Energy Conservation Program: Energy Conservation Standards for Room Air Conditioners, 34298-34364 [2023-10287]

Download as PDF 34298 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations FOR FURTHER INFORMATION CONTACT: DEPARTMENT OF ENERGY 10 CFR Parts 429 and 430 [EERE–2014–BT–STD–0059] RIN 1904–AD97 Energy Conservation Program: Energy Conservation Standards for Room Air Conditioners Office of Energy Efficiency and Renewable Energy, Department of Energy. ACTION: Final rule. AGENCY: The Energy Policy and Conservation Act, as amended (‘‘EPCA’’), prescribes energy conservation standards for various consumer products and certain commercial and industrial equipment, including room air conditioners. EPCA also requires the U.S. Department of Energy (‘‘DOE’’) to periodically determine whether more-stringent, standards would be technologically feasible and economically justified, and would result in significant energy savings. In this final rule, DOE is adopting amended energy conservation standards for room air conditioners. It has determined that the amended energy conservation standards for these products would result in significant conservation of energy, and are technologically feasible and economically justified. DATES: The effective date of this rule is July 25, 2023. Compliance with the amended standards established for room air conditioners in this final rule is required on and after May 26, 2026. ADDRESSES: The docket for this rulemaking, which includes Federal Register notices, public meeting attendee lists and transcripts, comments, and other supporting documents/materials, is available for review at www.regulations.gov. All documents in the docket are listed in the www.regulations.gov index. However, not all documents listed in the index may be publicly available, such as information that is exempt from public disclosure. The docket web page can be found at www.regulations.gov/docket??D=EERE2014-BT-STD-0059. The docket web page contains instructions on how to access all documents, including public comments, in the docket. For further information on how to review the docket, contact the Appliance and Equipment Standards Program staff at (202) 287–1445 or by email: ApplianceStandardsQuestions@ ee.doe.gov. ddrumheller on DSK120RN23PROD with RULES2 SUMMARY: VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 Mr. Lucas Adin, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE–5B, 1000 Independence Avenue SW, Washington, DC 20585–0121. Telephone: (202) 287– 5904. Email: ApplianceStandards Questions@ee.doe.gov. Ms. Sarah Butler, U.S. Department of Energy, Office of the General Counsel, GC–33, 1000 Independence Avenue SW, Washington, DC 20585–0121. Telephone: (202) 586–1777. Email: Sarah.Butler@hq.doe.gov. SUPPLEMENTARY INFORMATION: Table of Contents I. Synopsis of the Final Rule A. Benefits and Costs to Consumers B. Impact on Manufacturers C. National Benefits and Costs D. Conclusion II. Introduction A. Authority B. Background 1. Current Standards 2. History of Standards Rulemaking for Room Air Conditioners III. General Discussion A. Product Classes and Scope of Coverage B. Test Procedure C. Technological Feasibility 1. General 2. Maximum Technologically Feasible Levels D. Energy Savings 1. Determination of Savings 2. Significance of Savings E. Economic Justification 1. Specific Criteria a. Economic Impact on Manufacturers and Consumers b. Savings in Operating Costs Compared to Increase in Price (LCC and PBP) c. Energy Savings d. Lessening of Utility or Performance of Products e. Impact of Any Lessening of Competition f. Need for National Energy Conservation g. Other Factors 2. Rebuttable Presumption IV. Methodology and Discussion of Related Comments A. Market and Technology Assessment 1. Scope of Coverage and Product Classes 2. Technology Options a. Alternative Refrigerants b. Product Weight B. Screening Analysis 1. Screened-Out Technologies 2. Remaining Technologies C. Engineering Analysis 1. Efficiency Analysis a. Baseline Efficiency/Energy Use b. Higher Efficiency Levels 2. Cost Analysis 3. Cost-Efficiency Relationship 4. Consumer Utility D. Markups Analysis E. Energy Use Analysis F. Life-Cycle Cost and Payback Period Analysis 1. Product Cost PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 2. Installation Cost 3. Annual Energy Consumption a. Rebound Effect 4. Energy Prices 5. Maintenance and Repair Costs 6. Product Lifetime 7. Discount Rates 8. Energy Efficiency Distribution in the NoNew-Standards Case 9. Payback Period Analysis G. Shipments Analysis H. National Impact Analysis 1. Product Efficiency Trends 2. National Energy Savings 3. Net Present Value Analysis I. Consumer Subgroup Analysis J. Manufacturer Impact Analysis 1. Overview 2. Government Regulatory Impact Model and Key Inputs a. Manufacturer Production Costs b. Shipments Projections c. Product and Capital Conversion Costs d. Manufacturer Markup Scenarios 3. Discussion of MIA Comments K. Emissions Analysis 1. Air Quality Regulations Incorporated in DOE’s Analysis L. Monetizing Emissions Impacts 1. Monetization of Greenhouse Gas Emissions a. Social Cost of Carbon b. Social Cost of Methane and Nitrous Oxide 2. Monetization of Other Emissions Impacts M. Utility Impact Analysis N. Employment Impact Analysis V. Analytical Results and Conclusions A. Trial Standard Levels B. Economic Justification and Energy Savings 1. Economic Impacts on Individual Consumers a. Life-Cycle Cost and Payback Period b. Consumer Subgroup Analysis c. Rebuttable Presumption Payback 2. Economic Impacts on Manufacturers a. Industry Cash Flow Analysis Results b. Direct Impacts on Employment c. Impacts on Manufacturing Capacity d. Impacts on Subgroups of Manufacturers e. Cumulative Regulatory Burden 3. National Impact Analysis a. Significance of Energy Savings b. Net Present Value of Consumer Costs and Benefits c. Indirect Impacts on Employment 4. Impact on Utility or Performance of Products 5. Impact of Any Lessening of Competition 6. Need of the Nation To Conserve Energy 7. Other Factors 8. Summary of Economic Impacts C. Conclusion 1. Benefits and Burdens of TSLs Considered for Room Air Conditioner Standards 2. Annualized Benefits and Costs of the Adopted Standards VI. Cooling Capacity Verification VII. Procedural Issues and Regulatory Review A. Review Under Executive Orders 12866 and 13563 B. Review Under the Regulatory Flexibility Act E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations C. Review Under the Paperwork Reduction Act D. Review Under the National Environmental Policy Act of 1969 E. Review Under Executive Order 13132 F. Review Under Executive Order 12988 G. Review Under the Unfunded Mandates Reform Act of 1995 H. Review Under the Treasury and General Government Appropriations Act, 1999 I. Review Under Executive Order 12630 J. Review Under the Treasury and General Government Appropriations Act, 2001 K. Review Under Executive Order 13211 L. Information Quality M. Congressional Notification VIII. Approval of the Office of the Secretary I. Synopsis of the Final Rule The Energy Policy and Conservation Act, Public Law 94–163, as amended (‘‘EPCA’’),1 authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. (42 U.S.C. 6291– 6317) Title III, Part B of EPCA 2 established the Energy Conservation Program for Consumer Products Other Than Automobiles. (42 U.S.C. 6291– 6309) These products include room air conditioners, the subject of this final rule. Pursuant to EPCA, any new or amended energy conservation standard must be designed to achieve the maximum improvement in energy efficiency that DOE determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later than 6 years after issuance of any final rule establishing or amending a standard, DOE must publish 34299 either a notice of determination that standards for the product do not need to be amended, or a notice of proposed rulemaking including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)) In accordance with these and other statutory provisions discussed in this document, DOE is adopting amended energy conservation standards for room air conditioners. The adopted standards, which are expressed in the amount of cooling provided per amount of energy consumed, measured in British thermal units per watt-hour (‘‘Btu/Wh’’) are shown in Table I.1. These standards apply to all room air conditioners listed in Table I.1 and manufactured in, or imported into, the United States starting on May 26, 2026. TABLE I.1—ENERGY CONSERVATION STANDARDS FOR ROOM AIR CONDITIONERS [Compliance starting May 26, 2026] Combined energy efficiency ratio (CEER) (Btu/Wh) Equipment class 1. Without reverse cycle, with louvered sides, and less than 6,000 British thermal units per hour (‘‘Btu/h’’) ............................. 2. Without reverse cycle, with louvered sides and 6,000 to 7,900 Btu/h ..................................................................................... 3. Without reverse cycle, with louvered sides and 8,000 to 13,900 Btu/h ................................................................................... 4. Without reverse cycle, with louvered sides and 14,000 to 19,900 Btu/h ................................................................................. 5a. Without reverse cycle, with louvered sides and 20,000 to 27,900 Btu/h ............................................................................... 5b. Without reverse cycle, with louvered sides and 28,000 Btu/h or more .................................................................................. 6. Without reverse cycle, without louvered sides, and less than 6,000 Btu/h .............................................................................. 7. Without reverse cycle, without louvered sides and 6,000 to 7,900 Btu/h ................................................................................ 8a. Without reverse cycle, without louvered sides and 8,000 to 10,900 Btu/h ............................................................................ 8b. Without reverse cycle, without louvered sides and 11,000 to 13,900 Btu/h .......................................................................... 9. Without reverse cycle, without louvered sides and 14,000 to 19,900 Btu/h ............................................................................ 10. Without reverse cycle, without louvered sides and 20,000 Btu/h or more ............................................................................. 11. With reverse cycle, with louvered sides, and less than 20,000 Btu/h .................................................................................... 12. With reverse cycle, without louvered sides, and less than 14,000 Btu/h ............................................................................... 13. With reverse cycle, with louvered sides, and 20,000 Btu/h or more ...................................................................................... 14. With reverse cycle, without louvered sides, and 14,000 Btu/h or more ................................................................................. 15. Casement-Only ........................................................................................................................................................................ 16. Casement-Slider ...................................................................................................................................................................... A. Benefits and Costs to Consumers Table I.2 summarizes DOE’s evaluation of the economic impacts of the adopted standards on consumers of room air conditioners, as measured by the average life-cycle cost (‘‘LCC’’) savings and the simple payback period (‘‘PBP’’).3 The average LCC savings are positive for all product classes, and the 13.1 13.7 16.0 16.0 13.8 13.2 12.8 12.8 14.1 13.9 13.7 13.8 14.4 13.7 13.7 12.8 13.9 15.3 PBP is less than the average lifetime of room air conditioners, which is estimated to be 9.3 years (see section IV.F of this document). TABLE I.2—IMPACTS OF ADOPTED ENERGY CONSERVATION STANDARDS ON CONSUMERS OF ROOM AIR CONDITIONERS Average LCC savings (2021$) ddrumheller on DSK120RN23PROD with RULES2 Room air conditioner product class 1. Without reverse cycle, with louvered sides, and less than 6,000 Btu/h ................................................. 2. Without reverse cycle, with louvered sides and 6,000 to 7,900 Btu/h ................................................... 3. Without reverse cycle, with louvered sides and 8,000 to 13,900 Btu/h ................................................. 1 All references to EPCA in this document refer to the statute as amended through the Energy Act of 2020, Public Law. 116–260 (Dec. 27, 2020), which reflect the last statutory amendments that impact Parts A and A–1 of EPCA. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 2 For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A. 3 The average LCC savings refer to consumers that are affected by a standard and are measured relative to the efficiency distribution in the no-newstandards case, which depicts the market in the PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 65 72 100 Simple payback period (years) 0.8 1.5 2.9 compliance year in the absence of new or amended standards (see section IV.F.9 of this document). The simple PBP, which is designed to compare specific efficiency levels, is measured relative to the baseline product (see section IV.C of this document). E:\FR\FM\26MYR2.SGM 26MYR2 34300 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE I.2—IMPACTS OF ADOPTED ENERGY CONSERVATION STANDARDS ON CONSUMERS OF ROOM AIR CONDITIONERS— Continued Average LCC savings (2021$) Room air conditioner product class 4. Without reverse cycle, with louvered sides and 14,000 to 19,900 Btu/h ............................................... 5a. Without reverse cycle, with louvered sides and 20,000 Btu/h to 27,900 Btu/h .................................... 5b. Without reverse cycle, with louvered sides and 28,000 Btu/h or more ................................................ 8a. Without reverse cycle, without louvered sides and 8,000 to 10,900 Btu/h .......................................... 8b. Without reverse cycle, without louvered sides and 11,000 to 13,900 Btu/h ........................................ 9. Without reverse cycle, without louvered sides and 14,000 to 19,900 Btu/h .......................................... 11. With reverse cycle, with louvered sides, and less than 20,000 Btu/h .................................................. 12. With reverse cycle, without louvered sides, and less than 14,000 Btu/h ............................................. 16. Casement-Slider .................................................................................................................................... DOE’s analysis of the impacts of the adopted standards on consumers is described in section IV.F of this document. B. Impact on Manufacturers The industry net present value (‘‘INPV’’) is the sum of the discounted cash flows to the industry from the announcement of the standard through the end of the analysis period (2023– 2055). Using a real discount rate of 7.2 percent, DOE estimates that the INPV for manufacturers of room air conditioners in the case without amended standards is $1.20 billion.4 Under the adopted standards, DOE estimates the change in INPV to range from ¥4.8 percent to 7.1 percent, which is approximately ¥$57.7 million to $85.6 million. In order to bring products into compliance with amended standards, it is estimated that industry will incur total conversion costs of $24.8 million. DOE’s analysis of the impacts of the adopted standards on manufacturers is described in sections IV.J and V.B.2 of this document. ddrumheller on DSK120RN23PROD with RULES2 C. National Benefits and Costs DOE’s analyses indicate that the adopted energy conservation standards for room air conditioners would save a significant amount of energy. Relative to the case without amended standards, the lifetime energy savings for room air conditioners purchased in the 30-year period that begins in the anticipated year of compliance with the amended standards (2026–2055), amount to 1.41 quadrillion British thermal units (‘‘Btu’’), or quads.5 This represents a 4 All monetary values in this document are expressed in 2021 dollars. 5 The quantity refers to full-fuel-cycle (FFC) energy savings. FFC energy savings includes the energy consumed in extracting, processing, and transporting primary fuels (i.e., coal, natural gas, petroleum fuels), and, thus, presents a more complete picture of the impacts of energy efficiency standards. For more information on the FFC metric, see section IV.H.1 of this document. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 savings of 12 percent relative to the energy use of these products in the case without amended standards (referred to as the ‘‘no-new-standards case’’). The cumulative net present value (‘‘NPV’’) of total consumer benefits of the standards for room air conditioners ranges from $5.39 billion (at a 7-percent discount rate) to $11.46 billion (at a 3percent discount rate). This NPV expresses the estimated total value of future operating-cost savings minus the estimated increased product costs for room air conditioners purchased in 2026–2055. In addition, the adopted standards for room air conditioners are projected to yield significant environmental benefits. DOE estimates that the standards will result in cumulative emission reductions (over the same period as for energy savings) of 48.5 million metric tons (‘‘Mt’’) 6 of carbon dioxide (‘‘CO2’’), 20.1 thousand tons of sulfur dioxide (‘‘SO2’’), 74.2 thousand tons of nitrogen oxides (‘‘NOX’’), 325.6 thousand tons of methane (‘‘CH4’’), 0.5 thousand tons of nitrous oxide (‘‘N2O’’), and 0.1 tons of mercury (‘‘Hg’’).7 The estimated cumulative reduction in CO2 emissions through 2030 amounts to 4.4 Mt, which is equivalent to the emissions resulting from the annual electricity use of more than 856,000 homes. DOE estimates the value of climate benefits from a reduction in greenhouse gases (GHG) using four different estimates of the social cost of CO2 (‘‘SC– CO2’’), the social cost of methane (‘‘SC– CH4’’), and the social cost of nitrous oxide (‘‘SC–N2O’’). Together these 6 A metric ton is equivalent to 1.1 short tons. Results for emissions other than CO2 are presented in short tons. 7 DOE calculated emissions reductions relative to the no-new-standards-case, which reflects key assumptions in the Annual Energy Outlook 2022 (‘‘AEO2022’’). AEO2022 represents current Federal and state legislation and final implementation of regulations as of the time of its preparation. See section IV.K of this document for further discussion of AEO2022 assumptions that effect air pollutant emissions. PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 92 148 284 84 119 165 134 124 84 Simple payback period (years) 3.0 2.5 2.3 3.2 2.4 2.9 3.2 2.6 4.0 represent the social cost of GHG (SC– GHG).8 DOE used interim SC–GHG values developed by an Interagency Working Group on the Social Cost of Greenhouse Gases (IWG).9 The derivation of these values is discussed in section IV.L.1 of this document. For presentational purposes, the climate benefits associated with the average SC– GHG at a 3-percent discount rate are estimated to be $2.51 billion. DOE does not have a single central SC–GHG point estimate and it emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. DOE estimated the monetary health benefits of SO2 and NOX emissions reductions, using benefit per ton estimates from the scientific literature, as discussed in section IV.L of this document. DOE estimated the present value of the health benefits would be $2.02 billion using a 7-percent discount rate, and $4.39 billion using a 3-percent 8 On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal Government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv– 1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal Government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. As reflected in this rule, DOE has reverted to its approach prior to the injunction and presents monetized greenhouse gas abatement benefits where appropriate and permissible under law. 9 See Interagency Working Group on Social Cost of Greenhouse Gases, Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide. Interim Estimates Under Executive Order 13990, Washington, DC, February 2021 (‘‘February 2021 SC–GHG TSD’’). www.whitehouse.gov/wp-content/ uploads/2021/02/TechnicalSupportDocument_ SocialCostofCarbonMethaneNitrousOxide.pdf. E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations benefits from reductions in direct PM2.5 emissions. Table I.3 summarizes the economic benefits and costs expected to result from the adopted standards for room air conditioners. There are other important unquantified effects, including certain discount rate.10 DOE is currently only monetizing (for SO2 and NOX) fine particulate matter (‘‘PM2.5’’) precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health 34301 unquantified climate benefits, unquantified public health benefits from the reduction of toxic air pollutants and other emissions, unquantified energy security benefits, and distributional effects, among others. TABLE I.3—SUMMARY OF ECONOMIC BENEFITS AND COSTS OF ADOPTED ENERGY CONSERVATION STANDARDS FOR ROOM AIR CONDITIONERS Billion $2021 3% discount rate Consumer Operating Cost Savings ............................................................................................................................................. Climate Benefits * ......................................................................................................................................................................... Health Benefits ** ......................................................................................................................................................................... 14.63 2.51 4.39 Total Benefits † ..................................................................................................................................................................... Consumer Incremental Product Costs ‡ ...................................................................................................................................... 21.54 3.17 Net Benefits .......................................................................................................................................................................... 18.37 7% discount rate Consumer Operating Cost Savings ............................................................................................................................................. Climate Benefits * (3% discount rate) .......................................................................................................................................... Health Benefits ** ......................................................................................................................................................................... 7.46 2.51 2.02 Total Benefits † ..................................................................................................................................................................... Consumer Incremental Product Costs ‡ ...................................................................................................................................... 12.00 2.08 Net Benefits .......................................................................................................................................................................... 9.92 ddrumheller on DSK120RN23PROD with RULES2 Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026–2055. These results include benefits to consumers which accrue after 2055 from the products shipped in 2026–2055. * Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide (SC–N2O) (model average at 2.5 percent, 3 percent, and 5 percent discount rates; 95th percentile at 3 percent discount rate) (see section IV.L of this document). Together these represent the global SC–GHG. For presentational purposes of this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are shown, but DOE does not have a single central SC–GHG point estimate. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal Government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv–1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal Government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. As reflected in this rule, DOE has reverted to its approach prior to the injunction and presents monetized greenhouse gas abatement benefits where appropriate and permissible under law. ** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. † Total and net benefits include those consumer, climate, and health benefits that can be quantified and monetized. For presentation purposes, total and net benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but DOE does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. ‡ Costs include incremental equipment costs as well as installation costs. The benefits and costs of the standards can also be expressed in terms of annualized values. The monetary values for the total annualized net benefits are (1) the reduced consumer operating costs, minus (2) the increase in product purchase prices and installation costs, plus (3) the value of climate and health benefits of emission reductions, all annualized.11 The national operating cost savings are domestic private U.S. consumer monetary savings that occur as a result of purchasing the covered products and are measured for the lifetime of room air conditioners shipped in 2026–2055. The benefits associated with reduced emissions achieved as a result of the adopted standards are also calculated based on the lifetime of room air conditioners shipped in 2026–2055. Total benefits for both the 3-percent and 7-percent cases are presented using the average GHG social costs with 3-percent discount rate. Estimates of SC–GHG values are presented for all four discount rates in section V.B.6 of this document. Table I.4 presents the total estimated monetized benefits and costs associated with the standard, expressed in terms of 10 DOE estimates the economic value of these emissions reductions resulting from the considered TSLs for the purpose of complying with the requirements of Executive Order 12866. 11 To convert the time-series of costs and benefits into annualized values, DOE calculated a present value in 2022, the year used for discounting the NPV of total consumer costs and savings. For the benefits, DOE calculated a present value associated with each year’s shipments in the year in which the shipments occur (e.g., 2020 or 2030), and then discounted the present value from each year to 2022. Using the present value, DOE then calculated the fixed annual payment over a 30-year period, starting in the compliance year, that yields the same present value. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\26MYR2.SGM 26MYR2 34302 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations annualized values. The results under the primary estimate are as follows. Using a 7-percent discount rate for consumer benefits and costs and health benefits from reduced NOX and SO2 emissions, and the 3-percent discount rate case for climate benefits from reduced GHG emissions, the estimated cost of the standards adopted in this rule is $205.2 million per year in increased equipment costs, while the estimated annual benefits are $736.9 million in reduced equipment operating costs, $140.1 million in climate benefits, and $199.9 million in health benefits. In this case, the net benefit would amount to $871.7 million per year. Using a 3-percent discount rate for all benefits and costs, the estimated cost of the standards is $176.8 million per year in increased equipment costs, while the estimated annual benefits are $815.8 million in reduced operating costs, $140.1 million in climate benefits, and $244.8 million in health benefits. In this case, the net benefit would amount to $1,023.9 million per year. TABLE I.4—ANNUALIZED BENEFITS AND COSTS OF ADOPTED STANDARDS FOR ROOM AIR CONDITIONERS Million 2021$/year Primary estimate Low-netbenefits estimate High-netbenefits estimate 3% discount rate Consumer Operating Cost Savings ............................................................................................. Climate Benefits * ......................................................................................................................... Health Benefits ** ......................................................................................................................... 815.8 140.1 244.8 784.9 137.6 240.6 851.9 142.5 248.9 Total Benefits † ..................................................................................................................... Consumer Incremental Product Costs ‡ ...................................................................................... 1,200.6 176.8 1,163.2 199.0 1,243.3 152.2 Net Benefits .......................................................................................................................... 1,023.9 964.1 1,091.1 Consumer Operating Cost Savings ............................................................................................. Climate Benefits * (3% discount rate) .......................................................................................... Health Benefits ** ......................................................................................................................... 736.9 140.1 199.9 712.3 137.6 196.8 765.4 142.5 203.0 Total Benefits † ..................................................................................................................... Consumer Incremental Product Costs ‡ ...................................................................................... 1,076.9 205.2 1,046.7 227.0 1,111.0 181.0 Net Benefits .......................................................................................................................... 871.7 819.7 930.0 7% discount rate ddrumheller on DSK120RN23PROD with RULES2 Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026–2055. These results include benefits to consumers which accrue after 2057 from the products shipped in 2028–2057. The Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy prices from the AEO2022 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low Net Benefits Estimate, and a high decline rate in the High Net Benefits Estimate. The methods used to derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding. * Climate benefits are calculated using four different estimates of the global SC–GHG (see section IV.L of this document). For presentational purposes of this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are shown, but the Department does not have a single central SC–GHG point estimate, and it emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal Government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv–1074–JDC– KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal Government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. As reflected in this rule, DOE has reverted to its approach prior to the injunction and presents monetized greenhouse gas abatement benefits where appropriate and permissible under law. ** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L of this document for more details. † Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total and net benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the Department does not have a single central SC–GHG point estimate. ‡ Costs include incremental equipment costs as well as installation costs. DOE’s analysis of the national impacts of the adopted standards is described in sections IV.H, IV.K, and IV.L of this document. D. Conclusion DOE concludes that the standards adopted in this final rule represent the maximum improvement in energy VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 efficiency that is technologically feasible and economically justified, and would result in the significant conservation of energy. Specifically, with regards to technological feasibility products achieving these standard levels are already commercially available for all product classes covered by this rule. As for economic justification, DOE’s PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 analysis shows that the benefits of the standards exceed, to a great extent, the burdens of the standards. Using a 7-percent discount rate for consumer benefits and costs and NOX and SO2 reduction benefits, and a 3percent discount rate case for GHG social costs, the estimated cost of the standards for room air conditioners is E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations $205.2 million per year in increased product costs, while the estimated annual benefits are $736.9 million in reduced product operating costs, $140.1 million in climate benefits, and $199.9 million in health benefits. The net benefit amounts to $871.7 million per year. The significance of energy savings offered by a new or amended energy conservation standard cannot be determined without knowledge of the specific circumstances surrounding a given rulemaking.12 For example, some covered products and equipment have most of their energy consumption occur during periods of peak energy demand. The impacts of these products on the energy infrastructure can be more pronounced than products with relatively constant demand. Accordingly, DOE evaluates the significance of energy savings on a caseby-case basis. As previously mentioned, the standards are projected to result in estimated national energy savings of 1.41 quad FFC, the equivalent of the primary annual energy use of 15 million homes. In addition, they are projected to reduce CO2 emissions by 48.5 Mt. Based on these findings, DOE has determined the energy savings from the standard levels adopted in this final rule are ‘‘significant’’ within the meaning of 42 U.S.C. 6295(o)(3)(B). A more detailed discussion of the basis for these conclusions is contained in the remainder of this document and the accompanying TSD. ddrumheller on DSK120RN23PROD with RULES2 II. Introduction The following section briefly discusses the statutory authority underlying this final rule, as well as some of the relevant historical background related to the establishment of standards for room air conditioners. A. Authority EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. Title III, Part B of EPCA established the Energy Conservation Program for Consumer Products Other Than Automobiles. These products include room air conditioners, the subject of this document. (42 U.S.C. 6292(a)(2)) EPCA prescribed energy conservation standards for these products (42 U.S.C. 6295(c)(1)), and directs DOE to conduct future rulemakings to determine 12 Procedures, Interpretations, and Policies for Consideration in New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Commercial/Industrial Equipment, 86 FR 70892, 70901 (Dec. 13, 2021). VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 whether to amend these standards. (42 U.S.C. 6295(c)(2)) EPCA further provides that, not later than 6 years after the issuance of any final rule establishing or amending a standard, DOE must publish either a notice of determination that standards for the product do not need to be amended, or a NOPR including new proposed energy conservation standards (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)(1)) The energy conservation program under EPCA, consists essentially of four parts: (1) testing, (2) labeling, (3) the establishment of Federal energy conservation standards, and (4) certification and enforcement procedures. Relevant provisions of EPCA specifically include definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), labeling provisions (42 U.S.C. 6294), energy conservation standards (42 U.S.C. 6295), and the authority to require information and reports from manufacturers (42 U.S.C. 6296). Federal energy efficiency requirements for covered products established under EPCA generally supersede State laws and regulations concerning energy conservation testing, labeling, and standards. (42 U.S.C. 6297(a)–(c)) DOE may, however, grant waivers of Federal preemption in limited instances for particular State laws or regulations, in accordance with the procedures and other provisions set forth under EPCA. (See 42 U.S.C. 6297(d)) Subject to certain criteria and conditions, DOE is required to develop test procedures to measure the energy efficiency, energy use, or estimated annual operating cost of each covered product. (42 U.S.C. 6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products must use the prescribed DOE test procedure as the basis for certifying to DOE that their products comply with the applicable energy conservation standards adopted under EPCA and when making representations to the public regarding the energy use or efficiency of those products. (42 U.S.C. 6293(c) and 6295(s)) Similarly, DOE must use these test procedures to determine whether the products comply with standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test procedures for room air conditioners appear at title 10 of the Code of Federal Regulations (‘‘CFR’’), part 430, subpart B, appendix F. DOE must follow specific statutory criteria for prescribing new or amended standards for covered products, including room air conditioners. Any PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 34303 new or amended standard for a covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary of Energy determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) and (o)(3)(B)) Furthermore, DOE may not adopt any standard that would not result in the significant conservation of energy. (42 U.S.C. 6295(o)(3)) Moreover, DOE may not prescribe a standard (1) for certain products, including room air conditioners, if no test procedure has been established for the product, or (2) if DOE determines by rule that the standard is not technologically feasible or economically justified. (42 U.S.C. 6295(o)(3)(A)–(B)) In deciding whether a proposed standard is economically justified, DOE must determine whether the benefits of the standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make this determination after receiving comments on the proposed standard, and by considering, to the greatest extent practicable, the following seven statutory factors: (1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard; (2) The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the standard; (3) The total projected amount of energy (or as applicable, water) savings likely to result directly from the standard; (4) Any lessening of the utility or the performance of the covered products likely to result from the standard; (5) The impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the standard; (6) The need for national energy and water conservation; and (7) Other factors the Secretary of Energy (‘‘Secretary’’) considers relevant. (42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII)) Further, EPCA, as codified, establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) EPCA, as codified, also contains what is known as an ‘‘anti-backsliding’’ provision, which prevents the Secretary from prescribing any amended standard E:\FR\FM\26MYR2.SGM 26MYR2 34304 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations that either increases the maximum allowable energy use or decreases the minimum required energy efficiency of a covered product. (42 U.S.C. 6295(o)(1)) Also, the Secretary may not prescribe an amended or new standard if interested persons have established by a preponderance of the evidence that the standard is likely to result in the unavailability in the United States in any covered product type (or class) of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States. (42 U.S.C. 6295(o)(4)) Additionally, EPCA specifies requirements when promulgating an energy conservation standard for a covered product that has two or more subcategories. DOE must specify a different standard level for a type or class of products that has the same function or intended use if DOE determines that products within such group (A) consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature which other products within such type (or class) do not have and such feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In determining whether a performance-related feature justifies a different standard for a group of products, DOE must consider such factors as the utility to the consumer of such a feature and other factors DOE deems appropriate. Id. Any rule prescribing such a standard must include an explanation of the basis on which such higher or lower level was established. (42 U.S.C. 6295(q)(2)) Finally, pursuant to the amendments contained in the Energy Independence and Security Act of 2007 (EISA 2007), Public Law 110–140, any final rule for new or amended energy conservation standards promulgated after July 1, 2010, is required to address standby mode and off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE adopts a standard for a covered product after that date, it must, if justified by the criteria for adoption of standards under EPCA (42 U.S.C. 6295(o)), incorporate standby mode and off mode energy use into a single standard, or, if that is not feasible, adopt a separate standard for such energy use for that product. (42 U.S.C. 6295(gg)(3)(A)–(B)) DOE’s current test procedures and standards for room air conditioners address standby mode and off mode energy use, as do the amended standards adopted in this final rule. B. Background 1. Current Standards DOE prescribed the current energy conservation standards in a direct final rule published on April 21, 2011 (‘‘April 2011 Direct Final Rule’’), which apply to room air conditioners manufactured on and after April 21, 2014. 76 FR 22454. These standards are set forth in DOE’s regulations at 10 CFR 430.32(b) and are repeated in Table II.1. TABLE II.1—FEDERAL ENERGY EFFICIENCY STANDARDS FOR ROOM AIR CONDITIONERS Minimum CEER (Btu/Wh) Room air conditioner product class 1. Without reverse cycle, with louvered sides, and less than 6,000 Btu/h ......................................................................................... 2. Without reverse cycle, with louvered sides and 6,000 to 7,999 Btu/h ........................................................................................... 3. Without reverse cycle, with louvered sides and 8,000 to 13,999 Btu/h ......................................................................................... 4. Without reverse cycle, with louvered sides and 14,000 to 19,999 Btu/h ....................................................................................... 5a. Without reverse cycle, with louvered sides and 20,000 Btu/h to 27,999 Btu/h ............................................................................ 5b. Without reverse cycle, with louvered sides and 28,000 Btu/h or more ........................................................................................ 6. Without reverse cycle, without louvered sides, and less than 6,000 Btu/h .................................................................................... 7. Without reverse cycle, without louvered sides and 6,000 to 7,999 Btu/h ...................................................................................... 8a. Without reverse cycle, without louvered sides and 8,000 to 10,999 Btu/h .................................................................................. 8b. Without reverse cycle, without louvered sides and 11,000 to 13,999 Btu/h ................................................................................ 9. Without reverse cycle, without louvered sides and 14,000 to 19,999 Btu/h .................................................................................. 10. Without reverse cycle, without louvered sides and 20,000 Btu/h or more ................................................................................... 11. With reverse cycle, with louvered sides, and less than 20,000 Btu/h .......................................................................................... 12. With reverse cycle, without louvered sides, and less than 14,000 Btu/h ..................................................................................... 13. With reverse cycle, with louvered sides, and 20,000 Btu/h or more ............................................................................................ 14. With reverse cycle, without louvered sides, and 14,000 Btu/h or more ....................................................................................... 15. Casement-Only .............................................................................................................................................................................. 16. Casement-Slider ............................................................................................................................................................................ ddrumheller on DSK120RN23PROD with RULES2 2. History of Standards Rulemaking for Room Air Conditioners EPCA prescribed initial energy conservation standards for room air conditioners and further directed DOE to conduct two cycles of rulemakings to determine whether to amend these standards. (42 U.S.C. 6295(c)(1)–(2)) DOE completed the first of these rulemaking cycles on September 24, 1997, by adopting amended performance standards for room air conditioners manufactured on or after October 1, 2000. 62 FR 50122. Additionally, DOE completed a second rulemaking cycle to amend the VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 standards for room air conditioners by issuing the April 2011 Direct Final Rule, in which DOE prescribed the current energy conservation standards for room air conditioners manufactured on or after April 21, 2014. 76 FR 22454 (April 21, 2011). DOE subsequently published a final rule amending the compliance date for the current room air conditioner standards to June 1, 2014. 76 FR 52852 (Aug. 24, 2011). In a separate document, also published on August 24, 2011, DOE confirmed the adoption of these energy conservation standards in a notice of effective date and compliance dates for the April 2011 Direct Final Rule. 76 FR 52854. PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 11.0 11.0 10.9 10.7 9.4 9.0 10.0 10.0 9.6 9.5 9.3 9.4 9.8 9.3 9.3 8.7 9.5 10.4 As part of the current analysis, on June 18, 2015, DOE prepared a Request for Information (‘‘June 2015 RFI’’), which solicited information from the public to help DOE determine whether amended standards for room air conditioners would result in a significant amount of additional energy savings and whether those standards would be technologically feasible and economically justified.13 80 FR 34843. 13 Pursuant to amendments to appendix A to 10 CFR part 430, subpart C (‘‘appendix A’’), DOE generally will issue an early assessment request for information announcing that DOE is considering initiating a rulemaking proceeding. Section 6(a)(1) of appendix A; see also 85 FR 8626, 8637 (Feb. 14, E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations DOE published a notice of public meeting and availability of the preliminary technical support document (‘‘TSD’’) on June 17, 2020 (‘‘June 2020 Preliminary Analysis’’). 85 FR 36512. Comments received following the publication of the June 2020 Preliminary Analysis helped DOE identify and resolve issues related to the subsequent NOPR analysis.14 DOE published a notice of proposed rulemaking on April 7, 2022 (‘‘April 2022 NOPR’’). 87 FR 20608. DOE subsequently held a public meeting on May 3, 2022, to discuss and receive comments on the NOPR. The NOPR 34305 TSD that presented the methodology and results of the NOPR analysis is available at: www.regulations.gov/ document/EERE-2014-BT-STD-00590030. DOE received 17 written comments in response to the April 2022 NOPR from the interested parties listed in Table II.2. TABLE II.2—APRIL 2022 NOPR WRITTEN COMMENTS Abbreviation A. Krishna 1 ...................................................................................... Anonymous Individual ..................................................................... L. Adelman ...................................................................................... G. Larsen ......................................................................................... People’s Republic of China ............................................................. Treua Inc. (DBA Gradient) .............................................................. New York State Energy Research and Development Authority ..... Center for Law and Social Policy .................................................... Association of Home Appliance Manufacturers .............................. Friedrich Air Conditioning ................................................................ Appliance Standards Awareness Project (ASAP), American Council for an Energy-Efficient Economy (ACEEE), CLASP, Consumer Federation of America (CFA), National Consumer Law Center (NCLC). Consumer Federation of America (CFA), National Consumer Law Center (NCLC). Pacific Gas and Electric Company (PG&E), San Diego Gas and Electric (SDG&E), Southern California Edison (SCE). Keith Rice ........................................................................................ GE Appliances ................................................................................. Northwest Energy Efficiency Alliance (NEEA), Northwest Power and Conservation Council (NWPCC). Center for Climate and Energy Solutions (C2ES), Institute for Policy Integrity (IPI), Natural Resources Defense Council (NRDC), Sierra Club, Union of Concerned Scientists. Krishna .................................................................. University of Massachusetts Amherst Student ..... University of Massachusetts Amherst Student ..... University of Massachusetts Amherst Student ..... P.R. China ............................................................ Gradient ................................................................ NYSERDA ............................................................. CLASP .................................................................. AHAM .................................................................... Friedrich ................................................................ Joint Commenters ................................................. 32 34 35 37 39 40 41 42 43 44 45 Individual. Individual. Individual. Individual. Government. Manufacturer. Efficiency Organization. Efficiency Organization. Trade Association. Manufacturer. Efficiency Organizations. CFA and NCLC ..................................................... 46 Efficiency Organizations. California IOUs ..................................................... 47 Utilities. Rice ....................................................................... GEA ...................................................................... NEEA and NWPCC .............................................. 48 49 50 Individual. Manufacturer. Efficiency Advocates. Climate Commenters. ........................................... 51 Efficiency Advocate Group. 1 The Commenter type comment submitted by this individual did not pertain to room air conditioners. A parenthetical reference at the end of a comment quotation or paraphrase provides the location of the item in the public record.15 III. General Discussion different standard, DOE must consider such factors as the utility of the feature to the consumer and other factors DOE determines are appropriate. (42 U.S.C. 6295(q)) DOE’s NOPR analysis indicated that the current room air conditioner products classes are still appropriate. For further discussion and responses to comments received regarding product classes see section IV.A.1 of this document. expressed in terms of combined energy efficiency ratio (CEER), in Btu/Wh. (See 10 CFR 430.32(b) and 10 CFR part 430, subpart B, appendix F.) C. Technological Feasibility When evaluating and establishing energy conservation standards, DOE divides covered products into product classes by the type of energy used or by capacity or other performance-related features that justify differing standards. In making a determination whether a performance-related feature justifies a EPCA sets forth generally applicable criteria and procedures for DOE’s adoption and amendment of test procedures. (42 U.S.C. 6293) Manufacturers of covered products must use these test procedures to certify to DOE that their product complies with energy conservation standards and to quantify the efficiency of their product. DOE’s current energy conservation standards for room air conditioners are 1. General In each energy conservation standards rulemaking, DOE conducts a screening analysis based on information gathered on all current technology options and prototype designs that could improve the efficiency of the products or equipment that are the subject of the rulemaking. As the first step in such an analysis, DOE develops a list of technology options for consideration in consultation with manufacturers, design engineers, and other interested parties. DOE then determines which of those means for improving efficiency are technologically feasible. DOE considers technologies incorporated in commercially available products or in 2020) and 86 FR 70892 (Dec. 13, 2021). Section 6(a)(2) of appendix A provides that if the DOE determines it is appropriate to proceed with a rulemaking, the preliminary stages of a rulemaking to issue or amend an energy conservation standard that DOE will undertake will be a Framework Document and Preliminary Analysis, or an advance notice of proposed rulemaking. Because this rulemaking was already in progress at the time the relevant amendments to appendix A were published, DOE did not reinitiate the entire rulemaking process. Additionally, the June 2015 RFI presented the issues, analyses, and processes relevant to consideration of amended standards for room air conditioners. 14 Comments are available at www.regulations.gov/document/EERE-2014-BTSTD-0059-0031/comment. 15 The parenthetical reference provides a reference for information located in the docket of DOE’s rulemaking to develop energy conservation standards for room air conditioners. (Docket No. EERE–2014–BT–STD–0059, which is maintained at www.regulations.gov) The references are arranged as follows: (commenter name, comment docket ID number, page of that document). DOE developed this final rule after considering oral and written comments, data, and information from interested parties that represent a variety of interests. The following discussion addresses issues raised by these commenters. A. Product Classes and Scope of Coverage ddrumheller on DSK120RN23PROD with RULES2 Comment No. in the docket Commenter(s) VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 B. Test Procedure PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 E:\FR\FM\26MYR2.SGM 26MYR2 34306 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations working prototypes to be technologically feasible. Sections 6(b)(3)(i) and 7(b)(1) of appendix A to 10 CFR part 430, subpart C (‘‘appendix A’’). After DOE has determined that particular technology options are technologically feasible, it further evaluates each technology option in light of the following additional screening criteria: (1) practicability to manufacture, install, and service; (2) adverse impacts on product utility or availability; (3) adverse impacts on health or safety and (4) unique-pathway proprietary technologies. Section 7(b)(2)–(5) of appendix A. Section IV.B of this document discusses the results of the screening analysis for room air conditioners, particularly the designs DOE considered, those it screened out, and those that are the basis for the standards considered in this final rule. For further details on the screening analysis for this rulemaking, see chapter 4 of the final rule technical support document (‘‘TSD’’). 2. Maximum Technologically Feasible Levels When DOE proposes to adopt an amended standard for a type or class of covered product, it must determine the maximum improvement in energy efficiency or maximum reduction in energy use that is technologically feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the engineering analysis, DOE determined the maximum technologically feasible (‘‘max-tech’’) improvements in energy efficiency for room air conditioners, using the design parameters for the most efficient products available on the market or in working prototypes. The max-tech levels that DOE determined for this rulemaking are described in section IV.C of this final rule and in chapter 5 of the final rule TSD. ddrumheller on DSK120RN23PROD with RULES2 D. Energy Savings 1. Determination of Savings For each trial standard level (‘‘TSL’’), DOE projected energy savings from application of the TSL to room air conditioners purchased in the 30-year period that begins in the year of compliance with the amended standards (2026–2055).16 The savings are measured over the entire lifetime of products purchased in the 30-year analysis period. DOE quantified the energy savings attributable to each TSL as the difference in energy consumption between each standards case and the nonew-standards case. The no-new16 DOE also presents a sensitivity analysis that considers impacts for products shipped in a 9-year period. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 standards case represents a projection of energy consumption that reflects how the market for a product would likely evolve in the absence of amended energy conservation standards. DOE used its national impact analysis (‘‘NIA’’) spreadsheet models to estimate national energy savings (‘‘NES’’) from potential amended standards for room air conditioners. The NIA spreadsheet model (described in section IV.H of this document) calculates energy savings in terms of site energy, which is the energy directly consumed by products at the locations where they are used. For electricity, DOE reports national energy savings in terms of primary energy savings, which is the savings in the energy that is used to generate and transmit the site electricity. For natural gas, the primary energy savings are considered to be equal to the site energy savings. DOE also calculates NES in terms of FFC energy savings. The FFC metric includes the energy consumed in extracting, processing, and transporting primary fuels (i.e., coal, natural gas, petroleum fuels), and thus presents a more complete picture of the impacts of energy conservation standards.17 DOE’s approach is based on the calculation of an FFC multiplier for each of the energy types used by covered products or equipment. For more information on FFC energy savings, see section IV.H.2 of this document. infrastructure can be more pronounced than products with relatively constant demand. In evaluating the significance of energy savings, DOE considers differences in primary energy and FFC effects for different covered products and equipment when determining whether energy savings are significant. FFC effects include the energy consumed in electricity production (depending on load shape), in distribution and transmission, and in extracting, processing, and transporting primary fuels (i.e., coal, natural gas, petroleum fuels), and thus present a more complete picture of the impacts of energy conservation standards. Accordingly, DOE evaluates the significance of energy savings on a caseby-case basis, taking into account the significance of cumulative FFC national energy savings, the cumulative FFC emissions reductions, and the need to confront the global climate crisis, among other factors. As stated, the standard levels adopted in this final rule are projected to result in national energy savings of 1.41 quad, the equivalent of the electricity use of 15 million homes in one year. They are projected to reduce CO2 emissions by 48.5 Mt. Based on these findings, DOE has determined the energy savings from the standard levels adopted in this final rule are ‘‘significant’’ within the meaning of 42 U.S.C. 6295(o)(3)(B). 2. Significance of Savings To adopt any new or amended standards for a covered product, DOE must determine that such action would result in significant energy savings. (42 U.S.C. 6295(o)(3)(B)) The significance of energy savings offered by a new or amended energy conservation standard cannot be determined without knowledge of the specific circumstances surrounding a given rulemaking. For example, the United States has now rejoined the Paris Agreement on February 19, 2021. As part of that agreement, the United States has committed to reducing GHG emissions in order to limit the rise in mean global temperature.18 As such, energy savings that reduce GHG emission have taken on greater importance. Additionally, some covered products and equipment have most of their energy consumption occur during periods of peak energy demand. The impacts of these products on the energy E. Economic Justification 17 The FFC metric is discussed in DOE’s statement of policy and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as amended at 77 FR 49701 (Aug. 17, 2012). 18 See E.O. 14008, 86 FR 7619 (Feb. 1, 2021) (‘‘Tackling the Climate Crisis at Home and Abroad’’). PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 1. Specific Criteria As noted previously, EPCA provides seven factors to be evaluated in determining whether a potential energy conservation standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)(VII)) The following sections discuss how DOE has addressed each of those seven factors in this final rule. a. Economic Impact on Manufacturers and Consumers In determining the impacts of potential amended standards on manufacturers, DOE conducts a manufacturer impact analysis (‘‘MIA’’), as discussed in section IV.J of this document. DOE first uses an annual cash-flow approach to determine the quantitative impacts. This step includes both a short-term assessment—based on the cost and capital requirements during the period between when a regulation is issued and when entities must comply with the regulation—and a long-term assessment over a 30-year period. The industry-wide impacts analyzed include (1) INPV, which values the industry on the basis of expected future cash flows; E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations (2) cash flows by year; (3) changes in revenue and income; and (4) other measures of impact, as appropriate. Second, DOE analyzes and reports the impacts on different types of manufacturers, including impacts on small manufacturers. Third, DOE considers the impact of standards on domestic manufacturer employment and manufacturing capacity, as well as the potential for standards to result in plant closures and loss of capital investment. Finally, DOE takes into account cumulative impacts of various DOE regulations and other regulatory requirements on manufacturers. For individual consumers, measures of economic impact include the changes in LCC and payback period (‘‘PBP’’) associated with new or amended standards. These measures are discussed further in the following section. For consumers in the aggregate, DOE also calculates the national net present value of the consumer costs and benefits expected to result from particular standards. DOE also evaluates the impacts of potential standards on identifiable subgroups of consumers that may be affected disproportionately by a standard. due to a more-stringent standard by the change in annual operating cost for the year that standards are assumed to take effect. For its LCC and PBP analysis, DOE assumes that consumers will purchase the covered products in the first year of compliance with new or amended standards. The LCC savings for the considered efficiency levels (‘‘EL’’) are calculated relative to the case that reflects projected market trends in the absence of new or amended standards. DOE’s LCC and PBP analysis is discussed in further detail in section IV.F of this document. b. Savings in Operating Costs Compared To Increase in Price (LCC and PBP) EPCA requires DOE to consider the savings in operating costs throughout the estimated average life of the covered product in the type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered product that are likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP analysis. The LCC is the sum of the purchase price of a product (including its installation) and the operating cost (including energy, maintenance, and repair expenditures) discounted over the lifetime of the product. The LCC analysis requires a variety of inputs, such as product prices, product energy consumption, energy prices, maintenance and repair costs, product lifetime, and discount rates appropriate for consumers. To account for uncertainty and variability in specific inputs, such as product lifetime and discount rate, DOE uses a distribution of values, with probabilities attached to each value. The PBP is the estimated amount of time (in years) it takes consumers to recover the increased purchase cost (including installation) of a moreefficient product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost d. Lessening of Utility or Performance of Products In establishing product classes, and in evaluating design options and the impact of potential standard levels, DOE evaluates potential standards that would not lessen the utility or performance of the considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data available to DOE, the standards adopted in this document would not reduce the utility or performance of the products under consideration in this rulemaking. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 c. Energy Savings Although significant conservation of energy is a separate statutory requirement for adopting an energy conservation standard, EPCA requires DOE, in determining the economic justification of a standard, to consider the total projected energy savings that are expected to result directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As discussed in section IV.H of this document, DOE uses the NIA spreadsheet models to project national energy savings. e. Impact of Any Lessening of Competition EPCA directs DOE to consider the impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It also directs the Attorney General to determine the impact, if any, of any lessening of competition likely to result from a standard and to transmit such determination to the Secretary within 60 days of the publication of a proposed rule, together with an analysis of the nature and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(ii)) To assist the Department of Justice (‘‘DOJ’’) in making such a determination, DOE transmitted copies of its proposed rule and the NOPR TSD to the Attorney General for review, with a request that the DOJ provide its determination on this issue. PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 34307 In its assessment letter responding to DOE, DOJ concluded that the proposed energy conservation standards for room air conditioners are unlikely to have a significant adverse impact on competition. DOE is publishing the Attorney General’s assessment at the end of this final rule. f. Need for National Energy Conservation DOE also considers the need for national energy and water conservation in determining whether a new or amended standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy savings from the adopted standards are likely to provide improvements to the security and reliability of the Nation’s energy system. Reductions in the demand for electricity also may result in reduced costs for maintaining the reliability of the Nation’s electricity system. DOE conducts a utility impact analysis to estimate how standards may affect the Nation’s needed power generation capacity, as discussed in section IV.M of this document. DOE maintains that environmental and public health benefits associated with the more efficient use of energy are important to take into account when considering the need for national energy conservation. The adopted standards are likely to result in environmental benefits in the form of reduced emissions of air pollutants and greenhouse gases (‘‘GHGs’’) associated with energy production and use. DOE conducts an emissions analysis to estimate how potential standards may affect these emissions, as discussed in section IV.J.3 of this document; the estimated emissions impacts are reported in section V.B.6 of this document. DOE also estimates the economic value of emissions reductions resulting from the considered TSLs, as discussed in section IV.L of this document. g. Other Factors In determining whether an energy conservation standard is economically justified, DOE may consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To the extent DOE identifies any relevant information regarding economic justification that does not fit into the other categories described previously, DOE could consider such information under ‘‘other factors.’’ E:\FR\FM\26MYR2.SGM 26MYR2 34308 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations 2. Rebuttable Presumption As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a rebuttable presumption that an energy conservation standard is economically justified if the additional cost to the consumer of a product that meets the standard is less than three times the value of the first year’s energy savings resulting from the standard, as calculated under the applicable DOE test procedure. DOE’s LCC and PBP analyses generate values used to calculate the effect potential amended energy conservation standards would have on the payback period for consumers. These analyses include, but are not limited to, the 3-year payback period contemplated under the rebuttable-presumption test. In addition, DOE routinely conducts an economic analysis that considers the full range of impacts to consumers, manufacturers, the Nation, and the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The results of this analysis serve as the basis for DOE’s evaluation of the economic justification for a potential standard level (thereby supporting or rebutting the results of any preliminary determination of economic justification). The rebuttable presumption payback calculation is discussed in section IV.F of this final rule. ddrumheller on DSK120RN23PROD with RULES2 IV. Methodology and Discussion of Related Comments This section addresses the analyses DOE has performed for this rulemaking with regard to room air conditioners. Separate subsections address each component of DOE’s analyses. DOE used several analytical tools to estimate the impact of the standards considered in this document. The first tool is a spreadsheet that calculates the LCC savings and PBP of potential amended or new energy conservation standards. The national impacts analysis uses a second spreadsheet set that provides shipments projections and calculates national energy savings and net present value of total consumer costs and savings expected to result from potential energy conservation standards. DOE uses the third spreadsheet tool, the Government Regulatory Impact Model (GRIM), to assess manufacturer impacts of potential standards. These three spreadsheet tools are available on the DOE website for this rulemaking: www.regulations.gov/ docket??D=EERE-2014-BT-STD-0059. Additionally, DOE used output from the latest version of the Energy Information Administration’s (‘‘EIA’s’’) Annual VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 Energy Outlook (‘‘AEO’’) for the emissions and utility impact analyses. A. Market and Technology Assessment DOE develops information in the market and technology assessment that provides an overall picture of the market for the products concerned, including the purpose of the products, the industry structure, manufacturers, market characteristics, and technologies used in the products. This activity includes both quantitative and qualitative assessments, based primarily on publicly available information. The subjects addressed in the market and technology assessment for this rulemaking include: (1) a determination of the scope of the rulemaking and product classes, (2) manufacturers and industry structure, (3) existing efficiency programs, (4) shipments information, (5) market and industry trends, and (6) technologies or design options that could improve the energy efficiency of room air conditioners. The key findings of DOE’s market assessment are summarized in the following sections. See chapter 3 of the final rule TSD for further discussion of the market and technology assessment. 1. Scope of Coverage and Product Classes In the April 2022 NOPR, DOE did not propose any substantive changes to the room air conditioner scope of coverage or product classes, but did propose making clarifying amendments to the product class descriptions. Specifically, DOE proposed to revise the threshold values of cooling capacity in the product class descriptions to the nearest hundred Btu/h that would not exceed the existing thresholds, which is consistent with the cooling capacity delineation used in practice due to the rounding instruction at 10 CFR 429.15(a)(3) so would not impact compliance with current energy conservation standards. The proposed change to the product class delineation would add clarity and consistency amongst two existing regulatory provisions. 87 FR 20608. DOE requested comment on the room air conditioner scope of coverage and product classes. Currently, reversible and one-way products are in separate product classes and are therefore not compared in any analysis conducted by DOE. However, according to the Center for Law and Social Policy (‘‘CLASP’’), taking the efficiency of alternate heating methods into account would allow DOE to treat the reverse cycle in both room and central air conditioners not as a feature meriting its own product class, but as a technology/design option to reduce PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 energy consumption and high energy bills. In this manner, a one-way air conditioner would have the energy consumption of typical furnaces and boilers factored into its annual performance metric, while a reversible air conditioner could eliminate this energy consumption depending on its heating capacity and cold-climate performance potentially leading to energy conservation standards that require the use of reversing capabilities in all air conditioners. (CLASP, No. 42 at p. 2) Room air conditioner energy conservation standards are currently based on the CEER metric, determined in accordance with the DOE test procedure for room air conditioners at appendix F to 10 CFR 430 (‘‘appendix F’’). Appendix F does not currently account for the energy consumption during heating operation, and therefore the CEER metric reflects the energy efficiency of a room air conditioner during cooling mode, and other low power modes. In order to account for the energy cost of alternate heating methods for non-reverse cycle room air conditioners, a test procedure amendment would be necessary to address heating mode performance, which is outside of the scope of this energy conservation standards rulemaking. The Public Utilities recommended that DOE establish new product classes for room air conditioners with reverse cycle and <8,000 British thermal units per hour (‘‘Btu/h’’) and to consider less stringent standards for such product classes so as to not preclude the introduction of such equipment and deprive consumers of any potential consumer utility. The Public Utilities also provided options for potential standards in these suggested product classes, noting that generally efficiencies for room air conditioners with reverse cycle are lower than those without reverse cycle. (Public Utilities, No. 47 at pp. 2–4) DOE is not aware of any room air conditioners currently sold on the market, or any prototypes in development, that meet the criteria outlined by the Public Utilities. DOE is unaware of any data suggesting that the current energy conservation standards preclude the introduction of room air conditioners with reverse cycle capabilities and capacity less than 8,000 Btu/h to the market. Furthermore, the lack of extant products that meet these criteria leaves DOE without the information needed to analyze whether a new product class is necessary. Therefore, DOE is not amending the product class structure at this time to E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations specifically address room air conditioners with reverse cycle capabilities and capacity less than 8,000 Btu/h. DOE is, however, adopting the clarifying amendments to the product class descriptions, originally proposed in the April 2022 NOPR, to align with the rounding instruction at 10 CFR 429.15(a)(3). 2. Technology Options In the NOPR market analysis and technology assessment, DOE identified 34309 22 technology options initially determined to improve the efficiency of room air conditioners, as measured by the DOE test procedure: TABLE IV.1—TECHNOLOGY OPTIONS FOR ROOM AIR CONDITIONERS Increased Heat Transfer Surface Area: 1. Increased heat exchanger surface area (frontal area, fin density and depth of coil). 2. Condenser coil subcooler. 3. Suction line heat exchanger. Increased Heat Transfer Coefficient: 4. Improved fin and tube design. 5. Hydrophilic coating on fins. 6. Microchannel heat exchangers. 7. Spray condensate on condenser coil. Component Improvements: 8. Improved indoor blower and outdoor fan blade design. 9. Improved blower/fan motor design. 10. Improved compressor efficiency. Improved Installation, Insulation, and Airflow: 11. Improved installation materials. 12. Reduced evaporator air recirculation. 13. Reduced thermal bridging and internal air leakage. Part-load Performance: 14. Variable-speed compressors. 15. Variable-speed drive fans and blowers. 16. Thermostatic or electronic expansion valves. 17. Thermostatic cyclic controls. 18. Air and water economizers. Standby Power Improvements: 19. Low standby-power electronics. 20. High frequency switching power supply. Alternative Refrigerants: 21. Significant New Alternatives Policy (‘‘SNAP’’)-approved refrigerants (R–32, R–441A, and R–290). Other Improvements: 22. Washable air filters. ddrumheller on DSK120RN23PROD with RULES2 a. Alternative Refrigerants In the April 2022 NOPR, DOE analyzed R–32 (difluoromethane or HFC–32), R–441A (hydrocarbon blend), and R–290 (propane or HC–290) as potential design options to replace R– 410A to improve unit efficiency. DOE also analyzed the potential impact of implementing these alternative refrigerants on overall system cost and component efficiency. As discussed in chapter 3 of the NOPR TSD, while DOE did find efficiency benefits associated with R–441A and R–290 refrigerants relative to R410A, DOE did not rely upon those alternative refrigerants in the engineering analysis due to practical concerns regarding flammability and availability. DOE did not find reliable evidence of significant efficiency benefits from a change to R–32 refrigerant. However, based on DOE’s expectation that manufacturers are likely to change the primary refrigerant used in room air conditioners to R–32 in response to recent California VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 refrigerant regulations,19 DOE analyzed the efficiency of compressors that use R–32 as part of the technology analysis and implemented these compressors in the engineering analysis in the April 2022 NOPR. NEEA and NWPCC supported the inclusion of R–32 in the engineering analysis because of the potential energy savings, the number of products already using R–32, and the new California refrigerant requirements. In particular, NEEA agreed with the approached used by DOE to incorporate R–32 compressors into the design options used to achieve EL 3. (NEEA and NWPCC, No. 50 at pp. 4–5) NYSERDA also supported DOE’s incorporation of R–32 refrigerants and variable speed 19 The California Air Resources Board (CARB) finalized its rulemaking on Prohibitions on Use of Certain Hydrofluorocarbons in Stationary Refrigeration, Chillers, Aerosols-Propellants, and Foam End-Uses Regulation. See https:// ww2.arb.ca.gov/rulemaking/2020/hfc2020. This regulation prohibits the sale of new room air conditioners with refrigerants with a GWP of 750 or greater in California beginning on January 1, 2023. See chapter 3 of this final rule TSD for additional discussion. PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 compressors across the analysis, and urged DOE to move swiftly toward finalizing this standard to lock in the beneficial impacts as soon as possible. (NYSERDA, No. 41 at p. 3) In this final rule analysis, DOE has maintained its approach to incorporating R–32 from the NOPR analysis. Larsen requested that DOE include calculations on the impacts of alternate refrigerants in room air conditioners in updating the standards of room air conditioners as well as changing DOE’s priorities to include environmental impact and quality of life. Larsen referenced challenges to DOE’s decision not to include refrigerants (R–32, R441A, R–290) approved by the Environmental Protection Agency (EPA) Significant New Alternatives Policy (‘‘SNAP’’) in its engineering analysis, and stated that technological feasibility, predicted costs in the wake of increased value in climate and health benefits, reduced global warming potential compared to the proposed refrigerant R– 410A, and findings by the Oak Ridge National Laboratory that showed E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 34310 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations increased efficiency by around 3 percent warrant the inclusion of these calculations of benefits associated with alternative refrigerants, specifically R– 32. (G. Larsen, No. 37 at pp. 1–4) EPCA requires that DOE focus on the efficiency impacts of various design options, rather than the overall environmental impact. (42 U.S.C. 6295(o)(2)(A)) DOE does consider adverse effects on consumer utility when evaluating technology options. As discussed in chapter 3 of the final rule TSD, DOE found varying reports of the efficiency benefits attributable from the change-over from R–410A to R–32, and as discussed in chapter 5 of the NOPR TSD, opted not to include R–32 specifically as an efficiency option but did include inherent efficiency differences between R–32 compressors and R–410A compressors in the analysis. Due to the varying reports of efficiency impacts and the limitation of scope for this energy conservations standards rulemaking, DOE maintains the same approach as the NOPR, to analyze a change over to R–32 refrigerant so as to utilize the compressor efficiency benefits of R–32 compressors relative to R–410A compressors, without considering specific efficiency benefits attributable to the refrigerant itself. The Association of Home Appliance Manufacturers (AHAM) requested that DOE consider the recent safety testing challenges and safety concerns associated with the charge size of hydrocarbon refrigerants such as R–290 as, according to AHAM, DOE and the Electric Power Research Institute (‘‘EPRI’’) study projecting that use of R– 290 would yield significant efficiency gains fail to take into account the practical considerations that prevent the use of R–290 in room air conditioners. AHAM stated that the safety standard UL 60335–2–40 will likely limit the charge size of hydrocarbon refrigerants such as R–290 to 114 grams due to lab safety concerns, significantly less than the 200–300 grams required for the smallest capacities of room air conditioners according to AHAM. Additionally, AHAM requested that DOE take the concerns of groups representing firefighters and fire services into account and should not rely on R–290 refrigerant to achieve efficiency gains in its analysis. (AHAM, No. 43 at p. 26) In chapter 3 of the NOPR TSD, DOE noted that researchers have observed efficiency benefits associated with using R–290 as a refrigerant. However, DOE understands that this design option is still new to the room air conditioner industry and poses substantial design VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 challenges to meet UL safety standards. DOE did not propose to rely on R–290 refrigerant as a design option in the NOPR analysis and maintained that approach in this final rule. Systemair requested clarification regarding whether R–454B was included in the analysis. (Systemair, Public Meeting Transcript, No. 38 at pp. 15– 16) 20 AHAM disagreed with the potential use of R–454B as a refrigerant as mentioned by Systemair because of considerable cost increases as it is a more expensive refrigerant than R–32, lower efficiency than R–32 compressors, and lack of availability. AHAM recommended that DOE reject the use of R–454B as a technology option. (AHAM, No. 43 at p. 27) Additionally, UL stated that for any refrigerant considered in DOE’s analysis, SNAP approval would be required. (UL, Public Meeting Transcript, No. 38 at pp. 16–17) SNAP approved R–454B for use in residential air conditioning applications, subject to certain use conditions, in a final rule published on May 6, 2021. 