active air dams, and active ride
height adjustment. Manufacturers may employ both passive and active
aerodynamic technologies to improve aerodynamic drag values.
There are four levels of aerodynamic improvement (over AERO0, the
first level) available in the LD analysis (AERO5, AERO10, AERO15,
AERO20), and two levels of improvements available for the HDPUV
analysis (AERO10, AERO20). There are fewer levels available for the
HDPUV analysis because HDPUVs have less diversity in overall vehicle
shape; prioritization of vehicle functionality forces a boxy shape and
limits incorporation of many of the ``shaping''-based aerodynamic
technologies, such as smaller side-view mirrors, body air flow, rear
diffusers, and so on. Refer back to Figure III-7 and Figure III-8 for a
visual of each body style considered in the LD and HDPUV analyses.
Each AERO level associates with 5, 10, 15, or 20 percent
aerodynamic drag
[[Page 52656]]
improvement values over a reference value computed for each vehicle
body style. These levels, or bins, respectively correspond to the level
of aerodynamic drag reduction over the reference value, e.g., ``AERO5''
corresponds to the 5 percent aerodynamic drag improvement value over
the reference value, and so on. While each level of aerodynamic drag
improvement is technology agnostic--that is, manufacturers can
ultimately choose how to reach each level by using whatever
technologies work for the vehicle--we estimated a pathway to each
technology level based on data from an NRC Canada-sponsored wind tunnel
testing program. The program included an extensive review of production
vehicles utilizing aerodynamic drag improvement technologies, and
industry comments.\612\ Our example pathways for achieving each level
of aerodynamic drag improvements is discussed in Chapter 3.5 of the
TSD.
---------------------------------------------------------------------------
\612\ Larose, G. et al. 2016. Evaluation of the Aerodynamics of
Drag Reduction Technologies for Light-duty Vehicles--a Comprehensive
Wind Tunnel Study. SAE International Journal of Passenger Cars--
Mechanical Systems. Vol.9(2): at 772-784. Available at: https://doi.org/10.4271/2016-01-1613. (Accessed: May 31, 2023).
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We assigned aerodynamic drag reduction technology levels in the
analysis fleets based on vehicle body styles.\613\ We computed an
average coefficient of drag based on vehicle body styles, using
coefficient of drag data from the MY 2015 analysis fleet for the LD
analysis, and data from the MY 2019 Chevy Silverado and MY 2020 Ford
Transit and the MY 2022 Ford e-Transit for cargo vans for the HDPUV
analysis. Different body styles offer different utility and have
varying levels of form drag. This analysis considers both frontal area
and body style as unchangeable utility factors affecting aerodynamic
forces; therefore, the analysis assumes all reduction in aerodynamic
drag forces come from improvement in the drag coefficient. Then we used
drag coefficients for each vehicle in the analysis fleet to establish
an initial aerodynamic technology level for each vehicle. We compared
the vehicle's drag coefficient to the calculated drag coefficient by
body style mentioned above, to assign initial levels of aerodynamic
drag reduction technology to vehicles in the analysis fleets. We were
able to find most vehicles' drag coefficients in manufacturer's
publicly available specification sheets; however, in cases where we
could not find that information, we used engineering judgment to assign
the initial technology level.
---------------------------------------------------------------------------
\613\ These assignments do not necessarily match the body styles
that manufacturers use for marketing purposes. Instead, we make
these assignments based on engineering judgment and the categories
used in our modeling, considering how this affects a vehicle's AERO
and vehicle technology class assignments.
---------------------------------------------------------------------------
We also looked at vehicle body style and vehicle horsepower to
determine which types of vehicles can adopt different aerodynamic
technology levels. For the LD analysis, AERO15 and AERO20 cannot be
applied to minivans, and AERO20 cannot be applied to convertibles,
pickup trucks, and wagons. We also did not allow application of AERO15
and AERO20 technology to vehicles with more than 780 horsepower. There
are two main types of vehicles that inform this threshold: performance
ICE vehicles and high-power BEVs. In the case of the former, we
recognize that manufacturers tune aerodynamic features on these
vehicles to provide desirable downforce at high speeds and to provide
sufficient cooling for the powertrain, rather than reducing drag,
resulting in middling drag coefficients despite advanced aerodynamic
features. Therefore, manufacturers may have limited ability to improve
aerodynamic drag coefficients for high performance vehicles with ICEs
without reducing horsepower. Only 4,047 units of sales volume in the
analysis fleet include limited application of aerodynamic technologies
due to ICE vehicle performance.\614\
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\614\ See the Market Data Input File.
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In the case of high-power BEVs, the 780-horsepower threshold is set
above the highest peak system horsepower present on a BEV in the 2020
fleet. We originally set this threshold based on vehicles in the MY
2020 fleet in parallel with the 780-horsepower ICE limitation. For this
analysis, the restriction does not have any functional effect because
the only BEVs that have above 780-horsepower in the MY 2022 analysis
fleet--the Tesla Model S and X Plaid, and variants of the Lucid Air--
are already assigned AERO20 as an initial technology state and there
are no additional levels of AERO technology left for those vehicles to
adopt. Note that these high horsepower BEVs have extremely large
battery packs to meet both performance and range requirements. These
bigger battery packs make the vehicles heavier, which means they do not
have the same downforce requirements as a similarly situated high-
horsepower ICE vehicle. Broadly speaking, BEVs have different
aerodynamic behavior and considerations than ICE vehicles, allowing for
features such as flat underbodies that significantly reduce drag.\615\
BEVs are therefore more likely to achieve higher AERO levels, so the
horsepower threshold is set high enough that it does not restrict
AERO15 and AERO20 application. BEVs that do not currently use high AERO
technology levels are generally bulkier (e.g., SUVs or trucks) or lower
budget vehicles.
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\615\ 2020 EPA Automotive Trends Report, at 227.
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There are no additional adoption features for aerodynamic
improvement technologies in the HDPUV analysis. We limited the range of
technology options for reasons discussed above, but both AERO
technology levels are available to all HDPUV body styles.
The aerodynamic technology effectiveness values that show the
potential fuel consumption improvement from AERO0 technology are found
and discussed in Chapter 3.5.4 of the TSD. For example, the AERO20
values shown represent the range of potential fuel consumption
improvement values that could be achieved through the replacement of
AERO0 technology with AERO20 technology for every technology key that
is not restricted from using AERO20. We use the change in fuel
consumption values between entire technology keys and not the
individual technology effectiveness values. Using the change between
whole technology keys captures the complementary or non-complementary
interactions among technologies.
We carried forward the established AERO technology costs previously
used in the 2020 final rule and again into the MY 2024-2026 standards
analysis,\616\ and updated those costs to the dollar-year used in this
analysis. For LD AERO improvements, the cost to achieve AERO5 is
relatively low, as manufacturers can make most of the improvements
through body styling changes. The cost to achieve AERO10 is higher than
AERO5, due to the addition of several passive aerodynamic technologies,
and consecutively the cost to achieve AERO15 and AERO20 are much higher
than AERO10 due to use of both passive and active aerodynamic
technologies. The two AERO technology levels available for HDPUVs are
similar in technology type and application to LDVs in the same
technology categories, specifically light trucks. Because of this
similarity, and unlike other technology areas that are required to
handle higher loads or greater wear, aerodynamics technologies can be
almost directly ported between fleets. As a result, there is no
difference in technology cost
[[Page 52657]]
between LD and HDPUV fleets for this analysis. The cost estimates are
based on CBI submitted by the automotive industry in advance of the
2018 CAFE NPRM, and on our assessment of manufacturing costs for
specific aerodynamic technologies. See the 2018 FRIA for discussion of
the cost estimates.\617\ We received no additional comments from
stakeholders regarding the costs established in the 2018 FRIA during
the MY 2024-2026 standards analysis and continued to use the
established costs for this analysis. TSD Chapter 3.5 contains
additional discussion of aerodynamic improvement technology costs, and
costs for all technology classes across all MYs are in the CAFE Model's
Technologies Input File. We received no additional comments on
aerodynamics technologies and costs and continue to use the established
costs for this final rule analysis.
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\616\ See the FRIA accompanying the 2020 final rule, Chapter
VI.C.5.e.
\617\ See the PRIA accompanying the 2018 NPRM, Chapter
6.3.10.1.2.1.2 for a discussion of these cost estimates.
---------------------------------------------------------------------------
c. Low Rolling Resistance Tires
Tire rolling resistance burns additional fuel when driving. As a
car or truck tire rolls, at the point the tread touches the pavement,
the tire flattens-out to create what tire engineers call the contact
patch. The rubber in the contact patch deforms to mold to the tiny
peaks and valleys of the payment. The interlock between the rubber and
these tiny peaks and valleys creates grip. Every time the contact patch
leaves the road surface as the tire rotates, it must recover to its
original shape and then as the tire goes all the way around it must
create a new contact patch that molds to a new piece of road surface.
However, this molding and repeated re-molding action takes energy. Just
like when a person stretches a rubber band it takes work, so does
deforming the rubber and the tire to form the contact patch. When
thinking about the efficiency of driving a car down the road, this
means that not all the energy produced by a vehicle's engine can go
into propelling the vehicle forward. Instead, some small, but
appreciable, amount goes into deforming the tire and creating the
contact patch repeatedly. This also explains why tires with low
pressure have higher rolling resistance than properly inflated tires.
When the tire pressure is low, the tire deforms more to create the
contact patch which is the same as stretching the rubber farther in the
analogy above. The larger deformations burn up even more energy and
results in worse fuel mileage. Lower-rolling-resistance tires have
characteristics that reduce frictional losses associated with the
energy dissipated mainly in the deformation of the tires under load,
thereby improving fuel economy.
We use three levels of low rolling resistance tire technology for
LDVs and two levels for HDPUVs. Each level of low rolling resistance
tire technology reduces rolling resistance by 10 percent from an
industry-average rolling resistance coefficient (RRC) value of
0.009.\618\ While the industry-average RRC is based on information from
LDVs, we also determined that value is appropriate for HDPUVs. RRC data
from a NHTSA-sponsored study shows that similar vehicles across the LD
and HDPUV categories have been able to achieve similar RRC
improvements. See Chapter 3.6 of the TSD for more information on this
comparison. TSD Chapter 3.6.1 shows the LD and HDPUV low rolling
resistance technology options and their associated RRC.
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\618\ See Technical Analysis of Vehicle Load Reduction by
CONTROLTEC for California Air Resources Board (April 29, 2015). We
determined the industry-average baseline RRC using a CONTROLTEC
study prepared for the CARB, in addition to considering CBI
submitted by vehicle manufacturers prior to the 2018 LD NPRM
analysis. The RRC values used in this study were a combination of
manufacturer information, estimates from coast down tests for some
vehicles, and application of tire RRC values across other vehicles
on the same platform. The average RRC from surveying 1,358 vehicle
models by the CONTROLTEC study is 0.009. The CONTROLTEC study
compared the findings of their survey with values provided by the
U.S. Tire Manufacturers Association for original equipment tires.
The average RRC from the data provided by the U.S. Tire
Manufacturers Association is 0.0092, compared to the average of
0.009 from CONTROLTEC.
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We have been using ROLL10 and ROLL20 in the last several CAFE Model
analyses. New for this analysis is ROLL30 for the LD fleet. In past
rulemakings, we did not consider ROLL30 due to lack of widespread
commercial adoption of ROLL30 tires in the fleet within the rulemaking
timeframe, despite commenters' argument on availability of the
technology on current vehicle models and possibility that there would
be additional tire improvements over the next decade.\619\ Comments we
received during the comment period for the last CAFE rule also
reflected the application of ROLL30 by OEMs, although they discouraged
considering the technology due to high cost and possible wet traction
reduction. With increasing use of ROLL30 application by OEMs,\620\ and
material selection making it possible to design low rolling resistance
independent of tire wet grip (discussed in detail in Chapter 3.6 of the
TSD), we now consider ROLL30 as a viable future technology during this
rulemaking period. We believe that the tire industry is in the process
of moving automotive manufacturers towards higher levels of rolling
resistance technology in the vehicle fleet. We believe that at this
time, the emerging tire technologies that would achieve 30 percent
improvement in rolling resistance, like changing tire profile,
stiffening tire walls, novel synthetic rubber compounds, or adopting
improved tires along with active chassis control, among other
technologies, will be available for commercial adoption in the fleet
during this rulemaking timeframe.
---------------------------------------------------------------------------
\619\ NHTSA-2018-0067-11985.
\620\ Docket No. NHTSA-2021-0053-0010, Evaluation of Rolling
Resistance and Wet Grip Performance of OEM Stock Tires Obtained from
NCAP Crash Tested Vehicles Phase One and Two, Memo to Docket--
Rolling Resistance Phase One and Two; Technical Analysis of Vehicle
Load Reduction by CONTROLTEC for California Air Resources Board
(April 29, 2015); NHTSA DOT HS 811 154.
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However, we did not consider ROLL30 for the HDPUV fleet, for
several reasons. We do not believe that HDPUV manufacturers will use
ROLL30 tires because of the significant added cost for the technology
while they would see more fuel efficiency benefits from powertrain
improvements. As discussed further below, our cost estimates for ROLL30
technology--which incorporate both technology and materials costs--are
approximately double the costs of ROLL20. In addition, a significant
majority of the HDPUV fleet currently employs no low rolling resistance
tire technology. We believe that HDPUV manufacturers will still move
through ROLL10 and ROLL20 technology in the rulemaking timeframe. For
the final rule, we did not receive feedback from commenters regarding
using ROLL30 for HDPUVs. We finalized this rulemaking analysis without
including ROLL30 for the HDPUV fleet.
Assigning low rolling resistance tire technology to the analysis
fleet is difficult because RRC data is not part of tire manufacturers'
publicly released specifications, and because vehicle manufacturers
often offer multiple wheel and tire packages for the same nameplate.
Consistent with previous rules, we used a combination of CBI data, data
from a NHTSA-sponsored ROLL study, and assumptions about parts-sharing
to assign tire technology in the analysis fleet. A slight majority of
vehicles (52.9%) in the LD analysis fleet do not use any ROLL
improvement technology, while 16.2% of vehicles use ROLL10 and 24.9% of
vehicles use ROLL20. Only 6% of vehicles in the LD analysis fleet use
ROLL30. Most (74.5%) vehicles in the HDPUV analysis fleet do
[[Page 52658]]
not use any ROLL improvement technology, and 3.0% and 22.5% use ROLL10
and ROLL20, respectively.
The CAFE Model can apply ROLL technology at either a vehicle
refresh or redesign. We recognize that some vehicle manufacturers
prefer to use higher RRC tires on some performance cars and SUVs. Since
most of performance cars have higher torque, to avoid tire slip, OEMs
prefer to use higher RRC tires for these vehicles. Like the aerodynamic
technology improvements discussed above, we applied ROLL technology
adoption features based on vehicle horsepower and body style. All
vehicles in the LD and HDPUV fleets that have below 350hp can adopt all
levels of ROLL technology.
TSD Chapter 3.6.3 shows that all LDVs under 350 hp can adopt ROLL
technology, and as vehicle hp increases, fewer vehicles can adopt the
highest levels of ROLL technology. Note that ROLL30 is not available
for vehicles in the HDPUV fleet not because of an adoption feature, but
because it is not included in the ROLL technology pathway.
TSD Chapter 3.6 shows how effective the different levels of ROLL
technology are at improving vehicle fuel consumption.
DMCs and learning rates for ROLL10 and ROLL20 are the same as prior
analyses,\621\ but are updated to the dollar-year used in this
analysis. In the absence of ROLL30 DMCs from tire manufacturers,
vehicle manufacturers, or studies, to develop the DMC for ROLL30 we
extrapolated the DMCs for ROLL10 and ROLL20. In addition, we used the
same DMCs for the LD and HDPUV analyses. This is because the original
cost of a potentially heaver or sturdier HDPUV tire is already
accounted for in the initial MSRP of a HDPUV in our analysis fleet, and
the DMC represents the added cost of the improved tire technology. In
addition, as discussed above, LD and HDPUV tires are often
interchangeable. We believe that the added cost of each tire technology
accurately represents the price difference that would be experienced by
the different fleets. ROLL technology costs are discussed in detail in
Chapter 3.6 of the TSD, and ROLL technology costs for all vehicle
technology classes can be found in the CAFE Model's Technologies Input
File. We did not receive comments on this approach used for this
analysis and so we finalized the NPRM approach for the final rule.
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\621\ See NRC/NAS Special Report 286, Tires and Passenger
Vehicle Fuel Economy: Informing Consumers, Improving Performance
(2006); Corporate Average Fuel Economy for MY 2011 Passenger Cars
and Light Trucks, Final Regulatory Impact Analysis (March 2009), at
V-137; Joint Technical Support Document: Rulemaking to Establish
Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate
Average Fuel Economy Standards (April 2010), at 3-77; 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 (July 2016), at 5-153
and 154, 5-419. In brief, the estimates for ROLL10 are based on the
incremental $5 value for four tires and a spare tire in the NAS/NRC
Special Report and confidential manufacturer comments that provided
a wide range of cost estimates. The estimates for ROLL20 are based
on incremental interpolated ROLL10 costs for four tires (as NHTSA
and EPA believed that ROLL20 technology would not be used for the
spare tire), and were seen to be generally fairly consistent with
CBI suggestions by tire suppliers.
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5. Simulating Air Conditioning Efficiency and Off-Cycle Technologies
Off-cycle and AC efficiency technologies can provide fuel economy
benefits in real-world vehicle operation, but the traditional 2-cycle
test procedures (i.e., FTP and HFET) used to measure fuel economy
cannot fully capture those benefits.\622\ Off-cycle technologies can
include, but are not limited to, thermal control technologies, high-
efficiency alternators, and high-efficiency exterior lighting. As an
example, manufacturers can claim a benefit for thermal control
technologies like active seat ventilation and solar reflective surface
coating, which help to regulate the temperature within the vehicle's
cabin--making it more comfortable for the occupants and reducing the
use of low-efficiency heating, ventilation, and air-conditioning (HVAC)
systems. AC efficiency technologies are technologies that reduce the
operation of or the loads on the compressor, which pressurizes AC
refrigerant. The less the compressor operates or the more efficiently
it operates, the less load the compressor places on the engine or
battery storage system, resulting in better fuel efficiency. AC
efficiency technologies can include, but are not limited to, blower
motor controls, internal heat exchangers, and improved condensers/
evaporators.
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\622\ Pursuant to 49 U.S.C 32904(c), the Administrator of the
EPA must measure fuel economy for each model and calculate average
fuel economy for a manufacturer under testing and calculation
procedures prescribed by the Administrator. The Administrator is
required to use the same procedures for passenger automobiles used
for model year 1975 (weighted 55 percent urban cycle and 45 percent
highway cycle), or procedures that give comparable results.
---------------------------------------------------------------------------
Vehicle manufacturers have the option to generate credits for off-
cycle technologies and improved AC systems under the EPA's
CO2 program and receive a fuel consumption improvement value
(FCIV) equal to the value of the benefit not captured on the 2-cycle
test under NHTSA's CAFE program. The FCIV is not a ``credit'' in the
NHTSA CAFE program--unlike, for example, the statutory overcompliance
credits prescribed in 49 U.S.C. 32903--but FCIVs increase the reported
fuel economy of a manufacturer's fleet, which is used to determine
compliance. EPA applies FCIVs during determination of a fleet's final
average fuel economy reported to NHTSA.\623\ We only calculate and
apply FCIVs at a manufacturer's fleet level, and the improvement is
based on the volume of the manufacturer's fleet that contains
qualifying technologies.
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\623\ 49 U.S.C. 32904. Under EPCA, the Administrator of the EPA
is responsible for calculating and measuring vehicle fuel economy.
---------------------------------------------------------------------------
We currently do not model AC efficiency and off-cycle technologies
in the CAFE Model like we model other vehicle technologies, for several
reasons. Each time we add a technology option to the CAFE Model's
technology pathways we increase the number of Autonomie simulations by
approximately a hundred thousand. This means that to add just five AC
efficiency and five off-cycle technology options would double our
Autonomie simulations to around two million total simulations. In
addition, 40 CFR 600.512-12 does not require manufacturers to submit
information regarding AC efficiency and off-cycle technologies on
individual vehicle models in their FMY reports to EPA and NHTSA.\624\
In their FMY reports, manufacturers are only required to provide
information about AC efficiency and off-cycle technology application at
the fleet level. However, starting with MY 2023, manufacturers are
required to submit AC efficiency and off-cycle technology data to NHTSA
in the new CAFE Projections Reporting Template for PMY, MMY and
supplementary reports. Once we begin evaluating manufacturer
submissions in the CAFE Projections Reporting Template we may
reconsider how off-cycle and AC efficiency technologies are evaluated
in future analysis. However, developing a robust methodology for
including off-cycle and AC efficiency technologies in the analysis
depends on manufacturers giving us robust data.
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\624\ 40 CFR 600.512-12.
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Instead, the CAFE Model applies predetermined AC efficiency and
off-cycle benefits to each manufacturer's fleet after the CAFE Model
applies traditional technology pathway options. The CAFE Model attempts
to apply pathway technologies and AC efficiency
[[Page 52659]]
and off-cycle technologies in a way that both minimizes cost and allows
the manufacturer to meet a given CAFE standard without over or under
complying. The predetermined benefits that the CAFE Model applies for
AC efficiency and off-cycle technologies are based on EPA's 2022 Trends
Report and CBI compliance data from vehicle manufacturers. We started
with each manufacturer's latest reported values and extrapolated the
values to the regulatory cap for benefits that manufacturers are
allowed to claim, considering each manufacturer's fleet composition
(i.e., passenger cars versus light trucks) and historic AC efficiency
and off-cycle technology use. In general, data shows that manufacturers
apply less off-cycle technology to passenger cars than pickup trucks,
and our input assumptions reflect that. Additional details about how we
determined AC efficiency and off-cycle technology application rates are
discussed Chapter 3.7 of the TSD.
New for this rulemaking cycle, we also developed a methodology for
considering BEV AC efficiency and off-cycle technology application when
estimating the maximum achievable credit values for each manufacturer.
We did this because the analytical ``no-action'' reference baseline
against which we measure the costs and benefits of our standards
includes an appreciable number of BEVs. Because BEVs are not equipped
with a traditional engine or transmission, they cannot benefit from
off-cycle technologies like engine idle start-stop, active transmission
and engine warm-up, and high efficiency alternator technologies.
However, BEVs still benefit from technologies like high efficiency
lighting, solar panels, active aerodynamic improvement technologies,
and thermal control technologies. We calculated the maximum off-cycle
benefit that the model could apply for each manufacturer and each MY
based on off-cycle technologies that could be applied to BEVs and the
percentage of BEVs in each manufacturer's fleet. Note that we do not
include PHEVs in this calculation, because they still use a
conventional ICE and manufacturers are not required to report UF
estimates for individual vehicles, which would have made partial
estimation for off-cycle and AC efficiency benefits at the fleet level
very difficult. However, we do think that this is reasonable because
PHEVs overall constitute less than 2% of the current fleet and the off-
cycle and AC efficiency FCIVs for those vehicles only receive a
fractional benefit.\625\ We discuss additional details and assumptions
for this calculation in Chapter 3.7 of the Final TSD.
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\625\ For example, if UF of a PHEV is esitmated oepration to be
30% ICE and 70% electric than the benefit of Off-cycle and AC
efficiecny would only apply to the ICE portiona only.
---------------------------------------------------------------------------
Note also that we do not model AC efficiency and off-cycle
technology benefits for HDPUVs. We have received petitions for off-
cycle benefits for HDPUVs from manufacturers, but to date, none have
been approved.
Because the CAFE Model applies AC efficiency and off-cycle
technology benefits independent of the technology pathways, we must
account for the costs of those technologies independently as well. We
generated costs for these technologies on a dollars per gram of
CO2 per mile ($ per g/mi) basis, as AC efficiency and off-
cycle technology benefits are applied in the CAFE Model on a gram per
mile basis (as in the regulations). For this final rule, we updated our
AC efficiency and off-cycle technology costs by implementing an updated
calculation methodology and converting the DMCs to 2021 dollars. The AC
efficiency costs are based on data from EPA's 2010 Final Regulatory
Impact Analysis (FRIA) and the 2010 and 2012 Joint NHTSA/EPA
TSDs.626 627 628 We used data from EPA's 2016 Proposed
Determination TSD \629\ to develop the updated off-cycle costs that
were used for the 2022 final rule and now this final rule. Additional
details and assumptions used for AC efficiency and off-cycle costs are
discussed in Chapter 3.7.2 of the Final TSD.
---------------------------------------------------------------------------
\626\ Final Rulemaking to Establish Light-Duty Vehicle
Greenhouse Gas Emission Standards and Corporate Average Fuel Economy
Standards Regulatory Impact Analysis for MYs 2012-2016.
\627\ Final Rulemaking to Establish Light-Duty Vehicle
Greenhouse Gas Emission Standards and Corporate Average Fuel Economy
Standards Joint Technical Support Document for MYs 2012-2016.
\628\ Joint Technical Support Document: Final Rulemaking for
2017-2025 Light-Duty Vehicle Greenhouse Gas Emission Standards and
Corporate Average Fuel Economy Standards.
\629\ Proposed Determination on the Appropriateness of the Model
Year 2022-2025 Light-Duty Vehicle Greenhouse Gas Emissions Standards
under the Midterm Evaluation: Technical Support Document.
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We received limited comments on how we model off-cycle and AC
efficiency FCIVs for this rulemaking analysis.630 631
Mitsubishi commented that the differences between NHTSA and EPA's
proposed rules, ``would force manufacturers to choose between applying
off-cycle technologies that only apply to the CAFE standard or on-cycle
technologies--which are potentially more expensive--that would apply to
both the GHG and CAFE standards. NHTSA should model the effects of the
EPA GHG proposal on the adoption of off-cycle technology to avoid
overestimating the industry's ability to comply, and underestimating
the cost of compliance.'' The Alliance commented that ``for MYs 2023
through 2026 the limit is 15 g/mile on . . . passenger car and trucks
fleets. For all other years it is currently 10 g/mile. NHTSA's modeling
of off-cycle credits frequently exceeds the 10 g/mile cap in MYs 2027
and later. Assuming NHTSA intends manufacturers to follow the caps
defined by EPA, it should correct its modeling so that off-cycle
credits are limited to the capped amount.''
---------------------------------------------------------------------------
\630\ Mitsubishi, Docket No. NHTSA-2023-0022-61637.
\631\ The Alliance, Docket No. NHTSA-2023-0022-60652-A3.
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We agree with Mitsubishi's comment that differences between the
proposed changes to our off-cycle program and EPA's proposed changes to
its program could make it difficult for manufacturers to select which
off-cycle technologies to place on the vehicles in their compliance
fleets. We also agree with the Alliance that, in our modeling for the
NPRM, the off-cycle caps exceeded the limits established in the
regulation. For this final rule, to align with EPA, NHTSA has changed
its proposed limit on the number of off-cycle FCIVs available to
manufacturers in MYs 2027 through 2050 in our modeling. For passenger
cars powered by an internal combustion engine, we changed the off-cycle
FCIV limit from 10.0 g/mi in MYs 2030 through 2050 to 8.0 g/mi in MY
2031, 6.0 g/mi in MY 2032, and 0 g/mi in MYs 2033 through 2050. For
light trucks powered by an internal combustion engine, we changed the
off-cycle FCIV limit from 15.0 g/mi in MYs 2027 through 2050 to 10.0 g/
mi in MYs 2027 through 2030, 8.0 g/mi in MY 2031, 6.0 g/mi in MY 2032,
and 0 g/mi in MYs 2033 through 2050. Starting in MY 2027, BEVs will no
longer be eligible for off-cycle FCIVs in the CAFE program. To
facilitate this, we set the off-cycle FCIV limit for BEVs in both the
passenger car and light truck regulatory categories to 0 g/mi for MYs
2027 through 2050.
The Alliance also commented that NHTSA proposed to eliminate AC
efficiency FCIVs for BEVs beginning in MY 2027 but allowed the credit
caps set prior to MY 2027 to be carried forward through MY 2050. They
stated that if NHTSA finalizes its proposal to eliminate AC efficiency
FCIVs for BEVs, it should adjust its modeling to reflect that.
We agree with the commenter that, in our proposal, we did not model
the elimination of AC efficiency FCIVs for
[[Page 52660]]
BEVs in MYs 2027 through 2050. However, we have corrected this error in
our modeling for the final rule. Starting in MY 2027, BEVs will no
longer be eligible for AC efficiency FCIVs in the CAFE program. To
facilitate this, we set the AC efficiency credit limit for BEVs in both
the passenger car and light truck regulatory categories to 0 g/mi for
MYs 2027 through 2050 in our modeling.
E. Consumer Responses to Manufacturer Compliance Strategies
Previous subsections of Section III have so far discussed how
manufacturers might respond to changes in the standards. While the
technology analysis outlined different compliance strategies available
to manufacturers, the tangible costs and benefits that accrue because
of the standards also depend on how consumers respond to manufacturers
decisions. Some of the benefits and costs resulting from changes to
standards are private benefits that accrue to the buyers of new
vehicles, produced in the MYs under consideration. These benefits and
costs largely flow from changes to vehicle ownership and operating
costs that result from improved fuel economy, and the costs of the
technologies required to achieve those improvements. The remaining
benefits are also derived from how consumers use--or do not use--
vehicles, but because these are experienced by the broader public
rather than borne directly by consumers who purchase and drive new
vehicles, we categorize these as ``external'' benefits even when they
do not meet the formal economic definition of externalities. The next
few subsections outline how the agency's analysis models consumers'
responses to changes in vehicles implemented by manufacturers to
respond to the CAFE and HDPUV standards.
1. Macroeconomic and Consumer Behavior Assumptions
Most economic effects of the new standards this final rule
establishes are influenced by macroeconomic conditions that are outside
the agency's influence. For example, fuel prices are mainly determined
by global petroleum supply and demand, yet they partially determine how
much fuel efficiency-improving technology U.S. manufacturers will apply
to their vehicles, how much more consumers are willing to pay to
purchase models offering higher fuel economy or efficiency, how much
buyers decide to drive them, and the value of each gallon of fuel saved
from higher standards. Constructing these forecasts requires robust
projections of demographic and macroeconomic variables that span the
full timeframe of the analysis, including real GDP, consumer
confidence, U.S. population, and real disposable personal income.
The analysis presented with this final rule employs fuel price
forecasts developed by the U.S. Energy Information Administration
(EIA), an agency within the U.S. DOE which collects, analyzes, and
disseminates independent and impartial energy information to promote
sound policymaking and public understanding of energy and its
interaction with the economy and the environment. EIA uses its National
Energy Modeling System (NEMS) to produce its Annual Energy Outlook
(AEO), which presents forecasts of future fuel prices among many other
economic and energy-related variables, and these are the source of some
inputs to the agency's analysis. NHTSA noted in its proposal that it
was considering updating the inputs used to analyze this final rule to
include projections from the 2023 AEO for its final rule, and the
California Attorney General and others commented that NHTSA should make
this change. The agency's analysis of this final rule uses the 2023 EIA
AEO's forecasts of U.S. population, GDP, disposable personal income,
GDP deflator, fuel prices and electricity prices.\632\
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\632\ States and Cities, Docket No. NHTSA-2023-0022-61904, at
27.
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The analysis also relies on S&P Global's forecasts of total the
number of U.S. households, and the University of Michigan's Consumer
Confidence Index from its annual Global Economic Outlook, which EIA
also uses to develop the projections it reports in its AEO.
While these macroeconomic assumptions are important inputs to the
analysis, they are also uncertain, particularly over the long lifetimes
of the vehicles affected by this final rule. To reflect the effects of
this uncertainty, the agency also uses forecasts of fuel prices from
AEO's Low Oil Price and High Oil Price side cases to analyze the
sensitivity of its analysis to alternative fuel price projections. The
purpose of the sensitivity analyses, discussed in greater detail in
Chapter 9 of the FRIA, is to measure the degree to which important
outcomes can change under different assumptions about fuel prices.
NHTSA similarly uses low and high growth cases from the AEO as bounding
cases for the macroeconomic variables in its analysis.
Some commenters argued that electricity prices charged to users of
public charging stations are somewhat higher on average than the
residential rates in AEO 2023.\633\ NHTSA expects that at-home charging
will continue to be the primary charging method, and thus residential
electricity rates are the most representative electricity prices to use
in our analysis, and the CAFE Model as currently constructed cannot
differentiate between residential and public charging.
---------------------------------------------------------------------------
\633\ NATSO et al., Docket No. NHTSA-2023-0022-61070, at 7-8.
---------------------------------------------------------------------------
The first year included in this analysis is model year 2022, and
data for that year represent actual observations rather than forecasts
to the extent possible. The projected macroeconomic inputs used in this
analysis as well as the forecasts that depend on them--aggregate demand
for driving, new vehicle sales, and used vehicle retirement rates--
reflect a continued return to pre-pandemic growth rates under all
regulatory alternatives. See Chapter 4.1 of the TSD for a more complete
discussion of the macroeconomic forecasts and assumptions used in this
analysis.
Another key assumption that permeates the agency's analysis is how
much consumers are willing to pay for improved fuel economy. Increased
fuel economy offers vehicle owners savings through reduced fuel
expenditures throughout the lifetime of a vehicle. If buyers fully
value the savings in fuel costs that result from driving (and
potentially re-selling) vehicles with higher fuel economy, and
manufacturers supply all improvements in fuel economy that buyers
demand, then market-determined levels of fuel economy would reflect
both the cost of improving it and the private benefits from doing so.
In that case, regulations on fuel economy would only be necessary to
reflect environmental or other benefits not experienced by buyers
themselves. But if consumers instead undervalue future fuel savings or
appear unwilling to purchase cost-minimizing levels of fuel economy for
other reasons, manufacturers would spend too little on fuel-saving
technology (or deploy its energy-saving benefits to improve vehicles'
other attributes). In that case, more stringent fuel economy standards
could lead manufacturers to make improvements in fuel economy that not
only reduce external costs from producing and consuming fuel, but also
improve consumer welfare.
Increased fuel economy offers vehicle owners significant potential
savings. The analysis shows that the value of prospective fuel savings
exceeds manufacturers' technology costs to comply with the preferred
alternatives
[[Page 52661]]
for each regulatory class when discounted at 3 percent. It seems
reasonable to assume that well-informed vehicle shoppers who do not
face time constraints or other barriers to economically rational
decision-making will recognize the full value of fuel savings from
purchasing a model that offers higher fuel economy, since they would be
compensated with an equivalent increase in their disposable income and
the other consumption opportunities it affords them. For commercial
operators, higher fuel efficiency and the reduced fuel costs it
provides would free up additional capital for either higher profits or
additional business ventures. If consumers did value the full amount of
fuel savings, more fuel-efficient vehicles would functionally be less
costly for consumers to own when considering both their purchase prices
and subsequent operating costs, thus making the models that
manufacturers are likely to offer under stricter alternatives more
attractive than those available under the No-Action Alternative.
Recent econometric research is inconclusive. Some studies conclude
that consumers value most or all of the potential savings in fuel costs
from driving higher-mpg vehicles, and others conclude that consumers
significantly undervalue expected fuel savings. More circumstantial
evidence appears to show that consumers do not fully value the expected
lifetime fuel savings from purchasing higher-mpg models. Although the
average fuel economy of new light vehicles reached an all-time high in
MY 2021 of 25.4 mpg,\634\ this is still significantly below the fuel
economy of the fleet's most efficient vehicles that are readily
available to consumers.\635\ Manufacturers have repeatedly informed the
agency that consumers only value between 2 to 3 years of fuel savings
when choosing among competing models to purchase.
---------------------------------------------------------------------------
\634\ See EPA 2022 Automotive Trends Report at 5. Available at
https://www.epa.gov/system/files/documents/2022-12/420r22029.pdf.
(Accessed: Feb. 27, 2024).
\635\ Id. at 9.
---------------------------------------------------------------------------
The potential for buyers to forego improvements in fuel economy
that appear to offer future savings exceeding their initial costs is
one example of what is often termed the ``energy paradox'' or ``energy-
efficiency gap.'' This appearance of a gap between the level of energy
efficiency that would minimize consumers' overall expenses and the
level they choose to purchase is typically based on engineering
calculations that compare the initial cost for providing higher energy
efficiency to the discounted present value of the resulting savings in
future energy costs. There has long been an active debate about whether
such a gap actually exists and why it might arise. Economic theory
predicts, assuming perfect information and absent market failures, that
economically rational individuals will purchase more energy-efficient
products only if the savings in future energy costs they offer promise
to offset their higher initial purchase cost.
However, the field of behavioral economics has documented
situations in which the decision-making of consumers can differ from
what the standard model of rational consumer behavior predicts,
particularly when the choices facing consumers involve uncertain
outcomes.\636\ The future value of purchasing a vehicle that offers
higher fuel economy is inherently uncertain for many reasons, but
particularly because the mileage any particular driver experiences will
differ from that shown on fuel economy labels, potential buyers may be
uncertain how much they will actually drive a new vehicle, future
resale prices may be unpredictable, and future fuel prices are highly
uncertain. Recent research indicates that some consumers exhibit
several departures from purely rational economic behavior, some of
which could account for undervaluation of fuel economy to an extent
roughly consistent with the agency's assumed 30-month payback rule.
These include valuing potential losses more than potential gains of
equal value when faced with an uncertain choice (``loss aversion''),
the tendency to apply discount rates that decrease over time (``present
bias,'' also known as hyperbolic discounting), a preference for choices
with certain rather than uncertain outcomes (``certainty bias''), and
inattention or ``satisficing.'' \637\
---------------------------------------------------------------------------
\636\ E.g. Dellavigna, S. 2009. Psychology and Economics:
Evidence from the Field. Journal of Economic Literature. 47(2): at
315-372.
\637\ Satisficing is when a consumer finds a solution that meets
enough of their requirements instead of searching for a vehicle that
optimizes their utility.
---------------------------------------------------------------------------
There are also a variety of more conventional explanations for why
consumers might not be willing to pay the cost of improvements in fuel
efficiency that deliver net savings, including informational
asymmetries among consumers, dealerships, and manufacturers; market
power; first-mover disadvantages for both consumers and manufacturers;
principal-agent problems that create differences between the incentives
of vehicle purchasers and vehicle drivers; and positional
externalities.\638\
---------------------------------------------------------------------------
\638\ For a discussion of these potential market failures, see
Rothschild, R., Schwartz, J. 2021. Tune Up: Fixing Market Failures
to Cut Fuel Costs and Pollution from Cars and Trucks. IPI. New York
University School of Law.
---------------------------------------------------------------------------
The proposal assumed that potential buyers value only the
undiscounted savings in fuel costs from purchasing a higher-mpg model
they expect to realize over the first 30 months (i.e., 2.5 years) they
own it. NHTSA sought comment on the 30-month payback period assumption
in its proposal. IPI agreed with NHTSA's choice to include the energy
efficiency gap as a potential cause for why consumers may not fully
value fuel savings in their purchase decisions.\639\ IPI also suggested
that NHTSA's discussion of the energy efficiency gap omitted relevant
findings from the literature and expressed undue uncertainty regarding
the existence of the gap. Consumer Reports suggested that NHTSA should
continue to rely on a shorter payback period when modeling how much
fuel savings manufacturers believe consumers will value but use a
longer payback period to represent consumers preferences.
---------------------------------------------------------------------------
\639\ IPI, Docket No. NHTSA-2023-0022-60485, at. 2, 31-32.
---------------------------------------------------------------------------
Valero commented and suggested that NHTSA's 30-month payback
assumption is ``unsupported,'' and that in the proposal's No-Action
case a large number of vehicle models were converted to BEVs with
payback periods longer than 30 months.\640\ The Center for
Environmental Accountability suggested that manufacturers have not
supported the 30-month payback period and have instead stated that
consumers do not display any myopic tendencies. They suggested NHTSA
should switch from a 30-month assumption to a more conservative and
longer payback period and pointed towards the lower net benefits found
in the proposal's 60-month payback period sensitivity case as evidence
that this would lower net benefits from the preferred alternative, in
some cases causing them to become negative.\641\
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\640\ Valero, Docket No. NHTSA-2023-0022-58547, at 10.
\641\ CEA, Docket No. NHTSA-2023-0022-61918, at 18.
---------------------------------------------------------------------------
Although commenters expressed dissatisfaction with NHTSA's
assumption and proposed various alternatives to it, NHTSA ultimately
decided to continue using its methodology from the proposal in its
final rule analysis. In preparation for the final rule, NHTSA updated
its review of research on the energy efficiency gap, concluding that
estimates of how
[[Page 52662]]
consumers value fuel savings reported in recent published literature
continue to show a wide range, and updated its discussion of this topic
in Chapter 2.4 of the FRIA to reflect this finding. While survey data
like the results that Consumer Reports submitted are suggestive of a
broad appeal for fuel savings among consumers, they represent the
stated preferences of respondents for some increased level of fuel
economy and may not accurately describe their actual purchasing
behavior when faced with the range of fuel economy levels in today's
new vehicle market. In fact, previous surveys performed by Consumer
Reports show that a significantly smaller fraction--29%--of those who
are willing to pay for increased fuel economy would be willing to pay
for improvements that required longer than 3 years to repay the higher
costs of purchasing models that offered them, with the average consumer
willing to pay only for fuel economy improvements that recouped their
upfront costs within 2 to 3 years.\642\
---------------------------------------------------------------------------
\642\ See 87 FR 25856. NHTSA notes that Consumer Reports has
seemingly discountiued reporting this statistic in the report
accompanying their comment to the proposal.
---------------------------------------------------------------------------
In response to Valero and the Center for Environmental
accountability, NHTSA disagrees that its methodology is unsupported.
This assumption is based on what manufacturers have told NHTSA they
believe to be consumers' willingness to pay, and this belief is
ultimately what determines the amount of technology that manufacturers
will freely adopt. The Center for Environmental Accountability seems to
misconstrue comments submitted by the Alliance to the revised Circular
A-4 proposal, which explores the possibility that consumers value most
if not all fuel savings at higher personal discount rates. The
Alliance's comment to OMB mirrors the language included in the
proposal's TSD, and as the agency found in the proposal and again for
this final rule, is not incongruent with the 30-month payback
assumption, as explained in Chapter 2.4 of the FRIA. The Alliance's
comment to OMB also cites a recent paper by Leard (2023) which found
higher willingness to pay for fuel economy improvements. NHTSA
considered and referenced this same paper alongside other recent
research in its own evaluation of the literature in the proposal and in
the final rule. Furthermore, the Alliance has traditionally supported a
30-month payback assumption for the central analysis.\643\
---------------------------------------------------------------------------
\643\ See 87 FR 25856.
---------------------------------------------------------------------------
NHTSA did not choose to adopt separate assumptions about consumer
willingness to pay for fuel savings in its sales and technology modules
for the final rule. As profit maximizing firms, manufacturers have a
strong interest in producing vehicles with the attributes that
consumers will most value. Indeed, the EPA trends report finds that in
2022 the 90th percentile real-world fuel economy for the fleet of new
vehicles was over 3 times the median value.\644\ If fuel economy was
valued by consumers at a significantly higher rate than manufacturers
believe that they value it, then presumably these high fuel economy
vehicles would have severe excess demand and inventory for them would
be incredibly scarce, which NHTSA does not observe in the data.\645\
NHTSA would need more compelling evidence about the market failures
that would lead manufacturers to consistently incorrectly assess the
willingness to pay of consumers for fuel savings. NHTSA believes that
without such evidence, the approach from the proposal is a more
reasonable method for modeling this variable.
---------------------------------------------------------------------------
\644\ See EPA Automotive Trends Report, Available at: https://www.epa.gov/automotive-trends/explore-automotive-trends-data#DetailedData, (Accessed: April 12, 2024).
\645\ See Cox Automotive, ``New-vehicle inventory surpasses 2.5
million units, 71 days' supply'', December 14, 2023, available at:
https://www.coxautoinc.com/market-insights/new-vehicle-inventory-november-2023/, (Accessed: April 12, 2024).
---------------------------------------------------------------------------
The 30-month payback period assumption also has important
implications for other results of our regulatory analysis, including
the effect of raising standards on sales and use of new vehicles, the
number and use of older vehicles, safety, and emissions of air
pollutants. Recognizing the consequences of these effects for our
regulatory analysis, NHTSA also includes a handful of sensitivity cases
to examine the impacts of longer and shorter payback periods on its
outcomes. These concepts are explored more thoroughly in Chapter
4.2.1.1 of the TSD and Chapter 2.4 of the FRIA.
It is possible that buyers of vehicles used in commercial or
business enterprises, who presumably act as profit-maximizing entities,
could value tradeoffs between long-term fuel savings and initial
purchase prices differently than the average non-commercial consumer.
However, both commercial and non-commercial consumers face their own
sources of uncertainty or other constraints that may prevent them from
purchasing levels of fuel efficiency that maximize their private net
benefits. Additionally, the CAFE Model is unable to distinguish between
these two types of purchasers. Given this constraint, NHTSA believes
that using the same payback period for the HDPUV fleet as for the LD
fleet continues to make sense. Similar to the light-duty analysis, the
agency is including several sensitivity cases testing alternative
payback assumptions for HDPUVs. One commenter noted that switching to a
60-month payback period in its sensitivity case caused net benefits to
become negative.\646\ NHTSA acknowledged the sensitivity of this result
in the proposal but believes that for the reasons noted above, that a
30 month payback period is still a better supported choice for
modelling HDPUV buyers' payback period within the constraints of the
CAFE Model.
---------------------------------------------------------------------------
\646\ CEA, Docket No. NHTSA-2023-0022-61918, at 18.
---------------------------------------------------------------------------
2. Fleet Composition
The composition of the on-road fleet--and how it changes in
response to establishing higher CAFE and fuel efficiency standards--
determines many of the costs and benefits of the final rule. For
example, how much fuel the LD fleet consumes depends on the number and
efficiency of new vehicles sold, how rapidly older (and less efficient)
vehicles are retired, and how much the vehicles of each age that remain
in use are driven.
Until the 2020 final rule, previous CAFE rulemaking analyses used
static fleet forecasts that were based on a combination of manufacturer
compliance data, public data sources, and proprietary forecasts (or
product plans submitted by manufacturers). When simulating compliance
with regulatory alternatives, those analyses projected identical sales
and retirements for each manufacturer and model under every regulatory
alternative. Exactly the same number of each model was assumed to be
sold in a given MY under both the least stringent alternative
(typically the reference baseline) and the most stringent alternative
considered (intended to represent ``maximum technology'' scenarios in
some cases).
However, a static fleet forecast is unlikely to be representative
of a broad set of regulatory alternatives that feature significant
variation in prices and fuel economy levels for new vehicles. Several
commenters on previous regulatory actions and peer reviewers of the
CAFE Model encouraged NHTSA to consider the potential impact of fuel
efficiency standards on new vehicle prices and sales, the changes to
compliance strategies that those shifts
[[Page 52663]]
could necessitate, and the accompanying impact on vehicle retirement
rates. In particular, the continued growth of the utility vehicle
segment causes changes within some manufacturers' fleets as sales
volumes shift from one region of the footprint curve to another, or as
mass is added to increase the ride height of a vehicle originally
designed on a sedan platform to create a crossover utility vehicle with
the same footprint as the sedan on which it is based.
The analysis accompanying this final rule, like the 2020 and 2022
rulemakings, dynamically simulates changes in the vehicle fleet's size,
composition, and usage as manufacturers and consumers respond to
regulatory alternatives, fuel prices, and macroeconomic conditions. The
analysis of fleet composition is comprised of two forces: how sales of
new vehicles and their integration into the existing fleet change in
response to each regulatory alternative, and the influence of economic
and regulatory factors on retirement of used vehicles from the fleet
(or scrappage). Below are brief descriptions of how the agency models
sales and scrappage; for full explanations, readers should refer to
Chapter 4.2 of the TSD.
A number of commenters argued that future demand for BEVs is likely
to be weaker than assumed by the agency and that the agency's approach
to forecasting sales should account for the possibility of BEV adoption
causing the total number of new vehicles sales to drop. These
commenters theorize that buyers' skepticism towards new technology, the
limited driving range of most current BEVs, lack of charging
infrastructure, uncertainty over battery life and resale value, and
generally higher purchase prices will combine to hamper BEV sales.
Commenters similarly argued that even if consumers do purchase BEVs,
they will drive fewer miles because of limited charging infrastructure.
Within the CAFE Model's logic, there is an implicit assumption that
new vehicle models within the same vehicle class (e.g., passenger cars
v. light trucks) are close substitutes for one another, including
vehicles with differing powertrains.\647\ NHTSA recognizes that
different vehicle attributes may change a vehicle's utility and NHTSA
has implemented several safeguards to prevent the CAFE Model from
adopting technologies for fuel economy that could adversely affect the
utility of vehicles, such as maintaining performance neutrality,
including phase-in caps, and using engineering judgment in defining
technology pathways. The agency further considers that even with these
safeguards in place, there is a potential that vehicles could have been
improved in ways that would have further increased consumer utility in
the absence of standards.
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\647\ The CAFE Model does not assign different preferences
between technologies, and outside the standard setting restrictions,
will apply technology on a cost-effectiveness basis. Similarly,
outside of the sales response to changes in regulatory costs,
consumers are assumed to be indifferent to specific technology
pathways and will demand the same vehicles despite any changes in
technological composition.
---------------------------------------------------------------------------
This is not the first time the agency has received comments
suggesting that other vehicle attributes beyond price and fuel economy
affect vehicle sales and usage. Some commenters to past rules have
suggested that a more detailed representation of the new vehicle market
would enable the agency to incorporate the effect of additional vehicle
attributes on buyers' choices among competing models, reflect
consumers' differing preferences for specific vehicle attributes, and
provide the capability to simulate responses such as strategic pricing
strategies by manufacturers intended to alter the mix of models they
sell and enable them to comply with new CAFE standards. The agency has
previously invested considerable resources in developing such a
discrete choice model of the new automobile market, although those
investments have not yet produced a satisfactory and operational model.
The agency's experience partly reflects the fact that these models
are highly sensitive to their data inputs and estimation procedures,
and even versions that fit well when calibrated to data from a single
period--usually a cross-section of vehicles and shoppers or actual
buyers--often produce unreliable forecasts for future periods, which
the agency's regulatory analyses invariably require. This occurs
because they are often unresponsive to relevant shifts in economic
conditions or consumer preferences, and also because it is difficult to
incorporate factors such as the introduction of new model offerings--
particularly those utilizing advances in technology or vehicle design--
or shifts in manufacturers' pricing strategies into their
representations of choices and forecasts of future sales or market
shares. For these reasons, most vehicle choice models have been better
suited for analysis of the determinants of historical variation in
sales patterns than to forecasting future sales volumes and market
shares of particular categories.
Commenters' predictions of weak BEV demand demonstrate exactly how
formidable these challenges can be. The information commenters used to
arrive at their conclusions is largely informed by characteristics from
some of the earliest BEVs introduced into the market. Many of the
factors that commenters raised as weaknesses such as range, sparse
charging infrastructure, and high prices, have already experienced
significant improvements since those early models were released, and
the agency anticipates that efforts such as funding for charging
stations and tax credits from the BIL and the IRA will only serve to
further enhance these attributes.
Some commenters also offered subjective opinions of BEVs that they
felt the agency should consider in their analysis which NHTSA finds too
subjective to include in its primary regulatory analysis. For example,
one commenter suggested that consumers will reject BEVs because they
are ``less fun'' to drive than ``freedom machines.'' \648\ However,
some consumers find the driving experience of BEVs preferrable to ICE
vehicles because of their quietness, quick response, and ability to be
charged from nearly anywhere with a working outlet. Moreover, as a
larger and more diverse array of vehicle models become available with
BEV powertrains consumers will be more likely to find vehicles in this
class that satisfy their desire for other attributes. Under these
conditions, NHTSA would expect that consumer acceptance for BEVs will
normalize and more closely resemble current consumer demand for other
new vehicles.
---------------------------------------------------------------------------
\648\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
6-7.
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However, commenters are likely to be correct that some demographic
segment of consumers will still have reservations about transitioning
to BEVs, especially in the near-term. NHTSA's standards are
performance-based standards, and the market can dictate which
technologies should be applied to meet the standards. While the agency
believes there is a strong chance that the number of BEVs that will be
voluntarily adopted are underestimated in the agency's CAFE Model
simulations due to how the agency incorporates EPCA's statutory
constraints, the CAFE Model simulations project that BEVs will
represent only a quarter of the fleet by MY 2031--all of which occurs
in the reference baseline. While the agency disagrees with these
commenters, if commenters are correct in their assertions that BEV
demand will be weak, the CAFE Model simulations show that consumers
will continue to
[[Page 52664]]
enjoy a heterogenous marketplace with both BEV and non-BEV options, and
those who are strongly averse to purchasing a BEV are represented
within the nearly 70 percent of the fleet that remains non-electrified
under the reference baseline.
NHTSA also notes that consumer acceptance towards EVs is likely to
continue to normalize as a larger and more diverse array of vehicle
models become available. The likelihood of weak demand raised by
commenters is as likely as the possibility that the agency is
understating the demand for BEVs. In FRIA Chapter 9, NHTSA examined
sensitivity cases in which it alternately imposed its EPCA standard
setting year constraints on BEV adoption in each calendar year of its
analysis, and in which it did not force compliance with other ZEV
regulatory programs and found positive net benefits from the preferred
alternative in each case. For these reasons, NHTSA believes that it is
appropriate to continue to assume modeling BEVs and ICE vehicles as
substitutes is reasonable.
a. Sales
For the purposes of regulatory evaluation, the relevant metric is
the difference in the number of new vehicles sold between the baseline
and each alternative rather than the absolute number of sales under any
alternative. Recognizing this, the agency's analysis of the response of
new vehicle sales to requiring higher fuel economy includes three
components: a forecast of sales under the baseline alternative (based
exclusively on macroeconomic factors), a price elasticity of new
vehicle demand that interacts with estimated price increases under each
alternative to create differences in sales relative to the No-Action
alternative in each year, and a fleet share model that projects
differences in the passenger car and light truck market share under
each alternative. For a more detailed description of these three
components, see Chapter 4.2 of the TSD.
The agency's baseline sales forecast reflects the idea that total
new vehicle sales are primarily driven by conditions in the U.S.
economy that are outside the influence of the automobile industry. Over
time, new vehicle sales have been cyclical--rising when prevailing
economic conditions are positive (periods of growth) and falling during
periods of economic contraction. While changes to vehicles' designs and
prices that occur as consequences of manufacturers' compliance with
earlier standards (and with regulations on vehicles' features other
than fuel economy) exert some influence on the volume of new vehicle
sales, they are far less influential than macroeconomic conditions.
Instead, they produce the marginal differences in sales among
regulatory alternatives that the agency's sales module is designed to
simulate, with increases in new models' prices reducing their sales,
although only modestly.
The first component of the sales response model is the nominal
forecast, which is based on a small set of macroeconomic inputs that
together determine the size of the new vehicle market in each future
year under the baseline alternative. This statistically based model is
intended only to project a baseline forecast of LDV sales; it does not
incorporate the effect of prices on sales and is not intended to be
used for analysis of the response to price changes in the new vehicle
market. NHTSA's projection oscillates from model year to model year at
the beginning of the analysis, before settling to follow a constant
trend in the 2030s. This result seems consistent with the continued
response to the pandemic and to supply chain challenges. NHTSA's
projections of new light-duty vehicle sales during most future years
fall between those reported in AEO 2023, and the 2022 final rule which
were used as sensitivity cases. NHTSA will continue to monitor changes
in macroeconomic conditions and their effects on new vehicle sales, and
to update its baseline forecast as appropriate.
NHTSA received several comments suggesting that EV adoption would
weaken demand for new vehicles, leading to a decrease in the total
amount of vehicles sold.\649\ As noted, NHTSA believes that total
vehicle sales are largely driven by exogenous macroeconomic conditions.
Some commenters also raised the fact that NHTSA does not account for
the effects of higher EV prices in its baseline sales forecast. This is
consistent with the agency's treatment of other technologies that it
projects will be adopted under the No-Action Alternative, either
because they prove to be cost-effective or are compelled by other
government standards. In addition, we note that the value of tax
credits and additional fuel savings are assumed not to affect new
vehicle sales because the forecast of sales generated by the CAFE Model
for that alternative does not incorporate a response to changes in
their effective price.
---------------------------------------------------------------------------
\649\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
11.
---------------------------------------------------------------------------
The baseline HDPUV fleet is modeled differently. NHTSA considered
using a statistical model drawn from the LD specification to project
new HDPUV sales but reasoned that the mix of HDPUV buyers and vehicles
was sufficiently different that an alternative approach was required.
Due to a lack of historical and future data on the changing customer
base in the HDPUV market (e.g., the composition of commercial and
personal users) and uncertainty around vehicle classification at the
margin between the LDV and HDPUV categories, NHTSA chose to rely on an
exogenous forecast of HDPUV sales from the AEO. To align with the
technology used to create the model fleet, NHTSA used compliance data
from multiple model years to estimate aggregate sales for MY 2022, and
then applied year-over-year growth rates implicit in the AEO forecast
to project aggregate sales for subsequent MYs. Since the first year of
the analysis, MY 2022, was constructed using compliance data spanning
nearly a decade, the aggregate number of sales for the simulated fleet
in MY 2022 was lower than the MY 2022 AEO forecast. To align with the
AEO projections, the agency adjusted the growth rate in HDPUV sales
upward by 2 percent for MYs 2023-2025, and 2.5 percent for MYs 2026-
2028. Instead of adjusting the fleet size to match AEO's forecast for
MY2022, the agency elected to phase-in the increase in growth rates
over a span of years to reflect the likelihood that HDPUV production
will continue to face supply constraints resulting from the COVID
pandemic in the near future but should return to normal levels sometime
later in the decade.
TheXXXifferd component of the sales response model captures how
price changes affect the number of vehicles sold; NHTSA estimates the
change in sales from its baseline forecast during future years under
each regulatory alternative by applying an assumed price elasticity of
new vehicle demand to the percent difference in average price between
that regulatory alternative and the baseline. This price change does
not represent an increase or decrease from the previous year, but
rather the percent difference in the average price of new vehicles
between the baseline and each regulatory alternative for that year. In
the baseline, the average new vehicle price is defined as the observed
price in 2022 (the last historical year before the simulation begins)
plus the average regulatory cost associated with the No-Action
Alternative for each future model year.\650\ The central
[[Page 52665]]
analysis in this final rule simulates multiple programs simultaneously
(CAFE fuel economy and HDPUV fuel efficiency final standards, EPA's
2021 GHG standards, ZEV, and the California Framework Agreement), and
the regulatory cost includes both technology costs and civil penalties
paid for non-compliance with CAFE standards in a model year. We also
subtract any IRA tax credits that a vehicle may qualify for from those
regulatory costs to simulate sales.\651\ Because the elasticity assumes
no perceived change in the quality of the product, and the vehicles
produced under different regulatory scenarios have inherently different
operating costs, the price metric must account for this difference. The
price to which the elasticity is applied in this analysis represents
the residual price difference between the baseline and each regulatory
alternative after deducting the value of fuel savings over the first
2.5 years of each model year's lifetime.
---------------------------------------------------------------------------
\650\ The CAFE Model currently operates as if all costs incurred
by the manufacturer as a consequence of meeting regulatory
requirements, whether those are the cost of additional technology
applied to vehicles in order to improve fleetwide fuel economy or
civil penalties paid when fleets fail to achieve their standard, are
``passed through'' to buyers of new vehicles in the form of price
increases.
\651\ For additional details about how we model tax credits, see
Section II.C.5b above.
---------------------------------------------------------------------------
The price elasticity is also specified as an input, and for the
proposal, the agency assumed an elastic response of -0.4--meaning that
a five percent increase in the average price of a new vehicle produces
a two percent decrease in total sales. NHTSA sought comment on this
assumption. Commenters were split over the magnitude of NHTSA's assumed
elasticity value. NRDC suggested that more recent studies support a
lower magnitude but agreed that NHTSA's choice was reasonable.\652\
NADA argued that NHTSA should consider an elasticity of -1 due to the
alternatives available to consumers, like repairing used vehicles,
XXXifferc transport, and ridesharing services.\653\ After reviewing
these and other comments, however, NHTSA does not believe that there is
a strong empirical case for changing its assumption. As commenters
suggestions reveal, estimates of this parameter reported in published
literature vary widely, and NHTSA continues to believe that its choice
is a reasonable one within this range,\654\ but also includes
sensitivity cases that explore higher and lower elasticities. Chapter
4.2.1.2 of the TSD further presents the totality of present evidence
that NHTSA believes supports its decision.
---------------------------------------------------------------------------
\652\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, at 71.
\653\ NADA, Docket No. NHTSA-2023-0022-58200, at 8.
\654\ Jacobsen et al. (2021) report a range of estimates, with a
value of approximately -0.4 representing an upper bound of this
range. We select this point estimate for the central case and
explore alternative values in the sensitivity analysis. Jacobsen, M.
et al. 2021. The Effects of New-Vehicle Price Changes on New- and
Used-Vehicle Markets and Scrappage. EPA-420-R-21-019. Washington,
DC. Available at: https://cfpub.epa.gov/si/si_public_record_Report.cfm?Lab=OTAQ&dirEntryId=352754. (Accessed:
Feb. 13, 2024).
---------------------------------------------------------------------------
NADA also asserted that NHTSA did not release the price data used
to conduct its sales adjustment. MSRP data, price increase data, and
tax credit value data are all available in NHTSA's vehicles report that
accompanied both the proposal and final rule. NADA furthermore
suggested that NHTSA did not correctly implement its sales
adjustment.\655\ NADA submitted a similar comment to the agency's 2024-
2026 proposal and like there, NHTSA determined that NADA did not
correctly determine the change in effective cost or accurately track
the No-Action alternative's average effective cost of vehicles to which
the regulatory alternative's average effective cost is compared.
---------------------------------------------------------------------------
\655\ Id.
---------------------------------------------------------------------------
Commenters also offered differing suggestions about whether and how
NHTSA should incorporate fuel savings into its sales adjustment. NADA
suggested that NHTSA should not include fuel savings in the calculation
of sales effects since fuel savings do not affect the ability of
consumers to obtain financing for new vehicles and argued that
financing would act as a barrier to consumers looking to purchase more
expensive vehicles that offer greater fuel savings. In support of their
argument, NADA cited informal polls conducted by the American Financial
Services Association (AFSA) and Consumer Bankers Association showing
that approximately 85% of their surveyed members would not extend
additional funds to finance more fuel-efficient vehicles.\656\ In
contrast, NRDC and others argued that the agency's estimate of sales
effects was likely to be too large if, as they suggest, consumers value
more than 30 months of fuel savings.\657\
---------------------------------------------------------------------------
\656\ Id. at 8-9.
\657\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, at71.
---------------------------------------------------------------------------
NHTSA continues to believe that its approach is reasonable based on
its analysis of consumer valuation of fuel savings. As noted in the
FRIA Chapter 2.4, there are recent findings in the literature that show
a wide range in the estimates of how consumers value fuel savings.
While fuel savings may not influence the terms of a lease or
financing offer, the lack of preferential financing for more fuel-
efficient vehicles would only prevent consumers for whom the vehicle's
price is nearly prohibitive from purchasing the new vehicle in the
event of a price increase (e.g., only the marginal consumer would be
affected). The lack of preferential financing would not affect
consumers' willingness to pay for fuel economy or the fuel savings
realized by consumers who do purchase more fuel-efficient vehicles. New
vehicle prices have grown significantly from 2020, largely due to
supply constraints during and immediately following the COVID-19
pandemic, as well as continued growth in demand for more expensive SUVs
and trucks, and manufacturers removing some lower priced model lines
from their fleets.\658\ The NY Federal Reserve's Survey of Consumer
Expectations has found that rejection rates for auto loans did increase
in 2023 to around 11 percent of auto loans.\659\ However, the share of
consumers who reported that they are likely to apply for an auto loan
in the next year declined only marginally from 2022. Higher rejection
rates are in line with other forms of credit like credit cards, and
mortgage refinance applications which also increased during this
timeframe as interest rates have also increased significantly since
2022.\660\ At the same time, new vehicle sales grew sharply from 2022
to 2023. Higher prices and interest rates do not appear to be driving
consumers out of the market altogether, but rather leading consumers to
pursue longer term loans, as Experian reported that the average auto
loan term had grown to 68 months in 2024.\661\ The effect of higher new
vehicle prices on access to financing does not appear to be
significantly driving consumers out of the market altogether. Interest
rates are also cyclical and assuming interest rates continue to remain
constant over the next decade is unrealistic. Thus, NHTSA believes that
the rising prices that consumers would face as a result of higher
compliance costs could still be financed by a large
[[Page 52666]]
share of Americans, allowing them to take advantage of fuel savings. As
a result, NHTSA has not chosen to model access to financing as a
constraint on sales that would be affected incrementally by changes to
fuel economy standards. NHTSA believes that consumers are likely to be
willing to pay more in financing costs, if the perceived benefits of
the vehicle outweigh these costs. Indeed, Consumer Reports noted in its
comments, 70 percent of Americans expressed willingness to pay more to
lease or purchase a vehicle if its fuel savings outweighed the added
cost.
---------------------------------------------------------------------------
\658\ Bartlett, Jeff S., ``Cars Are Expensive. Here's Why and
What You Can Do About It.'' Consumer Reports, Sep. 13, 2023,
Available at: https://www.consumerreports.org/cars/buying-a-car/people-spending-more-on-new-cars-but-prices-not-necessarily-rising-a3134608893/ (Accessed: April 17, 2024).
\659\ ``Consumers Expect Further Decline in Credit Applications
and Rise in Rejection Rates'', Federal Reserve Bank of New York,
Press Release, November 20, 2023, Available at: https://www.newyorkfed.org/newsevents/news/research/2023/20231120,
(Accessed: April 5, 2024).
\660\ Id.
\661\ Horymski, Chris, ``Average Auto Loan Debt Grew 5.2% to
$23,792 in 2023'', Experian, Feb. 13, 2024, Available at: https://www.experian.com/blogs/ask-experian/research/auto-loan-debt-study/,
(Accessed: April 5, 2024).
---------------------------------------------------------------------------
The third and final component of the sales model, which only
applies to the light-duty fleet, is the dynamic fleet share module
(DFS). For the 2020 and 2022 rulemakings, NHTSA used a DFS model that
combines two functions from an earlier version of NEMS to estimate the
sales shares of new passenger cars and light trucks based on their
average fuel economy, horsepower, and curb weight, current fuel prices,
and their prior year's market shares and attributes. The two
independently estimated shares are then normalized to ensure that they
sum to one. However, as the agency explained in the 2022 final
rulemaking, that approach had several drawbacks including the model
showing counterintuitive responses to changes in attributes, its
exclusion of a price variable, and the observed tendency of the model
to overestimate the share of total sales accounted for by passenger
automobiles.\662\
---------------------------------------------------------------------------
\662\ 84 FR 25861 (May 2, 2022).
---------------------------------------------------------------------------
For this final rule, NHTSA has revised the inputs used to develop
its DFS. The baseline fleet share projection is derived from the
agency's own compliance data for the 2022 fleet, and the 2023 AEO
projections for subsequent model years. To reconcile differences in the
initial 2022 shares, NHTSA projected the fleet share forward using the
annual changes from 2022 predicted by AEO and applied these to the
agency's own compliance fleet shares for MY 2022.\663\ The fleet is
distributed across two different body-types: ``cars'' and ``light
trucks.'' While there are specific definitions of ``passenger cars''
and ``light trucks'' that determine a vehicle's regulatory class, the
distinction used in this phase of the analysis is simpler: all body
styles that are commonly considered cars, including sedans, coupes,
convertibles, hatchbacks, and station wagons, are defined as ``cars''
for the purpose of determining their fleet share. Everything else--
SUVs, smaller SUVs (crossovers), vans, and pickup trucks--are defined
as ``light trucks,'' even though some models included in this category
may not be treated as such for compliance purposes.
---------------------------------------------------------------------------
\663\ For example if AEO passenger car share grows from 40
percent in one year to 50 percent in the next (25 percent growth),
and our compliance passenger car share in that year is 44 percent
then the predicted share in the next year would be 55 percent (11
points or 25 percent higher).
---------------------------------------------------------------------------
These shares are applied to the total industry sales derived in the
first stage of the total sales model to estimate sales volumes of car
and light truck body styles. Individual model sales are then determined
using the following sequence: (1) individual manufacturer shares of
each body style (either car or light truck) are multiplied by total
industry sales of that body style, and then (2) each vehicle within a
manufacturer's volume of that body-style is assigned the same
percentage share of that manufacturer's sales as in model year 2022.
This implicitly assumes that consumer preferences for particular styles
of vehicles are determined in the aggregate (at the industry level),
but that manufacturers' sales shares of those body styles are
consistent with their MY 2022 sales. Within a given body style, a
manufacturer's sales shares of individual models are also assumed to be
constant over time.
This approach also implicitly assumes that manufacturers are
currently pricing individual vehicle models within market segments in a
way that maximizes their profit. Without more information about each
manufacturer's true cost of production, including its fixed and
variable components, and its target profit margins for its individual
vehicle models, there is no basis to assume that strategic shifts
within a manufacturer's portfolio will occur in response to standards.
In its comments, IPI noted that this could lead to overestimates of
compliance costs, since manufacturers that can more cost-effectively
comply with higher standards will be able to capture a larger market
share through lower vehicle prices.\664\ IPI's assertion may be
correct, however NHTSA believes that within its current model there is
not a clear way to incorporate such an adjustment, since it would
involve evaluating substitution patterns between individual models over
a longtime horizon.
---------------------------------------------------------------------------
\664\ IPI, Docket No. NHTSA-2023-0022-60485, at 21-22.
---------------------------------------------------------------------------
Similar to the second component of the sales module, the DFS then
applies an elasticity to the change in price between each regulatory
alternative and the No-Action Alternative to determine the change in
fleet share from its baseline value. NHTSA uses the net regulatory cost
differential (costs minus fuel savings) in a logistic model to capture
the changes in fleet share between passenger cars and light trucks,
with a relative price coefficient of -0.000042. NHTSA selected this
methodology and price coefficient based on a review of academic
literature.\665\ When the total regulatory costs of meeting new
standards for passenger automobiles minus the value of the resulting
fuel savings exceeds that of light-trucks, the market share of light-
trucks will rise relative to passenger automobiles. For example, a $100
net regulatory cost increase in passenger automobiles relative to light
trucks would produce a ~.1% shift in market share towards light trucks,
assuming the latter initially represent 60% of the fleet.
---------------------------------------------------------------------------
\665\ The agency describes this literature review and the
calibrated logit model in more detail in the accompanying docket
memo ``Calibrated Estimates for Projecting Light-Duty Fleet Share in
the CAFE Model''.
---------------------------------------------------------------------------
The approach for this final rule to modeling changes in fleet share
addresses several key concerns raised by NHTSA in its prior rulemaking.
The model no longer produces counterintuitive effects, and now directly
considers the impacts of changes in price. Because the model applies
fuel savings in determining changes in relative prices between
passenger cars and light trucks, the current approach does not require
it to separately consider the utility of fuel economy when determining
the respective market shares of passenger automobiles and light trucks.
In prior rules, NHTSA has speculated that the rise in light-truck
market share may be attributable to the increased utility that light-
trucks provide their operators, and as the fuel economy difference
between those two categories diminished, light-trucks have become an
even more attractive option. As explained in a docket memo accompanying
this final rule, NHTSA has been unable to create a comprehensive model
that includes vehicle prices, fuel economy, and other attributes that
produces appropriate responses to changes in each of these factors, so
the agency is considering applying an elasticity to the changes in fuel
economy directly to capture this change in utility. Consumer Reports
argued that NHTSA's dynamic fleet share model was too uncertain for use
in the CAFE Model.\666\ While fleet share's response to changes in the
standards is an uncertain factor to project, NHTSA based its model on
peer reviewed results and a well-grounded
[[Page 52667]]
methodology described in a docket memo ``Calibrated Estimates for
Projecting Light-Duty Fleet Share in the CAFE Model.'' Finally, some
commenters expressed confusion about NHTSA's approach to modeling fleet
share. NHTSA explains its approach using a combination of a fixed fleet
share forecast for the No-Action alternative, and a dynamic fleet share
model to adjust fleet share projections in the regulatory alternatives
in TSD Chapter 4.2.
---------------------------------------------------------------------------
\666\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 18.
---------------------------------------------------------------------------
b. Scrappage
New and used vehicles can substitute for each other within broad
limits, and when the prices of substitutes for a good increase or
decrease, demand for that good responds by rising or falling, causing
its equilibrium price and quantity supplied to also rise or fall. Thus,
increasing the quality-adjusted price of new vehicles will increase
demand for used vehicles, and by doing so raise their equilibrium
market value or price and the number that are kept in service. Because
used vehicles are not being produced, their supply can only be
increased by keeping more of those that would otherwise be retired in
use longer, which corresponds to a reduction in their scrappage or
retirement rates.
When new vehicles become more expensive, demand for used vehicles
increases, but meeting the increase in demand requires progressively
more costly maintenance and repairs to keep more of them in working
condition, in turn causing them to become more expensive. Because used
vehicles are more valuable in such circumstances, they are scrapped at
a lower rate, and just as rising new vehicle prices push some
prospective buyers into the used vehicle market, rising prices for used
vehicles force some prospective buyers to acquire even older vehicles
or models with fewer desired attributes. The effect of fuel economy
standards on scrappage is partially dependent on how consumers value
future fuel savings and our assumption that consumers value only the
first 30 months of fuel savings when making a purchasing decision.
Many competing factors influence the decision to scrap a vehicle,
including the cost to maintain and operate it, the household's demand
for VMT, the cost of alternative means of transportation, and the value
that can be attained through reselling or scrapping the vehicle for
parts. In theory, a car owner will decide to scrap a vehicle when the
value of the vehicle minus the cost to maintain or repair the vehicle
is less than its value as scrap material; in other words, when the
owner realizes more value from scrapping the vehicle than from
continuing to drive it or from selling it. Typically, the owner that
scraps the vehicle is not the original vehicle owner.
While scrappage decisions are made at the household level, NHTSA is
unaware of sufficiently detailed household data to sufficiently capture
scrappage at that level. Instead, NHTSA uses aggregate data measures
that capture broader market trends. Additionally, the aggregate results
are consistent with the rest of the CAFE Model, as the model does not
attempt to model how manufacturers will price new vehicles; the model
instead assumes that all regulatory costs to make a particular vehicle
compliant are passed onto the purchaser who buys the vehicle.
The dominant source of vehicles' overall scrappage rates is
``engineering scrappage,'' which is largely determined by the age of a
vehicle and the durability of the specific model year or vintage it
represents. NHTSA uses proprietary vehicle registration data from I/
Polk to estimate vehicle age and durability. Other factors affecting
owners' decisions to retire used vehicles or retain them in service
include fuel economy and new vehicle prices; for historical data on new
vehicle transaction prices, NHTSA uses National Automobile Dealers
Association (NADA) Data.\667\ The data consist of the average
transaction price of all LDVs; since the transaction prices are not
broken-down by body style, the model may miss unique trends within a
particular vehicle body style. The transaction prices are the amount
consumers paid for new vehicles and exclude any trade-in value credited
towards the purchase. This may be particularly relevant for pickup
trucks, which have experienced considerable changes in average price as
luxury and high-end options entered the market over the past decade.
Future versions of the agency's scrappage model may consider
incorporating price series that consider the price trends for cars,
SUVs and vans, and pickups separately. The final source of vehicle
scrappage is from cyclical effects, which the model captures using
forecasts of GDP and fuel prices.
---------------------------------------------------------------------------
\667\ The data can be obtained from NADA. For reference, the
data for MY 2020 may be found at https://www.nada.org/nadadata/.
---------------------------------------------------------------------------
Vehicle scrappage follows a roughly logistic function with age--
that is, when a vintage is young, few vehicles in the cohort are
scrapped; as they age, more and more of the cohort are retired each
year and the annual rate at which vehicles are scrapped reaches a peak.
Scrappage then declines as vehicles enter their later years as fewer
and fewer of the cohort remains on the road. The analysis uses a
logistic function to capture this trend of vehicle scrappage with age.
The data show that the durability of successive MYs generally increases
over time, or put another way, historically newer vehicles last longer
than older vintages. However, this trend is not constant across all
vehicle ages--the instantaneous scrappage rate of vehicles is generally
lower for more recent vintages up to a certain age, but must increase
thereafter so that the final share of vehicles remaining converges to a
similar share remaining for historically observed vintages.\668\
NHTSA's model uses fixed effects to capture potential changes in
durability across MYs, and to ensure that vehicles approaching the end
of their life are scrapped in the analysis, NHTSA applies a decay
function to vehicles after they reach age 30. The macroeconomic
conditions variables discussed above are included in the logistic model
to capture cyclical effects. Finally, the change in new vehicle prices
projected in the model (technology costs minus 30 months of fuel
savings and any tax credits passed through to the consumer) is
included, and changes in this variable are the source of differing
scrappage rates among regulatory alternatives.
---------------------------------------------------------------------------
\668\ Examples of why durability may have changed are new
automakers entering the market or general changes to manufacturing
practices like switching some models from a car chassis to a truck
chassis.
---------------------------------------------------------------------------
For this final rule, NHTSA modeled the retirement of HDPUVs
similarly to pick-up trucks. The amount of data for HDPUVs is
significantly smaller than for the LD fleet and drawing meaningful
conclusions from the small sample size is difficult. Furthermore, the
two regulatory classes share similar vehicle characteristics and are
likely used in similar fashions, so NHTSA believes that these vehicles
will follow similar scrappage schedules. Commercial HDPUVs may endure
harsher conditions during their useful life such as more miles in tough
operating conditions, which may also affect their retirement schedules.
We believe that many light-trucks likely endure the same rigor and are
represented in the light-truck segment of the analysis; however, NHTSA
recognizes that the intensity or proportionality of heavy use in the
HDPUV fleet may exceed that of smaller light trucks.
In addition to the variables included in the scrappage model, NHTSA
considered several other variables that
[[Page 52668]]
likely either directly or indirectly influence scrappage in the real
world, including maintenance and repair costs, the value of scrapped
metal, vehicle characteristics, the quantity of new vehicles purchased,
higher interest rates, and unemployment. These variables were excluded
from the model either because of difficulties in obtaining data to
measure them accurately or other modeling constraints. Their exclusion
from the model is not intended to diminish their importance, but rather
highlights the practical constraints of modeling intricate decisions
like scrappage.
NHTSA sought comment on its scrappage model, as well as on
differences between scrappage for light trucks and HDPUVs. IPI
suggested that NHTSA replace its reduced form model for scrappage with
a structural model, or that it should incorporate the price of used
vehicles and other omitted variables in its model to predict scrappage
and change its estimation strategy to avoid threats to identification
from endogeneity.\669\ NHTSA sees merit in the suggestion of a
structural model for scrappage but believes it should be implemented as
part of a larger change to the CAFE Model in a future rulemaking, since
it would also require NHTSA to incorporate a more complex model of the
used vehicle market. AFPM commented that increases in the new vehicle
prices of ZEVs will also lead to increases in the prices of new ICE
vehicles through cross subsidization.\670\ NHTSA notes that its
scrappage model determines scrappage rates using the average price of
new vehicles in each class. Thus, the manufacturers' pricing strategies
assumed in the CAFE Model will not affect predicted scrappage rates,
since this would only occur where manufacturers raise prices by more or
less than the costs they incur to improve the fuel economy of
individual models.
---------------------------------------------------------------------------
\669\ IPI, Docket No. NHTSA-2023-0022-60485, at 26-27.
\670\ AFPM, Docket No. NHTSA-2023-0022-61911, at 78.
---------------------------------------------------------------------------
MEMA disagreed with NHTSA's approach of modeling HDPUV and light
truck scrappage rates using the same function because of differences
between fleetwide average use and the average use of the typical
vehicle.\671\ MEMA noted that one manufacturer had told them that about
one-quarter of its fleet remained active for more than 200 percent of
the average vehicle's useful life. The maximum age NHTSA assumes for
LDVs (40 years) is more than twice their average or ``expected''
lifetime (about 15 years), so this experience does not appear to be
unusual. Indeed, in NHTSA's No-Action Alternative case, around 21
percent of HDPUVs produced in model years 2030-2035 were still
operating 30 years after entering the fleet. NHTSA thus continues to
believe that it is properly estimating scrappage rates at the fleet
level and using as much available data as possible to estimate its
scrappage rates. For additional details on how NHTSA modeled scrappage,
see Chapter 4.2.2 of the TSD.
---------------------------------------------------------------------------
\671\ MEMA, Docket No. NHTSA-2023-0022-59204, at 8.
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3. Changes in Vehicle Miles Traveled (VMT)
In the CAFE Model, VMT is projected from average use of vehicles
with different ages, the total number in use, and the composition of
the fleet by age, which itself depends on new vehicle sales during each
earlier year and vehicle retirement decisions. These three components--
average vehicle usage, new vehicle sales, and older vehicle scrappage--
jointly determine total VMT projections for each alternative. VMT
directly influences many of the various effects of fuel economy
standards that decision-makers consider in determining what levels of
standards to set. For example, the value of fuel savings is a function
of a vehicle's fuel efficiency, the number of miles it is driven, and
fuel price. Similarly, factors like criteria pollutant emissions,
congestion, and fatalities are direct functions of VMT. For a more
detailed description of how NHTSA models VMT, see Chapter 4.3 of the
TSD.
NHTSA's perspective is that the total demand for VMT should not
vary excessively across alternatives, because basic travel needs for a
typical household are unlikely to be influenced by the stringency of
the standards, so the daily need the services of vehicles to transport
household members will remain the same. That said, it is reasonable to
assume that fleets with differing age distributions and inherent cost
of operation will have slightly different annual VMT (even without
considering VMT associated with rebound miles). Because of the
structure of the CAFE Model, the combined effect of the sales and
scrappage responses can produce small differences in total VMT across
the range of regulatory alternatives if steps are not taken to
constrain VMT. Because VMT is related to many of the costs and benefits
of the program, even small differences in VMT among alternatives can
have meaningful impacts on their incremental net benefits. Furthermore,
since decisions about alternative stringencies look at the incremental
costs and benefits across alternatives, it is more important that the
analysis capture the variation of VMT across alternatives--mainly how
vehicles are distributed across vehicles and how many rebound miles may
occur in any given alternative--than to accurately project total VMT
for any single scenario.
To ensure that travel demand remains consistent across the
different regulatory scenarios for the LD fleet, the agency's analysis
relies on a model of aggregate light-duty VMT developed by the Federal
Highway Administration (FHWA) to produce that agency's official VMT
projections. The annual forecasts of total VMT generated by this model
when used in conjunction with the macroeconomic inputs described
previously model are used to constrain the forecasts of annual VMT
generated internally by the CAFE model to be identical among the
regulatory alternatives during each year in the analysis period.
NHTSA considered removing the constraint on VMT for the final rule
after seeking comment from the public. IPI supported allowing VMT to
vary with fleet size, arguing that if fleet size decreases some
travelers would likely choose to use alternative forms of
transportation like car-sharing, or mass transit rather than relying on
older vehicles.\672\ Ultimately NHTSA did not choose to make this
change in the absence of a tractable model for how this VMT would be
redistributed across alternative forms of transportation (including
additional miles driven by the legacy fleet), and the various costs and
benefits this change would produce. NHTSA will continue to explore
methods for modeling this kind of reallocation for future rulemakings,
including estimating the cross price elasticities of demand for these
alternative forms of travel as IPI recommended.
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\672\ IPI, Docket No. NHTSA-2023-0022-60485, at 24.
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Since vehicles of different ages and body styles have different
costs to own and operate but also provide different benefits, to
account properly for the average value of consumer and societal costs
and benefits associated with vehicle usage under various alternatives,
it is necessary to partition miles by age and body type. NHTSA created
``mileage accumulation schedules'' usiIIHS-Polk odometer data to
construct mileage accumulation schedules as an initial estimate of how
much a vehicle expected to drive at each age throughout its life.\673\
NHTSA
[[Page 52669]]
uses simulated new vehicle sales, annual rates of retirement for used
vehicles, and the mileage accumulation schedules to distribute VMT
across the age distribution of registered vehicles in each calendar
year to preserve the non-rebound VMT constraint.
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\673\ The mileage accumulations schedules are constructed with
content supplied by IHS Markit; Copyright (copyright) R.L. Polk &
Co., 2018. All rights reserved.
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FHWA does not produce an annual VMT forecast for HDPUVs. Without an
annual forecast, NHTSA is unable to constrain VMT for HDPUVs as it does
for the LD fleet. Instead, an estimate of total VMT for HDPUVs is
developed from the estimates of annual use for vehicles of each age
(the ``mileage accumulation'' schedules) and estimates of the number of
HDPUVs of each model year and age that remain in use during each future
calendar year. For the reasons described previously, we believe that
this method produces reasonable estimates of the differences in total
VMT and its distribution among vehicles of different ages that is
implied by changes in fleet composition and size between the reference
baseline and each regulatory alternative.
The fuel economy rebound effect--a specific example of the well-
documented energy efficiency rebound effect for energy-consuming
capital goods--refers to motorists who choose to increase vehicle use
(as measured by VMT) when their fuel economy is improved and, as a
result, the cost per mile (CPM) of driving declines. Establishing more
stringent standards than the reference baseline level will lead to
comparatively higher fuel economy for new cars and light trucks, and
increase fuel efficiency for HDPUVs, thus decreasing the cost of fuel
consumed by driving each mile and increasing the amount of travel in
new vehicles. NHTSA recognizes that the value selected for the rebound
effect influences overall costs and benefits associated with the
regulatory alternatives under consideration as well as the estimates of
lives saved under various regulatory alternatives, and that the rebound
estimate, along with fuel prices, technology costs, and other
analytical inputs, is part of the body of information that agency
decision-makers have considered in determining the appropriate levels
of the standards in this final rule. We also note that larger values
for the rebound effect diminishes the economic and environmental
benefits associated with increased fuel efficiency.
NHTSA conducted a review of the literature related to the fuel
economy rebound effect, which is extensive and covers multiple decades
and geographic regions.\674\ The totality of evidence, without
categorically excluding studies that fail to meet certain criteria and
evaluating individual studies based on their particular strengths,
suggests that a plausible range for the rebound effect is 10-50
percent. This range implies that, for example, a 10 percent reduction
in vehicles' fuel CPM would lead to an increase of 1-5 percent in the
number of miles they are driven annually. The central tendency of this
range appears to be at or slightly above its midpoint, which is 30
percent. Considering only those studies that NHTSA believes are derived
from extremely robust and reliable data, employ identification
strategies that are likely to prove effective at isolating the rebound
effect, and apply rigorous estimation methods, suggests a range of
approximately 10-45 percent, with most of the estimates falling in the
15-30 percent range.
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\674\ See TSD Chapter 4.3.
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However, published estimates of the rebound effect vary widely, as
do the data and methodologies that underpin them. A strong case can
also be made to support lower values. Both economic theory and
empirical evidence suggest that the rebound effect has been declining
over time due to factors such as increasing income (which raises the
value of travelers' time), progressive smaller reductions in fuel costs
in response to continuing increases in fuel economy, and slower growth
in car ownership and the number of license holders. Lower estimates of
the rebound effect estimates are associated with recently published
studies that rely on U.S. data, measure vehicle use using actual
odometer readings, control for the potential endogeneity of fuel
economy, and--critically--estimate the response of vehicle use to
variation in fuel economy itself rather than to fuel cost per distance
driven or fuel prices. According greater weight to these studies
suggests that the rebound effect is more likely to be in the 5-15
percent range. For a more complete discussion of the rebound
literature, see TSD Chapter 4.3.5.
NHTSA selected a rebound effect of 10% for its analysis of both LD
and HDPUV fleets because it was well-supported by the totality of the
evidence.\675\ It is rarely possible to identify whether estimates of
the rebound effect in academic literature apply specifically to
household vehicles, LDVs, or another category, and different nations
classify trucks included in NHTSA's HDPUV category in varying ways, so
NHTSA has assumed the same value for LDVs and HDPUVs.
---------------------------------------------------------------------------
\675\ The HDPUV and light trucks experience similar usage
patterns (hence why we estimate technology effectiveness on 2-cycle
tests similar to CAFE) and without a strong empirical evidence to
suggest an alternative estimate, decided it was appropriate to use
the same estimate.
---------------------------------------------------------------------------
We also examine the sensitivity of estimated impacts to values of
the rebound ranging from 5 percent to 15 percent to account for the
uncertainty surrounding its exact value. NHTSA sought comment on the
above discussion, and whether to consider a different value for the
rebound effect for the final rule analysis for either the LD or HDPUV
analyses. IPI agreed with NHTSA's choice, arguing that it was well
supported in the literature.\676\
---------------------------------------------------------------------------
\676\ IPI, Docket No. NHTSA-2023-0022-60485, at 26-28.
---------------------------------------------------------------------------
AFPM disagreed with NHTSA's approach to modeling mileage for BEVs,
suggesting that some studies find that these vehicles are driven less
than ICE vehicles, and so NHTSA's assumption that any decrease in
operating costs that these vehicles convey to their owner will not
cause them to ultimately be used more overall.\677\ In response, NHTSA
examined the VMT accumulation for BEVs relative to ICE counterparts.
Preliminary results showed lower VMT for these vehicles than ICE
vehicles, but the agency notes that given the lack of more recent data,
this result is driven mostly by early iterations of mainstream BEVs
which had shorter ranges, longer recharging times, and significantly
fewer charging stations. NHTSA believes that these factors likely
played a bigger role in determining their usage than consumers' innate
preferences for EVs vs. ICE vehicles. and concluded that there were
significant limitations that prevented the agency from being able to
project forward these differences with confidence. First, historically,
these vehicles have been limited to only a small subset of
manufacturers, and segments of the overall market. According to NHTSA's
analysis and publicly announced production plans, this is projected to
change in the years prior to NHTSA's standard setting years considered
in this rulemaking.\678\ This will make the owners of these vehicles,
and their use patterns more representative of drivers as a whole.
Second, the quality of the vehicle charging network is projected to
improve significantly as programs like NEVI funded by the Bipartisan
[[Page 52670]]
Infrastructure Law continue to be implemented. This will enable drivers
in areas without at-home charging to make more use of these vehicles
and will enable all drivers to travel longer distances in BEVs. Based
on these factors, NHTSA believes that projecting BEV use into the
future based on differences in their usage in recent years would
introduce more error into the model than maintaining its current
assumption. NHTSA is continuing to study this issue and will monitor
the evidence to determine if changes need to be made in future
rulemakings.
---------------------------------------------------------------------------
\677\ AFPM, Docket No. NHTSA-2023-0022-61911, at 52, 76.
\678\ Miller, Caleb, ``Future Electric Vehicles: The EVs You'll
Soon Be Able to Buy'', Car and Driver, Available at: https://www.caranddriver.com/news/g29994375/future-electric-cars-trucks/.
(Accessed: April 5, 2024).
---------------------------------------------------------------------------
In order to calculate total VMT after allowing for the rebound
effect, the CAFE Model applies the price elasticity of VMT (taken from
the FHWA forecasting model) to the change in fuel cost per mile
resulting from higher fuel economy and uses the result to adjust the
initial estimate of each model's annual use accordingly. The CAFE model
applies this adjustment after the reallocation step described
previously, since that adjustment is intended to ensure that total VMT
is identical among alternatives before considering the contribution of
increased driving due to the rebound effect. Its contribution differs
among regulatory alternatives because those requiring higher fuel
economy lead to larger reductions in the fuel cost of driving each
mile, and thus to larger increases in vehicle use.
The approach used in NHTSA's CAFE model is thus a combination of
``top-down'' (relying on the FHWA forecasting model to determine total
LD VMT in a given calendar year) and ``bottom-up'' (where the
composition and utilization of the on-road fleet determines a base
level of VMT in a calendar year, which is constrained to match the FHWA
model) forecasting. See Chapter 4.3 of the TSD for a complete
accounting of how NHTSA models VMT.
4. Changes to Fuel Consumption
NHTSA uses the fuel economy and age and body-style VMT estimates to
determine changes in fuel consumption. NHTSA divides the expected
vehicle use by the anticipated mpg to calculate the gallons consumed by
each simulated vehicle, and when aggregated, the total fuel consumed in
each alternative.
F. Simulating Emissions Impacts of Regulatory Alternatives
This final rule encourages manufacturers of light-duty vehicles and
HDPUVs to employ various fuel-saving technologies to improve the fuel
efficiency of some or all the models they produce, and in addition to
reducing drivers' outlays for fuel, the resulting reductions in their
fuel consumption will produce additional benefits. These benefits
include reduced vehicle emissions during their operation, as well as
lower ``upstream'' emissions from extracting petroleum, transporting,
and refining it to produce transportation fuels, and finally
transporting, storing, and distributing fuel. This section provides a
detailed discussion of how the agency estimates the resulting
reductions in emissions, particularly for the main standard-setting
options, including the development and evolution of parameters to
estimate emissions of criteria pollutants, GHGs, and air toxics, and
the potential improvements in human health from reducing them.
The rule implements an ``emissions inventory'' methodology for
estimating its emissions impacts. Vehicle emissions inventories are
often described as three-legged stools, comprised of vehicle activity
(i.e., miles traveled, hours operated, or gallons of fuel burned),
population (or number of vehicles), and emission factors.\679\ An
emission factor is a representative rate that attempts to relate the
quantity of a pollutant released to the atmosphere per unit of
activity. For this rulemaking, like past rules, activity levels (both
miles traveled and fuel consumption) are generated by the CAFE Model,
while emission factors have been adapted from models developed and
maintained by other Federal agencies.
---------------------------------------------------------------------------
\679\ There seems to be misalignment in the scientific community
as to the use of the term ``emission factor'' and ``emissions
factor'' to refer to a singular emission factor, and the use of the
term ``emission factors'' and ``emissions factors'' to refer to
multiple emission factors; we endeavor to remain consistent in this
section and implore the community to come to consensus on this
important issue.
---------------------------------------------------------------------------
The following section briefly discusses the methodology the CAFE
Model uses to track vehicle activity and populations, and how we
generate the emission factors that relate vehicle activity to emissions
of criteria pollutants, GHGs, and air toxics. This section also details
how we model the effects of these emissions on human health, especially
in regard to criteria pollutants known to cause poor air quality.
Further description of how the health impacts of criteria pollutant
emissions can vary and how these emission damages have been monetized
and incorporated into the rule can be found in Preamble Section III.G,
Chapter 6.2.2 of the TSD, and the Final EIS accompanying this analysis.
For transportation applications, emissions are generated at several
stages between the initial point of energy feedstock extraction and
delivering fuel to vehicles' fuel tanks or energy storage systems; in
lifecycle analysis, these are often referred to ``upstream'' or ``well-
to-tank'' emissions. In contrast, ``downstream'' or ``tank-to-wheel''
emissions are primarily comprised of those emitted by vehicles' exhaust
systems, but also include other emissions generated during vehicle
refueling, use, and inactivity (called `soaking'), including
hydrofluorocarbons leaked from vehicles' air conditioning (AC) systems.
They also include particulate matter (PM) released into the atmosphere
by brake and tire wear (BTW) as well as evaporation of volatile organic
compounds (VOCs) from fuel pumps and vehicles' fuel storage systems
during refueling and when parked. Cumulative emissions occurring
throughout the fuel supply and use cycle are often called ``well-to-
wheel'' emissions in lifecycle analysis.
The CAFE Model tracks vehicle populations and activity levels to
produce estimates of the effects of different levels of CAFE standards
on emissions and their consequences for human health and the global
climate. Tracking vehicle populations begins with the reference
baseline or analysis fleet, and estimates of each vehicle's fuel type
(e.g., gasoline, diesel, electricity), fuel economy, and number of
units sold in the U.S. As fuel economy-improving technology is added to
vehicles in the reference baseline fleet in MYs subject to proposed new
standards, the CAFE Model estimates annual rates at which new vehicles
are purchased, driven,\680\ and subsequently scrapped. The model uses
estimates of vehicles remaining in service in each year and the amount
those vehicles are driven (i.e., activity levels) to calculate the
quantities of each type of fuel or energy that vehicles in the fleet
consume in each year, including gasoline, diesel, and electricity. The
quantities of travel and fuel consumption estimated for the cross
section of MYs comprising each CYs vehicle fleet represents the
[[Page 52671]]
``activity levels'' the CAFE model uses to calculate emissions. The
model does so by multiplying each activity level by the relevant
emission factor and summing the results of those calculations.
---------------------------------------------------------------------------
\680\ The procedures the CAFE Model uses to estimate annual VMT
for individual car and light truck models produced during each model
year over their lifetimes and to combine these into estimates of
annual fleet-wide travel during each future CY, together with the
sources of its estimates of their survival rates and average use at
each age, are described in detail in TSD Chapters 4.2 and 4.3. The
data and procedures the CAFE Model employs to convert these
estimates of VMT to fuel and energy consumption by individual model,
and to aggregate the results to calculate total consumption and
energy content of each fuel type during future CYs, are also
described in detail in that section.
---------------------------------------------------------------------------
Emission factors measure the mass of each greenhouse gas or
criteria air pollutant emitted per unit of activity, which can be a
vehicle-mile of travel, gallon of fuel consumed, or unit of fuel energy
content. We generate emission factors for the following regulated
criteria pollutants and GHGs: carbon monoxide (CO), VOCs, nitrogen
oxides (NOX), sulfur oxides (SOX), particulate
matter with a diameter of 2.5-micron ([mu]m) or less
(PM2.5); CO2, methane (CH4), and
nitrous oxide (N2O).\681\ In this rulemaking, upstream
emission factors are based on the volume of each type of fuel supplied,
while downstream emission factors are expressed on a distance-traveled
(VMT) basis. Simply stated, the rulemaking's upstream emission
inventory is the product of the per-gallon emission factor and the
corresponding number of gallons of gasoline or diesel, or amount of
electricity,\682\ produced and distributed. Similarly, the downstream
emission inventory is the product of the per-mile emission factor and
the appropriate miles traveled estimate. The only exceptions are that
tailpipe emissions of SOX and CO2 are also
calculated on a per-gallon emission basis using appropriate emission
factors in the CAFE Model. EVs do not produce combustion-related
(tailpipe) emissions,\683\ however, EV upstream electricity emissions
are also accounted for in the CAFE Model inputs. Upstream and
downstream emission factors and subsequent inventories were developed
independently from separate data sources, as discussed in detail below.
---------------------------------------------------------------------------
\681\ There is also HFC leakage from air conditioner systems,
but these emissions are not captured in our analysis.
\682\ The CAFE Model utilizes a single upstream electricity
emission factor for each pollutant for transportation use and does
not differentiate by process, based on GREET emission factors for
electricity as a transportation fuel.
\683\ BEVs do not produce any combustion-based emissions while
PHEVs only produce combustion-based emissions during use of
conventional fuels. Utilization factors typically define how much
real-world operation occurs while using electricity versus
conventional fuels.
---------------------------------------------------------------------------
The analysis for the NPRM used upstream emission factors derived
from GREET 2022, which is a lifecycle emissions model developed by the
U.S. DOE's Argonne National Laboratory (Argonne). GREET 2022 projected
a national mix of fuel sources used for electricity generation (often
simply called the grid mix) for transportation from the latest AEO data
available, in that case from 2022. For the final rule, we updated
upstream petroleum (gasoline and diesel) and electricity emission
factors using R&D GREET 2023.\684\ Petroleum emission factors are based
on R&D GREET 2023 assumptions derived from AEO 2023, while electricity
emission factors are derived from an electricity forecast from the
National Renewable Energy Laboratory's 2022 Standard Scenarios
report.\685\ A detailed description of how we used R&D GREET 2023 to
generate upstream emission factors appears in Chapter 5 of the TSD, as
well as in the Electricity Grid Forecasts docket memo accompanying this
rule.
---------------------------------------------------------------------------
\684\ ANL. 2023. The Greenhouse Gases, Regulated Emissions and
Energy Use in Transportation (GREET) Model. Argonne National
Laboratory. Last revised: December 2023. Available at: http://greet.es.anl.gov/. (Accessed: January 25, 2022).
\685\ Gagnon, P., M. Brown, D. Steinberg, P. Brown, S. Awara, V.
Carag, S. Cohen, W. Cole, J. Ho, S. Inskeep, N. Lee, T. Mai, M.
Mowers, C. Murphy, and B. Sergi. 2022. 2022 Standard Scenarios
Report: A U.S. Electricity Sector Outlook. Revised March 2023.
National Renewable Energy Laboratory. NREL/TP-6A40-84327. Available
at: https://www.nrel.gov/docs/fy23osti/84327.pdf (Accessed: February
29, 2024).
---------------------------------------------------------------------------
Other grid mixes with higher penetrations of renewables are
presented as sensitivity cases in the FRIA and provide some context
about how the results of our analysis would differ using a grid mix
with a higher penetration of renewable energy sources. We sought
comment on these sensitivity cases and which national grid mix forecast
best represents the latest market conditions and policies, such as the
Inflation Reduction Act. We also sought comments on other forecasts to
consider, including EPA's Integrated Planning Model for the post-IRA
2022 reference case for the final rulemaking,\686\ and the methodology
used to generate alternate forecasts. We received no comments on our
grid mix assumptions; however, to be consistent with DOE's projections
in their Petroleum Equivalency Factor (PEF) final rule, we chose to use
the 2022 Standard Scenarios report projections.\687\
---------------------------------------------------------------------------
\686\ See EPA. 2023. Post-IRA 2022 Reference Case. Available at:
https://www.epa.gov/power-sector-modeling/post-ira-2022-reference-case. (Accessed: Feb. 27, 2024).
\687\ 89 FR 22041 (March 29, 2024).
---------------------------------------------------------------------------
As in past CAFE analyses, we used GREET to derive emission factors
for the following four upstream emission processes for gasoline, E85,
and diesel: (1) petroleum extraction, (2) petroleum transportation and
storage, (3) petroleum refining, and (4) fuel transportation, storage,
and distribution (TS&D)). We calculated average emission factors for
each fuel and upstream process during five-year intervals over the
period from 2022 through 2050. We considered feedstocks including
conventional crude oil, oil sands, and shale oils in the gasoline and
diesel emission factor calculations and follow assumptions consistent
with the GREET Model for ethanol blending.
In the proposal, NHTSA assumed that any reduction in fuel
consumption within the United States would lead to an equal increase in
gasoline exports. As a consequence, we projected that domestic fuel
production and the upstream emissions it generates would not change,
although we did acknowledge that emissions from feedstock extraction
and fuel production outside the U.S. were likely to be affected. NHTSA
also noted that this assumption was strong and that it was considering
how to project changes in domestic fuel production that were likely to
result from changes in CAFE and fuel efficiency standards over the long
run. NHTSA sought comments on how it should model the response of
domestic fuel production to changes in fuel consumption. AFPM commented
that the scale of reductions in domestic fuel consumption caused by the
proposed standards was likely to cause changes in domestic fuel
production, and that NHTSA should consider the rule's impact on biofuel
production.\688\
---------------------------------------------------------------------------
\688\ AFPM, Docket No. NHTSA-2023-0022-61911, at 12-14.
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NHTSA re-analyzed projections of domestic fuel production from
McKinsey & Company (2023),\689\ S&P Global (2023),\690\ and the 2023
AEO, and concluded that there is a wide range of estimates about how
domestic refining is likely to change over the coming decades, even
without considering the potential effects of higher standards. Instead
of relying on a single set of projections, NHTSA developed a simplified
parameterized economic model for estimating the response of domestic
fuel production to changes in U.S. fuel consumption. Using this model,
for the final rule NHTSA estimates that 20 percent of the reduction in
fuel consumption will be translated into reductions in domestic fuel
production. See Chapters 5 and 6.2.4 of the TSD for a more detailed
discussion of this process.
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\689\ Ding, Cherry, et. al, Refining in the energy transition
through 2040, McKinsey & Company, October, 2022.
\690\ Smith, Rob, ``Through the looking glass: Fuel retailing in
an era of declining US gasoline demand'' S&P Global, Commodity
Insights, September 27, 2023.
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We estimated non-CO2 downstream emission factors for
gasoline, E85,
[[Page 52672]]
diesel, and CNG \691\ using EPA's Motor Vehicle Emission Simulator
(MOVES4) model, a regulatory highway emissions inventory model
developed by that agency's National Vehicle and Fuel Emissions
Laboratory.\692\ We generated downstream CO2 emission
factors based on the carbon content (i.e., the fraction of each fuel
type's mass that is carbon) and mass density per unit of each specific
type of fuel, under the assumption that each fuel's entire carbon
content is converted to CO2 emissions during combustion. The
CAFE Model calculates CO2 vehicle-based emissions associated
with vehicle operation of the surviving on-road fleet by multiplying
the number of gallons of each specific fuel consumed by the
CO2 emission factor for that type of fuel. More
specifically, the number of gallons of a particular fuel is multiplied
by the carbon content and the mass density per unit of that fuel type,
and then the ratio of CO2 emissions generated per unit of
carbon consumed during the combustion process is applied.\693\ TSD
Chapter 5.3 contains additional detail about how we generated the
downstream emission factors used in this analysis.
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\691\ BEVs and FCEVs do not generate any combustion-related
emissions.
\692\ EPA. 2023. Motor Vehicle Emission Simulator: MOVES4.
Office of Transportation and Air Quality. US Environmental
Protection Agency. Ann Arbor, MI. August 2023. Available at: https://www.epa.gov/moves/latest-version-motor-vehicle-emission-simulator-moves (Accessed: February 2, 2024).
\693\ Chapter 3, Section 4 of the CAFE Model Documentation
provides additional description for calculation of CO2
downstream emissions with the model.
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With stringent LDV standards already in place for PM from vehicle
exhaust, particles from brake and tire wear (BTW) are becoming an
increasingly important component of PM2.5 emission
inventories. To put the magnitude of future BTW PM2.5
emissions in perspective, NHTSA conducted MOVES4 analysis using default
input values. This analysis indicates that BTW PM2.5
represent approximately half of gasoline-fueled passenger car and light
truck PM2.5 emissions (from vehicle exhaust, brake wear, and
tire wear) after 2020.\694\ While previous CAFE rulemakings have not
modeled the indirect impacts to BTW emissions due to changes in fuel
economy and VMT, this rulemaking considers total PM2.5
emissions from the vehicle's exhaust, brakes, and tires.
---------------------------------------------------------------------------
\694\ For additional information, including figures presenting
PM2.5 emissions by regulatory class from these MOVES
runs, please see TSD 5.3.3.4.
---------------------------------------------------------------------------
As with downstream emission factors, we generated BTW emission
factors using EPA's MOVES4 model.\695\ Due to limited BTW measurements,
MOVES does not estimate variation in BTW emission factors by vehicle
MY, fuel type, or powertrain. Instead, MOVES' estimates of emissions
from brake wear are based on weight-based vehicle regulatory classes
and operating behavior derived primarily from vehicle speed and
acceleration. On the other hand, MOVES' estimates of tire wear
emissions depend on the same weight-based regulatory classes, but the
effect of operations on emissions is represented only by vehicle speed.
Unlike the CAFE Model's downstream emission factors, the BTW estimates
were averaged over all vehicle MYs and ages to yield a single grams-
per-mile value by regulatory class.
---------------------------------------------------------------------------
\695\ EPA. 2020. Brake and Tire Wear Emissions from Onroad
Vehicles in MOVES3. Office of Transportation and Air Quality
Assessment and Standards Division, at 1-48. Available at: https://nepis.epa.gov/Exe/ZyPDF.cgi?Dockey=P1010M43.pdf. (Accessed Feb. 27,
2024).
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There is some evidence that average vehicle weight will differ by
fuel type and powertrain, particularly for longer-range EVs, which are
often heavier than a comparable gasoline- or diesel-powered vehicle due
to the weight of the battery.\696\ This weight increase may result in
additional tire wear. While regenerative braking often extends braking
systems' useful life and reduces emissions associated with brake
wear,\697\ the effect of additional mass might be to increase overall
BTW emissions.\698\ Further BTW field studies are needed to better
understand how differences in vehicle fuel and powertrain type are
likely to impact PM2.5 emissions from BTW. The CAFE Model's
BTW inputs can be differentiated by fuel type, but for the time being
are assumed to have equivalent values for gasoline, diesel, and
electricity. Given the degree to which PM2.5 inventories are
expected to shift from vehicle exhaust to BTW in the near future, we
believe that it is better to have some BTW estimates--even if
imperfect--than not to include them at all, as was the case in prior
CAFE rulemakings.
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\696\ Cooley, B. 2022. America's New Weight Problem: Electric
Vehicles. CNET. Published: Jan. 28, 2022. Available at: https://www.cnet.com/roadshow/news/americas-new-weight-problem-electric-cars. (Accessed: Feb. 27, 2024).
\697\ Bondorf, L. et al. 2023. Airborne Brake Wear Emissions
from a Battery Electric Vehicle. Atmosphere. Vol. 14(3): at 488.
Available at: https://doi.org/10.3390/atmos14030488. (Accessed: Feb.
27, 2024).
\698\ EPA.2022 Brake Wear Particle Emission Rates and
Characterization. Office of Transportation and Air Quality.
Available at: https://nepis.epa.gov/Exe/ZyPURL.cgi?Dockey=P1013TSX.txt. (Accessed: Feb. 27, 2024); McTurk,
E. 2022. Do Electric Vehicles Produce More Tyre and Brake Pollution
Than Their Petrol and Diesel Equivalents? RAC. Available at: https://www.rac.co.uk/drive/electric-cars/running/do-electric-vehicles-produce-more-tyre-and-brake-pollution-than-petrol-and/. (Accessed:
Feb. 27, 2024).
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In the NPRM, we sought comment on this updated approach and on
additional data sources that could be used to update the BTW estimates.
Commenters such as the Alliance for Automotive Innovation and
Stellantis recommended that NHTSA refrain from including BTW in the
analysis until SAE or another organization publishes a measurement
methodology and testing procedures for quantifying BTW.\699\ Another
commenter, the AFPM, stated that new ZEVs specifically would cause an
increase in average vehicle weight in the U.S. fleet, and in turn cause
more BTW emissions.\700\
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\699\ The Alliance, Docket No. NHTSA-2023-0022-60652, at 65-66;
Stellantis, Docket No. NHTSA-2023-0022-61107, at 14.
\700\ AFPM, Docket No. NHTSA-2023-0022-61911-A2, at 79.
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With notable reductions in fine particulate matter
(PM2.5) from tailpipe exhaust due to federal regulation,
non-exhaust sources such as brake and tire wear (BTW) constitute a
growing proportion of vehicles' PM2.5 emissions. Although we
agree with commenters that EVs could cause disproportionate brake wear
compared to internal combustion engine vehicles due to additional
battery weight, it is unclear how this might affect LD and HDPUV PM
emissions overall. Without any BEV tailpipe exhaust and some evidence
to suggest reduced EV brake wear from regenerative braking, NHTSA has
not yet been able to determine the relative PM contributions of BEVs,
HEVs, and ICE vehicles. In addition, as discussed in more detail in
Section III.D, it appears that the trend for manufacturers to produce
large EVs may be declining as manufacturers start building smaller and
more affordable EVs. While this final rule continues to project
differences in BTW emissions among regulatory classes, there has not
been enough new BTW data published since the proposal to update non-
exhaust PM emission factors by fuel type. That said, we continue to
believe that including the best available data on BTW estimates is
better than including no estimates.\701\ For further reading on BTW
assumptions, please refer to TSD Chapter 5.3.3.4.
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\701\ Ctr. for Biological Diversity v. Nat'l Highway Traffic
Safety Admin., 538 F.3d 1172 (9th Cir. 2008).
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The CAFE Model computes select health impacts resulting from
population exposure to PM2.5. These health impacts include
causing or aggravating several different respiratory
[[Page 52673]]
conditions and even premature death, each of which is measured by the
number of instances predicted to result from exposure to each ton of
PM2.5-related pollutant emitted (direct PM as well as
NOX and SO2, both precursors to secondarily-
formed PM2.5). The CAFE Model reports total
PM2.5-related health impacts by multiplying the estimated
emissions of each PM2.5-related pollutant (in tons)--
generated using the process described above--by the corresponding
health incidence per ton value. Broadly speaking, a health incidence
per ton value is the morbidity and mortality estimate linked to an
additional ton of an emitted pollutant; these can also be referred to
as benefit per ton values where monetary measures of adverse health
impacts avoided per ton by which emissions are reduced (discussed
further in Section III.G).
The American Lung Association commented on the limits of the health
impacts analysis, stating that it ``does not include monetized health
harms of ozone, ambient oxides of nitrogen or air toxics.'' \702\ We do
not include monetized health harms of air toxics as they have not
typically been monetized, and as such we currently have no basis for
that valuation. The sources used in our health impacts analysis were
chosen to best match the pollution source sector categories
incorporated in the CAFE Model. For some pollution source sectors, only
PM2.5 BPT values exist, and as such we chose to consistently
measure the same damages across all pollution source sectors by
focusing on PM2.5-related damages. We plan to revisit this
portion of analysis when more source sector BPT values become available
in the literature. We do note that these benefits (reduced health harms
of ozone, ambient oxides of nitrogen, air toxics) are potentially
significant despite not being quantified and have added language to our
discussion of benefits of the rule to clarify this.
---------------------------------------------------------------------------
\702\ ALA, Docket No. NHTSA-2023-0022-60091, at 2.
---------------------------------------------------------------------------
The health incidence per ton values in this analysis reflect the
differences in health impacts arising from the five upstream emission
source sectors that we use to generate upstream emissions (petroleum
extraction, petroleum transportation, refineries, fuel transportation,
storage and distribution, and electricity generation). We carefully
examined how each upstream source sector is defined in GREET to
appropriately map the emissions estimates to data on health incidences
from PM2.5-related pollutant emissions. As the health
incidences for the different source sectors are all based on the
emission of one ton of the same pollutants, NOX,
SOX, and directly-emitted PM2.5, differences in
the incidence per ton values arise from differences in the geographic
distribution of each pollutant's emissions, which in turn affects the
number of people exposed to potentially harmful concentrations of each
pollutant.\703\
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\703\ EPA. 2018. Estimating the Benefit per Ton of Reducing
PM2.5 Precursors from 17 Sectors. Office of Air and
Radiation and Office of Air Quality Planning and Standards. Research
Triangle Park, NC, at 1-108. Available at: https://www.epa.gov/sites/production/files/2018-02/documents/sourceapportionmentbpttsd_2018.pdf. (Accessed: Feb. 27, 2024).
---------------------------------------------------------------------------
As in past CAFE analyses, we relied on publicly available
scientific literature and reports from EPA and EPA-affiliated authors,
to estimate per-ton PM2.5-related health damage costs for
each upstream source of emissions. We used several EPA reports to
generate the upstream health incidence per ton values, as different EPA
reports provided more up-to-date estimates for different sectors based
on newer air quality modeling. These EPA reports use a reduced-form
benefit-per-ton (BPT) approach to assess health impacts;
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 to result from avoiding
one ton of directly-emitted PM2.5 or PM2.5
precursor such as NOX or sulfur dioxide (SO2). We
note, however, that the complex, non-linear photochemical processes
that govern ozone formation prevent us from developing reduced-form
ozone, ambient NOX, or other air toxic BPT values, an
important limitation to recognize when using the BPT approach. We
include additional discussion of uncertainties in the BPT approach in
Chapter 5.4.3 of the TSD and also conduct full-scale photochemical
modeling described in Appendix E of the FEIS. Nevertheless, we believe
that the BPT approach provides reasonable estimates of how establishing
more stringent CAFE standards is likely to affect public health, and of
the value of reducing the health consequences of exposure to air
pollution. The BPT methodology and data sources are unchanged from the
2022 CAFE rule, and stakeholders generally agreed that estimates of the
benefits of PM2.5 reductions were improved from prior
analyses based on our emissions-related health impacts methodology
updated for that rule.\704\
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\704\ CBD et al., Docket No. NHTSA-2021-0053-1572, at 5.
---------------------------------------------------------------------------
The reports we relied on for health incidences and BPT estimates
include EPA's 2018 technical support document titled Estimating the
Benefit per Ton of Reducing PM2.5 Precursors from 17 Sectors
(referred to here as the 2018 EPA source apportionment TSD),\705\ a
2018 oil and natural gas sector paper (Fann et al.), which estimates
health impacts for this sector in the year 2025,\706\ and a 2019 paper
(Wolfe et al.) that computes monetized per ton damage costs for several
categories of mobile sources, based on vehicle type and fuel type.\707\
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\705\ EPA. 2018. Estimating the Benefit per Ton of Reducing
PM2.5 Precursors from 17 Sectors. Office of Air and
Radiation and Office of Air Quality Planning and Standards. Research
Triangle Park, NC, at 1-108. Available at: https://19january2017snapshot.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-17-sectors_.html. (Accessed: Feb. 27,
2024).
\706\ Fann, N. et al. 2018. Assessing Human Health
PM2.5 and Ozone Impacts from U.S. Oil and Natural Gas
Sector Emissions in 2025. Environmental Science & Technology. Vol.
52(15): at 8095-8103. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6718951/. (Accessed: Feb. 27, 2024) (hereinafter
Fann et al.).
\707\ Wolfe, P. et al. 2019. Monetized Health Benefits
Attributable to Mobile Source Emission Reductions Across The United
States In 2025. The Science of the Total Environment. Vol. 650(Pt
2): at 2490-98. Available at: https://pubmed.ncbi.nlm.nih.gov/30296769/) (Accessed: Feb. 27, 2024) (hereinafter Wolfe et al.).
Health incidence per ton values corresponding to this paper were
sent by EPA staff.
---------------------------------------------------------------------------
Some CAFE Model upstream emissions components do not correspond to
any single EPA source sector identified in available literature, so we
used a weighted average of different source sectors to generate those
values. Data we used from each paper for each upstream source sector
are discussed in detail in Chapter 5.4 of the TSD.
The CAFE Model follows a similar process for computing health
impacts resulting from downstream emissions. We used the Wolfe et al.
paper to compute monetized damage costs per ton values for several on-
road mobile sources categories based on vehicle type and fuel type.
Wolfe et al. did not report incidences per ton, but that information
was obtained through communications with the study authors. Additional
information about how we generated downstream health estimates is
discussed in Chapter 5.4 of the TSD.
We are aware that EPA recently updated its estimated benefits for
reducing PM2.5 from several sources,\708\
[[Page 52674]]
but those do not include mobile sources (which include the vehicles
subject to CAFE and HDPUV fuel efficiency standards). After discussion
with EPA staff, we retained the PM2.5 incidence per ton
values from the previous CAFE analysis for consistency with the current
mobile source emissions estimates.
---------------------------------------------------------------------------
\708\ EPA. 2023. Estimating the Benefit per Ton of Reducing
Directly-Emitted PM2.5, PM2.5 Precursors and
Ozone Precursors from 21 Sectors. Last updated: Jan. 2023. Available
at: https://www.epa.gov/benmap/estimating-benefit-ton-reducing-directly-emitted-pm25-pm25-precursors-and-ozone-precursors.
(Accessed: Feb. 27, 2024).
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Although we did not discuss doing a quantitative lifecycle analysis
in the preamble of the NRPM, several commenters stressed the importance
of lifecycle analysis, identified suitable methods for conducting such
an analysis, and suggested how the results of such an analysis should
factor into the finding that final standards indeed meet the ``maximum
feasible'' test. The Agency understands the concern that many
commenters have with the potential environmental impacts of vehicle
production, including battery material extraction, manufacturing, and
end-vehicle and battery disposal. With rapidly expanding EV production,
this is a fast-evolving area of research and not one that can be fully
addressed in this rule. While some evidence suggests that emissions
from vehicle production would likely be greater for EVs than
conventionally fueled vehicles, there is also evidence that ICEs
continue to have greater total lifecycle emissions than EVs, depending
on where the EV is charged. NHTSA is not yet prepared to quantify these
relative vehicle cycle impacts. Further investigation across different
fuels and vehicle powertrains is warranted and is currently underway
with Argonne National Laboratory. For a review of relevant research and
additional qualitative discussion on the vehicle cycle and its impacts,
readers should refer to FEIS Chapter 6 (Lifecycle Analysis).
G. Simulating Economic Impacts of Regulatory Alternatives
The following sections describe NHTSA's approach for measuring the
economic costs and benefits that would result from establishing
alternative standards for future MYs. The measures that NHTSA uses are
important considerations, because as OMB Circular A-4 states, benefits
and costs reported in regulatory analyses must be defined and measured
consistently with economic theory and should also reflect how
alternative regulations are anticipated to change the behavior of
producers and consumers from a baseline scenario. For both the fuel
economy and fuel efficiency standards, those include vehicle
manufacturers, buyers of new vehicles, owners of used vehicles, and
suppliers of fuel, all of whose behavior is likely to respond in
complex ways to the level of standards that DOT establishes for future
MYs.
A number of commenters asked the agency to more explicitly account
for effects that occur in the analytical baseline in the agency's
incremental cost-benefit analysis. The agency responds substantively to
those comments below. The typical approach to quantifying the impacts
of regulations implies that these costs and benefits should be excluded
from the incremental cost-benefit analysis given these effects are
assumed to occur absent the regulation. Thus, quantifying them in the
incremental cost-benefit analysis would obscure the effects the agency
needs to isolate in order to analyze the effects of the regulation. For
these reasons, the agency does not explicitly account for some of the
costs and benefits requested by commenters that accrue in the baseline,
and instead focuses on the costs and benefits that may change in
response to the final rule.
It is also important to report the benefits and costs of this final
rule in a format that conveys useful information about how those
impacts are generated, while also distinguishing the economic
consequences for private businesses and households from the action's
effects on the remainder of the U.S. economy. A reporting format will
accomplish this objective to the extent that it clarifies who incurs
the benefits and costs of the final rule, while also showing how the
economy-wide or ``social'' benefits and costs of the final rule are
composed of direct effects on vehicle producers, buyers, and users,
plus the indirect or ``external'' benefits and costs it creates for the
general public. NHTSA does not attempt to distinguish benefits and
costs into co-benefits or secondary costs.
Table III-7 lists the economic benefits and costs analyzed in
conjunction with this final rule, and where to find explanations for
what we measure, why we include it, how we estimate it, and the
estimated value for that specific line item. The table also shows how
the different elements of the analysis piece together to inform NHTSA's
estimates of private and external costs and benefits.\709\
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\709\ Changes in tax revenues are a transfer and not an economic
externality as traditionally defined, but we group these with
external costs instead of private costs since that loss in revenue
affects society as a whole as opposed to impacting only consumers or
manufacturers.
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BILLING CODE 4910-59-P
[[Page 52675]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.062
BILLING CODE 4910-59-C
NHTSA reports the costs and benefits of standards for LDVs and
HDPUVs separately. While the effects are largely the same for the two
fleets, our fuel economy and fuel efficiency programs are separate, and
NHTSA makes independent determinations of the maximum feasible
standards for each fleet.
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\710\ This table presents the societal costs and benefits. Costs
and benefits that affect only the consumer analysis, such as sales
taxes, insurance costs, and reallocated VMT, are purposely ommited
from this table. See Chapters 8.2.3 and 8.3.3 of the FRIA for
consumer-specific costs and benefits.
\711\ Since taxes are transfers from consumers to governments, a
portion of the Savings in Retail Fuel Costs includes taxes avoided.
The Loss in Fuel Tax Revenue is completely offset within the Savings
in Retail Fuel Costs.
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A standard function of regulatory analysis is to evaluate tradeoffs
between impacts that occur at different points in time. Many Federal
regulations involve costly upfront investments that generate future
benefits in the form of reductions in health, safety, or environmental
damages. To evaluate these tradeoffs, the analysis must account for the
social rate of time preference--the broadly observed social preference
for benefits that occur sooner versus those that
[[Page 52676]]
occur further in the future. This is accomplished by discounting
impacts that occur further in the future more than impacts that occur
sooner.
OMB Circular A-4 (2003) affirms the appropriateness of accounting
for the social rate of time preference in regulatory analyses and
recommends discount rates of 3 and 7 percent for doing so. The
recommended 3 percent discount rate was chosen to represent the
``consumption rate of interest'' approach, which discounts future costs
and benefits to their present values using the rate at which consumers
appear to make tradeoffs between current consumption and equal
consumption opportunities when deferred to the future. OMB Circular A-4
(2003) reports an inflation-adjusted or ``real'' rate of return on 10-
year Treasury notes of 3.1 percent between 1973 and its 2003
publication date and interprets this as approximating the rate at which
society is indifferent between consumption today and in the future. The
7 percent rate reflects the opportunity cost of capital approach to
discounting, where the discount rate approximates the forgone return on
private investment if the regulation were to divert resources from
capital formation. Fuel savings and most other benefits from tightening
standards will be experienced directly by owners of vehicles that offer
higher fuel economy and thus affect their future consumption
opportunities, while benefits or costs that are experienced more widely
throughout the economy will also primarily affect future consumption.
Circular A-4 indicates that discounting at the consumption rate of
interest is the ``analytically preferred method'' when effects are
presented in consumption-equivalent units. Thus, applying OMB's
guidance to NHTSA's final rule suggests the 3 percent rate is the
appropriate rate. However, NHTSA reports both the 3 and 7 percent rates
for transparency and completeness. It should be noted that the OMB
finalized a revision to Circular A-4 on November 9th, 2023. The 2023
Circular A-4 is effective for NPRMs, IFRs, and direct final rules
submitted to OMB on or after March 1st, 2024, while the effective date
for other final rules is January 1st, 2025. Thus, while NHTSA has
considered the guidance in the revised circular for the final rule, as
this final rule will be published before January 1, 2025, the agency
will continue to use the discount rates in the prior version for the
primary analysis.\712\ The agency performed a sensitivity case using a
2 percent social discount rate consisted with the guidance of revised
Circular A-4 (2023) which can be found in Chapter 9 of the RIA.
---------------------------------------------------------------------------
\712\ That is, NHTSA did not incorporate the new recommendations
about social discounting at 2 percent into the primary analysis but
has included a senstivity with this discount rate.
---------------------------------------------------------------------------
A key exception to Circular A-4's guidance on social discounting
implicates the case of discounting climate related impacts. Because
some GHGs emitted today can remain in the atmosphere for hundreds of
years, burning fossil fuels today not only imposes uncompensated costs
on others around the globe today, but also imposes uncompensated
damages on future generations. As OMB Circular A-4 (2003) indicates
``special ethical considerations arise when comparing benefits and
costs across generations'' and that future citizens impacted by a
regulatory choice ``cannot take part in making them, and today's
society must act with some consideration of their interest.'' \713\
Thus, NHTSA has elected to discount these effects from the year of
abatement back to the present value with lower rates. For further
discussion, see Section III.G.2.b(1) of the Preamble.
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\713\ The Executive Office of the President's Office of
Management and Budget. 2003. Circular No. A-4. Regulatory Analysis.
Available at: https://www.whitehouse.gov/wp-content/uploades/legacy_drupal_files/omb/circulars/A4/a-4.pdf.
---------------------------------------------------------------------------
For a complete discussion of the methodology employed and the
results, see Chapter 6 of the TSD and Chapter 8 of the RIA,
respectively. The safety implications of the final rule--including the
monetary impacts--are reserved for Section III.H.
1. Private Costs and Benefits
a. Costs to Consumers
(1) Technology Costs
The technology applied to meet the standards would increase the
cost to produce new cars, light trucks and HDPUVs. Within this
analysis, manufacturers are assumed to transfer these costs to the
consumers who purchase vehicles offering higher fuel economy. While
NHTSA recognizes that some manufacturers may defray their regulatory
costs for meeting increased fuel economy and fuel efficiency standards
through more complex pricing strategies or by accepting lower profits,
NHTSA lacks sufficient insight into manufacturers' pricing strategies
to confidently model alternative approaches. Thus, we simply assume
that manufacturers raise the prices of models whose fuel economy they
elect to improve sufficiently to recover their increased costs for
doing so. The technology costs are incurred by manufacturers and then
passed onto consumers. While we include the effects of IRA tax credits
in our modeling of consumer responses to the standards, the effect of
the tax credit is an economic transfer where the costs to one party are
exactly offset by benefits to another and have no impact on the net
benefits of the final rule. While NHTSA could include IRA tax credits
as a reduction in the technology costs for manufacturers and purchasing
prices in our cost-benefit accounting, tax credits are a transfer from
the government to private parties, and as such have no net effect on
the benefits or costs of the final rule. As such, the line item
included in the tables summarizing the cost of technology throughout
this final rule should be considered pre-tax unless otherwise noted.
NHTSA did not receive comments pertaining to this topic. See
Section III.C.6 of this preamble and Chapter 2.5 of the TSD for more
details.
(2) Consumer Sales Surplus
Consumers who forgo purchasing a new vehicle because of the
increase in the price of new vehicles' prices caused by more stringent
standards will experience a decrease in welfare. The collective welfare
loss to these ``potential'' new vehicle buyers is measured by their
foregone consumer surplus.
Consumer surplus is a fundamental economic concept and represents
the net value (or net benefit) a good or service provides to consumers.
It is measured as the difference between what a consumer is willing to
pay for a good or service and its market price. OMB Circular A-4
explicitly identifies consumer surplus as a benefit that should be
accounted for in cost-benefit analysis. For instance, OMB Circular A-4
states the ``net reduction in total surplus (consumer plus producer) is
a real cost to society,'' and elsewhere recommends that consumer
surplus values be monetized ``when they are significant.''
Accounting for the limited portion of lifetime fuel savings that
the average new vehicle buyer values, and holding all else equal,
higher average prices should depress new vehicle sales and by extension
reduce consumer surplus. The inclusion of the effects on the final rule
on consumer surplus is not only consistent with OMB guidance, but with
other parts of this regulatory analysis. For instance, we calculate the
increase in consumer surplus associated with increased driving that
results from the lower CPM of driving under more stringent regulatory
alternatives, as discussed in Section II.G.1.b(3). The
[[Page 52677]]
surpluses associated with sales and additional mobility are
inextricably linked, as they capture the direct costs and benefits to
purchasers of new vehicles. The sales surplus captures the welfare loss
to consumers when they forego purchasing new vehicles because of higher
prices, while the consumer surplus associated with additional driving
measures the benefit of the increased mobility it provides.
NHTSA estimates the loss of sales surplus based on the change in
quantity of vehicles projected to be sold, after adjusting for quality
improvements attributable to higher fuel economy or fuel efficiency.
Several commenters mention that there may be distributional impacts in
terms of the less financially privileged not being able to afford
higher priced vehicles.\714\ Consumers in rural areas are specifically
mentioned as being adversely affected due to the higher cost of
charging an EV in rural areas which would presumably act as a barrier
to purchasing one of these vehicles.\715\
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\714\ AFPM, Docket No. NHTSA-2023-0022-61911, at 61-63; Heritage
Foundation-Mario Loyola, Docket No. NHTSA-2023-0022-61952, at 7-13;
American Consumer Institute, Docket No. NHTSA-2023-0022-50765, at 2.
\715\ NCB, Docket No. NHTSA-2023-0022-53876, at 2.
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While these commenters allege that consumers will be harmed by the
inability to purchase new vehicles because of the regulations,
commenters did not provide any evidence to support that these effects
will, or even likely to occur, and seemingly ignored how these
communities may value and benefit from reduced operational costs.
Regardless, NHTSA accounted for the possibility that there would be a
change in welfare associated with decreased sales, but NHTSA did not
receive any comments suggesting that its estimation of the consumer
sales surplus was inadequate. Nor did any commenters suggest changes to
the agency's methodology. As such, the agency has elected to use the
same methodology as the proposal and feels that the lost welfare from
the consumer sales surplus adequately captures the effects raised by
commenters. Furthermore, the IRA provides a 30% tax credit for
qualified alternative fuel vehicle refueling property supporting the
installation of charging infrastructure in low-income and non-urban
areas.\716\ For additional information about consumer sales surplus,
see Chapter 6.1.2 of the TSD.
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\716\ Internal Revenue Service, Alternative Fuel Vehicle
Refueling Property Credit, May 9, 2024. https://www.irs.gov/credits-deductions/alternative-fuel-vehicle-refueling-property-credit.
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(3) Ancillary Costs of Higher Vehicle Prices
Some costs of purchasing and owning a new or used vehicle increase
in proportion to its purchase price or market value. At the time of
purchase, the price of the vehicle combined with the state-specific tax
rate determine the sales tax paid. Throughout the lifetime of the
vehicle, the residual value of the vehicle--which is determined by its
initial purchase price, age, and accumulated usage--determine value-
related registration fees and insurance premiums. The analysis assumes
that the transaction price is a fixed share of the MSRP, which allows
calculation of these factors as shares of MSRP. As the standards
influence the price of vehicles, these ancillary costs will also
increase. For a detailed explanation of how NHTSA estimates these
costs, see Chapter 6.1.1 of the TSD. These costs are included in the
consumer per-vehicle cost-benefit analysis but not in the societal
cost-benefit analysis, because they are assumed to be transfers from
consumers to government agencies or to reflect actuarially ``fair''
insurance premiums. NHTSA did not receive any comments about its
treatment of state sales taxes or changes to insurance premiums.
In previous proposals and final rules, NHTSA also included the
costs of financing vehicle purchases as an ancillary cost to consumers.
However, as we noted in the 2022 final rule, the availability of
vehicle financing offers a benefit to consumers by spreading out the
costs of additional fuel economy technology over time. Thus, we no
longer include financing as a cost to consumers. Lucid supports NHTSA's
decision to exclude financing as an ancillary cost,\717\ recognizing
the benefit of smoothing out consumer costs over time. NADA and MEMA
have mentioned that the majority of prospective new vehicle purchasers
finance their transactions, and expressed concern that higher interest
rates may be impacting the affordability of financing and that consumer
credit may not reach to meet changing vehicle prices.\718\ NHTSA has
determined it is appropriate to continue to exclude these costs from
the analysis for the following reasons. With regards to the impact of
increasing vehicle purchasing costs, as previously mentioned, NHTSA
calculates and includes the change in consumer surplus of those who
choose not to purchase a new vehicle as a result of higher vehicle
prices due to the stringency of the standards. In addition, explicitly
modeling future long-run changes in financing costs due to changes in
interest rates is a technically uncertain undertaking and outside the
current bounds of this work. Forecasting long-run interest rates
includes making a variety of assumptions on the structure that these
rates might take, such as a random walk or equivalence to a forward
rate and are subject to numerous exogenous macroeconomic factors and
uncertainties. Commenters did not identify any long-run projections
that supported their conclusions pertaining to this aspect of consumer
costs. Therefore, it is inaccurate to assume that high interest rates
at one point in time will lead to higher rates (and therefore higher
costs) for all consumers during the regulatory period.
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\717\ Lucid, Docket No. NHTSA-2023-0022-50594, at 6.
\718\ NADA, Docket No. NHTSA-2023-0022-58200, at 6-8; MEMA,
Docket No. NHTSA-2023-0022-59204, at 9.
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b. Benefits to Consumers
(1) Fuel Savings
The primary benefit to consumers of increasing standards is the
savings in future fuel costs that accrue to buyers and subsequent
owners of new vehicles. The value of fuel savings is calculated by
multiplying avoided fuel consumption by retail fuel prices. Each
vehicle of a given body style is assumed to be driven the same amount
in each year of its lifetime as all those of comparable age and body
style. The ratio of that cohort's annual VMT to its fuel efficiency
produces an estimate of its yearly fuel consumption. The difference
between fuel consumption in the No-Action Alternative, and in each
regulatory alternative, represents the gallons (or energy content) of
fuel saved.
Under this assumption, our estimates of fuel consumption from
increasing the fuel economy or fuel efficiency of each individual model
depend only on how much its fuel economy or efficiency is increased,
and do not reflect whether its actual use differs from other models of
the same body type. Neither do our estimates of fuel consumption
account for variation in how much vehicles of the same body type and
age are driven each year, which appears to be significant (see Chapter
4.3.1.2 of the TSD). Consumers save money on fuel expenditures at the
average retail fuel price (fuel price assumptions are discussed in
detail in Chapter 4.1.2 of the TSD), which includes all taxes and
represents an average across octane blends. For gasoline and diesel,
the included taxes reflect both the Federal tax and a calculated
average state fuel tax. Expenditures on alternative fuels
[[Page 52678]]
(E85 and electricity, primarily) are also included in the calculation
of fuel expenditures, on which fuel savings are based. However, since
alternative fuel technology is not applied to meet the standards, the
majority of the costs associated with operating alternative fuels net
to zero between the reference baseline and action alternatives. And
while the included taxes net out of the social benefit cost analysis
(as they are a transfer), consumers value each gallon saved at retail
fuel prices including any additional fees or taxes they pay.
Chapter 6.1.3 of the TSD provides additional details. As explained
in the TSD, NHTSA considers the possibility that several of the
assumptions made about vehicle use could lead to misstating the
benefits of fuel savings. NHTSA notes that these assumptions are
necessary to model fuel savings and likely have minimal impact to the
accuracy of the analysis for this final rule.
A variety of commenters discussed how fuel savings are valued by
both manufacturers and consumers, with some discussion on whether NHTSA
has under or over-valued the benefits to consumers, the appropriate use
of discount rate to apply to fuel savings, and the source of data used
to project fuel savings. AEI commented that the ``inclusion of fuel
savings is illegitimate as a component of the `benefits' the [rule]
because the economic benefits of fuel savings are captured fully by
consumers of the fuel.'' \719\ Conversely, IPI commented that including
all fuel savings as a benefit of the rule is appropriate because the
rule is addressing the energy efficiency gap.
---------------------------------------------------------------------------
\719\ AEI, Docket No. NHTSA-2023-0022-54786, at 9-10.
---------------------------------------------------------------------------
NHTSA agrees with IPI that fuel savings should be accounted for
within the rule. AEI's comment is premised on the theory that the
vehicle market is efficient and therefore consumers must not value fuel
savings, and NHTSA's regulations may only address market failures that
address externalities. As discussed in III.E, the energy efficiency gap
has long been recognized as a market failure that may impact the
ability of consumers to realize fuel savings. Furthermore, the notion
that only externalities may be counted as a benefit is unfounded.
Executive Order 12866 and Circular A-4 (2003) have long required
agencies to attempt to quantify as many benefits as possible and costs
that can reasonably be ascertained and quantified into its analysis,
and courts have frowned upon federal agencies ignoring known and
quantifiable costs or benefits.\720\ In addition, how the agency
quantifies and monetizes this benefit is not the same as how the agency
considers it in making its determination of what standards are
``maximum feasible,'' and thus the extent to which the agency should
consider consumer fuel savings is addressed in that discussion.
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\720\ E.O. 12866 at 2, 7; Circular A4 (2003) under D. Analytical
Approaches (Benefit-Cost Analysis); CBD v. NHTA, 538 F.3d 1172, 1198
(9th Cir. 2008).
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NADA commented that ``NHTSA correctly noted that EV owners will
save refueling time by charging at home, but the analysis is flawed in
that it does not account for the impact of increased electricity
consumption and related expenditures for those who charge at home.''
\721\ NADA is incorrect in their assertion that NHTSA ignores the cost
of recharging at home. The fuel savings benefit is derived from all
fuel sources consumed--including electricity--and is intended to
capture the total cost spent to refuel and recharge in each
alternative.
---------------------------------------------------------------------------
\721\ NADA, Docket No. NHTSA-2023-0022-58200-A1, at 10.
---------------------------------------------------------------------------
Some commenters argued that NHTSA's use of static electricity price
projections could lead to an underestimate of the operating costs of
BEVs. The Heritage Foundation and NADA both argued that increased
demand for electricity induced by BEV adoption--which happens solely in
the analytical reference baseline through the end of the standard
setting years--would necessitate increased investment in the
electricity grid and thus lead to higher electricity prices to recover
the costs of these investments.\722\ The Heritage Foundation also
suggested that NHTSA's cost-benefit analysis should account for
incremental infrastructure costs required to comply with changes to the
standards. NHTSA believes it is properly accounting for the impact of
greater penetration of BEVs on electricity prices in its regulatory
analysis. The electricity prices used in its analysis are taken from
AEO 2023 and represent EIA's best projection of how greater
electrification in the automobile market will impact electricity
prices. Due to its statutory constraints under EPCA, NHTSA does not
permit production of BEVs as a compliance strategy during model years
for which it is establishing standards, which restricts BEV adoption to
the reference baseline. NHTSA believes that the modest difference in
projected adoption of BEVs between even the most stringent alternatives
and the reference baseline is unlikely to necessitate significant
additional investment in the electricity generation and distribution
grid beyond the No-Action Alternative, and thus will have only minimal
effects on electricity prices. NHTSA's choice not to account for
potential effects of its standards on future electricity prices in its
analysis of costs and benefits is consistent with the agency's
treatment of fuel prices, which is discussed in TSD Chapter 6.2.4.
---------------------------------------------------------------------------
\722\ Heritage Foundation-Mario Loyola, Docket No. NHTSA-2023-
0022-61952, at 13-14; NADA, Docket No. NHTSA-2023-0022-58200, at 9-
11.
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Some commenters, such as the Center for Environmental
Accountability, argued that electricity prices charged to users of
public charging stations are somewhat higher on average than those of
at home charging.\723\ NHTSA believes that at-home charging will
continue to be the primary charging method during the time period
relevant to this rulemaking, and thus residential electricity rates are
the most representative electricity prices to use in our analysis.
However, the agency notes again that electrification is restricted to
the reference baseline through the standard setting years, accounting
for the price difference between at-home versus public charging would
result in minor differences between the alternatives that would have
little impact in changing the net benefits of any of the scenarios.
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\723\ NATSO et al, Docket No. NHTSA-2023-0022-61070, at 7-8.
---------------------------------------------------------------------------
Finally, there is some discussion among the commenters related to
the appropriate choice of discount rate to apply to fuel savings.
Valero suggests that valuing medium-term impacts at a discount rate of
3 percent is inappropriate due to the consumer's investment
perspective,\724\ while CEA suggests that a 7 percent discount rate is
a more appropriate choice over 3 percent due to differences paid for
risk-free versus risky assets.\725\ Consumer Reports supports the use
of a 3 percent discount rate in its calculation of discounted net
savings for the consumer in the medium term.\726\
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\724\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment F, at
1.
\725\ CEA, Docket No. NHTSA-2023-0022-61918, at 23.
\726\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 11.
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NHTSA believes that is appropriate to account for fuel savings with
the same 3 and 7 percent discount rates used for other costs and
benefits, such as technology costs which are also accrued by consumers.
This approach, as explained in Circular A-4,\727\ captures
[[Page 52679]]
discount rates that reflect different preferences, and looking at both
rates provides policy makers a more well-informed perspective. It is
important to note that NHTSA's assumptions regarding how consumers
value fuel savings at the time of new vehicle purchase do not apply to
how NHTSA values fuel savings in its benefit-cost analysis. The prior
discussion of the energy efficiency gap and consumer's undervaluation
of lifetime fuel savings relates to the consumer decision in the
vehicle market. NHTSA's societal-level benefit cost analysis includes
the full lifetime fuel savings discounted using both 3 and 7 percent
discount rates. Additional detail can be found in Chapter 4.2.1.1 of
the TSD.
---------------------------------------------------------------------------
\727\ The Executive Office of the Present's Office of Management
and Budget. 2003. Circular No. A-4. Regulatory Analysis. Available
at: https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf (Accessed: Mar. 11,
2024).
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(2) Refueling Benefit
Increasing standards affects the amount of time drivers spend
refueling their vehicles in several ways. First, higher standards
increase the fuel efficiency of ICE vehicles produced in the future,
which may increase their driving range and decrease the number of
refueling events. Conversely, to the extent that more stringent
standards increase the purchase price of new vehicles, they may reduce
sales of new vehicles and scrappage of existing ones, causing more VMT
to be driven by older and less efficient vehicles that require more
refueling events for the same amount of driving. Finally, as the number
of EVs in the fleet increases, some of the time spent previously
refueling ICE vehicles at the pump will be replaced with recharging EVs
at public charging stations. While the analysis does not allow
electrification to be chosen as a compliance pathway with the standards
for LDVs, it is still important to model recharging since excluding
these costs would underestimate scenarios with additional BEVs, such as
our sensitivity cases that examine lower battery costs.
NHTSA estimates these savings by calculating the amount of
refueling time avoided--including the time it takes to locate a retail
outlet, refuel one's vehicle, and pay--and multiplying it by DOT's
estimated value of travel time. For a full description of the
methodology, refer to Chapter 6.1.4 of the TSD. An alternative
hypothesis NHTSA is still considering, but not adopting for the final
rule, is whether manufacturers maintain vehicle range by lowering tank
size as vehicle efficiency improves without, therefore, reducing
refueling time.
NADA commented that the agency's assumption that EVs will only be
recharged when necessary mid-trip is inaccurate. NADA noted that ``many
BEV owners and operators, particularly those living in urban areas,
will not charge at home.'' \728\ As noted earlier, NHTSA believes that
most charging will occur in the home during time period relevant to
this rulemaking, but NHTSA agrees with NADA that not all EV owners may
have access to home charging.\729\ Commenters did not come forward with
any specifics of how to best quantify these costs, but we may revisit
these assumptions in the future when more information is available. For
the time being, the agency believes that, even if it were to quantify
the recharging time of EVs for non-mid-trip refuelings, the differences
between the alternatives would be negligible given most of those costs
would be incurred in the reference baseline.
---------------------------------------------------------------------------
\728\ NADA, Docket No. NHTSA-2023-0022-58200, at 10.
\729\ NHTSA disagrees with NADA's ancillary comment that public
infrastructure is insufficient, and the agency believes it is more
than likely that some of who do not have access to home charging may
have charging options while at work or some other routine public
destination.
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(3) Additional Mobility
Any increase in travel demand provides benefits that reflect the
value to drivers and passengers of the added--or more desirable--social
and economic opportunities that additional travel makes available.
Under each of the alternatives considered in this analysis, the fuel
CPM of driving would decrease as a consequence of higher fuel economy
and efficiency levels, thus increasing the number of miles that buyers
of new cars, light trucks, and HDPUVs would drive as a consequence of
the well-documented fuel economy rebound effect.
In theory, the decision by drivers and their passengers to make
more frequent or longer trips when the cost of driving declines
demonstrates that the benefits that they gain by doing so must exceed
the costs they incur. At a minimum, one would expect the benefits of
additional travel to equal the cost of the fuel consumed to travel
additional miles (or they would not have occurred). Because the cost of
that additional fuel is reflected in the simulated fuel expenditures,
it is also necessary to account for the benefits associated with those
extra miles traveled. But those benefits arguably should also offset
the economic value of their (and their passengers') travel time, other
vehicle operating costs, and the economic cost of safety risks due to
the increase in exposure to crash risks that occurs with additional
travel. The amount by which the benefit of this additional travel
exceeds its economic costs measures the net benefits drivers and their
passengers experience, usually referred to as increased consumer
surplus.
Chapter 6.1.5 of the TSD explains NHTSA's methodology for
calculating benefits from additional mobility. The benefit of
additional mobility over and above its costs is measured by the change
in consumers' surplus, which NHTSA approximates as one-half of the
change in fuel CPM times the increase in VMT due to the rebound effect.
In the proposal, NHTSA sought comments on the assumptions and methods
used to calculate benefits derived from additional mobility. NHTSA
received several comments addressing its approach for estimating the
total change in VMT caused by changes in the standard. These comments
are addressed in section III.E. However, NHTSA did not receive comments
on its methodology for quantifying the related change in benefits from
additional mobility.
When the size of the vehicle stock decreases in the LD alternative
cases, VMT and fuel cost per-vehicle increase. Because maintaining
constant non-rebound VMT assumes consumers are willing to pay the full
cost of the reallocated vehicle miles, we offset the increase in fuel
cost per-vehicle in the LD analysis by adding the product of the
reallocated VMT and fuel CPM to the mobility value in the per-vehicle
consumer analysis. Because we do not estimate other changes in cost
per-vehicle that could result from the reallocated miles (e.g.,
maintenance, depreciation, etc.) we do not estimate the portion of the
transferred mobility benefits that would correspond to con'umers'
willingness to pay for those costs. We do not estimate the con'umers'
surplus associated with the reallocated miles because there is no
change in total non-rebound VMT and thus no change in con'umers'
surplus per consumer. Chapter 6.1.5 of the TSD explains NHTSA's
methodology for calculating the benefits of reallocated miles. NHTSA
sought comment in the proposal on its methodology for calculating the
benefits from reallocated milage. NHTSA did not receive comments on
this subject.
2. External Costs and Benefits
a. Costs
(1) Congestion and Noise
Increased vehicle use associated with the rebound effect also
contributes to increased traffic congestion and
[[Page 52680]]
highway noise. Although drivers obviously experience these impacts,
they do not fully value their effects on other travelers or bystanders,
just as they do not fully value the emissions impacts of their own
driving. Congestion and noise costs are thus ``external'' to the
vehicle owners whose decisions about how much, where, and when to drive
more in response to changes in fuel economy result in these costs.
Thus, unlike changes in the costs incurred by drivers for fuel
consumption or safety risks they willingly assume, changes in
congestion and noise costs are not offset by corresponding changes in
the travel benefits drivers experience.
Congestion costs are limited to road users; however, since road
users include a significant fraction of the U.S. population, changes in
congestion costs are treated as part of the final rule's external
economic impact on society as a whole instead of as a cost to private
parties. Costs resulting from road and highway noise are even more
widely dispersed because they are borne partly by surrounding
residents, pedestrians, and other non-road users, and for this reason
are also considered as costs that drivers impose on society as a whole.
To estimate the economic costs associated with changes in
congestion and noise caused by increases in driving, NHTSA updated the
estimates of per-mile congestion and noise costs from increased
automobile and light truck use reported in FHWA's 1997 Highway Cost
Allocation Study to account for changes in travel activity and economic
conditions since they were originally developed, as well as to express
them in 2021 dollars for consistency with other economic inputs. NHTSA
employed a similar approach for the 2022 final rule. Because HDPUVs and
light-trucks share similar operating characteristics, we also apply the
noise and congestion cost estimates for light-trucks to HDPUVs.
See Chapter 6.2 of the TSD for details on how NHTSA calculated
estimates of the economic costs associated with changes in congestion
and noise caused by differences in miles driven. In the NPRM, NHTSA
requested comment on the congestion costs employed in this analysis,
but we did not receive any and have not changed our methodology from
the NPRM for this final rule.
(2) Fuel Tax Revenue
As mentioned in Section II.G.1.b(1), a portion of the fuel savings
experienced by consumers includes avoided fuel taxes. While fuel taxes
are a transfer and do not affect net benefits, NHTSA reports an
estimate of changes in fuel tax revenues together with external costs
to show the potential impact on state and local government finances.
Several commenters, including AHUA and the ID, MT, ND, SD, and WY
DOTs, discussed changes in the Highway Trust Fund as a result of
changes in gasoline tax payment by consumers, and mentioned concern in
funding for highway infrastructure, a potential cost that was not
incorporated or accounted for in the rule.\730\ NHTSA reports changes
in gasoline tax payments by consumers and in revenues to government
agencies, and NHTSA's proposal explained in multiple places that
gasoline taxes are considered a transfer--a cost to governments and an
identical benefit to consumers that has already been accounted for in
reported fuel savings--and have no impact on net benefits. As indicated
above, any reduction in tax revenue received by governments that levy
taxes on fuel is exactly offset by lower fuel tax payments by
consumers, so from an economy-wide standpoint reductions in gasoline
tax revenues are simply a transfer of economic resources and has no
effect on net benefits. The agency notes that a decrease in revenue
from gasoline taxes does not preclude alternative methods from funding
the Highway Trust Fund or infrastructure,\731\ and--while fiscal policy
is outside the scope of this rulemaking--some of the more hyperbolic
claims that less fuel taxes ``would threaten the viability of the
national highway system'' are clearly unfounded.\732\
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\730\ AHUA, Docket No. NHTSA-2023-0022-58180, at 8; State DOTs,
Docket No. NHTSA-2023-0022-60034, at 1-2.
\731\ See, e.g., the Bipartisan Infrasctructure Bill, Public Law
117-58, which provided over 300 billion to repair and rebuild
American roads.
\732\ Heritage Foundation-Mario Loyola, Docket No. NHTSA-2023-
0022-61952, at 14.
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b. Benefits
(1) Climate Benefits
The combustion of petroleum-based fuels to power cars, light
trucks, and HDPUVs generates emissions of various GHGs, which
contribute to changes in the global climate and resulting economic
damages. Extracting and transporting crude petroleum, refining it to
produce transportation fuels, and distributing fuel all generate
additional emissions of GHGs and criteria air pollutants beyond those
from vehicle usage. By reducing the volume of petroleum-based fuel
produced and consumed, adopting standards will thus mitigate global
climate-related economic damages caused by accumulation of GHGs in the
atmosphere, as well as the more immediate and localized health damages
caused by exposure to criteria pollutants. Because they fall broadly on
the U.S. population, and on the global population as a whole in the
case of climate damages, reducing GHG emissions and criteria pollutants
represents an external benefit from requiring higher fuel economy.
(a) Social Cost of Greenhouse Gases Estimates
NHTSA estimated the climate benefits of CO2,
CH4, and N2O emission reductions expected from
the proposed rule using the Interagency Working Group's (IWG) interim
SC-GHG estimates presented in the Technical Support Document: SC of
Carbon (SCC), Methane, and Nitrous Oxide Interim Estimates (``February
2021 TSD''). NHTSA noted in the proposal that E.O. 13990 envisioned
these estimates to act as a temporary surrogate until the IWG could
finalize new estimates. NHTSA acknowledged in the proposal that our
understanding of the SC-GHG is still evolving and that the agency would
continue to track developments in the economic and environmental
sciences literature regarding the SC of GHG emissions, including
research from Federal sources like the EPA.\733\ NHTSA sought comment
on whether an alternative approach should be considered for the final
rule.
---------------------------------------------------------------------------
\733\ See 88 FR 56251.
---------------------------------------------------------------------------
On December 22, 2023, the IWG issued a memorandum to Federal
agencies, directing them to ``use their professional judgment to
determine which estimates of the SC-GHG reflect the best available
evidence, are most appropriate for particular analytical contexts, and
best facilitate sound decision-making.'' \734\ NHTSA determined that
the 2023 EPA SC-GHG Report for the final rule would be the most
appropriate estimate to use for the final rule.\735\
---------------------------------------------------------------------------
\734\ Memorandum from the Interagency Working Group on Social
Cost of Greenhouse Gases, avalaible at https://www.whitehouse.gov/wp-content/uploads/2023/12/IWG-Memo-12.22.23.pdf (Accessed: April
16, 2024).
\735\ US Environmental Protection Agency (EPA) ``Report on the
Social Cost of Greenhouse Gases Estimates Incorporating Recent
Scientific Advances'' (2023) (Final 2023 Report), https://www.epa.gov/system/files/documents/2023-12/epa_scghg_2023_report_final.pdf (Accessed: March 22, 2024)
(hereinafter 2023 EPA SC-GHG Report).
---------------------------------------------------------------------------
NHTSA arrived at this decision for several reasons. E.O. 13990
tasked the IWG with devising long-term recommendations to update the
methodologies used in calculating these SC-GHG values, based on ``the
best available economics and science,'' and incorporating principles of
``climate
[[Page 52681]]
risk, environmental justice (EJ), and intergenerational equity.'' The
E.O. also instructed the IWG to take into account recommendations from
the National Academies of the Sciences (NAS) committee convened on this
topic, which were published in 2017.\736\ Specifically, the National
Academies recommended that the SC-GHG should be developed using a
modular approach, where the separate modules address socioeconomic
projections, climate science, economic damages, and discounting. The
NAS recommended that the methodology underlying each of the four
modules be updated by drawing on the latest research and expertise from
the scientific disciplines relevant to that module.
---------------------------------------------------------------------------
\736\ National Academies of Sciences, Engineering, and Medicine.
2017. Valuing Climate Damages: Updating Estimation of the Social
Cost of Carbon Dioxide. Washington, DC: The National Academies
Press. https://nap.nationalacademies.org/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-of (Accessed:
April 1, 2024).
---------------------------------------------------------------------------
The 2023 EPA SC-GHG Report presents a set of SC-GHG estimates that
incorporate the National Academies' near-term recommendations and
reflects the most recent scientific evidence. The report was also
subject to notice, comment, and a peer review to ensure the quality and
integrity of the information it contains and concluded after NHTSA
issued its proposal.\737\ NHTSA specifically cited EPA's proposed
estimates and final external peer review report on EPA's draft
methodology in its proposal, as that was the most up-to-date version of
the estimates available as of the date of NHTSA's proposal.\738\
Several commenters, including IPI, suggested that the agency use EPA's
estimates for the final rule. This is further discussed in subsection
(c) of this Climate Benefits section. NHTSA believes the 2023 EPA SC-
GHG Report represent the most comprehensive SC-GHGs estimates currently
available. For additional details, see Chapter 6.2.1.1 of the TSD.
---------------------------------------------------------------------------
\737\ See page 3 of the 2023 EPA SC-GHG Report for more details
on public notice and comment and peer review.
\738\ 88 FR 56251 (Aug. 17, 2023).
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(b) Discount Rates for Climate Related Benefits
As mentioned earlier, NHTSA discounts non-climate benefits and
costs at both the 3% consumption rate of interest and the 7%
opportunity cost of capital, in accordance with OMB Circular A-4
(2003). Because GHGs degrade slowly and accumulate in the earth's
atmosphere, the economic damages they cause increase as their
atmospheric concentration accumulates. Some GHGs emitted today will
remain in the atmosphere for hundreds of years, therefore, burning
fossil fuels today not only imposes uncompensated costs on others
around the globe today, but also imposes uncompensated damages on
future generations. As OMB Circular A-4 (2003) indicates ``special
ethical considerations arise when comparing benefits and costs across
generations'' and that future citizens impacted by a regulatory choice
``cannot take part in making them, and today's society must act with
some consideration of their interest.'' \739\ As the EPA's report
states, ``GHG emissions are stock pollutants, in which damages result
from the accumulation of the pollutants in the atmosphere over time.
Because GHGs are long-lived, subsequent damages resulting from
emissions today occur over many decades or centuries, depending on the
specific GHG under consideration.'' \740\ NHTSA's analysis is
consistent with the notion that intergenerational considerations merit
lower discount rates for rules such as CAFE with impacts over very
long-time horizons.
---------------------------------------------------------------------------
\739\ The Executive Office of the Present's Office of Management
and Budget. 2003. Circular No. A-4. Regulatory Analysis. Available
at: https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf (Accessed: Mar. 11,
2024).
\740\ 2023 EPA SC-GHG Report, pp 62.
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In addition to the ethical considerations, Circular A-4 also
identifies uncertainty in long-run interest rates as another reason why
it is appropriate to use lower rates to discount intergenerational
impacts, since recognizing such uncertainty causes the appropriate
discount rate to decline gradually over progressively longer time
horizons. The social costs of distant future climate damages--and by
implication, the value of reducing them by lowering emissions of GHGs--
are highly sensitive to the discount rate, and the present value of
reducing future climate damages grows at an increasing rate as the
discount rate used in the analysis declines. This ``non-linearity''
means that even if uncertainty about the exact value of the long-run
interest rate is equally distributed between values above and below the
3 percent consumption rate of interest, the probability-weighted (or
``expected'') present value of a unit reduction in climate damages will
be higher than the value calculated using a 3 percent discount rate.
The effect of such uncertainty about the correct discount rate can be
accounted for by using a lower ``certainty-equivalent'' rate to
discount distant future damages, defined as the rate that produces the
same expected present value of a reduction in future damages implied by
the distribution of possible discount rates around what is believed to
be the most likely single value.
For the final rule, NHTSA is updating its discount rates from the
IWG recommendations to those found in the 2023 EPA SC-GHG Report. The
EPA's discounting module represents an advancement on the work of the
IWG in a number of ways. First, the EPA report uses the most recent
evidence on the ``consumption rate of interest''--the rate at which we
observe consumers trading off consumption today for consumption in the
future. Second, EPA's approach incorporates the uncertainty in the
consumption rate of interest over time, specifically by using
certainty-equivalent discount factors which effectively reduce the
discount rate progressively over time, so that the rate applied to
near-term avoided climate damages will be higher than the rate applied
to damages anticipated to occur further in the future. Finally, EPA's
revised approach incorporates risk aversion into its modeling
framework,, to recognize that individuals are likely to be willing to
pay some additional amount to avoid the risk that the actual damages
they experience might exceed their expected level. This gives some
consideration to the insurance against low-probability but high-
consequence climate damages that interventions to reduce GHG emissions
offer. For more detail, see the 2023 EPA SC-GHG Report.\741\
---------------------------------------------------------------------------
\741\ See page 64 of 2023 EPA SC-GHG Report.
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When the streams of future emissions reductions being evaluated are
moderate in terms of time (30 years or less), the EPA suggests to
discount from the year of abatement to the present using the
corresponding constant near-term target rates of 2.5, 2.0, and 1.5
percent. NHTSA's calendar year analysis includes fewer than 30 years of
impacts (the calendar year captures emissions of all model years on the
road through 2050), and the majority of emissions impacts considered in
NHTSA's model year analysis also occur within this timeframe (vehicles
in the MY analysis will continue to be on the road past 30 years,
however nearly 97 percent of their lifetime emissions will occur during
the first 30 years of their service given vehicles are used less as
they age on average and a majority of the vehicles in this cohort will
have already been retired completely from the fleet). Thus, NHTSA has
elected to discount from the year of abatement back to the present
value using constant near-term discount rates of 2.5, 2.0, and 1.5
[[Page 52682]]
percent.\742\ The 2023 EPA SC-GHG Report's central SC-GHG values are
based on a 2 percent discount rate,\743\ and for this reason NHTSA
presents SC-GHG estimates discounted at 2 percent alongside its primary
estimates of other costs and benefits wherever NHTSA does not report
the full range of SC-GHG estimates. The agency's analysis showing our
primary non-GHG impacts at 3 and 7 percent alongside climate-related
benefits may be found in Chapter 8 of the FRIA for both LDVs and
HDPUVs. We believe that this approach provides policymakers with a
range of costs and benefits associated with the rule using a reasonable
range of discounting approaches and associated climate benefits.
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\742\ As discussed in EPA SC-GHG Report, the error associated
with using a constant discount rate rather than a certainty-
equivalent rate path to calculate the present value of a future
stream of monetized climate benefits is small for analyses with
moderate time frames (e.g., 30 years or less). The EPA SC-GHG Report
also provides an illustration of the amount of climate benefits from
reductions in future emissions that would be underestimated by using
a constant discount rate relative to the more complicated certainty-
equivalent rate path.
\743\ See page 101 of the EPA SC-GHG Report (2023).
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NHTSA has also produced sensitivity analyses that vary the SC-GHG
values, as discussed in Section V.D, by applying the IWG SC-GHG values.
NHTSA finds net benefits in each of these sensitivity cases.
Accordingly, NHTSA's conclusion that this rule produces net benefits is
consistent across a range of SC-GHG choices.
For additional details, see Chapter 6.2.1.2 of the TSD. For costs
and benefits calculated with SC-GHG values and corresponding discount
rates of 2.5 percent and 1.5 percent, see Chapter 9 of tIRIA.
(c) Comments and Responses About the Agency's Choice of Social Cost of
Carbon Estimates and Discount Rates
A wide variety of comments were received regarding the social cost
of greenhouse gas emissions. The first category pertains to the
inclusion of a SC-GHG value in cost-benefit analysis calculations.
Commenters including IPI and NRDC proposed that NHTSA incorporates the
updated SC-GHG values from EPA's 2023 Report in the final rule.\744\
Valero and others suggested that climate benefits, should they be
included, be valued at discount rate above 7 percent.\745\ Other
commenters mention that research in this area is ongoing, has a degree
of uncertainty regarding the choice of underlying parameters and
models, and that a global consensus value has not been reached,
therefore such a measure should not be incorporated in the
analysis.\746\
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\744\ CBD, EDF, IPI, Montana Environmental Information Center,
Joint NGOs, Sierra Club, and Western Environmental Law Center,
Docket No. NHTSA-2023-0022-60439, at 1.
\745\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, at
9.
\746\ MEMA, Docket No. NHTSA-2023-0022-59204, Attachment A1, at
9; West Virginia Attorney General's Office, Docket No. NHTSA-2023-
0022-63056, at 10; Landmark, Docket No. NHTSA-2023-0022-48725, at 3-
5.
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Estimating the social costs of future climate damages caused by
emissions of greenhouse gases, or SC-GHG, requires analysts to make a
number of projections that necessarily involve uncertainty--for
example, about the likely future pattern of global emissions of GHGs--
and to model multifaceted scientific phenomena, including the effect of
cumulative emissions and atmospheric concentrations of GHGs on climate
measures including global surface temperatures and precipitation
patterns. Each of these entail critical judgements about complex
scientific and modeling questions. Doing so requires specialized
technical expertise, accumulated experience, and expert judgment, and
highly trained, experienced, and informed analysts can reasonably
differ in their judgements. Further, in CBD v. \NH\TSA, the 9th Circuit
concluded that uncertainty in SC-GHG estimates is not a reasonable
excuse for excluding any estimate of the SC-GHG in the analysis of CAFE
standards.\747\
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\747\ CBD v. NHTSA, 538 F.3d 1172, 1197 (9th Cir. 2008).
---------------------------------------------------------------------------
Commenters raise questions about the specific assumptions and
parameter values used to produce the estimates of the social costs of
various GHGs that NHTSA relied upon in the proposed regulatory analysis
and contend that using alternative assumptions and values would reduce
the recommended values significantly. The agency notes EPA's analysis,
like the IWG's, includes experts in climate science, estimation of
climate-related damages, and economic valuation of those impacts, and
that these individuals applied their collective expertise to review and
evaluate available empirical evidence and alternative projections of
important measures affecting the magnitude and cost of such damages. We
believe that EPA's update, which builds on the IWG's work, represents
the best current culmination in the field and has been vetted by both
the public and experts in the field during the peer review. As such, we
believe that EPA's estimates best represent the culminative impact of
GHGs analyzed by this rule.\748\
---------------------------------------------------------------------------
\748\ See page 3 of 2023 EPA SC-GHG Report for more details on
public notice and comment and peer review.
---------------------------------------------------------------------------
DOT uses its own judgment in applying the estimates in this
analysis. As a consequence, NHTSA views the chosen SC-GHG values as the
most reliable among those that were available for it to use in its
analysis. We feel that commenters did not address the inherent
uncertainty in estimating the SC-GHG. Specifically, we note that any
alternative model that attempts to project the costs of GHGs over the
coming decades--and centuries--will be subject to the same uncertainty
and criticisms raised by commenters.
A greater number of commenters mention the global scope involved in
the calculation of the social cost of greenhouse gas emissions. Some
contend that NHTSA should not consider any valuation which includes
global benefits of reduced emissions, as the costs are incurred by
manufacturers and consumers within the United States.\749\ In contrast,
the Center for Biological Diversity, Environmental Defense Fund, and
others comment that,
---------------------------------------------------------------------------
\749\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, at
9; American Highway Users Alliance, Docket No. NHTSA-2023-0022-
58180, at 8; The American Free Enterprise Chamber of Commerce,
Docket No. NHTSA-2023-0022-62353, at 5; West Virginia Attorney
General's Office, Docket No. NHTSA-2023-0022-63056, at 12; AmFree,
Docket No. NHTSA-2023-0022-62353, at 5.
NHTSA appropriately focuses on a global estimate of climate
benefits . . . While NHTSA offers persuasive justifications for this
decision, many additional justifications further support this
approach . . . The Energy Policy and Conservation Act (``EPCA''),
National Environmental Policy Act, Administrative Procedure Act, and
other key sources of law permit, if not require, NHTSA to consider
the effects of U.S. pollution on foreign nations . . . Executive
Order 13,990 instructs agencies to ``tak[e] global damages into
account'' when assessing climate impacts because ``[d]oing so
facilitates sound decision-making, recognizes the breadth of climate
impacts, and support the international leadership of the United
States on climate issues.\750\
---------------------------------------------------------------------------
\750\ CBD, EDF, IPI, Montana Environmental Information Center,
Joint NGOs, and Western Environmental Law Center, Docket No. NHTSA-
2023-0022-60439, at 3-6.
NHTSA agrees that climate change is a global problem and that the
global SC-GHG values are appropriate for this analysis. Emitting
greenhouse gases creates a global externality, in that GHG emitted in
one country mix uniformly with other gases in the atmosphere and the
consequences of the resulting increased concentration of GHG are felt
all over the world. The IWG concluded
[[Page 52683]]
that a global analysis is essential for SC-GHG estimates because
climate impacts directly and indirectly affect the welfare of U.S.
citizens and residents through complex pathways that spill across
national borders. These include direct effects on U.S. citizens and
assets, investments located abroad, international trade, and tourism,
and spillover pathways such as economic and political destabilization
and global migration that can lead to adverse impacts on U.S. national
security, public health, and humanitarian concerns. Those impacts are
more fully captured within global measures of the social cost of
greenhouse gases.
In addition, assessing the benefits of U.S. GHG mitigation
activities requires consideration of how those actions may affect
mitigation activities by other countries, as those international
actions will provide a benefit to U.S. citizens and residents. A wide
range of scientific and economic experts have emphasized the issue of
reciprocity as support for considering global damages of GHG emissions.
Using a global estimate of damages in U.S. analyses of regulatory
actions allows the U.S. to continue to actively encourage other
nations, including emerging major economies, to take significant steps
to reduce emissions. The only way to achieve an efficient allocation of
resources for emissions reduction on a global basis--and so benefit the
U.S. and its citizens--is for all countries to base their policies on
global estimates of damages.\751\
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\751\ For more information about the appropriateness of using
global estimates of SC-GHGs, which NHTSA endorses, see discussion
beginning on pg 3-20 of U.S. Environmental Protection Agency.
Regulatory Impact Analysis of the Standards of Performance for New,
Reconstructed, and Modified Sources and Emissions Guidelines for
Existing Sources: Oil and Natural Gas Sector Climate Review. EPA-
452/R-23-013, Office of Air Quality Planning and Standards, Health
and Environmental Impacts Division, Research Triangle Park, NC,
December 2023 (hereinafter, ``2023 EPA Oil and Gas Rule RIA'').
---------------------------------------------------------------------------
The SC-GHG values reported in EPA's 2023 Report provide a global
measure of monetized damages from GHG reductions. EPA's report explains
that ``The US economy is . . . inextricably linked to the rest of the
world'' and that ``over 20% of American firms' profits are earned on
activities outside of the country.'' On this basis EPA concludes
``Climate impacts that occur outside U.S. borders will impact the
welfare of individuals and the profits of firms that reside in the US
because of the connection to the global economy . . . through
international markets, trade, tourism, and other activities.'' \752\
Like the IWG, EPA also concluded that climate damages that originate in
other nations can produce ``economic and political destabilization, and
global migration that can lead to adverse impacts on U.S. national
security, public health, and humanitarian concerns.'' NHTSA is aligned
with EPA that climate damages to the rest of the world will result in
damages that will be felt domestically, and thus concludes that SC-GHG
values that incorporate both domestic and international damages are
appropriate for its analyses.
---------------------------------------------------------------------------
\752\ See Section 1.3, 2023 EPA SC-GHG Report.
---------------------------------------------------------------------------
While global estimates of the SC-GHG are the most appropriate
values to use for the above stated reasons, new modeling efforts
suggest that U.S.-specific damages are very likely higher than
previously estimated. For instance, the EPA's Framework for Evaluating
Damages and Impacts (FrEDI) is a ``reduced complexity model that
projects impacts of climate change within the United States through the
21st century'' that offers insights on some omitted impacts that are
not yet captured in global models.\753\ Results from FrEDI suggest that
damages due to climate change within the contiguous United States are
expected to be substantial. EPA's recent tailpipe emissions standards
cite a FrEDI-produced partial SC-CO2 estimate of $41 per
metric ton.\754\ This U.S.-specific value is comparable to SC-
CO2 estimates NHTSA has used for prior rulemakings and used
in sensitivity analyses for this rulemaking.\755\ NHTSA notes both that
the FrEDI estimates do not include many climate impacts and thus are
underestimates of harm, and that the FrEDI estimates include impact
categories that are not available for the rest of the world. and thus,
are missing from the global estimates used here. The damage models
applied to generate EPA's estimates of the global SC-CO2
estimates used in this final rule (the Data-driven Spatial Climate
Impact Model (DSCIM) and the Greenhouse Gas Impact Value Estimator
(GIVE)), which as noted do not reflect many important climate impacts,
provide estimates of climate change impacts physically occurring within
the United States of $16-$18 per metric ton for 2030 emissions. EPA
notes that ``[w]hile the FrEDI results help to illustrate how monetized
damages physically occurring within the [continental US] increase as
more impacts are reflected in the modeling framework, they are still
subject to many of the same limitations associated with the DSCIM and
GIVE damaIules, including the omission or partial modeling of important
damage categories.'' \756\ EPA also notes that the DSCIM and GIVE
estimates of climate change impacts physically occurring within the
United States are, like FrEDI, ``not equivalent to an estimate of the
benefits of marginal GHG mitigation accruing to U.S. citizens and
residents'' in part because they ``exclude the myriad of pathways
through which global climate impacts directly and indirectly affect the
interests of U.S. citizens and residents.'' \757\
---------------------------------------------------------------------------
\753\ EPA. 2021. Technical Documentation on the Framework for
Evaluating Damages and Impacts (FrEDI). U.S. Environmental
Protection Agency, EPA 430-R-21-004. Summary information at https://www.epa.gov/cira/fredi. Accessed 5/22/2024.
\754\ See 9-16 of U.S. Environmental Protection Agency. Multi-
Pollutant Emissions Standards for Model Years 2027 and Later Light-
Duty and Medium-Duty Vehicles Regulatory Impact Analysis. EPA-420-R-
24-004, Assessment and Standards Division, Office of Transportation
and Air Quality, March 2024.
\755\ For instance, NHTSA's previous final rule used a global
SC-CO2 value of $50 in calendar year 2020. See Section
6.2 of National Highway Traffic Safety Administration. Technical
Support Document: Final Rulemaking for Model Years 2024-2026 Light-
Duty Vehicle Corporate Average Fuel Economy Standards. March 2022.
\756\ See p. 9-16 of U.S. Environmental Protection Agency.
Multi-Pollutant Emissions Standards for Model Years 2027 and Later
Light-Duty and Medium-Duty Vehicles Regulatory Impact Analysis. EPA-
420-R-24-004, Assessment and Standards Division, Office of
Transportation and Air Quality, March 2024.
\757\ 2023 EPA SC-GHG Report.
---------------------------------------------------------------------------
Taken together, applying the U.S.-specific partial SC-GHG estimates
derived from the multiple lines of evidence described above to the GHG
emissions reduction expected under the final rule would yield
substantial benefits. For example, the present value of the climate
benefits as measured by FrEDI (under a 2 percent near-term Ramsey
discount rate) from climate change impacts in the contiguous United
States for the preferred alternative for passenger cars and light
trucks (CY perspective), for passenger cars and light trucks (MY
perspective), and for HDPUVs, are estimated to be $19.6 billion, $4.7
billion, and $1.5 billion, respectively.\758\ However, the numerous
explicitly omitted damage categories and other modeling limitations
discussed above and throughout the EPA's 2023 Report make it likely
that these estimates significantly underestimate the benefits to U.S.
citizens and residents of the GHG reductions from the final rule; the
limitations in developing a U.S.-specific
[[Page 52684]]
estimate that accurately captures direct and spillover effects on U.S.
citizens and residents further demonstrates that it is more appropriate
to use a global measure of climate benefits from GHG reductions.
---------------------------------------------------------------------------
\758\ DCIM and GIVE use global damage functions. Damage
functions based on only U.S.-data and research, but not for other
parts of the world, were not included in those models. FrEDI does
make use of some of this U.S.-specific data and research and as a
result has a broader coverage of climate impact categories.
---------------------------------------------------------------------------
Finally, the last major category of comments pertained to the
choice of discount rate applied to climate-related benefits and costs.
Valero contends that the appropriate choice of discount rate in this
case is an unsettled issue and that if global climate benefits are
considered, a global discount rate above 8 percent should be used.\759\
Our Children's Trust commented that NHTSA should consider
intergenerational equity and calculate climate benefits using negative,
zero, or near-zero percent discount rates.\760\ Several commenters,
including CBD and IPI,761 762 support the usage of the
discount rates included in the EPA's SC-GHG update, mention that
Executive Order 13990 instructs agencies to ensure that the social cost
of greenhouse gas values adequately account for intergenerational
equity, and argue that a capital-based discount rate is inappropriate
for these multigenerational climate effects.
---------------------------------------------------------------------------
\759\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, at
9.
\760\ OCT, Docket No. NHTSA-2023-0022-51242, at 3.
\761\ CBD, EDF, IPI, Montana Environmental Information Center,
Joint NGOs, Sierra Club, and Western Environmental Law Center,
Docket No. NHTSA-2023-0022-60439, at 17-22.
\762\ IPI, Docket No. NHTSA-2023-0022-60485, at 17-20.
---------------------------------------------------------------------------
As previously noted, NHTSA presents and considers a range of
discount rates for climate-related benefits and costs, including 2.5,
2.0, and 1.5 percent. Contrary to the position put forward by
Children's Trust that it is unlawful to discount the estimated costs of
SC-GHG, we also believe that discounting the stream of climate benefits
from reduced emissions from the rule in order to develop a present
value of the benefits of reducing GHG emissions is consistent with the
law, and that the discounting approach used by the EPA is reasonable.
Courts have previously reviewed and affirmed rules that discount
climate-related costs.\763\ Courts have likewise advised agencies to
approach cost-benefit analyses with impartiality, to ensure that
important factors are captured in the analysis, including climate
benefits,\764\ and to ensure that the decision rests ``on a
consideration of the relevant factors.'' \765\ NHTSA has followed these
principles here. In addition, NHTSA believes that discount rates at or
above the opportunity cost of capital (7 percent) are inappropriate to
use for GHG emissions that have intergenerational impacts. As discussed
at length above, the consumption rate of interest is a more appropriate
choice as it is the rate at which we observe consumers trading off
consumption today for consumption in the future. Circular A-4 also
identifies uncertainty in long-run interest rates as another reason why
it is appropriate to use lower rates to discount intergenerational
impacts, since recognizing such uncertainty causes the appropriate
discount rate to decline gradually over progressively longer time
horizons. In addition, the approach used incorporates rIrsion into its
the modeling framework, which recognizes that individuals are likely
willing to pay some additional amount to avoid the risk that the actual
damages they experience might exceed their expected level. This gives
some consideration to the insurance against low-probability but high-
consequence climate damages that interventions to reduce GHG emissions
offer.\766\ The impacts on future generations, uncertainty, and risk
aversion are reflected in the estimates used in this analysis. The 2023
EPA SC-GHG Report's central SC-GHG values are based on a 2 percent
discount rate,\767\ and for this reason NHTSA presents in its analysis
of this Final Rule SC-GHG estimates discounted at 2 percent together
with its primary estimates of other costs and benefits wherever NHTSA
does not report the full range of SC-GHG estimates. For additional
details regarding the choice of discount rates for climate related
benefits, see Chapter 6.2.1.2 of the TSD.
---------------------------------------------------------------------------
\763\ See, e.g., E.P.A. v. EME Homer City Generation, L.P., 572
U.S. 489 (2015).
\764\ CBD v. NHTSA, 538 F.3d 1172, 1197 (9th Cir. 2008).
\765\ State Farm, 463 U.S. 29, 43 (1983) (internal quotation
marks omitted).
\766\ In addition to the extensive discussion found in the 2023
EPA SC-GHG Report, a brief summary of the merits of the revised
discounting approach may be found on pages 3-14 and 3-15 of 2023 EPA
Oil and Gas Rule RIA.
\767\ See page 101 of the EPA SC-GHG Report (2023).
---------------------------------------------------------------------------
(2) Reduced Health Damages
The CAFE Model estimates monetized health effects associated with
emissions from directly emitted particulate matter 2.5 microns or less
in diameter (PM2.5) and two precursors to PM2.5
(NOX and SO2). As discussed in Section III.F
above, although other criteria pollutants are currently regulated, only
impacts from these three pollutants are calculated since they are known
to be emitted regularly from mobile sources, have the most adverse
effects on human health, and have been the subject of extensive
research by EPA to estimate the benefits of reducing these pollutants.
The CAFE Model computes the monetized PM2.5-related health
damages from each of the three pollutants by multiplying the monetized
health impact per ton by the total tons of each pollutant emitted,
including from both upstream and downstream sources. Reductions in
these costs from their level under the reference baseline alternative
that are projected to result from adopting alternative standards are
treated as external benefits of those alternatives. Chapter 5 of the
TSD accompanying this final rule includes a detailed description of the
emission factors that inform the CAFE Model's calculation of the total
tons of each pollutant associated with upstream and downstream
emissions.
These monetized health benefit per ton values are closely related
to the health incidence per ton values described above in Section III.F
and in detail in Chapter 5.4 of the TSD. We use the same EPA sources
that provided health incidence values to determine which monetized
health impacts per ton values to use as inputs in the CAFE Model. Like
the estimates associated with health incidences per ton of criteria
pollutant emissions, we used an EPA TSD, multiple papers written by EPA
staff and conversations with EPA staff to appropriately account for
monetized damages for each pollutant associated with the source sectors
included in the CAFE Model. The various emission source sectors
included in the EPA papers do not always correspond exactly to the
emission source categories used in the CAFE Model. In those cases, we
mapped multiple EPA sectors to a single source category and computed a
weighted average of the health impact per ton values.
The EPA uses the value of a statistical life (VSL) to estimate
premature mortality impacts, and a combination of willingness to pay
estimates and costs of treating the health impact for estimating the
morbidity impacts. EPA's 2018 technical support document, ``Estimating
the Benefit per Ton of Reducing PM2.5 Precursors from 17
Sectors,'' (referred to here as the 2018 EPA source apportionment TSD)
contains a more detailed account of how health incidences are
monetized. It is important to note that the EPA sources cited
frequently refer to these monetized health impacts per ton as
``benefits per ton,'' since they describe these estimates in terms of
emissions avoided. In the CAFE Model input structure, these are
[[Page 52685]]
generally referred to as monetized health impacts or damage costs
associated with pollutants emitted (rather than avoided), unless the
context states otherwise.
The CAFE Model health impacts inputs are based partially on the
structure of the 2018 EPA source apportionment TSD, which reported
benefits per ton values for the years 2020, 2025, and 2030. For the
years in between the source years used in the input structure, the CAFE
Model applies values from the closest source year. For example, the
model applies 2020 monetized health impact per ton values for calendar
years 2020-2022 and applies 2025 values for calendar years 2023-2027.
In order for some of the monetized health damage values to match the
structure of other impacts costs, DOT staff developed proxies for 7%
discounted values for specific source sectors by using the ratio
between a comparable sector's 3% and 7% discounted values. In addition,
we used implicit price deflators from the Bureau of Economic Analysis
(BEA) to convert different monetized estimates to 2021 dollars, in
order to be consistent with the rest of the CAFE Model inputs.
This process is described in more detail in Chapter 6.2.2 of the
TSD accompanying this final rule. In addition, the CAFE Model
documentation contains more details of the model's computation of
monetized health impacts. All resulting emission damage costs for
PM2.5-related pollutants are located in the Criteria
Emissions Cost worksheet of the Parameters file. The States and Cities
commented that NHTSA should emphasize that although only
NOX, SOX, and PM2.5 reductions are
monetized (in terms of their contribution to ambient PM2.5
formation), total benefits of reduced pollution are larger although
they do not appear in the benefit-cost-analysis. NHTSA agrees, and
notes that although we do not have a basis for valuing other
pollutants, we acknowledge that they form part of the unquantified
benefits that likely arise from this rule.
One specific category of benefits that is not monetized in our
analysis is the health harms of air toxics and ozone. ALA brought
forward the absence of the health harms of air toxics in their comments
on the NPRM, stating that the missing health harms of air toxics are a
limit of the health impacts analysis.\768\ Historically, these
pollutants have not typically been monetized, and as such we currently
have no basis for that valuation. In the case of ozone, monetized BPT
values that exist in the literature do not correspond to the source
sectors we need for our analysis (namely NHTSA notes that these
benefits are important although they have not been quantified.
---------------------------------------------------------------------------
\768\ ALA, Docket No. NHTSA-2023-0022-60091, at 2.
---------------------------------------------------------------------------
(3) Reduction in Petroleum Market Externalities
The standards would decrease domestic consumption of gasoline,
producing a corresponding decrease in the Nation's demand for crude
petroleum, a commodity that is traded actively in a worldwide market.
Because the U.S. accounts for a significant share of global oil
consumption, the resulting decrease in global petroleum demand will
exert some downward pressure on worldwide prices.
U.S. consumption and imports of petroleum products have three
potential effects on the domestic economy that are often referred to
collectively as ``energy security externalities,'' and increases in
their magnitude are sometimes cited as possible social costs of
increased U.S. demand for petroleum. Symmetrically, reducing U.S.
petroleum consumption and imports can reduce these costs, and by doing
so provide additional external benefits from establishing higher CAFE
and fuel efficiency standards.
First, any increase in global petroleum prices that results from
higher U.S. gasoline demand will cause a transfer of revenue to oil
producers worldwide from consumers of petroleum, because consumers
throughout the world are ultimately subject to the higher global price
that results. Under competitive market assumptions, this transfer is
simply a shift of resources that produces no change in global economic
output or welfare. Since the financial drain it produces on the U.S.
economy may not be considered by individual consumers of petroleum
products, it is sometimes cited as an external cost of increased U.S.
petroleum consumption.
As the U.S. has transitioned towards self-sufficiency in petroleum
production (the nation became a net exporter of petroleum in 2020),
this transfer is increasingly from U.S. consumers of refined petroleum
products to U.S. petroleum producers, so it not only leaves welfare
unaffected but even ceases to be a financial burden on the U.S.
economy. In fact, to the extent that the U.S. becomes a larger net
petroleum exporter, any transfer from global consumers to petroleum
producers becomes a financial benefit to the U.S. economy.
Nevertheless, uncertainty in the nation's long-term import-export
balance makes it difficult to project precisely how these effects might
change in response to increased consumption.
The loss of potential GDP from this externality will depend on the
degree that global petroleum suppliers like the Organization of
Petroleum Exporting Countries (OPEC) and Russia exercise market power
which raise oil market prices above competitive market levels. In that
situation, increases in U.S. gasoline demand will drive petroleum
prices further above competitive levels, thus exacerbating this
deadweight loss. More stringent standards lower gasoline demand and
hence reduce these losses.
Over most of the period spanned by NHTSA's analysis, any decrease
in domestic spending for petroleum caused by the effect of lower U.S.
fuel consumption and petroleum demand on world oil prices is expected
to remain entirely a transfer within the U.S. economy. In the case in
which large producers are able to exercise market power to keep global
prices for petroleum above competitive levels, this reduction in price
should also increase potential GDP in the U.S. However, the degree to
which OPEC and other producers like Russia are able to act as a cartel
depends on a variety of economic and political factors and has varied
widely over recent history, so there is significant uncertainty over
how this will evolve over the horizon that NHTSA models. For these
reasons, lower U.S. spending on petroleum products that results from
raising standards, reducing U.S. gasoline demand, and the downward
pressure it places on global petroleum prices is not included among the
economic benefits accounted for in the agency's evaluation of this
final rule.
Second, higher U.S. petroleum consumption can also increase
domestic consumers' exposure to oil price shocks and thus increase
potential costs to all U.S. petroleum users from possible interruptions
in the global supply of petroleum or rapid increases in global oil
prices. Because users of petroleum products are unlikely to consider
the effect of their increased purchases on these risks, their economic
value is often cited as an external cost of increased U.S. consumption.
Decreased consumption, which we expect as a result of the standards,
decreases this cost. We include an estimate of this impact of the
standards, and an explanation of our methodology can be found in
Chapter 6.2.4.4 of the TSD.
Finally, some analysts argue that domestic demand for imported
petroleum may also influence U.S. military spending; because the
increased cost of military activities
[[Page 52686]]
would not be reflected in the price paid at the gas pump, this is often
suggested as a third category of external costs from increased U.S.
petroleum consumption. For example, NHTSA has received extensive
comments to past rulemakings about exactly this effect on its past
actions from the group Securing America's Energy Future. Most recent
studies of military-related costs to protect U.S. oil imports conclude
that significant savings in military spending are unlikely to result
from incremental reductions in U.S. consumption of petroleum products
on the scale that would result from adopting higher standards. While
the cumulative effects of increasing fuel economy over the long-term
likely have reduced the amount the U.S. has to spend to protect its
interest in energy sources globally--avoid being beholden to geo-
political forces that could disrupt oil supplies--it is extremely
difficult to quantify the impacts and even further to identify how much
a single fuel economy rule contributes. As such NHTSA does not estimate
the impact of the standards on military spending. See Chapter 6.2.4.5
of the TSD for additional details.
Each of these three factors would be expected to decrease
incrementally as a consequence of a decrease in U.S. petroleum
consumption resulting from the standards. Chapter 6.2.4 of the TSD
provides a comprehensive explanation of NHTSA's analysis of these three
impacts.
NHTSA sought comment on its accounting of energy security in the
proposal. The Institute for Energy Research and AFPM both noted that
the United States is now a net-exporter of crude oil, and that a
significant share of imported crude oil is sourced from other North
American countries.\769\ The American Enterprise Institute suggested
that the macroeconomic risks associated with oil supply shocks like
those described by NHTSA in its proposal are reflected in the price of
oil since it is a globally traded commodity.\770\ As a result, they
argue that since all countries face common international prices for
these products (outside of transportation costs and other second order
differences), the energy security of countries does not depend on its
overall level of imports. Several commenters also argued that
increasing reliance on domestically produced ethanol rather than
battery electric vehicles represents a superior method for improving
energy security.\771\
---------------------------------------------------------------------------
\769\ Institue for Energy Research, Docket No. NHTSA-2023-0022-
63063, at 3; AFPM, Docket No. NHTSA-2023-0022-61911, at 22.
\770\ AEI, Docket No. NHTSA-2023-0022-54786, at 22-24.
\771\ CFDC et al., Docket No. NHTSA-2023-0022-62242, at 22-23;
Institute for Energy Research, Docket No. NHTSA-2023-0022-63063, at
3-4.
---------------------------------------------------------------------------
NHTSA noted in its proposal the importance of the United States'
role as a net exporter in its quantification of energy security related
benefits. For example, NHTSA discussed the so-called ``monopsony
effect'' or the effect of reduced consumption on global oil prices.
NHTSA noted that this represents a transfer between oil producers and
consumers, rather than a real change in domestic welfare, and since the
United States is no longer a net importer the monopsony effect on
global prices no longer represents a transfer from producers in other
countries. However, NHTSA disagrees with the suggestion that this
status eliminates the energy security externalities that NHTSA
quantified in its analysis. As described in TSD Chapter 6, NHTSA
considered the effect of reductions in domestic consumption on the
expected value of U.S. macroeconomic losses due to foreign oil supply
shocks in future years. The expected magnitude of the effect of these
shocks on overall domestic economic activity is determined by the
probability of these shocks, the overall exposure of the global oil
supply to these shocks, (which depends upon the size of U.S. gross oil
imports), the short run elasticities of supply and demand for oil, and
the sensitivity of the U.S. economy to changes in oil prices.
NHTSA analyzed these drivers of energy security costs in its
proposal and concluded that there were still strong reasons to believe
that changes in fuel economy standards could produce economic benefits
by reducing them. As can be seen through the events NHTSA listed in its
discussion of energy security in Chapter 6 of the TSD, foreign oil
shocks like the one caused by Russia's invasion of Ukraine remain a
risk that can at least in the short-term influence global oil supply
and prices, which adversely affect consumers and disrupt economic
growth, although no recent example of oil supply shocks has reached the
magnitude of the OPEC oil embargo or Iranian Revolution during the
1970s. NHTSA will continue to monitor the literature for updated
estimates of the probability and size foreign oil shocks and update its
estimates accordingly. As noted in the TSD, the U.S. has in recent
years become a net exporter of oil. However, the U.S. still only
accounts for about 14.7 percent of global oil production, and the U.S.,
Canada, and Mexico together account for less than a quarter of global
oil production according to the U.S. EIA.\772\ By contrast, seven
countries in the Persian Gulf region account for about one-third of
production and held about half of the world's proven reserves. Russia
alone accounted for 12.7 percent of production in 2022, and the global
supply shock caused by Russia's invasion of Ukraine was followed by a
surge of more than 20 percent in crude oil prices.\773\ Clearly
substantial shares of the global oil supply remain in regions that have
proven vulnerable to the exact supply shocks described by NHTSA in its
rulemaking documents. Furthermore, the U.S., while on balance a net-
exporter, continues to import substantial quantities of oil from
countries at risk of shocks. In 2022, Iraq, Saudi Arabia, and Colombia
accounted for 14 percent of oil imports in the U.S., or about 1.1
million barrels per day.\774\ On net, the U.S. still imports just under
3 million barrels of crude oil per day.\775\ Due to refinery
configurations, many refiners in the U.S., especially in the Midwest
and Gulf Coast still most profitably refine heavy, sour crude oil from
abroad. Indeed, in its 2023 AEO the EIA still projects that the U.S.
will import 6.65 million barrels per day of oil in 2050.\776\ Moreover,
U.S. consumers are also exposed to foreign oil shocks through other
imported goods that use petroleum as an input. Thus, NHTSA still
believes that it is correct to assume that changes in domestic
consumption are likely to affect demand for foreign oil.
---------------------------------------------------------------------------
\772\ U.S. Energy Information Agency, International Energy
Statistics, Crude oil production including lease condensate, as of
September 6, 2023. Available at: https://www.eia.gov/energyexplained/oil-and-petroleum-products/where-our-oil-comes-from.php. (Accessed: March 25, 2024).
\773\ WTI spot prices rose from $93/barrel the week of February
18, 2022, the week before Russia's invasion of Ukraine. The price
rose to $113/barrel the week of March 11, 2022, and eventually
reached a high of around $120/barrel in June 2022. Data available
at: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f=W, (Accessed: April 29, 2024).
\774\ U.S. Energy Information Agency, ``Oil and petroleum
products explained: Oil imports and exports'', Available at: https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php, (Accessed: April 29, 2024).
\775\ Id.
\776\ U.S. Energy Information Agency, Annual Energy Outlook
2023, Table 11. Petroleum and Other Liquids Supply and Disposition,
Available at: https://www.eia.gov/outlooks/aeo/data/browser/#/?id=11-AEO2023&cases=ref2023&sourcekey=0, (Accessed: March 25,
2024).
---------------------------------------------------------------------------
NHTSA also disagrees with the conclusion that these energy security
risks are efficiently priced by global markets. Traded oil prices
represent equilibrium outcomes determined by
[[Page 52687]]
global supply and demand for oil. Global demand is determined by the
aggregation of global consumers' willingness to pay for oil and the
products it produces. This willingness to pay depends on the private
benefits derived from oil products. The macroeconomic disruption costs
described by NHTSA are borne across the economy, meaning that they are
unlikely to be considered by individual consumers in their decision-
making calculus. For this reason, economists have classified them as
externalities, and thus a potential source of socially inefficient
outcomes.\777\ The magnitude of these macroeconomic disruptions from
oil supply shocks depends directly on the overall oil intensity of the
economy. A more fuel-efficient fleet of vehicles is expected to lower
the economy's oil intensity. Furthermore, EPCA, the statute that
confers the agency with the authority to set standards, was enacted
with the stated purpose to increase energy independence and security,
and set out to accomplish these goals through increasing the efficiency
of energy consuming goods such as automobiles.\778\ Congress explicitly
directed the agency to consider the need of the United States to
conserve energy when setting maximum feasible standards.\779\ The
suggestion that NHTSA should forgo the potential impacts to energy
security of setting standards cuts against the very fabric of public
policy underlying EPCA.
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\777\ See Brown, S.P., New estimates of the security costs of
U.S. oil consumption, Energy Policy, 113, (2018) page 172.
\778\ Public Law 110-140.
\779\ 42 U.S.C. 32902(f).
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NHTSA is also monitoring the availability of critical minerals used
in electrified powertrains and whether any shortage of such materials
could emerge as an additional energy security concern. While nearly all
electricity in the United States is generated through the conversion of
domestic energy sources and thus its supply does not raise security
concerns, EVs also require batteries to store and deliver that
electricity. Currently, the most commonly used electric vehicle battery
chemistries include relatively scarce materials (compared to other
automotive parts) which are sourced, in part, from potentially insecure
or unstable overseas sites and like all mined materials (including
those in internal combustion engine vehicles) can pose environmental
challenges during extraction and conversion to usable material. Known
supplies of some of these critical minerals are also highly
concentrated in a few countries and therefore face similar market power
concerns to petroleum products.
NHTSA is restricted from considering the fuel economy of
alternative fuel sources in determining CAFE standards, and as such,
the CAFE Model restricts the application of BEV pathways and PHEV
electric efficiency in simulating compliance with fuel economy
regulatory alternatives. While the cost of critical minerals may affect
the cost to supply both plug-in and non-plug-in hybrids that require
larger batteries, this would apply primarily to manufacturers whose
voluntary compliance strategy includes electrification given the
greater mineral requirements of battery electric vehicles and plug-in
hybrid-electric vehicles compared with non-plug-in hybrids. NHTSA did
not include costs or benefits related to these emerging energy security
considerations in its analysis for its proposal and sought comment on
whether it is appropriate to include an estimate in the analysis and,
if so, which data sources and methodologies it should employ.
NHTSA received a number of comments suggesting that it should
include costs and benefits related to these emerging energy security
considerations. Several commenters noted that politically unstable
countries or countries with which the U.S. does not have friendly trade
relations, including China, mine or process a significant share of the
minerals used in battery production, including lithium, cobalt,
graphite and nickel.\780\ AFPM also argued that the penetration rate of
BEVs in NHTSA's No-Action alternative would require supply chain
improvements that they contend are highly uncertain to occur, or that
the battery chemistry technologies necessary to alleviate these
concerns were not likely to be available in the timeframe suggested by
NHTSA's analysis.\781\ Some of these commenters suggested that mineral
security should be included in NHTSA's analysis as a cost associated
with adoption of technologies that require these minerals, and that the
failure to include this as a cost was arbitrary and capricious.\782\
ZETA on the other hand suggested that the demands for critical minerals
could be met through reserves in friendly countries, and noted the
steps taken by both the public and private sector to expand domestic
critical mineral production.\783\ The National Association of
Manufacturers and the U.S. Chamber of Commerce both suggested that
expanding domestic supply of critical minerals required the
Administration and Congress to expedite permitting.\784\
---------------------------------------------------------------------------
\780\ American Consumer Institute, Docket No. NHTSA-2023-0022-
50765, at 6-7; AHUA, Docket No. NHTSA-2023-0022-58180, at 7; U.S.
Chamber of Commerce, Docket No. NHTSA-2023-0022-61069, at 5; West
Virginia Attorney General's Office, Docket No. NHTSA-2023-0022-
63056, at 14; CFDC et al., Docket No. NHTSA-2023-0022-62242, at 22-
23; Institute for Energy Research, Docket No. NHTSA-2023-0022-63063,
at 3.
\781\ AFPM, Docket No. NHTSA-2023-0022-61911, at 13-14.
\782\ AFPM, Docket No. NHTSA-2023-0022-61911, at 19; West
Virginia Attorney General's Office, Docket No. NHTSA-2023-0022-
63056, at 14-15.
\783\ ZETA, Docket No. NHTSA-2023-0022-60508, at 29-46.
\784\ National Association of Manufacturers, Docket No. NHTSA-
2023-0022-59289, at 3; U.S. Chamber of Commerce, Docket No. NHTSA-
2023-0022-61069, at 5.
---------------------------------------------------------------------------
NHTSA agrees with commenters that the increase in battery demand
likely will require significant expansion of production of certain
critical minerals, although critical minerals have long been a
component of vehicles and many other goods consumed in the United
States. NHTSA also notes the concerted efforts across the federal
government to shift supply chains to ensure that a larger share of
critical mineral production comes from politically stable sources.
Between the publication of NHTSA's proposal and the final rule, ANL
produced a study of the prospective supply of upstream critical
materials used to meet the U.S.'s EV and Energy Storage System
deployment targets for 2035.\785\ According to ANL, the U.S. is
positioned to meet lithium demand through a combination of domestic
production as well as imports from FTA countries.\786\ The U.S. will
need to source graphite, nickel, and cobalt from partner countries
(including those with and without FTAs) in the near and medium
term.\787\ Thus, NHTSA believes that there is strong evidence that the
U.S. has significant opportunities to diversify supply chains away from
current suppliers like China.
---------------------------------------------------------------------------
\785\ Barlock, Tsisilile A. et al., ``Securing Critical Minerals
for the U.S. Electric Vehicle Industry'', Argonne National
Laboratory, Nuclear Technologies and National Security Directorate,
ANL-24/06, Feb. 2024, Available at: https://publications.anl.gov/anlpubs/2024/03/187907.pdf. (Accessed: April 5, 2024).
\786\ Id. at viii.
\787\ Id. at viii.
---------------------------------------------------------------------------
Further, NHTSA notes that considering mineral security in its
analysis of incremental societal costs and benefits would be unlikely
to materially impact the ranking of its regulatory alternatives. EPCA
constrains NHTSA from considering BEV adoption as a compliance strategy
during standard setting years in its light duty analysis. As a result,
there will be
[[Page 52688]]
minimal incremental demand for batteries and critical minerals in
regulatory alternatives, and thus minimal incremental societal costs
related to mineral security. While BEV adoption--including compliance
with ZEV regulatory programs--is considered in the No-Action
Alternative, mineral security costs associated with the adoption of
BEVs in these cases are (1) not incremental costs associated with
changes in CAFE standards, and (2) not considered by consumers and
manufacturers outside of how they impact technology costs and vehicle
prices, both of which are considered in NHTSA's analysis. In the HDPUV
fleet, a similar pattern emerges even in the absence of similar
constraints; the overwhelming majority of electrification takes place
in the reference baseline. Further, given the relatively small volume
of HDPUVs, the incremental demand for any critical minerals is minimal
compared to the total global supply.
Finally, NHTSA notes that while commenters suggested that NHTSA
include mineral security in its analysis, they did not recommend a
specific methodology for how to do so. During its analysis NHTSA
surveyed the economics literature and did not find a comparable
existing set of methods for analyzing mineral security as it did for
petroleum market externalities. This is largely due to the relatively
recent emergence of this topic. Several of the inputs used in NHTSA's
energy security analysis (distributions of estimates of its elasticity
parameters, supply shock probability distributions, long term
projections of supply and demand for petroleum) rely on decades of
research which do not exist for the emerging topic of mineral security.
NHTSA is continuing to monitor research in this field and is
considering implementing estimates of these costs in future rulemakings
but did not include them in this final rule.
(4) Changes in Labor Use and Employment
As vehicle prices rise, we expect consumers to purchase fewer
vehicles than they would have at lower prices. If manufacturers produce
fewer vehicles as a consequence of lower demand, they may need less
labor to produce and assemble vehicles, while dealers may need less
labor to sell the vehicles. Conversely, as manufacturers add equipment
to each new vehicle, the industry will require labor resources to
develop, sell, and produce additional fuel-saving technologies. We also
account for the possibility that new standards could shift the relative
shares of passenger cars and light trucks in the overall fleet. Since
the production of different vehicles involves different amounts of
labor, this shift affects the required quantity of labor.
The analysis considers the direct labor effects that the standards
have across the automotive sector. The effects include (1) dealership
labor related to new light-duty and HDPUV unit sales; (2) assembly
labor for vehicles, engines, and transmissions related to new vehicle
unit sales; and (3) labor related to mandated additional fuel savings
technologies, accounting for new vehicle unit sales. NHTSA has now used
this methodology across several rulemakings but has generally not
emphasized its results, largely because NHTSA found that attempting to
quantify the overall labor or economic effects was too uncertain and
difficult. We have also excluded any analysis of how changes in direct
labor requirements could change employment in adjacent industries.
NHTSA still believes that such an expanded analysis may be outside
the effects that are reasonably traceable to the final rule; however,
NHTSA has identified an exogenous model that can capture both the labor
impacts contained in the CAFE Model and the secondary macroeconomic
impacts due to changes in sales, vehicle prices, and fuel savings.
Accompanying this final rule is a docket memo explaining how the CAFE
Model's outputs may be used within Regional Economic Models, Inc.
(REMI)'s PI + employment model to quantify the impacts of this final
rule. We received comment from the Joint NGOs regarding the proposal
for additional analysis in the docket memo stating that NHTSA should
not include this additional analysis since the public was not given the
opportunity to comment on results.\788\ Although we were unable to
fully implement the side analysis with finalized results for this rule,
we are continuing to explore the possibility of including these impacts
in future analyses.
---------------------------------------------------------------------------
\788\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-A2, at 66.
---------------------------------------------------------------------------
The United Auto Workers (UAW) commented that NHTSA should perform
additional analysis of the impacts of the standards on employment, with
a particular focus on union jobs and new EV jobs.\789\ Although we do
not currently look at labor impacts by specific technologies, we may
consider including it in future analyses. All labor effects are
estimated and reported at a national aggregate level, in person-years,
assuming 2,000 hours of labor per person-year. These labor hours are
not converted to monetized values because we assume that the labor
costs are included into a new vehicle's purchasing price. The analysis
estimates labor effects from the forecasted CAFE Model technology costs
and from review of automotive labor for the MY 2022 fleet. NHTSA uses
information about the locations of vehicle assembly, engine assembly,
and transmission assembly, and the percent of U.S. content of vehicles
collected from American Automotive Labeling Act (AALA) submissions for
each vehicle in the reference fleet. The analysis assumes that the
fractions of parts that are currently made in the U.S. will remain
constant for each vehicle as manufacturers add fuel-savings
technologies. This should not be construed as a prediction that the
percentage of U.S.-made parts--and by extension U.S. labor-- will
remain constant, but rather as an acknowledgement that NHTSA does not
have a clear basis to project where future production may shift. The
analysis also uses data from the NADA annual report to derive
dealership labor estimates.
---------------------------------------------------------------------------
\789\ UAW, Docket No. NHTSA-2023-0022-63061-A1, at 2-3.
---------------------------------------------------------------------------
While the IRA tax credit eligibility is not dependent on our labor
assumptions here, if NHTSA were able to dynamically model changes in
parts content with enough confidence in its precision, NHTSA could
potentially employ those results to dynamically model a portion of tax
credit eligibility.
Some commenters argued that culmination of the standards and the
further adoption of BEVs would significantly impair the automotive
industry through dramatically reduced sales, leading to a substantial
number of layoffs, and accused the agency of improperly ignoring this
unintended consequence.\790\ The agency disagrees. First, the agency
notes that the premise in these comments is unsupported. As noted in
sales, we believe that sales are largely determined by exogenous market
factors, and our standards will have a marginal impact. Second,
electrification is not a compliance pathway for CAFE, so any impacts
would be contained to the reference baseline fleet through standard
setting years. Finally, commenters did not provide any evidence that
BEV adoption would harm domestic jobs and sales and relied solely on
speculation.
---------------------------------------------------------------------------
\790\ Heritage Foundation-Mario Loyola, Docket No. NHTSA-2023-
0022-61952, at 7-8.
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In sum, the analysis shows that the increased labor from producing
additional technology necessary to meet
[[Page 52689]]
the preferred alternative will outweigh any decreases attributable to
the change in new vehicle sales. For a full description of the process
NHTSA uses to estimate labor impacts, see Chapter 6.2.5 of the TSD.
3. Costs and Benefits Not Quantified
In addition to the costs and benefits described above, Table III-7
includes two-line items without values. The first is maintenance and
repair costs. Many of the technologies manufacturers apply to vehicles
to meet the standards are sophisticated and costly. The technology
costs capture only the initial or ``upfront'' costs to incorporate this
equipment into new vehicles; however, if the equipment is costlier to
maintain or repair--as seems likely for at least more conventional
technology because the materials used to produce the equipment are more
expensive and the equipment itself is significantly more complex and
requires more time and labor to maintain or repair--, then consumers
will also experience increased costs throughout the lifetime of the
vehicle to keep it operational. Conversely, electrification
technologies offer the potential to lower repair and maintenance costs.
For example, BEVs do not have engines that are costly to maintain, and
all electric pathways with regenerative braking may reduce the strain
on braking equipment and consequentially extend the useful life of
braking equipment. We received several comments concerned with electric
vehicle battery replacement costs and maintenance/repair cost
differences between EVs and ICEs. The Heritage Foundation and the
American Consumer Institute noted that EV battery replacement costs are
expensive, and AFPM commented that these battery replacement costs will
impact lower-income households.\791\
---------------------------------------------------------------------------
\791\ Heritage Foundation-Mario Loyola, Docket No. NHTSA-2023-
0022-61952; American Consumer Institute, Docket No. NHTSA-2023-0022-
50765; AFPM, Docket No. NHTSA-2023-0022-61911.
---------------------------------------------------------------------------
The West Virginia Attorney General's Office commented that NHTSA
should include a life-cycle analysis, emphasizing that EVs' complicated
powertrains could lead to higher maintenance and repair costs.\792\ We
do not currently include a life-cycle analysis as part of the CAFE
Model but may consider incorporating some aspects of this into future
rules. For a literature review and additional qualitative discussion on
the vehicle cycle and its impacts, readers should refer to FEIS Chapter
6 (Lifecycle Analysis) (See III.F as well). Other commenters have been
just as adamant that BEVs offer lifetime maintenance and repair
benefits.
---------------------------------------------------------------------------
\792\ West Virginia Attorney General's Office, Docket No. NHTSA-
2023-0022-63056-A1, at 11.
---------------------------------------------------------------------------
NHTSA notes that due to statutory constraints on considering the
fuel economy of BEVs and the full fuel economy of PHEVs in determining
maximum feasible CAFE standards, any change in maintenance and repair
costs due to electrification would have a limited impact on NHTSA's
analysis comparing alternatives. Given that this topic is still
emerging, and that the results would not affect the agency's decision
given the statutory constraint on consideration of BEV fuel economy in
determining maximum feasible CAFE standards, the agency believes it is
reasonable not to attempt to model these benefits or costs in this
final rule. See Section VI.A on economic practicability for discussion
on affordability impacts more generally.
Consumer Reports commented that hybrid-cost effectiveness is, on
average, better than that of non-hybrids due to maintenance and repair
cost savings over time, citing their 2023 analysis focusing on ten
bestselling hybrids and their ICE counterparts.\793\ NHTSA is
continuing to study the relative maintenance and repair costs
associated with adopting fuel saving technologies. In order to conduct
this analysis properly NHTSA would require more granular data on a
larger set of technologies than what is included in Consumer Reports'
study and would also need to estimate the effects of changes in vehicle
usage on these costs. NHTSA will continue to consider these costs in
the future as more information becomes available.
---------------------------------------------------------------------------
\793\ Consumer Reports, Docket No. NHTSA-2023-0022-61098-A1, at
1-2.
---------------------------------------------------------------------------
The second empty line item in the table is the value of potential
sacrifices in other vehicle attributes. Some technologies that are used
to improve fuel economy could have also been used to increase other
vehicle attributes, especially performance, carrying capacity, comfort,
and energy-using accessories, though some technologies can also
increase both fuel economy and performance simultaneously. While this
is most obvious for technologies that improve the efficiency of engines
and transmissions, it may also be true of technologies that reduce
mass, aerodynamic drag, rolling resistance or any road or accessory
load. The exact nature of the potential to trade-off attributes for
fuel economy varies with specific technologies, but at a minimum,
increasing vehicle efficiency or reducing loads allows a more powerful
engine to be used while achieving the same level of fuel economy.
Performance is held constant in our analysis. However, if a consumer
values a performance attribute that cannot be added to a vehicle
because fuel economy improvements have ``used up'' the relevant
technologies, or if vehicle prices become too high wherein either a
consumer cannot obtain additional financing or afford to pay more for a
vehicle within their household budget that consumers may opt to
purchase vehicles that are smaller or lack features such as heated
seats, advanced entertainment or convenience systems, advance safety
systems, or panoramic sunroofs, that the consumer values but are
unrelated to the performance of the drivetrain.\794\ Alternatively,
manufacturers may voluntarily preclude these features from certain
models or limit the development of other new features in anticipation
that new vehicle price affordability will limit the amount they may be
able to charge for these new features. How consumers value increased
fuel economy and how fuel economy regulations affect manufacturers'
decisions about using efficiency-improving technologies can have
important effects on the estimated costs, benefits, and indirect
impacts of fuel economy standards. Nevertheless, any sacrifice in
potential improvements to vehicles' other attributes could represent a
net opportunity cost to their buyers (though performance-efficiency
tradeoffs could also lower compliance costs, and some additional
attributes, like acceleration, could come with their own countervailing
social costs).\795\
---------------------------------------------------------------------------
\794\ NHTSA notes that if consumers simply take out a larger
loan, then some future consumption is replaced by higher principle
and interest payments in the future.
\795\ This is similar to the phenomena described in The Bernie
Mac Show: My Privacy (Fox Broadcasting Company Jan. 14, 2005). After
an embarrassing incident caused by too few bedrooms, Bernie Mac
decides to renovate his house. A contractor tells Mr. Mack that he
can have the renovations performed ``good and fast,'' ``good and
cheap,'' or ``fast and cheap,'' but it was impossible to have
``good, fast, and cheap.''
---------------------------------------------------------------------------
NHTSA has previously attempted to model the potential sacrifice in
other vehicle attributes in sensitivity analyses by assuming the
opportunity cost must be greater than some percentage of the fuel
savings they seemingly voluntarily forego. In those previous
rulemakings, NHTSA acknowledged that it is extremely difficult to
quantify the potential loss of other vehicle attributes, and therefore
included the value of other vehicle attributes only in sensitivity
analyses. This approach is used as a sensitivity analysis for the final
rule and is discussed in RIA 9.2.3. This approach is only relevant if
the
[[Page 52690]]
foregone fuel savings cannot be explained by the energy paradox.
The results of NHTSA's analysis of the HDPUV standards suggest that
buyer's perceived reluctance to purchasing higher-mpg models is due to
undervaluation of the expected fuel savings due to market failures,
including short-termism, principal-agent split incentives, uncertainty
about the performance and service needs of new technologies and first-
mover disadvantages for consumers, uncertainty about the resale market,
and market power and first-mover disadvantages among manufacturers.
This result is the same for vehicles purchased by individual consumers
and those bought for commercial purposes. NHTSA tested the sensitivity
of the analysis to the potential that the market failures listed do not
apply to the commercial side of the HDPUV market. In this sensitivity
analysis, commercial operators are modeled as profit maximizers who
would not be made more or less profitable by more stringent standards
by offsetting the estimated net private benefit to commercial
operators.\796\ NHTSA decided against including this alternative in the
primary analysis to align with its approach to market failures in the
light-duty analysis. Furthermore, there is insufficient data on the
size and composition of the commercial share of the HDPUV market to
develop a precise estimate of a commercial operator opportunity cost.
For additional details, see Chapter 9.2.3.10 of the FRIA.
---------------------------------------------------------------------------
\796\ Relevant sensitivity cases are labeled ``Commercial
Operator Sales Share'' and denote the percent of the fleet assumed
owned by commercial operators. NHTSA calculates net private benefits
as the sum of technology costs, lost consumer surplus from reduced
new vehicle sales, and safety costs internalized by drivers minus
fuel savings, benefits from additional driving, and savings from
less frequent refueling.
---------------------------------------------------------------------------
Several commenters argued that NHTSA's assumption that increases in
fuel economy to meet the new standards are not accompanied by foregone
vehicle performance leads to an overestimate of net-benefits from
increasing standards.797 798 For example Valero commented
that ``NHTSA offer[ed] no convincing rationale for omitting foregone
performance gains from the central-case analysis'' and claimed ``NHTSA
does its best to completely avoid the performance issue.'' \799\ IPI
shared a similar belief and commented that ``NHTSA should further
highlight [the implicit opportunity cost] sensitivity results.'' \800\
NHTSA agrees with IPI that it could do a better job highlighting the
results of sensitivities that stakeholders considered, especially ones
like the implicit opportunity cost which some commenters felt were
either missing or underrepresented.
---------------------------------------------------------------------------
\797\ Examples of performance related attributes listed by
commenters included: horsepower, horsepower per pound of vehicle
weight, acceleration, towing capacity, and torque.
\798\ Landmark, Docket No. NHTSA-2023-0022-48725, at 4; Valero,
Docket No. NHTSA-2023-0022-58547, Attachment E, at 1-4; KCBA, Docket
No. NHTSA-2023-0022-59007, at 4; AmFree, Docket No. NHTSA-2023-0022-
62353, at. 5.
\799\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at
3, 5.
\800\ IPI, Docket No. NHTSA-2023-0022-60485, at 31-32.
---------------------------------------------------------------------------
More specifically, Landmark argued that improvements in fuel
economy necessitate performance tradeoffs to reduce the weight of
vehicles.\801\ Other commenters argued that there is evidence that in
the absence of changes to standards manufacturers have chosen to make
further improvements to performance features of vehicles, and that
similar future improvements to performance would be sacrificed by
manufacturers in order to comply with the standards NHTSA proposed, and
thus should be counted as incremental consumer costs.\802\
---------------------------------------------------------------------------
\801\ Landmark, Docket No. NHTSA-2023-0022-48725, at 4.
\802\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at
1, 3.
---------------------------------------------------------------------------
Valero, CEA, and NADA referenced a recent paper from Leard, Linn,
and Zhou (2023), who estimate that this opportunity cost of fuel
economy improvement could offset much of the private fuel cost savings
benefits that consumers receive from the increase in stringency of
standards. The authors of this paper estimate that consumers value
improvements in acceleration much more highly than the fuel economy
improvements that manufacturers trade them off for in an effort to
comply with higher standards. However, the authors of this paper note
that their study does not account for the potential induced innovations
from tightened standards, or market failures associated with imperfect
competition in the new vehicle market. NHTSA discussed this paper in
its proposal, but recognized the limitations that the authors noted, as
well as the degree of uncertainty in the literature regarding the
implicit opportunity cost of fuel economy standards.
Valero suggests that in the absence of higher standards,
manufacturers would channel investment into improvements in vehicle
performance, which is foregone when standards are raised. As a result,
Valero commented that fuel economy standards cause performance to
increase less than it would in the absence of standards and referenced
the findings of Klier and Linn (2016).\803\ NHTSA also discussed this
paper in its proposal (see PRIA Chapter 9). The authors of the paper
note that during the period they examined, for passenger cars in the
United States there was no statistically significant evidence that
stringency affected the direction of technology adoption between fuel
efficiency and either horsepower or weight (the two attributes
considered). While the authors do find evidence of an effect on this
tradeoff for light trucks, they admit that there is significant
uncertainty over the consumer's willingness to pay for this foregone
performance (indeed they do not quantify the dollar value of the effect
on vehicle weight due to this uncertainty). Recent data also casts
doubt on Valero's deterministic understanding of the relationship
between tightening standards and vehicle performance. Between 2000 and
2010 CAFE standards for passenger cars were unchanged. According to the
2023 EPA Automotive Trends report, real world fuel economy for vehicles
rose at a rate of about 1.3 percent per year during this period, while
horsepower rose at a rate of 1.2 percent, weight increased at a rate of
0.4 percent, and acceleration as measured by 0 to 60 miles per hour
time declined at an average rate of 0.8 percent.\804\ Between 2010 and
2023, standards increased substantially and the fuel economy of these
vehicles has improved at a rate of around 2.4 percent per year over
this period. However, this has not caused improvements in other
attributes to slow down. Instead, weight (0.5 percent), horsepower (1.7
percent), and 0 to 60 time (-1.4 percent) all improved at faster rates
than the previous period. While these attributes could have potentially
improved at still greater rates in the absence of standards, these
headline values suggest that standards have at least not caused a
significant slow-down relative to prior trends. Also, as noted in FRIA
Chapter 9, other research suggests that consumers have not had to
tradeoff performance for fuel economy improvements, and should not be
expected to in the future, due to fuel saving technologies whose
adoption does not lead to adverse effects on the performance of
vehicles (Huang, Helfand, et al. 2018; Watten, Helfand and Anderson
2021; Helfand and Dorsey-Palmateer 2015). Indeed, there are
technologies that exist that provide
[[Page 52691]]
improved fuel economy without hindering performance, and in some cases,
also improve performance (such as high-strength aluminum alloy bodies,
turbocharging, and increasing the number of gear ratios in new
transmissions). Even as the availability of more fuel-efficient
vehicles has increased steadily over time, research has shown that the
attitudes of drivers towards those vehicles with improved fuel economy
has not been affected negatively. To the extent some performance-
efficiency tradeoffs may have occurred in the past, such tradeoffs may
decline over time, with technological advancements and manufacturer
learning over longer vehicle design periods (Bento 2018; Helfand &
Wolverton 2011).
---------------------------------------------------------------------------
\803\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at
1.
\804\ 2023 EPA Automotive Trends Report, Available at: https://www.epa.gov/automotive-trends/explore-automotive-trends-data#DetailedData, (Accessed: April 18, 2024).
---------------------------------------------------------------------------
NHTSA thus maintains that there is significant uncertainty in the
literature over the degree to which changes in fuel economy standards
will cause manufacturers to lower the performance of vehicles, and how
much this will be valued by consumers. Indeed, the possibility that
there are ancillary benefits to adopting fuel saving technology means
that the directionality of the effect of excluding these additional
attributes from the central analysis is unknown. In its analysis, NHTSA
assumes that the performance features listed by commenters remain fixed
across alternatives, and that manufacturers instead adopt fuel economy
improving technology in order to comply with standards without reducing
the quality of those features. NHTSA assumes that manufacturers are
aware of consumers' willingness to pay for performance features like
those noted by the commenters and would be reluctant to make sacrifices
to them as part of their compliance strategies. This, of course, is not
the only path to compliance for manufacturers. However, given
uncertainty over consumer willingness to pay for the full set of
potentially affected attributes, the long-term pricing strategies of
firms, and firm specific costs, it is a reasonable approach for NHTSA
to use when modeling the behavior of all manufacturers in the market.
Modeling the decisions of all manufacturers over the complete set of
attributes and technologies available would lead to a computationally
infeasible model of compliance. Moreover, without highly detailed data
about the manufacturing process of each manufacturer and vehicle model,
it could introduce significant opportunities for errors in the agency's
measurements of compliance costs. Omitting ancillary benefits and only
including the attributes that could be traded off for fuel savings
improvements by firms could bias the agency's analysis. Absent a better
understanding of consumer willingness to pay for these other
attributes, including them would create a misleading model of how firms
would choose to comply with the standards as well as how consumer
welfare would be affected. While commenters suggested that the
performance neutrality assumption in NHTSA's analysis is unrealistic,
they did not propose an alternative methodology for modeling how
manufacturers would adjust performance attributes in response to
changes in CAFE Standards.\805\ This performance neutrality assumption
is intended to isolate the impacts of the standards and is necessary
with or without a separate estimation of a potential implicit
opportunity cost. Since NHTSA believes that its assumption of
performance neutrality is a reasonable approach to modeling compliance,
and since alternative approaches would introduce highly uncertain
effects (with unknown directionality) and are currently infeasible,
NHTSA has chosen to maintain its assumption of performance
neutrality.\806\
---------------------------------------------------------------------------
\805\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at
3-4; CEA, Docket No. NHTSA-2023-0022-61918, at 20.
\806\ See Section II.C.6 for further details.
---------------------------------------------------------------------------
NHTSA does take seriously the possibility of opportunity costs as
described by these commenters. For this reason, the agency included
sensitivity cases in its analysis for both light duty and HDPUV in
Chapter 9 of the PRIA and FRIA. In this sensitivity case, the
opportunity cost of fuel economy for light duty vehicles is assumed to
be equal to the discounted fuel cost savings for a vehicle over its
first 72 months of use (roughly how long they are held, on average, by
their first owner), less the undiscounted fuel cost savings over the
first 30 months of use. NHTSA believes that this is a reasonable
approach, since this value is equivalent to the value of fuel savings
that new vehicle owners are assumed to not value in their purchase
decision.\807\ If consumers are not myopic and value fuel savings
fully, and assuming perfect information and no market distortions, then
offsetting losses in performance would be at least this high. For
HDPUVs, NHTSA also considered two additional sensitivity cases in which
it assumed that this opportunity cost fully offset any net private
benefits of fuel economy improvements for commercial buyers.\808\ This
higher value for opportunity cost for commercial buyers was based on
the assumption that commercial buyers are more likely to fully value
the lifetime fuel savings of their fleet vehicles, since these buyers
are profit maximizing businesses. As noted by IPI in its comments,
NHTSA found in the proposal that while net social benefits under the
preferred alternative are lower under these alternative assumptions,
under 3 percent discounting they remain positive in all cases.\809\
This is caused by reductions in emissions externalities offsetting
increases in safety externalities. NHTSA conducted similar sensitivity
exercises in its final rule and found that societal net benefits
remained positive in the preferred alternative regardless of discount
rate. Since neither of these cases include the potential ancillary
benefits of fuel saving technology adoption, and do not take into
account the full set of compliance methods that manufacturers could
employ to meet the standards in a cost effective way, NHTSA views these
cases as bounding exercises that allow the agency to see whether a
relatively high estimate of the potential opportunity costs of the
standards outweigh the other net societal benefits included in NHTSA's
analysis. Valero suggested that the agency's analysis of the implicit
opportunity cost should equal to all private fuel savings.\810\ We
disagree for several reasons. First, the average consumer will not hold
onto new vehicles for a vehicle's entire lifetime, and even if the
first owner valued all of the forgone attributes at the price of fuel
savings, the second or third owner would have her own set of
preferences that likely do not overlap the first owner's perfectly.
Second, assigning a specific dollar value on vehicle luxuries is likely
difficult for consumers, and there is a tendency for vehicle buyers to
splurge at the dealership only to regret overspending when the monthly
payments become due. For example, a Lending Tree survey found that 14
percent of car buyers wish ex post that they had chosen a different
make or model, 10
[[Page 52692]]
percent bought too expensive of a car, 4 percent bought a more
expensive car than they planned, and 3 percent noted they regretted
buying features they did not need.\811\ Similarly, not all vehicle
attributes are offered [agrave] la carte (some vehicle attributes are
sometimes only available in packages with other additions or require
consumers to purchase higher trims) and consumers may only value one or
two items in a larger package and are stuck buying as a bundle.
---------------------------------------------------------------------------
\807\ Kelly Blue Book, ``Average length of U.S. vehicle
ownership hit an all-time high'', Feb. 23, 2012, Available at:
https://www.kbb.com/car-news/average-length-of-us-vehicle-ownership-
hit-an-all_time-high/
#:~:text=The%20latest%20data%20compiled%20by%20global%20market%20inte
lligence,figure%20that%20also%20represents%20a%20new%20high%20mark.
(Accessed: April 29, 2024).
\808\ NHTSA simulated a case in which half of HDPUV buyers were
commercial buyers, and a cases in which all HDPUV buyers were
commercial buyers.
\809\ IPI, Docket No. NHTSA-2023-0022-60485, at 34.
\810\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment E, at
4.
\811\ J. Jones, D. Shepard, X. Martinez-White. Lending Tree.
Nearly Half Who Bought a Car in the Past Year Have Regrets. Jan 24,
2022. Available at https://www.lendingtree.com/auto/car-regrets-survey/ (Accessed: April 18, 2024).
---------------------------------------------------------------------------
H. Simulating Safety Effects of Regulatory Alternatives
The primary objective of the standards is to achieve maximum
feasible fuel economy and fuel efficiency, thereby reducing fuel
consumption. In setting standards to achieve this intended effect, the
potential of the standards to affect vehicle safety is also considered.
As a safety agency, NHTSA has long considered the potential for adverse
or positive safety consequences when establishing fuel economy and fuel
efficiency standards.
This safety analysis includes the comprehensive measure of safety
impacts of the light-duty and HDPUV standards from three sources:
Changes in Vehicle Mass
Similar to previous analyses, NHTSA calculates the safety impact of
changes in vehicle mass made to reduce fuel consumption to comply with
the standards. Statistical analysis of historical crash data indicates
reducing mass in heavier vehicles generally improves safety for
occupants in lighter vehicles and other road users like pedestrians and
cyclists, while reducing mass in lighter vehicles generally reduces
safety. NHTSA's crash simulation modeling of vehicle design concepts
for reducing mass revealed similar effects. These observations align
with the role of mass disparity in crashes; when vehicles of different
masses collide, the smaller vehicle will experience a larger change in
velocity (and, by extension, force), which increases the risk to its
occupants. NHTSA believes the most recent analysis represents the best
estimate of the impacts of mass reduction (MR) on crash fatalities
attributable to changes in mass disparities., One caveat to note is
that the best estimates are not significantly different from zero and
are not statistically significant at the 95th confidence level. In
other words, the effects of changes in mass due to this rule cannot be
distinguished from zero.
Two individuals, Mario Loyola and Steven G. Bradbury, submitted a
joint comment (referred to herein as ``Loyola and Bradbury''),
speculating that the agency is ``downplay[ing] and minimize[ing] the
loss of lives and serious injuries [the] standards [caused] by
attributing many of these deaths and injuries to other regulators.''
\812\ The commentors would have the agency include fatalities that are
projected to occur in the reference baseline as attributable t' this
rule. While NHTSA's analysis includes the impacts of other regulations
in the reference baseline, it does not separate the safety impacts
attributable to individual regulations. Instead, the analysis considers
the aggregate impact of these other regulations for comparison with the
impacts of CAFE standards. NHTSA does not have information, nor do the
commenters provide any specific information, indicating that the
inclusion of the impacts of these other regulations results in
undercounting of safety impacts attributable to the Preferred
Alternative. The purpose of calculating a reference baseline is to show
the world in the absence of further government action. If NHTSA chose
not to finalize the standards, the agency believes that the reference
baseline fatalities would still occur. As such, we disagree with the
authors' proposed suggestion.
---------------------------------------------------------------------------
\812\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
8.
---------------------------------------------------------------------------
Impacts of Vehicle Prices on Fleet Turnover
Vehicles have become safer over time through a combination of new
safety regulations and voluntary safety improvements. NHTSA expects
this trend to continue as emerging technologies, such as advanced
driver assistance systems, are incorporated into new vehicles. Safety
improvements will likely continue regardless of changes in the
standards.
As discussed in Section III.E.2, technologies added to comply with
fuel economy and efficiency standards have an impact on vehicle prices,
therefore slowing the acquisition of newer vehicles and retirement of
older ones. The delay in fleet turnover caused by the effect of new
vehicle prices affect safety by slowing the penetration of new safety
technologies into the fleet.
The standards also influence the composition of the light-duty
fleet. As the safety provided by light trucks, SUVs and passenger cars
responds differently to technology that manufacturers employ to meet
the standards--particularly mass reduction--fleets with different
compositions of body styles will have varying numbers of fatalities, so
changing the share of each type of light-duty vehicles in the projected
future fleet impacts safety outcomes.
Increased Driving Because of Better Fuel Economy
The ``rebound effect'' predicts consumers will drive more when the
cost of driving declines. More stringent standards reduce vehicle
operating costs, and in response, some consumers may choose to drive
more. Additional driving increases exposure to risks associated with
motor vehicle travel, and this added exposure translates into higher
fatalities and injuries. However, most fatalities associated with
rebound driving are the result of consumers choosing to drive more.
Therefore, most of the societal safety costs of rebound vehicle travel
are offset in our net benefits analysis.
The contributions of the three factors described above generate the
differences in safety outcomes among regulatory alternatives. NHTSA's
analysis makes extensive efforts to allocate the differences in safety
outcomes between the three factors. Fatalities expected during future
years under each alternative are projected by deriving a fleet-wide
fatality rate (fatalities per vehicle mile of travel) that incorporates
the effects of differences in each of the three factors from reference
baseline conditions and multiplying it by that alternative's expected
VMT. Fatalities are converted into a societal cost by multiplying
fatalities with the DOT-recommended value of a statistical life (VSL)
supplemented by economic impacts that are external to VSL measurements.
Traffic injuries and property damage are also modeled directly using
the same process and valued using costs that are specific to each
injury severity level.
All three factors influence predicted fatalities, but only two of
them--changes in vehicle mass and in the composition of the light-duty
fleet in response to changes in vehicle prices--impose increased risks
on drivers and passengers that are not compensated for by accompanying
benefits. In contrast, increased driving associated with the rebound
effect is a consumer choice that reveals the benefits of additional
travel. Consumers who choose to drive more have apparently concluded
that the utility of additional driving exceeds the additional costs for
doing so, including the crash risk that they perceive
[[Page 52693]]
additional driving involves. As discussed in Chapter 7 of the final
TSD, the benefits of rebound driving are accounted for by offsetting a
portion of the added safety costs.
For the safety component of the analysis for this final rule, NHTSA
assumed that HDPUVs have the same risk exposure as light trucks. Given
that the HDPUV fleet is significantly smaller than the light-duty
fleet, the sample size to derive safety coefficients separately for
HDPUVs is challenging. We believe that HDPUVs share many physical
commonalities with light trucks and the incidence and crash severity
are likely to be similar. As such, we concluded it was appropriate to
use the light truck safety coefficients for HDPUVs.
NHTSA is continuing to use the proposal's approach of including
non-occupants in the analysis. The agency categorizes safety outcome
through three measures of light-duty and HDPUV vehicle safety:
fatalities occurring in crashes, serious injuries, and the amount of
property damage incurred in crashes with no injuries. Counts of
fatalities to occupants of automobiles and non-occupants are obtained
from NHTSA's Fatal Accident Reporting System. Estimates of the number
of serious injuries to drivers and passengers of light-duty and HDPUV
vehicles are tabulated from NHTSA's General Estimates System (GES) for
1990-2015, and from its Crash Report Sampling System (CRSS) for 2016-
2019. Both GES and CRSS include annual samples of motor vehicle crashes
occurring throughout the United States. Weights for different types of
crashes were used to expand the samples of each type to estimates of
the total number of crashes occurring during each year. Finally,
estimates of the number of automobiles involved in property damage-only
crashes each year were also developed using GES.
NHTSA sought comment on its safety assumptions and methodology in
the proposal.
1. Mass Reduction Impacts
Vehicle mass reduction can be one of the more cost-effective means
of improving efficiency, particularly for makes and models not already
built with much high-strength steel or aluminum closures or low-mass
components. Manufacturers have stated that they will continue to reduce
mass of some of their models to meet more stringent standards, and
therefore, this expectation is incorporated into the modeling analysis
supporting the standards. Safety trade-offs associated with mass-
reduction have occurred in the past, particularly before standards were
attribute-based because manufacturers chose, in response to standards,
to build smaller and lighter vehicles; these smaller, lighter vehicles
did not fare as well in crashes as larger, heavier vehicles, on
average. Although NHTSA now uses attribute-based standards, in part to
reduce or eliminate the incentive to downsize vehicles to comply with
the standards, NHTSA must be mindful of the possibility of related
safety trade-offs. For this reason, NHTSA accounts for how the
application of MR to meet standards affects the safety of a specific
vehicle given changes in GVWR.
For this final rule, the agency employed the modeling technique,
which was developed in the 2016 Puckett and Kindelberger report and
used in the proposal, to analyze the updated crash and exposure data by
examining the cross sections of the societal fatality rate per billion
vehicle miles of travel (VMT) by mass and footprint, while controlling
for driver age, gender, and other factors, in separate logistic
regressions for five vehicle groups and nine crash types. NHTSA
utilized the relationships between weight and safety from this
analysis, expressed as percentage increases in fatalities per 100-pound
weight reduction (which is how MR is applied in the technology
analysis; see Section III.D.4), to examine the weight impacts applied
in this analysis. The effects of MR on safety were estimated relative
to (incremental to) the regulatory reference baseline in the analysis,
across all vehicles for MY 2021 and beyond. The analysis of MR includes
two opposing impacts. Research has consistently shown that MR affects
``lighter'' and ``heavier'' vehicles differently across crash types.
The 2016 Puckett and Kindelberger report found MR concentrated among
the heaviest vehicles is likely to have a beneficial effect on overall
societal fatalities, while MR concentrated among the lightest vehicles
is likely to have a detrimental effect on occupant fatalities but a
slight benefit to pedestrians and cyclists. This represents a
relationship between the dispersion of mass across vehicles in the
fleet and societal fatalities: decreasing dispersion is associated with
a decrease in fatalities. MR in heavier vehicles is more beneficial to
the occupants of lighter vehicles than it is harmful to the occupants
of the heavier vehicles. MR in lighter vehicles is more harmful to the
occupants of lighter vehicles than it is beneficial to the occupants of
the heavier vehicles.
To accurately capture the differing effect on lighter and heavier
vehicles, NHTSA splits vehicles into lighter and heavier vehicle
classifications in the analysis. However, this poses a challenge of
creating statistically meaningful results. There is limited relevant
crash data to use for the analysis. Each partition of the data reduces
the number of observations per vehicle classification and crash type,
and thus reduces the statistical robustness of the results. The
methodology employed by NHTSA was designed to balance these competing
forces as an optimal trade-off to accurately capture the impact of
mass-reduction across vehicle curb weights and crash types while
preserving the potential to identify robust estimates.
Loyola and Bradbury commented that smaller and lighter vehicles
built in response to the standards will increase the number of
fatalities but did not note any deficiencies in the agency's analysis
or consideration of mass-safety impacts.\813\ ACC and the Joint NGOs
commented that changes in vehicle design and materials technology may
lead to changes in relationships among vehicle mass and safety
outcomes.\814\ NHTSA has acknowledged this potential outcome across
multiple rulemakings and has continued to keep abreast of any new
developments; however, for the time being, NHTSA feels there is
insufficient data to support alternative estimates. NRDC further
commented that manufacturers are capable of applying MR to a greater
degree in heavier vehicles, yielding a net safety benefit to society.
The CAFE Model incorporates the relationship raised by NRDC and the
mass-size-safety coefficients applied in the model yield results
consistent with this relationship when MR is applied to heavier
vehicles more than lighter vehicles.
---------------------------------------------------------------------------
\813\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
8.
\814\ ACC, Docket No. NHTSA-2023-0022-60215, at 6 and 8-9; Joint
NGOs, Docket No. NHTSA-2023-0022-61944-2, at 72-3.
---------------------------------------------------------------------------
Multiple stakeholders commented that NHTSA failed to adequately
account for changes in vehicle mass associated with changing from ICE
to BEV platforms for a given vehicle model in the analysis of the
reference baseline.\815\ In related comments, ACC and the Aluminum
Association noted that BEVs are likely to have different safety
profiles than ICE vehicles. We note, however, that there are no safety
impacts resulting from a shift from ICE
[[Page 52694]]
to BEV platforms in NHTSA's central analysis of the impact of CAFE
standards because NHTSA's model is constrained such that no BEVs are
added to the fleet during standard-setting years as a result of an
increase in the stringency of CAFE standards. That is, any shift from
ICE vehicles to BEVs in the standard setting years is limited to
actions occurring in the reference baseline. In our analysis of the
reference baseline, we account for an expected increase in BEVs as a
result of market forces (like manufacturers' expected deployment of
electric vehicles consistent with levels required by California's ACC
II program) and regulatory requirements. However, while we acknowledge
that, all else equal, vehicle masses likely increase when shifting from
ICE to BEV platforms and BEVs may have distinct safety characteristics
relative to ICE vehicles across crash types, we have insufficient data
to account for how safety outcomes would be affected by shifting from
ICE to BEV platforms in the analysis of the reference baseline,
including insufficient information to justify an assumption that
changes in mass associated with BEV structural differences are
equivalent to changes in mass within ICE platforms. The CAFE Model is
not currently designed to account for differences in vehicle mass
associated with changes from ICE to BEV platforms. We are conducting
research to address this lack of data in future rulemakings, but for
this rule in the absence of sufficient data we have chosen to assume a
neutral net safety effect for mass (and center of gravity) changes
associated with shifts from ICE to BEV platforms for a given vehicle
model in the baseline analysis. We acknowledge that ICE and BEV
platforms for otherwise equivalent vehicles may differ in center of
gravity, frontal crush characteristics, and acceleration. This creates
uncertainty as to the validity of extrapolating observed mass-safety
relationships from ICE vehicles to BEVs, however, until there is
sufficient data and research to uncover an alternative relationship for
BEVs, we believe that our current approach is reasonable.
---------------------------------------------------------------------------
\815\ See, e.g., ACC, Docket No. NHTSA-2023-0022-60215, at 8-9;
Valero, Docket No. NHTSA-2023-0022-58547-2, at 7-8; KCGA, Docket No.
NHTSA-2023-0022-59007, at 4-5; The Aluminum Association, Docket No.
NHTSA-2023-0022-58486, at 4; Arconic, Docket No. NHTSA-2023-0022-
48374, at 2.
---------------------------------------------------------------------------
The Joint NGOs and Consumer Reports also commented that the
estimated mass-size-safety coefficients are statistically
insignificant.816 817 We have acknowledged this relationship
in this rulemaking along with previous rulemakings where the estimated
coefficients are not statistically significant at the 95 percent
confidence level. In this rulemaking, the distinction between using
insignificant estimates and zeroes is functionally moot because the
estimated societal safety impacts associated with changes in vehicle
mass associated with the rule are estimated to be zero in the Preferred
Alternative. Furthermore, courts have discouraged agencies from
excluding specific costs or benefits because the magnitude is
uncertain.\818\ Given the agency believes that the point estimates
still represent the best available data, NHTSA continues to include a
measurement of mass-safety impacts in its analysis.
---------------------------------------------------------------------------
\816\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-2, at 72-3.
\817\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 18.
\818\ CBD v. NHTSA, 538 F.3d 1172, 1198 (9th Cir. 2008).
---------------------------------------------------------------------------
A more detailed description of the mass-safety analysis can be
found in Chapter 7.2 of the Final TSD.
2. Sales/Scrappage Impacts
The sales and scrappage responses to higher vehicle prices
discussed in Section III.E.2 have important safety consequences and
influence safety through the same basic mechanism, fleet turnover. In
the case of the scrappage response, delaying fleet turnover keeps
drivers in older vehicles which tend to be less safe than newer
vehicles. Similarly, the sales response slows the rate at which newer
vehicles, and their associated safety improvements, enter the on-road
population. The sales response also influences the mix of vehicles on
the road-with more stringent CAFE standards leading to a higher share
of light trucks sold in the new vehicle market, assuming all else is
equal. Light trucks have higher rates of fatal crashes when interacting
with passenger cars and as earlier discussed, different directional
responses to MR technology based on the existing mass and body style of
the vehicle.
Any effect on fleet turnover (either from delayed vehicle
retirement or deferred sales of new vehicles) will affect the
distribution of both ages and MYs present in the on-road light duty and
HDPUV fleets. Because each of these vintages carries with it inherent
rates of fatal crashes, and newer vintages are generally safer than
older ones, changing that distribution will change the total number of
on-road fatalities under each regulatory alternative. Similarly, the
Dynamic Fleet Share (DFS) model captures the changes in the light-duty
fleet's composition of cars and trucks. As cars and trucks have
different fatality rates, differences in fleet composition across the
alternatives will affect fatalities.
At the highest level, NHTSA calculates the impact of the sales and
scrappage effects by multiplying the VMT of a vehicle by the fatality
risk of that vehicle. For this analysis, calculating VMT is rather
simple: NHTSA uses the distribution of miles calculated in Chapter 4.3
of the Final TSD. The trickier aspect of the analysis is creating
fatality rate coefficients. The fatality risk measures the likelihood
that a vehicle will be involved in a fatal accident per mile driven.
NHTSA calculates the fatality risk of a vehicle based on the vehicle's
MY, age, and style, while controlling for factors that are independent
of the intrinsic nature of the vehicle, such as behavioral
characteristics. Using this same approach, NHTSA designed separate
models for fatalities, non-fatal injuries, and property damaged
vehicles.
The vehicle fatality risk described above captures the historical
evolution of safety. Given that modern technologies are proliferating
faster than ever and offer greater safety benefits than traditional
safety improvements, NHTSA augmented the fatality risk projections with
knowledge about forthcoming safety improvements. NHTSA applied
estimates of the market uptake and improving effectiveness of crash
avoidance technologies to estimate their effect on the fleet-wide
fatality rate, including explicitly incorporating both the direct
effect of those technologies on the crash involvement rates of new
vehicles equipped with them, as well as the ``spillover'' effect of
those technologies on improving the safety of occupants of vehicles
that are not equipped with these technologies.
NHTSA's approach to measuring these impacts is to derive
effectiveness rates for these advanced crash-avoidance technologies
from safety technology literature. NHTSA then applies these
effectiveness rates to specific crash target populations for which the
crash avoidance technology is designed to mitigate, which are then
adjusted to reflect the current pace of adoption of the technology,
including any public commitment by manufacturers to install these
technologies. These technologies include Forward Collision Warning,
Automatic Emergency Braking, Lane Departure Warning, Lane Keep Assist,
Blind Spot Detection, Lane Change Assist, and Pedestrian Automatic
Emergency Braking. The products of these factors, combined across all 7
advanced technologies, produce a fatality rate reduction percentage
that is applied to the fatality rate trend model discussed above, which
projects both
[[Page 52695]]
vehicle and non-vehicle safety trends. The combined model produces a
projection of impacts of changes in vehicle safety technology as well
as behavioral and infrastructural trends. A much more detailed
discussion of the methods and inputs used to make these projections of
safety impacts from advanced technologies is included in Chapter 7.1 of
the Final TSD.
Loyola and Bradbury commented that the slowing of fleet turnover in
response to the standards will increase fatalities but did not note any
deficiencies in the agency's analysis or consideration of fleet
turnover impacts.\819\ As such, the agency believes it has
appropriately considered the issue the commenters raised.
---------------------------------------------------------------------------
\819\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
8.
---------------------------------------------------------------------------
Consumer Reports cited the sensitivity and uncertainty of NHTSA's
sales module, including the dynamic fleet share component and scrappage
model, and questioned the astuteness of including the safety impacts
from these effects. Consumer Reports also noted that they have not
observed these effects in practice. NHTSA thanks Consumer Reports for
providing their research in their comments. While the agency believes
their research is valuable, we were unable to arrive at the same
conclusions.\820\
---------------------------------------------------------------------------
\820\ The survey data collected by Consumer Reports on
consumers' willigness to pay is invalauble, but taking that survey
data and extrapolating about its potential impacts on fleet turnover
is too inferential for the agency's current rulemaking.
---------------------------------------------------------------------------
3. Rebound Effect Impacts
The additional VMT demanded due to the rebound effect is
accompanied by more exposure to risk, however, rebound miles are not
imposed on consumers by regulation. They are a freely chosen activity
resulting from reduced vehicle operational costs. As such, NHTSA
believes a large portion of the safety risks associated with additional
driving are offset by the benefits drivers gain from added driving. The
level of risk internalized by drivers is uncertain. This analysis
assumes that drivers of both HDPUV and light duty vehicles internalize
90 percent of this risk, which mostly offsets the societal impact of
any added fatalities from this voluntary consumer choice. Additional
discussion of internalized risk is contained in Chapter 7.5 of the TSD.
Consumer Reports commented that there is ``no evidence whatsoever
to support NHTSA's assumption that consumers internalize only 90% of
the safety risk'' and asks the agency to offset the entirety of rebound
fatalities.\821\ Alternatively, Consumer Reports suggests that even
though the agency's logic is sound for offsetting externality risks, if
the risk were not internalized, because rebound driving is voluntary,
it is still inappropriate to account for the increased fatality risks.
Consumer Reports also expressed concern about the precedent of
accounting for additional driving when consumers save money. The agency
appreciates Consumer Reports comment but has chosen not to adjust its
approach to offsetting rebound safety for the final rule. We agree with
Consumer Reports that there is a dearth of evidence to support a 90
percent offset, but the agency also notes that there is no evidence to
support a higher offset either. Accounting for rebound effects does not
set a broader precedent beyond fuel efficiency rules. The rebound
effect is generally recognized to be the phenomena of using more of an
energy consuming product when its operating costs decline rather than
how consumers will use energy consuming products as their income
increases.
---------------------------------------------------------------------------
\821\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 18.
---------------------------------------------------------------------------
4. Value of Safety Impacts
Fatalities, nonfatal injuries, and property damage crashes are
valued as a societal cost within the CAFE Model's cost and benefit
accounting. Their value is based on the comprehensive value of a
fatality, which includes lost quality of life and is quantified in the
VSL as well as economic consequences such as medical and emergency
care, insurance administrative costs, legal costs, and other economic
impacts not captured in the VSL alone. These values were first derived
from data in Blincoe et al. (2015), updated in Blincoe et al. (2023),
and adjusted to 2021 dollars, and updated to reflect the official DOT
guidance on the VSL.
Nonfatal injury costs, which differ by severity, were weighted
according to the relative incidence of injuries across the Abbreviated
Injury Scale (AIS). To determine this incidence, NHTSA applied a KABCO/
MAIS translator to CRSS KABCO based injury counts from 2017 through
2019. This produced the MAIS-based injury profile. This profile was
used to weight nonfatal injury unit costs derived from Blincoe et al.
(2023), adjusted to 2021 economics and updated to reflect the official
DOT guidance on the VSL. Property-damaged vehicle costs were also taken
from Blincoe et al (2023). and adjusted to 2021 economics.
For the analysis, NHTSA assigns a societal value of $12.2 million
for each fatality, $181,000 for each nonfatal injury, and $8,400 for
each property damaged vehicle. As discussed in the previous section,
NHTSA discounts 90% of the safety costs associated with the rebound
effect. The remaining 10% of those safety costs are not considered to
be internalized by drivers and appear as a cost of the standards that
influence net benefits. Similarly, the effects on safety attributable
to changes in mass and fleet turnover are not considered costs
internalized by drivers since manufacturers are responsible for
deciding how to design and price vehicles. The costs not internalized
by drivers is therefore the summation of the mass-safety effects, fleet
turnover effects, and the remaining 10% of rebound-related safety
effects.
IV. Regulatory Alternatives Considered in This Final Rule
A. General Basis for Alternatives Considered
Agencies typically consider regulatory alternatives in order to
evaluate the comparative effects of different potential ways of
implementing their statutory authority to achieve their intended policy
goals. NEPA requires agencies to compare the potential environmental
impacts of their actions to a reasonable range of alternatives. E.O.
12866 and E.O. 13563, as well as OMB Circular A-4, also request that
agencies evaluate regulatory alternatives in their rulemaking analyses.
Alternatives analysis begins with a ``No-Action'' Alternative,
typically described as what would occur in the absence of any further
regulatory action by the agency. OMB Circular A-4 states that ``the
choice of an appropriate baseline may require consideration of a wide
range of potential factors, including:
evolution of markets;
changes in regulations promulgated by the agency or other
government entities;
other external factors affecting markets;
the degree of compliance by regulated entities with other
regulations; and
the scale and number of entities or individuals that will
be subject to, or experience the benefits or costs of, the
regulation.'' \822\
---------------------------------------------------------------------------
\822\ See Office of Management and Budget. 2023. Circular A-4.
General Issues, 4. Developing an Analytic Baseline. Available at:
https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf. (Accessed: Apr. 4, 2024).
---------------------------------------------------------------------------
[[Page 52696]]
This final rule includes a No-Action Alternative for passenger cars
and light trucks and a No-Action alternative for HDPUVs, both described
below; five ``action alternatives'' for passenger cars and light
trucks; and four action alternatives for HDPUVs. Within both the set of
alternatives that apply to passenger cars and light trucks and the set
of alternatives that apply to HDPUVs, one alternative is identified as
the ``Preferred Alternative,'' which is NEPA parlance. In some places
the Preferred Alternative may also be referred to as the ``standards''
or ``final standards,'' but NHTSA intends ``standards'' and ``Preferred
Alternative'' to be used interchangeably for purposes of this final
rule. NHTSA believes the range of No-Action and action alternatives for
each set of standards appropriately comports with CEQ's directive that
``agencies shall . . . limit their consideration to a reasonable number
of alternatives.'' \823\
---------------------------------------------------------------------------
\823\ 40 CFR 1502.14(f).
---------------------------------------------------------------------------
The different regulatory alternatives for passenger cars and light
trucks are defined in terms of percent-changes in CAFE stringency from
year to year. Readers should recognize that those year-over-year
changes in stringency are not measured in terms of mile per gallon
differences (as in, 1 percent more stringent than 30 mpg in one year
equals 30.3 mpg in the following year), but rather in terms of shifts
in the footprint functions that form the basis for the actual CAFE
standards (as in, on a gallon per mile basis, the CAFE standards change
by a given percentage from one model year to the next).\824\
---------------------------------------------------------------------------
\824\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
---------------------------------------------------------------------------
For PCs, consistent with prior rulemakings, NHTSA is defining final
fuel economy targets as shown in Equation IV-1.
[GRAPHIC] [TIFF OMITTED] TR24JN24.064
Where:
TARGETFE is the fuel economy target (in mpg) applicable
to a specific vehicle model type with a unique footprint
combination,
a is a minimum fuel economy target (in mpg),
b is a maximum fuel economy target (in mpg),
c is the slope (in gallons per mile per square foot, or gpm per
square foot), of a line relating fuel consumption (the inverse of
fuel economy) to footprint, and
d is an intercept (in gpm) of the same line.
Here, MIN and MAX are functions that take the minimum and maximum
values, respectively, of the set of included values. For example,
MIN[40, 35] = 35 and MAX(40, 25) = 40, such that MIN[MAX(40, 25), 35] =
35.
The resultant functional form is reflected in graphs displaying the
passenger car target function in each model year for each regulatory
alternative in Sections IV.B.1 and IV.B.3.
For LTs, also consistent with prior rulemakings, NHTSA is defining
fuel economy targets as shown in Equation IV-2.
[GRAPHIC] [TIFF OMITTED] TR24JN24.065
Where:
TARGETFE is the fuel economy target (in mpg) applicable
to a specific vehicle model type with a unique footprint
combination,
a, b, c, and d are as for PCs, but taking values specific to LTs,
e is a second minimum fuel economy target (in mpg),
f is a second maximum fuel economy target (in mpg),
g is the slope (in gpm per square foot) of a second line relating
fuel consumption (the inverse of fuel economy) to footprint), and
h is an intercept (in gpm) of the same second line.