86 FR 24444. Therefore, DOE investigated R–454B as a design option for this final rule analysis. DOE did find some efficiency benefit associated with implementation of R– 454B but noted the additional costs associated with the technology and the design and supply challenges that AHAM discussed. The full design option analysis of R–454B can be found in the technology assessment in chapter 3 of the final rule TSD. b. Product Weight AHAM stated that DOE did not sufficiently evaluate the impact of its proposals with respect to product weight, and requested that DOE consider design parameters of 50 or 150 pound weight thresholds for one or two person lifts set by manufacturers for worker safety standards, consumer utility, and other distribution requirements. According to information collected by AHAM from members on their models’ weight and dimension characteristics, AHAM stated that there is a strong relationship between product weight and cooling capacity and claimed that DOE is underestimating the 20 A notation in the form ‘‘Systemair, Public Meeting Transcript, No. 38 at pp. 15–16’’ identifies an oral comment that DOE received on May 3, 2022 during the public meeting, and was recorded in the public meeting transcript in the docket for this test procedure rulemaking (Docket No. EERE–2014–BT– STD–0059–0030). This particular notation refers to a comment (1) made by Systemair during the public meeting; (2) recorded in document number 38, which is the public meeting transcript that is filed in the docket of this energy conservations standards rulemaking; and (3) which appears on pages 15 through 16 of document number 38. PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 change in weight associated with technology options and design required to meet DOE’s proposed standards for a significant number of models in the market. According to AHAM member data, there will likely be significant increase to product weight that exceeds DOE’s identified acceptable limits, and that by generalizing the increase in product weight by product class, DOE is overlooking a significant portion of the market. According to AHAM, this increase in product weight is an ongoing consideration as products are often removed from windows seasonally, and senior citizens who rely on these products will have more difficulty with heavier products. According to member data, AHAM estimated that product weight increases of up to 14.6 pounds for Product Classes 1–3 would be required to meet the proposed standards, with each estimated resulting product weight above the 51-pound threshold determined by DOE as a reasonable upper limit for single-person portability. For Product Class 1, AHAM predicted product weight increases between 21 and 56 percent, compared to DOE’s estimate of 17 to 46 percent. AHAM further estimated weight increases between 7 and 22 percent for Product Classes 3, 4, 5a, 8a, and 16. (AHAM, No. 43 at pp. 19–21) DOE understands that product weight is a concern to consumers, which is why DOE considered the effect on product weight when conducting the engineering analysis. DOE considered weight restrictions only for Product Class 1 because units in Product Class 2 already commonly exceed the 50pound Occupational Safety and Health Administration (OSHA) recommendation for a single-person lift, implying that single-person lifts are not an important consumer attribute for Product Class 2 or for larger units. DOE modeled the potential increases in product weight due to more efficient compressors using compressor weight data from product teardowns. Based on this analysis, DOE expects that manufacturers will be able to preserve single-person lift capability for those products for which it is important to consumers (i.e., units within Product Class 1), as DOE predicts a unit weight increase between 17 and 46 percent for the models in DOE’s teardown sample to achieve the max-tech efficiency level, but in no instance would unit weight exceed 51 pounds. DOE’s analysis indicates that unit weights resulting from higher efficiency level design options that exceed a 150-pound twoperson carry threshold were limited to two product classes, PC 5b and PC 11, E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations where existing units either nearly or already exceed 150 pounds. DOE expects that these large units are already installed primarily with the assistance of professional installers, limiting the impact of increased weight on the consumer utility of these units. B. Screening Analysis DOE uses the following four screening criteria to determine which technology options are suitable for further consideration in an energy conservation standards rulemaking: (1) Technological feasibility. Technologies that are not incorporated in commercial products or in commercially viable, existing prototypes will not be considered further. (2) Practicability to manufacture, install, and service. If it is determined that mass production of a technology in commerical products and reliable installation and servicing of the technology could not be achieved on the scale necessary to serve the relevant market at the time of the projected compliance date of the standard, then that technology will not be considered further. (3) Impacts on product utility. If a technology is determined to have a significant adverse impact on the utility of the product to significant subgroups of consumers or result in the unavailability of any covered product type with performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as products generally available in the United States at the time, it will not be considered further. (4) Safety of technologies. If it is determined that a technology would have significant adverse impacts on health or safety, it will not be considered further. (5) Unique-pathway proprietary technologies. If a technology has proprietary protection and represents a unique pathway to achieving a given efficiency level, that technology will not be considered further due to the potential for monopolistic concerns. Sections 6(b)(3) and 7(b) of appendix A. In sum, if DOE determines that a technology, or a combination of technologies, fails to meet one or more of the listed five criteria, it will be excluded from further consideration in the engineering analysis. The reasons for eliminating any technology are discussed in the following sections. The subsequent sections include comments from interested parties pertinent to the screening criteria, DOE’s evaluation of each technology option against the screening analysis criteria, and whether DOE determined that a technology option should be excluded (‘‘screened out’’) based on the screening criteria. 1. Screened-Out Technologies In the April 2022 NOPR, DOE proposed screening out air and water economizers and suction-line heat exchangers in the screening analysis, based on their negative impacts on product utility to consumers and on manufacturing impracticality. AHAM requested that DOE screen out installation materials like accordion side-curtains as there is no way to account for the energy savings according to the existing test procedure given that these features are not installed in the calorimeter during efficiency testing. AHAM also requested that DOE screen out the use of an extended polystyrene (EPS) panel as a technology option as the test procedure will not capture any efficiency gains given that calorimeters are balanced to avoid high differential pressure, which is the source of efficiency gains for this technology option. Additionally, AHAM stated that an EPS panel may conflict with the effectiveness of other technology options such as the condenser coil subcooler and increased heat transfer area. Further, AHAM stated that as most units on the market already use washable air filters, this technology option will not result in significant energy savings or efficiency gains. (AHAM, No. 43 at pp. 27–28) While the DOE test procedure does not account for the efficiency effects of installation materials (e.g., side-curtains, EPS panels, washable air filters), the technologies still meet the screening criteria, in that they are technically feasible, widely used and not a barrier to availability, manufacturing, installation, or service, do not pose a risk to health, and are not a proprietary technology. Therefore, DOE did not screen out installation materials at this stage. DOE notes that, as discussed in chapter 5 of the NOPR TSD, installation materials were not a design option used to construct efficiency levels for this analysis. 2. Remaining Technologies Through a review of each technology, DOE concluded that all of the other identified technologies listed in section IV.B.2 of this document met all five screening criteria to be examined further as design options in DOE’s final rule analysis. In summary, DOE did not screen out the following technology options: Table IV.2 displays the design options retained for the engineering analysis. ddrumheller on DSK120RN23PROD with RULES2 TABLE IV.2—RETAINED DESIGN OPTIONS Increased Heat Transfer Surface Area: 1. Increased heat exchanger surface area (frontal area, fin density and depth of coil). 2. Condenser coil subcooler. Increased Heat Transfer Coefficient: 3. Improved fin and tube design. 4. Hydrophilic coating on fins. 5. Microchannel heat exchangers. 6. Spray condensate on condenser coil. Component Improvements: 7. Improved indoor blower and outdoor fan blade design. 8. Improved blower/fan motor design. 9. Improved compressor efficiency. Improved Installation, Insulation, and Airflow: 10. Improved installation materials. 11. Reduced evaporator air recirculation. 12. Reduced thermal bridging and internal air leakage. Part-load Performance: 13. Variable-speed compressors. 14. Variable-speed drive fans and blowers. 15. Thermostatic or electronic expansion valves. 16. Thermostatic cyclic controls. Standby Power Improvements: 17. Low standby-power electronics. 18. High-frequency switching power supply. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 34311 E:\FR\FM\26MYR2.SGM 26MYR2 34312 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE IV.2—RETAINED DESIGN OPTIONS—Continued Alternative Refrigerants: 19. SNAP-approved refrigerants (R–32, R–441A and R–290). Other Improvements: 20. Washable air filters. DOE determined that these technology options are technologically feasible because they are being used or have previously been used in commercially-available products or working prototypes. DOE also finds that all of the remaining technology options meet the other screening criteria (i.e., practicable to manufacture, install, and service and do not result in adverse impacts on consumer utility, product availability, health, or safety). For additional details, see chapter 4 of the final rule TSD. ddrumheller on DSK120RN23PROD with RULES2 C. Engineering Analysis The purpose of the engineering analysis is to establish the relationship between the efficiency and cost of room air conditioners. There are two elements to consider in the engineering analysis; the selection of efficiency levels to analyze (i.e., the ‘‘efficiency analysis’’) and the determination of product cost at each efficiency level (i.e., the ‘‘cost analysis’’). In determining the performance of higher-efficiency products, DOE considers technologies and design option combinations not eliminated by the screening analysis. For each product class, DOE estimates the baseline cost, as well as the incremental cost for the product/ equipment at efficiency levels above the baseline. The output of the engineering analysis is a set of cost-efficiency ‘‘curves’’ that are used in downstream analyses (i.e., the LCC and PBP analyses and the NIA). 1. Efficiency Analysis DOE typically uses one of two approaches to develop energy efficiency levels for the engineering analysis: (1) relying on observed efficiency levels in the market (i.e., the efficiency-level approach), or (2) determining the incremental efficiency improvements associated with incorporating specific design options to a baseline model (i.e., the design-option approach). Using the efficiency-level approach, the efficiency levels established for the analysis are determined based on the market distribution of existing products (in other words, based on the range of efficiencies and efficiency level ‘‘clusters’’ that already exist on the market). Using the design option approach, the efficiency levels established for the analysis are VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 determined through detailed engineering calculations and/or computer simulations of the efficiency improvements from implementing specific design options that have been identified in the technology assessment. DOE may also rely on a combination of these two approaches. For example, the efficiency-level approach (based on actual products on the market) may be extended using the design option approach to interpolate to define ‘‘gap fill’’ levels (to bridge large gaps between other identified efficiency levels) and/or to extrapolate to the ‘‘max-tech’’ level (particularly in cases where the ‘‘maxtech’’ level exceeds the maximum efficiency level currently available on the market). In this rulemaking, DOE relied on a combination of these two approaches. For each product class, DOE analyzed a few units from different manufacturers to ensure the analysis was representative of various designs on the market. The analysis involved physically disassembling commercially available products, reviewing publicly available cost information, and modeling equipment cost. From this information, DOE estimated the manufacturer production costs (‘‘MPCs’’) for a range of products currently available on the market. DOE then considered the design options manufacturers would likely rely on to improve product efficiencies. From this information, DOE estimated the cost and efficiency impacts of incorporating specific design options at each efficiency level. DOE analyzed six efficiency levels as part of the engineering analysis: (1) The current DOE standard (baseline); (2) an intermediate level above the baseline but below the ENERGY STAR level, either halfway between the two or at a level where a number of models were certified (EL 1); (3) the ENERGY STAR efficiency criterion (EL 2); (4) the efficiency attainable by a unit with the most efficient R–32 single-speed compressor on the market (EL 3); (5) an intermediate level representing the efficiency of variable-speed units on the market, as tested by DOE using the recently amended test procedure (EL 4); and (6) the maximum technologically feasible (max-tech) efficiency (EL 5). In evaluating the technologies manufacturers could use to achieve the PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 analyzed efficiency levels, DOE considered design options which made the largest impact on unit efficiency and for which the cost-efficiency relationship was well defined. Accordingly, DOE implemented increased heat exchanger area, condenser coil subcoolers, improved blower motor efficiency, improved compressor efficiency, variable-speed compressors, and low standby-power electronic controls as design options, some or all of which were used to estimate the cost required to reach each efficiently level. DOE did not consider in its analysis certain technologies that met the screening criteria but that DOE was unable to evaluate for one or more of the following reasons: (1) Data were not available to evaluate the energy efficiency characteristics of the technology, (2) available data suggested that the efficiency benefits of the technology are negligible, and (3) certain technologies cannot be measured according to the conditions and methods specified in the existing test procedure. Further information on how the design options were chosen and implemented in the engineering analysis is available in chapter 5 of the final rule TSD. a. Baseline Efficiency/Energy Use For each product/equipment class, DOE generally selects a baseline model as a reference point for each class, and measures changes resulting from potential energy conservation standards against the baseline. The baseline model in each product/equipment class represents the characteristics of a product/equipment typical of that class (e.g., capacity, physical size). Generally, a baseline model is one that just meets current energy conservation standards, or, if no standards are in place, the baseline is typically the most common or least efficient unit on the market. Of the 48 total units DOE selected for analysis in this rulemaking, 19 of them were baseline units that fell within 12 of the 16 room air conditioner product classes and served as reference points for each analyzed product class. DOE used these reference points to assess the effects of amended energy conservation standards, which in turn support the engineering, LCC, and PBP analyses. The baseline units in each of the analyzed product classes represent the E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES2 basic characteristics of equipment in that class. b. Higher Efficiency Levels DOE considered five efficiency levels (‘‘ELs’’) above the baseline for this analysis. As discussed in chapter 5 of the final rule TSD, DOE modeled EL 1, EL 2, and EL 3 by analyzing the cost and efficiency impacts of implementing improved single-speed compressors. DOE also analyzed the impact of implementing tube-only or tube-and-fin subcoolers at EL 3 if the analyzed unit did not already have one. At EL 4, DOE considered the efficiency impacts of variable-speed compressors already available on the market and replacing permanent split capacitor (‘‘PSC’’) fan motors with more efficient electronically commutated motors (‘‘ECMs’’). As part of DOE’s analysis, the maximum available efficiency level is the highest efficiency unit currently available on the market. DOE also defines a ‘‘max-tech’’ efficiency level to represent the maximum possible efficiency for a given product. As discussed in chapter 5 of the final rule TSD, for the max-tech level, DOE modeled replacing single-speed compressors with the maximum efficiency variable-speed compressors available, reducing standby power to the minimum observed in DOE’s teardown sample, and increasing the cabinet and heat exchanger to the largest feasible sizes to improve efficiency. For all product classes, the max-tech level identified for EL 5 exceeds any other regulatory or voluntary efficiency criteria currently in effect in the United States. The max-tech level is based entirely on modeled combinations of design options that have not yet been combined in a commercially available room air conditioner. Notably, while the key design option implemented at max-tech, variable-speed compressors, is also considered at EL 4, the significant difference between the two is the level of variable-speed compressor efficiency being considered. At EL 4, DOE considers the variable-speed compressors currently implemented in room air conditioners on the market today, for which performance has been characterized through testing. At EL 5, DOE is considering the highest efficiency variable-speed compressor identified in compressor catalogs, which are not currently implemented in room air conditioner models on the market today or in prototypes. Therefore, the efficiency level at max-tech, EL 5, for each product class is a numerical estimation for the theoretical VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 implementation of the highest efficiency variable-speed compressors. Furthermore, the DOE room air conditioner test procedure measures variable-speed unit performance differently than test procedures for other air conditioning products, so limited performance and efficiency data are available for the most efficient examples of this emergent technology for room air conditioners. Additionally, the most efficient variable-speed compressors that DOE identified in compressor catalogs that were implemented in the analysis at the max-tech efficiency level are manufactured by one manufacturer and have rated Energy Efficiency Ratios (‘‘EERs’’) between 11.2 and 11.7 Btu/ Wh, with a range of rated capacities between 4,705 Btu/h and 16,170 Btu/h. Given the lack of information regarding availability of these highest efficiency variable-speed compressors, and the limited number of variable-speed compressors rated at or near the compressors considered for the maxtech efficiency level, there may not be widespread availability of these highefficiency variable-speed compressors. Gradient stated that EL 4 accurately represents an intermediate efficiency level that represents the efficiency of variable-speed units on the market. According to Gradient, variable-speed compressors for room air conditioners with a capacity greater than 8,000 Btu/ h are at this time a mature technology that is available from most manufacturers, and the technology needed for implementing variable-speed drives is no longer specialized. Therefore, Gradient strongly supported the proposal of EL 4 as the minimum efficiency level for room air conditioners with a capacity greater than 8,000 Btu/h. (Gradient, No. 40 at p. 2) NEEA and NWPCC also supported the new EL 4 level representing the efficiency of variable-speed units on the market below max tech. (NEEA and NWPCC, No. 50 at p. 5) DOE agrees with Gradient that multiple units with cooling capacities greater than 8,000 Btu/h from several manufacturers employing variablespeed compressors are now available on the market. Further, DOE concludes that variable-speed compressors with efficiencies higher than those currently observed on the market are technically feasible, but there is uncertainty as to whether they would be available in the quantities that would be required to implement them on the necessary scale at the time that compliance with the standards being adopted in this final rule will be required. PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 34313 In their comments, NEEA and NWPCC expressed disappointment in the reduction of EL 3 CEER from the preliminary analysis to the NOPR analysis because of the significant costeffective national energy savings achievable by using high efficiency single-speed compressors. However, they agreed with the methodology used to reach the change, as they recognize that the reduction in maximum singlespeed compressor efficiency to 12.7 Btu/ Wh was based on a comprehensive survey of available compressors and accounted for the changeover to R–32 refrigerant. (NEEA and NWPCC, No. 50 at p. 5) DOE is not making any changes to EL 3 in this final rule analysis, retaining the reduction in maximum single-speed compressor efficiency to 12.7 Btu/Wh as discussed in the NOPR. AHAM requested clarification regarding DOE’s conclusion that some of the technology options would not result in changes to chassis size and weight. (AHAM, Public Meeting Transcript, No. 38 at pp. 26–27) P.R. China stated that the proposed increases to efficiency ranging from 20 to 50 percent depending on the product class are unreasonable due to size, weight, and cost concerns and instead recommended controlling the increase in standards of each product class to about 15 percent. According to P.R. China, the upgrading technology paths introduced in the April 2022 NOPR would lead to increased costs and size of chassis associated with the proposed energy efficiency levels, and can lead to increased burden on consumers, and increased carbon emissions in the production process. Therefore, P.R. China suggests optimizing the proposed standards to reduce potential impacts on the supply chain. (P.R. China, No. 39 at pp. 3–4) Friedrich also indicated that based on its industry experience, EL 3 would require room air conditioner chassis to be enlarged and become heavier, due, in substantial part, to increased heat exchanger cross-sectional area and compressor size. (Friedrich, No. 44 at p. 5) According to AHAM, DOE underestimated the impacts that the considered technology options will have on chassis size, specifically with adoption of variable-speed compressors, feasible chassis width, and installation impacts/costs. AHAM stated that DOE should evaluate the space needed for compressor controls and transformers when considering the space needed for variable-speed compressors, as these additional components may not fit into existing sleeve sizes. Additionally, AHAM stated that at the proposed E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 34314 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations amended standard levels, chassis sizes will increase significantly to greater than DOE’s estimated maximum feasible chassis width and therefore DOE is underestimating a significant portion of the market. AHAM presented percent changes to product dimensions based on member data that ranged from 6 to 15 percent in height, 2 to 19 percent in width, and 2 to 21 percent in depth across Product Classes 1, 2, 3, 4, and 16. AHAM indicated that these increased dimensions would lead to more efficient room air conditioners that are potentially incompatible with older buildings, and would require either reinstallation, changes to the building’s infrastructure, or purchase of secondhand less efficient products that do fit windows in these older buildings leading to negative health impacts for low income consumers and those in underserved communities. AHAM also stated that with increased chassis sizes and weight, there will be the potential for an increase in packaging and structural robustness costs to ensure the product is not damaged during transport and to ensure the product passes the drop tests requirement outlined in UL 60335–2–40, Annex GG. AHAM requested that DOE update its analysis according to the information provided. (AHAM, No. 43 at pp. 21–23) Friedrich disputed the technological feasibility of increasing compressor efficiency to the levels DOE used to model EL 3 and EL 4. Friedrich stated that it was unable to source a singlespeed compressor that would achieve EL 3 with an EER of 12.7 Btu/h and that the most efficient single-speed compressor it was able to source has an EER of 10.8 Btu/h. Friedrich added that it was also unable to source a variablespeed compressor with an EER of 13.2 Btu/h, though Friedrich did not provide any information about the variablespeed compressors that are available to them. (Friedrich, No. 52 at p. 2) DOE identified the highly efficient compressors used in the design analysis in rotary compressor catalogues from companies that typically provide compressors for room air conditioners. The highest efficiency compressors available on the market used R–32 refrigerant. DOE incorporated only those compressors rated at American Society of Heating, Refrigerating, and AirConditioning Engineers (‘‘ASHRAE’’) test conditions in this analysis. On this basis, DOE concluded that these higher efficiency compressors would be an available option for increasing the efficiency of room air conditioners subject to the amended standards, including those discussed in Friedrich’s comments. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 DOE’s analysis indicates that manufacturers should not need to increase chassis sizes in order to implement variable-speed compressors at EL 4. DOE has observed that compressor controls and transformers do not require additional chassis size; room air conditioners with variablespeed compressors currently on the market have similar or smaller chassis sizes compared to their equivalent single-speed counterparts, as discussed further in chapter 5 of the final rule TSD. With respect to more robust packaging, DOE agrees that as chassis sizes increase, additional packaging is needed. Therefore, DOE has altered the NOPR analysis to incorporate an incremental cost for packaging into its engineering analysis at max-tech, where DOE modeled chassis size increases. As a part of the engineering analysis, DOE considered the weight increases associated with each design option for which a substantive weight impact was expected. Those design options included changes to the compressor efficiency, implementation of variablespeed compressors, and adjustments to the heat exchangers (including subcoolers) and resulting chassis size changes, which are discussed in detail both in this document and in chapters 3 and 5 of the final rule TSD. DOE determined that there is sufficient room in the chassis to swap a more efficient compressor of similar overall size and configuration, and therefore would not impact the overall size of the room air conditioner, unlike increases to the heat exchanger which would necessarily increase the model’s overall size. In that way, DOE considered the changes to a model’s overall size and weight resulting from implementing design options at each efficiency level. GEA indicated that, in order to meet the EL 3 requirements, either a variable-speed compressor or a large chassis size increase would be required, while DOE modeled the cost of meeting this efficiency level using only component replacements and a single-speed compressor. (GEA, No. 49 at pp.1–2) While manufacturers may elect to either implement variable-speed compressors or increase chassis size as a means to reach EL 3, DOE’s analysis shows that the most efficient singlespeed compressor alone can allow room air conditioners to reach EL 3. As DOE’s analysis estimates that manufacturers are likely to use the most cost-effective design options, DOE modeled EL 3 using the most efficient single-speed compressors instead of other possible design options. Friedrich suggested that compressor data found in catalogues would be better PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 if averaged rather than selecting the most efficient data for DOE’s analysis, given that manufacturers may not always be able to implement the best compressors in their products. (Friedrich, Public Meeting Transcript, No. 38 at pp. 18–19) EPCA requires DOE to adopt the maximum standards that are both technically justified and economically feasible. (42 U.S.C. 6295(o)(2)(A)) When assessing efficiency levels, and in particular the maximum technologically feasible room air conditioner efficiency level, DOE considered the compressor with the maximum available efficiency, based on product literature, to determine the limits of technical feasibility in room air conditioner compressors. Using an average would not provide DOE with the maximum technologically feasible result, though DOE notes that when considering efficiency levels above baseline and below max-tech, compressors of various efficiency were assessed and implemented in the analysis. Gradient requested clarification regarding the evaporating and condensing temperature test conditions used to characterize compressor efficiency in catalogue data surveyed by DOE. (Gradient, Public Meeting Transcript, No. 38 at pp. 17–18) In developing the engineering analysis, DOE considered compressors for which performance data were available in accordance with ASHRAE or Air Conditioning, Heating, & Refrigeration Institute test conditions, which use a condenser temperature of 54.4 °C and an evaporation temperature of 7.2 °C. These compressor test conditions are an industry standard, and are commonly used in characterizing and determining relative compressor efficiency improvements. Friedrich stated that most of the technology options in DOE’s analysis, such as a suction line heat exchanger, do not offer any benefit for the refrigerant used, or have already been used to maximize efficiency like with condenser coil subcoolers, and direct current (DC) fan and blower motors. Friedrich also stated that microchannel heat exchangers may not be appropriate for R–32 applications where minimizing leakage is paramount, as such heat exchangers have issues with galvanic corrosion. (Friedrich, No. 44 at p. 9) As discussed in chapters 3 and 5 of the final rule TSD, DOE evaluates each technology option for its potential efficiency benefit. However, when developing the engineering analysis, DOE typically focuses on design options with substantial impact on efficiency that DOE expects manufacturers would E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations implement in their designs to improve efficiency. In the case of condenser coil subcoolers, while DOE did find that most units implemented some form of this technology, DOE identified different types of subcoolers with varying efficiency benefits, and therefore retained subcoolers as a design option for those units for which efficiency improvements using a subcooler or improved subcooler design were feasible. In the case of fan and blower motors, DOE identified ECM motor technology as a potential improvement over the commonly implemented PSC motors, and considered the improvement at the two highest efficiency levels. DOE did not consider the implementation of microchannel heat exchangers as a design option for the engineering analysis due to the high cost and lack of room air conditioner applicationspecific efficiency data. NEEA and NWPCC stated that they could provide data on the costeffectiveness of high efficiency models. (NEEA and NWPCC, No. 50 at p. 4) DOE did not receive any additional information from NEEA and NWPCC on high efficiency models ahead of this final rule. ddrumheller on DSK120RN23PROD with RULES2 2. Cost Analysis The cost analysis portion of the engineering analysis is conducted using one or a combination of cost approaches. The selection of cost approach depends on a suite of factors, including the availability and reliability of public information, characteristics of the regulated product, the availability and timeliness of purchasing the product on the market. The cost approaches are summarized as follows: • Physical teardowns: Under this approach, DOE physically dismantles a commercially available product, component-by-component, to develop a detailed bill of materials for the product. • Catalog teardowns: In lieu of physically deconstructing a product, DOE identifies each component using parts diagrams (available from manufacturer websites or appliance repair websites, for example) to develop the bill of materials for the product. • Price surveys: If neither a physical nor catalog teardown is feasible (for example, for tightly integrated products such as fluorescent lamps, which are infeasible to disassemble and for which parts diagrams are unavailable) or costprohibitive and otherwise impractical (e.g. large commercial boilers), DOE conducts price surveys using publicly available pricing data published on major online retailer websites and/or by VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 soliciting prices from distributors and other commercial channels. In the present case, DOE conducted the analysis using physical teardowns. The resulting bill of materials (‘‘BOM’’) provides the basis for the MPC estimates. DOE estimated the cost of the highest efficiency single-speed and variable-speed compressors implemented in EL3 and EL 5, respectively, by extrapolating the costs from price surveys of other compressors. DOE used this approach because, as discussed previously, DOE is not aware of these most efficient single-speed and variable-speed compressors being implemented in any available room air conditioners to date. To account for manufacturers’ nonproduction costs and profit margin, DOE applies a multiplier (the manufacturer markup) to the MPC. The resulting manufacturer selling price (‘‘MSP’’) is the price at which the manufacturer distributes a unit into commerce. DOE developed an average manufacturer markup by examining the annual Securities and Exchange Commission (‘‘SEC’’) 10–K reports 21 filed by publicly-traded manufacturers primarily engaged in appliance manufacturing and whose combined product range includes room air conditioners. Chapter 12 of the final rule TSD provides additional information on the manufacturer markup. 3. Cost-Efficiency Relationship The results of the engineering analysis are presented as cost-efficiency data for each of the efficiency levels for each of the product classes that were analyzed, as well as those extrapolated from a product class with similar cooling capacity and features. DOE developed estimates of MPCs for each unit in the teardown sample, and also performed additional modeling for each of the teardown samples, to develop a comprehensive set of MPCs at each efficiency level. DOE then consolidated the resulting MPCs for each of DOE’s teardown units and modeled units using a weighted average for product classes in which DOE analyzed units from multiple manufacturers. DOE’s weighting factors were based on a market penetration analysis for each of the manufacturers within each product class. The resulting weighted-average incremental MPCs (i.e., the additional costs manufacturers would likely incur by producing room air conditioners at each efficiency level compared to the 21 U.S. Securities and Exchange Commission, Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Available at www.sec.gov/edgar/ search/ (last accessed September 7, 2022). PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 34315 baseline) are provided in Tables 5.5.5 and 5.5.6 in chapter 5 of the final rule TSD. See chapter 5 of the final rule TSD for additional detail on the engineering analysis. Gradient agreed with the incremental cost for Product Classes 1 through 5b including the expected trend of increased cost for higher capacity units, but stated that the incremental cost for variable-speed compressor technology should depend only on the capacity of the system, and as such, Gradient recommended applying the incremental costs for Product Classes 1 through 5b to systems of similar capacity in other product classes. (Gradient, No. 40 at p. 2) DOE based its incremental costs for each product class on data derived from teardowns of units in that product class and a design option analysis. The differences in incremental costs observed between non-louvered and louvered units are not due to differences in cost estimates for the variable-speed compressor design option, but inherent differences in incremental cost estimates for a particular configuration. These inherent differences in incremental costs are driven by differences in design and component types, as shown by DOE’s teardown analysis, as discussed in further detail in chapter 5 of the final rule TSD. AHAM stated that reducing energy consumption in room air conditioners requires balancing multiple tradeoffs between cost, functional performance, and energy efficiency among numerous components, with different mixes of technology for each product platform. Accordingly, AHAM stated that manufacturers have therefore selected virtually all of the viable technologies across their product lines and requested that DOE recognize that there is limited new technology that would allow for significant per-unit reduction in energy consumption in room air conditioners and that the more radical or comprehensive the design change, the more likely that retooling is necessary and, thus, the greater the product cost increase and capital investment requirement. AHAM concluded that while there may be declining costs over time associated with energy efficient components, these are due to changes in productivity and/or value engineering that is independent of energy efficiency. (AHAM, No. 43 at pp. 18–19) While DOE recognizes that manufacturers face tradeoffs regarding cost, performance, and efficiency, DOE identified several feasible technologies for improving product efficiency across product lines that have only been implemented in a few room air E:\FR\FM\26MYR2.SGM 26MYR2 34316 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations conditioner models to date, such as variable-speed compressors and ECM fan motors. DOE’s analysis in this final rule takes into account costs associated with retooling and capital investments when determining economic justification. See section IV.J.2.c of this document for a description of the conversion cost methodology. ddrumheller on DSK120RN23PROD with RULES2 4. Consumer Utility According to AHAM, consumers may elect to use window units in wall sleeves because higher capacity through-the-wall room air conditioners are already more costly, larger, and heavier than their window counterparts, which may limit efficiency gains and even lead to safety concerns due to inadequate cooling of high-pressure components. AHAM requested that DOE avoid this result not only because it undercuts energy conservation savings goals, but also because it increases safety risks for consumers, with a disproportionate burden on lower income and underserved communities. (AHAM, No. 43 at pp. 22–23) In its analyses, DOE assumes that consumers will install products according to manufacturer instructions and that they will not install units in an unsafe manner. DOE has no information from which to estimate the potential efficiency effects of the incorrect installation described. D. Markups Analysis The markups analysis develops appropriate markups (e.g., retailer markups, distributor markups, contractor markups) in the distribution chain and sales taxes to convert the MSP estimates derived in the engineering analysis to consumer prices, which are then used in the LCC and PBP analysis. At each step in the distribution channel, companies mark up the price of the product to cover business costs and profit margin. In the April 2022 NOPR, DOE assumed the main party in the distribution chain after manufacturers was retailers. Friedrich requested additional details regarding the assumption that 100 percent of room air conditioners sales occur through the retail distribution channel. (Friedrich, Public Meeting Transcript, No. 38 at p. 29) Unlike other larger space cooling equipment that require additional ductwork or installation materials, DOE was unable to find data suggesting that room air conditioners require a general or mechanical contractor for installation. In the absence of data or additional comment provided by stakeholders, DOE maintains the VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 assumption in this final rule that 100 percent of sales occur through the retail distribution channel. DOE developed baseline and incremental markups for each actor in the distribution chain. Baseline markups are applied to the price of products with baseline efficiency, while incremental markups are applied to the difference in price between baseline and higher-efficiency models (the incremental cost increase). The incremental markup is typically less than the baseline markup and is designed to maintain similar per-unit operating profit before and after new or amended standards.22 DOE relied on economic data from the U.S. Census Bureau to estimate average baseline and incremental markups. Specifically, DOE used the 2017 Annual Retail Trade Survey for the ‘‘electronics and appliance stores’’ sector to develop retailer markups.23 Chapter 6 of the final rule TSD provides details on DOE’s development of markups for room air conditioners. E. Energy Use Analysis The purpose of the energy use analysis is to determine the annual energy consumption of room air conditioners at different efficiencies in representative U.S. single-family homes, multi-family residences, and commercial buildings, and to assess the energy savings potential of increased room air conditioner efficiency. The energy use analysis estimates the range of energy use of room air conditioners in the field (i.e., as they are actually used by consumers). The energy use analysis provides the basis for other analyses DOE performed, particularly assessments of the energy savings and the savings in consumer operating costs that could result from adoption of amended or new standards. To estimate annual room air conditioner usage and energy consumption in the April 2022 NOPR, DOE first calculated the number of operating hours in cooling mode for each room air conditioner in the residential and commercial samples using the reported energy use for room air conditioning in the EIA’s Residential Energy Consumption Survey (‘‘RECS’’) 22 Because the projected price of standardscompliant products is typically higher than the price of baseline products, using the same markup for the incremental cost and the baseline cost would result in higher per-unit operating profit. While such an outcome is possible, DOE maintains that in markets that are reasonably competitive it is unlikely that standards would lead to a sustainable increase in profitability in the long run. 23 U.S. Census Bureau, Annual Retail Trade Survey. 2017. www.census.gov/programs-surveys/ arts.html. PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 2015 24 and Commercial Building Energy Consumption Survey (‘‘CBECS’’) 2012,25 along with historical estimates of the EER of the room air conditioner(s) in each sample home or building. DOE based the latter on the reported age (or simulated age) of the unit and historical data on shipment-weighted average EER. AHAM questioned the accuracy of the RECS data more generally, pointing to several sources of potential error or uncertainty within the dataset. (AHAM, No. 43 at pp. 8–10) RECS represents the largest available data-set of installed residential appliance stock that is designed to be nationally representative.26 Although there may be error or uncertainty in household responses, as in any survey, there is no evidence that responses to any of the questions regarding room air conditioners suffers from a systematic bias that would impact the energy use or LCC analysis. Additionally, the RECS end use energy consumption data, used is the energy use analysis, is derived from household energy bills provided by respondents and is an exact measurement that is not subject to response error from the household. The RECS end-use estimates are based on an engineering approach and calibrated based on the relative uncertainties of and correlations between the end uses.27 A study comparing field-energy estimates from the Pecan Street Project 28 to end-use estimates from RECS found good agreement between the air conditioning, water heating, and refrigerator consumption estimates as a fraction of the whole-home energy.29 Although the authors found that the total energy consumption by end use was higher in RECS households, the authors attribute the difference to selection bias associated with the volunteer households within the Pecan Street dataset. For this final rule, DOE maintains that the RECS dataset 24 U.S. Department of Energy–Energy Information Administration. Residential Energy Consumption Survey. 2015. www.eia.gov/consumption/ residential/data/2015/. 25 U.S. Department of Energy–Energy Information Administration. Commercial Buildings Energy Consumption Survey. 2012. www.eia.gov/ consumption/commercial/data/2012/. 26 www.eia.gov/consumption/residential/reports/ 2015/comparison/index.php. 27 Energy Information Administration. RECS 2015 Consumption and Expenditures Technical Documentation Summary. www.eia.gov/ consumption/residential/reports/2015/ methodology/pdf/2015C&EMethodology.pdf (last accessed September 12, 2022). 28 www.pecanstreet.org/dataport/. 29 Brock Glasgo, Chris Hendrickson, Ine ˆ s M.L. Azevedo. Using advanced metering infrastructure to characterize residential energy use. The Electricity Journal, Volume 30, Issue 3, 2017, Pages 64–70. E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations provides the most reasonable, nationally representative estimate for room air conditioner energy consumption in the U.S. AHAM and Friedrich stated that it appears highly likely that DOE has overestimated the cooling hours substantially based on end-use energy consumption estimates from RECS 2015, and thus the energy usage and related potential savings from more efficient room air conditioners. (AHAM, No. 43, at p. 8; Friedrich, No. 44 at pp. 7–8) According to AHAM, in many, if not most cases, room air conditioners are not thermostat-driven, load-following but, rather, are turned on and off by users as required, and assuming a loadfollowing pattern substantially overstates the number of hours a room air conditioner is actually on.30 AHAM believes it to be more common that room air conditioners are turned on and off by user choice such as when it is especially hot or when a room is occupied, and that the usage hours in that control mode are likely to be much lower than estimates based on load modeling. In support of this point, AHAM stated that in the RECS data, nearly half the respondents report turning on their room air conditioners only when needed and an additional 17 percent adjust the temperature manually, while only 30 percent report setting one temperature and leaving the unit as is. DOE acknowledges that the statistical nature of the RECS end-use load analysis includes some uncertainty, but maintains that the RECS end-use energy consumption estimates remain the best available dataset for determining the hours of operation associated with room air conditioners. DOE notes that the responses within the household survey portion of RECS for room air conditioner usage do not necessarily imply higher or lower usage relative to DOE’s estimates from RECS energy consumption data. For example, respondents that turn their unit on and off manually could potentially use their unit more than expected based only on cooling load-based operation. DOE performed a sensitivity analysis to estimate the potential impact of overestimating operating hours for households that turn their unit on and off as needed. For this sensitivity analysis, DOE reduced the operating hours by half for households reported in RECS as turning their unit on and off as needed. Although energy savings are reduced due to the overall lower operating hours in this sensitivity analysis, the average LCC savings remains positive for all product classes at the adopted TSL with a majority of consumers receiving a net benefit. The average shipment-weighted LCC savings are $62 (relative to $85 in the reference case) and 25% of consumers are impacted negatively (relative to 17 percent in the reference case). As noted above, the assumption of reduced usage associated with household that manually turn their unit on or off is a conservative assumption given that these households could potentially use their unit more than estimated based cooling-load based operation. See appendix 8F of the final rule TSD for the full results of the analysis. AHAM and Friedrich stated that portable air conditioners are a more appropriate analog for room air conditioner usage rather than assuming a cooling load-driven model, since both products are used as a last resort to meet a specific need and suggested DOE base operating hours on a field-metering study of portable air conditioners. (AHAM, No. 43 at p. 13; Friedrich, No. 44 at p. 8) The portable air conditioner fieldmetering study referenced by AHAM and Friedrich analyzed only 19 units for less than a full cooling season.31 As stated in the report itself, given the limited number of test sites in two locations in the Northeast, the study was not intended to be statistically representative of portable air conditioner (‘‘AC’’) users in the United States. Even if portable air conditioners were a good analog to room air conditioners, the limitations of this dataset in terms of sample size and representation of usage would preclude its application for the energy use analysis. In the April 2022 NOPR, DOE accounted for the reduction in energy use of models with a variable-speed compressor during part load operation based on the methodology developed for the DOE test procedure. DOE accounted for geographic-dependent climate variability by calculating U.S. Statedependent performance adjustment factors (‘‘PAFs’’) using historical climate data spanning the period from 2008– 2016 from the National Oceanic and Atmospheric Administration. For each state in the United States, DOE performed a temperature bin analysis to calculate within the cooling season 30 RECS reports space cooling end-use energy consumption estimates based on calculated cooling load based on household characteristics and weather data. 31 Burke et al., 2014. ‘‘Using Field-Metered Data to Quantify Annual Energy Use of Residential Portable Air Conditioners.’’ LBNL, Berkeley, CA. LBNL Report LBNL–6469E. September 2014. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 34317 (June through August) the fraction of time the outdoor dry bulb temperature was in one of four temperature bins: 80– 84 degrees Fahrenheit (‘‘°F’’), 85–89 °F, 90–94 °F, and 95–99 °F. DOE then calculated the corresponding PAF for each state using the methodology developed for variable-speed drive units in the test procedure and applied the PAF to the EER at full load. AHAM stated that before DOE assigns significant value to expensive variable speed/capacity compressors and related control and other systems in its engineering analysis, it needs to validate its assumptions about room air conditioner operating conditions, operating hours, and the likelihood of part load operation. (AHAM, No. 43 at p. 17) The methodology used in the April 2022 NOPR to estimate the energy savings associated with part-load operation is based on the DOE test procedure, as well as available data regarding room air conditioner usage. The development of the test procedure involved testing the performance of variable-speed units relative to singlespeed units in a laboratory setting and measuring the relative efficiency gained by part-load operation. DOE is unaware of additional data that can be utilized to estimate the performance of variablespeed units. DOE’s application of PAFs for variable-speed units used in the energy use analysis is consistent with the methodology used in DOE test procedure and represents DOE’s best estimates to capture the efficiency gains of part load operation based on available data. Rice stated that the energy use analysis in the April 2022 NOPR does not use the correct weighting factors to calculate room air conditioner (‘‘RAC’’) CEERs and performance adjustment factors (‘‘PAFs’’). Rice states that the weighting factors used by DOE were the fractional time spent in each bin, while the correct approach would be to use fractional cooling delivered, as done in the RAC test procedure final rule. Rice suggested DOE modify its approach in the final rule to use weighting factors derived by the fractional cooling delivered. (Rice, No. 48 at p. 2) DOE clarifies that the calculated State-dependent CEERs and PAFs in the April 2022 NOPR were estimated on the fractional cooling delivered, as suggested by Rice, which are derived from the fractional time spent in each temperature bin. The description of the analysis has been updated in the final rule TSD to reflect this clarification. In the April 2022 NOPR analysis, DOE included the impact of fan-only mode energy consumption in the total energy E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 34318 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations use, based on available data for portable ACs. Based on field metering data of portable air conditioners, fan-only mode is estimated at 30 percent of cooling mode hours. DOE assumed that models below ENERGY STAR efficiency level would operate in fan-only mode 30 percent of cooling mode hours.32 For ELs that meet or exceed the ENERGY STAR level, DOE estimated the amount of time the unit spent in fan-only mode based on the ENERGY STAR Version 4.2 criterion for room air conditioners criterion requiring that the unit run in off-cycle fan mode less than 17 percent of the time spent in off-cycle mode. Thus, for ELs that meet or exceed the ENERGY STAR efficiency level, DOE assumed units would operate in fanonly mode 5 percent of cooling mode hours. NEEA and NWPCC stated that DOE’s assumption of fan-only mode being 30 percent of cooling mode hours for models below ENERGY STAR efficiency level is a reasonable assumption. Additionally, NEEA and NWPCC agree that more efficient units (those meet or exceed the ENERGY STAR level) would be less likely to operate in fan-only mode given their variable-speed fans and motors and support the assumed operation of fan-only model to be 5 percent of cooling mode hours for these units. (NEEA and NWPCC, No. 50 at p. 5) In the April 2022 NOPR, DOE assumed that approximately half of room air conditioners are unplugged for half of the year. The ‘‘unplugged’’ time associated with these units is averaged over all units. The California IOUs provided data supporting DOE’s assumption. In an online survey conducted on behalf of the California IOUs by Evergreen Economics, results show that 48 percent of households with a room air conditioner reported removing their unit and reinstalling their equipment each year. (California IOUs, No. 47 at pp. 4–5) DOE appreciates the data provided by the California IOUs supporting its assumption. DOE maintains its assumption for this final rule. P.R. China suggested DOE account for the degradation in energy efficiency over the lifetime of the product and in different operating environments in the energy use and LCC analyses. (P.R. China, No. 39 at p. 4) DOE is unaware of data suggesting a decrease in product efficiency over the lifetime of room air conditioners. Moreover, there is no indication that the degradation would preferentially impact 32 Ibid. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 more efficient products over less efficient ones. As this effect would impact the energy use of units at various efficiency levels, it would likely have a small impact on the overall LCC savings results. Chapter 7 of the final rule TSD provides details on DOE’s energy use analysis for room air conditioners. F. Life-Cycle Cost and Payback Period Analysis DOE conducted LCC and PBP analyses to evaluate the economic impacts on individual consumers of potential energy conservation standards for room air conditioners. The effect of new or amended energy conservation standards on individual consumers usually involves a reduction in operating cost and an increase in purchase cost. DOE used the following two metrics to measure consumer impacts: • The LCC is the total consumer expense of an appliance or product over the life of that product, consisting of total installed cost (manufacturer selling price, distribution chain markups, sales tax, and installation costs) plus operating costs (expenses for energy use, maintenance, and repair). To compute the operating costs, DOE discounts future operating costs to the time of purchase and sums them over the lifetime of the product. • The PBP is the estimated amount of time (in years) it takes consumers to recover the increased purchase cost (including installation) of a moreefficient product through lower operating costs. DOE calculates the PBP by dividing the change in purchase cost at higher efficiency levels by the change in annual operating cost for the year that amended or new standards are assumed to take effect. For any given efficiency level, DOE measures the change in LCC relative to the LCC in the no-new-standards case, which reflects the estimated efficiency distribution of room air conditioners in the absence of new or amended energy conservation standards. In contrast, the PBP for a given efficiency level is measured relative to the baseline product. For each considered efficiency level in each product class, DOE calculated the LCC and PBP for a nationally representative set of housing units and commercial buildings. As stated previously, DOE developed household samples from the 2015 RECS and 2012 CBECS. For each sample household, DOE determined the energy consumption for room air conditioners and the appropriate energy price. By developing a representative sample of PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 households, the analysis captured the variability in energy consumption and energy prices associated with the use of room air conditioners. Inputs to the calculation of total installed cost include the cost of the product—which includes MPCs, manufacturer markups, retailer and distributor markups, and sales taxes— and installation costs. Inputs to the calculation of operating expenses include annual energy consumption, energy prices and price projections, repair and maintenance costs, product lifetimes, and discount rates. DOE created distributions of values for product lifetime, discount rates, and sales taxes, with probabilities attached to each value, to account for their uncertainty and variability. The computer model DOE uses to calculate the LCC and PBP relies on a Monte Carlo simulation to incorporate uncertainty and variability into the analysis. The Monte Carlo simulations randomly sample input values from the probability distributions and room air conditioner user samples. For this rulemaking, the Monte Carlo approach is implemented in MS Excel together with the Crystal BallTM add-on.33 The model calculated the LCC and PBP for products at each efficiency level for 10,000 housing units or commercial buildings per simulation run. The analytical results include a distribution of 10,000 data points showing the range of LCC savings for a given efficiency level relative to the no-new-standards case efficiency distribution. In performing an iteration of the Monte Carlo simulation for a given consumer, product efficiency is chosen based on its probability. If the chosen product efficiency is greater than or equal to the efficiency of the standard level under consideration, the LCC and PBP calculation reveals that a consumer is not impacted by the standard level. By accounting for consumers who already purchase more-efficient products, DOE avoids overstating the potential benefits from increasing product efficiency. DOE calculated the LCC and PBP for all consumers of room air conditioners as if each were to purchase a new product in the first year of required compliance with new or amended standards. Amended standards apply to room air conditioners manufactured 3 years after the date on which any new or amended standard is published. (42 U.S.C. 33 Crystal BallTM is commercially-available software tool to facilitate the creation of these types of models by generating probability distributions and summarizing results within Excel, available at www.oracle.com/technetwork/middleware/ crystalball/overview/ (last accessed September 6, 2022). E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations 6925(m)(4)(A)(i)) Therefore, DOE used 2026 as the first year of compliance with any amended standards for room air conditioners. Table IV.3 summarizes the approach and data DOE used to derive inputs to the LCC and PBP calculations. The subsections that follow provide further discussion. Details of the spreadsheet 34319 model, and of all the inputs to the LCC and PBP analyses, are contained in chapter 8 of the final rule TSD and its appendices. TABLE IV.3—SUMMARY OF INPUTS AND METHODS FOR THE LCC AND PBP ANALYSIS * Inputs Source/method Product Cost .................................................. Derived by multiplying MPCs by manufacturer and retailer markups and sales tax, as appropriate. Used historical data to derive a price scaling index to project product costs. Baseline installation cost determined with data from RSMeans 2022. The total annual energy use by operating mode multiplied by the hours per year in each mode. Variability: Based on the 2015 RECS and 2012 CBECS. Electricity: Based on Edison Electric Institute data for 2021. Variability: Regional energy prices determined for each Census Division. Based on AEO2022 price projections by Census Division. Assumed no change with efficiency level for maintenance costs. Repair costs estimated for each product class and efficiency level. Weibull probability distribution developed from historical shipments, American Housing Survey, and RECS, with an average lifetime of 9 years. Approach involves identifying all possible debt or asset classes that might be used to purchase the considered appliances, or might be affected indirectly. Primary data source was the Federal Reserve Board’s Survey of Consumer Finances. 2026. Installation Costs ........................................... Annual Energy Use ....................................... Energy Prices ................................................ Energy Price Trends ..................................... Repair and Maintenance Costs ..................... Product Lifetime ............................................ Discount Rates .............................................. Compliance Date ........................................... * References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the final rule TSD. ddrumheller on DSK120RN23PROD with RULES2 1. Product Cost To calculate consumer product costs, DOE multiplied the MPCs developed in the engineering analysis by the markups described previously (along with sales taxes). DOE used different markups for baseline products and higher-efficiency products, because DOE applies an incremental markup to the increase in MSP associated with higher-efficiency products. Economic literature and historical data suggest that the real costs of many products may trend downward over time according to ‘‘learning’’ or ‘‘experience’’ curves. Experience curve analysis implicitly includes factors such as efficiencies in labor, capital investment, automation, materials prices, distribution, and economies of scale at an industry-wide level. To derive the learning rate parameter for room air conditioners that utilize singlespeed compressors, DOE obtained historical Producer Price Index (‘‘PPI’’) data for room air conditioners from the Bureau of Labor Statistics (‘‘BLS’’). A PPI specific to ‘‘room air-conditioners and dehumidifiers, except portable dehumidifiers’’ was available for the time period between 1990 and 2009.34 After 2009, DOE used the primary products series of ‘‘air-conditioning, refrigeration and forced air heating equipment’’, which includes room air conditioners, spanning the years 2010– 34 Room air-conditioners and dehumidifiers, except portable dehumidifiers PPI series ID: PCU3334153334156; www.bls.gov/ppi/. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 2021.35 Inflation-adjusted price indices were calculated by dividing the PPI series by the gross domestic product index from Bureau of Economic Analysis for the same years. Using the combined data from 1990–2021, the estimated learning rate (defined as the fractional reduction in price expected from each doubling of cumulative production) is 24 percent. For efficiency levels that include variable-speed compressors, DOE applied a different price trend to the controls portion of the variable-speed compressors that contributes to the price increments moving from EL 3 (an efficiency level achieved with the highest efficiency single-speed compressor) to EL 4 and EL 5. DOE used PPI data on ‘‘semiconductors and related device manufacturing’’ between 1967 and 2021 to estimate the historic price trend of electronic components in the control. The regression performed as an exponential trend line fit results in an R-square of 0.99, with an annual price decline rate of 6.3 percent. See chapter 8 of the final rule TSD for further details on this topic. 2. Installation Cost Installation cost includes labor, overhead, and any miscellaneous materials and parts needed to install the product. In the April 2022 NOPR, DOE assumed that the installation cost would be constant for all efficiency levels and, 35 Air-conditioning, refrigeration, and forced air heating equipment manufacturing, Primary Products PPI series ID: PCU333415333415P; www.bls.gov/ppi/. PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 thus, did not include installation costs in the LCC calculation. AHAM stated that even with minimal size increases in smaller room air conditioners, different chassis sizes will necessitate different installation brackets that do not cover louvers. AHAM requested that DOE analyze costs of necessary retrofits if chassis size changes and the increased installation costs due to heavier products. (AHAM, No. 43 at p. 23) DOE agrees that a standard that changes the chassis size or weight of units may increase installation costs. For the final rule, DOE used data from RSMeans 2022 to estimate the labor and material cost necessary for installing units at various capacities. DOE matched the RSMeans installation costs derived by capacity to the corresponding baseline level within each product class. To account for additional labor hours in higher efficiency equipment with significantly larger dimensions and/or weight, DOE based the labor hour estimates on labor hours for higher capacity room air conditioners with similar dimensions/ weight. DOE notes that chassis size only increases at the max-tech level and does not project an increased cost due to retrofits at the adopted TSL. 3. Annual Energy Consumption For each sampled household or business, DOE determined the energy consumption for room air conditioners at different efficiency levels using the approach described previously in section IV.E of this document. E:\FR\FM\26MYR2.SGM 26MYR2 34320 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations a. Rebound Effect A direct rebound effect occurs when a product that is made more efficient is used more intensively, such that the expected energy savings from the efficiency improvement may not fully materialize. At the same time, consumers benefit from increased utilization of products due to rebound. Higher-efficiency room air conditioners reduce the operating costs for a consumer, which can lead to greater use of room air conditioners. Overall consumer welfare (taking into account additional costs and benefits of increased usage) is generally understood to increase from rebound. DOE did not find any data on the rebound effect that is specific to room air conditioners. In the April 2011 Direct Final Rule, DOE estimated a rebound of 15 percent for room air conditioners for the NIA but did not include rebound in the LCC analysis. 76 FR 22454, 22511. Given the uncertainty and lack of data specific to room air conditioners, DOE did not include the rebound effect in the LCC analysis for this final rule. DOE does include rebound in the NIA for a conservative estimate of national energy savings and the corresponding impact to consumer NPV. See sections IV.H.2 and IV.H.3 of this document for further details on how the rebound effect is applied in the NIA. ddrumheller on DSK120RN23PROD with RULES2 4. Energy Prices Because marginal electricity price more accurately captures the incremental savings associated with a change in energy use from higher efficiency, it provides a better representation of incremental change in consumer costs than average electricity prices. Therefore, DOE applied average electricity prices for the energy use of the product purchased in the no-newstandards case, and marginal electricity prices for the incremental change in energy use associated with the other efficiency levels considered. DOE derived electricity prices in 2021 using data from Edison Electric Institute (‘‘EEI’’) Typical Bills and Average Rates reports. Based upon comprehensive, industry-wide surveys, this semi-annual report presents typical monthly electric bills and average kilowatt-hour costs to the customer as charged by investorowned utilities. For the residential sector, DOE calculated electricity prices using the methodology described in Coughlin and Beraki (2018).36 For the 36 Coughlin, K. and B. Beraki.2018. Residential Electricity Prices: A Review of Data Sources and Estimation Methods. Lawrence Berkeley National Lab. Berkeley, CA. Report No. LBNL–2001169. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 commercial sector, DOE calculated electricity prices using the methodology described in Coughlin and Beraki (2019).37 DOE calculated weighted-average values for average and marginal price for the nine census divisions for both the residential and commercial sectors. As the EEI data are published separately for summer and winter, DOE calculated seasonal prices for each division and sector. See chapter 8 of the final rule TSD for details. To estimate energy prices in future years, DOE multiplied the 2021 energy prices by the projection of annual average price changes for each of the nine census divisions from the Reference case in AEO2022, which has an end year of 2050.38 To estimate price trends after 2050, DOE used a constant value based on the simple average between 2046 through 2050. 5. Maintenance and Repair Costs Repair costs are associated with repairing or replacing product components that have failed in an appliance; maintenance costs are associated with maintaining the operation of the product. Typically, small incremental increases in product efficiency produce no, or only minor, changes in repair and maintenance costs compared to baseline efficiency products. In this final rule analysis, DOE did not include maintenance costs in the LCC. In the April 2022 NOPR, DOE assumed that repair frequencies are low and increase for the higher-capacity units due to more expensive equipment costs. DOE assumed that 1 percent of small-sized units (below 8,000 Btu/h), 2 percent of medium-sized units (8,000 to 20,000 Btu/h), and 3 percent of largesized units (above 20,000 Btu/h) are maintained or repaired each year. DOE assumed that an average service call and repair/maintenance takes about 1 hour for small and medium-sized units and 2 hours for large units, and that the average material cost is equal to one-half of the incremental equipment cost. Friedrich states that DOE failed to incorporate increased repairs costs to service room air conditioners with https://ees.lbl.gov/publications/residentialelectricity-prices-review. 37 Coughlin, K. and B. Beraki. 2019. Nonresidential Electricity Prices: A Review of Data Sources and Estimation Methods. Lawrence Berkeley National Lab. Berkeley, CA. Report No. LBNL–2001203. https://ees.lbl.gov/publications/ non-residential-electricity-prices. 38 U.S. Department of Energy–Energy Information Administration. Annual Energy Outlook 2022 with Projections to 2050. Washington, DC. Available at www.eia.gov/forecasts/aeo/ (last accessed September 6, 2022). PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 variable-speed compressors and increased heat exchanger sizes. According to Friedrich, the likelihood and repair cost will increase due to complexity of components with variable-speed compressors or additional braze joints for larger heat exchangers. (Friedrich, No. 44 at pp. 8– 9) DOE’s analysis incorporates an increased repair cost due to the higher incremental costs associated with units with variable-speed compressors for more expensive components as suggested by Friedrich. DOE is unaware of any data indicating an increased likelihood of repair due to variablespeed compressors or increased heat exchanger sizes. A retrospective analysis of the April 2011 Direct Final Rule found that DOE’s approach to estimating repair costs at each efficiency level based on the incremental equipment cost agreed with an analysis of consumer survey data.39 DOE maintains its approach to estimating repair rates and costs for this final rule. 6. Product Lifetime For room air conditioners, DOE developed a distribution of lifetimes from which specific values are assigned to the appliances in the samples. DOE conducted an analysis of actual lifetime in the field using a combination of historical shipments data, the stock of the considered appliances in the American Housing Survey, and responses in RECS on the age of the appliances in the homes. The data allowed DOE to estimate a survival function, which provides an average appliance lifetime. This analysis yielded a lifetime probability distribution with an average lifetime for room air conditioners of approximately 9 years. Friedrich states that the increase in braze joints needed for larger heat exchangers may increase the potential for refrigerant leaks. Friedrich adds that in the event of a refrigerant leak, consumers are more likely to retire their unit early rather than repair the unit due to the high repair cost resulting in a short lifetime for efficiency levels with this technology. (Friedrich, No. 44 at p. 9) As described in section IV.F.5, the April 2022 NOPR assumed a low repair rate (1–3 percent). Data was not provided by stakeholders during the rulemaking demonstrating the impact that larger heat exchangers would have on the repair rate or repair cost which 39 Ganeshalingam, M., Ni, C., and Yang, H–C. 2021. A Retrospective Analysis of the 2011 Direct Final Rule for Room Air Conditioners. Lawrence Berkeley National Laboratory. LBNL–2001413. E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations could potentially lead to shorter product lifetimes. For this final rule, DOE maintained the same lifetime distribution for all efficiency levels. 7. Discount Rates In the calculation of LCC, DOE applies discount rates appropriate to households to estimate the present value of future operating cost savings. DOE estimated a distribution of discount rates for room air conditioners based on the opportunity cost of consumer funds. DOE applies weighted average discount rates calculated from consumer debt and asset data, rather than marginal or implicit discount rates.40 The LCC analysis estimates net present value over the lifetime of the product, so the appropriate discount rate will reflect the general opportunity cost of household funds, taking this time scale into account. Given the long time horizon modeled in the LCC, the application of a marginal interest rate associated with an initial source of funds is inaccurate. Regardless of the method of purchase, consumers are expected to continue to rebalance their debt and asset holdings over the LCC analysis period, based on the restrictions consumers face in their debt payment requirements and the relative size of the interest rates available on debts and assets. DOE estimates the aggregate impact of this rebalancing using the historical distribution of debts and assets. To establish residential discount rates for the LCC analysis, DOE identified all relevant household debt or asset classes in order to approximate a consumer’s opportunity cost of funds related to appliance energy cost savings. It estimated the average percentage shares of the various types of debt and equity by household income group using data from the Federal Reserve Board’s Survey of Consumer Finances 41 (‘‘SCF’’) for 1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019. Using the SCF and other sources, DOE developed a distribution of rates for each type of debt and asset by income group to represent the rates that may apply in the year in which amended standards would take effect. DOE assigned each sample household a specific discount rate drawn from one of the distributions. The average rate across all types of household debt and equity and income groups, weighted by the shares of each type, is 4.3 percent. See chapter 8 of the final rule TSD for further details on the development of consumer discount rates. 8. Energy Efficiency Distribution in the No-New-Standards Case To accurately estimate the share of consumers that would be affected by a potential energy conservation standard at a particular efficiency level, DOE’s LCC analysis considered the projected distribution (market shares) of product efficiencies under the no-new-standards case (i.e., the case without amended or new energy conservation standards). DOE utilized confidential 2019 shipments data disaggregated by product class and efficiency provided by AHAM in response to the June 2020 Preliminary Analysis to estimate the efficiency distribution in 2019. In the April 2022 NOPR, DOE assumed an annual 0.25 percent increase in shipment-weighted CEER for each product class to develop the efficiency distribution in 2026. The efficiency trend is supported by a retrospective analysis of the April 2011 Direct Final Rule which used a similar efficiency trend for single-speed compressor units.42 For this final rule, DOE 34321 assumed this trend applied to efficiency levels with single-speed compressors (EL 0, EL 1, EL 2, and EL 3). In the 2022 NOPR, DOE assumed the adoption of variable-speed technologies would follow a Bass diffusion curve which describes how new technologies diffuse into the consumer market. DOE assumed that units with variable-speed technologies would account for 5 percent of shipments in each product class by 2026. In response to the April 2022 NOPR, NEEA and NWPCC provided sales estimates for variable-speed units and all room air conditioners sold as part of the EPA ENERGY STAR® Retail Products Platform (ESRPP). NEEA and NWPCC encouraged DOE to use these data to calibrate the Bass diffusion curve for variable-speed models. (NEEA and NWPCC, No. 50 at pp. 2–4) DOE thanks NEEA and NWPCC for the provided sales data needed to calibrate the Bass diffusion curve for the adoption of variable-speed technologies. The ESRPP data provided by NEEA and NWPCC indicated a faster adoption of variable-speed technologies than estimated in the April 2022 NOPR between 2018 and 2022, in particular for capacities greater than 8,000 Btu/h. For this final rule, DOE calibrated its Bass diffusion curve model for variable-speed models to reach 7 percent of shipments in 2026 with faster adoption for capacities greater than 8,000 Btu/h based on the provided data. The estimated market shares for the no-new-standards case for room air conditioners in 2026 are shown in Tables IV.4 through IV.6. See chapter 8 of the final rule TSD for further information on the derivation of the efficiency distributions. TABLE IV.4—ROOM AIR CONDITIONERS WITHOUT REVERSE CYCLE AND WITH LOUVERED SIDES: NO-NEW-STANDARDS CASE MARKET SHARES IN 2026 <6,000 Btu/h (PC1) Efficiency level Efficiency CEER ddrumheller on DSK120RN23PROD with RULES2 Baseline ................................................... 1 ............................................................... 2 ............................................................... 3 ............................................................... 4 ............................................................... VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 Market share (%) 11.0 11.4 12.1 13.1 16.0 40 The implicit discount rate is inferred from a consumer purchase decision between two otherwise identical goods with different first cost and operating cost. It is the interest rate that equates the increment of first cost to the difference in net present value of lifetime operating cost, incorporating the influence of several factors: transaction costs; risk premiums and response to uncertainty; time preferences; interest rates at 6,000–7,900 Btu/h (PC2) Efficiency 7.7 85.2 2.1 0.0 5.0 CEER 11.0 11.4 12.1 13.7 16.0 which a consumer is able to borrow or lend. The implicit discount rate is not appropriate for the LCC analysis because it reflects a range of factors that influence consumer purchase decisions, rather than the opportunity cost of the funds that are used in purchases. 41 U.S. Board of Governors of the Federal Reserve System. Survey of Consumer Finances. 1995, 1998, PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 Market share (%) 0.0 74.6 18.3 2.1 5.0 8,000–13,900 Btu/h (PC3) Efficiency CEER 10.9 11.4 12.0 14.3 16.0 Market share (%) 0.0 30.3 58.0 0.9 10.7 2001, 2004, 2007, 2010, 2013, 2016, and 2019. (Last accessed September 6, 2022.) www.federalreserve.gov/econresdata/scf/ scfindex.htm. 42 Ganeshalingam, M., Ni, C., and Yang, H–C. 2021. A Retrospective Analysis of the 2011 Direct Final Rule for Room Air Conditioners. Lawrence Berkeley National Laboratory. LBNL–2001413. E:\FR\FM\26MYR2.SGM 26MYR2 34322 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE IV.4—ROOM AIR CONDITIONERS WITHOUT REVERSE CYCLE AND WITH LOUVERED SIDES: NO-NEW-STANDARDS CASE MARKET SHARES IN 2026—Continued <6,000 Btu/h (PC1) Efficiency level Efficiency CEER 5 ............................................................... 6,000–7,900 Btu/h (PC2) Market share (%) 20.2 CEER 0.0 14,000–19,900 Btu/h (PC4) Baseline ................................................... 1 ............................................................... 2 ............................................................... 3 ............................................................... 4 ............................................................... 