NHTSA is defining HDPUV fuel efficiency targets as shown in
Equation IV-3:
[GRAPHIC] [TIFF OMITTED] TR24JN24.066
Where:
c is the slope of the gasoline, CNG, Strong Hybrid, and PHEV work
factor target curve in gal/100 mile per WF
For diesel engines, BEVs and FCEVs, c will be replaced with e
d is the gasoline CNG, Strong Hybrid, and PHEV minimum fuel
consumption work factor target curve value in gal/100 mile
For diesel engines, BEVs and FCEVs, d will be replaced with f
WF = Work Factor = [0.75 x (Payload Capacity + Xwd)] + [0.25 x Towing
Capacity]
Where:
[[Page 52697]]
Xwd = 4wd adjustment = 500 lbs. if the vehicle group is equipped
with 4wd and all-wheel drive (AWD), otherwise equals 0 lbs. for 2wd
Payload Capacity = GVWR (lbs.)-Curb Weight (lbs.) (for each vehicle
group)
Towing Capacity = GCWR (lbs.)-GVWR (lbs.) (for each vehicle group)
In a departure from recent CAFE rulemaking trends, for this final
rule, we have applied different rates of increase to the passenger car
and the light truck fleets in different model years. For the Preferred
Alternative, rather than have both fleets increase their respective
standards at the same rate, passenger car standards will increase at a
steady rate year over year, while light truck standards will not
increase for a few years before beginning to rise again at the
passenger car rate. Several action alternatives evaluated for this
final rule have passenger car fleet rates-of-increase of fuel economy
that are different from the rates-of-increase of fuel economy for the
light truck fleet, while the Preferred Alternative has the same rate of
increase for passenger cars and light trucks for three out of the five
model years. NHTSA has discretion, by law, to set CAFE standards that
increase at different rates for cars and trucks, because NHTSA must set
maximum feasible CAFE standards separately for cars and trucks.\825\
---------------------------------------------------------------------------
\825\ See, e.g., the 2012 final rule establishing CAFE standards
for model years 2017 and beyond, in which rates of stringency
increase for passenger cars and light trucks were different. 77 FR
62623, 62638-39 (Oct. 15, 2012).
---------------------------------------------------------------------------
For HDPUVs, the different regulatory alternatives are also defined
in terms of percent-increases in stringency from year to year, but in
terms of fuel consumption reductions rather than fuel economy
increases, so that increasing stringency appears to result in standards
going down (representing a direct reduction in fuel consumed) over time
rather than up. Also, unlike for the passenger car and light truck
standards, because HDPUV standards are in fuel consumption space, year-
over-year percent changes actually do represent gallon/mile differences
across the work-factor range. For the Preferred Alternative, the
stringency increases at one fixed percentage rate in each the first
three model years, and a different fixed percentage rate in each of the
remaining three model years in the rulemaking time frame. Under the
other action alternatives, the stringency changes at the same
percentage rate in each model year in the rulemaking time frame. One
action alternative is less stringent than the Preferred Alternative for
HDPUVs, and two action alternatives are more stringent.
B. Regulatory Alternatives Considered
The regulatory alternatives considered by the agency in this final
rule are presented here as the percent-changes-per-year that they
represent. The sections that follow will present the alternatives as
the literal coefficients that define standards curves increasing at the
given percentage rates.
[GRAPHIC] [TIFF OMITTED] TR24JN24.067
[GRAPHIC] [TIFF OMITTED] TR24JN24.068
A variety of factors will be at play simultaneously as
manufacturers seek to comply with the final standards that NHTSA is
promulgating. NHTSA, EPA, and CARB will all be regulating
simultaneously; manufacturers will be
[[Page 52698]]
responding to those regulations as well as to foreseeable shifts in
market demand during the rulemaking time frame (both due to cost/price
changes for different types of vehicles over time, fuel price changes,
and the recently-passed tax credits for BEVs and PHEVs). Many costs and
benefits that will accrue as a result of manufacturer actions during
the rulemaking time frame will be occurring for reasons other than CAFE
standards, and NHTSA believes it is important to try to reflect many of
those factors in order to present a more accurate picture of the
effects of different potential CAFE and HDPUV standards to decision-
makers and to the public. Because the EPA and NHTSA programs were
developed in coordination jointly, and stringency decisions were made
in coordination, NHTSA did not incorporate EPA's only recently-
finalized CO2 standards as part of the analytical reference
baseline for the main analysis. The fact that EPA finalized its rule
before NHTSA is an artifact of circumstance only.
The following sections define each regulatory alternative,
including the No-Action Alternative, for each program, and explain
their derivation.
1. Reference Baseline/No-Action Alternative
As with the 2022 final rule, our No-Action Alternative (also
referred to as the reference baseline) is fairly nuanced. In this
analysis, the reference No-Action Alternative assumes:
The existing (through model year 2026) national CAFE and
GHG standards are met, and that the CAFE and GHG standards for model
year 2026 finalized in 2022 continue in perpetuity.\826\
---------------------------------------------------------------------------
\826\ NHTSA recognizes EPA published their Multi-Pollutant
Emissions Standards For Model Years 2027 and Later Light-Duty and
Medium-Duty Vehicles rule before this final rule is published,
however, EPA's newest standards were not included in the baseline
analysis, as the agencies developed their respective 27+ standards
jointly.
---------------------------------------------------------------------------
Manufacturers who committed to the California Framework
Agreements met their contractual obligations for model year 2022.
The HDPUV model year 2027 standards finalized in the
NHTSA/EPA Phase 2 program continue in perpetuity.
Manufacturers will comply with the Advanced Clean Trucks
(ACT) program that California and other states intend to implement
through 2035.
Manufacturers will, regardless of the existence or non-
existence of a legal requirement, produce additional electric vehicles
consistent with the levels that would be required under the ZEV/
Advanced Clean Cars II program, if it were to be granted a Clean Air
Act preemption waiver.
Manufacturers will make production decisions in response
to estimated market demand for fuel economy or fuel efficiency,
considering estimated fuel prices, estimated product development
cadence, the estimated availability, applicability, cost, and
effectiveness of fuel-saving technologies, and available tax credits.
NHTSA continues to believe that to properly estimate fuel
economies/efficiencies (and achieved CO2 emissions) in the
No-Action Alternative, it is necessary to simulate all of these legal
requirements, additional deployment plans of automakers, and other
influences affecting automakers and vehicle design simultaneously.\827\
Consequently, the CAFE Model evaluates each requirement in each model
year, for each manufacturer/fleet. Differences among fleets and
compliance provisions often create over-compliance in one program, even
if a manufacturer is able to exactly comply (or under-comply) in
another program. This is similar to how manufacturers approach the
question of concurrent compliance in the real world--when faced with
multiple regulatory programs, the most cost-effective path may be to
focus efforts on meeting one or two sets of requirements, even if that
results in ``more effort'' than would be necessary for another set of
requirements, in order to ensure that all regulatory obligations are
met. We elaborate on those model capabilities below. Generally
speaking, the model treats each manufacturer as applying the following
logic when making technology decisions, both for simulating passenger
car and light truck compliance, and HDPUV compliance, with a given
regulatory alternative:
---------------------------------------------------------------------------
\827\ To be clear, this is for purposes of properly estimating
the No-Action Alternative, which represents what NHTSA believes is
likely to happen in the world in the absence of future NHTSA
regulatory action. NHTSA does not attempt to simulate further
application of BEVs, for example, in determining amongst the action
alternatives for passenger cars and light trucks which one would be
maximum feasible, because the statute prohibits NHTSA from
considering the fuel economy of BEVs in determining maximum feasible
CAFE standards.
---------------------------------------------------------------------------
1. What do I need to carry over from last year?
2. What should I apply more widely in order to continue sharing
(of, e.g., engines) across different vehicle models?
3. What new BEVs do I need to build in order to satisfy the various
state ZEV programs and voluntary deployment of electric vehicles
consistent with ACC II?
4. What further technology, if any, could I apply that would enable
buyers to recoup additional costs within 30 months after buying new
vehicles?
5. What additional technology, if any, should I apply to respond to
potential new CAFE and CO2 standards for PCs and LTs, or to
potential new HDPUV standards?
Additionally, within the context of 4 and 5, the CAFE Model may
consider, as appropriate and allowed by statutory restrictions on
technology application for a given model year, the applicability of
recently-passed tax credits for battery-based vehicle technologies,
which improve the attractiveness of those technologies to consumers and
thus the model's likelihood of choosing them as part of a compliance
solution. The model can also apply over-compliance credits if
applicable and not legally prohibited. The CAFE Model simulates all of
these simultaneously. As mentioned above, this means that when
manufacturers make production decisions in response to actions or
influences other than CAFE or HDPUV standards, those costs and benefits
are not attributable to possible future CAFE or HDPUV standards. This
approach allows the analysis to isolate the effects of the decision
being made on the appropriate CAFE standards, as opposed to the effects
of many things that will be occurring simultaneously.
To account for the existing CAFE standards finalized in model year
2026 for passenger cars and light trucks, the No-Action Alternative
includes the following coefficients defining those standards, which
(for purposes of this analysis) are assumed to persist without change
in subsequent model years:
[[Page 52699]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.069
[GRAPHIC] [TIFF OMITTED] TR24JN24.070
These coefficients are used to create the graphic below, where the
x-axis represents vehicle footprint and the y-axis represents fuel
economy, showing that in ``CAFE space,'' targets are higher in fuel
economy for smaller footprint vehicles and lower for larger footprint
vehicles.
---------------------------------------------------------------------------
\828\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
\829\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equations IV-1, IV-2, and IV-3, respectively. See
Final TSD Chapter 1.2.1 for a complete discussion about the
footprint and work factor curve functions and how they are
calculated.
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[[Page 52700]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.071
Additionally, EPCA, as amended by EISA, requires that any
manufacturer's domestically-manufactured passenger car fleet must meet
the greater of either 27.5 mpg on average, or 92 percent of the average
fuel economy projected by the Secretary for the combined domestic and
non-domestic passenger automobile fleets manufactured for sale in the
United States by all manufacturers in the model year. NHTSA retains the
1.9 percent offset to the Minimum Domestic Passenger Car Standard
(MDPCS), first used in the 2020 final rule, to account for recent
projection errors as part of estimating the total passenger car fleet
fuel economy, and used in rulemakings since.830 831 The
projection shall be published in the Federal Register when the standard
for that model year is promulgated in accordance with 49 U.S.C.
32902(b).832 833 For purposes of the No-Action Alternative,
the MDPCS is as it was established in the 2022 final rule for model
year 2026, as shown in Table IV-5 below:
---------------------------------------------------------------------------
\830\ Section VI.A.2 (titled ``Separate Standards for Passenger
Cars, Light Trucks, and Heavy-Duty Pickups and Vans, and Minimum
Standards for Domestic Passenger Cars'') discusses the basis for the
offset.
\831\ 87 FR 25710 (May 2, 2022).
\832\ 49 U.S.C. 32902(b)(4).
\833\ The offset will be applied to the final regulation
numbers, but was not used in this analysis. The values for the MDPCS
for the action alternatives are nonadjusted values.
[GRAPHIC] [TIFF OMITTED] TR24JN24.072
To account for the HDPUV standards finalized in the Phase 2 rule,
the No-Action Alternative for HDPUVs includes the following
coefficients defining those standards, which (for purposes of this
analysis) are assumed to persist without change in subsequent model
years:
[[Page 52701]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.073
[GRAPHIC] [TIFF OMITTED] TR24JN24.074
These equations are represented graphically below:
---------------------------------------------------------------------------
\834\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
\835\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
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[[Page 52702]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.075
[GRAPHIC] [TIFF OMITTED] TR24JN24.076
[[Page 52703]]
As the reference baseline scenario, the No-Action Alternative also
includes the following additional actions that NHTSA believes will
occur in the absence of further regulatory action by NHTSA:
To account for the existing national GHG emissions standards, the
No-Action Alternative for passenger cars and light trucks includes the
following coefficients defining the GHG standards set by EPA in 2022
for model year 2026, which (for purposes of this analysis) are assumed
to persist without change in subsequent model years:
[GRAPHIC] [TIFF OMITTED] TR24JN24.077
[GRAPHIC] [TIFF OMITTED] TR24JN24.078
Coefficients a, b, c, d, e, and f define the model year 2026
Federal CO2 standards for passenger cars and light trucks,
respectively, in Table IV-8 and Table IV-9 above. Analogous to
coefficients defining CAFE standards, coefficients a and b specify
minimum and maximum CO2 targets in each model year.
Coefficients c and d specify the slope and intercept of the linear
portion of the CO2 target function, and coefficients e and f
bound the region within which CO2 targets are defined by
this linear form.
To account for the NHTSA/EPA Phase 2 national GHG emission
standards, the No-Action Alternative for HDPUVs includes the following
coefficients defining the WF based standards set by EPA for model year
2027 and beyond. The four-wheel drive coefficient is maintained at 500
(coefficient `a') and the weighting multiplier coefficient is
maintained at 0.75 (coefficient `b'). The CI and SI coefficients are in
the tables below:
[GRAPHIC] [TIFF OMITTED] TR24JN24.079
[GRAPHIC] [TIFF OMITTED] TR24JN24.080
[[Page 52704]]
Coefficients c, d, e, and f define the existing model year 2027 and
beyond CO2 standards from Phase 2 rule for HDPUVs, in Table
III-10 and Table III-11 above. The coefficients are linear work-factor
based function with c and d representing gasoline, CNG vehicles, SHEVs
and PHEVS and e and f representing diesels, BEVS and FCEVs. For this
rulemaking, this is identical to the NHTSA's fuel efficiency standards
No Action alternative.
The reference baseline No-Action Alternative also includes NHTSA's
estimates of ways that each manufacturer could introduce new PHEVs and
BEVs in response to state ZEV programs and additional production of
PHEVs and BEVs that manufacturers have indicated they will undertake
consistent with ACC II, regardless of whether it becomes a legal
requirement.\836\ To account for manufacturers' expected compliance
with the ACC I and ACT programs and additional deployment of electric
vehicles consistent with ACC II, NHTSA has included the main provisions
of the ACC, ACC II, (as currently submitted to EPA), and ACT programs
in the CAFE Model's analysis. Incorporating these programs into the
model includes converting vehicles that have been identified as
potential ZEV candidates into battery-electric vehicles (BEVs) and
taking into account PHEVs that meet the ZEV PHEV credit requirements so
that a manufacturer's fleet meets the calculated ZEV credit
requirements or anticipated voluntary compliance. The CAFE Model makes
manufacturer fleets consistent with ACC I, ACC II (as currently
submitted to EPA), and ACT first in the reference baseline, then solves
for the technology pathway used to meet increasing ZEV penetration
levels described by the state programs. Chapter 2.3 of the Final TSD
discusses, in detail, how NHTSA developed these estimates.
---------------------------------------------------------------------------
\836\ NHTSA interprets EPCA/EISA as allowing consideration of
BEVs and PHEVs built in response to state ZEV programs or voluntary
deployed by automakers independent of NHTSA's standards as part of
the analytical baseline because (1) 49 U.S.C. 32902(h) clearly
applies to the ``maximum feasible'' determination made under 49
U.S.C. 32902(f), which is a determination between regulatory
alternatives, and the baseline is simply the backdrop against which
that determination is made, and (2) NHTSA continues to believe that
it is arbitrary to interpret 32902(h) as requiring NHTSA to pretend
that BEVs and PHEVs clearly built for non-CAFE-compliance reasons do
not exist, because doing so would be unrealistic and would bias
NHTSA's analytical results by inaccurately attributing costs and
benefits to future potential CAFE standards that will not accrue as
a result of those standards in real life.
---------------------------------------------------------------------------
Several stakeholders commented in support of NHTSA's inclusion of
state ZEV programs and assumptions regarding other electric vehicles
that will be deployed in the absence of legal requirements in the
reference baseline.\837\ The States and Cities, for example, commented
that ``[g]iven NHTSA's duty to project a No-Action baseline that
accounts for sharply growing zero emission vehicle sales, modeling
compliance with California's Advanced Clean Cars I (``ACCI''), Advanced
Clean Cars II (``ACCII''), and Advanced Clean Trucks (``ACT'')
regulations is a reasonable methodology to do so, at least in the event
that California is granted its requested waiver for ACCII and ACCII
thus becomes enforceable.'' \838\ Similarly, the Joint NGOs commented
that ``consistent with EPCA's language, history, and legislative
intent, NHTSA models an accurate, real-world `no action' baseline for
the rulemaking, a task that requires a rational accounting of the real-
world BEVs and PHEVs projected to exist in the absence of the CAFE
standards NHTSA is considering. . . . NHTSA has done so here.'' \839\
---------------------------------------------------------------------------
\837\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 40; Joint NGOs, Docket No. NHTSA-2023-0022-61944,
Attachment 2, at 56-57; ALA, Docket No. NHTSA-2023-0022-60091, at 2-
3; Tesla, Docket No. NHTSA-2023-0022-60093, at 7.
\838\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 40.
\839\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Attachment
2, at 56-57.
---------------------------------------------------------------------------
Some stakeholders commented about uncertainties that they believe
could impact the reference baseline. For example, Kia commented that
``[w]hile automakers will plan to comply with the regulations, there is
great uncertainty as to whether automakers have the capacity to do so,
whether the California ZEV mandate will remain as currently written
through 2035, whether states that have adopted it will remain in the
program, and whether California will be granted a waiver.'' \840\
---------------------------------------------------------------------------
\840\ Kia, Docket No. NHTSA-2023-0022-58542-A1, at 4-5.
---------------------------------------------------------------------------
Other stakeholders commented in explicit opposition to modeling
state ZEV programs in the reference baseline.\841\ Stakeholders
asserted that NHTSA could not account for state ZEV programs in the
light-duty standards reference baseline because of EPCA/EISA's
statutory prohibition on considering electric vehicle fuel economy in
49 U.S.C. 32902(h). Several of these commenters objected in particular
to NHTSA's use of OMB Circular A-4 to guide the development of the
light-duty regulatory reference baseline, as they believe that Circular
A-4 cannot ``trump a clear statutory requirement,'' referring to 49
U.S.C. 32902(h).\842\ Stakeholders also commented that state ZEV
programs should not be included in the reference baseline because they
are preempted by various federal laws,\843\ and/or because EPA has not
yet granted a waiver of preemption to California for the ACC II
program.\844\ Commenters opposing the inclusion of state ZEV programs
in the reference baseline also alleged that it was a backdoor way to
establish an EV mandate when setting CAFE standards.845 846
---------------------------------------------------------------------------
\841\ Growth Energy, Docket No. NHTSA-2023-0022-61555, at 1;
KCGA, Docket No. NHTSA-2023-0022-59007, at 2; RFA, NCGA, and NFU,
Docket No. NHTSA-2023-0022-57625; NCB, Docket No. NHTSA-2023-0022-
53876; CEA, Docket No. NHTSA-2023-0022-61918, at 6; Corn Growers
Associations, Docket No. NHTSA-2023-0022-62242, at 4; ACE, Docket
No. NHTSA-2023-0022-60683; The Alliance, Docket No. NHTSA-2023-0022-
60652, Attachment 3, at 8-13; Toyota, Docket No. NHTSA-2023-0022-
61131, at 2, 23; AmFree, Docket No. NHTSA-2023-0022-62353, at 4;
AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at 23;
Stellantis, Docket No. NHTSA-2023-0022-61107, at 9; POET, Docket No.
NHTSA-2023-0022-61561, at 13-16.
\842\ E.g., The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 0, at 2.
\843\ RFA, NCGA, and NFU, Docket No. NHTSA-2023-0022-57625; CEA,
Docket No. NHTSA-2023-0022-61918, at 9; Corn Growers Associations,
Docket No. NHTSA-2023-0022-62242, at 6-8; AFPM, Docket No. NHTSA-
2023-0022-61911, Attachment 2, at 22.
\844\ Valero, Docket No. NHTSA-2023-0022-58547, at 5; Hyundai,
Docket No. NHTSA-2023-0022-51701, at 5; Nissan, Docket No. NHTSA-
2023-0022-60684, at 4; The Alliance, Docket No. NHTSA-2023-0022-
60652, Attachment 3, at 8-13; AFPM, Docket No. NHTSA-2023-0022-
61911, Attachment 2, at 23; Corn Growers Associations, Docket No.
NHTSA-2023-0022-62242, at 8.
\845\ Valero, Docket No. NHTSA-2023-0022-58547, Attachments A,
B, C, and D. Valero gave as an example vehicle models that were
flagged in the analysis fleet as BEV ``clones'' turning into BEVs
from model year 2022 to model year 2027 and later. However NHTSA has
confirmed that is exactly how our modeling of the ZEV program was
intended to operate. NHTSA directs Valero to TSD Chapter 2.5, which
describes when ZEV clones are created and when sales volume is
assigned to those clones for ZEV program compliance, and the CAFE
Model Documentation, which describes how the CAFE Model implements
restrictions surrounding BEV technology unrelated to ZEV modeling.
\846\ See, e.g., CEA, Docket No. NHTSA-2023-0022-61918, at 12.
CEA stated that ``NHTSA's baseline is a federal `insurance' policy
in the event that state mandates are repealed or struck down by the
courts--a federal regulatory `horcrux' that'll ensure the continued
survival of these state laws even if they are killed elsewhere.'' It
should be noted that while a horcrux and this commenter's implied
definition of a ``federal `insurance' policy'' would function
similarly in their ability to preserve and protect, the creation
process for each would be markedly dissimilar. Moreover, even if
NHTSA's baseline was a ``horcrux,'' the agency would liken it to the
horcrux in Harry Potter himself: It was created organically as a
product of the circumstances, and even after attempts to be struck
down, the Advanced Clean Car program does still live. Ohio v.
E.P.A., No. 22-1081 (D.C. Cir. Apr. 9, 2024).
---------------------------------------------------------------------------
Toyota did not explicitly object to NHTSA's consideration of state
ZEV
[[Page 52705]]
regulatory programs in the reference baseline but stated that ``NHTSA
should consider the impact of the EVs stemming from both the ZEV
Mandate and the GHG Program, but then use that knowledge to establish
economically practicable CAFE standards for the remining ICEs in the
U.S. fleet, thereby simultaneous[sic] satisfying 49 U.S.C. 32902(h).
For example, if 45 percent of a projected 17 million vehicle fleet in
2030 model year will be electrified due to other government programs,
CAFE standards would be set for the remaining 9.4 million ICE and
hybrid vehicles.'' \847\
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\847\ Toyota, Docket No. NHTSA-2023-0022-61131, at 24.
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Several stakeholders also commented about specific assumptions used
in the ZEV modeling such as the number of states signed on to the
program, how some compliance obligations should be assumed to be met
through credits, and assumptions around PHEV credit values; those
comments are addressed in Section III.C.5, above.
NHTSA agrees with commenters that the agency has a duty to model a
reference baseline that includes increasing zero emission vehicle sales
in response to state standards, and that the agency's methodology for
doing so is consistent with EPCA's language, history, and legislative
intent. NHTSA continues to believe that it is appropriate for the
reference baseline to reflect legal obligations other than CAFE
standards that automakers will be meeting and additional non-regulatory
deployment of electric vehicles during this time period so that the
regulatory analysis can identify the distinct effects of the CAFE
standards. Information provided by California continues to show there
has been industry compliance with the ZEV standards,\848\ which
provides further confirmation that manufacturers will meet legally-
binding state standards. This is also confirmed by manufacturers'
stated intent to deploy electric vehicles consistent with what would be
required under ACC II, regardless of whether it becomes a binding legal
obligation, as discussed in more detail below.
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\848\ California Air Resources Board, Annual ZEV Credits
Disclosure Dashboard, available at https://ww2.arb.ca.gov/applications/annual-zev-credits-disclosure-dashboard (accessed April
12, 2024).
---------------------------------------------------------------------------
In response to comments opposing the inclusion of state ZEV
programs in the reference baseline because doing so conflicts with 49
U.S.C. 32902(h), NHTSA maintains that it is perfectly possible to give
meaningful effect to the 49 U.S.C. 32902(h) prohibition by not allowing
the CAFE Model to rely on ZEV (or other dedicated alternative fuel)
technology during the rulemaking time frame, while still acknowledging
the clear reality that the state ZEV programs exist, and manufacturers
are complying with them, just like the agency acknowledges that
electric vehicles exist in the fleet independent of the ZEV program.
Comments regarding whether including state ZEV programs in the
reference baseline is consistent with 49 U.S.C. 32902(h) are discussed
in more detail below in Section VI.A.5.a.(5), and in the final rule for
model years 2024-2026 CAFE standards.\849\ Regarding commenters' views
that state ZEV programs are preempted, NHTSA addressed preemption in
the agency's 2021 rulemaking, and further discussion is located in the
NPRM and final rule for that rulemaking.\850\ In that rulemaking, the
agency expressed ``significant doubts as to the validity'' of
preemption positions similar to those raised by commenters here.\851\
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\849\ 87 FR 25899-900 (May 2, 2022).
\850\ CAFE Preemption. 86 FR 25,980 (May 12, 2021); 86 FR 74,236
(Dec. 29, 2021).
\851\ See 86 FR 25,980, 25,990.
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NHTSA also disagrees that including state ZEV programs in the
reference baseline is a way to, according to commenters, ``bypass''
limitations in 49 U.S.C. 32902(h). ACC I is a relevant legal
requirement that manufacturers must meet,\852\ and as mentioned above,
manufacturers are not just meeting those standards, they are exceeding
them.\853\ Further, manufacturers have indicated their intent to deploy
electric vehicles consistent with what would be required under ACC II,
regardless of whether it becomes a binding legal obligation. Vehicle
manufacturers told NHTSA, in CBI conversations regarding planned
vehicle product and technology investments, that they are complying
with and plan to comply in the future with ZEV programs.\854\ These
conversations were later confirmed by manufacturers' subsequent public
announcements, confirming both their support for California's programs
and for meeting their own stated electrification goals, which are
discussed in extensive detail below.
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\852\ Ohio v. E.P.A., No. 22-1081 (D.C. Cir. Apr. 9, 2024).
\853\ California Air Resources Board, Annual ZEV Credits
Disclosure Dashboard, available at https://ww2.arb.ca.gov/applications/annual-zev-credits-disclosure-dashboard (accessed April
12, 2024).
\854\ Docket ID NHTSA-2023-0022-0007, Docket Submission of Ex
Parte Meetings Prior to Publication of the Corporate Average Fuel
Economy Standards for Passenger Cars and Light Trucks for Model
Years 2027-2032 and Fuel Efficiency Standards for Heavy-Duty Pickup
Trucks and Vans for Model Years 2030-2035 Notice of Proposed
Rulemaking.
---------------------------------------------------------------------------
Kia, stating in their comments that ``automakers will plan to
comply with the regulations,'' joins a list of OEMs that have
established that they are planning technology decisions to comply with
state ZEV program deployment levels: Stellantis in a recent agreement
with California confirmed that they will explicitly comply with the ACC
programs through 2030; \855\ General Motors sent a letter to California
Governor Gavin Newsom both recognizing California's authority under the
Clean Air Act to set vehicle emissions standards and expressing its
commitment to ``emissions reductions that are aligned with the
California Air Resources Board's targets and . . . complying with
California's regulations'',\856\ and Ford, Volkswagen, BMW, Honda, and
Volvo formed a group of five manufacturers that committed in 2020 to
comply with ZEV program requirements and have since reiterated their
support for California's programs in a lengthy declaration to the D.C.
Circuit Court of Appeals.\857\ Not only have all three domestic
automakers expressed support for California's standards, several other
automakers have followed suit in explicitly expressing support for
California's programs, as shown above.
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\855\ California Air Resources Board, California announces
partnership with Stellantis to further emissions reductions (March
19, 2024), available at https://ww2.arb.ca.gov/news/california-announces-partnership-stellantis-further-emissions-reductions.
\856\ Hayley Harding, GM to recognize California emissions
standards, allowing state to buy its fleet vehicles, The Detroit
News (Jan. 9, 2022), available at https://www.detroitnews.com/story/business/autos/general-motors/2022/01/09/gm-recognizes-calif-emission-standards-opening-door-fleet-sales/9153355002/.
\857\ Initial Brief for Industry Respondent-Intervenors
(Document #1985804, filed February 13, 2023) in Ohio v. E.P.A., No.
22-1081 (D.C. Cir. Apr. 9, 2024); California Air Resources Board,
Zero-Emission Vehicle Program, available at https://ww2.arb.ca.gov/our-work/programs/zero-emission-vehicle-program/about.
---------------------------------------------------------------------------
Further, automakers have publicly signaled their commitment to the
EV transition at levels that well exceed the 28 percent BEV market
share in MY 2031 reflected in the baseline reference case. In August
2021, major automakers including GM, Ford, Stellantis, BMW, Honda,
Volkswagen, and Volvo pledged their support to achieve 40 to 50 percent
sales of electric vehicles by 2030.\858\ These announcements are
consistent with previous and ongoing corporate statements. Several
manufacturers have announced plans to fully transition to electric
vehicles, such as General
[[Page 52706]]
Motors ambition to shift its light-duty vehicles entirely to zero-
emissions by 2035,\859\ Volvo's plans to make only electric cars by
2030,\860\ Mercedes plans to become ready to go all-electric by 2030
where possible,\861\ and Honda's full electrification plan by
2040.\862\ Other car makers have chosen incremental commitments to
electrification that are still exceed the equivalent national EV market
share reflected in the reference baseline, such as Ford's announcement
that the company expects 40 percent of its global sales will be all-
electric by 2030,\863\ Volkswagen's expectation that half of its U.S.
sales will be all-electric by 2030,\864\ Subaru's global target to
achieve 50 percent BEVs by 2030,\865\ and Toyota's plans to introduce
30 BEV models by 2030.\866\ In addition to Honda's fully-electric
target in 2040, the company also expects 40 percent of North American
sales to be fully electric by 2030, and 80 percent by 2035.\867\
---------------------------------------------------------------------------
\858\ The White House, ``Statements on the Biden
Administration's Steps to Strengthen American Leadership on Clean
Cars and Trucks,'' August 5, 2021. Accessed on October 19, 2021 at
https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/05/statements-on-the-biden-administrations-steps-to-strengthen-american-leadership-on-clean-cars-and-trucks/.
\859\ General Motors, ``General Motors, the Largest U.S.
Automaker, Plans to be Carbon Neutral by 2040,'' Press Release,
January 28, 2021.
\860\ Volvo Car Group, ``Volvo Cars to be fully electric by
2030,'' Press Release, March 2, 2021.
\861\ Mercedes-Benz, ``Mercedes-Benz prepares to go all-
electric,'' Press Release, July 22, 2021.
\862\ 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.
\863\ 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.
\864\ 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.
\865\ Subaru Corporation, ``Briefing on the New Management
Policy,'' August 2, 2023. Accessed on December 5, 2023 at https://www.subaru.co.jp/pdf/news-en/en2023_0802_1_2023-08-01-193334.pdf
\866\ Toyota Motor Corporation, ``Video: Media Briefing on
Battery EV Strategies,'' Press Release, December 14, 2021. Accessed
on December 14, 2021 at https://global.toyota/en/newsroom/corporate/36428993.html.
\867\ 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.
---------------------------------------------------------------------------
The transition to electric vehicles is also taking place among
heavy-duty pick-up trucks and vans, with much of the initial focus on
last mile delivery vans. Several models of parcel delivery vans have
already entered the market including GM's BrightDrop Zevo 400 and Zevo
600; and the Rivian EDV 500 and EDV 700.868 869 Commercial
fleets have announced commitments to purchase zero emission delivery
trucks and vans, including FedEx,\870\ Amazon,\871\ and Walmart.\872\
Amazon reached 10,000 electric delivery vans operating in over 18,000
U.S. cities.\873\
---------------------------------------------------------------------------
\868\ https://www.gobrightdrop.com/.
\869\ https://rivian.com/fleet.
\870\ BrightDrop, ``BrightDrop Accelerates EV Production with
First 150 Electric Delivery Vans Integrated into FedEx Fleet,''
Press Release, June 21, 2022.
\871\ Amazon Corporation, ``Amazon's Custom Electric Delivery
Vehicles from Rivian Start Rolling Out Across the U.S.,'' Press
Release, July 21, 2022.
\872\ Walmart, ``Walmart To Purchase 4,500 Canoo Electric
Delivery Vehicles To Be Used for Last Mile Deliveries in Support of
Its Growing eCommerce Business,'' Press Release, July 12, 2022.
\873\ https://www.axios.com/2023/10/17/amazon-rivian-electrification-10000-climate.
---------------------------------------------------------------------------
These commitments provide further confirmation that automakers plan
to deploy electric vehicles at the levels indicated in the reference
baseline. They also provide further evidence that NHTSA's modeled
reference baseline is a reasonable--yet, as discussed further below,
likely conservative--representation of manufacturers' future product
offerings. Nevertheless, NHTSA developed an alternative baseline that
does not include ACC I or manufacturer deployment of electric vehicles
that would be consistent with ACC II--and as discussed below, NHTSA
determined that its final standards are reasonable as compared against
this alternative baseline.
In response to Toyota's alternative approach to considering state
ZEV programs in the analysis, not only does NHTSA not believe this
approach would allow the agency to set maximum feasible standards, but
NHTSA believes that the agency functionally already does what Toyota is
describing. In addition, by converting vehicles to BEVs to comply with
the ZEV program first, and then applying technology to the rest of the
remaining fleet, NHTSA is setting a standard based only on the
capability of the rest of the fleet to apply non-BEV technology.
Finally, in regards to including BEVs in the light-duty reference
baseline, while NHTSA agrees that OMB Circular A-4 cannot trump a clear
statutory requirement, NHTSA disagrees the agency's reference baseline
does or attempts to do so. Nowhere does EPCA/EISA say that NHTSA should
not consider the best available evidence in establishing the regulatory
reference baseline for its CAFE rulemakings. As explained in Circular
A-4, ``the benefits and costs of a regulation are generally measured
against a no-action baseline: an analytically reasonable forecast of
the way the world would look absent the regulatory action being
assessed, including any expected changes to current conditions over
time.'' \874\ NHTSA makes clear that its interpretation of 49 U.S.C.
32902(h) restricts the agency's analytical options when analyzing what
standards are maximum feasible, while being consistent with A-4's
guidance about how best to construct the reference baseline. Thus,
absent a clear indication to blind itself to important facts, NHTSA
continues to believe that the best way to implement its duty to
establish maximum feasible CAFE standards is to establish as realistic
a reference baseline as possible, including, among other factors, the
most likely composition of the fleet. This concept is discussed in more
detail in Section VI.A.
---------------------------------------------------------------------------
\874\ OMB Circular A-4, ``Regulatory Analysis'' Nov. 9, 2003, at
11. Note that Circular A-4 was recently updated; the initial version
was in effect at the time of the proposal.
---------------------------------------------------------------------------
In addition to their comments opposing the inclusion of ACC I and
ACC II in the light duty reference baseline, Valero also commented
opposing NHTSA's inclusion of the ACT program in the HDPUV reference
baseline, for several reasons.\875\ Regarding Valero's statutory
arguments, we direct Valero to EPA's grant of the waiver of preemption
for California's ACT program.\876\ EPA made requisite findings under
the Clean Air Act that the waiver should be granted and also grappled
with several issues that commenters raised about the program. NHTSA
defers to EPA's judgment there. Valero also took issue with the fact
that all states that have adopted California's ACT program standards
have adopted them on a different timeline than California, for example
Massachusetts' program beings with model year 2025 and Vermont's
program begins in model year 2026. NHTSA defers to EPA on what is an
appropriate interpretation of 42 U.S.C. 7507 but believes the agency
has appropriately modeled a most likely future scenario as a reference
baseline for future years.
---------------------------------------------------------------------------
\875\ Valero, Docket No. NHTSA-2023-0022-58547, Attachmend D, at
4.
\876\ 88 FR 20688 (April 6, 2023).
---------------------------------------------------------------------------
Separately, NHTSA can include a legal obligation in the reference
baseline that ``has not yet begun implementation or demonstrated
feasibility,'' contrary to Valero's assertions. First, regarding the
program having ``not yet begun implementation'': a reference baseline
is an ``analytically reasonable forecast of the way the world would
look absent the regulatory action being assessed'' (emphasis
added),\877\ and the nature of
[[Page 52707]]
the Clean Air Act waiver process is that EPA grants waivers for
programs that will affect future model years.
---------------------------------------------------------------------------
\877\ OMB Circular A-4, at 11. Some commenters in support of
their arguments that NHTSA cannot consider state ZEV programs in the
baseline have stated that OMB guidance cannot trump a statute. NHTSA
disagrees that the agency is trying to ``trump'' 49 U.S.C. 32902(h)
by observing guidance in OMB Circular A-4; but, regardless in the
case of the HDPUV program where there is no similar command to 49
U.S.C. 32902(h), NHTSA considers OMB guidance on the analytical
baseline to be instructive.
---------------------------------------------------------------------------
Regarding the argument that the ACT program has not demonstrated
feasibility, Chapter 2.5.1 of the TSD shows the ZEV sales percentage
requirements for Class 2b and 3 trucks (the vehicles covered by the
HDPUV standards included in this final rule) and in the near-term,
model years 2024-2026, the requirements increase by just 3% per year,
and then only by 5% per year in the model years after that. The HDPUV
segment is also a fraction of the size of the light-duty segment, as
discussed elsewhere in this preamble, but stakeholders have already
identified portions of the HDPUV segment that are candidates for
electrification. For example, a North American Council for Freight
Efficiency (NACFE) study of electrification for vans and step vans
found that ``fleets are aggressively expanding their purchases of
electric vans and step vans after successful pilot programs.'' \878\
Delivery vans are especially suited for electrification because range
is typically not a major factor in urban delivery/e-commerce solutions,
which in particular are spurring a rapid growth in the van and step van
market segment.\879\ In other words, the market seems to be heading in
a direction to meet state HDPUV ZEV programs not solely because of the
requirements, but also because the segment is ready for it. Valero's
characterization of state ACT programs as ``the transition of a large
and complex transportation system'' and a ``massive undertaking,'' is
an inaccurate dramatization of the scale of the ACT program in relation
to NHTSA's current analysis.
---------------------------------------------------------------------------
\878\ North American Council for Freight Efficiency, Run on
Less--Electric, available at https://nacfe.org/research/run-on-less-electric/#vans-step-vans.
\879\ Id.
---------------------------------------------------------------------------
Like for the NPRM, NHTSA additionally ran the CAFE Model for the
HDPUV analysis assuming the ACT program was not included in the
reference baseline. In the RIA, Table 9-8 highlights the changes in
technology penetration for the HDPUV No ZEV sensitivity. We see that by
model year 2038, BEV penetration decreases by just 0.2% and mild hybrid
penetration increases by 4.9% when compared to the reference baseline.
Between 2022-2050 we also see net social benefits increase by $1.81b,
gasoline consumption is reduced by 1 billion gallons, and regulatory
costs per vehicle increase by $41. This happens for two reasons: BEVs
are still a relatively cost-effective technology for compliance with
increasing levels of standards, and all of the benefits captured by the
ACT program in the reference baseline are now attributable to our HDPUV
program in the alternative case. Removing the ACT program from the
HDPUV reference baseline has little impact on the analysis and it alone
does not lead us to change our preferred alternative.
The No-Action Alternative also includes NHTSA estimates of ways
that manufacturers could take advantage of recently-passed tax credits
for battery-based vehicle technologies. NHTSA explicitly models
portions of three provisions of the IRA when simulating the behavior of
manufacturers and consumers. The first is the Advanced Manufacturing
Production Tax Credit (AMPC). The AMPC also includes a credit for the
production of applicable minerals. This provision of the IRA provides a
$35 per kWh tax credit for manufacturers of battery cells and an
additional $10 per kWh for manufacturers of battery modules (all
applicable to manufacture in the United States).\880\ These credits,
with the exception of the critical minerals credit, phase out 2030 to
2032. The agency also jointly modeled the Clean vehicle credit and the
Credit for qualified commercial clean vehicles (CVCs),\881\ which
provides up to $7,500 toward the purchase of clean vehicles covered by
this regulation.882 883 The AMPC and CVCs provide tax
credits for light-duty and HDPUV PHEVs, BEVs, and FCVs. Chapter 2.3 in
the TSD discusses, in detail, how NHTSA has modeled these tax credits.
---------------------------------------------------------------------------
\880\ 26 U.S.C. 45X. If a manufacturer produces a battery module
without battery cells, they are eligible to claim up to $45 per kWh
for the battery module. The provision includes other provisions
related to vehicles such as a credit equal to 10 percent of the
manufacturing cost of electrode active materials, and another 10
percent for the manufacturing cost of critical minerals. We are not
modeling these credits directly because of how we estimate battery
costs and to avoid the potential to double count the tax credits if
they are included into other analyses that feed into our inputs.
\881\ 26 U.S.C. 30D.
\882\ There are vehicle price and consumer income limitations on
the CVC as well, see Congressional Research Service. Tax Provisions
in the Inflation Reduction Act of 2022 (H.R. 5376). Aug. 10, 2022.
\883\ 26 U.S.C. 45W.
---------------------------------------------------------------------------
Stakeholders commented that NHTSA both underestimated and
overestimated the effect of tax credits on reference baseline EV
adoption for both the light-duty and HDPUV analyses. For example, IPI
commented that ``[a]lthough NHTSA's baseline modeling includes many
commendable elements . . . NHTSA appears to underestimate the baseline
share of BEVs resulting from the IRA during the Proposed Rule's
compliance period. This, in turn, likely produces an underestimate of
baseline average fuel economy and a corresponding overestimate of
compliance cost.'' \884\ On the other hand, the Corn Growers
Associations commented that NHTSA overestimated the CVC, and did not
support its assumptions surrounding its credit estimates.\885\ In
regards to the HDPUV analysis, ACEEE commented that ``[b]y excluding
the Commercial Credit from its baseline analysis, NHTSA risks
underestimating the additional positive impact that the IRA is
projected to have on market penetration of BEVs in its no-action
scenarios for passenger cars and HDPUVs.'' \886\ Rivian similarly
commented that they strongly supported NHTSA's stated intention to
consult with EPA to implement the Commercial CVC in the final rule.
NHTSA did not receive any comments recommending the agency not include
tax credits in the final rule.
---------------------------------------------------------------------------
\884\ The Institute for Policy Integrity at New York University
School of Law, NHTSA-2023-0022-60485, at 21-22.
\885\ Corn Growers Associations, Docket No. NHTSA-2023-0022-
62242, at 13-15.
\886\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 9.
---------------------------------------------------------------------------
NHTSA believes that its approach to modeling available tax credits
reasonably represents the ways that tax credits could be applied to
vehicles in the reference baseline during the years covered by the
standards. NHTSA disagrees that its assumptions were not well supported
and notes that the agency included a significant and transparent
discussion of the modeling assumptions the agency used in the NPRM and
associated technical documents. However, for this final rule, NHTSA has
refined important aspects of its tax credit modeling and presents
additional supporting documentation about those assumptions in Section
III.C.5, above, and in Chapter 2 of the Final TSD. In particular, for
the final rule analysis in response to comments and in light of further
guidance from the Department of Treasury, NHTSA modeled the Sec. 45W
tax credit jointly with Sec. 30D. NHTSA believes that these additional
updates ensure the agency's handling of tax credits does not over or
underestimate their effect in the reference baseline.
The No-Action Alternative for the passenger car, light truck, and
HDPUV fleets also includes NHTSA's
[[Page 52708]]
assumption, for purposes of compliance simulations, that manufacturers
will add fuel economy- or fuel efficiency-improving technology
voluntarily, if the value of future undiscounted fuel savings fully
offsets the cost of the technology within 30 months. This assumption is
often called the ``30-month payback'' assumption, and NHTSA has used it
for many years and in many CAFE rulemakings.\887\ It is used to
represent consumer demand for fuel economy. It can be a source of
apparent ``over-compliance'' in the No-Action Alternative, especially
when technology is estimated to be extremely cost-effective, as occurs
later in the analysis time frame when learning has significant effects
on some technology costs.
---------------------------------------------------------------------------
\887\ Even though NHTSA uses the 30-month payback assumption to
assess how much technology manufacturers would add voluntarily in
the absence of new standards, the benefit-cost analysis accounts for
the full lifetime fuel savings that would accrue to vehicles
affected by the standards.
---------------------------------------------------------------------------
NHTSA has determined that manufacturers do at times improve fuel
economy even in the absence of new standards, for several reasons.
First, overcompliance is not uncommon in the historical data, both in
the absence of new standards, and with new standards--NHTSA's analysis
in the 2022 TSD included CAFE compliance data showing that from 2004-
2017, while not all manufacturers consistently over-complied, a number
did. Of the manufacturers who did over-comply, some did so by 20
percent or more, in some fleets, over multiple model years.\888\
Ordinary market forces can produce significant increases in fuel
economy, either because of consumer demand or because of technological
advances.
---------------------------------------------------------------------------
\888\ See 2022 TSD, at 68.
---------------------------------------------------------------------------
Second, manufacturers have consistently told NHTSA that they do
make fuel economy improvements where the cost can be fully recovered in
the first 2-3 years of ownership. The 2015 NAS report discussed this
assumption explicitly, stating: ``There is also empirical evidence
supporting loss aversion as a possible cause of the energy paradox.
Greene (2011) showed that if consumers accurately perceived the upfront
cost of fuel economy improvements and the uncertainty of fuel economy
estimates, the future price of fuel, and other factors affecting the
present value of fuel savings, the loss-averse consumers among them
would appear to act as if they had very high discount rates or required
payback periods of about 3 years.'' \889\ Furthermore, the 2020 NAS HD
report states: ''The committee has heard from manufacturers and
purchasers that they look for 1.5- to 2-year paybacks or, in other
cases, for a payback period that is half the expected ownership period
of the first owner of the vehicle.'' \890\ Naturally, there are
heterogenous preferences for vehicle attributes in the marketplace: at
the same time that we are observing record sales of electrified
vehicles, we are also seeing sustained demand for pickup trucks with
higher payloads and towing capacity and hence lower fuel economy. This
analysis, like all the CAFE analyses preceding it, uses an average
value to represent these preferences for the CAFE fleet and the HDPUV
fleet. The analysis balances the risks of estimating too low of a
payback period, which would preclude most technologies from
consideration regardless of potential cost reductions due to learning,
against the risk of allowing too high of a payback period, which would
allow an unrealistic cost increase from technology addition in the
reference baseline fleet.
---------------------------------------------------------------------------
\889\ NRC. 2015. Cost, Effectiveness, and Deployment of Fuel
Economy Technologies for Light-Duty Vehicles. The National Academies
Press: Washington, DC. Page 31. Available at: https://doi.org/10.17226/21744. (Accessed: Feb. 27, 2024) and available for review
in hard copy at DOT headquarters). (hereinafter ``2015 NAS
report'').
\890\ National Academies of Sciences, Engineering, and Medicine.
2020. Reducing Fuel Consumption and Greenhouse Gas Emissions of
Medium- and Heavy-Duty Vehicles, Phase Two: Final Report. The
National Academies Press: Washington, DC, at 296. Available at:
https://doi.org/10.17226/25542. (Accessed: May 31, 2023).
---------------------------------------------------------------------------
Third, as in previous CAFE analyses, our fuel price projections
assume sustained increases in real fuel prices over the course of the
rule (and beyond). As readers are certainly aware, fuel prices have
changed over time--sometimes quickly, sometimes slowly, generally
upward. See further details of this in TSD Chapter 3.2.
In the 1990s, when fuel prices were historically low, manufacturers
did not tend to improve their fuel economy, likely in part because
there simply was very little consumer demand for improved fuel economy
and CAFE standards remained flat due to appropriations riders from
Congress preventing their increase. In subsequent decades, when fuel
prices were higher, many of them have exceeded their standards in
multiple fleets, and for multiple years. Our current fuel price
projections look more like the last two decades, where prices have been
more volatile, but also closer to $3/gallon on average. In recent
years, when fuel prices have generally declined on average and CAFE
standards have continued to increase, fewer manufacturers have exceeded
their standards. However, our compliance data show that at least some
manufacturers do improve their fuel economy if fuel prices are high
enough, even if they are not able to respond perfectly to fluctuations
precisely when they happen. This highlights the importance of fuel
price assumptions both in the analysis and in the real world on the
future of fuel economy improvements.
Stakeholders commented that the 30-month/2.5-year payback
assumption should be shorter (or nonexistent) or significantly longer
and specifically mentioned the effects of that assumption and
alternative assumptions on the reference baseline. Consumer Reports
reiterated their opposition to NHTSA's inclusion of the 2.5-year
payback assumption, citing previous comments they had submitted to past
CAFE rules and discussing additional historical data and
arguments.\891\ The Joint NGOs also re-submitted comments to prior
rules opposing the 30-month payback assumptions.\892\
---------------------------------------------------------------------------
\891\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 20-
22.
\892\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Attachment
3.
---------------------------------------------------------------------------
On the other hand, CEA commented in opposition to the use of a 30-
month payback period and stated that it should be significantly longer,
and pointed to NHTSA's 60-month sensitivity case as an example of how
that assumption was important enough to be included in the main
analysis.\893\ Valero also commented in opposition to the 30-month
payback assumption specifically in the HDPUV analysis, calling it
``unsupported'' and identified a situation where ``between model year
2029 and 2030, the CAFE Model projects that 168 models of Conventional,
MHEV, or SHEV HDPUVs will be converted to BEVs in the No Action
scenario--only 40 of those powertrain conversions have a modeled
``Payback'' of less than 30 months, and none have a ``Payback TCO'' of
less than 30 months.'' \894\ CEA similarly commented in opposition to
the use of a 30-month payback period in the HDPUV analysis.\895\
---------------------------------------------------------------------------
\893\ CEA, Docket No. NHTSA-2023-0022-61918, at 18.
\894\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A, at
10.
\895\ CEA, Docket No. NHTSA-2023-0022-61918, at 18.
---------------------------------------------------------------------------
In preparation for this final rule, NHTSA updated its review of
research supporting the 30-month payback assumption and continued to
use that
[[Page 52709]]
value for this final rule. Additional details on this research survey
are discussed in Section III.E, above, and in detail in FRIA Chapter
2.1.4. NHTSA also performed a range of sensitivity cases using
different payback assumptions, and those cases are discussed in detail
in FRIA Chapter 9. While NHTSA modeled those cases to determine the
effect of different payback assumptions on the levels of standards,
NHTSA still believes that 30 months is the most appropriate value to
use for the central analysis. Regarding Valero's comment about cost-
effective technology application in the HDPUV analysis, NHTSA believes
that Valero is missing the effect of tax credits in the effective cost
calculation. When the CAFE Model determines if a technology is cost
effective, it assesses the total cost of applying that technology and
subtracts any available tax credits, fuel savings, and reduction in
fines (if applicable for the analysis). The columns in the output file
that Valero references in their comments is what the CAFE Model
computes internally for only fuel savings for each vehicle and does not
include tax credits or fines (if applicable). Additional details on the
effective cost calculation are included in Section III.C.6 above and in
the FRM CAFE Model Documentation.
NHTSA also received several general comments that reiterated the
need for the agency to accurately consider EVs in the reference
baseline, unrelated to state ZEV programs, tax credits, or consumer
willingness to pay for increased fuel economy. Rivian commented that
``ignoring [EVs] in determining how automakers can and should improve
fuel economy in their fleets is nonsensical.'' \896\ As discussed
above, the Joint NGOs commented that ``consistent with EPCA's language,
history, and legislative intent, NHTSA models an accurate, real-world
`no action' baseline as a starting point for the rulemaking, a task
that requires a rational accounting of the real-world BEVs and PHEVs
projected to exist in the absence of the CAFE standards NHTSA is
considering setting.'' \897\ However, the Joint NGOs stated that ``in
an abundance of caution'' in light of the ongoing litigation in NRDC v.
NHTSA, No. 221080 (D.C. Cir.), NHTSA should ``model and evaluate the
effect of alternative ways in which it could account for the real-world
existence of BEVs/PHEVs in regulatory no-action alternatives,'' like
changing its assumptions surrounding compliance with state ZEV
programs.
---------------------------------------------------------------------------
\896\ Rivian, Docket No. NHTSA-2023-0022-59765, at 3.
\897\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Attachment
2, at 56-57.
---------------------------------------------------------------------------
NHTSA also received several requests for the agency to account for
manufacturer EV announcements in the reference baseline, or general
comments that because manufacturer EV announcements were not included
in the reference baseline, NHTSA's reference baseline underrepresented
future EV penetration rates. Consumer Reports commented that ``[i]n
order to finalize a rule that achieves its statutory requirements to
set maximum feasible standards that continue to reduce fuel consumption
from gasoline-powered vehicles, NHTSA must appropriately consider the
market share of electric vehicles that will exist in the fleet in the
absence of the CAFE rule. Failure to consider the significant and
rapidly growing sales of electric vehicles will result in a rule that
serves no useful purpose, because the stringency will be too low to
affect automakers' decisions to deploy fuel saving technology.'' \898\
However, Consumer Reports also stated that they found the percentage of
EVs in NHTSA's modeled reference baseline to be ``extremely
conservative'' based on projections of future EV market share: ``even
some of the most cautious estimates are significantly greater than
NHTSA's constrained baseline, indicating that it is an extremely
conservative approach'' \899\ Similarly, the States and Cities
commented that ``[b]ecause NHTSA's modeling does not account for
significant zero-emission vehicle sales outside of the States adopting
ACCI/II and ACT, its No-Action scenario likely significantly
underestimates the zero emission vehicles in the baseline fleet.
Because this underestimation may result in less stringent standards
than are truly the ``maximum feasible'' standards, 49 U.S.C. 32902(a),
NHTSA should consider modeling zero-emission vehicle adoption in States
not adopting ACCI/II and ACT.'' \900\ Tesla likewise commented that
``NHTSA's baseline suggests BEV technology market penetration rates
that are low,'' and that NHTSA ``must ensure it utilize[s public
commitments from manufacturers] in its analysis of the industry and
recognize shifts towards BEV technology in the marketplace is occurring
for reasons outside of the CAFE standards setting process.''
---------------------------------------------------------------------------
\898\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 13-
15.
\899\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at 15.
\900\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 41.
---------------------------------------------------------------------------
NHTSA agrees that having an accurate reference baseline results in
a more accurate analysis. However, in practice, it can be difficult to
model manufacturer deployment plans without the structure that a
regulatory program provides. NHTSA believes that the agency's modeling
methodology, which incorporates state ZEV requirements that are legally
binding and manufacturer commitments to deploy electric vehicles that
would be consistent with the targets of California's ACC II program,
regardless of whether it receives a waiver of Clean Air Act preemption,
is the most reasonable approach available to the agency at present. Per
the nature of NHTSA's standard-setting modeling, the agency recognizes
that the reference baseline will necessarily reflect fewer EVs than
will likely exist in the future fleet. However, the approach used to
construct the reference baseline necessarily reflects the data
constraints under which NHTSA was operating regarding manufacturer
plans outside of voluntary alignment with ACC II. Regarding NRDC's
comment, NHTSA did model several alternative ways that manufacturers
could comply with the agency's standards, including as assessed against
an alternative baseline that does not include state ZEV programs or
voluntary deployment consistent with ACC II. The alternative baseline
and range of sensitivity cases that NHTSA modeled, and results are
discussed in more detail in Chapters 3 and 9 of the FRIA, and the No
ZEV alternative baseline is discussed further below.
Lastly, regarding the reference baseline, the Joint NGOs commented
that the methodology of holding the reference baseline constant for
years prior to the start of the analysis year unrealistically
restricted automakers from adopting fuel economy improving technologies
they might otherwise adopt in response to increasingly stringent
standards.\901\ The Joint NGOs stated that this modeling decision had a
significant effect on the reference baseline, ``particularly for the
standard-setting runs where additional, economically efficient electric
vehicle technologies cannot be deployed in the model year 2027-2032
period.'' \902\ The Joint NGOs also stated that NHTSA did not explain
this methodology or decision in any of the agency's rulemaking
documents.
---------------------------------------------------------------------------
\901\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Attachment
2, at 8.
\902\ Id.
---------------------------------------------------------------------------
By way of additional background on this modeling approach: any
fleet improvements obtained when evaluating the No-Action Alternative
during model years 2022-2026 for the
[[Page 52710]]
passenger car and light truck fleets, and during model years 2022-2029
for the HDPUV fleet will be carried over into the Action Alternatives
for the same range of model years. Additionally, during those
``reference baseline'' set of years, any further fleet upgrades will
not be performed under the Action Alternatives. For the Action
Alternatives, technology evaluation and fleet improvements will then
begin starting with the first standard-setting year, which is model
year 2027 for passenger cars and light trucks, and model year 2030 for
HDPUV. Doing so prevents the reference baseline years from being
affected by standards defined under the Action Alternatives and ensures
that the reference baseline years remain constant irrespective of the
alternative being evaluated.
NHTSA believes that this approach captures the impact of new
regulations more accurately, as compared to the previously established
standards defined under the No-Action Alternative. More specifically,
this better allows the agency to capture the costs and benefits of the
range of standards being considered. If NHTSA allowed manufacturers to
apply technology in advance of increasing standards in later model
years, the costs and benefits of those improvements would be
attributable to the reference baseline and not NHTSA's action.
Moreover, this approach provides an additional level of certainty that
the model is not selecting BEV technology in the reference baseline
before the operative standards begin to take effect. Put another way,
this requirement was intended to ensure that the model does not
simulate manufacturers creating new BEVs prior to the standard-setting
years in anticipation of the need to comply with the CAFE standards
during those standard-setting years. It is exactly the situation that
the Joint NGOs describe--that the model might apply BEV technology in
the reference baseline but in response to the standards--that NHTSA
seeks to avoid in order to fully comply with 49 U.S.C. 32902(h). In
sum, not only does this approach allow NHTSA to better capture the
costs and benefits of different levels of standards under
consideration, but it ensures the modeling comports with all relevant
statutory constraints.
2. Alternative Baseline/No-Action Alternative
In addition to the reference baseline for the passenger car and
light truck fleet analysis, NHTSA considered an alternative baseline
analysis. This alternative baseline analysis for the passenger car and
light truck fleets was performed to provide a greater level of insight
into the possibilities of a changing baseline landscape. The
alternative baseline analysis is not meant to be a replacement for the
reference analysis, but a secondary review of the NHTSA analysis with
all of the assumptions from the reference baseline held (see Section
IV.B.1 above), except for the assumption of compliance with CARB ZEV
programs, and the voluntary deployment of electric vehicles consistent
with ACC II. The alternative baseline does not assume manufacturers
will comply with any of the California light duty ZEV programs or
voluntarily deploy electric vehicles consistent with ACC II during any
of the model years simulated in the analysis. Results for this
alternative baseline are shown in Chapter 8.2.7 of the FRIA and
discussed in more detail in Section VI.
3. Action Alternatives for Model Years 2027-2032 Passenger Cars and
Light Trucks
In addition to the No-Action Alternatives, NHTSA has considered
five ``action'' alternatives for passenger cars and light trucks, each
of which is more stringent than the No-Action Alternative during the
rulemaking time frame. These action alternatives are specified below
and demonstrate different possible approaches to balancing the
statutory factors applicable for passenger cars and light trucks.
Section VI discusses in more detail how the different alternatives
reflect different possible balancing approaches.
a. Alternative PC1LT3
Alternative PC1LT3 would increase CAFE stringency by 1 percent per
year, year over year, for model years 2027-2032 passenger cars, and by
3 percent per year, year over year, for model years 2027-2032 light
trucks.
---------------------------------------------------------------------------
\903\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.081
[[Page 52711]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.082
These equations are represented graphically below:
---------------------------------------------------------------------------
\904\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.083
[[Page 52712]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.084
Under this alternative, the MDPCS is as follows:
[GRAPHIC] [TIFF OMITTED] TR24JN24.085
b. Alternative PC2LT002--Final Standards
Alternative PC2LT002 would increase CAFE stringency by 2 percent
per year, year over year for model years 2027-2032 for passenger cars,
and by 0 percent per year, year over year for model years 2027-2028
light trucks and then 2 percent per year, year over year for model
years 2029-2032 for light trucks.
[GRAPHIC] [TIFF OMITTED] TR24JN24.086
[[Page 52713]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.087
[GRAPHIC] [TIFF OMITTED] TR24JN24.088
These equations are represented graphically below:
[GRAPHIC] [TIFF OMITTED] TR24JN24.089
[[Page 52714]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.090
c. Alternative PC2LT4
Alternative PC2LT4 would increase CAFE stringency by 2 percent per
year, year over year, for model years 2027-2032 for passenger cars, and
by 4 percent per year, year over year, for model years 2027-2032 for
light trucks.
---------------------------------------------------------------------------
\905\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.091
[[Page 52715]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.092
These equations are represented graphically below:
---------------------------------------------------------------------------
\906\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.093
[[Page 52716]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.094
Under this alternative, the MDPCS is as follows:
[GRAPHIC] [TIFF OMITTED] TR24JN24.095
d. Alternative PC3LT5
Alternative PC3LT5 would increase CAFE stringency by 3 percent per
year, year over year, for model years 2027-2032 for passenger cars, and
by 5 percent per year, year over year, for model years 2027-2032 for
light trucks.
[[Page 52717]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.096
[GRAPHIC] [TIFF OMITTED] TR24JN24.097
These equations are represented graphically below:
---------------------------------------------------------------------------
\907\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
\908\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.098
[[Page 52718]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.099
Under this alternative, the MDPCS is as follows:
[GRAPHIC] [TIFF OMITTED] TR24JN24.100
e. Alternative PC6LT8
Alternative PC6LT8 would increase CAFE stringency by 6 percent per
year, year over year, for model years 2027-2032 for passenger cars, and
by 8 percent per year, year over year, for model years 2027-2032 for
light trucks.
[[Page 52719]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.101
[GRAPHIC] [TIFF OMITTED] TR24JN24.102
These equations are represented graphically below:
---------------------------------------------------------------------------
\909\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
\910\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.103
[[Page 52720]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.104
Under this alternative, the MDPCS is as follows:
[GRAPHIC] [TIFF OMITTED] TR24JN24.105
f. Other Alternatives Suggested by Commenters for Passenger Car and LT
CAFE Standards
Commenters also suggested a variety of other regulatory
alternatives for NHTSA to analyze for the final rule.
Rivian commented that NHTSA should increase stringency for light
trucks relative to passenger cars by an even greater degree than the
proposal, such as ``stringency combinations in which standards would
increase by 2 percent annually for passenger cars but 5 to 8 percent
annually for light trucks.'' \911\ Rivian argued that this was
appropriate given ``that more stringent light truck targets perform
well from a cost-benefit perspective.'' \912\ Rivian also suggested
that NHTSA evaluate an alternative in which only light truck standards
were increased.\913\
---------------------------------------------------------------------------
\911\ Rivian, Docket No. NHTSA-2023-0022-28017, at 1.
\912\ Id.
\913\ Id.
---------------------------------------------------------------------------
IPI commented that NHTSA should (1) evaluate an alternative which
expressly maximizes net benefits (suggesting PC2LT8, specifically), and
(2) ``assess a broader range of alternatives that decouple increases
from light trucks from those for passenger cars and that impose non-
linear increases, which could further maximize net benefits.'' \914\
---------------------------------------------------------------------------
\914\ IPI, Docket No. NHTSA-2023-0022-60485, at 1, 6-9.
---------------------------------------------------------------------------
NHTSA appreciates Rivian's comment; however, we have an obligation
to set maximum feasible CAFE standards separately for passenger cars
and light trucks (see 49 U.S.C. 32902). We would not be in compliance
with our statutory authority if we failed to increase passenger car
standards despite concluding that Alternative PC2LT002 is feasible for
the industry. Establishing maximum feasible standards involves
balancing several factors, which means that some factors, like net
benefits, may not reach their maximum level. As previously mentioned,
NHTSA is statutorily required to set independent standards for
passenger cars and light trucks. As such, NHTSA's preferred alternative
contains passenger car and light truck standards that are already
``decoupled.'' Also, the stringency for the light truck fleet is non-
linear where it increases by 0 percent per year, year over year for MYs
2027-2028 light trucks and then 2 percent per year, year over year for
model years 2029-2031.
[[Page 52721]]
4. Action Alternatives for Model Years 2030-2035 Heavy-Duty Pickups and
Vans
In addition to the No-Action Alternative, NHTSA has considered four
action alternatives for HDPUVs. Each of the Action Alternatives,
described below, would establish increases in stringency over the No-
Action Alternative from model year 2030 through model year 2035.\915\
In the NPRM, NHTSA also sought comment on a scenario in which the
Action Alternatives would extend only through model year 2032. Ford
supported NHTSA ending its HDPUV standards in model year 2032 as more
harmonized with EPA's proposed standards, and as aligning ``better . .
. with the Inflation Reduction Act's ZEV credits, scheduled to end by
2032.'' \916\ Ford suggested re-evaluating the standards for model
years 2033-2035 at a later time.\917\ Wisconsin DNR, in contrast,
stated that ``given the different statutory authorities under which EPA
and NHTSA promulgate vehicle standards, it is appropriate for NHTSA to
set standards for the model year ranges it has proposed, rather than
extending these standards only through 2032 (which would align with the
final model year of EPA's proposed multipollutant standards).'' \918\
---------------------------------------------------------------------------
\915\ See 87 FR 29242-29243 (May 5, 2023). NHTSA recognizes that
the EIS accompanying this final rule examines only regulatory
alternatives for HDPUVs in which standards cover model years 2030-
2035.
\916\ Ford, Docket No. NHTSA-2023-0022-60837, at 11; see also
Stellantis, NHTSA-2023-0022-61107, at 3.
\917\ Id.; see also Alliance, NHTSA-2023-0022-60652, Appendix F,
at 62.
\918\ Wisconsin DNR, Docket No. NHTSA-2023-0022-21431, at 2.
---------------------------------------------------------------------------
We believe that setting HDPUV standards through model year 2035 is
appropriate based on our review of the baseline fleet and its
capability, in addition to the range of technologies that are available
for adoption in the rulemaking timeframe. In addition to the advanced
credit multiplier that is available for manufacturers until model year
2027, the current standards do not require significant improvements
from model year 2027 through model year 2029. Accordingly, our analysis
for model years 2030-2035 shows the potential for high technology
uptake; this can be seen in detail in RIA Chapter 8. We proposed 10
percent year over year increases and now we are finalizing 8 percent
year over year increases. This means that over the six-year period
where these standards are in effect, the stringency of our standards
almost matches the stringency of the EPA standards in model year 2032.
Our regulatory model years are different due to our statutory
requirements, however, as our statutory lead time requirements
prevented us from harmonizing with EPA directly on the model year 2027-
2029 standards.\919\ For a more detailed discussion on the lead time
for HDPUVs, see Section VI.A.1.b. Section VI also discusses in more
detail how the different alternatives reflect different possible
balancing approaches for setting HDPUV standards. HDPUV action
alternatives are specified below.
---------------------------------------------------------------------------
\919\ 49 U.S.C 32902(k)(3).
---------------------------------------------------------------------------
a. Alternative HDPUV4
Alternative HDPUV4 would increase HDPUV standard stringency by 4
percent per year for model years 2030-2035 for HDPUVs. NHTSA included
this alternative in order to evaluate a possible balancing of statutory
factors in which cost-effectiveness outweighed all other factors. The
four-wheel drive coefficient is maintained at 500 (coefficient `a') and
the weighting multiplier coefficient is maintained at 0.75 (coefficient
`b').
---------------------------------------------------------------------------
\920\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.106
[GRAPHIC] [TIFF OMITTED] TR24JN24.107
These equations are represented graphically below:
---------------------------------------------------------------------------
\921\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
---------------------------------------------------------------------------
[[Page 52722]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.108
[GRAPHIC] [TIFF OMITTED] TR24JN24.109
b. Alternative HDPUV108--Final Standards
Alternative HDPUV108 would increase HDPUV standard stringency by 10
percent per year, year over year for model years 2030-2032, and by 8
percent per year, year over year for model years 2033-2035 for HDPUVs.
The four-wheel drive coefficient is maintained at 500 (coefficient `a')
and the weighting multiplier coefficient is maintained at 0.75
(coefficient `b').
[[Page 52723]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.110
[GRAPHIC] [TIFF OMITTED] TR24JN24.111
These equations are represented graphically below:
---------------------------------------------------------------------------
\922\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
\923\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.112
[[Page 52724]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.113
c. Alternative HDPUV10
Alternative HDPUV10 would increase HDPUV standard stringency by 10
percent per year for model years 2030-2035 for HDPUVs. The four-wheel
drive coefficient is maintained at 500 (coefficient `a') and the
weighting multiplier coefficient is maintained at 0.75 (coefficient
`b').
[GRAPHIC] [TIFF OMITTED] TR24JN24.114
[GRAPHIC] [TIFF OMITTED] TR24JN24.115
These equations are represented graphically below:
---------------------------------------------------------------------------
\924\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
\925\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
---------------------------------------------------------------------------
[[Page 52725]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.116
[GRAPHIC] [TIFF OMITTED] TR24JN24.117
d. Alternative HDPUV14
Alternative HDPUV14 would increase HDPUV standard stringency by 14
percent per year for model years 2030-2035 for HDPUVs. The four-wheel
drive coefficient is maintained at 500 (coefficient `a') and the
weighting multiplier coefficient is maintained at 0.75 (coefficient
`b').
[[Page 52726]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.118
[GRAPHIC] [TIFF OMITTED] TR24JN24.119
These equations are represented graphically below:
---------------------------------------------------------------------------
\926\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
\927\ The PC, LT, and HDPUV target curve function coefficients
are defined in Equation IV-1, Equation IV-2, and Equation IV-3,
respectively. See Final TSD Chapter 1.2.1 for a complete discussion
about the footprint and work factor curve functions and how they are
calculated.
[GRAPHIC] [TIFF OMITTED] TR24JN24.120
[[Page 52727]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.121
V. Effects of the Regulatory Alternatives
A. Effects on Vehicle Manufacturers
1. Passenger Cars and Light Trucks
Each regulatory alternative considered in this final rule, aside
from the No-Action Alternative, would increase the stringency of both
passenger car and light truck CAFE standards during model years 2027-
2031 (with model year 2032 being an augural standard). To estimate the
potential effects of each of these alternatives, NHTSA has, as with all
recent rulemakings, assumed that standards would continue unchanged
after the last model year to be covered by CAFE targets (in this case
model year 2031 for the primary analysis and 2032 for the augural
standards). NHTSA recognizes that it is possible that the size and
composition of the fleet (i.e., in terms of distribution across the
range of vehicle footprints) could change over time, affecting the
average fuel economy requirements under both the passenger car and
light truck standards, and for the overall fleet. If fleet changes
ultimately differ from NHTSA's projections, average requirements would
differ from NHTSA's projections.
Following are the estimated required average fuel economy values
for the passenger car, light truck, and total fleets for each action
alternative that NHTSA considered alongside values for the No-Action
Alternative. (As a reminder, all projected effects presented use the
reference baseline unless otherwise stated.)
[[Page 52728]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.122
[GRAPHIC] [TIFF OMITTED] TR24JN24.123
Manufacturers do not always comply exactly with each CAFE standard
in each model year. To date, some manufacturers have tended to exceed
at least one requirement.\928\ Many manufacturers in practice make use
of EPCA's provisions allowing CAFE compliance credits to be applied
when a fleet's CAFE level falls short of the corresponding requirement
in a given model year.\929\ Some manufacturers have paid civil
penalties (i.e., fines) required under EPCA when a fleet falls short of
a standard in a given model year and the manufacturer lacks compliance
credits sufficient to address the compliance shortfall. As discussed in
the accompanying FRIA and TSD, NHTSA simulates manufacturers' responses
to each alternative given a wide range of input estimates (e.g.,
technology cost and efficacy, fuel prices), and, per EPCA requirements,
setting aside the potential that any manufacturer would respond to CAFE
standards in model years 2027-2031 by applying CAFE compliance credits
or considering the fuel economy attributable to alternative fuel
sources.\930\ Many of these inputs are subject to uncertainty, and, in
any event, as in all CAFE rulemakings, NHTSA's analysis simply
illustrates one set of ways manufacturers could potentially respond to
each regulatory alternative. The tables below show the estimated
achieved fuel economy produced by the CAFE Model for each regulatory
alternative.
---------------------------------------------------------------------------
\928\ Overcompliance can be the result of multiple factors
including projected ``inheritance'' of technologies (e.g., changes
to engines shared across multiple vehicle model/configurations)
applied in earlier model years, future technology cost reductions
(e.g., decreased techology costs due to learning), and changes in
fuel prices that affect technology cost effectiveness. As in all
past rulemakings over the last decade, NHTSA assumes that beyond
fuel economy improvements necessitated by CAFE standards, EPA-GHG
standards, and ZEV programs, manufacturers may also improve fuel
economy via technologies that would pay for themselves within the
first 30 months of vehicle operation.
\929\ For additional detail on the creation and use of
compliance credits, see Chapters 1.1 and 2.2.2.3 of the accompanying
TSD.
\930\ In the case of battery-electric vehicles, this means BEVs
will not be built in response to the standards. For plug-in hybrid
vehicles, this means only the gasoline-powered operation (i.e., non-
electric fuel economy, or charge sustaining mode operation only) is
considered when selecting technology to meet the standards.
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[[Page 52729]]
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[GRAPHIC] [TIFF OMITTED] TR24JN24.125
While these increases in estimated fuel economy levels are
partially attributable to changes in the composition of the fleet as
simulated by the CAFE Model (i.e., the relative shares of passenger
cars and light trucks), they result almost entirely from the projected
application of fuel-saving technology. Manufacturers' actual responses
will almost assuredly differ from NHTSA's simulations, and therefore
the achieved compliance levels will differ from these tables.
The SHEV share of the light-duty fleet initially (i.e., in model
year 2022) is relatively low, but increases to approximately 23 to 27
percent by the beginning of the final rule's regulatory period
(MY2027). Across action alternatives, SHEV penetration rates increase
as alternatives become more stringent, in both the passenger car and
light truck fleets. SHEVs are estimated to make up a larger portion of
light truck fleet than passenger car fleet across model years 2027-
2031. While their market shares do not increase to the levels of SHEVs,
PHEVs make up between 7 to 8 percent of the estimated light truck fleet
across the alternatives by the end of the regulatory period. In the
passenger car fleet, PHEV penetration stays under 2 percent for all
alternatives and all model years. Variation in penetration rates across
alternatives generally results from how many vehicles or models require
additional technology to become compliant, e.g. one technology pathway
is the most cost-effective pathway if a manufacturer is just shy of
their fuel economy target, but becomes ineffective if there's a larger
gap which may necessitate pursuing broader changes in powertrain across
the manufacturers' fleet. For example, Honda is projected to redesign
several of its models from MHEV to PHEV in 2027. This accounts for the
slightly increased PHEV
[[Page 52730]]
penetration rate in PC2LT002.\931\ For more detail on the technology
application by regulatory fleet, see FRIA Chapter 8.2.2.1.
---------------------------------------------------------------------------
\931\ In this particular case, the higher stringencies of
PC1LT3, PC2LT4, PC3LT5 and PC6LT8 lead to greater penetration of
SHEV in Honda's fleet. At this greater level of tech penetration and
tech investment in SHEV, the CAFE model projects that it becomes
more cost effective for Honda to convert several of its CrV and TLX
models to SHEV rather than convert additional models to PHEV, which
is present only in the PC2LT002 altnernative during Honda's standard
setting years, as making certain model lines within their fleet
PHEVs are extremely constly. Specifically for Honda in PC2LT002,
Honda is overcomplying with the CAFE standard, and the CAFE model
applies PHEV tech in order to comply with GHG standards. At higher
levels of stringency, SHEV tech is applied since it is a more cost-
effective method of achieving fuel efficiency than PHEV.
[GRAPHIC] [TIFF OMITTED] TR24JN24.126
[GRAPHIC] [TIFF OMITTED] TR24JN24.127
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[GRAPHIC] [TIFF OMITTED] TR24JN24.128
[GRAPHIC] [TIFF OMITTED] TR24JN24.129
Due to the statutory constraints imposed on the analysis by EPCA
that exclude consideration of AFVs, BEVs are not a compliance option
through model year 2031. Similarly, PHEVs can be introduced by the CAFE
Model, but only their charge-sustaining fuel economy value is
considered during standard setting years (as opposed to their charge-
depleting fuel economy value, which is used in all other years). As
seen in Table V-9 and Table V-10, BEV penetration increases across
model years in the No-Action Alternative. During the standard setting
years, BEVs are only added to account for manufacturers' expected
response to state ZEV programs and additional electric vehicles that
manufacturers have committed to deploy consistent with ACC II,
regardless of whether it becomes legally binding. In model years
outside of the standard setting restrictions, BEVs may be added if they
are cost-effective to produce for reasons other than the CAFE standards
The action alternatives show nearly the same BEV penetration rates as
the No-Action Alternative during the standard setting years, although
in some cases there is a slight deviation despite no new BEV models
entering the fleet, due to rounding in some model years where fewer
vehicles are being sold in response to the standards and altering fleet
shares.
[[Page 52732]]
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[GRAPHIC] [TIFF OMITTED] TR24JN24.131
The FRIA provides a longer summary of NHTSA's estimates of
manufacturers' potential application of fuel-saving technologies
(including other types of technologies, such as advanced transmissions,
aerodynamic improvements, and reduced vehicle mass) in response to each
regulatory alternative. Appendices I and II of the accompanying FRIA
provide more detailed and comprehensive results, and the underlying
CAFE Model output files provide all the information used to construct
these estimates, including the specific combination of technologies
estimated to be applied to every vehicle model/configuration in each of
model years 2022-2050.
NHTSA's analysis shows manufacturers' regulatory costs for
compliance with the CAFE standards, combined with existing EPA GHG
standards, state ZEV programs, and voluntary deployment of electric
vehicles consistent with ACC II 932 933 unsurprisingly
increasing more under the more stringent alternatives as more fuel-
saving technologies would be required. As summarized in Table V-11,
NHTSA estimates manufacturers' cumulative regulatory costs across model
years 2027-2031 could total $148b under the No-Action Alternative, and
an additional $18b, $21.8b, $33b, $41.4b, and $55.5b under alternatives
PC2LT002, PC1LT3, PC2LT4, PC3LT5, and PC6LT8, respectively, when
accounting for fuel-saving technologies added under the simulation for
each regulatory alternative (including AC improvements and other off-
cycle technologies), and also accounting for CAFE civil penalties that
NHTSA estimates some manufacturers could elect to pay rather than
achieving full compliance with the CAFE targets in
[[Page 52733]]
some model years in some fleets.\934\ The table below shows how these
costs are estimated to vary among manufacturers, accounting for
differences in the quantities of vehicles produced for sale in the U.S.
Differences in technology application and compliance pathways play a
significant role in determining variation across aggregate manufacturer
costs, and technology costs for each model year are defined on an
incremental basis, with costs equal to the relevant technology applied
minus the costs of the initial technology state in a reference
fleet.\935\ Appendices I and II of the accompanying FRIA present
results separately for each manufacturer's passenger car and light
truck fleets in each model year under each regulatory alternative, and
the underlying CAFE Model output files also show results specific to
manufacturers' domestic and imported car fleets.
---------------------------------------------------------------------------
\932\ EPA's Multi-Pollutant Emissions Standards for Model Years
2027 and Later Light-Duty and Medium-Duty Vehicles were not modeled
for this final rule.
\933\ NHTSA does not model state GHG programs outside of the ZEV
programs. See Chapter 2.2.2.6 of the accompanying TSD for details
about how NHTSA models anticipated manufacturer compliance with
California's ZEV program.
\934\ Refer to Chapter 8.2.2 of the FRIA for more details on
civil penalty payments by regulatory alternative.
\935\ For more detail regarding the calculation of technology
costs, see the CAFE Model Documentation.
[GRAPHIC] [TIFF OMITTED] TR24JN24.132
As discussed in the TSD, these estimates reflect technology cost
inputs that, in turn, reflect a ``markup'' factor that includes
manufacturers' profits. In other words, if costs to manufacturers are
reflected in vehicle price increases, NHTSA estimates that the average
costs to new vehicle purchasers could increase through model year 2031
as summarized in Table V-12 and Table V-13. Table V-14 shows how these
costs could vary among manufacturers, suggesting that price differences
between manufacturers could increase as the stringency of standards
increases. See Chapter 8.2.2 of the FRIA for more details of the
effects on vehicle manufacturers, including compliance and regulatory
costs.
[[Page 52734]]
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[GRAPHIC] [TIFF OMITTED] TR24JN24.134
[[Page 52735]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.135
Fuel savings and regulatory costs act as competing forces on new
vehicle sales. All else being equal, as fuel savings increase, the CAFE
Model projects higher new vehicle sales, but as regulatory costs
increase, the CAFE Model projects lower new vehicle sales. Both fuel
savings and regulatory costs increase with stringency. NHTSA observed
that on net that regulatory costs were increasing faster than the first
30 months of fuel savings in the CAFE Model projections and as such,
sales decreased in higher stringency alternatives. The magnitude of
these fuel savings and vehicle price increases depends on manufacturer
compliance decisions, especially technology application. In the event
that manufacturers select technologies with lower prices and/or higher
fuel economy improvements, vehicle sales effects could differ. TSD
Chapter 4.2.1.2 discusses NHTSA's approach to estimating new vehicle
sales, including NHTSA's estimate that new vehicle sales could recover
from 2020's aberrantly low levels. Figure V-1 shows the estimated
annual light-duty industry sales by regulatory alternative. For all
scenarios, sales stay constant relative to the No-Action scenario
through model year 2026, after which the model begins applying
technology in response to the action alternatives. Excluding the most
stringent case, light-duty vehicle sales differ from the No-Action
Alternative by approximately 1 percent or less through model year 2050,
and PC6LT8 sales differ from the No-Action Alternative by less than 2.5
percent through model year 2050.
[[Page 52736]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.136
These slight reductions in new vehicle sales tend to reduce
projected automobile industry labor projections by small margins. NHTSA
estimates that the cost increases could reflect an underlying increase
in employment to produce additional fuel-saving technology, such that
automobile industry labor could remain relatively similar under each of
the five regulatory alternatives.
[GRAPHIC] [TIFF OMITTED] TR24JN24.137
[[Page 52737]]
The accompanying TSD Chapter 6.2.5 discusses NHTSA's approach to
estimating automobile industry employment, and the accompanying FRIA
Chapter 8.2 (and its Appendices I and II) and CAFE Model output files
provide more detailed results of NHTSA's light-duty analysis.
We also include in the analysis a No ZEV alternative baseline,
wherein some sales volumes do not in MYs 2023 and beyond turn into ZEVs
in accordance with OEM commitments to deploy additional electric
vehicles consistent with ACC II, regardless of whether it becomes
legally binding. The No ZEV alternative baseline still includes BEVs
and PHEVs, but they are those that were already observed in the MY 2022
analysis fleet, as well as any made by the model outside of standard
setting years for LD BEVs (or in all years, in the case of PHEVs and
HDPUV BEVs). Across the entire light-duty fleet, the technology
penetration rates differ mainly from 2027 onwards. In the reference
baseline, BEVs make up approximately 28 percent of the total light-duty
fleet by model year 2031; they make up only 19 percent of the total
light-duty fleet by 2031 in the No ZEV alternative baseline.
PHEVs have virtually the same tech penetration in the reference
baseline as in the no ZEV alternative baseline, as the CAFE Model does
not build PHEVs for ZEV program compliance (only counts PHEVs built for
other reasons towards ZEV program compliance) or deploy them based on
OEM commitments to deploy electric vehicles consistent with ACC II.
PHEVs increase only from 2 percent in the reference case to 3 percent
in the No ZEV alternative baseline by model year 2031. Strong hybrids
have a slightly higher tech penetration rate under the reference
baseline than in the No ZEV case in model years between 2027 and 2031
at 27 percent compared to 23 percent in the reference baseline in model
year 2031.
2. Heavy-Duty Pickups and Vans
Each of the regulatory alternatives considered represents an
increase in HDPUV fuel efficiency standards for model years 2030-2035
relative to the existing standards set in 2016, with increases in
efficiency each year through model year 2035. Unlike the light-duty
CAFE program, NHTSA may consider AFVs when setting maximum feasible
average standards for HDPUVs. Additionally, for purposes of calculating
average fuel efficiency for HDPUVs, NHTSA considers EVs, fuel cell
vehicles, and the proportion of electric operation of EVs and PHEVs
that is derived from electricity that is generated from sources that
are not onboard the vehicle to have a fuel efficiency value of 0
gallons/mile.
NHTSA recognizes that it is possible that the size and composition
of the fleet (i.e., in terms of vehicle attributes that impact
calculation of standards for averaging sets) could change over time,
which would affect the currently-estimated average fuel efficiency
requirements. If fleet changes ultimately differ from NHTSA's
projections, average requirements could, therefore, also differ from
NHTSA's projections. The table below includes the estimated required
average fuel efficiency values for the HDPUV fleet in each of the
regulatory alternatives considered in this final rule.
[GRAPHIC] [TIFF OMITTED] TR24JN24.138
As with the light-duty program, manufacturers do not always comply
exactly with each fuel efficiency standard in each model year.
Manufacturers may bank credits from overcompliance in one year that may
be used to cover shortfalls in up to five future model years.
Manufacturers may also carry forward credit deficits for up to three
model years. If a manufacturer is still unable to address the
shortfall, NHTSA may assess civil penalties. As discussed in the
accompanying FRIA and TSD, NHTSA simulates manufacturers' responses to
each alternative given a wide range of input estimates (e.g.,
technology cost and effectiveness, fuel prices, electrification
technologies). For this final rule, NHTSA estimates that manufacturers'
responses to standards defined in each alternative could lead average
fuel efficiency levels to improve through model year 2035, as shown in
the following tables.
[[Page 52738]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.139
Table V-16 displays the projected achieved FE levels for the HDPUV
fleet through model year 2035. Estimates of achieved levels are very
similar between the No-Action Alternative and the least stringent
action alternative, with even the most stringent action alternative
differing by less than 0.8 gallons/100 miles from the No-Action
Alternative. The narrow band of estimated average achieved levels in
Table V-16 is primarily due to several factors. Relative to the LD
fleet, the HDPUV fleet (i) represents a smaller number of vehicles,
(ii) includes fewer manufacturers, and (iii) is composed of a smaller
number of manufacturer product lines. Technology choices for an
individual manufacturer or individual product line can therefore have a
large effect on fleet-wide average fuel efficiency. Second, Table V-17
shows that in the No-Action Alternative a substantial portion of the
fleet converts to an electrified powertrain (e.g., SHEV, PHEV, BEV)
between model year 2022 and model year 2030. This reduces the
availability of, and need for,\936\ additional fuel efficiency
improvement to meet more stringent standards.
---------------------------------------------------------------------------
\936\ The need for further improvements in response to more
stringent HDPUV standards is further reduced by the fact that NHTSA
regulations currently grant BEVs (and the electric-only operation of
PHEVs) an HDPUV compliance value of 0 gallons/100 miles.
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[[Page 52739]]
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[GRAPHIC] [TIFF OMITTED] TR24JN24.141
In line with the technology application trends above, regulatory
costs do not differ by large amounts between the No-Action Alternative
and the action alternatives. The largest differences in regulatory
costs occur in the HDPUV14 alternative and are also concentrated in a
few manufacturers (e.g., Ford, GM), where the compliance modeling
projects increases in PHEV and advanced engine technologies. For
example, GM is projected to increase its turbo parallel engine
technology penetration by 2038, which is modeled as a lower cost than
the superseded advanced diesel engine technology in the reference
baseline, contributing to the negative cost in the No-Action
Alternative. See RIA Chapter 8.3.2 for more detail on the manufacturer
regulatory cost by action alternative.
---------------------------------------------------------------------------
\937\ Specifically, this includes technologies with the
following codes in the CAFE Model: TURBO0, TURBOE, TURBOD, TURBO1,
TURBO2, ADEACD, ADEACS, HCR, HRCE, HCRD, VCR, VTG, VTGE, TURBOAD,
ADSL, DSLI.
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[[Page 52740]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.142
On a per-vehicle basis, costs by 2033 increase progressively with
stringency. Average per-vehicle costs are estimated to decrease
slightly for alternatives HDPUV108 and HPUV10 relative to the No-Action
Alternative for model year 2030-2032. Cost reductions of technology
applied in these years, combined with shifts altering the combination
of technologies to comply with different stringencies, result in
negative regulatory costs relative to the No-Action Alternative.
Specifically, differences in the quantity and type of technology
applications in the compliance pathways contribute to the cost
variation across regulatory alternatives.\938\ Overall, the two least
stringent alternatives represent less than a 12 percent difference in
average per-vehicle cost compared to the No-Action Alternative. FRIA
Chapter 8.3.2.1 provides more information about the technology
penetration changes and the subsequent costs.
---------------------------------------------------------------------------
\938\ Manufacturers overcomplying with the least stringent
standard can lead the CAFE model to applying additional cost-
effective technology adjustments which may increase the average
regulatory cost. As the stringency increases, the CAFE model follows
the cost-effective compliance path which may be limited in terms of
manufacturer refresh/redesign schedules. In the HDPUV4 scenario,
Ford is modeled to transition more towards BEV rather than strong
hybrids, which results in an increased average cost over the
reference scenario. In the HDPUV108 and HDPUV10 scenarios, a
redesign in 2030 is projected to lead to more lower level engine
technology and fewer overall tech changes compared to HDPUV4, which
contribute to the negative average cost for several years but a
larger jump in costs in later years.
[GRAPHIC] [TIFF OMITTED] TR24JN24.143
The sales and labor markets are estimated to have relatively little
variation in impacts across the No-Action Alternative and action
alternatives. The increase in sales in the No-Action Alternative
carries over to each of the action alternatives as well. The vehicle-
level cost increases noted above in Table V-19 produce very small
declines in overall sales. With the exception of HDPUV14, the change in
sales across alternatives stays within about a 0.21 percent change
relative to the No-Action Alternative, and HDPUV14 stays within a 0.6
percent change relative to the No-Action Alternative.
[[Page 52741]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.144
These minimal sales declines and limited additional technology
application produce small decreases in labor utilization, as the sales
effect ultimately outweighs job gains due to development and
application of advanced technology. In aggregate, the alternatives
represent less than half of a percentage point deviation from the No-
Action Alternative.
[GRAPHIC] [TIFF OMITTED] TR24JN24.145
The accompanying TSD Chapter 6.2.5 discusses NHTSA's approach to
estimating automobile industry employment, and the accompanying FRIA
Chapter 8.3.2.3 (and its Appendix III) and CAFE Model output files
[[Page 52742]]
provide more detailed results of NHTSA's HDPUV analysis.
B. Effects on Society
NHTSA accounts for the effects of the standards on society using a
benefit-cost framework. The categories considered include private costs
borne by manufacturers and passed on to consumers, social costs, which
include Government costs and externalities pertaining to emissions,
congestion, noise, energy security, and safety, and all the benefits
resulting from related categories in the form of savings, however they
may occur across the presented alternatives. In this accounting
framework, the CAFE Model records costs and benefits for vehicles in
the fleet throughout the lifetime of a particular model year and also
allows for the accounting of costs and benefits by calendar years.
Examining program effects through this lens illustrates the temporal
differences in major cost and benefit components and allows us to
examine costs and benefits for only those vehicles that are directly
regulated by the standards. In the HDPUV FE analysis, where the
standard would continue until otherwise amended, we report only the
costs and benefits across calendar years.
1. Passenger Cars and Light Trucks
We split effects on society into private costs, social costs,
private benefits, and external benefits. Table V-21 and Table V-22
describe the costs and benefits of increasing CAFE standards in each
alternative, as well as the party to which they accrue. Manufacturers
are directly regulated under the program and incur additional
production costs when they apply technology to their vehicle offerings
in order to improve their fuel economy. We assume that those costs are
fully passed through to new car and truck buyers in the form of higher
prices. We also assume that any civil penalties paid by manufacturers
for failing to comply with their CAFE standards are passed through to
new car and truck buyers and are included in the sales price. However,
those civil penalties are paid to the U.S. Treasury, where they
currently fund the general business of government. As such, they are a
transfer from new vehicle buyers to all U.S. citizens, who then benefit
from the additional Federal revenue. While they are calculated in the
analysis, and do influence consumer decisions in the marketplace, they
do not directly contribute to the calculation of net benefits (and are
omitted from the tables below).
While incremental maintenance and repair costs and benefits would
accrue to buyers of new cars and trucks affected by more stringent CAFE
standards, we do not carry these impacts in the analysis. They are
difficult to estimate but represent real costs (and potential benefits
in the case of AFVs that require less frequent maintenance events).
They may be included in future analyses as data become available to
evaluate lifetime maintenance impacts. This analysis assumes that
drivers of new vehicles internalize 90 percent of the risk associated
with increased exposure to crashes when they engage in additional
travel (as a consequence of the rebound effect).
Private benefits are dominated by the value of fuel savings, which
accrue to new car and truck buyers at retail fuel prices (inclusive of
Federal and state taxes). In addition to saving money on fuel
purchases, new vehicle buyers also benefit from the increased mobility
that results from a lower cost of driving their vehicle (higher fuel
economy reduces the per-mile cost of travel) and fewer refueling
events. The additional travel occurs as drivers take advantage of lower
operating costs to increase mobility, and this generates benefits to
those drivers--equivalent to the cost of operating their vehicles to
travel those miles, the consumer surplus, and the offsetting benefit
that represents 90 percent of the additional safety risk from travel.
In addition to private benefits and costs--those borne by
manufacturers, buyers, and owners of cars and light trucks--there are
other benefits and costs from increasing CAFE standards that are borne
more broadly throughout the economy or society, which NHTSA refers to
as social costs.\939\ The additional driving that occurs as new vehicle
buyers take advantage of lower per-mile fuel costs is a benefit to
those drivers, but the congestion (and road noise) created by the
additional travel also imposes a small additional social cost to all
road users. We also include transfers from one party to another other
than those directly incurred by manufacturers or new vehicle buyers
with social costs, the largest of which is the loss in fuel tax revenue
that occurs as a result of falling fuel consumption.\940\ Buyers of new
cars and light trucks produced in model years subject to increasing
CAFE standards save on fuel purchases that include Federal, state, and
sometimes local taxes, so revenues from these taxes decline; because
that revenue funds maintenance of roads and bridges as well as other
government activities, the loss in fuel tax revenue represents a social
cost, but is offset by the benefits gained by drivers who spend less at
the pump.\941\
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\939\ Some of these external benefits and social costs result
from changes in economic and environmental externalities from
supplying or consuming fuel, while others do not involve changes in
such externalities but are similar in that they are borne by parties
other than those whose actions impose them.
\940\ Changes in tax revenues are a transfer and not an economic
externality as traditionally defined, but we group these with social
costs instead of private costs since that loss in revenue affects
society as a whole as opposed to impacting only consumers or
manufacturers.
\941\ It may subsequently be replaced by another source of
revenue, but that is beyond the scope of this final rule to examine.
---------------------------------------------------------------------------
Among the purely external benefits created when CAFE standards are
increased, the largest is the reduction in damages resulting from GHG
emissions. Table V-20 shows the different social cost results that
correspond to each GHG discount rate. The associated benefits related
to reduced health damages from criteria pollutants and the benefit of
improved energy security are both significantly smaller than the
associated change in GHG damages across alternatives. As the tables
also illustrate, the majority of costs are private costs that accrue to
buyers of new cars and trucks, but the plurality of benefits stem from
external welfare changes that affect society more generally. These
external benefits are driven mainly by the benefits from reducing GHGs.
The tables show that the social and SC-GHG discount rates have a
significant impact on the estimated benefits in terms of magnitudes.
Net social benefits are positive for all alternatives at both the 3
percent and 7 percent social discount rates but have higher magnitudes
under the lower SC-GHG discount rates. Net benefits are higher when
assessed at a 3 percent social discount rate since the largest
benefit--fuel savings--accrues over a prolonged period, while the
largest cost--technology costs--accrue predominantly in earlier years.
Totals in the following table may not sum perfectly due to rounding.
BILLING CODE 4910-59-P
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Our analysis also includes a No ZEV alternative baseline for light-
duty, and the CAFE Model outputs results for all scenarios relative to
that baseline as well. Net benefits in the preferred alternative
increase when viewing the analysis from the perspective of the No ZEV
alternative baseline. Using the model year perspective, the SC-GHG DR
of 2% and a social discount rate of 3%, net benefits in the preferred
alternative of the No ZEV alternative baseline are 44.9 billion,
compared to the preferred alternative's net benefits relative to the
reference baseline (35.2 billion).
2. Heavy-Duty Pickups and Vans
Our categorizations of benefits and costs in the HDPUV space
mirrors the approach taken above for light-duty passenger trucks and
vans. Table V-22 describes the costs and benefits of increasing
standards in each alternative, as well as the party to which they
accrue. Manufacturers are directly regulated under the program and
incur additional production costs when they apply technology to their
vehicle offerings in order to improve their fuel efficiency. We assume
that those costs are fully passed through to new HDPUV buyers, in the
form of higher prices.
One key difference between the light-duty and HDPUV analysis is how
the agency approaches VMT. As explained in more detail in III.E.3 and
TSD Chapter 4.3, the agency does not constrain non-rebound VMT. As a
result, decreasing sales in the HDPUV fleet will lower the amount of
total VMT, while the rebound effect will cause those vehicles that are
improved and sold, to be driven more. On net, the CAFE Model shows that
the amount of VMT forgone from lower sales slightly outweighs the
amount of VMT gained through rebound driving, and as a result some of
the externalities from driving, such as safety costs and congestion,
appear as a cost reduction relative to the No-Action Alternative.
The choice of GHG discount rate also affects the resulting benefits
and costs. As the tables show, net social benefits are positive for all
alternatives, and are greatest when the SC-GHG discount rate of 1.5
percent is used. Totals in the following table may not sum perfectly
due to rounding.
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BILLING CODE 4910-59-C
C. Physical and Environmental Effects
1. Passenger Cars and Light Trucks
NHTSA estimates various physical and environmental effects
associated with the standards. These include quantities of fuel and
electricity consumed, GHGs and criteria pollutants reduced, and health
and safety impacts. Table V-23 shows the cumulative impacts grouped by
decade, including the on-road fleet sizes, VMT, fuel consumption, and
CO2 emissions, across alternatives. The size of the on-road
fleet increases in later decades regardless of alternative, but the
greatest on-road fleet size projection is seen in the reference
baseline, with fleet sizes declining as the alternatives become
increasingly more stringent. This is
[[Page 52749]]
attributable to the reduction in sales caused by increased regulatory
costs, which overtime decreases the existing vehicle stock, and
therefore the size of the overall fleet.
VMT increases occur in the two later decades, with the highest
miles occurring from 2041-2050. Fuel consumption (measured in gallons
or gasoline gallon equivalents) declines across both decades and
alternatives as the alternatives become more stringent, as do GHG
emissions.
---------------------------------------------------------------------------
\942\ These rows report total vehicle units observed during the
period. For example, 2,404 million units are modeled in the on-road
fleet for calendar years 2022-2030. On average, this represents
approximately 267 million vehicles in the on-road fleet for each
calendar year in this calendar year cohort.
\943\ These row report total miles traeled during the period.
For example, 27,853 billion miles traveled in calendar years 2022-
2030. On average, this represents approximately 3.05 trillion annual
miles traveled in this calendar year cohort.
[GRAPHIC] [TIFF OMITTED] TR24JN24.152
From a calendar year perspective, NHTSA's analysis estimates total
annual consumption of fuel by the entire on-road fleet from calendar
year 2022 through calendar year 2050. On this basis, gasoline and
electricity consumption by the U.S. light-duty fleet evolves as shown
in Figure IV-5 and Figure IV-6, each of which shows projections for the
No-Action Alternative (No-Action Alternative, i.e., the reference
baseline), Alternative PC2LT002, Alternative PC1LT3, Alternative
PC2LT4, Alternative PC3LT5, and Alternative PC6LT8. Gasoline
consumption decreases over time, with the largest decreases occurring
in more stringent alternatives. Electricity consumption increases over
time, with the same pattern of Alternative PC6LT8 experiencing the
highest magnitude of change.
[[Page 52750]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.153
[GRAPHIC] [TIFF OMITTED] TR24JN24.154
NHTSA estimates the GHGs attributable to the light-duty on-road
fleet, from both vehicles and upstream energy sector processes (e.g.,
petroleum refining, fuel transportation and distribution, electricity
generation). Figure IV-7, Figure IV-8, and Figure IV-9 present NHTSA's
estimate of how emissions from these three GHGs across
[[Page 52751]]
all fuel types could evolve over the years. Note that these graphs
include emissions from both downstream (powertrain and BTW) and
upstream processes. All three GHG emissions follow similar trends of
decline in the years between 2022-2050. Note that CO2
emissions are expressed in units of million metric tons (mmt) while
emissions from other pollutants are expressed in metric tons.
[GRAPHIC] [TIFF OMITTED] TR24JN24.155
[[Page 52752]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.156
[GRAPHIC] [TIFF OMITTED] TR24JN24.157
The figures presented here are not the only estimates NHTSA
calculates regarding projected GHG emissions in future years. The
accompanying EIS uses an ``unconstrained'' analysis as opposed to the
``standard setting'' analysis presented in this final rule. For more
information regarding projected GHG emissions, as well as model-based
[[Page 52753]]
estimates of corresponding impacts on several measures of global
climate change, see the EIS.
NHTSA also estimates criteria pollutant emissions resulting from
downstream (powertrain and BTW) and upstream processes attributable to
the light-duty on-road fleet. Since the NPRM, NHTSA has adopted the
NREL 2022 grid mix forecast which projects significant reductions in
criteria emission rates from upstream electricity production. This
results in further emission reductions across alternatives as EVs in
the reference baseline induce marginally less emissions relative to the
NPRM. This decrease in criteria pollutant emissions in turn leads to a
decrease in adverse health outcomes described in later sections. Under
each regulatory alternative, NHTSA projects a dramatic decline in
annual emissions of NOX, and PM2.5 attributable
to the light-duty on-road fleet between 2022 and 2050. As exemplified
in Figure V-10, NOx emissions in any given year could be very nearly
the same under each regulatory alternative.
On the other hand, as discussed in the FRIA Chapter 8.2 and Chapter
4 of the EIS accompanying this document, NHTSA projects that annual
SO2 emissions attributable to the LD on-road fleet could
increase by 2050, after significant fluctuation, in all of the
alternatives, including the reference baseline, due to greater use of
electricity for PHEVs and BEVs (See Figure IV-6). Differences between
the action alternatives are modest.
[GRAPHIC] [TIFF OMITTED] TR24JN24.158
[[Page 52754]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.159
[GRAPHIC] [TIFF OMITTED] TR24JN24.160
Health impacts quantified by the CAFE Model include various
instances of hospital visits due to respiratory problems, minor
restricted activity days, non-fatal heart attacks, acute bronchitis,
premature mortality, and other effects of criteria pollutant emissions
on health. Table V-24 shows the split in select health impacts relative
to the No-Action
[[Page 52755]]
Alternative, across all action alternatives. The magnitude of the
differences relates directly to the changes in tons of criteria
pollutants emitted. Magnitudes differ across health impact types
because of variation in the reference baseline totals; for example, the
total Minor Restricted Activity Days are much higher than the
Respiratory Hospital Admissions. See Chapter 5.4 of the TSD for
information regarding how the CAFE Model calculates these health
impacts.
[GRAPHIC] [TIFF OMITTED] TR24JN24.161
Lastly, NHTSA also quantifies safety impacts in its analysis. These
include estimated counts of fatalities, non-fatal injuries, and
property damage crashes occurring over the lifetimes of the LD on-road
vehicles considered in the analysis. The following table shows the
changes in these counts projected in action alternatives relative to
the reference baseline.
[[Page 52756]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.162
Generally, increasing fuel economy stringency leads to more adverse
safety outcomes from increased rebound VMT (motorists choosing to drive
more as driving becomes cheaper), and the reduction in scrappage
causing older vehicles with less safety features to remain in the fleet
longer. The impacts of mass reduction are nonlinear and depend on the
specific fleet receiving those reductions, with mass reduction to PCs
generally causing an increase in adverse safety outcomes and mass
reductions for LTs generally causing a decrease in adverse safety
outcomes; this explains the difference in the impacts of mass reduction
for Alternative PC6LT8, as this alternative sees the largest transition
from LTs to PCs and has PCs receiving the most mass reductions. NHTSA
notes that none of these safety outcomes due to mass reduction can be
statistically distinguished from zero. Chapter 7.1.5 of the FRIA
accompanying this document contains an in-depth discussion on the
effects of the various alternatives on these safety measures, and
Chapter 7 of the TSD contains information regarding the construction of
the safety estimates.
We also analyze physical and environmental effects relative to the
No ZEV alternative baseline. In the model year perspective (model years
through 2031), in the preferred alternative (PC2LT002) relative to the
No ZEV alternative baseline, CO2 emission reductions are
1,207 MMT, compared to the reduction in CO2 emissions in the
preferred alternative relative to the reference baseline (659 MMT).
2. Heavy-Duty Pickups and Vans
NHTSA estimates the same physical and environmental effects for
HDPUVs as it does for LDVs, including: quantities of fuel and
electricity consumption; tons of GHG emissions and criteria pollutants
reduced; and health and safety impacts. Table V-26 shows the cumulative
impacts grouped by decade, including the on-road fleet sizes, VMT, fuel
consumption, and CO2 emissions, across alternatives. The
size of the on-road fleet increases in later decades regardless of the
alternative, but the greatest on-road fleet size projection is seen in
the reference baseline. Most differences between the alternatives are
not visible in the Table V-26 due to rounding.
VMT increases occur in the later two decades, with the highest
numbers occurring from 2041-2050. Across alternatives, the VMT
increases remain around approximately the same magnitude. Fuel
consumption (measured in gallons or gasoline gallon equivalents)
declines across decades, as do GHG emissions. Differences between the
alternatives are minor but fuel consumption and GHG emissions also
decrease as alternatives become more stringent. As discussed in the
previous section, since the agency does not constrain VMT for HDPUVs,
alternatives
[[Page 52757]]
with fewer vehicles see a corresponding decrease in
VMT.944 945
---------------------------------------------------------------------------
\944\ These rows report total vehicle units observed during the
period. For example, 152 million units are modeled in the on-road
fleet for calendar years 2022-2030. On average, this represents
approximately 17 million vehicles in the on-road fleet for each
calendar year in this calendar year cohort.
\945\ These rows report total miles traveled during the period.
For example, 1.992 trillion miles traveled in calendar years 2022-
2030. On average, this represents approximately 221 billion annual
miles traveled in this calendar year cohort.
[GRAPHIC] [TIFF OMITTED] TR24JN24.163
Figure V-13 and Figure V-14 show the estimates of gasoline and
electricity consumption of the on-road HDPUV fleet for all fuel types
over time on a calendar year basis, from 2022-2050. The four action
alternatives, HDPUV4, HDPUV108, HDPUV10, and HDPUV14, are compared to
the reference baseline changes over time.
Gasoline consumption decreases over time, with the largest
decreases occurring in more stringent alternatives. Electricity
consumption increases over time, with the same pattern of Alternative
HDPUV14 experiencing the highest magnitude of change. In both charts,
the differences in magnitudes across alternatives do not vary
drastically.
[[Page 52758]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.164
[GRAPHIC] [TIFF OMITTED] TR24JN24.165
[[Page 52759]]
NHTSA estimates the GHGs attributable to the HDPUV on-road fleet,
from both downstream and upstream energy sector processes (e.g.,
petroleum refining, fuel transportation and distribution, electricity
generation). These estimates mirror those discussed in the light-duty
section above. Figure IV15, Figure IV16, and Figure IV17 present
NHTSA's estimate of how emissions from these three GHGs could evolve
over the years (CY 2022-2050). Emissions from all three GHG types
tracked follow similar trends of decline in the years between 2022-
2050. Note that these graphs include emissions from both vehicle and
upstream processes and scales vary by figure (CO2 emissions
are expressed in units of million metric tons (mmt) while emissions
from other pollutants are expressed in metric tons). NHTSA's
calculation of N2O emissions has changed since the NPRM
resulting in increased emission rates for diesel vehicles, which
comprise a significant portion of the HDPUV fleet.
[GRAPHIC] [TIFF OMITTED] TR24JN24.166
[[Page 52760]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.167
[GRAPHIC] [TIFF OMITTED] TR24JN24.168
For more information regarding projected GHG emissions, as well as
model-based estimates of corresponding impacts on several measures of
global climate change, see the EIS.
NHTSA also estimates criteria pollutant emissions resulting from
vehicle and upstream processes attributable to the HDPUV on-road fleet.
Under each regulatory alternative, NHTSA projects a significant decline
in annual emissions of NOX, and PM2.5
attributable to the HDPUV on-road fleet between 2022 and 2050. As
exemplified in Figure IV-18, the magnitude of
[[Page 52761]]
emissions in any given year could be very similar under each regulatory
alternative.
On the other hand, as discussed in the FRIA Chapter 8.3 and the
EIS, NHTSA projects that annual SO2 emissions attributable
to the HDPUV on-road fleet could increase modestly under the action
alternatives, because, as discussed above, NHTSA projects that each of
the action alternatives could lead to greater use of electricity (for
PHEVs and BEVs) in later calendar years.
[GRAPHIC] [TIFF OMITTED] TR24JN24.169
[[Page 52762]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.170
[GRAPHIC] [TIFF OMITTED] TR24JN24.171
Health impacts quantified by the CAFE Model include various
instances of hospital visits due to respiratory problems, minor
restricted activity days, non-fatal heart attacks, acute bronchitis,
premature mortality, and other effects of criteria pollutant emissions
on health. Table V-27 shows select health impacts relative to the
baseline, across all action alternatives. The magnitude of the
differences relates directly to the changes in tons of criteria
pollutants
[[Page 52763]]
emitted. The magnitudes differ across health impact types because of
variation in the totals; for example, the total Minor Restricted
Activity Days are much higher than the Respiratory Hospital Admissions.
See Chapter 5.4 of the TSD for information regarding how the CAFE Model
calculates these health impacts.
[GRAPHIC] [TIFF OMITTED] TR24JN24.172
Lastly, NHTSA also quantifies safety impacts in its analysis. These
include estimated counts of fatalities, non-fatal injuries, and
property damage crashes occurring over the lifetimes of the HD on-road
vehicles considered in the analysis. The following table shows
projections of these counts in action alternatives relative to the
baseline. As noted earlier, the safety impacts for HDPUV are a result
of changes in aggregate VMT.
[GRAPHIC] [TIFF OMITTED] TR24JN24.173
[[Page 52764]]
Chapter 7.1.5 of the FRIA accompanying this document contains an
in-depth discussion on the effects of the various alternatives on these
safety measures, and TSD Chapter 7 contains information regarding the
construction of the safety estimates.
D. Sensitivity Analysis, Including Alternative Baseline
The analysis conducted to support this rulemaking consists of data,
estimates, and assumptions, all applied within an analytical framework,
the CAFE Model. Just as with all past CAFE and HDPUV rulemakings, NHTSA
recognizes that many analytical inputs are uncertain, and some inputs
are very uncertain. Of those uncertain inputs, some are likely to exert
considerable influence over specific types of estimated impacts, and
some are likely to do so for the bulk of the analysis. Yet making
assumptions in the face of that uncertainty is necessary when analyzing
possible future events (e.g., consumer and industry responses to fuel
economy/efficiency regulation). In other cases, we made assumptions in
how we modeled the effects of other existing regulations that affected
the costs and benefits of the action alternatives (e.g., state ZEV
programs were included in the No-Action Alternative). To better
understand the effect that these assumptions have on the analytical
findings, we conducted additional model runs with alternative
assumptions. These additional runs were specified in an effort to
explore a range of potential inputs and the sensitivity of estimated
impacts to changes in these model inputs. Sensitivity cases and the
alternative baseline in this analysis span assumptions related to
technology applicability and cost, economic conditions, consumer
preferences, externality values, and safety assumptions, among
others.\946\ A sensitivity analysis can identify two critical pieces of
information: how big of an influence does each parameter exert on the
analysis, and how sensitive are the model results to that assumption?
---------------------------------------------------------------------------
\946\ In contrast to an uncertainty analysis, where many
assumptions are varied simultaneously, the sensitivity analyses
included here vary a single assumption and provide information about
the influence of each individual factor, rather than suggesting that
an alternative assumption would have justified a different Preferred
Alternative.
---------------------------------------------------------------------------
That said, influence is different from likelihood. NHTSA does not
mean to suggest that any one of the sensitivity cases presented here is
inherently more likely than the collection of assumptions that
represent the reference baseline in the figures and tables that follow.
Nor is this sensitivity analysis intended to suggest that only one of
the many assumptions made is likely to prove off-base with the passage
of time or new observations. It is more likely that, when assumptions
are eventually contradicted by future observation (e.g., deviations in
observed and predicted fuel prices are nearly a given), there will be
collections of assumptions, rather than individual parameters, that
simultaneously require updating. For this reason, we do not interpret
the sensitivity analysis as necessarily providing justification for
alternative regulatory scenarios to be preferred. Rather, the analysis
simply provides an indication of which assumptions are most critical,
and the extent to which future deviations from central analysis
assumptions could affect costs and benefits of the rule. For a full
discussion of how this information relates to NHTSA's determination of
which regulatory alternatives are maximum feasible, please see Section
VI.D].
Table V-29 lists and briefly describes the cases and alternative
baseline that we examined in the sensitivity analysis. Note that some
cases only apply to the LD fleet (e.g., scenarios altering assumptions
about fleet share modeling) and others only affect the HDPUV analysis
(e.g., initial PHEV availability).
BILLING CODE 4910-59-P
[[Page 52765]]
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[[Page 52766]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.175
[[Page 52767]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.176
[[Page 52768]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.177
BILLING CODE 4910-59-C
Chapters 3 and 9 of the accompanying FRIA summarize results for the
alternative baseline and sensitivity cases, and detailed model inputs
and outputs for curious readers are available on NHTSA's website.\947\
For purposes of this preamble, the figures in Section V.D.1 illustrate
the relative change of the sensitivity effect of selected inputs on the
costs and benefits estimated for this rule for LDVs, while the figures
in Section V.D.2 present the same data for the HDPUV analysis. Each
collection of figures groups sensitivity cases by the category of input
assumption (e.g., macroeconomic assumptions, technology assumptions,
and so on).
---------------------------------------------------------------------------
\947\ NHTSA. 2023. Corporate Average Fuel Economy. Available at:
https://www.nhtsa.gov/laws-regulations/corporate-average-fuel-economy. (Accessed: Feb. 23, 2024).
---------------------------------------------------------------------------
While the figures in this section do not show precise values, they
give us a sense of which inputs are ones for which a different
assumption would have a much different effect on analytical findings,
and which ones would not have much effect. For example, assuming a
different oil price trajectory would have a relatively large effect, as
would doubling, or eliminating the assumed ``payback period.''
Sensitivity analyses also allow us to examine the impact of specific
changes from the proposal on our findings. For example, in the final
rule analysis, NHTSA used estimates of the social costs of greenhouse
gases produced by the EPA, whereas these inputs were taken from the IWG
in the proposal. This has a significant impact on net benefits, though
they would remain strongly positive regardless of which set of
estimates was used. The relative magnitude of these effects also varies
by fleet. Making alternative assumptions about the future costs of
battery technology has a larger effect on the HDPUV results. Adjusting
assumptions related to the tax credits included in the IRA has a
significant impact on results for both LDVs and HDPUVs. On the other
hand, assumptions about which there has been significant disagreement
in the past, like the rebound effect or the sales-scrappage response to
changes in vehicle price, appear to cause only relatively small changes
in net benefits across the range of analyzed input values. Chapter 9 of
the FRIA provides an extended discussion of these findings, and
presents net benefits estimated under each of the cases included in the
sensitivity analysis.
The results presented in the earlier subsections of Section V and
discussed in Section VI reflect NHTSA's best judgments regarding many
different factors, and the sensitivity analysis discussed here is
simply to illustrate the obvious, that differences in assumptions can
lead to differences in analytical outcomes, some of which can be large
and some of which may be smaller than expected. Policymaking in the
face of future uncertainty is inherently complex. Section VI explains
how NHTSA balances the statutory factors in light of the analytical
findings, the uncertainty that we know exists, and our nation's policy
goals, to set CAFE standards for model years 2027-2031, and HDPUV fuel
efficiency standards for model year 2030 and beyond that NHTSA
concludes are maximum feasible.
1. Passenger Cars and Light Trucks
Overall, NHTSA finds that for light duty vehicles, the preferred
alternative PC2LT002 produces positive societal net benefits for each
sensitivity and alternative baseline at both 3 and 7 percent discount
rates. Societal net benefits are highest in the ``No payback period''
case ($33 billion) and lowest in the ``Standard-setting conditions for
MY 2023-2050'' case ($7.7 billion) at a 3 percent social discount rate
and 2 percent SC-GHG discount rate.
[[Page 52769]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.178
[[Page 52770]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.179
[[Page 52771]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.180
[[Page 52772]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.181
[[Page 52773]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.182
[[Page 52774]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.183
2. Heavy-Duty Pickups and Vans
In our HDPUV analysis the preferred alternative HDPUV108 produces
positive net benefits for all but a handful of cases. In these cases,
the alternative assumptions lead to greater technology adoption in the
No-Action Alternative and lead to net benefits that are just below 0.
[[Page 52775]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.184
[[Page 52776]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.185
[[Page 52777]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.186
[[Page 52778]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.187
[GRAPHIC] [TIFF OMITTED] TR24JN24.188
[[Page 52779]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.222
VI. Basis for NHTSA's Conclusion That the Standards Are Maximum
Feasible
NHTSA's purpose in setting CAFE standards is to conserve energy, as
directed by EPCA/EISA. Energy conservation provides many benefits to
the American public, including better protection for consumers against
changes in fuel prices, significant fuel savings and reduced impacts
from harmful pollution. NHTSA continues to believe that fuel economy
standards can function as an important insurance policy against oil
price volatility, particularly to protect consumers even as the U.S.
has improved its energy independence over time. Although NHTSA proposed
PC2LT4 as the preferred alternative for CAFE standards for model years
2027-2031, NHTSA is finalizing PC2LT002 for those model years. Based on
comments received and a closer look at the model results under the
statutorily-constrained analysis, NHTSA now concludes that
``shortfalls'' and civil penalties must be managed in order to conserve
manufacturer capital and resources for making the technological
transition that NHTSA is prohibited from considering directly.
Similarly, for HDPUV, while NHTSA proposed HDPUV10 for model years
2030-2035, NHTSA is finalizing HDPUV108 for those model years. Based on
comments received and a closer look at the model results--and
specifically, as in the NPRM, the sensitivity analyses, as well as the
apparent effects on certain manufacturers--NHTSA recognizes that
uncertainty, particularly in the later model years of the rulemaking,
means that a slower rate of increase is maximum feasible for those
years. These conclusions, for both passenger cars and light trucks and
for HDPUVs, will be discussed in more detail below.
A. EPCA, as Amended by EISA
EPCA, as amended by EISA, contains provisions establishing how
NHTSA must set CAFE standards and fuel efficiency standards for HDPUVs.
DOT (by delegation, NHTSA) \948\ must establish separate CAFE standards
for passenger cars and light trucks for each model
year,949 950 and each standard must be the maximum feasible
that the Secretary (again, by delegation, NHTSA) determines
manufacturers can achieve in that model year.\951\ In determining the
maximum feasible levels of CAFE standards, EPCA requires that NHTSA
consider four statutory factors: technological feasibility, economic
practicability, the effect of other motor vehicle standards of the
Government on fuel economy, and the need of the United States to
conserve energy.\952\ NHTSA must also set separate standards for
HDPUVs, and while those standards must also ``achieve the maximum
feasible improvement,'' they must be ``appropriate, cost-effective, and
technologically feasible'' \953\--factors slightly different from those
required to be considered for passenger car and light truck standards.
NHTSA has broad discretion to balance the statutory factors in
developing fuel consumption standards to achieve the maximum feasible
improvement. In addition, NHTSA has the authority to consider (and
typically does consider) other relevant factors, such as the effect of
CAFE standards on motor vehicle safety.
---------------------------------------------------------------------------
\948\ EPCA and EISA direct the Secretary of Transportation to
develop, implement, and enforce fuel economy standards (see 49
U.S.C. 32901 et seq.), which authority the Secretary has delegated
to NHTSA at 49 FR 1.95(a).
\949\ 49 U.S.C. 32902(b)(1) (2007).
\950\ 49 U.S.C. 32902(a) (2007).
\951\ Id.
\952\ 49 U.S.C. 32902(f).
\953\ 49 U.S.C. 32902(k)(2).
---------------------------------------------------------------------------
The ultimate determination of what standards can be considered
maximum feasible involves a weighing and balancing of factors, and the
balance may shift depending on the information NHTSA has available
about the expected circumstances in the model years covered by the
rulemaking. NHTSA's decision must also be guided by the overarching
purpose of EPCA, energy conservation, while balancing these
factors.\954\
---------------------------------------------------------------------------
\954\ Center for Biological Diversity v. NHTSA, 538 F.3d 1172,
1197 (9th Cir. 2008) (``Whatever method it uses, NHTSA cannot set
fuel economy standards that are contrary to Congress's purpose in
enacting the EPCA--energy conservation.''). While this decision
applied only to standards for passenger cars and light trucks, NHTSA
interprets the admonition as broadly applicable to its actions under
section 32902.
---------------------------------------------------------------------------
[[Page 52780]]
EPCA/EISA also contain several other requirements, as follows.
1. Lead Time
a. Passenger Cars and Light Trucks
EPCA requires that NHTSA prescribe new CAFE standards at least 18
months before the beginning of each model year.\955\ Thus, if the first
year for which NHTSA is establishing new CAFE standards is model year
2027, NHTSA interprets this provision as requiring us to issue a final
rule covering model year 2027 standards no later than April 2025. No
specific comments were received regarding the 18-month lead time
requirement for CAFE standards, although ZETA and Hyundai commented
that NHTSA should wait to finalize the CAFE standards until after DOE
finalized the PEF revision, out of concern that failing to do so would
``increase administrative burden for both'' agencies,\956\ and that
NHTSA's final rule would not otherwise ``accurately reflect the final
PEF.'' \957\ Because NHTSA coordinated with DOE as both agencies worked
to finalize their respective rules, this final rule reflects DOE's
final PEF. Given that the Deputy Administrator of NHTSA signed this
final rule in June 2024, the statutory lead time requirement is met.
---------------------------------------------------------------------------
\955\ 49 U.S.C. 32902(a) (2007).
\956\ ZETA, Docket No. NHTSA-2023-0022-60508, at 28.
\957\ Hyundai, Docket No. NHTSA-2023-0022-51701, at 6.
---------------------------------------------------------------------------
b. Heavy-Duty Pickups and Vans
EISA requires that standards for commercial medium- and HD on-
highway vehicles and work trucks (of which HDPUVs are part) provide not
less than four full model years of regulatory lead time.\958\ Thus, if
the first year for which NHTSA is establishing new fuel efficiency
standards for HDPUVs is model year 2030, NHTSA interprets this
provision as requiring us to issue a final rule covering model year
2030 standards no later than October 2025.\959\ Stellantis commented
that it agreed with the proposal, that in order to provide four full
model years of regulatory lead time, the earliest model year for which
NHTSA could establish new standards was model year 2030.\960\ NHTSA
agrees and is establishing new standards for HDPUVs beginning in model
year 2030. This means that the applicable model years of NHTSA's final
rule do not align perfectly with EPA's recent final rule establishing
multipollutant (including GHG) standards for the same vehicles, but
this is a direct consequence of the statutory lead time requirement in
EISA. The Alliance and GM also agreed in their comments that model year
2030 was an appropriate start year for new HDPUV standards.\961\ GM
stated that that timeframe ``would provide manufacturers sufficient
lead time to adjust product plans to standards.'' \962\ Given that the
Deputy Administrator of NHTSA signed this final rule in June, 2024,
this lead time requirement is met.
---------------------------------------------------------------------------
\958\ 49 U.S.C. 32902(k)(3)(A) (2007).
\959\ As with passenger cars and light trucks, NHTSA interprets
the model year for HDPUVs as beginning with October of the calendar
year prior. Therefore, HDPUV model year 2029 would begin in October
2028; therefore, four full model years prior to October 2028 would
be October 2024.
\960\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 12.
\961\ The Alliance, Docket No. NHTSA-2023-0022-60652, Attachment
3, at 52; GM, Docket No. NHTSA-2023-0022-60686, at 7.
\962\ GM, Docket No. NHTSA-2023-0022-60686, at 7.
---------------------------------------------------------------------------
EISA contains a related requirement for HDPUVs that the standards
provide not only four full model years of regulatory lead time, but
also three full model years of regulatory stability.\963\ As discussed
in the Phase 2 final rule, Congress has not spoken directly to the
meaning of the words ``regulatory stability.'' NHTSA interprets the
``regulatory stability'' requirement as ensuring that manufacturers
will not be subject to new standards in repeated rulemakings too
rapidly, given that Congress did not include a minimum duration period
for the MD/HD standards.\964\ NHTSA further interprets the statutory
meaning as reasonably encompassing standards which provide for
increasing stringency during the rulemaking time frame to be the
maximum feasible. In this statutory context, NHTSA thus interprets the
phrase ``regulatory stability'' in section 32902(k)(3)(B) as requiring
that the standards remain in effect for three years before they may be
increased by amendment. It does not prohibit standards that contain
predetermined stringency increases.
---------------------------------------------------------------------------
\963\ 49 U.S.C. 32902(k)(3)(B) (2007).
\964\ In contrast, as discussed below, passenger car and
standards must remain in place for ``at least 1, but not more than
5, model years.'' 49 U.S.C. 32902(b)(3)(B).
---------------------------------------------------------------------------
CEA commented that this interpretation was inconsistent with the
law. It stated that a standard could not be ``stable'' if it
``continually ratchets up each year,'' and argued that HDPUV redesign
cycles are longer than light truck redesign cycles and that
``manufacturers would therefore have difficulty meeting standards that
ratchet up every year.'' \965\ In response, NHTSA continues to believe
that ``stable'' can reasonably be interpreted as ``known in advance''
and ``remaining in effect for three years,'' in part because the
dictionary provides definitions for ``stable'' that include ``firmly
established; fixed; steadfast; enduring.'' \966\ While some definitions
of ``stable'' mention ``not changing or fluctuating; unvarying,'' \967\
NHTSA believes that standards that are known in advance and established
in three-year tranches can reasonably fit these definitions--the
standards will not change or vary from what is established here, except
by rulemaking as necessary (and as permissible given lead time
requirements). EISA does not suggest that NHTSA interpret ``unvarying''
as exclusively suggesting that ``standards may only increase once every
three years and then must be held at that level,'' and could also be
reasonably read to suggest that ``standards should not change from
established levels, once established.'' NHTSA is accordingly
establishing new HDPUV standards in two tranches: standards that
increase 10 percent per year for model years 2030-2031-2032, and
standards that increase at 8 percent per year for model years 2033-
2034-2035.
---------------------------------------------------------------------------
\965\ CEA, Docket No. NHTSA-2023-0022-61918, at 31.
\966\ https://www.merriam-webster.com/dictionary/stable (last
accessed Apr. 15, 2024).