5 ............................................................... Efficiency 10.7 11.1 11.8 14.0 16.0 19.8 8,000–13,900 Btu/h (PC3) Market share (%) 21.2 CEER 0.0 20,000–27,900 Btu/h (PC5a) 0.0 0.0 89.1 0.1 10.7 0.0 Efficiency 9.4 9.8 10.3 11.8 13.8 18.7 Market share (%) 21.9 0.0 >=28,000 Btu/h (PC5b) 0.0 9.0 80.3 0.0 10.7 0.0 9.0 9.4 9.9 10.3 13.2 16.3 40.3 45.7 9.0 0.0 5.0 0.0 TABLE IV.5—ROOM AIR CONDITIONERS WITHOUT REVERSE CYCLE AND WITHOUT LOUVERED SIDES: NO-NEW-STANDARDS CASE MARKET SHARES IN 2026 8,000–10,900 Btu/h (PC 8a) Efficiency level Efficiency CEER Baseline ................................................... 1 ............................................................... 2 ............................................................... 3 ............................................................... 4 ............................................................... 5 ............................................................... 11,000–13,900 Btu/h (PC8b) Market share (%) 9.6 10.1 10.6 12.3 14.1 18.7 Efficiency CEER 0.0 11.4 83.6 0.0 5.0 0.0 Market share (%) 9.5 10.0 10.5 12.3 13.9 19.0 14,000–19,900 Btu/h (PC9) Efficiency CEER 0.0 0.0 94.3 0.7 5.0 0.0 Market share (%) 9.3 9.7 10.2 10.9 13.7 16.8 39.1 46.9 9.0 0.0 5.0 0.0 TABLE IV.6—ROOM AIR CONDITIONERS WITH REVERSE CYCLE, CASEMENT-SLIDER: NO-NEW-STANDARDS CASE MARKET SHARES IN 2026 w/louvers (PC11) wo/louvers (PC12) <20,000 Btu/h <14,000 Btu/h Casement-slider (PC16) Efficiency level Efficiency CEER Baseline ................................................... 1 ............................................................... 2 ............................................................... 3 ............................................................... 4 ............................................................... 5 ............................................................... 9.8 10.4 10.8 12.3 14.4 18.0 ddrumheller on DSK120RN23PROD with RULES2 9. Payback Period Analysis The payback period is the amount of time it takes the consumer to recover the additional installed cost of moreefficient products, compared to baseline products, through energy cost savings. Payback periods are expressed in years. Payback periods that exceed the life of the product mean that the increased total installed cost is not recovered in reduced operating expenses. The inputs to the PBP calculation for each efficiency level are the change in total installed cost of the product and the change in the first-year annual operating expenditures relative to the baseline. The PBP calculation uses the VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 Market share (%) Efficiency 50.7 35.2 9.0 0.0 5.0 0.0 CEER 9.3 9.7 10.2 11.3 13.7 16.4 same inputs as the LCC analysis, except that discount rates are not needed. As noted previously, EPCA establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the first year’s energy savings resulting from the standard, as calculated under the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) For each considered efficiency level, DOE determined the value of the first year’s energy savings by calculating the energy savings in PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 Market share (%) 39.1 46.9 9.0 0.0 5.0 0.0 Efficiency CEER 10.4 10.8 11.4 13.2 15.3 19.1 Market share (%) 34.4 51.6 9.0 0.0 5.0 0.0 accordance with the applicable DOE test procedure, and multiplying those savings by the average energy price projection for the year in which compliance with the amended standards would be required. G. Shipments Analysis DOE uses projections of annual product shipments to calculate the national impacts of potential amended or new energy conservation standards on energy use, NPV, and future manufacturer cash flows.43 The 43 DOE uses data on manufacturer shipments as a proxy for national sales, as aggregate data on sales E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations shipments model takes an accounting approach, tracking market shares of each product class and the vintage of units in the stock. Stock accounting uses product shipments as inputs to estimate the age distribution of in-service product stocks for all years. The age distribution of in-service product stocks is a key input to calculations of both the NES and NPV, because operating costs for any year depend on the age distribution of the stock. Total shipments for room air conditioners are developed by considering the demand from replacements for units in stock that fail and the demand from first-time owners in existing homes. DOE calculated shipments due to replacements using the retirement function developed for the LCC analysis. DOE calculated shipments due to first-time owners in existing households using estimates from room air conditioner saturation in RECS 2015 and projections of housing stock from AEO2022. See chapter 8 of the final rule TSD for details. DOE considers the impacts on shipments from changes in product purchase price and operating cost associated with higher energy efficiency levels using a price elasticity and an efficiency elasticity. As in the April 2022 NOPR, DOE employs a 0.2-percent efficiency elasticity rate and a price elasticity of ¥0.45 in its shipments model. These values are based on analysis of aggregated data for five residential appliances including room air conditioners.44 The market impact is defined as the difference between the product of price elasticity of demand and the change in price due to a standard level, and the product of the efficiency elasticity and the change in operating costs due to a standard level. H. National Impact Analysis The NIA assesses the national energy savings (‘‘NES’’) and the NPV from a national perspective of total consumer costs and savings that would be expected to result from new or amended standards at specific efficiency levels.45 (‘‘Consumer’’ in this context refers to consumers of the product being regulated.) DOE calculates the NES and NPV for the potential standard levels considered based on projections of annual product shipments, along with the annual energy consumption and total installed cost data from the energy use and LCC analyses. For the present analysis, DOE projected the energy savings, operating cost savings, product costs, and NPV of consumer benefits over the lifetime of room air conditioners sold from 2026 through 2055. DOE evaluates the impacts of new or amended standards by comparing a case 34323 without such standards with standardscase projections. The no-new-standards case characterizes energy use and consumer costs for each product class in the absence of new or amended energy conservation standards. For this projection, DOE considers historical trends in efficiency and various forces that are likely to affect the mix of efficiencies over time. DOE compares the no-new-standards case with projections characterizing the market for each product class if DOE adopted new or amended standards at specific energy efficiency levels (i.e., the TSLs or standards cases) for that class. For the standards cases, DOE considers how a given standard would likely affect the market shares of products with efficiencies greater than the standard. DOE uses a spreadsheet model to calculate the energy savings and the national consumer costs and savings from each TSL. Interested parties can review DOE’s analyses by changing various input quantities within the spreadsheet. The NIA spreadsheet model uses typical values (as opposed to probability distributions) as inputs. Table IV.7 summarizes the inputs and methods DOE used for the NIA analysis for the final rule. Discussion of these inputs and methods follows the table. See chapter 10 of the final rule TSD for further details. TABLE IV.7—SUMMARY OF INPUTS AND METHODS FOR THE NATIONAL IMPACT ANALYSIS Inputs Method Shipments ...................................................... Compliance Date of Standard ....................... Efficiency Trends ........................................... Annual shipments from shipments model. 2026. Bass diffusion curve to allocate shipments to ELs with variable-speed technology and annual 0.25% increase in shipment-weighted CEER for ELs with single-speed technology. Calculated for each efficiency level based on inputs from energy use analysis. Calculated for each efficiency level based on inputs from the LCC analysis. Incorporates projection of future product prices based on historical data. Annual weighted-average values as a function of the annual energy consumption per unit and energy prices. Calculated for each efficiency level on inputs from the LCC analysis. AEO2022 projections (to 2050) and a constant value derived from simple average between 2046– 2050 thereafter. A time-series conversion factor based on AEO2022. Three and seven percent. 2022. Annual Energy Consumption per Unit .......... Total Installed Cost per Unit ......................... Annual Energy Cost per Unit ........................ Repair and Maintenance Cost per Unit ........ Energy Price Trends ..................................... Energy Site-to-Primary and FFC Conversion Discount Rate ................................................ Present Year ................................................. ddrumheller on DSK120RN23PROD with RULES2 1. Product Efficiency Trends A key component of the NIA is the trend in energy efficiency projected for the no-new-standards case and each of the standards cases. Section IV.F.8 of this document describes how DOE developed an energy efficiency distribution for the no-new-standards are lacking. In general, one would expect a close correspondence between shipments and sales. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 case (which yields a shipment-weighted average efficiency) for each of the considered product classes for the year of anticipated compliance with an amended or new standard. To project the trend in efficiency absent amended standards for room air conditioners over the entire shipments projection period, DOE assumed that market share for ELs with variable-speed technologies would follow a Bass diffusion curve, while the shipment-weighted CEER for ELs with single-speed compressors would increase annually by 0.25 percent in CEER based on historical trends in 44 Fujita, K. (2015) Estimating Price Elasticity using Market-Level Appliance Data. Lawrence Berkeley National Laboratory, LBNL–188289. 45 The NIA accounts for impacts in the 50 states and U.S. territories. PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 E:\FR\FM\26MYR2.SGM 26MYR2 34324 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations shipment-weighted efficiency.46 The approach is further described in chapter 10 of the final rule TSD. In its reference scenario, DOE assumed that variable-speed technologies would comprise 25 percent of the market by the end of the analysis period (2055). DOE also performed sensitivity scenarios assuming a low penetration of variable-speed technologies (10 percent of the market in 2055) and a high penetration of variable-speed technologies (50 percent of the market in 2055). The results of these scenarios can be found in appendix 10E of the final rule TSD. For the standards cases, DOE used a ‘‘roll-up’’ scenario to establish the shipment-weighted efficiency for the year that standards are assumed to become effective in 2026. In the year of compliance, the market shares of products in the no-new-standards case that do not meet the standard under consideration would ‘‘roll up’’ to the minimum EL that meets the standard, and the market share of products above the standard would remain unchanged. As in the no-new-standards case, DOE assumed an annual increase of 0.25 percent in CEER over the analysis period for ELs with single-speed technology. ddrumheller on DSK120RN23PROD with RULES2 2. National Energy Savings The national energy savings analysis involves a comparison of national energy consumption of the considered products between each potential standards case (‘‘TSL’’) and the case with no new or amended energy conservation standards. DOE calculated the national energy consumption by multiplying the number of units (stock) of each product (by vintage or age) by the unit energy consumption (also by vintage). DOE calculated annual NES based on the difference in national energy consumption for the no-newstandards case and for each higher efficiency standard case. DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savings to primary energy (i.e., the energy consumed by power plants to generate site electricity) using annual conversion factors derived from AEO2022. Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis. Use of higher-efficiency products is sometimes associated with a direct rebound effect, which refers to an 46 Ganeshalingam, M., Ni, C., and Yang, H–C. 2021. A Retrospective Analysis of the 2011 Direct Final Rule for Room Air Conditioners. Lawrence Berkeley National Laboratory. LBNL–2001413. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 increase in utilization of the product due to the increase in efficiency. DOE did not find any data on the rebound effect specific to room air conditioners, but it applied a direct rebound effect of 15 percent as suggested by Sorrell et al. for space cooling appliances.47 The calculated NES at each efficiency level is therefore reduced by 15 percent in residential applications. DOE also included the rebound effect in the NPV analysis by accounting for the additional net benefit from increased room air conditioner usage as described in section IV.H.3 of this document. In 2011, in response to the recommendations of a committee on ‘‘Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards’’ appointed by the National Academy of Sciences, DOE announced its intention to use FFC measures of energy use and greenhouse gas and other emissions in the national impact analyses and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the approaches discussed in the August 18, 2011 document, DOE published a statement of amended policy in which DOE explained its determination that EIA’s National Energy Modeling System (‘‘NEMS’’) is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain, multi-sector, partial equilibrium model of the U.S. energy sector 48 that EIA uses to prepare its Annual Energy Outlook. The FFC factors incorporate losses in production and delivery in the case of natural gas (including fugitive emissions) and additional energy used to produce and deliver the various fuels used by power plants. The approach used for deriving FFC measures of energy use and emissions is described in appendix 10B of the final rule TSD. 3. Net Present Value Analysis The inputs for determining the NPV of the total costs and benefits experienced by consumers are (1) total annual installed cost, (2) total annual operating costs (energy costs and repair and maintenance costs), and (3) a discount factor to calculate the present value of costs and savings. DOE 47 Sorrell, S., J. Dimitropoulos, M. Sommerville. 2009. Empirical estimates of the direct rebound effect: A review. Energy Policy 37 (2009) 1356– 1371. 48 For more information on NEMS, refer to The National Energy Modeling System: An Overview 2018, DOE/EIA–0581(2019), April 2019. Available at www.eia.gov/outlooks/aeo/nems/documentation/ (last accessed September 7, 2022). PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 calculates net savings each year as the difference between the no-newstandards case and each standards case in terms of total savings in operating costs versus total increases in installed costs. DOE calculates operating cost savings over the lifetime of each product shipped during the projection period. As discussed in section IV.F.1 of this document, DOE developed room air conditioner price trends based on combined historical PPI data of ‘‘room air-conditioners and dehumidifiers, except portable dehumidifiers’’ and primary air-conditioning, refrigeration and forced air heating equipment. DOE applied the same trends to project prices for each product class at each considered efficiency level. By 2055, the end date of the analysis period, the average single-speed compressor room air conditioner price is projected to drop 18 percent and the variable-speed compressor room air conditioner price is projected to drop about 31 percent relative to 2026. DOE’s projection of product prices is described in appendix 10C of the final rule TSD. To evaluate the effect of uncertainty regarding the price trend estimates, DOE investigated the impact of alternate product price projections on the consumer NPV for the considered TSLs for room air conditioners. In addition to the default price trend, DOE considered high and low product price sensitivity cases. In the high price scenario, DOE based the price decline of the nonvariable speed controls portion on room air conditioner PPI data limited to the period 1990–2009, which shows a faster price decline relative to the full time series. For the variable-speed controls portion, DOE used a faster price decline derived from the exponential fit of ‘‘semiconductors and related device manufacturing’’ PPI series spanning between 1994 and 2021. In the low price decline scenario, DOE assumed a constant price for the non-variablespeed controls portion of the price and a slower price decline estimate for the variable-speed controls portion derived from the exponential fit of ‘‘semiconductors and related device manufacturing’’ PPI series spanning between 1967 and 1993. The derivation of these price trends and the results of these sensitivity cases are described in appendix 10C of the final rule TSD. The operating cost savings are energy cost savings, which are calculated using the estimated energy savings in each year and the projected price of the appropriate form of energy. To estimate energy prices in future years, DOE multiplied the average regional energy prices by the projection of annual national-average residential energy price E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES2 changes in the Reference case from AEO2022, which has an end year of 2050. To estimate price trends after 2050, DOE used a constant value derived from a simple average of the price trend between 2046 through 2050. As part of the NIA, DOE also analyzed scenarios that used inputs from variants of the AEO2022 Reference case that have lower and higher economic growth. Those cases have lower and higher energy price trends compared to the Reference case. NIA results based on these cases are presented in appendix 10C of the final rule TSD. As previously described, DOE assumed a 15 percent rebound from an increase in utilization of the product arising from the increase in efficiency (i.e., the direct rebound effect). In considering the consumer welfare gained due to the direct rebound effect, DOE accounted for change in consumer surplus attributed to additional cooling from the purchase of a more efficient unit. Overall consumer welfare is generally understood to be enhanced from rebound. The net consumer impact of the rebound effect is included in the calculation of operating cost savings in the consumer NPV results. See appendix 10F of the final rule TSD for details on DOE’s treatment of the monetary valuation of the rebound effect. In calculating the NPV, DOE multiplies the net savings in future years by a discount factor to determine their present value. For this final rule, DOE estimated the NPV of consumer benefits using both a 3-percent and a 7percent real discount rate. DOE uses these discount rates in accordance with guidance provided by the Office of Management and Budget (‘‘OMB’’) to Federal agencies on the development of regulatory analysis.49 The discount rates for the determination of NPV are in contrast to the discount rates used in the LCC analysis, which are designed to reflect a consumer’s perspective. The 7percent real value is an estimate of the average before-tax rate of return to private capital in the U.S. economy. The 3-percent real value represents the ‘‘social rate of time preference,’’ which is the rate at which society discounts future consumption flows to their present value. I. Consumer Subgroup Analysis In analyzing the potential impact of new or amended energy conservation standards on consumers, DOE evaluates 49 United States Office of Management and Budget. Circular A–4: Regulatory Analysis. September 17, 2003. Section E. Available at www.whitehouse.gov/omb/memoranda/m0321.html (last accessed September 7, 2022). VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 the impact on identifiable subgroups of consumers that may be disproportionately affected by a new or amended national standard. The purpose of a subgroup analysis is to determine the extent of any such disproportional impacts. DOE evaluates impacts on particular subgroups of consumers by analyzing the LCC impacts and PBP for those particular consumers from alternative standard levels. For this final rule, DOE analyzed the impacts of the considered standard levels on two subgroups: (1) low-income households and (2) senior-only households. The analysis used subsets of the RECS 2015 sample composed of households that meet the criteria for the considered subgroups. DOE determined households in the low-income subgroup analysis using poverty thresholds from the U.S. Federal Poverty Guidelines which are based on household income and occupancy.50 The subgroup, which represents a total of 12.1 million room ACs in 7.3 million low-income households across the U.S., is composed of 55 percent renters, 43 percent homeowners, 2 percent occupants living in homes without paying rent. Approximately 90 percent of the lowincome sample have an annual household income of less than $20,000. Both the low-income and National consumer samples share a similar geographic distribution in ownership with a plurality (49 percent) of room AC units concentrated on the East Coast of the U.S. Based on an analysis of RECS 2015, low-income households were found to have 12 percent higher operating hours relative to the National sample. DOE used the LCC and PBP spreadsheet model to estimate the impacts of the considered efficiency levels on these subgroups. Chapter 11 in the final rule TSD describes the consumer subgroup analysis. AHAM stated that many lower and middle-income households have negative discretionary income and requested that DOE change its approach towards sub-group analysis to take into account real limitations on purchasing capability and the effects of increased costs on discretionary income, credit ratings, and the ability of consumers to meet other necessary bills. Additionally, AHAM stated that DOE does not take into account the 23 percent of households with incomes under $15,000 who are ‘‘unbanked’’ in its financial framework and therefore needs to rethink its approach to sub-groups and 50 Department of Health and Human Services, Poverty Thresholds. Available at https:// aspe.hhs.gov/2015-poverty-guidelines (last accessed September 7, 2022). PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 34325 include a more comprehensive approach to impact analysis to ensure that traditionally marginalized subgroups are included in its analysis. (AHAM, No. 43 at pp. 5–8) AHAM and Friedrich commented that excessively stringent standards are likely to negatively impact the populations that use these and noted that it is particularly important not to price-out lower income and underserved communities from purchasing room air conditioners. (AHAM, No. 43 at pp. 3– 4; Friedrich, No. 44 at pp. 2–4) DOE’s approach to the low-income consumer subgroup analysis includes households that do not have assets or debts included in the SCF. It is likely that a majority of these ‘‘unbanked’’ households primarily rely on cash to complete transactions and as a form of savings, which is included in the distribution of discount rates associated with low-income consumers. Consumers that rely entirely on cash are assigned a discount rate of 0 percent as there is no lost opportunity cost from alternative non-cash assets or debts. For households that utilize non-traditional, non-bank financing, DOE’s methodology includes a distribution of high discount rates (>10%) which are representative of the opportunity cost associated with non-bank lines of credit. Additionally, DOE’s subgroup analysis for low-income households found that, at the adopted TSL, the estimated installed cost increase is $28 while the average discounted lifetime operating cost savings is $110. (See section V.B.1.b for results of the consumer subgroup analysis.) DOE also notes that its lowincome subgroup analysis is a conservative estimate in that it assumes that renter households purchase the unit. In cases where the landlord purchases the unit but the renter pays the electricity bill, the renting household may not pay an increased purchase price due to a standard, but would benefit from reduced operating costs. CFA and NCLC supported DOE’s proposed TSL and noted that lowincome consumers in particular would benefit from reduced operating costs associated with more efficient room air conditioners as low-income households pay a disproportionately higher percentage of their incomes on energy bills compared to other households. (CFA and NCLC, No. 46 at pp. 1–2) J. Manufacturer Impact Analysis 1. Overview DOE performed an MIA to estimate the financial impacts of amended energy conservation standards on E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 34326 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations manufacturers of room air conditioners and to estimate the potential impacts of such standards on employment and manufacturing capacity. The MIA has both quantitative and qualitative aspects and includes analyses of projected industry cash flows, the INPV, investments in research and development (‘‘R&D’’) and manufacturing capital, and domestic manufacturing employment. Additionally, the MIA seeks to determine how amended energy conservation standards might affect manufacturing employment, capacity, and competition, as well as how standards contribute to overall regulatory burden. Finally, the MIA serves to identify any disproportionate impacts on manufacturer subgroups, including small business manufacturers. The quantitative part of the MIA primarily relies on the Government Regulatory Impact Model (‘‘GRIM’’), an industry cash flow model with inputs specific to this rulemaking. The key GRIM inputs include data on the industry cost structure, unit production costs, product shipments, manufacturer markups, and investments in R&D and manufacturing capital required to produce compliant products. The key GRIM outputs are the INPV, which is the sum of industry annual cash flows over the analysis period, discounted using the industry-weighted average cost of capital, and the impact to domestic manufacturing employment. The model uses standard accounting principles to estimate the impacts of more-stringent energy conservation standards on a given industry by comparing changes in INPV and domestic manufacturing employment between a no-new-standards case and the various standards cases. To capture the uncertainty relating to manufacturer pricing strategies following amended standards, the GRIM estimates a range of possible impacts under different markup scenarios. The qualitative part of the MIA addresses manufacturer characteristics and market trends. Specifically, the MIA considers such factors as a potential standard’s impact on manufacturing capacity, competition within the industry, the cumulative impact of other DOE and non-DOE regulations, and impacts on manufacturer subgroups. The complete MIA is outlined in chapter 12 of the final rule TSD. DOE conducted the MIA for this rulemaking in three phases. In Phase 1 of the MIA, DOE prepared a profile of the room air conditioner manufacturing industry based on the market and technology assessment and publiclyavailable information. This included a VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 top-down analysis of room air conditioner manufacturers that DOE used to derive preliminary financial inputs for the GRIM (e.g., revenues; materials, labor, overhead, and depreciation expenses; selling, general, and administrative expenses (‘‘SG&A’’); and R&D expenses). DOE also used public sources of information to further calibrate its initial characterization of the room air conditioner manufacturing industry, including company filings of form 10–K from the SEC,51 corporate annual reports, April 2011 Direct Final Rule, the U.S. Census Bureau’s Annual Survey of Manufactures (‘‘ASM’’),52 and reports from Dun & Bradstreet.53 76 FR 22454. In Phase 2 of the MIA, DOE prepared a framework industry cash-flow analysis to quantify the potential impacts of amended energy conservation standards. The GRIM uses several factors to determine a series of annual cash flows starting with the announcement of the standard and extending over a 30-year period following the compliance date of the standard. These factors include annual expected revenues, costs of sales, SG&A and R&D expenses, taxes, and capital expenditures. In general, energy conservation standards can affect manufacturer cash flow in three distinct ways: (1) creating a need for increased investment, (2) raising production costs per unit, and (3) altering revenue due to higher per-unit prices and changes in sales volumes. In addition, during Phase 2, DOE developed interview guides to distribute to manufacturers of room air conditioners in order to develop other key GRIM inputs, including product and capital conversion costs, and to gather additional information on the anticipated effects of energy conservation standards on revenues, direct employment, capital assets, industry competitiveness, and subgroup impacts. In Phase 3 of the MIA, DOE conducted structured, detailed interviews with representative manufacturers. During these interviews, DOE discussed engineering, manufacturing, procurement, and 51 U.S. Securities and Exchange Commission, Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. Available at www.sec.gov/edgar/ search/ (last accessed September 7, 2022). 52 U.S. Census Bureau, Annual Survey of Manufactures. ‘‘Summary Statistics for Industry Groups and Industries in the U.S (2020).’’ Available at: www.census.gov/data/tables/time-series/econ/ asm/2018-2020-asm.html (last accessed September 7, 2022). 53 The Dun & Bradstreet Hoovers login is available at: app.dnbhoovers.com (last accessed September 7, 2022). PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 financial topics to validate assumptions used in the GRIM and to identify key issues or concerns. As part of Phase 3, DOE also evaluated subgroups of manufacturers that may be disproportionately impacted by amended standards or that may not be accurately represented by the average cost assumptions used to develop the industry cash flow analysis. Such manufacturer subgroups may include small business manufacturers, lowvolume manufacturers (‘‘LVMs’’), niche players, and/or manufacturers exhibiting a cost structure that largely differs from the industry average. DOE identified one subgroup for a separate impact analysis: small business manufacturers. The small business subgroup is discussed in section VII.B, ‘‘Review under the Regulatory Flexibility Act’’ and in chapter 12 of the final rule TSD. 2. Government Regulatory Impact Model and Key Inputs DOE uses the GRIM to quantify the changes in cash flow due to amended standards that result in a higher or lower industry value. The GRIM uses a standard, annual discounted cash-flow analysis that incorporates manufacturer costs, markups, shipments, and industry financial information as inputs. The GRIM models changes in costs, distribution of shipments, investments, and manufacturer margins that could result from an amended energy conservation standard. The GRIM spreadsheet uses the inputs to arrive at a series of annual cash flows, beginning in 2023 (the base year of the analysis) and continuing to 2055. DOE calculated INPVs by summing the stream of annual discounted cash flows during this period. For manufacturers of room air conditioners, DOE used a real discount rate of 7.2 percent, which was derived from industry financials and then modified according to feedback received during manufacturer interviews. The GRIM calculates cash flows using standard accounting principles and compares changes in INPV between the no-new-standards case and each standards case. The difference in INPV between the no-new-standards case and a standards case represents the financial impact of the amended energy conservation standard on manufacturers. As discussed previously, DOE developed critical GRIM inputs using a number of sources, including publicly available data, results of the engineering analysis and shipments analysis, and information gathered from industry stakeholders during the course of manufacturer interviews. The GRIM results are presented in section V.B.2 of E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations this document. Additional details about the GRIM, the discount rate, and other financial parameters can be found in chapter 12 of the final rule TSD. a. Manufacturer Production Costs Manufacturing more efficient products is typically more expensive than manufacturing baseline products due to the use of more complex components, which are typically more costly than baseline components. The changes in the MPCs of covered products can affect the revenues, gross margins, and cash flow of the industry. DOE models the relationship between efficiency and MPCs as a part of its engineering analysis. For a complete description of the MPCs, see chapter 5 of the final rule TSD or section IV.C of this document. ddrumheller on DSK120RN23PROD with RULES2 b. Shipments Projections The GRIM estimates manufacturer revenues based on total unit shipment projections and the distribution of those shipments by efficiency level. Changes in sales volumes and efficiency mix over time can significantly affect manufacturer finances. For this analysis, the GRIM uses the NIA’s annual shipment projections derived from the shipments analysis from 2023 (the base year) to 2055 (the end year of the analysis period). See chapter 9 of the final rule TSD for additional details or section IV.G of this document for additional details. c. Product and Capital Conversion Costs Amended energy conservation standards could cause manufacturers to incur conversion costs to bring their production facilities and product designs into compliance. DOE evaluated the level of conversion-related expenditures that would be needed to comply with each considered efficiency level in each product class. For the MIA, DOE classified these conversion costs into two major groups: (1) product conversion costs; and (2) capital conversion costs. Product conversion costs are investments in research, development, testing, marketing, and other non-capitalized costs necessary to make product designs comply with amended energy conservation standards. Capital conversion costs are investments in property, plant, and equipment necessary to adapt or change existing production facilities such that new compliant product designs can be fabricated and assembled. To calculate the MPCs for room air conditioners at and above the baseline, DOE performed teardowns for representative units. The data generated from these analyses were then used to VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 estimate the capital investments in equipment, tooling, and conveyor required of original equipment manufacturers (‘‘OEMs’’) at each efficiency level, taking into account such factors as product design, raw materials, purchased components, and fabrication method. Changes in equipment, tooling, and conveyer were used to estimate capital conversion costs. Additionally, capital conversion costs accounted for investments in appearance tooling made by manufacturers that are not OEMs. DOE relied on feedback from industry to evaluate the product conversion costs industry would likely incur at the considered standard levels. DOE integrated feedback from manufacturers, both OEM and non-OEM, on redesign effort and staffing to estimate product conversion costs. Manufacturer numbers were aggregated to protect confidential information. DOE adjusted the conversion cost estimates developed in support of the April 2022 NOPR to 2021$ for this analysis. The conversion cost figures used in the GRIM can be found in section V.B.2 of this document. For additional information on the capital and product conversion costs, see chapter 12 of the final rule TSD. In general, DOE assumes all conversion-related investments occur between the year of publication of the final rule and the year by which manufacturers must comply with the new standard. The conversion cost figures used in the GRIM can be found in section V.B.2 of this document. For additional information on the estimated capital and product conversion costs, see chapter 12 of the final rule TSD. d. Manufacturer Markup Scenarios MSPs include direct manufacturing production costs (i.e., labor, materials, and overhead estimated in DOE’s MPCs) and all non-production costs (i.e., SG&A, R&D, and interest), along with profit. To calculate the MSPs in the GRIM, DOE applied a manufacturer markup to the MPCs estimated in the engineering analysis for each product class and efficiency level. Modifying these markups in the standards case yields different sets of impacts on manufacturers. For the MIA, DOE modeled two standards-case scenarios to represent uncertainty regarding the potential impacts on prices and profitability for manufacturers following the implementation of amended energy conservation standards: (1) a preservation of gross margin percentage scenario; and (2) a preservation of perunit operating profit scenario. These scenarios lead to different markup PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 34327 values that, when applied to the MPCs, result in varying revenue and cash flow impacts. Under the preservation of gross margin percentage scenario, DOE applied a single uniform ‘‘gross margin percentage’’ across all efficiency levels, which assumes that manufacturers would be able to maintain the same amount of profit as a percentage of revenues at all efficiency levels within a product class. As MPCs increase with efficiency, this scenario implies that the absolute dollar markup will increase as well. DOE assumed a gross margin percentage of 21 percent for all product classes.54 Manufacturers tend to believe it is optimistic to assume that they would be able to maintain the same gross margin percentage markup as their production costs increase, particularly for minimally efficient products. Therefore, DOE assumes that this scenario represents a high bound to industry profitability under an amended energy conservation standard. In the preservation of per-unit operating profit scenario, as the cost of production goes up under a standards case, manufacturers are generally required to reduce their markups to a level that maintains base-case operating profit. DOE implemented this scenario in the GRIM by lowering the manufacturer markups at each TSL to yield approximately the same earnings before interest and taxes in the standards case as in the no-newstandards case in the year after the compliance date of the amended standards. The implicit assumption behind this scenario is that the industry can only maintain its operating profit in absolute dollars after the standard. A comparison of industry financial impacts under the two scenarios is presented in section V.B.2.a of this document. 3. Discussion of MIA Comments In response to the April 2022 NOPR, AHAM submitted written comments about the impact of supply chain constraints, tariffs, cumulative regulatory burden, and elevated shipping costs on manufacturers of room air conditioners. (AHAM, No. 43 at pp. 28–31) AHAM noted that manufacturers continue to face global supply chain challenges—including procuring semiconductors and experiencing transportation delays—and urged DOE to further review the current situation manufacturers are facing and to account for this in the MIA. (AHAM, No. 43 at 54 The gross margin percentage of 21 percent is based on a manufacturer markup of 1.26. E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 34328 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations p. 31) Although DOE is appreciative of these recent challenges, in the-long term manufacturers of room air conditioners face both evolving challenges and evolving opportunities. DOE does not attempt the forecast the global supply chain challenges in the timeframe of compliance. Increased costs associated with recent supply chain issues have been implemented in the cost analysis by way of 5-year moving averages for materials, purchase parts, and shipping costs. AHAM noted that room air conditioners as well as room air conditioner chassis are currently subject to United States Trade Representative (‘‘USTR’’) China section 301 tariffs at 25 percent and 10 percent, respectively. AHAM requested that DOE follow up with individual manufacturers to fully assess the impact of tariffs, as according to AHAM, these tariffs will likely remain in place. (AHAM, No. 43 at pp. 30–31) DOE contractors conducted manufacturer interviews during the NOPR phases of analysis to solicit information on manufacturer costs. Furthermore, DOE published its MPCs as part of the NOPR TSD. DOE’s final rule analysis incorporates both confidential feedback and public comments from manufacturers on MPCs, which incorporates all costs and would include tariffs. AHAM encouraged DOE to incorporate the financial results of the cumulative regulatory burden analysis into the MIA, stating that this could be done by adding the combined cost of complying with multiple regulations into the product conversion costs in the GRIM. (AHAM, No. 43 at pp. 28–29) AHAM noted other regulations impact room air conditioner manufacturers such as residential clothes washers, consumer clothes dryers, commercial clothes washers, consumer refrigerator/ freezers, miscellaneous refrigeration products, cooking products, dishwashers, room air conditioners, dehumidifiers, portable air conditioners, and room air cleaner rulemakings. (AHAM, No. 43 at p. 29) Additionally, AHAM noted that DOE should not discount the time and resources needed for stakeholders to review test procedure and energy conservation standard rulemakings and assess their potential impacts. (AHAM, No. 43 at p. 28) If DOE were to combine the conversion costs from multiple regulations, as requested, it would be appropriate to match the combined conversion costs against combined revenues of the regulated products. DOE expects that combined results would make it more difficult to discern the VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 direct impact of this amended standard on room air conditioner manufacturers. With regard to AHAM’s request that DOE not discount the costs for stakeholders to review rulemakings, although appreciative that monitoring and responding to rulemakings does impose costs for stakeholders, DOE believes that this is outside the scope of analysis for individual product rulemakings. Because EPCA requires DOE to establish and maintain the energy conservation program for consumer products and to periodically propose new and amended standards and test procedures, DOE considers this rulemaking activity to be part of the analytical baseline. That is, these activities would exist regardless of the regulatory option that DOE adopts through a rulemaking and would be independent from the conversion costs required to adapt product designs and manufacturing facilitates to meet an amended standard. Nonetheless, DOE welcomes any available data on the costs of monitoring. As noted in the April 2022 NOPR, a summary of the job titles and annual hours per job title at a prototypical company would allow DOE to construct a detailed analysis of AHAM’s monitoring costs and would help DOE assess whether these costs would materially affect future analyses. AHAM noted that changes to room air conditioner chassis dimensions and product weight will increase shipping and transportation costs and requested that DOE account for this in its MIA through revision. (AHAM, No. 43 at p. 31) As noted in sections IV.A.2.b and IV.C.1.b of this document, DOE evaluated the impact of design options on weight and chassis dimensions. DOE evaluated the impact of those changes in weight and dimensions on overseas container and domestic shipping rates. For efficiency levels below max-tech, DOE did not find increases in shipping costs at efficiency levels. At max-tech, there are increases in shipping costs that could affect downstream analyses. However, as discussed in the walkdown, DOE is not adopting max-tech for any product classes. Additional information about shipping costs is available in chapter 5 of the TSD. K. Emissions Analysis The emissions analysis consists of two components. The first component estimates the effect of potential energy conservation standards on power sector and site (where applicable) combustion emissions of CO2, NOX, SO2, and Hg. The second component estimates the impacts of potential standards on emissions of two additional greenhouse PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 gases, CH4 and N2O, as well as the reductions in emissions of other gases due to ‘‘upstream’’ activities in the fuel production chain. These upstream activities comprise extraction, processing, and transporting fuels to the site of combustion. The analysis of electric power sector emissions of CO2, NOX, SO2, and Hg uses emissions intended to represent the marginal impacts of the change in electricity consumption associated with amended or new standards. The methodology is based on results published for the AEO, including a set of side cases that implement a variety of efficiency-related policies. The methodology is described in appendix 13A in the final rule TSD. The analysis presented in this rule uses projections from AEO2022. Power sector emissions of CH4 and N2O from fuel combustion are estimated using Emission Factors for Greenhouse Gas Inventories published by the EPA.55 FFC upstream emissions, which include emissions from fuel combustion during extraction, processing, and transportation of fuels, and ‘‘fugitive’’ emissions (direct leakage to the atmosphere) of CH4 and CO2, are estimated based on the methodology described in chapter 15 of the final rule TSD. The emissions intensity factors are expressed in terms of physical units per megawatt-hour (‘‘MWh’’) or million British thermal units (‘‘MMBtu’’) of site energy savings. For power sector emissions, specific emissions intensity factors are calculated by sector and end use. Total emissions reductions are estimated using the energy savings calculated in the national impact analysis. 1. Air Quality Regulations Incorporated in DOE’s Analysis DOE’s no-new-standards case for the electric power sector reflects the AEO, which incorporates the projected impacts of existing air quality regulations on emissions. AEO2022 generally represents current legislation and environmental regulations, including recent government actions, that were in place at the time of preparation of AEO2022, including the emissions control programs discussed in the following paragraphs.56 55 Available at www.epa.gov/sites/production/ files/2021-04/documents/emission-factors_ apr2021.pdf (last accessed July 12, 2022). 56 For further information, see the Assumptions to AEO2022 report that sets forth the major assumptions used to generate the projections in the Annual Energy Outlook. Available at www.eia.gov/ outlooks/aeo/assumptions/ (last accessed September 6, 2022). E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES2 SO2 emissions from affected electric generating units (‘‘EGUs’’) are subject to nationwide and regional emissions capand-trade programs. Title IV of the Clean Air Act sets an annual emissions cap on SO2 for affected EGUs in the 48 contiguous States and the District of Columbia (‘‘DC’’). (42 U.S.C. 7651 et seq.) SO2 emissions from numerous States in the eastern half of the United States are also limited under the CrossState Air Pollution Rule (‘‘CSAPR’’). 76 FR 48208 (Aug. 8, 2011). CSAPR requires these States to reduce certain emissions, including annual SO2 emissions, and went into effect as of January 1, 2015.57 AEO2022 incorporates implementation of CSAPR, including the update to the CSAPR ozone season program emission budgets and target dates issued in 2016. 81 FR 74504 (Oct. 26, 2016). Compliance with CSAPR is flexible among EGUs and is enforced through the use of tradable emissions allowances. Under existing EPA regulations, for states subject to SO2 emissions limits under CSAPR, any excess SO2 emissions allowances resulting from the lower electricity demand caused by the adoption of an efficiency standard could be used to permit offsetting increases in SO2 emissions by another regulated EGU. However, beginning in 2016, SO2 emissions began to fall as a result of the Mercury and Air Toxics Standards (‘‘MATS’’) for power plants. 77 FR 9304 (Feb. 16, 2012). The final rule establishes power plant emission standards for mercury, acid gases, and non-mercury metallic toxic pollutants. In order to continue operating, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed. Both technologies, which are used to reduce acid gas emissions, also reduce SO2 emissions. Because of the emissions reductions under the MATS, it is unlikely that excess SO2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO2 57 CSAPR requires states to address annual emissions of SO2 and NOX, precursors to the formation of fine particulate matter (‘‘PM2.5’’) pollution, in order to address the interstate transport of pollution with respect to the 1997 and 2006 PM2.5 National Ambient Air Quality Standards (‘‘NAAQS’’). CSAPR also requires certain states to address the ozone season (May–September) emissions of NOX, a precursor to the formation of ozone pollution, in order to address the interstate transport of ozone pollution with respect to the 1997 ozone NAAQS. 76 FR 48208 (Aug. 8, 2011). EPA subsequently issued a supplemental rule that included an additional five states in the CSAPR ozone season program; 76 FR 80760 (Dec. 27, 2011) (Supplemental Rule), and EPA issued the CSAPR Update for the 2008 ozone NAAQS. 81 FR 74504 (Oct. 26, 2016). VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 emissions by another regulated EGU. Therefore, energy conservation standards that decrease electricity generation will generally reduce SO2 emissions. DOE estimated SO2 emissions reduction using emissions factors based on AEO2022. CSAPR also established limits on NOX emissions for numerous States in the eastern half of the United States. Energy conservation standards would have little effect on NOX emissions in those States covered by CSAPR emissions limits if excess NOX emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NOX emissions from other EGUs. In such case, NOX emissions would remain near the limit even if electricity generation goes down. Depending on the configuration of the power sector in the different regions and the need for allowances, however, NOX emissions might not remain at the limit in the case of lower electricity demand. That would mean that standards might reduce NOX emissions in covered States. Despite this possibility, DOE has chosen to be conservative in its analysis and has maintained the assumption that standards will not reduce NOX emissions in States covered by CSAPR. Standards would be expected to reduce NOX emissions in the States not covered by CSAPR. DOE used AEO2022 data to derive NOX emissions factors for the group of States not covered by CSAPR. The MATS limit mercury emissions from power plants, but they do not include emissions caps and, as such, DOE’s energy conservation standards would be expected to slightly reduce Hg emissions. DOE estimated mercury emissions reduction using emissions factors based on AEO2022, which incorporates the MATS. L. Monetizing Emissions Impacts As part of the development of this final rule, for the purpose of complying with the requirements of Executive Order 12866, DOE considered the estimated monetary benefits from the reduced emissions of CO2, CH4, N2O, NOX, and SO2 that are expected to result from each of the TSLs considered. In order to make this calculation analogous to the calculation of the NPV of consumer benefit, DOE considered the reduced emissions expected to result over the lifetime of products shipped in the projection period for each TSL. This section summarizes the basis for the values used for monetizing the emissions benefits and presents the values considered in this final rule. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 34329 granted the Federal Government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv–1074– JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal Government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. In the absence of further intervening court orders, DOE has reverted to its approach prior to the injunction and present monetized benefits where appropriate and permissible under law. DOE requests comment on how to address the climate benefits and other non-monetized effects of the proposal. 1. Monetization of Greenhouse Gas Emissions DOE estimates the monetized benefits of the reductions in emissions of CO2, CH4, and N2O by using a measure of the SC of each pollutant (e.g., SC–CO2). These estimates represent the monetary value of the net harm to society associated with a marginal increase in emissions of these pollutants in a given year, or the benefit of avoiding that increase. These estimates are intended to include (but are not limited to) climate-change-related changes in net agricultural productivity, human health, property damages from increased flood risk, disruption of energy systems, risk of conflict, environmental migration, and the value of ecosystem services. DOE exercises its own judgment in presenting monetized climate benefits as recommended by applicable Executive orders, and DOE would reach the same conclusion presented in this final rule in the absence of the social cost of greenhouse gases including the February 2021 interim estimates presented by the Interagency Working Group on the Social Cost of Greenhouse Gases. DOE estimated the global social benefits of CO2, CH4, and N2O reductions (i.e., SC–GHGs) using the estimates presented in the ‘‘Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order 13990,’’ published in February E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 34330 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations 2021 by the IWG. The SC–GHGs is the monetary value of the net harm to society associated with a marginal increase in emissions in a given year, or the benefit of avoiding that increase. In principle, SC–GHGs includes the value of all climate change impacts, including (but not limited to) changes in net agricultural productivity, human health effects, property damage from increased flood risk and natural disasters, disruption of energy systems, risk of conflict, environmental migration, and the value of ecosystem services. The SC–GHGs therefore, reflects the societal value of reducing emissions of the gas in question by one metric ton. The SC– GHGs is the theoretically appropriate value to use in conducting benefit-cost analyses of policies that affect CO2, N2O and CH4 emissions. As a member of the IWG involved in the development of the February 2021 SC–GHG TSD, DOE agrees that the interim SC–GHG estimates represent the most appropriate estimate of the SC–GHG until revised estimates have been developed reflecting the latest, peer-reviewed science. The SC–GHGs estimates presented here were developed over many years, using transparent process, peerreviewed methodologies, the best science available at the time of that process, and with input from the public. Specifically, in 2009, the IWG, that included the DOE and other executive branch agencies and offices was established to ensure that agencies were using the best available science and to promote consistency in the social cost of carbon (SC–CO2) values used across agencies. The IWG published SC–CO2 estimates in 2010 that were developed from an ensemble of three widely cited integrated assessment models (IAMs) that estimate global climate damages using highly aggregated representations of climate processes and the global economy combined into a single modeling framework. The three IAMs were run using a common set of input assumptions in each model for future population, economic, and CO2 emissions growth, as well as equilibrium climate sensitivity—a measure of the globally averaged temperature response to increased atmospheric CO2 concentrations. These estimates were updated in 2013 based on new versions of each IAM. In August 2016 the IWG published estimates of the social cost of methane (SC–CH4) and nitrous oxide (SC–N2O) using methodologies that are consistent with the methodology underlying the SC– CO2 estimates. The modeling approach that extends the IWG SC–CO2 VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 methodology to non-CO2 GHGs has undergone multiple stages of peer review. The SC–CH4 and SC–N2O estimates were developed by Marten et al.58 and underwent a standard doubleblind peer review process prior to journal publication. In 2015, as part of the response to public comments received to a 2013 solicitation for comments on the SC–CO2 estimates, the IWG announced a National Academies of Sciences, Engineering, and Medicine review of the SC–CO2 estimates to offer advice on how to approach future updates to ensure that the estimates continue to reflect the best available science and methodologies. In January 2017, the National Academies released their final report, ‘‘Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxide,’’ and recommended specific criteria for future updates to the SC–CO2 estimates, a modeling framework to satisfy the specified criteria, and both near-term updates and longer-term research needs pertaining to various components of the estimation process (National Academies, 2017).59 Shortly thereafter, in March 2017, President Trump issued Executive Order 13783, which disbanded the IWG, withdrew the previous TSDs, and directed agencies to ensure SC–CO2 estimates used in regulatory analyses are consistent with the guidance contained in OMB’s Circular A–4, ‘‘including with respect to the consideration of domestic versus international impacts and the consideration of appropriate discount rates’’ (E.O. 13783, section 5(c)). Benefitcost analyses following E.O. 13783 used SC–GHG estimates that attempted to focus on the U.S.-specific share of climate change damages as estimated by the models and were calculated using two discount rates recommended by Circular A–4, 3 percent and 7 percent. All other methodological decisions and model versions used in SC–GHG calculations remained the same as those used by the IWG in 2010 and 2013, respectively. On January 20, 2021, President Biden issued Executive Order 13990, which reestablished the IWG and directed it to ensure that the U.S. Government’s estimates of the social cost of carbon and other greenhouse gases reflect the 58 Marten, A.L., E.A. Kopits, C.W. Griffiths, S.C. Newbold, and A. Wolverton. Incremental CH4 and N2O mitigation benefits consistent with the US Government’s SC–CO2 estimates. Climate Policy. 2015. 15(2): pp. 272–298. 59 National Academies of Sciences, Engineering, and Medicine. Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxide. 2017. The National Academies Press: Washington, DC. PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 best available science and the recommendations of the National Academies (2017). The IWG was tasked with first reviewing the SC–GHG estimates currently used in Federal analyses and publishing interim estimates within 30 days of the E.O. that reflect the full impact of GHG emissions, including by taking global damages into account. The interim SC– GHG estimates published in February 2021 are used here to estimate the climate benefits for this rulemaking. The E.O. instructs the IWG to undertake a fuller update of the SC–GHG estimates by January 2022 that takes into consideration the advice of the National Academies (2017) and other recent scientific literature. The February 2021 SC–GHG TSD provides a complete discussion of the IWG’s initial review conducted under E.O. 13990. In particular, the IWG found that the SC– GHG estimates used under E.O. 13783 fail to reflect the full impact of GHG emissions in multiple ways. First, the IWG found that the SC–GHG estimates used under E.O. 13783 fail to fully capture many climate impacts that affect the welfare of U.S. citizens and residents, and those impacts are better reflected by global measures of the SC– GHG. Examples of omitted effects from the E.O. 13783 estimates include direct effects on U.S. citizens, assets, and investments located abroad, supply chains, U.S. military assets and interests abroad, 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. 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 mitigation actions will provide a benefit to U.S. citizens and residents by mitigating climate impacts that affect 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. If the United States does not consider impacts on other countries, it is difficult to convince other countries to consider the impacts of their emissions on the United States. The only way to achieve an efficient allocation of resources for emissions reduction on a global basis— and so benefit the United States and its citizens—is for all countries to base their policies on global estimates of damages. As a member of the IWG involved in the development of the E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES2 February 2021 SC–GHG TSD, DOE agrees with this assessment and, therefore, in this rule DOE centers attention on a global measure of SC– GHG. This approach is the same as that taken in DOE regulatory analyses from 2012 through 2016. A robust estimate of climate damages that accrue only to U.S. citizens and residents does not currently exist in the literature. As explained in the February 2021 TSD, existing estimates are both incomplete and an underestimate of total damages that accrue to the citizens and residents of the United States because they do not fully capture the regional interactions and spillovers discussed above, nor do they include all of the important physical, ecological, and economic impacts of climate change recognized in the climate change literature. As noted in the February 2021 SC–GHG TSD, the IWG will continue to review developments in the literature, including more robust methodologies for estimating a U.S.-specific SC–GHG value, and explore ways to better inform the public of the full range of carbon impacts. As a member of the IWG, DOE will continue to follow developments in the literature pertaining to this issue. Second, the IWG found that the use of the social rate of return on capital (7 percent under current OMB Circular A– 4 guidance) to discount the future benefits of reducing GHG emissions inappropriately underestimates the impacts of climate change for the purposes of estimating the SC–GHG. Consistent with the findings of the National Academies (2017) and the economic literature, the IWG continued to conclude that the consumption rate of interest is the theoretically appropriate discount rate in an intergenerational context,60 and recommended that 60 Interagency Working Group on Social Cost of Carbon. Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866. 2010. United States Government. (Last accessed April 15, 2022.) www.epa.gov/sites/default/files/2016-12/ documents/scc_tsd_2010.pdf; Interagency Working Group on Social Cost of Carbon. Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order No. 12866. 2013. (Last accessed April 15, 2022.) 78 FR 70586, November 26, 2013, www.federalregister.gov/ documents/2013/11/26/2013-28242/technicalsupport-document-technical-update-of-the-socialcost-of-carbon-for-regulatory-impact; Interagency Working Group on Social Cost of Greenhouse Gases, United States Government. Technical Support Document: Technical Update on the Social Cost of Carbon for Regulatory Impact Analysis-Under Executive Order 12866. August 2016. (Last accessed January 18, 2022.) www.epa.gov/sites/default/files/ 2016-12/documents/sc_co2_tsd_august_2016.pdf; Interagency Working Group on Social Cost of Greenhouse Gases, United States Government. Addendum to Technical Support Document on Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866: Application of the Methodology to Estimate the Social Cost of VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 discount rate uncertainty and relevant aspects of intergenerational ethical considerations be accounted for in selecting future discount rates. Furthermore, the damage estimates developed for use in the SC–GHG are estimated in consumption-equivalent terms, and so an application of OMB Circular A–4’s guidance for regulatory analysis would then use the consumption discount rate to calculate the SC–GHG. DOE agrees with this assessment and will continue to follow developments in the literature pertaining to this issue. DOE also notes that while OMB Circular A–4, as published in 2003, recommends using 3 percent and 7 percent discount rates as ‘‘default’’ values, Circular A–4 also reminds agencies that ‘‘different regulations may call for different emphases in the analysis, depending on the nature and complexity of the regulatory issues and the sensitivity of the benefit and cost estimates to the key assumptions.’’ On discounting, Circular A–4 recognizes that ‘‘special ethical considerations arise when comparing benefits and costs across generations,’’ and Circular A–4 acknowledges that analyses may appropriately ‘‘discount future costs and consumption benefits . . . at a lower rate than for intragenerational analysis.’’ In the 2015 Response to Comments on the Social Cost of Carbon for Regulatory Impact Analysis (‘‘RIA’’), OMB, DOE, and the other IWG members recognized that ‘‘Circular A–4 is a living document’’ and ‘‘the use of 7 percent is not considered appropriate for intergenerational discounting. There is wide support for this view in the academic literature, and it is recognized in Circular A–4 itself.’’ Thus, DOE concludes that a 7% discount rate is not appropriate to apply to value the social cost of greenhouse gases in the analysis presented in this analysis. To calculate the present and annualized values of climate benefits, DOE uses the same discount rate as the rate used to discount the value of damages from future GHG emissions, for internal consistency. That approach to discounting follows the same approach that the February 2021 TSD recommends ‘‘to ensure internal consistency—i.e., future damages from climate change using the SC–GHG at 2.5 percent should be discounted to the base year of the analysis using the same 2.5 percent rate.’’ DOE has also consulted the National Academies’ 2017 Methane and the Social Cost of Nitrous Oxide. August 2016. (Last accessed January 18, 2022.) www.epa.gov/sites/default/files/2016-12/ documents/addendum_to_sc-ghg_tsd_august_ 2016.pdf. PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 34331 recommendations on how SC–GHG estimates can ‘‘be combined in RIAs with other cost and benefits estimates that may use different discount rates.’’ The National Academies reviewed several options, including ‘‘presenting all discount rate combinations of other costs and benefits with [SC–GHG] estimates.’’ As a member of the IWG involved in the development of the February 2021 SC–GHG TSD, DOE agrees with the above assessment and will continue to follow developments in the literature pertaining to this issue. While the IWG works to assess how best to incorporate the latest, peer reviewed science to develop an updated set of SC–GHG estimates, it set the interim estimates to be the most recent estimates developed by the IWG prior to the group being disbanded in 2017. The estimates rely on the same models and harmonized inputs and are calculated using a range of discount rates. As explained in the February 2021 SC–GHG TSD, the IWG has recommended that agencies revert to the same set of four values drawn from the SC–GHG distributions based on three discount rates as were used in regulatory analyses between 2010 and 2016 and were subject to public comment. For each discount rate, the IWG combined the distributions across models and socioeconomic emissions scenarios (applying equal weight to each) and then selected a set of four values recommended for use in benefitcost analyses: an average value resulting from the model runs for each of three discount rates (2.5 percent, 3 percent, and 5 percent), plus a fourth value, selected as the 95th percentile of estimates based on a 3 percent discount rate. The fourth value was included to provide information on potentially higher-than-expected economic impacts from climate change. As explained in the February 2021 SC–GHG TSD, and DOE agrees, this update reflects the immediate need to have an operational SC–GHG for use in regulatory benefitcost analyses and other applications that was developed using a transparent process, peer-reviewed methodologies, and the science available at the time of that process. Those estimates were subject to public comment in the context of dozens of proposed rulemakings as well as in a dedicated public comment period in 2013. There are a number of limitations and uncertainties associated with the SC– GHG estimates. First, the current scientific and economic understanding of discounting approaches suggests discount rates appropriate for intergenerational analysis in the context of climate change are likely to be less E:\FR\FM\26MYR2.SGM 26MYR2 34332 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES2 than 3 percent, near 2 percent or lower.61 Second, the IAMs used to produce these interim estimates do not include all of the important physical, ecological, and economic impacts of climate change recognized in the climate change literature and the science underlying their ‘‘damage functions’’—i.e., the core parts of the IAMs that map global mean temperature changes and other physical impacts of climate change into economic (both market and nonmarket) damages—lags behind the most recent research. For example, limitations include the incomplete treatment of catastrophic and non-catastrophic impacts in the integrated assessment models, their incomplete treatment of adaptation and technological change, the incomplete way in which inter-regional and intersectoral linkages are modeled, uncertainty in the extrapolation of damages to high temperatures, and inadequate representation of the relationship between the discount rate and uncertainty in economic growth over long time horizons. Likewise, the socioeconomic and emissions scenarios used as inputs to the models do not reflect new information from the last decade of scenario generation or the full range of projections. The modeling limitations do not all work in the same direction in terms of their influence on the SC–CO2 estimates. However, as discussed in the February 2021 TSD, the IWG has recommended that, taken together, the limitations suggest that the interim SC–GHG estimates used in this final rule likely underestimate the damages from GHG emissions. DOE concurs with this assessment. AHAM objected to DOE using the social cost of carbon and other monetization of emissions reductions benefits in its analysis of the factors EPCA requires DOE to balance to determine the appropriate standard. AHAM stated that while it may be acceptable for DOE to continue its current practice of examining the social cost of carbon and monetization of other emissions reductions benefits as informational so long as the underlying interagency analysis is transparent and vigorous, the monetization analysis should not impact the TSLs DOE selects as a new or amended standard. AHAM noted that the scientific and economic 61 Interagency Working Group on Social Cost of Greenhouse Gases (IWG). 2021. Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order 13990. February. United States Government. Available at: www.whitehouse.gov/briefing-room/ blog/2021/02/26/a-return-to-science-evidencebased-estimates-of-the-benefits-of-reducing-climatepollution/. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 knowledge surrounding the contribution of CO2 and other greenhouse gases to climate change is an upgoing field of study and monetization values are subject to change. AHAM further commented that it was unclear whether DOE relied upon the emissions monetization analysis when proposing a TSL. (AHAM, No. 43 at pp. 29–30) As stated in section III.E.1.f of this document, DOE maintains that environmental and public health benefits associated with the more efficient use of energy, including those connected to global climate change, are important to take into account when considering the need for national energy conservation, which is one of the factors that EPCA requires DOE to evaluate in determining whether a potential energy conservation standard is economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) In addition, Executive Order 13563, which was re-affirmed on January 20, 2021, states that each agency must, among other things: ‘‘select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity).’’ 62 E.O. 13563, section 1(b). For these reasons, DOE includes monetized emissions reductions in its evaluation of potential standard levels. As previously stated, however, DOE would reach the same conclusion presented in this final rule in the absence of the social cost of greenhouse gases. The Climate Commenters stated that DOE appropriately applies the social cost estimates developed by the Interagency Working Group on the Social Cost of Greenhouse Gases to its analysis of emissions reduction benefits generated by the proposed rule. They stated that DOE should expand upon its rationale for adopting a global damages valuation and for the range of discount rates it applies to climate effects, as there are additional legal, economic, and policy reasons for such methodological decisions that can further bolster DOE’s support for these choices. They added that DOE should consider conducting sensitivity analysis using a sound domestic-only social cost estimate as a backstop, and should explicitly conclude that the rule is costbenefit justified even using a domesticonly valuation that may still undercount climate benefits. They also urged DOE to consider providing additional sensitivity analysis using discount rates 62 www.whitehouse.gov/briefing-room/ presidential-actions/2021/01/20/modernizingregulatory-review/. PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 lower than 2.5 percent for climate impacts. (Climate Commenters, No. 51 at pp. 1–2) In response, DOE maintains that the reasons for using global measures of the SC–GHG previously discussed are sufficient for the purposes of this rulemaking. DOE notes that further discussion of this topic is contained in the February 2021 SC–GHG TSD, and DOE agrees with the assessment therein. Regarding conducting sensitivity analysis using a domestic-only social cost estimate, DOE agrees with the assessment in the February 2021 SC– GHG TSD that the only currentlyavailable quantitative characterization of domestic damages from GHG emissions is both incomplete and an underestimate of the share of total damages that accrue to the citizens and residents of the United States. Therefore, it would be of questionable value to conduct the suggested sensitivity analysis at this time. DOE considered performing sensitivity analysis using discount rates lower than 2.5 percent for climate impacts, as suggested by the IWG, but it concluded that such analysis would not add meaningful information or impact the rationale in the context of this rulemaking. The Climate Commenters also stated that DOE should provide additional justification for combining climate effects discounted at an appropriate consumption-based discount rate with other costs and benefits discounted at a capital-based rate (i.e., 7%).63 (Climate Commenters, No. 51 at p. 2) The reasons for using consumption-based discount rates for future climate effects were discussed previously, and are further elaborated in the February 2021 SC– GHG TSD. Combining climate benefits with health benefits and consumer economic benefits is in keeping with the guidance of OMB Circular A–4 to count all significant costs and benefits. DOE is aware that there are different approaches to combining climate benefits with other cost and benefits estimates that may use different discount rates, and the approach applied in this document (as well as in numerous other past DOE rulemaking actions) is among those discussed in the National Academies 2017 report (p. 182).64 63 In several places in this final rule (e.g., Tables I–3 and I–4), the climate benefits of potential standards are combined with other benefits and costs that are discounted at rates of 3% and 7%, based on OMB Circular A–4 guidance. 64 National Academies of Sciences, Engineering, and Medicine. Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxide. 2017. The National Academies Press: Washington, E:\FR\FM\26MYR2.SGM 26MYR2 34333 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations DOE’s derivations of the SC–CO2, SC– N2O, and SC–CH4 values used for this final rule are discussed in the following sections, and the results of DOE’s analyses estimating the benefits of the reductions in emissions of these pollutants are presented in section V.B.6 of this document. a. Social Cost of Carbon The SC–CO2 values used for this final rule were based on the values developed for the IWG’s February 2021 TSD. Table IV.8 shows the updated sets of SC–CO2 estimates from the IWG’s TSD in 5-year increments from 2020 to 2050. The full set of annual values that DOE used is presented in appendix 14A of the final rule TSD. For purposes of capturing the uncertainties involved in regulatory impact analysis, DOE has determined it is appropriate to include all four sets of SC–CO2 values, as recommended by the IWG.65 TABLE IV.8—ANNUAL SC–CO2 VALUES FROM 2021 INTERAGENCY UPDATE, 2020–2050 [2020$ per metric ton CO2] Discount rate Year 2020 2025 2030 2035 2040 2045 2050 5% 3% 2.5% 3% Average Average Average 95th percentile ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... ........................................................................................................... For 2051 to 2070, DOE used SC–CO2 estimates published by EPA, adjusted to 2021$.66 These estimates are based on methods, assumptions, and parameters identical to the 2020–2050 estimates published by the IWG. DOE expects additional climate benefits to accrue for any longer-life room air conditioners after 2070, but a lack of available SC– CO2 estimates for emissions years beyond 2070 prevents DOE from monetizing these potential benefits in this analysis. DOE multiplied the CO2 emissions reduction estimated for each year by the 14 17 19 22 25 28 32 SC–CO2 value for that year in each of the four cases. DOE adjusted the values to 2021$ using the implicit price deflator for gross domestic product (‘‘GDP’’) from the Bureau of Economic Analysis. To calculate a present value of the stream of monetary values, DOE discounted the values in each of the four cases using the specific discount rate that had been used to obtain the SC–CO2 values in each case. b. Social Cost of Methane and Nitrous Oxide The SC–CH4 and SC–N2O values used for this final rule were based on the 51 56 62 67 73 79 85 76 83 89 96 103 110 116 152 169 187 206 225 242 260 values presented in the February 2021 TSD. Table IV.9 shows the updated sets of SC–CH4 and SC–N2O estimates from the latest interagency update in 5–year increments from 2020 to 2050. The full set of annual values used is presented in appendix 14A of the final rule TSD. To capture the uncertainties involved in regulatory impact analysis, DOE has determined it is appropriate to include all four sets of SC–CH4 and SC–N2O values, as recommended by the IWG. DOE derived values after 2050 using the approach described above for the SC– CO2. TABLE IV.9—ANNUAL SC–CH4 AND SC–N2O VALUES FROM 2021 INTERAGENCY UPDATE, 2020–2050 [2020$ per metric ton] SC–CH4 SC–N2O Discount rate and statistic Discount rate and statistic Year ddrumheller on DSK120RN23PROD with RULES2 2020 2025 2030 2035 2040 2045 2050 5% 3% 2.5% 3% 5% 3% 2.5% 3% Average Average Average 95th percentile Average Average Average 95th percentile ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... ......................................................... 670 800 940 1100 1300 1500 1700 DC. Available at https://nap.nationalacademies.org/ catalog/24651/valuing-climate-damages-updatingestimation-of-the-social-cost-of. 65 For example, the February 2021 TSD discusses how the understanding of discounting approaches VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 1500 1700 2000 2200 2500 2800 3100 2000 2200 2500 2800 3100 3500 3800 3900 4500 5200 6000 6700 7500 8200 suggests that discount rates appropriate for intergenerational analysis in the context of climate change may be lower than 3 percent. 66 See EPA, Revised 2023 and Later Model Year Light-Duty Vehicle GHG Emissions Standards: PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 5800 6800 7800 9000 10000 12000 13000 18000 21000 23000 25000 28000 30000 33000 27000 30000 33000 36000 39000 42000 45000 48000 54000 60000 67000 74000 81000 88000 Regulatory Impact Analysis, Washington, DC, December 2021. Available at: www.epa.gov/system/ files/documents/2021-12/420r21028.pdf (last accessed September 12, 2022). E:\FR\FM\26MYR2.SGM 26MYR2 34334 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations DOE multiplied the CH4 and N2O emissions reduction estimated for each year by the SC–CH4 and SC–N2O estimates for that year in each of the cases. DOE adjusted the values to 2021$ using the implicit price deflator for gross domestic product (‘‘GDP’’) from the Bureau of Economic Analysis. To calculate a present value of the stream of monetary values, DOE discounted the values in each of the cases using the specific discount rate that had been used to obtain the SC–CH4 and SC–N2O estimates in each case. ddrumheller on DSK120RN23PROD with RULES2 2. Monetization of Other Emissions Impacts For the final rule, DOE estimated the monetized value of NOX and SO2 emissions reductions from electricity generation using benefit per ton estimates for that sector from the EPA’s Benefits Mapping and Analysis Program.67 DOE used EPA’s values for PM2.5-related benefits associated with NOX and SO2 and for ozone-related benefits associated with NOX for 2025 and 2030, and 2040, calculated with discount rates of 3 percent and 7 percent. DOE used linear interpolation to define values for the years not given in the 2025 to 2040 range; for years beyond 2040 the values are held constant. DOE derived values specific to the sector for room air conditioners using a method described in appendix 14B of the final rule TSD. DOE multiplied the site emissions reduction (in tons) in each year by the associated $/ton values, and then discounted each series using discount rates of 3 percent and 7 percent as appropriate. M. Utility Impact Analysis The utility impact analysis estimates several effects on the electric power generation industry that would result from the adoption of new or amended energy conservation standards. The utility impact analysis estimates the changes in installed electrical capacity and generation that would result for each TSL. The analysis is based on published output from the NEMS associated with AEO2022. NEMS produces the AEO Reference case, as well as a number of side cases that estimate the economy-wide impacts of changes to energy supply and demand. For the current analysis, impacts are quantified by comparing the levels of electricity sector generation, installed capacity, fuel consumption and emissions in the AEO2022 Reference 67 Estimating the Benefit per Ton of Reducing PM2.5 Precursors from 21 Sectors. www.epa.gov/ benmap/estimating-benefit-ton-reducing-pm25precursors-21-sectors. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 case and various side cases. Details of the methodology are provided in the appendices to chapters 13 and 15 of the final rule TSD. The output of this analysis is a set of time-dependent coefficients that capture the change in electricity generation, primary fuel consumption, installed capacity and power sector emissions due to a unit reduction in demand for a given end use. These coefficients are multiplied by the stream of electricity savings calculated in the NIA to provide estimates of selected utility impacts of potential new or amended energy conservation standards. N. Employment Impact Analysis DOE considers employment impacts in the domestic economy as one factor in selecting a standard. Employment impacts from new or amended energy conservation standards include both direct and indirect impacts. Direct employment impacts are any changes in the number of employees of manufacturers of the products subject to standards. The MIA addresses those impacts. Indirect employment impacts are changes in national employment that occur due to the shift in expenditures and capital investment caused by the purchase and operation of more-efficient appliances. Indirect employment impacts from standards consist of the net jobs created or eliminated in the national economy, other than in the manufacturing sector being regulated, caused by (1) reduced spending by consumers on energy, (2) reduced spending on new energy supply by the utility industry, (3) increased consumer spending on the products to which the new standards apply and other goods and services, and (4) the effects of those three factors throughout the economy. One method for assessing the possible effects on the demand for labor of such shifts in economic activity is to compare sector employment statistics developed by the Labor Department’s BLS. BLS regularly publishes its estimates of the number of jobs per million dollars of economic activity in different sectors of the economy, as well as the jobs created elsewhere in the economy by this same economic activity. Data from BLS indicate that expenditures in the utility sector generally create fewer jobs (both directly and indirectly) than expenditures in other sectors of the economy.68 There are many reasons for 68 See U.S. Department of Commerce–Bureau of Economic Analysis. Regional Multipliers: A User Handbook for the Regional Input-Output Modeling System (‘‘RIMS II’’). 1997. U.S. Government Printing Office: Washington, DC. Available at www.bea.gov/ PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 these differences, including wage differences and the fact that the utility sector is more capital-intensive and less labor-intensive than other sectors. Energy conservation standards have the effect of reducing consumer utility bills. Because reduced consumer expenditures for energy likely lead to increased expenditures in other sectors of the economy, the general effect of efficiency standards is to shift economic activity from a less labor-intensive sector (i.e., the utility sector) to more labor-intensive sectors (e.g., the retail and service sectors). Thus, the BLS data suggest that net national employment may increase due to shifts in economic activity resulting from energy conservation standards. DOE estimated indirect national employment impacts for the standard levels considered in this final rule using an input/output model of the U.S. economy called Impact of Sector Energy Technologies version 4 (‘‘ImSET’’).69 ImSET is a special-purpose version of the ‘‘U.S. Benchmark National InputOutput’’ (‘‘I–O’’) model, which was designed to estimate the national employment and income effects of energy-saving technologies. The ImSET software includes a computer- based I– O model having structural coefficients that characterize economic flows among 187 sectors most relevant to industrial, commercial, and residential building energy use. DOE notes that ImSET is not a general equilibrium forecasting model, and that the uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Because ImSET does not incorporate price changes, the employment effects predicted by ImSET may over-estimate actual job impacts over the long run for this rule. Therefore, DOE used ImSET only to generate results for near-term timeframes (2026–2030), where these uncertainties are reduced. For more details on the employment impact analysis, see chapter 16 of the final rule TSD. V. Analytical Results and Conclusions The following section addresses the results from DOE’s analyses with respect to the considered energy conservation standards for room air conditioners. It addresses the TSLs examined by DOE, the projected scb/pdf/regional/perinc/meth/rims2.pdf (last accessed July 1, 2021). 69 Livingston, O.V., S.R. Bender, M.J. Scott, and R.W. Schultz. ImSET 4.0: Impact of Sector Energy Technologies Model Description and User’s Guide. 2015. Pacific Northwest National Laboratory: Richland, WA. PNNL–24563. E:\FR\FM\26MYR2.SGM 26MYR2 34335 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations impacts of each of these levels if adopted as energy conservation standards for room air conditioners, and the standards levels that DOE is adopting in this final rule. Additional details regarding DOE’s analyses are contained in the final rule TSD supporting this document. A. Trial Standard Levels In general, DOE typically evaluates potential amended standards for products and equipment by grouping individual efficiency levels for each class into TSLs. Use of TSLs allows DOE to identify and consider manufacturer cost interactions between the product classes, to the extent that there are such interactions, and market cross elasticity from consumer purchasing decisions that may change when different standard levels are set. In the analysis conducted for this final rule, DOE analyzed the benefits and burdens of five TSLs for room air conditioners. DOE maintained the same TSL structure as proposed in the NOPR. TSL 5 represents the max-tech energy efficiency for all product classes and corresponds to EL 5. TSL 4 corresponds to EL 4 for all product classes, consistent with the implementation of commercially available variable-speed compressors based on the current availability of variable speed compressors at cooling capacities ≥8,000 Btu/h. However, as of 2022, there are no models commercially available that incorporate variable-speed compressors for cooling capacities less than 8,000 Btu/h, and the uncertainties of the possibilities of incorporating variablespeed compressors in smaller units may have the potential to eliminate room air conditioners with the smallest cooling capacities from the market. TSL 3, therefore, is constructed with EL 4 for product classes with cooling capacities ≥8,000 Btu/h, corresponding to the inclusion of commercially available variable-speed compressors, and EL 3 for cooling capacities <8,000 Btu/h, corresponding to the incorporation of maximum energy efficient single-speed compressors. TSL 2 corresponds to EL 3 for all product classes and represents room air conditioners with the maximum energy efficient single-speed compressor. TSL 1 corresponds to EL 2 for all product classes and represents the current ENERGY STAR level. DOE presents the results for the TSLs in this document, while the results for all efficiency levels that DOE analyzed are in the final rule TSD. DOE presents the results for the TSLs in this document, while the results for all efficiency levels that DOE analyzed are in the final rule TSD. Table V.1 presents the TSLs and the corresponding efficiency levels that DOE has identified for potential amended energy conservation standards for room air conditioners. TABLE V.1—TRIAL STANDARD LEVELS FOR ROOM AIR CONDITIONERS Product class TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 CEER (Btu/Wh) ddrumheller on DSK120RN23PROD with RULES2 Room Air Conditioner without reverse cycle, with louvered sides: <6,000 Btu/h (PC 1) ............................................................................................. 6,000 to 7,900 Btu/h (PC 2) ................................................................................. 8,000 to 13,900 Btu/h (PC 3) ............................................................................... 14,000 to 19,900 Btu/h (PC 4) ............................................................................. 20,000 to 27,900 Btu/h (PC 5a) ........................................................................... ≥28,000 Btu/h (PC 5b) .......................................................................................... Room Air Conditioner without reverse cycle, without louvered sides: <6,000 Btu/h (PC 6) ............................................................................................. 6,000 to 7,900 Btu/h (PC 7) ................................................................................. 8,000 to 10,900 Btu/h (PC 8a) ............................................................................. 11,000 to 13,900 Btu/h (PC 8b) ........................................................................... 14,000 to 19,900 Btu/h (PC 9) ............................................................................. ≥20,000 Btu/h (PC 10) .......................................................................................... Room Air Conditioner with reverse cycle, with louvered sides: <20,000 Btu/h (PC 11) ......................................................................................... ≥20,000 Btu/h (PC 13) .......................................................................................... Room Air Conditioner with reverse cycle, without louvered sides: <14,000 Btu/h (PC 12) ......................................................................................... ≥14,000 Btu/h (PC 14) .......................................................................................... Casement: Casement-Only (PC 15) ....................................................................................... Casement-Slide (PC 16) ....................................................................................... 12.1 12.1 12.0 11.8 10.3 9.9 13.1 13.7 14.3 14.0 11.8 10.3 13.1 13.7 16.0 16.0 13.8 13.2 16.0 16.0 16.0 16.0 13.8 13.2 20.2 21.2 21.9 19.8 18.7 16.3 11.0 11.0 10.6 10.5 10.2 10.3 12.8 12.8 12.3 12.3 10.9 11.0 12.8 12.8 14.1 13.9 13.7 13.8 14.7 14.7 14.1 13.9 13.7 13.8 19.4 19.4 18.7 19.0 16.8 17.0 10.8 10.2 12.3 11.7 14.4 13.7 14.4 13.7 18.0 18.5 10.2 9.6 11.3 11.2 13.7 12.8 13.7 12.8 16.4 17.4 10.5 11.4 12.2 13.2 13.9 15.3 13.9 15.3 17.6 19.1 DOE constructed the TSLs for this final rule to include ELs representative of ELs with similar characteristics (i.e., using similar technologies and/or efficiencies, and having roughly comparable equipment availability). The use of representative ELs provided for greater distinction between the TSLs. While representative ELs were included in the TSLs, DOE considered all efficiency levels as part of its analysis.70 DOE did not consider a TSL with EL 1 because DOE’s projected efficiency distribution indicated a significant portion of the market would meet or exceed EL 1 in the no-new-standards case by the compliance year leading to smaller national energy savings and lower LCC savings for a standard set at EL 1 relative to EL 2. As such, the least efficient level considered for TSLs in this final rule is EL 2. 70 Efficiency levels that were analyzed for this NOPR are discussed in section IV.C.1 of this document. Results by efficiency level are presented in chapters 8, 10, and 12 of the final rule TSD. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 B. Economic Justification and Energy Savings 1. Economic Impacts on Individual Consumers DOE analyzed the economic impacts on room air conditioners consumers by looking at the effects that potential amended standards at each TSL would have on the LCC and PBP. DOE also examined the impacts of potential standards on selected consumer subgroups. These analyses are discussed in the following sections. E:\FR\FM\26MYR2.SGM 26MYR2 34336 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations a. Life-Cycle Cost and Payback Period In general, higher-efficiency products affect consumers in two ways: (1) purchase price increases and (2) annual operating costs decrease. Inputs used for calculating the LCC and PBP include total installed costs (i.e., product price plus installation costs), and operating costs (i.e., annual energy use, energy prices, energy price trends, repair costs, and maintenance costs). The LCC calculation also uses product lifetime and a discount rate. Chapter 8 of the purchase products with higher efficiency in the no-new-standards case, the average savings are less than the difference between the average LCC of the baseline product and the average LCC at each TSL. The savings refer only to consumers who are affected by a standard at a given TSL. Those who already purchase a product with efficiency at or above a given TSL are not affected. Consumers for whom the LCC increases at a given TSL experience a net cost. final rule TSD provides detailed information on the LCC and PBP analyses. Tables V.2 through V.25 show the LCC and PBP results for the TSLs considered for each product class. In the first of each pair of tables, the simple payback is measured relative to the baseline product. In the second table, the impacts are measured relative to the efficiency distribution in the in the nonew-standards case in the compliance year (see section IV.F.8 of this document). Because some consumers TABLE V.2—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 1, WITHOUT REVERSE CYCLE AND WITH LOUVERS, LESS THAN 6,000 Btu/h Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ CEER ................ ................ 1 2,3 4 5 11.0 11.4 12.1 13.1 16.0 20.2 First year’s operating cost Installed cost 419 421 424 429 518 532 Lifetime operating cost 64 63 57 52 43 35 486 474 428 397 328 267 LCC 906 895 852 826 846 799 Simple payback (years) ................ 1.0 0.6 0.8 4.6 3.8 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.3—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 1, WITHOUT REVERSE CYCLE AND WITH LOUVERS, LESS THAN 6,000 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2, 3 ....................................................................................................... 4 ........................................................................................................... 5 ........................................................................................................... Average LCC savings * (2021$) 11.4 12.1 13.1 16.0 20.2 Percent of consumers that experience net cost 1 41 65 47 93 0 2 3 41 34 * The savings represent the average LCC for affected consumers. TABLE V.4—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 2, WITHOUT REVERSE CYCLE AND WITH LOUVERS, 6,000–7,900 Btu/h Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ................ ................ 1 2,3 4 5 CEER 11.0 11.4 12.1 13.7 16.0 21.2 First year’s operating cost Installed cost 437 440 444 463 539 599 Lifetime operating cost 82 80 73 65 56 44 635 614 563 504 431 337 LCC 1,072 1,054 1,007 967 970 936 Simple payback (years) ................ 1.0 0.7 1.5 3.8 4.2 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 9.3 ddrumheller on DSK120RN23PROD with RULES2 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.5—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 2, WITHOUT REVERSE CYCLE AND WITH LOUVERS, 6,000–7,900 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00040 Fmt 4701 Average LCC savings * (2021$) 11.4 12.1 Sfmt 4700 E:\FR\FM\26MYR2.SGM 0 35 26MYR2 Percent of consumers that experience net cost 0 2 34337 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.5—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 2, WITHOUT REVERSE CYCLE AND WITH LOUVERS, 6,000–7,900 Btu/h—Continued Life-cycle cost savings TSL CEER 2, 3 ....................................................................................................... 4 ........................................................................................................... 5 ........................................................................................................... Average LCC savings * (2021$) 13.7 16.0 21.2 Percent of consumers that experience net cost 72 69 103 14 38 42 * The savings represent the average LCC for affected consumers. TABLE V.6—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 3, WITHOUT REVERSE CYCLE, WITH LOUVERED SIDES, AND 8,000–13,900 Btu/h Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ CEER ................ ................ 1 2 3,4 5 10.9 11.4 12.0 14.3 16.0 21.9 First year’s operating cost Installed cost 561 564 576 584 669 727 Lifetime operating cost 106 102 93 79 69 51 809 781 710 603 524 394 LCC 1,370 1,345 1,287 1,187 1,193 1,122 Simple payback (years) ................ 0.7 1.2 0.9 2.9 3.1 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.7—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 3, WITHOUT REVERSE CYCLE, WITH LOUVERED SIDES, AND 8,000–13,900 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3, 4 ....................................................................................................... 5 ........................................................................................................... Average LCC savings * (2021$) 11.4 12.0 14.3 16.0 21.9 Percent of consumers that experience net cost 0 17 105 100 171 0 2 2 26 30 * The savings represent the average LCC for affected consumers. TABLE V.8—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 4, WITHOUT REVERSE CYCLE AND WITH LOUVERS, 14,000–19,900 Btu/h Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ................ ................ 1 2 3,4 5 CEER 10.7 11.1 11.8 14.0 16.0 19.8 First year’s operating cost Installed cost 703 705 713 739 835 868 Lifetime operating cost 121 118 107 91 77 63 921 896 813 692 588 479 LCC 1,623 1,601 1,526 1,431 1,423 1,347 Simple payback (years) ................ 0.7 0.7 1.2 3.0 2.8 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. ddrumheller on DSK120RN23PROD with RULES2 TABLE V.9—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 4, WITHOUT REVERSE CYCLE AND WITH LOUVERS, 14,000–19,900 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3,4 ........................................................................................................ VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00041 Fmt 4701 Average LCC savings * (2021$) 11.1 11.8 14.0 16.0 Sfmt 4700 E:\FR\FM\26MYR2.SGM 0 0 85 92 26MYR2 Percent of consumers that experience net cost 0 0 9 33 34338 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.9—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 4, WITHOUT REVERSE CYCLE AND WITH LOUVERS, 14,000–19,900 Btu/h—Continued Life-cycle cost savings TSL CEER 5 ........................................................................................................... Average LCC savings * (2021$) 19.8 Percent of consumers that experience net cost 168 30 * The savings represent the average LCC for affected consumers. TABLE V.10—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 5A, WITHOUT REVERSE CYCLE AND WITH LOUVERS, 20,000–27,900 Btu/h Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ CEER ................ ................ 1 2 3,4 5 9.4 9.8 10.3 11.8 13.8 18.7 First year’s operating cost Installed cost 876 879 893 909 1,014 1,057 Lifetime operating cost 148 142 132 115 93 69 1,086 1,047 969 849 688 511 LCC 1,962 1,926 1,862 1,758 1,703 1,567 Simple payback (years) ................ 0.6 1.1 1.0 2.5 2.3 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.11—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 5A, WITHOUT REVERSE CYCLE AND WITH LOUVERS, 20,000–27,900 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3,4 ........................................................................................................ 5 ........................................................................................................... Average LCC savings * (2021$) 9.8 10.3 11.8 13.8 18.7 Percent of consumers that experience net cost 0 6 99 148 284 0 1 5 30 27 * The savings represent the average LCC for affected consumers. TABLE V.12—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PCS 5B, WITHOUT REVERSE CYCLE AND WITH LOUVERS, GREATER THAN 28,000 Btu/h Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ CEER ................ ................ 1 2 3,4 5 9.0 9.4 9.9 10.3 13.2 16.3 First year’s operating cost Installed cost 926 929 935 939 1,080 1,106 Lifetime operating cost 180 172 159 151 113 91 1,322 1,268 1,170 1,114 833 675 LCC 2,248 2,197 2,105 2,053 1,912 1,781 Simple payback (years) ................ 0.4 0.4 0.5 2.3 2.0 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.13—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PCS 5B, WITHOUT REVERSE CYCLE AND WITH LOUVERS, GREATER THAN 28,000 Btu/h Life-cycle cost savings ddrumheller on DSK120RN23PROD with RULES2 TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3, 4 ....................................................................................................... 5 ........................................................................................................... Average LCC savings * (2021$) 9.4 9.9 10.3 13.2 16.3 21 101 150 284 415 * The savings represent the average LCC for affected consumers. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 E:\FR\FM\26MYR2.SGM 26MYR2 Percent of consumers that experience net cost 0 0 1 24 21 34339 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.14—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 8A, WITHOUT REVERSE CYCLE AND WITHOUT LOUVERED SIDES, 8,000–10,900 Btu/h Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ CEER ................ ................ 1 2 3,4 5 9.6 10.1 10.6 12.3 14.1 18.7 First year’s operating cost Installed cost 577 580 584 611 695 764 Lifetime operating cost 108 103 96 83 71 54 823 787 731 634 539 417 LCC 1,400 1,368 1,316 1,245 1,234 1,181 Simple payback (years) ................ 0.8 0.6 1.4 3.2 3.5 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.15—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 8A, WITHOUT REVERSE CYCLE AND WITHOUT LOUVERED SIDES, 8,000–10,900 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3,4 ........................................................................................................ 5 ........................................................................................................... Average LCC savings * (2021$) 10.1 10.6 12.3 14.1 18.7 Percent of consumers that experience net cost 0 6 73 84 137 0 0 15 34 38 * The savings represent the average LCC for affected consumers. TABLE V.16—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 8B, WITHOUT REVERSE CYCLE AND WITHOUT LOUVERED SIDES, 11,000–13,999 Btu/h Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ CEER ................ ................ 1 2 3,4 5 9.5 10.0 10.5 12.3 13.9 19.0 First year’s operating cost Installed cost 626 629 634 670 738 846 Lifetime operating cost 132 127 116 100 86 64 1,010 968 885 764 656 492 LCC 1,636 1,597 1,520 1,434 1,394 1,338 Simple payback (years) ................ 0.6 0.5 1.4 2.4 3.2 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.17—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 8B, WITHOUT REVERSE CYCLE AND WITHOUT LOUVERED SIDES, 11,000–13,900 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3,4 ........................................................................................................ 5 ........................................................................................................... Average LCC savings * (2021$) 10.0 10.5 12.3 13.9 19.0 Percent of consumers that experience net cost 0 0 81 119 175 0 0 17 26 37 ddrumheller on DSK120RN23PROD with RULES2 * The savings represent the average LCC for affected consumers. TABLE V.18—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 9, WITHOUT REVERSE CYCLE AND WITHOUT LOUVERED SIDES, 14,000–19,900 Btu/h Average costs (2021$) EL TSL 0 ........................................................................................ 1 ........................................................................................ 2 ........................................................................................ VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 ................ ................ 1 PO 00000 Frm 00043 CEER 9.3 9.7 10.2 Fmt 4701 Installed cost 756 760 770 Sfmt 4700 First year’s operating cost Lifetime operating cost 119 115 106 E:\FR\FM\26MYR2.SGM 901 867 803 26MYR2 LCC 1,658 1,627 1,573 Simple payback (years) ................ 0.8 1.1 Average lifetime (years) 9.3 9.3 9.3 34340 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.18—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 9, WITHOUT REVERSE CYCLE AND WITHOUT LOUVERED SIDES, 14,000–19,900 Btu/h—Continued Average costs (2021$) EL TSL 3 ........................................................................................ 4 ........................................................................................ 5 ........................................................................................ CEER 2 3,4 5 10.9 13.7 16.8 First year’s operating cost Installed cost 795 877 964 Lifetime operating cost 99 77 63 754 584 482 LCC Simple payback (years) 1,549 1,461 1,446 Average lifetime (years) 2.0 2.9 3.7 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.19—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 9, WITHOUT REVERSE CYCLE AND WITHOUT LOUVERED SIDES, 14,000–19,900 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3, 4 ....................................................................................................... 5 ........................................................................................................... Average LCC savings * (2021$) 9.7 10.2 10.9 13.7 16.8 Percent of consumers that experience net cost 12 58 81 165 180 1 4 19 24 39 * The savings represent the average LCC for affected consumers. TABLE V.20—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 11, WITH REVERSE CYCLE AND WITH LOUVERED SIDES, LESS THAN 20,000 Btu/h Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ CEER ................ ................ 1 2 3,4 5 9.8 10.4 10.8 12.3 14.4 18.0 First year’s operating cost Installed cost 659 663 668 705 778 826 Lifetime operating cost 108 102 94 83 71 58 829 788 725 645 546 448 LCC 1,488 1,451 1,392 1,349 1,324 1,274 Simple payback (years) Average lifetime (years) ................ 0.8 0.6 1.9 3.2 3.4 9.3 9.3 9.3 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.21—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 11, WITH REVERSE CYCLE AND WITH LOUVERED SIDES, LESS THAN 20,000 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3,4 ........................................................................................................ 5 ........................................................................................................... Average LCC savings * (2021$) 10.4 10.8 12.3 14.4 18.0 Percent of consumers that experience net cost 18 69 110 134 185 2 2 19 30 34 * The savings represent the average LCC for affected consumers. ddrumheller on DSK120RN23PROD with RULES2 TABLE V.22—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 12, WITH REVERSE CYCLE AND WITHOUT LOUVERED SIDES, LESS THAN 14,000 Btu/h Average costs (2021$) EL 0 1 2 3 4 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 ................ ................ 1 2 3,4 PO 00000 Frm 00044 CEER 9.3 9.7 10.2 11.3 13.7 Fmt 4701 Installed cost 776 779 788 812 854 Sfmt 4700 First year’s operating cost Lifetime operating cost 88 85 79 72 59 E:\FR\FM\26MYR2.SGM 674 649 603 550 449 26MYR2 LCC 1,449 1,428 1,391 1,362 1,302 Simple payback (years) ................ 1.0 1.3 2.2 2.6 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 34341 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.22—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 12, WITH REVERSE CYCLE AND WITHOUT LOUVERED SIDES, LESS THAN 14,000 Btu/h—Continued Average costs (2021$) EL TSL 5 ........................................................................................ CEER 5 16.4 First year’s operating cost Installed cost 915 Lifetime operating cost 50 383 LCC Simple payback (years) 1,298 3.6 Average lifetime (years) 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.23—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 12, WITH REVERSE CYCLE AND WITHOUT LOUVERED SIDES, LESS THAN 14,000 Btu/h Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3,4 ........................................................................................................ 5 ........................................................................................................... Average LCC savings * (2021$) 9.7 10.2 11.3 13.7 16.4 Percent of consumers that experience net cost 8 40 67 124 128 2 8 22 21 36 * The savings represent the average LCC for affected consumers. TABLE V.24—AVERAGE LCC AND PBP RESULTS FOR ROOM AIR CONDITIONERS PC 16, CASEMENT-SLIDER Average costs (2021$) EL 0 1 2 3 4 5 TSL ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ ........................................................................................ CEER ................ ................ 1 2 3,4 5 10.4 10.8 11.4 13.2 15.3 19.1 First year’s operating cost Installed cost 554 556 560 571 672 689 Lifetime operating cost 88 85 78 69 59 48 677 654 599 529 452 372 LCC 1,230 1,211 1,159 1,100 1,124 1,061 Simple payback (years) ................ 1.0 0.7 0.9 4.0 3.4 Average lifetime (years) 9.3 9.3 9.3 9.3 9.3 9.3 Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the baseline product. TABLE V.25—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR ROOM AIR CONDITIONERS PC 16, CASEMENT-SLIDER Life-cycle cost savings TSL CEER ......................................................................................................... 1 ........................................................................................................... 2 ........................................................................................................... 3,4 ........................................................................................................ 5 ........................................................................................................... Average LCC savings * (2021$) 10.8 11.4 13.2 15.3 19.1 7 51 107 84 147 Percent of consumers that experience net cost 2 3 5 38 32 ddrumheller on DSK120RN23PROD with RULES2 * The savings represent the average LCC for affected consumers. b. Consumer Subgroup Analysis In the consumer subgroup analysis, DOE estimated the impact of the considered TSLs on low-income households and senior-only households for product classes with a sufficient sample size in RECS 2015 to perform a Monte Carlo analysis. Tables V.26 through V.28 compares the average LCC savings and PBP at each efficiency level VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 for the consumer subgroups with similar metrics for the entire consumer sample for product classes 1, 2, and 3. The percentage of consumers with either a net benefit or cost are calculated relative to consumers within that subgroup. Product Classes 4, 5a, 5b, 8a, 8b, 9, 11, 12, and 16 were not analyzed due to their low presence (<5%) in low-income and senior-only households based on PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 shipments and stock estimates from RECS 2015. In most cases, the average LCC savings and PBP for low-income households and senior-only households at the considered efficiency levels are not substantially different from the average for all households. Chapter 11 of the final rule TSD presents the complete LCC and PBP results for the subgroups. E:\FR\FM\26MYR2.SGM 26MYR2 34342 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.26—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS: ROOM AIR CONDITIONERS PC 1, WITHOUT REVERSE CYCLE AND WITH LOUVERS, LESS THAN 6,000 Btu/h Average LCC Savings (2021$): TSL 1 ............................................................................................................................ TSL 2, 3 ........................................................................................................................ TSL 4 ............................................................................................................................ TSL 5 ............................................................................................................................ Payback Period (years): TSL 1 ............................................................................................................................ TSL 2,3 ......................................................................................................................... TSL 4 ............................................................................................................................ TSL 5 ............................................................................................................................ Consumers with Net Benefit (%): TSL 1 ............................................................................................................................ TSL 2, 3 ........................................................................................................................ TSL 4 ............................................................................................................................ TSL 5 ............................................................................................................................ Consumers with Net Cost (%): TSL 1 ............................................................................................................................ TSL 2, 3 ........................................................................................................................ TSL 4 ............................................................................................................................ TSL 5 ............................................................................................................................ Low-income households * Senior-only households ** All households † .......................... $41 $66 $53 $99 .......................... 0.7 0.8 4.7 3.9 .......................... 93% 94% 59% 72% .......................... 0% 1% 36% 28% ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ .......................... $39 $62 $40 $84 .......................... 0.7 0.9 5.1 4.2 .......................... 92% 92% 53% 66% .......................... 1% 3% 42% 34% * Low-income households represent 60.0 percent of all households for this product class. ** Insufficient sample size to conduct subgroup analysis. † The savings represent results of residential consumers only and exclude results from commercial consumers. TABLE V.27—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS: ROOM AIR CONDITIONERS PC 2, WITHOUT REVERSE CYCLE AND WITH LOUVERS, 6,000–7,900 Btu/h Average LCC Savings (2021$): TSL 1 ................................................................................................................................... TSL 2, 3 ............................................................................................................................... TSL 4 ................................................................................................................................... TSL 5 ................................................................................................................................... Payback Period (years): TSL 1 ................................................................................................................................... TSL 2, 3 ............................................................................................................................... TSL 4 ................................................................................................................................... TSL 5 ................................................................................................................................... Consumers with Net Benefit (%): TSL 1 ................................................................................................................................... TSL 2, 3 ............................................................................................................................... TSL 4 ................................................................................................................................... TSL 5 ................................................................................................................................... Consumers with Net Cost (%): TSL 1 ................................................................................................................................... TSL 2, 3 ............................................................................................................................... TSL 4 ................................................................................................................................... TSL 5 ................................................................................................................................... Low-income households * Senior-only households ** All households † .......................... $37 $78 $76 $117 .......................... 0.7 1.5 3.8 4.1 .......................... 74% 83% 60% 61% .......................... 1% 10% 35% 39% ............................ $42 $90 $97 $150 ............................ 0.6 1.3 3.3 3.6 ............................ 72% 83% 66% 68% ............................ 3% 10% 29% 32% .......................... $36 $75 $72 $109 .......................... 0.7 1.5 3.9 4.2 .......................... 73% 80% 59% 60% .......................... 2% 13% 36% 40% * Low-income households represent 50.1 percent of all households for this product class. ** Senior-only households represent 24.7 percent of all households for this product class. † The savings represent results of residential consumers only and exclude results from commercial consumers. TABLE V.28—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS: ROOM AIR CONDITIONERS PC 3, WITHOUT REVERSE CYCLE, WITH LOUVERED SIDES, AND 8,000–13,900 BTU/H ddrumheller on DSK120RN23PROD with RULES2 Low-income households * Average LCC savings (2021$): TSL 1 ............................................................................................................................ TSL 2 ............................................................................................................................ TSL 3,4 ......................................................................................................................... TSL 5 ............................................................................................................................ Payback Period (years): TSL 1 ............................................................................................................................ TSL 2 ............................................................................................................................ VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 Senior-only households ** All households † $20 $122 $122 $214 $16 $98 $83 $149 $16 $101 $94 $161 1.1 0.8 1.3 0.9 1.3 0.9 E:\FR\FM\26MYR2.SGM 26MYR2 34343 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.28—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS: ROOM AIR CONDITIONERS PC 3, WITHOUT REVERSE CYCLE, WITH LOUVERED SIDES, AND 8,000–13,900 BTU/H—Continued Low-income households * TSL 3,4 ......................................................................................................................... TSL 5 ............................................................................................................................ Consumers with Net Benefit (%): TSL 1 ............................................................................................................................ TSL 2 ............................................................................................................................ TSL 3,4 ......................................................................................................................... TSL 5 ............................................................................................................................ Consumers with Net Cost (%): TSL 1 ............................................................................................................................ TSL 2 ............................................................................................................................ TSL 3,4 ......................................................................................................................... TSL 5 ............................................................................................................................ Senior-only households ** All households † 2.6 2.8 3.2 3.4 3.1 3.3 27% 86% 64% 71% 25% 86% 55% 60% 27% 87% 64% 70% 2% 2% 25% 29% 4% 2% 34% 40% 2% 2% 26% 30% * Low-income households represent 25.7 percent of all households for this product class. ** Senior-only households represent 26.6 percent of all households for this product class. † The savings represent results of residential consumers only and exclude results from commercial consumers. c. Rebuttable Presumption Payback As discussed in section II.A of this document, EPCA establishes a rebuttable presumption that an energy conservation standard is economically justified if the increased purchase cost for a product that meets the standard is less than three times the value of the first-year energy savings resulting from the standard. In calculating a rebuttable presumption payback period for each of the considered TSLs, DOE used discrete values, and, as required by EPCA, based the energy use calculation on the DOE test procedures for room air conditioners. In contrast, the PBPs presented in section V.B.1.a of this document were calculated using distributions that reflect the range of energy use in the field. Table V.29 presents the rebuttablepresumption payback periods for the considered TSLs for room air conditioners. While DOE examined the rebuttable-presumption criterion, it considered whether the standard levels considered for this rule are economically justified through a more detailed analysis of the economic impacts of those levels, pursuant to 42 U.S.C. 6295(o)(2)(B)(i), that considers the full range of impacts to the consumer, manufacturer, Nation, and environment. The results of that analysis serve as the basis for DOE to definitively evaluate the economic justification for a potential standard level, thereby supporting or rebutting the results of any preliminary determination of economic justification. TABLE V.29—REBUTTABLE-PRESUMPTION PAYBACK PERIODS Trial standard level Product class 1 2 3 4 5 ddrumheller on DSK120RN23PROD with RULES2 (years) PC 1: Room Air Conditioners, without reverse cycle, with louvered sides, and less than 6,000 Btu/h ............................................................................................................................................. PC 2: Room Air Conditioners, without reverse cycle, with louvered sides, and 6,000 to 7,900 Btu/h ............................................................................................................................................. PC 3: Room Air Conditioners, without reverse cycle, with louvered sides, and 8,000 to 13,900 Btu/h ............................................................................................................................................. PC 4: Room Air Conditioners, without reverse cycle, with louvered sides, and 14,000 to 19,900 Btu/h ............................................................................................................................................. PC 5a: Room Air Conditioners, without reverse cycle, with louvered sides, and 20,000 to 27,900 Btu/h ................................................................................................................................. PC 5b: Room Air Conditioners, without reverse cycle, with louvered sides, and 28,000 Btu/h or more ............................................................................................................................................. PC 8a: Room Air Conditioners, without reverse cycle, without louvered sides, and 8,000 to 10,900 Btu/h ................................................................................................................................. PC 8b: Room Air Conditioners, without reverse cycle, without louvered sides, and 11,000 to 13,900 Btu/h ................................................................................................................................. PC 9: Room Air Conditioners, without reverse cycle, without louvered sides, and 14,000 to 19,900 Btu/h ................................................................................................................................. PC 11: Room Air Conditioners, with reverse cycle, with louvered sides, and less than 20,000 Btu/h ............................................................................................................................................. PC 12: Room Air Conditioners, with reverse cycle, without louvered sides, and less than 14,000 Btu/h ............................................................................................................................................. PC 16: Room Air Conditioners, Casement-Slider ........................................................................... VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 1.1 1.2 1.2 7.2 5.5 1.0 1.8 1.8 6.1 5.1 1.4 0.9 4.0 4.0 3.2 0.7 0.8 2.8 2.8 2.2 0.7 0.6 1.8 1.8 1.4 0.3 0.3 1.5 1.5 1.3 0.7 1.2 4.3 4.3 3.5 0.6 1.3 3.7 3.7 3.2 0.8 1.2 2.7 2.7 2.4 0.8 1.9 4.4 4.4 3.5 1.5 0.8 2.1 1.0 3.6 4.9 3.6 4.9 3.7 3.9 E:\FR\FM\26MYR2.SGM 26MYR2 34344 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations 2. Economic Impacts on Manufacturers DOE performed an MIA to estimate the impact of amended energy conservation standards on manufacturers of room air conditioners. The next section describes the expected impacts on manufacturers at each considered TSL. Chapter 12 of the final rule TSD explains the analysis in further detail. a. Industry Cash Flow Analysis Results In this section, DOE provides GRIM results from the analysis, which examines changes in the industry that would result from a standard. The following tables summarize the estimated financial impacts (represented by changes in INPV) of potential amended energy conservation standards on manufacturers of room air conditioners, as well as the conversion costs that DOE estimates manufacturers of room air conditioners would incur at each TSL. The impact of potential amended energy conservation standards were analyzed under two scenarios: (1) the preservation of gross margin percentage; and (2) the preservation of per-unit operating profit, as discussed in section IV.J.2.d of this document. The preservation of gross margin percentage scenario provides the upper bound while the preservation of per-unit operating profit scenario results in the lower (or more severe) bound to impacts of potential amended standards on industry. Each of the modeled scenarios results in a unique set of cash flows and corresponding INPV for each TSL. INPV is the sum of the discounted cash flows to the industry from the publication of the final rule through the end of the analysis period (2023–2055). The ‘‘change in INPV’’ results refer to the difference in industry value between the no-new-standards case and standards case at each TSL. To provide perspective on the short-run cash flow impact, DOE includes a comparison of free cash flow between the no-newstandards case and the standards case at each TSL in the year before amended standards would take effect. This figure provides an understanding of the magnitude of the required conversion costs relative to the cash flow generated by the industry in the no-new-standards case. Conversion costs are one-time investments for manufacturers to bring their manufacturing facilities and product designs into compliance with potential amended standards. As described in section IV.J.2.c of this document, conversion cost investments occur between the year of publication of the final rule and the year by which manufacturers must comply with the new standard. The conversion costs can have a significant impact on the shortterm cash flow on the industry and generally result in lower free cash flow in the period between the publication of the final rule and the compliance date of potential amended standards. Conversion costs are independent of the manufacturer markup scenarios and are not presented as a range in this analysis. TABLE V.30—MANUFACTURER IMPACT ANALYSIS RESULTS FOR THE ROOM AIR CONDITIONER INDUSTRY * INPV ................................... Change in INPV ................. Free Cash Flow (2025) ...... Change in Free Cash Flow (2025). Conversion Costs ............... Units No-New STDs case TSL 1 TSL 2 TSL 3 TSL 4 $2021 MM .. % ................ $2021 MM .. % ................ 1,198.5 .................... 86.1 .................... 1,188.7 to 1,192.9 (0.8) to (0.5) ......... 79.9 ...................... (7.2) ...................... 1,167.8 to 1,197.2 (2.6) to (0.1) ......... 72.6 ...................... (15.7) .................... 1,140.8 to 1,284.1 (4.8) to 7.1 ............ 76.9 ...................... (10.7) .................... 1,097.7 to 1,369.0 (8.4) to 14.2 .......... 75.5 ...................... (12.4) .................... 857.5 to 1,211.5. (28.4) to 1.1. (55.3). (164.2). $2021 MM .. .................... 14.6 ...................... 31.3 ...................... 24.8 ...................... 29.0 ...................... 319.7. TSL 5 ddrumheller on DSK120RN23PROD with RULES2 * Negative values denoted by parentheses. At TSL 1, the standard is set to existing ENERGY STAR levels (EL 2) for all product classes. DOE estimates the change in INPV to be minimal under both manufacturer markup scenarios. INPV is expected to range from ¥0.8 percent to ¥0.5 percent. At this level, free cash flow is estimated to decrease by 7.2 percent compared to the no-newstandards case value of $86.1 million in the year 2025, the year before the standards year. DOE’s shipments analysis estimates approximately 32 percent of current shipments meet this level. At TSL 1, DOE does not expect industry to adopt new or larger chassis sizes. Capital conversion costs may be necessary for incremental updates in tooling. Product conversion costs are driven by specification, sourcing, and testing of more efficient compressors. DOE estimates capital conversion costs of $11.4 million and product conversion costs of $3.2 million. Conversion costs total $14.6 million. At TSL 2, the standard reflects an efficiency level attainable by units with the most efficient R–32 single-speed VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 compressor on the market, in combination with other design options, for all product classes (EL 3). DOE estimates the change in INPV to range from ¥2.6 percent to ¥0.1 percent. At this level, free cash flow is estimated to decrease by 15.7 percent compared to the base-case value in the year before the standards year. DOE’s shipments analysis estimates approximately 2 percent of current shipments meet this level. At TSL 2, DOE does not expect industry to adopt new or larger chassis designs. Capital conversion costs may be necessitated by the incorporation of additional design options, such as the inclusion of sub-cooling. Product conversion costs are driven by the need to redesign models to incorporate more efficient single-speed compressors as well as other design options. DOE estimates capital conversion costs of $26.2 million and product conversion costs of $5.1 million. Conversion costs total $31.3 million. At TSL 3, the standard varies based by product class. For product classes with cooling capacities less than 8,000 Btu/ PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 h, the standard reflects an efficiency level attainable by units with the most efficient R–32 single-speed compressor on the market (EL 3) in combination with other design options. For product classes with cooling capacities greater than or equal to 8,000 Btu/h, the standard reflects an efficiency level consistent with the implementation commercially available variable-speed compressors (EL 4). DOE estimates the change in INPV to range from ¥4.8 percent to 7.1 percent. At this level, free cash flow is estimated to decrease by 10.7 percent compared to the base-case value in the year before the standards year. DOE’s shipments analysis estimates approximately 2 percent of current shipments meet this level. At this level, DOE does not expect industry to adopt new or larger chassis designs. For product classes with cooling capacities greater than or equal to the 8,000 Btu/h threshold, additional capital conversion costs may be necessary to adjust appearance tooling. DOE anticipates greater redesign efforts and product conversion costs as E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations manufacturers move these products to variable-speed compressor designs. DOE estimates capital conversion costs of $7.1 million and product conversion costs of $17.7 million. Conversion costs total $24.8 million. In interviews and through review of market data, DOE found that all but one OEM currently produce R–32 room air conditioner models. Additionally, based on interview feedback, all OEMs intend to entirely transition to R–32 room air conditioners by 2023 regardless of DOE actions related to the energy conservation standards for room air conditioners. Thus, DOE did not consider the redesign costs related to R– 32 as conversion costs that are the result of any amended energy conservation standards. DOE accounted for the costs associated with the transition to lowGWP refrigerants in its modeling of the GRIM, consistent with the April 2022 NOPR. At TSL 4, the standard reflects the efficiency consistent with the implementation of commercially available variable-speed compressors for all product classes (EL 4). DOE estimates the change in INPV to range from ¥8.4 percent to 14.2 percent. At this level, free cash flow is estimated to decrease by 12.4 percent compared to the base-case value in the year before the standards year. DOE’s shipments analysis estimates that less than 2 percent of current shipments meet this level. At this level, DOE does not expect industry to adopt new or larger chassis designs. Capital conversion costs may be necessary for adjustments in appearance tooling. Compared to lower efficiency levels, DOE anticipates significantly greater redesign efforts and product conversion costs as manufacturers move all products to variable-speed compressor designs. Based on DOE’s Compliance Certification Database (‘‘CCD’’),71 DOE estimates that OEMs would need to redesign all product platforms to meet the efficiency levels required by TSL 4. DOE estimates capital conversion costs of $6.9 million and product conversion costs of $22.0 million. Conversion costs total $29.0 million. At TSL 5, the standard reflects maxtech efficiency (EL 5) for all product classes. DOE estimates the change in INPV to range from ¥28.4 percent to 1.1 percent. At this level, free cash flow is estimated to decrease by 164.2 percent compared to the base-case value in the year before the standards year. In DOE’s 71 U.S. Department of Energy’s Compliance Certification Database. Available at: regulations.doe.gov/certification-data/#q=Product_ Group_s%3A* (last accessed: March 17, 2021). VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 review of the market, no models currently meet this level. DOE estimates capital conversion costs of $297.5 million and product conversion costs of $22.2 million. Conversion costs total $319.7 million. At this level, DOE expects changes to chassis size for certain window and through-the-wall units. As a result, capital conversion costs increase significantly as manufacturers adjust equipment and tooling to accommodate new dimensions. As with EL 4, DOE anticipates significant redesign efforts and product conversion costs as manufacturers move all products to variable-speed compressor designs. OEMs would need to redesign all product platforms to meet the efficiency levels required by TSL 5. At TSL 5, the large conversion costs result in a free cash flow dropping below zero in the years before the standard year. The negative free cash flow calculation indicates manufacturers may need to access cash reserves or outside capital to finance conversion efforts. b. Direct Impacts on Employment DOE’s research indicates no room air conditioners are currently made in domestic production facilities. DOE expects that amended standards would have no impact on domestic production employment, which would remain at zero. Manufacturers maintain offices in the United States to handle design, marketing, technical support, and other business needs. Large changes in total annual shipments may lead to companies reducing their nonproduction room air conditioner staff. However, DOE’s shipments model does not forecast substantial changes in total annual shipments for TSL 3. If total shipments remain relatively steady DOE would not expect any change to nonproduction employment as a result of amended standards. See section IV.G of this document for additional details on DOE’s shipments analysis. c. Impacts on Manufacturing Capacity In interviews, manufacturers noted that the majority of room air conditioners are manufactured overseas by high-volume manufacturers producing product for a range of international markets. Manufacturers had few concerns about production line constraints below the max-tech level (TSL 5). However, at the max-tech level, some manufacturers noted concerns about having sufficient technical resources to oversee the redesign and testing of all room air conditioner products to incorporate variable-speed technology. Additionally, DOE notes PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 34345 that the most efficient variable-speed compressors that were implemented at the max-tech level (TSL 5) are offered by only a single manufacturer. Based on public information, DOE was unable to determine the availability and pricing of these compressors. Given the lack of information regarding availability of these highest efficiency variable-speed compressors and the limited number of variable-speed compressors rated at or near the efficiency of compressors considered for the max-tech efficiency level, there may not be sufficient availability of the highest efficiency variable-speed compressors to meet the entire industry’s production capacity needs at all cooling capacities of room air conditioners at the max-tech level (TSL 5). d. Impacts on Subgroups of Manufacturers Using average cost assumptions to develop industry cash-flow estimates may not capture the differential impacts among subgroups of manufacturers. Small manufacturers, niche players, or manufacturers exhibiting a cost structure that differs substantially from the industry average could be affected disproportionately. DOE investigated small businesses as a manufacturer subgroup that could be disproportionally impacted by energy conservation standards and could merit additional analysis. DOE did not identify any other adversely impacted manufacturer subgroups for this rulemaking based on the results of the industry characterization. DOE analyzes the impacts on small businesses in a separate analysis in section VII.B of this document as part of the Regulatory Flexibility Analysis. For a discussion of the impacts on the small business manufacturer subgroup, see the Regulatory Flexibility Analysis in section VII.B of this document and chapter 12 of the final rule TSD. e. Cumulative Regulatory Burden One aspect of assessing manufacturer burden involves looking at the cumulative impact of multiple DOE standards and the regulatory actions of other Federal agencies and States that affect the manufacturers of a covered product or equipment. While any one regulation may not impose a significant burden on manufacturers, the combined effects of several existing or impending regulations may have serious consequences for some manufacturers, groups of manufacturers, or an entire industry. Multiple regulations affecting the same manufacturer can strain profits and lead companies to abandon product lines or markets with lower expected E:\FR\FM\26MYR2.SGM 26MYR2 34346 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations future returns than competing products. For these reasons, DOE conducts an analysis of cumulative regulatory burden as part of its rulemakings pertaining to appliance efficiency. Table V.31 presents the results of DOE’s analysis which includes productspecific regulations that will take effect approximately three years before or after the 2026 compliance date of any amended energy conservation standards for room air conditioners. TABLE V.31—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION STANDARDS AFFECTING ROOM AIR CONDITIONER MANUFACTURERS Number of OEMs * Federal energy conservation standard Commercial Warm Air Furnaces 81 FR 2420 (January 15, 2016). Small, Large, and Very Large Commercial Package Air Conditioning and Heating Equipment 81 FR 2420 (January 15, 2016). Residential Central Air Conditioners and Heat Pumps 82 FR 1786 (January 6, 2017). Portable Air Conditioners 85 FR 1378 (January 10, 2020) ...... Commercial Packaged Boilers 85 FR 1592 (January 10, 2020). Commercial Water Heating Equipment †† 87 FR 30610 (May 19, 2022). Consumer Furnaces †† 87 FR 40590 (July 7, 2022) ............... Consumer Pool Heaters †† 87 FR 22640 (April 15, 2022) ....... Consumer Clothes Dryers †† 87 FR 51734 (August 23, 2022) Microwave Ovens †† 87 FR 52282 (August 24, 2022) ............. Consumer Conventional Cooking Products †† 88 FR 6818 (February 1, 2023). Residential Clothes Washers †† 88 FR 13520 (March 3, 2023). Refrigerators, Freezers, and Refrigerator-Freezers †† 88 FR 12452 (February 27, 2023). Number of OEMs affected from the room air conditioner rule ** Approx. standards year Industry conversion costs (millions $) Industry conversion costs/product revenue *** 16 1 2023 ..................... $7.5 to $22.2 (2014$) .......... 1.7% to 5.1%.† 29 4 2018 and 2023 ‡ ... $520.8 (2014$) .................... 4.9%. 51 8 2023 ..................... $342.6 (2015$) .................... 0.5%. 11 43 5 1 2025 ..................... 2023 ..................... $320.9 (2015$) .................... $21.2 (2015$) ...................... 6.7%. 2.3%. 14 1 2026 ..................... $34.6 (2020$) ...................... 4.7%. 15 21 15 18 34 2 1 4 4 3 2029 2028 2027 2026 2027 ..................... ..................... ..................... ..................... ..................... $150.6 (2020$) .................... $38.8 (2020$) ...................... $149.7 (2020$) .................... $46.1 (2021$) ...................... $183.4 (2021$) .................... 1.4%. 1.9%. 1.8%. 0.7%. 1.2%. 19 4 2027 ..................... $690.8 (2021$) .................... 5.2%. 49 4 2027 ..................... $1,323.6 (2021$) ................. 3.8%. * This column presents the total number of manufacturers identified in the energy conservation standard rule contributing to cumulative regulatory burden. ** This column presents the number of manufacturers producing room air conditioner products that are also listed as manufacturers in the listed energy conservation standard contributing to cumulative regulatory burden. *** This column presents industry conversion costs as a percentage of product revenue during the conversion period. Industry conversion costs are the upfront investments manufacturers must make to sell compliant products/equipment. The revenue used for this calculation is the revenue from just the covered product/equipment associated with each row. The conversion period is the time frame over which conversion costs are made and lasts from the publication year of the final rule to the compliance year of the final rule. The conversion period typically ranges from 3 to 5 years, depending on the energy conservation standard. † Low and high conversion cost scenarios were analyzed as part of this direct final rule. The range of estimated conversion expenses presented here reflects those two scenarios. ‡ The direct final rule for small, large, and very large commercial package air conditioning and heating equipment adopts an amended standard in 2018 and a higher amended standard in 2023. The conversion costs are spread over an 8-year conversion period ending in 2022, with over 80 percent of the conversion costs occurring between 2019 and 2022. †† These rulemakings are in the proposed rule stage and all values are subject to change until finalized. 3. National Impact Analysis a. Significance of Energy Savings This section presents DOE’s estimates of the national energy savings and the NPV of consumer benefits that would result from each of the TSLs considered as potential amended standards. To estimate the energy savings attributable to potential amended standards for room air conditioners, DOE compared their energy consumption under the no-newstandards case to their anticipated energy consumption under each TSL. The savings are measured over the entire lifetime of products purchased in the 30-year period that begins in the year of anticipated compliance with amended standards (2026–2055). Table V.32 presents DOE’s projections of the national energy savings for each TSL considered for room air conditioners. The savings were calculated using the approach described in section IV.H.2 of this document. TABLE V.32—CUMULATIVE NATIONAL ENERGY SAVINGS FOR ROOM AIR CONDITIONERS; 30 YEARS OF SHIPMENTS [2026–2055] Trial standard level ddrumheller on DSK120RN23PROD with RULES2 1 2 3 4 5 (quads) Primary energy ......................................................................................... FFC energy .............................................................................................. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00050 Fmt 4701 0.30 0.31 Sfmt 4700 0.91 0.95 E:\FR\FM\26MYR2.SGM 1.35 1.41 26MYR2 1.80 1.87 3.35 3.48 34347 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations OMB Circular A–4 72 requires agencies to present analytical results, including separate schedules of the monetized benefits and costs that show the type and timing of benefits and costs. Circular A–4 also directs agencies to consider the variability of key elements underlying the estimates of benefits and costs. For this rulemaking, DOE undertook a sensitivity analysis using 9 years, rather than 30 years, of product shipments. The choice of a 9year period is a proxy for the timeline in EPCA for the review of certain energy conservation standards and potential revision of and compliance with such revised standards.73 The review timeframe established in EPCA is generally not synchronized with the product lifetime, product manufacturing cycles, or other factors specific to room air conditioners. Thus, such results are presented for informational purposes only and are not indicative of any change in DOE’s analytical methodology. The NES sensitivity analysis results based on a 9-year analytical period are presented in Table V.33. The impacts are counted over the lifetime of room air conditioners purchased in 2026–2055. TABLE V.33—CUMULATIVE NATIONAL ENERGY SAVINGS FOR ROOM AIR CONDITIONERS; 9 YEARS OF SHIPMENTS [2026–2034] Trial standard level 1 2 3 4 5 (quads) Primary energy savings ........................................................................... FFC energy savings ................................................................................. b. Net Present Value of Consumer Costs and Benefits DOE estimated the cumulative NPV of the total costs and savings for 0.12 0.12 0.36 0.38 consumers that would result from the TSLs considered for room air conditioners. In accordance with OMB’s guidelines on regulatory analysis,74 DOE calculated NPV using both a 7- 0.50 0.52 0.64 0.67 1.09 1.13 percent and a 3-percent real discount rate. Table V.34 shows the consumer NPV results with impacts counted over the lifetime of products purchased in 2026–2055. TABLE V.34—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR ROOM AIR CONDITIONERS; 30 YEARS OF SHIPMENTS [2026–2055] Trial standard level Discount rate 1 2 3 4 5 (billion 2021$) 3 percent .................................................................................................. 7 percent .................................................................................................. The NPV results based on the aforementioned 9-year analytical period are presented in Table V.35. The impacts are counted over the lifetime of 2.89 1.47 8.76 4.45 products purchased in 2026–2055. As mentioned previously, such results are presented for informational purposes only and are not indicative of any 11.46 5.39 13.83 6.11 24.27 10.63 change in DOE’s analytical methodology or decision criteria. TABLE V.35—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR ROOM AIR CONDITIONERS; 9 YEARS OF SHIPMENTS [2026–2034] Trial standard level Discount rate 1 2 3 4 5 (billion 2021$) ddrumheller on DSK120RN23PROD with RULES2 3 percent .................................................................................................. 7 percent .................................................................................................. 72 U.S. Office of Management and Budget. Circular A–4: Regulatory Analysis. September 17, 2003. https://obamawhitehouse.archives.gov/omb/ circulars_a004_a-4/ (last accessed May 22, 2023). 73 Section 325(m) of EPCA requires DOE to review its standards at least once every 6-years, and requires, for certain products, a 3-year period after any new standard is promulgated before VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 1.45 0.92 compliance is required, except that in no case may any new standards be required within 6-years of the compliance date of the previous standards. While adding a 6-year review to the 3-year compliance period adds up to 9 years, DOE notes that it may undertake reviews at any time within the 6-year period and that the 3-year compliance date may yield to the 6-year backstop. A 9-year analysis PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 4.39 2.77 4.94 2.96 5.34 3.02 9.33 5.31 period may not be appropriate given the variability that occurs in the timing of standards reviews and the fact that for some products, the compliance period is 5 years rather than 3 years. 74 U.S. Office of Management and Budget. Circular A–4: Regulatory Analysis. September 17, 2003. https://obamawhitehouse.archives.gov/omb/ circulars_a004_a-4/ (last accessed May 22, 2023). E:\FR\FM\26MYR2.SGM 26MYR2 34348 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations The previous results reflect the use of a default trend to estimate the change in price for room air conditioners over the analysis period (see section IV.H.3 of this document). DOE also conducted a sensitivity analysis that considered one scenario with a lower rate of price decline than the reference case and one scenario with a higher rate of price decline than the reference case. The results of these alternative cases are presented in appendix 10C of the final rule TSD. In the high-price-decline case, the NPV of consumer benefits is higher than in the default case. In the lowprice-decline case, the NPV of consumer benefits is lower than in the default case. Under each sensitivity scenario, net benefits remain positive at the adopted TSL. c. Indirect Impacts on Employment DOE estimates that amended energy conservation standards for room air conditioners will reduce energy expenditures for consumers of those products, with the resulting net savings being redirected to other forms of economic activity. These expected shifts in spending and economic activity could affect the demand for labor. As described in section IV.N of this document, DOE used an input/output model of the U.S. economy to estimate indirect employment impacts of the TSLs that DOE considered. There are uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Therefore, DOE generated results for near-term timeframes (2026– 2030), where these uncertainties are reduced. The results suggest that the adopted standards are likely to have a negligible impact on the net demand for labor in the economy. The net change in jobs is so small that it would be imperceptible in national labor statistics and might be offset by other, unanticipated effects on employment. Chapter 16 of the final rule TSD presents detailed results regarding anticipated indirect employment impacts. copies of the NOPR and the TSD for review. In its assessment letter responding to DOE, DOJ concluded that the proposed energy conservation standards for room air conditioners are unlikely to have a significant adverse impact on competition. DOE is publishing the Attorney General’s assessment at the end of this final rule. 4. Impact on Utility or Performance of Products Enhanced energy efficiency, where economically justified, improves the Nation’s energy security, strengthens the economy, and reduces the environmental impacts (costs) of energy production. Reduced electricity demand due to energy conservation standards is also likely to reduce the cost of maintaining the reliability of the electricity system, particularly during peak-load periods. Chapter 15 in the final rule TSD presents the estimated impacts on electricity generating capacity, relative to the no-newstandards case, for the TSLs that DOE considered in this rulemaking. Energy conservation resulting from potential energy conservation standards for room air conditioners is expected to yield environmental benefits in the form of reduced emissions of certain air pollutants and greenhouse gases. Table V.36 provides DOE’s estimate of cumulative emissions reductions expected to result from the TSLs considered in this rulemaking. The emissions were calculated using the multipliers discussed in section IV.J.3 of this document. DOE reports annual emissions reductions for each TSL in chapter 13 of the final rule TSD. 6. Need of the Nation To Conserve Energy As discussed in section IV.C.1.b of this document, DOE has concluded that the standards adopted in this final rule will not lessen the utility or performance of the room air conditioners under consideration in this rulemaking. Manufacturers of these products currently offer units that meet or exceed the adopted standards. 5. Impact of Any Lessening of Competition DOE considered any lessening of competition that would be likely to result from new or amended standards. As discussed in section III.E.1.e of this document, EPCA directs the Attorney General of the United States (‘‘Attorney General’’) to determine the impact, if any, of any lessening of competition likely to result from a proposed standard and to transmit such determination in writing to the Secretary within 60 days of the publication of a proposed rule, together with an analysis of the nature and extent of the impact. To assist the Attorney General in making this determination, DOE provided DOJ with TABLE V.36—CUMULATIVE EMISSIONS REDUCTION FOR ROOM AIR CONDITIONERS SHIPPED IN 2026–2055 Trial standard level 1 2 3 4 5 Power Sector and Site Emissions CO2 (million metric tons) ......................................................................... CH4 (thousand tons) ................................................................................ N2O (thousand tons) ................................................................................ NOX (thousand tons) ............................................................................... SO2 (thousand tons) ................................................................................ Hg (tons) .................................................................................................. 9.97 0.72 0.10 4.99 4.40 0.03 30.44 2.21 0.31 15.27 13.45 0.08 45.05 3.26 0.45 22.48 19.80 0.12 59.87 4.32 0.60 29.81 26.26 0.16 110.45 7.94 1.10 54.71 48.20 0.30 2.31 216.71 0.01 34.77 0.17 0.00 3.43 322.37 0.02 51.71 0.25 0.00 4.56 429.43 0.02 68.88 0.33 0.00 8.45 796.29 0.04 127.68 0.61 0.00 32.74 48.48 64.43 118.90 ddrumheller on DSK120RN23PROD with RULES2 Upstream Emissions CO2 (million metric tons) ......................................................................... CH4 (thousand tons) ................................................................................ N2O (thousand tons) ................................................................................ NOX (thousand tons) ............................................................................... SO2 (thousand tons) ................................................................................ Hg (tons) .................................................................................................. 0.76 71.16 0.00 11.42 0.06 0.00 Total FFC Emissions CO2 (million metric tons) ......................................................................... VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00052 Fmt 4701 10.73 Sfmt 4700 E:\FR\FM\26MYR2.SGM 26MYR2 34349 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.36—CUMULATIVE EMISSIONS REDUCTION FOR ROOM AIR CONDITIONERS SHIPPED IN 2026–2055—Continued Trial standard level 1 CH4 (thousand tons) ................................................................................ N2O (thousand tons) ................................................................................ NOX (thousand tons) ............................................................................... SO2 (thousand tons) ................................................................................ Hg (tons) .................................................................................................. As part of the analysis for this rule, DOE estimated monetary benefits likely to result from the reduced emissions of CO2 that DOE estimated for each of the considered TSLs for room air 71.88 0.10 16.41 4.46 0.03 2 3 4 5 218.92 0.32 50.04 13.62 0.08 325.63 0.47 74.20 20.05 0.12 433.76 0.62 98.69 26.60 0.16 804.23 1.15 182.39 48.82 0.30 conditioners. Section IV.L.1 of this document discusses the estimated SC– CO2 values that DOE used. Table V.37 presents the value of CO2 emissions reduction at each TSL for each of the SC–CO2 cases. The time-series of annual values is presented for the selected TSL in chapter 14 of the final rule TSD. TABLE V.37—PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR ROOM AIR CONDITIONERS SHIPPED IN 2026–2055 SC–CO2 case Discount rate and statistics TSL 5% 3% 2.5% 3% Average Average Average 95th percentile (million 2021$) 1 2 3 4 5 ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... As discussed in section IV.L.2 of this document, DOE estimated the climate benefits likely to result from the reduced emissions of methane and N2O that DOE estimated for each of the 111 342 499 658 1,194 considered TSLs for room air conditioners. Table V.38 presents the value of the CH4 emissions reduction at each TSL, and Table V.39 presents the value of the N2O emissions reduction at 461 1,415 2,075 2,745 5,013 714 2,189 3,215 4,257 7,789 1,402 4,307 6,313 8,350 15,250 each TSL. The time-series of annual values is presented for the selected TSL in chapter 14 of the final rule TSD. TABLE V.38—PRESENT VALUE OF METHANE EMISSIONS REDUCTION FOR ROOM AIR CONDITIONERS SHIPPED IN 2026– 2055 SC–CH4 case Discount rate and statistics TSL 5% 3% 2.5% 3% Average Average Average 95th percentile (million 2021$) ddrumheller on DSK120RN23PROD with RULES2 1 2 3 4 5 ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00053 Fmt 4701 34 103 151 200 365 Sfmt 4700 95 292 431 573 1,055 E:\FR\FM\26MYR2.SGM 26MYR2 132 403 596 793 1,463 253 775 1,144 1,519 2,797 34350 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.39—PRESENT VALUE OF NITROUS OXIDE EMISSIONS REDUCTION FOR ROOM AIR CONDITIONERS SHIPPED IN 2026–2055 SC–N2O case Discount rate and statistics TSL 5% 3% 2.5% 3% Average Average Average 95th percentile (million 2021$) 1 2 3 4 5 ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... ................................................................................................................... DOE is well aware that scientific and economic knowledge about the contribution of CO2 and other GHG emissions to changes in the future global climate and the potential resulting damages to the global and U.S. economy continues to evolve rapidly. DOE, together with other Federal agencies, will continue to review methodologies for estimating the monetary value of reductions in CO2 and other GHG emissions. This ongoing review will consider the comments on this subject that are part of the public 0.4 1.3 1.8 2.4 4.4 record for this and other rulemakings, as well as other methodological assumptions and issues. DOE notes, however, that the adopted standards would be economically justified even without inclusion of monetized benefits of reduced GHG emissions. DOE also estimated the monetary value of the economic benefits associated with NOX and SO2 emissions reductions anticipated to result from the considered TSLs for room air conditioners. The dollar-per-ton values that DOE used are discussed in section 1.6 4.8 7.0 9.3 17.0 2.4 7.4 10.8 14.3 26.1 4.2 12.8 18.7 24.8 45.1 IV.L of this document. Table V.40 presents the present value for NOX emissions reduction for each TSL calculated using 7-percent and 3percent discount rates, and Table V.41 presents similar results for SO2 emissions reductions. The results in these tables reflect application of EPA’s low dollar-per-ton values, which DOE used to be conservative. The time-series of annual values is presented for the selected TSL in chapter 14 of the final rule TSD. TABLE V.40—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR ROOM AIR CONDITIONERS SHIPPED IN 2026–2055 TSL 7% Discount rate 3% Discount rate (million 2021$) 1 2 3 4 5 ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... 329 1,022 1,465 1,915 3,408 713 2,196 3,209 4,238 7,714 TABLE V.41—PRESENT VALUE OF SO2 EMISSIONS REDUCTION FOR ROOM AIR CONDITIONERS SHIPPED IN 2026–2055 TSL 7% Discount rate 3% Discount rate (million 2021$) ddrumheller on DSK120RN23PROD with RULES2 1 2 3 4 5 ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... ............................................................................................................................................................... 7. Other Factors 8. Summary of Economic Impacts The Secretary of Energy, in determining whether a standard is economically justified, may consider any other factors that the Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No other factors were considered in this analysis. Table V.42 presents the NPV values that result from adding the estimates of the economic benefits resulting from reduced GHG and NOX and SO2 emissions to the NPV of consumer benefits calculated for each TSL considered in this rulemaking. The consumer benefits are domestic U.S. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 127 394 560 730 1,290 264 814 1,182 1,556 2,813 monetary savings that occur as a result of purchasing the covered room air conditioners, and are measured for the lifetime of products shipped in 2026– 2055. The benefits associated with reduced GHG emissions resulting from the adopted standards are global benefits, and are also calculated based on the lifetime of room air conditioners shipped in 2026–2055. E:\FR\FM\26MYR2.SGM 26MYR2 34351 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.42—CONSUMER NPV COMBINED WITH PRESENT VALUE OF BENEFITS FROM CLIMATE AND HEALTH Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 3% discount rate for NPV of Consumer and Health Benefits (billion 2021$) 5% d.r., Average SC–GHG case ............................................................. 3% d.r., Average SC–GHG case ............................................................. 2.5% d.r., Average SC–GHG case .......................................................... 3% d.r., 95th percentile SC–GHG case .................................................. 4.0 4.4 4.7 5.5 12.2 13.5 14.4 16.9 16.5 18.4 19.7 23.3 20.5 22.9 24.7 29.5 36.4 40.9 44.1 52.9 9.6 12.1 13.8 18.7 16.9 21.4 24.6 33.4 7% discount rate for NPV of Consumer and Health Benefits (billion 2021$) 5% d.r., Average SC–GHG case ............................................................. 3% d.r., Average SC–GHG case ............................................................. 2.5% d.r., Average SC–GHG case .......................................................... 