\967\ Id.
---------------------------------------------------------------------------
NHTSA also believes, based on comments, that redesign cycles should
not be a problem for the HDPUV standards. NHTSA notes the comment from
GM, mentioned above, that NHTSA beginning new standards in model year
2030 will provide sufficient lead time for manufacturers to adjust
their product plans as needed, even while GM also noted that redesign
cycles were longer for HDPUVs than for LTs.\968\ GM further stated that
the lead time provided ``lowers the likelihood of product disruptions
in the market.'' \969\ NHTSA agrees that HDPUV redesign cycles are
longer than light truck redesign cycles and reflects this in our
analysis, which shows the final standards (and indeed, all of the
alternatives) as being achievable for the entirety of the HDPUV fleet,
with no shortfalls under any regulatory alternative:
---------------------------------------------------------------------------
\968\ GM, Docket No. NHTSA-2023-0022-60686, at 7.
\969\ Id.
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[[Page 52781]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.189
This approach is consistent with our understanding of regulatory
stability. Manufacturers appear likely to have little to zero
difficulty in meeting the final standards. Setting HDPUV standards that
did not increase for three years instead would make little functional
difference to compliance, given the availability of credit banking.
2. Separate Standards for Passenger Cars, Light Trucks, and Heavy-Duty
Pickups and Vans, and Minimum Standards for Domestic Passenger Cars
EPCA requires NHTSA to set separate standards for passenger cars
and light trucks for each model year.\970\ Based on the plain language
of the statute, NHTSA has long interpreted this requirement as
preventing NHTSA from setting a single combined CAFE standard for cars
and trucks together. Congress originally required separate CAFE
standards for cars and trucks to reflect the different fuel economy
capabilities of those different types of vehicles, and over the history
of the CAFE program, has never revised this requirement. Even as many
cars and trucks have come to resemble each other more closely over
time--many crossover and sport-utility models, for example, come in
versions today that may be subject to either the car standards or the
truck standards depending on their characteristics--it is still
accurate to say that vehicles with truck-like characteristics such as
4-wheel drive, cargo-carrying capability, etc., currently consume more
fuel per mile than vehicles without these components. While there have
been instances in recent rulemakings where NHTSA raised passenger car
and light truck standard stringency at the same numerical rate year
over year, NHTSA also has precedent for setting passenger car and light
truck standards that increase at different numerical rates year over
year, as in the 2012 final rule. This underscores that NHTSA's
obligation is to set maximum feasible standards separately for each
fleet, based on our assessment of each fleet's circumstances as seen
through the lens of the four statutory factors that NHTSA must
consider. Regarding the applicability of the CAFE standards, individual
citizens commenting via Climate Hawks Civic Action asked whether U.S.
Postal Service vehicles,\971\ airplanes,\972\ and non-road engines
(such as for lawn equipment) \973\ could also be subject to CAFE
standards. Postal Service vehicles are generally HDPUVs, and thus
subject to those standards rather than to CAFE standards. Airplanes and
non-road engines are not automobiles under 49 U.S.C. 32901, so they
cannot be subject to CAFE standards. An individual citizen with Climate
Hawks Civic Action also requested that NHTSA not set separate standards
for light trucks, on the basis that doing so would be detrimental to
energy conservation.\974\ As explained above, NHTSA interprets 49
U.S.C. 32902 as requiring NHTSA to set separate standards for passenger
cars and light trucks. Again, NHTSA does not believe that it has
statutory authority to set a single standard for both passenger cars
and light trucks.
---------------------------------------------------------------------------
\970\ 49 U.S.C. 32902(b)(1) (2007).
\971\ Climate Hawks, Docket No. NHTSA-2023-0022-61094, at 182.
\972\ Id. at 2244.
\973\ Id. at 2520.
\974\ Id. at 2579.
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EPCA, as amended by EISA, also requires another separate standard
to be set for domestically manufactured passenger cars.\975\ Unlike the
generally applicable standards for passenger cars and light trucks
described above, the compliance obligation of the minimum
[[Page 52782]]
domestic passenger car standard (MDPCS) is identical for all
manufacturers. The statute clearly states that any manufacturer's
domestically manufactured passenger car fleet must meet the greater of
either 27.5 mpg on average, or ``92 percent of the average fuel economy
projected by the Secretary for the combined domestic and non-domestic
passenger automobile fleets manufactured for sale in the United States
by all manufacturers in the model year, which projection shall be
published in the Federal Register when the standard for that model year
is promulgated in accordance with [49 U.S.C. 32902(b)].'' \976\ Since
that statutory requirement was established, the ``92 percent'' has
always been greater than 27.5 mpg, and foreseeably will continue to be
so in the future. As in the 2020 and 2022 final rules, NHTSA continues
to recognize industry concerns that actual total passenger car fleet
standards have differed significantly from past projections, perhaps
more so when NHTSA has projected significantly into the future. In the
2020 final rule, the compliance data showed that standards projected in
the 2012 final rule were consistently more stringent than the actual
standards as calculated at the end of the model year, by an average of
1.9 percent. NHTSA has stated that this difference indicates that in
rulemakings conducted in 2009 through 2012, NHTSA's and EPA's
projections of passenger car vehicle footprints and production volumes,
in retrospect, underestimated the production of larger passenger cars
over the model years 2011 to 2018 period.\977\
---------------------------------------------------------------------------
\975\ In the CAFE program, ``domestically manufactured'' is
defined by Congress in 49 U.S.C. 32904(b). The definition roughly
provides that a passenger car is ``domestically manufactured'' as
long as at least 75 percent of the cost to the manufacturer is
attributable to value added in thie United States, Canada, or
Mexico, unless the assembly of the vehicle is completed in Canada or
Mexico and the vehicle is imported into the United States more than
30 days after the end of the model year.
\976\ 49 U.S.C. 32902(b)(4) (2007).
\977\ See 85 FR 25127 (Apr. 30, 2020).
---------------------------------------------------------------------------
Unlike the passenger car standards and light truck standards which
are vehicle-attribute-based and automatically adjust with changes in
consumer demand, the MDPCS are not attribute-based, and therefore do
not adjust with changes in consumer demand and production. They are,
instead, fixed standards that are established at the time of the
rulemaking. As a result, by assuming a smaller-footprint fleet, on
average, than what ended up being produced, the model year 2011-2018
MDPCS ended up being more stringent and placing a greater burden on
manufacturers of domestic passenger cars than was projected and
expected at the time of the rulemakings that established those
standards. In the 2020 final rule, therefore, NHTSA agreed with
industry concerns over the impact of changes in consumer demand (as
compared to what was assumed in 2012 about future consumer demand for
greater fuel economy) on manufacturers' ability to comply with the
MDPCS and in particular, manufacturers that produce larger passenger
cars domestically. Some of the largest civil penalties for
noncompliance in the history of the CAFE program have been paid for
noncompliance with the MDPCS.\978\ NHTSA also expressed concern at that
time that consumer demand may shift even more in the direction of
larger passenger cars if fuel prices continue to remain low. Sustained
low oil prices can be expected to have real effects on consumer demand
for additional fuel economy, and if that occurs, consumers may
foreseeably be even more interested in 2WD crossovers and passenger-
car-fleet SUVs (and less interested in smaller passenger cars) than
they are at present.
---------------------------------------------------------------------------
\978\ See the Civil Penalties Report visualization tool at
https://www.nhtsa.gov/corporate-average-fuel-economy/cafe-public-information-center for more specific information about civil
penalties previously paid.
---------------------------------------------------------------------------
Therefore, in the 2020 final rule, to help avoid similar outcomes
in the 2021 to 2026 time frame to what had happened with the MDPCS over
the preceding model years, NHTSA determined that it was reasonable and
appropriate to consider the recent projection errors as part of
estimating the total passenger car fleet fuel economy for model years
2021-2026. NHTSA therefore projected the total passenger car fleet fuel
economy using the central analysis value in each model year, and
applied an offset based on the historical 1.9 percent difference
identified for model years 2011-2018.
For the 2022 final rule, NHTSA retained the 1.9 percent offset,
concluding that it is difficult to predict passenger car footprint
trends in advance, which means that, as various stakeholders have
consistently noted, the MDPCS may turn out quite different from 92
percent of the ultimate average passenger car standard once a model
year is complete. NHTSA also expressed concern, as suggested by the
United Automobile, Aerospace, and Agricultural Implement Workers of
America (UAW), that automakers struggling to meet the unadjusted MDPCS
may choose to import their passenger cars rather than producing them
domestically.
In the NPRM, NHTSA proposed to continue employing the 1.9 percent
offset for model years 2027-2032, stating that NHTSA continued to
believe that the reasons presented previously for the offset still
apply, and that therefore the offset is appropriate, reasonable, and
consistent with Congress' intent.
The Alliance, Ford, Nissan, and Kia commented that retaining the
MDPCS offset was appropriate.\979\ Kia, for example, stated that it
helped manufacturers avoid civil penalty payments, but expressed
concern that the stringency of the proposed passenger car standards was
so high that ``even strong hybrids may not achieve the proposed MDPCS
in the outer years.'' \980\ Despite the offset, Kia suggested that this
overall passenger car stringency could ``complicate'' Kia's continued
ability to produce passenger cars in the United States.\981\
---------------------------------------------------------------------------
\979\ The Alliance, NHTSA-2023-0022-60652, Attachment 2, at 10;
Ford, NHTSA-2023-0022-60837, at 10; Nissan, NHTSA-2023-0022-60696,
at 9; Kia, NHTSA-2023-0022-58542-A1, at 5.
\980\ Kia, Docket No. NHTSA-2023-0022-58542-A1, at 5.
\981\ Id.
---------------------------------------------------------------------------
The States and Cities commented that while the offset to the MDPCS
was not ``inherently unreasonable,'' they disagreed with NHTSA's
interpretation of 32902(b)(4). Specifically, they argued that ``the
average fuel economy projected by the Secretary for the combined
domestic and non-domestic passenger car fleets . . .'' should be
interpreted to refer to the estimated achieved value rather than (as
NHTSA has long interpreted it) to the estimated required value.\982\
The States and Cities commented that this reading was closer to the
plain language of the statute, and asked NHTSA to clarify in the final
rule that the offset was a ``proxy for the required projected average,
[rather than] an interpretation away from the plain statutory text.''
\983\ The States and Cities further requested that the offset, if any,
be calculated as ``the difference between the previous model years'
central analysis value and average fuel economies achieved, rather than
the difference between the projected and actual fleet-average
standard.'' \984\
---------------------------------------------------------------------------
\982\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 41.
\983\ Id.
\984\ Id. at 41-42.
---------------------------------------------------------------------------
NHTSA has interpreted ``projected'' as referring to estimated
required levels rather than estimated achieved levels since at least
2010. In the final rule establishing CAFE standards for model years
2012-2016, NHTSA noted that the Alliance had requested in its comments
that the MDPCS be based on estimated achieved values.\985\ NHTSA
responded that because Congress referred in the second clause of
32904(b)(4)(B) to the standard promulgated for that model year,
therefore NHTSA interpreted the
[[Page 52783]]
``projection'' as needing to be based on the estimated required value
(i.e., the projection of the standard).\986\ The estimated achieved
value represents manufacturers' assumed performance against the
standard, not the standard itself. NHTSA believes that this logic
continues to hold, and thus continues to determine the MDPCS based on
the estimated required mpg levels projected for the model years covered
by the rulemaking, and to determine the offset based on the estimated
required levels rather than on the estimated achieved levels.
---------------------------------------------------------------------------
\985\ See 75 FR 25324, 25614 (May 7, 2010).
\986\ Id.
---------------------------------------------------------------------------
That said, NHTSA agrees that the offset is in some ways a proxy for
92 percent of the projected standard, insofar as the future is
inherently uncertain and many different factors may combine to result
in actual final passenger car mpg values that differ from those
estimated as part of this final rule. Vehicle manufacturers may face
even more uncertainty in the time frame of this rulemaking than they
have faced since the MDPCS offset was first implemented. While NHTSA
believes that the overall passenger car standards are maximum feasible
based on the discussion in Section VI.D below, in response to Kia's
comment that passenger car standard stringency may cause Kia to move
its car production offshore, NHTSA continues to believe that the MDPCS
offset helps to mitigate that uncertainty and perhaps to ease the major
transition through which the industry is passing.
For HDPUVs, Congress gave DOT (by delegation, NHTSA) broad
discretion to ``prescribe separate standards for different classes of
vehicles'' under 49 U.S.C. 32902(k). HDPUVs are defined by regulation
as ``pickup trucks and vans with a gross vehicle weight rating between
8,501 pounds and 14,000 pounds (Class 2b through 3 vehicles)
manufactured as complete vehicles by a single or final stage
manufacturer or manufactured as incomplete vehicles as designated by a
manufacturer.'' \987\ NHTSA also allows HD vehicles above 14,000 pounds
GVWR to be optionally certified as HDPUVs and comply with HDPUV
standards ``if properly included in a test group with similar vehicles
at or below 14,000 pounds GVWR,'' and ``The work factor for these
vehicles may not be greater than the largest work factor that applies
for vehicles in the test group that are at or below 14,000 pounds
GVWR.''\988\ Incomplete HD vehicles at or below 14,000 pounds GVWR may
also be optionally certified as HDPUVs and comply with the HDPUV
standards.\989\
---------------------------------------------------------------------------
\987\ 49 CFR 523.7(a).
\988\ 49 CFR 523.7(b).
\989\ 49 CFR 523.7(c).
---------------------------------------------------------------------------
GM commented that it was appropriate for NHTSA to set HDPUV
standards and passenger car/light truck CAFE standards in the same
rulemaking, because electrifying certain light trucks could increase
their weight to the point where they become HDPUVs, and ``Conducting
these rulemakings together is an important first step to considering
this possibility when setting standards.'' \990\ In response, NHTSA
does track the classification of vehicles in order to ensure that its
consideration of potential future CAFE and HDPUV stringencies is
appropriately informed, and NHTSA did reassign vehicles from the light
truck fleet to the HDPUV fleet (and vice versa) in response to
stakeholder feedback to the NPRM. RVIA commented that the NPRM neither
considered nor specifically mentioned motorhomes weighing less than
14,000 pounds GVWR, and expressed concern that the new standards would
apply to these vehicles and ``require [them] to be electrified.'' \991\
In response, the Phase 2 MD/HD final rule explains that these vehicles
are properly classified under EISA's definitions as Class 2b-8
vocational vehicles and not as HDPUVs.\992\ NHTSA is not setting new
standards for vocational vehicles as part of this action. Moreover, as
discussed elsewhere in this document, the HDPUV standards are
performance-based standards and not electric-vehicle mandates.\993\
---------------------------------------------------------------------------
\990\ GM, Docket No. NHTSA-2023-0022-60686, at 7.
\991\ RVIA, Docket No. NHTSA-2023-0022-51462, at 1.
\992\ See 81 FR 73478, at 73522 (Oct. 25, 2016).
\993\ RVIA also commented that motor homes are often used for
extended periods in areas without access to electricity (a practice
known as ``boondocking''), and that therefore requiring motor homes
to be BEVs was infeasible. RVIA, NHTSA-2023-0022-51462, at 2. Again,
the vehicles described by RVIA are not subject to the HDPUV
standards, and the HDPUV standards themselves are performance-based
and not electric-vehicle mandates.
---------------------------------------------------------------------------
AFPM commented that NHTSA ``failed to address any of the unique
statutory factors for HDPUVs,'' pointing to 49 U.S.C. 32902(k)(1) and
suggesting that NHTSA had not followed that section in developing its
proposal.\994\ NHTSA agrees that it did not follow 32902(k)(1) in
developing its proposal, because NHTSA executed the requirements of
that section as part of the Phase 1 MD/HD fuel efficiency rulemaking,
completed in 2011. NHTSA's website contains a link to the independent
study that NHTSA performed, as directed by 32902(k)(1), following the
publication of the NAS report.\995\ Because that statutory requirement
has been executed, NHTSA did not undertake it again as part of this
rulemaking.
---------------------------------------------------------------------------
\994\ AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at
84.
\995\ NHTSA. 2010. Factors and Considerations for Establishing a
Fuel Efficiency Regulatory Program for Commercial Medium- and Heavy-
Duty Vehicles. October 2010. Available at: https://www.nhtsa.gov/sites/nhtsa.gov/files/2022-02/NHTSA_Study_Trucks.pdf (last accessed
Mar. 1, 2024).
---------------------------------------------------------------------------
NHTSA is establishing separate standards for ``spark ignition''
(SI, or gasoline-fueled) and ``compression ignition'' (CI, or diesel-
fueled) HDPUVs, consistent with the existing Phase 2 standards. Each
class of vehicles has its own work-factor based target curve;
alternative fueled vehicles (such as BEVs) are subject to the standard
for CI vehicles and HEVs and PHEVs are subject to the standard for SI
vehicles. We understand that EPA has recently finalized a single curve
for all HDPUVs regardless of fuel type. ACEEE commented that NHTSA
should follow suit and raise the stringency of the gasoline standards
to match that of the diesel standards, arguing that it would improve
consistency with EPA's program and be consistent with NHTSA's
acknowledgement of the emergence of van electrification.\996\ NHTSA is
not taking this approach, for several reasons. First, EPA is modifying
the model year 2027 standards set in the 2016 ``Phase 2'' rulemaking,
and NHTSA cannot follow suit due to statutory lead time requirements.
Second, EPA's single curve standard developed in GHG gas units (g
CO2/mile) will still result in two separate curves when
converted to the units used by NHTSA to set standards for fuel
efficiency (gal/100 miles). This is a result of the differing amount of
CO2 released by each fuel type represented by each standard
curve. Gasoline releases about 8,887g of CO2 per gallon
burned and diesel fuel releases about 10,180g of CO2 per
gallon burned.\997\ As an example, a model year 2030 HDPUV with a WF of
4500 would be required to produce less than 346 gCO2/mile according to
the current EPA single curve standards; due to the difference in carbon
content for fuels this translates to either a required gasoline
consumption of less than 3.89 gal/100miles or a required diesel
consumption of less than 3.4 gal/
[[Page 52784]]
100miles. Considering difference in carbon content between gasoline and
diesel, NHTSA chose to continue to use two separate curves based on
combustion (and fuel) type because the agency believes it results in a
closer harmonization between the NHTSA and EPA's standards when
compared in fuel efficiency space. By retaining separate CI and SI
curves NHTSA's standards will not only align closer with EPA's
standards, but also better balance to the agency's statutory factors
for HDPUVs: cost-effectiveness and technological feasibility.
---------------------------------------------------------------------------
\996\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 8.
\997\ See Greenhouse Gases Equivalencies Calculator--
Calculations and References, https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references, last
accessed 04/18/2024.
---------------------------------------------------------------------------
3. Attribute-Based and Defined by a Mathematical Function
For passenger cars and light trucks, EISA requires NHTSA to set
CAFE standards that are ``based on 1 or more attributes related to fuel
economy and express[ed]. in the form of a mathematical function.''
\998\ Historically, NHTSA has based standards on vehicle footprint, and
will continue to do so for model years 2027-2031. As in previous
rulemakings, NHTSA defines the standards in the form of a constrained
linear function that generally sets higher (more stringent) targets for
smaller-footprint vehicles and lower (less stringent) targets for
larger-footprint vehicles. Comments received on these aspects of the
final rule are summarized and addressed in Section III.B of this
preamble.
---------------------------------------------------------------------------
\998\ 49 U.S.C. 32902(b)(3)(A) (2007).
---------------------------------------------------------------------------
For HDPUVs, NHTSA also sets attribute-based standards defined by a
mathematical function. HDPUV standards have historically been set in
units of gallons per 100 miles, rather than in mpg, and the attribute
for HDPUVs has historically been ``work factor,'' which is a function
of a vehicle's payload capacity and towing capacity.\999\ Valero argued
that setting HDPUV standards in units of gallons per 100 miles was
inconsistent with the statutory text, and referred to 49 U.S.C.
32902(b)(1), which states that ``average fuel economy standards'' shall
be prescribed for, among other things, ``work trucks and commercial
medium- and heavy-duty on-highway vehicles in accordance with
subsection (k).'' Valero argued that therefore the HDPUV standards are
``fuel economy standards'' and subject to the 32902(h)
prohibitions.\1000\ In response, NHTSA has long interpreted ``fuel
economy standards'' in the context of 49 U.S.C. 32902(k) as referring
not specifically to mpg, as in the passenger car/light truck context,
but instead more broadly to account as accurately as possible for MD/HD
fuel efficiency. In the Phase 1 MD/HD rulemaking, NHTSA considered
setting standards for HDPUVs (and other MD/HD vehicles) in mpg, but
concluded that that would not be an appropriate metric given the work
that MD/HD vehicles are manufactured to do.\1001\ NHTSA has thus set
fuel efficiency standards for HDPUVs in this manner since 2011, and
further notes that 32902(h) applies by its terms to subsections (c),
(f), and (g), but not (b) or (k).
---------------------------------------------------------------------------
\999\ See 49 CFR 535.5(a)(2).
\1000\ Valero, Docket No. NHTSA-2023-0022-58547, at 12.
\1001\ See 76 FR 57106, 57112, fn. 19 (Sep. 15, 2011).
---------------------------------------------------------------------------
While NHTSA does not interpret EISA as requiring NHTSA to set
attribute-based standards defined by a mathematical function for
HDPUVs, given that 49 U.S.C. 32902(b)(3)(A) refers specifically to fuel
economy standards for passenger and non-passenger automobiles, NHTSA
has still previously concluded that following that approach for HDPUVs
is reasonable and appropriate, as long as the work performed by HDPUVs
is accounted for. NHTSA therefore continues to set work-factor based
gallons-per-100-miles standards for HDPUVs for model years 2030-2035.
4. Number of Model Years for Which Standards May Be Set at a Time
For passenger cars and light trucks, EISA also states that NHTSA
shall ``issue regulations under this title prescribing average fuel
economy standards for at least 1, but not more than 5, model years.''
\1002\ For this final rule, NHTSA is establishing new CAFE standards
for passenger cars and light trucks for model years 2027-2031, and to
facilitate longer-term product planning by industry and in the interest
of harmonization with EPA, NHTSA is also presenting augural standards
for model year 2032 as representative of what levels of stringency
NHTSA currently believes could be appropriate in that model year, based
on the information before us today. Hyundai commented that it supported
the inclusion of the augural standards for model year 2032 to the
extent that they were coordinated with EPA's final GHG standards for
model year 2032, and were ``representative of the actual starting point
for the standards commencing in model year 2032.'' \1003\ The Alliance,
in contrast, argued that presenting augural standards was ``unnecessary
and generally inconsistent with Congressional intent,'' and that
therefore NHTSA should defer any further mention of model year 2032
standards until a future rulemaking.\1004\ In response, NHTSA has
coordinated with EPA to the extent possible given our statutory
restrictions and we continue to emphasize that the augural standards
are informational only. As explained in the NPRM, a future rulemaking
consistent with all applicable law will be necessary for NHTSA to
establish final CAFE standards for model year 2032 passenger cars and
light trucks. While the NPRM provided information about the impacts of
the standards throughout the documents without distinguishing between
the standards and the augural standards in the interest of brevity, the
final rule and associated documents divorced the results for the
augural model year 2032 standards (including the net benefits) to be
abundantly clear that they are neither final nor included as part of
the agency's decision on the model year 2027-2031 standards.
---------------------------------------------------------------------------
\1002\ 49 U.S.C. 32902(b)(3)(B) (2007).
\1003\ Hyundai, Docket No. NHTSA-2023-0022-51701, at 3.
\1004\ The Alliance, Docket No. NHTSA-2023-0022-60652, at 10.
---------------------------------------------------------------------------
The five-year statutory limit on average fuel economy standards
that applies to passenger cars and light trucks does not apply to the
HD pickup and van standards. NHTSA has previously stated that ``it is
reasonable to assume that if Congress intended for the [MD/HD]
regulatory program to be limited by the timeline prescribed in [49
U.S.C. 32902(b)(3)(B)], it would have either mentioned [MD/HD] vehicles
in that subsection or included the same timeline in [49 U.S.C.
32902(k)].'' 1005 1006 Additionally, ``in order for [49
U.S.C. 32902(b)(3)(B) to be interpreted to apply to [49 U.S.C.
32902(k)], the agency would need to give less than full weight to the .
. . phrase in [49 U.S.C. 32902(b)(1)(C)] directing the Secretary to
prescribe standards for `work trucks and commercial MD or HD on-highway
vehicles in accordance with Subsection (k).' Instead, this direction
would need to be read to mean `in accordance with Subsection (k) and
the remainder of Subsection (b).' NHTSA believes this interpretation
would be inappropriate.
[[Page 52785]]
Interpreting `in accordance with Subsection (k)' to mean something
indistinct from `in accordance of this Subsection' goes against the
canon that statutes should not be interpreted in a way that `render[s]
language superfluous.' Dobrova v. Holder, 607 F.3d 297, 302 (2d Cir.
2010), quoting Mendez v. Holder, 566 F.3d 316, 321-22 (2d Cir. 2009).''
\1007\ As a result, the standards previously set remain in effect
indefinitely at the levels required in the last model year, until
amended by a future rulemaking action.
---------------------------------------------------------------------------
\1005\ ``[W]here Congress includes particular language in one
section of a statute but omits it in another section of the same
Act, it is generally presumed that Congress acts intentionally and
purposely in the disparate inclusion or exclusion.'' Russello v.
United States, 464 U.S. 16, 23 (1983), quoting U.S. v. Wong Kim Bo,
472 F.2d 720, 722 (5th Cir. 1972). See also Mayo v. Questech, Inc.,
727 F.Supp. 1007, 1014 (E.D. Va. 1989) (conspicuous absence of
provision from section where inclusion would be most logical signals
Congress did not intend for it to be implied).
\1006\ 76 FR 57106, 57131 (Sep. 15, 2011).
\1007\ Id.
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5. Maximum Feasible Standards
As discussed above, EPCA requires NHTSA to consider four factors in
determining what levels of CAFE standards (for passenger cars and light
trucks) would be maximum feasible--technological feasibility, economic
practicability, the effect of other motor vehicle standards of the
Government on fuel economy, and the need of the United States to
conserve energy. For determining what levels of fuel efficiency
standards (for HDPUVs) would be maximum feasible, EISA requires NHTSA
to consider three factors--whether a given fuel efficiency standard
would be appropriate, cost-effective, and technologically feasible.
NHTSA presents in the sections below its understanding of the meanings
of all those factors in their respective decision-making contexts.
a. Passenger Cars and Light Trucks
(1) Technological Feasibility
``Technological feasibility'' refers to whether a particular method
of improving fuel economy is available for deployment in commercial
application in the model year for which a standard is being
established. Thus, NHTSA is not limited in determining the level of new
standards to technology that is already being applied commercially at
the time of the rulemaking. For this final rule, NHTSA has considered a
wide range of technologies that improve fuel economy, while considering
the need to account for which technologies have already been applied to
which vehicle mode/configuration, as well as the need to estimate,
realistically, the cost and fuel economy impacts of each technology as
applied to different vehicle models/configurations. MEMA commented that
it ``appreciated NHTSA's openness to using different constellations of
powertrains (BEV, PHEV, mild hybrid, ICE, FCEV, etc.) to comply with
the standards.'' \1008\ NHTSA thanks MEMA, and continues to believe
that the range of technologies considered, as well as how the
technologies are defined for purposes of the analysis, is reasonable,
based on our technical expertise, our independent research, and our
interactions with stakeholders. NHTSA has not, however, attempted to
account for every technology that might conceivably be applied to
improve fuel economy, nor does NHTSA believe it is necessary to do so,
given that many technologies address fuel economy in similar
ways.\1009\
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\1008\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 3.
\1009\ For example, NHTSA has not considered high-speed
flywheels as potential energy storage devices for hybrid vehicles;
while such flywheels have been demonstrated in the laboratory and
even tested in concept vehicles, commercially available hybrid
vehicles currently known to NHTSA use chemical batteries as energy
storage devices, and the agency has considered a range of hybrid
vehicle technologies that do so.
---------------------------------------------------------------------------
Several commenters focused on the technological feasibility of
electrifying vehicle fleets. Jaguar commented that ``At present, there
are increasingly limited opportunities with regards to technologies
that will meet the incredibly challenging standards set. Soon, it will
only be possible to meet these targets with increased BEV sales.''
\1010\ Volkswagen commented that there may not be enough American-
sourced batteries to meet both Inflation Reduction Act requirements and
the proposed standards, that those limitations would prevent industry
from manufacturing more than a certain number of BEVs per year, and
that therefore the proposed standards were beyond technologically
feasible and civil penalty payment would be unavoidable.\1011\ AVE
expressed concern about whether supply chains would be fully developed
to support compliance.\1012\ CFDC et al., a group of corn-based ethanol
producers' organizations, argued that ``shockingly high numbers'' of
electric vehicles would be required by the proposed standards, and that
therefore the proposed standards were infeasible and unlawful because
they could not be met without electric vehicles.\1013\ The commenter
further argued that ``the proposal systematically neglects the fact
that there are simply not enough minerals, particularly lithium,
available to sustain global electric vehicle growth,'' and that ``this
is an insuperable obstacle [that makes] NHTSA's proposal not
technologically feasible.'' \1014\ RFA et al., another group of corn-
based ethanol producers' organizations, commented that NHTSA had not
adequately considered the technological feasibility of the regulatory
reference baseline (i.e., the amount of electrification assumed in
response to State ZEV programs and assumed market demand), and that
NHTSA's analysis of technological feasibility now needed to include
consideration of critical mineral availability and BEV charging
infrastructure.\1015\ The Alliance commented that when it ran the CAFE
model with BEVs removed from the analysis entirely and with no option
for paying civil penalties, many fleets appeared unable to meet the
proposed standards, which meant that the proposed standards were not
technologically feasible.\1016\ AFPM offered similar comments.\1017\
---------------------------------------------------------------------------
\1010\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 3.
\1011\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 5.
\1012\ AVE, Docket No. NHTSA-2023-0022-60213, at 3-4.
\1013\ CFDC et al., Docket No. NHTSA-2023-0022-62242, at 10.
\1014\ Id. at 16.
\1015\ RFA et al. 2, Docket No. NHTSA-2023-0022-57625, at 16-18.
\1016\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
B, at 8-9.
\1017\ AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at
37.
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In response, NHTSA clarifies, again, that CAFE standards are
performance-based standards, not technology mandates, and that NHTSA
cannot set standards that require BEVs because NHTSA is statutorily
prohibited from considering BEV fuel economy in determining maximum
feasible CAFE standards. Commenters objecting to electrification shown
in NHTSA's analysis are looking at what is assumed in the reference
baseline levels, not what is required to meet NHTSA's final standards
being promulgated in this rulemaking. As Table VI1 shows, the
technology penetration rates for the various alternatives do not result
in further penetration of BEVs in response to the action alternatives,
although they do illustrate a potential compliance path for industry
that would rely on somewhat higher numbers of SHEVs.
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[[Page 52786]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.190
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As to whether NHTSA is required to prove that the reference
baseline as well as the CAFE standards are technologically feasible--a
point also inherent in the Alliance comments, because the BEVs that the
Alliance removed from its analysis were nearly all in the reference
baseline--NHTSA disagrees that this is the agency's obligation under
EPCA/EISA. Section IV above discusses the various considerations that
inform the reference baselines. NHTSA has determined it is reasonable
to assume that certain technologies will appear in the reference
baseline, regardless of any action by NHTSA, in response to cost-
effectiveness/market demand (as would occur if battery prices fall as
currently assumed in our analysis, for example). Similarly, if certain
technologies appear in the reference baseline because manufacturers
have said they would plan to meet State regulations, then either the
manufacturers have concluded that doing so is feasible (else they would
not plan to do so), and/or the State(s) involved have made and are
responsible for any determinations about feasibility. Nothing in EPCA/
EISA compels NHTSA to be responsible for proving the feasibility of
things which are beyond our authority, like State regulations or
development of charging infrastructure or permitting of critical
minerals production sites, and which involve consideration of
technologies which NHTSA itself is prohibited from
[[Page 52787]]
considering. Just as it is not NHTSA's authority or responsibility to
determine whether State programs are feasible, so it is not NHTSA's
responsibility to determine whether State programs are not feasible.
State programs are developed under State legal authority, and their
feasibility is a matter for the State(s) and vehicle manufacturers (and
other interested parties) to discuss. Nonetheless, NHTSA continues to
believe that it is reasonably foreseeable that manufacturers will at
least plan to meet legally binding State regulations, and thus to
reflect that intent in our regulatory reference baseline so that we may
best reflect the world as it would look in the absence of further
regulatory action by NHTSA.
---------------------------------------------------------------------------
\1018\ The values in the table report fleet-wide technology
penetration rates in the No-Action Alternative and differences from
this baseline in the action alternatives.
\1019\ Advanced Gasoline Engines includes SGDI, DEAC, and
TURBO0.
\1020\ Minor technology penetration differences exist due to
rounding and changes in fleet size and regulaory class composition.
Changes less than 0.1% were rounded to zero for this table.
---------------------------------------------------------------------------
Reviewing Table VI-1 above, our analysis of the final rule
illustrates a technology path in which manufacturers might modestly
increase strong hybrid-based technologies beyond reference baseline
levels. CTLCV commented that the technology exists to meet the
standards, but that the auto industry ``must be required to provide the
most efficient versions of gas-powered vehicles possible and not stand
in the way of our transition to zero-emission vehicles.'' \1021\ The
Joint NGOs commented that NHTSA's proposed standards were below maximum
feasible levels because they do not represent future possible
improvements that manufacturers could conceivably make to ICE
vehicles.\1022\ The Joint NGOs cited the 2022 EPA Trends Report as
indicating that various manufacturers had ``underutilized''
technologies ``such as turbocharged engines, continuously variable
transmission and cylinder deactivation.'' \1023\ The Joint NGOs next
cited an ICCT study suggesting that further ``continual'' improvements
to cylinder deactivation, high compression Atkinson cycle engines,
light weighting, and mild hybridization'' could increase the fuel
economy benefits of those technologies.\1024\ The Joint NGOs then
suggested that manufacturers could change the mix of vehicles they
produced in a given model year so that only the ``cleanest powertrain''
was sold for each vehicle model.\1025\ The Joint NGOs later stated that
NHTSA's analysis was based on ``what manufacturers `will,' `would,' or
are `likely to' do--rather than what manufacturers `can' or `could'
do.'' The Joint NGOs argued that ``many of these assumptions about what
`would' happen are also based on a review of historical practice,
rather than a forward-looking assessment of possibility.'' \1026\ The
States and Cities also argued that all of the alternatives in the
proposal were technologically feasible because they could be met with
varying amounts of mass reduction and strong hybrids, technologies that
certainly exist and are available for deployment.\1027\ This commenter
further argued that mass reduction was highly effective and that NHTSA
should use its authority to encourage more mass reduction.\1028\
Nissan, in contrast, expressed concern that the proposal would ``divert
significant resources towards further technological development of ICE
vehicles, rather than allowing manufacturers to focus on fleet
electrification goals.'' \1029\
---------------------------------------------------------------------------
\1021\ CTLCV, Docket No. NHTSA-2023-0022-29018, at 2.
\1022\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, NGO Comment
Appendix, at 6.
\1023\ Id. at 6-7.
\1024\ Id.
\1025\ Id.
\1026\ Id. at 51-52.
\1027\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 28.
\1028\ Id.
\1029\ Nissan, Docket No. NHTSA-2023-0022-60696, at 3.
---------------------------------------------------------------------------
In response, while NHTSA sets performance-based standards rather
than specifying which technologies should be used, NHTSA is mindful
that industry is in the early to mid-stages of a major technological
transition. NHTSA may not consider the fuel economy of BEVs when
setting standards, but industry has made it extremely clear that it is
committed to the transition to electric vehicles. The contrast between
the comments from NRDC and the States and Cities, calling on NHTSA to
somehow specifically require ongoing ICE vehicle improvements, and from
Nissan, arguing that NHTSA must not require further ICE vehicle
improvements, highlights this issue. NHTSA agrees that the
technological feasibility factor allows NHTSA to set standards that
force the development and application of new fuel-efficient
technologies but notes this factor does not require NHTSA to do
so.\1030\ In the 2012 final rule, NHTSA stated that ``[i]t is important
to remember that technological feasibility must also be balanced with
the other of the four statutory factors. Thus, while `technology
feasibility' can drive standards higher by assuming the use of
technologies that are not yet commercial, `maximum feasible' is also
defined in terms of economic practicability, for example, which might
caution the agency against basing standards (even fairly distant
standards) entirely on such technologies.'' \1031\ NHTSA further stated
that ``as the `maximum feasible' balancing may vary depending on the
circumstances at hand for the model year in which the standards are
set, the extent to which technological feasibility is simply met or
plays a more dynamic role may also shift.'' \1032\ With performance-
based standards, NHTSA cannot mandate the mix of technologies that
manufacturers will use to achieve compliance, so it is not within
NHTSA's power to specifically require any particular type of ICE
vehicle improvements, as NRDC and the States and Cities suggest and as
Nissan fears. In determining maximum feasible CAFE standards, however,
NHTSA can do its best to balance the concerns raised by all parties, as
they fall under the various statutory factors committed to NHTSA's
discretion. Whether these concerns are properly understood as ones of
``technological feasibility'' is increasingly murky as the technology
transition (that NHTSA cannot consider directly) proceeds. NHTSA has
also grappled with whether the ``available for deployment in commercial
application'' language of our historical interpretation of
technological feasibility is appropriately read as ``available for
deployment in the world'' or ``available for deployment given the
restrictions of 32902(h).'' The Heritage Foundation commented that
``There is no doubt that EPCA is referring to'' ICE vehicles in
describing technological feasibility, because EPCA defines ``fuel'' as
referring to gasoline or diesel fuels and electricity as an
``alternative fuel,'' and NHTSA is prohibited from considering
alternative fueled vehicles in determining maximum feasible CAFE
standards.\1033\ Hyundai argued that the proposed PC2LT4 standards were
not technologically feasible, because (1) the regulatory reference
baseline included BEVs, and (2) DOE's changes to the PEF value and
NHTSA's proposal to reduce available AC/OC flexibilities made any
standards harder to meet.\1034\ NHTSA agrees that it cannot consider
BEV fuel economy in determining maximum feasible standards, but NHTSA
reiterates that the technological transition that NHTSA is prohibited
from considering in setting standards complicates the historical
approach to the statutory factors. It may well be that in light of this
transition, a better interpretation is
[[Page 52788]]
for technological feasibility to be specifically limited to the
technologies that NHTSA is permitted to consider.
---------------------------------------------------------------------------
\1030\ See 77 FR 63015 (Oct. 12, 2012).
\1031\ Id.
\1032\ Id.
\1033\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
4.
\1034\ Hyundai, Docket No. NHTSA-2023-0022-51701, at 5-6.
---------------------------------------------------------------------------
Nevertheless, in the overall balancing of factors for determining
maximum feasible, the above interpretive question may not matter,
because it is clear that the very high cost of the most stringent
alternatives likely puts them out of range of economic practicability,
especially if manufacturers appear in NHTSA's analysis to be broadly
resorting to payment of civil penalties rather than complying through
technology application. Although some companies historically have
chosen to pay civil penalties as a more cost-effective option than
compliance, which NHTSA has not seen as an indication of infeasibility
previously, the levels of widespread penalty payment rather than
compliance projected in this analysis is novel. Further, penalty
payment could detract from fuel economy during these particular model
years, where manufacturers are devoting significant resources to a
broader transition to electrification. Effectively, given the statutory
constraints under which NHTSA must operate, and constraining technology
deployment to what is feasible under expected redesign cycles, NHTSA
does not see a technology path to reach the higher fuel economy levels
that would be required by the more stringent alternatives, in the time
frame of the rulemaking. Moreover, even if technological feasibility
were not a barrier, that does not mean that requiring that technology
to be added would be economically practicable under these specific
circumstances.
IPI commented that NHTSA's inclusion in the NPRM of tables showing
technology penetration rates under the ``standard setting'' analysis
belied NHTSA's suggestion in the NPRM that there did not appear to be a
technology path to reach the higher fuel economy levels that would be
required by the more stringent alternatives.\1035\ IPI suggested that
either NHTSA must believe the more stringent alternatives to be
impossible to meet in the rulemaking time frame, or that NHTSA was
``collapsing'' the technological feasibility factor into the economic
practicability factor by considering cost under the heading of
technological feasibility.\1036\
---------------------------------------------------------------------------
\1035\ IPI, Docket No. NHTSA-2023-0022-60485, at 9.
\1036\ Id.
---------------------------------------------------------------------------
In response, within the context of the constrained analysis which
NHTSA must consider by statute, NHTSA does find that there is no
technology path for the majority of manufacturers to meet the most
stringent CAFE alternatives, considering expected redesign cycles,
without shortfalling and resorting to penalties. Even setting aside
that some manufacturers have historically chosen to pay penalties
rather than applying technology as an economic decision, NHTSA's final
rule (constrained) analysis illustrates that a number of manufacturers
do not have enough opportunities to redesign enough vehicles during the
rulemaking time frame in order to achieve the levels estimated to be
required by the more stringent alternatives.
Figure VI-2 through Figure VI-4 present several manufacturer-fleet
combinations that clearly illustrate these limits in NHTSA's
statutorily constrained analysis. The figures present fleet powertrain
distribution along with vehicle redesign cycles.\1037\ Each bar in the
figure represents total manufacturer-fleet sales in a given model year,
and bars are shaded to indicate the composition of sales by powertrain.
Any portion of the bar with overlayed hashed lines denotes the portion
of the manufacturer's fleet that is not eligible for redesign (i.e.,
cannot change powertrain) in that model year, often due to recent
redesigns and the need to adhere to the redesign cycle to avoid
imposing costs for which NHTSA does not currently account.\1038\ The
left and right panels of the figure present results for the least and
most stringent action alternatives, respectively, for comparison.
---------------------------------------------------------------------------
\1037\ Manufacturers also apply non-powertrain technology to
improve vehicle fuel economy, and likely do so in these examples,
but these plots are limited to powertrain conversion and eligibility
to simplify the illustration. Note also that any increase in BEV
share in model year 2027 and beyond is the result of ZEV compliance,
as BEV conversion is constrained during standard-setting years.
\1038\ See TSD Chapter 2.6 for more information on refresh and
redesign assumptions.
---------------------------------------------------------------------------
[[Page 52789]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.191
Figure VI-2 displays these results for Ford's light truck fleet.
Under PC2LT002 (left panel), Ford's fleet complies with the standards
in all model years, as shown in the row ``Achieved FE relative to
standard,'' which has all results either positive or zero (meaning that
the fleet exactly complies with Ford's estimated applicable standard).
This occurs because the model converts a large part of the Ford light
trucks eligible for redesign to SHEVs in model year 2027, represented
by the large, un-hashed dark gray segment in the center of the model
year 2027 bar. It continues to convert eligible MHEVs to SHEVs in model
year 2028 and model year 2029. Under PC6LT8 (right panel), Ford
converts all eligible vehicles to SHEVs in model years 2027, 2028, and
2029. Even with this technology application, Ford's achieved fuel
economy levels do not meet the alternative's estimated standards (note
the negative values in the row ``Achieved FE relative to standard,'')
and Ford is therefore assumed to pay civil penalties for model years
2028 and beyond. Under all alternatives, Ford has no light trucks
eligible for redesign in model year 2030, and the only vehicles whose
redesign schedule makes them eligible in model year 2031 are BEVs,
which represent the end of the powertrain pathway and have no other
technology that may be applied.\1039\ According to the statutorily-
constrained analysis that NHTSA considers for determining maximum
feasible standards, Ford simply cannot comply with the PC6LT8 light
truck standards beginning in model year 2028, because it has redesigned
all the light trucks that it can (consistent with its redesign
schedule) and is out of technology moves.
---------------------------------------------------------------------------
\1039\ At the time of the analysis, FCV technology is projected
to make up a non-substantive percentatge of the fleet, and FCV is
therefore not shown in the graphics, See technology penetration
rates in FRIA Databook Appendices.
---------------------------------------------------------------------------
Other manufacturers encounter similar constraints at higher
stringency levels and across fleets. As shown in Figure VI-3, the model
converts nearly all eligible portions of GM's light truck fleet to
PHEVs, but GM still encounters compliance constraints. These
constraints are marginal under PC2LT002, but under PC6LT8, GM is unable
to comply beginning in model year 2027, with shortfalls exceeding 3
MPG.
[[Page 52790]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.192
Figure VI-4 and Figure VI-5 show Toyota's import and domestic
passenger car fleet, respectively. Under PC2LT002, Toyota's import
passenger car fleet exceeds the applicable standard for all years, but
in contrast Toyota's domestic passenger car fleet falls slightly short
during model years 2027-2029. As in the other examples, this occurs due
to the lack of powertrains eligible for redesign during those years.
This phenomenon is even more pronounced and affects both Toyota's
import and domestic passenger car fleets, under PC6LT8. Both of
Toyota's passenger car fleets develop shortfalls but only the domestic
fleet is able to eliminate the shortfall in the rulemaking time frame
when redesigns are available in model year 2030.
[[Page 52791]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.193
[GRAPHIC] [TIFF OMITTED] TR24JN24.194
[[Page 52792]]
Figure VI-6 shows Honda's domestic passenger car fleet CAFE
performance.\1040\ Under PC2LT002, the passenger car fleet complies
with the standard across all years, achieving a 0.1 mpg overcompliance
in model year 2027 and slowly increasing to a 2.2 mpg overcompliance by
the end of the standard setting years. Under PC6LT8, Honda is unable to
meet the standard for model year 2027 but reaches compliance by model
year 2028 and maintains it through the standard-setting years. However,
it is worth noting that the fleet drops from a 6.6 mpg overcompliance
in model year 2029 to zero overcompliance in model year 2031, after
converting over 75 percent of their fleet to advanced powertrain
technologies, and Honda is the only non-BEV manufacturer to achieve
consistent compliance under the highest stringency.
---------------------------------------------------------------------------
\1040\ Only Honda's Domestic Car fleet is shown here; Honda's
import car fleet makes up approxametly 1 percent of their U.S. sales
volume.
[GRAPHIC] [TIFF OMITTED] TR24JN24.195
[[Page 52793]]
NHTSA conducted similar analysis for every manufacturer-fleet
combination and found similar patterns and constraints on compliance.
Results for manufacturers that make up the top 80 percent of fleet
sales in model year 2031 are included in Table VI-2 and Table VI-3.
In the light truck fleet, nearly all vehicles are either ineligible
for redesign or reach the end of their powertrain compliance pathways
under PC6LT8, with the majority of manufacturers not achieving
compliance, some falling short by as much as 18.7 mpg. Under PC2LT002,
most manufacturers achieve the standard and overcomply somewhat, with
only two manufacturers showing any shortfalls. And in all cases shown,
representing 80 percent of all light truck sales volume, shortfalls are
1.8 mpg or less under PC2LT002.
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR24JN24.196
All manufacturers shown, representing 80 percent of all passenger
car sales volume, generally comply with fleet fuel economy levels in
the passenger car fleet for the preferred alternative. Some
manufacturers do show one or two years of shortfalls in the rulemaking
time frame, resulting from redesign rate constraints, indicated by a
lack of share eligibility. At high stringency levels, such as PC6LT8,
the rate of stringency increase coupled with
[[Page 52794]]
limited share eligibility makes compliance for the majority of the
fleet untenable in NHTSA's statutorily constrained analysis.
---------------------------------------------------------------------------
\1041\ The passenger car fleet contains both domestic and
imported car fleets. Shortfalls can occur in one fleet while the
overall passenger car fleet remains in compliance. This could result
in estimiated civil penalties with a positive compliance positon, as
in the case of Nissan in model year 2028.
[GRAPHIC] [TIFF OMITTED] TR24JN24.197
[[Page 52795]]
The compliance illustrations in the figures and tables above
demonstrate the challenge that higher stringencies pose, especially
within the constrained modeling framework required by statute.
Historically, in the constrained analysis, the higher levels of
electrification that could be considered under the statute (SHEV and
PHEV in charge sustaining mode) in addition to advanced engine
modifications (turbocharging and HCR) easily provided the effectiveness
levels needed to raise the manufacturers' fleet fuel economy when
applied at the rates governed by refresh and redesign schedules.\1042\
In past analyses, the cost of converting the vehicles to the new
technologies was the limiting factor. However, the remaining
percentages of fleets that can be modified consistent with redesign and
refresh cycles, coupled with the limits of total fuel efficiency
improvement possible (considering only statutorily-allowed
technologies), now limits what is achievable by the manufacturers in
the time frame of the rule. Regardless of the technology cost, or
application of penalties, higher levels of fuel economy improvement are
simply not achieved under the higher stringency alternatives, often
because manufacturers have no opportunity to make the improvement and
the statutorily-available technologies will not get them to where they
would need to be.
---------------------------------------------------------------------------
\1042\ See, e.g., 87 FR 25710 (May 2, 2022).
---------------------------------------------------------------------------
For purposes of model years 2027-2031, NHTSA concludes that
sufficient technology and timely opportunities to apply that technology
exist to meet the final standards. Moreover, as Table VI-1 above shows,
NHTSA's analysis demonstrates a technology path to meet the standards
that does not involve application of BEVs, FCEVs, or other prohibited
technologies. NHTSA therefore believes that the final standards are
technologically feasible.
As discussed above, NHTSA also conducted a ``No ZEV alternative
baseline'' analysis. Technology penetration rates and manufacturer
compliance status results are somewhat different under that analysis,
as might be foreseeable.
[[Page 52796]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.198
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\1043\ The values in the table report fleet-wide technology
penetration rates in the No-Action Alternative and differences from
this baseline in the action alternatives.
\1044\ Advanced Gasoline Engines includes SGDI, DEAC, and
TURBO0.
\1045\ Minor technology penetration differences exist due to
rounding and changes in fleet size and regulaory class composition.
Changes less than 0.1% were rounded to zero for this table.
---------------------------------------------------------------------------
[[Page 52797]]
Comparing to the reference case baseline analysis results in Table
VI-1, under the No ZEV alternative baseline analysis, BEV rates in the
baseline go down in every model year (and remain at 0 percent for all
action alternatives due to statutory constraints implemented in the
model); SHEV rates increase by several percentage points; PHEV rates go
up by about 1 percent; and advanced gasoline engine rates remain
roughly the same in the baseline but drop several percentage points in
the action alternatives. These trends hold across action alternatives.
[GRAPHIC] [TIFF OMITTED] TR24JN24.199
In terms of manufacturers' ability to comply with different
regulatory alternatives given existing redesign schedules, results for
the light truck fleet under the No ZEV alternative baseline did not
vary significantly from the results presented in Table VI-2 for the
reference case baseline analysis. Manufacturer light truck shortfalls
[[Page 52798]]
under PC6LT8 were still nearly universal, with maximum shortfalls
reaching more than 19 mpg, higher than the shortfalls under the
reference case baseline. Ford, GM, and Nissan light truck penalties are
almost identical under both baselines. Under the No ZEV alternative
baseline analysis, Toyota still pays no light truck penalties under
PC2LT002, and generally lower penalties under PC6LT8. Stellantis pays
slightly higher penalties under PC2LT002, and generally lower penalties
under PC6LT8. Honda and Subaru still pay no penalties under PC2LT002
and pay somewhat higher penalties under PC6LT8.
---------------------------------------------------------------------------
\1046\ The passenger car fleet contains both domestic and
imported car fleets. Shortfalls can occur in one fleet while the
overall passenger car fleet remains in compliance. This could result
in estimiated civil penalties with a positive compliance positon, as
in the case of Nissan in model year 2027.
[GRAPHIC] [TIFF OMITTED] TR24JN24.200
[[Page 52799]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.201
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For passenger car shortfalls, the use of the No ZEV alternative
baseline does not change much for Hyundai, Kia, VWA, Tesla, or GM
(which in GM's case, illustrates that most of GM's compliance
difficulty is in its light truck fleet), when comparing the results of
the above table with Table VI-3. Toyota and Honda see higher passenger
car penalties under the No ZEV alternative baseline for both PC2LT002
and PC6LT8, with fewer opportunities for redesigns. Nissan sees higher
penalties under the No ZEV alternative baseline even though redesign
opportunities are nearly identical.
Based on these results, which are generally quite similar to those
under the reference case baseline, NHTSA finds that using the No ZEV
alternative baseline would not change our conclusions regarding the
technological feasibility of the various action alternatives.
(2) Economic Practicability
``Economic practicability'' has consistently referred to whether a
standard is one ``within the financial capability of the industry, but
not so stringent as to'' lead to ``adverse economic consequences, such
as a significant loss of jobs or unreasonable elimination of consumer
choice.'' \1047\ In evaluating economic practicability, NHTSA considers
the uncertainty surrounding future market conditions and consumer
demand for fuel economy alongside consumer demand for other vehicle
attributes. There is not necessarily a bright-line test for whether a
regulatory alternative is economically practicable, but there are
several metrics that we discuss below that we find can be useful for
making this assessment. In determining whether standards may or may not
be economically practicable, NHTSA considers: \1048\
---------------------------------------------------------------------------
\1047\ 67 FR 77015, 77021 (Dec. 16, 2002).
\1048\ The Institute for Energy Research argued that NHTSA had
``deliberate[ly]'' failed to propose ``any alternative that . . .
meet[s] the threshold for economic practicability,'' and that NHTSA
was ``thus asserting that economic practicability is a factor that
can be disregarded at the agency's whim.'' Institute for Energy
Research, NHTSA-2023-0022-63063, Attachment 1, at 2. In response,
NHTSA grappled extensively with the economic practicability of the
regulatory alternatives, see, e.g., 88 FR at 56328-56350 (Aug. 17,
2023), and concluded that (for purposes of the proposal) the PC2LT4
alternative was economically practicable but the more stringent
alternatives likely were not. NHTSA does not understand how the
commenter reached its conclusion that NHTSA disregarded economic
practicability.
---------------------------------------------------------------------------
Application rate of technologies--whether it appears that
a regulatory alternative would impose undue burden on manufacturers in
either or both the near and long term in terms of how much and which
technologies might be required. This metric connects to other metrics,
as well.
The States and Cities commented that the differences in technology
penetration rates between the proposed standards and Alternative PC3LT5
were ``minimal,'' arguing that ``Where differences do exist, such as in
the degree of strong hybrids and mass reduction improvements applied,
[they] represent a modest additional burden for manufacturers that is
lower than or similar to the technology application rates for passenger
cars estimated for past rulemakings.'' \1049\ That commenter stated
further that ``While the differences in degree of strong hybrid and
mass reduction improvements estimated for light trucks in the current
versus previous rulemaking is more moderate, . . . it does not make the
standards economically impracticable.'' \1050\ CEI commented that ``The
EV sales projections informing. . .NHTSA's regulatory proposal[ is]
based in significant part on California's EPCA-preempted ZEV program.''
\1051\
---------------------------------------------------------------------------
\1049\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 31.
\1050\ Id.
\1051\ CEI, Docket No. NHTSA-2023-0022-61121, Attachment 1, at
8.
---------------------------------------------------------------------------
NHTSA explored technology penetration rates above in the context of
technological feasibility; for economic practicability, the question
becomes less about ``does the technology exist and could it be
applied'' and more about ``if manufacturers were to apply it at the
rates NHTSA's analysis suggests, what would the economic consequences
be?'' The States and Cities argue that the additional burden of
applying additional ICE/vehicle-based technology would be ``modest''
and ``not economically impracticable,'' while CEI argues that NHTSA's
analysis relies unduly and inappropriately on EVs. In response, NHTSA
notes again that our analysis does not allow BEVs to be added in
response to potential new CAFE standards, although it does recognize
the existence of BEVs added during standard-setting years for non-CAFE
reasons.\1052\ In their comments, the automotive industry dwells
heavily on the difficulty of building BEVs for reasons other than the
proposed standards, and suggests that having to make any fuel economy
improvements to their ICEVs in response to the CAFE program would be
economically impracticable and ruinous to their other technological
efforts. NHTSA has considered these comments carefully.
[[Page 52800]]
NHTSA may be prohibited from considering the fuel economy of BEVs in
determining maximum feasible CAFE standards, but NHTSA does not believe
that it is prohibited from considering the industry resources needed to
build BEVs, and industry is adamant that the resource load that it
faces as part of this technological transition is unprecedented. As
such, it appears that the economic-practicability tolerance of
technological investment other than what manufacturers already intended
to invest must be lower than NHTSA assumed in the NPRM. NHTSA
recognizes, as discussed above in the technological feasibility
section, that refresh and redesign schedules included in the analysis
(in response to manufacturer comments to NHTSA rulemakings over the
last decade or more) limit opportunities in the analysis for
manufacturers to apply new technologies in response to potential future
standards.\1053\ While this is a limitation, it is consistent with and
a proxy for actual manufacturing practice. The product design cycle
assumptions are based in manufacturer comments regarding how they
manage the cost to design new models, retool factories, coordinate
spare parts production, and train workers to build vehicles that
accommodate new technologies. The product design cycle also allows
products to exist in the market long enough to recoup (at least some
of) these costs. Changing these assumptions, or assuming shorter
product design cycles, would likely increase the resources required by
industry and increase costs significantly in a way that NHTSA's
analysis currently does not capture. Increasing costs significantly
would distract industry's focus on the unprecedented technology
transition, which industry has made clear it cannot afford to do. NHTSA
therefore recognizes the refresh and redesign cycles as a very real
limitation on economic practicability in the time frame of the final
standards.
---------------------------------------------------------------------------
\1052\ See Section IV above for more discussion on this topic.
\1053\ See TSD Chapter 2.6 for discussions on Product Design
Cycle.
---------------------------------------------------------------------------
Other technology-related considerations--related to the
application rate of technologies, whether it appears that the burden on
several or more manufacturers might cause them to respond to the
standards in ways that compromise, for example, vehicle safety, or
other aspects of performance that may be important to consumer
acceptance of new products.
The Alliance commented that ``Manufacturers have a limited pool of
human and capital resources to invest in new vehicles and
powertrains,'' and argued that it would not be ``economically
practicable to invest the resources necessary to achieve both the non-
EV improvements envisioned and the increase in EV market share
envisioned.'' \1054\ Kia provided similar comments. Mitsubishi
similarly expressed concern that the proposal would cause OEMs to spend
resources on ICE technology ``that would otherwise be better used to
accelerate the launch of new electric vehicle platforms.'' \1055\
---------------------------------------------------------------------------
\1054\ The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 2, at 8.
\1055\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 2.
---------------------------------------------------------------------------
As with the comments about technology penetration rates, while
NHTSA does not consider the technological transition itself in
determining maximum feasible standards, NHTSA does acknowledge the
resources needed to make that transition and agrees that manufacturers
have a limited pool of human and capital resources. That said,
manufacturers' comments suggest that they believe that NHTSA is
demanding specific types of technological investments to comply with
CAFE standards. NHTSA reiterates that the CAFE standards are
performance-based standards and NHTSA does not require any specific
technologies to be employed to meet the standards. Moreover, NHTSA
notes numerous recent manufacturer announcements of new HEV and PHEV
models.\1056\ The central (statutorily-constrained) analysis for the
final rule happens to reflect these recent technological developments,
particularly in the early (pre-rulemaking time frame) years of the
analysis. For model year 2026, the analysis shows a fleetwide sales-
weighted average of combined SHEV and PHEV technology penetration of 7
percent for passenger cars and 24 percent for light trucks. This occurs
in parallel with an estimated fleetwide sales-weighted average BEV
technology penetration of 31 percent for passenger cars and 14 percent
for light trucks. The analysis reflects the possibility that initial
BEV offerings might fall in the passenger car market, as well as the
rise of hybrid powertrain designs (perhaps as a transitional
technology) early in the larger technology transition. We note that no
significant additional advanced engine technology is introduced to the
fleet in the analysis, across the alternatives. As stringency
increases, the analysis mostly applies higher volumes of strong hybrid
technologies. NHTSA thus concludes that given the announcements
discussed above, the central analysis does in fact represent a
reasonable path to compliance for industry (even if it is not the only
technology path that industry might choose) that allows for a high
level of resource focus by not requiring significant investments in
technology beyond what they may already plan to apply.
---------------------------------------------------------------------------
\1056\ See, e.g., ``GM to release plug-in hybrid electric
vehicles, backtracking on product plans,'' cnbc.com, Jan. 30, 2024,
at https://www.cnbc.com/2024/01/30/gm-to-release-plug-in-hybrid-vehicles-backtracking-on-product-plans.html; ``As Ford loses
billions on EVs, the company embraces hybrids,'' cnbc.com, Jul. 28,
2023, at https://www.cnbc.com/2023/07/28/ford-embraces-hybrids-as-it-loses-billions-on-evs.html; ``Here's why plug-in hybrids are
gaining momentum,'' Automotive News, Mar. 7, 2024, at https://www.autonews.com/mobility-report/phevs-can-help-introduce-evs-reduce-emissions; ``Genesis will reportedly launch its first hybrid
models in 2025,'' autoblog.com, Feb. 20, 2024, at https://www.autoblog.com/2024/02/20/genesis-will-reportedly-launch-its-first-hybrid-models-in-2025/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAEX5xWHtRIyg5otwKBUziml8MrkD5He-xxjOQdFZCnodUbvrtwUljfJ9IHSovY9JtYQjTUDDcjV4Zz1ZWrMu7VE9D037IhYTi_wfNPEI6aXzC-bbvrRVi2hkM3sqsGQBqFPgAVh_MK6WDqt1rNA25b14UovtiNgzQr6wpwp2iORi.
---------------------------------------------------------------------------
Cost of meeting the standards--even if the technology
exists and it appears that manufacturers can apply it consistent with
their product cadence, if meeting the standards is estimated to raise
per-vehicle cost more than we believe consumers are likely to accept,
which could negatively impact sales and employment in the automotive
sector, the standards may not be economically practicable. While
consumer acceptance of additional new vehicle cost associated with more
stringent CAFE standards is uncertain, NHTSA still finds this metric
useful for evaluating economic practicability.
---------------------------------------------------------------------------
\1057\ IPI, Docket No. NHTSA-2023-0022-60485, at 12.
\1058\ Rivian, Docket No. NHTSA-2023-0022-59765, at 3.
---------------------------------------------------------------------------
IPI commented that NHTSA's compliance costs were very likely
overstated due to the statutory constraints, and that ``While NHTSA
reasonably omits these features from its consideration due to its
statutory constraints and should maintain that approach, it is
particularly odd for NHTSA to prioritize compliance costs unduly as a
basis to reject the most net-beneficial alternative when it knows that
those costs are overestimates.'' \1057\ Rivian also commented that
NHTSA's statutory constraints inflate the apparent cost of compliance,
and suggested that NHTSA look at the feasibility of potential standards
instead of at their cost.\1058\ An individual citizen commented that it
appeared NHTSA had proposed lower standards than would otherwise be
feasible out of
[[Page 52801]]
concern about costs, and stated that NHTSA should reconsider ``in light
of recent news of the exorbitant personal annual CEO compensations for
the Big Three automobile manufacturers, $75 million, combined,''
suggesting that perhaps all costs associated with technology
application did not need to be passed fully on to consumers.\1059\ The
States and Cities stated that the per-vehicle costs associated with the
proposed standards and Alternative PC3LT5 ``are both reasonable and
lower than past estimates of average price change.'' \1060\
---------------------------------------------------------------------------
\1059\ Roselie Bright, Docket No. NHTSA-2022-0075-0030-0004.
\1060\ States and Cities, Docket No. NHTSA-2022-0075-0033,
Attachment 2, at 30.
---------------------------------------------------------------------------
In contrast, Landmark stated that ``NHTSA admits'' that the
projected costs due to meeting potential future standards would be
passed forward to consumers as price increases, and that ``The Proposed
Rule would punish consumers of passenger cars.'' \1061\ MOFB commented
that increased vehicle prices would ``apply disproportionate burden on
[its] members.'' \1062\ Jaguar commented that the proposed revisions to
the PEF resulted in increased compliance costs and ``a weaker business
case,'' which ``could push automakers to limit BEVs to more profitable
markets.'' \1063\ Jaguar also expressed concerns about volatility for
critical minerals pricing that could further affect per-vehicle
costs.\1064\ AAPC commented that NHTSA's analysis showed that the
projected per-vehicle cost was ``over three times greater'' for the
Detroit 3 automakers than for the rest of the industry, and that this
``directly results from DOE's proposed reduction of the PEF for EVs and
NHTSA's proposal to require drastically faster fuel economy
improvements from trucks as compared to cars.'' \1065\ AAPC argued that
DOE and NHTSA were deliberately pursuing policies contrary to
Administration goals, and that doing so would ``benefit[ ] foreign auto
manufacturers'' and ``unfairly harm[ ] the [Detroit 3] and its
workforce.'' \1066\
---------------------------------------------------------------------------
\1061\ Landmark, Docket No. NHTSA-2023-0022-48725, Attachment 1,
at 4.
\1062\ MOFB, Docket No. NHTSA-2023-0022-61601, at 1.
\1063\ Jaguar, Docket No. NHTSA-2023-0022-57296, Attachment 1,
at 6.
\1064\ Id.
\1065\ AAPC, Docket No. NHTSA-2023-0022-60610, at 5.
\1066\ Id.
---------------------------------------------------------------------------
Several commenters stated that the proposed standards would require
an unduly expensive transition to BEVs. KCGA argued that ``EVs actively
lose companies money and require subsidization to remain competitive,''
and that ``Scaling would be one of the biggest challenges. . . .''
\1067\ The American Consumer Institute stated that among the
``obstacles to a sudden and immediate electrification of the fleet,''
``The price differential between an EV and an ICE vehicle still exceeds
$10,000, which poses a staggering disparity in upfront costs alone.''
\1068\ AHUA echoed these concerns, stating that ``the price of an EV
was more than double the price of a subcompact car,'' and that ``This
represents a real financial challenge for middle class families that
need a basic vehicle to get to work, health care, the grocery store,
and other fundamental destinations, and for local business travel, such
as meetings and sales calls, particularly for small businesses.''
\1069\ SEMA argued that ``the only way for OEMs to comply with the
proposed standards is to rapidly increase sales of electric vehicles
and sell fewer ICE vehicles,'' and that ``The alternative is . . . to
pay massive fines. . . .'' \1070\ SEMA also stated that electric
vehicles were much more expensive than ICE vehicles, and that consumers
would also be required to spend extra money on home vehicle
chargers.\1071\ AFPM commented that NHTSA was ``ignor[ing]'' cross-
subsidization of vehicles by manufacturers, and that ``NHTSA must
account for these real-world costs and communicate to the public that
these cross-subsidies must be paid for by a shrinking number of ICEV
buyers and, therefore, must significantly increase the average price of
EVs.'' \1072\ Heritage Foundation offered similar comments about cross-
subsidization and also expressed concern about battery costs and lack
of charging infrastructure.\1073\
---------------------------------------------------------------------------
\1067\ KCGA, Docket No. NHTSA-2023-0022-59007, at 3.
\1068\ American Consumer Institute, Docket No. NHTSA-2023-0022-
50765, Attachment 1, at 2.
\1069\ AHUA, Docket No. NHTSA-2023-0022-58180, at 4.
\1070\ SEMA, Docket No. NHTSA-2023-0022-57386, Attachment 1, at
2.
\1071\ Id.
\1072\ AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at
67.
\1073\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
6, 7.
---------------------------------------------------------------------------
In response, NHTSA agrees that the statutory constraints lead to
different analytical results (including per-vehicle costs) than if the
statutory constraints were not included in the analysis, but the agency
is bound to consider the facts as they appear within the context of
that constrained analysis. Also within that context, NHTSA agrees with
commenters who point out that some companies appear to struggle more
than others to meet the different regulatory alternatives. After
considering the comments, NHTSA understands better that manufacturers'
tolerance for technology investments other than those they have already
chosen to make is much lower than NHTSA previously understood. The
updated per-vehicle costs for each fleet, each manufacturer, and the
boundary cases for considered regulatory alternatives are as follows:
[[Page 52802]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.202
[[Page 52803]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.203
Even though per-vehicle costs are quite low in some instances
compared to what NHTSA has considered economically practicable in the
past, they are still fairly high for others, and quite high for some
individual manufacturers, like Kia and Mazda. Moreover, companies have
made it clear that they cannot afford to make any further technology
investments (which would result in higher per-vehicle costs) if they
are to successfully undertake the technological transition that NHTSA
cannot consider directly, due to constraints on research and production
budgets. The idea that CEO compensation could be repurposed to research
and production is innovative but not within NHTSA's control, so NHTSA
cannot assume that companies would choose that approach.
As discussed above, NHTSA also conducted a ``No ZEV alternative
baseline'' analysis. Estimated average price change (regulatory cost)
under the No ZEV alternative baseline, as compared to the reference
case baseline, varies by manufacturer.
[[Page 52804]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.204
[[Page 52805]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.205
As under the reference baseline analysis, even though per-vehicle
costs are quite low in some instances under the No ZEV alternative
baseline compared to what NHTSA has considered economically practicable
in the past, they are still fairly high for others, and quite high for
some individual manufacturers, like Kia and Mazda. Costs under the No
ZEV alternative baseline analysis are somewhat higher than under the
reference baseline analysis, particularly for passenger cars, but not
by enough to change the agency's conclusions about the general
direction of per-vehicle cost increases. As explained above, companies
have made it clear that they cannot afford to make any further
technology investments (which would result in higher per-vehicle costs)
if they are to successfully undertake the technological transition that
NHTSA cannot consider directly, due to constraints on research and
production budgets. Additional costs would exacerbate that situation.
With regard to the comments discussing perceived BEV costs, NHTSA
reiterates that CAFE standards are performance-based standards and not
technology mandates, and companies are free to choose their own
compliance path with their own preferred technological approach. The
comments suggesting that NHTSA ignores cross-subsidization may not have
sufficiently considered the NPRM discussion on manufacturer pricing
strategies.\1074\ NHTSA stated, and reiterates elsewhere in this final
rule, that while the agency recognizes that some manufacturers may
defray their regulatory costs through more complex pricing strategies
or by accepting lower profits, NHTSA lacks sufficient insight into
these practices to confidently model alternative approaches.
Manufacturers tend to be unwilling to discuss these practices publicly
or even privately with much specificity. Without better information,
NHTSA believes it is more prudent to
[[Page 52806]]
continue to assume that manufacturers raise the prices of models whose
fuel economy they elect to improve sufficiently to recover their
increased costs for doing so, and then pass those costs forward to
buyers as price increases. Any stakeholders who might wish to provide
more information on cross-subsidization that could improve the realism
of NHTSA's future analyses are invited to do so.
---------------------------------------------------------------------------
\1074\ 88 FR at 56249 (Aug. 17, 2023).
---------------------------------------------------------------------------
A number of commenters discussed the estimated civil penalties for
non-compliance shown in the analysis for the NPRM. Civil penalties are
a component of per-vehicle cost increases because NHTSA assumes that
they (like technology costs) are passed forward to new vehicle buyers.
Jaguar commented that all of the regulatory alternatives were
beyond maximum feasible for Jaguar, because NHTSA's analysis showed
Jaguar paying civil penalties under all regulatory alternatives.\1075\
The Alliance and Kia argued more broadly that automaker non-compliance
at the level of the proposed standards ``exceeds reason'' and ``will
increase costs to the American consumer with absolutely no
environmental or fuel savings benefits.'' \1076\ AAPC made a similar
point.\1077\ Kia stated further that ``Kia and the industry as a whole
cannot afford to pay billions in civil penalties for CAFE non-
compliance while also investing billions of dollars in the EV
transition and EPA GHG regulation compliance.'' \1078\ MEMA stated that
``money spent on noncompliance fines is money not spent on technology
investment or workforce training,'' and argued that these ``lost funds
and unrealized improvements'' should be factored into the analysis.
Toyota commented that the amount of civil penalties projected showed
``that the technology being relied upon is insufficient to achieve the
proposed standards.'' \1079\ BMW stated that NHTSA had forecast
penalties for BMW over the rulemaking time frame of roughly $4.7
billion, and that the standards were therefore not economically
practicable because ``By its own admission, NHTSA has proposed a rule
which is prohibitive to doing business in the U.S. market for
BMW.''\1080\ Ford similarly commented that while NHTSA had acknowledged
in the NPRM that Ford had never paid civil penalties under the CAFE
program, NHTSA's analysis demonstrated that Ford would ``likely pay $1
billion in civil penalties if NHTSA's proposal were finalized,'' making
the proposed standards infeasible.\1081\ Stellantis offered similar
comments, and also stated that ``The PEF adjustment combined with the
proposed NHTSA rule forces fines with insufficient time to adjust
plans.'' \1082\ The Alliance further stated that when it ran the CAFE
model with civil penalties turned off, many fleets were unable to meet
the standards, which made the proposed standards arbitrary and
capricious.\1083\
---------------------------------------------------------------------------
\1075\ Jaguar, Docket No. NHTSA-2023-0022-57296, Attachment 1,
at 3.
\1076\ The Alliance, Docket No. NHTSA-2023-0022-27803,
Attachment 1, at 1; The Alliance, Docket No. NHTSA-2023-0022-60652,
Appendix B, at 14-19; Kia, Docket No. NHTSA-2023-0022-58542-A1, at
6.
\1077\ AAPC, Docket No. NHTSA-2023-0022-60610, at 6.
\1078\ Kia, at 6. Ford offered similar comments: Ford, Docket
No. NHTSA-2023-0022-60837, at 4.
\1079\ Toyota, Docket No. NHTSA-2023-0022-61131, at 2, 12, 16.
\1080\ BMW, Docket No. NHTSA-2023-0022-58614, at 3.
\1081\ Ford, Docket No. NHTSA-2023-0022-60837, at 3, 6.
\1082\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 8-9.
\1083\ Alliance, Docket No. NHTSA-2023-0022-60652, Appendix B,
at 21-23.
---------------------------------------------------------------------------
Valero commented that ``It is inappropriate and unlawful for NHTSA
to set standards that are so stringent that manufacturers cannot comply
without the use of civil penalties,'' and stated that such standards
would not be economically practicable.\1084\ POET commented that the
proposal ``dictates that manufacturers must pay significant fines to
continue in business,'' and argued that a rule that ``increase[d]
manufacturer fines by multiple billions of dollars'' was neither
technologically feasible nor economically practicable.\1085\ Heritage
Foundation offered similar comments,\1086\ as did U.S. Chamber of
Commerce, who suggested that standards that drove up vehicle prices
(through manufacturers passing civil penalties forward to consumers as
price increases) without improving efficiency must be beyond
economically practicable.\1087\ Landmark also offered similar comments,
stating that ``The government is seeking to force companies toward
greater production of EVs by heavily penalizing them for failing to
comply with completely unreasonable standards.''\1088\
---------------------------------------------------------------------------
\1084\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A,
at 7.
\1085\ POET, Docket No. NHTSA-2023-0022-61561, Attachment 1, at
16.
\1086\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
5.
\1087\ U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, Attachment 1, at 3-4. NADA offered similar comments, Docket
No. NHTSA-2023-0022-58200, at 5.
\1088\ Landmark, Docket No. NHTSA-2023-0022-48725, Attachment 1,
at 4.
---------------------------------------------------------------------------
The Alliance argued further that analysis showing significant
potential payment of civil penalties necessarily demonstrated that
standards were economically impracticable, because NHTSA has
consistently recognized that automakers are always free to pay
penalties if they cannot meet the standards, meaning that ``in the
light-duty context, the civil penalties effectively set an upper limit
on economic practicability.'' \1089\ The Alliance stated that NHTSA was
incorrect to suggest in the NPRM that ``moderating [its] standards in
response to [civil penalty estimates] would . . . risk `keying
standards to the least capable manufacturer,''' because ``these are
precisely the type of `industry-wide considerations' that NHTSA has
concluded [Congress intended NHTSA to consider].'' \1090\ The Alliance
concluded that economic practicability ``might include standards that
require a few laggards to pay penalties, but that concept cannot
reasonably encompass a scenario in which the cost of compliance for a
majority of the market in a given class will exceed the cost of
penalties.'' \1091\
---------------------------------------------------------------------------
\1089\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
B, at 14.
\1090\ Id. at 15.
\1091\ Id.
---------------------------------------------------------------------------
The Joint NGOs, in contrast, commented that manufacturers have the
ability to use credit carry-forward and carry-back, and ``Nothing in
EPCA contemplates that NHTSA will doubly account for automakers' multi-
year product plans by tempering the stringency of the standard in any
particular model year,'' implying that shortfalls in any given year
need not indicate economic impracticability.\1092\
---------------------------------------------------------------------------
\1092\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, NGO Comment
Appendix, at 5.
---------------------------------------------------------------------------
NHTSA has considered these comments carefully. The Joint NGOs are
correct that manufacturers may carry credits forward and back, but 49
U.S.C. 32902(h) does not allow NHTSA to consider the availability of
credits in determining maximum feasible CAFE standards. NHTSA is bound
by the statutory constraints, and the constrained analysis for the NPRM
did show several manufacturers paying civil penalties rather than
achieving compliance. With the final rule updates, estimated civil
penalties for the Preferred Alternative appear as follows.
[[Page 52807]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.206
---------------------------------------------------------------------------
\1093\ For comparison, the combined profits for Stellantis, GM
and Ford were approximately $143 billion over the last 5 years,
averaging $28.6 billion per year. See: https://www.epi.org/blog/uaw-automakers-negotiations/.
---------------------------------------------------------------------------
[[Page 52808]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.207
For comparison, civil penalties estimated in the NPRM analysis for
the then-Preferred Alternative (PC2LT4) totaled $10.6 billion for the
entire industry summed over the 5 years of the rulemaking time
frame.\1094\ Total civil penalties for the final rule under the
reference baseline are estimated at an order of magnitude less, just
over $1 billion for the 5-year period. For further comparison, civil
penalties estimated for the 2022 final rule Preferred Alternative
(Alternative 2.5) totaled $5.3 billion over 3 years for the entire
industry, or approximately $1.8 billion per year, which is equivalent
to the total 5-year estimate of civil penalties for the preferred
alternative in this final rule.\1095\
---------------------------------------------------------------------------
\1094\ See NHTSA, Preliminary Regulatory Impact Analysis,
Corporate Average Fuel Economy Standards for Passenger Cars and
Light Trucks for Model Years 2027 and Beyond and Fuel Efficiency
Standards for Heavy-Duty Pickup Trucks and Vans for Model Years 2030
and Beyond, July 2023. Available at https://www.nhtsa.gov/sites/nhtsa.gov/files/2023-08/NHTSA-2127-AM55-PRIA-tag.pdf (last accessed
May 29, 2024).
\1095\ See 87 FR 25710 (May 2, 2022).
---------------------------------------------------------------------------
[[Page 52809]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.208
---------------------------------------------------------------------------
\1096\ For comparison, the combined profits for Stellantis, GM,
and Ford were approximately $143 billion over the last 5 years,
averaging $28.6 billion per year. See: https://www.epi.org/blog/uaw-automakers-negotiations/.
---------------------------------------------------------------------------
[[Page 52810]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.209
Comparing the estimated civil penalties under the reference case
and No ZEV alternative baseline analyses, NHTSA finds that civil
penalties are somewhat higher--roughly $1.6 billion for both passenger
cars and light trucks under the No ZEV alternative baseline analysis,
compared to roughly $770 million for passenger cars and roughly $1
billion for light trucks under the reference case baseline analysis.
Even the total under the No ZEV alternative baseline analysis is still
considerably lower than the penalties estimated for the NPRM preferred
alternative, or for the 2022 final rule. NHTSA therefore concludes that
the use of the No ZEV alternative baseline rather than the reference
case baseline does not result in costs that alter the agency's
determination that the rule is economically feasible.
NHTSA has long interpreted economic practicability as meaning that
standards should be ``within the financial capability of the industry,
but not so stringent as to lead to adverse economic consequences.''
Civil penalty payment has not historically been specifically
highlighted as an ``adverse economic consequence,'' due to NHTSA's
assumption that manufacturers recoup those payments by increasing new
vehicle prices. NHTSA continues to believe that it is reasonable to
assume that manufacturers will recoup civil penalty payments, and that
changes in per-vehicle costs can drive sales effects. If per-vehicle
costs and sales effects appear practicable, then shortfalls by
themselves would not seem to weigh any more heavily on economic
practicability.
However, NHTSA is persuaded by the comments that civil penalties
are money not spent on investments that could help manufacturers comply
with higher standards in the future. NHTSA also agrees that civil
penalties do not improve either fuel savings or emissions reductions,
and thus do not directly serve EPCA's overarching purpose. As such,
while NHTSA does not believe that economic practicability mandates that
zero penalties be modeled to occur in response to potential future
standards, NHTSA does believe, given the circumstances of this rule and
the technological transition that NHTSA may not consider directly, that
economic practicability can reasonably include the idea that high
percentages of the cost of compliance should not be attributed to
shortfall penalties across a wide group of manufacturers, either,
because penalties are not compliance. Table VI-11 and Table VI-12 show
the number of manufacturers who have shortfalls in each fleet with a
regulatory cost break down for each alternative.\1097\
---------------------------------------------------------------------------
\1097\ Values in these tables may not sum perfectly due to
rounding.
---------------------------------------------------------------------------
[[Page 52811]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.210
[GRAPHIC] [TIFF OMITTED] TR24JN24.211
As Table VI-12 shows, civil penalties as a percentage of regulatory
costs rise rapidly for light trucks as alternatives increase in
stringency, jumping from only 9 percent for PC2LT002 to 29 percent for
PC1LT3, and rising to 59 percent for PC6LT8--that is to say, civil
penalties actually outweigh technology costs for the light truck fleet
under PC6LT8. The number of manufacturers facing shortfalls (and thus
civil penalties, for purposes of the analysis due to the statutory
prohibition against considering the availability of credits) similarly
rises as alternatives increase in stringency, from only 2 out of 19
manufacturers under PC2LT002, to 8 out of 19 (nearly half) for PC1LT3,
to 14 out of 19 for PC6LT8.
Table VI-11 shows that results are for the passenger car fleet. The
number of manufacturers facing shortfalls (particularly in their
imported car fleets) and the percentage of regulatory costs represented
by civil penalties rapidly increase for the highest stringency
scenarios considered, PC3LT5 and PC6LT8, such that at the highest
stringency 43 percent of the regulatory cost is attributed to penalties
and approximately three quarters of the 19 manufacturers are facing
shortfalls. The three less stringent alternatives show only one
manufacturer facing shortfalls for each of alternatives PC2LT002,
PC1LT3, and PC2LT4. However, civil penalties represent higher
percentages of regulatory costs under PC1LT3 and PC2LT4 than under
PC2LT002. Optimizing the use of resources for technology improvement
over penalties suggests PC2LT002 as the best option of the three for
the passenger car fleet.
Considering this ratio as an element of economic practicability for
purposes of this rulemaking, then, NHTSA believes that PC2LT002
represents the least harmful alternative considered. With nearly half
of light truck manufacturers facing shortfalls under PC1LT3, and nearly
30 percent of regulatory costs being attributable to civil penalties,
given the concerns raised by manufacturers regarding their ability to
finance the ongoing technological transition if they must divert funds
to paying CAFE penalties, NHTSA believes that PC1LT3 may be beyond
economically practicable in this particular rulemaking time frame.
NHTSA also considered civil penalties as a percentage of regulatory
costs under the No ZEV alternative baseline, as follows:
[[Page 52812]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.212
[GRAPHIC] [TIFF OMITTED] TR24JN24.213
Similar to the reference baseline, the No ZEV alternative baseline
demonstrates increased civil penalties and more fleet shortfalls with
higher stringency alternatives. For example, Table VI-14 shows similar
rapid increases percentage of regulatory costs for light trucks as
alternative increase in stringency, jumping from 10 percent for
PC2LT002 to 26 percent for PC1LT3 and rising to 62 percent for PC6LT8.
Like the reference baseline, the number of manufacturers facing
shortfalls similarly rises as alternatives increase in stringency.
Another example, Table VI-13 shows the trends in results for the No ZEV
alternative baseline. The number of manufacturers facing shortfalls and
the percentage of regulatory costs represented by civil penalties
rapidly increase for the highest stringency scenarios considered,
PC3LT5 and PC6LT8, such that at the highest stringency 49 percent of
the regulatory cost is attributed to penalties and approximately three
quarters of the 19 manufacturers are facing shortfalls.
Sales and employment responses--as discussed above, sales
and employment responses have historically been key to NHTSA's
understanding of economic practicability.
The Alliance stated that ``The projected $3,000 average price
increase over today's vehicles is likely to decrease sales and increase
the average age of vehicles on our roads.'' \1098\ The America First
Policy Institute also referred to NHTSA's estimated costs and stated
that ``Raising the upfront costs of vehicles is regressive policy; it
increasingly places vehicle purchases out of financial reach for the
American people and disadvantages lower-income consumers. The estimated
potential savings on vehicle operation are thus irrelevant for those
who would be unable to purchase a vehicle in the first
[[Page 52813]]
place.'' \1099\ Mitsubishi commented that rising costs attributable to
the proposed standards would drive ``price-sensitive car buyers . . .
to the used car market [and] older, less fuel-efficient vehicles,
exactly the opposite of the intention of the CAFE program.'' \1100\
Mitsubishi further stated that ``the resulting increased demand for
used cars would also raise used car prices, leaving a growing segment
of the U.S. population--mostly low-to-moderate income families--unable
to purchase a vehicle at all.'' \1101\ AFPM argued that ``As ZEV prices
rise, their sales and ICEV fleet turnover will slow, reducing fuel
efficiency benefits and creating a significant drag on the economy.''
\1102\ U.S. Chamber of Commerce offered similar comments.\1103\
---------------------------------------------------------------------------
\1098\ The Alliance, at 1.
\1099\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 3.
\1100\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 10.
\1101\ Id.
\1102\ AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at
67.
\1103\ U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, at 3.
---------------------------------------------------------------------------
The Heritage Foundation commented that the proposed standards would
cause there to be fewer new vehicle choices and that those options
would be more expensive, and that therefore new vehicle sales would
drop, which ``will challenge the profitability of the auto industry and
lead to a loss of jobs for tens of thousands of America's autoworkers,
as well as a loss of jobs'' amongst suppliers, and entail ``soaring
unemployment among both consumers and workers in the auto- and related
industries.'' \1104\ SEMA commented that ``A large-scale transition to
EVs over a truncated timeline will significantly disrupt automotive
supply chains and potentially eliminate many jobs in vehicle
manufacturing, parts production, and repair shops,'' including negative
effects on many small businesses.\1105\ In contrast, Ceres commented
that their 2021 report ``found that the strongest of NHTSA's previously
proposed alternatives would make U.S. automakers more globally
competitive and increase auto industry jobs.'' \1106\ Ceres concluded
that ``Failing to adopt the strongest fuel economy standards would
undermine the U.S.' efforts to create a globally competitive domestic
vehicle supply chain and put [their] members' business strategies at
risk.'' \1107\ The Conservation Voters of South Carolina cited the same
Ceres report to argue that ``Strong fuel economy standards mean more
U.S. manufacturing opportunities that can provide new, well-paying,
family-sustaining union manufacturing jobs.'' \1108\
---------------------------------------------------------------------------
\1104\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
7.
\1105\ SEMA, Docket No. NHTSA-2023-0022-57386, at 3.
\1106\ Ceres BICEP, Docket No. NHTSA-2023-0022-28667, at 1.
\1107\ Id.
\1108\ Conservation Voters of South Carolina, Docket No. NHTSA-
2023-0022-27799, at 1.
---------------------------------------------------------------------------
While NHTSA agrees generally that changes in per-vehicle costs can
affect vehicle sales and thus employment, the analysis for this final
rule found that the effects were much smaller than the commenters above
suggest could occur. Section 8.2.2.3 of the RIA discusses NHTSA's
findings that, with the exception of PC6LT8, sales effects in the
action alternatives differ from the No-Action alternative by no more
than 1 percent in any given model year, with most below this
value.\1109\ Relatedly, Table 8-1 in Section 8.2.2.3 of the RIA shows
that maximum employment effects in any year is fewer than 7,000 full
time equivalent jobs added (against a backdrop of over 900,000 full
time equivalent jobs industry-wide). Overall labor utilization follows
the general trend of the No-Action alternative but increases very
slightly over the reference baseline in all but the most stringent
action alternative cases, which indicates to NHTSA that technological
innovation (industry's need to build more advanced technologies in
response to the standards) ultimately outweighs sales effects in the
rulemaking time frame. Under the No ZEV alternative baseline, sales and
labor market effects are slightly larger than in the reference
baseline. This is in line with expectations, as alternative baseline
costs are slightly larger than costs in the reference baseline. With
the exception of PC6LT8, where sales reductions are approximately 3
percent, sales changes for all other action alternatives relative to
the No-Action alternative remain below 1.5 percent. Labor market
increases do not exceed 8,000 full-time equivalent jobs added over No-
Action levels.\1110\ Given that annual sales and employment effects
represent differences of well under 2 percent for each year for every
regulatory alternative, contrary to the commenters' concerns, NHTSA
does not find sales or employment effects to be dispositive for
economic practicability in this rulemaking.
---------------------------------------------------------------------------
\1109\ NHTSA models total light duty sales differences from the
regulatory baseline based on the percentage difference in the
average price paid by consumers, net of any tax credits. NHTSA
adjusts sales using a constant price elasticity of -0.4. NHTSA's
methodology is explained in more detail in TSD Chapter 4.1.
\1110\ For additional detail, see FRIA 8.2.7.
---------------------------------------------------------------------------
Uncertainty and consumer acceptance of technologies--these
are considerations not accounted for expressly in our modeling
analysis,\1111\ but important to an assessment of economic
practicability given the timeframe of this rulemaking. Consumer
acceptance can involve consideration of anticipated consumer response
not just to increased vehicle cost and consumer valuation of fuel
economy, but also the way manufacturers may change vehicle models and
vehicle sales mix in response to CAFE standards.
---------------------------------------------------------------------------
\1111\ See, e.g., Center for Auto Safety v. NHTSA (CAS), 793
F.2d 1322 (D.C. Cir. 1986) (Administrator's consideration of market
demand as component of economic practicability found to be
reasonable).
---------------------------------------------------------------------------
Many commenters stated that the proposed rule would restrict
consumer choice by forcing consumers to purchase electric vehicles,
because there would be no ICE vehicles available.\1112\ Mitsubishi
expressed concern that the proposal would require OEMs to ``prematurely
phase-out some of the most affordable/cleaner ICE and hybrid vehicles
and replace them with more expensive battery electric vehicles, thereby
limiting consumer choice for fuel efficient and affordable vehicles.''
\1113\ Heritage Foundation argued that the ICEs that could meet the
standards would be ``anemic'' and ``woefully lacking in power,
durability, and performance and will thus offer far less utility for
America's families,'' causing a ``generational loss in consumer
welfare.'' \1114\ Additional commenters argued that these required BEVs
would not meet consumers' diverse needs,\1115\ and that consumers did
not want them.\1116\ The American
[[Page 52814]]
Consumer Institute, for example, stated that ``Car companies losing
money on their EV divisions is a testament to their unpopularity among
the public. Several automakers are losing tens of thousands of dollars
for every unit sold. One of the `Big Three' automobile manufacturers is
poised to lose billions on its electric vehicles division this year.''
\1117\ CEI argued that higher vehicle prices would force ``millions''
of households to ``rely on transit'' and ``experience significant
losses of personal liberty, time, convenience, economic opportunity,
health, safety, and, yes, fun.'' \1118\ NADA cited data from multiple
surveys suggesting that consumers would not consider buying EVs or were
very unlikely to buy one.\1119\ Other commenters stated that more lead
time was needed to make more BEVs and for more consumers to accept
them.\1120\
---------------------------------------------------------------------------
\1112\ American Consumer Institute, Docket No. NHTSA-2023-0022-
50765, at 2; WPE, Docket No. NHTSA-2023-0022-52616, at 1; National
Association of Manufacturers, Docket No. NHTSA-2023-0022-59203-A1,
at 1; Heritage Foundation, Docket No. NHTSA-2023-0022-61952,
Attachment 1, at 3; SEMA, Docket No. NHTSA-2023-0022-57386, at 2;
POET, Docket No. NHTSA-2023-0022-61561, at 13; AHUA, Docket No.
NHTSA-2023-0022-58180, at 3; MCGA, Docket No. NHTSA-2023-0022-58413,
at 2; CEI, Docket No. NHTSA-2023-0022-61121, at 2.
\1113\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 2.
\1114\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
6.
\1115\ American Consumer Institute, at 2; Heritage Foundation,
at 7.
\1116\ KCGA, at 3; American Consumer Institute, Docket No.
NHTSA-2023-0022-50765, Attachment 1, at 1, 7-8; CFDC et al., Docket
No. NHTSA-2023-0022-62242, at 16; AFPM, Docket No. NHTSA-2023-0022-
61911, Attachment 2, at 52 (citing range anxiety and infrastructure
limitations); CEI, Docket No. NHTSA-2023-0022-61121, at 9 (citing
``high purchase price,'' price ``volatility,'' range anxiety,
refueling times, ``reduced cold-weather performance,'' and ``less
reliability during blackouts'').
\1117\ American Consumer Institute, at 7.
\1118\ CEI, Docket No. NHTSA-2023-0022-61121, at 2.
\1119\ NADA, Docket No. NHTSA-2023-0022-58200, at 7.
\1120\ National Association of Manufacturers, at 1.
---------------------------------------------------------------------------
In contrast, the States and Cities commented that the proposed
standards promoted greater consumer choice, ``as consumers will have a
greater array of vehicles with higher fuel economy, including plug-in
and mild hybrids, some of which offer advantages over internal
combustion engine vehicles, such as faster vehicle acceleration, more
torque, and lower maintenance costs.'' \1121\ Lucid commented that
research from Consumer Reports showed that fuel economy was important
to many American consumers and that ``Stringent fuel economy standards
are aligned with the interests of American consumers.'' \1122\
---------------------------------------------------------------------------
\1121\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 30-31.
\1122\ Lucid, Docket No. NHTSA-2023-0022-50594, Attachment 1, at
5.
---------------------------------------------------------------------------
NHTSA disagrees that the proposed standards would have forced new
vehicle buyers to purchase BEVs, and thus comments expressing concern
about alleged lack of consumer interest in BEVs are not relevant here.
CAFE standards do not and cannot require electrification. BEVs included
in the reference baseline are simply those that are anticipated to
exist in the world for reasons other than CAFE compliance, including
but not limited to estimated consumer demand for BEVs as costs decrease
over time in response to market forces. NHTSA's analysis of the effects
of potential new CAFE standards is bound by the statutory constraints.
That said, NHTSA agrees with comments suggesting that improved fuel
economy is beneficial to consumers, and that having an array of vehicle
choices with higher fuel economy is also beneficial. While NHTSA has no
authority to compel manufacturers to improve fuel economy in every
single vehicle that they offer, higher average fleet fuel economy
standards improve the likelihood that more vehicle models' fuel economy
will improve over time. NHTSA does not believe that it is a given that
improving fuel economy comes at the expense of improving other vehicle
attributes appreciated by consumers, and NHTSA's analysis expressly
holds vehicle performance constant when simulating the application of
fuel-efficient technologies.\1123\ The assumption of performance
neutrality is built into the technology costs incurred in the analysis,
and thus ensures the costs to maintain performance are represented when
feasibility is considered. While this does not address every single
vehicle attribute listed by commenters, NHTSA believes that it helps to
ensure the economic practicability of the standards that NHTSA chooses.
---------------------------------------------------------------------------
\1123\ Performance neutrality is further discussed in the Final
TSD Chapter 2.3.4 and in the CAFE Analysis Autonomie Documentation.
---------------------------------------------------------------------------
That said, NHTSA is also aware, as cited above, that a number of
manufacturers are beginning to introduce new SHEV and PHEV models,
purportedly in response to consumer demand for them.\1124\ NHTSA still
maintains that our analysis demonstrates only one technological path
toward compliance with potential future CAFE standards, and that there
are many paths toward compliance, but it may be a relevant data point
that the technological path we show includes a reliance on SHEV
technology in the light truck sector, particularly pickups, similar to
some product plans recently announced or already being
implemented.\1125\ The auto industry has a strong interest in offering
vehicles that consumers will buy. Introducing new models with these
technologies suggests that the industry believes that consumer demand
for these technologies is robust enough to support a greater supply.
The future remains uncertain, but it is possible that NHTSA's
constrained analysis may not completely fail to reflect consumer
preferences for vehicle technologies, if recent and planned
manufacturer behavior is indicative.
---------------------------------------------------------------------------
\1124\ Reuters. 2024. U.S. automakers race to build more hybrids
as EV sales slow. Mar. 15, 2024. Available at: https://www.reuters.com/business/autos-transportation/us-automakers-race-build-more-hybrids-ev-sales-slow-2024-03-15/.
\1125\ Rosevear, J. CNBC. 2023. As Ford loses billions on EVs,
the company embraces hybrids. Jul. 28, 2023. Available at: https://www.cnbc.com/2023/07/28/ford-embraces-hybrids-as-it-loses-billions-on-evs.html; Sutton, M. Car and Driver. 2024. 2024 Toyota Tacoma
Hybrid Is a Spicier Taco. Apr.23, 2024. Available at: https://www.caranddriver.com/reviews/a60555316/2024-toyota-tacoma-hybrid-drive/.
---------------------------------------------------------------------------
Over time, NHTSA has tried different methods to account for
economic practicability. NHTSA previously abandoned the ``least capable
manufacturer'' approach to ensuring economic practicability, of setting
standards at or near the level of the manufacturer whose fleet mix was,
on average, the largest and heaviest, generally having the highest
capacity (for passengers and/or cargo) and capability (in terms of
ability to perform their intended function(s)) so as not to limit the
availability of those types of vehicles to consumers.\1126\ Economic
practicability has typically focused on the capability of the industry
and seeks to avoid adverse consequences such as (inter alia) a
significant loss of jobs or unreasonable elimination of consumer
choice. If the overarching purpose of EPCA is energy conservation,
NHTSA generally believes that it is reasonable to expect that maximum
feasible standards may be harder for some automakers than for others,
and that they need not be keyed to the capabilities of the least
capable manufacturer. NHTSA concluded in past rulemakings that keying
standards to the least capable manufacturer may disincentivize
innovation by rewarding laggard performance, and it could very
foreseeably result in less energy conservation than an approach that
looked at the abilities of the industry as a whole.
---------------------------------------------------------------------------
\1126\ NHTSA has not used the ``least capable manufacturer''
approach since prior to the model year 2005-2007 rulemaking (68 FR
16868, Apr. 7, 2003) under the non-attribute-based (fixed) CAFE
standards.
---------------------------------------------------------------------------
[[Page 52815]]
IPI commented that NHTSA's emphasis on costs, that as NHTSA notes
are ``likely overstate[d],'' resembles the rejected ``least capable
manufacturer approach.'' IPI stated that ``This rejection is
reasonable,'' as NHTSA had explained in the NPRM, and that therefore
``costs should not be a decisive barrier to adopting more stringent
standards.'' \1127\ NHTSA agrees that for purposes of the final rule,
estimated per-vehicle costs are not a decisive barrier to adopting more
stringent standards, because costs for a number of alternatives are
well within limits which NHTSA has previously considered economically
practicable. However, estimated civil penalties, as a subcomponent of
manufacturer costs, do remain meaningful in light of the technological
transition that NHTSA does not consider directly, insofar as
manufacturers state that they divert resources from that transition,
even though NHTSA assumes that manufacturers eventually recoup those
costs by passing them forward to consumers. NHTSA thus concludes that,
for purposes of this final rule, the threshold of economic
practicability may be much lower in terms of estimated shortfalls than
NHTSA tentatively concluded could be practicable in the NPRM.
---------------------------------------------------------------------------
\1127\ IPI, NHTSA-2023-0022-60485, at 10.
---------------------------------------------------------------------------
NHTSA recognizes that this approach to economic practicability may
appear to be focusing on the least capable manufacturers, but as
industry and other commenters noted, civil penalties do not reduce fuel
use or emissions, and thus do not serve the overarching purpose of
EPCA. They merely consume resources that could otherwise be better
spent elsewhere. NHTSA has also sought to account for economic
practicability by applying marginal benefit-cost analysis since the
first rulemakings establishing attribute-based standards, considering
both overall societal impacts and overall consumer impacts. Whether the
standards maximize net benefits has thus been a relevant, albeit not
dispositive, factor in the past for NHTSA's consideration of economic
practicability. E.O. 12866 states that agencies should ``select, in
choosing among alternative regulatory approaches, those approaches that
maximize net benefits . . .'' As the E.O. further recognizes, agencies,
including NHTSA, must acknowledge that the modeling of net benefits
does not capture all considerations relevant to economic
practicability, and moreover that the uncertainty of input assumptions
makes perfect foresight impossible. As in past rulemakings, NHTSA has
considered our estimates of net societal impacts, net consumer impacts,
and other related elements in the consideration of economic
practicability. We emphasize, however, that it is well within our
discretion to deviate from the level at which modeled net benefits
appear to be maximized if we conclude that the level would not
represent the maximum feasible level for future CAFE standards, given
all relevant and statutorily-directed considerations, as well as
unquantifiable benefits.\1128\ Economic practicability is complex, and
like the other factors must be considered in the context of the overall
balancing and EPCA's overarching purpose of energy conservation.
---------------------------------------------------------------------------
\1128\ Even E.O. 12866 acknowledges that ``Nothing in this order
shall be construed as displacing the agencies' authorities or
responsibilities, as authorized by law.'' E.O. 12866, Sec. 9.
---------------------------------------------------------------------------
The Renewable Fuels Association et al. commented that the passenger
car standards for both the PC1LT3 and PC2LT4 alternatives were beyond
economically practicable, because NHTSA's analysis showed that they
resulted in net costs for both society and for consumers.\1129\ The
commenters stated that NHTSA had explained in the NPRM that it had the
authority to deviate from the point at which net benefits were
maximized if other statutory considerations made it appropriate to do
so, but the commenters asserted that the fuel savings associated with
those alternatives were ``not high'' and did not outweigh the
costs.\1130\ Institute for Energy Research and Mitsubishi offered
similar comments.\1131\ POET argued that because even NHTSA
acknowledged that there was substantial uncertainty in its analysis,
therefore NHTSA should ``only adopt standards that clearly have a net
positive benefit under all its main discount rate scenarios,'' using
``conservative assumptions'' ``to avoid a rule that puts automakers
into severe non-compliance.'' \1132\
---------------------------------------------------------------------------
\1129\ Renewable Fuels Association et al., Docket No. NHTSA-
2023-0022-1652, at 14-15; RFA et al. 1, Docket No. NHTSA-2023-0022-
57720, at 4.
\1130\ Id.
\1131\ Institute for Energy Research, Docket No. NHTSA-2023-
0022-63063, at 2; Mitsubishi, Docket No. NHTSA-2023-0022-61637, at
3.
\1132\ POET, Docket No. NHTSA-2023-0022-61561, at 13.
---------------------------------------------------------------------------
In contrast, IPI argued that the net benefits of all alternatives
were likely understated due to (1) ``conservative'' assumptions about
the SC-GHG and discount rates, and (2) the analysis ending at calendar
year 2050 rather than extending further, ``given that more stringent
standards' net benefits rise quickly in later years.'' \1133\
---------------------------------------------------------------------------
\1133\ IPI, Docket No. NHTSA-2023-0022-60485, at 11.
---------------------------------------------------------------------------
In response, NHTSA notes that the benefit-cost landscape of the
final rule is somewhat different from the NPRM analysis. While NHTSA
maintains that economic practicability does not mandate that the agency
choose only the alternative(s) that maximize net benefits, NHTSA agrees
that passenger car and light truck standards should be independently
justifiable. NHTSA also agrees that alternatives for which costs
outweigh benefits should be scrutinized closely, even while NHTSA
recognizes that certain benefits, especially related to climate
effects, remain uncaptured by our analysis. Regarding the timeframe of
the analysis, NHTSA emphasizes the fact that model-year accounting for
benefits and costs focuses on effects over the lifetime of the light
duty vehicles affected by the rulemaking. The fleet of remaining
vehicles declines over time, and the analysis extends beyond calendar
year 2050. For example, a model year 2031 vehicle accrues benefits and
costs through calendar year 2070, though only approximately 2 percent
of these vehicles remain in the fleet.\1134\
---------------------------------------------------------------------------
\1134\ See RIA 8.2.4 for an illustration of model-year
accounting of benefits and costs, reported by calendar year.
---------------------------------------------------------------------------
To examine the benefit-cost landscape and results more closely,
Table VI-15 reports social benefits and costs for passenger cars and
light trucks separately, along with the total net benefits for the two
fleets combined. Though the preferred alternative does not maximize net
benefits across the two fleets, it is the only alternative in which net
benefits are positive for both passenger cars and light trucks.
[[Page 52816]]
This holds at both the 3 percent social discount rate and a more
conservative 7 percent discount rate, as shown in Table VI-16.
---------------------------------------------------------------------------
\1135\ Values may not add exactly due to rounding.
\1136\ Includes safety costs, congestion and noise costs, and
loss in fuel tax revenue.
\1137\ Includes benefits from rebound VMT and less frequent
refueling.
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BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR24JN24.214
BILLING CODE 4910-59-C
[[Page 52817]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.215
Net benefits for PC2LT002 remain positive due in part to
differences in fleet and travel behavior projected by the CAFE Model.
That is, when stringencies increase at a faster rate for light trucks,
as in alternatives PC1LT3 through PC6LT8, passenger cars see
significantly more use and are kept in service longer. The resulting
increase in costs (e.g., additional fuel use from more driving) offsets
some portion of benefits (e.g., reduced fuel use from higher fuel
economy). The rate of improved benefits for passenger cars is also
limited by the technology feasibility issues discussed in the section
above. The PC2LT002 stringency manages to strike a favorable balance of
this effect.
To examine this effect in more detail, observe the levels of
incremental private benefits and non-technology costs for alternatives
PC1LT3 through PC6LT8 relative to PC2LT002 in Table VI-15. The majority
of this difference is an artifact of the interaction between passenger
car and light truck fleets in instances where car and truck
stringencies increase at different rates. For instance, where light
truck stringency increases faster than passenger car stringency (e.g.,
PC2LT4), light truck vehicle costs increase more than passenger car
costs. This reduces light truck sales, and hence total light truck non-
rebound VMT.\1138\ The sales effect, coupled with the model's aggregate
non-rebound VMT constraint, increases passenger car VMT. This change in
mileage affects a number of benefit-cost categories. Some of the
categories for which mileage is a central input include congestion and
noise costs, safety costs, fuel savings benefits, and emissions
reductions. With increased passenger car mileage, congestion and noise
costs and safety costs all increase relative to the No-Action
alternative. Some fuel savings benefits for the passenger car fleet are
offset by increased travel relative to the No-Action alternative; even
if industry-wide fuel economy levels rise, increased vehicle use can
suppress fuel savings benefits as overall fuel savings is the product
of the two metrics. Emissions reductions for the passenger car fleet
are offset in a similar manner. In the case of PC2LT002, costs, sales,
and VMT do not see the same VMT shift as the other action alternatives.
For passenger cars, this produces lower non-technology costs and avoids
suppressing some portion of projected fuel cost savings and emissions
reductions. The higher costs and partially-offset benefits of PC1LT3
through PC6LT8 combine to produce negative net social benefits for the
passenger car fleet in these alternatives. Conversely, the absence of
VMT shifts between fleets in the case of PC2LT002 allow net social
benefits to remain positive.\1139\
---------------------------------------------------------------------------
\1138\ The CAFE Model's non-rebound VMT constraint operates on a
fleet-wide basis and does not hold VMT fixed within regulatory
class.
\1139\ For all of the reasons discussed in the TSD and FRIA,
NHTSA believes that the CAFE model's treatment of passenger car and
light truck VMT and fleet share behavior are reasonable
representations of market behavior, and that the benefit-cost values
that result are a plausible result of the modeled compliance
pathways. NHTSA also ran a sensitivity case with the fleet share
adjustment disabled, which showed that PC2LT002 remains the
alternative with the highest net benefits for passenger cars. See
Chapter 9 of the FRIA for full results.
---------------------------------------------------------------------------
Consumer benefits and costs produce a slightly different picture.
For the passenger car fleet, per-vehicle fuel savings exceed regulatory
cost in both PC2LT002 (by $191 in model year 2031) and PC1LT3 (by $132
in model year 2031). For the light truck fleet, this difference remains
positive for PC2LT002, PC1LT3, and PC2LT4.
[[Page 52818]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.216
[[Page 52819]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.217
[[Page 52820]]
From these tables, it is clear that consumers who purchase
passenger cars stand to save the most from the PC2LT002 standards,
according to the statutorily-constrained analysis, and that the more
stringent alternatives would result in net consumer costs, as
identified by some commenters. For light truck purchasers, PC1LT3
represents slightly higher net fuel savings, but PC2LT002 is only about
$50 less per vehicle.
Under the No ZEV alternative baseline analysis, results are fairly
similar, as shown:
---------------------------------------------------------------------------
\1140\ Values may not add exactly due to rounding.
\1141\ Includes safety costs, congestion and noise costs, and
loss in fuel tax revenue.
\1142\ Includes benefits from rebound VMT and less frequent
refueling.
---------------------------------------------------------------------------
BILLING CODE 4910-59-P
[GRAPHIC] [TIFF OMITTED] TR24JN24.218
BILLING CODE 4910-59-C
[[Page 52821]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.219
For light trucks, net benefits under the No ZEV alternative
baseline analysis peak at PC1LT3, while for passenger cars, net
benefits operate generally the same way under the No ZEV alternative
baseline analysis as under the reference baseline analysis, where net
benefits are only positive for PC2LT002, and remain positive due in
part to differences in fleet and travel behavior projected by the CAFE
Model, as discussed above.
Consumer benefits and costs produce a slightly different picture.
For the passenger car fleet, per-vehicle fuel savings exceed regulatory
cost in both PC2LT002 (by $375 in model year 2031) and PC1LT3 (by $191
in model year 2031). For the light truck fleet, this difference remains
positive for PC2LT002, and PC1LT3. In these regulatory alternatives
under the No ZEV alternative baseline, regulatory costs increase
slightly over those in the reference baseline but this is outweighed by
an increase in fuel savings.
[GRAPHIC] [TIFF OMITTED] TR24JN24.220
[[Page 52822]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.221
From these tables, under the No ZEV alternative baseline analysis
as under the reference baseline analysis, it is clear that consumers
who purchase passenger cars stand to save the most from the PC2LT002
standards, according to the statutorily-constrained analysis, and that
the more stringent alternatives would result in net consumer costs, as
identified by some commenters. For light truck purchasers, PC2LT002
also saves consumers the most under the No ZEV alternative baseline
analysis. Given the passenger car results and the closeness of the
light truck results, NHTSA concludes that PC2LT002 would be most
directly beneficial for consumers according to the constrained
analysis.
(3) The Effect of Other Motor Vehicle Standards of the Government on
Fuel Economy
``The effect of other motor vehicle standards of the Government on
fuel economy'' involves analysis of the effects of compliance with
emission, safety, noise, or damageability standards on fuel economy
capability, and thus on the industry's ability to meet a given level of
CAFE standards. In many past CAFE rulemakings, NHTSA has said that it
considers the adverse effects of other motor vehicle standards on fuel
economy. It said so because, from the CAFE program's earliest years
until recently, compliance with these other types of standards has had
a negative effect on fuel economy.\1143\ For example, safety standards
that have the effect of increasing vehicle weight thereby lower fuel
economy capability (because a heavier vehicle must work harder to
travel the same distance, and in working harder, consumes more energy),
thus decreasing the level of average fuel economy that NHTSA can
determine to be feasible. NHTSA notes that nothing about the Federal
Motor Vehicle Safety Standards (FMVSS) would be altered or inhibited by
this CAFE/HDPUV standards rule. NHTSA has also accounted for Federal
Tier 3 and California LEV III criteria pollutant standards within its
estimates of technology effectiveness in prior rules and in this final
rule.\1144\
---------------------------------------------------------------------------
\1143\ 43 FR 63184, 63188 (Dec. 15, 1977). See also 42 FR 33534,
33537 (Jun. 30, 1977).
\1144\ For most ICE vehicles on the road today, the majority of
vehicle-based NOX, NMOG, and CO emissions occur during
``cold-start,'' before the three-way catalyst has reached higher
exhaust temperatures (e.g., approximately 300[deg]C), at which point
it is able to convert (through oxidation and reduction reactions)
those emissions into less harmful derivatives. By limiting the
amount of those emissions, vehicle-level smog standards require the
catalyst to be brought to temperature rapidly, so modern vehicles
employ cold-start strategies that intentionally release fuel energy
into the engine exhaust to heat the catalyst to the right
temperature as quickly as possible. The additional fuel that must be
used to heat the catalyst is typically referred to as a ``cold-start
penalty,'' meaning that the vehicle's fuel economy (over a test
cycle) is reduced because the fuel consumed to heat the catalyst did
not go toward the goal of moving the vehicle forward. The Autonomie
work employed to develop technology effectiveness estimates for this
final rule accounts for cold-start penalties, as discussed in the
Chapter ``Cold-start Penalty'' of the ``CAFE Analysis Autonomie
Documentation''.
---------------------------------------------------------------------------
In other cases, the effect of other motor vehicle standards of the
Government on fuel economy may be neutral, or positive. Since the Obama
Administration, NHTSA has considered the GHG standards set by EPA as
``other motor vehicle standards of the Government.'' NHTSA received
many comments about considering EPA's GHG standards. BMW commented that
``coordination between NHTSA and EPA during the rulemaking process is
critical'' and stated further that in light of differences in governing
statutes, NHTSA and EPA ``have historically recognized and accounted
for these differences in the standard setting process.'' \1145\ Jaguar
stated that ``while there has always been a degree of misalignment
between NHTSA CAFE and EPA GHG regulations due to differences in their
treatment of BEVs,'' NHTSA had gone to great lengths in the model years
2024-2026 CAFE rule to minimize those differences, and needed
[[Page 52823]]
to make a similar proof for the current final rule.\1146\ Jaguar
further argued that ``If NHTSA cannot consider that BEVs are required
to meet their proposed CAFE standards, NHTSA should consider that
significant levels of electrification are needed to meet the EPA
targets.'' \1147\ The Alliance also argued that NHTSA's proposed
standards were ``serious[ly] misalign[ed]'' with EPA's proposed
standards, given, among other things, DOE's proposal to revise the PEF
value.\1148\ The Alliance further stated that EPA's proposed standards
were ``neither reasonable nor achievable'' and needed to be less
stringent, and that NHTSA's CAFE standards ``should also be modified
commensurately.'' \1149\
---------------------------------------------------------------------------
\1145\ BMW, Docket No. NHTSA-2023-0022-58614, at 1.
\1146\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 5.
\1147\ Id. at 6.
\1148\ The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 2, at 2.
\1149\ Id. at 4. National Association of Manufacturers offered
similar comments, Docket No. NHTSA-2023-0022-59203-A1, at 2; Kia
offered similar comments, Docket No. NHTSA-2023-0022-58542-A1, at 5-
6; NADA offered similar comments, Docket No. NHTSA-2023-0033-58200,
at 12.
---------------------------------------------------------------------------
Subaru stated that ``regulatory alignment'' between NHTSA, EPA, DOE
(with the PEF value revision) and CARB was crucial, because
``Regulations that impose differing requirements for the same vehicle
add costs, without consumer benefit, and divert resources that could
otherwise be used toward meeting the Administration's electrification
goals.'' \1150\ Subaru added that ``If any automaker can comply with
one set of standards, they should not be in jeopardy of paying
penalties toward another agency's efficiency program,'' and suggested
that the DOE PEF value revision made that more likely under NHTSA's
proposal.\1151\ GM commented that not only should manufacturers be able
to comply with both standards without paying penalties in CAFE space,
but that they should also be able to comply ``without . . . restricting
product, or purchasing credits,'' and that NHTSA, EPA, and CARB needed
``to base their analyses of industry compliance . . . on the same level
of EV deployment and ICE criteria pollutant and efficiency
improvement.'' \1152\ Nissan stated that the combination of EPA, NHTSA,
DOE, and CARB regulations ``create a complicated and unachievable
landscape for the automotive industry in the proposed timeframe.''
\1153\ AHUA made a similar point and added that it complicates the
landscape for related industries (like electricity generation/
infrastructure and mining/minerals processing) as well, concluding that
``It makes it harder to make favorable assumptions on how quickly
changes can be made in the market for EV chargers and in other markets
that must perform well to facilitate marketplace acceptance of EVs and
otherwise increase fuel economy as proposed in these efforts.'' \1154\
---------------------------------------------------------------------------
\1150\ Subaru, Docket No. NHTSA-2023-0022-58655, at 2. Ford
offered similar comments, Docket No. NHTSA-2023-0022-60837, at 1;
Jaguar offered similar comments, Docket No. NHTSA-2023-0022-57296,
at 5; MECA offered similar comments, Docket No. NHTSA-2023-0022-
63053, at 4; NADA offered similar comments, Docket No. NHTSA-2023-
0022-58200, at 12; GM offered similar comments, Docket No. NHTSA-
2023-0022-60686, at 4; Mitsubishi offered similar comments, Docket
No. NHTSA-2023-0022-61637, at 2.
\1151\ Id.; Kia offered similar comments, Docket No. NHTSA-2023-
0022-58542-A1, at 2-3; Jaguar offered similar comments, Docket No.
NHTSA-2023-0022-57296, at 6; Ford offered similar comments, Docket
No. NHTSA-2023-0022-60837, at 3; Mitsubishi offered similar
comments, Docket No. NHTSA-2023-0022-61637, at 2; Stellantis offered
similar comments, Docket No. NHTSA-2023-0022-61107, at 3.
\1152\ GM, Docket No. NHTSA-2023-0022-60686, at 4.
\1153\ Nissan, Docket No. NHTSA-2023-0022-60696, at 1. BMW
offered similar comments, Docket No. NHTSA-2023-0022-58614, at 1.
\1154\ AHUA, Docket No. NHTSA-2023-0022-58180, at 6.
---------------------------------------------------------------------------
Volkswagen commented that EPA's rule was ``the leading rule'' and
that NHTSA's proposal ``fails to align'' and needed to ``harmonize[ ]
to the finalized EPA GHG regulation,'' \1155\ or if not, that NHTSA
accept compliance with EPA's standard in lieu of compliance with
NHTSA's standard.\1156\ POET similarly commented that NHTSA should
finalize standards ``no more stringent than what correlates to fuel
economy equivalence under a corrected EPA light-duty vehicle GHG
rule.'' \1157\ ANHE commented that NHTSA's standards were not strong
enough and needed to be aligned with EPA's proposal to ensure benefits
to lung health due to less-polluting vehicles.\1158\ The Colorado State
Agencies also commented that NHTSA's standards needed to be aligned
with EPA's to ``avoid any backsliding'' as well as ``a scenario in
which OEMs are forced to divert investment away from transportation
electrification.'' \1159\ Wisconsin DNR requested that NHTSA coordinate
with EPA on additional standards for ozone and PM2.5.\1160\
---------------------------------------------------------------------------
\1155\ Jaguar made similar comments, at 6; AHUA also offered
similar comments, Docket No. NHTSA-2023-0022-58180, at 3; Toyota
offered similar comments, Docket No. NHTSA-2023-0022-61131, at 2.
\1156\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 1, 3.
U.S. Chamber of Commerce offered similar comments, Docket No. NHTSA-
2023-0022-61069, at 2; Hyundai offered similar comments, Docket No.
NHTSA-2023-0022-51701, at 2-3; NADA offered similar comments, Docket
No. NHTSA-2023-0022-58200, at 12. Volkswagen also requested, if
NHTSA took a ``deemed to comply'' approach, that NHTSA allow
compliance ``reporting requirements [to] be streamlined.''
Volkswagen, at 3.
\1157\ POET, Docket No. NHTSA-2023-0022-61561, at 10.
\1158\ ANHE, Docket No. NHTSA-2023-0022-27781, at 1.
\1159\ Colorado State Agencies, Docket No. NHTSA-2023-0022-
41652, at 2.
\1160\ Wisconsin DNR, Docket No. NHTSA-2023-0022-21431, at 2.
NHTSA has no authority under EPCA/EISA or any other statute to issue
standards for criteria pollutants, so this comment will not be
addressed further.
---------------------------------------------------------------------------
MEMA commented that NHTSA should abandon a separate rulemaking and
``jointly collaborate with EPA in writing one final rule,'' and that
``Joint regulatory action will also allow EPA to fill in the gaps in
NHTSA's congressional authority regarding EVs.'' \1161\ Consumer
Reports also encouraged NHTSA to ``work with EPA to ensure consistency
between the levels of stringency in each specific model year.'' \1162\
MECA commented that NHTSA and EPA had long issued joint rules, and
given that the agencies had issued separate proposals, NHTSA needed to
``spend additional effort to document in the final rule how the
regulations are aligned and where they are not aligned.'' \1163\
Specifically, MECA requested that ``NHTSA analyze the impact of
separate regulations, particularly on compliance flexibility and the
potential for . . . fuel economy penalties to be used as a compliance
mechanism,'' and ``clearly articulate'' the effect of the revised DOE
PEF value on CAFE compliance.\1164\ GM similarly argued that NHTSA's
analysis needed to ``include how the modeled NHTSA-, EPA-, and CARB-
regulated fleets comply with all regulations with a consistent level of
EVs and ICE improvement,'' both ``on an industry-wide basis'' and ``for
each manufacturer individually.'' \1165\
---------------------------------------------------------------------------
\1161\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 2.
\1162\ Consumer Reports, Docket No. NHTSA-2023-0022-61098, at
17.
\1163\ MECA, Docket No. NHTSA-2023-0022-63053, at 3.
\1164\ Id. at 4.
\1165\ GM, Docket No. NHTSA-2023-0022-60686, at 4.
---------------------------------------------------------------------------
CEI agreed that NHTSA and EPA conducting separate rulemakings was
problematic, stating that it ``undermined key premises'' of
Massachusetts v. EPA because the agencies now seek to ``ban ICE
vehicles'' rather than to issue ``CAFE and GHG standards of
approximately equal stringency.'' \1166\
[[Page 52824]]
CEI argued that EPA and NHTSA's standards were inconsistent in two
ways: first, that EPA's standards were more stringent overall, and
second, that NHTSA's standards were more stringent for ICE
vehicles.\1167\ As a result, CEI stated, manufacturers who could comply
with EPA's standards but not with NHTSA's would be compelled ``to
withdraw from the ICE vehicle market . . . in order to simplify and
reduce overall compliance burdens.'' \1168\ CEI further stated that
NHTSA had not shown in the NPRM what CO2 targets would
correspond to the proposed CAFE standards, unlike in the model years
2024-2026 final rule, and argued that it was ``backwards'' for NHTSA to
suggest that its proposed standards ``complement and align with EPA's''
because ``The EPA's standards increasingly clash and misalign with
NHTSA's.'' \1169\ The Heritage Foundation argued that NHTSA's efforts
to ``force the auto industry to convert to the production of electric
vehicles in violation of [its] statutory authorities'' was ``part of a
unified strategy of the Biden administration, as set forth in executive
orders,'' combining NHTSA, EPA, and CARB efforts.\1170\
---------------------------------------------------------------------------
\1166\ CEI, Docket No. NHTSA-2023-0022-61121, at 2. West
Virginia Attorney General's Office offered similar comments, Docket
No. NHTSA-2023-0022-63056, at 2.
\1167\ CEI, at 1.
\1168\ Id.
\1169\ Id. at 4.
\1170\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
2.
---------------------------------------------------------------------------
In response, NHTSA notes that many of these comments and arguments
are generally similar to those offered to the model years 2024-2026
proposal, and that the response provided by NHTSA in the model years
2024-2026 final rule largely continues to apply. NHTSA has carefully
considered EPA's standards, by including the baseline (i.e., through
model year 2026) CO2 standards in our analytical reference
baseline for the main analysis.
In the 2012 final rule, NHTSA stated that ``[t]o the extent the GHG
standards result in increases in fuel economy, they would do so almost
exclusively as a result of inducing manufacturers to install the same
types of technologies used by manufacturers in complying with the CAFE
standards.'' \1171\ NHTSA concluded in 2012 that ``no further action
was needed'' because ``the agency had already considered EPA's [action]
and the harmonization benefits of the National Program in developing
its own [action].'' \1172\ In the 2020 final rule, NHTSA reinforced
that conclusion by explaining that a textual analysis of the statutory
language made it clear that EPA's GHG standards are literally ``other
motor vehicle standards of the Government'' because they are standards
set by a Federal agency that apply to motor vehicles. NHTSA and EPA are
obligated by Congress to exercise their own independent judgment in
fulfilling their statutory missions, even though both agencies'
regulations affect both fuel economy and CO2 emissions.
There are differences between the two agencies' programs that make
NHTSA's CAFE standards and EPA's GHG standards not perfectly one-to-one
(even besides the fact that EPA regulates other GHGs besides
CO2, EPA's CO2 standards also differ from NHTSA's
in a variety of ways, often because NHTSA is bound by statute to a
certain aspect of CAFE regulation). NHTSA creates standards that meet
our statutory obligations, including through considering EPA's
standards as other motor vehicle standards of the Government.\1173\
Specifically, NHTSA has considered EPA's standards through model year
2026 for this final rule by including the baseline GHG standards in our
analytical reference baseline for the main analysis. Because the EPA
and NHTSA programs were developed in coordination, and stringency
decisions were made in coordination, NHTSA has not incorporated EPA's
CO2 standards for model years 2027-2032 as part of the
analytical reference baseline for this final rule's main analysis. The
fact that EPA finalized its rule before NHTSA is an artifact of
circumstance only. NHTSA recognizes, however, that the CAFE standards
thus sit alongside EPA's light-duty vehicle multipollutant emission
standards that were issued in March. NHTSA also notes that any electric
vehicles deployed to comply with EPA's standards will count towards
real-world compliance with these fuel economy standards. In this final
rule, NHTSA's goal has been to establish regulations that achieve
energy conservation per its statutory mandate and consistent with its
statutory constraints, and that work in harmony with EPA's regulations
addressing air pollution. NHTSA believes that these statutory mandates
can be met while ensuring that manufacturers have the flexibility they
need to achieve cost-effective compliance.
---------------------------------------------------------------------------
\1171\ 77 FR 62624, 62669 (Oct. 15, 2012).
\1172\ Id.
\1173\ Massachusetts v. EPA, 549 U.S. 497, 532 (2007) (``[T]here
is no reason to think that the two agencies cannot both administer
their obligations and yet avoid inconsistency.'').
---------------------------------------------------------------------------
NHTSA is aware that when multiple agencies regulate concurrently in
the same general space, different regulations may be binding for
different regulated entities at different times. Many commenters
requested that NHTSA set standards low enough so that, among the CAFE,
CO2, and California regulations, the CAFE standards were
never the binding regulation. NHTSA explained in the model years 2024-
2026 final rule that NHTSA and EPA had explained in the 2012 final rule
that depending on each manufacturer's chosen compliance path, there
could be situations in which the relative difficulty of each agency's
standards varied. To quote the 2012 final rule again,
Several manufacturers commented on this point and suggested that
this meant that the standards were not aligned, because NHTSA's
standards might be more stringent in some years than EPA's. This
reflects a misunderstanding of the agencies' purpose. The agencies
have sought to craft harmonized standards such that manufacturers
may build a single fleet of vehicles to meet both agencies'
requirements. That is the case with these final standards.
Manufacturers will have to plan their compliance strategies
considering both the NHTSA standards and the EPA standards and
assure that they are in compliance with both, but they can still
build a single fleet of vehicles to accomplish that goal.'' \1174\
(emphasis added)
---------------------------------------------------------------------------
\1174\ 77 FR at 63054-55 (Oct. 15, 2012).
As explained in the model years 2024-2026 final rule, even in 2012,
the agencies anticipated the possibility of this situation and
explained that regardless of which agency's standards are binding given
a manufacturer's chosen compliance path, manufacturers will still have
to choose a path that complies with both standards--and in doing so,
will still be able to build a single fleet of vehicles, even if they
must be slightly more strategic in how they do so. This remains the
case with this final rule.
In requesting that NHTSA set CAFE standards that account precisely
for each difference between the programs and ensure that CAFE standards
are never more stringent than EPA's, never require any payment of civil
penalties for any manufacturer, etc., commenters appear to be asking
NHTSA again to define ``maximum feasible'' as ``the fuel economy level
at which no manufacturer need ever apply any additional technology or
spend any additional dollar beyond what EPA's standards, with their
greater flexibilities, would require.'' NHTSA believes that this takes
``consideration'' of ``the effect of other motor vehicle standards of
the Government'' farther than Congress intended for it to go.
NHTSA has considered EPA's standards in determining the maximum
feasible CAFE standards for model years 2027-2031, as discussed above.
In
[[Page 52825]]
response to comments, NHTSA conducted a side study in which we analyzed
simultaneous compliance with EPA's recently finalized CO2
standards and the regulatory alternatives considered here.\1175\ This
analysis confirms that if industry reaches compliance with EPA's
standards, then compliance with NHTSA final standards is feasible.
NHTSA has coordinated its standards with EPA's where doing so was
consistent with NHTSA's separate statutory direction. NHTSA disagrees
that harmonization can only ever be achieved at the very cheapest
level, or that this would be consistent with NHTSA's statutory mandate.
---------------------------------------------------------------------------
\1175\ Side Study Memo to Docket.
---------------------------------------------------------------------------
Industry commenters discussed at length their concerns with
managing simultaneous compliance with NHTSA's standards while also
making the technological transition that NHTSA cannot consider, just as
they did in their comments to the model years 2024-2026 proposal. NHTSA
recognizes that the difference in the current rulemaking is that the
transition that NHTSA cannot consider directly is likely closer, and
the urgency of needing all available resources and capital for that
transition--resources and capital investments that NHTSA can consider,
because they are dollars and not miles per gallon--is greater at the
current time. Given that, NHTSA has accounted for the significant
investments needed by manufacturers to meet EPA's standards, and has
reduced CAFE stringency from the proposal accordingly, as will be
discussed more in Section VI.D below. As the final standards show, it
is possible for NHTSA to account for EPA's program without the agencies
needing to conduct a single joint rulemaking, and without NHTSA being
obliged to prove, as some commenters requested, that exactly the same
technology for every single vehicle for every single manufacturer will
result in compliance with all applicable standards. Manufacturers are
sophisticated enterprises well-accustomed to managing compliance with
multiple regulatory regimes, particularly in this space. The reduced
stringency of the final standards should address their concerns.
With regard to the comments requesting that NHTSA accept compliance
with EPA standards in lieu of compliance with CAFE standards, NHTSA
does not believe that this would be consistent with the intent of ``the
effect of other motor vehicle standards of the Government on fuel
economy'' provision. Congress would not have set that provision as one
factor among four for NHTSA to consider if it intended for it to
control absolutely--instead, NHTSA and courts have long held that all
factors must be considered together. Moreover, Congress delegated to
DOT (and DOT delegated to NHTSA) decision-making authority for the CAFE
standards program. The Supreme Court said in Massachusetts v. EPA that
because ``DOT sets mileage standards in no way licenses EPA to shirk
its environmental responsibilities. EPA has been charged with
protecting the public's `health' and `welfare,' 42 U.S.C. 7521(a)(1), a
statutory obligation wholly independent of DOT's mandate to promote
energy efficiency. See Energy Policy and Conservation Act, Sec. 2(5),
89 Stat. 874, 42 U.S.C. 6201(5). The two obligations may overlap, but
there is no reason to think the two agencies cannot both administer
their obligations and yet avoid inconsistency.'' The converse must
necessarily be true--the fact that EPA sets GHG standards in no way
licenses NHTSA to shirk its energy conservation responsibilities.
Unless and until Congress changes EPCA/EISA, NHTSA is bound to continue
exercising its own independent judgment and setting CAFE standards and
to do so consistent with statutory directives. Part of setting CAFE
standards is considering EPA's GHG standards and other motor vehicle
standards of the Government and how those affect manufacturers' ability
to comply with potential future CAFE standards, but that is only one
inquiry among several in determining what levels of CAFE standards
would be maximum feasible.
Additionally, nothing in EPCA or EISA suggests that compliance with
GHG standards would be an acceptable basis for CAFE compliance. The
calculation provisions in 49 U.S.C. 32904 are explicit. The compliance
provisions in 49 U.S.C. 32912 state that automakers must comply with
applicable fuel economy standards, and failure to do so is a failure to
comply. Emissions standards are not fuel economy standards. NHTSA does
not agree that a ``deemed to comply'' option is consistent with
statute, nor that it is necessary for coordination with and
consideration of those other standards.
With regard to the comments suggesting that NHTSA, EPA, California,
and the rest of the Federal government are somehow colluding to force a
transition from ICE to BEV technology, NHTSA reiterates that 49 U.S.C.
32902(h) bars NHTSA from setting standards that require alternative
fuel vehicle technology.
With regard to state standards, as for the NPRM analysis, NHTSA
considered and accounted for the impacts of anticipated manufacturer
compliance with California's ACC I and ACT programs (and their
adoption, where relevant, by the Section 177 states), incorporating
them into the reference baseline No-Action Alternative as other
regulatory requirements foreseeably applicable to automakers during the
rulemaking time frame. NHTSA continues not to model other state-level
emission standards, as discussed in the 2022 final rule.\1176\
---------------------------------------------------------------------------
\1176\ See 87 FR at 25982 (May 2, 2022).
---------------------------------------------------------------------------
API commented that NHTSA was prohibited from considering the
California ACC and ACT programs in setting standards, because ``The
term `the Government' clearly is a reference to the federal government
and cannot reasonably be construed as including state or local
governments''; because even if it was reasonable to construe the term
as including state and local governments, NHTSA ``is still barred from
considering BEVs,'' because any EPA grant of a CAA waiver does not
federalize those standards, and because those standards are preempted
by EPCA.\1177\ API stated that ``NHTSA's refusal to engage on these
issues here is facially arbitrary and capricious.'' \1178\
---------------------------------------------------------------------------
\1177\ API, Docket No. NHTSA-2023-0022-60234, Attachment 1, at
6-7.
\1178\ Id. at 7.
---------------------------------------------------------------------------
NHTSA continues to disagree that it is necessary for NHTSA to
determine definitively whether these regulatory requirements are or are
not other motor vehicle standards of the Government (in effect, whether
they became ``federalized'' when EPA granted the CAA preemption waiver
for ACC I and ACT), because whether they are or not, it is still
appropriate to include these requirements in the regulatory reference
baseline because the automakers have repeatedly stated their intent to
comply with those requirements during the rulemaking time frame. For
the same reason, NHTSA included additional electric vehicles in the
reference baseline--which would be consistent with ACC II, which has
not been granted a waiver--because the automakers have similarly stated
their intention to deploy electric vehicles at the modeled level
independent of whether ACC II is granted a waiver and independent of
the existence of NHTSA's standards. If manufacturers are operating as
though they plan to comply with ACC I and ACT and deploy additional
electric vehicles beyond that level, then that assumption is therefore
relevant to understanding the state of the world absent any further
regulatory action by NHTSA. With regard to whether the
[[Page 52826]]
California standards are preempted under EPCA, NHTSA is not a court and
thus does not have authority to make such determinations with the force
of law, no matter how much commenters may wish us to do so. Further, as
discussed above and below, NHTSA addressed uncertainty about the level
of penetration of electric vehicles into the reference baseline fleet
by developing an alternative baseline, No ZEV, and assessing the final
standards against that baseline.
Some commenters also argued that NHTSA should consider the CAFE
standards in the context of other Federal rules and programs. Absolute
Energy commented that ``CAFE is not the only tool'' for addressing
``fuel efficiency, energy security, and decarbonization,'' and NHTSA
should consider the role of CAFE given the existence of the Renewable
Fuel Standard (RFS) and various tax credits and grant programs that
encourage renewable fuels production.\1179\ West Virginia Attorney
General's office stated that by ``considering EVs as the chief
compliance option'' for CAFE standards, ``NHTSA's analysis is at odds
with promoting renewable fuels,'' and suggested that this created a
conflict of laws.\1180\ POET offered similar comments and added that
``NHTSA should expand incentives for biofuels under the CAFE program to
further promote energy security.'' \1181\
---------------------------------------------------------------------------
\1179\ Absolute Energy, Docket No. NHTSA-2023-0022-50902, at 2.
CAE offered similar comments, Docket No. NHTSA-2023-0022-61599, at
3.
\1180\ West Virginia Attorney General's Office, Docket No.
NHTSA-2023-0022-63056, at 5-6.
\1181\ POET, Docket No. NHTSA-2023-0022-61651, at 9.
---------------------------------------------------------------------------
In response, NHTSA agrees that CAFE is not the only tool for
addressing fuel efficiency, energy security, and decarbonization.
However, since CAFE compliance is measured on EPA's test cycle with a
defined test fuel, and since NHTSA does not have authority to require
in-use compliance, programs like the RFS and other programs that
encourage biofuels production cannot factor into NHTSA's consideration.
The test cycle (and the off-cycle program, which does not include
alternative fuels) is NHTSA's entire world for purposes of the CAFE
program. To the extent that some commenters believe there is a conflict
between the RFS and the CAFE program, it has existed for decades and
Congress has had multiple opportunities to address it, but has not done
so. This may be evidence that the programs do not conflict but instead
aim to solve similar problems with different approaches.
(4) The Need of the U.S. To Conserve Energy
NHTSA has consistently interpreted ``the need of the United States
to conserve energy'' to mean ``the consumer cost, national balance of
payments, environmental, and foreign policy implications of our need
for large quantities of petroleum, especially imported petroleum.''
\1182\ The following sections discuss each of these elements, relevant
comments, and NHTSA's responses, in more detail.
---------------------------------------------------------------------------
\1182\ See, e.g., 42 FR 63184, 63188 (Dec. 15, 1977); 77 FR
62624, 62669 (Oct. 15, 2012).
---------------------------------------------------------------------------
(a) Consumer Costs and Fuel Prices
Fuel for vehicles costs money for vehicle owners and operators, so
all else equal, consumers benefit from vehicles that need less fuel to
perform the same amount of work. Future fuel prices are a critical
input into the economic analysis of potential CAFE standards because
they determine the value of fuel savings both to new vehicle buyers and
to society; the amount of fuel economy that the new vehicle market is
likely to demand in the absence of regulatory action; and they inform
NHTSA about the ``consumer cost . . . of our need for large quantities
of petroleum.'' For this final rule, NHTSA relied on fuel price
projections from the EIA AEO for 2023, updating them from the AEO 2022
version used for the proposal. Federal Government agencies generally
use EIA's price projections in their assessment of future energy-
related policies.
Raising fuel economy standards can reduce consumer costs on fuel--
this has long been a major focus of the CAFE program and was one of the
driving considerations for Congress in establishing the CAFE program
originally. Over time, as average VMT has increased and more and more
Americans have come to live farther and farther from their workplaces
and activities, fuel costs have become even more important. Even when
gasoline prices, for example, are relatively low, they can still add up
quickly for consumers whose daily commute measures in hours, like many
Americans in economically disadvantaged and historically underserved
communities. When vehicles can go farther on a gallon of gasoline,
consumers save money, and for lower-income consumers the savings may
represent a larger percentage of their income and overall expenditures
than for more-advantaged consumers. Of course, when fuel prices spike,
lower-income consumers suffer disproportionately. Thus, clearly, the
need of the United States to conserve energy is well-served by helping
consumers save money at the gas pump.
NHTSA and the DOT are committed to improving equity in
transportation. Helping economically disadvantaged and historically
underserved Americans save money on fuel and get where they need to go
is an important piece of this puzzle, and it also improves energy
conservation, thus implementing Congress' intent in EPCA. All of the
action alternatives considered in this final rule improve fuel economy
over time as compared to the reference baseline standards, with the
most stringent alternatives saving consumers the most on fuel costs.
The States and Cities agreed that increasing fuel economy will save
consumers money and also further EPCA's energy conservation
goals.\1183\ NESCAUM agreed that consumers would save more money under
the strictest alternatives, stating that saving money on fuel was
particularly important for consumers with long commutes, such as those
in rural areas and economically disadvantaged and historically
underserved communities.\1184\ NESCAUM emphasized that lower income
consumers benefit most from reductions in fuel costs and are most
vulnerable to fuel cost price spikes.\1185\ IPL and Chispa LCV offered
similar comments.\1186\ NHTSA appreciates these comments.
---------------------------------------------------------------------------
\1183\ States and Cities, Docket No. NHTSA-2022-0075-0033-0035,
at 25-26.
\1184\ NESCAUM, Docket No. NHTSA-2023-0022-57714, at 3.
\1185\ Id.
\1186\ IPL, Docket No. NHTSA-2023-0022-49058, at 1-2; Chispa
LCV, Docket No. NHTSA-2023-0022-28014, at 1.
---------------------------------------------------------------------------
NHTSA also notes that, in many previous CAFE rulemakings,
discussions of fuel prices have always been intended to reflect the
price of motor gasoline. However, a growing set of vehicle offerings
that rely in part, or entirely, on electricity suggests that gasoline
prices are no longer the only fuel prices relevant to evaluations of
the effects of different possible CAFE standards. In the analysis
supporting this final rule, NHTSA considers the energy consumption from
the entire on-road fleet, which already contains a number of plug-in
hybrid and fully electric vehicles that are part of the fleet
independent of CAFE standards.\1187\
[[Page 52827]]
While the current and projected national average electricity price is
and is expected to remain significantly higher than that of gasoline,
on an energy equivalent basis ($/MMBtu),\1188\ electric motors convert
energy into propulsion much more efficiently than ICEs. This means
that, even though the energy-equivalent prices of electricity are
higher, electric vehicles still produce fuel savings for their owners.
As the reliance on electricity grows in the LD fleet, NHTSA will
continue to monitor the trends in electricity prices and their
implications, if any, for CAFE standards.
---------------------------------------------------------------------------
\1187\ Higher CAFE standards encourage manufacturers to improve
fuel economy; at the same time, manufacturers will foreseeably seek
to continue to maximize profit, and to the extent that plug-in
hybrids and fully-electric vehicles are cost-effective to build and
desired by the market, manufacturers may well build more of these
vehicles, even though NHTSA does not expressly consider them as a
compliance option when we are determining maximum feasible CAFE
stringency. Due to forces other than CAFE standards, however, we do
expect continued growth in electrification technologies (and we
reflect those forces in the analytical baseline).
\1188\ See AEO. 2023. Table 3: Energy Prices by Sector and
Source. Available at: https://www.eia.gov/outlooks/aeo/data/browser/#/?id=3-AEO2023&cases=ref2023&sourcekey=0. (Accessed: Mar. 22,
2024).
---------------------------------------------------------------------------
(b) National Balance of Payments
NHTSA has consistently included consideration of the ``national
balance of payments'' as part of the need of the U.S. to conserve
energy because of concerns that importing large amounts of oil created
a significant wealth transfer to oil-exporting countries and left the
U.S. economically vulnerable.\1189\ According to EIA, the net U.S.
petroleum trade value deficit peaked in 2008, but it has fallen over
the past decade as volumes of U.S. petroleum exports increased to
record-high levels and imports decreased.\1190\ The 2020 net U.S.
petroleum trade value deficit was $3 billion, the smallest on record,
partially because of less consumption amid COVID mitigation
efforts.\1191\ In 2020 and 2021, annual total petroleum net imports
were actually negative, the first years since at least 1949. For
petroleum that was imported in 2023, 52 percent came from Canada, 11
percent came from Mexico, 5 percent came from Saudi Arabia, 4 percent
came from Iraq and 3 percent came from Brazil.\1192\ The States and
Cities agreed that finalizing the proposal would improve the U.S.
balance of payments and protect consumers from global price shocks, and
added that ``NHTSA could strengthen its analysis by acknowledging that
the U.S. consumed more petroleum than it produced in 2022, and that the
U.S. remained a net crude oil importer in 2022, importing about 6.28
million barrels per day of crude oil and exporting about 3.58 million
barrels per day.'' \1193\ NHTSA appreciates the comment.
---------------------------------------------------------------------------
\1189\ For the earliest discussion of this topic, see 42 FR
63184, 63192 (Dec. 15, 1977).
\1190\ EIA. 2021. Today in Energy: U.S. Energy Trade Lowers the
Overall 2020 U.S. Trade Deficit for the First Time on Record. Last
revised: Sept. 22, 2021. Available at https://www.eia.gov/todayinenergy/detail.php?id=49656#. (Accessed: Feb. 27, 2024).
\1191\ EIA. 2022. Oil and Petroleum Products Explained, Oil
Imports and Exports. Last revised: Nov. 2, 2022. Available at:
https://www.eia.gov/energyexplained/oil-and-petroleum-products/imports-and-exports.php. (Accessed Feb. 27, 2024).
\1192\ EIA. Frequently Asked Questions (FAQs): How much
petroleum does the United States import and export? Last revised:
March 29, 2024. Available at: https://www.eia.gov/tools/faqs/faq.php?id=727&t=6. (Accessed April 16, 2024).
\1193\ States and Cities, Docket No. NHTSA-2022-0075-0033-0011,
at 26.
---------------------------------------------------------------------------
While transportation demand is expected to continue to increase as
the economy recovers from the pandemic, it is foreseeable that the
trend of trade in consumer goods and services continuing to dominate
the national balance of payments, as compared to petroleum, will
continue during the rulemaking time frame.\1194\ Regardless, the U.S.
does continue to rely on oil imports. Moreover, because the oil market
is global in nature, the U.S. is still subject to price volatility, as
recent global events have demonstrated.\1195\ NHTSA recognizes that
reducing the vulnerability of the U.S. to possible oil price shocks
remains important. This final rule aims to improve fleet-wide fuel
efficiency and to help reduce the amount of petroleum consumed in the
U.S., and therefore aims to improve this part of the U.S. balance of
payments as well as to protect consumers from global price shocks.
---------------------------------------------------------------------------
\1194\ EIA, Oil and Petroleum Products Explained, Oil Imports
and Exports.
\1195\ See, e.g., FRED (St. Louis Federal Reserve) Blog, ``The
Ukraine War's effects on US commodity prices,'' Oct. 26, 2023,
available at https://fredblog.stlouisfed.org/2023/10/the-ukraine-wars-effects-on-us-commodity-prices/ (last accessed May 23. 2024).
---------------------------------------------------------------------------
(c) Environmental Implications
Higher fleet fuel economy reduces U.S. emissions of CO2
as well as various other pollutants by reducing the amount of oil that
is produced and refined for the U.S. vehicle fleet but can also
potentially increase emissions by reducing the cost of driving, which
can result in increased vehicle miles traveled (i.e., the rebound
effect). Thus, the net effect of more stringent CAFE standards on
emissions of each pollutant depends on the relative magnitudes of its
reduced emissions in fuel refining and distribution and any increases
in emissions from increased vehicle use. Fuel savings from CAFE
standards also result in lower emissions of CO2, the main
GHG emitted as a result of refining, distribution, and use of
transportation fuels.
NHTSA has considered environmental issues, both within the context
of EPCA and the context of NEPA, in making decisions about the setting
of standards since the earliest days of the CAFE program. As courts of
appeal have noted in three decisions stretching over the last 20
years,\1196\ NHTSA defined ``the need of the United States to conserve
energy'' in the late 1970s as including, among other things,
environmental implications. In 1988, NHTSA included climate change
considerations in its CAFE notices and prepared its first environmental
assessment addressing that subject.\1197\ It cited concerns about
climate change as one of the reasons for limiting the extent of its
reduction of the CAFE standard for model year 1989 passenger
cars.\1198\
---------------------------------------------------------------------------
\1196\ CAS, 793 F.2d 1322, 1325 n. 12 (D.C. Cir. 1986); Public
Citizen, 848 F. 2d 256, 262-63 n. 27 (D.C. Cir. 1988) (noting that
``NHTSA itself has interpreted the factors it must consider in
setting CAFE standards as including environmental effects''); CBD,
538 F.3d 1172 (9th Cir. 2007).
\1197\ 53 FR 33080, 33096 (Aug. 29, 1988).
\1198\ 63 FR 39275, 39302 (Oct. 6, 1988).
---------------------------------------------------------------------------
NHTSA also considers EJ issues as part of the environmental
considerations under the need of the United States to conserve energy,
as described in the Final Environmental Impact Statement for this
rulemaking.'' \1199\ The affected environment for EJ is nationwide,
with a focus on areas that could contain communities with EJ concerns
who are most exposed to the environmental and health effects of oil
production, distribution, and consumption, or the impacts of climate
change. This includes areas where oil production and refining occur,
areas near roadways, coastal flood-prone areas, and urban areas that
are subject to the heat island effect.
---------------------------------------------------------------------------
\1199\ DOT. 2021. Actions to Address Environmental Justice in
Minority Populations and Low-Income Populations. Order 5610.2(c).
---------------------------------------------------------------------------
Numerous studies have found that some environmental hazards are
more prevalent in areas where minority and low-income populations
represent a higher proportion of the population compared with the
general population. In terms of effects due to criteria pollutants and
air toxics emissions, the body of scientific literature points to
disproportionate representation of minority and low-income populations
in proximity to a range of industrial, manufacturing, and hazardous
waste facilities that are stationary sources of air pollution, although
results of individual studies may vary. While the
[[Page 52828]]
scientific literature specific to oil refineries is limited,
disproportionate exposure of minority and low-income populations to air
pollution from oil refineries is suggested by other broader studies of
racial and socioeconomic disparities in proximity to industrial
facilities generally. Studies have also consistently demonstrated a
disproportionate prevalence of minority and low-income populations
living near mobile sources of pollutants (such as roadways) and
therefore are exposed to higher concentrations of criteria air
pollutants in multiple locations across the United States. Lower-
positioned socioeconomic groups are also generally more exposed to air
pollution, and thus generally more vulnerable to effects of exposure.
In terms of exposure to climate change risks, the literature
suggests that across all climate risks, low-income communities, some
communities of color, and those facing discrimination are
disproportionately affected by climate events. Communities overburdened
by poor environmental quality experience increased climate risk due to
a combination of sensitivity and exposure. Urban populations
experiencing inequities and health issues have greater susceptibility
to climate change, including substantial temperature increases. Some
communities of color facing cumulative exposure to multiple pollutants
also live in areas prone to climate risk. Indigenous peoples in the
United States face increased health disparities that cause increased
sensitivity to extreme heat and air pollution.
Available information indicates that climate impacts
disproportionately affect communities with environmental justice
concerns in part because of socioeconomic circumstances, including
location of lower-income housing, histories of discrimination, and
inequity can be contributing factors. Furthermore, high temperatures
can exacerbate poor air quality, further compounding the risk to
overburdened communities. Finally, health-related sensitivities in low-
income and minority populations increase risk of damaging impacts from
poor air quality under climate change, underscoring the potential
benefits of improving air quality to communities overburdened by poor
environmental quality. Chapter 7 of the EIS discusses EJ issues in more
detail.
In the EIS, Chapters 3 through 5 discuss the connections between
oil production, distribution, and consumption, and their health and
environmental impacts. Electricity production and distribution also
have health and environmental impacts, discussed in those chapters as
well.
All of the action alternatives in this final rule reduce carbon
dioxide emissions and, thus, the effects of climate change, over time
as compared to the reference baseline. Under the No ZEV alternative
baseline analysis as compared to the reference baseline analysis,
CO2 emissions (and thus climate change effects) are reduced
by similar magnitudes under the different action alternatives, because
while the No ZEV alternative baseline starts at a higher CO2
level than the reference baseline, the action alternatives under the No
ZEV alternative baseline analysis reduce CO2 by more than
the action alternatives under the reference baseline analysis. Criteria
pollutant and air toxic emissions are also all reduced over time
compared to both the reference baseline analysis and the No ZEV
alternative baseline analysis, with marginal changes occurring in early
years and becoming more pronounced in later years as more new vehicles
subject to the standards enter the fleet and the electricity grid
shifts fuel sources. FRIA Chapter 8 discusses modeled standard-setting
air quality and climate effects in more detail, while Chapters 4 and 5
of the EIS discuss the unrestricted modeling results in more detail.
As discussed above, while our analysis suggests that the majority
of LDVs will continue to be powered by ICEs in the near- to mid-term
under all regulatory alternatives, greater electrification in the mid-
to longer-term is foreseeable. While NHTSA is prohibited from
considering the fuel economy of EVs in determining maximum feasible
CAFE standards, EVs (which appear both in NHTSA's reference baseline
and which may be produced in model years following the period of
regulation as an indirect effect of more stringent standards, or in
response to other non-NHTSA standards, or in response to tax incentives
and other government incentives, or in response to market demand)
produce few to zero combustion-based emissions. As a result,
electrification contributes meaningfully to the decarbonization of the
transportation sector, in addition to having additional environmental,
health, and economic development benefits, although these benefits may
not yet be equally distributed across society. They also present new
environmental (and social) questions, like the consequences of upstream
electricity production, minerals extraction for battery components, and
ability to charge an EV. The upstream environmental effects of
extraction and refining for petroleum are well-recognized; minerals
extraction and refining can also have significant environmental
impacts. NHTSA's EIS discusses these and other effects (such as
production and end-of-life issues) in more detail in Chapters 3 and 6,
and NHTSA will continue to monitor these issues going forward insofar
as CAFE standards may end up causing increased electrification levels
even if NHTSA does not consider electrification in setting those
standards, because NHTSA does not control what technologies
manufacturers use to meet those standards, and because NHTSA is
required to consider the environmental effects of its standards under
NEPA.
NHTSA carefully considered the environmental effects of this
rulemaking, both quantitative and qualitative, as discussed in the EIS
and in Sections VI.C and VI.D of this preamble.
Comments on climate effects associated with the proposal varied.
The States and Cities commented that consideration of the environmental
effects of the regulatory alternatives as set forth in the Draft EIS
supported more stringent standards, because reducing GHG emissions is
necessary to stave off the worst effects of climate change, and because
more stringent standards will also help to reduce criteria pollutant
emissions.\1200\ That commenter also argued that NHTSA had likely
understated the climate benefits of stricter standards by using a SC-
GHG value that ``does not fully capture the harms from climate change .
. . particularly in terms of unquantified climate damages (such as
damages caused by more frequent and intense wildfires and loss of
cultural and historical resources, neither of which are accounted for
in the SC-GHG) and its utilization of overly high discount rates.''
\1201\ An individual citizen commented that NHTSA should finalize the
strictest possible standards even though they do not contribute greatly
to overall emissions because ``all emissions count.'' \1202\
---------------------------------------------------------------------------
\1200\ States and Cities, Docket No. NHTSA-2022-0075-0033-0012,
at 8, 26-28.
\1201\ Id. at 33.
\1202\ Roselie Bright, Docket No. NHTSA-2022-0075-0030-0007, at
1.
---------------------------------------------------------------------------
In contrast, CEI commented that ``climate change is not a crisis,
and the global warming mitigation achieved by the proposed CAFE
standards would be orders of magnitude smaller than scientists can
detect or identify.'' \1203\ CEA argued that NHTSA should not be
considering climate effects in
[[Page 52829]]
determining maximum feasible standards, because to do so contradicted
Massachusetts v. EPA, which states that EPA's and NHTSA's obligations
are ``wholly independent'' from one another.\1204\ The commenter
further argued that ``Case law holding NHTSA may consider climate
change is therefore in serious conflict with Supreme Court precedent.''
\1205\
---------------------------------------------------------------------------
\1203\ CEI, Docket No. NHTSA-2023-0022-61121, at 2, 10.
\1204\ CEA, Docket No. NHTSA-2023-0022-61918, at 28.
\1205\ Id.
---------------------------------------------------------------------------
NHTSA agrees that stricter standards should, in theory, reduce
emissions further, although NHTSA recognizes the possibility of
situations under which intended emission reductions might not be fully
achieved. For example, on the supply side of the market, if standards
were too strict, companies might choose to pay civil penalties instead
of complying with the standards. On the demand side of the market,
vehicle prices associated with standards that are too strict could
potentially lead some consumers to forego new vehicle purchases,
perhaps choosing less fuel efficient alternatives and thus dampening
the intended emissions reductions. Climate effects of potential new
CAFE standards may appear small in absolute terms, as suggested by CEI,
but they are quantifiable, as shown in the FRIA, and they do contribute
meaningfully to mitigating the worst effects of climate change, as part
of a suite of actions taken by the U.S. and the international
community. With regard to the comments from CEA, NHTSA reiterates that
the overarching purpose of the CAFE standards is energy conservation.
Improving fuel economy generally reduces carbon dioxide emissions,
because basic principles of chemistry explain that consuming less
carbon-based fuel to do the same amount of work results in less carbon
dioxide being released per amount of work (in this case, a vehicle
traveling a mile). Thus, reducing climate-related emissions is an
effect of improving fuel economy, even if it is not the overarching
purpose of improving fuel economy. Another effect of improving fuel
economy is that consumers can travel the same distance for less money
spent on fuel. If NHTSA took the comment literally, NHTSA would be
compelled to consider only gallons of fuel use avoided, rather than the
dollars that would otherwise be spent on those gallons. NHTSA disagrees
that it would be appropriate to circumscribe its effects analysis to
such a degree. It should also be clear at this point that EPA and NHTSA
are each capable of executing their statutory obligations
independently.
On environmental justice, SELC and NESCAUM commented that exposure
to smog disproportionately affects communities with environmental
justice concerns, and that stricter CAFE standards would reduce these
effects.\1206\ Lucid commented that finalizing PC6LT8 would not only
reduce on-road emissions but also significantly reduce emissions
associated with petroleum extraction and distribution.\1207\ Climate
Hawks commented that all vehicles should have exhaust pipes on the left
side, so that pedestrians on sidewalks did not have to breathe in
emissions.\1208\
---------------------------------------------------------------------------
\1206\ SELC, Docket No. NHTSA-2023-0022-60224, at 5, 6; NESCAUM,
Docket No. NHTSA-2023-0022-57714, at 3. MPCA agency offered similar
comments, Docket No. NHTSA-2023-0022-60666, at 2; IPL offered
similar comments, Docket No. NHTSA-2023-0022-49058, at 2.
\1207\ Lucid, Docket No. -2023-0022-50594, at 6.
\1208\ Climate Hawks, Docket No. NHTSA-2023-0022-61094, at 854.
---------------------------------------------------------------------------
NHTSA agrees that environmental justice concerns are significant
and that stricter CAFE standards reduce effects on communities with
environmental justice concerns in many ways. NHTSA does not have
authority to regulate the location of exhaust pipes on a vehicle, and
so is unable to respond further to Climate Hawks on the point raised in
the comment.
(d) Foreign Policy Implications
U.S. consumption and imports of petroleum products impose costs on
the domestic economy that are not reflected in the market price for
crude petroleum or in the prices paid by consumers for petroleum
products such as gasoline. These costs include (1) higher prices for
petroleum products resulting from the effect of U.S. oil demand on
world oil prices; (2) the risk of disruptions to the U.S. economy, and
the effects of those disruptions on consumers, caused by sudden
increases in the global price of oil and its resulting impact of fuel
prices faced by U.S. consumers; (3) expenses for maintaining the
Strategic Petroleum Reserve (SPR) to provide a response option should a
disruption in commercial oil supplies threaten the U.S. economy, to
allow the U.S. to meet part of its International Energy Agency
obligation to maintain emergency oil stocks, and to provide a national
defense fuel reserve; and (4) the threat of significant economic
disruption, and the underlying effect on U.S. foreign policy, if an
oil-exporting country threatens the United States and uses, as part of
its threat, its power to upend the U.S. economy. Reducing U.S.
consumption of crude oil or refined petroleum products (by reducing
motor fuel use) can reduce these external costs.
In addition, a 2006 report by the Council on Foreign Relations
identified six foreign policy costs that it said arose from U.S.
consumption of imported oil: (1) The adverse effect that significant
disruptions in oil supply will have for political and economic
conditions in the U.S. and other importing countries; (2) the fears
that the current international system is unable to secure oil supplies
when oil is seemingly scarce and oil prices are high; (3) political
realignment from dependence on imported oil that limits U.S. alliances
and partnerships; (4) the flexibility that oil revenues give oil-
exporting countries to adopt policies that are contrary to U.S.
interests and values; (5) an undermining of sound governance by the
revenues from oil and gas exports in oil-exporting countries; and (6)
an increased U.S. military presence in the Middle East that results
from the strategic interest associated with oil consumption.
CAFE standards over the last few decades have conserved significant
quantities of oil, and the petroleum intensity of the U.S. fleet has
decreased significantly. Continuing to improve energy conservation and
reduce U.S. oil consumption by raising CAFE standards further has the
potential to continue to help with all of these considerations. Even if
the energy security picture has changed since the 1970s, due in no
small part to the achievements of the CAFE program itself in increasing
fleetwide fuel economy, energy security in the petroleum consumption
context remains extremely important. Congress' original concern with
energy security was the impact of supply shocks on American consumers
in the event that the U.S.'s foreign policy objectives lead to
conflicts with oil-producing nations or that global events more
generally lead to fuel disruptions. Moreover, oil is produced, refined,
and sold in a global marketplace, so events that impact it anywhere,
impact it everywhere. The world is dealing with these effects
currently. Oil prices have fluctuated dramatically in recent years and
reached over $100/barrel in 2022. A motor vehicle fleet with greater
fuel economy is better able to absorb increased fuel costs,
particularly in the short-term, without those costs leading to a
broader economic crisis, as had occurred in the 1973 and 1979 oil
crises. Ensuring that the U.S. fleet is positioned to take advantage of
cost-effective technology innovations will allow the U.S. to continue
to base its international activities on foreign policy objectives
[[Page 52830]]
that are not limited, at least not completely, by petroleum issues.
Further, when U.S. oil consumption is linked to the globalized and
tightly interconnected oil market, as it is now, the only means of
reducing the exposure of U.S. consumers to global oil shocks is to
reduce their oil consumption and the overall oil intensity of the U.S.
economy. Thus, the reduction in oil consumption driven by fuel economy
standards creates an energy security benefit.
This benefit is the original purpose behind the CAFE standards. Oil
prices are inherently volatile, in part because geopolitical risk
affects prices. International conflicts, sanctions, civil conflicts
targeting oil production infrastructure, pandemic-related economic
upheaval, cartels, all of these have had dramatic and sudden effects on
oil prices in recent years. For all of these reasons, energy security
remains quite relevant for NHTSA in determining maximum feasible CAFE
standards.\1209\ There are extremely important energy security benefits
associated with raising CAFE stringency that are not discussed in the
TSD Chapter 6.2.4, and which are difficult to quantify, but have
weighed importantly for NHTSA in developing the standards in this final
rule.
---------------------------------------------------------------------------
\1209\ TSD Chapter 6.2.4 also discusses emerging energy security
considerations associated with vehicle electrification, but NHTSA
only considers these effects for decision-making purposes within the
framework of the statutory restrictions applicable to NHTSA's
determination of maximum feasible CAFE standards.
---------------------------------------------------------------------------
The States and Cities agreed with NHTSA that energy security in the
petroleum consumption context remains extremely important, and
encouraged NHTSA to choose a more stringent alternative than the
proposed standards, citing potential benefits in terms of reducing
military spending and reducing revenue to regimes potentially hostile
to U.S. interests.\1210\ In contrast, America First Policy Institute
commented that improving energy security and reducing costs for
consumers can be more expeditiously done using other policies.\1211\
While NHTSA agrees that more stringent standards must directionally
improve foreign policy benefits, it has long been difficult to quantify
these effects precisely due to numerous confounding factors. NHTSA thus
considers these effects from a mostly qualitative perspective. In
response to whether other policies might more ``expeditiously'' improve
energy security and reduce consumer costs, even if that were true,
Congress requires NHTSA to continue setting standards, and when setting
standards, to set maximum feasible standards.\1212\
---------------------------------------------------------------------------
\1210\ States and Cities, Docket No. NHTSA-2022-0075-0033-0012,
at 27.
\1211\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 7.
\1212\ 49 U.S.C. 32902.
---------------------------------------------------------------------------
Heritage Foundation stated that U.S. oil and gas reserves are
plentiful and that a ``proper consideration of the `need of the U.S. to
conserve energy' should result in standards becoming less stringent.''
\1213\ This could be true if oil were not a global commodity. Oil
produced in the U.S. is not necessarily consumed in the U.S., and its
price is tied to global oil prices (and their fluctuations due to world
events). CAFE standards are intended to insulate against external risks
given the U.S. participation in global markets, and thus, strong CAFE
standards continue to be helpful in this regard.
---------------------------------------------------------------------------
\1213\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
10.
---------------------------------------------------------------------------
A number of commenters expressed concern that ``essentially
mandating electric vehicles'' would create non-petroleum-related energy
security issues, associated with production of critical minerals for
BEVs in parts of the world that are neither consistently reliable nor
friendly to U.S. interests.\1214\ Related comments argued that the U.S.
could not itself produce sufficient critical minerals to supply the
volumes of BEVs that would be needed to meet the standards.\1215\ Other
related comments argued that the U.S. could produce sufficient
petroleum, but could not produce sufficient critical minerals, and that
requiring vehicles to be BEVs amounted to creating an energy security
issue where there would otherwise be none.\1216\ Various commenters
said that NHTSA's commitment to ``monitoring'' these issues was
insufficient, and that NHTSA was required to analyze these energy
security risks from electrification (including, among other things,
critical minerals and electric grid capacity and cybersecurity)
expressly.\1217\
---------------------------------------------------------------------------
\1214\ Valero, Docket No. NHTSA-2023-0022-58547, Appendix A, at
7; Absolute Energy, Docket No. NHTSA-2023-0022-50902, at 2; Heritage
Foundation, Docket No. NHTSA-2023-0022-61952, at 9; NATSO et al.,
Docket No. NHTSA-2023-0022-61070, at 12; West Virginia Attorney
General's Office, Docket No. NHTSA-2023-0022-63056, at 12-15; ACE,
Docket No. NHTSA-2023-0022-60683, at 2-3; American Consumer
Institute, Docket No. NHTSA-2023-0022-50765, at 6, 7.
\1215\ KCGA, Docket No. NHTSA-2023-0022-59007, at 3.
\1216\ Institute for Energy Research, Docket No. NHTSA-2023-
0022-63063, at 3, 4.
\1217\ MME, Docket No. NHTSA-2023-0022-50861, at 2; WPE, Docket
No. NHTSA-2023-0022-52616, at 2; MCGA, Docket No. NHTSA-2023-0022-
60208, at 3-10; RFA et al. 2, Docket No. NHTSA-2023-0022-41652, at
3-10 (arguing that it would be arbitrary and capricious for NHTSA
not to issue a supplemental NPRM expressly analyzing and accounting
for energy security risks associated with critical minerals); HCP,
Docket No. NHTSA-2023-0022-59280, at 2; SIRE, Docket No. NHTSA-2023-
0022-57940, at 2; Missouri Corn Growers Association, Docket No.
NHTSA-2023-0022-58413, at 2; CAE, Docket No. NHTSA-2023-0022-61599,
at 2; AFPM, Docket No. NHTSA-2023-0022-61911, Attachment 2, at 21;
Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 10.
---------------------------------------------------------------------------
In the model years 2024-2026 final rule, NHTSA responded to similar
comments by explaining that NHTSA is prohibited from considering the
fuel economy of electric vehicles in determining maximum feasible
standards, and that the agency did not believe that the question was
truly ripe, given expected concentrations of electrified vehicles in
the-then rulemaking time frame. For the current rulemaking, due to the
proliferation of electrified vehicles in the reference baseline, it is
harder to say that the question is not ripe, and if NHTSA considers the
resources necessary for the technological transition (without
considering the fuel economy of BEVs or the full fuel economy of PHEVs)
in evaluating economic practicability, then it is logical also to be
informed about energy security effects of these vehicles (without
considering their fuel economy) in evaluating the need of the U.S. to
conserve energy. That said, there is a difference between being
informed about something, and taking responsibility for it. As long as
NHTSA is statutorily prohibited from considering the fuel economy of
BEVs and the full fuel economy of PHEVs, NHTSA continues to disagree
that it is required to account in its determination for energy security
effects that CAFE regulations are prohibited from causing. This
discussion is part of NHTSA's ongoing commitment to monitoring these
issues. Commenters may wish for NHTSA to take responsibility for which
the agency does not have authority, but NHTSA continues to believe that
remaining informed is the best and most reasonable course of action in
this area.
As discussed in Chapter 6.2.4 of the TSD, as the number of electric
vehicles on the road continues to increase, NHTSA agrees that the issue
of energy security is likely to expand to encompass the United States'
ability to supply the material necessary to build these vehicles and
the additional electricity necessary to power their use. Nearly all
electricity in the United States is generated through the conversion of
domestic energy sources and thus its supply does not raise security
concerns, although commenters did express some concern with grid
resilience and cybersecurity. NHTSA is
[[Page 52831]]
aware that under the Bipartisan Infrastructure Law, DOE will administer
more than $62 billion for investments in energy infrastructure,
including $14 billion in financial assistance to States, Tribes,
utilities, and other entities who provide products and services for
enhancing the reliability, resilience, and energy efficiency of the
electric grid.\1218\ Dozens of projects are already underway across the
country.\1219\ This work is ongoing and NHTSA has no reason at present
to conclude that it is not being addressed, as commenters suggest. With
regard to cybersecurity, if commenters mean to suggest that BEVs are at
greater risk of hacking than ICEVs, NHTSA disagrees that this is the
case. NHTSA's efforts on cybersecurity cover all light vehicles, as all
new light vehicles are increasingly computerized.\1220\ Additionally,
the Joint Office of Energy and Transportation published cybersecurity
procurement language to address risks when building out charging
infrastructure.\1221\ If commenters mean to suggest that there are
cybersecurity risks associated with electric grid attacks, those would
exist no matter how many BEVs or other electrified vehicles there were.
DOE is also actively involved in this issue,\1222\ and as before, NHTSA
has no reason to think either that this is not being addressed, as
commenters suggest, or that because work is ongoing, it is an inherent
barrier to NHTSA's assumptions.
---------------------------------------------------------------------------
\1218\ https://netl.doe.gov/bilhub/grid-resilience (last
accessed Mar. 28, 2024).
\1219\ https://www.energy.gov/gdo/grid-resilience-and-innovation-partnerships-grip-program-projects (last accessed Mar.
28, 2024).
\1220\ https://www.nhtsa.gov/research/vehicle-cybersecurity
(last accessed Mar. 28, 2024).
\1221\ See https://driveelectric.gov/news/joint-office-offers-new-cybersecurity-resource (last accessed May 23, 2024).
\1222\ https://www.energy.gov/sites/default/files/2021/01/f82/OTT-Spotlight-on-Cybersecurity-final-01-21.pdf (last accessed Mar.
28, 2024).
---------------------------------------------------------------------------
Besides requiring electricity generation and distribution, electric
vehicles also require batteries to store and deliver that electricity.
Currently, the most commonly used vehicle battery chemistries include
materials that are relatively scarce or expensive, and are sourced
largely from overseas sites, and/or (like any mined minerals) can pose
environmental challenges during extraction and conversion to usable
material, which can create security issues if environmental challenges
result in political destabilization. NHTSA does not include costs or
benefits related to securing sourcing of battery materials in its
analysis for this final rule, just as NHTSA has not previously or here
included costs or benefits associated with the energy security
considerations associated with internal combustion vehicle supply
chains. However, we are aware that uncertainties exist. Although robust
efforts are already underway to build a secure supply chain for
critical minerals that includes domestic sources as well as friendly
countries, the U.S. is currently at a disadvantage with respect to
domestic sources of materials (raw and processed). To combat these
challenges, President Biden issued an E.O. on ``America's Supply
Chains,'' aiming to strengthen the resilience of America's supply
chains, including those for automotive batteries.\1223\ Reports
covering six sectors were developed by seven agencies within one year
of issuance of the E.O. and outlined specific actions for the Federal
government and Congress to take.\1224\ The Biden-Harris administration
also awarded $2.8 billion from the Bipartisan Infrastructure Law to
support projects that develop supplies of battery-grade lithium,
graphite, and nickel and invest in other battery related mineral
production.\1225\ Overall, the BIL appropriates $7.9 billion for the
purpose of battery manufacturing, recycling, and critical
minerals.\1226\
---------------------------------------------------------------------------
\1223\ White House. 2021. Executive Order on America's Supply
Chains. Available at: https://www.whitehouse.gov/briefing-room/presidential-actions/2021/02/24/executive-order-on-americas-supply-chains/ (last accessed May 31, 2024).
\1224\ White House. 2022. Executive Order on America's Supply
Chains: A Year of Actions and Progress. National Security Affairs.
Washington, DC. Available at: https://www.whitehouse.gov/wp-content/uploads/2022/02/Capstone-Report-Biden.pdf (last accessed Mar. 28,
2024).
\1225\ See https://netl.doe.gov/node/12160 (last accessed Mar.
28, 2024).
\1226\ Congressional Research Service. Energy and Minerals
Provisions in the Infrastructure Investment and Jobs Act (Pub. L.
117-58). CRS Report R47034. Congressional Research Service.
Available at https://crsreports.conress.gov/product/pdf/R/R47034.
(last accessed Feb. 14, 2024).
---------------------------------------------------------------------------
The Inflation Reduction Act calls for half of the Clean Vehicle
Credit to be contingent on at least 40 percent of the value of the
critical minerals in the battery having been extracted or processed in
the United States or a country with a U.S. free-trade agreement, or
recycled in North America. Starting in 2025, an EV cannot qualify for
the clean vehicle credit if the vehicle's battery contains critical
minerals that were extracted, processed, or recycled by a ``foreign
entity of concern.''\1227\ The Inflation Reduction Act also included an
Advanced Manufacturing Production tax credit that provides taxpayers
who produce certain eligible components, such as electrodes and battery
arrays for BEVs, and critical minerals tax credits on a per-unit
basis.\1228\ These measures are intended to spur the development of
more secure supply chains for critical minerals used in battery
production. Additionally, since 2021, over $100 billion of investments
have been announced for new or expanded U.S. facilities for recycling
and upcycling, materials separation and processing, and battery
component manufacturing.\1229\
---------------------------------------------------------------------------
\1227\ Public Law 117-169, Section 13401.
\1228\ Id., Section 13502.
\1229\ See U.S. Department of Energy, 2023. Battery Supply Chain
Investments. Available at https://www.energy.gov/investments-american-made-energy (last accessed Feb. 14, 2024).
---------------------------------------------------------------------------
The IRA also removed the $25 billion cap on the total amount of
Advanced Technology Vehicle Manufacturing direct loans.\1230\ These
loans may be used to expand domestic production of advanced technology
vehicles and their components. Finally, it established the Domestic
Manufacturing Conversion Grant Program, a $2 billion cost-shared grant
program to aid businesses in manufacturing for hybrid, plug-in hybrid
electric, plug-in electric drive, and hydrogen fuel cell electric
vehicles.\1231\
---------------------------------------------------------------------------
\1230\ See https://www.energy.gov/lpo/inflation-reduction-act-2022 (last accessed Mar. 28, 2024).
\1231\ See https://www.energy.gov/mesc/domestic-manufacturing-conversion-grants (last accessed Mar. 28, 2024).
---------------------------------------------------------------------------
With regard to making permitting for critical minerals extraction
more efficient and effective, the Biden-Harris administration has also
targeted permitting reform as a legislative priority.\1232\ This
includes reforming mining laws to accelerate the development of
domestic supplies of critical minerals. These priorities also include
improving community engagement through identifying community engagement
officers for permitting processes, establishing community engagement
funds to expand the capacity of local governments, Tribes, or community
groups to engage on Federal actions, create national maps of Federal
actions being analyzed with an Environmental Impact Statement, and
transferring funds to Tribal Nations to enhance engagement in National
Historic Preservation Act consultations. In March 2023, the
administration also released implementation guidance for permitting
provisions in the BIL. This
[[Page 52832]]
guidance directs agencies to, among other things: engage in early and
meaningful outreach and communication with Tribal Nations, States,
Territories, and Local Communities; improve responsiveness, technical
assistance, and support; adequately resource agencies and use the
environmental review process to improve environmental and community
outcomes.\1233\
---------------------------------------------------------------------------
\1232\ See The White House, 2023, Fact Sheet: Biden-Harris
Administration Outlines Priorities for Building America's
Infrastructure Faster, Safer and Cleaner. Available at https://www.whitehouse.gov/briefing-room/statements-releases/2023/05/10/fact-sheet-biden-harris-administration-outlines-priorities-for-building-americas-energy-infrastructure-faster-safer-and-cleaner/
(last accessed Mar. 28, 2024).
\1233\ See OMB, FPISC, and CEQ, 2023, Memorandum M-23-14:
Implementation Guidance for the Biden-Harris Permitting Action Plan.
Available at: https://www.whitehouse.gov/wp-content/uploads/2023/03/M-23-14-Permitting-Action-Plan-Implementation-Guidance_OMB_FPISC_CEQ.pdf (last accessed Mar. 28, 2024).
---------------------------------------------------------------------------
Based on all of the above, NHTSA finds that the energy security
benefits of more stringent CAFE standards outweigh any potential energy
security drawbacks that (1) are not the result of the CAFE standards
and (2) are being actively addressed by numerous government and private
sector efforts.
When considering both the reference baseline and the No ZEV
alternative baseline analyses, NHTSA finds that fuel savings, national
balance of payments, environmental implications, and energy security
effects are all similar with reference to estimated outcomes of the
different action alternatives. When alternatives are compared to either
baseline, more stringent CAFE standards would generally result in more
energy conserved and thus better meet the need of the United States to
conserve energy.
(5) Factors That NHTSA Is Prohibited From Considering
EPCA also provides that in determining the level at which it should
set CAFE standards for a particular model year, NHTSA may not consider
the ability of manufacturers to take advantage of several EPCA
provisions that facilitate compliance with CAFE standards and thereby
reduce the costs of compliance.\1234\ NHTSA cannot consider the
trading, transferring, or availability of compliance credits that
manufacturers earn by exceeding the CAFE standards and then use to
achieve compliance in years in which their measured average fuel
economy falls below the standards. NHTSA also must consider dual fueled
automobiles to be operated only on gasoline or diesel fuel, and it
cannot consider the possibility that manufacturers would create new
dedicated alternative fueled automobiles--including battery-electric
vehicles--to comply with the CAFE standards in any model year for which
standards are being set. EPCA encourages the production of AFVs by
specifying that their fuel economy is to be determined using a special
calculation procedure; this calculation results in a more-generous fuel
economy assignment for alternative-fueled vehicles compared to what
they would achieve under a strict energy efficiency conversion
calculation. Of course, manufacturers are free to use dedicated and
dual-fueled AFVs and credits in achieving compliance with CAFE
standards.
---------------------------------------------------------------------------
\1234\ 49 U.S.C. 32902(h).
---------------------------------------------------------------------------
The effect of the prohibitions against considering these statutory
flexibilities (like the compliance boosts for dedicated and dual-fueled
alternative vehicles, and the use and availability of overcompliance
credits) in setting the CAFE standards is that NHTSA cannot set
standards that assume the use of these flexibilities in response to
those standards--in effect, that NHTSA cannot set standards as
stringent as NHTSA would if NHTSA could account for the availability of
those flexibilities. For example, NHTSA cannot set standards based on
an analysis that modeled technology pathway that includes additional
BEV penetration specifically in response to more stringent CAFE
standards.
In contrast, for the non-statutory fuel economy improvement value
program that NHTSA developed by regulation, as explained in the
proposal, NHTSA has long believed that these fuel economy adjustments
are not subject to the 49 U.S.C. 32902(h) prohibition. The statute is
very clear as to which flexibilities are not to be considered in
determining maximum feasible CAFE standards. When NHTSA has introduced
additional compliance mechanisms such as AC efficiency and ``off-
cycle'' technology fuel improvement values, NHTSA has considered those
technologies as available in the analysis. Thus, the analysis for this
final rule includes assumptions about manufacturers' use of those
technologies, as detailed in Chapter 2 of the accompanying TSD.
In developing the proposal, NHTSA explained that it was aware that
some stakeholders had previously requested that we interpret 32902(h)
to erase completely all knowledge of BEVs' existence from the analysis,
not only restricting their application during the standard-setting
years, but restricting their application entirely, for any reason, and
deleting them from the existing fleet that NHTSA uses to create an
analytical reference baseline. PHEVs would correspondingly be counted
simply as strong hybrids, considered only in ``charge-sustaining''
mode. In the NPRM, NHTSA continued to restrict the application of BEVs
(and other dedicated alternative fueled vehicles) during standard-
setting years (except as is necessary to model compliance with state
ZEV programs), and to count PHEVs only in charge-sustaining mode during
that time frame, which for this final rule is model years 2027-2032.
NHTSA's proposal analysis also mandated the same compliance solution
(based on compliance with the reference baseline standards) for all
regulatory alternatives for the model years 2022-2026 period. This was
intended to ensure that the model does not simulate manufacturers
creating new BEVs prior to the standard-setting years in anticipation
of the need to comply with the CAFE standards during those standard-
setting years. Additionally, because the model is restricted (for
purposes of the standard-setting analysis) from applying BEVs during
model years 2027-2032 (again, except as is necessary to model
compliance with state ZEV programs), it literally cannot apply BEVs in
those model years in an effort to reach compliance in subsequent model
years. NHTSA did not take the additional step of removing BEVs from the
reference baseline fleet, and continued to assume that manufacturers
would meet their California ZEV obligations and deployment commitments
whether or not NHTSA sets new CAFE standards. Those manufacturer
efforts were reflected in the reference baseline fleet. Thus, in the
NPRM, NHTSA interpreted the 32902(h) prohibition as preventing NHTSA
from setting CAFE standards that effectively require additional
application of dedicated alternative fueled vehicles in response to
those standards, not as preventing NHTSA from being aware of the
existence of dedicated alternative fueled vehicles that are already
being produced for other reasons besides CAFE standards. Modeling the
application of BEV technology in model years outside the standard-
setting years allowed NHTSA to account for BEVs that manufacturers may
produce for reasons other than the CAFE standards, without accounting
for those BEVs that would be produced because of the CAFE standards.
This is consistent with Congress' intent, made evident in the statute,
that NHTSA does not consider the potential for manufacturers to comply
with CAFE standards by producing additional dedicated alternative fuel
automobiles. We further explained that OMB Circular A-4 directs
agencies to conduct cost-benefit analyses against a reference baseline
that represents the world in the absence of further regulatory action,
and that an
[[Page 52833]]
artificial reference baseline that pretends that dedicated alternative
fueled vehicles do not exist would not be consistent with that
directive. We concluded that we could not fulfill our statutory mandate
to set maximum feasible CAFE standards without understanding these
real-world reference baseline effects.
In the NPRM, NHTSA also tested the possible effects of this
interpretation on NHTSA's analysis by conducting several sensitivity
cases: one which applied the EPCA standard setting year restrictions
from model years 2027-2035, one which applied the EPCA standard setting
year restrictions from model years 2027-2050, and one which applied the
EPCA standard setting year restrictions for all model years covered by
the analysis. NHTSA concluded that none of the results of these
sensitivity analyses were significant enough to change our position on
what regulatory alternative was maximum feasible.
Before discussing the comments, we note, as we did in the NPRM,
that NHTSA is aware of challenges to its approach in Natural Resources
Defense Council v. NHTSA, No. 22-1080 (D.C. Cir.), but as of this final
rule, no decision has yet been issued in this case.
NHTSA received comments from numerous stakeholders on this issue.
A number of commenters opposed the agency's approach in the
proposal. These commenters included:
Representatives of the auto industry, including the
Alliance,\1235\ as well as several individual manufacturers: BMW,\1236\
Toyota,\1237\ Volkswagen,\1238\ Kia,\1239\ and Stellantis; \1240\
---------------------------------------------------------------------------
\1235\ The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 2, at 6; Attachment 3, at 2-7.
\1236\ BMW, Docket No. NHTSA-2023-0022-58614, at 1.
\1237\ Toyota, Docket No. NHTSA-2023-0022-61131, at 11.
\1238\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3.
\1239\ Kia, Docket No. NHTSA-2023-0022-58542, at 4.
\1240\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 9.
---------------------------------------------------------------------------
NADA; \1241\
---------------------------------------------------------------------------
\1241\ NADA, Docket No. NHTSA-2023-0022-58200, at 9.
---------------------------------------------------------------------------
The Motorcycle Riders Foundation; \1242\
---------------------------------------------------------------------------
\1242\ Motorcycle Riders Foundation, Docket No. NHTSA-2023-0022-
63054, at 1-2.
---------------------------------------------------------------------------
Representatives of the oil industry, including
Valero,\1243\ API,\1244\ and the AFPM; \1245\
---------------------------------------------------------------------------
\1243\ Valero, Docket No. NHTSA-2023-0022-58547, at 4, 11.
\1244\ API, Docket No. NHTSA-2023-0022-60234, at 5-8.
\1245\ AFPM, Docket No. NHTSA-2023-0022-61911, at 27-30.
---------------------------------------------------------------------------
Entities involved in the renewable fuels and ethanol
industry, including a joint comment from RFA, NCGA, NFU, NACS, NATSO,
and SIGMA (RFA et al. 1), \1246\ a separate, more detailed joint
comment from RFA, NCGA, and NFU (RFA et al. 2).\1247\ ACE),\1248\
KCGA,\1249\ SIRE,\1250\ NCB,\1251\ CAE,\1252\ MME,\1253\ WPE,\1254\
Growth Energy,\1255\ and HCP; \1256\
---------------------------------------------------------------------------
\1246\ RFA et al. 1, Docket No. NHTSA-2023-0022-57720, at 2.
\1247\ RFA et al 2, Docket No. NHTSA-2023-0022-41652, at 11-14.
\1248\ ACE, Docket No. NHTSA-2023-0022-60683, at 2.
\1249\ KCGA, Docket No. NHTSA-2023-0022-59007, at 2.
\1250\ SIRE, Docket No. NHTSA-2023-0022-57940, at 2.
\1251\ NCB, Docket No. NHTSA-2023-0022-53876, at 2.
\1252\ CAE, Docket No. NHTSA-2023-0022-61599, at 2.
\1253\ MME, Docket No. NHTSA-2023-0022-50861, at 1.
\1254\ WPE, Docket No. NHTSA-2023-0022-52616, at 2.
\1255\ Growth Energy, Docket No. NHTSA-2023-0022-61555, at 1.
\1256\ HCP, Docket No. NHTSA-2023-0022-59280, at 1.
---------------------------------------------------------------------------
Various other energy industry commenters, including
Absolute Energy \1257\ and the Institute for Energy Research; \1258\
---------------------------------------------------------------------------
\1257\ Absolute Energy, Docket No. NHTSA-2023-0022-50902, at 2.
\1258\ IER, Docket No. NHTSA-2023-0022-63063, at 1-2.
---------------------------------------------------------------------------
The National Association of Manufacturers; \1259\
---------------------------------------------------------------------------
\1259\ NAM, Docket No. NHTSA-2023-0022-59203, at 2-3 (NHTSA-
2023-0022-59289 is a duplicate comment).
---------------------------------------------------------------------------
A joint comment led by NACS; \1260\ and
---------------------------------------------------------------------------
\1260\ NACS, Docket No. NHTSA-2023-0022-61070, at 11.
---------------------------------------------------------------------------
Non-governmental organizations, including the America
First Policy Institute,\1261\ CEI,\1262\ and the Heritage
Foundation.\1263\
---------------------------------------------------------------------------
\1261\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 6.
\1262\ CEI, Docket No. NHTSA-2023-0022-61121, at 2, 7.
\1263\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
4.
---------------------------------------------------------------------------
NHTSA also received comments that were generally supportive of its
proposed approach from MEMA,\1264\ Lucid,\1265\ a joint comment from
several NGOs,\1266\ and IPI.\1267\
---------------------------------------------------------------------------
\1264\ MEMA, Docket No. NHTSA-2023-0022-59204, at 9-10.
\1265\ Lucid, Docket No. NHTSA-2023-0022-50594.
\1266\ Joint NGOs, Docket No. NHTSA-2023-0022-61944, Appendix 2,
at 56.
\1267\ IPI, Docket No. NHTSA-2023-0022-60485, at 29-31.
---------------------------------------------------------------------------
NHTSA also received two comments from different coalitions of
States, one led by West Virginia that opposed the agency's
approach,\1268\ while the other, led by California and also supported
by several local governments, supported the agency's approach.\1269\
---------------------------------------------------------------------------
\1268\ West Virginia Attorney General's Office, Docket No.
NHTSA-2023-0022-63056, at 1-8.
\1269\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 39-40.
---------------------------------------------------------------------------
Generally, the views expressed by commenters were consistent with
views and arguments made in the prior CAFE rule and during the ongoing
litigation. Further, commenters who opposed our approach to
implementing this provision opposed it in its entirety. That is,
commenters either uniformly opposed any consideration of
electrification (e.g., whether that be due to market-driven factors or
state programs, or whether in the reference baseline or beyond the
standard-setting years), or, made most clearly in the case of the
States and Cities comment, supported all aspects of our proposed
approach. Similarly, commenters who opposed the agency's approach to
considering BEVs under 32902(h)(1) also opposed how the agency had
considered PHEVs under (h)(2) and credits under (h)(3). This is not
surprising, as all of these particular questions stem from the more
general question of how NHTSA may ``consider'' these vehicles and
flexibilities. Thus, in the below discussion, we typically discuss the
comments and our response broadly as applying to all uses of BEVs in
either the reference baseline or outside the standard-setting years.
The agency continues to find arguments that it should not consider
real-world increases in BEVs and PHEVs that occur due to factors other
than the CAFE requirements, both in constructing the reference baseline
and outside the standard-setting years, to be unpersuasive. As
discussed in the proposal and in the prior rulemaking, to do so would
unnecessarily divorce the CAFE standards from how the world would most
likely exist in the absence of our program.
Commenters opposing the agency's inclusion of BEVs as part of the
reference baseline fleet relied on three primary categories of
argument--two of which are purely legal, while the third
[[Page 52834]]
concerns the effect of NHTSA's approach on whether the proposed
standards are achievable.\1270\
---------------------------------------------------------------------------
\1270\ Technical comments concerning the construction of the
baseline are discussed in Section IV above; this discussion is
limited to the legal questions concerning the application of this
section.
---------------------------------------------------------------------------
First, commenters opposing NHTSA's proposed approach argued that
the language of EPCA prohibited NHTSA's approach to the inclusion of
BEVs in the reference baseline. The level of detail provided in their
comment on this issue varied across commenters, with the coalition of
State commenters led by West Virginia providing the most extensive
arguments.\1271\ Regardless of detail, all comments revolved around the
central question of what it means for NHTSA to ``consider''
electrification in this context. West Virginia and commenters
expressing similar views argue that the prohibition here is broad and
thus the presence of BEVs should, as the Alliance put it, be excluded
``for any purpose whatsoever,'' \1272\ or as West Virginia put it,
``not in the reference baseline, not in technology options, and not in
compliance paths.'' \1273\ According to many of these commenters,
NHTSA's interpretation conflicts with the ``plain meaning'' of the text
and instead relies on, as RFA et al. 2 argued, NHTSA to ``add words to
the Act'' that are not present.\1274\ West Virginia also argued that
the proposed approach would frustrate both the intent of EPCA to
provide incentives for dual-fueled vehicles rather than mandate them,
and the Renewable Fuel Standards program, which exists to incentivize
biofuels.\1275\ Other commenters expressed similar concerns that
NHTSA's approach prioritized EVs at the expense of other vehicle
technologies or compliance paths.\1276\
---------------------------------------------------------------------------
\1271\ West Virginia Attorney General's office, Docket No.
NHTSA-2023-0022-60356, at 1-8.
\1272\ The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 3, at 2.
\1273\ West Virginia Attorney General's office, Docket No.
NHTSA-2023-0022-60356, at 6.
\1274\ RFA et al. 2, Docket No. Docket No. NHTSA-2023-0022-
41652, at 11-12.
\1275\ West Virginia Attorney General's office, Docket No.
NHTSA-2023-0022-60356, at 6-7.
\1276\ See, e.g., CAE, Docket No. NHTSA-2023-0022-61599, at 2;
MME, Docket No. NHTSA-2023-0022-50861, at 1; WPE, Docket No. NHTSA-
2023-0022-52616, at 2.
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NHTSA remains unpersuaded by these arguments. The statute makes
clear that NHTSA ``may not consider the fuel economy'' of BEVs (among
others) when ``carrying out subsections (c), (f), and (g) of this
section.'' Which is to say, for purposes of this rulemaking, the
prohibition applies only when NHTSA is making decisions about whether
the CAFE standards are maximum feasible under 32902(c). NHTSA is not
reading any additional words into the statutory text, but instead is
reading the entire relevant provision, rather than a single word in
isolation without the necessary context. In making the maximum feasible
determination in this rule, as in all previous rules, NHTSA is clear
that it does not consider that BEVs could be used to meet new CAFE
standards. Instead, NHTSA models a cost-effective pathway to compliance
with potential new CAFE standards that includes no new BEVs in response
to the standards, and that counts PHEVs in charge-sustaining mode only,
avoiding consideration of their electric-only-operation fuel economy.
Consequently, NHTSA is in no way pushing manufacturers toward
electrification--just the opposite, as without this provision, NHTSA
would almost certainly include pathways involving increased
electrification, which would provide the agency with more flexibility
in determining what standards could be maximum feasible. Without the
restriction on considering electrification, these standards would be
significantly more stringent and achieve significantly greater fuel
economy benefits. Commenters asserting favorable treatment of BEVs
appear to be arguing with other policies of Federal and State
governments, such as the IRA credits and the California ZEV program,
and with manufacturer plans to deploy electric vehicles independent of
any legal requirements. These are other policies and business plans
that exist separate from CAFE. NHTSA chooses to acknowledge that these
policies and commitments (and other factors) exist when developing the
regulatory reference baseline and considering years after the standard-
setting time frame, rather than ignoring them, but when it comes to
determining maximum feasible standards NHTSA does not consider these
technologies.
Commenters opposing NHTSA's interpretation argue that the
prohibition should be expanded beyond this determination. They assert
that Congress intended NHTSA to ignore BEVs entirely, even when, as is
the case here, there is clear evidence that significant BEVs are
already in the fleet and their numbers are anticipated to grow
significantly during the rulemaking time frame independent of the CAFE
standards. As NHTSA explained in the NPRM, doing so would require NHTSA
to ignore what is occurring with the fleet separate from the CAFE
program. NHTSA would thus be attempting to determine maximum feasible
CAFE standards on the foundation of a fleet that it knows is divorced
from reality. The agency does not believe that this was Congress'
intent or that it is a proper construction of the statute. Instead, as
the statute clearly states, Congress only required that NHTSA could not
issue standards that are presumed on the use of additional BEVs and
other alternative fueled vehicles.
Nowhere does EPCA/EISA say that NHTSA should not consider the best
available evidence in establishing the regulatory reference baseline
for its CAFE rulemakings. As explained in Circular A-4, ``The benefits
and costs of a regulation are generally measured against a no-action
baseline: an analytically reasonable forecast of the way the world
would look absent the regulatory action being assessed, including any
expected changes to current conditions over time.'' \1277\ The Alliance
commented that ``an OMB Circular does not trump a clear statutory
requirement.'' \1278\ This is, of course, correct and NHTSA does not
intend to imply anything else. Instead, NHTSA makes clear that its
interpretation of this provision restricts the agency's analytical
options when analyzing what standards are maximum feasible, while being
consistent with A-4's guidance about how best to construct the
reference baseline. Thus, absent a clear indication to blind itself to
important facts, NHTSA continues to believe that the best way to
implement its duty to establish maximum feasible CAFE standards is to
establish as realistic a reference baseline as possible, including,
among other factors, the most likely composition of the fleet.
---------------------------------------------------------------------------
\1277\ OMB Circular A-4, ``Regulatory Analysis'' Nov. 9, 2003,
at 11. Note that Circular A-4 was recently updated; the initial
version was in effect at the time of the proposal.
\1278\ The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 3, at 2.
---------------------------------------------------------------------------
Second, several commenters argued that including BEVs in the
reference baseline would run afoul of the ``major questions doctrine.''
West Virginia made this argument most comprehensively, stating that
``this proposal is about transforming the American auto markets to lead
with EVs. It aims to morph a longstanding scheme to regulate internal
combustion engine vehicles into one that erases them from the market.''
\1279\ These arguments misunderstand the major questions doctrine.
NHTSA has clear authority to establish CAFE
[[Page 52835]]
standards, and thus simply establishing new ones that are more
stringent than prior ones cannot be considered to be a ``major
question.'' Moreover, commenters imply a motive to this rulemaking that
appears nowhere in the rule, which is simply about establishing CAFE
standards that include marginal increases to the prior standards. And
finally, 32902(h) is the literal provision that prohibits any attempt
by NHTSA to actually require electrification. The very provision that
these commenters believe somehow raises major questions is the
provision that prevents NHTSA from actually taking that action.
---------------------------------------------------------------------------
\1279\ West Virginia Attorney General's office, Docket No.
NHTSA-2023-0022-63056, at 6-8; see also Valero, Docket No. NHTSA-
2023-0022-58547, at 4. Several other commenters (e.g., NACS and CEI)
argued that the rule more broadly raised major questions; those
comments are addressed in Section VI.B.
---------------------------------------------------------------------------
Third, several other commenters, including the Alliance,\1280\
Stellantis,\1281\ NACS,\1282\ and AFPM,\1283\ argued that the proposed
standards were technologically achievable only if BEVs were considered
in the reference baseline and, based on their view that NHTSA is
prohibited from taking this action in the reference baseline, the
standards were not in fact maximum feasible. Other commenters were not
so explicit in making this argument, but their general theme, that
NHTSA's approach to the reference baseline led to standards that were
beyond maximum feasible, is consistent with many otherwise purely
legalistic objections. Finally, the environmental NGOs recommended that
the agency conduct sensitivity analyses examining this issue.\1284\
---------------------------------------------------------------------------
\1280\ Alliance, Docket No. NHTSA-2023-0022-60652, Attachment 3,
at 5-9.
\1281\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 9.
\1282\ NACS, Docket No. NHTSA-2023-0022-61070, at 11.
\1283\ AFPM, Docket No. NHTSA-2023-0022-61911, at 30.
\1284\ Joint NGO comments, Docket No. NHTSA-2023-0022-61944,
Appendix 2, at 56.
---------------------------------------------------------------------------
At the outset, NHTSA stresses that it disagrees with the basic
premise here, and as discussed above, the agency believes that it is
permitted to include electrification in the reference baseline and in
the years following the rulemaking time frame. Leaving that aside, it
is also important to note that, in response to comments from the auto
industry and others, the final CAFE standards for light trucks have
changed significantly since the proposal. Thus, any concerns about the
practicability of achieving the proposed standards are clearly reduced
in this final rule.
That said, NHTSA also modeled a No ZEV alternative baseline. The No
ZEV case removed not only the electric vehicles that would be deployed
to comply with ACC I, but also those that would be deployed consistent
with manufacturer commitments to deploy additional electric vehicles
regardless of legal requirements, consistent with the levels under ACC
II. NHTSA also modeled three cases that extend the EPCA standard
setting year constraints (no application of BEVs and no credit use)
beyond years considered in the reference baseline.
When the standards are assessed relative to the no ZEV alternative
baseline, the industry as a whole overcomplies with the final standards
in every year covered by the standards. The passenger car fleet
overcomplies handily, and the light truck fleet overcomplies in model
years 2027-2030, until model year 2031 when the fleet exactly meets the
standard. Individual manufacturers' compliance results are also much
less dramatically affected than comments would lead one to believe;
while some manufacturers comply with the 4 percent per year light truck
stringency increases from the proposal without ZEV in the reference
baseline, a majority of manufacturers comply in most or all years under
the final light truck standards. In general, the manufacturers that
have to work harder to comply with CAFE standards without ZEV in the
reference baseline are the same manufacturers that have to work harder
to comply with CAFE standards with no ZEV in the reference baseline.
For example, General Motors sees higher technology costs and civil
penalties to comply with the CAFE standards over the five years covered
by the standards; however, this is expected as they are starting from a
lower reference baseline compliance position. General Motors seems to
be the only outlier, and for the rest of the industry technology costs
are low and civil penalty payments are nonexistent in many cases.
Net benefits of CAFE standards increase in the no ZEV case, which
is expected as benefits related to increased fuel economy attributable
to state ZEV programs and automaker-driven deployment of electric
vehicles in the reference baseline are now attributable to the CAFE
program. This includes additional decreases in fuel use, CO2
emissions, and criteria emissions deaths from the application of fuel
economy-improving technology in response to CAFE standards. In
addition, consumer fuel savings attributable to state ZEV programs and
non-regulatory manufacturer ZEV deployment in the reference baseline
are now attributable to the CAFE program: in 2031, the final standards
show fuel savings of over $1,000 for consumers buying model year 2031
vehicles.
Similar trends hold true for the EPCA standard setting year
constraints cases. Examining the most restrictive scenario, which does
not allow BEV adoption in response to CAFE standards in any year when
the CAFE Model adds technology to vehicles (2023-2050, as 2022 is the
reference baseline fleet year), the industry, as a whole, still
overcomplies in every year from model year 2027-2031, in both the
passenger car and light truck fleets. Some manufacturers again have to
work harder in individual model years or compliance categories, but the
majority comply or overcomply in both compliance categories of
vehicles. Again, General Motors is the only manufacturer that sees
notable increases in their technology costs over the reference
baseline, however their civil penalty payments are low, at under $500
million total over the five-year period covered by the new standards.
Net benefits attributable to CAFE standards do decrease from the
central analysis under the EPCA constraints case--but they remain
significantly positive. However, as discussed in more detail below, net
benefits are just one of many factors considered when NHTSA sets fuel
economy standards.
This alternative baseline and these sensitivity cases offer two
conclusions. First, contrary to the Alliance's and other commenter's
concerns, the difference between including BEVs in the base case for
non-CAFE reasons and excluding them are not great--thus, NHTSA would
make the same determination of what standards are maximum feasible
under any of the analyzed scenarios.\1285\ And second, this lack of
dispositive difference in the alternative baseline and sensitivity
cases shows that the interpretive concerns raised by commenters, even
if correct, would not lead to a different decision by NHTSA on the
question of what is maximum feasible. This reaffirms NHTSA's point all
along: understanding the reference baseline is a crucial part of
determining the costs and benefits of various regulatory alternatives,
but the real decision making is informed by the analysis NHTSA conducts
when ``carrying out'' its duty to determine the appropriate standards.
---------------------------------------------------------------------------
\1285\ See RIA Chapter 9 for sensitivity run results.
---------------------------------------------------------------------------
The results of the sensitivity cases not discussed here are
discussed in detail in Chapter 9 of the FRIA. Chapter 9 also reports
other metrics not reported here like categories of technology adoption
and physical impacts such as changes in fuel use and greenhouse gas
emissions.
On a somewhat similar point, America First Policy Institute argued
that language from NHTSA acknowledging that real-world compliance may
differ from modeled
[[Page 52836]]
compliance in the standard-setting runs indicated that the standards
would be met by additional electrification.\1286\ This concern
misunderstands NHTSA's point. As always, NHTSA's modeling is intended
to show one potential path toward compliance that is based on the
statutory constraints and NHTSA's assumptions about costs,
effectiveness, and other manufacturer and consumer behaviors. Actual
compliance will always be different, both due to the fact that
compliance options do not include the statutory limitations discussed
here, and also simply because NHTSA cannot perfectly predict the
future. NHTSA's point is just to acknowledge this reality, not to make
any implications about how it believes compliance should occur. West
Virginia made a similar point, arguing that ``everything in the CAFE
model assumes the fastest possible adoption of electrification.''
\1287\ This, too, misunderstands NHTSA's modeling, which applies a
technologically-neutral approach consistent with the statutory
limitations in the standard-setting years.
---------------------------------------------------------------------------
\1286\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 6.
\1287\ West Virginia Attorney General's office, Docket No.
NHTSA-2023-0022-63056, at 4.
---------------------------------------------------------------------------
(6) Other Considerations in Determining Maximum Feasible CAFE Standards
NHTSA has historically considered the potential for adverse safety
effects in setting CAFE standards. This practice has been upheld in
case law.\1288\ Heritage Foundation commented that ``the proposed rule
will cause an increase in traffic deaths and serious injuries on
America's highways,'' both because automakers will make vehicles
smaller and lighter in response to the standards, and because consumers
will retain older vehicles for longer rather than buying newer, more
expensive vehicles.\1289\ Heritage Foundation further argued that NHTSA
inappropriately ``downplayed and minimized the loss of lives and
serious injuries its standards will cause by attributing many of these
. . . to EPA's parallel rules and to the EV mandates issued by CARB--in
other words, by assuming them away and not counting them for purposes
of the current rulemaking.'' \1290\ For this final rule, as explained
in Chapter 8.2.4.6 of the accompanying FRIA, across nearly all
alternatives (with the exception of PC6LT8), mass changes relative to
the reference baseline result in small reductions in overall
fatalities, injuries, and property damage, due to changes in the
model's fleet share accounting such that the relatively beneficial
effect of mass reduction on light trucks results in safety benefits.
Rebound and scrappage effects increase fatalities as policy
alternatives become more stringent, but these effects are relatively
minor and NHTSA discusses its consideration of these effects in Section
VI.D below. These safety outcomes for mass reduction, rebound, and
scrappage are also present in the No ZEV alternative baseline analysis.
With regard to NHTSA's analytical decision not to include safety
effects associated with activities occurring in the reference baseline,
this is because NHTSA does not include reference baseline effects in
its incremental analysis of the effects of regulatory alternatives,
because to do so would obscure the effects of NHTSA's action, which is
what NHTSA is supposed to consider. If NHTSA were to include baseline
safety effects, NHTSA should then also include baseline CO2
reductions, which would be demonstrably absurd because NHTSA's actions
did not cause those--they belong to the reference baseline because
their cause is something other than CAFE standards. NHTSA disagrees
that it would be appropriate for NHTSA's rule to account for reference
baseline safety effects.
---------------------------------------------------------------------------
\1288\ As courts have recognized, ``NHTSA has always examined
the safety consequences of the CAFE standards in its overall
consideration of relevant factors since its earliest rulemaking
under the CAFE program.'' Competitive Enterprise Institute v. NHTSA,
901 F.2d 107, 120 n. 11 (D.C. Cir. 1990) (``CEI-I'') (citing 42 FR
33534, 33551 (Jun. 30, 1977)). Courts have consistently upheld
NHTSA's implementation of EPCA in this manner. See, e.g.,
Competitive Enterprise Institute v. NHTSA, 956 F.2d 321, 322 (D.C.
Cir. 1992) (``CEI-II'') (in determining the maximum feasible
standard, ``NHTSA has always taken passenger safety into account'')
(citing CEI-I, 901 F.2d at 120 n. 11); Competitive Enterprise
Institute v. NHTSA, 45 F.3d 481, 482-83 (D.C. Cir. 1995) (``CEI-
III'') (same); Center for Biological Diversity v. NHTSA, 538 F.3d
1172, 1203-04 (9th Cir. 2008) (upholding NHTSA's analysis of vehicle
safety issues associated with weight in connection with the model
years 2008-2011 CAFE rulemaking).
\1289\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
8.
\1290\ Id.
---------------------------------------------------------------------------
b. Heavy-Duty Pickups and Vans
Statutory authority for the fuel consumption standards established
in this document for HDPUVs is found in Section 103 of EISA, codified
at 49 U.S.C. 32902(k). That section authorizes a fuel efficiency
improvement program, designed to achieve the maximum feasible
improvement, to be created for (among other things) HDPUVs. Congress
directed that the standards, test methods, measurement metrics, and
compliance and enforcement protocols for HDPUVs be ``appropriate, cost-
effective, and technologically feasible,'' while achieving the
``maximum feasible improvement'' in fuel efficiency. These three
factors are similar to and yet somewhat different from the four factors
that NHTSA considers for passenger car and light truck standards, but
they still modify ``feasible'' in ``maximum feasible'' in the context
of the HDPUV final rule beyond a plain meaning of ``capable of being
done.''\1291\ Importantly, NHTSA interprets them as giving NHTSA
similarly broad authority to weigh potentially conflicting priorities
to determine maximum feasible standards.\1292\ Thus, as with passenger
car and light truck standards, NHTSA believes that it is firmly within
our discretion to weigh and balance the HDPUV factors in a way that is
technology-forcing, as evidenced by this final rule, but not in a way
that requires the application of technology that will not be available
in the lead time provided by this final rule, or that is not cost-
effective.
---------------------------------------------------------------------------
\1291\ See Center for Biological Diversity v. NHTSA, 538 F. 3d
1172, 1194 (9th Cir. 2008).
\1292\ Where Congress has not directly spoken to a potential
issue related to such a balancing, NHTSA's interpretation must be a
``reasonable accommodation of conflicting policies . . . committed
to the agency's care by the statute.'' Id. at 1195.
---------------------------------------------------------------------------
While NHTSA has sought in the past to set HDPUV standards that are
maximum feasible by balancing the considerations of whether standards
are appropriate, cost-effective, and technologically feasible, NHTSA
has not sought to interpret those factors more specifically. In the
interest of helping NHTSA ground the elements of its analysis in the
words of the statute, without intending to restrict NHTSA's
consideration of any important factors, NHTSA is interpreting the
32902(k)(2) factors as follows.
(1) Appropriate
Given that the overarching purpose of EPCA is energy conservation,
the amount of energy conserved by standards should inform whether
standards are appropriate. When considering energy conservation, NHTSA
may consider things like average estimated fuel savings to consumers,
average estimated total fuel savings, and benefits to our nation's
energy security, among other things. Environmental benefits are another
facet of energy conservation, and NHTSA may consider carbon dioxide
emissions avoided, criteria pollutant and air toxics emissions avoided,
and so forth. Given NHTSA's additional mission as a safety agency,
NHTSA may also consider the possible safety effects of different
potential standards in determining whether those standards are
[[Page 52837]]
appropriate. Effects on the industry that do not relate directly to
``cost-effectiveness'' may be encompassed here, such as estimated
effects on sales and employment, and effects in the industry that
appear to be happening for reasons other than NHTSA's regulations may
also be encompassed. NHTSA interprets ``appropriate'' broadly, as not
prohibiting consideration of any relevant elements that are not already
considered under one of the other factors.
AFPM commented that ``appropriate'' should also encompass ``the
significant costs to commercial fleet operators associated with
purchasing, using and maintaining HDPUV ZEVs,'' suggesting that
maintenance costs would be higher, and that refueling HDPUV ZEVs would
``require significant time to accommodate charging needs, which results
in costly vehicle down-time and increased labor expenses.'' \1293\
NHTSA disagrees that this is likely for HDPUV BEVs. While HD BEVs could
require longer recharging times due to the need for much larger battery
packs to accommodate heavy-duty use cycles, HDPUV BEVs are much closer
to their light truck BEV counterparts given the sizes of their battery
packs, and therefore NHTSA would expect similar charging needs for
HDPUVs. Sections II.B and III.D of this preamble discuss these issues
in more detail.
---------------------------------------------------------------------------
\1293\ AFPM, Docket No. -2023-0022-61911, at 86.
---------------------------------------------------------------------------
AFPM also commented that ``appropriate'' should encompass energy
security considerations related specifically to electric
vehicles.\1294\ As discussed in the proposal, NHTSA agrees that energy
security considerations may be part of whether HDPUV standards are
``appropriate,'' and NHTSA also agrees with AFPM that energy security
considerations related to electric vehicles are relevant to this
inquiry, given that NHTSA is allowed to consider electrification fully
in determining maximum feasible HDPUV standards.
---------------------------------------------------------------------------
\1294\ AFPM, Docket No. NHTSA-2023-0022-61911, at 21.
---------------------------------------------------------------------------
However, NHTSA disagrees with AFPM that energy security issues
specific to BEVs should necessarily change our decision for this final
rule. As discussed above in Section VI.A.5.a.(4)(d) for passenger cars
and light trucks, the energy security considerations associated with
the supply chains for internal combustion engine vehicles and for BEVs
are being actively addressed through a variety of public and private
measures. AFPM's comments identified potential problems but did not
acknowledge the many efforts currently underway to address them. Based
on all of the above, NHTSA finds that the energy security benefits of
more stringent HDPUV standards outweigh any potential energy security
drawbacks that are being actively addressed by numerous government and
private sector efforts.
(2) Cost-Effective
Congress' use of the term ``cost-effective'' in 32902(k) appears to
have a more specific aim than the broader term ``economic
practicability'' in 32902(f). In past rulemakings covering HDPUVs,
NHTSA has considered the ratio of estimated technology (or regulatory)
costs to the estimated value of GHG emissions avoided, and also to
estimated fuel savings. In setting passenger car and light truck
standards, NHTSA often looks at consumer costs and benefits, like the
estimated additional upfront cost of the vehicle (as above, assuming
that the cost of additional technology required to meet standards gets
passed forward to consumers) and the estimated fuel savings. Another
way to consider cost-effectiveness could be total industry-wide
estimated compliance costs compared to estimated societal benefits.
Other similar comparisons of costs and benefits may also be relevant.
NHTSA interprets ``cost-effective'' as encompassing these kinds of
comparisons.
NHTSA received no specific comments regarding this interpretation
of ``cost-effective,'' and thus finalizes the interpretation as
proposed.
(3) Technologically Feasible
Technological feasibility in the HDPUV context is similar to how
NHTSA interprets it in the passenger car and light truck context. NHTSA
has previously interpreted ``technological feasibility'' to mean
``whether a particular method of improving fuel economy can be
available for commercial application in the model year for which a
standard is being established,'' as discussed above. NHTSA has further
clarified that the consideration of technological feasibility ``does
not mean that the technology must be available or in use when a
standard is proposed or issued.'' \1295\ Consistent with these previous
interpretations, NHTSA believes that a technology does not necessarily
need to be currently available or already in use for all regulated
parties to be ``technologically feasible'' for these standards, as long
as it is reasonable to expect, based on the evidence before us, that
the technology will be available in the model year in which the
relevant standard takes effect.
---------------------------------------------------------------------------
\1295\ Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1325 n.
12 (D.C. Cir. 1986), quoting 42 FR 63, 184 (1977).
---------------------------------------------------------------------------
ACEEE commented that while NHTSA did account for many hybrid and
electric HDPUV technologies, NHTSA did not ``take full advantage of the
full range of available fuel saving technologies in setting the
standards for HDPUVs.'' \1296\ NHTSA interprets this comment as
suggesting that ACEEE would have preferred to see higher penetration
rates for SHEVs and PHEVs (and BEVs) in the analysis in response to
NHTSA's proposed and final standards. This is less a question of
technological feasibility--of course NHTSA agrees that SHEVs and PHEVs
will be available for deployment in the rulemaking time frame--and more
a question of cost-effectiveness. NHTSA's analysis for both the
proposal and the final rule illustrates that BEVs are cost-effective
for certain portions of the HDPUV fleet. If it is cost-effective for
vehicles to turn from ICE to BEV, there is no need for them to turn
SHEV or PHEV instead. PHEVs do, however, play an important role for
heavy-duty pickup trucks, which tend on average to have use cases
currently well-suited to a dual-fuel technology. Moreover, if fleetwide
standards can be met cost-effectively with certain penetrations of BEVs
and PHEVs, setting more stringent standards that could necessitate
additional (and perhaps not cost-effective) penetration of SHEVs or
advanced ICEV technologies could be technologically feasible, but could
well be beyond maximum feasible.
---------------------------------------------------------------------------
\1296\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 7.
---------------------------------------------------------------------------
MCGA commented that NHTSA should conduct additional analysis of
whether the volumes of BEVs it projected for HDPUVs were
technologically feasible, and specifically asked whether critical
minerals supplies and charging infrastructure were adequate to render
the standards technologically feasible.\1297\ Critical minerals
supplies and charging infrastructure considerations could potentially
bear on whether technology may be deployable in the rulemaking time
frame. As with the discussion above regarding energy security, on
critical minerals, the available evidence gives NHTSA confidence that
supplies will be even more broadly available from stable locations
within the rulemaking time frame. Regarding infrastructure, as above,
NHTSA
[[Page 52838]]
believes that the use case for HDPUVs is similar enough to light trucks
that charging needs for HDPUV BEVs should be similar to charging needs
for light truck BEVs, and that extensive public and private efforts to
build out that infrastructure are ongoing. Moreover, the HDPUV
standards do not begin until model year 2030, by which time NHTSA would
expect infrastructure to be even more developed than model year 2027.
---------------------------------------------------------------------------
\1297\ MCGA, Docket No. NHTSA-2023-0022-60208, at 16-17.
---------------------------------------------------------------------------
NHTSA has concluded that a 10 percent increase in model years 2030-
2032 and an 8 percent increase in model years 2033-2035 for the HDPUV
fleet (HDPUV108) is maximum feasible. To determine what levels of fuel
efficiency standards for HDPUVs would be maximum feasible, EISA
requires NHTSA to consider three factors--whether a given fuel
efficiency standard would be appropriate, cost-effective, and
technologically feasible. Because EISA directs NHTSA to establish the
maximum feasible standard, the most stringent alternative that
satisfies these three factors is the standard that should be finalized.
In evaluating whether HDPUV standards are technologically feasible,
NHTSA considers whether the standards could be met using technology
expected to be available in the rulemaking time frame. For HDPUVs,
NHTSA takes into account the full fuel efficiency of BEVs and PHEVs,
and considers the availability and use of overcompliance credits in
this final rule. Given the ongoing transition to electrification, most
technology applications between now and model year 2035 would be
occurring as a result of reference baseline efforts and would not be an
effect of new NHTSA standards. Under the reference baseline, as early
as model year 2033, nearly 80 percent of the fleet would be
electrified, including SHEV, PHEV, and BEV.
However, both HDPUV10 and HDPUV108 will encourage technology
application for some manufacturers while functioning as a backstop for
the others, and it remains net beneficial for consumers. When
considering harmonization between the HDPUV GHG rules recently
finalized by EPA and these fuel efficiency standards, HDPUV108 will
best harmonize with EPA's recently finalized standards, realigning with
EPA's model year 2032 standards by model year 2034. Moreover, HDPUV108
produces the highest benefit-cost rations for aggregate societal
effects as well as when narrowing the focus to private benefits and
costs.
B. Comments Regarding the Administrative Procedure Act (APA) and
Related Legal Concerns
The APA governs agency rulemaking generally and provides the
standard of judicial review for agency actions. To be upheld under the
``arbitrary and capricious'' standard of judicial review under the APA,
an agency rule must be rational, based on consideration of the relevant
factors, and within the scope of authority delegated to the agency by
statute. The agency must examine the relevant data and articulate a
satisfactory explanation for its action, including a ``rational
connection between the facts found and the choice made.'' \1298\ The
APA also requires that agencies provide notice and comment to the
public when proposing regulations,\1299\ as NHTSA did during the NPRM
and comment period that preceded this final rule and its accompanying
materials.
---------------------------------------------------------------------------
\1298\ Burlington Truck Lines, Inc. v. United States, 371 U.S.
156, 168 (1962).
\1299\ 5 U.S.C. 553.
---------------------------------------------------------------------------
In a sense, all comments to this (or any) proposed rule raise
issues that concern compliance with the APA's requirements. Comments
challenging our technical or economic findings imply that the rule was
``arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law,'' and comments challenging our interpretations
imply that the rule is ``in excess of statutory jurisdiction, authority
or limitations, or short of statutory right.'' \1300\ However, nearly
all of those comments are about, or build off of, various substantive
issues that commenters have with the rule (e.g., whether the standards
are ``maximum feasible'' or whether our technology assumptions are
reasonable). Those comments are considered and responded to in the
relevant parts of the final rule and accompanying documents. A small
number of comments, however, raised issues that were unique to APA
compliance. Two commenters, a group led by the Clean Fuels Development
Coalition and a separate group led by the Renewable Fuels
Association,1301 1302 argued that the agency should change
its approach to modeling BEVs in the reference baseline and in the
years after the rulemaking time frame and that, if the agency adopted
this change, NHTSA would be prohibited from finalizing the rule without
further comment due to logical outgrowth concerns. As discussed in
Section VI.A.5.a(5), NHTSA continues to believe that its proposed
approach on these issues is correct; thus, the procedural questions
that might arise if NHTSA adopted a new interpretation are not present.
Separately, the Landmark Legal Foundation argued that the agency's use
of SC-GHG values produced by the Interagency Working Group (IWG)
violated the APA because the ``SC-GHG values never underwent the normal
and legal required comment and notice period.'' \1303\ NHTSA, however,
took comment on the appropriate SC-GHG value in the NPRM, and responds
to those comments in this final rule. The SC-GHG value used in this
final rule is therefore the product of the notice-and-comment process.
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\1300\ 5 U.S.C. 706(a), (c).
\1301\ CFDC et al., Docket No. NHTSA-2023-0022-62242, at 9.
\1302\ RFA et al., Docket No. NHTSA-2023-0022-57625, at 13-14.
\1303\ Landmark, Docket No. NHTSA-2023-0022-48725, at 3.
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NHTSA also received a few comments that argued that the rule, in
general, violated the ``major questions doctrine,'' as it has been
developed by the Supreme Court. Several of these comments raised this
question specifically in relation to the agency's interpretation of 49
U.S.C. 32902(h); those questions are addressed in Section VI.A.5.a(5)
above. Two commenters made more general arguments. CEI argued that the
rule is intended to ``backstop the administration's electrification
agenda,'' which CEI believes is a ``policy decision of vast economic
and political significance for which no clear congressional
authorization exist.'' \1304\ Similarly, NACS argues that ``[b]y
effectively mandating the production of EVs, the Proposal violates this
judicial doctrine.'' \1305\ As NHTSA has explained throughout this
final rule, the agency is not mandating electrification, and in fact
due to the limitations in 32902(h), cannot take such an action. The
rule simply sets slightly increased CAFE standards that are based on
the agency's long-established and clear authority to set these
standards and administer this program. Regardless of how much certain
commenters may disagree with the agency's interpretations and
conclusions, the agency has ``clear congressional authorization'' to
set CAFE standards.
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\1304\ CEI, Docket No. NHTSA-2023-0022-61121, at 1.
\1305\ NACS, Docket No. NHTSA-2023-0022-61070, at 11-12.
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Finally, the agency received a small number of comments that raised
constitutional concerns. First, Valero commented that the proposed rule
violated numerous constitutional provisions. Valero argued that the
rule
[[Page 52839]]
violated ``the Takings Clause of the Fifth Amendment, which precludes
the taking of private property (or the elimination of entire
industries) for public use without just compensation, as contemplated
by the Proposal with regard to traditional and renewable liquid fuels
and related industries (e.g., asphalt, sulfur, etc.).'' \1306\ NHTSA
disagrees that this rule could constitute a ``taking'' in this regard,
as it simply sets CAFE standards at a marginally higher level than
those finalized for model year 2026, nor does it eliminate the
``entire'' ``renewable liquid fuels and related industries,'' given
that ICE vehicles remain a valid compliance option available to
manufacturers. Valero also commented that ``to the extent the final
rule relies on and/or incorporates state ZEV mandates,'' NHTSA violates
the Dormant Commerce Clause; the equal sovereignty clause; the Import-
Export Clause; the Privileges and Immunities Clause; and the Full Faith
and Credit Clause.\1307\ To the extent that these claims raise
cognizable constitutional concerns, they are with the existence of the
ZEV program, which NHTSA neither administers nor approves, and thus are
outside the scope of this rulemaking and NHTSA's authority. Landmark
Legal Foundation, similar to its comment on APA concerns discussed
above, argued that the proposed rule was unconstitutional because it
``relies heavily on SC-GHG valuations which have been created by the
IWG[, which was] created unconstitutionally by executive order.''\1308\
The SC-GHG developed by the IWG and used in the proposal was simply a
value used by the agency that was subject to notice-and-comment, and
NHTSA is using a different value developed by EPA for this final rule,
as discussed in Chapter 6.2.1 of the accompanying TSD. Moreover, as
discussed below, NHTSA recognizes that PC2LT002 does not
comprehensively maximize net benefits and concludes that it is
nevertheless maximum feasible for economic practicability reasons.
Further, the Federal government routinely establishes interagency
groups for a wide variety of issues to ensure appropriate coordination
across the Federal government; \1309\ thus, there is nothing unique
about an IWG being established related to climate change, which affects
the equities of many Federal agencies. Finally, Our Children's Trust
requested that, based on their view of the Public Trust Doctrine,
``NHTSA incorporate[ ] the protection of children's fundamental rights
to a safe climate system, defined by the best available science, into
future rulemaking, policies, and initiatives,'' \1310\ and that,
generally, standards be set at a more stringent level.\1311\ NHTSA has
addressed Our Children's Trust's substantive comments elsewhere in this
final rule with regard to their broader constitutional concerns. NHTSA
notes that, though it must act consistent with the Constitution, the
extent of the agency's authority is limited to what is provided by
Congress in statute.
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\1306\ Valero, Docket No. NHTSA-2023-0022-58547, at 15.
\1307\ Id.
\1308\ Landmark, Docket No. NHTSA-2023-0022-48725, at 3.
\1309\ To use but one high-profile example among many, the
recent Executive Order on artificial intelligence provides that
``the Director of OMB shall convene and chair an interagency council
to coordinate the development and use of AI in agencies' programs
and operations, other than the use of AI in national security
systems.'' E.O. 14110, ``Safe, Secure, and Trustworthy Development
and Use of Artificial Intelligence,'' at Section 10.1 (Oct. 30,
2023).
\1310\ OCT, Docket No. NHTSA-2023-0022-51242, at 7.
\1311\ Id. at 1-2.
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C. National Environmental Policy Act
The National Environmental Policy Act (NEPA) directs that
environmental considerations be integrated into Federal decision making
process, considering the purpose and need for agencies' actions.\1312\
As discussed above, EPCA requires NHTSA to determine the level at which
to set CAFE standards for passenger cars and light trucks by
considering the four factors of technological feasibility, economic
practicability, the effect of other motor vehicle standards of the
Government on fuel economy, and the need of the U.S. to conserve
energy, and to set fuel efficiency standards for HDPUVs by adopting and
implementing appropriate test methods, measurement metrics, fuel
economy standards,\1313\ and compliance and enforcement protocols that
are appropriate, cost-effective, and technologically feasible.\1314\ To
explore the potential environmental consequences of this rulemaking
action, NHTSA prepared a Draft EIS for the NPRM and a and Final EIS for
the final rule. The purpose of an EIS is to ``. . .provide full and
fair discussion of significant environmental impacts and [to] inform
decision makers and the public of reasonable alternatives that would
avoid or minimize adverse impacts or enhance the quality of the human
environment.'' \1315\ This section of the preamble describes results
from NHTSA's Final EIS, which is being publicly issued simultaneously
with this final rule.
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\1312\ NEPA is codified at 42 U.S.C. 4321-47. The Council on
Environmental Quality (CEQ) NEPA implementing regulations are
codified at 40 CFR parts 1500 through 1508.
\1313\ In the Phase 1 HD Fuel Efficiency Improvement Program
rulemaking, NHTSA, aided by the National Academies of Sciences
report, assessed potential metrics for evaluating fuel efficiency.
NHTSA found that fuel economy would not be an appropriate metric for
HD vehicles. Instead, NHTSA chose a metric that considers the amount
of fuel consumed when moving a ton of freight (i.e., performing
work). As explained in the Phase 2 HD Fuel Efficiency Improvement
Program Final Rule, this metric, delegated by Congress to NHTSA to
formulate, is not precluded by the text of the statute. The agency
concluded that it is a reasonable way by which to measure fuel
efficiency for a program designed to reduce fuel consumption.
Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium-
and Heavy-Duty Engines and Vehicles--Phase 2; Final Rule, 81 FR
73478, 73520 (Oct. 25, 2016).
\1314\ 49 U.S.C. 32902(k)(2).
\1315\ 40 CFR 1502.1.
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EPCA and EISA require that the Secretary of Transportation
determine the maximum feasible levels of CAFE standards in a manner
that sets aside the potential use of CAFE credits or application of
alternative fuel technologies toward compliance in model years for
which NHTSA is issuing new standards. NEPA, however, does not impose
such constraints on analysis; instead, its purpose is to ensure that
``Federal agencies consider the environmental impacts of their actions
in the decision-making process.'' \1316\ As the environmental impacts
of this action depend on manufacturers' actual responses to standards,
and those responses are not constrained by the adoption of alternative
fueled technologies or the use of compliance credits, the Final EIS is
based on ``unconstrained'' modeling rather than ``standard setting''
modeling. The ``unconstrained'' analysis considers manufacturers'
potential use of CAFE credits and application of alternative fuel
technologies in order to disclose and allow consideration of the real-
world environmental consequences of the final standards and
alternatives.
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\1316\ 40 CFR 1500.1(a).
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NHTSA conducts modeling both ways in order to reflect the various
statutory requirements of EPCA/EISA and NEPA. The rest of the preamble,
and importantly, NHTSA's balancing of relevant EPCA/EISA factors
explained in Section VI.D, employs the ``standard setting'' modeling in
order to aid the decision-maker in avoiding consideration of the
prohibited items in 49 U.S.C. 32902(h) in determining maximum feasible
standards, but as a result, the impacts reported here may
[[Page 52840]]
differ from those reported elsewhere in the preamble.\1317\
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\1317\ ``Unconstrained'' modeling results are presented for
comparison purposes only in some sections of the FRIA and
accompanying databooks.
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NHTSA's overall EIS-related obligation is to ``take a `hard look'
at the environmental consequences'' as appropriate.\1318\
Significantly, ``[i]f the adverse environmental effects of the proposed
action are adequately identified and evaluated, the agency is not
constrained by NEPA from deciding that other values outweigh the
environmental costs.'' \1319\ The agency must identify the
``environmentally preferable'' alternative but need not adopt it.\1320\
``Congress in enacting NEPA . . . did not require agencies to elevate
environmental concerns over other appropriate considerations.'' \1321\
Instead, NEPA requires an agency to develop and consider alternatives
to the proposed action in preparing an EIS.\1322\ The statute and
implementing regulations do not command an agency to favor an
environmentally preferable course of action, only that it makes its
decision to proceed with the action after taking a hard look at the
potential environmental consequences and consider the relevant factors
in making a decision among alternatives.\1323\ As such, NHTSA
considered the impacts reported in the Final EIS, in addition to the
other information presented in this preamble, the TSD, and the FRIA, as
part of its decision-making process.
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\1318\ Baltimore Gas & Elec. Co. v. Natural Resources Defense
Council, Inc., 462 U.S. 87, 97 (1983).
\1319\ Robertson v. Methow Valley Citizens Council, 490 U.S.
332, 350 (1989).
\1320\ See 40 CFR 1505.2(a)(2). Vermont Yankee Nuclear Power
Corp. v. Nat. Res. Def. Council, Inc., 435 U.S. 519, 558 (1978).
\1321\ Baltimore Gas, 462 U.S. at 97.
\1322\ 42 U.S.C. 4332(2)(c)(iii).
\1323\ See 40 CFR 1505.2(a)(2).
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The agency received several comments on the Draft EIS. Comments
regarding the Draft EIS, including the environmental analysis, are
addressed in Appendix B of the Final EIS. NHTSA addresses substantive
comments that concern the rule but that are not related to the EIS in
this preamble and its associated documents in the public docket.
When preparing an EIS, NEPA requires an agency to compare the
potential environmental impacts of its proposed action and a reasonable
range of alternatives. Because NHTSA is setting standards for passenger
cars, light trucks, and HDPUVs,\1324\ and because evaluating the
environmental impacts of this rulemaking requires consideration of the
impacts of the standards for all three vehicle classes, the main
analyses of direct and indirect effects of the action alternatives
presented in the Final EIS reflect: (1) the environmental impacts
associated with the CAFE standards for LDVs, and (2) the environmental
impacts associated with the HDPUV FE standards. The analyses of
cumulative impacts of the action alternatives presented in this EIS
reflect the cumulative or combined impact of the two sets of standards
that are being set by NHTSA in this final rule, in addition to the
model year 2032 augural year standards being set forth.
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\1324\ Under EPCA, as amended by EISA, NHTSA is required to set
the fuel economy standards for passenger cars in each model year at
the maximum feasible level and to do so separately for light trucks.
Separately, and in accordance with EPCA, as amended by EISA, NHTSA
is required to set FE standards for HDPUVs in each model year that
are ``designed to achieve the maximum feasible improvement'' (49
U.S.C. 32902(k)(2)).
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In the DEIS, NHTSA analyzed a CAFE No-Action Alternative and four
action alternatives for passenger cars and light trucks, along with a
HDPUV FE No-Action Alternative and three action alternatives for HDPUV
FE standards. In the Final EIS, NHTSA has analyzed a CAFE No-Action
Alternative and five action alternatives for passenger car and light
truck standards, along with a HDPUV FE No-Action Alternative and four
action alternatives for HDPUV FE standards.\1325\ The alternatives
represent a range of potential actions NHTSA could take, and they are
described more fully in Section IV of this preamble, Chapter 1 of the
TSD, and Chapter 3 of the FRIA. The estimated environmental impacts of
these alternatives, in turn, represent a range of potential
environmental impacts that could result from NHTSA's setting maximum
feasible fuel economy standards for passenger cars and light trucks and
fuel efficiency standards for HDPUVs.
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\1325\ In its scoping notice, NHTSA indicated that the action
alternatives analyzed would bracket a range of reasonable standards,
allowing the agency to select an action alternative in its final
rule from any stringency level within that range. 87 FR 50386, 50391
(Sept. 15, 2022).
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To derive the direct, indirect, and cumulative impacts of the CAFE
standard action alternatives and the HDPUV FE standard action
alternatives, NHTSA compared each action alternative to the relevant
No-Action Alternative, which reflects reference baseline trends that
would be expected in the absence of any further regulatory action. More
specifically, the CAFE No-Action Alternative in the Draft and Final EIS
assumes that the model year 2026 CAFE standards finalized in 2022
continue in perpetuity. 1326 1327 The HDPUV FE No-Action
Alternative in the Draft and Final EIS assumes that the model year 2027
HDPUV FE standards finalized in the Phase 2 program continue in
perpetuity.\1328\ Like all of the action alternatives, the No-Action
Alternatives also include other considerations that will foreseeably
occur during the rulemaking time frame, as discussed in more detail in
Section IV above. The No-Action Alternatives assume that manufacturers
will comply with ZEV programs set by California and other Section 177
states and their deployment commitments consistent with ACC II's
targets.\1329\ The No-Action Alternatives also assume that
manufacturers would make production decisions in response to estimated
market demand for fuel economy or fuel efficiency, considering
estimated fuel prices; estimated product development cadence; estimated
availability, applicability, cost, and effectiveness of fuel-saving
technologies; and available tax credits. The No-Action Alternatives
further assume the applicability of recently passed tax credits for
battery-based vehicle technologies, which improve the attractiveness of
those technologies to consumers. The No-Action Alternatives provide a
reference baseline (i.e., an illustration of what would be occurring in
the world in the absence of new Federal regulations) against which to
compare the environmental impacts of other alternatives presented in
the Draft and Final EIS.\1330\
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\1326\ Corporate Average Fuel Economy Standards for Model Years
2024-2026 Passenger Cars and Light Trucks; Final Rule, 87 FR 25710
(May 2, 2022). Revised 2023 and Later Model Year Light-Duty Vehicle
Greenhouse Gas Emissions Standards; Final Rule, 86 FR 74434 (Dec.
30, 2021).
\1327\ In the last CAFE analysis, the No-Action Alternative also
included five manufacturers' voluntary agreements with the State of
California to achieve more stringent GHG standards through model
year 2026. The stringency in the California Framework Agreement
standards were superseded with EPA's revised GHG rule. Revised 2023
and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions
Standards; Final Rule, 86 FR 74434 (Dec. 30, 2021).
\1328\ Greenhouse Gas Emissions Standards and Fuel Efficiency
Standards for Medium- and Heavy-Duty Engines and Vehicles; Final
Rule, 76 FR 57106 (Sept. 15, 2011).
\1329\ Section 177 of the CAA allows states to adopt motor
vehicle emissions standards California has put in place to make
progress toward attainment of national ambient air quality
standards. At the time of writing, Colorado, Connecticut, Maine,
Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island,
Vermont, and Washington have adopted California's ZEV program. See
CARB. 2022. States that have Adopted California's Vehicle Standards
under section 177 of the Federal CAA. Available at: https://ww2.arb.ca.gov/resources/documents/states-have-adopted-californias-vehicle-standards-under-section-177-federal. (Accessed: Feb. 28,
2024).
\1330\ See 40 CFR 1502.2(e), 1502.14(d). CEQ has explained that
``[T]he regulations require the analysis of the No-Action
Alternative even if the agency is under a court order or legislative
command to act. This analysis provides a benchmark, enabling
decision makers to compare the magnitude of environmental effects of
the action alternatives [See 40 CFR 1502.14(c).] . . . Inclusion of
such an analsyis in the EIS is necessary to inform Congress, the
public, and the President as intended by NEPA. [See 40 CFR
1500.1(a).]'' Forty Most Asked Questions Concerning CEQ's NEPA
Regulations, 46 FR 18026 (Mar. 23, 1981).
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[[Page 52841]]
The range of CAFE and HDPUV FE standard action alternatives, as
well as the relevant No-Action Alternative in the Final EIS,
encompasses a spectrum of possible fuel economy and fuel efficiency
standards that NHTSA could determine were maximum feasible based on the
different ways NHTSA could weigh the applicable statutory factors.
NHTSA analyzed five CAFE standard action alternatives, Alternative
PC2LT002,\1331\ Alternative PC1LT3, Alternative PC2LT4, Alternative
PC3LT5, and Alternative PC6LT8 for passenger cars and light trucks, and
four HDPUV FE standard action alternatives, Alternative HDPUV4,\1332\
Alternative HDPUV108, Alternative HDPUV10, and Alternative HDPUV14 for
HDPUVs. Under Alternative PC2LT002, fuel economy stringency would
increase, on average, 2 percent per year, year over year for model year
2027-2031 passenger cars, and 0 percent increase per year, year over
year for model year 2027-2028 light trucks, and 2 percent increase per
year, year over year for model year 2029-2031 light trucks (Alternative
PC2LT002 is NHTSA's Preferred Alternative for CAFE standards). Under
Alternative PC1LT3, fuel economy stringency would increase, on average,
1 percent per year, year over year for model year 2027--2031 passenger
cars, and 3 percent per year, year over year for model year 2027-2031
light trucks. Under Alternative PC2LT4, fuel economy stringency would
increase, on average, 2 percent per year, year over year for model year
2027-2031 passenger cars, and 4 percent per year, year over year for
model year 2027-2031 light trucks. Under Alternative PC3LT5, fuel
economy stringency would increase, on average, 3 percent per year, year
over year for model year 2027-2031 passenger cars, and 5 percent per
year, year over year for model year 2027-2031 light trucks. Under
Alternative PC6LT8, fuel economy stringency would increase, on average,
6 percent per year, year over year for model year 2027-2031 passenger
cars, and 8 percent per year, year over year for model year 2027-2031
light trucks. Under Alternative HDPUV4, FE stringency would increase,
on average, 4 percent per year, year over year, for model year 2030-
2035 HDPUVs. Under Alt. HDPUV108, FE stringency would increase, on
average, 10 percent per year, year over year for model year 2030-2032
and 8 percent per year, year over year for model year 2033-2035 HDPUVs
(Alt. HDPUV108 is NHTSA's Preferred Alternative for HDPUV FE
standards). Under HDPUV10, FE stringency would increase, on average, 10
percent per year, year over year, for model year 2030-2035 HDPUVs
(Alternative HDPUV10 is NHTSA's Preferred Alternative for HDPUV FE
standards). Under Alternative HDPUV14, FE stringency would increase on
average, 14 percent per year, year over year for model year 2030-2035
HDPUVs. NHTSA also analyzed three CAFE and HDPUV FE alternative
combinations for the cumulative impacts analysis, Alternatives PC2LT002
and HDPUV4 (the least stringent and highest fuel-use CAFE and HDPUV FE
standard action alternatives), Alternatives PC2LT002 and HDPUV108 (the
Preferred CAFE and HDPUV FE alternatives), and Alternatives PC6LT8 and
HDPUV14 (the most stringent and lowest fuel-use CAFE and HDPUV FE
standard action alternatives). The primary differences between the
action alternatives considered for the Draft EIS and the Final EIS is
that the Final EIS added an alternative, Alternative PC2LT002 for CAFE
standard and Alternative HDPUV108 for HDPUV FE standard. Both of the
ranges of action alternatives, as well as the No-Action alternative, in
the Draft EIS and Final EIS encompassed a spectrum of possible
standards the agency could determine was maximum feasible, or
represented the maximum feasible improvement for HDPUVs, based on the
different ways the agency could weigh EPCA's four statutory factors.
Throughout the Final EIS, estimated impacts were shown for all of these
action alternatives, as well as for the relevant No-Action Alternative.
For a more detailed discussion of the environmental impacts associated
with the alternatives, see Chapters 3-8 of the EIS, as well as Section
IV.C of this preamble.
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\1331\ The abbreviation PC2LT002 is meant to reflect a 2 percent
increase for passenger cars, a 0 percent increase for light trucks
for model year 2027-2028, and a 2 percent increase for light trucks,
including SUVs, for model year 2029-2031. PC2LT002 is formatted
differently than the other CAFE alternatives because the rate of
stringency increase changes across years, whereas in the other
alternatives, the rate of increase is constant year over year.
\1332\ The abbreviation HDPUV4 is meant to reflect a 4 percent
increase for HDPUVs. The abbreviation for each HDPUV action
alternative uses the same naming convention.
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The agency's Final EIS describes potential environmental impacts to
a variety of resources, including fuel and energy use, air quality,
climate, EJ, and historic and cultural resources. The EIS also
describes how climate change resulting from global GHG emissions
(including CO2 emissions attributable to the U.S. LD
transportation sector under the alternatives considered) could affect
certain key natural and human resources. Resource areas are assessed
qualitatively and quantitatively, as appropriate, in the Final EIS, and
the findings of that analysis are summarized here. As explained above,
the qualitative impacts presented below come from the EIS'
``unconstrained'' modeling so that NHTSA is appropriately informed
about the potential environmental impacts of this action. Qualitative
discussions of impacts related to life-cycle assessment of vehicle
materials, EJ, and historic and cultural resources are located in the
EIS, while the impacts summarized here focus on energy, air quality,
and climate change.
1. Environmental Consequences
a. Energy
(1) Direct and Indirect Impacts
As the stringency of the CAFE standard alternatives increases,
total U.S. passenger car and light truck fuel consumption for the
period of 2022 to 2050 decreases. Total LD vehicle fuel consumption
from 2022 to 2050 under the CAFE No-Action Alternative is projected to
be 2,774 billion gasoline gallon equivalents (GGE). LD vehicle fuel
consumption from 2022 to 2050 under the action alternatives is
projected to range from 2,760 billion GGE under Alternative PC2LT002 to
2,596 billion GGE under Alternative PC6LT8. Under Alternative
AlternativePC1LT3, LD vehicle fuel consumption from 2022 to 2050 is
projected to be 2,736 billion GGE. Under Alternative PC2LT4, LD vehicle
fuel consumption from 2022 to 2050 is projected to be 2,729 billion
GGE. Under Alternative PC3LT5, LD vehicle fuel consumption from 2022 to
2050 is projected to be 2,695 billion GGE. All of the CAFE standard
action alternatives would decrease fuel consumption compared to the
relevant No-Action Alternative, with fuel consumption decreases that
range from 14 billion GGE under Alternative PC2LT002 to 179 billion GGE
under Alternative PC6LT8. For the preferred alternative, fuel
consumption decreases by 14 billion GGE.
As the stringency of the HDPUV FE standard alternatives increases,
total U.S. HDPUV fuel consumption for the period of 2022 to 2050
decreases. Total
[[Page 52842]]
HDPUV vehicle fuel consumption from 2022 to 2050 under the No-Action
Alternative is projected to be 418.9 billion GGE. HDPUV fuel
consumption from 2022 to 2050 under the action alternatives is
projected to range from 418.6 billion GGE under Alternative HDPUV4 to
401.9 billion GGE under Alternative HDPUV14. Under Alternative
HDPUV108, HDPUV vehicle fuel consumption from 2022 to 2050 is projected
to be 415 billion GGE. Under Alternative HDPUV10, HDPUV vehicle fuel
consumption from 2022 to 2050 is projected to be 412 billion GGE. All
of the HDPUV standard action alternatives would decrease fuel
consumption compared to the relevant No-Action Alternative, with fuel
consumption decreases that range from 0.3 billion GGE under Alternative
HDPUV4 to 17.0 billion GGE under HDPUV14. For the preferred
alternative, fuel consumption decreases by 4 billion GGE.
(2) Cumulative Impacts
Energy cumulative impacts are composed of both LD and HDPUV energy
use in addition to other past, present, and reasonably foreseeable
future actions. As the CAFE Model includes many foreseeable trends,
NHTSA examined two AEO 2023 side cases that could proxy a range of
future outcomes where oil consumption is lower based on a range of
macroeconomic factors. Since the results of the CAFE and HDPUV FE
standards are a decline in oil consumption, examining side cases that
also result in lower oil consumption while varying macroeconomic
factors provides some insights into the cumulative effects of CAFE
standards paired with other potential future events. Energy production
and consumption from those side cases is presented in comparison to the
AEO 2023 reference case qualitatively in the EIS. Below, we present the
combined fuel consumption savings from the LD CAFE and HDPUV FE
standards. These results also include impacts from the model year 2032
augural year standard that the agency is setting forth.
Total LD vehicle and HDPUV fuel consumption from 2022 to 2050 under
the No-Action Alternatives is projected to be 3,193 billion GGE. LD
vehicle and HDPUV fuel consumption from 2022 to 2050 under the action
alternatives is projected to range from 3,178 billion GGE under
Alternatives PC2LT002 and HDPUV4 to 2,955 billion GGE under
Alternatives PC6LT8 and HDPUV14. Under Alternatives PC2LT002 and
HDPUV108, the total LD vehicle and HDPUV fuel consumption from 2022 to
2050 is projected to be 3,174 billion GGE. All of the action
alternatives would decrease fuel consumption compared to the No-Action
Alternatives, with decreases ranging from 15 billion GGE under
Alternatives PC2LT002 and HDPUV4 to 238 billion GGE under Alternatives
PC6LT8 and HDPUV14. For the preferred alternatives, fuel consumption
decreases by 19 billion GGE.
Changing CAFE and HDPUV FE standards are expected to reduce
gasoline and diesel fuel use in the transportation sector but are not
expected to have any discernable effect on energy consumption by other
sectors of the U.S. economy because petroleum products account for a
very small share of energy use in other sectors. Gasoline and diesel
(distillate fuel oil) account for less than 5 percent of energy use in
the industrial sector, less than 4 percent of energy use in the
commercial building sector, 2 percent of energy use in the residential
sector, and only about 0.2 percent of energy use in the electric power
sector.
b. Air Quality
(1) Direct and Indirect Impacts
The relationship between stringency and criteria and air toxics
pollutant emissions is less straightforward than the relationship
between stringency and energy use, because it reflects the complex
interactions among the vehicle-based emissions rates of the various
vehicle types (passenger cars and light trucks, HDPUVs, ICE vehicles
and EVs, older and newer vehicles, etc.), the technologies assumed to
be incorporated by manufacturers in response to CAFE and HDPUV FE
standards, upstream emissions rates, the relative proportions of
gasoline, diesel, and electricity in total fuel consumption, and
changes in VMT from the rebound effect. In general, emissions of
criteria air pollutants decrease, with some exceptions, in both the
short and long term. The decreases get larger as the stringency
increases across action alternatives, with some exceptions. In general,
emissions of toxic air pollutants remain the same or decrease in both
the short and long term. The decreases stay the same or get larger as
the stringency increases across action alternatives, with some
exceptions. In addition, the action alternatives would result in
decreased incidence of PM2.5-related health impacts in most
years and alternatives due to the emissions decreases. Decreases in
adverse health impacts include decreased incidences of premature
mortality, acute bronchitis, respiratory emergency room visits, and
work-loss days.
(a) Criteria Pollutants
In 2035, emissions of CO, NOX, PM2.5, and
VOCs decrease under all CAFE standard action alternatives compared to
the CAFE No-Action Alternative, while emissions of SO2
increase. Relative to the No-Action Alternative, the modeling results
suggest CO, NOX, PM2.5, and VOC emissions
decreases in 2035 that get larger from Alternative PC2LT002 through
Alternative PC6LT8. There are also increases in SO2
emissions that reflect the projected increase in EV use in the later
years. However, note that modeled increases are very small relative to
reductions from the historical levels.
In 2050, emissions of CO, NOX, PM2.5, and
VOCs decrease under all CAFE standard action alternatives compared to
the CAFE No-Action Alternative. Relative to the No-Action Alternative,
the modeling results suggest CO, NOX, PM2.5, and
VOC emissions decreases in 2050 that get larger from Alternative
PC2LT002 to Alternative PC1LT3, and from Alternative PC2LT4 through
Alternative PC6LT8, but the decreases get smaller from Alternative
PC1LT3 to PC2LT4. Emissions of SO2 increase under all CAFE
standard action alternatives, except for Alternative PC2LT4, compared
to the CAFE No-Action Alternative, and the increases get larger from
Alternative PC2LT002 to Alternative PC1LT3 and from Alternative PC3LT5
to Alternative PC6LT8. In 2050, as in 2035, the increases in
SO2 emissions reflect the projected increase in EV use in
the later years. Further, any modeled increases were very small
relative to reductions from the historical levels represented in the
current CAFE standard. Under each CAFE standard action alternative
compared to the CAFE No-Action Alternative, the largest relative
increases in emissions among the criteria pollutants would occur for
SO2, for which emissions would increase by as much as 3.0
percent under Alternative PC6LT8 in 2050 compared to the CAFE No-Action
Alternative. The largest relative decreases in emissions would occur
for CO, for which emissions would decrease by as much as 18.3 percent
under Alternative PC6LT8 in 2050 compared to the CAFE No-Action
Alternative. Percentage increases and decreases in emissions of
NOX, PM2.5, and VOCs would be less. The smaller
differences are not expected to lead to measurable changes in
concentrations of criteria pollutants in the ambient air. The larger
differences in emissions could lead to changes in ambient pollutant
concentrations.
[[Page 52843]]
In 2035 and 2050, emissions of SO2 increase under the
HDPUV FE standard action alternatives compared to the HDPUV FE No-
Action Alternative, while emissions of CO, NOX,
PM2.5, and VOCs decrease. Relative to the HDPUV FE No-Action
Alternative, the modeling results suggest SO2 emissions
increases get larger from Alternative HDPUV4 through Alternative
HDPUV14. The increases in SO2 emissions reflect the
projected increase in EV use in the later years. Further, any modeled
increases were very small relative to reductions from the historical
levels represented in the current HDPUV FE standard. For CO,
NOX, PM2.5, and VOCs, the emissions decreases get
larger from Alternative HDPUV4 through Alternative HDPUV14 relative to
the No-Action Alternative.
Under each HDPUV FE standard action alternative compared to the
HDPUV FE No-Action Alternative, the largest relative increases in
emissions among the criteria pollutants would occur for SO2,
for which emissions would increase by as much as 6.7 percent under
Alternative HDPUV14 in 2050 compared to the No-Action Alternative. The
largest relative decreases in emissions would occur for CO, for which
emissions would decrease by as much as 13.5 percent under Alternative
HDPUV14 in 2050 compared to the No-Action Alternative. Percentage
reductions in emissions of NOX, PM2.5, and VOCs
would be less, though the reductions in VOCs in 2035 (by as much as 3.3
percent under Alternative HDPUV14) would be greater than those of CO in
2035 (by as much as 1.7 percent under Alternative HDPUV14). The smaller
differences are not expected to lead to measurable changes in
concentrations of criteria pollutants in the ambient air. The larger
differences in emissions could lead to changes in ambient pollutant
concentrations.
(b) Toxic Air Pollutants
Under each CAFE standard action alternative in 2035 and 2050
relative to the CAFE No-Action Alternative, emissions would remain the
same or decrease for all toxic air pollutants. The decreases stay the
same or get larger from Alternative PC2LT002 through Alternative
PC6LT8, except that for acetaldehyde, acrolein, 1,3-butadiene, and
formaldehyde for which emissions would decrease by as much as 23
percent under Alternative PC6LT8 in 2050 compared to the CAFE No-Action
Alternative. Percentage decreases in emissions of benzene and DPM would
be less. The smaller differences are not expected to lead to measurable
changes in concentrations of toxic air pollutants in the ambient air.
For such small changes, the impacts of those action alternatives would
be essentially equivalent. The larger differences in emissions could
lead to changes in ambient pollutant concentrations.
Under each HDPUV FE standard action alternative in 2035 and 2050
relative to the HDPUV FE No-Action Alternative, emissions either remain
the same or decrease for all toxic air pollutants. The decreases get
larger from Alternative HDPUV4 through Alternative HDPUV14. The largest
relative decreases in national emissions of toxic air pollutants among
the HDPUV FE standard action alternatives, compared to the HDPUV FE No-
Action Alternative, generally would occur for 1,3-butadiene and
formaldehyde for which emissions would decrease by as much as 14.5
percent under Alternative HDPUV14 in 2050 compared to the HDPUV FE No-
Action Alternative. The largest percentage decreases in emissions of
acetaldehyde, acrolein, and benzene would be similar, decreasing as
much as 13.6 to 14.2 percent under Alternative HDPUV14 in 2050 compared
to the No-Action Alternative. Percentage decreases in emissions of DPM
would be less, in some cases less than 1 percent. The smaller
differences are not expected to lead to measurable changes in
concentrations of toxic air pollutants in the ambient air. For such
small changes, the impacts of those action alternatives would be
essentially equivalent. The larger differences in emissions could lead
to changes in ambient pollutant concentrations.
(c) Health Impacts
In 2035 and 2050, all CAFE standard action alternatives would
result in decreases in adverse health impacts (mortality, acute
bronchitis, respiratory emergency room visits, and other health
effects) nationwide compared to the CAFE No-Action Alternative, due to
decreases in downstream emissions, particularly of PM2.5.
The improvements to health impacts (or decreases in health incidences)
would stay the same or get larger from Alternative PC2LT002 to
Alternative PC6LT8 in 2035 and 2050, except that in 2050 the decrease
from Alternative PC1LT3 to Alternative PC2LT4 is smaller. These
decreases reflect the generally increasing stringency of the action
alternatives as they become implemented.