3% d.r., 95th percentile SC–GHG case .................................................. C. Conclusion When considering new or amended energy conservation standards, the standards that DOE adopts for any type (or class) of covered product must be designed to achieve the maximum improvement in energy efficiency that the Secretary determines is technologically feasible and 2.1 2.5 2.8 3.6 economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining whether a standard is economically justified, the Secretary must determine whether the benefits of the standard exceed its burdens by, to the greatest extent practicable, considering the seven statutory factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or amended standard must also result in 6.3 7.6 8.5 11.0 8.1 9.9 11.2 14.9 significant conservation of energy. (42 U.S.C. 6295(o)(3)(B)) In the April 2022 NOPR, DOE proposed energy conservation standards for room air conditioners at TSL 3, as constructed for that analysis. The minimum CEERs corresponding to TSL 3 from the April 2022 NOPR are shown in Table V.43. 87 FR 20608, 20678 (Apr. 7, 2022). TABLE V.43—APRIL 2022 NOPR PROPOSED ENERGY CONSERVATION STANDARDS FOR ROOM AIR CONDITIONERS CEER (Btu/Wh) Equipment class ddrumheller on DSK120RN23PROD with RULES2 1. Without reverse cycle, with louvered sides, and less than 6,000 Btu/h ......................................................................................... 2. Without reverse cycle, with louvered sides and 6,000 to 7,900 Btu/h ........................................................................................... 3. Without reverse cycle, with louvered sides and 8,000 to 13,900 Btu/h ......................................................................................... 4. Without reverse cycle, with louvered sides and 14,000 to 19,900 Btu/h ....................................................................................... 5a. Without reverse cycle, with louvered sides and 20,000 to 27,900 Btu/h ..................................................................................... 5b. Without reverse cycle, with louvered sides and 28,000 Btu/h or more ........................................................................................ 6. Without reverse cycle, without louvered sides, and less than 6,000 Btu/h .................................................................................... 7. Without reverse cycle, without louvered sides and 6,000 to 7,900 Btu/h ...................................................................................... 8a. Without reverse cycle, without louvered sides and 8,000 to 10,900 Btu/h .................................................................................. 8b. Without reverse cycle, without louvered sides and 11,000 to 13,900 Btu/h ................................................................................ 9. Without reverse cycle, without louvered sides and 14,000 to 19,900 Btu/h .................................................................................. 10. Without reverse cycle, without louvered sides and 20,000 Btu/h or more ................................................................................... 11. With reverse cycle, with louvered sides, and less than 20,000 Btu/h .......................................................................................... 12. With reverse cycle, without louvered sides, and less than 14,000 Btu/h ..................................................................................... 13. With reverse cycle, with louvered sides, and 20,000 Btu/h or more ............................................................................................ 14. With reverse cycle, without louvered sides, and 14,000 Btu/h or more ....................................................................................... 15. Casement-Only .............................................................................................................................................................................. 16. Casement-Slider ............................................................................................................................................................................ Gradient, NYSERDA, NEEA, and NWPCC supported DOE’s proposed standards and stated that these proposed standards are technologically achievable and cost-effective, and should therefore be adopted in order to provide the predicted cost and energy savings. (Gradient, No. 40 at pp. 1–2; NYSERDA, No. 41 at p. 2; NEEA and NWPCC, No. 50 at pp. 1–2) While NYSERDA supported DOE’s proposed energy conservation standards for room air conditioners, NYSERDA strongly urged DOE to set more aggressive standards at or potentially even above the proposed ELs if the VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 analysis supports more aggressive standards such as those that incorporate ECM fan motors in the smaller capacity product class sizes, given the multitude of technology options DOE showed could be used to achieve higher efficiencies. (NYSERDA, No. 41 at p. 2) DOE reviewed the comments directly concerning proposed standards and TSLs analyzed in the April 2022 NOPR. In this final rule, DOE reassessed the benefits and burdens of the TSLs while considering all comments received, as detailed. For this final rule, DOE considered the impacts of amended standards for room air conditioners at each TSL, PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 13.1 13.7 16.0 16.0 13.8 13.2 12.8 12.8 14.1 13.9 13.7 13.8 14.4 13.7 13.7 12.8 13.9 15.3 beginning with the maximum technologically feasible level, to determine whether that level was economically justified. Where the maxtech level was not justified, DOE then considered the next most efficient level and undertook the same evaluation until it reached the highest efficiency level that is both technologically feasible and economically justified and saves a significant amount of energy. To aid the reader as DOE discusses the benefits and/or burdens of each TSL, tables in this section present a summary of the results of DOE’s quantitative analysis for each TSL. In addition to the E:\FR\FM\26MYR2.SGM 26MYR2 34352 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations quantitative results presented in the tables, DOE also considers other burdens and benefits that affect economic justification. These include the impacts on identifiable subgroups of consumers who may be disproportionately affected by a national standard and impacts on employment. DOE also notes that the economics literature provides a wide-ranging discussion of how consumers trade off upfront costs and energy savings in the absence of Government intervention. Much of this literature attempts to explain why consumers appear to undervalue energy efficiency improvements. There is evidence that consumers undervalue future energy savings as a result of (1) a lack of information; (2) a lack of sufficient salience of the long-term or aggregate benefits; (3) a lack of sufficient savings to warrant delaying or altering purchases; (4) excessive focus on the short term, in the form of inconsistent weighting of future energy cost savings relative to available returns on other investments; (5) computational or other difficulties associated with the evaluation of relevant tradeoffs; and (6) a divergence in incentives (for example, between renters and owners, or builders and purchasers). Having less than perfect foresight and a high degree of uncertainty about the future, consumers may trade off these types of investments at a higher than expected rate between current consumption and uncertain future energy cost savings. In DOE’s current regulatory analysis, potential changes in the benefits and costs of a regulation due to changes in consumer purchase decisions are included in two ways. First, if consumers forego the purchase of a product in the standards case, this decreases sales for product manufacturers, and the impact on manufacturers attributed to lost revenue is included in the MIA. Second, DOE accounts for energy savings attributable only to products actually used by consumers in the standards case; if a standard decreases the number of products purchased by consumers, this decreases the potential energy savings from an energy conservation standard. DOE provides estimates of shipments and changes in the volume of product purchases in chapter 9 of the final rule TSD. However, DOE’s current analysis does not explicitly control for heterogeneity in consumer preferences, preferences across subcategories of products or specific features, or consumer price sensitivity variation according to household income.75 While DOE is not prepared at present to provide a fuller quantifiable framework for estimating the benefits and costs of changes in consumer purchase decisions due to an energy conservation standard, DOE is committed to developing a framework that can support empirical quantitative tools for improved assessment of the consumer welfare impacts of appliance standards. DOE has posted a paper that discusses the issue of consumer welfare impacts of appliance energy conservation standards, and potential enhancements to the methodology by which these impacts are defined and estimated in the regulatory process.76 DOE welcomes comments on how to more fully assess the potential impact of energy conservation standards on consumer choice and how to quantify this impact in its regulatory analysis in future rulemakings. 1. Benefits and Burdens of TSLs Considered for Room Air Conditioner Standards Tables V.44 and V.45 summarize the quantitative impacts estimated for each TSL for room air conditioners. The national impacts are measured over the lifetime of room air conditioners purchased in the 30-year period that begins in the anticipated year of compliance with amended standards (2026–2055). The energy savings, emissions reductions, and value of emissions reductions refer to full-fuelcycle results. DOE is presenting monetized benefits in accordance with the applicable Executive orders and DOE would reach the same conclusion presented in this rule in the absence of the social cost of greenhouse gases, including the Interim Estimates presented by the Interagency Working Group. The efficiency levels contained in each TSL are described in section V.A of this document. TABLE V.44—SUMMARY OF ANALYTICAL RESULTS FOR ROOM AIR CONDITIONERS TSLS—NATIONAL IMPACTS Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Cumulative FFC National Energy Savings Quads ................................................................................................................. 0.31 0.95 1.41 1.87 3.48 32.74 218.92 0.32 50.04 13.62 0.08 48.48 325.63 0.47 74.20 20.05 0.12 64.43 433.76 0.62 98.69 26.60 0.16 118.90 804.23 1.15 182.39 48.82 0.30 14.63 2.51 19.37 3.33 35.77 6.09 Cumulative FFC Emissions Reduction CO2 (million metric tons) ................................................................................... CH4 (thousand tons) .......................................................................................... N2O (thousand tons) .......................................................................................... NOX (thousand tons) ......................................................................................... SO2 (thousand tons) .......................................................................................... Hg (tons) ............................................................................................................ 10.73 71.88 0.10 16.41 4.46 0.03 Present Value of Benefits and Costs (3% discount rate, billion 2021$) ddrumheller on DSK120RN23PROD with RULES2 Consumer Operating Cost Savings ................................................................... Climate Benefits * ............................................................................................... 75 P.C. Reiss and M.W. White. Household Electricity Demand, Revisited. Review of Economic Studies. 2005. 72(3): pp. 853–883. doi: 10.1111/ 0034-6527.00354. 76 Sanstad, A.H. Notes on the Economics of Household Energy Consumption and Technology Choice. 2010. Lawrence Berkeley National Laboratory. www1.eere.energy.gov/buildings/ VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 3.23 0.56 9.99 1.71 appliance_standards/pdfs/consumer_ee_theory.pdf (last accessed July 1, 2021). PO 00000 Frm 00056 Fmt 4701 Sfmt 4700 E:\FR\FM\26MYR2.SGM 26MYR2 34353 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.44—SUMMARY OF ANALYTICAL RESULTS FOR ROOM AIR CONDITIONERS TSLS—NATIONAL IMPACTS—Continued Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Health Benefits ** ............................................................................................... 0.98 3.01 4.39 5.79 10.53 Total Benefits † ........................................................................................... Consumer Incremental Product Costs ‡ ............................................................ 4.76 0.33 14.71 1.23 21.54 3.17 28.49 5.55 52.38 11.49 Consumer Net Benefits .............................................................................. Total Net Benefits ................................................................................ 2.89 4.43 8.76 13.48 11.46 18.37 13.83 22.95 24.27 40.89 Present Value of Benefits and Costs (7% discount rate, billion 2021$) Consumer Operating Cost Savings ................................................................... Climate Benefits * ............................................................................................... Health Benefits ** ............................................................................................... 1.66 0.56 0.46 5.20 1.71 1.42 7.46 2.51 2.02 9.79 3.33 2.65 17.65 6.09 4.70 Total Benefits † ........................................................................................... Consumer Incremental Product Costs ‡ ............................................................ 2.68 0.19 8.32 0.75 12.00 2.08 15.76 3.67 28.43 7.02 Consumer Net Benefits .............................................................................. Total Net Benefits ................................................................................ 1.47 2.49 4.45 7.58 5.39 9.92 6.11 12.08 10.63 21.41 Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026–2055. These results include benefits to consumers which accrue after 2055 from the products shipped in 2026–2055. * Climate benefits are calculated using four different estimates of the SC–CO2, SC–CH4, and SC–N2O. Together these represent the global SC–GHG. For presentational purposes of this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are shown, but the Department does not have a single central SC–GHG point estimate. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal Government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv–1074–JDC–KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal Government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. As reflected in this rule, DOE has reverted to its approach prior to the injunction and presents monetized greenhouse gas abatement benefits where appropriate and permissible under law. ** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for NOX and SO2) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L of this document for more details. † Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total and net benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the Department does not have a single central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. ‡ Costs include incremental equipment costs as well as installation costs. TABLE V.45—SUMMARY OF ANALYTICAL RESULTS FOR ROOM AIR CONDITIONERS TSLS: MANUFACTURER AND CONSUMER IMPACTS Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 Manufacturer Impacts Industry NPV (million 2021$) (No-newstandards case INPV = 1,189.5). Industry NPV (% change) .................... 1,188.7 to 1,192.9 ...... 1,167.8 to 1,197.2 ...... 1,140.8 to 1,284.1 ...... 1,097.7 to 1,369.0 ...... 857.5 to 1,211.5. (0.8) to (0.5) ............... (2.6) to (0.1) ............... (4.8) to 7.1 .................. (8.4) to 14.2 ................ (28.4) to 1.1. ddrumheller on DSK120RN23PROD with RULES2 Consumer Average LCC Savings (2021$) PC1: Room Air Conditioners, without reverse cycle, with louvered sides, and less than 6,000 Btu/h. PC2: Room Air Conditioners, without reverse cycle, with louvered sides, and 6,000 to 7,900 Btu/h. PC3: Room Air Conditioners, without reverse cycle, with louvered sides, and 8,000 to 13,900 Btu/h. PC4: Room Air Conditioners, without reverse cycle, with louvered sides, and 14,000 to 19,900 Btu/h. PC5a: Room Air Conditioners, without reverse cycle, with louvered sides, and 20,000 to 27,900 Btu/h. PC5b: Room Air Conditioners, without reverse cycle, with louvered sides, and 28,000 Btu/h or more. PC8a: Room Air Conditioners, without reverse cycle, without louvered sides, and 8,000 to 10,900 Btu/h. VerDate Sep<11>2014 20:20 May 25, 2023 41 ................................ 65 ................................ 65 ................................ 47 ................................ 93. 35 ................................ 72 ................................ 72 ................................ 69 ................................ 103. 17 ................................ 105 .............................. 100 .............................. 100 .............................. 171. 0 .................................. 85 ................................ 92 ................................ 92 ................................ 168. 6 .................................. 99 ................................ 148 .............................. 148 .............................. 284. 101 .............................. 150 .............................. 284 .............................. 284 .............................. 415. 6 .................................. 73 ................................ 84 ................................ 84 ................................ 137. Jkt 259001 PO 00000 Frm 00057 Fmt 4701 Sfmt 4700 E:\FR\FM\26MYR2.SGM 26MYR2 34354 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations TABLE V.45—SUMMARY OF ANALYTICAL RESULTS FOR ROOM AIR CONDITIONERS TSLS: MANUFACTURER AND CONSUMER IMPACTS—Continued Category TSL 1 TSL 2 TSL 3 TSL 4 PC8b: Room Air Conditioners, without reverse cycle, without louvered sides, and 11,000 to 13,900 Btu/h. PC9: Room Air Conditioners, without reverse cycle, without louvered sides, and 14,000 to 19,900 Btu/h. PC11: Room Air Conditioners, with reverse cycle, with louvered sides, and less than 20,000 Btu/h. PC12: Room Air Conditioners, with reverse cycle, without louvered sides, and less than 14,000 Btu/h. PC16: Room Air Conditioners, Casement-Slider. Shipment-Weighted Average * ............. 0 .................................. 81 ................................ 119 .............................. 119 .............................. 175. TSL 5 58 ................................ 81 ................................ 165 .............................. 165 .............................. 180. 69 ................................ 110 .............................. 134 .............................. 134 .............................. 185. 40 ................................ 67 ................................ 124 .............................. 124 .............................. 128. 51 ................................ 107 .............................. 84 ................................ 84 ................................ 147. 27 ................................ 83 ................................ 85 ................................ 78 ................................ 134. Consumer Simple PBP (years) PC1: Room Air Conditioners, without reverse cycle, with louvered sides, and less than 6,000 Btu/h. PC2: Room Air Conditioners, without reverse cycle, with louvered sides, and 6,000 to 7,900 Btu/h. PC3: Room Air Conditioners, without reverse cycle, with louvered sides, and 8,000 to 13,900 Btu/h. PC4: Room Air Conditioners, without reverse cycle, with louvered sides, and 14,000 to 19,900 Btu/h. PC5a: Room Air Conditioners, without reverse cycle, with louvered sides, and 20,000 to 27,900 Btu/h. PC5b: Room Air Conditioners, without reverse cycle, with louvered sides, and 28,000 Btu/h or more. PC8a: Room Air Conditioners, without reverse cycle, without louvered sides, and 8,000 to 10,900 Btu/h. PC8b: Room Air Conditioners, without reverse cycle, without louvered sides, and 11,000 to 13,900 Btu/h. PC9: Room Air Conditioners, without reverse cycle, without louvered sides, and 14,000 to 19,900 Btu/h. PC11: Room Air Conditioners, with reverse cycle, with louvered sides, and less than 20,000 Btu/h. PC12: Room Air Conditioners, with reverse cycle, without louvered sides, and less than 14,000 Btu/h. PC16: Room Air Conditioners, Casement-Slider. Shipment-Weighted Average * ............. 0.6 ............................... 0.8 ............................... 0.8 ............................... 4.6 ............................... 3.8. 0.7 ............................... 1.5 ............................... 1.5 ............................... 3.8 ............................... 4.2. 1.2 ............................... 0.9 ............................... 2.9 ............................... 2.9 ............................... 3.1. 0.7 ............................... 1.2 ............................... 3.0 ............................... 3.0 ............................... 2.8. 1.1 ............................... 1.0 ............................... 2.5 ............................... 2.5 ............................... 2.3. 0.4 ............................... 0.5 ............................... 2.3 ............................... 2.3 ............................... 2.0. 0.6 ............................... 1.4 ............................... 3.2 ............................... 3.2 ............................... 3.5. 0.5 ............................... 1.4 ............................... 2.4 ............................... 2.4 ............................... 3.2. 1.1 ............................... 2.0 ............................... 2.9 ............................... 2.9 ............................... 3.7. 0.6 ............................... 1.9 ............................... 3.2 ............................... 3.2 ............................... 3.4. 1.3 ............................... 2.2 ............................... 2.6 ............................... 2.6 ............................... 3.6. 0.7 ............................... 0.9 ............................... 4.0 ............................... 4.0 ............................... 3.4. 0.8 ............................... 1.0 ............................... 1.9 ............................... 3.6 ............................... 3.5. ddrumheller on DSK120RN23PROD with RULES2 Percent of Consumers That Experience a Net Cost PC1: Room Air Conditioners, without reverse cycle, with louvered sides, and less than 6,000 Btu/h. PC2: Room Air Conditioners, without reverse cycle, with louvered sides, and 6,000 to 7,900 Btu/h. PC3: Room Air Conditioners, without reverse cycle, with louvered sides, and 8,000 to 13,900 Btu/h. PC4: Room Air Conditioners, without reverse cycle, with louvered sides, and 14,000 to 19,900 Btu/h. PC5a: Room Air Conditioners, without reverse cycle, with louvered sides, and 20,000 to 27,900 Btu/h. PC5b: Room Air Conditioners, without reverse cycle, with louvered sides, and 28,000 Btu/h or more. PC8a: Room Air Conditioners, without reverse cycle, without louvered sides, and 8,000 to 10,900 Btu/h. VerDate Sep<11>2014 20:20 May 25, 2023 2% .............................. 3% .............................. 3% .............................. 41% ............................ 34%. 2% .............................. 14% ............................ 14% ............................ 38% ............................ 42%. 2% .............................. 2% .............................. 26% ............................ 26% ............................ 30%. 0% .............................. 9% .............................. 33% ............................ 33% ............................ 30%. 1% .............................. 5% .............................. 30% ............................ 30% ............................ 27%. 0% .............................. 1% .............................. 24% ............................ 24% ............................ 21%. 0% .............................. 15% ............................ 34% ............................ 34% ............................ 38%. Jkt 259001 PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations 34355 TABLE V.45—SUMMARY OF ANALYTICAL RESULTS FOR ROOM AIR CONDITIONERS TSLS: MANUFACTURER AND CONSUMER IMPACTS—Continued Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 PC8b: Room Air Conditioners, without reverse cycle, without louvered sides, and 11,000 to 13,900 Btu/h. PC9: Room Air Conditioners, without reverse cycle, without louvered sides, and 14,000 to 19,900 Btu/h. PC11: Room Air Conditioners, with reverse cycle, with louvered sides, and less than 20,000 Btu/h. PC12: Room Air Conditioners, with reverse cycle, without louvered sides, and less than 14,000 Btu/h. PC16: Room Air Conditioners, Casement-Slider. Shipment-Weighted Average * ............. 0% .............................. 17% ............................ 26% ............................ 26% ............................ 37%. 4% .............................. 19% ............................ 24% ............................ 24% ............................ 39%. 2% .............................. 19% ............................ 30% ............................ 30% ............................ 34%. 8% .............................. 22% ............................ 21% ............................ 21% ............................ 36%. 3% .............................. 5% .............................. 38% ............................ 38% ............................ 32%. 2% .............................. 6% .............................. 17% ............................ 34% ............................ 34%. ddrumheller on DSK120RN23PROD with RULES2 Parentheses indicate negative (¥) values. * Weighted by shares of each product class in total projected shipments in 2026. DOE first considered TSL 5, which represents the max-tech efficiency levels. At this level, DOE expects room air conditioners would require the maximum available efficiency variablespeed compressor at all product classes. TSL 5 would save an estimated 3.48 quads of energy, an amount DOE considers significant. Under TSL 5, the NPV of consumer benefit would be $10.63 billion using a discount rate of 7 percent, and $24.27 billion using a discount rate of 3 percent. The cumulative emissions reductions at TSL 5 are 118.9 Mt of CO2, 48.8 thousand tons of SO2, 182.4 thousand tons of NOX, 0.3 tons of Hg, 804.2 thousand tons of CH4, and 1.1 thousand tons of N2O. The estimated monetary value of the climate benefits from reduced GHG emissions (associated with the average SC–GHG at a 3-percent discount rate) at TSL 5 is $6.09 billion. The estimated monetary value of the health benefits from reduced SO2 and NOX emissions at TSL 5 is $4.70 billion using a 7-percent discount rate and $10.53 billion using a 3-percent discount rate. Using a 7-percent discount rate for consumer benefits and costs, health benefits from reduced SO2 and NOX emissions, and the 3-percent discount rate case for climate benefits from reduced GHG emissions, the estimated total NPV at TSL 5 is $21.41 billion. Using a 3-percent discount rate for all benefits and costs, the estimated total NPV at TSL 5 is $40.89 billion. The estimated total NPV is provided for additional information, however DOE primarily relies upon the NPV of consumer benefits when determining whether a proposed standard level is economically justified. At TSL 5, for the product classes with the largest market share, the average LCC impact is $93 for PC 1, $103 for PC VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 2, and $171 for PC 3. The simple payback period is 3.8 years for PC 1, 4.2 years for PC 2, and 3.1 years for PC 3. The fraction of consumers who experience a net LCC cost is 34 percent for PC 1, 42 percent for PC 2, and 30 percent for PC 3. Overall, 34 percent of consumers would experience a net cost. At TSL 5, the projected change in INPV ranges from a decrease of $341.0 million to an increase of $13.0 million, which corresponds to a decrease of 28.4 percent and an increase of 1.1 percent, respectively. Conversion costs total $319.7 million. As discussed in section IV.C.1 of this document, DOE believes there is uncertainty regarding the estimated compressor cost and availability of the highest efficiency variable-speed compressors across the full range of capacities at TSL 5, particularly in the smaller capacity room air conditioners. These uncertainties stem from the fact that the efficiency level for TSL 5 is obtained by using the highest efficiency variable-speed compressors that are currently available to be incorporated into room air conditioners at the time the analysis was competed. In addition, variable speed compressors representing these efficiencies are manufactured by just one manufacturer. It is unclear whether the highest efficiency variablespeed compressors will be available to all manufacturers of room air conditioners since there is only a single supplier at this time. In addition, these highest efficiency variable-speed compressors are not currently available in the full range of capacities of air room air conditioners, which could limit the current product offerings by manufacturers. Furthermore, due to the single supplier for these highest efficiency variable-speed compressors and their unknown manufacturing volume and potential bottlenecks for PO 00000 Frm 00059 Fmt 4701 Sfmt 4700 ramp-up manufacturing capabilities, there is a likelihood that there may not be sufficient supply to meet the demand of the market for the full range of cooling capacities for room air conditioners, should TSL 5 be selected. This may have the potential to result in the unavailability of room air conditioners of certain cooling capacities from the market, which would contradict the requirements in 42 U.S.C. 6295(o)(4) for any amended energy conservation standards, as well impact the overall number of room air conditioners available on the market should TSL 5 be selected. The Secretary concludes that at TSL 5 for room air conditioners, the benefits of energy savings, positive NPV of consumer benefits, emission reductions, and the estimated monetary value of the climate and health benefits would be outweighed by the impacts on manufacturers, including the conversion costs and profit margin impacts that could result in a large reduction in INPV, and the potential for product unavailability due to limitations in key components such as the highest efficiency variable-speed compressors necessary to reach the max-tech efficiency levels. Consequently, the Secretary has concluded that TSL 5 is not economically justified. DOE then considered TSL 4. At TSL 4, DOE expects that all room air conditioners product classes would require variable-speed compressors. TSL 4 would save an estimated 1.87 quads of energy, an amount DOE considers significant. Under TSL 4, the NPV of consumer benefit would be $6.11 billion using a discount rate of 7 percent, and $13.83 billion using a discount rate of 3 percent. The cumulative emissions reductions at TSL 4 are 64.4 Mt of CO2, 26.6 thousand tons of SO2, 98.7 thousand E:\FR\FM\26MYR2.SGM 26MYR2 ddrumheller on DSK120RN23PROD with RULES2 34356 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations tons of NOX, 0.16 tons of Hg, 433.8 thousand tons of CH4, and 0.62 thousand tons of N2O. The estimated monetary value of the climate benefits from reduced GHG emissions (associated with the average SC–GHG at a 3-percent discount rate) at TSL 4 is $3.33 billion. The estimated monetary value of the health benefits from reduced SO2 and NOX emissions at TSL 4 is $2.65 billion using a 7-percent discount rate and $5.79 billion using a 3-percent discount rate. Using a 7-percent discount rate for consumer benefits and costs, health benefits from reduced SO2 and NOX emissions, and the 3-percent discount rate case for climate benefits from reduced GHG emissions, the estimated total NPV at TSL 4 is $12.08 billion. Using a 3-percent discount rate for all benefits and costs, the estimated total NPV at TSL 4 is $22.95 billion. The estimated total NPV is provided for additional information, however DOE primarily relies upon the NPV of consumer benefits when determining whether a proposed standard level is economically justified. At TSL 4, for the product classes with the largest market share, the average LCC impact is $47 for PC 1, $69 for PC 2, and $100 for PC 3. The simple payback period is 4.6 years for PC 1, 3.8 years for PC 2, and 2.9 years for PC 3. The fraction of consumers who experience a net LCC cost is 41 percent for PC 1, 38 percent for PC 2, and 26 percent for PC 3. Overall, 34 percent of consumers would experience a net cost across all product classes. At TSL 4, the projected change in INPV ranges from a decrease of $100.8 million to an increase of $170.5 million, which corresponds to a decrease of 8.4 percent and an increase of 14.2 percent, respectively. Conversion costs total $29.0 million. TSL 4 represents commercially available room air conditioners that implement variable-speed compressors, based on models with cooling capacities greater than 8,000 Btu/h. However, for room air conditioners with the smallest cooling capacities (i.e., less than 8,000 Btu/h), uncertainties exist regarding both the availability of variable-speed compressors that can be integrated into these smaller-size units and the feasibility of incorporating these variable-speed compressors with related components into a more spaceconstrained chassis than for largercapacity room air conditioners. There are no models commercially available that incorporate variable-speed compressors for cooling capacities less than 8,000 Btu/h, and the uncertainty in the availability of those compressors VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 may have the potential to eliminate room air conditioners with the smallest cooling capacities from the market, should TSL 4 be selected. While there are similarly no room air conditioners currently on the market with variablespeed compressors at cooling capacities greater than 22,000 Btu/h, other air conditioning products with such cooling capacities (e.g., mini-split air conditioners) do exist in the U.S. market, thereby not giving rise to the same uncertainties as for the smallest cooling capacities. Based on an analysis of RECS 2015 and historical shipments data, approximately 78 percent of consumers in the low-income sample purchase units in PC 1 and PC 2. The unavailability of products at this capacity range would disproportionally impact the low-income consumers and their ability to access cooling from room air conditioners. The Secretary concludes that at TSL 4 for room air conditioners, the benefits of energy savings, positive NPV of consumer benefits, emission reductions, and the estimated monetary value of the climate and health benefits would be outweighed by the impacts on manufacturers, including the conversion costs and profit margin impacts that could result in a reduction in INPV and potential unavailability of key components for small-capacity product classes. Consequently, the Secretary has concluded that TSL 4 is not economically justified. DOE then considered TSL 3, which would save an estimated 1.41 quads of energy, an amount DOE considers significant. TSL 3 represents the same efficiency levels as TSL 4 for product classes with cooling capacities greater than or equal to 8,000 Btu/h. For product classes, less than 8,000 Btu/h, TSL 3 corresponds to the implementation of the maximum efficiency single-speed compressor (i.e., one efficiency level lower than at TSL 4). At TSL 3, the NPV of consumer benefit would be $5.39 billion using a discount rate of 7 percent, and $11.46 billion using a discount rate of 3 percent. The cumulative emissions reductions at TSL 3 are 48.5 Mt of CO2, 20.1 thousand tons of SO2, 74.2 thousand tons of NOX, 0.1 tons of Hg, 325.6 thousand tons of CH4, and 0.5 thousand tons of N2O. The estimated monetary value of the climate benefits from reduced GHG emissions (associated with the average SC–GHG at a 3-percent discount rate) at TSL 3 is $2.51 billion. The estimated monetary value of the health benefits from reduced SO2 and NOX emissions at TSL 3 is $2.02 billion using a 7-percent discount rate and PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 $4.39 billion using a 3-percent discount rate. Using a 7-percent discount rate for consumer benefits and costs, SO2 reduction benefits, and NOX reduction benefits, and the 3-percent discount rate for GHG social costs, the estimated combined monetized NPV at TSL 3 is $9.92 billion. Using a 3-percent discount rate for all consumer and emissions benefits and costs, the estimated combined monetized NPV at TSL 3 is $18.37 billion. The estimated total monetized NPV is provided for additional information; however, DOE primarily relies upon the consumer NPV when determining whether a standard level is economically justified. At TSL 3, for the product classes with the largest market share, the average LCC impact is $65 for PC 1, $72 for PC 2, and $100 for PC 3. The simple payback period is 0.8 years for PC 1, 1.5 years for PC 2, and 2.9 years for PC 3. The fraction of consumers who experience a net LCC cost is 3 percent for PC 1, 14 percent for PC 2, and 26 percent for PC 3. Overall, 17 percent of consumers would experience a net cost across all product classes. Based on an analysis of RECS 2015 and historical shipments data, approximately 78% of consumers in the low-income sample purchase units in PC 1 and PC 2. At TSL 3, the percentage of consumers who experience a net LCC cost is 1 percent for PC 1 and 10 percent for PC 2. Additionally, the low-income subgroup analysis conservatively estimates the impact to low-income consumers by assuming all renters (64% of low-income sample) are paying the first cost of a room air conditioner. In cases where the landlord purchases the unit and renter pays electricity bill, the renter would not pay an increased first cost, but would benefit from operating cost savings due to a higher efficiency standard. At TSL 3, the projected change in manufacturer INPV ranges from a decrease of $57.7 million to an increase of $85.6 million, which corresponds to a decrease of 4.8 percent and an increase of 7.1 percent, respectively. Conversion costs total $24.8 million. After considering the analysis and weighing the benefits and burdens, the Secretary has concluded that a standard set at TSL 3 for room air conditioners would be economically justified. At this TSL, the average LCC savings for room air conditioner consumers is positive, meaning that the average consumer would experience net savings from the standard. An estimated 17 percent of room air conditioner consumers would experience a net cost. The FFC national energy savings of 1.41 quads are E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations significant and the NPV of consumer benefits is positive using both a 3percent and 7-percent discount rate. Notably, the benefits to consumers vastly outweigh the cost to manufacturers. At TSL 3, the NPV of consumer benefits, even measured at the more conservative discount rate of 7 percent, is 96 times higher than the maximum estimated manufacturers’ loss in INPV. The positive LCC savings—a different way of quantifying consumer benefits—reinforces this conclusion. The standard levels at TSL 3 are economically justified even without weighing the estimated monetary value of emissions reductions. When those monetized climate benefits from GHG emissions reductions and health benefits from SO2 and NOX emissions reductions are included—representing $2.51 billion in climate benefits (associated with the average SC–GHG at a 3-percent discount rate), and $4.39 billion (using a 3-percent discount rate) or $2.02 billion (using a 7-percent discount rate) in health benefits—the rationale becomes stronger still. As stated, DOE conducts the walkdown analysis to determine the TSL that represents the maximum improvement in energy efficiency that is technologically feasible and economically justified as required under EPCA. The walk-down is not a comparative analysis, as a comparative analysis would result in the maximization of net benefits instead of energy savings that are technologically feasible and economically justified, which would be contrary to the statute. 86 FR 70892, 70908. Although DOE has not conducted a comparative analysis to select the amended energy conservation standards, DOE notes that as compared to TSL 4 and TSL 5, TSL 3 has a shorter payback period, smaller percentages of consumer experiencing a net cost, a lower maximum decrease in INPV, and lower manufacturer conversion costs. Although DOE considered amended standard levels for room air conditioners by grouping the efficiency levels for each product class into TSLs, DOE evaluates all analyzed efficiency levels in its analysis. For room air conditioners with cooling capacities greater than or equal to 8,000 Btu/h, TSL 3 corresponds to EL 4, the highest efficiency level below max-tech, incorporating commercially available variable-speed compressors. The variable-speed compressor required to achieve the max-tech efficiency level is currently available from only a single manufacturer, leading to the likelihood there may not be sufficient supply at that efficiency level to meet the demand of the market for the full range of cooling capacities for room air conditioners. For room air conditioners with cooling capacities less than 8,000 Btu/h, TSL 3 corresponds to EL 3, incorporating the maximum energy efficient single-speed compressors commercially available. Both EL 4 and EL 5 for room air conditioners with cooling capacities less than 8,000 34357 Btu/h incorporate variable-speed compressors based on modeling of available compressors for models with cooling capacities greater than or equal to 8,000 Btu/h. Uncertainties exist at those efficiency levels regarding both the availability of variable-speed compressors that can be integrated into these smaller-size units and the feasibility of incorporating these variable-speed compressors with related components into a more spaceconstrained chassis than for largercapacity room air conditioners. There are no models commercially available that incorporate variable-speed compressors for cooling capacities less than 8,000 Btu/h. Additionally, average LCC savings are higher at EL 3 relative to EL 4 for product classes with cooling capacities less than 8,000 Btu/h. The adopted standard levels at TSL 3 results in positive LCC savings for all product classes, significantly reduce the number of consumers experiencing a net cost, and reduce the decrease in INPV and conversion costs to the point where DOE has concluded they are economically justified, as discussed for TSL 3 in the preceding paragraphs. Therefore, based on the previous considerations, DOE adopts the energy conservation standards for room air conditioners at TSL 3. The amended energy conservation standards for room air conditioners, which are expressed as CEER, are shown in Table V.46. TABLE V.46—AMENDED ENERGY CONSERVATION STANDARDS FOR ROOM AIR CONDITIONERS Adopted standard CEER (Btu/h) ddrumheller on DSK120RN23PROD with RULES2 Product class Room Air Conditioner without reverse cycle, with louvered sides: <6,000 Btu/h (1) ......................................................................................................................................................... 6,000 to 7,900 Btu/h (2) ............................................................................................................................................. 8,000 to 13,900 Btu/h (3) ........................................................................................................................................... 14,000 to 19,900 Btu/h (4) ......................................................................................................................................... 20,000 to 27,900 Btu/h (5a) ....................................................................................................................................... ≥28,000 Btu/h (5b) ...................................................................................................................................................... Room Air Conditioner without reverse cycle, without louvered sides: <6,000 Btu/h (6) ......................................................................................................................................................... 6,000 to 7,900 Btu/h (7) ............................................................................................................................................. 8,000 to 10,900 Btu/h (8a) ......................................................................................................................................... 11,000 to 13,900 Btu/h (8b) ....................................................................................................................................... 14,000 to 19,900 Btu/h (9) ......................................................................................................................................... ≥20,000 Btu/h (10) ...................................................................................................................................................... Room Air Conditioner with reverse cycle, with louvered sides: <20,000 Btu/h (11) ..................................................................................................................................................... ≥20,000 Btu/h (13) ...................................................................................................................................................... Room Air Conditioner with reverse cycle, without louvered sides: <14,000 Btu/h (12) ..................................................................................................................................................... ≥14,000 Btu/h (14) ...................................................................................................................................................... Casement: Casement-Only (15) ................................................................................................................................................... Casement-Slider (16) ................................................................................................................................................. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4700 E:\FR\FM\26MYR2.SGM 26MYR2 13.1 13.7 16.0 16.0 13.8 13.2 12.8 12.8 14.1 13.9 13.7 13.8 14.4 13.7 13.7 12.8 13.9 15.3 34358 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations 2. Annualized Benefits and Costs of the Adopted Standards The benefits and costs of the adopted standards can also be expressed in terms of annualized values. The annualized net benefit is (1) the annualized national economic value (expressed in 2021$) of the benefits from operating products that meet the adopted standards (consisting primarily of operating cost savings from using less energy), minus increases in product purchase costs, and (2) the annualized monetary value of the climate and health benefits. Table V.47 shows the annualized values for room air conditioners under TSL 3, expressed in 2021$. The results under the primary estimate are as follows. Using a 7-percent discount rate for consumer benefits and costs and NOX and SO2 reductions, and the 3-percent discount rate case for GHG social costs, the estimated cost of the adopted standards for room air conditioners is $205.2 million per year in increased equipment installed costs, while the estimated annual benefits are $736.9 million from reduced equipment operating costs, $140.1 million in GHG reductions, and $199.9 million from reduced NOX and SO2 emissions. In this case, the net benefit amounts to $871.7 million per year. Using a 3-percent discount rate for all benefits and costs, the estimated cost of the adopted standards for room air conditioners is $176.8 million per year in increased equipment costs, while the estimated annual benefits are $815.8 million in reduced operating costs, $140.1 million from GHG reductions, and $244.8 million from reduced NOX and SO2 emissions. In this case, the net benefit amounts to $1,023.9 million per year. TABLE V.47—ANNUALIZED BENEFITS AND COSTS OF ADOPTED STANDARDS (TSL 3) FOR ROOM AIR CONDITIONERS Million 2021$/year Primary estimate Low-net-benefits estimate High-net-benefits estimate 3% discount rate Consumer Operating Cost Savings ............................................................... Climate Benefits * ........................................................................................... Health Benefits ** ........................................................................................... 815.8 140.1 244.8 784.9 137.6 240.6 851.9 142.5 248.9 Total Benefits † ....................................................................................... Consumer Incremental Product Costs ‡ ........................................................ 1,200.6 176.8 1,163.2 199.0 1,243.3 152.2 Net Benefits ............................................................................................ 1,023.9 964.1 1,091.1 Consumer Operating Cost Savings ............................................................... Climate Benefits * ........................................................................................... Health Benefits ** ........................................................................................... 736.9 140.1 199.9 712.3 137.6 196.8 765.4 142.5 203.0 Total Benefits † ....................................................................................... Consumer Incremental Product Costs ‡ ........................................................ 1,076.9 205.2 1,046.7 227.0 1,111.0 181.0 Net Benefits ............................................................................................ 871.7 819.7 930.0 ddrumheller on DSK120RN23PROD with RULES2 7% discount rate Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026–2055. These results include benefits to consumers which accrue after 2057 from the products shipped in 2028–2057. The Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy prices from the AEO2022 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the Low Net Benefits Estimate, and a high decline rate in the High Net Benefits Estimate. The methods used to derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that the Benefits and Costs may not sum to the Net Benefits due to rounding. * Climate benefits are calculated using four different estimates of the global SC–GHG (see section IV.L of this document). For presentational purposes of this table, the climate benefits associated with the average SC–GHG at a 3 percent discount rate are shown, but the Department does not have a single central SC–GHG point estimate, and it emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22–30087) granted the Federal Government’s emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction issued in Louisiana v. Biden, No. 21–cv–1074–JDC– KK (W.D. La.). As a result of the Fifth Circuit’s order, the preliminary injunction is no longer in effect, pending resolution of the Federal Government’s appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in that case from ‘‘adopting, employing, treating as binding, or relying upon’’ the interim estimates of the social cost of greenhouse gases—which were issued by the Interagency Working Group on the Social Cost of Greenhouse Gases on February 26, 2021—to monetize the benefits of reducing greenhouse gas emissions. As reflected in this rule, DOE has reverted to its approach prior to the injunction and presents monetized greenhouse gas abatement benefits where appropriate and permissible under law. ** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L of this document for more details. † Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total and net benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate, but the Department does not have a single central SC–GHG point estimate. ‡ Costs include incremental equipment costs as well as installation costs. VI. Cooling Capacity Verification In the April 2022 NOPR, DOE proposed to add the cooling capacity of room air conditioners to 10 CFR 429.134 VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 to help regulated entities understand how DOE will determine the product class that applies to a given basic model in the context of an enforcement PO 00000 Frm 00062 Fmt 4701 Sfmt 4700 investigation. DOE proposed a similar approach to other products, where DOE would compare the mean of the tested cooling capacity from the units of a E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations given basic model that DOE has tested for enforcement rounded to the nearest hundred to the certified cooling capacity by the manufacturer. DOE would use the certified cooling capacity of the manufacturer if the mean of the DOE tested units is within 5 percent of the certified cooling capacity. If the manufacturer does not have a valid certification, including if the certified cooling capacity was incorrectly certified, or the certified cooling capacity is found to be outside of the 5 percent tolerance, DOE would use the rounded mean of the DOE tested units within the enforcement sample to determine the applicable product class and energy conservation standard for this particular basic model. DOE received no comments on the proposed cooling capacity verification instructions and maintains that the provisions proposed in the April 2022 NOPR provide additional clarity and transparency to the enforcement process. Therefore, DOE is adopting the 10 CFR 429.134 amendments, as proposed in the April 2022 NOPR, in this final rule. ddrumheller on DSK120RN23PROD with RULES2 VII. Procedural Issues and Regulatory Review A. Review Under Executive Orders 12866 and 13563 Executive Order (‘‘E.O.’’) 12866, ‘‘Regulatory Planning and Review,’’ 58 FR 51735 (Oct. 4, 1993), as supplemented and reaffirmed by E.O. 13563, ‘‘Improving Regulation and Regulatory Review’’, 76 FR 3821 (Jan. 21, 2011), requires agencies, to the extent permitted by law, to: (1) propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs (recognizing that some benefits and costs are difficult to quantify); (2) tailor regulations to impose the least burden on society, consistent with obtaining regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; (3) select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity); (4) to the extent feasible, specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt; and (5) identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 marketable permits, or providing information upon which choices can be made by the public. DOE emphasizes as well that E.O. 13563 requires agencies to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible. In its guidance, the Office of Information and Regulatory Affairs (‘‘OIRA’’) in OMB has emphasized that such techniques may include identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes. For the reasons stated in the preamble, this final regulatory action is consistent with these principles. Section 6(a) of E.O. 12866 also requires agencies to submit ‘‘significant regulatory actions’’ to OIRA for review. OIRA has determined that this final regulatory action constitutes a ‘‘significant regulatory action’’ within the scope of section 3(f)(1) of E.O. 12866. Accordingly, pursuant to section 6(a)(3)(C) of E.O. 12866, DOE has provided to OIRA an assessment, including the underlying analysis, of benefits and costs anticipated from the final regulatory action, together with, to the extent feasible, a quantification of those costs; and an assessment, including the underlying analysis, of costs and benefits of potentially effective and reasonably feasible alternatives to the planned regulation, and an explanation why the planned regulatory action is preferable to the identified potential alternatives. These assessments are summarized in this preamble and further detail can be found in the technical support document for this rulemaking. B. Review Under the Regulatory Flexibility Act The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires preparation of an initial regulatory flexibility analysis (‘‘IRFA’’) and a final regulatory flexibility analysis (‘‘FRFA’’) for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by E.O. 13272, ‘‘Proper Consideration of Small Entities in Agency Rulemaking,’’ 67 FR 53461 (Aug. 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaking process. 68 FR 7990. DOE has made its procedures and policies available on the Office of the General PO 00000 Frm 00063 Fmt 4701 Sfmt 4700 34359 Counsel’s website (www.energy.gov/gc/ office-general-counsel). DOE reviewed this final rule under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. DOE certifies that the final rule would not have significant economic impact on a substantial number of small entities. The factual basis of this certification is set forth in the following paragraphs. For manufacturers of room air conditioners, the U.S. Small Business Administration (‘‘SBA’’) has set a size threshold, which defines those entities classified as ‘‘small businesses’’ for the purposes of the statute. DOE used the SBA’s small business size standards to determine whether any small entities would be subject to the requirements of the rule. (See 13 CFR part 121.) The size standards are listed by North American Industry Classification System (‘‘NAICS’’) code and industry description and are available at www.sba.gov/document/support--tablesize-standards. Manufacturing of room air conditioners is classified under NAICS 333415, ‘‘Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing.’’ The SBA sets a threshold of 1,250 employees or fewer for an entity to be considered as a small business for this category. EPCA authorizes DOE to regulate the energy efficiency of a number of consumer products and certain industrial equipment. (42 U.S.C. 6291– 6317) Title III, Part B of EPCA 77 established the Energy Conservation Program for Consumer Products Other Than Automobiles. (42 U.S.C. 6291– 6309) These products include room air conditioners, the subject of this rulemaking. Pursuant to EPCA, any new or amended energy conservation standard must be designed to achieve the maximum improvement in energy efficiency that DOE determines is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new or amended standard must result in significant conservation of energy. (42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later than 6 years after issuance of any final rule establishing or amending a standard, DOE must publish either a notice of determination that standards for the product do not need to be amended, or a notice of proposed rulemaking including new proposed energy conservation standards 77 For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A. E:\FR\FM\26MYR2.SGM 26MYR2 34360 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES2 (proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m)) In accordance with these and other statutory provisions discussed in this document, DOE is adopting amended energy conservation standards for room air conditioners. To estimate the number of companies that could be small business manufacturers of products covered by this final rule, DOE conducted a market survey using public information and subscription-based company reports to identify potential small manufacturers. DOE’s research involved DOE’s Compliance Certification Database (‘‘CCD’’),78 California Energy Commission’s Modernized Appliance Efficiency Database System (‘‘MAEDbS’’),79 ENERGY STAR Product Finder,80 individual company websites, and market research tools (e.g., reports from Dun & Bradstreet 81) to create a list of companies that manufacture, produce, import, or assemble the products covered by this rulemaking. DOE also asked stakeholders and industry representatives if they were aware of any other small manufacturers during manufacturer interviews and at DOE public meetings. DOE identified eight OEMs of room air conditioner products sold in the United States. Upon initial review, one OEM was identified as a small manufacturer based in the United States. However, in August 2021, a large manufacturer acquired the small manufacturer.82 Following that acquisition, no domestic room air conditioner OEMs qualify as a small business. Given the lack of small entities with a direct compliance burden, DOE certifies that the proposed rule would not have ‘‘a significant economic impact on a substantial number of small entities.’’ DOE did not receive written comments in response to the April 2022 NOPR that specifically addressed the potential impacts on small businesses. 78 U.S. Department of Energy’s Compliance Certification Database. Available at: regulations.doe.gov/certification-data/#q=Product_ Group_s%3A* (last accessed: March 17, 2021). 79 California Energy Commission’s Modernized Appliance Efficiency Database System. Available at: cacertappliances.energy.ca.gov/Pages/ ApplianceSearch.aspx (last accessed: March 17, 2021). 80 U.S. Environmental Protection Agency’s ENERGY STAR data set. Available at: energystar.gov/productfinder/ (last accessed March 17, 2021). 81 Dun & Bradstreet subscription login is available at: app.dnbhoovers.com (last accessed September 14, 2022). 82 Rheem Manufacturing Company. Press Release. Available at: www.rheem.com/about/news-releases/ rheem-acquires-friedrich-air-conditioning (published August 30, 2021). VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 DOE has transmitted the certification and supporting statement of factual basis to the Chief Counsel for Advocacy of the SBA for review under 5 U.S.C. 605(b). C. Review Under the Paperwork Reduction Act Manufacturers of room air conditioners must certify to DOE that their products comply with any applicable energy conservation standards. In certifying compliance, manufacturers must test their products according to the DOE test procedures for room air conditioners, including any amendments adopted for those test procedures. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial equipment, including room air conditioners. (See generally 10 CFR part 429.) The collection-of-information requirement for the certification and recordkeeping is subject to review and approval by OMB under the Paperwork Reduction Act (‘‘PRA’’). This requirement has been approved by OMB under OMB control number 1910–1400. Public reporting burden for the certification is estimated to average 35 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number. D. Review Under the National Environmental Policy Act of 1969 Pursuant to the National Environmental Policy Act of 1969 (‘‘NEPA’’), DOE has analyzed this rule in accordance with NEPA and DOE’s NEPA implementing regulations (10 CFR part 1021). DOE has determined that this rule qualifies for categorical exclusion under 10 CFR part 1021, subpart D, appendix B, section B5.1, because it is a rulemaking that establishes energy conservation standards for consumer products or industrial equipment, none of the exceptions identified in section B5.1(b) apply, no extraordinary circumstances exist that require further environmental analysis, and it meets the requirements for application of a categorical exclusion. See 10 CFR 1021.410. Therefore, DOE has determined that PO 00000 Frm 00064 Fmt 4701 Sfmt 4700 promulgation of this rule is not a major Federal action significantly affecting the quality of the human environment within the meaning of NEPA, and does not require an environmental assessment or an environmental impact statement. E. Review Under Executive Order 13132 E.O. 13132, ‘‘Federalism,’’ 64 FR 43255 (Aug. 10, 1999), imposes certain requirements on Federal agencies formulating and implementing policies or regulations that preempt State law or that have federalism implications. The Executive order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. 65 FR 13735. DOE has examined this rule and has determined that it would not have a substantial direct effect 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. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of this final rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297) Therefore, no further action is required by Executive Order 13132. F. Review Under Executive Order 12988 With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of E.O. 12988, ‘‘Civil Justice Reform,’’ 61 FR 4729 (Feb. 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) eliminate drafting errors and ambiguity, (2) write regulations to minimize litigation, (3) provide a clear legal standard for affected conduct rather than a general standard, and (4) promote simplification and burden reduction. 61 FR 4729 (Feb. 7, 1996). Regarding the review required by section 3(a), section 3(b) of E.O. 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation (1) clearly specifies the E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES2 preemptive effect, if any, (2) clearly specifies any effect on existing Federal law or regulation, (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction, (4) specifies the retroactive effect, if any, (5) adequately defines key terms, and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of E.O. 12988 requires Executive agencies to review regulations in light of applicable standards in section 3(a) and section 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this final rule meets the relevant standards of E.O. 12988. G. Review Under the Unfunded Mandates Reform Act of 1995 Title II of the Unfunded Mandates Reform Act of 1995 (‘‘UMRA’’) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Public Law 104–4, section. 201 (codified at 2 U.S.C. 1531). For a regulatory action likely to result in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a ‘‘significant intergovernmental mandate,’’ and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect them. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. 62 FR 12820. DOE’s policy statement is also available at www.energy.gov/sites/prod/files/gcprod/ documents/umra_97.pdf. DOE has concluded that this final rule may require expenditures of $100 million or more in any one year by the private sector. Such expenditures may include (1) investment in research and development and in capital expenditures by room air conditioner manufacturers in the years between the VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 final rule and the compliance date for the new standards and (2) incremental additional expenditures by consumers to purchase higher-efficiency room air conditioners, starting at the compliance date for the applicable standard. Section 202 of UMRA authorizes a Federal agency to respond to the content requirements of UMRA in any other statement or analysis that accompanies the final rule. (2 U.S.C. 1532(c)) The content requirements of section 202(b) of UMRA relevant to a private sector mandate substantially overlap the economic analysis requirements that apply under section 325(o) of EPCA and Executive Order 12866. This SUPPLEMENTARY INFORMATION section and the TSD for this final rule respond to those requirements. Under section 205 of UMRA, the Department is obligated to identify and consider a reasonable number of regulatory alternatives before promulgating a rule for which a written statement under section 202 is required. (2 U.S.C. 1535(a)) DOE is required to select from those alternatives the most cost-effective and least burdensome alternative that achieves the objectives of the rule unless DOE publishes an explanation for doing otherwise, or the selection of such an alternative is inconsistent with law. As required by 42 U.S.C. 6295(m), this final rule establishes amended energy conservation standards for room air conditioners that are designed to achieve the maximum improvement in energy efficiency that DOE has determined to be both technologically feasible and economically justified, as required by 6295(o)(2)(A) and 6295(o)(3)(B). A full discussion of the alternatives considered by DOE is presented in chapter 17 of the TSD for this final rule. H. Review Under the Treasury and General Government Appropriations Act, 1999 Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105–277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment. I. Review Under Executive Order 12630 Pursuant to E.O. 12630, ‘‘Governmental Actions and Interference with Constitutionally Protected Property Rights,’’ 53 FR 8859 (Mar. 18, 1988), PO 00000 Frm 00065 Fmt 4701 Sfmt 4700 34361 DOE has determined that this rule would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution. J. Review Under the Treasury and General Government Appropriations Act, 2001 Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to review most disseminations of information to the public under information quality guidelines established by each agency pursuant to general guidelines issued by OMB. OMB’s guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE’s guidelines were published at 67 FR 62446 (Oct. 7, 2002). Pursuant to OMB Memorandum M–19–15, Improving Implementation of the Information Quality Act (April 24, 2019), DOE published updated guidelines which are available at www.energy.gov/sites/prod/files/2019/ 12/f70/DOE%20Final%20Updated %20IQA%20Guidelines%20Dec %202019.pdf. DOE has reviewed this final rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines. K. Review Under Executive Order 13211 E.O. 13211, ‘‘Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,’’ 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OIRA at OMB, a Statement of Energy Effects for any significant energy action. A ‘‘significant energy action’’ is defined as any action by an agency that promulgates or is expected to lead to promulgation of a final rule, and that (1) is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy, or (3) is designated by the Administrator of OIRA as a significant energy action. For any significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use. DOE has concluded that this regulatory action, which sets forth amended energy conservation standards for room air conditioners, is not a significant energy action because the standards are not likely to have a significant adverse effect on the supply, E:\FR\FM\26MYR2.SGM 26MYR2 34362 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations distribution, or use of energy, nor has it been designated as such by the Administrator at OIRA. Accordingly, DOE has not prepared a Statement of Energy Effects on this final rule. ddrumheller on DSK120RN23PROD with RULES2 L. Information Quality On December 16, 2004, OMB, in consultation with the Office of Science and Technology Policy (‘‘OSTP’’), issued its Final Information Quality Bulletin for Peer Review (‘‘the Bulletin’’). 70 FR 2664 (Jan. 14, 2005). The Bulletin establishes that certain scientific information shall be peer reviewed by qualified specialists before it is disseminated by the Federal Government, including influential scientific information related to agency regulatory actions. The purpose of the Bulletin is to enhance the quality and credibility of the Government’s scientific information. Under the Bulletin, the energy conservation standards rulemaking analyses are ‘‘influential scientific information,’’ which the Bulletin defines as ‘‘scientific information the agency reasonably can determine will have, or does have, a clear and substantial impact on important public policies or private sector decisions.’’ 70 FR 2664, 2667. In response to OMB’s Bulletin, DOE conducted formal peer reviews of the energy conservation standards development process and the analyses that are typically used and prepared a report describing that peer review.83 Generation of this report involved a rigorous, formal, and documented evaluation using objective criteria and qualified and independent reviewers to make a judgment as to the technical/ scientific/business merit, the actual or anticipated results, and the productivity and management effectiveness of programs and/or projects. Because available data, models, and technological understanding have changed since 2007, DOE has engaged with the National Academy of Sciences to review DOE’s analytical methodologies to ascertain whether modifications are needed to improve the Department’s analyses. DOE is in the process of evaluating the resulting report.84 83 The 2007 ‘‘Energy Conservation Standards Rulemaking Peer Review Report’’ is available at the following website: energy.gov/eere/buildings/ downloads/energy-conservation-standardsrulemaking-peer-review-report-0 (last accessed September 12, 2022). 84 The report is available at www.nationalacademies.org/our-work/review-of- VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 M. Congressional Notification As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of this rule prior to its effective date. The report will state that it has been determined that the rule is a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). VIII. Approval of the Office of the Secretary The Secretary of Energy has approved publication of this final rule. List of Subjects 10 CFR Part 430 Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Imports, Intergovernmental relations, Reporting and recordkeeping requirements, Small businesses. Signing Authority This document of the Department of Energy was signed on March 22, 2023, by Francisco Alejandro Moreno, Acting Assistant Secretary for Energy Efficiency and Renewable Energy, pursuant to delegated authority from the Secretary of Energy. That document with the original signature and date is maintained by DOE. For administrative purposes only, and in compliance with requirements of the Office of the Federal Register, the undersigned DOE Federal Register Liaison Officer has been authorized to sign and submit the document in electronic format for publication, as an official document of the Department of Energy. This administrative process in no way alters the legal effect of this document upon publication in the Federal Register. Signed in Washington, DC, on May 10, 2023. Treena V. Garrett, Federal Register Liaison Officer, U.S. Department of Energy. For the reasons stated in the preamble, DOE amends parts 429 and 430 of chapter II, subchapter D, of title methods-for-setting-building-and-equipmentperformance-standards. Fmt 4701 1. The authority citation for part 429 continues to read as follows: ■ Authority: 42 U.S.C. 6291–6317; 28 U.S.C. 2461 note. 2. Amend § 429.134 by adding paragraph (bb) to read as follows: Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Reporting and recordkeeping requirements. Frm 00066 PART 429—CERTIFICATION, COMPLIANCE, AND ENFORCEMENT FOR CONSUMER PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT ■ 10 CFR Part 429 PO 00000 10 of the Code of Federal Regulations, as set forth below: Sfmt 4700 § 429.134 Product-specific enforcement provisions. * * * * * (bb) Room air conditioners. The cooling capacity will be measured pursuant to the test requirements of 10 CFR part 430 for each unit tested. The results of the measurement(s) will be averaged and compared to the value of cooling capacity certified by the manufacturer for the basic model. The certified cooling capacity will be considered valid only if the measurement is within five percent of the certified cooling capacity. (1) If the certified cooling capacity is found to be valid, the certified cooling capacity will be used as the basis for determining the minimum combined energy efficiency ratio allowed for the basic model. (2) If the certified cooling capacity is found to be invalid, the average measured cooling capacity of the units in the sample will be used as the basis for determining the minimum combined energy efficiency ratio allowed for the basic model. PART 430—ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS 3. The authority citation for part 430 continues to read as follows: ■ Authority: 42 U.S.C. 6291–6309; 28 U.S.C. 2461 note. 4. Amend § 430.32 by revising paragraph (b) to read as follows: ■ § 430.32 Energy and water conservation standards and their compliance dates. * * * * * (b) Room air conditioners. (1) The following standards remain in effect from June 1, 2014, until May 26, 2026: E:\FR\FM\26MYR2.SGM 26MYR2 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations 34363 TABLE 3 TO PARAGRAPH (b) Combined energy efficiency ratio Equipment class 1. Without reverse cycle, with louvered sides, and with a certified cooling capacity 1 less than 6,000 Btu/h ............................. 2. Without reverse cycle, with louvered sides and with a certified cooling capacity of 6,000 to 7,999 Btu/h .............................. 3. Without reverse cycle, with louvered sides and with a certified cooling capacity of 8,000 to 13,999 Btu/h ............................ 4. Without reverse cycle, with louvered sides and with a certified cooling capacity of 14,000 to 19,999 Btu/h .......................... 5a. Without reverse cycle, with louvered sides and with a certified cooling capacity of 20,000 Btu/h to 27,999 Btu/h .............. 5b. Without reverse cycle, with louvered sides and with a certified cooling capacity of 28,000 Btu/h or more .......................... 6. Without reverse cycle, without louvered sides, and with a certified cooling capacity less than 6,000 Btu/h .......................... 7. Without reverse cycle, without louvered sides and with a certified cooling capacity of 6,000 to 7,999 Btu/h ......................... 8a. Without reverse cycle, without louvered sides and with a certified cooling capacity of 8,000 to 10,999 Btu/h ..................... 8b. Without reverse cycle, without louvered sides and with a certified cooling capacity of 11,000 to 13,999 Btu/h ................... 9. Without reverse cycle, without louvered sides and with a certified cooling capacity of 14,000 to 19,999 Btu/h ..................... 10. Without reverse cycle, without louvered sides and with a certified cooling capacity of 20,000 Btu/h or more ..................... 11. With reverse cycle, with louvered sides, and with a certified cooling capacity less than 20,000 Btu/h ................................ 12. With reverse cycle, without louvered sides, and with a certified cooling capacity less than 14,000 Btu/h ........................... 13. With reverse cycle, with louvered sides, and with a certified cooling capacity of 20,000 Btu/h or more .............................. 14. With reverse cycle, without louvered sides, and with a certified cooling capacity of 14,000 Btu/h or more ......................... 15. Casement-Only ........................................................................................................................................................................ 16. Casement-Slider ...................................................................................................................................................................... 1 The 11.0 11.0 10.9 10.7 9.4 9.0 10.0 10.0 9.6 9.5 9.3 9.4 9.8 9.3 9.3 8.7 9.5 10.4 certified cooling capacity is determined by the manufacturer in accordance with 10 CFR 429.15(a)(3). (2) The following standards apply to products manufactured starting May 26, 2026: TABLE 4 TO PARAGRAPH (b)(2) Combined energy efficiency ratio Equipment class 1. Without reverse cycle, with louvered sides, and with a certified cooling capacity 1 less than 6,000 Btu/h ............................. 2. Without reverse cycle, with louvered sides and with a certified cooling capacity of 6,000 to 7,900 Btu/h .............................. 3. Without reverse cycle, with louvered sides and with a certified cooling capacity of 8,000 to 13,900 Btu/h ............................ 4. Without reverse cycle, with louvered sides and with a certified cooling capacity of 14,000 to 19,900 Btu/h .......................... 5a. Without reverse cycle, with louvered sides and with a certified cooling capacity of 20,000 Btu/h to 27,900 Btu/h .............. 5b. Without reverse cycle, with louvered sides and with a certified cooling capacity of 28,000 Btu/h or more .......................... 6. Without reverse cycle, without louvered sides, and with a certified cooling capacity less than 6,000 Btu/h .......................... 7. Without reverse cycle, without louvered sides and with a certified cooling capacity of 6,000 to 7,900 Btu/h ......................... 8a. Without reverse cycle, without louvered sides and with a certified cooling capacity of 8,000 to 10,900 Btu/h ..................... 8b. Without reverse cycle, without louvered sides and with a certified cooling capacity of 11,000 to 13,900 Btu/h ................... 9. Without reverse cycle, without louvered sides and with a certified cooling capacity of 14,000 to 19,900 Btu/h ..................... 10. Without reverse cycle, without louvered sides and with a certified cooling capacity of 20,000 Btu/h or more ..................... 11. With reverse cycle, with louvered sides, and with a certified cooling capacity less than 20,000 Btu/h ................................ 12. With reverse cycle, without louvered sides, and with a certified cooling capacity less than 14,000 Btu/h ........................... 13. With reverse cycle, with louvered sides, and with a certified cooling capacity of 20,000 Btu/h or more .............................. 14. With reverse cycle, without louvered sides, and with a certified cooling capacity of 14,000 Btu/h or more ......................... 15. Casement-Only ........................................................................................................................................................................ 16. Casement-Slider ...................................................................................................................................................................... 1 The * * certified cooling capacity is determined by the manufacturer in accordance with 10 CFR 429.15(a)(3). * * * Note: The following appendix will not appear in the Code of Federal Regulations. Appendix A—Letter From the Department of Justice to the Department of Energy ddrumheller on DSK120RN23PROD with RULES2 13.1 13.7 16.0 16.0 13.8 13.2 12.8 12.8 14.1 13.9 13.7 13.8 14.4 13.7 13.7 12.8 13.9 15.3 U.S. Department of Justice, Antitrust Division, Jonathan S. Kanter, Assistant Attorney General, Main Justice Building, 950 Pennsylvania Avenue NW, Washington, DC 20530–0001, (202) 514– 2401/(202) 616–2645 (Fax), May 31, 2022 Ami Grace-Tardy, Assistant General Counsel for Legislation, Regulation and Energy Efficiency, U.S. Department of Energy, VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 Washington, DC 20585, Ami.Grace-Tardy@ hq.doe.gov Dear Assistant General Counsel GraceTardy: I am responding to your April 7, 2022, letter seeking the views of the Attorney General about the potential impact on competition of proposed energy conservation standards for room air conditioners (room ACs). Your request was submitted under Section 325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act, as amended (EPCA), 42 U.S.C. 6295(o)(2)(B)(i)(V) and 42 U.S.C. 6316(a), which requires the Attorney General to make a determination of the impact of any lessening of competition that is likely to result from the imposition of proposed energy conservation standards. The PO 00000 Frm 00067 Fmt 4701 Sfmt 4700 Attorney General’s responsibility for responding to requests from other departments about the effect of a program on competition has been delegated to the Assistant Attorney General for the Antitrust Division in 28 CFR 0.40(g). In conducting its analysis, the Antitrust Division examines whether a proposed standard may lessen competition, for example, by substantially limiting consumer choice or increasing industry concentration. A lessening of competition could result in higher prices to manufacturers and consumers. We have reviewed the proposed standards contained in the Notice of Proposed Rulemaking (87 FR 20608 April 7, 2022), and the related technical support documents. We also reviewed the transcript E:\FR\FM\26MYR2.SGM 26MYR2 34364 Federal Register / Vol. 88, No. 102 / Friday, May 26, 2023 / Rules and Regulations ddrumheller on DSK120RN23PROD with RULES2 from the public meeting held on May 3, 2022 and reviewed public comments submitted by industry members in response to DOE’s Request for Information in this matter. VerDate Sep<11>2014 20:20 May 25, 2023 Jkt 259001 Based on the information currently available, we do not believe that the proposed energy conservation standards for room ACs are likely to have a significant adverse impact on competition. PO 00000 Frm 00068 Fmt 4701 Sfmt 9990 Sincerely, Jonathan S. Kanter, [FR Doc. 2023–10287 Filed 5–25–23; 8:45 am] BILLING CODE 6450–01–P E:\FR\FM\26MYR2.SGM 26MYR2