In 2035 and 2050, all HDPUV FE standard action alternatives would
decrease adverse health impacts nationwide compared to the HDPUV FE No-
Action Alternative. The improvements to health impacts (or decreases in
health incidences) would get larger from Alternative HDPUV4 to
Alternative HDPUV14 in 2035 and 2050.
(2) Cumulative Impacts
(a) Criteria Pollutants
In 2035 and 2050, emissions of SO2 increase under the
CAFE and HDPUV FE alternative combinations compared to the No-Action
Alternatives, while emissions of CO, NOX, PM2.5,
and VOCs decrease. However, any modeled increases are very small
relative to reductions from the historical levels represented in the
current CAFE and HDPUV FE standards. Relative to the No-Action
Alternatives, the modeling results suggest SO2 emissions
increases that get larger with increasing stringency of alternative
combinations compared to the No-Action Alternatives. For CO,
NOX, PM2.5, and VOCs, the emissions decreases get
larger with increasing stringency of alternative combinations compared
to the No-Action Alternatives.
Under each CAFE and HDPUV FE alternative combination compared to
the No-Action Alternatives, the largest relative increases in emissions
among the criteria pollutants would occur for SO2, for which
emissions would increase by as much as 5.2 percent under Alternatives
PC6LT8 and HDPUV14 in 2050, compared to the No-Action Alternatives. The
largest relative decreases in emissions would occur for CO, for which
emissions would decrease by as much as 24 percent under Alternatives
PC6LT8 and HDPUV14 in 2050, compared to the No-Action Alternatives.
Percentage decreases in emissions of NOX, PM2.5,
and VOCs would be less, though reductions in PM2.5 in 2035
(by as much as 4.1 percent under Alternatives PC6LT8 and HDPUV14) and
VOCs in 2035 (by as much as 6.1 percent under Alternatives PC6LT8 and
HDPUV14) would be greater than those of CO in 2035 (by as much as 3.7
percent under Alternatives PC6LT8 and HDPUV14). The smaller differences
are not expected to lead to measurable changes in concentrations of
criteria pollutants in the ambient air. The larger differences in
emissions could lead to changes in ambient pollutant concentrations.
(b) Toxic Air Pollutants
Toxic air pollutant emissions across the CAFE and HDPUV FE
alternative combinations decrease in 2035 and 2050, relative to the No-
Action Alternatives. The decreases remain the same or get larger with
increasing stringency of alternative combinations. The largest relative
decreases in
[[Page 52844]]
emissions generally would occur for 1,3-butadiene and formaldehyde for
which emissions would decrease by as much as 28 percent under
Alternatives PC6LT8 and HDPUV14 in 2050, compared to the No-Action
Alternatives. The largest percentage decreases in emissions of
acetaldehyde, acrolein, and benzene would be similar, decreasing as
much as 26 to 27 percent under Alternatives PC6LT8 and HDPUV14 in 2050
compared to the No-Action Alternative. Percentage decreases in
emissions of DPM would be less.
(c) Health Impacts
Adverse health impacts (mortality, acute bronchitis, respiratory
emergency room visits, and other health effects) from criteria
pollutant emissions would decrease nationwide in 2035 and 2050 under
all CAFE and HDPUV FE alternative combinations, relative to the No-
Action Alternatives. The improvements to health impacts (or decreases
in health incidences) in 2035 and 2050 would stay the same or get
larger from Alternatives PC2LT002 and HDPUV4 to Alternatives PC6LT8 and
HDPUV14. These decreases reflect the generally increasing stringency of
the CAFE and HDPUV FE standard action alternatives as they become
implemented.
As mentioned above, changes in assumptions about modeled technology
adoption; the relative proportions of gasoline, diesel, and other fuels
in total fuel consumption changes; and changes in VMT from the rebound
effect would alter these health impact results; however, NHTSA believes
that assumptions employed in the modeling supporting these final
standards are reasonable.
c. Greenhouse Gas Emissions and Climate Change
(1) Direct and Indirect Impacts
In terms of climate effects, the action alternatives would decrease
both U.S. passenger car and light truck and HDPUV fuel consumption and
CO2 emissions compared with the relevant No-Action
Alternative, resulting in reductions in the anticipated increases in
global CO2 concentrations, temperature, precipitation, sea
level, and ocean acidification that would otherwise occur. They would
also, to a small degree, reduce the impacts and risks associated with
climate change. The impacts of the action alternatives on atmospheric
CO2 concentration, global mean surface temperature,
precipitation, sea level, and ocean pH would be small in relation to
global emissions trajectories. Although these effects are small, they
occur on a global scale and are long lasting; therefore, in aggregate,
they can have large consequences for health and welfare and can make an
important contribution to reducing the risks associated with climate
change.
(a) Greenhouse Gas Emissions
The CAFE standard action alternatives would have the following
impacts related to GHG emissions: Passenger cars and light trucks are
projected to emit 46,500 million metric tons of carbon dioxide
(MMTCO2) from 2027 through 2100 under the CAFE No-Action
Alternative. Compared to the No-Action Alternative, projected emissions
reductions from 2027 to 2100 under the CAFE standard action
alternatives would range from 400 to 7,000 MMTCO2. Under
Alternative PC2LT002, emissions reductions from 2027 to 2100 are
projected to be 400 MMTCO2. The CAFE standard action
alternatives would reduce total CO2 emissions from U.S.
passenger cars and light trucks by a range of 0.9 to 15.1 percent from
2027 to 2100 compared to the CAFE No-Action Alternative. Alternative
PC2LT002 would decrease these emissions by less than 1 percent through
2100. All CO2 emissions estimates associated with the CAFE
standard action alternatives include upstream emissions.
The HDPUV FE standard action alternatives would have the following
impacts related to GHG emissions: HDPUVs are projected to emit 9,700
MMTCO2from 2027 through 2100 under the HDPUV FE No-Action
Alternative. Compared to the No-Action Alternative, projected emissions
reductions from 2027 to 2100 under the HDPUV action alternatives would
range from 0 to 1,100 MMTCO2. Under Alternative HDPUV108,
emissions reductions from 2027 to 2100 are projected to be 300
MMTCO2. The HDPUV FE standard action alternatives would
decrease these emissions by a range of 0.0 to 11.3 percent from 2027 to
2100 compared to the HDPUV FE No-Action Alternative. Alternative
HDPUV108 would decrease these emissions by 3.1 percent through 2100.
All CO2 emissions estimates associated with the HDPUV FE
standard action alternatives include upstream emissions.
Compared with total projected CO2 emissions of 468
MMTCO2 from all passenger cars and light trucks under the
CAFE No-Action Alternative in the year 2100, the CAFE standard action
alternatives are expected to decrease CO2 emissions from
passenger cars and light trucks in the year 2100 by 2 percent under
Alternative PC1LT3, less than 2 percent under Alternative PC2LT4, 6
percent under Alternative PC3LT5, and 19 percent under Alternative
PC6LT8. Under Alternative PC2LT002, the 2100 total projected
CO2 emissions for all passenger cars and light trucks are
464 MMTCO2, reflecting a 1 percent decrease.
Compared with total projected CO2 emissions of 116
MMTCO2 from all HDPUVs under the HDPUV FE No-Action
Alternative in the year 2100, the HDPUV FE standard action alternatives
are expected to decrease CO2 emissions from HDPUVs in the
year 2100 by a range of less than 1 percent under Alternative HDPUV4 to
13 percent under Alternative HDPUV14. Under Alternative HDPUV108, the
2100 total projected CO2 emissions for all HDPUVs are 112
MMTCO2, reflecting a 4 percent decrease.
To estimate changes in CO2 concentrations and global
mean surface temperature, NHTSA used a reduced-complexity climate model
(MAGICC). The reference scenario used in the direct and indirect
analysis is the SSP3-7.0 scenario, which the Intergovernmental Panel on
Climate Change (IPCC) describes as a high emissions scenario that
assumes no successful, comprehensive global actions to mitigate GHG
emissions and yields atmospheric CO2 levels of 800 ppm and
an effective radiative forcing (ERF) of 7.0 watts per square meter (W/
m\2\) in 2100. Compared to the SSP3-7.0 total U.S. emissions projection
of 619,064 MMTCO2 under the CAFE No-Action Alternative from 2027 to
2100, the CAFE standard action alternatives are expected to reduce U.S.
emissions by .06 percent under Alternative PC2LT002, 0.18 percent under
Alternative PC1LT3, 0.16 percent under Alternative PC2LT4, 0.40 percent
under Alternative PC3LT5, and 1.13 percent under Alternative PC6LT8 by
2100. Global emissions would also be reduced to a lesser extent.
Compared to SSP3-7.0 total global CO2 emissions projection
of 4,991,547 MMTCO2 under the CAFE No-Action Alternative
from 2027 through 2100, the CAFE standard action alternatives are
expected to reduce global CO2 by 0.01 percent under
Alternative PC2LT002, 0.02 percent under Alternative PC1LT3, 0.02
percent under Alternative PC2LT4, 0.05 percent under Alternative
PC3LT5, and 0.14 percent under Alternative PC6LT8 by 2100. Additional
information about the range of alternatives' emissions decreases
compared to U.S. emissions projections is located in Chapter 5 of the
Final EIS.
Compared to the SSP3-7.0 total U.S. emissions projection of 619,064
[[Page 52845]]
MMTCO2 under the HDPUV No-Action Alternative from 2027 to 2100, the
HDPUV standard action alternatives are expected to reduce U.S.
emissions by 0.00 percent under Alternative HDPUV4, 0.05 percent under
Alternative HDPUV108, 0.08 percent under Alternative HDPUV10, and 0.18
percent under Alternative HDPUV14 by 2100. Global emissions would also
be reduced to a lesser extent. Compared to SSP3-7.0 total global
CO2 emissions projection of 4,991,547 MMTCO2
under the HDPUV No-Action Alternative from 2027 through 2100, the HDPUV
action alternatives are expected to reduce global CO2 by
less than 0.01 percent under Alternative HDPUV4, 0.01 percent under
Alternative HDPUV108, 0.01 percent under Alternative HDPUV10, and 0.02
percent under Alternative HDPUV14 by 2100.
The emissions reductions from all passenger cars and light trucks
in 2035 compared with emissions under the CAFE No-Action Alternative
are approximately equivalent to the annual emissions from 2,282,379
vehicles under Alternative PC2LT002 to 25,343,679 passenger cars and
light trucks (Alternative PC6LT8) in 2035, compared to the annual
emissions under the No-Action Alternative. A total of 260,932,626
passenger cars and light trucks are projected to be on the road in 2035
under the No-Action Alternative.\1333\ The emissions reductions from
HDPUVs in 2032 compared with emissions under the HDPUV FE No-Action
Alternative are approximately equivalent to the annual emissions from
16,180 HDPUVs (Alternative HDPUV4) to 785,474 HDPUVs (Alternative
HDPUV14) in 2035, compared to the annual emissions under the No-Action
Alternative. A total of 18,299,639 HDPUVs are projected to be on the
road in 2035 under the No-Action Alternative.\1334\
---------------------------------------------------------------------------
\1333\ Values for vehicle totals have been rounded. The
passenger car and light truck equivalency is based on an average
per[hyphen]vehicle emissions estimate, which includes both tailpipe
CO2 emissions and associated upstream emissions from fuel
production and distribution. The average passenger car and light
truck is projected to account for 3.94 metric tons of CO2
emissions in 2035 based on MOVES, the GREET model, and EPA analysis.
\1334\ Values for vehicle totals have been rounded. The average
HDPUV is projected to account for 8.46 metric tons of CO2
emissions in 2035 based on MOVES, the GREET model, and EPA analysis.
---------------------------------------------------------------------------
(b) Climate Change Indicators (Carbon Dioxide Concentration, Global
Mean Surface Temperature, Sea Level, Precipitation, and Ocean pH)
CO2 emissions affect the concentration of CO2
in the atmosphere, which in turn affects global temperature, sea level,
precipitation, and ocean pH. For the analysis of direct and indirect
impacts, NHTSA used the SSP3-7.0 scenario to represent the reference
case emissions scenario (i.e., future global emissions assuming no
comprehensive global actions to mitigate GHG emissions). NHTSA selected
the SSP3-7.0 scenario for its incorporation of a comprehensive suite of
GHG and pollutant gas emissions, including carbonaceous aerosols and a
global context of emissions with a full suite of GHGs and ozone
precursors.
The CO2 concentrations under the SSP3-7.0 emissions
scenario in 2100 are estimated to be 838.31 ppm under the CAFE No-
Action Alternative. CO2 concentrations under the CAFE
standard action alternatives could reach 837.65 ppm under Alternative
PC6LT8, indicating a maximum atmospheric CO2 decrease of
approximately 0.67 ppm compared to the CAFE No-Action Alternative.
Atmospheric CO2 concentrations under Alternative PC2LT002
would decrease by 0.04 ppm compared with the CAFE No-Action
Alternative. Under the HDPUV FE standard action alternatives,
CO2 concentrations under the SSP3-7.0 emissions scenario in
2100 are estimated to decrease to 838.21 ppm under Alternative HDPUV14,
indicating a maximum atmospheric CO2 decrease of
approximately 0.10 ppm compared to the HDPUV FE No-Action Alternative.
Atmospheric CO2 concentrations under Alternative HDPUV108
would decrease by 0.03 ppm compared with the HDPUV FE No-Action
Alternative.
Under the SSP3-7.0 emissions scenario, global mean surface
temperature is projected to increase by approximately 4.34 [deg]C (7.81
[deg]F) under the CAFE No-Action Alternative by 2100. Implementing the
most stringent alternative (Alternative PC6LT8) would decrease this
projected temperature rise by 0.003 [deg]C (0.005 [deg]F), while
Alternative PC2LT002 would decrease the projected temperature rise by
0.001 [deg]C (0.002 [deg]F).
Under the SSP3-7.0 emissions scenario, global mean surface
temperature is projected to increase by approximately 4.34 [deg]C (7.81
[deg]F) under the HDPUV FE No-Action Alternative by 2100. The range of
temperature increases under the HDPUV FE standard action alternatives
would decrease this projected temperature rise by a range of less than
0.0001 [deg]C (0.0002 [deg]F) under Alternative HDPUV4 to 0.0004 [deg]C
(0.0007 [deg]F) under Alternative HDPUV14.
Under the CAFE standard action alternatives, projected sea-level
rise in 2100 under the SSP3-7.0 scenario ranges from a high of 83.24
centimeters (32.77 inches) under the CAFE No-Action Alternative to a
low of 83.19 centimeters (32.75 inches) under Alternative PC6LT8.
Alternative PC6LT8 would result in a decrease in sea-level rise equal
to 0.06 centimeter (0.02 inch) by 2100 compared with the level
projected under the CAFE No-Action Alternative. Alternative PC2LT002
would result in a decrease of less than 0.01 centimeter (0.004 inch)
compared with the CAFE No-Action Alternative. Under the HDPUV FE
standard action alternatives, projected sea-level rise in 2100 under
the SSP3-7.0 scenario varies less than 0.01 centimeter (0.004 inch)
under Alternative HDPUV14 from a high of 83.24 centimeters (32.77
inches) under HDPUV FE No-Action Alternative. Under the SSP3-7.0
scenario, global mean precipitation is anticipated to increase by 7.42
percent by 2100 under the CAFE No-Action Alternative. Under the CAFE
standard action alternatives, this increase in precipitation would be
reduced by less than 0.01 percent.
Under the SSP3-7.0 scenario, global mean precipitation is
anticipated to increase by 7.42 percent by 2100 under the HDPUV FE No-
Action Alternative. HDPUV FE standard action alternatives would see a
reduction in precipitation of less than 0.01 percent.
Under the SSP3-7.0 scenario, ocean pH in 2100 is anticipated to be
8.1936 under Alternative PC6LT8, about 0.0003 more than the CAFE No-
Action Alternative. Under Alternative PC2LT002, ocean pH in 2100 would
be 8.1933, or less than 0.0001 more than the CAFE No-Action
Alternative.
Under the SSP3-7.0 scenario, ocean pH in 2100 is anticipated to be
8.1933 under Alternative HDPUV108, or less than 0.0001 more than the
HDPUV FE No-Action Alternative.
The action alternatives for both CAFE and HDPUV FE standards would
reduce the impacts of climate change that would otherwise occur under
the No-Action Alternative. Although the projected reductions in
CO2 and climate effects are small compared with total
projected future climate change, they are quantifiable and
directionally consistent and would represent an important contribution
to reducing the risks associated with climate change.
(2) Cumulative Impacts
(a) Greenhouse Gas Emissions
For the analysis of cumulative impacts, NHTSA used the SSP2-4.5
scenario to represent a reference case global emissions scenario that
assumes a moderate level of global actions to address climate change
and predicts CO2 emissions would remain around
[[Page 52846]]
current levels before starting to fall mid-century. The IPCC refers to
SSP2-4.5 as an intermediate emissions scenario. NHTSA chose this
scenario as a plausible global emissions baseline for the cumulative
analysis because of the potential impacts of these reasonably
foreseeable actions, yielding a moderate level of global GHG reductions
from the SSP3-7.0 baseline scenario used in the direct and indirect
analysis.
The CAFE and HDPUV alternative combinations would have the
following impacts related to GHG emissions: Projections of total
emissions reductions from 2027 to 2100 under the CAFE and HDPUV
alternative combinations and other reasonably foreseeable future
actions compared with the No-Action Alternatives range from 500
MMTCO2 under Alternatives PC2LT002 and HDPUV4 to 10,500
MMTCO2 under Alternatives PC6LT8 and HDPUV14. Under
Alternatives PC2LT002 and HDPUV108, emissions reductions from 2027 to
2100 are projected to be 800 MMTCO2. The action alternatives
would decrease total vehicle emissions by between 0.9 percent under
Alternatives PC2LT002 and HDPUV4 and 18.7 percent under Alternatives
PC6LT8 and HDPUV14 by 2100. Alternatives PC2LT002 and HDPUV108 would
decrease these emissions by 1.4 percent over the same period. Compared
with projected total global CO2 emissions of 2,484,191
MMTCO2 from all sources from 2027 to 2100 using the moderate
climate scenario, the incremental impact of this rulemaking is expected
to decrease global CO2 emissions between 0.01 percent under
Alternatives PC2LT002 and HDPUV4 and 0.21 percent under Alternatives
PC6LT8 and HDPUV14 by 2100. Alternatives PC2LT002 and HDPUV108 would
decrease these emissions by 0.02 percent over the same period.
(b) Climate Change Indicators (Carbon Dioxide Concentration, Global
Mean Surface Temperature, Sea Level, Precipitation, and Ocean pH)
Estimated atmospheric CO2 concentrations in 2100 range
from 587.78 ppm under the No-Action Alternatives to 586.89 ppm under
Alternatives PC6LT8 and HDPUV14 (the combination of the most stringent
CAFE and HDPUV FE standard alternatives). This is a decrease of 0.89
ppm compared with the No-Action Alternatives.
Global mean surface temperature decreases for the CAFE and HDPUV
alternative combinations compared with the No-Action Alternatives in
2100 range from a low of less than 0.0001 [deg]C (0.002 [deg]F) under
Alternatives PC2LT002 and HDPUV4 to a high of 0.0042 [deg]C (0.007
[deg]F) under Alternatives PC6LT8 and HDPUV14.
Global mean precipitation is anticipated to increase 6.11 percent
under the No-Action Alternatives, with the CAFE and HDPUV alternative
combinations reducing this effect up to 0.01 percent.
Projected sea-level rise in 2100 ranges from a high of 67.12
centimeters (26.42 inches) under the No-Action Alternatives to a low of
67.03 centimeters (26.39 inches) under Alternatives PC6LT8 and HDPUV14,
indicating a maximum decrease in projected sea-level rise of 0.08
centimeter (0.03 inch) by 2100.
Ocean pH in 2100 is anticipated to be 8.3334 under Alternatives
PC6LT8 and HDPUV14, about 0.0006 more than the No-Action Alternatives.
(c) Health, Societal, and Environmental Impacts of Climate Change
The Proposed Action and action alternatives would reduce the
impacts of climate change that would otherwise occur under the No-
Action Alternatives. The magnitude of the changes in climate effects
that would be produced by the most stringent action alternatives
combination (Alternatives PC6LT8 and HDPUV14) using the three-degree
sensitivity analysis by the year 2100 is 0.89 ppm lower concentration
of CO2, a four-thousandths-of-a-degree decrease in the
projected temperature rise, a small percentage change in precipitation
increase, a 0.08 centimeter (0.03 inch) decrease in projected sea-level
rise, and an increase of 0.0006 in ocean pH. Although the projected
reductions in CO2 and climate effects are small compared
with total projected future climate change, they are quantifiable,
directionally consistent, and would represent an important contribution
to reducing the risks associated with climate change. As discussed
below, one significant risk associated with climate change is reaching
a level of atmospheric greenhouse gas concentrations that cause large-
scale, abrupt changes in the climate system and lead to significant
impacts on human and natural systems. We do not know what level of
atmospheric concentrations will trigger a tipping point--only that the
risk increases significantly as concentrations rise. As such, even the
relatively small reductions achieved by this rule could turn out to be
the reductions that avoid triggering a tipping point, and thereby avoid
the highly significant deleterious climate impacts that would have
followed.
Although NHTSA does quantify the changes in monetized damages that
can be attributable to each action alternative with its use of the
social cost of carbon metric, many specific impacts of climate change
on health, society, and the environment cannot be estimated
quantitatively. Economists have estimated the incremental effect of GHG
emissions, and monetized those effects, to express the social costs of
carbon, CH4, and N2O in terms of dollars per ton
of each gas. By multiplying the emissions reductions of each gas by
estimates of their social cost, NHTSA derived a monetized estimate of
the benefits associated with the emissions reductions projected under
each action alternative. NHTSA has estimated the monetized benefits
associated with GHG emissions reductions in its Final Regulatory Impact
Analysis Chapter 6.5.1. See Chapter 6.2.1 of the Technical Support
Document (TSD) for a description of the methods used for these
estimates.
NHTSA also provides a qualitative discussion of these impacts by
presenting the findings of peer-reviewed panel reports including those
from IPCC, the Global Change Research Program (GCRP), the Climate
Change Science Program (CCSP), the National Resource Council (NRC), and
the Arctic Council, among others. While the action alternatives would
decrease growth in GHG emissions and reduce the impact of climate
change across resources relative to the No-Action Alternative, they
would not themselves prevent climate change and associated impacts.
Long-term climate change impacts identified in the scientific
literature are briefly summarized below, and vary regionally, including
in scope, intensity, and directionality (particularly for
precipitation). While it is difficult to attribute any particular
impact to emissions that could result from this rulemaking, the
following impacts are likely to be beneficially affected to some degree
by reduced emissions from the action alternatives:
Freshwater Resources: Projected risks to freshwater
resources are expected to increase due to changing temperature and
precipitation patterns as well as the intensification of extreme events
like floods and droughts, affecting water security in many regions of
the world and exacerbating existing water-related vulnerabilities.
Terrestrial and Freshwater Ecosystems: Climate change is
affecting terrestrial and freshwater ecosystems, including their
component species and the services they provide. This impact can range
in scale (from individual to population to species) and can affect all
aspects of an organism's life, including
[[Page 52847]]
its range, phenology, physiology, and morphology.
Ocean Systems, Coasts, and Low-Lying Areas: Climate
change-induced impacts on the physical and chemical characteristics of
oceans (primarily through ocean warming and acidification) are exposing
marine ecosystems to unprecedented conditions and adversely affecting
life in the ocean and along its coasts. Anthropogenic climate change is
also worsening the impacts on non-climatic stressors, such as habitat
degradation, marine pollution, and overfishing.
Food, Fiber, and Forest Products: Through its impacts on
agriculture, forestry and fisheries, climate change adversely affects
food availability, access, and quality, and increases the number of
people at risk of hunger, malnutrition, and food insecurity.
Urban Areas: Extreme temperatures, extreme precipitation
events, and rising sea levels are increasing risks to urban
communities, their health, wellbeing, and livelihood, with the
economically and socially marginalized being most vulnerable to these
impacts.
Rural Areas: A high dependence on natural resources,
weather-dependent livelihood activities, lower opportunities for
economic diversity, and limited infrastructural resources subject rural
communities to unique vulnerabilities to climate change impacts.
Human Health: Climate change can affect human health,
directly through mortality and morbidity caused by heatwaves, floods
and other extreme weather events, changes in vector-borne diseases,
changes in water and food-borne diseases, and impacts on air quality as
well as through indirect pathways such as increased malnutrition and
mental health impacts on communities facing climate-induced migration
and displacement.
Human Security: Climate change threatens various
dimensions of human security, including livelihood security, food
security, water security, cultural identity, and physical safety from
conflict, displacement, and violence. These impacts are interconnected
and unevenly distributed across regions and within societies based on
differential exposure and vulnerability.
Stratospheric Ozone: There is strong evidence that
anthropogenic influences, particularly the addition of GHGs and ozone-
depleting substances to the atmosphere, have led to a detectable
reduction in stratospheric ozone concentrations and contributed to
tropospheric warming and related cooling in the lower stratosphere.
These changes in stratospheric ozone have further influenced the
climate by affecting the atmosphere's temperature structure and
circulation patterns.
Compound events: Compound events consist of combinations
of multiple hazards that contribute to amplified societal and
environmental impacts. Observations and projections show that climate
change may increase the underlying probability of compound events
occurring. To the extent the action alternatives would decrease the
rate of CO2 emissions relative to the relevant No-Action
Alternative, they would contribute to the general decreased risk of
extreme compound events. While this rulemaking alone would not
necessarily decrease compound event frequency and severity from climate
change, it would be one of many global actions that, together, could
reduce these effects.
Tipping Points and Abrupt Climate Change: Tipping points
represent thresholds within Earth systems that could be triggered by
continued increases in the atmospheric concentration of GHGs,
incremental increases in temperature, or other relatively small or
gradual changes related to climate change. For example, the melting of
the Greenland ice sheet, Arctic sea-ice loss, destabilization of the
West Antarctic ice sheet, and deforestation in the Amazon and dieback
of boreal forests are seen as potential tipping points that can cause
large-scale, abrupt changes in the climate system and lead to
significant impacts on human and natural systems. We note that all of
these adverse effects would be mitigated to some degree by our
standards.
(d) Qualitative Impacts Assessment
In cases where quantitative impacts assessment is not possible,
NHTSA presents the findings of a literature review of scientific
studies in the Final EIS, such as in Chapter 6, where NHTSA provides a
literature synthesis focusing on existing credible scientific
information to evaluate the most significant lifecycle environmental
impacts from some of the technologies that may be used to comply with
the alternatives. In Chapter 6, NHTSA describes the life-cycle
environmental implications related to the vehicle cycle phase
considering the materials and technologies (e.g., batteries) that NHTSA
forecasts vehicle manufacturers might use to comply with the CAFE and
HDPUV FE standards. In Chapter 7, NHTSA discusses EJ and qualitatively
describes potential disproportionate impacts on low-income and minority
populations. In Chapter 8, NHTSA qualitatively describes potential
impacts on historic and cultural resources. In these chapters, NHTSA
concludes that impacts would vary between the action alternatives.
2. Conclusion
Based on the foregoing, NHTSA concludes from the Final EIS that
Alternative PC6LT8 is the overall environmentally preferable
alternative for model years 2027-2031 CAFE standards and Alternative
HDPUV14 is the overall environmentally preferable alternative for model
years 2030-2035 HDPUV FE standards because, assuming full compliance
were achieved regardless of NHTSA's assessment of the costs to industry
and society, it would result in the largest reductions in fuel use and
CO2 emissions among the alternatives considered. In
addition, Alternative PC6LT8 and Alternative HDPUV14 would result in
lower overall emissions levels over the long term of criteria air
pollutants and of the toxic air pollutants studied by NHTSA. Impacts on
other resources would be proportional to the impacts on fuel use and
emissions, as further described in the Final EIS, with Alternative
PC6LT8 and Alternative HDPUV14 being expected to have the fewest
negative environmental impacts. Although the CEQ regulations require
NHTSA to identify the environmentally preferable alternative, NHTSA
need not adopt it, as described above. The following section explains
how NHTSA balanced the relevant factors to determine which alternative
represented the maximum feasible standards, including why NHTSA does
not believe that the environmentally preferable alternative is maximum
feasible.
NHTSA is informed by the discussion above and the Final EIS in
arriving at its conclusion that Alternative PC2LT002 and HDPUV108 is
maximum feasible, as discussed below. The following section (Section
VI.D) explains how NHTSA balanced the relevant factors to determine
which alternatives represented the maximum feasible standards for
passenger cars, light trucks, and HDPUVs.
D. Evaluating the EPCA/EISA Factors and Other Considerations To Arrive
at the Final Standards
Accounting for all of the information presented in this preamble,
in the TSD, in the FRIA, and in the EIS, consistent with our statutory
authorities, NHTSA continues to approach the decision of what standards
would be ``maximum feasible'' as a balancing of relevant factors and
information, both for passenger cars and light trucks, and for
[[Page 52848]]
HDPUVs. The different regulatory alternatives considered in this final
rule represent different balancing of the factors--for example,
PC2LT002, the preferred alternative, would represent a balancing in
which NHTSA determined that economic practicability significantly
outweighed the need of the U.S. to conserve energy for purposes of the
rulemaking time frame. By contrast, PC6LT8, a more stringent
alternative, would represent a balancing in which NHTSA determined that
the need of the U.S. to conserve energy significantly outweighed
economic practicability during the same period. Because the statutory
factors that NHTSA must consider are slightly different between
passenger cars and light trucks on the one hand, and HDPUVs on the
other, the following sections separate the segments and describe
NHTSA's balancing approach for each final rule.
1. Passenger Cars and Light Trucks
NHTSA's purpose in setting CAFE standards is to conserve energy, as
directed by EPCA/EISA. Energy conservation provides many benefits to
the American public, including better protection for consumers against
changes in fuel prices, significant fuel savings and reduced impacts
from harmful pollution. NHTSA continues to believe that fuel economy
standards can function as an important insurance policy against oil
price volatility, particularly to protect consumers even as the U.S.
has improved its energy independence over time. The U.S. participates
in the global market for oil and petroleum fuels. As a market
participant--on both the demand and supply sides--the nation is exposed
to fluctuations in that market. The fact that the U.S. may produce more
petroleum in a given period does not in and of itself protect the
nation from the consequences of these fluctuations. Accordingly, the
nation must conserve petroleum and reduce the oil intensity of the
economy to insulate itself from the effects of market volatility. The
primary mechanism for doing so in the transportation sector is to
continue to improve fleet fuel economy. In addition, better fuel
economy saves consumers money at the gas pump. For example, our
analysis estimates that the preferred alternative would reduce fuel
consumption by 64 billion gallons through calendar year 2050 and save
buyers of new model year 2031 vehicles an average of $639 in gasoline
over the lifetime of the vehicle. Moreover, as climate change
progresses, the U.S. may face new energy-related security risks if
climate effects exacerbate geopolitical tensions and destabilization.
Thus, mitigating climate effects by increasing fuel economy standards,
as all of the action alternatives in this final rule would do over
time, can also potentially improve energy security.
Maximum feasible CAFE standards look to balance the need of the
U.S. to conserve energy with the technological feasibility and economic
impacts of potential future standards, while also considering other
motor vehicle standards of the Government that may affect automakers'
ability to meet CAFE standards. To comply with our statutory
constraints, NHTSA disallows the application of BEVs (and other
dedicated AFVs) in our analysis in response to potential new CAFE
standards, and PHEVs are applied only with their charge-sustaining mode
fuel economy.
In considering this final rule, NHTSA is mindful of the fact that
the standards for model years 2024-2026 included year-by-year
improvements compared to the standards established in 2020 that were
faster than had been typical since the inception of the CAFE program in
the late 1970s and early 1980s. Those standards were intended to
correct for the lack of adequate consideration of the need for energy
conservation in the 2020 rule and were intended to reestablish the
appropriate level of consideration of these effects that had been
included in the initial 2012 rule. Thus, though the standards increased
significantly when compared to the 2020 rule, they were comparable to
the standards that were initially projected as augural standards for
the model years included in the 2012 final rule. The world has changed
considerably in some ways, but less so in others. Since May 2022, the
U.S. economy continues to have strengths and weaknesses; the auto
industry remains in the middle of a major transition for a variety of
reasons besides the CAFE program. NHTSA is prohibited from considering
the fuel economy effects of this transition, but industry commenters
argue that NHTSA must not fail to account for the financial effects of
this transition. Upon considering the comments, NHTSA agrees that
diverting manufacturer resources to paying CAFE non-compliance
penalties, as our statutorily-constrained analysis shows manufacturers
doing under the more stringent regulatory alternatives, would not aid
manufacturers in the transition and would not ultimately improve energy
conservation, since non-compliance means that manufacturers are
choosing to pay penalties rather than to save fuel. Further stringency
increases at a comparable rate, immediately on the heels of the
increases for model years 2024-2026, may therefore be beyond maximum
feasible for model years 2027-2032.
In the NPRM, NHTSA tentatively concluded that Alternative PC2LT4
was the maximum feasible alternative that best balanced all relevant
factors for passenger cars and light trucks built in model years 2027-
2032. NHTSA explained that energy conservation was still our paramount
objective, for the consumer benefits, energy security benefits, and
environmental benefits that it provides. NHTSA expressed its belief
that a large percentage of the fleet would remain propelled by ICEs
through 2032, despite the potential significant transformation being
driven by reasons other than the CAFE standards and stated that the
proposal would encourage those ICE vehicles produced during the
standard-setting time frame to achieve and maintain significant fuel
economies, improve energy security, and reduce GHG emissions and other
air pollutants. At the same time, NHTSA stated that our estimates
suggest that the proposal would continue to reduce petroleum
dependence, saving consumers money and fuel over the lifetime of their
vehicles, particularly light truck buyers, among other benefits, while
being economically practicable for manufacturers to achieve.
NHTSA further explained that although Alternatives PC3LT5 and
PC6LT8 would conserve more energy and provide greater fuel savings
benefits and carbon dioxide emissions reductions, NHTSA believed that
those alternatives may simply not be achievable for many manufacturers
in the rulemaking time frame, particularly given NHTSA's statutory
restrictions on the technologies we may consider when determining
maximum feasible standards. Additionally, NHTSA expressed concern that
compliance with those more stringent alternatives would impose
significant costs on individual consumers without corresponding fuel
savings benefits large enough to, on average, offset those costs.
Within that framework, NHTSA's NPRM analysis suggested that the more
stringent alternatives could push more technology application than
would be economically practicable, given the rate of increase for the
model years 2024-2026 standards, given anticipated reference baseline
activity on which our standards would be building, and given a
realistic consideration of the rate of response that industry is
capable of achieving. In contrast to Alternatives PC3LT5 and PC6LT8,
NHTSA argued that Alternative PC2LT4 appeared to come at a cost that
the market can bear,
[[Page 52849]]
appeared to be much more achievable, and would still result in consumer
net benefits on average. NHTSA also stated that PC2LT4 would achieve
large fuel savings benefits and significant reductions in carbon
dioxide emissions. NHTSA therefore tentatively concluded Alternative
PC2LT4 was a better proposal than PC3LT5 and PC6LT8 given these
factors.
Comments on this tentative conclusion varied widely. In general,
automotive and oil industry commenters and conservative think tanks
argued that the proposal was beyond maximum feasible,\1335\ while
environmental and some state commenters argued that a more stringent
alternative was likely to be maximum feasible.
---------------------------------------------------------------------------
\1335\ For example, Subaru, Docket No. NHTSA-2023-0022-58655, at
3; Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at 2;
American Consumer Institute, Docket No. NHTSA-2023-0022-50765, at 1;
BMW, Docket No. NHTSA-2023-0022-58614, at 2.
---------------------------------------------------------------------------
Some commenters supported the proposed PC2LT4 alternative as
maximum feasible.\1336\ ICCT stated, for example, that ``Substantial
public and private sector investments and a comprehensive package of
federal and state level policies make the timing and stringency of the
proposed rule achievable, feasible, and cost-effective. ICCT recommends
its finalization as quickly as possible. Doing so will provide a clear
long-term signal that automakers, suppliers, and other stakeholders
need to make needed investments with confidence.'' \1337\ MEMA agreed
with the proposal that light truck stringency could be advanced faster
than passenger car stringency, stating that ``The current passenger car
and light truck markets have different levels of advanced technology
penetration and differ in terms of the extent of technological
improvements that can be made.'' \1338\
---------------------------------------------------------------------------
\1336\ For example, Arconic, Docket No. NHTSA-2023-0022-48374,
at 3; DC Government Agencies, Docket No. NHTSA-2023-0022-27703, at
1.
\1337\ ICCT, Docket No. NHTSA-2023-0022-54064, at 3, 4.
\1338\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 2-3.
---------------------------------------------------------------------------
Other commenters argued that more stringent standards were likely
to be maximum feasible. Many stakeholders commented that standards
should be at least as high as PC2LT4.\1339\ ACEEE argued that more
stringent standards than PC2LT4 are feasible because automakers have
stated that they will build more BEVs and the IRA tax credits will spur
more BEVs, and if automakers build more BEVs than NHTSA projects,
NHTSA's standards would be ineffective.\1340\ NESCAUM and OCT commented
that more stringent standards are economically practicable,
technologically feasible, and would keep better pace with standards
from EPA and California.\1341\
---------------------------------------------------------------------------
\1339\ Individual citizen form letters, Docket No. NHTSA-2023-
0022-63051; MPCA, Docket No. NHTSA-2023-0022-60666, at 1; ELPC,
Docket No. NHTSA-2023-0022-60687, at 3.
\1340\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 2.
\1341\ NESCAUM, Docket No. NHTSA-2023-0022-57714, at 2; OCT,
Docket No. NHTSA-2023-0022-51242, at 3.
---------------------------------------------------------------------------
A number of commenters relatedly argued that NHTSA should
prioritize energy conservation and weigh the need of the U.S. to
conserve energy more heavily, and find that more stringent standards
than the proposal were maximum feasible.\1342\ Commenters focused on
issues such as the urgency of climate crisis, its unequal impacts, the
need to meet the U.S.'s Paris Accord targets, public health effects,
environmental justice, and consumer fuel costs (where more stringent
standards ``make a meaningful difference to low-income households and
households of color that generally spend a greater proportion of their
income on transportation costs'').\1343\ Some state commenters, like
Wisconsin DNR, urged NHTSA to set the most stringent standards due to
concerns about criteria and GHG emissions, and stated that Wisconsin
plans to support these efforts through electrification planning and
infrastructure investments.\1344\
---------------------------------------------------------------------------
\1342\ See, e.g., EDF, Docket No. NHTSA-2023-0022-62360, at 1-2;
Tesla, Docket No. NHTSA-2023-0022-60093, at 10; IEC, Docket No.
NHTSA-2023-0022-24513, at 1.
\1343\ SELC, Docket No. NHTSA-2023-0022-60224, at 4, 6; IEC,
Docket No. NHTSA-2023-0022-24513, at 1; Chispa LCV, Docket No.
NHTSA-2023-0022-24464, at 1; LCV, Docket No. NHTSA-2023-0022-27796,
at 1.
\1344\ Wisconsin DNR, Docket No. NHTSA-2023-0022-21431, at 2.
---------------------------------------------------------------------------
Some commenters stated that light truck stringency should increase
faster than passenger car stringency, arguing that the current design
of the standards encourages companies to build trucks instead of cars,
with resulting worse outcomes for both fuel savings and safety, due to
the proliferation of larger vehicles on the roads.\1345\ The States and
Cities commenters argued that NHTSA is allowed to set standards that
increase faster for light trucks than for passenger cars, and that
therefore NHTSA should consider PC3LT5 or PC2.5LT7, depending on what
the record indicated would be maximum feasible.\1346\ These commenters
stated that although net benefits for passenger cars may be negative,
net benefits for light trucks were positive, with a peak at the most
stringent alternative, and therefore NHTSA should pick PC3LT5,\1347\
and that either PC3LT5 or PC2.5LT7 ``are technologically feasible,
economically practicable, and effectuate the purpose of EPCA to
conserve energy, thus satisfying the `maximum feasible' mandate.''
\1348\ These commenters further argued that NHTSA should not rely on an
``uncertain'' concern about consumer demand to such an extent that it
ignored the ``overarching goal of fuel conservation,'' 793 F.2d 1322,
1340 (D.C. Cir. 1986), and noted that the estimated per-vehicle costs
for PC3LT5 were actually lower than what NHTSA had described as
economically practicable for the model years 2024-2026 standards.\1349\
These commenters stated that NHTSA must not give so much weight to
economic practicability as to reject PC3LT5, because NHTSA is afraid of
possibly burdening sales through extra cost.
---------------------------------------------------------------------------
\1345\ SELC, Docket No. NHTSA-2023-0022-60224, at 6; Public
Citizen, Docket No. NHTSA-2023-0022-57095, at 2.
\1346\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 2.
\1347\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 32.
\1348\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 43.
\1349\ States and Cities, Docket No. NHTSA-2023-0022-61904,
Attachment 2, at 31.
---------------------------------------------------------------------------
SELC also supported NHTSA choosing PC3LT5, arguing that its
societal benefits were higher than the proposal, and that choosing a
more stringent alternative than the proposal would provide a buffer
against uncertainty in the value of the SC-GHG and against the risk
that compliance flexibilities could end up undermining fuel
savings.\1350\
---------------------------------------------------------------------------
\1350\ SELC, Docket No. NHTSA-2023-0022-60224, at 7.
---------------------------------------------------------------------------
A number of other commenters stated that NHTSA should choose
PC6LT8, because that alternative would result in the largest fuel
savings and climate benefits,\1351\ and would be most beneficial for
public health.\1352\ NHTSA
[[Page 52850]]
received over 70,000 form letters and comments from individuals in
favor of NHTSA choosing PC6LT8.\1353\ Public Citizen commented that
PC6LT8 is technologically and economically feasible, because the
technology is available and it can be afforded by companies, who are
making record profits.\1354\ ACEEE similarly argued that PC6LT8 can be
met with SHEVs and a variety of ICE-improving technology that will save
consumers money at the pump, and concluded that therefore PC6LT8 is
maximum feasible.\1355\ Several commenters cited a Ceres study finding
that the most stringent standards would be best for the competitiveness
of the auto industry.\1356\ ZETA commented that PC6LT8 is cost-
effective and feasible, and best for energy security.\1357\
---------------------------------------------------------------------------
\1351\ Lucid, Docket No. NHTSA-2023-0022-50594, at 5; Colorado
State Agencies, Docket No. NHTSA-2023-0022-57625, at 2; Green
Latinos, Docket No. NHTSA-2023-0022-59638, at 1; BICEP Network,
Docket No. NHTSA-2023-0022-61135, at 1; Blue Green Alliance, Docket
No. NHTSA-2023-0022-61668, at 1; Minnesota Rabbinical Association,
Docket No. NHTSA-2023-0022-28117, at 1; ZETA, Docket No. NHTSA-2023-
0022-60508, at 18; CALSTART, Docket No. NHTSA-2023-0022-61099, at 1.
\1352\ Public Citizen, Docket No. NHTSA-2023-0022-57095, at 1;
Colorado State Agencies, Docket No. NHTSA-2023-0022-57625, at 2;
Green Latinos, Docket No. NHTSA-2023-0022-59638, at 1; ZETA, Docket
No. NHTSA-2023-0022-60508, at 18; CALSTART, Docket No. NHTSA-2023-
0022-61099, at 1; Mothers & Others for Clean Air, Docket No. NHTSA-
2023-0022-60614, at 1.
\1353\ NRDC form letter, Docket No. NHTSA-2023-0022-57375;
Consumer Reports, Docket No. NHTSA-2023-0022-61098, Attachment 3;
Climate Hawks, Docket No. NHTSA-2023-0022-61094, at 1.
\1354\ Public Citizen, Docket No. NHTSA-2023-0022-57095, at 2.
\1355\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 3.
\1356\ Ceres, Docket No. NHTSA-2023-0022-28667, at 1;
Conservation Voters of South Carolina, Docket No. NHTSA-2023-0022-
27800, at 1; Minnesota Rabbinical Association, Docket No. NHTSA-
2023-0022-28117, at 1; CALSTART, Docket No. NHTSA-2023-0022-61099,
at 1.
\1357\ ZETA, Docket No. NHTSA-2023-0022-60508, at 1.
---------------------------------------------------------------------------
OCT found even PC6LT8 to be insufficiently stringent, arguing that
internal combustion engines should be reduced to zero by 2027 in order
to achieve climate targets. In lieu of this, that commenter requested
that NHTSA align the CAFE standards with California's target of 100%
ZEV for the light-duty fleet by 2035.\1358\
---------------------------------------------------------------------------
\1358\ OCT, Docket No. NHTSA-2023-0022-51242, at 2-4.
---------------------------------------------------------------------------
In contrast, many other commenters expressed concern that the
proposed standards were too stringent, and many commenters encouraged
NHTSA to balance the factors differently for the final rule and find
that less stringent standards were maximum feasible. Some commenters
encouraged NHTSA to weigh technological feasibility and economic
practicability more heavily.\1359\ For example, the Alliance argued
that ``When the majority of manufacturers and a significant portion of
the fleet (or worse yet the fleet on average) are projected to be
unable to meet (a question of technological feasibility) or unwilling
to meet (a question of economic practicability) the proposed standards,
the proposal clearly exceeds maximum feasibility for both passenger
cars and light trucks.'' \1360\ The American Consumer Institute stated
that economic practicability and consumer choice were more important
than environmental concerns, and argued that EPCA focuses on direct
consumer benefits rather than environmental benefits.\1361\ The
Alliance stated that the proposed standards were too stringent because
the average per-vehicle price increase was estimated to be $3,000,
which ``ignored'' economic practicability.\1362\
---------------------------------------------------------------------------
\1359\ The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 2, at 2; Nissan, Docket No. NHTSA-2023-0022-60696, at 10;
U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-61069, at 6.
\1360\ The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 2, at 6-7.
\1361\ American Consumer Institute, Docket No. NHTSA-2023-0022-
50765, at 2; NADA, Docket No. NHTSA-2023-0022-58200, at 5.
\1362\ The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 2, at 2.
---------------------------------------------------------------------------
Many of these commenters also mentioned compliance shortfalls and
estimated penalties associated with the proposed standards. Volkswagen
argued that it was arbitrary and capricious to set standards that
result in nearly everyone being out of compliance.\1363\ Toyota stated
that the estimated $14 billion in penalties demonstrates ``that the
technology being relied upon is insufficient to achieve the proposed
standards,'' \1364\ and Volkswagen and Jaguar commented that
effectively mandating penalties diverts resources for no environmental
or energy benefit.\1365\ POET commented that ``The D.C. Circuit has
found that `a standard with harsh economic consequences for the auto
industry . . . would represent an unreasonable balancing of EPCA's
policies,''' and has previously approved NHTSA stating that ``If
manufacturers had to restrict the availability of large trucks and
engines in order to adhere to CAFE standards, the effects . . . would
go beyond the realm of `economic practicability' as contemplated in the
Act.'' \1366\ Toyota further argued that while NHTSA had stated in the
NPRM that automakers could manufacture more BEVs rather than pay
penalties, ``The preferred alternative standards do not account for the
cost of a manufacturer to pursue higher levels of electrification than
currently in the baseline assumption. Further, the expectation that
manufacturers can simply make and sell more EVs ignores the abrupt jump
in 2027 model year stringency,'' due to FCIV and PEF changes, as well
as the uncertainty of the market.\1367\ Jaguar also commented that the
stringency of the early years of the proposed standards was
particularly problematic.\1368\
---------------------------------------------------------------------------
\1363\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 5.
\1364\ Toyota, Docket No. NHTSA-2023-0022-61131, at 2.
\1365\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 5;
Jaguar, Docket No. NHTSA-2023-0022-57296, at 4.
\1366\ POET, Docket No. NHTSA-2023-0022-61561, at 16, citing
Center for Auto Safety v. NHTSA, 793 F.2d 1322 (D.C. Cir. 1986).
\1367\ Toyota, Docket No. NHTSA-2023-0022-61131, at 20.
\1368\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 4.
---------------------------------------------------------------------------
The Heritage Foundation commented that ``In administering the fuel
economy program, NHTSA must (i) respect the practical needs and desires
of American car buyers; (ii) take into account the economic realities
of supply and demand in the auto markets; (iii) protect the
affordability of vehicle options for American families; (iv) preserve
the vitality of the domestic auto industry, which sustains millions of
good-paying American jobs; (v) maintain highway traffic safety for the
country; (vi) consider the nation's need to conserve energy; and (vii)
advance the goal of reducing America's dependence on foreign supplies
of critical inputs.'' \1369\ The America First Policy Institute
commented that fuel economy standards do not save consumers enough
money, and that a better way to help consumers save money on fuel is
``creating a regulatory environment that is more amenable to oil
production and refining.'' \1370\ CEA commented that fuel efficiency
standards are a bad way to reduce carbon from the transport sector,
because the compliance cost per ton is much larger than the SC-GHG you
used.\1371\
---------------------------------------------------------------------------
\1369\ Heritage Foundation, Docket No. NHTSA-2023-0022-61952, at
4.
\1370\ America First Policy Institute, Docket No. NHTSA-2023-
0022-61447, at 4.
\1371\ CEA, Docket No. NHTSA-2023-0022-61918, at 12. NHTSA notes
that the purpose of the CAFE standards is energy conservation and
reduction of fuel consumption, and that reducing CO2
emissions is a co-benefit of the standards. While NHTSA accounts for
the economic benefit of reducing CO2 emissions in our
cost-benefit analysis, NHTSA's decision regarding maximum feasible
stringency is merely informed by and not driven by the cost-benefit
analysis, and therefore NHTSA disagrees that cost per ton would be a
relevant metric for distinguishing regulatory alternatives.
---------------------------------------------------------------------------
Some comments focused on the feasibility of the proposed passenger
car standards. For example, Volkswagen pointed to an analysis from the
Alliance stating that most of the industry would be unable to comply
with the passenger car standards in model years 2027-2031.\1372\ The
West Virginia Attorney General's Office argued that NHTSA ``even admits
that massive EV increases are necessary to comply with the
[[Page 52851]]
Proposed Rule--after all, `manufacturers will find it difficult to
improve fuel economy with [internal combustion] engine technologies.'
(citing NPRM at 88 FR at 56259)'' \1373\ CEA commented that NHTSA had
not independently justified the passenger car standards and was
attempting to downplay their difficulty by bundling the results with
those for the light truck standards.\1374\ Several commenters noted
that net benefits for the passenger car alternatives were
negative,\1375\ with Valero arguing that NHTSA was attempting to bypass
the negative net benefits by asserting that the costs to consumers are
outweighed by the environmental benefits, which Valero stated were very
minor and which would disappear if NHTSA had conducted a full life-
cycle analysis of BEV production.\1376\ POET argued that net benefits
should be positive for passenger car drivers,\1377\ and a number of
commenters requested that the passenger car standards be set at the No-
Action level for the final rule because of net benefits (both societal
and to consumers).\1378\ Porsche further argued that ``In this specific
proposal, where costs so dramatically outweigh consumer private
benefits, it would appear NHTSA is not balancing economic
practicability, but rather may be inappropriately minimizing it.''
\1379\
---------------------------------------------------------------------------
\1372\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3.
\1373\ West Virginia Attorney General's Office, Docket No.
NHTSA-2023-0022-63056, at 6, 12. NHTSA notes that this comment
incompletely quotes the agency's discussion in the NPRM, in which
NHTSA explained on the same page that it was not proposing to set
passenger car standards higher than 2 percent per year because NHTSA
is prohibited from considering the fuel economy of BEVs or the full
fuel economy of PHEVs, and so NHTSA realized that expecting
manufacturers to achieve more stringent standards with ICEVs and
maintain reasonable costs was unrealistic.
\1374\ CEA, NHTSA-2023-0022-61918, at 25-26.
\1375\ For example, KCGA, Docket No. NHTSA-2023-0022-59007, at
4.
\1376\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A,
at 14.
\1377\ POET, Docket No. NHTSA-2023-0022-61561, at 12.
\1378\ MCGA, Docket No. NHTSA-2023-0022-60208, at 14-15;
Porsche, Docket No. NHTSA-2023-0022-59240, at 3; AmFree, Docket No.
NHTSA-2023-0022-62353, at 5; RFA et al. 2, Docket No. NHTSA-2023-
0022-57625, at 14.
\1379\ Porsche, Docket No. NHTSA-2023-0022-59240, at 3.
---------------------------------------------------------------------------
Other comments focused on the feasibility of the proposed light
truck standards. Volkswagen argued that manufacturers will have to
decrease utility to meet the proposed light truck standards.\1380\
Porsche expressed concern that raising light truck stringency faster
than passenger car stringency was unfair and ``creates inequity among
products, and ultimately among OEMs who sell different types of
vehicles.'' \1381\ Stellantis similarly argued that ``Under an
appropriate rule, multiple manufacturers should be able to readily meet
standards in a category as large as the light truck/SUV category, so as
to maintain competition and consumer choice and avoid unduly benefiting
a single manufacturer. A rule where only one manufacturer can
comfortably comply is arbitrary and capricious, at least a `relevant
factor' that NHTSA has failed to consider.'' \1382\
---------------------------------------------------------------------------
\1380\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 2.
\1381\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 3; AAPC,
Docket No. NHTSA-2023-0022-60610, at 1.
\1382\ POET, Docket No. NHTSA-2023-0022-61561, at 12.
---------------------------------------------------------------------------
The Alliance provided extensive comments as to why the stringency
of light truck standards should not increase faster than the stringency
of passenger car standards. First, they stated that light trucks are
bigger and heavier with generally larger frontal area (decreasing their
fuel economy), and they can perform work like off-roading, towing and
hauling, which also decrease their fuel economy.\1383\ Second, they
commented that S&P Global Mobility data shows that from model year 2012
to model year 2022, setting aside alternative fuel vehicles, passenger
car fuel consumption improved 12 percent, while light truck fuel
consumption improved 18 percent.\1384\ And third, they disagreed at
length that light trucks had less fuel economy-improving technology
than passenger cars, stating that
---------------------------------------------------------------------------
\1383\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
C, at 24; U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, at 2.
\1384\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
C, at 24-25.
---------------------------------------------------------------------------
The powertrain efficiency of the car and truck fleets,
excluding EVs, are the same--24 percent.\1385\
---------------------------------------------------------------------------
\1385\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
C, at 26.
---------------------------------------------------------------------------
Light trucks have also generally decreased roadload more
quickly than passenger cars over the last decade, and the passenger car
fleet (and cars as a subfleet) increased roadload.\1386\ Passenger cars
have more aero and MR in the reference baseline, but light trucks have
more low rolling resistance technology, and light trucks are limited in
their ability to apply aero technologies because of pickup
trucks.\1387\
---------------------------------------------------------------------------
\1386\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
C, at 26.
\1387\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
C, at 32.
---------------------------------------------------------------------------
Light trucks have greater electrification tech levels (12v
start-stop, SHEV) than passenger cars, which have a higher proportion
of BEVs, which NHTSA is prohibited from considering anyway, so light
trucks are more electrified for NHTSA's purposes than passenger cars,
and these trends are projected to continue.\1388\ (Ford similarly
argued that LT4 was too stringent because NHTSA did not account for the
``likely [slower] rates of [full] electrification in the Truck segments
as compared to Car segments,'' nor for the transfer cap--in EPA's
program, manufacturers can just overcomply with passenger car standards
and transfer as many credits as needed to offset light truck
shortfalls, but NHTSA's program doesn't allow this, so LT4 is beyond
maximum feasible.\1389\)
---------------------------------------------------------------------------
\1388\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
C, at 27.
\1389\ Ford, Docket No. NHTSA-2023-0022-60837, at 7.
---------------------------------------------------------------------------
``While NHTSA projects that light trucks have a somewhat
higher usage of basic ICE technologies than passenger cars,
manufacturers may be using engine stop-start systems in combination
with basic engine technologies to achieve similar benefits as passenger
cars see with low-level ICE technologies. Light trucks make higher use
of mid-level ICE technologies than passenger cars, and both fleets
exhibit similar use of high-level ICE technologies. Based on these
trends, it appears that baseline ICE technology penetration is similar
or higher for light trucks as compared to passenger cars.'' \1390\
---------------------------------------------------------------------------
\1390\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
C, at 29-30.
---------------------------------------------------------------------------
``Transmission technology in the non-strongly electrified
fleet is similar for both passenger cars and light trucks.'' \1391\
---------------------------------------------------------------------------
\1391\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
C, at 31.
---------------------------------------------------------------------------
Based on all of these points, the Alliance concluded that light
trucks have similar or more technology than passenger cars, and argued
that it was unfair of NHTSA to assert that light trucks have more room
to improve and should increase in stringency faster.\1392\ Several
commenters argued that NHTSA should finalize PC2/LT2, because such an
alternative would be more fair to manufacturers of trucks who would
otherwise have to work harder than manufacturers who build more cars,
and because ``If NHTSA applies the same 2% rate of increase to both car
and truck fleets, that 2% increase in mpg on vehicles included in the
truck fleet will
[[Page 52852]]
save significantly more gallons per year than the car fleet.'' \1393\
---------------------------------------------------------------------------
\1392\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
C, at 33; Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3.
\1393\ AAPC, Docket No. NHTSA-2023-0022-60610, at 1; Ford,
Docket No. NHTSA-2023-0022-60837, at 4; Missouri Farm Bureau, Docket
No. NHTSA-2023-0022-61601, at 2.
---------------------------------------------------------------------------
Several commenters discussed the interaction of NHTSA's proposal
with EPA's proposal and other government statements and programs. The
Alliance commented that CAFE standards should be expressly offset from
EPA's GHG standards ``considering the agencies' differences in the
treatment of EVs and compliance flexibilities.'' \1394\ AVE and Nissan
stated that NHTSA must align with EPA's rule.\1395\ The U.S. Chamber of
Commerce stated that all agencies should work together to ensure
manufacturers can build a single fleet of compliant vehicles with
sufficient lead time and regulatory certainty.\1396\ Toyota argued that
the CAA is a better tool to ``support the shift to electrification,''
and instead NHTSA should ``focus on economically practicable ICE
improvements considering the resources being diverted to
electrification.'' \1397\ Volkswagen commented that NHTSA should ``make
the CAFE target and framework consistent with'' E.O. 14037.\1398\
Jaguar commented that the proposal was too stringent, and that NHTSA
should follow the ``U.S. Blueprint for Transportation Decarbonization''
published in early 2023, which built on E.O. 14037 and called for 50
percent of all new passenger cars and light trucks in model year 2030
to be zero-emission vehicles, including BEVs, PHEVs, and FCEVs.\1399\
In contrast, the West Virginia Attorney General's Office and the
Motorcycle Riders Foundation commented that CAFE rules are part of a
coordinated Biden Administration strategy to force a full transition to
BEVs.\1400\
---------------------------------------------------------------------------
\1394\ The Alliance, Docket No. NHTSA-2023-0022-27803, at 2.
\1395\ AVE, Docket No. NHTSA-2023-0022-60213, at 2; Nissan,
Docket No. NHTSA-2023-0022-60696, at 10.
\1396\ U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, at 6.
\1397\ Toyota, Docket No. NHTSA-2023-0022-61131, at 2.
\1398\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 2.
\1399\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 2, 3.
\1400\ West Virginia Attorney General's Office, Docket No.
NHTSA-2023-0022-63056, at 6; Motorcycle Riders Foundation, Docket
No. NHTSA-2023-0022-63054, at 1.
---------------------------------------------------------------------------
A number of commenters continued with the theme of CAFE standards
somehow forcing a full transition to BEVs. NAM and the Motorcycle
Riders Foundation commented that NHTSA was forcing manufacturers to
build only BEVs, that consumers should have choices, like strong
hybrids and PHEVs, and that the market should decide whether and when
BEVs should be introduced.\1401\ MOFB expressed concern that NHTSA was
forcing farmers to purchase BEVs, and argued that BEVs would not work
well for farmers due to insufficient rural charging infrastructure and
the time necessary for recharging, lack of range, inability to haul
loads or perform in extreme temperatures, and a lack of available
service technicians.\1402\ CEI, BMW, Jaguar, and Nissan commented that
the proposal would force manufacturers both to build more BEVs and to
improve their ICEVs,\1403\ and Jaguar stated that manufacturers may
have to stop offering certain of their vehicles in order to
comply.\1404\ Volkswagen, Jaguar, Kia, and Hyundai commented that
requiring improvements in ICEVs hindered their efforts to transition to
full electrification.\1405\ In contrast, POET stated that the proposal
was forcing manufacturers to build BEVs and restricting their ability
to build ICEVs, and argued that this effort was contrary to West
Virginia v. EPA which says agencies cannot ``substantially restructure
the American energy market'' in a way that ``Congress had conspicuously
and repeatedly declined to enact itself.'' \1406\ API stated that NHTSA
does not have authority to impose standards that effectively require a
portion of the fleet to be BEV.\1407\ KCGA argued that BEVs are heavier
than ICE vehicles and thus worse for safety,\1408\ while the Missouri
Corn Growers Association argued that the proposal would significantly
hurt working farmers because in combination with EPA's proposal, it
``may cost the U.S. corn industry nearly one-billion bushels annually
in lost corn demand,'' and it would force farmers to buy BEVs when they
need ICEVs.\1409\ Several commenters stated that forcing a full
transition to BEVs would be more expensive and less effective than
requiring ICE improvements or high-octane low-carbon fuels.\1410\
---------------------------------------------------------------------------
\1401\ NAM, Docket No. NHTSA-2023-0022-59203-A1, at 1;
Motorcycle Riders Foundation, Docket No. NHTSA-2023-0022-63054, at
1.
\1402\ Missouri Farm Bureau, Docket No. NHTSA-2023-0022-61601,
at 2.
\1403\ CEI, Docket No. NHTSA-2023-0022-61121, at 6; BMW, Docket
No. NHTSA-2023-0022-58614, at 2; Jaguar, Docket No. NHTSA-2023-0022-
57296, at 4; Nissan, Docket No. NHTSA-2023-0022-60696, at 10.
\1404\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 4.
\1405\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3;
Jaguar, Docket No. NHTSA-2023-0022-58702, at 4; Kia, Docket No.
NHTSA-2023-0022-58542-A1, at 2; Hyundai, Docket No. NHTSA-2023-0022-
48991, at 1.
\1406\ POET, Docket No. NHTSA-2023-0022-61561, at 16-17.
\1407\ API, Docket No. NHTSA-2023-0022-60234, at 4.
\1408\ KCGA, Docket No. NHTSA-2023-0022-59007, at 3.
\1409\ Missouri Corn Growers Association, Docket No. NHTSA-2023-
0022-58413, at 1.
\1410\ KCGA, Docket No. NHTSA-2023-0022-59007, at 5; POET,
Docket No. NHTSA-2023-0022-61561, at 17; RFA et al. 2, Docket No.
NHTSA-2023-0022-57625, at 2.
---------------------------------------------------------------------------
Commenters also focused on the effect that they believed NHTSA's
inclusion of BEVs in the analysis (generally, in the regulatory
reference baseline) had on NHTSA's decision to propose PC2LT4. Valero
commented that ``The more EVs are assumed to penetrate the market in
the baseline scenario, the easier it is for vehicle manufacturers to
comply with the [proposed CAFE] standards . . . , because an EV
receives the maximum compliance credit possible in the CAFE program. To
help justify highly stringent CAFE standards, the agency paints a
picture of the baseline where state-level ZEV mandates in sixteen
states are implemented without difficulty and lead to a dramatic
increase in EV sales from 2022 to 2032.'' \1411\ Several commenters
asserted that the proposed standards would not be feasible if BEVs were
excluded from the analysis,\1412\ while other commenters expressed
concern that building the number of BEVs assumed in NHTSA's analysis
would be more difficult than NHTSA acknowledged, due to uncertainty in
future battery prices, charging infrastructure, available manufacturer
capital resources, and so on.\1413\ Toyota commented that while NHTSA
claimed that BEVs in the reference baseline would happen regardless of
new CAFE standards, NHTSA then went on to assume that strong hybrids
would replace ICEs, when those ICEs existed because of the BEVs in the
reference baseline.\1414\ The Alliance commented
[[Page 52853]]
that when it ran the model taking BEVs out of the reference baseline,
setting PHEV electric operation to zero for all years, setting fine
payments to zero, and otherwise keeping standard-setting restrictions,
``Over a third of passenger cars are in fleets that do not meet the
proposed standard in model years 2027-2032. For light trucks almost a
third of production is in fleets that do not meet standards in model
year 2027. In model year 2028, over three quarters of vehicles are in
fleets that do not meet the proposed standard, and in model year 2029
and later nine out of every ten vehicles are in a fleet that do not
meet the proposed standard.'' \1415\ CEA argued that even though NHTSA
stated in the NPRM that based on the sensitivity analysis, NHTSA would
have made the same decision even if state ZEV programs were excluded,
NHTSA still acknowledges that less stringent alternatives would have
had higher net benefits in that case, and it would be arbitrary and
capricious to decide to pick a more stringent alternative for no good
reason.\1416\ RFA et al. 2 argued that NHTSA had based the maximum
feasible determination on allowing BEVs starting in model year 2033,
which they stated was contrary to 32902(h).\1417\
---------------------------------------------------------------------------
\1411\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment C,
at 1.
\1412\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3; The
Alliance, Docket No. NHTSA-2023-0022-60652, Attachment 2, at 2;
Nissan, Docket No. NHTSA-2023-0022-60696, at 6; SEMA, Docket No.
NHTSA-2023-0022-57386, at 3-4; Toyota, Docket No. NHTSA-2023-0022-
61131, at 9; U.S. Chamber of Commerce, Docket No. NHTSA-2023-0022-
61069, at 2-3.
\1413\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment D,
at 1, 7; Subaru, Docket No. NHTSA-2023-0022-58655, at 3; KCGA,
Docket No. NHTSA-2023-0022-59007, at 3; NAM, Docket No. NHTSA-2023-
0022-59203-A1, at 1; AFPM, Docket No. NHTSA-2023-0022-61911,
Attachment 2, at 36. NHTSA notes that it always has authority to
amend CAFE standards based on new information and as appropriate, as
long as statutory lead time requirements are met.
\1414\ Toyota, Docket No. NHTSA-2023-0022-61131, at 9.
\1415\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
A, at 7-8.
\1416\ CEA, Docket No. NHTSA-2023-0022-61918, at 8.
\1417\ RFA et al. 2, Docket No. NHTSA-2023-0022-57625, at 11.
---------------------------------------------------------------------------
A number of commenters expressed further concern that DOE's
proposed revisions to the PEF, combined with the inclusion of BEVs in
NHTSA's reference baseline, made the proposed standards
infeasible.\1418\ Jaguar commented that the proposed standards were too
difficult with the proposed PEF revision ``step change,'' especially
for manufacturers who were already at the cap for AC/OC,\1419\ and
stated that NHTSA must ``stop the step change.'' \1420\ Subaru,
Stellantis, BMW, and Toyota also commented that the proposed new PEF
would make CAFE compliance significantly more difficult, and the
proposed standards beyond maximum feasible.\1421\ Subaru and Stellantis
argued that NHTSA should not have accounted for the proposed PEF
revisions in the NPRM analysis.\1422\ Volkswagen and AAPC commented
that the proposed new PEF raises lead time concerns in terms of how
manufacturers would comply with CAFE standards, because manufacturer
plans had been based on the then-existing PEF value and revisions would
mean that more BEVs (by accelerating capital investments) would be
necessary to achieve the same compliance levels or face
penalties.\1423\ Jaguar added that the proposed new PEF plus the
agencies' proposals to remove/reduce AC/OC would make compliance more
expensive and imperil the industry's transition to full
electrification.\1424\ Volkswagen and AAPC also expressed concern that
the proposed new PEF would lead to different compliance answers for
NHTSA and EPA.\1425\ GM stated that if the proposed new PEF is
finalized, GM would not support PC2LT4; that if the PEF remained at the
then-existing value, GM would support PC2LT4; and that if the proposed
new PEF took effect in model year 2030, GM could support PC2LT4 but
still had concern regarding ``substantial CAFE/GHG alignment issues
starting'' whenever the new PEF goes into effect.\1426\
---------------------------------------------------------------------------
\1418\ Kia, Docket No. NHTSA-2023-0022-58542-A1, at 2; AAPC,
Docket No. NHTSA-2023-0022-60610, at 3-5; Honda, Docket No. NHTSA-
2023-0022-61033, at 6.
\1419\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 4.
\1420\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 6.
\1421\ Subaru, Docket No. NHTSA-2023-0022-58655, at 3;
Stellantis, Docket No. NHTSA-2023-0022-61107, at 3-8; BMW, Docket
No. NHTSA-2023-0022-58614, at 2; Toyota, Docket No. NHTSA-2023-0022-
61131, at 2, 14.
\1422\ Subaru, Docket No. NHTSA-2023-0022-5865, at 4;
Stellantis, Docket No. NHTSA-2023-0022-61107, at 4.
\1423\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 3; AAPC,
Docket No. NHTSA-2023-0022-60610, at 5.
\1424\ Jaguar, Docket No. NHTSA-2023-0022-57296, at 3, 4.
\1425\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 6; AAPC,
Docket No. NHTSA-2023-0022-60610, at 3-5.
\1426\ GM, Docket No. NHTSA-2023-0022-60686, at 6.
---------------------------------------------------------------------------
NHTSA has considered these comments carefully, although we note
that some of them are beyond our ability to consider--specifically, if
NHTSA is prohibited by statute from considering the fuel economy of
electric vehicles in determining maximum feasible fuel economy
standards, NHTSA does not believe that it can specifically consider the
fact that changing the PEF value may change manufacturers' CAFE
compliance strategies in future model years. The PEF value is literally
the value that turns BEV energy consumption into fuel economy, and BEV
fuel economy is exactly what NHTSA may not consider in determining
maximum feasible standards (among other things).
However, NHTSA finds some of the comments to be persuasive,
particularly regarding the idea that the proposed light truck standards
may well be too stringent if manufacturers are going to successfully
undertake the technological transition that NHTSA cannot consider
directly, and the idea that compliance shortfalls that result in civil
penalties and no additional fuel savings benefit neither manufacturers,
nor consumers, nor energy conservation.
Comments regarding the stringency of the passenger car fleet were
less contentious than those regarding stringency of the light truck
fleet. NHTSA agreed with many of the commenters, including the
Alliance, that maintaining the proposed stringency levels for the
passenger car fleet was acceptable, when considered in conjunction with
a less stringent light truck standard. GM, too, stated that it could
accept the proposed stringency for passenger cars under certain
circumstances.
In response to these comments, for the final rule NHTSA created a
new alternative, PC2LT002, combining elements of alternatives presented
in the NPRM analysis, out of concern that existing manufacturer
commitments to technology development make further improvements to the
light truck fleet economically impracticable for model years 2027-2028,
due to the need to reserve development and production funds for other
purposes, and make light truck improvements at the proposed rate beyond
economically practicable for model years 2029-2031.
The following text will walk through the four statutory factors in
more detail and discuss NHTSA's decision-making process more
thoroughly. The balancing of factors presented here represents NHTSA's
thinking based on all of the information presented by the commenters
and in the record for this final rule.
For context and the reader's reference, here again are the
regulatory alternatives among which NHTSA has chosen maximum feasible
CAFE standards for model years 2027-2031, representing different annual
rates of stringency increase over the required levels in model year
2026:
[[Page 52854]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.223
In evaluating the statutory factors to determine maximum feasible
standards, EPCA's overarching purpose of energy conservation suggests
that NHTSA should begin with the need of the U.S. to conserve energy.
According to the analysis presented in Section V and in the
accompanying FRIA, Alternative PC6LT8 is estimated to save consumers
the most in fuel costs compared to any of the baselines.\1427\ Even in
the rulemaking time frame of model years 2027-2032, when many forces
other than CAFE standards will foreseeably be driving higher rates of
passenger car and light truck electrification, NHTSA believes that
gasoline will still likely be the dominant fuel used in LD
transportation. This means that consumers, and the economy more
broadly, remain subject to fluctuations in gasoline price that impact
the cost of travel and, consequently, the demand for mobility. The
American economy is largely built around the availability of affordable
personal transportation. Vehicles are long-lived assets, and the long-
term price uncertainty and volatility of petroleum prices still
represents a risk to consumers. By increasing the fuel economy of
vehicles in the marketplace, more stringent CAFE standards help to
better insulate consumers, and the economy more generally, against
these risks over longer periods of time. Fuel economy improvements that
reduce demand are an effective hedging strategy against price
volatility because gasoline prices are linked to global oil prices.
Continuing to reduce the amount of money that consumers spend on
vehicle fuel thus remains an important consideration for the need of
the U.S. to conserve energy. Additionally, by reducing U.S.
participation in global oil markets, fuel economy standards also
improve U.S. energy security and our national balance of payments.
Again, by reducing the most fuel consumed, Alternative PC6LT8 would
likely best serve the need of the U.S. to conserve energy in these
respects.
---------------------------------------------------------------------------
\1427\ See Table V-20 and Table V-21, which illustrate that fuel
savings increase for passenger cars and light trucks as alternative-
stringency increases under both model year and calendar year
accounting methods.
---------------------------------------------------------------------------
With regard to pollution effects, Alternative PC6LT8 would also
result in the greatest reduction in CO2 emissions over time,
and thus have the largest (relative) impact on climate change, as
assessed against any of the baselines.\1428\ The effects of other
pollutants are more mixed--while the emissions of NOX and
PM2.5 eventually decrease over time, with effects being
greater as stringency increases, SOX emissions could
marginally increase by 2050, after significant fluctuation, in all of
the alternatives including the No-Action alternative, due to greater
use of electricity for PHEVs and BEVs, although differences between the
action alternatives are modest and SOx emissions would be
significantly lower than they are at present.\1429\ Chapter 8.2.5 of
the FRIA discusses estimated environmental effects of the regulatory
alternatives in more detail.
---------------------------------------------------------------------------
\1428\ See Table V-23, which illustrates that CO2
emissions are further reduced as alternative-stringency increases,
with PC6LT8 reducing the most CO2 over time.
\1429\ See Section V.C of the preamble above for more discussion
on these analytical results, as well as FRIA Chapter 8.2 and Chapter
4 of the EIS.
---------------------------------------------------------------------------
These results are a direct consequence of the input assumptions
used for this analysis, as well as the uncertainty surrounding these
assumptions. However, both relative and absolute effects for
NOX, PM2.5, and SOX under each
regulatory alternative are quite small in the context of overall U.S.
emissions of these pollutants, and even in the context of U.S.
transportation sector emissions of these pollutants. CAFE standards are
not a primary driver for these pollutants; the estimated effects
instead come largely from potential changes in travel demand that may
result from improved fuel economy, rather than from the standards
themselves. NHTSA would thus say, generally speaking, that Alternative
PC6LT8 likely best meets the need of the U.S. to conserve energy in
terms of environmental effects, because it saves the most fuel under
either baseline considered, which consequently means that it (1)
maximizes consumer savings on fuel costs, (2) reduces a variety of
pollutant emissions by the greatest amount, and (3) most reduces U.S.
participation in global oil markets, with attendant benefits to energy
security and the national balance of payments.
However, even though Alternative PC6LT8 may best meet the need of
the U.S. to conserve energy, and even though other regulatory
alternatives may also contribute more to the need of the U.S. to
conserve energy than the preferred alternative, NHTSA concludes that
those other alternatives are beyond maximum feasible in the rulemaking
time frame. NHTSA is arriving at this conclusion based on the other
factors that we consider, because all of the statutory factors must be
considered in determining maximum feasible CAFE standards. The need of
the U.S. to conserve energy nearly always works in NHTSA's balancing to
push standards more stringent, while other factors may work in the
opposite direction.
Specifically, based on the information currently available, NHTSA
concludes that the more stringent regulatory alternatives considered in
this analysis land past the point of economic practicability in this
time frame. In considering economic practicability, NHTSA tries to
evaluate where the
[[Page 52855]]
tipping point in the balancing of factors might be through a variety of
metrics and considerations, examined in more detail below.
We underscore again that the modeling analysis does not dictate the
``answer,'' it is merely one source of information among others that
aids NHTSA's balancing of the standards. We similarly underscore that
there is no single bright line beyond which standards might be
economically impracticable, and that these metrics are not intended to
suggest one; they are simply ways to think about the information before
us. The discussion of trying to identify a ``tipping point'' is simply
an attempt to grapple with the information, and the ultimate decision
rests with the decision-maker's discretion.
While the need of the U.S. to conserve energy may encourage NHTSA
to be more technology-forcing in its balancing, regulatory alternatives
that can only be achieved by the extensive application of advanced
technologies besides BEVs are not economically practicable in the MY
2027-2031 time frame and are thus beyond maximum feasible. Technology
application can be considered as ``which technologies, and when''--both
the technologies that NHTSA's analysis suggests would be used, and how
that application occurs given manufacturers' product lifecycles. It is
crucially important to remember that NHTSA's decision-making with
regard to economic practicability and what standards are maximum
feasible overall must be made in the context of the 32902(h)
restrictions against considering the fuel economy of BEVs and the full
fuel economy of PHEVs. Our results comply with those restrictions, and
it is those results that inform NHTSA's decision-making.
Additionally, as discussed in Section VI.A, NHTSA concludes in this
final rule that many of the alternatives are beyond technologically
feasible considering the technologies available to be considered under
the statutorily-constrained analysis, and the constraints of planned
redesign cycles, a point that was not a concern in prior rulemakings
due to the state of technology development at that time. NHTSA has
historically understood technological feasibility as referring to
whether a particular method of improving fuel economy is available for
deployment in commercial application in the model year for which a
standard is being established. While all of the technology in NHTSA's
analysis is already available for deployment, the statutory requirement
to exclude fuel economy improvements due to BEVs (and the full fuel
economy of PHEVs) from consideration of maximum feasible standards
means that NHTSA must focus on technology available to improve the fuel
economy of ICEs, and on the remaining vehicles that are not yet
anticipated to be fully electric during the rulemaking time frame. Many
commenters agreed that when these forms of electrification were
excluded, more stringent standards were not technologically feasible
considering the technologies available to be considered under the
statutorily-constrained analysis and the constraints of planned
redesign cycles.
In terms of the levels of technology required and which
technologies those may be, NHTSA's analysis estimates manufacturers'
product ``cadence,'' representing them in terms of estimated schedules
for redesigning and ``freshening'' vehicles, and assuming that
significant technology changes will be implemented during vehicle
redesigns--as they historically have been. Once applied, a technology
will be carried forward to future model years until superseded by a
more advanced technology, if one exists that NHTSA can consider in the
statutorily-constrained analysis. If manufacturers are already applying
technology widely and intensively to meet standards in earlier years,
then during the model years subject to the rulemaking more technology
may simply be unavailable to apply (having already been applied or
being statutorily prohibited for purposes of NHTSA's analysis), or
redesign opportunities may be very limited, causing manufacturers to
fail to comply and making standards less economically practicable.
In the rulemaking time frame, running out of available technology
is the fundamental issue that distinguishes the regulatory
alternatives. Per-vehicle cost,\1430\ according to the analysis, is
relatively low as compared to what NHTSA determined was tolerable in
prior rounds of rulemaking for both cars and trucks, for most
alternatives in most model years, compared to the reference baseline or
the No ZEV alternative baseline, although some manufacturers are
affected more than others, and sales and employment effects are minimal
and not dispositive.\1431\ Some commenters noted that per-vehicle costs
for the proposal were lower than what NHTSA had considered to be still
within the range of economic practicability in prior rules. NHTSA
agrees that this is the case and recognizes that the per-vehicle costs
for the final rule are significantly lower than for the proposal, but
NHTSA also recognizes manufacturer concerns with retaining all
available capital and resources for the technology transition that
NHTSA cannot consider directly.
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\1430\ Because our analysis includes estimates of manufacturers'
indirect costs and profits, as well as civil penalties that some
manufacturers (as allowed under EPCA/EISA) might choose to pay in
lieu of achieving compliance with CAFE standards, we report cost
increases as estimated average increase in vehicle price (as MSRP).
NHTSA does not expect that the prices of every vehicle would
increase by the same amount; rather, the agency's underlying
analysis shows unit costs varying widely between different vehicle
models, as evident in the model output available on NHTSA's website.
While we recognize that manufacturers will distribute regulatory
costs throughout their fleet to maximize profit, we have not
attempted to estimate strategic pricing as requested by some
commenters, having insufficient data (which would likely be CBI) on
which to base such an attempt. Additionally, even recognizing that
manufacturers will distribute regulatory costs throughout their
fleets, NHTSA still believes that average per-vehicle cost is useful
for illustrating the possible broad affordability implications of
new standards.
The technology costs described here are what NHTSA elsewhere
calls ``regulatory costs,'' which means the combination of
additional costs of technology added to meet the standards, plus any
civil penalties paid in lieu of meeting standards. This is not an
assessment that manufacturers will pay civil penalties, it is simply
an assumption for purposes of this analysis and subject to its
constraints that some manufacturers could choose to pay civil
penalties rather than apply additional technology if they deem that
approach more cost-effective. Manufacturers are always free to
choose their own compliance path.
\1431\ See Section V.A. and FRIA 8.2.2 and 8.2.7.
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The tables below show additional regulatory (estimated technology
plus estimated civil penalties) costs estimated to be incurred under
each action alternative as compared to the No-Action Alternative, given
the statutory restrictions under which NHTSA conducts its ``standard
setting'' analysis:
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The figures above illustrate clearly that results vary by
manufacturer, by year, and by fleet. NHTSA typically considers average
results for a metric
[[Page 52860]]
like per-vehicle cost, in part because NHTSA has typically approached
economic practicability as a question for the industry as a whole, such
that standards can still be maximum feasible even if they are harder
for some manufacturers than others.\1432\ The average passenger car
cost increase under PC6LT8 is $537 in model year 2027 but rises rapidly
thereafter, exceeding $2,300 by model year 2031. In contrast, the
average passenger car cost increase under PC2LT002 reaches only $409 by
model year 2031. This is a fairly stark difference between the least
and most stringent action alternatives. Industry average passenger car
costs are lower for PC1LT3 than for PC2LT002, as might be assumed given
the slower rate of increase, but the increase for model years 2029-2031
passenger cars under PC2LT4 as compared to PC2LT002 is about $100 more
per vehicle in any given model year, even though the rate of increase--
2 percent per year for passenger cars--is the same for both
alternatives. This is largely a function of higher average civil
penalties for light trucks under LT4 being distributed across all of a
manufacturer's fleets, rather than an inherent difference in passenger
car technology costs under the two different PC2 alternatives. NHTSA
believes that this approach to distributing civil penalties is
reasonable, even though manufacturers may have different pricing
strategies in the real world, but we lack more precise information to
target penalty distribution more specifically and invite manufacturers
to share whatever information might increase the specificity of our
assumptions for future rounds of rulemaking. Industry average passenger
car costs for PC3LT5 are nearly double those for PC2LT002 and PC2LT4.
Under the No ZEV alternative baseline, average passenger car costs are
higher for every alternative, ranging from $384 for PC1LT3 in MY 2031,
to $2,948 for PC6LT8 in MY 2031. As under the reference baseline,
industry average passenger car costs for PC3LT5 are nearly double those
for PC2LT002 and PC2LT4, and PC2LT4 is slightly more expensive than
PC2LT002 due to distribution of civil penalties as discussed above.
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\1432\ See, e.g., 87 FR at 25969 (``If the overarching purpose
of EPCA is energy conservation, NHTSA believes that it is reasonable
to expect that maximum feasible standards may be harder for some
automakers than for others, and that they need not be keyed to the
capabilities of the least capable manufacturer. Indeed, keying
standards to the least capable manufacturer may disincentivize
innovation by rewarding laggard performance.'').
---------------------------------------------------------------------------
For light trucks, the average light truck cost increase under
PC6LT8 is $541 in model year 2027, and (similarly to cars) rises
rapidly thereafter, exceeding $3,000 by model year 2031. In contrast,
the average light truck cost increase under PC2LT002 reaches only $409
by model year 2032. As for cars, this is a fairly stark difference
between these alternatives. Comparing average light truck cost
increases between PC2LT002 and PC1LT3, industry average light truck
costs more than double, and model year 2031 industry average light
truck costs for PC2LT4 are triple those for PC2LT002. Under the No ZEV
alternative baseline, average light truck costs are higher for every
alternative, ranging from $677 for PC2LT002 in MY 2031, to $3,722 for
PC6LT8 in MY 2031. As under the reference baseline, industry average
light truck costs increase fairly rapidly as stringency increases. As
discussed in Section VI.A, while NHTSA has no bright-line rule
regarding the point at which per-vehicle cost becomes economically
impracticable, when considering the stringency increases (and attendant
costs) that manufacturers will be facing over the period immediately
prior to these standards, in the form of the model years 2024-2026
standards, NHTSA has concluded that the over-$3,000 per vehicle
estimated for PC6LT8 by model year 2032 is too much. model year 2031
average costs for PC2LT4 and PC3LT5 are more in line with the levels of
per-vehicle costs that NHTSA has considered to be economically
practicable over the last dozen years of rulemakings.
However, average results may be increasingly somewhat misleading as
manufacturers transition their fleets to the BEVs whose fuel economy
NHTSA is prohibited from considering when setting the standards. This
is because fuel economy in the fleet has historically been more of a
normal distribution (i.e., a bell curve), and with more and more BEVs,
it becomes more of a bimodal distribution (i.e., a two-peak curve).
Attempting to average a bimodal distribution does not necessarily give
a clear picture of what non-BEV-specialized manufacturers are capable
of doing, and regardless, NHTSA is directed not to consider BEV fuel
economy. Thus, examining individual manufacturer results more closely
may be more illuminating, particularly the results for the
manufacturers who have to deploy the most technology to meet the
standards.
Looking at per-manufacturer results for passenger cars, under
PC6LT8, nearly every non-BEV-only manufacturer would exceed more than
$2,000 per passenger car in regulatory costs by model year 2031 under
the reference baseline analysis, with higher costs (over $3,000) for
GM, Hyundai, Kia, Mazda, and Stellantis. Costs are somewhat higher
under the No ZEV alternative baseline than under the reference
baseline, as shown in Section VI.A above. In the standard-setting
analysis which NHTSA must consider here, significant levels of advanced
MR, SHEV, and advanced engine technologies tend to be driving many of
these cost increases. These changes are best understood in context--
passenger car sales have been falling over recent years while prices
have been rising, and most of the new vehicles sold in the last couple
of years have been more expensive models.\1433\ NHTSA does not want to
inadvertently burden passenger car sales by requiring too much
additional cost for new vehicles, particularly given the performance of
the passenger car fleet in comparison to the light truck fleet in terms
of mileage gains; every mile driven in passenger cars is, on average,
more fuel-efficient than miles driven in light trucks. While the costs
of PC2LT002 or PC2LT4 may challenge some manufacturers of passenger
cars, they will generally do so by much less than PC3LT5.\1434\
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\1433\ Tucker, S.2021. Automakers Carry Tight Inventories: What
Does It Mean to Car Buyers? Kelly Blue Book. Available at: https://www.kbb.com/car-advice/automakers-carry-tight-inventories-what-does-it-mean-to-car-buyers/. (Accessed: Feb. 28, 2024).
\1434\ This is particularly true for a manufacturer like GM who
clearly struggles in the statutorily-constrained analysis to control
costs as alternative stringency increases.
---------------------------------------------------------------------------
Looking at per-manufacturer results for light trucks, under PC6LT8,
every non-BEV-only manufacturer but Subaru and Toyota would exceed
$2,000 in per-vehicle costs by model year 2031, with nearly all of
those exceeding $3,000. This is likely due to a combination of high MR
levels, advanced engines, advanced transmissions, SHEV, and (for
PC6LT8, particularly) PHEV technologies being applied to trucks in
order to meet PC6LT8. The only alternative with no manufacturer
exceeding $2,000 in any model year under the reference baseline
analysis is PC2LT002, because GM exceeds $2,000 in model year 2031
under PC1LT3. Costs are somewhat higher under the No ZEV alternative
baseline than under the reference baseline, as shown in Section VI.A
above, with JLR exceeding $2,000 in MY 2031 even under PC2LT002. Again,
this is not to say that $2,000 is a bright line threshold for economic
practicability, but simply to recognize that manufacturers, including
GM and
[[Page 52861]]
JLR, commented extensively about the need to retain resources for the
technological transition that NHTSA cannot consider directly. NHTSA may
consider availability of resources, and NHTSA would not want CAFE
standards to complicate manufacturer efforts to save more fuel in the
longer term by diverting resources in the shorter term.
As discussed above, this is particularly the case for civil penalty
payment--during this rulemaking time frame, given the technological
transition underway, NHTSA agrees with industry commenters that civil
penalty payments resulting from CAFE non-compliance would divert needed
resources from that transition without conserving additional energy.
NHTSA has typically considered shortfalls in the context of economic
practicability, but as discussed in Section VI.A, as the fleet
approaches the technological limits of what NHTSA may consider by
statute in setting standards, manufacturers appearing in the analysis
to run out of technology may increasingly be an issue of technological
feasibility as well. Some commenters suggested that NHTSA was
conflating these two factors in considering them this way, btu NHTSA
believes it is still giving full effect to all relevant factors even if
they begin to blend somewhat as the world changes and as the statutory
constraints become more constraining on NHTSA's ability to account for
the real world in its decision-making.
Section VI.A discussed the phenomenon in the analysis that
manufacturers attempting to comply with future CAFE standards could
``run out of technology'' just because opportunities were lacking to
redesign enough of their vehicles consistent with their normal redesign
schedule. NHTSA does not account for the possibility that manufacturers
would choose to ``break'' their redesign schedules to keep pace with
more stringent standards, in large part because the costs to do so
would be significant and NHTSA does not have the information needed to
reflect such an effort. The figures below illustrate, for passenger
cars and light trucks, how technology application (in this case, SHEVs,
which are essentially the end of the powertrain decision tree for
purposes of the constrained analysis \1435\) lack of redesign
opportunity and manufacturer likelihood of shortfalls interact. The
number for any given manufacturer, model year, and regulatory
alternative is the portion of the fleet that is lower on the decision
trees than SHEV (typically MHEV or ICEV). Cells with boxes around them
indicate shortfalls. For nearly every instance where a manufacturer is
unable to achieve the standard, their fleet has already been converted
to SHEV or above (represented by a darker box with a zero
inside).\1436\
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\1435\ Other non-powertrain technologies are, of course,
available to manufacturers to apply in the analysis, but in terms of
meeting the higher stringency alternatives under the constrained
analysis, no other technology besides SHEV is as cost-effective.
NHTSA therefore uses SHEVs for this illustration because it is the
technology that the model is most likely to choose for manufacturer
compliance, even if it is not necessarily the technology path that
all manufacturers will choose in the future.
\1436\ There are a few instances in these illustrations where a
manufacturer-fleet combination is not in compliance and appears to
have some vehicles eligible for powertrain redesign (as shown with a
non-zero value inside the box). These are cases in which compliance
logic restricts certain SHEV technology, tech conversion is not
cost-effective, or where the domestic fleet is not in compliance but
the only vehicles eligble for redesign are in the imported car fleet
(or vice versa).
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[[Page 52862]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.229
The figures show that for some manufacturers, for some fleets, some
shortfalls are almost inevitable (in the constrained analysis) no
matter the alternative. In the passenger car fleet, Stellantis clearly
would be expected to routinely default to penalty payments under all
alternatives but particularly those more stringent than PC2LT002; in
the light truck fleet, BMW, GM, Jaguar, Mercedes, Stellantis, and
Volkswagen shortfall repeatedly given redesign cycle constraints under
all alternatives except PC2LT002, and even under PC2LT002, GM
particularly continues to struggle for multiple model years, due to
earlier redesigns that responded to the model years 2024-2026 standards
and an otherwise relatively long redesign schedule. NHTSA believes that
this lends more support to the conclusion that PC2LT002 is maximum
feasible.
Shortfall trends are slightly exacerbated for all action
alternatives (although results vary by manufacturer) under the No ZEV
alternative baseline analysis, as follows:
[[Page 52863]]
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[[Page 52864]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.231
As under the reference baseline analysis, the figures show that for
some manufacturers, for some fleets, shortfalls are almost inevitable
(in the constrained analysis) under the No ZEV alternative baseline, no
matter the action alternative. In the passenger car fleet, Stellantis
would be expected to routinely default to penalty payments under all
alternatives; in the light truck fleet, BMW, GM, Jaguar, Mercedes,
Stellantis, Volvo, and Volkswagen shortfall repeatedly given redesign
constraints under all alternatives except PC2LT002, and even under
PC2LT002, GM particularly continues to default to penalty payments for
multiple model years, due to earlier redesigns that responded to the
model years 2024-2026 standards and an otherwise relatively long
redesign schedule. Toyota, Volvo, and Subaru also see powertrain
constraints in PC1LT3, where they did not when the alternative was run
relative to the reference baseline case. NHTSA believes that this lends
more support to the conclusion that PC2LT002 is maximum feasible.
The following tables help to illustrate that in many cases,
manufacturers simply lack redesign opportunities during the rulemaking
time frame, and as stringency increases across the alternatives, that
lack of redesign opportunities becomes more dire in terms of civil
penalties consequently owed. ``Share eligible'' means the percent of
this manufacturer's fleet that can be redesigned in this model year and
are conventional or MHEV powertrain,\1437\ ``compliance position''
means the mpg amount by which the manufacturer's fleet performance
exceeds or falls short of the manufacturer's fleet target, and ``civil
penalties'' means the average amount of civil penalties per vehicle of
the passenger car or light truck fleet that the manufacturer would owe
as a consequence of a shortfall. These tables provide results estimated
versus the reference baseline; results estimated against the No ZEV
alternative baseline are generally similar, although some
manufacturers' estimated results vary.
---------------------------------------------------------------------------
\1437\ These tables present eligibility results based on
powertrain technology, and vehicle powertrain changes are only
available at vehicle redesigns. Manufacturers also apply non-
powertrain technology to improve vehicle fuel economy, and likely do
so in these examples. To simplify the discussion, these changes are
omitted from the table and we are only showing technologies that
have the highest cost effectiveness, and likely to drive compliance.
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Under the No ZEV alternative baseline analysis, the light truck
fleet is more impacted, but not significantly more impacted than under
the reference baseline analysis. NHTSA believes that this lends more
support to the importance of reducing light truck standard stringency
relative to the proposal.
For purposes of the constrained analysis that NHTSA considers for
determining maximum feasible standards, manufacturer shortfalls lead
necessarily to civil penalties during the model years covered by the
rulemaking when manufacturers are prohibited from using credit reserves
in a given fleet. As the tables above show, civil penalties increase
rapidly as the stringency of regulatory alternatives increase, with
some manufacturers facing (in the constrained analysis) penalties of
over $2,000 per vehicle for some fleets by model year 2031 under
PC6LT8. GM in particular faces penalties of over $1,000 per light truck
even under PC2LT4, and roughly an additional $600 per light truck in
each model year 2029 through 2031 as stringency increases from PC2LT002
to PC1LT3. For model year 2031 alone, this equates to an increase of
$907 million in penalties for GM if NHTSA were to choose PC1LT3 over
PC2LT002. Civil penalties for GM increase by a similar magnitude ($895
million) between PC2LT002 and PC1LT3 under the No ZEV alternative
baseline. As industry commenters pointed out, civil penalties are
resources diverted from the technological transition that NHTSA cannot
consider directly--but NHTSA is not prohibited from considering the
resources necessary to make that transition, and NHTSA accepts the
premise that manufacturers need maximum available resources now to
potentially conserve more energy in the longer run. NHTSA has thus also
examined civil penalties as a share of regulatory costs as a potential
metric for economic practicability in this rulemaking. Table VI-11 and
Table VI-12 in Section VI.A.5.a(2) above illustrate civil penalties as
a share of regulatory costs for the entire industry for each fleet
under each regulatory alternative. NHTSA concluded there that PC2LT002
represents the alternative considered with the lowest economic impacts
on manufacturers. With nearly half of light truck manufacturers facing
shortfalls under PC1LT3, and over 30 percent of regulatory costs being
attributable to civil penalties, given the concerns raised by
manufacturers regarding their ability to finance the ongoing
technological transition if they must divert funds to paying CAFE
penalties, NHTSA believes that PC1LT3 is beyond economically
practicable in this particular rulemaking time frame. Given that the
proposal, PC2LT4, is even more stringent and results in even higher
civil penalties, it too must be beyond economically practicable in this
particular rulemaking time frame, when evaluated relative to either the
reference baseline analysis or the No ZEV alternative baseline.\1438\
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\1438\ NHTSA recognizes that the Alliance provided extensive
comments as to why it believed the stringency of light truck
standards should not increase faster than the stringency of
passenger car standards. Given NHTSA's decision to reduce the
stringency of the light truck standards, NHTSA considers these
comments overtaken by events.
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NHTSA received comments from industry stakeholders arguing with
NHTSA's reflection of DOE's proposed revisions to the PEF in CAFE
analysis. Industry stakeholders expressed concern about the effects of
a revised
[[Page 52871]]
PEF value on their CAFE compliance positions,\1439\ and stated that
NHTSA should reduce the final rule stringency relative to the proposal
to account for these effects. In response, NHTSA notes that it cannot
consider the fuel economy of BEVs in determining maximum feasible CAFE
standards, and the PEF value exists to translate energy consumed by
electric and partially-electric vehicles into miles per gallon. NHTSA
interprets 49 U.S.C. 32902(h) as therefore expressly prohibiting NHTSA
from considering how the PEF revisions affect manufacturers' CAFE
compliance positions as part of its determination of new maximum
feasible CAFE standards. NHTSA interprets 32902(h) as allowing the
agency to consider the resources needed to build BEVs for reasons other
than CAFE, but as prohibiting direct consideration of BEV fuel economy
(as calculated using the PEF, whatever the PEF value is) in the
standard-setting decision. NHTSA reflects the now-final revised PEF
value in the final rule analysis in order to properly calculate
manufacturers' reference baseline fuel economy positions but cannot use
the revised PEF value as an excuse to set less stringent CAFE
standards. NHTSA did conduct a sensitivity analysis run with the prior
PEF value,\1440\ and found that the manufacturers' relative behavior
under the alternatives remained similar to the central analysis. While
the specific model results did (predictably) change, the underlying
mechanisms as discussed in Section VI.A driving the feasibilities of
the alternatives under consideration remained the same. As a result,
NHTSA believes the use of the prior PEF value would likely not have
produced a change in final standard selection. Moreover, as discussed
above, there are adequate reasons in the constrained analysis for NHTSA
to find that less stringent standards than the proposal reach the
limits of economic practicability in the rulemaking time frame.
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\1439\ NHTSA has no authority to ``stop'' DOE's process of
revising the PEF, as some commenters requested.
\1440\ See Chapter 9 of the FRIA.
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As also discussed above and in the TSD and FRIA accompanying this
final rule, the No-Action Alternative includes a considerable amount of
fuel-saving technology applied in response to (1) the reference
baseline (set in 2022) CAFE and CO2 standards, (2) fuel
prices and technology cost-effectiveness (which accounts for recently-
developed tax incentives), (3) the California Framework Agreements
(albeit only for some intervening model years), (4) ZEV programs in
place in California and other States, and (5) manufacturer voluntary
deployment of ZEVs consistent with ACC II, regardless of whether it
becomes legally binding. The effects of this reference baseline
application of technology are not attributable to this action, and
NHTSA has therefore excluded these from our estimates of the
incremental technology application, benefits, and costs that could
result from each action alternative considered here. NHTSA's obligation
is to understand and evaluate the effects of potential future CAFE
standards, as compared to what is happening in the reference baseline.
We realize that manufacturers face a combination of regulatory
requirements simultaneously, which is why NHTSA seeks to account for
those in its analytical reference baseline, and to determine what the
additional incremental effects of different potential future CAFE
standards would be, within the context of our statutory restrictions.
Additionally, for both passenger cars and light trucks, NHTSA notes
that in considering the various technology penetration rates for
fleets, readers (and NHTSA) must keep in mind that due to the statutory
restrictions, NHTSA's analysis considers these technologies as
applicable to the remaining ICE vehicles that have not yet electrified
for reasons reflected in the reference baseline. This means that the
rates apply to only a fraction of each overall fleet, and thus
represent a higher rate for that fraction.
However, NHTSA also recognizes that technology applied in the
reference baseline, or technological updates made in response to the
reference baseline, may limit the technology available to be applied
during the rulemaking time frame. As discussed above, if a manufacturer
has already widely applied SHEV (for example) in the reference
baseline, then the SHEV vehicles cannot be improved further under the
constrained analysis. If a manufacturer has redesigned vehicles in
order to meet reference baseline obligations and does not have another
(or many) redesign opportunity during the rulemaking time frame, then
the manufacturer may be unable to meet its CAFE standard and may face
civil penalties. NHTSA's final standards, which are less stringent than
the proposal, respond to these considerations. So too does NHTSA's
analysis of the standards as assessed against the alternative baseline.
With regard to lead time and timing of technology application,
NHTSA acknowledges that there is more lead time for these standards
than manufacturers had for the model years 2024-2026 standards. That
said, NHTSA also recognizes that we have previously stated that if the
standards in the years immediately preceding the rulemaking time frame
do not require significant additional technology application, then more
technology should theoretically be available for meeting the standards
during the rulemaking time frame--but this is not necessarily the case
here. The SHEV penetration rates shown in Figure VI-15 and Figure VI-16
suggest that, at least for purposes of what NHTSA may consider by
statute, industry would be running up against the limits of
statutorily-available technology deployment, considering planned
redesign cycles, for the more stringent regulatory alternatives, in a
way that has not occurred in prior rulemakings. Lead time may not be
able to overcome the costs of applying additional technology at a high
rate, beyond what is already being applied to the fleet for other
reasons during the rulemaking time frame and, in the years immediately
preceding it, when considered in the context of the constrained
analysis.
As discussed above, when manufacturers do not achieve required fuel
economy levels, NHTSA describes them as ``in shortfall.'' NHTSA's
analysis reflects several possible ways that manufacturers could fail
to meet required fuel economy levels. For some companies that NHTSA
judges willing to pay civil penalties in lieu of compliance, usually
based on past history of penalty payment, NHTSA assumes that they will
do so as soon as it becomes more cost-effective to pay penalties rather
than add technology. For other companies whom NHTSA judges unwilling to
pay civil penalties, if they have converted all vehicles available to
be redesigned in a given model year to SHEV or PHEV and still cannot
meet the required standard, then NHTSA does not assume that these
companies will break redesign or refresh cycles to convert even more
(of the remaining ICE) vehicles to SHEV or PHEV.\1441\ In these
instances, a manufacturer would be ``in shortfall'' in NHTSA's
analysis. Shortfall rates can also be informative for determining
economic practicability, because if manufacturers simply are not
achieving the required levels, then that suggests that manufacturers
have generally judged it more cost-effective not to
[[Page 52872]]
comply by adding technology. Moreover, the standards would not be
accomplishing what they set out to accomplish, which would mean that
the standards are not meeting the need of the U.S. to conserve energy
as originally expected.
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\1441\ Ensuring that technology application occurs consistent
with refresh/redesign schedules is part of how NHTSA accounts for
economic practicability. Forcing technology application outside of
those schedules would be neither realistic from a manufacturing
perspective nor cost-effective. See Chapter 2.2.1.7 of the TSD for
more information about product timing cycles.
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The following figures illustrate shortfalls by fleet, model year,
manufacturer, and regulatory alternative:
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Under both the reference baseline and the No ZEV alternative
baseline analyses, for passenger cars, the industry average again
obscures more
[[Page 52877]]
serious shortfall trends among individual manufacturers, with results
slightly intensified for some manufacturers under the No ZEV
alternative baseline analysis. Many manufacturers' passenger car fleets
are estimated to fall significantly short of required levels under
PC6LT8, with only one non-BEV manufacturer achieving compliance for
most of the model years covered by the rulemaking. Even for PC3LT5, a
large part of the sales volume of non-BEV-only manufacturers still
appears to be falling short in most model years. Passenger car
shortfalls are much less widespread under PC2LT4 and PC2LT002. For
light trucks, under both the reference baseline and the No ZEV
alternative baseline analyses, the shortfalls are extensive under
PC6LT8, and most of non-BEV-only manufacturers fall short in most if
not all model years under PC3LT5. Even PC2LT4 and PC1LT3 appears
challenging, if not simply unattainable, under the standard-setting
runs for a large portion of the light truck sales volume of non-BEV-
only manufacturers. Given all of the data examined, and the unique
circumstances of this rulemaking discussed above, NHTSA believes that
PC2LT002 may represent the upper limit of economic practicability
during the rulemaking time frame.
Of course, CAFE standards are performance-based, and NHTSA does not
dictate specific technology paths for meeting them, so it is entirely
possible that individual manufacturers and industry as a whole will
take a different path from the one that NHTSA presents here.\1442\
Nonetheless, this is a path toward compliance, relying on known,
existing technology, and NHTSA believes that our analysis suggests that
the levels of technology and cost required by PC2LT002 are reasonable
and economically practicable in the rulemaking time frame.
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\1442\ NHTSA acknowledges that compliance looks easier and more
cost-effective for many manufacturers under the ``unconstrained''
analysis as compared to the ``standard-setting'' analysis discussed
here, but emphasizes that NHTSA's decision on maximum feasible
standards must be based on the standard-setting analysis reflecting
the 32902(h) restrictions.
---------------------------------------------------------------------------
The tables and discussion also illustrate that, for purposes of
this final rule, economic practicability points in the opposite
direction of the need of the U.S. to conserve energy. It is within
NHTSA's discretion to forgo the potential prospect of additional energy
conservation benefits if NHTSA believes that more stringent standards
would be economically impracticable, and thus, beyond maximum feasible.
Changes in costs for new vehicles are not the only costs that NHTSA
considers in balancing the statutory factors. Fuel costs for consumers
are relevant to the need of the U.S. to conserve energy, and NHTSA
believes that consumers themselves weigh expected fuel savings against
increases in purchase price for vehicles with higher fuel economy,
although the extent to which consumers value fuel economy improvements
is hotly debated, as discussed in Chapter 2.1.4 of the TSD. Fuel costs
(or savings) continue, for now, to be the largest source of benefits
for CAFE standards. Comparing private costs to private benefits, the
estimated results for American consumers are as follows:
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[[Page 52878]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.243
Looking simply at the effects for consumers, our analysis suggests
that private benefits would outweigh private costs for passenger cars
under PC2LT002, PC1LT3, and PC2LT4, with PC2LT002 being the most
beneficial for passenger car purchasers. For light trucks, all of the
action alternatives appear net beneficial for consumers, with PC2LT4
and PC3LT5 being the most beneficial. Under the No ZEV alternative
baseline analysis, comparing private costs to private benefits, the
estimated results for American consumers are as follows:
[[Page 52879]]
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Again, looking simply at the effects for consumers, our analysis
suggests that private benefits would outweigh private costs for
passenger cars under PC2LT002, PC1LT3, PC2LT4, and PC3LT5, with
PC2LT002 being by far the most beneficial for passenger car purchasers.
For light trucks, all of the action alternatives appear net beneficial
for consumers, with PC1LT3 being the most beneficial.
[[Page 52880]]
Broadening the scope to consider external/governmental benefits as
well, we see the following:
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[[Page 52881]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.247
Adding external/social costs and benefits does not change the
direction of NHTSA's analytical findings. Net benefits for passenger
cars become negative across all alternatives except for PC2LT002.\1443\
Net benefits for light trucks remain positive across alternatives, with
a peak at PC2LT4.
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\1443\ This behavior is discussed in Section VI.A.5.a.(2).
---------------------------------------------------------------------------
Under the No ZEV alternative baseline analysis, adding external/
social costs and benefits still does not change the direction of
NHTSA's analytical findings, as the tables illustrate:
[[Page 52882]]
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[[Page 52883]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.249
Under the No ZEV alternative baseline analysis, net benefits for
passenger cars also become negative across all alternatives except for
PC2LT002.\1444\ Net benefits for light trucks remain positive across
alternatives, with a peak at PC1LT3.
---------------------------------------------------------------------------
\1444\ This behavior is discussed in Section VI.A.5.a.(2).
---------------------------------------------------------------------------
Because NHTSA considers multiple discount rates in its analysis,
and because analysis also includes multiple values for the SC-GHG, we
also estimate the following cumulative values for each regulatory
alternative:
[[Page 52884]]
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[[Page 52885]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.251
While the results shown in the tables above range widely--
underscoring that DR assumptions significantly affect benefits
estimates--the ordering of alternatives generally remains the same
under most discounting scenarios. In most cases the greatest net
benefits are a function of overall alternative stringency, with PC6LT8
having the highest net benefits in most cases. Only in the higher SC-
GHG discount rates do the lower stringencies start to show a higher net
benefit. Under the No ZEV alternative baseline analysis, results chart
a similar path:
[[Page 52886]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.252
[[Page 52887]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.253
Again, the results shown in the tables above range widely--
underscoring that DR assumptions significantly affect benefits
estimates. Under the MY accounting approach, PC2LT4 has the greatest
net benefits under the various SC-GHG discount rates, and under the CY
accounting approach, PC6LT8 has the highest net benefits under the
various SC-GHG discount rates.
E.O. 12866 and Circular A-4 direct agencies to consider maximizing
net benefits in rulemakings whenever possible and consistent with
applicable law. Because it can be relevant to balancing the statutory
factors and because it is directed by E.O. 12866 and OMB guidance,
NHTSA does evaluate and consider net benefits associated with different
potential future CAFE standards. As the tables above show, our analysis
suggests that for passenger cars, under either baseline analysis, net
benefits tend to be higher when standards are less stringent (and thus
anticipated costs are lower). For light trucks, net benefits are higher
when standards are more stringent, although not consistently. Looking
solely at net benefits, under the reference baseline analysis, PC6LT8
looks best overall and across all DRs, as well as for light trucks
specifically, although PC2LT002 is the only non-negative alternative
for passenger cars. Under the No ZEV alternative baseline analysis,
PC2LT002 is still the only non-negative alternative for passenger cars,
but PC1LT3 produces the largest net benefits for the light truck fleet.
That said, while maximizing net benefits is a valid decision
criterion for choosing among alternatives, provided that appropriate
consideration is given to impacts that cannot be monetized, it is not
the only reasonable decision perspective, and we recognize that what we
include in our cost-benefit analysis affects our estimates of net
benefits. We also note that important benefits cannot be monetized--
including the full health and welfare benefits of reducing climate
emissions and other pollution, which means that the benefits estimates
are underestimates. Thus, given the uncertainties associated with many
aspects of this analysis, NHTSA does not rely solely on net benefit
maximization, and instead considers it as one piece of information that
contributes to how we balance the statutory factors, in our
discretionary judgment. NHTSA recognizes that the need of the U.S. to
conserve energy weighs importantly in the overall balancing of factors,
and thus believes that it is reasonable to at least consider choosing
the regulatory alternative that produces the largest reduction in fuel
consumption, while still remaining net beneficial. Of course, the
benefit-cost analysis is not the sole factor that NHTSA considers in
determining the maximum feasible stringency, though it informs NHTSA's
conclusion that Alternative PC2LT002 is the maximum feasible
stringency. Importantly, the shortfalls discussion above suggests that
even if more stringent alternatives appear net beneficial, under the
constraints of our standard-setting analysis which is the analysis that
NHTSA is statutorily required to
[[Page 52888]]
consider, hardly any manufacturers would be able to achieve the fuel
economy levels required by PC6LT8 considering technologies available
under the constrained analysis and planned redesign cycles, and even
under the proposal PC2LT4, more than half of manufacturers could not
achieve the light truck standards considering technologies available
under the constrained analysis and planned redesign cycles.
Unachievable standards would not be accomplishing their goals and thus
be beyond maximum feasible for purposes of this final rule.
As with any analysis of sufficient complexity, there are a number
of critical assumptions here that introduce uncertainty about
manufacturer compliance pathways, consumer responses to fuel economy
improvements and higher vehicle prices, and future valuations of the
consequences from higher CAFE standards. Recognizing that uncertainty,
NHTSA prepared an alternative baseline and also conducted more than 60
sensitivity analysis runs for the passenger car and light truck fleet
analysis. The entire sensitivity analysis is presented in the FRIA,
demonstrating the effect that different assumptions would have on the
costs and benefits associated with the different regulatory
alternatives. NHTSA's assessment of the final standards as compared to
the alternative baseline ensures that the determination that the
standards are maximum feasible is robust to the different futures
represented by the reference baseline ZEV deployment and the lack of
ZEV deployment to satisfy state ZEV standards and non-regulatory
manufacturer ZEV deployment in the No ZEV alternative baseline, and
thus also to scenarios in between these poles. While NHTSA considers
dozens of sensitivity cases to measure the influence of specific
parametric assumptions and model relationships, only a small number of
them demonstrate meaningful impacts to net benefits under the different
alternatives.\1445\
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\1445\ For purposes of this table, the IWG SC-GHG sensitivtiy
case uses a 2.5% discount rate.
---------------------------------------------------------------------------
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BILLING CODE 4910-59-C
The results of the sensitivity analysis runs suggest that
relatively few metrics make major differences to cost and benefit
outcomes, and the ones that do, act in relatively predictable ways.
Some changes in values (fuel prices, removing ZEV, IRA tax credits) act
on the reference baseline, increasing or reducing the amount of fuel
economy improvements available for CAFE standards. Other changes in
values (for example, fuel prices) affect benefits, and thus net
benefits. However, NHTSA's determination of maximum feasible standards
does not solely rely on net benefits. That said, it is notable that net
benefits remain positive in the vast majority of sensitivity cases,
including the most stringent EPCA constraints cases, for the standards
being finalized in this notice, PC2LT002, and for the proposed
standards, PC2LT4. NHTSA therefore disagrees with commenters that
alleged not including EPCA
[[Page 52894]]
standard setting year constraints in model years other than the
standard-setting years affected our decision.
NHTSA is statutorily prohibited from considering the fuel economy
of BEVs in determining maximum feasible stringency but notes in passing
that the case changing the value of DOE's PEF reduces net benefits
somewhat, although not significantly, and that changing assumptions
about the value of electrification tax credits that reach consumers
also changes net benefits slightly. However, because NHTSA cannot
consider the fuel economy of BEVs in determining maximum feasible fuel
economy standards, these are effects that happen only in the reference
baseline of our analysis and are not considered in our determination.
Moreover, regardless of net benefits, NHTSA believes that its
conclusion would be the same that Alternative PC2LT002 is economically
practicable, based on manufacturers' apparent ability to reach
compliance in most model years, considering statutory constraints on
technology available to be considered as well as planned redesign cycle
constrains, as compared to Alternative PC2LT4 or PC1LT3.
The Alliance created its own sensitivity run by modifying a number
of model settings and inputs, including taking BEVs out of the
reference baseline, setting PHEV electric operation to zero for all
years, setting fine payments to zero, and otherwise keeping standard-
setting restrictions. The Alliance noted that compliance appeared much
more difficult for a number of manufacturers' fleets under these
settings and with these input assumptions. As explained in Section VI.A
above, NHTSA modeled an alternative baseline and additional
sensitivities similar to the Alliance's test, to evaluate the
sensitivity of assumptions surrounding BEVs, including a no ZEV
alternative baseline, a reduced ZEV compliance case (which allows for
increased use of banked credits in modeling the ACC I program), and
three cases that extend EPCA standard setting year constraints (no
application of BEVs and no credit use) beyond years considered in the
reference baseline.
In the no ZEV alternative baseline, the industry, as a whole,
overcomplies with the final standards in every year covered by the
standards. The passenger car fleet overcomplies handily, and the light
truck fleet overcomplies in model years 2027-2030, until model year
2031 when the fleet exactly meets the standard. Individual
manufacturers' compliance results are also much less dramatically
affected than comments would lead one to believe; while some
manufacturers comply with the 4 percent per year light truck stringency
increases from the proposal without ZEV in the baseline, a majority of
manufacturers comply in most or all years under the final light truck
standards. In general, the manufacturers that have to work harder to
comply with CAFE standards without ZEV in the baseline are the same
manufacturers that have to work harder to comply with CAFE standards
with ZEV in the reference baseline. For example, General Motors sees
higher technology costs and civil penalties to comply with the CAFE
standards over the five years covered by the standards; however, this
is expected as they are starting from a lower baseline compliance
position. However, General Motors seems to be the only outlier, and for
the rest of the industry technology costs are low and civil penalty
payments are nonexistent in many cases.
Similar trends hold true for the EPCA standard setting year
constraints cases. Examining the most restrictive case, which does not
allow BEV adoption in response to CAFE standards in any year when the
CAFE Model adds technology to vehicles (2023-2050, as 2022 is the
baseline fleet year), the industry, as a whole, overcomplies in every
year from model year 2027-2031, in both the passenger car and light
truck fleets. Some manufacturers again struggle in individual model
years or compliance categories, but the majority comply or overcomply
in both compliance categories of vehicles. Again, General Motors is the
only manufacturer that sees notable increases in their technology costs
over the reference baseline, however their civil penalty payments are
low, at under $500 million total over the five-year period covered by
the new standards. Net benefits attributable to CAFE standards do
decrease from the central analysis under the EPCA constraints case, but
remain significantly positive. In addition, as discussed in more detail
below, net benefits are just one of many factors considered when NHTSA
sets fuel economy standards.
These alternative baseline and sensitivity cases offer two
conclusions. First, contrary to the Alliance's and other commenter's
concerns, the difference between including BEVs for non-CAFE reasons
and excluding them are not great--thus, NHTSA would make the same
determination of what standards are maximum feasible under any of the
analyzed scenarios.\1446\ NHTSA does not mean that it is considering
the electric vehicles in these various baselines (and thus the fuel
economy inherent in the BEVs they include or do not include) in
determining the maximum feasible CAFE standards; NHTSA means instead
that it developed an alternative baseline in response to comments and
that the inclusion or exclusion of BEVs in the analytical reference
baseline would not lead NHTSA to make a different decision on maximum
feasible standards. And second, this lack of dispositive difference in
the various baselines shows that the interpretive concerns raised by
commenters, even if correct, would not lead to a different decision by
NHTSA on the question of what is maximum feasible.
---------------------------------------------------------------------------
\1446\ See RIA Chapter 9 for sensitivity run results.
---------------------------------------------------------------------------
Finally, as discussed in Section IV.A, NHTSA accounts for the
effects of other motor vehicle standards of the Government in its
balancing, often through their incorporation into our regulatory
reference baseline.\1447\ NHTSA believes that this approach accounts
for these effects reasonably and appropriately. Some commenters
requested that NHTSA ``keep pace'' with EPA's standards specifically,
(i.e., that NHTSA should choose a more stringent alternative in the
final rule), while other commenters requested that NHTSA set CAFE
standards such that no additional investment in fuel economy-improving
technologies would be necessary beyond what manufacturers intended to
make to meet EPA's GHG standards (i.e., that NHTSA should choose a less
stringent alternative in the final rule). NHTSA can only ``keep pace''
with EPA's standards (or government-wide transportation decarbonization
plans, or even Executive Orders) to the extent permitted by statute,
specifically to the extent permitted by our statutory restrictions on
considering the fuel economy of BEVs in determining what levels of CAFE
standards would be maximum feasible. Conversely, while NHTSA
coordinates closely with EPA in developing and setting CAFE standards,
as discussed above, even when the standards of the two programs are
coordinated closely, it is still foreseeable that there could be
situations in which different agencies' programs could be binding for
different
[[Page 52895]]
manufacturers in different model years. This has been true across
multiple CAFE rulemakings over the past decade. Regardless of which
agency's standards are binding given a manufacturer's chosen compliance
path, manufacturers will choose a path that complies with both
standards, and in doing so, will still be able to build a single fleet
of vehicles--even if it is not exactly the fleet that the manufacturer
might have preferred to build. This remains the case with this final
rule.
---------------------------------------------------------------------------
\1447\ NHTSA has carefully considered EPA's standards by
including the baseline (i.e., model years 2024-2026) CO2
standards in our analytical baseline. Because the EPA and NHTSA
final rules were developed in coordination jointly, and stringency
decisions were made in coordination, NHTSA did not include EPA's
final rule for model years 2027 and beyond CO2 standards
in our analytical baseline for this final rule. The fact that EPA
issued its final rule before NHTSA is an artifact of circumstance
only.
---------------------------------------------------------------------------
NHTSA continues to disagree that it would be a reasonable
interpretation of Congress' direction to set ``maximum feasible''
standards, as some commenters might prefer, at the fuel economy level
at which no manufacturer need ever apply any additional technology or
spend any additional dollar beyond what EPA's standards, with their
many flexibilities, would require. NHTSA believes that CAFE standards
can still be consistent with EPA's GHG standards even if they impose
additional costs for certain manufacturers, although NHTSA is, of
course, mindful of the magnitude of those costs and believes that the
preferred alternative would impose minimal additional costs, if any,
above compliance with EPA's standards.
Some commenters also asked NHTSA to set standards that ``keep
pace'' with CARB's programs, i.e. to set standards that mandate BEVs or
lead to a ban on ICEVs. As discussed above, NHTSA cannot mandate BEVs
or ban ICEVs, due to the statutory restrictions in 49 U.S.C.
32902(h).\1448\ NHTSA continues to believe that accounting for CARB's
programs that have been granted a waiver by including them in the
regulatory reference baseline is reasonable. NHTSA has not included
CARB's ACC II program (which includes the ZEV program) as a legal
requirement by including it in the No-Action Alternative, because it
has not been granted a Clean Air Act preemption waiver. However, NHTSA
did use ACC II levels of electrification as a proxy for the electric
vehicle deployment that automakers have committed to executing,
regardless of legal requirements. Modeling anticipated manufacturer
compliance with ACC I and ACT and the additional electric vehicles that
manufacturers have committed to deploy enables NHTSA to make more
realistic projections of how the U.S. vehicle fleet will change in the
coming years independent of CAFE standards, which is foundational to
our ability to set CAFE standards that reflect the maximum feasible
fuel economy level achievable through improvements to internal
combustion vehicles. Likewise, by creating a more accurate projection
of how manufacturers might modify their fleets even in the absence of
new CAFE standards, we are better able to identify the effects of new
CAFE standards, which is the task properly before us. If NHTSA could
not account for the ACC I program and could not be informed about its
reference baseline effects, then NHTSA could overestimate the
availability of internal combustion engine vehicles that can be
improved to meet potential new CAFE standards, and thus end up setting
a fuel economy standard that requires an infeasible level of
improvement. Moreover, as the No ZEV alternative baseline shows, the
effect of including the ACC I program and additional electric vehicle
deployment that manufacturers intend to implement in the reference
baseline is simply to decrease costs and benefits attributable to
potential future CAFE standards. Removing these electric vehicles from
the reference baseline increases costs and benefits for nearly every
alternative, but even so, we note that net benefits change relatively
little for that alternative baseline, as shown in more detail in Table
VI-43. While PC2LT4 looks slightly more net beneficial than PC2LT002
under that case, it is relatively slightly, and it is not so great an
effect as to change NHTSA's balancing of the statutory factors in this
final rule. NHTSA continues to believe, even under this scenario, that
PC2LT002 is maximum feasible for the rulemaking time frame.
---------------------------------------------------------------------------
\1448\ NHTSA thus also cannot be part of any supposed strategy
to force manufacturers to produce BEVs or consumers to purchase
BEVs. On the compliance side of this equation, just as NHTSA cannot
force manufacturers to use BEVs to comply, so NHTSA cannot force
manufacturers not to use BEVs to comply (and instead improve the
fuel economy of their ICEV models), contrary to the assertions of
several industry commenters. Manufacturers are always free to use
whatever technology they choose to meet the CAFE standards.
---------------------------------------------------------------------------
Even though NHTSA is statutorily prohibited from considering the
possibility that manufacturers would produce additional BEVs to comply
with CAFE standards, and even though manufacturers have stated their
intention to rely more and more heavily on those BEVs for compliance,
CAFE standards still have an important role to play in meeting the
country's ongoing need to conserve energy. CAFE standards can also
ensure continued improvements in energy conservation by requiring
ongoing fuel economy improvements even if demand for more fuel economy
flags unexpectedly, or if other regulatory pushes change in unexpected
ways. Saving money on fuel and reducing CO2 and other
pollutant emissions by reducing fuel consumption are also important
equity goals. As discussed by some commenters, fuel expenditures are a
significant budget item for consumers who are part of lower-income and
historically disadvantaged communities. By increasing fuel savings to
consumers (given estimated effects on new vehicle costs), CAFE
standards can help to improve equity. NHTSA believes, moreover, that
the final CAFE standards will improve the affordability of new vehicles
relative to the proposal, and will continue to preserve consumer
choice, while still contributing to the nation's need to conserve
energy and improve energy security.
That said, NHTSA continues to acknowledge the statute-driven
cognitive dissonance, and NHTSA's task in approaching the determination
of maximum feasible standards is the same as ever, to evaluate
potential future CAFE stringencies in light of statutory constraints.
NHTSA has listened carefully to commenters and is establishing final
standards that it believes are technologically feasible and
economically practicable within the context of the statutory
constraints. The rate of increase in the standards may be slower than
in the last round of rulemaking, but NHTSA believes that is reasonable
and appropriate given the likely state of the fleet by model year
2027.\1449\ Consider, for example, the non-linear relationship between
fuel economy and fuel consumption (in the absence of new technological
innovations) as illustrated below:
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\1449\ Moreover, if future information indicates that NHTSA's
conclusions in this regard are incorrect, NHTSA always has authority
to amend fuel economy as long as lead-time requirements are
respected, if applicable. See 49 U.S.C. 32902(g).
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[[Page 52896]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.261
As fleet fuel economy improves, there are simply fewer further
improvements to ICEs available to be made (in the absence of further
technological innovation), and the amount of fuel consumers actually
save is smaller, and the remaining available improvements are
increasingly expensive. This is even more true given the statutory
restrictions that NHTSA must observe, which precludes NHTSA from
incorporating the set of technologies deployed in electric vehicles
that is evolving most rapidly right now. CAFE standards can still help
industry further improve internal combustion engine vehicles, and as
such, based on all of the information contained in this record, NHTSA
concludes that PC2LT002 represents the maximum feasible standards for
passenger cars and light trucks in the model years 2027 to 2031 time
frame.
NHTSA also conducted an analysis using an alternative baseline,
under which NHTSA removed not only the electric vehicles that would be
deployed to comply with ACC I, but also those that would be deployed
consistent with manufacturer commitments to deploy additional electric
vehicles regardless of legal requirements, consistent with the levels
under ACC II. NHTSA describes this as the ``No ZEV alternative
baseline.'' Under the No ZEV alternative baseline, NHTSA generally
found that benefits and costs attributable to the CAFE standards were
higher than under the reference case baseline, and that net benefits
were also higher. Removing some electric vehicles, as under the No ZEV
alternative baseline, increases the share of other powertrains in the
No Action alternative. The preferred alternative results in more SHEVs
and fewer PHEVs than when compared to the reference baseline case.
Relative to the reference baseline, total technology costs and civil
penalties for the passenger car and light truck fleets increase
somewhat under PC2LT002, but not by enough to alter NHTSA's conclusion.
Chapter 8.2.7 of the FRIA presents these results in more detail. Based
on these results, NHTSA concludes that it would continue to find
PC2LT002 to be maximum feasible fuel economy level that manufacturers
can achieve even under the No ZEV alternative baseline.
NHTSA's conclusion, after consideration of the factors described
below and information in the administrative record for this action, is
that 2 percent increases in stringency for passenger cars for model
years 2027-2031, 0 percent increases in stringency for light trucks in
model years 2027-2028, and 2 percent increases in stringency for model
years 2029-2031 (Alternative PC2LT002) are maximum feasible. EPCA
requires NHTSA to consider four factors in determining what levels of
CAFE standards (for passenger cars and light trucks) would be maximum
feasible--technological feasibility, economic practicability, the
effect of other motor vehicle standards
[[Page 52897]]
of the Government on fuel economy, and the need of the United States to
conserve energy.
``Technological feasibility'' refers to whether a particular method
of improving fuel economy is available for deployment in commercial
application in the model year for which a standard is being
established. The technological feasibility factor allows NHTSA to set
standards that force the development and application of new fuel-
efficient technologies, recognizing that NHTSA may not consider the
fuel economy of BEVs when setting standards. Given the statutory
constraints under which NHTSA must operate, and constraining technology
deployment to what is feasible under expected redesign cycles, NHTSA
does not see a technology path to reach the higher fuel economy levels
that would be required by the more stringent alternatives, in the time
frame of the rulemaking. NHTSA's final rule (constrained) analysis
illustrates that a number of manufacturers do not have enough
opportunities to redesign enough vehicles during the rulemaking time
frame in order to achieve the levels estimated to be required by the
more stringent alternatives. NHTSA also finds that using the No ZEV
alternative baseline would not change our conclusions regarding the
technological feasibility of the various action alternatives--rather,
it reinforces those conclusions. NHTSA therefore concludes that the
final standards are technologically feasible, but the most stringent
alternatives are not technologically feasible, considering redesign
cycles, without widespread payment of penalties.
``Economic practicability'' has consistently referred to whether a
standard is one ``within the financial capability of the industry, but
not so stringent as to'' lead to ``adverse economic consequences, such
as a significant loss of jobs or unreasonable elimination of consumer
choice.''\1450\ While NHTSA is prohibited from considering the fuel
economy of BEVs in determining maximum feasible CAFE standards, NHTSA
does not believe that it is prohibited from considering the industry
resources needed to build BEVs, and industry is adamant that the
resource load it faces as part of this technological transition to
electric vehicles is unprecedented. Specifically, NHTSA believes it can
consider the reality that given the ongoing transition to electric
vehicles, fuel economy standards set at a level that resulted in
widespread payment of penalties rather than compliance would be
counterproductive to the core aim of the statute we are implementing,
which is improving energy conservation. Such widespread payment of
penalties at the precise time when manufacturers are concentrating
available resources on a transition to electrification which will
itself dramatically improve fuel economy and energy conservation would
be at cross purposes with the statute. Further, while NHTSA does not
believe that economic practicability mandates that zero penalties be
modeled to occur in response to potential future standards, NHTSA does
believe that economic practicability cannot reasonably include the idea
that high percentages of the cost of compliance would be attributed to
shortfall penalties across a wide group of manufacturers, because
penalties are not compliance. The number of manufacturers facing
shortfalls (particularly in their imported car fleets) and the
percentage of regulatory costs represented by civil penalties rapidly
increase for the highest stringency scenarios considered, PC3LT5 and
PC6LT8, such that at the highest stringency 43 percent of the
regulatory cost is attributed to penalties and approximately three
quarters of the 19 manufacturers are facing shortfalls. The three less
stringent alternatives show only one manufacturer facing shortfalls for
each of the alternatives PC2LT002, PC1LT3, and PC2LT4. Moreover, civil
penalties represent higher percentages of regulatory costs under PC1LT3
and PC2LT4 than under PC2LT002. Evaluating the alternatives against the
No ZEV alternative baseline further reinforces these trends. Optimizing
the use of resources for technology improvement rather than penalties
suggests PC2LT002 as the best option of the three for the passenger car
fleet. Considering this ratio as an element of economic practicability
for purposes of this rulemaking, then, NHTSA believes that PC2LT002
represents the least harmful alternative considered given the need for
industry resources to be dedicated to the ongoing transition to
electrification.
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\1450\ 67 FR 77015, 77021 (Dec. 16, 2002).
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``The effect of other motor vehicle standards of the Government on
fuel economy'' involves analysis of the effects of compliance with
emission, safety, noise, or damageability standards on fuel economy
capability, and thus on industry's ability to meet a given level of
CAFE standards. In many past CAFE rulemakings, NHTSA has said that it
considers the adverse effects of other motor vehicle standards on fuel
economy. Because the EPA and NHTSA programs were developed in
coordination, and stringency decisions were made in coordination, NHTSA
has not incorporated EPA's CO2 standards for model years
2027-2032 as part of the analytical reference baseline for this final
rule's main analysis. The fact that EPA finalized its rule before NHTSA
is an artifact of circumstance only. NHTSA recognizes, however, that
the CAFE standards thus sit alongside EPA's light-duty multipollutant
emission standards that were issued in March. NHTSA also notes that any
electric vehicles deployed to comply with EPA's standards will count
toward real-world compliance with these fuel economy standards. In this
final rule, NHTSA's goal has been to establish regulations that achieve
energy conservation per its statutory mandate and consistent with its
statutory constraints, and that work in harmony with EPA's regulations
addressing air pollution. NHTSA believes these standards meet that
goal.
NHTSA has consistently interpreted ``the need of the United States
to conserve energy'' to mean ``the consumer cost, national balance of
payments, environmental, and foreign policy implications of our need
for large quantities of petroleum, especially imported petroleum.'' As
discussed above, when considered in isolation, the more stringent
alternatives better satisfy this objective, whether compared against
the reference baseline or the No ZEV alternative baseline. However,
taking the widespread penalty payment that is projected to occur under
the more stringent alternatives into account, and the resulting
diversion of resources from the electrification transition to penalty
payments, the more stringent alternatives would not likely further
energy conservation in implementation.
In summary, when compared to either the reference case baseline or
the No ZEV alternative baseline, NHTSA believes that the technology
``available'' for manufacturers to comply under the statutory
constraints, combined with the relatively few opportunities for vehicle
redesigns, simply put the more stringent action alternatives out of
reach for certain manufacturers during the rulemaking time frame and
resulted in unacceptably high levels of penalty payments rather than
fuel economy improvements. NHTSA further notes that these penalty
payments would divert resources from the ongoing electrification
transition, in a manner that would be at cross-purposes with the energy
conservation aims of the statute. Finally, NHTSA finds that the
economic practicability factor is not satisfied where penalty payments
are projected to comprise such a high penalty payment levels would also
reduce resources
[[Page 52898]]
available to manufacturers to invest in the transition to electric
vehicles, which they have indicated they are undertaking and which will
have very significant fuel economy benefits. NHTSA therefore concludes
that PC2LT002 is maximum feasible for passenger cars and light trucks
for MYs 2027-2031.
2. Heavy-Duty Pickups and Vans
NHTSA has not set new HDPUV standards since 2016. The redesign
cycles in this segment are slightly longer than for passenger cars and
light trucks, roughly 6-7 years for pickups and roughly 9 years for
vans.\1451\ To our knowledge, technology for pickups in this segment
has been relatively slow to advance compared to in the light truck
segment, and there are still no hybrid HD pickups. That said,
electrification is beginning to appear among the vans in this segment,
perhaps especially among vans typically used for deliveries,\1452\ and
under NHTSA's distinct statutory authority for setting HDPUV standards,
expanding BEV technologies are part of NHTSA's standard setting
consideration. The Ford E-Transit, for example, is based on the Mach-E
platform and uses similar battery architecture; \1453\ other
manufacturers have also shown a willingness to transition to electric
vans and away from conventional powertrains.\1454\ NHTSA is aware that
some historic light truck applications now being offered as BEVs may be
heavy enough to fall outside the light truck segment and into the HDPUV
segment,\1455\ but NHTSA expects manufacturers to find strategies to
return them to the CAFE light truck fleet in the coming years. This
could include development in battery design or electrified powertrain
architecture that could reduce vehicle weight. The vehicles in these
segments are purpose-built for key applications and we expect
manufacturers will cater electrified offerings for businesses that
maximize benefits in small volumes. However, until these technologies
materialize, NHTSA assumes in its analysis there will continue to be
`spill-over' of vehicles that exist as edge cases, and that they will
count toward HDPUV compliance.
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\1451\ See TSD Chapter 2.2.1.7. HDPUVs have limited makes and
models. Assumptions about their refresh and redesign schedules have
an outsized impact on our modeling of HDPUVs, where a single
redesign can have a noticeable effect on technology penetration,
costs, and benefits.
\1452\ North American Council for Freight Efficiency (NACFE).
2022. Electric Trucks Have Arrived: The Use Case For Vans and Step
Vans. Available at: https://nacfe.org/research/run-on-less-electric/#vans-step-vans. (Accessed: Feb. 28, 2024).
\1453\ Martinez, M. 2023. Ford to Sell EVs With 2 Types of
Batteries, Depending On Customer Needs. Automotive News. Last
revised: Mar. 5, 2023. Available at: https://www.autonews.com/technology/ford-will-offer-second-ev-battery-type-lower-cost-and-range. (Accessed: Feb. 28, 2024).
\1454\ Hawkins, T. 2023. Mercedes-Benz eSprinter Unveiled As
BrightDrop Zevo Rival. GM Authority. Available at: https://gmauthority.com/blog/2023/02/mercedes-benz-esprinter-unveiled-as-brightdrop-zevo-rival/. (Accessed: Feb. 28, 2024).
\1455\ Gilboy, J. 2023.Massive Weight Could Push Past EPA's
Light-Duty Rules. The Drive. Available at: https://www.thedrive.com/news/the-2025-ram-1500-revs-massive-weight-could-push-past-epas-light-duty-rules. (Accessed Feb. 27, 2024); See also Arbelaez, R.
2023. IIHS Insight. As Heavy EVs Proliferate, Their Weight May Be a
Drag on Safety. Available at: https://www.iihs.org/news/detail/as-heavy-evs-proliferate-their-weight-may-be-a-drag-on-safety.
(Accessed Feb. 27, 2024).
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NHTSA proposed HDPUV standards that would increase at 10 percent
per year, each year, for the 3-year periods of model years 2030-2032
and model years 2033-2035 (the preferred alternative in the proposal
was designated as ``HDPUV10''). NHTSA acknowledged in the proposal that
more stringent standards, as represented by HDPUV14, appeared to be
potentially appropriate, cost-effective, and technologically feasible.
However, NHTSA was concerned that the nature of the HDPUV fleet--with
many fewer different models than the passenger car and light truck
fleets over which improvements could be spread--could lead to
significant negative implications if certain of NHTSA's assumptions
turned out to be incorrect, such as assumptions about battery costs or
future gasoline prices, significantly raising costs and reducing
benefits.\1456\ Significantly different cost and benefit assumptions
can change both the cost-effectiveness and the appropriateness of
potential new HDPUV standards. NHTSA therefore proposed HDPUV10 rather
than HDPUV14 out of an abundance of caution given the wish to support
and not hinder the technological transition anticipated to occur
leading up to and during the rulemaking time frame.\1457\
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\1456\ See 88 FR at 56358 (Aug. 17, 2023).
\1457\ NHTSA reminds readers that 49 U.S.C. 32902(h) does not
apply to HDPUV standards set under 32902(k) and (b), and thus that
NHTSA may, in setting HDPUV standards, consider the reality of the
electric vehicle transition.
---------------------------------------------------------------------------
Some commenters encouraged NHTSA to finalize more stringent HDPUV
standards. MPCA commented that NHTSA should finalize standards at least
as stringent as proposed, because more stringent standards would reduce
fossil fuel use, save consumers money, and be better for the
environment.\1458\ A number of commenters urged NHTSA to finalize more
stringent standards on the basis that the ``appropriate'' factor
includes ``a variety of factors related to energy conservation,
including average estimated fuel savings to consumers, average
estimated total fuel savings, benefits to U.S. energy security, and
environmental benefits, including avoided emissions of criteria
pollutants, air toxics, and CO2 emissions,'' stating that
all of these point toward higher standards.\1459\ Commenters also noted
environmental justice benefits, and that reductions in consumer fuel
costs ``make a meaningful difference to low-income households and
households of color that generally spend a greater proportion of their
income on transportation costs.'' \1460\ Public Citizen focused on
public health concerns, stating that ``Vehicle pollution is a major
contributor to the unhealthy air pollution levels affecting more than 1
in 3 Americans, which is linked to numerous health problems and
thousands of premature deaths. Heavy duty vehicles are particularly
problematic. Their fumes create ``diesel death zones'' with elevated
levels of asthma rates and cancer risks.'' \1461\ Ceres commented that
it had found that HDPUV14 would be best for the competitiveness of the
auto industry.\1462\
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\1458\ MPCA, Docket No. NHTSA-2023-0022-60666, at 1.
\1459\ NESCAUM, Docket No. NHTSA-2023-0022-57714, at 4; SELC,
Docket No. NHTSA-2023-0022-60224, at 4, 6; Public Citizen, Docket
No. NHTSA-2023-0022-57095, at 1; Colorado State Agencies, Docket No.
NHTSA-2023-0022-57625, at 2; OCT, Docket No. NHTSA-2023-0022-51242,
at 2-4; BICEP Network, Docket No. NHTSA-2023-0022-61135, at 1.
\1460\ SELC, Docket No. NHTSA-2023-0022-60224, at 4, 6; Public
Citizen, Docket No. NHTSA-2023-0022-57095, at 1; Colorado State
Agencies, Docket No. NHTSA-2023-0022-57625, at 2; OCT, Docket No.
NHTSA-2023-0022-51242, at 2-4; BICEP Network, Docket No. NHTSA-2023-
0022-61135, at 1.
\1461\ Public Citizen, Docket No. NHTSA-2023-0022-57095, at 2.
\1462\ Ceres, Docket No. NHTSA-2023-0022-28667, at 1.
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[[Page 52899]]
Tesla and ZETA stated that HDPUV14 is best for the environment,
energy security, and has the largest net benefits.\1463\ Rivian also
commented that NHTSA should finalize HDPUV14, because ``(1) NHTSA shows
that, of the alternatives considered, HDPUV14 delivers the greatest net
benefits; (2) The agency's analysis acknowledges that HDPUV14 is
feasible; (3) NHTSA does not appear to account for Rivian's Class 2b
commercial van or the impact of the Advanced Clean Fleets (`ACF')
rule.'' \1464\ Several commenters argued that NHTSA should finalize
more stringent standards because they would be technologically feasible
and cost-effective, and because NHTSA is allowed to consider BEVs,
PHEVs, FCEVs, and other technologies for HDPUV.\1465\
---------------------------------------------------------------------------
\1463\ Tesla, Docket No. NHTSA-2023-0022-60093, at 14; ZETA,
Docket No. NHTSA-2023-0022-60508, at 1.
\1464\ Rivian, Docket No. NHTSA-2023-0022-59765, at 11.
\1465\ NESCAUM, Docket No. NHTSA-2023-0022-57714, at 4; Public
Citizen, Docket No. NHTSA-2023-0022-57095, at 2; OCT, Docket No.
NHTSA-2023-0022-51242, at 3.
---------------------------------------------------------------------------
IPI agreed that HDPUV14 was clearly the most ``appropriate,'' and
argued that NHTSA should not have proposed HDPUV10 based only on 3 of
dozens of sensitivities, without explaining why those are the relevant
or likely ones or reporting net benefits under those sensitivities. IPI
stated that NHTSA should have conducted a Monte Carlo analysis for
HDPUV instead. IPI also argued that NHTSA's cost estimates for the
proposal and alternatives were inflated because NHTSA holds
manufacturer fleet share fixed in response to the standards.\1466\
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\1466\ IPI, Docket No. NHTSA-2023-0022-60485, at 12-16. NHTSA
discusses the topic of fleet share in more detail in Section III,
but notes here that IPI's suggested approach is currently not
congruent with our analytical structure and the information we have
from manufacturers.
---------------------------------------------------------------------------
Some commenters supported standards closer to the proposal. Some
commenters supported HDPUV10 as maximum feasible.\1467\ The Alliance
stated that HDPUV10 could be acceptable, but only through model year
2032, because of the uncertainty that NHTSA had discussed in the NPRM,
especially regarding consumer acceptance and infrastructure
development.\1468\ The Alliance further stated that if NHTSA must set
standards through model year 2035, then standards should increase only
4 percent per year for model years 2033-2035, or 7 percent per each
year for model years 2030-2035.\1469\ MEMA agreed that 10 percent per
year increases in model years 2033-2035 were challenging and stated
that NHTSA should ``more carefully analyze the assumptions and
conditions needed.''\1470\
---------------------------------------------------------------------------
\1467\ Arconic, Docket No. NHTSA-2023-0022-48374, at 3; DC
Government Agencies, Docket No. NHTSA-2023-0022-27703, at 1.
\1468\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
F, at 63.
\1469\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
F, at 63.
\1470\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 3.
---------------------------------------------------------------------------
Other commenters argued that the proposed standards were too
stringent,\1471\ for a variety of reasons. NTEA commented that NHTSA
should finalize the No-Action alternative because today's trucks are
already 98 percent cleaner than pre-2010 trucks, and making trucks more
expensive will discourage consumers from buying them.\1472\ Valero
commented that the proposed fuel efficiency standards for CI engines
are beyond maximum feasible and reduce the number of CI HDPUV models to
zero by model year 2031. Valero stated that NHTSA also eliminates any
diesel engine hybridization from the model entirely, which is neither
technologically feasible nor economically practicable as not a single
CI HDPUV in the model year 2030 analysis fleet would meet the proposed
standards without becoming a BEV or a gasoline SHEV.\1473\ Valero
concluded that ``The rule effectively kills diesel engines for eternity
without ever once addressing whether NHTSA even has the legal authority
to work such a huge transformation on the transportation sector in the
United States--clearly a question of ``vast economic and political
significance,'' and argued that NHTSA has recognized that under all its
scenarios, its modeling has reduced ``the use of ICE technology . . .
to only a few percentage points'' with most of the new technology
penetration coming from BEVs. The baseline HDPUV fleet had 0% hybrids
and only 6% BEVs. This is nothing short of a momentous shift in only 8
years.'' \1474\ Elsewhere, Valero argued that the proposed standards
relied entirely on changes in the reference baseline, and that the
proposed standards themselves contribute nothing (i.e., that the
reference baseline assumptions are excessive).\1475\ API argued that
NHTSA does not have authority to impose standards that effectively
require a portion of the fleet to be BEV.\1476\ AVE stated that NHTSA
should align with EPA's rule.\1477\
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\1471\ See, e.g., Heritage Foundation, Docket No. NHTSA-2023-
0022-61952, at 2; The Alliance, Docket No. NHTSA-2023-0022-60652,
Attachment 2, at 13.
\1472\ NTEA--The Work Truck Association, Docket No. NHTSA-2023-
0022-60167, at 2.
\1473\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A,
at 11, and Attachment G, at 9.
\1474\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment A,
at 11.
\1475\ Valero, Docket No. NHTSA-2023-0022-58547, Attachment G,
at 1.
\1476\ API, Docket No. NHTSA-2023-0022-60234, at 4.
\1477\ AVE, Docket No. NHTSA-2023-0022-60213, at 2.
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RFA et al. 2 argued that NHTSA is required to analyze critical
mineral supply and charging infrastructure as part of technological
feasibility because the standards are based on the reference baseline,
and NHTSA had not proven that the reference baseline is feasible even
though ``comparing regulatory alternatives to a baseline is
customary.'' \1478\ These commenters also stated that NHTSA did not
address consumer demand for BEVs.\1479\ RVIA expressed concern that
motor homes would not recoup the cost increases estimated for the
proposed standards because they are only driven sparingly.\1480\
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\1478\ RFA et al. 2, Docket No. NHTSA-2023-0022-57625, at 16-18.
\1479\ RFA et al. 2, Docket No. NHTSA-2023-0022-57625, at 16-18.
\1480\ RVIA, Docket No. NHTSA-2023-0022-51462, at 2. As
discussed above, motor homes fall under NHTSA's vocational vehicle
standards per the Phase 2 HD rule, and therefore they are not
subject to the HDPUV standards being finalized as part of this
rulemaking.
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The following text will walk through the three statutory factors in
more detail and discuss NHTSA's decision-making process more
thoroughly. The balancing of factors presented here represents NHTSA's
thinking at the present time, based on all of the information presented
in the public comments and in the record for this final rule.
For the reader's reference, the regulatory alternatives under
consideration for HDPUVs are presented again below:
[[Page 52900]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.262
As discussed in Section VI.A, the three statutory factors for HDPUV
standards are similar to and yet somewhat different from the four
factors that NHTSA considers for passenger car and light truck
standards, but they still modify ``feasible'' in ``maximum feasible.''
NHTSA also interprets the HDPUV factors as giving us broad authority to
weigh potentially conflicting priorities to determine maximum feasible
standards. It is firmly within NHTSA's discretion to weigh and balance
the HDPUV factors in a way that is technology-forcing, although NHTSA
would find a balancing of the factors in a way that would require the
application of technology that will not be available in the lead time
provided by this final rule, or that is not cost-effective, to be
beyond maximum feasible.
That said, because HDPUV standards are set in accordance with 49
U.S.C. 32902(k), NHTSA is not bound by the 32902(h) factors when it
determines maximum feasible HDPUV standards.\1481\ That means that
NHTSA may, and does, consider the full fuel efficiency of BEVs and
PHEVs, and that NHTSA may consider the availability and use of
overcompliance credits, in this final rule. These considerations thus
play a role in NHTSA's balancing of the HDPUV factors, as described
below.
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\1481\ 49 U.S.C. 32902(h) clearly states that it applies only to
actions taken under subsections (c), (f), and (g) of 49 U.S.C.
32902.
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In evaluating whether HDPUV standards are appropriate, NHTSA could
begin by seeking to isolate the effects of new HDPUV standards from
NHTSA, by understanding effects in the industry that appear to be
happening for reasons other than potential new NHTSA regulations. NHTSA
explained in Chapter 1.4.1 of the TSD that the No-Action Alternative
for HDPUV accounts for existing technology on HDPUVs, technology
sharing across platforms, manufacturer compliance with existing HDPUV
standards from NHTSA and EPA (i.e., those standards set in the Phase 2
final rule in 2016 for model year 2021 to model year 2029),
manufacturer compliance with California's ACT and ZEV programs, and
foreseeable voluntary manufacturer application of fuel efficiency-
improving technologies (whether because of tax credits or simply
because the technologies are estimated to pay for themselves within 30
months). One consequence of accounting for these effects in the No-
Action Alternative is that the effects of the different regulatory
alternatives under consideration appear less cost-beneficial than they
would otherwise. Nonetheless, NHTSA believes that this is reasonable
and appropriate to better ensure that NHTSA has the clearest possible
understanding of the effects of the decision being made, as opposed to
the effects of many things that will be occurring simultaneously. All
estimates of effects of the different regulatory alternatives presented
in this section are thus relative to the No-Action Alternative.
GM stated that it believed the proposed model years 2030-2032 HDPUV
standards were appropriate, and it suggested that NHTSA reconsider the
model years 2033-2035 standards at a later time, to determine whether
they were still appropriate ``consider[ing] availability, reliability,
and cost of zero emissions vehicle fuel and refueling infrastructure,
and consider[ing] demand for zero emission vehicles as the Clean
Commercial Vehicle tax credits under the Inflation Reduction Act
expire.'' \1482\ NHTSA is setting HDPUV standards through model year
2035 for the reasons discussed in Section VI.A, but agrees that it
always has authority to reconsider standards based on new information,
as long as statutory lead time requirements are met.
---------------------------------------------------------------------------
\1482\ GM, Docket No. NHTSA-2023-0022-60686, at 7.
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Other information that are relevant to whether HDPUV standards are
appropriate could include how much energy we estimate they would
conserve; the magnitude of emissions reductions; possible safety
effects, if any; and estimated effects on sales and employment. NHTSA
agrees with commenters that ``appropriate'' encompasses many different
concerns related to energy conservation and that reducing fuel use and
emissions are important goals of EPCA/EISA. Simultaneously, NHTSA bears
in mind that HDPUV is a much smaller fleet (with much lower total VMT)
than passenger cars and light trucks, so while we seek to conserve
energy with the HDPUV standards, the effects are inevitably relatively
small compared to the effects resulting from CAFE standards.
In terms of energy conservation, Alternative HDPUV14 would conserve
the most energy and produce the greatest reduction in fuel expenditure,
as shown below:
[[Page 52901]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.263
[GRAPHIC] [TIFF OMITTED] TR24JN24.264
[GRAPHIC] [TIFF OMITTED] TR24JN24.265
Assuming that benefits to energy security correlate directly with
fuel consumption avoided, Alternative HDPUV14 would also contribute the
most to improving U.S. energy security. The discussion about energy
security effects of passenger car and light truck standards applies for
HDPUVs as well.
In terms of environmental benefits, Alternative HDPUV14 is also
estimated to be the most beneficial for most metrics:
[[Page 52902]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.266
The criteria pollutant effects demonstrate that increased
electrification (which increases faster under more stringent
alternatives) reduces vehicle-based emissions while increasing upstream
emissions due to increased demand for electricity. SELC commented that
``The significant environmental, public health, and equity impacts of
improved fuel [efficiency] must be given substantial weight in setting
. . . HDPUV standards.'' \1483\ NHTSA agrees that these are important
effects and weighs them carefully in determining maximum feasible HDPUV
standards.
---------------------------------------------------------------------------
\1483\ SELC, Docket No. NHTSA-2023-0022-60224, at 1.
---------------------------------------------------------------------------
Some other effects are fairly muted, possibly due to the relatively
small size of the HDPUV fleet. The safety effects associated with the
HDPUV alternatives are extremely small, too small to affect our
decision-making in this final rule. Readers may refer to Chapter
8.3.4.5 of the FRIA for specific information. For sales and employment,
readers may refer to Chapter 8.3.2.3 of the FRIA for more specific
information, but there is very little difference in sales between HDPUV
alternatives, less than one percent relative to the No-Action
Alternatives. Employment effects are of similar relative magnitude;
HDPUV108, HDPUV10, and HDPUV14 all subtract very slightly from the
reference baseline employment utilization, as sales declines produce a
small decrease in labor utilization that are not offset by technology
effects (i.e., that development and deployment of new fuel-efficient
technologies increases demand for labor). Estimated safety, sales, and
employment effects are thus all too small to be dispositive.
In evaluating whether HDPUV standards are cost-effective, NHTSA
could consider different ratios of cost versus the primary benefits of
the standards, such as fuel saved and GHG emissions avoided. Table VI-
48 and Table VI-49 include a number of informative metrics of the HDPUV
alternatives relative to the No-Action Alternative. None of the action
alternatives emerges as a clearly
[[Page 52903]]
superior option when evaluated along this dimension. When considering
aggregate societal effects, as well as when narrowing the focus to
private benefits and costs, HDPUV108 produces the highest benefit-cost
ratios, although HDPUV4 is also the most cost-effective under several
metrics.
[GRAPHIC] [TIFF OMITTED] TR24JN24.267
[GRAPHIC] [TIFF OMITTED] TR24JN24.268
Because NHTSA considers multiple discount rates in its analysis,
and because analysis also includes multiple values for the SC-GHG, we
also estimate the following cumulative values for each regulatory
alternative:
[[Page 52904]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.269
E.O. 12866 and Circular A-4 direct agencies to consider maximizing
net benefits in rulemakings whenever possible and consistent with
applicable law. Because it can inform NHTSA's consideration of the
statutory factors and because it is directed by E.O. 12866 and OMB
guidance, NHTSA does evaluate and consider net benefits associated with
different potential future HDPUV standards. As Table VI-50 shows, our
analysis suggests that HDPUV14 produces the largest net benefits,
although we note that the step from both HDPUV10 and HDPUV108 to
HDPUV14 results in a substantial jump in total costs.
Our analysis also suggests that all alternatives will result in
fuel savings for consumers, and that all alternatives will be cost-
effective under nearly every listed metric of comparison and at either
discount rate. Overall, avoided climate damages are lower and with each
alternative the ratio of cost to benefits for this metric decreases due
to increased cost and diminishing climate benefits. As discussed
earlier, the HDPUV fleet is a smaller fleet compared to passenger cars
and light trucks, and so for a manufacturer to meet standards that are
more or less stringent, they must transition a relatively larger
portion of that smaller fleet to new technologies. Thus, under some
comparisons, HDPUV108 appears the most cost-effective; under others,
HDPUV4 appears the most cost-effective. ZETA commented that NHTSA
should finalize HDPUV14 as ``a feasible and optimal way to cost-
effectively improve fleet fuel efficiency and reduce petroleum
consumption,'' because it would maximize fuel savings while providing
regulatory certainty to the supply chain.\1484\ ICCT commented that
costs were likely lower for many HDPUV technologies than NHTSA had
modeled, and stated that many gasoline and diesel-efficiency improving
technologies have yet to be broadly implemented among HDPUVs.\1485\
ACEEE argued that the IRA would hasten learning cost reductions for
electric HDPUVs and thus more stringent final standards would be cost-
effective if these cost reductions were reflected in NHTSA's
analysis.\1486\ NHTSA believes that the costs for HDPUV technologies,
including BEVs, are based on the best information available to the
agency at the present time, and thus are reasonable and accurate for
the rulemaking time frame. While HDPUV14 may maximize fuel savings,
NHTSA's information presented in the tables above does not support
ZETA's assertion that it is the most cost-effective by all metrics.
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\1484\ ZETA, Docket No. NHTSA-2023-0022-60508, at 28.
\1485\ ICCT, Docket No. NHTSA-2023-0022-54064, at 25.
\1486\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 8.
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As discussed above for passenger car and light truck standards,
while maximizing net benefits is a valid decision criterion for
choosing among alternatives, provided that appropriate consideration is
given to impacts that cannot be monetized, it is not the only
reasonable decision perspective. We recognize that what we include in
our cost-benefit analysis affects our estimates of net benefits. We
also note that important benefits cannot be monetized--including the
full health and welfare benefits of reducing climate and other
pollution, which means that the benefits estimates are underestimates.
Thus, given the uncertainties associated with many aspects of this
analysis, NHTSA does not rely solely on net benefit maximization, and
instead considers it as one piece of information that contributes to
how we balance the
[[Page 52905]]
statutory factors, in our discretionary judgment.
In evaluating whether HDPUV standards are technologically feasible,
NHTSA could consider whether the standards represented by the different
regulatory alternatives could be met using technology expected to be
available in the rulemaking time frame.
On the one hand, the HDPUV analysis employs technologies that we
expect will be available, and our analysis suggests widespread
compliance with all regulatory alternatives, which might initially
suggest that technological feasibility is not at issue for this final
rule. At the industry level, technology penetration rates estimated to
meet the different regulatory alternatives in the different MYs would
be as follows:
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[[Page 52907]]
As Table VI-51 \1487\ shows, it is immediately clear that most
technology application between now and model year 2038 would be
occurring as a result of reference baseline efforts and would not be an
effect of new NHTSA standards. Under the reference baseline, as early
as model year 2033, nearly 80 percent of the fleet would be electrified
(including SHEV, PHEV, and BEV). As mentioned above, Valero argued that
the proposed standards relied entirely on changes in the reference
baseline, and that the proposed standards themselves contributed
nothing (i.e., that the reference baseline assumptions are excessive).
NHTSA agrees that the reference baseline technology penetration rates
were high for the proposal and remain high for the final rule.
Nevertheless, NHTSA believes that these reference baseline technology
penetration rates, while high, are feasible and the best available
projection of reference case technology deployment in this time frame,
given projected trends for HD vans in particular (vans are roughly 40
percent of the HDPUV fleet during the rulemaking time frame). Due to
the relatively small number of models in the HDPUV fleet as compared to
the passenger car and light truck fleets, just a few models becoming
electrified can have large effects in terms of the overall fleet. NHTSA
also recognizes that these reference baseline technology penetration
rates result from our assumptions about battery costs and available tax
credits, among other things.\1488\ Some commenters argued that NHTSA
was itself obligated to prove that sufficient U.S.-derived critical
minerals, sufficient vehicle charging infrastructure, and sufficient
consumer demand for BEV HDPUVs would exist by the rulemaking time
frame, in order for NHTSA to establish that the HDPUV standards were
technologically feasible. NHTSA continues to believe that it is
reasonable to assume that critical minerals and charging infrastructure
will be sufficient to support BEV volume assumptions in the analysis by
the rulemaking time frame. NHTSA bases this belief on the U.S.
government sources cited in TSD Chapter 6.2.4 and discussed above in
Section VI.A.5.a(4)(d) of this preamble. NHTSA agrees with the
conclusion of these sources that the BIL will contribute significantly
toward resolving these concerns by the rulemaking time frame. With
regard to consumer demand for BEVs, NHTSA believes that it is evident
from sales that consumer demand continues to grow, especially for the
van segment of the HDPUV fleet, and that the IRA tax credits will
continue to encourage consumer demand as battery costs continue to
decrease and cost parity is eventually reached.
---------------------------------------------------------------------------
\1487\ The list of these engines is discussed in TSD Chapter
3.1.
\1488\ All EVs have zero emissions and are asisgned the fuel
consumption test group result to a value of zero gallons per 100
miles per 49 CFR 535.6(a)(3)(iii).
---------------------------------------------------------------------------
Against the backdrop of the reference baseline, HDPUV4 would
require no additional technology at all, on average, which explains why
the per-vehicle fuel cost savings associated is low. HDPUV108 could be
met with an additional 4.4 percent increase in PHEVs in MY2038. HDPUV10
could be met with an additional 6 percent increase in PHEVs, and very
slight increases in BEVs in the later years rulemaking time frame.
HDPUV14 could be met with an additional 11-12 percent increase in
PHEVs, an additional 6 percent increase in BEVs, and a 13 percent
decrease in advanced engines by model year 2038.
As in the analysis for passenger cars and light trucks, however,
NHTSA finds manufacturer-level results to be particularly informative
for this analysis. Of the five manufacturers modeled for HDPUV,
Mercedes-Benz, Nissan, and Stellantis would be able to meet all
regulatory alternatives with reference baseline technologies--only Ford
and GM show any activity in response to any of the regulatory
alternatives. HDPUV14 pushes Ford to increase volumes of PHEVs and
BEVs. Alternatives more stringent than HDPUV4 result in higher
penetration rates of PHEVs and BEVs for GM, with most change coming
from PHEVs, especially for HDPUV108 and HDPUV10.
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[GRAPHIC] [TIFF OMITTED] TR24JN24.271
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Again, it is clear that a great deal of technology application is
expected in response to the reference baseline, as evidenced by the
fact that technology penetration rates for most manufacturers do not
change between alternatives. For example, Stellantis is assumed to go
from 0 percent strong hybrids in its
[[Page 52909]]
HDPUV fleet in model year 2030 to 47 percent strong hybrids by model
year 2038 under each regulatory alternative, which means that the
regulatory alternatives are not influencing that decision--because if
they were, we would see technology differences between the
alternatives. Ford and GM show more responsiveness to the alternatives,
especially for stringencies beyond HPDUV4. Technology solutions for
Ford are similar for HDPUV108 and HDPUV10, up to HDPUV14, at which
point a larger portion of the fleet is converted to BEVs to meet the
more stringent standards. GM shows more movement across alternatives,
but NHTSA continues to suspect that this may be an artifact of our
relatively smaller data for the HDPUV fleet. It is very possible that
the apparent increase in PHEVs and BEVs and decrease in advanced engine
rates for GM could be due to the fact that technologies in the
reference baseline fleet are based on Phase 1 standards and (for
purposes of the analysis) manufacturers have not started adopting
technologies to meet Phase 2 standards.
We note also that NHTSA is allowed to consider banked
overcompliance credits for the HDPUV fleet,\1489\ as well as the full
fuel efficiency of AFVs like BEVs and PHEVs.\1490\ Combined with the
fact that BEVs and the electric operation of PHEVs are granted 0 gal/
100 miles fuel consumption for compliance purposes, our analysis shows
that even with one redesign we see large improvements in the fleet even
at low volumes, because manufacturers have relatively fewer models, and
lower volumes of those models, as compared to the passenger car/light
truck fleet--so ``20 percent increase in BEVs'' could be a single model
being redesigned in a given model year. While the analysis does show
higher stringency alternatives as being slightly more challenging to GM
in particular, nothing in EPCA/EISA suggests that for HDPUV standards,
``technological feasibility'' should be interpreted as ``every
manufacturer meets the standards without applying additional
technology.'' Based on the information before us, NHTSA cannot conclude
that technological feasibility is necessarily a barrier to choosing any
of regulatory alternatives considered in this final rule.
---------------------------------------------------------------------------
\1489\ See Manufacturers tab in the CAFE Model Input file
market_data_HDPUV_ref.xlsx for HDPUV banked credits.
\1490\ 49 CFR 535.6(a)(3)(iii).
---------------------------------------------------------------------------
Valero commented that the proposed standards were not
technologically feasible because NHTSA was ``killing diesel engines''
by not assuming that CI engines could be paired with SHEV or PHEV
technology in our analysis. In response, we reiterate that our
standards are performance-based, and that they do not serve as an edict
to industry about how our standards must be met. NHTSA's technology
tree did not simulate CI engines being paired with SHEV or PHEV
technology, but that in no way precludes manufacturers from using that
technology, nor does NHTSA mean to say that NHTSA does not believe that
CI engines could be used with SHEV or PHEV systems. Instead, this
technology decision was a simplifying assumption, as discussed in the
TSD, where NHTSA decides how to represent a technology being applied
but always recognizes that there will likely be a diverse
representation of that technology in the actual vehicle fleet. Other
similar simplifying assumptions include assuming future SHEVs will only
be of the P2 variety in the future, because that was the specific
technology form used to represent the technology in our analysis, when
of course SHEV technology may be more diverse than that, or that all
forced induction engines will only use exhaust-based turbo systems,
with no superchargers. NHTSA therefore disagrees with Valero that the
CI standard compels the elimination of CI engines and disagrees that
the CI standard somehow prohibits SHEV and PHEV powertrains from using
CI engines. The technology path that NHTSA shows to compliance is
simply a path, not the path, as NHTSA endeavors to emphasize. NHTSA
also disagrees that the final standards present a ``major question'' as
Valero suggested, because (1) they do not mandate specific
technologies, (2) they are incremental increases in stringency based on
the agency's determination of maximum feasible fuel efficiency
standards, consistent with the agency's direction in EPCA/EISA, and (3)
even if the final standards do assume electrification in the analysis
in response to the standards, 49 U.S.C. 32902(h) does not cover
decisions made under 32902(k).
The information presented thus far suggests that HDPUV14 would
result in the best outcomes for energy conservation, including fuel
consumption and fuel expenditure reduced, energy security, climate
effects, and most criteria pollutant effects; that it would produce the
largest net benefits, and that it is likely achievable with not much
more technology than would be applied in the reference baseline
regardless of new HDPUV standards from NHTSA; even if it would not
necessarily be the most cost-effective, would result in the highest
overall costs, and does not provide the largest consumer net benefits.
Even if HDPUV14 would maximize energy conservation, for purposes of
this final rule, however, NHTSA concludes that some conservatism may
still be appropriate.
As in the proposal, there are several reasons for this conservatism
in this final rule. First, NHTSA recognizes that standards have
remained stable for this segment for many years, since 2016. While on
the one hand, that may mean that the segment has room for improvement,
or at least for standards to catch up to where the fleet is, NHTSA is
also mindful that the sudden imposition of stringency where there was
previously little may require some adjustment time, especially with
technologies like BEVs and PHEVs that have not been in mass production
in the HDPUV space. Second, NHTSA acknowledges that our available data
in this segment may be less complete than our data for passenger cars
and light trucks. Compared to the CAFE program's robust data submission
requirements, manufacturers submit many fewer data elements in the HD
program, and the program is newer, so we have many fewer years of
historical data. If NHTSA's technology or vehicle make/model
assumptions in the reference baseline lags on road production, then our
estimated manufacturer responses to potential new HDPUV standards could
lack realism in important ways, particularly given the relatively
smaller fleet and fewer numbers of make/models across which
manufacturers can spread technology improvements in response to
standards. Although NHTSA also relies on manufacturer media
publications for announcements of new vehicles and technologies, we are
considerate of how those will be produced in large quantities and if
they can be considered by other competitors due to intellectual
property issues and availability.
Third, again perhaps because of the relatively smaller fleet and
fewer numbers of make/models, the sensitivity analysis for HDPUVs
strongly suggests that uncertainty in the input assumptions can have
significant effects on outcomes. As with any analysis of sufficient
complexity, there are a number of critical assumptions here that
introduce uncertainty about manufacturer compliance pathways, consumer
responses to fuel efficiency improvements and higher vehicle prices,
and future valuations of the consequences from higher HDPUV standards.
Recognizing that uncertainty, NHTSA also conducted 50 sensitivity
[[Page 52910]]
analysis runs for the HDPUV fleet analysis.\1491\ The entire
sensitivity analysis is presented in Chapter 9 of the FRIA,
demonstrating the effect that different assumptions would have on the
costs and benefits associated with the different regulatory
alternatives. While NHTSA considers dozens of sensitivity cases to
measure the influence of specific parametric assumptions and model
relationships, only a small number of them demonstrate meaningful
impacts to net benefits under the different alternatives.
---------------------------------------------------------------------------
\1491\ In response to IPI's suggestion that NHTSA should conduct
Monte Carlo analysis rather than sensitivity analysis, NHTSA was
unable to develop Monte Carlo capabilities in time for this final
rule but will continue to develop our capabilities for subsequent
rounds of rulemaking. Meanwhile, we continue to believe that
sensitivity cases are illuminating and appropriate for consideration
in determining the final standards.
---------------------------------------------------------------------------
The results of the sensitivity analyses for HDPUVs are different
from the sensitivity analysis results for passenger cars and light
trucks. Generally speaking, for HDPUVs, varying the inputs seems either
to make no difference at all, or to make a fairly major difference. As
suggested above, NHTSA interprets this as likely resulting from the
relatively smaller size and ``blockiness'' of the HDPUV fleet: there
are simply fewer vehicles, and fewer models, so variation in input
parameters may cause notable moves in tranches of the fleet that are
large enough (as a portion of the total HDPUV fleet) to produce
meaningful effects on the modeling results.
[GRAPHIC] [TIFF OMITTED] TR24JN24.272
Figure VI-30 shows the magnitude of variation in sensitivity cases
on per-vehicle costs for the HDPUV fleet. Each point in the figure
represents the average per-vehicle cost for a given manufacturer, in a
given alternative, for
[[Page 52911]]
one sensitivity case; each row includes one point for each of the 50
sensitivity cases. While most sensitivity cases are represented by open
circles, some specific cases of interest are highlighted with different
shapes. For most manufacturers and alternatives, the sensitivity
results are clustered around the reference baseline (represented by a
square) and may overlap with other sensitivity results. Some cases,
especially involving assumptions about higher costs of electrification
or lower fuel prices, produce significant increases in per-vehicle cost
relative to the Reference baseline. Table VI-53 shows estimated per-
vehicle costs by HDPUV manufacturer, by regulatory alternative, for the
Reference baseline (the central analysis) and several selected
influential sensitivity runs.
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[[Page 52912]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.273
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In this table, ``Oil Price (low)'' assumes EIA's AEO 2023 low oil
price side case; ``Battery DMC (high)'' increases battery direct
manufacturing costs 25 percent above Reference baseline levels; and
``NPRM Battery Learning Curve'' retains the battery learning curve from
NHTSA's NPRM. Dollar values for all action alternatives are incremental
to the No-Action alternative. If they are negative, that means that the
compliance solution for that action alternative reduces cost relative
to no action in a given model
[[Page 52913]]
run.\1492\ These particular sensitivity runs were selected because they
had the largest effect on costs of the alternatives considered, and
cost is of primary interest to NHTSA given industry's stated need to
retain all available capital for use in making the BEV transition.. The
final standards for HDPUVs will result in an industry-wide FE
improvement of approximately 25 percent in the rulemaking time frame of
only 6 years. With the vehicles in this segment having the same if not
longer redesign cycle time, our analysis shows that any change to these
inputs could have a dramatic impact on the manufacturers. As shown in
Table VI-53 above, the industry average incremental cost for HDPUV108
is $226, but that increases to roughly $1,200 to over $1,500 with the
change to an input that could be due to any number of global
circumstances.
---------------------------------------------------------------------------
\1492\ This occurs in some instances where incremental
technology additions are less expensive than the value of any
technology removed. For example, the engine and transmission
component cost differences in converting from an advanced diesel to
a gasoline turbo engine PHEV could produce negative net technology
cost.
---------------------------------------------------------------------------
Looking beyond HDPUV108, each of these sensitivity runs illustrate
that per-vehicle costs for nearly every manufacturer to comply with
HDPUV10 and HDPUV14 could be significantly higher under any of these
cases. Looking at the industry average results, each of the three
sensitivity runs presented here could bring per-vehicle costs to nearly
$3,000 per vehicle in model year 2038 under HDPUV14, and nearly $2,000
per vehicle under HDPUV10. While the effects of these assumptions are
slightly less dramatic than in the NPRM analysis, they are still
significant increases in costs for an industry grappling with a major
technological transition. For nearly every manufacturer, the jump in
cost from HDPUV4 to HDPUV108 is meaningful under each sensitivity run
shown, and the jump from HDPUV108 to HDPUV10 and certainly to HDPUV14
under each of the sensitivity runs shown would be greater than NHTSA
would likely conclude was appropriate for this segment. The uncertainty
demonstrated in these estimates aligns with comments NHTSA received on
the NPRM and NHTSA believes it is relevant to our consideration of
maximum feasible HDPUV standards. The Alliance commented that if NHTSA
set standards through model year 2035, annual stringency increases in
model years 2030-2032 should be 10% per year, and model years 2033-2035
should be 4% per year, in recognition of ``market and technology
uncertainty.''\1493\ Alternatively, the Alliance stated that stringency
increases could be 7% per year, each year, for model years 2030-
2035.\1494\
---------------------------------------------------------------------------
\1493\ The Alliance, Docket No. NHTSA-2023-0022-60652, Appendix
F, at 63.
\1494\ Id.
---------------------------------------------------------------------------
NHTSA agrees that uncertainty exists, and it matters for this
segment and the effects that new HDPUV standards would have on the
affordability of these vehicles and the capital available for
manufacturers for making the BEV transition. The nature of this fleet--
smaller, with fewer models--and the nature of the technologies that
this fleet will be applying leading up to and during the rulemaking
time frame, means that the analysis is very sensitive to changes in
inputs, and the inputs are admittedly uncertain. If the uncertainty
causes NHTSA to set standards higher than they would otherwise have
been, and industry is unable to meet the standards, the resources they
would have to expend on civil penalties (which can potentially be much
higher for HDPUVs than for passenger cars and light truck) would be
diverted from their investments in the technological transition, and
the estimated benefits would not come to pass anyway. To provide some
margin for that uncertainty given the technological transition that
this segment is trying to make, NHTSA believes that some conservatism
is reasonable and appropriate for this round of standards. However, the
further conservatism that the Alliance and other commenters request--4
percent standards for model years 2033-2035, or 7 percent standards for
model years 2030-2035--would have NHTSA setting standards below the
point of maximum feasibility. In response to this comment, NHTSA
conducted some initial analysis of these suggested rates of increase
and this exploratory analysis indicated technology choices, and hence
regulatory costs, were very similar to those of HDPUV4. Based on that
initial analysis, NHTSA concluded that the effects of these suggested
rates of increase would have fallen close enough to HDPUV4 that a full
examination would not have provided much additional information beyond
what including HDPUV4 in the analysis already includes.
We also note, that because NHTSA does consider BEV technologies in
the HDPUV analysis, and because our current regulations assign BEVs a
fuel consumption value for compliance purposes of 0 gal/100 miles, this
significantly influences our modeling results. This is an artifact of
the mathematics of averaging, where including a ``0'' value in the
calculation effectively reduces other values by as much as 50 percent
(depending on sample size) and is exaggerated when BEV-only
manufacturers are considered in industry-average calculations. This
effect creates the appearance of overcompliance at the industry level.
As for the analysis for passenger cars and light trucks, examining
individual manufacturer results can be more informative, and Chapter
8.3 of the FRIA shows that non-BEV-only manufacturers are more
challenged by, for example, HDPUV14, although overcompliance is still
evident in many model years. This underscores the effect of BEVs on
compliance, particularly when their fuel consumption is counted as 0
even though their energy consumption is non-zero. It also indirectly
underscores the effect of the 32902(h) restrictions on NHTSA's
decision-making for passenger car and light truck standard stringency,
which does not apply in the HDPUV context. While NHTSA did not propose
to change this value and is not changing it in this final rule, we are
aware that it adds to the appearance of overcompliance in NHTSA's
analysis, and this is another potential reason to be conservative in
our final rule.
Based on the information in the record and consideration of the
comments received, NHTSA therefore concludes that HDPUV108 represents
the maximum feasible standards for HDPUVs in the model years 2030 to
2035 time frame. While HDPUV14 could potentially save more fuel and
reduce emissions further, it is less cost-effective than HDPUV108 by
every metric that NHTSA considered, and the longer redesign cycles in
this segment make NHTSA cautious of finalizing HDPUV14. Moreover, the
effects of uncertainty for our analytical inputs are significant in
this analysis, as discussed, and NHTSA believes some conservatism is
appropriate for this rulemaking time frame. Both HDPUV10 and HDPUV108
will encourage technology application for some manufacturers while
functioning as a backstop for the others, and they remain net
beneficial for consumers. However, in a final consideration of
coordination between the HDPUV GHG rules recently finalized by EPA and
these fuel consumption standards, NHTSA believes HDPUV108 provides a
better approach.
The HDPUV108 final rule will serve to re-align the two rules after
being offset by statutory differences in lead time and standard years.
HDPUV108
[[Page 52914]]
will best harmonize with EPA's recently finalized standards, realigning
with EPA by model year 2034 and only slightly surpassing them in model
year 2035 (assuming EPA does not later change its standards for the
model years 2033-2035 time frame). The need for harmonization was
frequently cited in comments, and NHTSA has sought to the best of its
statutory ability to harmonize with EPA's broader authority under the
Clean Air Act.
Based on all of the reasons discussed above, NHTSA is finalizing
HDPUV108 for HDPUVs.
3. Severability
For the reasons described above, NHTSA believes that its authority
to establish CAFE and HDPUV standards for the various fleets described
is well-supported in law and practice and should be upheld in any legal
challenge. NHTSA also believes that its exercise of its authority
reflects sound policy.
However, in the event that any portion of the final rule is
declared invalid, NHTSA intends that the various aspects of the final
rule be severable, and specifically, that each standard and each year
of each standard is severable, as well as the various compliance
changes discussed in the following section of this preamble. NYU IPI
commented that NHTSA should provide further detail on why NHTSA
believes that the standards are severable.\1495\ Furthermore, they
identified a specific area of the analysis and state, ``Because
changing manufacturing processes for one product class or model year
could affect those processes for another, NHTSA should explain why
these technical processes are sufficiently independent that individual
standards for each year could be applied separately.''I. In response,
EPCA/EISA is clear that standards are to be prescribed separately for
each fleet, for each model year. 49 U.S.C. 32902(b) states expressly
that DOT (by delegation, NHTSA) must set separate standards for
passenger automobiles (passenger cars) in each model year, non-
passenger automobiles (light trucks) in each model year, and work
trucks (HDPUVs) in accordance with 32902(k), which directs that
standards be set in tranches of 3 model years at a time. When NHTSA
sets these standards, it does so by publishing curve coefficients in
the Federal Register, to be incorporated into the Code of Federal
Regulations. The curve coefficients are incorporated into the same
table, but they are clearly distinguishable for each year. NHTSA
establishes several model years of standards at a time in order to
provide improved regulatory certainty for industry, but standards for
one year can still be met by any given fleet even if standards for a
prior or subsequent year suddenly do not exist. We agree with IPI in
that manufacturers do share components between vehicles and apply these
components for different vehicle classes at different model years;
however, we do acknowledge that manufacturers do not implement
technologies all at once across their fleets within a given model year
or subsequent model year. NHTSA does not set CAFE or FE standards at
the vehicle level, but instead at the individual fleet levels. And so,
adoption of technologies for meeting the standards are allowed in a
cadence that reflects manufacturers capability to implement a
reasonable time for PCs, LTs and HDPUVs. These assumptions for sharing
of components between vehicles are considered as part of our analysis
that considers refreshes/redesigns schedules that manufacturers adhere
to. We discuss vehicle refreshes/redesigns cadences and other lead time
assumptions in TSD Chapter 2 and in Section III.D of this preamble. The
modeling captures decisions that manufacturers make in the real world
that will happen regardless of whether NHTSA is considering one year of
standards or five. Manufacturers will still only refresh or redesign a
portion of their fleet in any given model year and even though our
analysis shows one pathway to compliance, manufacturers make the
ultimate decisions about which technologies to apply to which vehicles
in a particular model year, also considering factors unrelated to fuel
economy. Manufacturer comments may discuss the relative difficulty of
complying with one standard or another, but since the inception of the
program, compliance with each standard has been separately required.
---------------------------------------------------------------------------
\1495\ IPI, Docket No. NHTSA-2023-0022-60485, at 32-33.
---------------------------------------------------------------------------
Any of the standards could be implemented independently if any of
the other standards were struck down, and NHTSA firmly believes that it
would be in the best interests of the nation as a whole for the
standards to be applicable in order to support EPCA's overarching
purpose of energy conservation. Each standard is justified
independently on both legal and policy grounds and could be implemented
effectively by NHTSA.
VII. Compliance and Enforcement
NHTSA is finalizing changes to its enforcement programs for light-
duty vehicles in the CAFE program as well as for HDPUVs in the Heavy-
Duty National Program. These changes include: (1) eliminating AC and
off-cycle (OC) fuel consumption improvement values (FCIVs) for BEVs in
the CAFE program; (2) adding a utility factor to the calculation of
FCIVs for PHEVs; (3) phasing out the OC program for all vehicles in the
CAFE program by model year 2033; (4) eliminating the 5-cycle and
alternative approval pathways for OC FCIVs in the CAFE program; (5)
adding additional deadlines for the alternative approval process for
model years 2025-2026 for the CAFE program; (6) eliminating OC FCIVs
for HDPUVs for model year 2030 and beyond; and (7) making an assortment
of minor technical amendments, including technical amendments to the
regulations pertaining to advanced technology credits and clarifying
amendments to definitions in 49 part 523. To provide context for these
changes, this section first provides an overview of NHTSA's enforcement
programs. The section then discusses and addresses the comments
received on the NPRM and discusses the changes NHTSA is finalizing with
this rule. Finally, this section concludes with a discussion and
response to comment on a requested program for EJ credits that NHTSA
has decided is not practical to implement at this time, as well as a
discussion and response to comments received that are relevant to
NHTSA's compliance and enforcement programs for light-duty vehicles and
HDPUVs but out of scope of this rulemaking.
A. Background
NHTSA has separate enforcement programs for light-duty vehicles in
the CAFE program and heavy-duty vehicles in the Heavy-Duty National
program. NHTSA's CAFE enforcement program is largely established by
EPCA, as amended by EISA, and is very prescriptive regarding
enforcement. EPCA and EISA also clearly specify a number of
flexibilities and incentives that are available to manufacturers to
help them comply with the CAFE standards. EISA also provides DOT and
NHTSA with the authority to regulate heavy-duty vehicles, and NHTSA
structured the enforcement program for HDPUVs to be similar to its CAFE
enforcement program.
The light-duty CAFE program includes all vehicles with a Gross
Vehicle Weight Rating (GVWR) of 8,500 pounds or less as well as
vehicles between 8,501 and 10,000 pounds that are classified as medium-
duty passenger vehicles (MDPVs). As prescribed by 49 U.S.C.
32901(a)(19)(B) and defined in 40
[[Page 52915]]
CFR 86.1803-01,\1496\ an MDPV means any heavy-duty vehicle with a GVWR
of less than 10,000 pounds that is designed primarily for the
transportation of persons and generally subject to requirements that
apply for light-duty trucks.1497 1498 The MDHD Program
includes all vehicles 8,501 pounds and up, and the engines that power
them, except for MDPVs, which are covered under the CAFE program.
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\1496\ As prescribed in 49 U.S.C. 32901(a)(19)(B), an MDPV is
``defined in section 86.1803-01 of title 40, Code of Federal
Regulations, as in effect on the date of the enactment of the Ten-
in-Ten Fuel Economy Act.''
\1497\ 40 CFR 86.1803-01 excludes from the definition of MDPV
``any vehicle which: (1) Is an ``incomplete truck'' as defined in
this subpart; or (2) Has a seating capacity of more than 12 persons;
or (3) Is designed for more than 9 persons in seating rearward of
the driver's seat; or (4) Is equipped with an open cargo area (for
example, a pick-up truck box or bed) of 72.0 inches in interior
length or more. A covered box not readily accessible from the
passenger compartment will be considered an open cargo area for
purposes of this definition.''
\1498\ See Heavy-duty vehicle definition in 40 CFR 86.1803-01.
MDPVs are classified as either passenger automobiles or light trucks
depending on whether they meet the critiera to be a non-passenger
automobile under 49 CFR 523.5. If the MDPV is classified as a non-
passenger automobile, it is a light truck and subject ot the
requirements in 49 CFR 533. If the MDPV does not meet the criteria
in 49 CFR 523.5 to be a non-passenger automobile, then it is
classified as a passenger automobile and subject to the requriements
in 49 CFR 531.
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NHTSA's authority to regulate heavy-duty vehicles under EISA
directs NHTSA to establish fuel efficiency standards for commercial
medium- and heavy-duty on-highway vehicles and work
trucks.1499 1500 Under this authority, NHTSA has developed
standards for three regulatory categories of heavy-duty vehicles:
combination tractors; HDPUVs; and vocational vehicles. HDPUVs include
heavy-duty vehicles with a GVWR between 8,501 pounds and 14,000 pounds
(known as Class 2b through 3 vehicles) manufactured as complete
vehicles by a single or final stage manufacturer or manufactured as
incomplete vehicles as designated by a manufacturer.\1501\ The majority
of these HDPUVs are 3- 4-ton and 1-ton pickup trucks, 12-and 15-
passenger vans, and large work vans that are sold by vehicle
manufacturers as complete vehicles, with no secondary manufacturer
making substantial modifications prior to registration and use. These
vehicles can also be sold as cab-complete vehicles (i.e., incomplete
vehicles that include complete or nearly complete cabs that are sold to
secondary manufacturers).
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\1499\ EISA added the following definition to the automobile
fuel economy chapter of the U.S. Code: ``commercial medium- and
heavy-duty on-highway vehicle'' means an on-highway vehicle with a
gross vehicle weight rating of 10,000 pounds or more. 49 U.S.C.
32901(a)(7).
\1500\ EISA added the following definition to the automobile
fuel economy chapter of the U.S. Code: ``work truck'' means a
vehicle that--(A) is rated at between 8,500 and 10,000 pounds gross
vehicle weight; and (B) is not a medium-duty passenger vehicle (as
defined in section 86.1803-01 of title 40, Code of Federal
Regulations, as in effect on the date of the enactment of [EISA]).
49 U.S.C. 32901(a)(19).
\1501\ See 49 CFR 523.7, 40 CFR 86.1801-12, 40 CFR 86.1819-14,
40 CFR 1037.150.
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B. Overview of Enforcement
This subsection is intended to provide a general overview of
NHTSA's enforcement of its fuel economy and fuel efficiency standards
in order to provide context for the discussion of the changes to these
enforcement programs. At a high-level, NHTSA's fuel efficiency and fuel
economy enforcement programs encompass how NHTSA determines whether
manufacturers comply with standards for each model year, and how
manufacturers may use compliance flexibilities and incentives, or
alternatively address noncompliance through paying civil penalties.
NHTSA's goal in administering these programs is to balance the energy-
saving purposes of the authorizing statutes against the benefits of
certain flexibilities and incentives. More detailed explanations of
NHTSA's enforcement programs have also been included in recent
rulemaking documents.1502 1503
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\1502\ For more detailed explanations of CAFE enforcement, see
77 FR 62649 (October 15, 2012) and 87 FR 26025 (May 2, 2022).
\1503\ For more detailed explanations of heavy-duty pickup
trucks and vans fuel efficiency standards and enforcement, see 76 FR
57256 (September 15, 2011) and 81 FR 73478 (October 25, 2016).
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1. Light Duty CAFE Program
As mentioned above, there are three primary components to NHTSA's
compliance program: (1) determining compliance; (2) using flexibilities
and incentives; and (3) paying civil penalties for shortfalls. The
following table provides an overview of the CAFE program for light-duty
vehicles and MDPVs.
BILLING CODE 4910-59-P
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BILLING CODE 4910-59-C
a. Determining Compliance
This first component of NHTSA's enforcement program pertains to how
NHTSA determines compliance with its fuel economy standards. In
general, as prescribed by Congress, NHTSA finalizes footprint-based
fleet average standards for LDVs for fuel economy on a mpg basis. In
that way, the standard applies to the fleet as a whole and not to a
specific vehicle, and manufacturers can balance the performance of
their vehicles and technologies in complying with standards. Also, as
specified by Congress, light-duty vehicles is separated into three
fleets for compliance purposes: passenger automobiles manufactured
domestically (referred to as domestic passenger vehicles), passenger
automobiles not manufactured domestically (referred to as import
passenger vehicles), and non-passenger automobiles (which are referred
to as light trucks and includes MDPVs that meet certain
criteria).\1504\ Each manufacturer must comply with the fleet average
standard derived from the model type target standards. These target
standards are taken from a set of curves (mathematical functions) for
each fleet. Vehicle testing for the light-duty vehicle program is
conducted by EPA using the FTP (or ``city'' test) and HFET (or
``highway'' test).\1505\
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\1504\ 49 U.S.C. 32903(g)(6)(B).
\1505\ 40 CFR part 600.
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At the end of each model year, EPA determines the fleet average
fuel economy performance for the fleets as determined by procedures set
forth in 40 CFR part 600. NHTSA then confirms whether a manufacturer's
fleet average performance for each of its fleets of LDVs exceeds the
applicable target-based fleet standard. NHTSA makes its ultimate
determination of a manufacturer's CAFE compliance obligation based on
official reported and verified CAFE data received from EPA. Pursuant to
49 U.S.C. 32904(e), EPA is responsible for calculating manufacturers'
CAFE values so that NHTSA can determine compliance with its CAFE
standards. The EPA-verified data is based on information from NHTSA's
testing,\1506\ its own vehicle testing, and FMY data submitted by
manufacturers to EPA pursuant to 40 CFR 600.512-12. A manufacturer's
FMY report must be submitted to EPA no later than 90 days after
December 31st of the model year including any adjustment for off-cycle
credits for the addition of technologies that result in real-world fuel
improvements that are not accounted for in the 2-cycle testing as
specified in 40 CFR part 600 and 40 CFR part 86. EPA verifies the data
submitted by manufacturers and issues final CAFE reports that are sent
to manufacturers and to NHTSA electronically between April and October
of each year. NHTSA's database system identifies which fleets do not
meet the applicable CAFE fleet standards and calculates each
manufacturer's credit amounts (credits for vehicles exceeding the
standards), credit excesses (credits accrued for a fleet exceeding the
standards), and shortfalls (amount by which a fleet fails to meet the
standards). A manufacturer meets NHTSA's fuel economy standard if its
fleet average performance is greater than or equal to its required
standard or its MDPCS (whichever is greater). Congress enacted MDPCSs
per 49 U.S.C. 32902. These standards require that domestic passenger
car fleets meet a minimum level directed by statute and then projected
by the Secretary at the time a standard is promulgated in a rulemaking.
In addition, manufacturers are not allowed to use traded or transferred
credits to resolve credit shortfalls resulting from failing to exceed
the MDPCS.
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\1506\ NHTSA conducts vehicle testing under its ``Footprint''
attribute conformity testing to verify track width and wheelbase
measurements used by manufacturers to derive model type target
standards. If NHTSA finds a discrepancy in its testing,
manufacturers will need to make changes in their final reports to
EPA.
---------------------------------------------------------------------------
If a manufacturer's fleet fails to meet a fuel economy standard,
NHTSA will provide written notification to the manufacturer that it has
not met the standard. The manufacturer will be required to confirm the
shortfall and must either submit a plan indicating how to allocate
existing credits, or if it does not have sufficient credits available
in that fleet, how it will address the shortfall either by earning,
transferring and/or acquiring credits or by paying the appropriate
civil penalty. The manufacturer must submit a plan or payment within 60
days of receiving agency notification. Credit allocation plans received
from the manufacturer will be reviewed and approved by NHTSA. NHTSA
will approve a credit allocation plan unless it finds the proposed
credits are unavailable or that it is unlikely that the plan will
result in the manufacturer earning sufficient credits to offset the
shortfall. If a plan is approved, NHTSA will revise the manufacturer's
credit account accordingly. If a plan is rejected, NHTSA will notify
the manufacturer and request a revised plan or payment of the
appropriate fine.
b. Flexibilities
As mentioned above, there are flexibilities manufacturers can use
in the CAFE program for compliance purposes. Two general types of
flexibilities that exist for the CAFE program include (1) FCIVs that
can be used to increase CAFE values; and (2) credit flexibilities. To
provide context for the changes NHTSA is making, a discussion of two
types of FCIVs is provided below. These credits are for the addition of
technologies that improve air/conditioning efficiency (AC FCIVs) and
other ``off-cycle'' technologies that reduce fuel consumption that are
not accounted for in the 2-cycle testing (OC FCIVs).\1507\ NHTSA is not
making any changes to the provisions regarding the flexibilities for
how credits may be used. A discussion of these flexibilities can be
found in previous rulemakings.\1508\
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\1507\ Manufacturers may also earn FCIVs for full size pickup
trucks which have hybrid or electric drivetrains or have advanced
technologies as specified in 40 CFR 86.1870-12. NHTSA is not
providing an overview of these credits because NHTSA is not making
any changes for these credits. For an an explanation of these
credits see the May 2, 2022 final rule (87 FR 25710, page 26025).
\1508\ October 15, 2012 (77 FR 63125, starting at page 62649)
and May 2, 2022 (87 FR 25710, starting at page 26025).
---------------------------------------------------------------------------
As mentioned above, the light-duty CAFE program provides FCIVs for
improving the efficiency of AC systems.\1509\ Improving the efficiency
of these systems is important because AC usage places a load on the
Internal Combustion Engines (ICE) that results in additional fuel
consumption, and AC systems are virtually standard automotive
accessories, with more than 95 percent of new cars and light trucks
sold in the U.S. equipped with mobile AC systems. Together, this means
that AC efficiency can have a signifant impact on total fuel
consumption. The AC FCIV program is designed to incentivize the
adoption of more efficient systems, thereby reducing energy consumption
across the fleet.
---------------------------------------------------------------------------
\1509\ 40 CFR 1868-12.
---------------------------------------------------------------------------
Manufacturers can improve the efficiency of AC systems through
redesigned and refined AC system components and controls. These
improvements, however, are not measurable or recognized using 2-cycle
test procedures because the AC is turned off during the CAFE compliance
2-cycle testing. Any AC system efficiency improvements that reduce load
on the engine and improve fuel economy, therefore, cannot be accounted
for in those tests.
In the joint final rule for model year 2017-2025, EPA extended its
AC
[[Page 52920]]
efficiency program to allow manufacturers to generate fuel consumption
improvement values for NHTSA's CAFE compliance.\1510\ The program
provides a technology menu that specifies improvement values for the
addition of specific technologies and specifies testing requirements to
confirm that the technologies provide emissions reductions when
installed as a system on vehicles.\1511\ A vehicle's total AC
efficiency FCIV is calculated by summing the individual values for each
efficiency-improving technology used on the vehicle, as specified in
the AC menu or by the AC17 test result.\1512\ The total AC efficiency
FCIV sum for each vehicle is capped at 5.0 grams/mile for cars and 7.2
grams/mile for trucks.\1513\ Related to AC efficiency improvements, the
off-cycle program, discussed in the next section, contains fuel
consumption improvement opportunities for technologies that help to
maintain a comfortable air temparature of the vehicle interior without
the use of the A/C system (e.g., solar reflective surface coating,
passive cabin ventilation). These technologies are listed on a thermal
control menu that provides a predefined improvement value for each
technology.\1514\ If a vehicle has more than one thermal control
technology, the improvement values are added together, but subject to a
cap of 3.0 grams/mile for cars and 4.3 grams/mile for trucks.\1515\
Manufacturers seeking FCIVs beyond the regulated caps may request the
added benefit for AC technology under the off-cycle program alternative
approval pathway.
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\1510\ October 15, 2012 final rule (77 FR 62624).
\1511\ See 40 CFR 86.1868-12(e) through (g).
\1512\ See 40 CFR 1868-12(g)(2)(iii).
\1513\ See 40 CFR 1868-12(b)(2).
\1514\ See 40 CFR 86.1869-12(b)(1)(viii)(A) through (E).
\1515\ See 40 CFR 86.1869-12(b)(1)(viii).
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In addition to allowing improvements for AC efficiency
technologies, manufacturers may also generate FCIVs for off-cycle
technologies. ``Off-cycle'' technologies are those that reduce vehicle
fuel consumption in the real world, but for which the fuel consumption
reduction benefits cannot be fully measured under the 2-cycle test
procedures used to determine compliance with the fleet average
standards. The FTP and HFET cycles are effective in measuring
improvements in most fuel efficiency-improving technologies; however,
they are unable to measure or do not adequately represent certain fuel
economy-improving technologies because of limitations in the test
cycles. For example, off-cycle technologies that improve emissions and
fuel efficiency at idle (such as ``stop start'' systems) and those
technologies that improve fuel economy to the greatest extent at
highway speeds (such as active grille shutters that improve
aerodynamics) are not fully accounted for in the 2-cycle tests.
In the model year 2017-2025 CAFE rulemaking, EPA, in coordination
with NHTSA, established regulations extending benefits for off-cycle
technologies and created FCIVs for the CAFE program starting with model
year 2017.\1516\ Under its EPCA authority for CAFE, EPA determined that
the summation of the all the FCIVs values (for AC, OC, and advanced
technology incentives for full size pickup trucks) in grams per mile
could be converted to equivalent gallons per mile totals for improving
CAFE values. More specifically, EPA normalizes the FCIVs values based
on the manufacturer's total fleet production and then applies the
values in an equation that can increase the manufacturer's CAFE values
for each fleet instead of treating them as separate credits as they are
in the GHG program.\1517\
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\1516\ Off-cycle credits were extened to light-duty vehicles
under the CAFE program in the October 15, 2012 final rule (77 FR
62624).
\1517\ FCIVAC and FCIVOC are each deducted
as separately calculated credit values from the fleet fuel economy
per 40 CFR 600.510-12(c)(1)(ii) and 40 CFR 600.510-12(c)(3)(i)
through (ii). AC efficiency credit falls under FCIVAC,
while thermal load improvement technology credit falls under
FCIVOC.
---------------------------------------------------------------------------
For determining FCIV benefits, EPA created three compliance
pathways for the off-cycle program: (1) menu technologies, (2) 2 to 5-
Cycle Testing, and (3) an alternative approval methodology.
Manufacturers may generate off-cycle credits or improvements through
the approved menu pathway without agency approval. Manufacturers report
the inclusion of pre-defined technologies for vehicle configurations
that utilize the technologies, from the pre-determined values listed in
40 CFR 86.1869-12(b), in their PMY and MMY reports to NHTSA and then in
their final reports to EPA.
For off-cycle technologies both on and off the pre-defined
technology list, EPA allows manufacturers to use 5-cycle testing to
demonstrate off-cycle improvements.\1518\ Starting in model year 2008,
EPA developed the ``five-cycle'' test methodology to measure fuel
economy for the purpose of improving new car window stickers (labels)
and giving consumers better information about the fuel economy they
could expect under real-world driving conditions. The ``five-cycle''
methodology was also able to capture real-world fuel consumption
improvements that weren't fully reflected on the ``two-cycle'' test and
EPA established this methodology as a pathway for a manufacturer to
obtain FCIVs. The additional testing allows emission benefits to be
demonstrated over some elements of real-world driving not captured by
the two-cycle testing, including high speeds, rapid accelerations, hot
temperatures, and cold temperatures. Under this pathway, manufacturers
submit test data to EPA, and EPA determines whether there is sufficient
technical basis to approve the value of the off-cycle credit or fuel
consumption improvement.
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\1518\ See 40 CFR 86.1869-12(c).
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The final pathway allows manufacturers to earn OC FCIVs is an
alternative pathway that requires a manufacturer to seek EPA review and
approval.\1519\ This path allows a manufacturer to submit an
application to EPA to request approval of off-cycle benefits using an
alternative methodology. The application must describe the off-cycle
technology and how it functions to reduce CO2 emissions
under conditions not represented in the 2-cycle testing, as well as
provide a complete description of the methodology used to estimate the
off-cycle benefit of the technology and all supporting data, including
vehicle testing and in-use activity data. A manufacturer may request
that EPA, in coordination with NHTSA, informally review their
methodology prior to undertaking testing and/or data gathering efforts
in support of their application. Once a manufacturer submits an
application, EPA publishes a notice of availability in the Federal
Register notifying the public of a manufacturer's proposed alternative
off-cycle benefit calculation methodology.\1520\ EPA makes a decision
whether to approve the methodology after consulting with NHTSA and
considering the public comments.
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\1519\ 40 CFR 86.1869-12(d).
\1520\ EPA may waive the notice and comment requirements for
technologies for which EPA has previously approved a methodology for
determining credits. See 40 CFR 86.1869-12(d)(2)(ii).
---------------------------------------------------------------------------
c. Civil Penalties
If a manufacturer does not comply with a CAFE standard and cannot
or chooses not to cover the shortfall with credits, EPCA provides for
the assessment of civil penalties. The Act specifies a precise formula
for determining the amount of civil penalties for such noncompliance.
Starting in model year 2024, the penalty, as adjusted for inflation by
law,
[[Page 52921]]
is $17 for each tenth of a mpg that a manufacturer's average fuel
economy falls short of the standard multiplied by the total volume of
those vehicles in the affected fleet (i.e., import passenger vehicles,
domestic passenger vehicles, or light trucks), manufactured for that
model year.\1521\ On November 2, 2015, the Federal Civil Penalties
Inflation Adjustment Act Improvements Act (Inflation Adjustment Act or
2015 Act), Public Law 114-74, Section 701, was signed into law. The
2015 Act required Federal agencies to promulgate an interim final rule
to make an initial ``catch-up'' adjustment to the civil monetary
penalties they administer, and then to make subsequent annual
adjustments. The amount of the penalty may not be reduced except under
the unusual or extreme circumstances specified in the statute,\1522\
which have never been exercised by NHTSA in the history of the CAFE
program.
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\1521\ See 49 U.S.C. 32912(b) and 49 CFR 578.6(h)(2). For MYs
before 2019, the penalty is $5.50; for MYs 2019 through 2021, the
civil penalty is $14; for MY 2022, the civil penalty is $15; for MY
2023, the civil penalty is $16.
\1522\ See 49 U.S.C. 32913.
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NHTSA may also assess general civil penalties as prescribed by
Congress under 49 U.S.C. 32912(a). A person that violates section
32911(a) of title 49 is liable to the United States Government for a
civil penalty of not more than $51,139 for each violation.\1523\ A
separate violation occurs for each day the violation continues. These
penalties apply in cases in which NHTSA finds a violation outside of
not meeting CAFE standards, such as those that may occur due to
violating information requests or reporting requirements as specified
by Congress or codified in NHTSA's regulations.
---------------------------------------------------------------------------
\1523\ The maximum civil penalty under Sec. 32912 is
periodically adjusted for inflation.
---------------------------------------------------------------------------
2. Heavy-Duty Pickup Trucks and Vans
As with the CAFE enforcement program, there are three primary
components to NHTSA's compliance program for heavy-duty vehicles: (1)
determining compliance; (2) using flexibilities and incentives; and (3)
paying civil penalties for shortfalls. The following table provides an
overview of the Heavy-Duty Fuel Efficiency Program for HDPUVs.
BILLING CODE 4910-59-P
[[Page 52922]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.276
[[Page 52923]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.277
[[Page 52924]]
[GRAPHIC] [TIFF OMITTED] TR24JN24.278
[[Page 52925]]
BILLING CODE 4910-59-C
a. Determining Compliance
In general, NHTSA finalizes attribute-based fleet average standards
for fuel consumption of HDPUVs on a gal/100-mile basis using a similar
compliance strategy as required for light-vehicles in the CAFE program.
For these vehicles, the agencies set standards based on attribute
factors relative to the capability of each model to perform work, which
the agencies defined as ``work factor.'' More specifically, the work-
factor of each model is a measure of its towing and payload capacities
and whether equipped with a 4-wheel drive configuration. Each
manufacturer must comply with the fleet average standard derived from
the unique subconfiguration target standards (or groups of
subconfigurations approved by EPA in accordance with 40 CFR 86.1819-
14(a)(4)) of the model types that make up the manufacturer's fleet in a
given model year. Each subconfiguration has a unique attribute-based
target standard, defined by each group of vehicles having the same work
factor. These target standards are taken from a set of curves
(mathematical functions), with separate performance curves for gasoline
and diesel vehicles.\1524\ In general, in calculating HDPUVs, fleets
with a mixture of vehicles with increased payloads or greater towing
capacity (or utilizing four-wheel drive configurations) will face
numerically less stringent standards than fleets consisting of less
powerful vehicles. Vehicle testing for both the HDPUV and LDV programs
is conducted on chassis dynamometers using the drive cycles from FTP
and HFET.\1525\ While the FTP and the HFET driving patterns are
identical to that of the light-duty test cycles, other test parameters
for running them, such as test vehicle loaded weight, are specific to
complete HDPUV vehicles.
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\1524\ However, both gasoline and diesel vehicles in this
category are included in a single averaging set for generating and
using credit flexibilities.
\1525\ The light-duty FTP is a vehicle driving cycle that was
originally developed for certifying light-duty vehicles and
subsequently applied to heavy-duty chassis testing for criteria
pollutants. This contrasts with the Heavy-duty FTP, which refers to
the transient engine test cycles used for certifying heavy-duty
engines (with separate cycles specified for diesel and spark-
ignition engines).
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Due to the variations in designs and construction processes,
optional requirements were added to simplify testing and compliance
burdens for cab-chassis Class 2b and 3 vehicles. Requirements were
added to treat cab-chassis Class 2b and 3 vehicles (vehicles sold as
incomplete vehicles with the cab substantially in place but without the
primary load-carrying enclosure) as equivalent to the complete van or
truck product from which they are derived. Manufacturers determine
which complete vehicle configurations most closely matches the cab-
chassis product leaving its facility and include each of these cab-
chassis vehicles in the fleet averaging calculations, as though it were
identical to the corresponding complete ``sister'' vehicle. The Phase 1
MDHD program also added a flexibility known as the ``loose engine''
provision. Under the provision, spark-ignition (SI) engines produced by
manufacturers of HDPUVs and sold to chassis manufacturers and intended
for use in vocational vehicles need not meet the separate SI engine
standard, and instead may be averaged with the manufacturer's HDPUVs
fleet.\1526\ This provision was adopted primarily to address small
volume sales of engines used in complete vehicles that are also sold to
other manufacturers.
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\1526\ See 40 CFR 86.1819-14(k)(8).
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And finally, at the end of each model year NHTSA confirms whether a
manufacturer's fleet average performance for its fleet of HDPUVs
exceeds the applicable target-based fleet standard using the model type
work factors. Compliance with the fleet average standards is determined
using 2-cycle test procedures. However, manufacturers may also earn
credits for the addition of technologies that result in real-world fuel
improvements that are not accounted for in the 2-cycle testing. If the
fleet average performance exceeds the standard, the manufacturer
complies for the model year. If the manufacturer's fleet does not meet
the standard, the manufacturer may address the shortfall by using a
credit flexibility equal to the credit shortage in the averaging set.
The averaging set balance is equal to the balance of earned credits in
the account plus any credits that are traded into or out of the
averaging set during the model year. If a manufacturer cannot meet the
standard using credit flexibilities, NHTSA may assess a civil penalty
for any violation of this part under 49 CFR 535.9(b).
b. Flexibilities
Broadly speaking, there are two types of flexibilities available to
manufacturers for HDPUVs. Manufacturers may improve fleet averages by
(1) earning fuel consumption incentive benefits and by (2) transferring
or trading in credits that were earned through overcompliance with the
standards. First, as mentioned above, manufacturers may earn credits
associated with fuel efficiencies that are not accounted for in the 2-
cycle testing.\1527\ Second, manufacturers may transfer credits into
like fleets (i.e., averaging sets) from other manufacturers through
trades.\1528\
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\1527\ Off-cycle benefits were extened to heavy-duty pickup
trucks and vans through the--MDHD--Phase 1 program in the September
15, 2011 final rule (76 FR 57106).
\1528\ See 49 CFR 535.7(a)(2)(iii) and 49 CFR 535.7(a)(4).
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Unlike the light-duty program, there is no AC credit program for
HDPUVs. Currently, these vehicles may only earn fuel consumption
improvement credits through an off-cycle program, which may include
earning credits for AC efficiency improvements. In order to receive
these credits, manufacturers must submit a request to EPA and NHTSA
with data supporting that the technology will result in measurable,
demonstrable, and verifiable real-world CO2 emission
reductions and fuel savings. After providing an opportunity for the
public to comment on the manufacturer's methodology, the agencies make
a decision whether to approve the methodology and credits.\1529\
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\1529\ See 49 CFR 535.7(f)(2), 40 CFR 86.1819-14(d)(13), and 40
CFR 86.1869-12(c) through (e).
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In addition to earning additional OC FCIVs, manufacturers have the
flexibility to transfer credits into their fleet to meet the standards.
Manufacturers may transfer in credits from past (carry-forward credits)
model years of the same averaging set.\1530\ Manufacturers may also
trade in credits earned by another manufacturer, as long as the credits
are traded into the same averaging set/fleet type. Manufacturers may
not transfer credits between light-duty CAFE fleets and heavy-duty
fleets. Likewise, a manufacturer cannot trade in credits from another
manufacturer's light-duty fleet to cover shortfalls in their heavy-duty
fleets. NHTSA oversees these credit transfer and trades through
regulations issued in 49 CFR 535.7, which includes reporting
requirements for credit trades and transfers for medium- and heavy-duty
vehicles.
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\1530\ See 49 CFR 535.7(a)(3)(i), 49 CFR 535.7(a)(3)(iv), 49 CFR
535.7(a)(2)(v), and 49 CFR 535.7(a)(5).
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c. Civil Penalties
The framework established by Congress and codified by NHTSA for
civil penalties for the heavy-duty program is quite different from the
light-duty program.
[[Page 52926]]
Congress did not prescribe a specific rate for the fine amount for
civil penalties but instead gave NHTSA general authority under EISA, as
codified at 49 U.S.C. 32902(k), to establish requirements based upon
appropriate measurement metrics, test procedures, standards, and
compliance and enforcement protocols for HD vehicles. NHTSA interpreted
its authority and developed an enforcement program to include the
authority to determine and assess civil penalties for noncompliance
that would impose penalties based on the following criteria, as
codified in 49 CFR 535.9(b).
In cases of noncompliance, NHTSA assesses civil penalties based
upon consideration of the following factors:
Gravity of the violation.
Size of the violator's business.
Violator's history of compliance with applicable fuel
consumption standards.
Actual fuel consumption performance related to the
applicable standard.
Estimated cost to comply with the regulation and
applicable standard.
Quantity of vehicles or engines not complying.
Civil penalties paid under CAA section 205 (42 U.S.C.
7524) for noncompliance for the same vehicles or engines.
NHTSA considers these factors in determining civil penalties to
help ensure, given NHTSA's wide discretion, that penalties would be
fair and appropriate, and not duplicative of penalties that could be
imposed by EPA. NHTSA goal is to avoid imposing duplicative civil
penalties, and both agencies consider civil penalties imposed by the
other in the case of non-compliance with GHG and fuel consumption
regulations. NHTSA also uses the ``estimated cost to comply with the
regulation and applicable standard,''\1531\ to ensure that any
penalties for non-compliance will not be less than the cost of
compliance. It would be contrary to the purpose of the regulation for
the penalty scheme to incentivize noncompliance. Further, NHTSA set its
maximum civil penalty amount not to exceed the limit that EPA is
authorized to impose under the CAA. The agencies agreed that violations
under either program should not create greater punitive damage for one
program over the other. Therefore, NHTSA's maximum civil penalty for a
manufacturer would be calculated as the: Aggregate Maximum Civil
Penalty for a Non-Compliant Regulatory Category = (CAA Limit) x
(production volume within the regulatory category). This approach
applies for all HD vehicles including pickup trucks and vans as well as
engines regulated under NHTSA's fuel consumption programs.
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\1531\ See 49 CFR 535.9(b)(4).
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C. Changes Made by This Final Rule
The following sections describe the changes NHTSA is finalizing in
order to update its enforcement programs for light-duty vehicles and
for HDPUVs. These changes include: (1) amending NHTSA's regulations to
reflect the elimination of AC and OC FCIVs for BEVs in model year 2027
and beyond; (2) adding a provision that references that a utility
factor will be used for the calculation of FCIVs for PHEVs; (3)
amending NHTSA's regulations to reflect the phasing out of OC FCIVs for
all vehicles in the CAFE program by model year 2033 (10 g/mi for model
year 2027-2030, 8 g/mi for model year 2031, 6 g/mi for model year 2032,
and 0 g/mi for model year 2033 and beyond); (4) amending NHTSA's
regulations to reflect the elimination of 5-cycle and alternative
approval pathways for OC FCIVs in CAFE in model year 2027 and beyond;
(5) adding language to NHTSA's regulations stating that NHTSA will
recommend denial of requests for OC FCIVs under the alternative if
requests for information are not responded to within set amounts of
time for model years 2025-2026 for the CAFE program; (6) eliminating OC
technology credits for HDPUVs in model year 2030 and beyond; and (7)
making an assortment of minor technical amendments. These changes
reflect experience gained in the past few years and are intended to
improve the programs overall.
NHTSA received comments from a variety of stakeholders related to
compliance and enforcement. The commenters included manufacturers and
trade groups, environmental groups, and groups involved in the supply
of fuels and vehicle manufacturing resources. NHTSA received comments
on all of our proposed changes as well as comments about other
compliance issues that commenters believed should be addressed. NHTSA
also received comments of general support or opposition to the changes
proposed for the AC/OC program.1532 1533 The comments are
discussed in more detail below.
---------------------------------------------------------------------------
\1532\ Ceres BICEP, Docket No. NHTSA-2023-0022-61125, at 1;
Joint NGOs, Docket No. NHTSA-2023-0022-61944, at 61.
\1533\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 3; Ford,
Docket No. NHTSA-2023-0022-60837, at 10; Nissan, Docket No. NHTSA-
2023-0022-60696, at 9; Stellantis, Docket No. NHTSA-2023-0022-61107,
at 3; Volkswagen, Docket No. NHTSA-2023-0022-58702, at 4;
Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 9.
---------------------------------------------------------------------------
1. Elimination of OC and AC Efficiency FCIVs for BEVs in the CAFE
Program
In the NPRM, NHTSA proposed removing AC and OC FCIVs for BEVs,
which manufacturers can use to improve their fuel economy values to
comply with CAFE standards. NHTSA proposed this change to align with
EPA's May 5, 2023 proposal and because the FCIVs were based on
information about energy savings for ICE vehicles and, therefore, are
not representative of energy savings for BEVs.\1534\ The CAFE program
currently allows manufacturers to increase their fleet average fuel
economy performance with FCIVs for vehicles equipped with technologies
that improve the efficiency of the vehicles' AC systems and otherwise
reduce fuel consumption. The FCIVs were intended to incentize the
adoption of fuel economy-improving technologies whose benefits are not
accounted for in the 2-cycle testing required by 49 U.S.C. 32904(c) to
be used for calculating fuel economy performance for CAFE compliance.
NHTSA also sought comment on whether, instead of eliminating FCIVs for
BEVs completely, new off-cycle and AC values for BEVs based on BEV
powertrains rather than IC engines should be proposed, and, if so, how
those proposed values should be calculated.
---------------------------------------------------------------------------
\1534\ [thinsp]88 FR 29184.
---------------------------------------------------------------------------
On April 18, 2024, EPA issued a final rule that eliminated,
beginning in model year 2027, eligibility to gain FCIVs for any
vehicles that do not have IC engines.\1535\ Thus, BEVs are no longer
eligible for these FCIVs after model year 2026. NHTSA believes that
eliminating AC and OC FCIVs was appropriate because BEVs are currently
generating FCIVs in a program designed to account for fuel economy
improvements that were based on reductions in emissions and fuel
consumption of ICE vehicles. In the OC program specifically, we note
that the values associated with menu technologies were based on ICE
vehicles with exhaust emissions and fuel consumption. While there may
be AC and other technologies that improve BEV energy consumption, the
values associated with AC FCIVs and the OC menu FCIVs were based on ICE
vehicles and, therefore, are not representative of energy consumption
reductions in BEVs. When EPA and NHTSA adopted these flexibilities in
the 2012 rule, there was little concern about this issue
[[Page 52927]]
because BEV sales were only a small fraction of total
sales.1536 1537 Now, however, BEVs are gaining FCIVs as part
of the fleet compliance that aren't representative of real-world energy
consumption reduction. Therefore, NHTSA proposed changes to align its
regulation with EPA's proposal to end off-cycle and AC efficiency FCIVs
for light-duty vehicles with no IC engine beginning in model year 2027.
---------------------------------------------------------------------------
\1535\ 89 FR 27842. See especially 40 CFR 86.1869-12 and
600.510-12(c)(3)(ii).).
\1536\ See 77 FR 62624, (October 15, 2012).
\1537\ 2022 EPA Automotive Trends Report at Table 4.1 on page
74.
---------------------------------------------------------------------------
NHTSA received comments both supportive and in opposition of the
proposal regarding the elimination of FCIVs for BEVs. While NHTSA
appreciates these comments, NHTSA first notes that NHTSA's final rule
changes on this matter are technical in nature. That is, while NHTSA's
regulations reference a manufacturer's ability to generate FCIVs for
CAFE compliance purposes, the authority for determining how to
calculate fuel economy performance rests with EPA.\1538\ NHTSA's
regulations merely reference EPA's provisions that stipulate how
manufacturers may generate FCIVs. Therefore, the comments requesting
NHTSA to make changes regarding FCIVs are, as a general matter, outside
the scope of this rulemaking.
---------------------------------------------------------------------------
\1538\ 49 U.S.C. 32904.
---------------------------------------------------------------------------
Although NHTSA's regulatory changes to reflect the elimination of
FCIVs for BEVs are technical in nature, NHTSA believes that it is still
appropriate to summarize and discuss comments received and explain how
NHTSA's views on this issue align with EPA's regulatory changes. NHTSA
received several comments from vehicle manufacturers and trade groups
expressing opposition of the proposal to eliminate AC and OC FCIVs for
BEVs. Some of the comments expressed general opposition to the
proposal, while others requested that the elimination of FCIVs for BEVs
be delayed until model year 2032.\1539\ Ford suggested that FCIVs for
BEVs be phased out over time, as they ``believe that the program can
serve an important function during this transitional period towards
electrification.'' \1540\ Other commenters noted the current incentives
drive research and adoption of AC and OC efficiencies on all vehicles
and that without the incentives the research may not be financially
practical for OEMs.\1541\ DENSO also commented that if research and
development of AC and OC efficiencies is not incentivized on all
vehicles there may be less penetration of AC and OC technologies on ICE
vehicles as manufacturers focus research and development on EVs.\1542\
---------------------------------------------------------------------------
\1539\ The Alliance, Docket No. NHTSA-2023-0022-60652-A2, at 11;
HATCI, Docket No. NHTSA-2023-0022-48991, at 1; Kia, Docket No,
NHTSA-2023-0022-58542-A1, at 6; MEMA, Docket No. NHTSA-2023-0022-
59204-A1, at 7.
\1540\ Ford, Docket No. NHTSA-2023-0022-60837, at 9.
\1541\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 3; Kia,
Docket No. NHTSA-2023-0022-58542-A1, at 3, 6 and 7; MEMA, Docket No.
NHTSA-2023-0022-59204-A1, at 7; Toyota, Docket No. NHTSA-2023-0022-
61131, at 2.
\1542\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 4.
---------------------------------------------------------------------------
Commenters also noted that the technologies do still have a benefit
in BEVs, particularly for AC efficiencies.\1543\ Lucid noted that ``AC
efficiency improvements have a direct impact on tailpipe emissions for
ICE vehicles'' \1544\ and that, as a corollary, ``improvements to AC
efficiency in EVs yield benefits such as better vehicle range,
increased vehicle efficiency, and less demand on the grid.'' \1545\
Lucid states that these benefits ``directly impact EV usage, vehicle
miles traveled, and consumer sentiment toward the adoption of EVs.''
\1546\ BMW believes NHTSA should maintain the current OC and AC
efficiency FCIVs for BEVs.\1547\ Volkswagenexpressed concern that the
elimination of OC and AC efficiency FCIVs for BEVs would put BEVs and
PHEVs at a disadvantage.\1548\
---------------------------------------------------------------------------
\1543\ HATCI, Docket No. NHTSA-2023-0022-48991-A1, at 3; Kia,
Docket No. NHTSA-2023-0022-58542-A1, at 7; MEMA, Docket No. NHTSA-
2023-0022-59204-A1, at 7; Toyota, Docket No. NHTSA-2023-0022-61131,
at 2 and 25.
\1544\ Lucid, Docket No. NHTSA-2023-0022-50594, at 6.
\1545\ Lucid, Docket No. NHTSA-2023-0022-50594, at 6.
\1546\ Lucid, Docket No. NHTSA-2023-0022-50594, at 6.
\1547\ BMW, Docket No. NHTSA-2023-0022-58614, at 3
\1548\ Volkswagen, Docket No. NHTSA-2023-0022-58702, at 4.
---------------------------------------------------------------------------
Several commenters had suggestions for how to improve the accuracy
of AC and off-cycle values for BEVs. DENSO proposed several options for
improving the calculation of AC and OC FCIVs. \1549\ Rivian noted that
BEVs can still benefit from improved AC systems in the form of less
energy usage, and that as such, NHTSA should allow BEVs to earn AC
credits.\1550\ ICCT, in contrast, commented that ``while BEVs also
benefit from improved AC system efficiency and off-cycle technologies,
BEVs do not require the additional incentive provided by AC and OC
credits.'' ICCT recommended that NHTSA not introduce new OC and AC
credits for BEVs and further recommended that ``if NHTSA decides to
introduce such credits, they should be based on relative or percentage-
based reductions in 5-cycle energy consumption.'' \1551\
---------------------------------------------------------------------------
\1549\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 5.
\1550\ Rivian, Docket No. NHTSA-2023-0022-59765, at 9.
\1551\ ICCT, Docket No. NHTSA-2023-0022-54064, at 24.
---------------------------------------------------------------------------
NHTSA also received several comments expressing support of the
proposal to eliminate AC and OC efficiency FCIVs for BEVs, including
Arconic, the Joint NGOs, ICCT, and ACEEE.\1552\
---------------------------------------------------------------------------
\1552\ Arconic, Docket No. NHTSA-2023-0022-60684, at 4; ACEEE,
Docket No. NHTSA-2023-0022-48374, at 2; Joint NGOs, Docket No.
NHTSA-2023-0022-61944-A2, at 62; ICCT, Docket No. NHTSA-2023-0022-
54064, at 24.
---------------------------------------------------------------------------
In light of EPA's April 18, 2024 final rule, NHTSA is finalizing
its proposed regulatory changes that note that starting in 2027,
manufacturers may not generate FCIVs for vehicles that lack an internal
combustion engine. As mentioned earlier, the original AC and OC FCIVs
were exclusively developed with IC engines efficiency assumptions and
are not representative of energy consumption reductions for BEVs. They
correspond to motor vehicle emissions reductions that occur when the AC
systems on ICE vehicles are operated more efficiently, which in turn
reduces their use of electricity produced by the alternator and engine,
and which in turn reduces fuel consumption of the motor vehicle engine.
The AC FCIV program provides an incentive for manufacturers to increase
the efficiency of their AC systems and in turn reduce the fuel
consumption by the vehicle engine. Also, OC FCIVs were intended to
incentivize the adoption of technologies that would not have been
adopted if the program didn't exist.
NHTSA has also recently observed that BEVs that have received AC
and OC FCIVs have increased their fuel economy compliance values by
significant amounts due to the required use of the petroleum
equivalence factor to determine the fuel economy of BEVs combined with
the order of operation for calculating FCIVs per EPA's
regulation.1553 1554 As a result, a manufacturer that is
solely building electric vehicles may generate unrealistic FCIVs. For
example, assuming the performance of a 2022 Tesla Model 3 Long Range
AWD variant based on the 2-cycle test, NHTSA would calculate the same
vehicle in model year 2031 to have a fuel economy of 154.3 MPGe based
on the 2-cycle test and
[[Page 52928]]
DOE's revised PEF.\1555\ Assuming that the model year 2031 vehicle
received the same amount of FCIVs as the model year 2022 vehicle (5
grams/mile AC FCIVs and 5 grams/mile OC FCIVs, for a total of 10 grams/
mile), the FCIVs would increase the vehicle's CAFE fuel economy to
186.7 MPGe. This is a difference of 32.4 MPGe. In comparison, if an ICE
vehicle with a fuel economy of 35 MPG based on the 2-cycle test
generated the same amount of AC and OC FCIVs (10 grams/mile), the FCIVs
would only increase the vehicle's fuel economy to 36.4 MPG. This is
just an increase of 1.4 mpg from an increase of 10 grams/mile of AC and
OC. Not only is the increase in MPGe for the BEV in this example a 21%
increase as compared to a 4% increase in the MPG for the ICE vehicle,
but it is also unrealistic to believe that an increase of 32.4 MPGe is
representative of the energy consumption savings provided by BEVs
having the technology for which they generated the FCIVs. To provide
perspective, the fuel savings for an ICE vehicle that increased its
fuel economy by 32.4 MPG would be enormous if applied across a fleet of
vehicles. While AC and OC technologies may increase the energy
efficiency of BEVs, the current FCIVs generated by these vehicles are
out of proportion to the real-world benefit they provide.
---------------------------------------------------------------------------
\1553\ 40 CFR 600.116-12.
\1554\ 40 CFR 600.510-12(c).
\1555\ 89 FR 22041 (March 29, 2024).
---------------------------------------------------------------------------
2. Addition of a Utility Factor for Calculating FCIVs for PHEVs
Additionally, in light of its proposal to eliminate FCIVs for BEVs,
NHTSA sought comment on adjusting FCIVs for PHEVs based on a utility
factor for the portion of usage where the vehicle is operated by the IC
engine to align with EPA's May 5, 2023 NPRM. For CAFE compliance
purposes, the fuel economy of dual-fueled vehicles, such as PHEVs, is
calculated by EPA using a utility factor to account the portion of
power energy consumption from the different energy sources.\1556\ A
utility factor of 0.3, for example, means that the vehicle is estimated
to operate as an IC Engine vehicle 70 percent of the vehicle's VMT.
NHTSA requested comment on aligning NHTSA's regulations to align with
EPA's proposal to reduce FCIVs for PHEVs proportional to the estimated
percentage of VMT that the vehicles would be operated as EVs.
---------------------------------------------------------------------------
\1556\ 40 CFR 600.116-12.
---------------------------------------------------------------------------
We received only one comment on the proposal to adjust FCIVs for
PHEVs using a utility factor calculation. The Joint NGOs commented that
NHTSA should eliminate FCIVs for PHEVs when they are operating on
electricity.\1557\
---------------------------------------------------------------------------
\1557\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-A2, at 62.
---------------------------------------------------------------------------
On April 18, 2024, EPA issued a final rule that added a utility
factor to the calculation of FCIVs for PHEVs.\1558\ Accordingly,
starting in model year 2027, the calculated credit value for PHEVs will
be scaled based on the vehicle's estimated utility factor.\1559\ In
light of the changes made in EPA's final rule, NHTSA is finalizing
technical amendments to note that FCIVs for PHEVs will be based on a
utility factor starting in model year 2027. While PHEVs will remain
eligible for off-cycle FCIVs under the CAFE program, EPA finalized, as
a reasonable approach for addressing off-cycle FCIVs for PHEVs, to
scale the calculated FCIVs for PHEVs based on the vehicle's assigned
utility factor. For example, if a PHEV has a utility factor of 0.3,
meaning the vehicle is estimated to operate as an ICE vehicle 70
percent of the vehicle's VMT, the PHEV will earn an off-cycle FCIV that
is 70 percent of the FCIV value of a fully ICE vehicle to properly
account for the value of the off-cycle FCIVs corresponding to expected
engine operation. This calculation methodology is consistent with EPA's
decision to eliminate FCIVs for BEVs because the values are not
representative of real-world improvements in energy consumption during
electric operation. As has been the case for FCIVs under the existing
regulations, individual vehicles may generate more FCIVs than the
fleetwide cap value but the fleet average credits per vehicle must
remain at or below the applicable menu cap.
---------------------------------------------------------------------------
\1558\ 89 FR 27842, 27922.
\1559\ 89 FR 27842, 27922.
---------------------------------------------------------------------------
3. Phasing Out OC FCIVs by MY 2033
NHTSA also requested comment on phasing out OC FCIVs for all
vehicles before MY 2031. As a possible approach, NHTSA sought comment
on phasing out the off-cycle menu cap by reducing it to 10 g/mi in
model year 2027, 8 g/mi in model year 2028, 6 g/mi in model year 2029,
and 3 g/mi in model year 2030 before eliminating OC FCIVs in model year
2031. As noted above, FCIVs were added to the CAFE program by the
October 15, 2012 final rule and manufacturers were able to start
earning OC FCIVs starting in model year 2017.\1560\
---------------------------------------------------------------------------
\1560\ 77 FR 62624.
---------------------------------------------------------------------------
The value of FCIVs for OC technologies listed on the predefined
list are derived from estimated emissions reductions associated with
the technologies which is then converted into an equivalent improvement
in MPG. These values, however, were established based on model year
2008 vehicles and technologies assessed during the 2012 rulemaking and
may now be less representative of the fuel savings provided by the off-
cycle technologies as fuel economy has improved over time. While
NHTSA's CAFE standards have increased over time, FCIVs for some menu
technologies have remained the same, which may result in the FCIVs
being less representative of MPG improvements provided by the off-cycle
technologies. As fuel economy improves, FCIVs increasingly represent a
larger portion of their fuel economy and there is not currently a
mechanism to confirm that the off-cycle technologies provide fuel
savings commensurate with the FCIVs the menu provides. Further, issues
such as the synergistic effects and overlap among off-cycle
technologies take on more importance as the FCIVs represent a larger
portion of the vehicle fuel economy. Therefore, NHTSA requested comment
on phasing out FCIVs for off-cycle technologies for ICE vehicles.
Alternatively, NHTSA requested comment on whether new values should be
established for off-cycle technologies that are more representative of
the real-world fuel savings provided by these technologies, and if so,
how the appropriate values for these technologies could be calculated.
On April 18, 2024, EPA issued a final rule that phases out OC FCIVs
between model years 2031-2033.\1561\ While EPA proposed phasing out OC
FCIVs in model years 2027-2033,\1562\ EPA finalized provisions to
retain the current 10 g/mile menu cap through model year 2030, with a
phase-out of 8/6/0 g/mile in model years 2031-2033. As discussed above,
while NHTSA's regulations reference a manufacturer's ability to
generate FCIVs for CAFE compliance purposes, the authority for
determining how to calculate fuel economy performance rests with
EPA.\1563\ Therefore, EPA's final rule has already effectuated the
phase-out of FCIVs for OC technology. As such, NHTSA is moving forward
with finalizing amendments to update NHTSA's regulations to align with
EPA's phase-out of FCIVs for OC technologies.
---------------------------------------------------------------------------
\1561\ 89 FR 27842.
\1562\ 88 FR 29184 (May 5, 2023).
\1563\ 49 U.S.C. 32904.
---------------------------------------------------------------------------
Although NHTSA's regulatory changes to reflect the phase out of OC
FCIVs are technical in nature, NHTSA believes that it is still
appropriate to summarize and discuss comments
[[Page 52929]]
received and explain how NHTSA's views on this issue align with EPA's
regulatory changes.
Several commenters wrote in support of phasing out OC FCIVs. ICCT
\1564\ commented in support of phasing out the OC FCIVs by model year
2031. ACEEE commented that ``[t]here is also limited evidence of the
benefits of the credits in reducing real-world emissions so without any
reforms NHTSA should similarly phase out the program.''\1565\ ACEEE
also commented that the additional incentives currently provided by
NHTSA weaken the standards. Lucid,\1566\ Rivian,\1567\ and Tesla
submitted comments encouraging NHTSA to remove OC FCIVs in model year
2027 along with the elimination of OC and AC efficiency FCIVs for
BEVs.\1568\ Rivian also commented that if NHTSA does not eliminate OC
FCIVs in model year 2027 they should phase out OC FCIVs before the
proposed model year 2031 timeframe, reducing the menu cap to zero by
model year 2030 since NHTSA does not currently have a mechanism to
confirm that the off-cycle technologies provide fuel savings
commensurate with the menu values.\1569\ Toyota also commented in
support of NHTSA's proposal to phase out menu credits.\1570\
---------------------------------------------------------------------------
\1564\ ICCT, Docket No. NHTSA-2023-0022-54064, at 24.
\1565\ ACEEE, Docket No. NHTSA-2023-0022-60684, at 4.
\1566\ Lucid, Docket No. NHTSA-2023-0022-50594, at 7.
\1567\ Rivian, Docket No. NHTSA-2023-0022-28017, at 1.
\1568\ Tesla, Docket No. NHTSA-2023-0022-60093, at 16.
\1569\ Rivian, Docket No. NHTSA-2023-0022-59765, at 8.
\1570\ Toyota, Docket No. NHTSA-2023-0022-61131, at 26.
---------------------------------------------------------------------------
Other commenters requested to extend the phase out through model
year 2032 and coordinate with EPA on the phase-out.\1571\ Porsche
suggested that NHTSA extend the menu phase-out by allowing
manufacturers to continue to apply for credits for menu items after the
phase out of OC FCIVs.\1572\ Subaru commented requesting that ``already
approved efficiency technologies are allowed to maintain their value
for as long as they are applied to future vehicles.\1573\ Large
investments were made into these technologies, which should be
recognized for their real-world energy savings.''
---------------------------------------------------------------------------
\1571\ The Alliance, Docket No. NHTSA-2023-0022-60652-A2, at 11;
DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 3.
\1572\ Porsche, Docket No. NHTSA-2023-0022-59240, at 9.
\1573\ Subaru, Docket No. NHTSA-2023-0022-58655, at 4.
---------------------------------------------------------------------------
Commenters argued for maintaining menu OC FCIVs for several reasons
including: (1) the incentives will help manufacturers as they
transition to EVs, (2) the incentives support the development and
application of technology which improves fuel economy, (3) OC
technology provides real world benefits to fuel economy. Commenters
noted that the incentives from the OC program help manufacturers to
meet NHTSA's standards and will help manufacturers navigate the
transition to EVs.\1574\ Other commenters noted that these incentives
reflect real-world fuel economy improvements.\1575\ While these
technologies do provide some real-world fuel economy improvements, it
is difficult to quantify how much real world benefit they provide.
Commenters \1576\ noted that without the incentives manufacturers will
be less likely to develop new OC technology that could assist in
NHTSA's overall goal of reducing fuel consumption. Additionally,
manufacturers would be less likely to include OC technologies in their
fleets without the incentives.\1577\
---------------------------------------------------------------------------
\1574\ The Alliance, Docket No. NHTSA-2023-0022-60652-A3, at 34;
Ford, Docket No. NHTSA-2023-0022-60837, at 9; MEMA, Docket No.
NHTSA-2023-0022-59204-A1, at 7; NADA, NHTSA-2023-0022-58200, at 13.
\1575\ MEMA, Docket No. NHTSA-2023-0022-59204-A1, at 3; Subaru,
Docket No. NHTSA 2023-002-58655, at 4; Stellantis, Docket No. NHTS-
2023-0022-61107, at 10; BMW, Docket No. NHTSA-2023-0022-58614, at 4.
\1576\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 3; Ford,
Docket No. NHTSA-2023-0022-60837, at 9; Kia, Docket No. NHTSA-2023-
0022-58542-A1, at 3.
\1577\ Kia, Docket No. NHTSA-2023-002-58542-A1, at 6-7.
---------------------------------------------------------------------------
Kia commented that they oppose NHTSA's proposal to phase out and
eventually eliminate off-cycle technology menu FCIVs by MY2031 and
instead urged NHTSA to retain existing off-cycle menu-based credits
through at least 2032.\1578\ Kia noted that the increased off-cycle
menu cap (from 10 g/mi to 15 g/mi) for model years 2023-2026 signaled
to industry that EPA, and therefore NHTSA, would continue to encourage
and account for these off-cycle technologies.\1579\ Kia further stated
that it had made significant investments in these technologies and
would appreciate the opportunity to earn a return on investment.\1580\
---------------------------------------------------------------------------
\1578\ Kia, Docket No. NHTSA-2023-002-58542-A1, at 6-7.
\1579\ Kia, Docket No. NHTSA-2023-002-58542-A1, at 6-7.
\1580\ Kia, Docket No. NHTSA-2023-002-58542-A1, at 6-7.
---------------------------------------------------------------------------
As discussed above, NHTSA is finalizing minor regulatory changes to
align with EPA's phase-out of menu credits over the model year 2030-
2033 timeframe. NHTSA believes the slower phase-out schedule provided
in EPA's regulation will provide additional time for manufacturers who
have made substantial use of off-cycle credits in their product
planning to pursue alternative pathways for improving fuel economy. The
extended phase-out schedule also will address lead time in the early
years of the program. Instead of the proposed menu cap phase-out of 10/
8/6/3/0 g/mile in model years 2027-2031, EPA finalized provisions that
retain the 10 g/mile menu cap through model year 2030, with a phase-out
of 8 g/mi in model year 2031, 6 g/mi in model year 2032 and 0 g/mi in
model year 2033. We believe this phase-out schedule is an appropriate
way to address concerns that the off-cycle credits may not be
reflective of the real-world emissions impact of the off-cycle
technologies.
4. Elimination of the 5-Cycle and Alternative Approval Pathways for
CAFE
In the NPRM, NHTSA proposed eliminating both the 5-cycle pathway
and the alternative pathway for off-cycle FCIVs for light-duty vehicles
starting in model year 2027. NHTSA proposed this change to align with
EPA and believes it to be appropriate because we do not believe that
the benefit to manufacturers is significant enough to justify the
significant amount of time and resources required to be committed to
reviewing and approving requests. Further, based on the general degree
of robustness of data provided by manufacturers to EPA and NHTSA for
approval consideration, the analysis is often delayed and may
ultimately result in a denial, causing undesirable and often
unnecessary delays to final compliance processing.
In the NPRM, NHTSA stated that it does not believe that the 5-cycle
pathway is beneficial to manufacturers or to NHTSA, as the pathway is
used infrequently, provides minimal benefits, and requires a
significant amount of time for review. Historically, only a few
technologies have been approved for FCIVs through 5-cycle testing. The
5-cycle demonstrations are less frequent than the alternative pathway
due to the complexity and cost of demonstrating real-world emissions
reductions for technologies not listed on the menu. NHTSA's proposal
aligned with EPA's proposed rule issued on May 5, 2023.\1581\
---------------------------------------------------------------------------
\1581\ 88 FR 29184.
---------------------------------------------------------------------------
NHTSA also proposed eliminating the alternative approval process
for off-
[[Page 52930]]
cycle FCIVs starting in model year 2027. This proposal also aligned
with EPA's May 5, 2023 NPRM.\1582\ Manufacturers currently seek EPA
review, in consultation with NHTSA, through a notice and comment
process, to use an alternative methodology other than the menu or 5-
cycle methodology.\1583\ Manufacturers must provide supporting data on
a case-by-case basis demonstrating the benefits of the off-cycle
technology on their vehicle models. Manufacturers may also use the
alternative approval pathway to apply for FCIVs for menu technologies
where the manufacturer is able to demonstrate FCIVs greater than those
provided by the menu.
---------------------------------------------------------------------------
\1582\ 88 FR 29184.
\1583\ 40 CFR 86.1869-12(d).
---------------------------------------------------------------------------
NHTSA proposed eliminating the alternative approval process for
off-cycle credits starting in model year 2027 to align with EPA's
proposal. The alternative approval process has been used successfully
by several manufacturers for high efficiency alternators, resulting in
EPA adding them to the off-cycle menu beginning in model year
2021.\1584\ The program has resulted in a number of concepts for
potential off-cycle technologies over the years, but few have been
implemented, at least partly due to the difficulty in demonstrating the
quantifiable real-world fuel consumption reductions associated with
using the technology. Many FCIVs sought by manufacturers have been
relatively small (less than 1 g/mile). Manufacturers have commented
several times that the process takes too long, but the length of time
is often associated with the need for additional data and information
or issues regarding whether a technology is eligible for FCIVs. NHTSA
has been significantly impacted in conducting its final compliance
processes due to the untimeliness of OC approvals. For these reasons,
NHTSA proposed edits to update NHTSA's regulations to align with EPA's
proposal to eliminate the alternative approval process for earning off-
cycle fuel economy improvements starting in model year 2027.
---------------------------------------------------------------------------
\1584\ 85 FR 25236 (April 30, 2020).
---------------------------------------------------------------------------
On April 18, 2024, EPA issued a final rule that eliminated the 5-
cycle and alternative pathways, starting in model year 2027 for earning
off-cycle fuel economy improvements.\1585\ Under EPA's final rule,
manufacturers may no longer generate credits under the 5-cycle and
alternative pathways starting in model year 2027.\1586\ Therefore,
NHTSA is moving forward with the proposed amendments to its regulations
to align with the changes in EPA's regulations.
---------------------------------------------------------------------------
\1585\ 89 FR 27842.
\1586\ See changes to 40 CFR 86.1869-12 (89 FR 27842, 28199).
---------------------------------------------------------------------------
While NHTSA received comments both supporting and opposing NHTSA's
proposed regulatory changes, NHTSA's regulatory changes are technical
in nature. That is, the elimination of FCIVs for BEVs starting in model
year 2027 was effectuated as part of EPA's April 18, 2024 rule.\1587\
While NHTSA's regulations reference a manufacturer's ability to
generate FCIVs in the CAFE program, the authority for determining how
to calculate fuel economy performance rests with EPA.\1588\ NHTSA's
regulations merely reference EPA's provisions that stipulate how
manufacturers may generate FCIVs. Therefore, the comments requesting
NHTSA to make changes regarding FCIVs are, as a general matter, outside
the scope of this rulemaking.
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\1587\ 89 FR 27842.
\1588\ 49 U.S.C. 32904.
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Although NHTSA's regulatory changes to reflect the elimination of
5-cycle and alternative approval pathways are technical in nature,
NHTSA believes that it is still appropriate to respond to comments and
explain how NHTSA's views on this issue align with EPA's. NHTSA
received comments both supporting and opposing the proposals to
eliminate the 5-cycle and alternative approval
pathways.1589 1590
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\1589\ Arconic, Docket No. NHTSA-2023-0022-48374-A1, at 2.
\1590\ DENSO, Docket No. NHTSA-2023-0022-60676-A1, at 4.
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Hyundai America Technical Center, Inc. (HATCI), Kia, Mitsubishi and
MECA expressed concerns with the removal of the 5-cycle and alternative
approval pathways. MECA commented acknowledging the complexity of the
5-cycle and alternative approval processes and the fact that not many
manufacturers have used these pathways. MECA also stated that they
believe that there might be increased adoption of the 5-cycle and
alternative approval pathways with other incentives being sunset and,
for this reason, requested that NHTSA keep these pathways available for
OEMs.\1591\ HATCI requested that NHTSA extend the 5-cycle and
alternative pathways through at least 2032, believing that if these
pathways are eliminated manufacturers will abandon these
technologies.\1592\ Kia commented that the alternative and 5-cycle
approaches would be helpful to manufacturers during the transition to
EVs.\1593\ Mitsubishi also requested that NHTSA extend the 5-cycle and
alternative approval method past model year 2032.\1594\ In response to
these comments, NHTSA notes that the requested changes are outside of
the scope of this rulemaking. With EPA's April 18, 2024 final rule,
manufacturers may not generate FCIVs through either the 5-cycle or
alternative approval pathways beginning in model year 2027. NHTSA
further notes that due to the limited use of these pathways to date,
NHTSA does not believe this change will have a substantial negative
impact on manufacturers.
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\1591\ MECA, Docket No. NHTSA-2023-0022-63053- A1, at 7.
\1592\ HATCI, Docket No. NHTSA-2023-0022-48991, at 3.
\1593\ Kia, Docket No. NHTSA-2023-0022-58542-A1, at 7.
\1594\ Mitsubishi, Docket No. NHTSA-2023-0022-61637, at 8.
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Some commenters requested that technologies approved via the
alternative approval or 5-cycle pathway prior to model year 2027 that
are not included on the menu credit still be eligible for the credit
amount for which they were approved.\1595\ NHTSA understands these
commenters to be asking that manufacturers be permitted to generate
FCIVs that were approved through the alternative approval and 5-cycle
pathways as long as FCIVs are permitted to be generated for
technologies on the menu even though new technologies would not be able
to be approved. NHTSA notes, however, that EPA's final rule precludes
manufacturers from generating FCIVs through the alternative approval
and 5-cycle pathways starting in model year 2027 and does not merely
prevent new technologies to be approved.
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\1595\ BMW, Docket No. NHTSA-2023-0022-58614, at 4; DENSO,
Docket No. NHTSA-2023-0022-60676-A1, at 4.
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Commenters also requested that NHTSA add to the off-cycle credits
menu list all of the previously approved 5-cycle and public process
pathway credits with an associated increase in the cap.\1596\ HATCI
also requested that, after adding the previously approved technologies
to the menu, the menu cap be adjusted accordingly.\1597\ In response to
these comments, NHTSA notes that the menu for FCIVs is found within
EPA's regulations and that the authority for determining how fuel
economy performance is calculated rests with EPA.\1598\ NHTSA has not
identified authority that would allow it to establish new technologies
to a menu
[[Page 52931]]
for FCIVs. NHTSA further notes that the few credits that have been
approved under the 5-cycle and alternative approval pathways have been
specific to individual vehicle models and there is not sufficient data
on the real-world emissions impact of these technologies across a wide
range of vehicle segments to determine an appropriate menu credit for
these technologies.
---------------------------------------------------------------------------
\1596\ HATCI, Docket No. NHTSA-2023-002-48991, at 3; BMW, Docket
No. NHTSA-2023-0022-58614, at 4; DENSO, Docket No. NHTSA-2023-002-
60676-A1, at 4.
\1597\ HATCI, Docket No. NHTSA-2023-002-48991, at 3.
\1598\ 49 U.S.C. 32904.
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For the foregoing reasons, NHTSA is finalizing its proposed
amendments to align with EPA's April 18, 2024 final rule, which
eliminated the generation of FCIVs through the 5-cycle and alternative
approvals process starting in model year 2027.
5. Requirement To Respond To Requests for Information Regarding Off-
Cycle Requests Within 60 Days for LDVs for MYs 2025 and 2026
For model year 2025 and model year 2026, NHTSA proposed creating a
time limit to respond to requests for information regarding OC
petitions for light-duty vehicles. This limit was proposed to allow for
the timelier processing of OC petitions. In the last rule, NHTSA added
provisions clarifying and outlining the deadlines for manufacturers to
submit off-cycle requests.\1599\ Since laying out those new
requirements, NHTSA has identified another point in the OC request
process that is delaying the timely processing of the requests. When
considering OC petitions, NHTSA and EPA frequently need to request
additional information from the manufacturer, and NHTSA observes that
it has sometimes taken OEMs an extended amount of time to respond to
these requests.
---------------------------------------------------------------------------
\1599\ See 49 CFR 531.6(b)(3)(i) and 49 CFR 533.6(c)(4)(i).
---------------------------------------------------------------------------
NHTSA proposed to create a deadline of 60 days for responding to
requests for additional information regarding OC petitions. If the
manufacturer does not respond within the 60-day limit with the
requested information, NHTSA may recommend that EPA deny the petition
for the petitioned model year. NHTSA may grant an extension for
responding if the manufacturer responds within 60 days with a
reasonable timeframe for when the requested information can be provided
to the agencies. If an OEM does not respond to NHTSA's call for
additional data regarding the request within a timely manner, the
request may be denied. If the request is denied, it will no longer be
considered for the model year in question. If the denied petition is
for model year 2025 the OEM may still request consideration of the
credits for the following year. A manufacturer may request
consideration for later model years by responding to NHTSA/EPA's data
request and expressing such interest.
NHTSA received one comment in support of the proposal, from the
Joint NGOs,\1600\ and one comment opposing the proposal, from
Toyota.\1601\ Toyota stated that NHTSA ``should not add additional
requirements to the FCIV application process as these alternative
methods wind down over the 2025-2026 model years.'' \1602\ Toyota
stated that approval of applications has taken years in some cases with
the loss of planned FCIVs due to no fault of the manufacturer.\1603\
Toyota also stated that an application for an off-cycle technology is
often followed by several rounds of additional data requests from NHTSA
and EPA with long delays between each submission of data by the
manufacturer and requested that if NHTSA were to enact a deadline on
manufacturers, they establish a commensurate deadline for agency action
on the requested data submissions.''\1604\
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\1600\ Joint NGOs, Docket No. NHTSA-2023-0022-61944-A2, at 66.
\1601\ Toyota, Docket No. NHTSA-2023-0022-61131, at 26.
\1602\ Id.
\1603\ Id.
\1604\ Id.
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After considering the comments, NHTSA has decided to move forward
with adopting the 60-day deadline for responding in an attempt to
streamline the process for manufacturers as well as NHTSA. While NHTSA
understands manufacturers frustration with the extended time period the
application review can take, the FCIV approval process involves
significant agency review to confirm that technologies for which the
manufacturer is requesting FCIVs provides real world benefits and that
the FCIV value is appropriate. Since the manufacturers are petitioning
for the FCIVs, NHTSA does not believe it is appropriate for the
manufacturer to delay the process by not responding to agency requests
for information in a timely manner. Accordingly, NHTSA is finalizing a
change to the regulation to notify manufacturers that NHTSA may
recommend denial of their OC FCIV petition if the manufacturer does not
respond within 60-days. This change applies for model year 2025-26.
6. Elimination of OC Technology Credits for Heavy-Duty Pickup Trucks
and Vans Starting in Model Year 2030
In the NPRM, NHTSA proposed eliminating OC technology credits for
HDPUVs for the same reasons discussed above for eliminating the 5-cycle
and alternative pathways for OC technology credits in the CAFE program
starting in model year 2030. Currently, manufacturers of HDPUVs may
only earn credits through an off-cycle program that involves requesting
public comment and case-by-case review and approval. Since its
inception, the program has involved lengthy and resource-intensive
processes that have not resulted in significant benefits to the HDPUV
fleet. At this time, NHTSA does not believe the benefit provided by
these credits justifies NHTSA's time and resources. Accordingly, NHTSA
proposed to end the off-cycle program for HDPUVs starting in model year
2030. NHTSA also requested comment on eliminating OC technology credits
for BEVs if NHTSA did not eliminate OC technology credits for all
HDPUVs. In the current regulation, we consider all BEVs and PHEVs to
have no fuel usage and we assume zero fuel consumption for compliance.
Accordingly, these vehicles would go to negative compliance values if
we allowed OC technology credits for BEVs.
NHTSA received only one comment specific to the proposal to remove
OC FCIVs for HDPUVs. In the comment, Arconic\1605\ expressed support of
eliminating OC FCIVs for HDPUVs.
---------------------------------------------------------------------------
\1605\ Arconic, Docket No. NHTSA-2023-0022-48374, at 2.
---------------------------------------------------------------------------
After considering the comments received, NHTSA has decided to move
forward with the elimination of OC technology credits for heavy-duty
pickup trucks and vans starting in model year 2030. As stated above,
NHTSA believes the lengthy and resource-intensive processes involved
with approving OC credits for HDPUVs has not resulted in significant
benefits to the HDPUV fleet. Additionally, NHTSA believes that, even
apart from process considerations, it is appropriate to eliminate OC
FCIVs for HDPUV BEVs and PHEVs because they are considered to have no
fuel usage and zero g/mile for compliance and allowing FCIVs to apply
to these vehicles would result in negative compliance values.
7. Technical Amendments for Advanced Technology Credits
In addition to the changes discussed above, NHTSA is also making
several minor technical amendments to 49 CFR parts 523, 531, 533, 535,
536 and 537. These amendments include technical amendments related to
advanced technology credits in the Heavy-Duty National program as well
as an assortment of technical amendments to update statutory citations
and cross-references and to update language regarding medium-duty
passenger
[[Page 52932]]
vehicles. Although some of these technical amendments were not included
in the NPRM, NHTSA finds that notice and comment would be unnecessary.
Pursuant to the Administrative Procedure Act (APA), a Federal agency
must generally provide the public and notice and an opportunity to
comment on agency rulemakings.\1606\ The APA, however, creates an
exception in cases where an agency for good cause determines ``that
notice and public procedure thereon are impractical, unnecessary, or
contrary the public interest.'' \1607\ Because all of the changes
discussed below involve only minor, technical amendments to NHTSA's
regulations, the agency has determined that notice and comment are
unnecessary. NHTSA will briefly discuss each of these technical
amendments below.
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\1606\ 5 U.S.C. 553(b).
\1607\ 5 U.S.C. 553(b)(4)(B).
---------------------------------------------------------------------------
In the NPRM, NHTSA proposed to make technical amendments to the
current regulations pertaining to advanced technology credits. In the
Phase 2 rule for the Heavy-Duty National Program, NHTSA and EPA jointly
explained that we were adopting advanced technology credit multipliers
for three types of advanced technologies. As described in the 2016
final rule, there would be a 3.5 multiplier for advanced technology
credits for plug-in hybrid vehicles, a 4.5 multiplier for advanced
technology credits for all-electric vehicles, and a 5.5 multiplier for
advanced technology credits for fuel cell vehicles. The agencies stated
that their intention in adopting these multipliers was to create a
meaningful incentive to manufacturers considering adopting these
technologies in their vehicles. The agencies further noted that the
adoption rates for these advanced technologies in heavy vehicles was
essentially non-existent at the time the final rule was issued and
seemed unlikely to grow significantly within the next decade without
additional incentives. Because of their large size, the agencies
decided to adopt them as an interim program that would continue through
model year 2027. These changes, however, were not accurately reflected
in the regulatory changes made by the final rule. Since issuing the
NPRM, NHTSA published a final rule which made technical amendments to
the regulations for the heavy-duty fuel efficiency program and
finalized the proposed change.\1608\ The current text of 49 CFR 535.7
now states that for Phase 2, advanced technology credits may be
increased by the corresponding multiplier through model year 2027.