Agencies

DEPARTMENT OF ENERGY

[Federal Register Volume 88, Number 102 (Friday, May 26, 2023)]
[Rules and Regulations]
[Pages 34298-34364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10287]



[[Page 34297]]

Vol. 88

Friday,

No. 102

May 26, 2023

Part III





Department of Energy





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10 CFR Parts 429 and 430





Energy Conservation Program: Energy Conservation Standards for Room Air 
Conditioners; Final Rule

Federal Register / Vol. 88 , No. 102 / Friday, May 26, 2023 / Rules 
and Regulations

[[Page 34298]]


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DEPARTMENT OF ENERGY

10 CFR Parts 429 and 430

[EERE-2014-BT-STD-0059]
RIN 1904-AD97


Energy Conservation Program: Energy Conservation Standards for 
Room Air Conditioners

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Final rule.

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SUMMARY: The Energy Policy and Conservation Act, as amended (``EPCA''), 
prescribes energy conservation standards for various consumer products 
and certain commercial and industrial equipment, including room air 
conditioners. EPCA also requires the U.S. Department of Energy 
(``DOE'') to periodically determine whether more-stringent, standards 
would be technologically feasible and economically justified, and would 
result in significant energy savings. In this final rule, DOE is 
adopting amended energy conservation standards for room air 
conditioners. It has determined that the amended energy conservation 
standards for these products would result in significant conservation 
of energy, and are technologically feasible and economically justified.

DATES: The effective date of this rule is July 25, 2023. Compliance 
with the amended standards established for room air conditioners in 
this final rule is required on and after May 26, 2026.

ADDRESSES: The docket for this rulemaking, which includes Federal 
Register notices, public meeting attendee lists and transcripts, 
comments, and other supporting documents/materials, is available for 
review at www.regulations.gov. All documents in the docket are listed 
in the www.regulations.gov index. However, not all documents listed in 
the index may be publicly available, such as information that is exempt 
from public disclosure.
    The docket web page can be found at www.regulations.gov/docket??D=EERE-2014-BT-STD-0059. The docket web page contains 
instructions on how to access all documents, including public comments, 
in the docket.
    For further information on how to review the docket, contact the 
Appliance and Equipment Standards Program staff at (202) 287-1445 or by 
email: [email protected].

FOR FURTHER INFORMATION CONTACT:  Mr. Lucas Adin, U.S. Department of 
Energy, Office of Energy Efficiency and Renewable Energy, Building 
Technologies Office, EE-5B, 1000 Independence Avenue SW, Washington, DC 
20585-0121. Telephone: (202) 287-5904. Email: [email protected].
    Ms. Sarah Butler, U.S. Department of Energy, Office of the General 
Counsel, GC-33, 1000 Independence Avenue SW, Washington, DC 20585-0121. 
Telephone: (202) 586-1777. Email: [email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Synopsis of the Final Rule
    A. Benefits and Costs to Consumers
    B. Impact on Manufacturers
    C. National Benefits and Costs
    D. Conclusion
II. Introduction
    A. Authority
    B. Background
    1. Current Standards
    2. History of Standards Rulemaking for Room Air Conditioners
III. General Discussion
    A. Product Classes and Scope of Coverage
    B. Test Procedure
    C. Technological Feasibility
    1. General
    2. Maximum Technologically Feasible Levels
    D. Energy Savings
    1. Determination of Savings
    2. Significance of Savings
    E. Economic Justification
    1. Specific Criteria
    a. Economic Impact on Manufacturers and Consumers
    b. Savings in Operating Costs Compared to Increase in Price (LCC 
and PBP)
    c. Energy Savings
    d. Lessening of Utility or Performance of Products
    e. Impact of Any Lessening of Competition
    f. Need for National Energy Conservation
    g. Other Factors
    2. Rebuttable Presumption
IV. Methodology and Discussion of Related Comments
    A. Market and Technology Assessment
    1. Scope of Coverage and Product Classes
    2. Technology Options
    a. Alternative Refrigerants
    b. Product Weight
    B. Screening Analysis
    1. Screened-Out Technologies
    2. Remaining Technologies
    C. Engineering Analysis
    1. Efficiency Analysis
    a. Baseline Efficiency/Energy Use
    b. Higher Efficiency Levels
    2. Cost Analysis
    3. Cost-Efficiency Relationship
    4. Consumer Utility
    D. Markups Analysis
    E. Energy Use Analysis
    F. Life-Cycle Cost and Payback Period Analysis
    1. Product Cost
    2. Installation Cost
    3. Annual Energy Consumption
    a. Rebound Effect
    4. Energy Prices
    5. Maintenance and Repair Costs
    6. Product Lifetime
    7. Discount Rates
    8. Energy Efficiency Distribution in the No-New-Standards Case
    9. Payback Period Analysis
    G. Shipments Analysis
    H. National Impact Analysis
    1. Product Efficiency Trends
    2. National Energy Savings
    3. Net Present Value Analysis
    I. Consumer Subgroup Analysis
    J. Manufacturer Impact Analysis
    1. Overview
    2. Government Regulatory Impact Model and Key Inputs
    a. Manufacturer Production Costs
    b. Shipments Projections
    c. Product and Capital Conversion Costs
    d. Manufacturer Markup Scenarios
    3. Discussion of MIA Comments
    K. Emissions Analysis
    1. Air Quality Regulations Incorporated in DOE's Analysis
    L. Monetizing Emissions Impacts
    1. Monetization of Greenhouse Gas Emissions
    a. Social Cost of Carbon
    b. Social Cost of Methane and Nitrous Oxide
    2. Monetization of Other Emissions Impacts
    M. Utility Impact Analysis
    N. Employment Impact Analysis
V. Analytical Results and Conclusions
    A. Trial Standard Levels
    B. Economic Justification and Energy Savings
    1. Economic Impacts on Individual Consumers
    a. Life-Cycle Cost and Payback Period
    b. Consumer Subgroup Analysis
    c. Rebuttable Presumption Payback
    2. Economic Impacts on Manufacturers
    a. Industry Cash Flow Analysis Results
    b. Direct Impacts on Employment
    c. Impacts on Manufacturing Capacity
    d. Impacts on Subgroups of Manufacturers
    e. Cumulative Regulatory Burden
    3. National Impact Analysis
    a. Significance of Energy Savings
    b. Net Present Value of Consumer Costs and Benefits
    c. Indirect Impacts on Employment
    4. Impact on Utility or Performance of Products
    5. Impact of Any Lessening of Competition
    6. Need of the Nation To Conserve Energy
    7. Other Factors
    8. Summary of Economic Impacts
    C. Conclusion
    1. Benefits and Burdens of TSLs Considered for Room Air 
Conditioner Standards
    2. Annualized Benefits and Costs of the Adopted Standards
VI. Cooling Capacity Verification
VII. Procedural Issues and Regulatory Review
    A. Review Under Executive Orders 12866 and 13563
    B. Review Under the Regulatory Flexibility Act

[[Page 34299]]

    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act of 1969
    E. Review Under Executive Order 13132
    F. Review Under Executive Order 12988
    G. Review Under the Unfunded Mandates Reform Act of 1995
    H. Review Under the Treasury and General Government 
Appropriations Act, 1999
    I. Review Under Executive Order 12630
    J. Review Under the Treasury and General Government 
Appropriations Act, 2001
    K. Review Under Executive Order 13211
    L. Information Quality
    M. Congressional Notification
VIII. Approval of the Office of the Secretary

I. Synopsis of the Final Rule

    The Energy Policy and Conservation Act, Public Law 94-163, as 
amended (``EPCA''),\1\ authorizes DOE to regulate the energy efficiency 
of a number of consumer products and certain industrial equipment. (42 
U.S.C. 6291-6317) Title III, Part B of EPCA \2\ established the Energy 
Conservation Program for Consumer Products Other Than Automobiles. (42 
U.S.C. 6291-6309) These products include room air conditioners, the 
subject of this final rule.
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    \1\ All references to EPCA in this document refer to the statute 
as amended through the Energy Act of 2020, Public Law. 116-260 (Dec. 
27, 2020), which reflect the last statutory amendments that impact 
Parts A and A-1 of EPCA.
    \2\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
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    Pursuant to EPCA, any new or amended energy conservation standard 
must be designed to achieve the maximum improvement in energy 
efficiency that DOE determines is technologically feasible and 
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new 
or amended standard must result in significant conservation of energy. 
(42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later than 6 
years after issuance of any final rule establishing or amending a 
standard, DOE must publish either a notice of determination that 
standards for the product do not need to be amended, or a notice of 
proposed rulemaking including new proposed energy conservation 
standards (proceeding to a final rule, as appropriate). (42 U.S.C. 
6295(m))
    In accordance with these and other statutory provisions discussed 
in this document, DOE is adopting amended energy conservation standards 
for room air conditioners. The adopted standards, which are expressed 
in the amount of cooling provided per amount of energy consumed, 
measured in British thermal units per watt-hour (``Btu/Wh'') are shown 
in Table I.1. These standards apply to all room air conditioners listed 
in Table I.1 and manufactured in, or imported into, the United States 
starting on May 26, 2026.

   Table I.1--Energy Conservation Standards for Room Air Conditioners
                   [Compliance starting May 26, 2026]
------------------------------------------------------------------------
                                                        Combined energy
                   Equipment class                      efficiency ratio
                                                        (CEER) (Btu/Wh)
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and                  13.1
 less than 6,000 British thermal units per hour
 (``Btu/h'').........................................
2. Without reverse cycle, with louvered sides and                   13.7
 6,000 to 7,900 Btu/h................................
3. Without reverse cycle, with louvered sides and                   16.0
 8,000 to 13,900 Btu/h...............................
4. Without reverse cycle, with louvered sides and                   16.0
 14,000 to 19,900 Btu/h..............................
5a. Without reverse cycle, with louvered sides and                  13.8
 20,000 to 27,900 Btu/h..............................
5b. Without reverse cycle, with louvered sides and                  13.2
 28,000 Btu/h or more................................
6. Without reverse cycle, without louvered sides, and               12.8
 less than 6,000 Btu/h...............................
7. Without reverse cycle, without louvered sides and                12.8
 6,000 to 7,900 Btu/h................................
8a. Without reverse cycle, without louvered sides and               14.1
 8,000 to 10,900 Btu/h...............................
8b. Without reverse cycle, without louvered sides and               13.9
 11,000 to 13,900 Btu/h..............................
9. Without reverse cycle, without louvered sides and                13.7
 14,000 to 19,900 Btu/h..............................
10. Without reverse cycle, without louvered sides and               13.8
 20,000 Btu/h or more................................
11. With reverse cycle, with louvered sides, and less               14.4
 than 20,000 Btu/h...................................
12. With reverse cycle, without louvered sides, and                 13.7
 less than 14,000 Btu/h..............................
13. With reverse cycle, with louvered sides, and                    13.7
 20,000 Btu/h or more................................
14. With reverse cycle, without louvered sides, and                 12.8
 14,000 Btu/h or more................................
15. Casement-Only....................................               13.9
16. Casement-Slider..................................               15.3
------------------------------------------------------------------------

A. Benefits and Costs to Consumers

    Table I.2 summarizes DOE's evaluation of the economic impacts of 
the adopted standards on consumers of room air conditioners, as 
measured by the average life-cycle cost (``LCC'') savings and the 
simple payback period (``PBP'').\3\ The average LCC savings are 
positive for all product classes, and the PBP is less than the average 
lifetime of room air conditioners, which is estimated to be 9.3 years 
(see section IV.F of this document).
---------------------------------------------------------------------------

    \3\ The average LCC savings refer to consumers that are affected 
by a standard and are measured relative to the efficiency 
distribution in the no-new-standards case, which depicts the market 
in the compliance year in the absence of new or amended standards 
(see section IV.F.9 of this document). The simple PBP, which is 
designed to compare specific efficiency levels, is measured relative 
to the baseline product (see section IV.C of this document).

        Table I.2--Impacts of Adopted Energy Conservation Standards on Consumers of Room Air Conditioners
----------------------------------------------------------------------------------------------------------------
                                                                               Average LCC       Simple payback
                    Room air conditioner product class                       savings (2021$)     period (years)
----------------------------------------------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and less than 6,000 Btu/h..                 65                0.8
2. Without reverse cycle, with louvered sides and 6,000 to 7,900 Btu/h....                 72                1.5
3. Without reverse cycle, with louvered sides and 8,000 to 13,900 Btu/h...                100                2.9

[[Page 34300]]

 
4. Without reverse cycle, with louvered sides and 14,000 to 19,900 Btu/h..                 92                3.0
5a. Without reverse cycle, with louvered sides and 20,000 Btu/h to 27,900                 148                2.5
 Btu/h....................................................................
5b. Without reverse cycle, with louvered sides and 28,000 Btu/h or more...                284                2.3
8a. Without reverse cycle, without louvered sides and 8,000 to 10,900 Btu/                 84                3.2
 h........................................................................
8b. Without reverse cycle, without louvered sides and 11,000 to 13,900 Btu/               119                2.4
 h........................................................................
9. Without reverse cycle, without louvered sides and 14,000 to 19,900 Btu/                165                2.9
 h........................................................................
11. With reverse cycle, with louvered sides, and less than 20,000 Btu/h...                134                3.2
12. With reverse cycle, without louvered sides, and less than 14,000 Btu/h                124                2.6
16. Casement-Slider.......................................................                 84                4.0
----------------------------------------------------------------------------------------------------------------

    DOE's analysis of the impacts of the adopted standards on consumers 
is described in section IV.F of this document.

B. Impact on Manufacturers

    The industry net present value (``INPV'') is the sum of the 
discounted cash flows to the industry from the announcement of the 
standard through the end of the analysis period (2023-2055). Using a 
real discount rate of 7.2 percent, DOE estimates that the INPV for 
manufacturers of room air conditioners in the case without amended 
standards is $1.20 billion.\4\ Under the adopted standards, DOE 
estimates the change in INPV to range from -4.8 percent to 7.1 percent, 
which is approximately -$57.7 million to $85.6 million. In order to 
bring products into compliance with amended standards, it is estimated 
that industry will incur total conversion costs of $24.8 million.
---------------------------------------------------------------------------

    \4\ All monetary values in this document are expressed in 2021 
dollars.
---------------------------------------------------------------------------

    DOE's analysis of the impacts of the adopted standards on 
manufacturers is described in sections IV.J and V.B.2 of this document.

C. National Benefits and Costs

    DOE's analyses indicate that the adopted energy conservation 
standards for room air conditioners would save a significant amount of 
energy. Relative to the case without amended standards, the lifetime 
energy savings for room air conditioners purchased in the 30-year 
period that begins in the anticipated year of compliance with the 
amended standards (2026-2055), amount to 1.41 quadrillion British 
thermal units (``Btu''), or quads.\5\ This represents a savings of 12 
percent relative to the energy use of these products in the case 
without amended standards (referred to as the ``no-new-standards 
case'').
---------------------------------------------------------------------------

    \5\ The quantity refers to full-fuel-cycle (FFC) energy savings. 
FFC energy savings includes the energy consumed in extracting, 
processing, and transporting primary fuels (i.e., coal, natural gas, 
petroleum fuels), and, thus, presents a more complete picture of the 
impacts of energy efficiency standards. For more information on the 
FFC metric, see section IV.H.1 of this document.
---------------------------------------------------------------------------

    The cumulative net present value (``NPV'') of total consumer 
benefits of the standards for room air conditioners ranges from $5.39 
billion (at a 7-percent discount rate) to $11.46 billion (at a 3-
percent discount rate). This NPV expresses the estimated total value of 
future operating-cost savings minus the estimated increased product 
costs for room air conditioners purchased in 2026-2055.
    In addition, the adopted standards for room air conditioners are 
projected to yield significant environmental benefits. DOE estimates 
that the standards will result in cumulative emission reductions (over 
the same period as for energy savings) of 48.5 million metric tons 
(``Mt'') \6\ of carbon dioxide (``CO2''), 20.1 thousand tons 
of sulfur dioxide (``SO2''), 74.2 thousand tons of nitrogen 
oxides (``NOX''), 325.6 thousand tons of methane 
(``CH4''), 0.5 thousand tons of nitrous oxide 
(``N2O''), and 0.1 tons of mercury (``Hg'').\7\ The 
estimated cumulative reduction in CO2 emissions through 2030 
amounts to 4.4 Mt, which is equivalent to the emissions resulting from 
the annual electricity use of more than 856,000 homes.
---------------------------------------------------------------------------

    \6\ A metric ton is equivalent to 1.1 short tons. Results for 
emissions other than CO2 are presented in short tons.
    \7\ DOE calculated emissions reductions relative to the no-new-
standards-case, which reflects key assumptions in the Annual Energy 
Outlook 2022 (``AEO2022''). AEO2022 represents current Federal and 
state legislation and final implementation of regulations as of the 
time of its preparation. See section IV.K of this document for 
further discussion of AEO2022 assumptions that effect air pollutant 
emissions.
---------------------------------------------------------------------------

    DOE estimates the value of climate benefits from a reduction in 
greenhouse gases (GHG) using four different estimates of the social 
cost of CO2 (``SC-CO2''), the social cost of 
methane (``SC-CH4''), and the social cost of nitrous oxide 
(``SC-N2O''). Together these represent the social cost of 
GHG (SC-GHG).\8\ DOE used interim SC-GHG values developed by an 
Interagency Working Group on the Social Cost of Greenhouse Gases 
(IWG).\9\ The derivation of these values is discussed in section IV.L.1 
of this document. For presentational purposes, the climate benefits 
associated with the average SC-GHG at a 3-percent discount rate are 
estimated to be $2.51 billion. DOE does not have a single central SC-
GHG point estimate and it emphasizes the importance and value of 
considering the benefits calculated using all four sets of SC-GHG 
estimates.
---------------------------------------------------------------------------

    \8\ On March 16, 2022, the Fifth Circuit Court of Appeals (No. 
22-30087) granted the Federal Government's emergency motion for stay 
pending appeal of the February 11, 2022, preliminary injunction 
issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a 
result of the Fifth Circuit's order, the preliminary injunction is 
no longer in effect, pending resolution of the Federal Government's 
appeal of that injunction or a further court order. Among other 
things, the preliminary injunction enjoined the defendants in that 
case from ``adopting, employing, treating as binding, or relying 
upon'' the interim estimates of the social cost of greenhouse 
gases--which were issued by the Interagency Working Group on the 
Social Cost of Greenhouse Gases on February 26, 2021--to monetize 
the benefits of reducing greenhouse gas emissions. As reflected in 
this rule, DOE has reverted to its approach prior to the injunction 
and presents monetized greenhouse gas abatement benefits where 
appropriate and permissible under law.
    \9\ See Interagency Working Group on Social Cost of Greenhouse 
Gases, Technical Support Document: Social Cost of Carbon, Methane, 
and Nitrous Oxide. Interim Estimates Under Executive Order 13990, 
Washington, DC, February 2021 (``February 2021 SC-GHG TSD''). 
www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf.
---------------------------------------------------------------------------

    DOE estimated the monetary health benefits of SO2 and 
NOX emissions reductions, using benefit per ton estimates 
from the scientific literature, as discussed in section IV.L of this 
document. DOE estimated the present value of the health benefits would 
be $2.02 billion using a 7-percent discount rate, and $4.39 billion 
using a 3-percent

[[Page 34301]]

discount rate.\10\ DOE is currently only monetizing (for SO2 
and NOX) fine particulate matter (``PM2.5'') 
precursor health benefits and (for NOX) ozone precursor 
health benefits, but will continue to assess the ability to monetize 
other effects such as health benefits from reductions in direct 
PM2.5 emissions.
---------------------------------------------------------------------------

    \10\ DOE estimates the economic value of these emissions 
reductions resulting from the considered TSLs for the purpose of 
complying with the requirements of Executive Order 12866.
---------------------------------------------------------------------------

    Table I.3 summarizes the economic benefits and costs expected to 
result from the adopted standards for room air conditioners. There are 
other important unquantified effects, including certain unquantified 
climate benefits, unquantified public health benefits from the 
reduction of toxic air pollutants and other emissions, unquantified 
energy security benefits, and distributional effects, among others.

   Table I.3--Summary of Economic Benefits and Costs of Adopted Energy
            Conservation Standards for Room Air Conditioners
------------------------------------------------------------------------
                                                         Billion $2021
------------------------------------------------------------------------
                            3% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings.....................               14.63
Climate Benefits *..................................                2.51
Health Benefits **..................................                4.39
                                                     -------------------
    Total Benefits [dagger].........................               21.54
Consumer Incremental Product Costs [Dagger].........                3.17
                                                     -------------------
    Net Benefits....................................               18.37
------------------------------------------------------------------------
                            7% discount rate
------------------------------------------------------------------------
Consumer Operating Cost Savings.....................                7.46
Climate Benefits * (3% discount rate)...............                2.51
Health Benefits **..................................                2.02
                                                     -------------------
    Total Benefits [dagger].........................               12.00
Consumer Incremental Product Costs [Dagger].........                2.08
                                                     -------------------
    Net Benefits....................................                9.92
------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with room
  air conditioners shipped in 2026-2055. These results include benefits
  to consumers which accrue after 2055 from the products shipped in 2026-
  2055.
* Climate benefits are calculated using four different estimates of the
  social cost of carbon (SC-CO2), methane (SC-CH4), and nitrous oxide
  (SC-N2O) (model average at 2.5 percent, 3 percent, and 5 percent
  discount rates; 95th percentile at 3 percent discount rate) (see
  section IV.L of this document). Together these represent the global SC-
  GHG. For presentational purposes of this table, the climate benefits
  associated with the average SC-GHG at a 3 percent discount rate are
  shown, but DOE does not have a single central SC-GHG point estimate.
  On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-30087)
  granted the Federal Government's emergency motion for stay pending
  appeal of the February 11, 2022, preliminary injunction issued in
  Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of
  the Fifth Circuit's order, the preliminary injunction is no longer in
  effect, pending resolution of the Federal Government's appeal of that
  injunction or a further court order. Among other things, the
  preliminary injunction enjoined the defendants in that case from
  ``adopting, employing, treating as binding, or relying upon'' the
  interim estimates of the social cost of greenhouse gases--which were
  issued by the Interagency Working Group on the Social Cost of
  Greenhouse Gases on February 26, 2021--to monetize the benefits of
  reducing greenhouse gas emissions. As reflected in this rule, DOE has
  reverted to its approach prior to the injunction and presents
  monetized greenhouse gas abatement benefits where appropriate and
  permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX
  and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5
  precursor health benefits and (for NOX) ozone precursor health
  benefits, but will continue to assess the ability to monetize other
  effects such as health benefits from reductions in direct PM2.5
  emissions. See section IV.L of this document for more details.
[dagger] Total and net benefits include those consumer, climate, and
  health benefits that can be quantified and monetized. For presentation
  purposes, total and net benefits for both the 3-percent and 7-percent
  cases are presented using the average SC-GHG with 3-percent discount
  rate, but DOE does not have a single central SC-GHG point estimate.
  DOE emphasizes the importance and value of considering the benefits
  calculated using all four sets of SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as
  installation costs.

    The benefits and costs of the standards can also be expressed in 
terms of annualized values. The monetary values for the total 
annualized net benefits are (1) the reduced consumer operating costs, 
minus (2) the increase in product purchase prices and installation 
costs, plus (3) the value of climate and health benefits of emission 
reductions, all annualized.\11\
---------------------------------------------------------------------------

    \11\ To convert the time-series of costs and benefits into 
annualized values, DOE calculated a present value in 2022, the year 
used for discounting the NPV of total consumer costs and savings. 
For the benefits, DOE calculated a present value associated with 
each year's shipments in the year in which the shipments occur 
(e.g., 2020 or 2030), and then discounted the present value from 
each year to 2022. Using the present value, DOE then calculated the 
fixed annual payment over a 30-year period, starting in the 
compliance year, that yields the same present value.
---------------------------------------------------------------------------

    The national operating cost savings are domestic private U.S. 
consumer monetary savings that occur as a result of purchasing the 
covered products and are measured for the lifetime of room air 
conditioners shipped in 2026-2055. The benefits associated with reduced 
emissions achieved as a result of the adopted standards are also 
calculated based on the lifetime of room air conditioners shipped in 
2026-2055. Total benefits for both the 3-percent and 7-percent cases 
are presented using the average GHG social costs with 3-percent 
discount rate. Estimates of SC-GHG values are presented for all four 
discount rates in section V.B.6 of this document.
    Table I.4 presents the total estimated monetized benefits and costs 
associated with the standard, expressed in terms of

[[Page 34302]]

annualized values. The results under the primary estimate are as 
follows.
    Using a 7-percent discount rate for consumer benefits and costs and 
health benefits from reduced NOX and SO2 emissions, and the 
3-percent discount rate case for climate benefits from reduced GHG 
emissions, the estimated cost of the standards adopted in this rule is 
$205.2 million per year in increased equipment costs, while the 
estimated annual benefits are $736.9 million in reduced equipment 
operating costs, $140.1 million in climate benefits, and $199.9 million 
in health benefits. In this case, the net benefit would amount to 
$871.7 million per year.
    Using a 3-percent discount rate for all benefits and costs, the 
estimated cost of the standards is $176.8 million per year in increased 
equipment costs, while the estimated annual benefits are $815.8 million 
in reduced operating costs, $140.1 million in climate benefits, and 
$244.8 million in health benefits. In this case, the net benefit would 
amount to $1,023.9 million per year.

             Table I.4--Annualized Benefits and Costs of Adopted Standards for Room Air Conditioners
----------------------------------------------------------------------------------------------------------------
                                                                                Million 2021$/year
                                                                 -----------------------------------------------
                                                                                     Low-net-        High-net-
                                                                      Primary        benefits        benefits
                                                                     estimate        estimate        estimate
----------------------------------------------------------------------------------------------------------------
                                                3% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.................................           815.8           784.9           851.9
Climate Benefits *..............................................           140.1           137.6           142.5
Health Benefits **..............................................           244.8           240.6           248.9
                                                                 -----------------------------------------------
    Total Benefits [dagger].....................................         1,200.6         1,163.2         1,243.3
Consumer Incremental Product Costs [Dagger].....................           176.8           199.0           152.2
                                                                 -----------------------------------------------
    Net Benefits................................................         1,023.9           964.1         1,091.1
----------------------------------------------------------------------------------------------------------------
                                                7% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.................................           736.9           712.3           765.4
Climate Benefits * (3% discount rate)...........................           140.1           137.6           142.5
Health Benefits **..............................................           199.9           196.8           203.0
                                                                 -----------------------------------------------
    Total Benefits [dagger].....................................         1,076.9         1,046.7         1,111.0
Consumer Incremental Product Costs [Dagger].....................           205.2           227.0           181.0
                                                                 -----------------------------------------------
    Net Benefits................................................           871.7           819.7           930.0
----------------------------------------------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026-2055.
  These results include benefits to consumers which accrue after 2057 from the products shipped in 2028-2057.
  The Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy prices from the
  AEO2022 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition,
  incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the
  Low Net Benefits Estimate, and a high decline rate in the High Net Benefits Estimate. The methods used to
  derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that the
  Benefits and Costs may not sum to the Net Benefits due to rounding.
* Climate benefits are calculated using four different estimates of the global SC-GHG (see section IV.L of this
  document). For presentational purposes of this table, the climate benefits associated with the average SC-GHG
  at a 3 percent discount rate are shown, but the Department does not have a single central SC-GHG point
  estimate, and it emphasizes the importance and value of considering the benefits calculated using all four
  sets of SC-GHG estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-30087) granted the
  Federal Government's emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction
  issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of the Fifth Circuit's order, the
  preliminary injunction is no longer in effect, pending resolution of the Federal Government's appeal of that
  injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in
  that case from ``adopting, employing, treating as binding, or relying upon'' the interim estimates of the
  social cost of greenhouse gases--which were issued by the Interagency Working Group on the Social Cost of
  Greenhouse Gases on February 26, 2021--to monetize the benefits of reducing greenhouse gas emissions. As
  reflected in this rule, DOE has reverted to its approach prior to the injunction and presents monetized
  greenhouse gas abatement benefits where appropriate and permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
  (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
  continue to assess the ability to monetize other effects such as health benefits from reductions in direct
  PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
  of this document for more details.
[dagger] Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total
  and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
  percent discount rate, but the Department does not have a single central SC-GHG point estimate.
[Dagger] Costs include incremental equipment costs as well as installation costs.

    DOE's analysis of the national impacts of the adopted standards is 
described in sections IV.H, IV.K, and IV.L of this document.

D. Conclusion

    DOE concludes that the standards adopted in this final rule 
represent the maximum improvement in energy efficiency that is 
technologically feasible and economically justified, and would result 
in the significant conservation of energy. Specifically, with regards 
to technological feasibility products achieving these standard levels 
are already commercially available for all product classes covered by 
this rule. As for economic justification, DOE's analysis shows that the 
benefits of the standards exceed, to a great extent, the burdens of the 
standards.
    Using a 7-percent discount rate for consumer benefits and costs and 
NOX and SO2 reduction benefits, and a 3-percent 
discount rate case for GHG social costs, the estimated cost of the 
standards for room air conditioners is

[[Page 34303]]

$205.2 million per year in increased product costs, while the estimated 
annual benefits are $736.9 million in reduced product operating costs, 
$140.1 million in climate benefits, and $199.9 million in health 
benefits. The net benefit amounts to $871.7 million per year.
    The significance of energy savings offered by a new or amended 
energy conservation standard cannot be determined without knowledge of 
the specific circumstances surrounding a given rulemaking.\12\ For 
example, some covered products and equipment have most of their energy 
consumption occur during periods of peak energy demand. The impacts of 
these products on the energy infrastructure can be more pronounced than 
products with relatively constant demand. Accordingly, DOE evaluates 
the significance of energy savings on a case-by-case basis.
---------------------------------------------------------------------------

    \12\ Procedures, Interpretations, and Policies for Consideration 
in New or Revised Energy Conservation Standards and Test Procedures 
for Consumer Products and Commercial/Industrial Equipment, 86 FR 
70892, 70901 (Dec. 13, 2021).
---------------------------------------------------------------------------

    As previously mentioned, the standards are projected to result in 
estimated national energy savings of 1.41 quad FFC, the equivalent of 
the primary annual energy use of 15 million homes. In addition, they 
are projected to reduce CO2 emissions by 48.5 Mt. Based on 
these findings, DOE has determined the energy savings from the standard 
levels adopted in this final rule are ``significant'' within the 
meaning of 42 U.S.C. 6295(o)(3)(B). A more detailed discussion of the 
basis for these conclusions is contained in the remainder of this 
document and the accompanying TSD.

II. Introduction

    The following section briefly discusses the statutory authority 
underlying this final rule, as well as some of the relevant historical 
background related to the establishment of standards for room air 
conditioners.

A. Authority

    EPCA authorizes DOE to regulate the energy efficiency of a number 
of consumer products and certain industrial equipment. Title III, Part 
B of EPCA established the Energy Conservation Program for Consumer 
Products Other Than Automobiles. These products include room air 
conditioners, the subject of this document. (42 U.S.C. 6292(a)(2)) EPCA 
prescribed energy conservation standards for these products (42 U.S.C. 
6295(c)(1)), and directs DOE to conduct future rulemakings to determine 
whether to amend these standards. (42 U.S.C. 6295(c)(2)) EPCA further 
provides that, not later than 6 years after the issuance of any final 
rule establishing or amending a standard, DOE must publish either a 
notice of determination that standards for the product do not need to 
be amended, or a NOPR including new proposed energy conservation 
standards (proceeding to a final rule, as appropriate). (42 U.S.C. 
6295(m)(1))
    The energy conservation program under EPCA, consists essentially of 
four parts: (1) testing, (2) labeling, (3) the establishment of Federal 
energy conservation standards, and (4) certification and enforcement 
procedures. Relevant provisions of EPCA specifically include 
definitions (42 U.S.C. 6291), test procedures (42 U.S.C. 6293), 
labeling provisions (42 U.S.C. 6294), energy conservation standards (42 
U.S.C. 6295), and the authority to require information and reports from 
manufacturers (42 U.S.C. 6296).
    Federal energy efficiency requirements for covered products 
established under EPCA generally supersede State laws and regulations 
concerning energy conservation testing, labeling, and standards. (42 
U.S.C. 6297(a)-(c)) DOE may, however, grant waivers of Federal 
preemption in limited instances for particular State laws or 
regulations, in accordance with the procedures and other provisions set 
forth under EPCA. (See 42 U.S.C. 6297(d))
    Subject to certain criteria and conditions, DOE is required to 
develop test procedures to measure the energy efficiency, energy use, 
or estimated annual operating cost of each covered product. (42 U.S.C. 
6295(o)(3)(A) and 42 U.S.C. 6295(r)) Manufacturers of covered products 
must use the prescribed DOE test procedure as the basis for certifying 
to DOE that their products comply with the applicable energy 
conservation standards adopted under EPCA and when making 
representations to the public regarding the energy use or efficiency of 
those products. (42 U.S.C. 6293(c) and 6295(s)) Similarly, DOE must use 
these test procedures to determine whether the products comply with 
standards adopted pursuant to EPCA. (42 U.S.C. 6295(s)) The DOE test 
procedures for room air conditioners appear at title 10 of the Code of 
Federal Regulations (``CFR''), part 430, subpart B, appendix F.
    DOE must follow specific statutory criteria for prescribing new or 
amended standards for covered products, including room air 
conditioners. Any new or amended standard for a covered product must be 
designed to achieve the maximum improvement in energy efficiency that 
the Secretary of Energy determines is technologically feasible and 
economically justified. (42 U.S.C. 6295(o)(2)(A) and (o)(3)(B)) 
Furthermore, DOE may not adopt any standard that would not result in 
the significant conservation of energy. (42 U.S.C. 6295(o)(3)) 
Moreover, DOE may not prescribe a standard (1) for certain products, 
including room air conditioners, if no test procedure has been 
established for the product, or (2) if DOE determines by rule that the 
standard is not technologically feasible or economically justified. (42 
U.S.C. 6295(o)(3)(A)-(B)) In deciding whether a proposed standard is 
economically justified, DOE must determine whether the benefits of the 
standard exceed its burdens. (42 U.S.C. 6295(o)(2)(B)(i)) DOE must make 
this determination after receiving comments on the proposed standard, 
and by considering, to the greatest extent practicable, the following 
seven statutory factors:

    (1) The economic impact of the standard on manufacturers and 
consumers of the products subject to the standard;
    (2) The savings in operating costs throughout the estimated 
average life of the covered products in the type (or class) compared 
to any increase in the price, initial charges, or maintenance 
expenses for the covered products that are likely to result from the 
standard;
    (3) The total projected amount of energy (or as applicable, 
water) savings likely to result directly from the standard;
    (4) Any lessening of the utility or the performance of the 
covered products likely to result from the standard;
    (5) The impact of any lessening of competition, as determined in 
writing by the Attorney General, that is likely to result from the 
standard;
    (6) The need for national energy and water conservation; and
    (7) Other factors the Secretary of Energy (``Secretary'') 
considers relevant.

(42 U.S.C. 6295(o)(2)(B)(i)(I)-(VII))

    Further, EPCA, as codified, establishes a rebuttable presumption 
that a standard is economically justified if the Secretary finds that 
the additional cost to the consumer of purchasing a product complying 
with an energy conservation standard level will be less than three 
times the value of the energy savings during the first year that the 
consumer will receive as a result of the standard, as calculated under 
the applicable test procedure. (42 U.S.C. 6295(o)(2)(B)(iii))
    EPCA, as codified, also contains what is known as an ``anti-
backsliding'' provision, which prevents the Secretary from prescribing 
any amended standard

[[Page 34304]]

that either increases the maximum allowable energy use or decreases the 
minimum required energy efficiency of a covered product. (42 U.S.C. 
6295(o)(1)) Also, the Secretary may not prescribe an amended or new 
standard if interested persons have established by a preponderance of 
the evidence that the standard is likely to result in the 
unavailability in the United States in any covered product type (or 
class) of performance characteristics (including reliability), 
features, sizes, capacities, and volumes that are substantially the 
same as those generally available in the United States. (42 U.S.C. 
6295(o)(4))
    Additionally, EPCA specifies requirements when promulgating an 
energy conservation standard for a covered product that has two or more 
subcategories. DOE must specify a different standard level for a type 
or class of products that has the same function or intended use if DOE 
determines that products within such group (A) consume a different kind 
of energy from that consumed by other covered products within such type 
(or class); or (B) have a capacity or other performance-related feature 
which other products within such type (or class) do not have and such 
feature justifies a higher or lower standard. (42 U.S.C. 6295(q)(1)) In 
determining whether a performance-related feature justifies a different 
standard for a group of products, DOE must consider such factors as the 
utility to the consumer of such a feature and other factors DOE deems 
appropriate. Id. Any rule prescribing such a standard must include an 
explanation of the basis on which such higher or lower level was 
established. (42 U.S.C. 6295(q)(2))
    Finally, pursuant to the amendments contained in the Energy 
Independence and Security Act of 2007 (EISA 2007), Public Law 110-140, 
any final rule for new or amended energy conservation standards 
promulgated after July 1, 2010, is required to address standby mode and 
off mode energy use. (42 U.S.C. 6295(gg)(3)) Specifically, when DOE 
adopts a standard for a covered product after that date, it must, if 
justified by the criteria for adoption of standards under EPCA (42 
U.S.C. 6295(o)), incorporate standby mode and off mode energy use into 
a single standard, or, if that is not feasible, adopt a separate 
standard for such energy use for that product. (42 U.S.C. 
6295(gg)(3)(A)-(B)) DOE's current test procedures and standards for 
room air conditioners address standby mode and off mode energy use, as 
do the amended standards adopted in this final rule.

B. Background

1. Current Standards
    DOE prescribed the current energy conservation standards in a 
direct final rule published on April 21, 2011 (``April 2011 Direct 
Final Rule''), which apply to room air conditioners manufactured on and 
after April 21, 2014. 76 FR 22454. These standards are set forth in 
DOE's regulations at 10 CFR 430.32(b) and are repeated in Table II.1.

      Table II.1--Federal Energy Efficiency Standards for Room Air
                              Conditioners
------------------------------------------------------------------------
                                                           Minimum CEER
           Room air conditioner product class                (Btu/Wh)
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and less             11.0
 than 6,000 Btu/h.......................................
2. Without reverse cycle, with louvered sides and 6,000             11.0
 to 7,999 Btu/h.........................................
3. Without reverse cycle, with louvered sides and 8,000             10.9
 to 13,999 Btu/h........................................
4. Without reverse cycle, with louvered sides and 14,000            10.7
 to 19,999 Btu/h........................................
5a. Without reverse cycle, with louvered sides and                   9.4
 20,000 Btu/h to 27,999 Btu/h...........................
5b. Without reverse cycle, with louvered sides and                   9.0
 28,000 Btu/h or more...................................
6. Without reverse cycle, without louvered sides, and               10.0
 less than 6,000 Btu/h..................................
7. Without reverse cycle, without louvered sides and                10.0
 6,000 to 7,999 Btu/h...................................
8a. Without reverse cycle, without louvered sides and                9.6
 8,000 to 10,999 Btu/h..................................
8b. Without reverse cycle, without louvered sides and                9.5
 11,000 to 13,999 Btu/h.................................
9. Without reverse cycle, without louvered sides and                 9.3
 14,000 to 19,999 Btu/h.................................
10. Without reverse cycle, without louvered sides and                9.4
 20,000 Btu/h or more...................................
11. With reverse cycle, with louvered sides, and less                9.8
 than 20,000 Btu/h......................................
12. With reverse cycle, without louvered sides, and less             9.3
 than 14,000 Btu/h......................................
13. With reverse cycle, with louvered sides, and 20,000              9.3
 Btu/h or more..........................................
14. With reverse cycle, without louvered sides, and                  8.7
 14,000 Btu/h or more...................................
15. Casement-Only.......................................             9.5
16. Casement-Slider.....................................            10.4
------------------------------------------------------------------------

2. History of Standards Rulemaking for Room Air Conditioners
    EPCA prescribed initial energy conservation standards for room air 
conditioners and further directed DOE to conduct two cycles of 
rulemakings to determine whether to amend these standards. (42 U.S.C. 
6295(c)(1)-(2)) DOE completed the first of these rulemaking cycles on 
September 24, 1997, by adopting amended performance standards for room 
air conditioners manufactured on or after October 1, 2000. 62 FR 50122. 
Additionally, DOE completed a second rulemaking cycle to amend the 
standards for room air conditioners by issuing the April 2011 Direct 
Final Rule, in which DOE prescribed the current energy conservation 
standards for room air conditioners manufactured on or after April 21, 
2014. 76 FR 22454 (April 21, 2011). DOE subsequently published a final 
rule amending the compliance date for the current room air conditioner 
standards to June 1, 2014. 76 FR 52852 (Aug. 24, 2011). In a separate 
document, also published on August 24, 2011, DOE confirmed the adoption 
of these energy conservation standards in a notice of effective date 
and compliance dates for the April 2011 Direct Final Rule. 76 FR 52854.
    As part of the current analysis, on June 18, 2015, DOE prepared a 
Request for Information (``June 2015 RFI''), which solicited 
information from the public to help DOE determine whether amended 
standards for room air conditioners would result in a significant 
amount of additional energy savings and whether those standards would 
be technologically feasible and economically justified.\13\ 80 FR 
34843.
---------------------------------------------------------------------------

    \13\ Pursuant to amendments to appendix A to 10 CFR part 430, 
subpart C (``appendix A''), DOE generally will issue an early 
assessment request for information announcing that DOE is 
considering initiating a rulemaking proceeding. Section 6(a)(1) of 
appendix A; see also 85 FR 8626, 8637 (Feb. 14, 2020) and 86 FR 
70892 (Dec. 13, 2021). Section 6(a)(2) of appendix A provides that 
if the DOE determines it is appropriate to proceed with a 
rulemaking, the preliminary stages of a rulemaking to issue or amend 
an energy conservation standard that DOE will undertake will be a 
Framework Document and Preliminary Analysis, or an advance notice of 
proposed rulemaking. Because this rulemaking was already in progress 
at the time the relevant amendments to appendix A were published, 
DOE did not reinitiate the entire rulemaking process. Additionally, 
the June 2015 RFI presented the issues, analyses, and processes 
relevant to consideration of amended standards for room air 
conditioners.

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

[[Page 34305]]

    DOE published a notice of public meeting and availability of the 
preliminary technical support document (``TSD'') on June 17, 2020 
(``June 2020 Preliminary Analysis''). 85 FR 36512.
    Comments received following the publication of the June 2020 
Preliminary Analysis helped DOE identify and resolve issues related to 
the subsequent NOPR analysis.\14\ DOE published a notice of proposed 
rulemaking on April 7, 2022 (``April 2022 NOPR''). 87 FR 20608. DOE 
subsequently held a public meeting on May 3, 2022, to discuss and 
receive comments on the NOPR. The NOPR TSD that presented the 
methodology and results of the NOPR analysis is available at: 
www.regulations.gov/document/EERE-2014-BT-STD-0059-0030.
---------------------------------------------------------------------------

    \14\ Comments are available at www.regulations.gov/document/EERE-2014-BT-STD-0059-0031/comment.
---------------------------------------------------------------------------

    DOE received 17 written comments in response to the April 2022 NOPR 
from the interested parties listed in Table II.2.

                                  Table II.2--April 2022 NOPR Written Comments
----------------------------------------------------------------------------------------------------------------
                                                            Comment No. in
            Commenter(s)                  Abbreviation        the docket               Commenter type
----------------------------------------------------------------------------------------------------------------
A. Krishna \1\.....................  Krishna..............              32  Individual.
Anonymous Individual...............  University of                      34  Individual.
                                      Massachusetts
                                      Amherst Student.
L. Adelman.........................  University of                      35  Individual.
                                      Massachusetts
                                      Amherst Student.
G. Larsen..........................  University of                      37  Individual.
                                      Massachusetts
                                      Amherst Student.
People's Republic of China.........  P.R. China...........              39  Government.
Treua Inc. (DBA Gradient)..........  Gradient.............              40  Manufacturer.
New York State Energy Research and   NYSERDA..............              41  Efficiency Organization.
 Development Authority.
Center for Law and Social Policy...  CLASP................              42  Efficiency Organization.
Association of Home Appliance        AHAM.................              43  Trade Association.
 Manufacturers.
Friedrich Air Conditioning.........  Friedrich............              44  Manufacturer.
Appliance Standards Awareness        Joint Commenters.....              45  Efficiency Organizations.
 Project (ASAP), American Council
 for an Energy-Efficient Economy
 (ACEEE), CLASP, Consumer
 Federation of America (CFA),
 National Consumer Law Center
 (NCLC).
Consumer Federation of America       CFA and NCLC.........              46  Efficiency Organizations.
 (CFA), National Consumer Law
 Center (NCLC).
Pacific Gas and Electric Company     California IOUs......              47  Utilities.
 (PG&E), San Diego Gas and Electric
 (SDG&E), Southern California
 Edison (SCE).
Keith Rice.........................  Rice.................              48  Individual.
GE Appliances......................  GEA..................              49  Manufacturer.
Northwest Energy Efficiency          NEEA and NWPCC.......              50  Efficiency Advocates.
 Alliance (NEEA), Northwest Power
 and Conservation Council (NWPCC).
Center for Climate and Energy        Climate Commenters...              51  Efficiency Advocate Group.
 Solutions (C2ES), Institute for
 Policy Integrity (IPI), Natural
 Resources Defense Council (NRDC),
 Sierra Club, Union of Concerned
 Scientists.
----------------------------------------------------------------------------------------------------------------
\1\ The comment submitted by this individual did not pertain to room air conditioners.

    A parenthetical reference at the end of a comment quotation or 
paraphrase provides the location of the item in the public record.\15\
---------------------------------------------------------------------------

    \15\ The parenthetical reference provides a reference for 
information located in the docket of DOE's rulemaking to develop 
energy conservation standards for room air conditioners. (Docket No. 
EERE-2014-BT-STD-0059, which is maintained at www.regulations.gov) 
The references are arranged as follows: (commenter name, comment 
docket ID number, page of that document).
---------------------------------------------------------------------------

III. General Discussion

    DOE developed this final rule after considering oral and written 
comments, data, and information from interested parties that represent 
a variety of interests. The following discussion addresses issues 
raised by these commenters.

A. Product Classes and Scope of Coverage

    When evaluating and establishing energy conservation standards, DOE 
divides covered products into product classes by the type of energy 
used or by capacity or other performance-related features that justify 
differing standards. In making a determination whether a performance-
related feature justifies a different standard, DOE must consider such 
factors as the utility of the feature to the consumer and other factors 
DOE determines are appropriate. (42 U.S.C. 6295(q)) DOE's NOPR analysis 
indicated that the current room air conditioner products classes are 
still appropriate. For further discussion and responses to comments 
received regarding product classes see section IV.A.1 of this document.

B. Test Procedure

    EPCA sets forth generally applicable criteria and procedures for 
DOE's adoption and amendment of test procedures. (42 U.S.C. 6293) 
Manufacturers of covered products must use these test procedures to 
certify to DOE that their product complies with energy conservation 
standards and to quantify the efficiency of their product. DOE's 
current energy conservation standards for room air conditioners are 
expressed in terms of combined energy efficiency ratio (CEER), in Btu/
Wh. (See 10 CFR 430.32(b) and 10 CFR part 430, subpart B, appendix F.)

C. Technological Feasibility

1. General
    In each energy conservation standards rulemaking, DOE conducts a 
screening analysis based on information gathered on all current 
technology options and prototype designs that could improve the 
efficiency of the products or equipment that are the subject of the 
rulemaking. As the first step in such an analysis, DOE develops a list 
of technology options for consideration in consultation with 
manufacturers, design engineers, and other interested parties. DOE then 
determines which of those means for improving efficiency are 
technologically feasible. DOE considers technologies incorporated in 
commercially available products or in

[[Page 34306]]

working prototypes to be technologically feasible. Sections 6(b)(3)(i) 
and 7(b)(1) of appendix A to 10 CFR part 430, subpart C (``appendix 
A'').
    After DOE has determined that particular technology options are 
technologically feasible, it further evaluates each technology option 
in light of the following additional screening criteria: (1) 
practicability to manufacture, install, and service; (2) adverse 
impacts on product utility or availability; (3) adverse impacts on 
health or safety and (4) unique-pathway proprietary technologies. 
Section 7(b)(2)-(5) of appendix A. Section IV.B of this document 
discusses the results of the screening analysis for room air 
conditioners, particularly the designs DOE considered, those it 
screened out, and those that are the basis for the standards considered 
in this final rule. For further details on the screening analysis for 
this rulemaking, see chapter 4 of the final rule technical support 
document (``TSD'').
2. Maximum Technologically Feasible Levels
    When DOE proposes to adopt an amended standard for a type or class 
of covered product, it must determine the maximum improvement in energy 
efficiency or maximum reduction in energy use that is technologically 
feasible for such product. (42 U.S.C. 6295(p)(1)) Accordingly, in the 
engineering analysis, DOE determined the maximum technologically 
feasible (``max-tech'') improvements in energy efficiency for room air 
conditioners, using the design parameters for the most efficient 
products available on the market or in working prototypes. The max-tech 
levels that DOE determined for this rulemaking are described in section 
IV.C of this final rule and in chapter 5 of the final rule TSD.

D. Energy Savings

1. Determination of Savings
    For each trial standard level (``TSL''), DOE projected energy 
savings from application of the TSL to room air conditioners purchased 
in the 30-year period that begins in the year of compliance with the 
amended standards (2026-2055).\16\ The savings are measured over the 
entire lifetime of products purchased in the 30-year analysis period. 
DOE quantified the energy savings attributable to each TSL as the 
difference in energy consumption between each standards case and the 
no-new-standards case. The no-new-standards case represents a 
projection of energy consumption that reflects how the market for a 
product would likely evolve in the absence of amended energy 
conservation standards.
---------------------------------------------------------------------------

    \16\ DOE also presents a sensitivity analysis that considers 
impacts for products shipped in a 9-year period.
---------------------------------------------------------------------------

    DOE used its national impact analysis (``NIA'') spreadsheet models 
to estimate national energy savings (``NES'') from potential amended 
standards for room air conditioners. The NIA spreadsheet model 
(described in section IV.H of this document) calculates energy savings 
in terms of site energy, which is the energy directly consumed by 
products at the locations where they are used. For electricity, DOE 
reports national energy savings in terms of primary energy savings, 
which is the savings in the energy that is used to generate and 
transmit the site electricity. For natural gas, the primary energy 
savings are considered to be equal to the site energy savings. DOE also 
calculates NES in terms of FFC energy savings. The FFC metric includes 
the energy consumed in extracting, processing, and transporting primary 
fuels (i.e., coal, natural gas, petroleum fuels), and thus presents a 
more complete picture of the impacts of energy conservation 
standards.\17\ DOE's approach is based on the calculation of an FFC 
multiplier for each of the energy types used by covered products or 
equipment. For more information on FFC energy savings, see section 
IV.H.2 of this document.
---------------------------------------------------------------------------

    \17\ The FFC metric is discussed in DOE's statement of policy 
and notice of policy amendment. 76 FR 51282 (Aug. 18, 2011), as 
amended at 77 FR 49701 (Aug. 17, 2012).
---------------------------------------------------------------------------

2. Significance of Savings
    To adopt any new or amended standards for a covered product, DOE 
must determine that such action would result in significant energy 
savings. (42 U.S.C. 6295(o)(3)(B))
    The significance of energy savings offered by a new or amended 
energy conservation standard cannot be determined without knowledge of 
the specific circumstances surrounding a given rulemaking. For example, 
the United States has now rejoined the Paris Agreement on February 19, 
2021. As part of that agreement, the United States has committed to 
reducing GHG emissions in order to limit the rise in mean global 
temperature.\18\ As such, energy savings that reduce GHG emission have 
taken on greater importance. Additionally, some covered products and 
equipment have most of their energy consumption occur during periods of 
peak energy demand. The impacts of these products on the energy 
infrastructure can be more pronounced than products with relatively 
constant demand. In evaluating the significance of energy savings, DOE 
considers differences in primary energy and FFC effects for different 
covered products and equipment when determining whether energy savings 
are significant. FFC effects include the energy consumed in electricity 
production (depending on load shape), in distribution and transmission, 
and in extracting, processing, and transporting primary fuels (i.e., 
coal, natural gas, petroleum fuels), and thus present a more complete 
picture of the impacts of energy conservation standards. Accordingly, 
DOE evaluates the significance of energy savings on a case-by-case 
basis, taking into account the significance of cumulative FFC national 
energy savings, the cumulative FFC emissions reductions, and the need 
to confront the global climate crisis, among other factors.
---------------------------------------------------------------------------

    \18\ See E.O. 14008, 86 FR 7619 (Feb. 1, 2021) (``Tackling the 
Climate Crisis at Home and Abroad'').
---------------------------------------------------------------------------

    As stated, the standard levels adopted in this final rule are 
projected to result in national energy savings of 1.41 quad, the 
equivalent of the electricity use of 15 million homes in one year. They 
are projected to reduce CO2 emissions by 48.5 Mt. Based on 
these findings, DOE has determined the energy savings from the standard 
levels adopted in this final rule are ``significant'' within the 
meaning of 42 U.S.C. 6295(o)(3)(B).

E. Economic Justification

1. Specific Criteria
    As noted previously, EPCA provides seven factors to be evaluated in 
determining whether a potential energy conservation standard is 
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)(VII)) The 
following sections discuss how DOE has addressed each of those seven 
factors in this final rule.
a. Economic Impact on Manufacturers and Consumers
    In determining the impacts of potential amended standards on 
manufacturers, DOE conducts a manufacturer impact analysis (``MIA''), 
as discussed in section IV.J of this document. DOE first uses an annual 
cash-flow approach to determine the quantitative impacts. This step 
includes both a short-term assessment--based on the cost and capital 
requirements during the period between when a regulation is issued and 
when entities must comply with the regulation--and a long-term 
assessment over a 30-year period. The industry-wide impacts analyzed 
include (1) INPV, which values the industry on the basis of expected 
future cash flows;

[[Page 34307]]

(2) cash flows by year; (3) changes in revenue and income; and (4) 
other measures of impact, as appropriate. Second, DOE analyzes and 
reports the impacts on different types of manufacturers, including 
impacts on small manufacturers. Third, DOE considers the impact of 
standards on domestic manufacturer employment and manufacturing 
capacity, as well as the potential for standards to result in plant 
closures and loss of capital investment. Finally, DOE takes into 
account cumulative impacts of various DOE regulations and other 
regulatory requirements on manufacturers.
    For individual consumers, measures of economic impact include the 
changes in LCC and payback period (``PBP'') associated with new or 
amended standards. These measures are discussed further in the 
following section. For consumers in the aggregate, DOE also calculates 
the national net present value of the consumer costs and benefits 
expected to result from particular standards. DOE also evaluates the 
impacts of potential standards on identifiable subgroups of consumers 
that may be affected disproportionately by a standard.
b. Savings in Operating Costs Compared To Increase in Price (LCC and 
PBP)
    EPCA requires DOE to consider the savings in operating costs 
throughout the estimated average life of the covered product in the 
type (or class) compared to any increase in the price of, or in the 
initial charges for, or maintenance expenses of, the covered product 
that are likely to result from a standard. (42 U.S.C. 
6295(o)(2)(B)(i)(II)) DOE conducts this comparison in its LCC and PBP 
analysis.
    The LCC is the sum of the purchase price of a product (including 
its installation) and the operating cost (including energy, 
maintenance, and repair expenditures) discounted over the lifetime of 
the product. The LCC analysis requires a variety of inputs, such as 
product prices, product energy consumption, energy prices, maintenance 
and repair costs, product lifetime, and discount rates appropriate for 
consumers. To account for uncertainty and variability in specific 
inputs, such as product lifetime and discount rate, DOE uses a 
distribution of values, with probabilities attached to each value.
    The PBP is the estimated amount of time (in years) it takes 
consumers to recover the increased purchase cost (including 
installation) of a more-efficient product through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
due to a more-stringent standard by the change in annual operating cost 
for the year that standards are assumed to take effect.
    For its LCC and PBP analysis, DOE assumes that consumers will 
purchase the covered products in the first year of compliance with new 
or amended standards. The LCC savings for the considered efficiency 
levels (``EL'') are calculated relative to the case that reflects 
projected market trends in the absence of new or amended standards. 
DOE's LCC and PBP analysis is discussed in further detail in section 
IV.F of this document.
c. Energy Savings
    Although significant conservation of energy is a separate statutory 
requirement for adopting an energy conservation standard, EPCA requires 
DOE, in determining the economic justification of a standard, to 
consider the total projected energy savings that are expected to result 
directly from the standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) As 
discussed in section IV.H of this document, DOE uses the NIA 
spreadsheet models to project national energy savings.
d. Lessening of Utility or Performance of Products
    In establishing product classes, and in evaluating design options 
and the impact of potential standard levels, DOE evaluates potential 
standards that would not lessen the utility or performance of the 
considered products. (42 U.S.C. 6295(o)(2)(B)(i)(IV)) Based on data 
available to DOE, the standards adopted in this document would not 
reduce the utility or performance of the products under consideration 
in this rulemaking.
e. Impact of Any Lessening of Competition
    EPCA directs DOE to consider the impact of any lessening of 
competition, as determined in writing by the Attorney General, that is 
likely to result from a standard. (42 U.S.C. 6295(o)(2)(B)(i)(V)) It 
also directs the Attorney General to determine the impact, if any, of 
any lessening of competition likely to result from a standard and to 
transmit such determination to the Secretary within 60 days of the 
publication of a proposed rule, together with an analysis of the nature 
and extent of the impact. (42 U.S.C. 6295(o)(2)(B)(ii)) To assist the 
Department of Justice (``DOJ'') in making such a determination, DOE 
transmitted copies of its proposed rule and the NOPR TSD to the 
Attorney General for review, with a request that the DOJ provide its 
determination on this issue. In its assessment letter responding to 
DOE, DOJ concluded that the proposed energy conservation standards for 
room air conditioners are unlikely to have a significant adverse impact 
on competition. DOE is publishing the Attorney General's assessment at 
the end of this final rule.
f. Need for National Energy Conservation
    DOE also considers the need for national energy and water 
conservation in determining whether a new or amended standard is 
economically justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) The energy 
savings from the adopted standards are likely to provide improvements 
to the security and reliability of the Nation's energy system. 
Reductions in the demand for electricity also may result in reduced 
costs for maintaining the reliability of the Nation's electricity 
system. DOE conducts a utility impact analysis to estimate how 
standards may affect the Nation's needed power generation capacity, as 
discussed in section IV.M of this document.
    DOE maintains that environmental and public health benefits 
associated with the more efficient use of energy are important to take 
into account when considering the need for national energy 
conservation. The adopted standards are likely to result in 
environmental benefits in the form of reduced emissions of air 
pollutants and greenhouse gases (``GHGs'') associated with energy 
production and use. DOE conducts an emissions analysis to estimate how 
potential standards may affect these emissions, as discussed in section 
IV.J.3 of this document; the estimated emissions impacts are reported 
in section V.B.6 of this document. DOE also estimates the economic 
value of emissions reductions resulting from the considered TSLs, as 
discussed in section IV.L of this document.
g. Other Factors
    In determining whether an energy conservation standard is 
economically justified, DOE may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) To 
the extent DOE identifies any relevant information regarding economic 
justification that does not fit into the other categories described 
previously, DOE could consider such information under ``other 
factors.''

[[Page 34308]]

2. Rebuttable Presumption
    As set forth in 42 U.S.C. 6295(o)(2)(B)(iii), EPCA creates a 
rebuttable presumption that an energy conservation standard is 
economically justified if the additional cost to the consumer of a 
product that meets the standard is less than three times the value of 
the first year's energy savings resulting from the standard, as 
calculated under the applicable DOE test procedure. DOE's LCC and PBP 
analyses generate values used to calculate the effect potential amended 
energy conservation standards would have on the payback period for 
consumers. These analyses include, but are not limited to, the 3-year 
payback period contemplated under the rebuttable-presumption test. In 
addition, DOE routinely conducts an economic analysis that considers 
the full range of impacts to consumers, manufacturers, the Nation, and 
the environment, as required under 42 U.S.C. 6295(o)(2)(B)(i). The 
results of this analysis serve as the basis for DOE's evaluation of the 
economic justification for a potential standard level (thereby 
supporting or rebutting the results of any preliminary determination of 
economic justification). The rebuttable presumption payback calculation 
is discussed in section IV.F of this final rule.

IV. Methodology and Discussion of Related Comments

    This section addresses the analyses DOE has performed for this 
rulemaking with regard to room air conditioners. Separate subsections 
address each component of DOE's analyses.
    DOE used several analytical tools to estimate the impact of the 
standards considered in this document. The first tool is a spreadsheet 
that calculates the LCC savings and PBP of potential amended or new 
energy conservation standards. The national impacts analysis uses a 
second spreadsheet set that provides shipments projections and 
calculates national energy savings and net present value of total 
consumer costs and savings expected to result from potential energy 
conservation standards. DOE uses the third spreadsheet tool, the 
Government Regulatory Impact Model (GRIM), to assess manufacturer 
impacts of potential standards. These three spreadsheet tools are 
available on the DOE website for this rulemaking: www.regulations.gov/docket??D=EERE-2014-BT-STD-0059. Additionally, DOE used output from the 
latest version of the Energy Information Administration's (``EIA's'') 
Annual Energy Outlook (``AEO'') for the emissions and utility impact 
analyses.

A. Market and Technology Assessment

    DOE develops information in the market and technology assessment 
that provides an overall picture of the market for the products 
concerned, including the purpose of the products, the industry 
structure, manufacturers, market characteristics, and technologies used 
in the products. This activity includes both quantitative and 
qualitative assessments, based primarily on publicly available 
information. The subjects addressed in the market and technology 
assessment for this rulemaking include: (1) a determination of the 
scope of the rulemaking and product classes, (2) manufacturers and 
industry structure, (3) existing efficiency programs, (4) shipments 
information, (5) market and industry trends, and (6) technologies or 
design options that could improve the energy efficiency of room air 
conditioners. The key findings of DOE's market assessment are 
summarized in the following sections. See chapter 3 of the final rule 
TSD for further discussion of the market and technology assessment.
1. Scope of Coverage and Product Classes
    In the April 2022 NOPR, DOE did not propose any substantive changes 
to the room air conditioner scope of coverage or product classes, but 
did propose making clarifying amendments to the product class 
descriptions. Specifically, DOE proposed to revise the threshold values 
of cooling capacity in the product class descriptions to the nearest 
hundred Btu/h that would not exceed the existing thresholds, which is 
consistent with the cooling capacity delineation used in practice due 
to the rounding instruction at 10 CFR 429.15(a)(3) so would not impact 
compliance with current energy conservation standards. The proposed 
change to the product class delineation would add clarity and 
consistency amongst two existing regulatory provisions. 87 FR 20608. 
DOE requested comment on the room air conditioner scope of coverage and 
product classes.
    Currently, reversible and one-way products are in separate product 
classes and are therefore not compared in any analysis conducted by 
DOE. However, according to the Center for Law and Social Policy 
(``CLASP''), taking the efficiency of alternate heating methods into 
account would allow DOE to treat the reverse cycle in both room and 
central air conditioners not as a feature meriting its own product 
class, but as a technology/design option to reduce energy consumption 
and high energy bills. In this manner, a one-way air conditioner would 
have the energy consumption of typical furnaces and boilers factored 
into its annual performance metric, while a reversible air conditioner 
could eliminate this energy consumption depending on its heating 
capacity and cold-climate performance potentially leading to energy 
conservation standards that require the use of reversing capabilities 
in all air conditioners. (CLASP, No. 42 at p. 2)
    Room air conditioner energy conservation standards are currently 
based on the CEER metric, determined in accordance with the DOE test 
procedure for room air conditioners at appendix F to 10 CFR 430 
(``appendix F''). Appendix F does not currently account for the energy 
consumption during heating operation, and therefore the CEER metric 
reflects the energy efficiency of a room air conditioner during cooling 
mode, and other low power modes. In order to account for the energy 
cost of alternate heating methods for non-reverse cycle room air 
conditioners, a test procedure amendment would be necessary to address 
heating mode performance, which is outside of the scope of this energy 
conservation standards rulemaking.
    The Public Utilities recommended that DOE establish new product 
classes for room air conditioners with reverse cycle and <8,000 British 
thermal units per hour (``Btu/h'') and to consider less stringent 
standards for such product classes so as to not preclude the 
introduction of such equipment and deprive consumers of any potential 
consumer utility. The Public Utilities also provided options for 
potential standards in these suggested product classes, noting that 
generally efficiencies for room air conditioners with reverse cycle are 
lower than those without reverse cycle. (Public Utilities, No. 47 at 
pp. 2-4)
    DOE is not aware of any room air conditioners currently sold on the 
market, or any prototypes in development, that meet the criteria 
outlined by the Public Utilities. DOE is unaware of any data suggesting 
that the current energy conservation standards preclude the 
introduction of room air conditioners with reverse cycle capabilities 
and capacity less than 8,000 Btu/h to the market. Furthermore, the lack 
of extant products that meet these criteria leaves DOE without the 
information needed to analyze whether a new product class is necessary. 
Therefore, DOE is not amending the product class structure at this time 
to

[[Page 34309]]

specifically address room air conditioners with reverse cycle 
capabilities and capacity less than 8,000 Btu/h. DOE is, however, 
adopting the clarifying amendments to the product class descriptions, 
originally proposed in the April 2022 NOPR, to align with the rounding 
instruction at 10 CFR 429.15(a)(3).
2. Technology Options
    In the NOPR market analysis and technology assessment, DOE 
identified 22 technology options initially determined to improve the 
efficiency of room air conditioners, as measured by the DOE test 
procedure:

        Table IV.1--Technology Options for Room Air Conditioners
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Increased Heat Transfer Surface Area:
    1. Increased heat exchanger surface area (frontal area, fin density
     and depth of coil).
    2. Condenser coil subcooler.
    3. Suction line heat exchanger.
Increased Heat Transfer Coefficient:
    4. Improved fin and tube design.
    5. Hydrophilic coating on fins.
    6. Microchannel heat exchangers.
    7. Spray condensate on condenser coil.
Component Improvements:
    8. Improved indoor blower and outdoor fan blade design.
    9. Improved blower/fan motor design.
    10. Improved compressor efficiency.
Improved Installation, Insulation, and Airflow:
    11. Improved installation materials.
    12. Reduced evaporator air recirculation.
    13. Reduced thermal bridging and internal air leakage.
Part-load Performance:
    14. Variable-speed compressors.
    15. Variable-speed drive fans and blowers.
    16. Thermostatic or electronic expansion valves.
    17. Thermostatic cyclic controls.
    18. Air and water economizers.
Standby Power Improvements:
    19. Low standby-power electronics.
    20. High frequency switching power supply.
Alternative Refrigerants:
    21. Significant New Alternatives Policy (``SNAP'')-approved
     refrigerants (R-32, R-441A, and R-290).
Other Improvements:
    22. Washable air filters.
------------------------------------------------------------------------

a. Alternative Refrigerants
    In the April 2022 NOPR, DOE analyzed R-32 (difluoromethane or HFC-
32), R-441A (hydrocarbon blend), and R-290 (propane or HC-290) as 
potential design options to replace R-410A to improve unit efficiency. 
DOE also analyzed the potential impact of implementing these 
alternative refrigerants on overall system cost and component 
efficiency. As discussed in chapter 3 of the NOPR TSD, while DOE did 
find efficiency benefits associated with R-441A and R-290 refrigerants 
relative to R410A, DOE did not rely upon those alternative refrigerants 
in the engineering analysis due to practical concerns regarding 
flammability and availability. DOE did not find reliable evidence of 
significant efficiency benefits from a change to R-32 refrigerant. 
However, based on DOE's expectation that manufacturers are likely to 
change the primary refrigerant used in room air conditioners to R-32 in 
response to recent California refrigerant regulations,\19\ DOE analyzed 
the efficiency of compressors that use R-32 as part of the technology 
analysis and implemented these compressors in the engineering analysis 
in the April 2022 NOPR.
---------------------------------------------------------------------------

    \19\ The California Air Resources Board (CARB) finalized its 
rulemaking on Prohibitions on Use of Certain Hydrofluorocarbons in 
Stationary Refrigeration, Chillers, Aerosols-Propellants, and Foam 
End-Uses Regulation. See https://ww2.arb.ca.gov/rulemaking/2020/hfc2020. This regulation prohibits the sale of new room air 
conditioners with refrigerants with a GWP of 750 or greater in 
California beginning on January 1, 2023. See chapter 3 of this final 
rule TSD for additional discussion.
---------------------------------------------------------------------------

    NEEA and NWPCC supported the inclusion of R-32 in the engineering 
analysis because of the potential energy savings, the number of 
products already using R-32, and the new California refrigerant 
requirements. In particular, NEEA agreed with the approached used by 
DOE to incorporate R-32 compressors into the design options used to 
achieve EL 3. (NEEA and NWPCC, No. 50 at pp. 4-5) NYSERDA also 
supported DOE's incorporation of R-32 refrigerants and variable speed 
compressors across the analysis, and urged DOE to move swiftly toward 
finalizing this standard to lock in the beneficial impacts as soon as 
possible. (NYSERDA, No. 41 at p. 3)
    In this final rule analysis, DOE has maintained its approach to 
incorporating R-32 from the NOPR analysis.
    Larsen requested that DOE include calculations on the impacts of 
alternate refrigerants in room air conditioners in updating the 
standards of room air conditioners as well as changing DOE's priorities 
to include environmental impact and quality of life. Larsen referenced 
challenges to DOE's decision not to include refrigerants (R-32, R441A, 
R-290) approved by the Environmental Protection Agency (EPA) 
Significant New Alternatives Policy (``SNAP'') in its engineering 
analysis, and stated that technological feasibility, predicted costs in 
the wake of increased value in climate and health benefits, reduced 
global warming potential compared to the proposed refrigerant R-410A, 
and findings by the Oak Ridge National Laboratory that showed

[[Page 34310]]

increased efficiency by around 3 percent warrant the inclusion of these 
calculations of benefits associated with alternative refrigerants, 
specifically R-32. (G. Larsen, No. 37 at pp. 1-4)
    EPCA requires that DOE focus on the efficiency impacts of various 
design options, rather than the overall environmental impact. (42 
U.S.C. 6295(o)(2)(A)) DOE does consider adverse effects on consumer 
utility when evaluating technology options. As discussed in chapter 3 
of the final rule TSD, DOE found varying reports of the efficiency 
benefits attributable from the change-over from R-410A to R-32, and as 
discussed in chapter 5 of the NOPR TSD, opted not to include R-32 
specifically as an efficiency option but did include inherent 
efficiency differences between R-32 compressors and R-410A compressors 
in the analysis. Due to the varying reports of efficiency impacts and 
the limitation of scope for this energy conservations standards 
rulemaking, DOE maintains the same approach as the NOPR, to analyze a 
change over to R-32 refrigerant so as to utilize the compressor 
efficiency benefits of R-32 compressors relative to R-410A compressors, 
without considering specific efficiency benefits attributable to the 
refrigerant itself.
    The Association of Home Appliance Manufacturers (AHAM) requested 
that DOE consider the recent safety testing challenges and safety 
concerns associated with the charge size of hydrocarbon refrigerants 
such as R-290 as, according to AHAM, DOE and the Electric Power 
Research Institute (``EPRI'') study projecting that use of R-290 would 
yield significant efficiency gains fail to take into account the 
practical considerations that prevent the use of R-290 in room air 
conditioners. AHAM stated that the safety standard UL 60335-2-40 will 
likely limit the charge size of hydrocarbon refrigerants such as R-290 
to 114 grams due to lab safety concerns, significantly less than the 
200-300 grams required for the smallest capacities of room air 
conditioners according to AHAM. Additionally, AHAM requested that DOE 
take the concerns of groups representing firefighters and fire services 
into account and should not rely on R-290 refrigerant to achieve 
efficiency gains in its analysis. (AHAM, No. 43 at p. 26)
    In chapter 3 of the NOPR TSD, DOE noted that researchers have 
observed efficiency benefits associated with using R-290 as a 
refrigerant. However, DOE understands that this design option is still 
new to the room air conditioner industry and poses substantial design 
challenges to meet UL safety standards. DOE did not propose to rely on 
R-290 refrigerant as a design option in the NOPR analysis and 
maintained that approach in this final rule.
    Systemair requested clarification regarding whether R-454B was 
included in the analysis. (Systemair, Public Meeting Transcript, No. 38 
at pp. 15-16) \20\ AHAM disagreed with the potential use of R-454B as a 
refrigerant as mentioned by Systemair because of considerable cost 
increases as it is a more expensive refrigerant than R-32, lower 
efficiency than R-32 compressors, and lack of availability. AHAM 
recommended that DOE reject the use of R-454B as a technology option. 
(AHAM, No. 43 at p. 27) Additionally, UL stated that for any 
refrigerant considered in DOE's analysis, SNAP approval would be 
required. (UL, Public Meeting Transcript, No. 38 at pp. 16-17)
---------------------------------------------------------------------------

    \20\ A notation in the form ``Systemair, Public Meeting 
Transcript, No. 38 at pp. 15-16'' identifies an oral comment that 
DOE received on May 3, 2022 during the public meeting, and was 
recorded in the public meeting transcript in the docket for this 
test procedure rulemaking (Docket No. EERE-2014-BT-STD-0059-0030). 
This particular notation refers to a comment (1) made by Systemair 
during the public meeting; (2) recorded in document number 38, which 
is the public meeting transcript that is filed in the docket of this 
energy conservations standards rulemaking; and (3) which appears on 
pages 15 through 16 of document number 38.
---------------------------------------------------------------------------

    SNAP approved R-454B for use in residential air conditioning 
applications, subject to certain use conditions, in a final rule 
published on May 6, 2021. 86 FR 24444. Therefore, DOE investigated R-
454B as a design option for this final rule analysis. DOE did find some 
efficiency benefit associated with implementation of R-454B but noted 
the additional costs associated with the technology and the design and 
supply challenges that AHAM discussed. The full design option analysis 
of R-454B can be found in the technology assessment in chapter 3 of the 
final rule TSD.
b. Product Weight
    AHAM stated that DOE did not sufficiently evaluate the impact of 
its proposals with respect to product weight, and requested that DOE 
consider design parameters of 50 or 150 pound weight thresholds for one 
or two person lifts set by manufacturers for worker safety standards, 
consumer utility, and other distribution requirements. According to 
information collected by AHAM from members on their models' weight and 
dimension characteristics, AHAM stated that there is a strong 
relationship between product weight and cooling capacity and claimed 
that DOE is underestimating the change in weight associated with 
technology options and design required to meet DOE's proposed standards 
for a significant number of models in the market. According to AHAM 
member data, there will likely be significant increase to product 
weight that exceeds DOE's identified acceptable limits, and that by 
generalizing the increase in product weight by product class, DOE is 
overlooking a significant portion of the market. According to AHAM, 
this increase in product weight is an ongoing consideration as products 
are often removed from windows seasonally, and senior citizens who rely 
on these products will have more difficulty with heavier products. 
According to member data, AHAM estimated that product weight increases 
of up to 14.6 pounds for Product Classes 1-3 would be required to meet 
the proposed standards, with each estimated resulting product weight 
above the 51-pound threshold determined by DOE as a reasonable upper 
limit for single-person portability. For Product Class 1, AHAM 
predicted product weight increases between 21 and 56 percent, compared 
to DOE's estimate of 17 to 46 percent. AHAM further estimated weight 
increases between 7 and 22 percent for Product Classes 3, 4, 5a, 8a, 
and 16. (AHAM, No. 43 at pp. 19-21)
    DOE understands that product weight is a concern to consumers, 
which is why DOE considered the effect on product weight when 
conducting the engineering analysis. DOE considered weight restrictions 
only for Product Class 1 because units in Product Class 2 already 
commonly exceed the 50-pound Occupational Safety and Health 
Administration (OSHA) recommendation for a single-person lift, implying 
that single-person lifts are not an important consumer attribute for 
Product Class 2 or for larger units. DOE modeled the potential 
increases in product weight due to more efficient compressors using 
compressor weight data from product teardowns. Based on this analysis, 
DOE expects that manufacturers will be able to preserve single-person 
lift capability for those products for which it is important to 
consumers (i.e., units within Product Class 1), as DOE predicts a unit 
weight increase between 17 and 46 percent for the models in DOE's 
teardown sample to achieve the max-tech efficiency level, but in no 
instance would unit weight exceed 51 pounds. DOE's analysis indicates 
that unit weights resulting from higher efficiency level design options 
that exceed a 150-pound two-person carry threshold were limited to two 
product classes, PC 5b and PC 11,

[[Page 34311]]

where existing units either nearly or already exceed 150 pounds. DOE 
expects that these large units are already installed primarily with the 
assistance of professional installers, limiting the impact of increased 
weight on the consumer utility of these units.

B. Screening Analysis

    DOE uses the following four screening criteria to determine which 
technology options are suitable for further consideration in an energy 
conservation standards rulemaking:

    (1) Technological feasibility. Technologies that are not 
incorporated in commercial products or in commercially viable, 
existing prototypes will not be considered further.
    (2) Practicability to manufacture, install, and service. If it 
is determined that mass production of a technology in commerical 
products and reliable installation and servicing of the technology 
could not be achieved on the scale necessary to serve the relevant 
market at the time of the projected compliance date of the standard, 
then that technology will not be considered further.
    (3) Impacts on product utility. If a technology is determined to 
have a significant adverse impact on the utility of the product to 
significant subgroups of consumers or result in the unavailability 
of any covered product type with performance characteristics 
(including reliability), features, sizes, capacities, and volumes 
that are substantially the same as products generally available in 
the United States at the time, it will not be considered further.
    (4) Safety of technologies. If it is determined that a 
technology would have significant adverse impacts on health or 
safety, it will not be considered further.
    (5) Unique-pathway proprietary technologies. If a technology has 
proprietary protection and represents a unique pathway to achieving 
a given efficiency level, that technology will not be considered 
further due to the potential for monopolistic concerns.

    Sections 6(b)(3) and 7(b) of appendix A.
    In sum, if DOE determines that a technology, or a combination of 
technologies, fails to meet one or more of the listed five criteria, it 
will be excluded from further consideration in the engineering 
analysis. The reasons for eliminating any technology are discussed in 
the following sections.
    The subsequent sections include comments from interested parties 
pertinent to the screening criteria, DOE's evaluation of each 
technology option against the screening analysis criteria, and whether 
DOE determined that a technology option should be excluded (``screened 
out'') based on the screening criteria.
1. Screened-Out Technologies
    In the April 2022 NOPR, DOE proposed screening out air and water 
economizers and suction-line heat exchangers in the screening analysis, 
based on their negative impacts on product utility to consumers and on 
manufacturing impracticality.
    AHAM requested that DOE screen out installation materials like 
accordion side-curtains as there is no way to account for the energy 
savings according to the existing test procedure given that these 
features are not installed in the calorimeter during efficiency 
testing. AHAM also requested that DOE screen out the use of an extended 
polystyrene (EPS) panel as a technology option as the test procedure 
will not capture any efficiency gains given that calorimeters are 
balanced to avoid high differential pressure, which is the source of 
efficiency gains for this technology option. Additionally, AHAM stated 
that an EPS panel may conflict with the effectiveness of other 
technology options such as the condenser coil subcooler and increased 
heat transfer area. Further, AHAM stated that as most units on the 
market already use washable air filters, this technology option will 
not result in significant energy savings or efficiency gains. (AHAM, 
No. 43 at pp. 27-28)
    While the DOE test procedure does not account for the efficiency 
effects of installation materials (e.g., side-curtains, EPS panels, 
washable air filters), the technologies still meet the screening 
criteria, in that they are technically feasible, widely used and not a 
barrier to availability, manufacturing, installation, or service, do 
not pose a risk to health, and are not a proprietary technology. 
Therefore, DOE did not screen out installation materials at this stage. 
DOE notes that, as discussed in chapter 5 of the NOPR TSD, installation 
materials were not a design option used to construct efficiency levels 
for this analysis.
2. Remaining Technologies
    Through a review of each technology, DOE concluded that all of the 
other identified technologies listed in section IV.B.2 of this document 
met all five screening criteria to be examined further as design 
options in DOE's final rule analysis. In summary, DOE did not screen 
out the following technology options:
    Table IV.2 displays the design options retained for the engineering 
analysis.

                   Table IV.2--Retained Design Options
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Increased Heat Transfer Surface Area:
    1. Increased heat exchanger surface area (frontal area, fin density
     and depth of coil).
    2. Condenser coil subcooler.
Increased Heat Transfer Coefficient:
    3. Improved fin and tube design.
    4. Hydrophilic coating on fins.
    5. Microchannel heat exchangers.
    6. Spray condensate on condenser coil.
Component Improvements:
    7. Improved indoor blower and outdoor fan blade design.
    8. Improved blower/fan motor design.
    9. Improved compressor efficiency.
Improved Installation, Insulation, and Airflow:
    10. Improved installation materials.
    11. Reduced evaporator air recirculation.
    12. Reduced thermal bridging and internal air leakage.
Part-load Performance:
    13. Variable-speed compressors.
    14. Variable-speed drive fans and blowers.
    15. Thermostatic or electronic expansion valves.
    16. Thermostatic cyclic controls.
Standby Power Improvements:
    17. Low standby-power electronics.
    18. High-frequency switching power supply.

[[Page 34312]]

 
Alternative Refrigerants:
    19. SNAP-approved refrigerants (R-32, R-441A and R-290).
Other Improvements:
    20. Washable air filters.
------------------------------------------------------------------------

    DOE determined that these technology options are technologically 
feasible because they are being used or have previously been used in 
commercially-available products or working prototypes. DOE also finds 
that all of the remaining technology options meet the other screening 
criteria (i.e., practicable to manufacture, install, and service and do 
not result in adverse impacts on consumer utility, product 
availability, health, or safety). For additional details, see chapter 4 
of the final rule TSD.

C. Engineering Analysis

    The purpose of the engineering analysis is to establish the 
relationship between the efficiency and cost of room air conditioners. 
There are two elements to consider in the engineering analysis; the 
selection of efficiency levels to analyze (i.e., the ``efficiency 
analysis'') and the determination of product cost at each efficiency 
level (i.e., the ``cost analysis''). In determining the performance of 
higher-efficiency products, DOE considers technologies and design 
option combinations not eliminated by the screening analysis. For each 
product class, DOE estimates the baseline cost, as well as the 
incremental cost for the product/equipment at efficiency levels above 
the baseline. The output of the engineering analysis is a set of cost-
efficiency ``curves'' that are used in downstream analyses (i.e., the 
LCC and PBP analyses and the NIA).
1. Efficiency Analysis
    DOE typically uses one of two approaches to develop energy 
efficiency levels for the engineering analysis: (1) relying on observed 
efficiency levels in the market (i.e., the efficiency-level approach), 
or (2) determining the incremental efficiency improvements associated 
with incorporating specific design options to a baseline model (i.e., 
the design-option approach). Using the efficiency-level approach, the 
efficiency levels established for the analysis are determined based on 
the market distribution of existing products (in other words, based on 
the range of efficiencies and efficiency level ``clusters'' that 
already exist on the market). Using the design option approach, the 
efficiency levels established for the analysis are determined through 
detailed engineering calculations and/or computer simulations of the 
efficiency improvements from implementing specific design options that 
have been identified in the technology assessment. DOE may also rely on 
a combination of these two approaches. For example, the efficiency-
level approach (based on actual products on the market) may be extended 
using the design option approach to interpolate to define ``gap fill'' 
levels (to bridge large gaps between other identified efficiency 
levels) and/or to extrapolate to the ``max-tech'' level (particularly 
in cases where the ``max-tech'' level exceeds the maximum efficiency 
level currently available on the market).
    In this rulemaking, DOE relied on a combination of these two 
approaches. For each product class, DOE analyzed a few units from 
different manufacturers to ensure the analysis was representative of 
various designs on the market. The analysis involved physically 
disassembling commercially available products, reviewing publicly 
available cost information, and modeling equipment cost. From this 
information, DOE estimated the manufacturer production costs (``MPCs'') 
for a range of products currently available on the market. DOE then 
considered the design options manufacturers would likely rely on to 
improve product efficiencies. From this information, DOE estimated the 
cost and efficiency impacts of incorporating specific design options at 
each efficiency level.
    DOE analyzed six efficiency levels as part of the engineering 
analysis: (1) The current DOE standard (baseline); (2) an intermediate 
level above the baseline but below the ENERGY STAR level, either 
halfway between the two or at a level where a number of models were 
certified (EL 1); (3) the ENERGY STAR efficiency criterion (EL 2); (4) 
the efficiency attainable by a unit with the most efficient R-32 
single-speed compressor on the market (EL 3); (5) an intermediate level 
representing the efficiency of variable-speed units on the market, as 
tested by DOE using the recently amended test procedure (EL 4); and (6) 
the maximum technologically feasible (max-tech) efficiency (EL 5).
    In evaluating the technologies manufacturers could use to achieve 
the analyzed efficiency levels, DOE considered design options which 
made the largest impact on unit efficiency and for which the cost-
efficiency relationship was well defined. Accordingly, DOE implemented 
increased heat exchanger area, condenser coil subcoolers, improved 
blower motor efficiency, improved compressor efficiency, variable-speed 
compressors, and low standby-power electronic controls as design 
options, some or all of which were used to estimate the cost required 
to reach each efficiently level. DOE did not consider in its analysis 
certain technologies that met the screening criteria but that DOE was 
unable to evaluate for one or more of the following reasons: (1) Data 
were not available to evaluate the energy efficiency characteristics of 
the technology, (2) available data suggested that the efficiency 
benefits of the technology are negligible, and (3) certain technologies 
cannot be measured according to the conditions and methods specified in 
the existing test procedure. Further information on how the design 
options were chosen and implemented in the engineering analysis is 
available in chapter 5 of the final rule TSD.
a. Baseline Efficiency/Energy Use
    For each product/equipment class, DOE generally selects a baseline 
model as a reference point for each class, and measures changes 
resulting from potential energy conservation standards against the 
baseline. The baseline model in each product/equipment class represents 
the characteristics of a product/equipment typical of that class (e.g., 
capacity, physical size). Generally, a baseline model is one that just 
meets current energy conservation standards, or, if no standards are in 
place, the baseline is typically the most common or least efficient 
unit on the market.
    Of the 48 total units DOE selected for analysis in this rulemaking, 
19 of them were baseline units that fell within 12 of the 16 room air 
conditioner product classes and served as reference points for each 
analyzed product class. DOE used these reference points to assess the 
effects of amended energy conservation standards, which in turn support 
the engineering, LCC, and PBP analyses. The baseline units in each of 
the analyzed product classes represent the

[[Page 34313]]

basic characteristics of equipment in that class.
b. Higher Efficiency Levels
    DOE considered five efficiency levels (``ELs'') above the baseline 
for this analysis. As discussed in chapter 5 of the final rule TSD, DOE 
modeled EL 1, EL 2, and EL 3 by analyzing the cost and efficiency 
impacts of implementing improved single-speed compressors. DOE also 
analyzed the impact of implementing tube-only or tube-and-fin 
subcoolers at EL 3 if the analyzed unit did not already have one. At EL 
4, DOE considered the efficiency impacts of variable-speed compressors 
already available on the market and replacing permanent split capacitor 
(``PSC'') fan motors with more efficient electronically commutated 
motors (``ECMs'').
    As part of DOE's analysis, the maximum available efficiency level 
is the highest efficiency unit currently available on the market. DOE 
also defines a ``max-tech'' efficiency level to represent the maximum 
possible efficiency for a given product. As discussed in chapter 5 of 
the final rule TSD, for the max-tech level, DOE modeled replacing 
single-speed compressors with the maximum efficiency variable-speed 
compressors available, reducing standby power to the minimum observed 
in DOE's teardown sample, and increasing the cabinet and heat exchanger 
to the largest feasible sizes to improve efficiency. For all product 
classes, the max-tech level identified for EL 5 exceeds any other 
regulatory or voluntary efficiency criteria currently in effect in the 
United States.
    The max-tech level is based entirely on modeled combinations of 
design options that have not yet been combined in a commercially 
available room air conditioner. Notably, while the key design option 
implemented at max-tech, variable-speed compressors, is also considered 
at EL 4, the significant difference between the two is the level of 
variable-speed compressor efficiency being considered. At EL 4, DOE 
considers the variable-speed compressors currently implemented in room 
air conditioners on the market today, for which performance has been 
characterized through testing. At EL 5, DOE is considering the highest 
efficiency variable-speed compressor identified in compressor catalogs, 
which are not currently implemented in room air conditioner models on 
the market today or in prototypes. Therefore, the efficiency level at 
max-tech, EL 5, for each product class is a numerical estimation for 
the theoretical implementation of the highest efficiency variable-speed 
compressors. Furthermore, the DOE room air conditioner test procedure 
measures variable-speed unit performance differently than test 
procedures for other air conditioning products, so limited performance 
and efficiency data are available for the most efficient examples of 
this emergent technology for room air conditioners.
    Additionally, the most efficient variable-speed compressors that 
DOE identified in compressor catalogs that were implemented in the 
analysis at the max-tech efficiency level are manufactured by one 
manufacturer and have rated Energy Efficiency Ratios (``EERs'') between 
11.2 and 11.7 Btu/Wh, with a range of rated capacities between 4,705 
Btu/h and 16,170 Btu/h. Given the lack of information regarding 
availability of these highest efficiency variable-speed compressors, 
and the limited number of variable-speed compressors rated at or near 
the compressors considered for the max-tech efficiency level, there may 
not be widespread availability of these high-efficiency variable-speed 
compressors.
    Gradient stated that EL 4 accurately represents an intermediate 
efficiency level that represents the efficiency of variable-speed units 
on the market. According to Gradient, variable-speed compressors for 
room air conditioners with a capacity greater than 8,000 Btu/h are at 
this time a mature technology that is available from most 
manufacturers, and the technology needed for implementing variable-
speed drives is no longer specialized. Therefore, Gradient strongly 
supported the proposal of EL 4 as the minimum efficiency level for room 
air conditioners with a capacity greater than 8,000 Btu/h. (Gradient, 
No. 40 at p. 2) NEEA and NWPCC also supported the new EL 4 level 
representing the efficiency of variable-speed units on the market below 
max tech. (NEEA and NWPCC, No. 50 at p. 5)
    DOE agrees with Gradient that multiple units with cooling 
capacities greater than 8,000 Btu/h from several manufacturers 
employing variable-speed compressors are now available on the market. 
Further, DOE concludes that variable-speed compressors with 
efficiencies higher than those currently observed on the market are 
technically feasible, but there is uncertainty as to whether they would 
be available in the quantities that would be required to implement them 
on the necessary scale at the time that compliance with the standards 
being adopted in this final rule will be required.
    In their comments, NEEA and NWPCC expressed disappointment in the 
reduction of EL 3 CEER from the preliminary analysis to the NOPR 
analysis because of the significant cost-effective national energy 
savings achievable by using high efficiency single-speed compressors. 
However, they agreed with the methodology used to reach the change, as 
they recognize that the reduction in maximum single-speed compressor 
efficiency to 12.7 Btu/Wh was based on a comprehensive survey of 
available compressors and accounted for the changeover to R-32 
refrigerant. (NEEA and NWPCC, No. 50 at p. 5)
    DOE is not making any changes to EL 3 in this final rule analysis, 
retaining the reduction in maximum single-speed compressor efficiency 
to 12.7 Btu/Wh as discussed in the NOPR.
    AHAM requested clarification regarding DOE's conclusion that some 
of the technology options would not result in changes to chassis size 
and weight. (AHAM, Public Meeting Transcript, No. 38 at pp. 26-27) P.R. 
China stated that the proposed increases to efficiency ranging from 20 
to 50 percent depending on the product class are unreasonable due to 
size, weight, and cost concerns and instead recommended controlling the 
increase in standards of each product class to about 15 percent. 
According to P.R. China, the upgrading technology paths introduced in 
the April 2022 NOPR would lead to increased costs and size of chassis 
associated with the proposed energy efficiency levels, and can lead to 
increased burden on consumers, and increased carbon emissions in the 
production process. Therefore, P.R. China suggests optimizing the 
proposed standards to reduce potential impacts on the supply chain. 
(P.R. China, No. 39 at pp. 3-4) Friedrich also indicated that based on 
its industry experience, EL 3 would require room air conditioner 
chassis to be enlarged and become heavier, due, in substantial part, to 
increased heat exchanger cross-sectional area and compressor size. 
(Friedrich, No. 44 at p. 5)
    According to AHAM, DOE underestimated the impacts that the 
considered technology options will have on chassis size, specifically 
with adoption of variable-speed compressors, feasible chassis width, 
and installation impacts/costs. AHAM stated that DOE should evaluate 
the space needed for compressor controls and transformers when 
considering the space needed for variable-speed compressors, as these 
additional components may not fit into existing sleeve sizes. 
Additionally, AHAM stated that at the proposed

[[Page 34314]]

amended standard levels, chassis sizes will increase significantly to 
greater than DOE's estimated maximum feasible chassis width and 
therefore DOE is underestimating a significant portion of the market. 
AHAM presented percent changes to product dimensions based on member 
data that ranged from 6 to 15 percent in height, 2 to 19 percent in 
width, and 2 to 21 percent in depth across Product Classes 1, 2, 3, 4, 
and 16. AHAM indicated that these increased dimensions would lead to 
more efficient room air conditioners that are potentially incompatible 
with older buildings, and would require either reinstallation, changes 
to the building's infrastructure, or purchase of second-hand less 
efficient products that do fit windows in these older buildings leading 
to negative health impacts for low income consumers and those in 
underserved communities. AHAM also stated that with increased chassis 
sizes and weight, there will be the potential for an increase in 
packaging and structural robustness costs to ensure the product is not 
damaged during transport and to ensure the product passes the drop 
tests requirement outlined in UL 60335-2-40, Annex GG. AHAM requested 
that DOE update its analysis according to the information provided. 
(AHAM, No. 43 at pp. 21-23)
    Friedrich disputed the technological feasibility of increasing 
compressor efficiency to the levels DOE used to model EL 3 and EL 4. 
Friedrich stated that it was unable to source a single-speed compressor 
that would achieve EL 3 with an EER of 12.7 Btu/h and that the most 
efficient single-speed compressor it was able to source has an EER of 
10.8 Btu/h. Friedrich added that it was also unable to source a 
variable-speed compressor with an EER of 13.2 Btu/h, though Friedrich 
did not provide any information about the variable-speed compressors 
that are available to them. (Friedrich, No. 52 at p. 2)
    DOE identified the highly efficient compressors used in the design 
analysis in rotary compressor catalogues from companies that typically 
provide compressors for room air conditioners. The highest efficiency 
compressors available on the market used R-32 refrigerant. DOE 
incorporated only those compressors rated at American Society of 
Heating, Refrigerating, and Air-Conditioning Engineers (``ASHRAE'') 
test conditions in this analysis. On this basis, DOE concluded that 
these higher efficiency compressors would be an available option for 
increasing the efficiency of room air conditioners subject to the 
amended standards, including those discussed in Friedrich's comments.
    DOE's analysis indicates that manufacturers should not need to 
increase chassis sizes in order to implement variable-speed compressors 
at EL 4. DOE has observed that compressor controls and transformers do 
not require additional chassis size; room air conditioners with 
variable-speed compressors currently on the market have similar or 
smaller chassis sizes compared to their equivalent single-speed 
counterparts, as discussed further in chapter 5 of the final rule TSD. 
With respect to more robust packaging, DOE agrees that as chassis sizes 
increase, additional packaging is needed. Therefore, DOE has altered 
the NOPR analysis to incorporate an incremental cost for packaging into 
its engineering analysis at max-tech, where DOE modeled chassis size 
increases.
    As a part of the engineering analysis, DOE considered the weight 
increases associated with each design option for which a substantive 
weight impact was expected. Those design options included changes to 
the compressor efficiency, implementation of variable-speed 
compressors, and adjustments to the heat exchangers (including 
subcoolers) and resulting chassis size changes, which are discussed in 
detail both in this document and in chapters 3 and 5 of the final rule 
TSD. DOE determined that there is sufficient room in the chassis to 
swap a more efficient compressor of similar overall size and 
configuration, and therefore would not impact the overall size of the 
room air conditioner, unlike increases to the heat exchanger which 
would necessarily increase the model's overall size. In that way, DOE 
considered the changes to a model's overall size and weight resulting 
from implementing design options at each efficiency level. GEA 
indicated that, in order to meet the EL 3 requirements, either a 
variable-speed compressor or a large chassis size increase would be 
required, while DOE modeled the cost of meeting this efficiency level 
using only component replacements and a single-speed compressor. (GEA, 
No. 49 at pp.1-2)
    While manufacturers may elect to either implement variable-speed 
compressors or increase chassis size as a means to reach EL 3, DOE's 
analysis shows that the most efficient single-speed compressor alone 
can allow room air conditioners to reach EL 3. As DOE's analysis 
estimates that manufacturers are likely to use the most cost-effective 
design options, DOE modeled EL 3 using the most efficient single-speed 
compressors instead of other possible design options.
    Friedrich suggested that compressor data found in catalogues would 
be better if averaged rather than selecting the most efficient data for 
DOE's analysis, given that manufacturers may not always be able to 
implement the best compressors in their products. (Friedrich, Public 
Meeting Transcript, No. 38 at pp. 18-19)
    EPCA requires DOE to adopt the maximum standards that are both 
technically justified and economically feasible. (42 U.S.C. 
6295(o)(2)(A)) When assessing efficiency levels, and in particular the 
maximum technologically feasible room air conditioner efficiency level, 
DOE considered the compressor with the maximum available efficiency, 
based on product literature, to determine the limits of technical 
feasibility in room air conditioner compressors. Using an average would 
not provide DOE with the maximum technologically feasible result, 
though DOE notes that when considering efficiency levels above baseline 
and below max-tech, compressors of various efficiency were assessed and 
implemented in the analysis.
    Gradient requested clarification regarding the evaporating and 
condensing temperature test conditions used to characterize compressor 
efficiency in catalogue data surveyed by DOE. (Gradient, Public Meeting 
Transcript, No. 38 at pp. 17-18)
    In developing the engineering analysis, DOE considered compressors 
for which performance data were available in accordance with ASHRAE or 
Air Conditioning, Heating, & Refrigeration Institute test conditions, 
which use a condenser temperature of 54.4 [deg]C and an evaporation 
temperature of 7.2 [deg]C. These compressor test conditions are an 
industry standard, and are commonly used in characterizing and 
determining relative compressor efficiency improvements.
    Friedrich stated that most of the technology options in DOE's 
analysis, such as a suction line heat exchanger, do not offer any 
benefit for the refrigerant used, or have already been used to maximize 
efficiency like with condenser coil subcoolers, and direct current (DC) 
fan and blower motors. Friedrich also stated that microchannel heat 
exchangers may not be appropriate for R-32 applications where 
minimizing leakage is paramount, as such heat exchangers have issues 
with galvanic corrosion. (Friedrich, No. 44 at p. 9)
    As discussed in chapters 3 and 5 of the final rule TSD, DOE 
evaluates each technology option for its potential efficiency benefit. 
However, when developing the engineering analysis, DOE typically 
focuses on design options with substantial impact on efficiency that 
DOE expects manufacturers would

[[Page 34315]]

implement in their designs to improve efficiency. In the case of 
condenser coil subcoolers, while DOE did find that most units 
implemented some form of this technology, DOE identified different 
types of subcoolers with varying efficiency benefits, and therefore 
retained subcoolers as a design option for those units for which 
efficiency improvements using a subcooler or improved subcooler design 
were feasible. In the case of fan and blower motors, DOE identified ECM 
motor technology as a potential improvement over the commonly 
implemented PSC motors, and considered the improvement at the two 
highest efficiency levels. DOE did not consider the implementation of 
microchannel heat exchangers as a design option for the engineering 
analysis due to the high cost and lack of room air conditioner 
application-specific efficiency data.
    NEEA and NWPCC stated that they could provide data on the cost-
effectiveness of high efficiency models. (NEEA and NWPCC, No. 50 at p. 
4)
    DOE did not receive any additional information from NEEA and NWPCC 
on high efficiency models ahead of this final rule.
2. Cost Analysis
    The cost analysis portion of the engineering analysis is conducted 
using one or a combination of cost approaches. The selection of cost 
approach depends on a suite of factors, including the availability and 
reliability of public information, characteristics of the regulated 
product, the availability and timeliness of purchasing the product on 
the market. The cost approaches are summarized as follows:
     Physical teardowns: Under this approach, DOE physically 
dismantles a commercially available product, component-by-component, to 
develop a detailed bill of materials for the product.
     Catalog teardowns: In lieu of physically deconstructing a 
product, DOE identifies each component using parts diagrams (available 
from manufacturer websites or appliance repair websites, for example) 
to develop the bill of materials for the product.
     Price surveys: If neither a physical nor catalog teardown 
is feasible (for example, for tightly integrated products such as 
fluorescent lamps, which are infeasible to disassemble and for which 
parts diagrams are unavailable) or cost-prohibitive and otherwise 
impractical (e.g. large commercial boilers), DOE conducts price surveys 
using publicly available pricing data published on major online 
retailer websites and/or by soliciting prices from distributors and 
other commercial channels.
    In the present case, DOE conducted the analysis using physical 
teardowns. The resulting bill of materials (``BOM'') provides the basis 
for the MPC estimates. DOE estimated the cost of the highest efficiency 
single-speed and variable-speed compressors implemented in EL3 and EL 
5, respectively, by extrapolating the costs from price surveys of other 
compressors. DOE used this approach because, as discussed previously, 
DOE is not aware of these most efficient single-speed and variable-
speed compressors being implemented in any available room air 
conditioners to date.
    To account for manufacturers' non-production costs and profit 
margin, DOE applies a multiplier (the manufacturer markup) to the MPC. 
The resulting manufacturer selling price (``MSP'') is the price at 
which the manufacturer distributes a unit into commerce. DOE developed 
an average manufacturer markup by examining the annual Securities and 
Exchange Commission (``SEC'') 10-K reports \21\ filed by publicly-
traded manufacturers primarily engaged in appliance manufacturing and 
whose combined product range includes room air conditioners. Chapter 12 
of the final rule TSD provides additional information on the 
manufacturer markup.
---------------------------------------------------------------------------

    \21\ U.S. Securities and Exchange Commission, Electronic Data 
Gathering, Analysis, and Retrieval (EDGAR) system. Available at 
www.sec.gov/edgar/search/ (last accessed September 7, 2022).
---------------------------------------------------------------------------

3. Cost-Efficiency Relationship
    The results of the engineering analysis are presented as cost-
efficiency data for each of the efficiency levels for each of the 
product classes that were analyzed, as well as those extrapolated from 
a product class with similar cooling capacity and features. DOE 
developed estimates of MPCs for each unit in the teardown sample, and 
also performed additional modeling for each of the teardown samples, to 
develop a comprehensive set of MPCs at each efficiency level. DOE then 
consolidated the resulting MPCs for each of DOE's teardown units and 
modeled units using a weighted average for product classes in which DOE 
analyzed units from multiple manufacturers. DOE's weighting factors 
were based on a market penetration analysis for each of the 
manufacturers within each product class. The resulting weighted-average 
incremental MPCs (i.e., the additional costs manufacturers would likely 
incur by producing room air conditioners at each efficiency level 
compared to the baseline) are provided in Tables 5.5.5 and 5.5.6 in 
chapter 5 of the final rule TSD. See chapter 5 of the final rule TSD 
for additional detail on the engineering analysis.
    Gradient agreed with the incremental cost for Product Classes 1 
through 5b including the expected trend of increased cost for higher 
capacity units, but stated that the incremental cost for variable-speed 
compressor technology should depend only on the capacity of the system, 
and as such, Gradient recommended applying the incremental costs for 
Product Classes 1 through 5b to systems of similar capacity in other 
product classes. (Gradient, No. 40 at p. 2)
    DOE based its incremental costs for each product class on data 
derived from teardowns of units in that product class and a design 
option analysis. The differences in incremental costs observed between 
non-louvered and louvered units are not due to differences in cost 
estimates for the variable-speed compressor design option, but inherent 
differences in incremental cost estimates for a particular 
configuration. These inherent differences in incremental costs are 
driven by differences in design and component types, as shown by DOE's 
teardown analysis, as discussed in further detail in chapter 5 of the 
final rule TSD.
    AHAM stated that reducing energy consumption in room air 
conditioners requires balancing multiple tradeoffs between cost, 
functional performance, and energy efficiency among numerous 
components, with different mixes of technology for each product 
platform. Accordingly, AHAM stated that manufacturers have therefore 
selected virtually all of the viable technologies across their product 
lines and requested that DOE recognize that there is limited new 
technology that would allow for significant per-unit reduction in 
energy consumption in room air conditioners and that the more radical 
or comprehensive the design change, the more likely that retooling is 
necessary and, thus, the greater the product cost increase and capital 
investment requirement. AHAM concluded that while there may be 
declining costs over time associated with energy efficient components, 
these are due to changes in productivity and/or value engineering that 
is independent of energy efficiency. (AHAM, No. 43 at pp. 18-19)
    While DOE recognizes that manufacturers face tradeoffs regarding 
cost, performance, and efficiency, DOE identified several feasible 
technologies for improving product efficiency across product lines that 
have only been implemented in a few room air

[[Page 34316]]

conditioner models to date, such as variable-speed compressors and ECM 
fan motors. DOE's analysis in this final rule takes into account costs 
associated with retooling and capital investments when determining 
economic justification. See section IV.J.2.c of this document for a 
description of the conversion cost methodology.
4. Consumer Utility
    According to AHAM, consumers may elect to use window units in wall 
sleeves because higher capacity through-the-wall room air conditioners 
are already more costly, larger, and heavier than their window 
counterparts, which may limit efficiency gains and even lead to safety 
concerns due to inadequate cooling of high-pressure components. AHAM 
requested that DOE avoid this result not only because it undercuts 
energy conservation savings goals, but also because it increases safety 
risks for consumers, with a disproportionate burden on lower income and 
underserved communities. (AHAM, No. 43 at pp. 22-23)
    In its analyses, DOE assumes that consumers will install products 
according to manufacturer instructions and that they will not install 
units in an unsafe manner. DOE has no information from which to 
estimate the potential efficiency effects of the incorrect installation 
described.

D. Markups Analysis

    The markups analysis develops appropriate markups (e.g., retailer 
markups, distributor markups, contractor markups) in the distribution 
chain and sales taxes to convert the MSP estimates derived in the 
engineering analysis to consumer prices, which are then used in the LCC 
and PBP analysis. At each step in the distribution channel, companies 
mark up the price of the product to cover business costs and profit 
margin.
    In the April 2022 NOPR, DOE assumed the main party in the 
distribution chain after manufacturers was retailers.
    Friedrich requested additional details regarding the assumption 
that 100 percent of room air conditioners sales occur through the 
retail distribution channel. (Friedrich, Public Meeting Transcript, No. 
38 at p. 29)
    Unlike other larger space cooling equipment that require additional 
ductwork or installation materials, DOE was unable to find data 
suggesting that room air conditioners require a general or mechanical 
contractor for installation. In the absence of data or additional 
comment provided by stakeholders, DOE maintains the assumption in this 
final rule that 100 percent of sales occur through the retail 
distribution channel.
    DOE developed baseline and incremental markups for each actor in 
the distribution chain. Baseline markups are applied to the price of 
products with baseline efficiency, while incremental markups are 
applied to the difference in price between baseline and higher-
efficiency models (the incremental cost increase). The incremental 
markup is typically less than the baseline markup and is designed to 
maintain similar per-unit operating profit before and after new or 
amended standards.\22\
---------------------------------------------------------------------------

    \22\ Because the projected price of standards-compliant products 
is typically higher than the price of baseline products, using the 
same markup for the incremental cost and the baseline cost would 
result in higher per-unit operating profit. While such an outcome is 
possible, DOE maintains that in markets that are reasonably 
competitive it is unlikely that standards would lead to a 
sustainable increase in profitability in the long run.
---------------------------------------------------------------------------

    DOE relied on economic data from the U.S. Census Bureau to estimate 
average baseline and incremental markups. Specifically, DOE used the 
2017 Annual Retail Trade Survey for the ``electronics and appliance 
stores'' sector to develop retailer markups.\23\
---------------------------------------------------------------------------

    \23\ U.S. Census Bureau, Annual Retail Trade Survey. 2017. 
www.census.gov/programs-surveys/arts.html.
---------------------------------------------------------------------------

    Chapter 6 of the final rule TSD provides details on DOE's 
development of markups for room air conditioners.