---------------------------------------------------------------------------
\1608\ March 15, 2024 (89 FR 18808).
---------------------------------------------------------------------------
Additionally, the final rule also explained that because of the
adoption of the large multipliers, the agencies were discontinuing the
allowance to use advanced technology credits across averaging
sets.\1609\ This change was also not accurately reflected in the
regulatory changes. NHTSA proposed making a technical amendment to
reflect the intended change.
---------------------------------------------------------------------------
\1609\ ``Averaging set'' is defined at 49 CFR 535.4.
---------------------------------------------------------------------------
NHTSA received several comments about this technical amendment.
Rivian Automotive, LLC (Rivian) suggests that NHTSA should accelerate
the phase out of advanced technology multipliers ``in recognition of a
much-changed industry and vehicle technology landscape.'' \1610\ The
Auto Innovators,\1611\ GM,\1612\ MECA,\1613\ and Stellantis commented
supporting NHTSA's clarification that the advanced technology
multipliers will extend through model year 2027, with Stellantis adding
that this ``avoids disrupting OEM product plans by changing a
previously published final rule.'' \1614\ The Strong PHEV Coalition
commented that NHTSA ``should provide a small credit multiplier in
model year 2027 to 2030 for several advanced technologies including
PHEVs with a long all-electric range that are not being produced today
because they need extra lead time to develop.'' \1615\
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\1610\ Rivian, NHTSA-2023-0022-59765, at 14.
\1611\ The Alliance, Docket No. NHTSA-2023-0022-60652-A2, at 12.
\1612\ GM, Docket No. NHTSA-2023-0022-60686-A1, at 7.
\1613\ MECA, Docket No. NHTSA-2023-0022-63053- A1, at 7.
\1614\ Stellantis, NHTSA-2023-0022-61107, at 11.
\1615\ Strong PHEV Coalition, NHTSA-2023-0022-60193, at 5.
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In response to the comments received, NHTSA notes that substantive
changes to the advanced technology multiplier are out of scope of this
rulemaking. Accordingly, NHTSA is not phasing out the advanced
technology multipliers sooner than model year 2027, as Rivian
requested, nor is NHTSA extending the multipliers through model year
2030, as the Strong PHEV Coalition requested. NHTSA is instead making
the technical amendments that were proposed in the NPRM, which
clarifies that advanced technology multipliers may be used through
model year 2027, but they may not be used across averaging sets.
While NHTSA added clarifying language to 49 CFR 535.7 in the final
rule published on March 15, 2024, which made technical amendments to
the regulations for heavy-duty fuel efficiency program, NHTSA is making
additional corrections, as proposed in the NPRM, to clarify that only
advanced technology credits earned in Phase 1 may be used across
averaging sets. Specifically, NHTSA is amending 49 CFR 535.7
(a)(2)(iii) to clarify that positive credits, other than advanced
technology credits earned in Phase 1, generated and calculated within
an averaging set may only be used to offset negative credits within the
same averaging set. NHTSA is adding the same type of clarification to
Sec. 535.7(a)(4)(i) by clarifying that other than advanced technology
credits earned in phase 1, traded FCCs may be used only within the
averaging set in which they were generated and clarifying that Sec.
535.7(a)(4)(ii) only applies to advanced technology credits earned in
Phase 1.
8. Technical Amendments to Part 523
NHTSA is making technical amendments to part 523 to provide clarity
regarding medium-duty passenger vehicles. Although these amendments
were not included in the NPRM, NHTSA has since identified a need to
update NHTSA's regulation regarding medium-duty passenger vehicles by
making minor changes. Specifically, these amendments are made to
provide consistency throughout the regulation and to align with the
statutory definition of medium-duty passenger vehicle.
a. 49 CFR 523.2 Definitions
NHTSA is updating the definitions of definitions of base tire (for
passenger automobiles, light trucks, and medium duty passenger
vehicles), basic vehicle frontal area, and emergency vehicle to change
reference to ``medium duty passenger vehicles'' to ``medium-duty
passenger vehicles'' for consistency with the term used in NHTSA's
authorizing statute.
NHTSA is also updating the definitions of full-size pickup truck
and light truck to change reference to ``medium duty passenger
vehicles'' to ``medium-duty passenger vehicles'' for consistency.
Additionally, NHTSA is updating both terms to clarify that the terms
include medium-duty passenger vehicles that meet the criteria for those
vehicles.
NHTSA is also replacing the term the term medium duty passenger
vehicle with the term medium-duty passenger vehicle for consistency and
is updating the definition to align with the statutory definition. The
term medium-duty passenger vehicle is defined at 49 U.S.C. 32901(a)(19)
as being defined in 40 CFR 86.1803-01 as in effect on the date of the
enactment of the Ten-in-Ten Fuel Economy Act (Pub. L. 110-140, enacted
[[Page 52933]]
on December 19, 2007). Since the existing definition is not in complete
alignment with the statutory definition, NHTSA is updating the
regulatory definition. This change also provides greater clarity to
manufacturers in regard to applicability of fuel economy standards to
these vehicles.
b. 49 CFR 523.3 Automobile
NHTSA is amending Sec. 523.3 to remove outdated language currently
found in paragraph (b) that may cause confusion as to which vehicles
are included as automobiles for purposes of CAFE standards. The text
found in paragraph (b) was superseded by statutory changes in the Ten-
in-Ten Fuel Economy Act (Pub. L. 110-140). With these statutory
changes, all vehicles with a GVWR of 10,000 lbs. or less are subject to
the CAFE standards with the exception of work trucks. A work truck is
defined at 49 U.S.C. (a)(19) as a vehicle that is rated at between
8,500 and 10,000 lbs. gross vehicle weight and is not a medium-duty
passenger vehicle. With this statutory change, all medium-duty
passenger vehicles became subject to NHTSA's authority for setting CAFE
standards. Medium-duty passenger vehicles are classified as either
passenger cars or light trucks depending on whether the vehicle meets
the requirements for light trucks found at Sec. 523.5.
c. 49 CFR 523.4 Passenger Automobile
NHTSA is amending Sec. 523.4 to add a sentence to clarify that a
medium-duty passenger vehicle that does not meet the criteria for non-
passenger motor vehicles in Sec. 523.5 is a passenger automobile. As
discussed above, since issuing the NPRM, NHTSA identified a need to
provide greater clarity to the applicability of the CAFE standards to
medium-duty passenger vehicles. NHTSA believes this technical amendment
helps to provide that needed clarity.
d. 49 CFR 523.5 Non-Passenger Automobile
NHTSA is amending Sec. 523.5 to add a sentence to clarify that a
medium-duty passenger vehicle that meets the criteria for non-passenger
motor vehicles in Sec. 523.5 is a non-passenger automobile. This
change, like the change to Sec. 523.4, is intended to greater clarity
regarding the applicability of the CAFE standards to medium-duty
passenger vehicles.
e. 49 CFR 523.6 Heavy-Duty Vehicle
NHTSA is amending Sec. 523.6 to correct a typo involving a missing
hyphen after the word ``medium'' and to remove ``Heavy-duty trailers''
from the list of four regulatory categories. NHTSA is removing heavy-
duty trailers from the list consistent with a November 2021 decision by
the United States Court of Appeals for the District of Columbia
Circuit.\1616\ The D.C. Circuit decision vacated all portions of NHTSA
and EPA's joint 2016 rule that apply to trailers.\1617\ The underlying
statute authorizes NHTSA to examine the fuel efficiency of and
prescribe fuel economy standards for ``commercial medium-duty [and/or]
heavy-duty on-highway vehicles.'' 49 U.S.C. 32902(b)(1)(C); 49 U.S.C.
32902(k)(2). The Court reasoned that trailers do not qualify as
``vehicles'' when that term is used in the fuel economy context because
trailers are motorless and use no fuel.\1618\ Accordingly, the Court
held that NHTSA does not have the authority to regulate the fuel
economy of trailers.\1619\ Consistent with this decision, NHTSA is
removing reference to heavy-duty trailers in Sec. 523.6.
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\1616\ Truck Trailer Mfrs. Ass'n, Inc. v. EPA, 17 F.4th 1198,
1200 (D.C. Cir. 2021).
\1617\ 81 FR 73478
\1618\ Truck Trailer Mfrs. Ass'n, Inc., 17 F.4th at 1200, at
1204-08.
\1619\ Id. at 1208. For similar reasons, the Court also held
that the statute authorizing EPA to regulate the emissions of
``motor vehicles'' does not encompass trailers. Id. at 1200-03. The
Court affirmed, however, that both agencies still ``can regulate
tractors based on the trailers they pull.'' Id. at 1208. Moreover,
NHTSA is still authorized to regulate trailers in other contexts,
such as under 49 U.S.C. chapter 301. See 49 U.S.C. 30102(a)(7)
(defining ``motor vehicle'' to include ``a vehicle . . . drawn by
mechanical power''); Truck Trailer Mfrs. Ass'n, Inc., 17 F.4th at
1207 (``A trailer is `drawn by mechanical power.' '').
---------------------------------------------------------------------------
f. 49 CFR 523.8 Heavy-Duty Vocational Vehicle
NHTSA is making a minor amendment to Sec. 523.8(b) to replace the
term ``Medium duty passenger vehicles'' with ``Medium-duty passenger
vehicles''. This minor technical amendment is being made for
consistency.
9. Technical Amendments to Part 531
NHTSA is making several technical amendments to update references
in the existing regulation and to include a definition for a term used
in the regulation.
a. 49 CFR 531.1 Scope
NHTSA is amending Sec. 531.1 to change the reference to section
502(a) and (c) of the Motor Vehicle Information and Cost Savings Act,
to the appropriate codified provisions at 49 U.S.C. 32902. This change
is intended to allow the reader to more easily identify the statutory
definitions referenced in this section.
b. 49 CFR 531.4 Definitions
NHTSA is amending Sec. 531.4 to change references to section 502
of the Motor Vehicle Information and Cost Savings Act, as amended by
Public Law 94-163, to the appropriate codified provisions at 49 U.S.C.
32901. This change is to allow the reader to more easily identify the
statutory definitions referenced in this section. NHTSA is also adding
the term domestically manufactured passenger automobile and defining it
as a vehicle that is deemed to be manufactured domestically under 49
U.S.C. 32904(b)(3) and 40 CFR 600.511-08. This second change is to
provide greater clarity regarding a term that is used in the existing
part 531.
c. 49 CFR 531.5 Fuel Economy Standards
NHTSA is making technical amendments to Sec. 531.5(a) to correct a
cross reference to NHTSA's alternative fuel economy standards for
manufacturers who have petitioned and received exemptions from fuel
economy standards under part 525. The correct cross-reference should be
to paragraph (e). NHTSA is also making a technical amendment to Sec.
531.5(b), (c), and (d) to add language clarifying that requirements in
those paragraphs do not apply to manufacturers subject to alternative
fuel economy standards in paragraph (e). These technical amendments
clarify that manufacturers that have petitioned for and received
exemptions from average fuel economy standards under 49 CFR part 525
are only subject to the alternative fuel economy standards set forth at
Sec. 531.5(e).
10. Technical Amendments to Part 533
NHTSA is making a few minor technical amendments to part 533 to
update references to statutory authority.
a. 49 CFR 533.1 Scope
NHTSA is amending Sec. 533.1 to change the reference to section
502(a) and (c) of the Motor Vehicle Information and Cost Savings Act,
to the appropriate codified provisions at 49 U.S.C. 32902. This change
is intended to allow the reader to more easily identify the statutory
definitions referenced in this section.
b. 49 CFR 533.4 Definitions
NHTSA is amending Sec. 533.4 to change references to section 501
of the Motor Vehicle Information and Cost Savings Act, as amended by
Public Law 94-163, to the appropriate codified provisions at 49 U.S.C.
32901. This change is to allow the reader to more easily identify the
statutory definitions referenced in this section. NHTSA is also
removing the
[[Page 52934]]
term domestically manufactured from Sec. 533.4 because it not used
within part 533. As discussed above, NHTSA is defining the term in
Sec. 531.4 because the term is used in part 531. NHTSA is also
updating the term captive import to include reference to where the term
is defined in section 502(b)(2)(E) of the Motor Vehicle Information and
Cost Savings Act. This change is to allow the reader to more readily
find the statutory definition of the term.
11. Technical Amendments to Part 535
NHTSA is making a few minor technical amendments to part 535 to
update references to statutory authority and to update a cross
reference to an EPA provision.
a. 49 CFR 535.4 Definitions
NHTSA is amending Sec. 535.4 to change a reference to section 501
of the Motor Vehicle Information and Cost Savings Act, as amended by
Public Law 94-163, to the appropriate codified definitions at 49 U.S.C.
32901. NHTSA is making this change to indicate that the terms
manufacture and manufacturer are also codified at 49 U.S.C. 32901.
NHTSA is also amending the introductory text of Sec. 535.4 to remove
the term ``commercial medium-duty and heavy-duty on highway vehicle''
because the term is not used in part 535, nor are the terms
``commercial medium-duty on highway vehicle'' or ``commercial heavy-
duty on highway vehicle'' used in part 535. NHTSA is also adding a
comma after the term ``fuel'' to indicate that it is a separate term
from ``work truck.''
b. 49 CFR 535.7 Average, Banking, and Trading (ABT) Credit Program
NHTSA is amending Sec. 535.7(a)(1)(iii) to remove outdated and
unnecessary cross references. Specifically, the paragraph, which
describes advanced technology credits, is being updated to remove
reference to the credits being generated under EPA's regulations and
instead will just reference NHTSA's relevant provisions at Sec.
535.7(f)(1).
NHTSA is amending Sec. 535.7(b)(2) to correct a cross-reference to
the EPA's provision regarding fuel consumption values for advanced
technologies. The current regulation references ``40 CFR 86.1819-
14(d)(7)'' and NHTSA is correcting it read ``40 CFR 86.1819-
14(d)(6)(iii).''
12. Technical Amendments to Part 536
NHTSA is making a technical amendment to part 536 to correct a date
in Table 1 Sec. 536.4(c)--Lifetime Vehicle Miles Traveled. The years
covered in the final column of the table have been updated from ``2017-
2026'' to ``2017-2031.'' This change is being made to reflect updates
made in the Final Rulemaking for Model Years 2027-2031 Light-Duty
Corporate Average Fuel Economy Standards.
13. Technical Amendments to Part 537
NHTSA is making a few technical amendments to part 537 to correct a
typo and update statutory references to include the appropriate
codified provisions.
a. 49 CFR 537.2 Scope
NHTSA is amending Sec. 537.2 to correct a typo by changing
``valuating'' to ``evaluating.''
b. 49 CFR 537.3 Applicability
NHTSA is amending Sec. 537.3 to replace the reference to ``section
502(c) of the Act'' to instead reference 49 U.S.C. 32902(d). This
change is to aid the reader in finding the relevant statutory
provision.
c. 49 CFR 537.4 Definitions
NHTSA is amending Sec. 537.4 to change references to section 501
of the Motor Vehicle Information and Cost Savings Act, as amended by
Public Law 94-163, to the appropriate codified provisions at 49 U.S.C.
32901. This change is to allow the reader to more easily identify the
statutory definitions referenced in this section. With this change,
NHTS is also removing the definition of Act as meaning the Motor
Vehicle Information and Cost Savings Act (Pub. L. 92-513), as amended
by the Energy Policy and Conservation Act (Pub. L. 94-163).
d. 49 CFR 537.7 Pre-Model Year and Mid-Model Year Reports
NHTSA is amending Sec. 537.7(c)(7)(i), (ii), and (iii) to provide
clarity and to note, in subparagraph (iii) that the reporting
requirements for reporting full-size trucks that meet the mild and
strong hybrid vehicle definitions end after model year 2024, to
coincide with the sunset date for FCIVs for advanced full-size pickup
trucks.
D. Non-Fuel Saving Credits or Flexibilities
In a comment to the August 16, 2022 EIS scoping notice for model
year 2027 and beyond CAFE standards,\1620\ Hyundai requested that NHTSA
consider developing an optional credit program for vehicle
manufacturers selling certain types of vehicles in environmental
justice (EJ) communities.\1621\ Because creation of any such program
would be a part of NHTSA's CAFE Compliance and Enforcement program,
NHTSA responded to Hyundai's comment in the proposal rather than in the
EIS.\1622\ NHTSA reaffirmed its commitment to considering communities
with EJ concerns but declined to propose an EJ credit program in
response to Hyundai's comment, for several reasons. In brief, NHTSA's
concerns about Hyundai's proposed program included whether EPCA/EISA
included the relevant authority to construct such a program, whether
such a program would provide a credit windfall to manufacturers without
providing verifiable benefits for communities with EJ concerns, and
whether such a program would ensure EPCA/EISA's goal of saving fuel.
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\1620\ Notice of Intent To Prepare an Environmental Impact
Statement for MYs 2027 and Beyond Corporate Average Fuel Economy
Standards and MYs 2029 and Beyond Heavy-Duty Pickup Trucks and Vans
Vehicle Fuel Efficiency Improvement Program Standards (87 FR 50386).
\1621\ Hyundai, Docket No. NHTSA-2022-0075-0011.
\1622\ 88 FR 56372 (August 17, 2023).
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In comments responding to NHTSA's response, Hyundai proposed
additional clarifications to their environmental justice
proposal.\1623\ Hyundai's concept, which they termed the Community
Energy Savings Credit, would offer a maximum 25% discount on vehicles
purchased by buyers with incomes at less than or equal to two times the
Federal Poverty Level, if the buyers scrap an existing ICE vehicle that
is at least ten model years old. Hyundai proposed credit earnings for
the vehicles as follows: a 3x multiplier for HEVs and PHEVs, and a 5x
multiplier for BEVs and FCEVs. The proposed program also includes
annual OEM reporting requirements, in addition to OEM and scrappage
companies being subject to agency audit.
---------------------------------------------------------------------------
\1623\ Hyundai, Docket No. NHTSA-2023-0022-51701-A1, at 6-7.
---------------------------------------------------------------------------
NHTSA thanks Hyundai for thoughtfully responding to the concerns
that NHTSA raised in the proposal. NHTSA will not create this type of
credit program at this time. NHTSA has extensive experience
administering a vehicle scrappage program,\1624\ and is cognizant of
the need to balance a program that achieves its stated goals against
the program's administrative costs. NHTSA will continue to think of
ways that EPCA/EISA and its other relevant authorities could allow the
agency better consideration of EJ concerns in setting CAFE standards,
beyond NHTSA's current
[[Page 52935]]
consideration.\1625\ That said, NHTSA wants to emphasize that nothing
in today's decision should preclude Hyundai specifically, and the
automotive industry as a whole,\1626\ from continuing to consider how
it could better serve local communities, including those with EJ
concerns. Aside from the potential to earn credits, NHTSA encourages
automakers to deploy more fuel-efficient and cleaner vehicles in
communities that have the potential to benefit from that deployment the
most.
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\1624\ Consumer Assistance to Recycle and Save Act of 2009 (CARS
Program), https://www.nhtsa.gov/fmvss/consumer-assistance-recycle-and-save-act-2009-cars-program.
\1625\ See, e.g., all past CAFE EISs, the current Final EIS,
Chapter 7, and all past CAFE preambles.
\1626\ See 88 FR 56371-2 (August 17, 2023). As far as NHTSA is
aware, Hyundai was the first OEM commenter in CAFE history to
comment about environmental justice.
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E. Additional Comments
NHTSA received many additional comments related to NHTSA's
compliance programs for CAFE and fuel efficiency that requested changes
that were either outside of the scope of this rulemaking or outside of
NHTSA's statutory authority. Specifically, NHTSA received many comments
on credit flexibilities for which NHTSA had not proposed any changes.
Many of these flexibilities are set by statute and cannot be changed
through NHTSA rulemaking. NHTSA discusses these comments below.
1. AC FCIVs
Some commenters may have misunderstood the proposal to phase out OC
FCIVs and believed NHTSA was proposing changes to both AC and OC for
ICE vehicles. Stellantis expressed concern that NHTSA was removing AC
efficiencies for ICE.\1627\ To be clear, NHTSA only proposed amending
its regulations to note that OC FCIVs would be phased out. Therefore,
phasing out FCIVs for AC efficiencies is out of scope of this
rulemaking and the existing provisions for AC FCIVs for ICE vehicles
will remain as is. Stellantis also requested additions to AC
efficiencies for ICE vehicles.\1628\ NHTSA didn't propose any changes
to AC efficiencies for ICE vehicles for the NPRM, so this change would
be outside the scope of this rulemaking.
---------------------------------------------------------------------------
\1627\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 9.
\1628\ Stellantis, Docket No. NHTSA-2023-0022-61107, at 10.
---------------------------------------------------------------------------
2. Credit Transfer Cap AC
Several commenters requested that NHTSA adjust the transfer cap for
credit transfers between fleets based on the oil savings equivalent to
2 mpg in 2018. In support of this request, the Auto Innovators urged
NHTSA to ``interpret the statutory cap on credit transfers in terms of
oil savings, a primary purpose of the CAFE program.'' \1629\ Several
other commenters expressed agreement and support for Auto Innovators'
proposal. As part of the rationale supporting this request, several
commenters expressed concerns that the transfer cap compounds the
misalignment between NHTSA and EPA. Hyundai expressed their view that
adjusting the transfer cap would support the Administration's goals of
bringing green manufacturing to the United States by allowing credits
earned in the DP fleet as a result of IRA tax credits incentivizing
domestic production of BEVs to be used in the IP fleet.\1630\ Ford
commented stating that the ``[r]apid electrification of the light truck
segment is much more expensive and difficult to achieve compared to
passenger cars, and the transfer cap would limit its ability to use
overcompliance in the Car fleet to meet the Truck fleet
standards.\1631\ And GM more generally recommended that NHTSA ``allow
full fungibility of credits across regulated vehicle classes or
otherwise adjust standard stringency, if vehicle classes have
constraints that prevent alignment.'' \1632\
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\1629\ The Alliance, NHTSA-2023-0022-60652, at 11-12.
\1630\ HATCI, NHTSA-2023-0022-48991, at 2.
\1631\ Ford, NHTSA-2023-022-60837, at 7.
\1632\ GM, NHTSA-2023-0022-60686, at 5.
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In response to these comments, NHTSA notes that the transfer cap is
set by statute in 49 U.S.C. 32903(g)(3). NHTSA does not have the
authority to adjust the transfer cap in a manner that is inconsistent
with the plain language of the statute. For the final rule, NHTSA is
not making any changes to the existing provisions regarding
transferring credits. NHTSA's view remains unchanged that the transfer
cap in 49 U.S.C. 32903(g)(1) clearly limits the amount of performance
increase for a manufacturer's fleet that fails to achieve the
prescribed standards. Accordingly, the statute prevents NHTSA from
changing the transfer cap for CAFE compliance to be consistent with
EPA's program.
3. Credit Trading Between HDPUV and Light Truck Fleets
Several commenters requested that NHTSA allow credit transfers
between the HDPUV fleet and the light truck fleet. The Auto Innovators
suggested that NHTSA create such transfer mechanism to ``address the
likelihood of light trucks with heavy batteries moving to the Class 2b/
3 fleet, and to improve alignment with proposed EPA regulations.''
\1633\ The Auto Innovators assert that NHTSA's governing statutes do
not prohibit it from creating a credit transfer program between HDPUVs
and light truck fleets and suggested that NHTSA ``establish a transfer
program from HDPUV to light truck by converting credits based on oil
savings.'' \1634\
---------------------------------------------------------------------------
\1633\ The Alliance, NHTSA-2023-0022-60652-A2, at 17.
\1634\ The Alliance, NHTSA-2023-0022-60652-A2, at 13.
---------------------------------------------------------------------------
NHTSA disagrees with the Auto Innovators interpretation of the
statute and instead believes that the statutes preclude NHTSA from
establishing a transfer program from the HDPUV to the light truck
fleet. Specifically, NHTSA notes that 49 U.S.C. 32912(b) establishes
how NHTSA calculates penalties for violations of fuel economy standards
and permits NHTSA to only consider the fuel economy calculated under 49
U.S.C. 32904(a)(1)(A) or (B) multiplied by the number of automobiles in
the fleet and reduced by the credits available to the manufacturers
under 49 U.S.C. 32903. Because credits for the HDPUV fleet would not be
available to a manufacturer under 49 U.S.C. 32903, NHTSA would be
precluded from considering those credits when evaluating whether a
manufacturer complied with the fuel economy standards. Additionally,
NHTSA notes that the authority for establishing requirements for light
trucks and HDPUVs is provided under separate statutory provisions.
NHTSA establishes requirements for light trucks pursuant to its
authority for establishing CAFE standards at 49 U.S.C. 32902(b),
whereas NHTSA's authority for establishing standards for fuel
efficiency for HDPUVs comes from 49 U.S.C. 32902(k). Since the fuel
economy and fuel efficiency programs are established under separate
statutory provisions, NHTSA does not believe it has the authority to
allow overcompliance in one program to offset shortfalls in the other.
4. Adjustment for Carry Forward and Carryback Credits
Honda commented about the devaluation of CAFE credits when they are
used by a manufacturer to address its own future compliance shortfalls
and requested that NHTSA adjust carryback and carry forward credits
based on oil savings.\1635\ Honda notes that while transferred or
traded credits are appropriately adjusted into consumption-based
equivalents before use, credits internally used within the
[[Page 52936]]
same compliance category are not similarly adjusted.\1636\ For
consistency with both GHG credits and traded CAFE credits, Honda
requested that credits used similarly carry a gallons-equivalent value
based on the achieved value, standard, and fleet-specific VMT under
which they were earned. Honda stated that not adjusting the credits
results in a devaluation of internally used credits, since credits
earned under a less-efficient fleet represent a higher gallon-per-
credit value and stated that it believes it is unlikely that Congress
intended for such mathematical anomalies to persist in the CAFE
average, banking, and trading (ABT) program.
---------------------------------------------------------------------------
\1635\ Honda, NHTSA-2023-0022-61033, at 7.
\1636\ Honda, NHTSA-2023-0022-61033, at 7.
---------------------------------------------------------------------------
NHTSA thanks Honda for their comment but notes that changes to
carryback and carry forward credits are out of scope of this
rulemaking. Accordingly, NHTSA is not making any changes in response to
Honda's comment.
5. Increasing Carryback Period
HATCI commented requesting that NHTSA increase the carry-back
period from 3 to 5 years.\1637\ HATCI stated that extending the
carryback period by two years would encourage manufacturers to develop
long-term fuel economy increasing technologies.\1638\ HATCI states that
advanced technologies take years to develop, and the option to carry-
back credits up to 5 years provides more opportunities for a return on
R&D investments, which would support ZEV and high-MPG vehicle
development.'' \1639\
---------------------------------------------------------------------------
\1637\ HATCI, NHTSA-2023-0022-48991, at 2.
\1638\ HATCI, NHTSA-2023-0022-48991, at 2.
\1639\ HATCI, NHTSA-2023-0022-48991, at 2.
---------------------------------------------------------------------------
In response to Hyundai-Kia's comment, NHTSA notes that the time
period for carryback is set in statute at 49 U.S. Code 32903(a)(1).
Accordingly, NHTSA does not have the authority to make any changes to
the carryback period. NHTSA also notes that it considers the time of
refresh and redesign of vehicles required for development of new
technologies into consideration when setting standards. For more
discussion on this see TSD Chapter 2.
6. Flex Fuel Vehicle Incentives
RFA et al., 2 and MCGA requested that NHTSA and EPA reinstitute
incentives for flex-fueled vehicles (FFVs).1640 1641 RFA et
al. 2 also discussed how a lack of CAFE incentives for FFVs may have
contributed to the decrease in FFVs from 2014 to 2021.
---------------------------------------------------------------------------
\1640\ RFA et al. 2, NHTSA-2023-0022-57625, at 18.
\1641\ MCGA, NHTSA-2023-0022-60208, at 18.
---------------------------------------------------------------------------
Per 49 U.S. Code 32906, the incentives for FFVs were phased out in
model year 2020. While FFVs are still allowed to receive credits for
exceeding CAFE standards under 49 U.S.C. 32903 based on EPA's
calculation of fuel economy,\1642\ but are no longer eligible for an
increase in fuel economy under 49 U.S.C. 32906. EPA has existing
provisions to calculate the emissions weighting of FFVs, based on our
projection of actual usage of gasoline vs. E85, referred to as the F-
factor.\1643\ Additionally, as NHTSA did not propose any FFV incentives
in the final rule, adopting new incentives would be outside the scope
of this rulemaking. Accordingly, NHTSA is not making any changes
regarding FFV incentives.
---------------------------------------------------------------------------
\1642\ 40 CFR 600.510-12(g).
\1643\ 40 CFR 600.510-12(k) and 40 CFR 86.1819-14(d)(10)(i).
---------------------------------------------------------------------------
7. Reporting
Volkswagen commented requesting an alternative mechanism for
reporting to reduce reporting burden.\1644\ NHTSA thanks Volkswagen for
its comment and would like to express its commitment to simplifying and
streamlining reporting as much as possible. However, as NHTSA did not
propose any changes to reporting in the NPRM, NHTSA will not be
finalizing any changes to reporting at this time. NHTSA also notes
that, as part of the previous CAFE rulemaking, it created templates for
several of the required reports in order to simplify the reporting
process and is open to continuing to work with manufacturers to
simplify those reporting templates.
---------------------------------------------------------------------------
\1644\ Volkswagen, NHTSA-2023-0022-58702, at 3.
---------------------------------------------------------------------------
8. Petroleum Equivalency Factor for HDPUVs
In response to request on NHTSA's proposal to remove OC technology
FCIVs for HDPUVs, several commenters seem to have misunderstood NHTSA's
proposal and believed NHTSA intended to make changes to provision in
the existing regulation that provides that BEVs and PHEVs are
considered to have no fuel usage.\1645\ However, NHTSA did not propose
and will not be finalizing any changes to the zero g/mile assumption
for compliance. Several commenters also requested that NHTSA establish
petroleum equivalency values for HDPUVs to reflect the fact that BEVs
do require energy.\1646\ This request, however, is outside the scope of
this rulemaking.
---------------------------------------------------------------------------
\1645\ Rivian, NHTSA-2023-0022-59765, at 10; Stellantis, NHTSA-
2023-0022-61107-A1, at 12; The Aluminum Association, NHTSA-2023-
0022-58486, at 3; ZETA, NHTSA-2023-0022-60508, at 29; Volkswagen,
NHTSA-2023-0022-58702, at 4.
\1646\ Valero, NHTSA-2023-0022-58547-G, at 6; The Aluminum
Association, NHTSA-2023-0022-58486, at 3.
---------------------------------------------------------------------------
9. Incentives for Fuel Cell Electric Vehicles
BMW commented requesting additional incentives for hydrogen
technology.\1647\ BMW stated that they believe that ``hydrogen
technology will play a key role on the path to climate neutrality
across all industries and has great potential, particularly for
individual mobility'' and asked NHTSA to consider additional incentives
to support this nascent technology.\1648\
---------------------------------------------------------------------------
\1647\ BMW, NHTSA-2023-0022-58614, at 4.
\1648\ BMW, NHTSA-2023-0022-58614, at 4.
---------------------------------------------------------------------------
In response to BMW's comment, NHTSA notes that it did not propose
any new incentives for vehicles with hydrogen technology and,
therefore, any changes in this regard would be out of scope of the
rulemaking. Additionally, BMW did not identify any specific authority
that would allow NHTSA to create such new incentives and NHTSA has
itself not identified statutory authority that would allow NHTSA to
create new incentives. Accordingly, NHTSA is not finalizing any changes
to add additional credit mechanisms for vehicles with hydrogen
technology.
10. EV Development
GM commented suggesting that NHTSA and EPA create an optional
compliance path for manufacturers that deliver ``greater-than-projected
EV volumes for greater multipollutant and fuel consumption reduction.''
\1649\ GM refers to this optional compliance path as a ``Leadership
Pathway,'' and states that it believes that ``[a] voluntary program for
companies with higher EV deployment has the potential to result in
greater overall national EV volumes than the Executive Order 2030 goal
(i.e., 50% EVs)''.\1650\
---------------------------------------------------------------------------
\1649\ GM, NHTSA-2023-0022-60686, at 5.
\1650\ GM, NHTSA-2023-0022-60686, at 5.
---------------------------------------------------------------------------
In response to GM's comment, NHTSA notes that the agency did not
propose any program to create new incentives for BEV production and,
therefore, any such changes would be out of scope of this rulemaking.
Additionally, NHTSA does not believe it has authority to establish the
type of program GM describes.
11. PHEV in HDPUV
The Strong PHEV Coalition commented requesting incentives for HDPUV
PHEVs. Specifically, the Strong PHEV Coalition requested incentives
[[Page 52937]]
related to the use of the PHEV's battery to do work while the vehicle
is stationary or to do bidirectional charging to the electric grid with
on-board AC inverters. The Strong PHEV Coalition recommended that NHTSA
``somehow encourage these two technology types (e.g., exemptions,
advanced technology credit multiplier or some other type of special
consideration) and include a robust discussion of these technologies.''
\1651\
---------------------------------------------------------------------------
\1651\ Strong PHEV Coalition, NHTSA-2023-0022-60193, at 5.
---------------------------------------------------------------------------
Since NHTSA did not propose any incentives for HDPUVs PHEVs with
special off-road functionality, any changes in response to this comment
would be outside the scope of this rulemaking. Additionally, NHTSA does
not believe its authority for establishing fuel efficiency standards
would permit the agency to establish incentives related to off-road use
of the vehicles. The discussed examples of bidirectional charging to
the grid and charging of other electric machinery may be saving energy,
but these savings are not related to energy use for transportation
purposes.
VIII. Regulatory Notices and Analyses
A. Executive Order 12866, Executive Order 13563, and Executive Order
14094
E.O. 12866, ``Regulatory Planning and Review'' (58 FR 51735, Oct.
4, 1993), reaffirmed by E.O. 13563, ``Improving Regulation and
Regulatory Review'' (76 FR 3821, Jan. 21, 2011), and amended by E.O.
14094, ``Modernizing Regulatory Review'' (88 FR 21879), provides for
determining whether a regulatory action is ``significant'' and
therefore subject to the Office of Management and Budget (OMB) review
process and to the requirements of the E.O. Under these E.O.s, this
action is a ``significant regulatory action'' under section 3(f)(1) of
E.O. 12866, as amended by E.O. 14094, because it is likely to have an
annual effect on the economy of $200 million or more. Accordingly,
NHTSA submitted this action to OMB for review and any changes made in
response to interagency feedback submitted via the OMB review process
have been documented in the docket for this action. The estimated
benefits and costs of this final rule are described above and in the
FRIA, which is located in the docket and on NHTSA's website.
B. DOT Regulatory Policies and Procedures
This final rule is also significant within the meaning of the DOT's
Regulatory Policies and Procedures. The estimated benefits and costs of
the final rule are described above and in the FRIA, which is located in
the docket and on NHTSA's website.
C. Executive Order 14037
E.O. 14037, ``Strengthening American Leadership in Clean Cars and
Trucks'' (86 FR 43583, Aug. 10, 2021), directs the Secretary of
Transportation (by delegation, NHTSA) to consider beginning work on a
rulemaking under EISA to establish new fuel economy standards for
passenger cars and LD trucks beginning with model year 2027 and
extending through and including at least model year 2030, and to
consider beginning work on a rulemaking under EISA to establish new
fuel efficiency standards for HDPUVs beginning with model year 2028 and
extending through and including at least model year 2030.\1652\ The
E.O. directs the Secretary to consider issuing any final rule no later
than July 2024;\1653\ to coordinate with the EPA and the Secretaries of
Commerce, Labor, and Energy;\1654\ and to, ``seek input from a diverse
range of stakeholders, including representatives from labor unions,
States, industry, environmental justice organizations, and public
health experts.'' \1655\
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\1652\ 86 FR 43583 (Aug. 10, 2021), Sec. 2(b) and (c).
\1653\ Id., Sec. 5(b).
\1654\ Id., Sec. 6(a) and (b).
\1655\ Id., Sec. 6(d).
---------------------------------------------------------------------------
This final rule follows the directions of this E.O. It is issued
pursuant to NHTSA's statutory authorities as set forth in EISA and sets
new CAFE standards for passenger cars and light trucks beginning in
model year 2027, and new fuel efficiency standards for HDPUVs beginning
in model year 2030 due to statutory lead time and stability
requirements. NHTSA coordinated with EPA, Commerce, Labor, and Energy,
in developing this final rule, and the final rule also accounts for the
views provided by labor unions, States, industry, environmental justice
organizations, and public health experts.
D. Environmental Considerations
1. National Environmental Policy Act (NEPA)
Concurrently with this final rule, NHTSA is releasing a Final EIS,
pursuant to the National Environmental Policy Act, 42 U.S.C. 4321 et
seq., and implementing regulations issued by the Council on
Environmental Quality (CEQ), 40 CFR parts 1500-1508, and NHTSA, 49 CFR
part 520. NHTSA prepared the Final EIS to analyze and disclose the
potential environmental impacts of the CAFE and HDPUV FE standards and
a range of alternatives. The Final EIS analyzes direct, indirect, and
cumulative impacts and analyzes impacts in proportion to their
significance. It describes potential environmental impacts to a variety
of resources, including fuel and energy use, air quality, climate,
historical and cultural resources, and environmental justice. The Final
EIS also describes how climate change resulting from global carbon
dioxide emissions (including CO2 emissions attributable to
the U.S. LD and HDPUV transportation sectors under the alternatives
considered) could affect certain key natural and human resources.
Resource areas are assessed qualitatively and quantitatively, as
appropriate, in the Final EIS.
NHTSA has considered the information contained in the Final EIS as
part of developing this final rule.\1656\ This preamble and final rule
constitute the agency's Record of Decision (ROD) under 40 CFR 1505.2
for its promulgation of CAFE standards for model years 2027-2031
passenger cars and lights trucks and FE standards for model years 2030-
2035 heavy-duty pickup trucks and vans. The agency has the authority to
issue its Final EIS and ROD simultaneously pursuant to 49 U.S.C.
304a(b) and U.S. Department of Transportation, Office of Transportation
Policy, Guidance on the Use of Combined Final Environmental Impact
Statements/Records of Decision and Errata Sheets in National
Environmental Policy Act Reviews (April 25, 2019).\1657\ NHTSA has
determined that neither the statutory criteria nor practicability
considerations preclude simultaneous issuance. For additional
information on NHTSA's NEPA analysis, please see the Final EIS.
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\1656\ The Final EIS is available for review in the public
docket for this action and in Docket No. NHTSA-2022-0075.
\1657\ The guidance is available at https://www.transportation.gov/sites/dot.gov/files/docs/mission/transportation-policy/permittingcenter/337371/feis-rod-guidance-final-04302019.pdf.
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As required by the CEQ regulations,\1658\ this final rule (as the
ROD) sets forth the following in Sections IV, V, and VI above: (1) the
agency's decision; (2) alternatives considered by NHTSA in reaching its
decision, including the environmentally preferable alternative; (3) the
factors balanced by NHTSA in making its decision, including essential
considerations of national policy (Section VIII.B above); (4) how these
factors and considerations entered into its decision; and (5) the
agency's
[[Page 52938]]
preferences among alternatives based on relevant factors, including
economic and technical considerations and agency statutory missions.
The Final EIS discusses comments received on the Draft EIS, NHTSA's
range of alternatives, and other factors used in the decision-making
process. The Final EIS also addresses mitigation efforts as required by
NEPA.\1659\ NHTSA, as the lead agency, certifies that it has considered
all of the alternatives, information, analyses, and objections
submitted by cooperating agencies, and State, Tribal, and local
governments and public commenters for consideration in developing the
Final EIS, and that this final rule was informed by the summary of the
submitted alternatives, information, and analyses in the Final EIS,
together with any other material in the record that it has determined
to be relevant.\1660\
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\1658\ 40 CFR 1505.2(a)(1) and (2).
\1659\ The CEQ regulations specify that a ROD must ``[s]tate
whether the agency has adopted all practicable means to avoid or
minimize environmental harm from the alternative selected, and if
not, why the agency did not.'' 40 CFR 1505.2(a)(3). See also 40 CFR
1508.1(s) (``Mitigation includes . . . [m]inimizing impacts by
limiting the degree or magnitude of the action and its
implementation.'').
\1660\ 40 CFR 1505.2(b).
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2. Clean Air Act (CAA) as Applied to NHTSA's Final Rule
The CAA (42 U.S.C.[thinsp]7401 et seq.) is the primary Federal
legislation that addresses air quality. Under the authority of the CAA
and subsequent amendments, EPA has established National Ambient Air
Quality Standards (NAAQS) for six criteria pollutants, which are
relatively commonplace pollutants that can accumulate in the atmosphere
as a result of human activity. EPA is required to review NAAQS every
five years and to revise those standards as may be appropriate
considering new scientific information.
The air quality of a geographic region is usually assessed by
comparing the levels of criteria air pollutants found in the ambient
air to the levels established by the NAAQS (also considering the other
elements of a NAAQS: averaging time, form, and indicator).
Concentrations of criteria pollutants within the air mass of a region
are measured in parts of a pollutant per million parts (ppm) of air or
in micrograms of a pollutant per cubic meter ([mu]g/m3) of air present
in repeated air samples taken at designated monitoring locations using
specified types of monitors. These ambient concentrations of each
criteria pollutant are compared to the levels, averaging time, and form
specified by the NAAQS to assess whether the region's air quality is in
attainment with the NAAQS.
When the measured concentrations of a criteria pollutant within a
geographic region are below those permitted by the NAAQS, EPA
designates the region as an attainment area for that pollutant, while
regions where concentrations of criteria pollutants exceed Federal
standards are called nonattainment areas. Former nonattainment areas
that are now in compliance with the NAAQS are designated as maintenance
areas. Each State with a nonattainment area is required to develop and
implement a State Implementation Plan (SIP) documenting how the region
will reach attainment levels within the time periods specified in the
CAA. For maintenance areas, the SIP must document how the State intends
to maintain compliance with the NAAQS. EPA develops a Federal
Implementation Plan (FIP) if a State fails to submit an approvable plan
for attaining and maintaining the NAAQS. When EPA revises a NAAQS, each
State must revise its SIP to address how it plans to attain the new
standard.
No Federal agency may ``engage in, support in any way or provide
financial assistance for, license or permit, or approve'' any activity
that does not ``conform'' to a SIP or FIP after EPA has approved or
promulgated it.\1661\ Further, no Federal agency may ``approve, accept
or fund'' any transportation plan, program, or project developed
pursuant to Title 23 or Chapter 53 of Title 49, U.S.C., unless the
plan, program, or project has been found to ``conform'' to any
applicable implementation plan in effect.\1662\ The purpose of these
conformity requirements is to ensure that Federally sponsored or
conducted activities do not interfere with meeting the emissions
targets in SIPs or FIPs, do not cause or contribute to new violations
of the NAAQS, and do not impede the ability of a State to attain or
maintain the NAAQS or delay any interim milestones. EPA has issued two
sets of regulations to implement the conformity requirements:
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\1661\ 42 U.S.C. 7506(c)(1).
\1662\ 42 U.S.C. 7506(c)(2).
---------------------------------------------------------------------------
(1) The Transportation Conformity Rule \1663\ applies to
transportation plans, programs, and projects that are developed,
funded, or approved under 23 U.S.C. (Highways) or 49 U.S.C. Chapter 53
(Public Transportation).
---------------------------------------------------------------------------
\1663\ 40 CFR part 51, subpart T, and part 93, subpart A.
---------------------------------------------------------------------------
(2) The General Conformity Rule \1664\ applies to all other Federal
actions not covered under the Transportation Conformity Rule. The
General Conformity Rule establishes emissions thresholds, or de minimis
levels, for use in evaluating the conformity of an action that results
in emissions increases.\1665\ If the net increases of direct and
indirect emissions exceed any of these thresholds, and the action is
not otherwise exempt, then a conformity determination is required. The
conformity determination can entail air quality modeling studies,
consultation with EPA and state air quality agencies, and commitments
to revise the SIP or to implement measures to mitigate air quality
impacts.
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\1664\ 40 CFR part 51, subpart W, and part 93, subpart B.
\1665\ 40 CFR 93.153(b).
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The CAFE and HDPUV FE standards and associated program activities
are not developed, funded, or approved under 23 U.S.C. or 49 U.S.C.
Chapter 53. Accordingly, this final action and associated program
activities would not be subject to transportation conformity. Under the
General Conformity Rule, a conformity determination is required where a
Federal action would result in total direct and indirect emissions of a
criteria pollutant or precursor originating in nonattainment or
maintenance areas equaling or exceeding the rates specified in 40 CFR
93.153(b)(1) and (2). As explained below, NHTSA's action results in
neither direct nor indirect emissions as defined in 40 CFR 93.152.
The General Conformity Rule defines direct emissions as ``those
emissions of a criteria pollutant or its precursors that are caused or
initiated by the Federal action and originate in a nonattainment or
maintenance area and occur at the same time and place as the action and
are reasonably foreseeable.''\1666\ NHTSA's action sets fuel economy
standards for passenger cars and light trucks and fuel efficiency
standards for HDPUVs. It therefore does not cause or initiate direct
emissions consistent with the meaning of the General Conformity
Rule.\1667\ Indeed, the agency's action in aggregate reduces emissions,
and to the degree the model predicts small (and time-limited)
increases, these increases are based on a theoretical response by
individuals to fuel prices and savings, which are at best indirect.
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\1666\ 40 CFR 93.152.
\1667\ Dep't of Transp. v. Pub. Citizen, 541 U.S. 752 at 772
(``[T]he emissions from the Mexican trucks are not `direct' because
they will not occur at the same time or at the same place as the
promulgation of the regulations.''). NHTSA's action is to establish
fuel economy standards for model year 2021-2026 passenger car and
light trucks; any emissions increases would occur in a different
place and well after promulgation of the final rule.
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Indirect emissions under the General Conformity Rule are ``those
emissions of a criteria pollutant or its precursors (1)
[[Page 52939]]
that are caused or initiated by the federal action and originate in the
same nonattainment or maintenance area but occur at a different time or
place as the action; (2) that are reasonably foreseeable; (3) that the
agency can practically control; and (4) for which the agency has
continuing program responsibility.''\1668\ Each element of the
definition must be met to qualify as indirect emissions. NHTSA has
determined that, for purposes of general conformity, emissions (if any)
that may result from its final fuel economy and fuel efficiency
standards would not be caused by the agency's action, but rather would
occur because of subsequent activities the agency cannot practically
control. ``[E]ven if a Federal licensing, rulemaking or other approving
action is a required initial step for a subsequent activity that causes
emissions, such initial steps do not mean that a Federal agency can
practically control any resulting emissions.''\1669\
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\1668\ 40 CFR 93.152.
\1669\ 40 CFR 93.152.
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As the CAFE and HDPUV FE programs use performance-based standards,
NHTSA cannot control the technologies vehicle manufacturers use to
improve the fuel economy of passenger cars and light trucks and fuel
efficiency of HDPUVs. Furthermore, NHTSA cannot control consumer
purchasing (which affects average achieved fleetwide fuel economy and
fuel efficiency) and driving behavior (i.e., operation of motor
vehicles, as measured by VMT). It is the combination of fuel economy
and fuel efficiency technologies, consumer purchasing, and driving
behavior that results in criteria pollutant or precursor emissions. For
purposes of analyzing the environmental impacts of the alternatives
considered under NEPA, NHTSA has made assumptions regarding all of
these factors. NHTSA's Final EIS projects that increases in air toxics
and criteria pollutants would occur in some nonattainment areas under
certain alternatives in the near term, although over the longer term,
all action alternatives see improvements. However, the CAFE and HDPUV
FE standards and alternative standards do not mandate specific
manufacturer decisions, consumer purchasing, or driver behavior, and
NHTSA cannot practically control any of them.\1670\
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\1670\ See, e.g., Dep't of Transp. v. Pub. Citizen, 541 U.S.
752, 772-73 (2004); S. Coast Air Quality Mgmt. Dist. v. Fed. Energy
Regulatory Comm'n, 621 F.3\d\ 1085, 1101 (9th Cir. 2010).
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In addition, NHTSA does not have the statutory authority or
practical ability to control the actual VMT by drivers. As the extent
of emissions is directly dependent on the operation of motor vehicles,
changes in any emissions that would result from NHTSA's CAFE and HDPUV
FE standards are not changes NHTSA can practically control or for which
NHTSA has continuing program responsibility. Therefore, the final CAFE
and HDPUV FE standards and alternative standards considered by NHTSA
would not cause indirect emissions under the General Conformity Rule,
and a general conformity determination is not required.
3. National Historic Preservation Act (NHPA)
The NHPA (54 U.S.C. 300101 et seq.) sets forth government policy
and procedures regarding ``historic properties''--that is, districts,
sites, buildings, structures, and objects included on or eligible for
the National Register of Historic Places. Section 106 of the NHPA
requires Federal agencies to ``take into account'' the effects of their
actions on historic properties.\1671\ NHTSA concludes that the NHPA is
not applicable to this rulemaking because the promulgation of CAFE
standards for passenger cars and light trucks and FE standards for
HDPUVs is not the type of activity that has the potential to cause
effects on historic properties. However, NHTSA includes a brief,
qualitative discussion of the impacts of the action alternatives on
historical and cultural resources in the Final EIS.
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\1671\ Section 106 is now codified at 54 U.S.C. 306108.
Implementing regulations for the section 106 process are located at
36 CFR part 800.
---------------------------------------------------------------------------
4. Fish and Wildlife Conservation Act (FWCA)
The FWCA (16 U.S.C. 2901 et seq.) provides financial and technical
assistance to States for the development, revision, and implementation
of conservation plans and programs for nongame fish and wildlife. In
addition, FWCA encourages all Federal departments and agencies to
utilize their statutory and administrative authorities to conserve and
to promote conservation of nongame fish and wildlife and their
habitats. NHTSA concludes that the FWCA does not apply to this final
rule because it does not involve the conservation of nongame fish and
wildlife and their habitats. However, NHTSA conducted a qualitative
review in its Final EIS of the related direct, indirect, and cumulative
impacts, positive or negative, of the alternatives on potentially
affected resources, including nongame fish and wildlife and their
habitats.
5. Coastal Zone Management Act (CZMA)
The CZMA (16 U.S.C. 1451 et seq.) provides for the preservation,
protection, development, and (where possible) restoration and
enhancement of the Nation's coastal zone resources. Under the statute,
States are provided with funds and technical assistance in developing
coastal zone management programs. Each participating State must submit
its program to the Secretary of Commerce for approval. Once the program
has been approved, any activity of a Federal agency, either within or
outside of the coastal zone, that affects any land or water use or
natural resource of the coastal zone must be carried out in a manner
that is consistent, to the maximum extent practicable, with the
enforceable policies of the State's program.\1672\
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\1672\ 16 U.S.C. 1456(c)(1)(A).
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NHTSA concludes that the CZMA does not apply to this rulemaking
because it does not involve an activity within, or outside of, the
nation's coastal zones that affects any land or water use or natural
resource of the coastal zone. NHTSA has, however, conducted a
qualitative review in the Final EIS of the related direct, indirect,
and cumulative impacts, positive or negative, of the action
alternatives on potentially affected resources, including coastal
zones.
6. Endangered Species Act (ESA)
Under section 7(a)(2) of the ESA, Federal agencies must ensure that
actions they authorize, fund, or carry out are ``not likely to
jeopardize the continued existence'' of any Federally listed threatened
or endangered species (collectively, ``listed species'') or result in
the destruction or adverse modification of the designated critical
habitat of these species.\1673\ If a Federal agency determines that an
agency action may affect a listed species or designated critical
habitat, it must initiate consultation with the appropriate Service--
the U.S. Fish and Wildlife Service (FWS) of the Department of the
Interior (DOI) or the National Oceanic and Atmospheric Administration's
National Marine Fisheries Service of the Department of Commerce
(together, ``the Services'') or both, depending on the species
involved--in order to ensure that the action is not likely to
jeopardize the species or destroy or adversely modify designated
critical habitat.\1674\ Under this standard, the Federal agency taking
action evaluates the possible
[[Page 52940]]
effects of its action and determines whether to initiate
consultation.\1675\
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\1673\ 16 U.S.C. 1536(a)(2).
\1674\ See 50 CFR 402.14.
\1675\ See 50 CFR 402.14(a) (``Each Federal agency shall review
its actions at the earliest possible time to determine whether any
action may affect listed species or critical habitat.'').
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The section 7(a)(2) implementing regulations require consultation
if a Federal agency determines its action ``may affect'' listed species
or critical habitat.\1676\ The regulations define ``effects of the
action'' as ``all consequences to listed species or critical habitat
that are caused by the proposed action, including the consequences of
other activities that are caused by the proposed action but that are
not part of the action.\1677\ A consequence is caused by the proposed
action if it would not occur but for the proposed action and it is
reasonably certain to occur.'' \1678\ The definition makes explicit a
``but for'' test and the concept of ``reasonably certain to occur'' for
all effects.\1679\ The Services have defined ``but for'' causation to
mean ``that the consequence in question would not occur if the proposed
action did not go forward. . . In other words, if the agency fails to
take the proposed action and the activity would still occur, there is
no `but for' causation. In that event, the activity would not be
considered an effect of the action under consultation.''\1680\
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\1676\ 50 CFR 402.14(a).
\1677\ On April 5, 2024, the Services issued revised ESA
consultation regulations. 89 FR 24268 (revisions to portions of
regulations that implement section 7 of the Endangered Species Act
of 1973, as amended). Among other amendments, the Services updated
the definition of ``effects of action'' by adding the phrase ``but
that are not part of the action'' to clarify that the scope of the
analysis of the effects includes other activities caused by the
proposed action that are reasonably certain to occur. Id. at 24273.
\1678\ 50 CFR 402.02 (emphasis added).
\1679\ The Services' prior regulations defined ``effects of the
action'' in relevant part as ``the direct and indirect effects of an
action on the species or critical habitat, together with the effects
of other activities that are interrelated or interdependent with
that action, that will be added to the environmental baseline.'' 50
CFR 402.02 (as in effect prior to Oct. 28, 2019). Indirect effects
were defined as ``those that are caused by the proposed action and
are later in time, but still are reasonably certain to occur.'' Id.
\1680\ 84 FR 44977 (Aug. 27, 2019) (``As discussed in the
proposed rule, the Services have applied the `but for' test to
determine causation for decades. That is, we have looked at the
consequences of an action and used the causation standard of `but
for' plus an element of foreseeability (i.e., reasonably certain to
occur) to determine whether the consequence was caused by the action
under consultation.''). We note that as the Services do not consider
this to be a change in their longstanding application of the ESA,
this interpretation applies equally under the prior regulations
(which were effective through October 28, 2019) and the current
regulations (as amended on April 5, 2024). See 89 FR 24268.
---------------------------------------------------------------------------
The Services have previously provided legal and technical guidance
about whether CO2 emissions associated with a specific
proposed Federal action trigger ESA section 7(a)(2) consultation. NHTSA
analyzed the Services' history of actions, analysis, and guidance in
Appendix G of the model year 2012-2016 CAFE standards EIS and now
adopts by reference that appendix here.\1681\ In that appendix, NHTSA
looked at the history of the Polar Bear Special Rule and several
guidance memoranda provided by FWS and the U.S. Geological Survey.
Ultimately, DOI concluded that a causal link could not be made between
CO2 emissions associated with a proposed Federal action and
specific effects on listed species; therefore, no section 7(a)(2)
consultation would be required.
---------------------------------------------------------------------------
\1681\ Available on NHTSA's Corporate Average Fuel Economy
website at https://static.nhtsa.gov/nhtsa/downloads/CAFE/2012-2016%20Docs-PCLT/2012-2016%20Final%20Environmental%20Impact%20Statement/Appendix_G_Endangered_Species_Act_Consideration.pdf.
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Subsequent to the publication of that appendix, a court vacated the
Polar Bear Special Rule on NEPA grounds, though it upheld the ESA
analysis as having a rational basis.\1682\ FWS then issued a revised
Final Special Rule for the Polar Bear.\1683\ In that final rule, FWS
provided that for ESA section 7, the determination of whether
consultation is triggered is narrow and focused on the discrete effect
of the proposed agency action. FWS wrote, ``[T]he consultation
requirement is triggered only if there is a causal connection between
the proposed action and a discernible effect to the species or critical
habitat that is reasonably certain to occur. One must be able to
`connect the dots' between an effect of a proposed action and an impact
to the species and there must be a reasonable certainty that the effect
will occur.'' \1684\ The statement in the revised Final Special Rule is
consistent with the prior guidance published by FWS and remains valid
today.\1685\ If the consequence is not reasonably certain to occur, it
is not an ``effect of a proposed action'' and does not trigger the
consultation requirement.
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\1682\ In re: Polar Bear Endangered Species Act Listing and
Section 4(D) Rule Litigation, 818 F.Supp.2d 214 (D.D.C. Oct. 17,
2011).
\1683\ 78 FR 11766 (Feb. 20, 2013).
\1684\ 78 FR 11784-11785 (Feb. 20, 2013).
\1685\ See DOI. 2008. Guidance on the Applicability of the
Endangered Species Act Consultation Requirements to Proposed Actions
Involving the Emissions of Greenhouse Gases. Solicitor's Opinion No.
M-37017. Oct. 3, 2008.
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In this NPRM for this action, NHTSA stated that pursuant to section
7(a)(2) of the ESA, NHTSA considered the effects of the proposed CAFE
and HDPUV FE standards and reviewed applicable ESA regulations, case
law, and guidance to determine what, if any, impact there might be to
listed species or designated critical habitat. NHTSA considered issues
related to emissions of CO2 and other GHGs, and issues
related to non-GHG emissions. NHTSA stated that, based on this
assessment, the agency determined that the action of setting CAFE and
HDPUV FE standards does not require consultation under section 7(a)(2)
of the ESA. NHTSA's determination remains unchanged from the NPRM and
has concluded the agency's review of this action under section 7 of the
ESA.
7. Floodplain Management (Executive Order 11988 and DOT Order 5650.2)
These Orders require Federal agencies to avoid the long- and short-
term adverse impacts associated with the occupancy and modification of
floodplains, and to restore and preserve the natural and beneficial
values served by floodplains. E.O. 11988, ``Floodplain management''
(May 24, 1977), also directs agencies to minimize the impacts of floods
on human safety, health and welfare, and to restore and preserve the
natural and beneficial values served by floodplains through evaluating
the potential effects of any actions the agency may take in a
floodplain and ensuring that its program planning and budget requests
reflect consideration of flood hazards and floodplain management. DOT
Order 5650.2, ``Floodplain Management and Protection'' (April 23,
1979), sets forth DOT policies and procedures for implementing E.O.
11988. The DOT Order requires that the agency determine if a proposed
action is within the limits of a base floodplain, meaning it is
encroaching on the floodplain, and whether this encroachment is
significant. If significant, the agency is required to conduct further
analysis of the proposed action and any practicable alternatives. If a
practicable alternative avoids floodplain encroachment, then the agency
is required to implement it.
In this final rule, NHTSA is not occupying, modifying, and/or
encroaching on floodplains. NHTSA therefore concludes that the Orders
do not apply to this final rule. NHTSA has, however, conducted a review
of the alternatives on potentially affected resources, including
floodplains, in its Final EIS.
8. Preservation of the Nation's Wetlands (Executive Order 11990 and DOT
Order 5660.1a)
These Orders require Federal agencies to avoid, to the extent
possible, undertaking or providing assistance for new construction
located in wetlands
[[Page 52941]]
unless the agency head finds that there is no practicable alternative
to such construction and that the proposed action includes all
practicable measures to minimize harms to wetlands that may result from
such use. E.O. 11990, ``Protection of Wetlands'' (May 24, 1977), also
directs agencies to take action to minimize the destruction, loss, or
degradation of wetlands in ``conducting Federal activities and programs
affecting land use, including but not limited to water and related land
resources planning, regulating, and licensing activities.'' DOT Order
5660.1a, ``Preservation of the Nation's Wetlands'' (August 24, 1978),
sets forth DOT policy for interpreting E.O. 11990 and requires that
transportation projects ``located in or having an impact on wetlands''
should be conducted to assure protection of the Nation's wetlands. If a
project does have a significant impact on wetlands, an EIS must be
prepared.
NHTSA is not undertaking or providing assistance for new
construction located in wetlands. NHTSA therefore concludes that these
Orders do not apply to this rulemaking. NHTSA has, however, conducted a
review of the alternatives on potentially affected resources, including
wetlands, in its Final EIS.
9. Migratory Bird Treaty Act (MBTA), Bald and Golden Eagle Protection
Act (BGEPA), Executive Order 13186
The MBTA (16 U.S.C. 703-712) provides for the protection of certain
migratory birds by making it illegal for anyone to ``pursue, hunt,
take, capture, kill, attempt to take, capture, or kill, possess, offer
for sale, sell, offer to barter, barter, offer to purchase, purchase,
deliver for shipment, ship, export, import, cause to be shipped,
exported, or imported, deliver for transportation, transport or cause
to be transported, carry or cause to be carried, or receive for
shipment, transportation, carriage, or export'' any migratory bird
covered under the statute.\1686\
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\1686\ 16 U.S.C. 703(a).
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The BGEPA (16 U.S.C. 668-668d) makes it illegal to ``take, possess,
sell, purchase, barter, offer to sell, purchase or barter, transport,
export or import'' any bald or golden eagles.\1687\ E.O. 13186,
``Responsibilities of Federal Agencies to Protect Migratory Birds,''
helps to further the purposes of the MBTA by requiring a Federal agency
to develop an MOU with FWS when it is taking an action that has (or is
likely to have) a measurable negative impact on migratory bird
populations.
---------------------------------------------------------------------------
\1687\ 16 U.S.C. 668(a).
---------------------------------------------------------------------------
NHTSA concludes that the MBTA, BGEPA, and E.O. 13186 do not apply
to this rulemaking because there is no disturbance, take, measurable
negative impact, or other covered activity involving migratory birds or
bald or golden eagles involved in this rulemaking.
10. Department of Transportation Act (Section 4(f))
Section 4(f) of the Department of Transportation Act of 1966 (49
U.S.C. 303), as amended, is designed to preserve publicly owned park
and recreation lands, waterfowl and wildlife refuges, and historic
sites. Specifically, section 4(f) provides that DOT agencies cannot
approve a transportation program or project that requires the use of
any publicly owned land from a public park, recreation area, or
wildlife or waterfowl refuge of national, State, or local significance,
unless a determination is made that:
(1) There is no feasible and prudent alternative to the use of
land, and
(2) The program or project includes all possible planning to
minimize harm to the property resulting from the use.
These requirements may be satisfied if the transportation use of a
section 4(f) property results in a de minimis impact on the area.
NHTSA concludes that section 4(f) does not apply to this rulemaking
because this rulemaking is not an approval of a transportation program
nor project that requires the use of any publicly owned land.
11. Executive Order 12898: ``Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations''; Executive
Order 14096: ``Revitalizing Our Nation's Commitment to Environmental
Justice for All''
E.O. 12898, ``Federal Actions to Address EJ in Minority Populations
and Low-Income Populations'' (Feb. 16, 1994), directs Federal agencies
to promote nondiscrimination in federal programs substantially
affecting human health and the environment, and provide minority and
low-income communities access to public information on, and an
opportunity for public participation in, matters relating to human
health or the environment. E.O. 14096, ``Revitalizing Our Nation's
Commitment to Environmental Justice for All,'' (April 21, 2023), builds
on and supplements E.O. 12898, and further directs Federal agencies to
prioritize EJ initiatives in their core missions.\1688\ Additionally,
the 2021 DOT Order 5610.2C, ``U.S. Department of Transportation Actions
to Address Environmental Justice in Minority Populations and Low-Income
Populations'' (May 16, 2021), describes the process for DOT agencies to
incorporate EJ principles in programs, policies, and activities.
Section VI and the Final EIS discuss NHTSA's consideration of EJ issues
associated with this final rule.
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\1688\ E.O. 14096 on environmental justice does not rescind E.O.
12898--``Federal Actions to Address Environmental Justice in
Minority Populations and Low-Income Populations,'' which has been in
effect since February 11, 1994 and is currently implemented through
DOT Order 5610.2C. This implementation will continue until further
guidance is provided regarding the implementation of the new E.O.
14096 on environmental justice.
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12. Executive Order 13045: ``Protection of Children From Environmental
Health Risks and Safety Risks''
This action is subject to E.O. 13045 (62 FR 19885, Apr. 23, 1997)
because is a significant regulatory action under section 3(f)(1) of
E.O. 12866, and NHTSA has reason to believe that the environmental
health and safety risks related to this action, although small, may
have a disproportionate effect on children. Specifically, children are
more vulnerable to adverse health effects related to mobile source
emissions, as well as to the potential long-term impacts of climate
change. Pursuant to E.O. 13045, NHTSA must prepare an evaluation of the
environmental health or safety effects of the planned action on
children and an explanation of why the planned action is preferable to
other potentially effective and reasonably feasible alternatives
considered by NHTSA. Further, this analysis may be included as part of
any other required analysis.
All of the action alternatives would reduce CO2
emissions relative to the reference baseline and thus have positive
effects on mitigating global climate change, and thus environmental and
health effects associated with climate change. While environmental and
health effects associated with criteria pollutant and toxic air
pollutant emissions vary over time and across alternatives, negative
effects, when estimated, are extremely small. This preamble and the
Final EIS discuss air quality, climate change, and their related
environmental and health effects. In addition, Section VI of this
preamble explains why NHTSA believes that the CAFE and HDPUV FE final
standards are preferable to other alternatives considered. Together,
this
[[Page 52942]]
preamble and Final EIS satisfy NHTSA's responsibilities under E.O.
13045.
E. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq.,
as amended by the Small Business Regulatory Enforcement Fairness Act
(SBREFA) of 1996), whenever an agency is required to publish a NPRM or
final rule, it must prepare and make available for public comment a
regulatory flexibility analysis that describes the effect of the rule
on small entities (i.e., small businesses, small organizations, and
small governmental jurisdictions). No regulatory flexibility analysis
is required if the head of an agency certifies the rule will not have a
significant economic impact on a substantial number of small entities.
SBREFA amended the Regulatory Flexibility Act to require Federal
agencies to provide a statement of the factual basis for certifying
that a rule will not have a significant economic impact on a
substantial number of small entities.
NHTSA has considered the impacts of this final rule under the
Regulatory Flexibility Act and the head of NHTSA certifies that this
final rule will not have a significant economic impact on a substantial
number of small entities. The following is NHTSA's statement providing
the factual basis for this certification pursuant to 5 U.S.C. 605(b).
Small businesses are defined based on the North American Industry
Classification System (NAICS) code.\1689\ One of the criteria for
determining size is the number of employees in the firm. For
establishments primarily engaged in manufacturing or assembling
automobiles, including HDPUVs, the firm must have less than 1,500
employees to be classified as a small business. This rulemaking would
affect motor vehicle manufacturers. As shown in Table VII-1, NHTSA has
identified eighteen small manufacturers that produce passenger cars,
light trucks, SUVs, HD pickup trucks, and vans of electric, hybrid, and
ICEs. NHTSA acknowledges that some very new manufacturers may
potentially not be listed. However, those new manufacturers tend to
have transportation products that are not part of the LD and HDPUV
vehicle fleet and have yet to start production of relevant vehicles.
Moreover, NHTSA does not believe that there are a ``substantial
number'' of these companies.\1690\
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\1689\ Classified in NAICS under Subsector 336--Transportation
Equipment Manufacturing for Automobile and Light Duty Motor Vehicle
Manufacturing (336110) and Heavy Duty Truck Manufacturing (336120).
Available at: https://www.sba.gov/document/support--table-size-standards. (last accessed Feb. 22, 2024).
\1690\ 5 U.S.C. 605(b).
\1691\ Estimated number of employees as of February 2024,
source: linkedin.com, zoominfo.com, rocketreach.co, and
datanyze.com.
\1692\ Rough estimate of LDV production for model year 2022.
[GRAPHIC] [TIFF OMITTED] TR24JN24.280
NHTSA believes that the final rule would not have a significant
economic impact on small vehicle manufacturers, because under 49 CFR
part 525 passenger car manufacturers building less than 10,000 vehicles
per year can petition NHTSA to have alternative standards determined
for them. Listed manufacturers producing ICE vehicles
[[Page 52943]]
do not currently meet the standard and must already petition NHTSA for
relief. If the standard is raised, it has no meaningful impact on these
manufacturers--they still must go through the same process and petition
for relief. Given there already is a mechanism for relieving burden on
small businesses, a regulatory flexibility analysis was not prepared.
All HDPUV manufacturers listed in Table VIII-1 build BEVs, and
consequently far exceed the fuel efficiency standards. We designate
those vehicles to have no fuel consumption. NHTSA has researched the
HDPUV manufacturing industry and found no small manufacturers of ICE
vehicles that would be impacted by the final rule.
Further, small manufacturers of EVs would not face a significant
economic impact. The method for earning credits applies equally across
manufacturers and does not place small entities at a significant
competitive disadvantage. In any event, even if the rulemaking had a
``significant economic impact'' on these small EV manufacturers, the
number of these companies is not ``a substantial number.'' \1693\ For
these reasons, their existence does not alter NHTSA's analysis of the
applicability of the Regulatory Flexibility Act.
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\1693\ 5 U.S.C. 605.
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F. Executive Order 13132 (Federalism)
E.O. 13132, ``Federalism'' (64 FR 43255, Aug. 10, 1999), requires
Federal agencies to develop an accountable process to ensure
``meaningful and timely input by State and local officials in the
development of regulatory policies that have federalism implications.''
The order defines the term ``[p]olicies that have federalism
implications'' to include regulations that 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.'' Under the
order, agencies may not issue a regulation that has federalism
implications, that imposes substantial direct compliance costs, unless
the Federal Government provides the funds necessary to pay the direct
compliance costs incurred by the State and local governments, or the
agencies consult with State and local officials early in the process of
developing the final rule.
Similar to the CAFE preemption final rule,\1694\ NHTSA continues to
believe that this final rule does not implicate E.O. 13132, because it
neither imposes substantial direct compliance costs on State, local, or
Tribal governments, nor does it preempt State law. Thus, this final
rule does not implicate the consultation procedures that E.O. 13132
imposes on agency regulations that would either preempt State law or
impose substantial direct compliance costs on State, local, or Tribal
governments, because the only entities subject to this final rule are
vehicle manufacturers. Nevertheless, NHTSA has complied with the
Order's requirements and consulted directly with CARB in developing a
number of elements of this final rule.
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\1694\ See 86 FR 74236, 74365 (Dec. 29, 2021).
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A few commenters (a comment from several states led by West
Virginia,\1695\ Valero,\1696\ CEI,\1697\ a group of organizations by
led by the Renewable Fuels Association (RFA),\1698\ and a group of
organizations led by the Clean Fuels Development Coalition \1699\),
though, claimed that this rule raised preemption issues, specifically
NHTSA's consideration of California's ZEV program in the reference
baseline and out years. In particular, these commenters believed that
the ZEV program is a ``law or regulation related to fuel economy
standards'' and, thus, preempted under section 32919(a).\1700\ A few of
these commenters referenced NHTSA's 2019 attempt to dictate the
contours EPCA preemption through the SAFE I rule, and criticized the
agency's subsequent repeal of that rule. In particular, those
commenters advocated for NHTSA to make a substantive determination of
whether state programs are preempted by EPCA.\1701\
---------------------------------------------------------------------------
\1695\ West Virginia Attorney General's Office, Docket No.
NHTSA-2023-0022-63056 at 9-10.
\1696\ Valero, Docket No. NHTSA-2023-0022-58547 at 13.
\1697\ CEI, Docket No. NHTSA-2023-0022-61121 at 8.
\1698\ RFA et al, Docket No. NHTSA-2023-0022-57625 at 12.
\1699\ CFDC et al, NHTSA-2023-0022-62242 at 6.
\1700\ See, e.g,. West Virginia Attorney General's Office,
Docket No. NHTSA-2023-0022-63056 at 9 (``ZEV programs relate to fuel
economy standards, so incorporating them into the Proposed Rule
turns Congress's preemption judgment upside down.''); Valero, NHTSA-
2023-0022-58547 at 13 (``the state ZEV mandates that NHTSA
incorporated into its regulatory baseline are independently unlawful
under EPCA's preemption provision.'').
\1701\ West Virginia Attorney General's Office, Docket No.
NHTSA-2023-0022-63056 at 9 (``So one would think that California's
program and others like it are `related to' fuel economy standards.
But the agency refuses to `tak[e] a position on whether' ZEV
`programs are preempted' here. . . . NHTSA is wrong.'')
---------------------------------------------------------------------------
NHTSA is not taking any action regarding preemption in this final
rule, as this rule's purpose is to establish new final CAFE and HDPUV
standards. Nothing in EPCA or EISA provides that NHTSA must, or even
should, make a determination or pronouncement on preemption.\1702\ As
such, the agency continues to believe that it is not appropriate to
opine in a sweeping manner on the legality of State programs--
particularly in a generalized rulemaking. Moreover, this type of legal
determination is unnecessary for this action because the agency's
decision to incorporate the ZEV program is not based on an assessment
of its legality, but rather the agency's empirical observation that the
program seems likely to have an actual impact on the compositions of
vehicle fleets in California and other states that adopt similar
programs. To date, a court has not determined that this program is
preempted by EPCA. In fact, the D.C. Circuit recently rejected
consolidated challenges to the EPA's waiver to CARB for the Advanced
Clean Car Program.\1703\ As a result, California programs and those of
other states appear likely to remain in place at least long enough to
influence fleet composition decisions by vehicle manufacturers over the
relevant timeframes for this rule's analysis. Should future changes in
the legal status of those programs occur, NHTSA would, of course,
adjust its analysis as needed to reflect the likely empirical effects
of such developments. Separately, RFA and the Clean Fuels Development
Coalition also argued that the renewable fuel standards (RFS) program
preempts the ZEV program.1704 1705 NHTSA does not administer
this program but notes that the ZEV program has never been found to be
preempted by the RFS and thus, the program, as a factual matter, is not
preempted. Therefore, much like their EPCA preemption arguments, the
commenters' RFS preemption arguments also do not change the empirical
effect that the ZEV program has on manufacturers' decisions and
projections about the compositions of their fleets.
---------------------------------------------------------------------------
\1702\ See, e.g., NHTSA, Final Rule: CAFE Preemption, 86 FR
74,236, 74,241 (Dec. 29, 2021).
\1703\ Ohio v. EPA, No. 22-1081 (D.C. Cir. Sept. 15, 2023).
\1704\ RFA et al, NHTSA-2023-0022-57625 at 12.
\1705\ CFDC et al, NHTSA-2023-0022-62242 at 6.
---------------------------------------------------------------------------
G. Executive Order 12988 (Civil Justice Reform)
Pursuant to E.O. 12988, ``Civil Justice Reform'' (61 FR 4729, Feb.
7, 1996), NHTSA has considered whether this final rule would have any
retroactive effect. This final rule does not have any retroactive
effect.
[[Page 52944]]
H. Executive Order 13175 (Consultation and Coordination With Indian
Tribal Governments)
This final rule does not have tribal implications, as specified in
E.O. 13175, ``Consultation and Coordination with Indian Tribal
Governments'' (65 FR 67249, Nov. 9, 2000). This final rule would be
implemented at the Federal level and would impose compliance costs only
on vehicle manufacturers. Thus, E.O. 13175, which requires consultation
with Tribal officials when agencies are developing policies that have
``substantial direct effects'' on Tribes and Tribal interests, does not
apply to this final rule.
I. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires Federal agencies to prepare a written assessment of the costs,
benefits, and other effects of a proposed or final rule that includes a
Federal mandate likely to result in the expenditure by State, local, or
Tribal governments, in the aggregate, or by the private sector, of more
than $100 million in any one year (adjusted for inflation with base
year of 1995). Adjusting this amount by the implicit gross domestic
product price deflator for 2021 results in $165 million (110.213/66.939
= 1.65).\1706\ Before promulgating a rule for which a written statement
is needed, section 205 of UMRA generally requires NHTSA to identify and
consider a reasonable number of regulatory alternatives and adopt the
least costly, most cost-effective, or least burdensome alternative that
achieves the objective of the rule. The provisions of section 205 do
not apply when they are inconsistent with applicable law. Moreover,
section 205 allows NHTSA to adopt an alternative other than the least
costly, most cost-effective, or least burdensome alternative if NHTSA
publishes with the rule an explanation of why that alternative was not
adopted.
---------------------------------------------------------------------------
\1706\ U.S. Bureau of Economic Analysis (BEA). 2024. National
Income and Product Accounts, Table 1.1.9: Implicit Price Deflators
for Gross Domestic Product (use Interactive Data Tables to select
years). Available at: https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey. (Accessed: Feb, 28,
2024).
---------------------------------------------------------------------------
This final rule will not result in the expenditure by State, local,
or Tribal governments, in the aggregate, of more than $165 million
annually, but it will result in the expenditure of that magnitude by
vehicle manufacturers and/or their suppliers. In developing this final
rule, we considered a range of alternative fuel economy and fuel
efficiency standards. As explained in detail in Section V of the
preamble above, NHTSA concludes that our selected alternatives are the
maximum feasible alternatives that achieve the objectives of this
rulemaking, as required by EPCA/EISA.
J. Regulation Identifier Number
The DOT assigns a regulation identifier number (RIN) to each
regulatory action listed in the Unified Agenda of Federal Regulations.
The Regulatory Information Service Center publishes the Unified Agenda
in April and October of each year. The RIN contained in the heading at
the beginning of this document may be used to find this action in the
Unified Agenda.
K. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act (NTTAA) requires NHTSA evaluate and use existing voluntary
consensus standards in its regulatory activities unless doing so would
be inconsistent with applicable law (e.g., the statutory provisions
regarding NHTSA's vehicle safety authority) or otherwise
impractical.\1707\
---------------------------------------------------------------------------
\1707\ 15 U.S.C. 272.
---------------------------------------------------------------------------
Voluntary consensus standards are technical standards developed or
adopted by voluntary consensus standards bodies. Technical standards
are defined by the NTTAA as ``performance-based or design-specific
technical specification and related management systems practices.''
They pertain to ``products and processes, such as size, strength, or
technical performance of a product, process or material.''
Examples of organizations generally regarded as voluntary consensus
standards bodies include the American Society for Testing and
Materials, International, the SAE, and the American National Standards
Institute (ANSI). If NHTSA does not use available and potentially
applicable voluntary consensus standards, it is required by the Act to
provide Congress, through OMB, an explanation of reasons for not using
such standards. There are currently no consensus standards that NHTSA
administers relevant to these CAFE and HDPUV standards.
L. Department of Energy Review
In accordance with 49 U.S.C. 32902(j)(2), NHTSA submitted this
final rule to the DOE for review. That agency did not make any comments
that NHTSA did not address.\1708\
---------------------------------------------------------------------------
\1708\ DOE's letter of review of the final rule.
---------------------------------------------------------------------------
M. Paperwork Reduction Act
Under the procedures established by the Paperwork Reduction Act of
1995 (PRA) (44 U.S.C. 3501, et seq.), Federal agencies must obtain
approval from the OMB for each collection of information they conduct,
sponsor, or require through regulations. A person is not required to
respond to a collection of information by a Federal Agency unless the
collection displays a valid OMB control number. This final rule
implements changes that relate to information collections that are
subject to the PRA, but the changes are not expected to substantially
or materially modify the information collections nor increase the
burden associated with the information collections. Additional details
about NHTSA's information collection for its Corporate Average Fuel
Economy (CAFE) program (OMB control number 2127-0019, Current
Expiration: 02/28/2026) and how NHTSA estimated burden for this
collection are available in the supporting statements for the currently
approved collection.\1709\
---------------------------------------------------------------------------
\1709\ Office of Information and Regulatory Affairs. 2022.
Supporting Statements: Part A, Corporate Average Fuel Economy
Reporting. OMB 2127-0019. Available at: https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202210-2127-003. (Accessed: Feb,
28, 2024).
---------------------------------------------------------------------------
N. Congressional Review Act
The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. NHTSA will submit a report containing this rule and
other required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of the rule in the Federal Register. Because this rule
meets the criteria in 5 U.S.C. 804(2), it will be effective sixty days
after the date of publication in the Federal Register.
List of Subjects in 49 CFR Parts 523, 531, 533, 535, 536 and 537
Fuel economy, Reporting and recordkeeping requirements.
For the reasons discussed in the preamble, NHTSA is amending 49 CFR
parts 523, 531, 533, 535, 536, and 537 as follows:
PART 523--VEHICLE CLASSIFICATION
0
1. The citation for part 523 continues to read as follows:
[[Page 52945]]
Authority: 49 U.S.C. 32901; delegation of authority at 49 CFR
1.95.
0
2. Amend Sec. 523.2 by revising the definitions of ``Base tire (for
passenger automobiles, light trucks, and medium-duty passenger
vehicles)'', ``Basic vehicle frontal area'', ``Emergency vehicle'',
``Full-size pickup truck'', ``Light truck'', and ``Medium duty
passenger vehicle'' to read as follows:
Sec. 523.2 Definitions.
* * * * *
Base tire (for passenger automobiles, light trucks, and medium-duty
passenger vehicles) means the tire size specified as standard equipment
by the manufacturer on each unique combination of a vehicle's footprint
and model type. Standard equipment is defined in 40 CFR 86.1803.
Basic vehicle frontal area is used as defined in 40 CFR 86.1803-01
for passenger automobiles, light trucks, medium-duty passenger vehicles
and Class 2b through 3 pickup trucks and vans. For heavy-duty tracts
and vocational vehicles, it has the meaning given in 40 CFR 1037.801.
* * * * *
Emergency vehicle means one of the following:
(1) For passenger cars, light trucks and medium-duty passenger
vehicles, emergency vehicle has the meaning given in 49 U.S.C.
32902(e).
(2) For heavy-duty vehicles, emergency vehicle has the meaning
given in 40 CFR 1037.801.
* * * * *
Full-size pickup truck means a light truck, including a medium-duty
passenger vehicle, that meets the specifications in 40 CFR 86.1803-01
for a full-size pickup truck.
* * * * *
Light truck means a non-passenger automobile meeting the criteria
in Sec. 523.5. The term light truck includes medium-duty passenger
vehicles that meet the criteria in Sec. 523.5 for non-passenger
automobiles.
* * * * *
Medium-duty passenger vehicle means any complete or incomplete
motor vehicle rated at more than 8,500 pounds GVWR and less than 10,000
pounds GVWR that is designed primarily to transport passengers, but
does not include a vehicle that--
(1) Is an ``incomplete truck,'' meaning any truck which does not
have the primary load carrying device or container attached; or
(2) Has a seating capacity of more than 12 persons; or
(3) Is designed for more than 9 persons in seating rearward of the
driver's seat; or
(4) Is equipped with an open cargo area (for example, a pick-up
truck box or bed) of 72.0 inches in interior length or more. A covered
box not readily accessible from the passenger compartment will be
considered an open cargo area for purposes of this definition. (See
paragraph (1) of the definition of medium-duty passenger vehicle at 40
CFR 86.1803-01).
* * * * *
0
3. Revise Sec. 523.3 to read as follows:
Sec. 523.3 Automobile.
An automobile is any 4-wheeled vehicle that is propelled by fuel,
or by alternative fuel, manufactured primarily for use on public
streets, roads, and highways and rated at less than 10,000 pounds gross
vehicle weight, except:
(a) A vehicle operated only on a rail line;
(b) A vehicle manufactured in different stages by 2 or more
manufacturers, if no intermediate or final-stage manufacturer of that
vehicle manufactures more than 10,000 multi-stage vehicles per year; or
(c) A work truck.
0
4. Revise Sec. 523.4 to read as follows:
Sec. 523.4 Passenger automobile.
A passenger automobile is any automobile (other than an automobile
capable of off-highway operation) manufactured primarily for use in the
transportation of not more than 10 individuals. A medium-duty passenger
vehicle that does not meet the criteria for non-passenger motor
vehicles in Sec. 523.6 is a passenger automobile.
0
5. Revise the introductory text of Sec. 523.5 to read as follows:
Sec. 523.5 Non-passenger automobile.
A non-passenger automobile means an automobile that is not a
passenger automobile or a work truck and includes vehicles described in
paragraphs (a) and (b) of this section. A medium-duty passenger motor
vehicle that meets the criteria in either paragraph (a) or (b) of this
section is a non-passenger automobile.
* * * * *
0
6. Revise Sec. 523.6(a) to read as follows:
Sec. 523.6 Heavy-duty vehicle.
(a) A heavy-duty vehicle is any commercial medium- or heavy-duty
on-highway vehicle or a work truck, as defined in 49 U.S.C. 32901(a)(7)
and (19). For the purpose of this section, heavy-duty vehicles are
divided into four regulatory categories as follows:
(1) Heavy-duty pickup trucks and vans;
(2) Heavy-duty vocational vehicles;
(3) Truck tractors with a GVWR above 26,000 pounds; and
(4) Heavy-duty trailers.
* * * * *
0
7. Revise Sec. 523.8(b) to read as follows:
Sec. 523.8 Heavy-duty vocational vehicle.
* * * * *
(b) Medium-duty passenger vehicles; and
* * * * *
PART 531--PASSENGER AUTOMOBILE AVERAGE FUEL ECONOMY STANDARDS
0
8. The authority citation for part 531 continues to read as follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.95.
0
9. Revise Sec. 531.1 to read as follows:
Sec. 531.1 Scope.
This part establishes average fuel economy standards pursuant to 49
U.S.C. 32902 for passenger automobiles.
0
10. Revise Sec. 531.4 to read as follows:
Sec. 531.4 Definitions.
(a) Statutory terms. (1) The terms average fuel economy,
manufacture, manufacturer, and model year are used as defined in 49
U.S.C. 32901.
(2) The terms automobile and passenger automobile are used as
defined in 49 U.S.C. 32901 and in accordance with the determination in
part 523 of this chapter.
(b) Other terms. As used in this part, unless otherwise required by
the context--
(1) The term domestically manufactured passenger automobile means
the vehicle is deemed to be manufactured domestically under 49 U.S.C.
32904(b)(3) and 40 CFR 600.511-08.
(2) [Reserved]
0
11. Amend Sec. 531.5 by revising paragraphs (a) through (d) to read as
follows:
Sec. 531.5 Fuel economy standards.
(a) Except as provided in paragraph (e) of this section, each
manufacturer of passenger automobiles shall comply with the fleet
average fuel economy standards in table 1 to this paragraph (a),
expressed in miles per gallon, in the model year specified as
applicable:
[[Page 52946]]
Table 1 to Paragraph (a)
------------------------------------------------------------------------
Average fuel economy
Model year standard (miles per
gallon)
------------------------------------------------------------------------
1978.............................................. 18.0
1979.............................................. 19.0
1980.............................................. 20.0
1981.............................................. 22.0
1982.............................................. 24.0
1983.............................................. 26.0
1984.............................................. 27.0
1985.............................................. 27.5
1986.............................................. 26.0
1987.............................................. 26.0
1988.............................................. 26.0
1989.............................................. 26.5
1990-2010......................................... 27.5
------------------------------------------------------------------------
(b) Except as provided in paragraph (e) of this section, for model
year 2011, a manufacturer's passenger automobile fleet shall comply
with the fleet average fuel economy level calculated for that model
year according to figure 1 and the appropriate values in table 2 to
this paragraph (b).
Figure 1 to Paragraph (b)
[GRAPHIC] [TIFF OMITTED] TR24JN24.281
Where:
N is the total number (sum) of passenger automobiles produced by a
manufacturer;
Ni is the number (sum) of the ith passenger automobile
model produced by the manufacturer; and
Ti is the fuel economy target of the ith model passenger
automobile, which is determined according to the following formula,
rounded to the nearest hundredth:
[GRAPHIC] [TIFF OMITTED] TR24JN24.282
Where:
Parameters a, b, c, and d are defined in table 2 to this paragraph
(b);
e = 2.718; and
x = footprint (in square feet, rounded to the nearest tenth) of the
vehicle model.
Table 2 to paragraph (b)-- Parameters for the Passenger Automobile Fuel Economy Targets
----------------------------------------------------------------------------------------------------------------
Model year
------------------------------------------------------------------------------------------------ Parameters
a (mpg) b (mpg) c (gal/mi/ft2) d (gal/mi)
----------------------------------------------------------------------------------------------------------------
2011........................................ 31.20 24.00 51.41 1.91
----------------------------------------------------------------------------------------------------------------
(c) Except as provided in paragraph (e) of this section, for model
years 2012-2031, a manufacturer's passenger automobile fleet shall
comply with the fleet average fuel economy level calculated for that
model year according to this figure 2 and the appropriate values in
this table 3 to this paragraph (c).
[[Page 52947]]
Figure 2 to Paragraph (c)
[GRAPHIC] [TIFF OMITTED] TR24JN24.283
Where:
CAFErequired is the fleet average fuel economy standard
for a given fleet (domestic passenger automobiles or import
passenger automobiles);
Subscript i is a designation of multiple groups of automobiles,
where each group's designation, i.e., i = 1, 2, 3, etc., represents
automobiles that share a unique model type and footprint within the
applicable fleet, either domestic passenger automobiles or import
passenger automobiles;
Productioni is the number of passenger automobiles
produced for sale in the United States within each ith designation,
i.e., which share the same model type and footprint;
TARGETi is the fuel economy target in miles per gallon
(mpg) applicable to the footprint of passenger automobiles within each
ith designation, i.e., which share the same model type and footprint,
calculated according to figure 3 to this paragraph (c) and rounded to
the nearest hundredth of a mpg, i.e., 35.455 = 35.46 mpg, and the
summations in the numerator and denominator are both performed over all
models in the fleet in question.
Figure 3 to Paragraph (c)
[GRAPHIC] [TIFF OMITTED] TR24JN24.284
Where:
TARGET is the fuel economy target (in mpg) applicable to vehicles of
a given footprint (FOOTPRINT, in square feet);
Parameters a, b, c, and d are defined in table 3 to this paragraph
(c); and
The MIN and MAX functions take the minimum and maximum,
respectively, of the included values.
Table 3 to Paragraph (c)--Parameters for the Passenger Automobile Fuel Economy Targets, MYs 2012-2031
----------------------------------------------------------------------------------------------------------------
Parameters
---------------------------------------------------------------
Model year c (gal/mi/
a (mpg) b (mpg) ft2) d (gal/mi)
----------------------------------------------------------------------------------------------------------------
2012............................................ 35.95 27.95 0.0005308 0.006057
2013............................................ 36.80 28.46 0.0005308 0.005410
2014............................................ 37.75 29.03 0.0005308 0.004725
2015............................................ 39.24 29.90 0.0005308 0.003719
2016............................................ 41.09 30.96 0.0005308 0.002573
2017............................................ 43.61 32.65 0.0005131 0.001896
2018............................................ 45.21 33.84 0.0004954 0.001811
2019............................................ 46.87 35.07 0.0004783 0.001729
2020............................................ 48.74 36.47 0.0004603 0.001643
2021............................................ 49.48 37.02 0.000453 0.00162
2022............................................ 50.24 37.59 0.000447 0.00159
2023............................................ 51.00 38.16 0.000440 0.00157
2024............................................ 55.44 41.48 0.000405 0.00144
2025............................................ 60.26 45.08 0.000372 0.00133
2026............................................ 66.95 50.09 0.000335 0.00120
2027............................................ 68.32 51.12 0.00032841 0.00117220
2028............................................ 69.71 52.16 0.00032184 0.00114876
2029............................................ 71.14 53.22 0.00031541 0.00112579
2030............................................ 72.59 54.31 0.00030910 0.00110327
2031............................................ 74.07 55.42 0.00030292 0.00108120
----------------------------------------------------------------------------------------------------------------
[[Page 52948]]
(d) In addition to the requirements of paragraphs (b) and (c) of
this section, each manufacturer, other than manufacturers subject to
standards in paragraph (e) of this section, shall also meet the minimum
fleet standard for domestically manufactured passenger automobiles
expressed in table 4 to this paragraph (d):
Table 4 to Paragraph (d)--Minimum Fuel Economy Standards for
Domestically Manufactured Passenger Automobiles, MYs 2011-2031
------------------------------------------------------------------------
Minimum
Model year standard
------------------------------------------------------------------------
2011....................................................... 27.8
2012....................................................... 30.7
2013....................................................... 31.4
2014....................................................... 32.1
2015....................................................... 33.3
2016....................................................... 34.7
2017....................................................... 36.7
2018....................................................... 38.0
2019....................................................... 39.4
2020....................................................... 40.9
2021....................................................... 39.9
2022....................................................... 40.6
2023....................................................... 41.1
2024....................................................... 44.3
2025....................................................... 48.1
2026....................................................... 53.5
2027....................................................... 55.2
2028....................................................... 56.3
2029....................................................... 57.5
2030....................................................... 58.6
2031....................................................... 59.8
------------------------------------------------------------------------
* * * * *
0
9. Amend Sec. 531.6 by revising paragraph (b) to read as follows:
Sec. 531.6 Measurement and calculation procedures.
* * * * *
(b) For model years 2017 through 2031, a manufacturer is eligible
to increase the fuel economy performance of passenger cars in
accordance with procedures established by the Environmental Protection
Agency (EPA) set forth in 40 CFR part 600, subpart F, including
adjustments to fuel economy for fuel consumption improvements related
to air conditioning (AC) efficiency and off-cycle technologies.
Starting in model year 2027, fuel economy increases for fuel
consumption improvement values under 40 CFR 86.1868-12 and 40 CFR
86.1869-12 only apply for vehicles propelled by internal combustion
engines. Manufacturers must provide reporting on these technologies as
specified in Sec. 537.7 of this chapter by the required deadlines.
(1) Efficient AC technologies. A manufacturer may increase its
fleet average fuel economy performance through the use of technologies
that improve the efficiency of AC systems pursuant to the requirements
in 40 CFR 86.1868-12. Fuel consumption improvement values resulting
from the use of those AC systems must be determined in accordance with
40 CFR 600.510-12(c)(3)(i).
(2) Off-cycle technologies on EPA's predefined list. A manufacturer
may increase its fleet average fuel economy performance through the use
of off-cycle technologies pursuant to the requirements in 40 CFR
86.1869-12 for predefined off-cycle technologies in accordance with 40
CFR 86.1869-12(b). The fuel consumption improvement is determined in
accordance with 40 CFR 600.510-12(c)(3)(ii).
(3) Off-cycle technologies using 5-cycle testing. Through model
year 2026, a manufacturer may increase its fleet average fuel economy
performance through the use of off-cycle technologies tested using the
EPA's 5-cycle methodology in accordance with 40 CFR 86.1869-12(c). The
fuel consumption improvement is determined in accordance with 40 CFR
600.510-12(c)(3)(ii).
(4) Off-cycle technologies using the alternative EPA-approved
methodology. Through model year 2026, a manufacturer may seek to
increase its fuel economy performance through use of an off-cycle
technology requiring an application request made to the EPA in
accordance with 40 CFR 86.1869-12(d).
(i) Eligibility under the Corporate Average Fuel Economy (CAFE)
program requires compliance with paragraphs (b)(4)(i)(A) through (C) of
this section. Paragraphs (b)(4)(i)(A), (B) and (D) of this section
apply starting in model year 2024. Paragraph (b)(4)(i)(E) of this
section applies starting in model year 2025.
(A) A manufacturer seeking to increase its fuel economy performance
using the alternative methodology for an off-cycle technology, should
submit a detailed analytical plan to EPA prior to the applicable model
year. The detailed analytical plan may include information, such as
planned test procedure and model types for demonstration. The plan will
be approved or denied in accordance with 40 CFR 86.1869.12(d).
(B) A manufacturer seeking to increase its CAFE program fuel
economy performance using the alternative methodology for an off-cycle
technology must submit an official credit application to EPA and obtain
approval in accordance with 40 CFR 86.1869.12(e) prior to September of
the given model year.
(C) A manufacturer's plans, applications and requests approved by
the EPA must be made in consultation with NHTSA. To expedite NHTSA's
consultation with the EPA, a manufacturer must concurrently submit its
application to NHTSA if the manufacturer is seeking off-cycle fuel
economy improvement values under the CAFE program for those
technologies. For off-cycle technologies that are covered under 40 CFR
86.1869-12(d), NHTSA will consult with the EPA regarding NHTSA's
evaluation of the specific off-cycle technology to ensure its impact on
fuel economy and the suitability of using the off-cycle technology to
adjust the fuel economy performance.
(D) A manufacturer may request an extension from NHTSA for more
time to obtain an EPA approval. Manufacturers should submit their
requests 30 days before the deadlines in paragraphs (b)(4)(i)(A)
through (C) of this section. Requests should be submitted to NHTSA's
Director of the Office of Vehicle Safety Compliance at [email protected].
(E) For MYs 2025 and 2026, a manufacturer must respond within 60-
days to any requests from EPA or NHTSA for additional information or
clarifications to submissions provided pursuant to paragraphs
(b)(4)(i)(A) and (B) of this section. Failure to respond within 60 days
may result in denial of the manufacturer's request to increase its fuel
economy performance through use of an off-cycle technology requests
made to the EPA in accordance with 40 CFR 86.1869-12(d).
(ii) Review and approval process. NHTSA will provide its views on
the suitability of the technology for that purpose to the EPA. NHTSA's
evaluation and review will consider:
(A) Whether the technology has a direct impact upon improving fuel
economy performance;
(B) Whether the technology is related to crash-avoidance
technologies, safety critical systems or systems affecting safety-
critical functions, or technologies designed for the purpose of
reducing the frequency of vehicle crashes;
(C) Information from any assessments conducted by the EPA related
to the application, the technology and/or related technologies; and
(D) Any other relevant factors.
(iii) Safety. (A) Technologies found to be defective or non-
compliant, subject to recall pursuant to part 573 of this chapter,
Defect and Noncompliance Responsibility and Reports, due to a risk to
motor vehicle safety, will have the values of approved off-cycle
credits removed from the manufacturer's credit
[[Page 52949]]
balance or adjusted to the population of vehicles the manufacturer
remedies as required by 49 U.S.C. chapter 301. NHTSA will consult with
the manufacturer to determine the amount of the adjustment.
(B) Approval granted for innovative and off-cycle technology
credits under NHTSA's fuel efficiency program does not affect or
relieve the obligation to comply with the Vehicle Safety Act (49 U.S.C.
chapter 301), including the ``make inoperative'' prohibition (49 U.S.C.
30122), and all applicable Federal motor vehicle safety standards
(FMVSSs) issued thereunder (part 571 of this chapter). In order to
generate off-cycle or innovative technology credits manufacturers must
state--
(1) That each vehicle equipped with the technology for which they
are seeking credits will comply with all applicable FMVSS(s); and
(2) Whether or not the technology has a fail-safe provision. If no
fail-safe provision exists, the manufacturer must explain why not and
whether a failure of the innovative technology would affect the safety
of the vehicle.
PART 533--LIGHT TRUCK FUEL ECONOMY STANDARDS
0
10. The authority citation for part 533 continues to read as follows:
Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR
1.95.
0
11. Revise Sec. 533.1 to read as follows:
Sec. 533.1 Scope.
This part establishes average fuel economy standards pursuant to 49
U.S.C. 32902 for light trucks.
0
12. Revise Sec. 533.4 to read as follows:
Sec. 533.4 Definitions.
(a) Statutory terms. (1) The terms average fuel economy, average
fuel economy standard, fuel economy, import, manufacture, manufacturer,
and model year are used as defined in 49 U.S.C. 32901.
(2) The term automobile is used as defined in 49 U.S.C. 32901 and
in accordance with the determinations in part 523 of this chapter.
(b) Other terms. As used in this part, unless otherwise required by
the context--
(1) Light truck is used in accordance with the determinations in
part 523 of this chapter.
(2) Captive import means with respect to a light truck, one which
is not domestically manufactured, as defined in section 502(b)(2)(E) of
the Motor Vehicle Information and Cost Savings Act, but which is
imported in the 1980 model year or thereafter by a manufacturer whose
principal place of business is in the United States.
(3) 4-wheel drive, general utility vehicle means a 4-wheel drive,
general purpose automobile capable of off-highway operation that has a
wheelbase of not more than 280 centimeters, and that has a body shape
similar to 1977 Jeep CJ-5 or CJ-7, or the 1977 Toyota Land Cruiser.
(4) Basic engine means a unique combination of manufacturer, engine
displacement, number of cylinders, fuel system (as distinguished by
number of carburetor barrels or use of fuel injection), and catalyst
usage.
(5) Limited product line light truck means a light truck
manufactured by a manufacturer whose light truck fleet is powered
exclusively by basic engines which are not also used in passenger
automobiles.
0
13. Amend Sec. 533.5 by revising table 7 to paragraph (a) and
paragraph (j) to read as follows:
Sec. 533.5 Requirements.
(a) * * *
Table 7 to Paragraph (a)-Parameters for the Light Truck Fuel Economy Targets for MYs, 2017-2031
--------------------------------------------------------------------------------------------------------------------------------------------------------
Parameters
-----------------------------------------------------------------------------------------------
Model year h (gal/
a (mpg) b (mpg) c (gal/mi/ft2) d (gal/mi) e (mpg) f (mpg) g (gal/mi/ft2) mi)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2017.................................................... 36.26 25.09 0.0005484 0.005097 35.10 25.09 0.0004546 0.009851
2018.................................................... 37.36 25.20 0.0005358 0.004797 35.31 25.20 0.0004546 0.009682
2019.................................................... 38.16 25.25 0.0005265 0.004623 35.41 25.25 0.0004546 0.009603
2020.................................................... 39.11 25.25 0.0005140 0.004494 35.41 25.25 0.0004546 0.009603
2021.................................................... 39.71 25.63 0.000506 0.00443 NA NA NA NA
2022.................................................... 40.31 26.02 0.000499 0.00436 NA NA NA NA
2023.................................................... 40.93 26.42 0.000491 0.00429 NA NA NA NA
2024.................................................... 44.48 26.74 0.000452 0.00395 NA NA NA NA
2025.................................................... 48.35 29.07 0.000416 0.00364 NA NA NA NA
2026.................................................... 53.73 32.30 0.000374 0.00327 NA NA NA NA
2027.................................................... 53.73 32.30 0.00037418 0.00327158 NA NA NA NA
2028.................................................... 53.73 32.30 0.00037418 0.00327158 NA NA NA NA
2029.................................................... 54.82 32.96 0.00036670 0.00320615 NA NA NA NA
2030.................................................... 55.94 33.63 0.00035936 0.00314202 NA NA NA NA
2031.................................................... 57.08 34.32 0.00035218 0.00307918 NA NA NA NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
* * * * *
(j) For model years 2017-2031, a manufacturer's light truck fleet
shall comply with the fleet average fuel economy standard calculated
for that model year according to figures 2 and 4 to paragraph (a) of
this section and the appropriate values in table 7 to paragraph (a) of
this section.
0
14. Amend Sec. 533.6 by:
0
a. Revising paragraph (c) to read as follows:
Sec. 533.6 Measurement and calculation procedures.
* * * * *
(c) For model years 2017 through 2031, a manufacturer is eligible
to increase the fuel economy performance of light trucks in accordance
with procedures established by the Environmental Protection Agency
(EPA) set forth in 40 CFR part 600, subpart F, including adjustments to
fuel economy for fuel consumption improvements related to air
conditioning (AC) efficiency, off-cycle technologies, and hybridization
and other performance-based technologies for full-size pickup trucks
that meet the requirements specified in 40 CFR 86.1803. Starting in
model year 2027, fuel economy increases for fuel consumption
improvement values under 40 CFR 86.1868-12 and 40 CFR 86.1869-12 only
apply for vehicles propelled by internal combustion engines.
[[Page 52950]]
Manufacturers must provide reporting on these technologies as specified
in Sec. 537.7 of this chapter by the required deadlines.
(1) Efficient AC technologies. A manufacturer may seek to increase
its fleet average fuel economy performance through the use of
technologies that improve the efficiency of AC systems pursuant to the
requirements in 40 CFR 86.1868-12. Fuel consumption improvement values
resulting from the use of those AC systems must be determined in
accordance with 40 CFR 600.510-12(c)(3)(i).
(2) Incentives for advanced full-size light-duty pickup trucks. For
model year 2023 and 2024, the eligibility of a manufacturer to increase
its fuel economy using hybridized and other performance-based
technologies for full-size pickup trucks must follow 40 CFR 86.1870-12
and the fuel consumption improvement of these full-size pickup truck
technologies must be determined in accordance with 40 CFR 600.510-
12(c)(3)(iii). Manufacturers may also combine incentives for full size
pickups and dedicated alternative fueled vehicles when calculating fuel
economy performance values in 40 CFR 600.510-12.
(3) Off-cycle technologies on EPA's predefined list. A manufacturer
may seek to increase its fleet average fuel economy performance through
the use of off-cycle technologies pursuant to the requirements in 40
CFR 86.1869-12 for predefined off-cycle technologies in accordance with
40 CFR 86.1869-12(b). The fuel consumption improvement is determined in
accordance with 40 CFR 600.510-12(c)(3)(ii).
(4) Off-cycle technologies using 5-cycle testing. Through model
year 2026, a manufacturer may only increase its fleet average fuel
economy performance through the use of off-cycle technologies tested
using the EPA's 5-cycle methodology in accordance with 40 CFR 86.1869-
12(c). The fuel consumption improvement is determined in accordance
with 40 CFR 600.510-12(c)(3)(ii).
(5) Off-cycle technologies using the alternative EPA-approved
methodology. Through model year 2026, a manufacturer may seek to
increase its fuel economy performance through the use of an off-cycle
technology requiring an application request made to the EPA in
accordance with 40 CFR 86.1869-12(d).
(i) Eligibility under the Corporate Average Fuel Economy (CAFE)
program requires compliance with paragraphs (c)(5)(i)(A) through (C) of
this section. Paragraphs (c)(5)(i)(A), (B) and (D) of this section
apply starting in model year 2024. Paragraph (b)(5)(i)(E) of this
section applies starting in model year 2025.
(A) A manufacturer seeking to increase its fuel economy performance
using the alternative methodology for an off-cycle technology, should
submit a detailed analytical plan to EPA prior to the applicable model
year. The detailed analytical plan may include information such as,
planned test procedure and model types for demonstration. The plan will
be approved or denied in accordance with 40 CFR 86.1869-12(d).
(B) A manufacturer seeking to increase its fuel economy performance
using the alternative methodology for an off-cycle technology must
submit an official credit application to EPA and obtain approval in
accordance with 40 CFR 86.1869-12(e) prior to September of the given
model year.
(C) A manufacturer's plans, applications and requests approved by
the EPA must be made in consultation with NHTSA. To expedite NHTSA's
consultation with the EPA, a manufacturer must concurrently submit its
application to NHTSA if the manufacturer is seeking off-cycle fuel
economy improvement values under the CAFE program for those
technologies. For off-cycle technologies that are covered under 40 CFR
86.1869-12(d), NHTSA will consult with the EPA regarding NHTSA's
evaluation of the specific off-cycle technology to ensure its impact on
fuel economy and the suitability of using the off-cycle technology to
adjust the fuel economy performance.
(D) A manufacturer may request an extension from NHTSA for more
time to obtain an EPA approval. Manufacturers should submit their
requests 30 days before the deadlines above. Requests should be
submitted to NHTSA's Director of the Office of Vehicle Safety
Compliance at [email protected].
(E) For MYs 2025 and 2026, a manufacturer must respond within 60-
days to any requests from EPA or NHTSA for additional information or
clarifications to submissions provided pursuant to paragraphs
(b)(4)(i)(A) and (B) of this section. Failure to respond within 60 days
may result in denial of the manufacturer's request to increase its fuel
economy performance through use of an off-cycle technology requests
made to the EPA in accordance with 40 CFR 86.1869-12(d).
(ii) Review and approval process. NHTSA will provide its views on
the suitability of the technology for that purpose to the EPA. NHTSA's
evaluation and review will consider:
(A) Whether the technology has a direct impact upon improving fuel
economy performance;
(B) Whether the technology is related to crash-avoidance
technologies, safety critical systems or systems affecting safety-
critical functions, or technologies designed for the purpose of
reducing the frequency of vehicle crashes;
(C) Information from any assessments conducted by the EPA related
to the application, the technology and/or related technologies; and
(D) Any other relevant factors.
(E) NHTSA will collaborate to host annual meetings with EPA at
least once by July 30th before the model year begins to provide general
guidance to the industry on past off-cycle approvals.
(iii) Safety. (A) Technologies found to be defective or non-
compliant, subject to recall pursuant to part 573 of this chapter,
Defect and Noncompliance Responsibility and Reports, due to a risk to
motor vehicle safety, will have the values of approved off-cycle
credits removed from the manufacturer's credit balance or adjusted to
the population of vehicles the manufacturer remedies as required by 49
U.S.C. chapter 301. NHTSA will consult with the manufacturer to
determine the amount of the adjustment.
(B) Approval granted for innovative and off-cycle technology
credits under NHTSA's fuel efficiency program does not affect or
relieve the obligation to comply with the Vehicle Safety Act (49 U.S.C.
chapter 301), including the ``make inoperative'' prohibition (49 U.S.C.
30122), and all applicable Federal motor vehicle safety standards
issued thereunder (FMVSSs) (part 571 of this chapter). In order to
generate off-cycle or innovative technology credits manufacturers must
state--
(1) That each vehicle equipped with the technology for which they
are seeking credits will comply with all applicable FMVSS(s); and
(2) Whether or not the technology has a fail-safe provision. If no
fail-safe provision exists, the manufacturer must explain why not and
whether a failure of the innovative technology would affect the safety
of the vehicle.
PART 535 MEDIUM- AND HEAVY-DUTY VEHICLE FUEL EFFICIENCY PROGRAM
0
15. The authority citation for part 535 continues to read as follows:
Authority: 49 U.S.C. 32902 and 30101; delegation of authority at
49 CFR 1.95.
0
16. Amend Sec. 535.4 by revising the introductory text, removing the
definition for ``Alterers'', and adding the
[[Page 52951]]
definition for ``Alterer'', in alphabetical order, to read as follows:
Sec. 535.4 Definitions.
The terms manufacture, manufacturer, commercial medium-duty on
highway vehicle, commercial heavy-duty on highway vehicle, fuel, and
work truck are used as defined in 49 U.S.C. 32901. See 49 CFR 523.2 for
general definitions related to NHTSA's fuel efficiency programs.
* * * * *
Alterer means a manufacturer that modifies an altered vehicle as
defined in 49 CFR 567.3
* * * * *
0
17. Amend Sec. 535.5 by revising paragraphs (a)(1), (2) and (9) to
read as follows:
Sec. 535.5 Standards.
(a) * * *
(1) Mandatory standards. For model years 2016 and later, each
manufacturer must comply with the fleet average standard derived from
the unique subconfiguration target standards (or groups of
subconfigurations approved by EPA in accordance with 40 CFR 86.1819) of
the model types that make up the manufacturer's fleet in a given model
year. Each subconfiguration has a unique attribute-based target
standard, defined by each group of vehicles having the same payload,
towing capacity and whether the vehicles are equipped with a 2-wheel or
4-wheel drive configuration. Phase 1 target standards apply for model
years 2016 through 2020. Phase 2 target standards apply for model years
2021 through 2029. NHTSA's Phase 3 HDPUV target standards apply for
model year 2030 and later.
(2) Subconfiguration target standards. (i) Two alternatives exist
for determining the subconfiguration target standards for Phase 1. For
each alternative, separate standards exist for compression-ignition and
spark-ignition vehicles:
(A) The first alternative allows manufacturers to determine a fixed
fuel consumption standard that is constant over the model years; and
(B) The second alternative allows manufacturers to determine
standards that are phased-in gradually each year.
(ii) Calculate the subconfiguration target standards as specified
in this paragraph (a)(2)(ii), using the appropriate coefficients from
table 1 to paragraph (a)(2)(ii), choosing between the alternatives in
paragraph (a)(2)(i) of this section. For electric or fuel cell heavy-
duty vehicles, use compression-ignition vehicle coefficients ``c'' and
``d'' and for hybrid (including plug-in hybrid), dedicated and dual-
fueled vehicles, use coefficients ``c'' and ``d'' appropriate for the
engine type used. Round each standard to the nearest 0.001 gallons per
100 miles and specify all weights in pounds rounded to the nearest
pound. Calculate the subconfiguration target standards using equation:
1 to this paragraph (a)(2)(ii).
Equation 1 to Paragraph (a)(2)(ii)
Subconfiguration Target Standard (gallons per 100 miles) = [c x (WF)] +
d
Where:
WF = Work Factor = [0.75 x (Payload Capacity + Xwd)] + [0.25 x
Towing Capacity]
Xwd = 4wd Adjustment = 500 lbs. if the vehicle group is equipped
with 4wd and all-wheel drive, otherwise equals 0 lbs. for 2wd.
Payload Capacity = GVWR (lbs.) - Curb Weight (lbs.) (for each
vehicle group) Towing Capacity = GCWR (lbs.) - GVWR (lbs.) (for each
vehicle group)
Table 1 to Paragraph (a)(2)(ii)--Coefficients for Mandatory
Subconfiguration Target Standards
------------------------------------------------------------------------
Model year(s) c d
------------------------------------------------------------------------
Phase 1 Alternative 1--Fixed Target Standards
Compression Ignition (CI) Vehicle Coefficients
------------------------------------------------------------------------
2016 to 2018............................ 0.0004322 3.330
2019 to 2020............................ 0.0004086 3.143
------------------------------------------------------------------------
SI Vehicle Coefficients
------------------------------------------------------------------------
2016 to 2017............................ 0.0005131 3.961
2018 to 2020............................ 0.0004086 3.143
------------------------------------------------------------------------
Phase 1 Alternative 2--Phased-in Target Standards
------------------------------------------------------------------------
CI Vehicle Coefficients
------------------------------------------------------------------------
2016.................................... 0.0004519 3.477
2017.................................... 0.0004371 3.369
2018 to 2020............................ 0.0004086 3.143
------------------------------------------------------------------------
SI Vehicle Coefficients
------------------------------------------------------------------------
2016.................................... 0.0005277 4.073
2017.................................... 0.0005176 3.983
2018 to 2020............................ 0.0004951 3.815
------------------------------------------------------------------------
Phase 2--Fixed Target Standards
------------------------------------------------------------------------
CI Vehicle Coefficients
------------------------------------------------------------------------
2021.................................... 0.0003988 3.065
2022.................................... 0.0003880 2.986
2023.................................... 0.0003792 2.917
2024.................................... 0.0003694 2.839
2025.................................... 0.0003605 2.770
2026.................................... 0.0003507 2.701
2027 to 2029............................ 0.0003418 2.633
[[Page 52952]]
2030.................................... 0.00030762 2.370
2031.................................... 0.00027686 2.133
2032.................................... 0.00024917 1.919
2033.................................... 0.00022924 1.766
2034.................................... 0.00021090 1.625
2035.................................... 0.00019403 1.495
------------------------------------------------------------------------
SI Vehicle Coefficients
------------------------------------------------------------------------
2021.................................... 0.0004827 3.725
2022.................................... 0.0004703 3.623
2023.................................... 0.0004591 3.533
2024.................................... 0.0004478 3.443
2025.................................... 0.0004366 3.364
2026.................................... 0.0004253 3.274
2027 to 2029............................ 0.0004152 3.196
2030.................................... 0.00037368 2.876
2031.................................... 0.00033631 2.589
2032.................................... 0.00030268 2.330
2033.................................... 0.00027847 2.143
2034.................................... 0.00025619 1.972
2035.................................... 0.00023569 1.814
------------------------------------------------------------------------
* * * * *
(9) Advanced, innovative, and off-cycle technologies. For vehicles
subject to Phase 1 standards, manufacturers may generate separate
credit allowances for advanced and innovative technologies as specified
in Sec. 535.7(f)(1) and (2). For vehicles subject to Phase 2
standards, manufacturers may generate separate credits allowance for
off-cycle technologies in accordance with Sec. 535.7(f)(2) through
model year 2029. Separate credit allowances for advanced technology
vehicles cannot be generated; instead, manufacturers may use the credit
specified in Sec. 535.7(f)(1)(ii) through model year 2027.
* * * * *
0
18. Amend Sec. 535.6 by revising paragraph (a)(1) to read as follows:
Sec. 535.6 easurement and calculation procedures.
* * * * *
(a) * * *
(1) For the Phase 1 program, if the manufacturer's fleet includes
conventional vehicles (gasoline, diesel and alternative fueled
vehicles) and advanced technology vehicles (hybrids with powertrain
designs that include energy storage systems, vehicles with waste heat
recovery, electric vehicles and fuel cell vehicles), it may divide its
fleet into two separate fleets each with its own separate fleet average
fuel consumption performance rate. For Phase 2 and later, manufacturers
may calculate their fleet average fuel consumption rates for a
conventional fleet and separate advanced technology vehicle fleets.
Advanced technology vehicle fleets should be separated into plug-in
hybrid electric vehicles, electric vehicles and fuel cell vehicles.
* * * * *
0
19. Amend Sec. 535.7 by revising paragraphs (a)(1)(iii) and (iv),
(a)(2)(iii), (a)(4)(i) and (ii), (b)(2), (f)(2) introductory text,
(f)(2)(ii), and (f)(2)(vi)(B) to read as follows:
Sec. 535.7 Averaging, banking, and trading (ABT) credit program.
(a) * * *
(1) * * *
(iii) Advanced technology credits. Credits generated by vehicle or
engine families or subconfigurations containing vehicles with advanced
technologies (i.e., hybrids with regenerative braking, vehicles
equipped with Rankine-cycle engines, electric and fuel cell vehicles)
as described in paragraph (f)(1) of this section.
(iv) Innovative and off-cycle technology credits. Credits can be
generated by vehicle or engine families or subconfigurations having
fuel consumption reductions resulting from technologies not reflected
in the GEM simulation tool or in the Federal Test Procedure (FTP)
chassis dynamometer and that were not in common use with heavy-duty
vehicles or engines before model year 2010 that are not reflected in
the specified test procedure. Manufacturers should prove that these
technologies were not in common use in heavy-duty vehicles or engines
before model year 2010 by demonstrating factors such as the penetration
rates of the technology in the market. NHTSA will not approve any
request if it determines that these technologies do not qualify. The
approach for determining innovative and off-cycle technology credits
under this fuel consumption program is described in paragraph (f)(2) of
this section and by the Environmental Protection Agency (EPA) under 40
CFR 86.1819-14(d)(13), 1036.610, and 1037.610. Starting in model year
2030, manufacturers certifying vehicles under Sec. 535.5(a) may not
earn off-cycle technology credits under 40 CFR 86.1819-14(d)(13).
(2) * * *
(iii) Positive credits, other than advanced technology credits in
Phase 1, generated and calculated within an averaging set may only be
used to offset negative credits within the same averaging set.
* * * * *
(4) * * *
(i) Manufacturers may only trade banked credits to other
manufacturers to use for compliance with fuel consumption standards.
Traded FCCs, other than advanced technology credits earned in Phase 1,
may be used only within the averaging set in which they were generated.
Manufacturers may only trade credits to other entities for the purpose
of expiring credits.
(ii) Advanced technology credits earned in Phase 1 can be traded
across different averaging sets.
* * * * *
(b) * * *
[[Page 52953]]
(2) Adjust the fuel consumption performance of subconfigurations
with advanced technology for determining the fleet average actual fuel
consumption value as specified in paragraph (f)(1) of this section and
40 CFR 86.1819-14(d)(6)(iii). Advanced technology vehicles can be
separated in a different fleet for the purpose of applying credit
incentives as described in paragraph (f)(1) of this section.
* * * * *
(f) * * *
(2) Innovative and off-cycle technology credits. This provision
allows fuel saving innovative and off-cycle engine and vehicle
technologies to generate fuel consumption credits (FCCs) comparable to
CO\2\ emission credits consistent with the provisions of 40 CFR
86.1819-14(d)(13) (for heavy-duty pickup trucks and vans), 40 CFR
1036.610 (for engines), and 40 CFR 1037.610 (for vocational vehicles
and tractors). Heavy-duty pickup trucks and vans may only generate FCCs
through model year 2029.
* * * * *
(ii) For model years 2021 and later, or for model years 2021
through 2029, for heavy-duty pickup trucks and vans manufacturers may
generate off-cycle technology credits for introducing technologies that
are not reflected in the EPA specified test procedures. Upon
identification and joint approval with EPA, NHTSA will allow equivalent
FCCs into its program to those allowed by EPA for manufacturers seeking
to obtain innovative technology credits in a given model year. Such
credits must remain within the same regulatory subcategory in which the
credits were generated. NHTSA will adopt FCCs depending upon whether--
(A) The technology meets paragraphs (f)(2)(i)(A) and (B) of this
section.
(B) For heavy-duty pickup trucks and vans, manufacturers using the
5-cycle test to quantify the benefit of a technology are not required
to obtain approval from the agencies to generate results.
* * * * *
(vi) * * *
(B) For model years 2021 and later, or for model years 2021 through
2029 for heavy-duty pickup trucks and vans, manufacturers may not rely
on an approval for model years before 2021. Manufacturers must
separately request the agencies' approval before applying an
improvement factor or credit under this section for 2021 and later
engines and vehicle, even if the agencies approve the improvement
factor or credit for similar engine and vehicle models before model
year 2021.
* * * * *
PART 536--TRANSFER AND TRADING OF FUEL ECONOMY CREDITS
0
20. The authority citation for part 536 continues to read as follows:
Authority: 49 U.S.C. 32903; delegation of authority at 49 CFR
1.95.
0
21. Revise Table 1 to Sec. 536.4(c) to read as follows:
Sec. 536.4 Credits.
* * * * *
Table 1 to Sec. 536.4(c)--Lifetime Vehicle Miles Traveled
----------------------------------------------------------------------------------------------------------------
Lifetime vehicle miles traveled (VMT)
Model year -----------------------------------------------------------------------------
2012 2013 2014 2015 2016 2017-2031
----------------------------------------------------------------------------------------------------------------
Passenger Cars.................... 177,238 177,366 178,652 180,497 182,134 195,264
Light Trucks...................... 208,471 208,537 209,974 212,040 213,954 225,865
----------------------------------------------------------------------------------------------------------------
PART 537--AUTOMOTIVE FUEL ECONOMY REPORTS
0
22. The authority citation for part 537 continues to read as follows:
Authority: 49 U.S.C. 32907; delegation of authority at 49 CFR
1.95.
0
23. Revise Sec. 537.2 to read as follows:
Sec. 537.2 Purpose.
The purpose of this part is to obtain information to aid the
National Highway Traffic Safety Administration in evaluating automobile
manufacturers' plans for complying with average fuel economy standards
and in preparing an annual review of the average fuel economy
standards.
0
24. Revise Sec. 537.3 to read as follows:
Sec. 537.3 Applicability.
This part applies to automobile manufacturers, except for
manufacturers subject to an alternate fuel economy standard under 49
U.S.C. 32902(d).
0
25. Revise Sec. 537.4 to read as follows:
Sec. 537.4 Definitions.
(a) Statutory terms. (1) The terms average fuel economy standard,
fuel, manufacture, and model year are used as defined in 49 U.S.C.
32901.
(2) The term manufacturer is used as defined in 49 U.S.C. 32901 and
in accordance with part 529 of this chapter.
(3) The terms average fuel economy, fuel economy, and model type
are used as defined in subpart A of 40 CFR part 600.
(4) The terms automobile, automobile capable of off-highway
operation, and passenger automobile are used as defined in 49 U.S.C.
32901 and in accordance with the determinations in part 523 of this
chapter.
(b) Other terms. (1) The term loaded vehicle weight is used as
defined in subpart A of 40 CFR part 86.
(2) The terms axle ratio, base level, body style, car line,
combined fuel economy, engine code, equivalent test weight, gross
vehicle weight, inertia weight, transmission class, and vehicle
configuration are used as defined in subpart A of 40 CFR part 600.
(3) The term light truck is used as defined in part 523 of this
chapter and in accordance with determinations in that part.
(4) The terms approach angle, axle clearance, brakeover angle,
cargo carrying volume, departure angle, passenger carrying volume,
running clearance, and temporary living quarters are used as defined in
part 523 of this chapter.
(5) The term incomplete automobile manufacturer is used as defined
in part 529 of this chapter.
(6) As used in this part, unless otherwise required by the context:
(i) Administrator means the Administrator of the National Highway
Traffic Safety Administration or the Administrator's delegate.
(ii) Current model year means:
(A) In the case of a pre-model year report, the full model year
immediately following the period during which that report is required
by Sec. 537.5(b) to be submitted.
(B) In the case of a mid-model year report, the model year during
which
[[Page 52954]]
that report is required by Sec. 537.5(b) to be submitted.
(iii) Average means a production-weighted harmonic average.
(iv) Total drive ratio means the ratio of an automobile's engine
rotational speed (in revolutions per minute) to the automobile's
forward speed (in miles per hour).
0
26. Amend Sec. 537.7 by revising paragraphs (c)(7)(i) through (iii) to
read as follows:
Sec. 537.7 Pre-model year and mid-model year reports.
* * * * *
(c) * * *
(7) * * *
(i) Provide a list of each air conditioning (AC) efficiency
improvement technology utilized in your fleet(s) of vehicles for each
model year for which the manufacturer qualifies for fuel consumption
improvement values under 49 CFR 531.6 or 533.6. For each technology
identify vehicles by make and model types that have the technology,
which compliance category those vehicles belong to and the number of
vehicles for each model equipped with the technology. For each
compliance category (domestic passenger car, import passenger car, and
light truck), report the AC fuel consumption improvement value in
gallons/mile in accordance with the equation specified in 40 CFI00.510-
12(c)(3)(i).
(ii) Manufacturers must provide a list of off-cycle efficiency
improvement technologies utilized in its fleet(s) of vehicles for each
model year that is pending or approved by the Environmental Protection
Agency (EPA) for which the manufacturer qualifies for fuel consumption
improvement values under 49 CFR 531.6 or 533.6. For each technology,
manufacturers must identify vehicles by make and model types that have
the technology, which compliance category those vehicles belong to, the
number of vehicles for each model equipped with the technology, and the
associated off-cycle credits (grams/mile) available for each
technology. For each compliance category (domestic passenger car,
import passenger car, and light truck), manufacturers must calculate
the fleet off-cycle fuel consumption improvement value in gallons/mile
in accordance with the equation specified in 40 CFR 600.510-
12(c)(3)(ii).
(iii) For model years up to 2024, manufacturers must provide a list
of full-size pickup trucks in its fleet that meet the mild and strong
hybrid vehicle definitions. For each mild and strong hybrid type,
manufacturers must identify vehicles by make and model types that have
the technology, the number of vehicles produced for each model equipped
with the technology, the total number of full-size pickup trucks
produced with and without the technology, the calculated percentage of
hybrid vehicles relative to the total number of vehicles produced, and
the associated full-size pickup truck credits (grams/mile) available
for each technology. For the light truck compliance category,
manufacturers must calculate the fleet pickup truck fuel consumption
improvement value in gallons/mile in accordance with the equation
specified in 40 CFR 600.510-12(c)(3)(iii).
Issued in Washington, DC, under authority delegated in 49 CFR
1.95 and 501.5.
Sophie Shulman,
Deputy Administrator.
[FR Doc. 2024-12864 Filed 6-13-24; 8:45 am]
BILLING CODE 4910-59-P