E. Energy Use Analysis

    The purpose of the energy use analysis is to determine the annual 
energy consumption of room air conditioners at different efficiencies 
in representative U.S. single-family homes, multi-family residences, 
and commercial buildings, and to assess the energy savings potential of 
increased room air conditioner efficiency. The energy use analysis 
estimates the range of energy use of room air conditioners in the field 
(i.e., as they are actually used by consumers). The energy use analysis 
provides the basis for other analyses DOE performed, particularly 
assessments of the energy savings and the savings in consumer operating 
costs that could result from adoption of amended or new standards.
    To estimate annual room air conditioner usage and energy 
consumption in the April 2022 NOPR, DOE first calculated the number of 
operating hours in cooling mode for each room air conditioner in the 
residential and commercial samples using the reported energy use for 
room air conditioning in the EIA's Residential Energy Consumption 
Survey (``RECS'') 2015 \24\ and Commercial Building Energy Consumption 
Survey (``CBECS'') 2012,\25\ along with historical estimates of the EER 
of the room air conditioner(s) in each sample home or building. DOE 
based the latter on the reported age (or simulated age) of the unit and 
historical data on shipment-weighted average EER.
---------------------------------------------------------------------------

    \24\ U.S. Department of Energy-Energy Information 
Administration. Residential Energy Consumption Survey. 2015. 
www.eia.gov/consumption/residential/data/2015/.
    \25\ U.S. Department of Energy-Energy Information 
Administration. Commercial Buildings Energy Consumption Survey. 
2012. www.eia.gov/consumption/commercial/data/2012/.
---------------------------------------------------------------------------

    AHAM questioned the accuracy of the RECS data more generally, 
pointing to several sources of potential error or uncertainty within 
the dataset. (AHAM, No. 43 at pp. 8-10)
    RECS represents the largest available data-set of installed 
residential appliance stock that is designed to be nationally 
representative.\26\ Although there may be error or uncertainty in 
household responses, as in any survey, there is no evidence that 
responses to any of the questions regarding room air conditioners 
suffers from a systematic bias that would impact the energy use or LCC 
analysis. Additionally, the RECS end use energy consumption data, used 
is the energy use analysis, is derived from household energy bills 
provided by respondents and is an exact measurement that is not subject 
to response error from the household. The RECS end-use estimates are 
based on an engineering approach and calibrated based on the relative 
uncertainties of and correlations between the end uses.\27\ A study 
comparing field-energy estimates from the Pecan Street Project \28\ to 
end-use estimates from RECS found good agreement between the air 
conditioning, water heating, and refrigerator consumption estimates as 
a fraction of the whole-home energy.\29\ Although the authors found 
that the total energy consumption by end use was higher in RECS 
households, the authors attribute the difference to selection bias 
associated with the volunteer households within the Pecan Street 
dataset. For this final rule, DOE maintains that the RECS dataset

[[Page 34317]]

provides the most reasonable, nationally representative estimate for 
room air conditioner energy consumption in the U.S.
---------------------------------------------------------------------------

    \26\ www.eia.gov/consumption/residential/reports/2015/comparison/index.php.
    \27\ Energy Information Administration. RECS 2015 Consumption 
and Expenditures Technical Documentation Summary. www.eia.gov/consumption/residential/reports/2015/methodology/pdf/2015C&EMethodology.pdf (last accessed September 12, 2022).
    \28\ www.pecanstreet.org/dataport/.
    \29\ Brock Glasgo, Chris Hendrickson, In[ecirc]s M.L. Azevedo. 
Using advanced metering infrastructure to characterize residential 
energy use. The Electricity Journal, Volume 30, Issue 3, 2017, Pages 
64-70.
---------------------------------------------------------------------------

    AHAM and Friedrich stated that it appears highly likely that DOE 
has overestimated the cooling hours substantially based on end-use 
energy consumption estimates from RECS 2015, and thus the energy usage 
and related potential savings from more efficient room air 
conditioners. (AHAM, No. 43, at p. 8; Friedrich, No. 44 at pp. 7-8) 
According to AHAM, in many, if not most cases, room air conditioners 
are not thermostat-driven, load-following but, rather, are turned on 
and off by users as required, and assuming a load-following pattern 
substantially overstates the number of hours a room air conditioner is 
actually on.\30\ AHAM believes it to be more common that room air 
conditioners are turned on and off by user choice such as when it is 
especially hot or when a room is occupied, and that the usage hours in 
that control mode are likely to be much lower than estimates based on 
load modeling. In support of this point, AHAM stated that in the RECS 
data, nearly half the respondents report turning on their room air 
conditioners only when needed and an additional 17 percent adjust the 
temperature manually, while only 30 percent report setting one 
temperature and leaving the unit as is.
---------------------------------------------------------------------------

    \30\ RECS reports space cooling end-use energy consumption 
estimates based on calculated cooling load based on household 
characteristics and weather data.
---------------------------------------------------------------------------

    DOE acknowledges that the statistical nature of the RECS end-use 
load analysis includes some uncertainty, but maintains that the RECS 
end-use energy consumption estimates remain the best available dataset 
for determining the hours of operation associated with room air 
conditioners. DOE notes that the responses within the household survey 
portion of RECS for room air conditioner usage do not necessarily imply 
higher or lower usage relative to DOE's estimates from RECS energy 
consumption data. For example, respondents that turn their unit on and 
off manually could potentially use their unit more than expected based 
only on cooling load-based operation.
    DOE performed a sensitivity analysis to estimate the potential 
impact of overestimating operating hours for households that turn their 
unit on and off as needed. For this sensitivity analysis, DOE reduced 
the operating hours by half for households reported in RECS as turning 
their unit on and off as needed. Although energy savings are reduced 
due to the overall lower operating hours in this sensitivity analysis, 
the average LCC savings remains positive for all product classes at the 
adopted TSL with a majority of consumers receiving a net benefit. The 
average shipment-weighted LCC savings are $62 (relative to $85 in the 
reference case) and 25% of consumers are impacted negatively (relative 
to 17 percent in the reference case). As noted above, the assumption of 
reduced usage associated with household that manually turn their unit 
on or off is a conservative assumption given that these households 
could potentially use their unit more than estimated based cooling-load 
based operation. See appendix 8F of the final rule TSD for the full 
results of the analysis.
    AHAM and Friedrich stated that portable air conditioners are a more 
appropriate analog for room air conditioner usage rather than assuming 
a cooling load-driven model, since both products are used as a last 
resort to meet a specific need and suggested DOE base operating hours 
on a field-metering study of portable air conditioners. (AHAM, No. 43 
at p. 13; Friedrich, No. 44 at p. 8)
    The portable air conditioner field-metering study referenced by 
AHAM and Friedrich analyzed only 19 units for less than a full cooling 
season.\31\ As stated in the report itself, given the limited number of 
test sites in two locations in the Northeast, the study was not 
intended to be statistically representative of portable air conditioner 
(``AC'') users in the United States. Even if portable air conditioners 
were a good analog to room air conditioners, the limitations of this 
dataset in terms of sample size and representation of usage would 
preclude its application for the energy use analysis.
---------------------------------------------------------------------------

    \31\ Burke et al., 2014. ``Using Field-Metered Data to Quantify 
Annual Energy Use of Residential Portable Air Conditioners.'' LBNL, 
Berkeley, CA. LBNL Report LBNL-6469E. September 2014.
---------------------------------------------------------------------------

    In the April 2022 NOPR, DOE accounted for the reduction in energy 
use of models with a variable-speed compressor during part load 
operation based on the methodology developed for the DOE test 
procedure. DOE accounted for geographic-dependent climate variability 
by calculating U.S. State-dependent performance adjustment factors 
(``PAFs'') using historical climate data spanning the period from 2008-
2016 from the National Oceanic and Atmospheric Administration. For each 
state in the United States, DOE performed a temperature bin analysis to 
calculate within the cooling season (June through August) the fraction 
of time the outdoor dry bulb temperature was in one of four temperature 
bins: 80-84 degrees Fahrenheit (``[deg]F''), 85-89 [deg]F, 90-94 
[deg]F, and 95-99 [deg]F. DOE then calculated the corresponding PAF for 
each state using the methodology developed for variable-speed drive 
units in the test procedure and applied the PAF to the EER at full 
load.
    AHAM stated that before DOE assigns significant value to expensive 
variable speed/capacity compressors and related control and other 
systems in its engineering analysis, it needs to validate its 
assumptions about room air conditioner operating conditions, operating 
hours, and the likelihood of part load operation. (AHAM, No. 43 at p. 
17)
    The methodology used in the April 2022 NOPR to estimate the energy 
savings associated with part-load operation is based on the DOE test 
procedure, as well as available data regarding room air conditioner 
usage. The development of the test procedure involved testing the 
performance of variable-speed units relative to single-speed units in a 
laboratory setting and measuring the relative efficiency gained by 
part-load operation. DOE is unaware of additional data that can be 
utilized to estimate the performance of variable-speed units. DOE's 
application of PAFs for variable-speed units used in the energy use 
analysis is consistent with the methodology used in DOE test procedure 
and represents DOE's best estimates to capture the efficiency gains of 
part load operation based on available data.
    Rice stated that the energy use analysis in the April 2022 NOPR 
does not use the correct weighting factors to calculate room air 
conditioner (``RAC'') CEERs and performance adjustment factors 
(``PAFs''). Rice states that the weighting factors used by DOE were the 
fractional time spent in each bin, while the correct approach would be 
to use fractional cooling delivered, as done in the RAC test procedure 
final rule. Rice suggested DOE modify its approach in the final rule to 
use weighting factors derived by the fractional cooling delivered. 
(Rice, No. 48 at p. 2)
    DOE clarifies that the calculated State-dependent CEERs and PAFs in 
the April 2022 NOPR were estimated on the fractional cooling delivered, 
as suggested by Rice, which are derived from the fractional time spent 
in each temperature bin. The description of the analysis has been 
updated in the final rule TSD to reflect this clarification.
    In the April 2022 NOPR analysis, DOE included the impact of fan-
only mode energy consumption in the total energy

[[Page 34318]]

use, based on available data for portable ACs. Based on field metering 
data of portable air conditioners, fan-only mode is estimated at 30 
percent of cooling mode hours. DOE assumed that models below ENERGY 
STAR efficiency level would operate in fan-only mode 30 percent of 
cooling mode hours.\32\ For ELs that meet or exceed the ENERGY STAR 
level, DOE estimated the amount of time the unit spent in fan-only mode 
based on the ENERGY STAR Version 4.2 criterion for room air 
conditioners criterion requiring that the unit run in off-cycle fan 
mode less than 17 percent of the time spent in off-cycle mode. Thus, 
for ELs that meet or exceed the ENERGY STAR efficiency level, DOE 
assumed units would operate in fan-only mode 5 percent of cooling mode 
hours.
---------------------------------------------------------------------------

    \32\ Ibid.
---------------------------------------------------------------------------

    NEEA and NWPCC stated that DOE's assumption of fan-only mode being 
30 percent of cooling mode hours for models below ENERGY STAR 
efficiency level is a reasonable assumption. Additionally, NEEA and 
NWPCC agree that more efficient units (those meet or exceed the ENERGY 
STAR level) would be less likely to operate in fan-only mode given 
their variable-speed fans and motors and support the assumed operation 
of fan-only model to be 5 percent of cooling mode hours for these 
units. (NEEA and NWPCC, No. 50 at p. 5)
    In the April 2022 NOPR, DOE assumed that approximately half of room 
air conditioners are unplugged for half of the year. The ``unplugged'' 
time associated with these units is averaged over all units.
    The California IOUs provided data supporting DOE's assumption. In 
an online survey conducted on behalf of the California IOUs by 
Evergreen Economics, results show that 48 percent of households with a 
room air conditioner reported removing their unit and reinstalling 
their equipment each year. (California IOUs, No. 47 at pp. 4-5)
    DOE appreciates the data provided by the California IOUs supporting 
its assumption. DOE maintains its assumption for this final rule.
    P.R. China suggested DOE account for the degradation in energy 
efficiency over the lifetime of the product and in different operating 
environments in the energy use and LCC analyses. (P.R. China, No. 39 at 
p. 4)
    DOE is unaware of data suggesting a decrease in product efficiency 
over the lifetime of room air conditioners. Moreover, there is no 
indication that the degradation would preferentially impact more 
efficient products over less efficient ones. As this effect would 
impact the energy use of units at various efficiency levels, it would 
likely have a small impact on the overall LCC savings results.
    Chapter 7 of the final rule TSD provides details on DOE's energy 
use analysis for room air conditioners.

F. Life-Cycle Cost and Payback Period Analysis

    DOE conducted LCC and PBP analyses to evaluate the economic impacts 
on individual consumers of potential energy conservation standards for 
room air conditioners. The effect of new or amended energy conservation 
standards on individual consumers usually involves a reduction in 
operating cost and an increase in purchase cost. DOE used the following 
two metrics to measure consumer impacts:
     The LCC is the total consumer expense of an appliance or 
product over the life of that product, consisting of total installed 
cost (manufacturer selling price, distribution chain markups, sales 
tax, and installation costs) plus operating costs (expenses for energy 
use, maintenance, and repair). To compute the operating costs, DOE 
discounts future operating costs to the time of purchase and sums them 
over the lifetime of the product.
     The PBP is the estimated amount of time (in years) it 
takes consumers to recover the increased purchase cost (including 
installation) of a more-efficient product through lower operating 
costs. DOE calculates the PBP by dividing the change in purchase cost 
at higher efficiency levels by the change in annual operating cost for 
the year that amended or new standards are assumed to take effect.
    For any given efficiency level, DOE measures the change in LCC 
relative to the LCC in the no-new-standards case, which reflects the 
estimated efficiency distribution of room air conditioners in the 
absence of new or amended energy conservation standards. In contrast, 
the PBP for a given efficiency level is measured relative to the 
baseline product.
    For each considered efficiency level in each product class, DOE 
calculated the LCC and PBP for a nationally representative set of 
housing units and commercial buildings. As stated previously, DOE 
developed household samples from the 2015 RECS and 2012 CBECS. For each 
sample household, DOE determined the energy consumption for room air 
conditioners and the appropriate energy price. By developing a 
representative sample of households, the analysis captured the 
variability in energy consumption and energy prices associated with the 
use of room air conditioners.
    Inputs to the calculation of total installed cost include the cost 
of the product--which includes MPCs, manufacturer markups, retailer and 
distributor markups, and sales taxes--and installation costs. Inputs to 
the calculation of operating expenses include annual energy 
consumption, energy prices and price projections, repair and 
maintenance costs, product lifetimes, and discount rates. DOE created 
distributions of values for product lifetime, discount rates, and sales 
taxes, with probabilities attached to each value, to account for their 
uncertainty and variability.
    The computer model DOE uses to calculate the LCC and PBP relies on 
a Monte Carlo simulation to incorporate uncertainty and variability 
into the analysis. The Monte Carlo simulations randomly sample input 
values from the probability distributions and room air conditioner user 
samples. For this rulemaking, the Monte Carlo approach is implemented 
in MS Excel together with the Crystal Ball\TM\ add-on.\33\ The model 
calculated the LCC and PBP for products at each efficiency level for 
10,000 housing units or commercial buildings per simulation run. The 
analytical results include a distribution of 10,000 data points showing 
the range of LCC savings for a given efficiency level relative to the 
no-new-standards case efficiency distribution. In performing an 
iteration of the Monte Carlo simulation for a given consumer, product 
efficiency is chosen based on its probability. If the chosen product 
efficiency is greater than or equal to the efficiency of the standard 
level under consideration, the LCC and PBP calculation reveals that a 
consumer is not impacted by the standard level. By accounting for 
consumers who already purchase more-efficient products, DOE avoids 
overstating the potential benefits from increasing product efficiency. 
DOE calculated the LCC and PBP for all consumers of room air 
conditioners as if each were to purchase a new product in the first 
year of required compliance with new or amended standards. Amended 
standards apply to room air conditioners manufactured 3 years after the 
date on which any new or amended standard is published. (42 U.S.C.

[[Page 34319]]

6925(m)(4)(A)(i)) Therefore, DOE used 2026 as the first year of 
compliance with any amended standards for room air conditioners.
---------------------------------------------------------------------------

    \33\ Crystal Ball\TM\ is commercially-available software tool to 
facilitate the creation of these types of models by generating 
probability distributions and summarizing results within Excel, 
available at www.oracle.com/technetwork/middleware/crystalball/overview/ (last accessed September 6, 2022).
---------------------------------------------------------------------------

    Table IV.3 summarizes the approach and data DOE used to derive 
inputs to the LCC and PBP calculations. The subsections that follow 
provide further discussion. Details of the spreadsheet model, and of 
all the inputs to the LCC and PBP analyses, are contained in chapter 8 
of the final rule TSD and its appendices.

Table IV.3--Summary of Inputs and Methods for the LCC and PBP Analysis *
------------------------------------------------------------------------
            Inputs                           Source/method
------------------------------------------------------------------------
Product Cost.................  Derived by multiplying MPCs by
                                manufacturer and retailer markups and
                                sales tax, as appropriate. Used
                                historical data to derive a price
                                scaling index to project product costs.
Installation Costs...........  Baseline installation cost determined
                                with data from RSMeans 2022.
Annual Energy Use............  The total annual energy use by operating
                                mode multiplied by the hours per year in
                                each mode. Variability: Based on the
                                2015 RECS and 2012 CBECS.
Energy Prices................  Electricity: Based on Edison Electric
                                Institute data for 2021. Variability:
                                Regional energy prices determined for
                                each Census Division.
Energy Price Trends..........  Based on AEO2022 price projections by
                                Census Division.
Repair and Maintenance Costs.  Assumed no change with efficiency level
                                for maintenance costs. Repair costs
                                estimated for each product class and
                                efficiency level.
Product Lifetime.............  Weibull probability distribution
                                developed from historical shipments,
                                American Housing Survey, and RECS, with
                                an average lifetime of 9 years.
Discount Rates...............  Approach involves identifying all
                                possible debt or asset classes that
                                might be used to purchase the considered
                                appliances, or might be affected
                                indirectly. Primary data source was the
                                Federal Reserve Board's Survey of
                                Consumer Finances.
Compliance Date..............  2026.
------------------------------------------------------------------------
* References for the data sources mentioned in this table are provided
  in the sections following the table or in chapter 8 of the final rule
  TSD.

1. Product Cost
    To calculate consumer product costs, DOE multiplied the MPCs 
developed in the engineering analysis by the markups described 
previously (along with sales taxes). DOE used different markups for 
baseline products and higher-efficiency products, because DOE applies 
an incremental markup to the increase in MSP associated with higher-
efficiency products.
    Economic literature and historical data suggest that the real costs 
of many products may trend downward over time according to ``learning'' 
or ``experience'' curves. Experience curve analysis implicitly includes 
factors such as efficiencies in labor, capital investment, automation, 
materials prices, distribution, and economies of scale at an industry-
wide level. To derive the learning rate parameter for room air 
conditioners that utilize single-speed compressors, DOE obtained 
historical Producer Price Index (``PPI'') data for room air 
conditioners from the Bureau of Labor Statistics (``BLS''). A PPI 
specific to ``room air-conditioners and dehumidifiers, except portable 
dehumidifiers'' was available for the time period between 1990 and 
2009.\34\ After 2009, DOE used the primary products series of ``air-
conditioning, refrigeration and forced air heating equipment'', which 
includes room air conditioners, spanning the years 2010-2021.\35\ 
Inflation-adjusted price indices were calculated by dividing the PPI 
series by the gross domestic product index from Bureau of Economic 
Analysis for the same years. Using the combined data from 1990-2021, 
the estimated learning rate (defined as the fractional reduction in 
price expected from each doubling of cumulative production) is 24 
percent. For efficiency levels that include variable-speed compressors, 
DOE applied a different price trend to the controls portion of the 
variable-speed compressors that contributes to the price increments 
moving from EL 3 (an efficiency level achieved with the highest 
efficiency single-speed compressor) to EL 4 and EL 5. DOE used PPI data 
on ``semiconductors and related device manufacturing'' between 1967 and 
2021 to estimate the historic price trend of electronic components in 
the control. The regression performed as an exponential trend line fit 
results in an R-square of 0.99, with an annual price decline rate of 
6.3 percent. See chapter 8 of the final rule TSD for further details on 
this topic.
---------------------------------------------------------------------------

    \34\ Room air-conditioners and dehumidifiers, except portable 
dehumidifiers PPI series ID: PCU3334153334156; www.bls.gov/ppi/.
    \35\ Air-conditioning, refrigeration, and forced air heating 
equipment manufacturing, Primary Products PPI series ID: 
PCU333415333415P; www.bls.gov/ppi/.
---------------------------------------------------------------------------

2. Installation Cost
    Installation cost includes labor, overhead, and any miscellaneous 
materials and parts needed to install the product. In the April 2022 
NOPR, DOE assumed that the installation cost would be constant for all 
efficiency levels and, thus, did not include installation costs in the 
LCC calculation.
    AHAM stated that even with minimal size increases in smaller room 
air conditioners, different chassis sizes will necessitate different 
installation brackets that do not cover louvers. AHAM requested that 
DOE analyze costs of necessary retrofits if chassis size changes and 
the increased installation costs due to heavier products. (AHAM, No. 43 
at p. 23)
    DOE agrees that a standard that changes the chassis size or weight 
of units may increase installation costs. For the final rule, DOE used 
data from RSMeans 2022 to estimate the labor and material cost 
necessary for installing units at various capacities. DOE matched the 
RSMeans installation costs derived by capacity to the corresponding 
baseline level within each product class. To account for additional 
labor hours in higher efficiency equipment with significantly larger 
dimensions and/or weight, DOE based the labor hour estimates on labor 
hours for higher capacity room air conditioners with similar 
dimensions/weight. DOE notes that chassis size only increases at the 
max-tech level and does not project an increased cost due to retrofits 
at the adopted TSL.
3. Annual Energy Consumption
    For each sampled household or business, DOE determined the energy 
consumption for room air conditioners at different efficiency levels 
using the approach described previously in section IV.E of this 
document.

[[Page 34320]]

a. Rebound Effect
    A direct rebound effect occurs when a product that is made more 
efficient is used more intensively, such that the expected energy 
savings from the efficiency improvement may not fully materialize. At 
the same time, consumers benefit from increased utilization of products 
due to rebound. Higher-efficiency room air conditioners reduce the 
operating costs for a consumer, which can lead to greater use of room 
air conditioners. Overall consumer welfare (taking into account 
additional costs and benefits of increased usage) is generally 
understood to increase from rebound. DOE did not find any data on the 
rebound effect that is specific to room air conditioners. In the April 
2011 Direct Final Rule, DOE estimated a rebound of 15 percent for room 
air conditioners for the NIA but did not include rebound in the LCC 
analysis. 76 FR 22454, 22511. Given the uncertainty and lack of data 
specific to room air conditioners, DOE did not include the rebound 
effect in the LCC analysis for this final rule. DOE does include 
rebound in the NIA for a conservative estimate of national energy 
savings and the corresponding impact to consumer NPV. See sections 
IV.H.2 and IV.H.3 of this document for further details on how the 
rebound effect is applied in the NIA.
4. Energy Prices
    Because marginal electricity price more accurately captures the 
incremental savings associated with a change in energy use from higher 
efficiency, it provides a better representation of incremental change 
in consumer costs than average electricity prices. Therefore, DOE 
applied average electricity prices for the energy use of the product 
purchased in the no-new-standards case, and marginal electricity prices 
for the incremental change in energy use associated with the other 
efficiency levels considered.
    DOE derived electricity prices in 2021 using data from Edison 
Electric Institute (``EEI'') Typical Bills and Average Rates reports. 
Based upon comprehensive, industry-wide surveys, this semi-annual 
report presents typical monthly electric bills and average kilowatt-
hour costs to the customer as charged by investor-owned utilities. For 
the residential sector, DOE calculated electricity prices using the 
methodology described in Coughlin and Beraki (2018).\36\ For the 
commercial sector, DOE calculated electricity prices using the 
methodology described in Coughlin and Beraki (2019).\37\
---------------------------------------------------------------------------

    \36\ Coughlin, K. and B. Beraki.2018. Residential Electricity 
Prices: A Review of Data Sources and Estimation Methods. Lawrence 
Berkeley National Lab. Berkeley, CA. Report No. LBNL-2001169. 
https://ees.lbl.gov/publications/residential-electricity-prices-review.
    \37\ Coughlin, K. and B. Beraki. 2019. Non-residential 
Electricity Prices: A Review of Data Sources and Estimation Methods. 
Lawrence Berkeley National Lab. Berkeley, CA. Report No. LBNL-
2001203. https://ees.lbl.gov/publications/non-residential-electricity-prices.
---------------------------------------------------------------------------

    DOE calculated weighted-average values for average and marginal 
price for the nine census divisions for both the residential and 
commercial sectors. As the EEI data are published separately for summer 
and winter, DOE calculated seasonal prices for each division and 
sector. See chapter 8 of the final rule TSD for details.
    To estimate energy prices in future years, DOE multiplied the 2021 
energy prices by the projection of annual average price changes for 
each of the nine census divisions from the Reference case in AEO2022, 
which has an end year of 2050.\38\ To estimate price trends after 2050, 
DOE used a constant value based on the simple average between 2046 
through 2050.
---------------------------------------------------------------------------

    \38\ U.S. Department of Energy-Energy Information 
Administration. Annual Energy Outlook 2022 with Projections to 2050. 
Washington, DC. Available at www.eia.gov/forecasts/aeo/ (last 
accessed September 6, 2022).
---------------------------------------------------------------------------

5. Maintenance and Repair Costs
    Repair costs are associated with repairing or replacing product 
components that have failed in an appliance; maintenance costs are 
associated with maintaining the operation of the product. Typically, 
small incremental increases in product efficiency produce no, or only 
minor, changes in repair and maintenance costs compared to baseline 
efficiency products. In this final rule analysis, DOE did not include 
maintenance costs in the LCC.
    In the April 2022 NOPR, DOE assumed that repair frequencies are low 
and increase for the higher-capacity units due to more expensive 
equipment costs. DOE assumed that 1 percent of small-sized units (below 
8,000 Btu/h), 2 percent of medium-sized units (8,000 to 20,000 Btu/h), 
and 3 percent of large-sized units (above 20,000 Btu/h) are maintained 
or repaired each year. DOE assumed that an average service call and 
repair/maintenance takes about 1 hour for small and medium-sized units 
and 2 hours for large units, and that the average material cost is 
equal to one-half of the incremental equipment cost.
    Friedrich states that DOE failed to incorporate increased repairs 
costs to service room air conditioners with variable-speed compressors 
and increased heat exchanger sizes. According to Friedrich, the 
likelihood and repair cost will increase due to complexity of 
components with variable-speed compressors or additional braze joints 
for larger heat exchangers. (Friedrich, No. 44 at pp. 8-9)
    DOE's analysis incorporates an increased repair cost due to the 
higher incremental costs associated with units with variable-speed 
compressors for more expensive components as suggested by Friedrich. 
DOE is unaware of any data indicating an increased likelihood of repair 
due to variable-speed compressors or increased heat exchanger sizes. A 
retrospective analysis of the April 2011 Direct Final Rule found that 
DOE's approach to estimating repair costs at each efficiency level 
based on the incremental equipment cost agreed with an analysis of 
consumer survey data.\39\ DOE maintains its approach to estimating 
repair rates and costs for this final rule.
---------------------------------------------------------------------------

    \39\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A 
Retrospective Analysis of the 2011 Direct Final Rule for Room Air 
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
---------------------------------------------------------------------------

6. Product Lifetime
    For room air conditioners, DOE developed a distribution of 
lifetimes from which specific values are assigned to the appliances in 
the samples. DOE conducted an analysis of actual lifetime in the field 
using a combination of historical shipments data, the stock of the 
considered appliances in the American Housing Survey, and responses in 
RECS on the age of the appliances in the homes. The data allowed DOE to 
estimate a survival function, which provides an average appliance 
lifetime. This analysis yielded a lifetime probability distribution 
with an average lifetime for room air conditioners of approximately 9 
years.
    Friedrich states that the increase in braze joints needed for 
larger heat exchangers may increase the potential for refrigerant 
leaks. Friedrich adds that in the event of a refrigerant leak, 
consumers are more likely to retire their unit early rather than repair 
the unit due to the high repair cost resulting in a short lifetime for 
efficiency levels with this technology. (Friedrich, No. 44 at p. 9)
    As described in section IV.F.5, the April 2022 NOPR assumed a low 
repair rate (1-3 percent). Data was not provided by stakeholders during 
the rulemaking demonstrating the impact that larger heat exchangers 
would have on the repair rate or repair cost which

[[Page 34321]]

could potentially lead to shorter product lifetimes. For this final 
rule, DOE maintained the same lifetime distribution for all efficiency 
levels.
7. Discount Rates
    In the calculation of LCC, DOE applies discount rates appropriate 
to households to estimate the present value of future operating cost 
savings. DOE estimated a distribution of discount rates for room air 
conditioners based on the opportunity cost of consumer funds.
    DOE applies weighted average discount rates calculated from 
consumer debt and asset data, rather than marginal or implicit discount 
rates.\40\ The LCC analysis estimates net present value over the 
lifetime of the product, so the appropriate discount rate will reflect 
the general opportunity cost of household funds, taking this time scale 
into account. Given the long time horizon modeled in the LCC, the 
application of a marginal interest rate associated with an initial 
source of funds is inaccurate. Regardless of the method of purchase, 
consumers are expected to continue to rebalance their debt and asset 
holdings over the LCC analysis period, based on the restrictions 
consumers face in their debt payment requirements and the relative size 
of the interest rates available on debts and assets. DOE estimates the 
aggregate impact of this rebalancing using the historical distribution 
of debts and assets.
---------------------------------------------------------------------------

    \40\ The implicit discount rate is inferred from a consumer 
purchase decision between two otherwise identical goods with 
different first cost and operating cost. It is the interest rate 
that equates the increment of first cost to the difference in net 
present value of lifetime operating cost, incorporating the 
influence of several factors: transaction costs; risk premiums and 
response to uncertainty; time preferences; interest rates at which a 
consumer is able to borrow or lend. The implicit discount rate is 
not appropriate for the LCC analysis because it reflects a range of 
factors that influence consumer purchase decisions, rather than the 
opportunity cost of the funds that are used in purchases.
---------------------------------------------------------------------------

    To establish residential discount rates for the LCC analysis, DOE 
identified all relevant household debt or asset classes in order to 
approximate a consumer's opportunity cost of funds related to appliance 
energy cost savings. It estimated the average percentage shares of the 
various types of debt and equity by household income group using data 
from the Federal Reserve Board's Survey of Consumer Finances \41\ 
(``SCF'') for 1995, 1998, 2001, 2004, 2007, 2010, 2013, 2016, and 2019. 
Using the SCF and other sources, DOE developed a distribution of rates 
for each type of debt and asset by income group to represent the rates 
that may apply in the year in which amended standards would take 
effect. DOE assigned each sample household a specific discount rate 
drawn from one of the distributions. The average rate across all types 
of household debt and equity and income groups, weighted by the shares 
of each type, is 4.3 percent.
---------------------------------------------------------------------------

    \41\ U.S. Board of Governors of the Federal Reserve System. 
Survey of Consumer Finances. 1995, 1998, 2001, 2004, 2007, 2010, 
2013, 2016, and 2019. (Last accessed September 6, 2022.) 
www.federalreserve.gov/econresdata/scf/scfindex.htm.
---------------------------------------------------------------------------

    See chapter 8 of the final rule TSD for further details on the 
development of consumer discount rates.
8. Energy Efficiency Distribution in the No-New-Standards Case
    To accurately estimate the share of consumers that would be 
affected by a potential energy conservation standard at a particular 
efficiency level, DOE's LCC analysis considered the projected 
distribution (market shares) of product efficiencies under the no-new-
standards case (i.e., the case without amended or new energy 
conservation standards).
    DOE utilized confidential 2019 shipments data disaggregated by 
product class and efficiency provided by AHAM in response to the June 
2020 Preliminary Analysis to estimate the efficiency distribution in 
2019. In the April 2022 NOPR, DOE assumed an annual 0.25 percent 
increase in shipment-weighted CEER for each product class to develop 
the efficiency distribution in 2026. The efficiency trend is supported 
by a retrospective analysis of the April 2011 Direct Final Rule which 
used a similar efficiency trend for single-speed compressor units.\42\ 
For this final rule, DOE assumed this trend applied to efficiency 
levels with single-speed compressors (EL 0, EL 1, EL 2, and EL 3).
---------------------------------------------------------------------------

    \42\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A 
Retrospective Analysis of the 2011 Direct Final Rule for Room Air 
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
---------------------------------------------------------------------------

    In the 2022 NOPR, DOE assumed the adoption of variable-speed 
technologies would follow a Bass diffusion curve which describes how 
new technologies diffuse into the consumer market. DOE assumed that 
units with variable-speed technologies would account for 5 percent of 
shipments in each product class by 2026.
    In response to the April 2022 NOPR, NEEA and NWPCC provided sales 
estimates for variable-speed units and all room air conditioners sold 
as part of the EPA ENERGY STAR[supreg] Retail Products Platform 
(ESRPP). NEEA and NWPCC encouraged DOE to use these data to calibrate 
the Bass diffusion curve for variable-speed models. (NEEA and NWPCC, 
No. 50 at pp. 2-4)
    DOE thanks NEEA and NWPCC for the provided sales data needed to 
calibrate the Bass diffusion curve for the adoption of variable-speed 
technologies. The ESRPP data provided by NEEA and NWPCC indicated a 
faster adoption of variable-speed technologies than estimated in the 
April 2022 NOPR between 2018 and 2022, in particular for capacities 
greater than 8,000 Btu/h. For this final rule, DOE calibrated its Bass 
diffusion curve model for variable-speed models to reach 7 percent of 
shipments in 2026 with faster adoption for capacities greater than 
8,000 Btu/h based on the provided data.
    The estimated market shares for the no-new-standards case for room 
air conditioners in 2026 are shown in Tables IV.4 through IV.6. See 
chapter 8 of the final rule TSD for further information on the 
derivation of the efficiency distributions.

              Table IV.4--Room Air Conditioners Without Reverse Cycle and With Louvered Sides: No-New-Standards Case Market Shares in 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                <6,000 Btu/h (PC1)            6,000-7,900 Btu/h (PC2)        8,000-13,900 Btu/h (PC3)
                                                         -----------------------------------------------------------------------------------------------
                    Efficiency level                        Efficiency                      Efficiency                      Efficiency
                                                         ----------------  Market share  ----------------  Market share  ----------------  Market share
                                                               CEER             (%)            CEER             (%)            CEER             (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................            11.0             7.7            11.0             0.0            10.9             0.0
1.......................................................            11.4            85.2            11.4            74.6            11.4            30.3
2.......................................................            12.1             2.1            12.1            18.3            12.0            58.0
3.......................................................            13.1             0.0            13.7             2.1            14.3             0.9
4.......................................................            16.0             5.0            16.0             5.0            16.0            10.7

[[Page 34322]]

 
5.......................................................            20.2             0.0            21.2             0.0            21.9             0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             14,000-19,900 Btu/h (PC4)
                                                            20,000-27,900 Btu/h (PC5a)
                                                               >=28,000 Btu/h (PC5b)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................            10.7             0.0             9.4             0.0             9.0            40.3
1.......................................................            11.1             0.0             9.8             9.0             9.4            45.7
2.......................................................            11.8            89.1            10.3            80.3             9.9             9.0
3.......................................................            14.0             0.1            11.8             0.0            10.3             0.0
4.......................................................            16.0            10.7            13.8            10.7            13.2             5.0
5.......................................................            19.8             0.0            18.7             0.0            16.3             0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table IV.5--Room Air Conditioners Without Reverse Cycle and Without Louvered Sides: No-New-Standards Case Market Shares in 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            8,000-10,900 Btu/h (PC 8a)      11,000-13,900 Btu/h (PC8b)       14,000-19,900 Btu/h (PC9)
                                                         -----------------------------------------------------------------------------------------------
                    Efficiency level                        Efficiency                      Efficiency                      Efficiency
                                                         ----------------  Market share  ----------------  Market share  ----------------  Market share
                                                               CEER             (%)            CEER             (%)            CEER             (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................             9.6             0.0             9.5             0.0             9.3            39.1
1.......................................................            10.1            11.4            10.0             0.0             9.7            46.9
2.......................................................            10.6            83.6            10.5            94.3            10.2             9.0
3.......................................................            12.3             0.0            12.3             0.7            10.9             0.0
4.......................................................            14.1             5.0            13.9             5.0            13.7             5.0
5.......................................................            18.7             0.0            19.0             0.0            16.8             0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------


                   Table IV.6--Room Air Conditioners With Reverse Cycle, Casement-Slider: No-New-Standards Case Market Shares in 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 w/louvers (PC11)                wo/louvers (PC12)            Casement-slider (PC16)
                                                         -----------------------------------------------------------------------------------------------
                                                                   <20,000 Btu/h                   <14,000 Btu/h
                    Efficiency level                     -----------------------------------------------------------------------------------------------
                                                            Efficiency                      Efficiency                      Efficiency
                                                         ----------------  Market share  ----------------  Market share  ----------------  Market share
                                                               CEER             (%)            CEER             (%)            CEER             (%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................             9.8            50.7             9.3            39.1            10.4            34.4
1.......................................................            10.4            35.2             9.7            46.9            10.8            51.6
2.......................................................            10.8             9.0            10.2             9.0            11.4             9.0
3.......................................................            12.3             0.0            11.3             0.0            13.2             0.0
4.......................................................            14.4             5.0            13.7             5.0            15.3             5.0
5.......................................................            18.0             0.0            16.4             0.0            19.1             0.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

9. Payback Period Analysis
    The payback period is the amount of time it takes the consumer to 
recover the additional installed cost of more-efficient products, 
compared to baseline products, through energy cost savings. Payback 
periods are expressed in years. Payback periods that exceed the life of 
the product mean that the increased total installed cost is not 
recovered in reduced operating expenses.
    The inputs to the PBP calculation for each efficiency level are the 
change in total installed cost of the product and the change in the 
first-year annual operating expenditures relative to the baseline. The 
PBP calculation uses the same inputs as the LCC analysis, except that 
discount rates are not needed.
    As noted previously, EPCA establishes a rebuttable presumption that 
a standard is economically justified if the Secretary finds that the 
additional cost to the consumer of purchasing a product complying with 
an energy conservation standard level will be less than three times the 
value of the first year's energy savings resulting from the standard, 
as calculated under the applicable test procedure. (42 U.S.C. 
6295(o)(2)(B)(iii)) For each considered efficiency level, DOE 
determined the value of the first year's energy savings by calculating 
the energy savings in accordance with the applicable DOE test 
procedure, and multiplying those savings by the average energy price 
projection for the year in which compliance with the amended standards 
would be required.

G. Shipments Analysis

    DOE uses projections of annual product shipments to calculate the 
national impacts of potential amended or new energy conservation 
standards on energy use, NPV, and future manufacturer cash flows.\43\ 
The

[[Page 34323]]

shipments model takes an accounting approach, tracking market shares of 
each product class and the vintage of units in the stock. Stock 
accounting uses product shipments as inputs to estimate the age 
distribution of in-service product stocks for all years. The age 
distribution of in-service product stocks is a key input to 
calculations of both the NES and NPV, because operating costs for any 
year depend on the age distribution of the stock.
---------------------------------------------------------------------------

    \43\ DOE uses data on manufacturer shipments as a proxy for 
national sales, as aggregate data on sales are lacking. In general, 
one would expect a close correspondence between shipments and sales.
---------------------------------------------------------------------------

    Total shipments for room air conditioners are developed by 
considering the demand from replacements for units in stock that fail 
and the demand from first-time owners in existing homes. DOE calculated 
shipments due to replacements using the retirement function developed 
for the LCC analysis. DOE calculated shipments due to first-time owners 
in existing households using estimates from room air conditioner 
saturation in RECS 2015 and projections of housing stock from AEO2022. 
See chapter 8 of the final rule TSD for details.
    DOE considers the impacts on shipments from changes in product 
purchase price and operating cost associated with higher energy 
efficiency levels using a price elasticity and an efficiency 
elasticity. As in the April 2022 NOPR, DOE employs a 0.2-percent 
efficiency elasticity rate and a price elasticity of -0.45 in its 
shipments model. These values are based on analysis of aggregated data 
for five residential appliances including room air conditioners.\44\ 
The market impact is defined as the difference between the product of 
price elasticity of demand and the change in price due to a standard 
level, and the product of the efficiency elasticity and the change in 
operating costs due to a standard level.
---------------------------------------------------------------------------

    \44\ Fujita, K. (2015) Estimating Price Elasticity using Market-
Level Appliance Data. Lawrence Berkeley National Laboratory, LBNL-
188289.
---------------------------------------------------------------------------

H. National Impact Analysis

    The NIA assesses the national energy savings (``NES'') and the NPV 
from a national perspective of total consumer costs and savings that 
would be expected to result from new or amended standards at specific 
efficiency levels.\45\ (``Consumer'' in this context refers to 
consumers of the product being regulated.) DOE calculates the NES and 
NPV for the potential standard levels considered based on projections 
of annual product shipments, along with the annual energy consumption 
and total installed cost data from the energy use and LCC analyses. For 
the present analysis, DOE projected the energy savings, operating cost 
savings, product costs, and NPV of consumer benefits over the lifetime 
of room air conditioners sold from 2026 through 2055.
---------------------------------------------------------------------------

    \45\ The NIA accounts for impacts in the 50 states and U.S. 
territories.
---------------------------------------------------------------------------

    DOE evaluates the impacts of new or amended standards by comparing 
a case without such standards with standards-case projections. The no-
new-standards case characterizes energy use and consumer costs for each 
product class in the absence of new or amended energy conservation 
standards. For this projection, DOE considers historical trends in 
efficiency and various forces that are likely to affect the mix of 
efficiencies over time. DOE compares the no-new-standards case with 
projections characterizing the market for each product class if DOE 
adopted new or amended standards at specific energy efficiency levels 
(i.e., the TSLs or standards cases) for that class. For the standards 
cases, DOE considers how a given standard would likely affect the 
market shares of products with efficiencies greater than the standard.
    DOE uses a spreadsheet model to calculate the energy savings and 
the national consumer costs and savings from each TSL. Interested 
parties can review DOE's analyses by changing various input quantities 
within the spreadsheet. The NIA spreadsheet model uses typical values 
(as opposed to probability distributions) as inputs.
    Table IV.7 summarizes the inputs and methods DOE used for the NIA 
analysis for the final rule. Discussion of these inputs and methods 
follows the table. See chapter 10 of the final rule TSD for further 
details.

    Table IV.7--Summary of Inputs and Methods for the National Impact
                                Analysis
------------------------------------------------------------------------
            Inputs                               Method
------------------------------------------------------------------------
Shipments....................  Annual shipments from shipments model.
Compliance Date of Standard..  2026.
Efficiency Trends............  Bass diffusion curve to allocate
                                shipments to ELs with variable-speed
                                technology and annual 0.25% increase in
                                shipment-weighted CEER for ELs with
                                single-speed technology.
Annual Energy Consumption per  Calculated for each efficiency level
 Unit.                          based on inputs from energy use
                                analysis.
Total Installed Cost per Unit  Calculated for each efficiency level
                                based on inputs from the LCC analysis.
                                Incorporates projection of future
                                product prices based on historical data.
Annual Energy Cost per Unit..  Annual weighted-average values as a
                                function of the annual energy
                                consumption per unit and energy prices.
Repair and Maintenance Cost    Calculated for each efficiency level on
 per Unit.                      inputs from the LCC analysis.
Energy Price Trends..........  AEO2022 projections (to 2050) and a
                                constant value derived from simple
                                average between 2046-2050 thereafter.
Energy Site-to-Primary and     A time-series conversion factor based on
 FFC Conversion.                AEO2022.
Discount Rate................  Three and seven percent.
Present Year.................  2022.
------------------------------------------------------------------------

1. Product Efficiency Trends
    A key component of the NIA is the trend in energy efficiency 
projected for the no-new-standards case and each of the standards 
cases. Section IV.F.8 of this document describes how DOE developed an 
energy efficiency distribution for the no-new-standards case (which 
yields a shipment-weighted average efficiency) for each of the 
considered product classes for the year of anticipated compliance with 
an amended or new standard. To project the trend in efficiency absent 
amended standards for room air conditioners over the entire shipments 
projection period, DOE assumed that market share for ELs with variable-
speed technologies would follow a Bass diffusion curve, while the 
shipment-weighted CEER for ELs with single-speed compressors would 
increase annually by 0.25 percent in CEER based on historical trends in

[[Page 34324]]

shipment-weighted efficiency.\46\ The approach is further described in 
chapter 10 of the final rule TSD.
---------------------------------------------------------------------------

    \46\ Ganeshalingam, M., Ni, C., and Yang, H-C. 2021. A 
Retrospective Analysis of the 2011 Direct Final Rule for Room Air 
Conditioners. Lawrence Berkeley National Laboratory. LBNL-2001413.
---------------------------------------------------------------------------

    In its reference scenario, DOE assumed that variable-speed 
technologies would comprise 25 percent of the market by the end of the 
analysis period (2055). DOE also performed sensitivity scenarios 
assuming a low penetration of variable-speed technologies (10 percent 
of the market in 2055) and a high penetration of variable-speed 
technologies (50 percent of the market in 2055). The results of these 
scenarios can be found in appendix 10E of the final rule TSD.
    For the standards cases, DOE used a ``roll-up'' scenario to 
establish the shipment-weighted efficiency for the year that standards 
are assumed to become effective in 2026. In the year of compliance, the 
market shares of products in the no-new-standards case that do not meet 
the standard under consideration would ``roll up'' to the minimum EL 
that meets the standard, and the market share of products above the 
standard would remain unchanged. As in the no-new-standards case, DOE 
assumed an annual increase of 0.25 percent in CEER over the analysis 
period for ELs with single-speed technology.
2. National Energy Savings
    The national energy savings analysis involves a comparison of 
national energy consumption of the considered products between each 
potential standards case (``TSL'') and the case with no new or amended 
energy conservation standards. DOE calculated the national energy 
consumption by multiplying the number of units (stock) of each product 
(by vintage or age) by the unit energy consumption (also by vintage). 
DOE calculated annual NES based on the difference in national energy 
consumption for the no-new-standards case and for each higher 
efficiency standard case. DOE estimated energy consumption and savings 
based on site energy and converted the electricity consumption and 
savings to primary energy (i.e., the energy consumed by power plants to 
generate site electricity) using annual conversion factors derived from 
AEO2022. Cumulative energy savings are the sum of the NES for each year 
over the timeframe of the analysis.
    Use of higher-efficiency products is sometimes associated with a 
direct rebound effect, which refers to an increase in utilization of 
the product due to the increase in efficiency. DOE did not find any 
data on the rebound effect specific to room air conditioners, but it 
applied a direct rebound effect of 15 percent as suggested by Sorrell 
et al. for space cooling appliances.\47\ The calculated NES at each 
efficiency level is therefore reduced by 15 percent in residential 
applications. DOE also included the rebound effect in the NPV analysis 
by accounting for the additional net benefit from increased room air 
conditioner usage as described in section IV.H.3 of this document.
---------------------------------------------------------------------------

    \47\ Sorrell, S., J. Dimitropoulos, M. Sommerville. 2009. 
Empirical estimates of the direct rebound effect: A review. Energy 
Policy 37 (2009) 1356-1371.
---------------------------------------------------------------------------

    In 2011, in response to the recommendations of a committee on 
``Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy 
Efficiency Standards'' appointed by the National Academy of Sciences, 
DOE announced its intention to use FFC measures of energy use and 
greenhouse gas and other emissions in the national impact analyses and 
emissions analyses included in future energy conservation standards 
rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the 
approaches discussed in the August 18, 2011 document, DOE published a 
statement of amended policy in which DOE explained its determination 
that EIA's National Energy Modeling System (``NEMS'') is the most 
appropriate tool for its FFC analysis and its intention to use NEMS for 
that purpose. 77 FR 49701 (Aug. 17, 2012). NEMS is a public domain, 
multi-sector, partial equilibrium model of the U.S. energy sector \48\ 
that EIA uses to prepare its Annual Energy Outlook. The FFC factors 
incorporate losses in production and delivery in the case of natural 
gas (including fugitive emissions) and additional energy used to 
produce and deliver the various fuels used by power plants. The 
approach used for deriving FFC measures of energy use and emissions is 
described in appendix 10B of the final rule TSD.
---------------------------------------------------------------------------

    \48\ For more information on NEMS, refer to The National Energy 
Modeling System: An Overview 2018, DOE/EIA-0581(2019), April 2019. 
Available at www.eia.gov/outlooks/aeo/nems/documentation/ (last 
accessed September 7, 2022).
---------------------------------------------------------------------------

3. Net Present Value Analysis
    The inputs for determining the NPV of the total costs and benefits 
experienced by consumers are (1) total annual installed cost, (2) total 
annual operating costs (energy costs and repair and maintenance costs), 
and (3) a discount factor to calculate the present value of costs and 
savings. DOE calculates net savings each year as the difference between 
the no-new-standards case and each standards case in terms of total 
savings in operating costs versus total increases in installed costs. 
DOE calculates operating cost savings over the lifetime of each product 
shipped during the projection period.
    As discussed in section IV.F.1 of this document, DOE developed room 
air conditioner price trends based on combined historical PPI data of 
``room air-conditioners and dehumidifiers, except portable 
dehumidifiers'' and primary air-conditioning, refrigeration and forced 
air heating equipment. DOE applied the same trends to project prices 
for each product class at each considered efficiency level. By 2055, 
the end date of the analysis period, the average single-speed 
compressor room air conditioner price is projected to drop 18 percent 
and the variable-speed compressor room air conditioner price is 
projected to drop about 31 percent relative to 2026. DOE's projection 
of product prices is described in appendix 10C of the final rule TSD.
    To evaluate the effect of uncertainty regarding the price trend 
estimates, DOE investigated the impact of alternate product price 
projections on the consumer NPV for the considered TSLs for room air 
conditioners. In addition to the default price trend, DOE considered 
high and low product price sensitivity cases. In the high price 
scenario, DOE based the price decline of the non-variable speed 
controls portion on room air conditioner PPI data limited to the period 
1990-2009, which shows a faster price decline relative to the full time 
series. For the variable-speed controls portion, DOE used a faster 
price decline derived from the exponential fit of ``semiconductors and 
related device manufacturing'' PPI series spanning between 1994 and 
2021. In the low price decline scenario, DOE assumed a constant price 
for the non-variable-speed controls portion of the price and a slower 
price decline estimate for the variable-speed controls portion derived 
from the exponential fit of ``semiconductors and related device 
manufacturing'' PPI series spanning between 1967 and 1993. The 
derivation of these price trends and the results of these sensitivity 
cases are described in appendix 10C of the final rule TSD.
    The operating cost savings are energy cost savings, which are 
calculated using the estimated energy savings in each year and the 
projected price of the appropriate form of energy. To estimate energy 
prices in future years, DOE multiplied the average regional energy 
prices by the projection of annual national-average residential energy 
price

[[Page 34325]]

changes in the Reference case from AEO2022, which has an end year of 
2050. To estimate price trends after 2050, DOE used a constant value 
derived from a simple average of the price trend between 2046 through 
2050. As part of the NIA, DOE also analyzed scenarios that used inputs 
from variants of the AEO2022 Reference case that have lower and higher 
economic growth. Those cases have lower and higher energy price trends 
compared to the Reference case. NIA results based on these cases are 
presented in appendix 10C of the final rule TSD.
    As previously described, DOE assumed a 15 percent rebound from an 
increase in utilization of the product arising from the increase in 
efficiency (i.e., the direct rebound effect). In considering the 
consumer welfare gained due to the direct rebound effect, DOE accounted 
for change in consumer surplus attributed to additional cooling from 
the purchase of a more efficient unit. Overall consumer welfare is 
generally understood to be enhanced from rebound. The net consumer 
impact of the rebound effect is included in the calculation of 
operating cost savings in the consumer NPV results. See appendix 10F of 
the final rule TSD for details on DOE's treatment of the monetary 
valuation of the rebound effect.
    In calculating the NPV, DOE multiplies the net savings in future 
years by a discount factor to determine their present value. For this 
final rule, DOE estimated the NPV of consumer benefits using both a 3-
percent and a 7-percent real discount rate. DOE uses these discount 
rates in accordance with guidance provided by the Office of Management 
and Budget (``OMB'') to Federal agencies on the development of 
regulatory analysis.\49\ The discount rates for the determination of 
NPV are in contrast to the discount rates used in the LCC analysis, 
which are designed to reflect a consumer's perspective. The 7-percent 
real value is an estimate of the average before-tax rate of return to 
private capital in the U.S. economy. The 3-percent real value 
represents the ``social rate of time preference,'' which is the rate at 
which society discounts future consumption flows to their present 
value.
---------------------------------------------------------------------------

    \49\ United States Office of Management and Budget. Circular A-
4: Regulatory Analysis. September 17, 2003. Section E. Available at 
www.whitehouse.gov/omb/memoranda/m03-21.html (last accessed 
September 7, 2022).
---------------------------------------------------------------------------

I. Consumer Subgroup Analysis

    In analyzing the potential impact of new or amended energy 
conservation standards on consumers, DOE evaluates the impact on 
identifiable subgroups of consumers that may be disproportionately 
affected by a new or amended national standard. The purpose of a 
subgroup analysis is to determine the extent of any such 
disproportional impacts. DOE evaluates impacts on particular subgroups 
of consumers by analyzing the LCC impacts and PBP for those particular 
consumers from alternative standard levels. For this final rule, DOE 
analyzed the impacts of the considered standard levels on two 
subgroups: (1) low-income households and (2) senior-only households. 
The analysis used subsets of the RECS 2015 sample composed of 
households that meet the criteria for the considered subgroups. DOE 
determined households in the low-income subgroup analysis using poverty 
thresholds from the U.S. Federal Poverty Guidelines which are based on 
household income and occupancy.\50\ The subgroup, which represents a 
total of 12.1 million room ACs in 7.3 million low-income households 
across the U.S., is composed of 55 percent renters, 43 percent home-
owners, 2 percent occupants living in homes without paying rent. 
Approximately 90 percent of the low-income sample have an annual 
household income of less than $20,000. Both the low-income and National 
consumer samples share a similar geographic distribution in ownership 
with a plurality (49 percent) of room AC units concentrated on the East 
Coast of the U.S. Based on an analysis of RECS 2015, low-income 
households were found to have 12 percent higher operating hours 
relative to the National sample. DOE used the LCC and PBP spreadsheet 
model to estimate the impacts of the considered efficiency levels on 
these subgroups. Chapter 11 in the final rule TSD describes the 
consumer subgroup analysis.
---------------------------------------------------------------------------

    \50\ Department of Health and Human Services, Poverty 
Thresholds. Available at https://aspe.hhs.gov/2015-poverty-guidelines (last accessed September 7, 2022).
---------------------------------------------------------------------------

    AHAM stated that many lower and middle-income households have 
negative discretionary income and requested that DOE change its 
approach towards sub-group analysis to take into account real 
limitations on purchasing capability and the effects of increased costs 
on discretionary income, credit ratings, and the ability of consumers 
to meet other necessary bills. Additionally, AHAM stated that DOE does 
not take into account the 23 percent of households with incomes under 
$15,000 who are ``unbanked'' in its financial framework and therefore 
needs to rethink its approach to sub-groups and include a more 
comprehensive approach to impact analysis to ensure that traditionally 
marginalized subgroups are included in its analysis. (AHAM, No. 43 at 
pp. 5-8) AHAM and Friedrich commented that excessively stringent 
standards are likely to negatively impact the populations that use 
these and noted that it is particularly important not to price-out 
lower income and underserved communities from purchasing room air 
conditioners. (AHAM, No. 43 at pp. 3-4; Friedrich, No. 44 at pp. 2-4)
    DOE's approach to the low-income consumer subgroup analysis 
includes households that do not have assets or debts included in the 
SCF. It is likely that a majority of these ``unbanked'' households 
primarily rely on cash to complete transactions and as a form of 
savings, which is included in the distribution of discount rates 
associated with low-income consumers. Consumers that rely entirely on 
cash are assigned a discount rate of 0 percent as there is no lost 
opportunity cost from alternative non-cash assets or debts. For 
households that utilize non-traditional, non-bank financing, DOE's 
methodology includes a distribution of high discount rates (>10%) which 
are representative of the opportunity cost associated with non-bank 
lines of credit. Additionally, DOE's subgroup analysis for low-income 
households found that, at the adopted TSL, the estimated installed cost 
increase is $28 while the average discounted lifetime operating cost 
savings is $110. (See section V.B.1.b for results of the consumer 
subgroup analysis.) DOE also notes that its low-income subgroup 
analysis is a conservative estimate in that it assumes that renter 
households purchase the unit. In cases where the landlord purchases the 
unit but the renter pays the electricity bill, the renting household 
may not pay an increased purchase price due to a standard, but would 
benefit from reduced operating costs.
    CFA and NCLC supported DOE's proposed TSL and noted that low-income 
consumers in particular would benefit from reduced operating costs 
associated with more efficient room air conditioners as low-income 
households pay a disproportionately higher percentage of their incomes 
on energy bills compared to other households. (CFA and NCLC, No. 46 at 
pp. 1-2)

J. Manufacturer Impact Analysis

1. Overview
    DOE performed an MIA to estimate the financial impacts of amended 
energy conservation standards on

[[Page 34326]]

manufacturers of room air conditioners and to estimate the potential 
impacts of such standards on employment and manufacturing capacity. The 
MIA has both quantitative and qualitative aspects and includes analyses 
of projected industry cash flows, the INPV, investments in research and 
development (``R&D'') and manufacturing capital, and domestic 
manufacturing employment. Additionally, the MIA seeks to determine how 
amended energy conservation standards might affect manufacturing 
employment, capacity, and competition, as well as how standards 
contribute to overall regulatory burden. Finally, the MIA serves to 
identify any disproportionate impacts on manufacturer subgroups, 
including small business manufacturers.
    The quantitative part of the MIA primarily relies on the Government 
Regulatory Impact Model (``GRIM''), an industry cash flow model with 
inputs specific to this rulemaking. The key GRIM inputs include data on 
the industry cost structure, unit production costs, product shipments, 
manufacturer markups, and investments in R&D and manufacturing capital 
required to produce compliant products. The key GRIM outputs are the 
INPV, which is the sum of industry annual cash flows over the analysis 
period, discounted using the industry-weighted average cost of capital, 
and the impact to domestic manufacturing employment. The model uses 
standard accounting principles to estimate the impacts of more-
stringent energy conservation standards on a given industry by 
comparing changes in INPV and domestic manufacturing employment between 
a no-new-standards case and the various standards cases. To capture the 
uncertainty relating to manufacturer pricing strategies following 
amended standards, the GRIM estimates a range of possible impacts under 
different markup scenarios.
    The qualitative part of the MIA addresses manufacturer 
characteristics and market trends. Specifically, the MIA considers such 
factors as a potential standard's impact on manufacturing capacity, 
competition within the industry, the cumulative impact of other DOE and 
non-DOE regulations, and impacts on manufacturer subgroups. The 
complete MIA is outlined in chapter 12 of the final rule TSD.
    DOE conducted the MIA for this rulemaking in three phases. In Phase 
1 of the MIA, DOE prepared a profile of the room air conditioner 
manufacturing industry based on the market and technology assessment 
and publicly-available information. This included a top-down analysis 
of room air conditioner manufacturers that DOE used to derive 
preliminary financial inputs for the GRIM (e.g., revenues; materials, 
labor, overhead, and depreciation expenses; selling, general, and 
administrative expenses (``SG&A''); and R&D expenses). DOE also used 
public sources of information to further calibrate its initial 
characterization of the room air conditioner manufacturing industry, 
including company filings of form 10-K from the SEC,\51\ corporate 
annual reports, April 2011 Direct Final Rule, the U.S. Census Bureau's 
Annual Survey of Manufactures (``ASM''),\52\ and reports from Dun & 
Bradstreet.\53\ 76 FR 22454.
---------------------------------------------------------------------------

    \51\ U.S. Securities and Exchange Commission, Electronic Data 
Gathering, Analysis, and Retrieval (EDGAR) system. Available at 
www.sec.gov/edgar/search/ (last accessed September 7, 2022).
    \52\ U.S. Census Bureau, Annual Survey of Manufactures. 
``Summary Statistics for Industry Groups and Industries in the U.S 
(2020).'' Available at: www.census.gov/data/tables/time-series/econ/asm/2018-2020-asm.html (last accessed September 7, 2022).
    \53\ The Dun & Bradstreet Hoovers login is available at: 
app.dnbhoovers.com (last accessed September 7, 2022).
---------------------------------------------------------------------------

    In Phase 2 of the MIA, DOE prepared a framework industry cash-flow 
analysis to quantify the potential impacts of amended energy 
conservation standards. The GRIM uses several factors to determine a 
series of annual cash flows starting with the announcement of the 
standard and extending over a 30-year period following the compliance 
date of the standard. These factors include annual expected revenues, 
costs of sales, SG&A and R&D expenses, taxes, and capital expenditures. 
In general, energy conservation standards can affect manufacturer cash 
flow in three distinct ways: (1) creating a need for increased 
investment, (2) raising production costs per unit, and (3) altering 
revenue due to higher per-unit prices and changes in sales volumes.
    In addition, during Phase 2, DOE developed interview guides to 
distribute to manufacturers of room air conditioners in order to 
develop other key GRIM inputs, including product and capital conversion 
costs, and to gather additional information on the anticipated effects 
of energy conservation standards on revenues, direct employment, 
capital assets, industry competitiveness, and subgroup impacts.
    In Phase 3 of the MIA, DOE conducted structured, detailed 
interviews with representative manufacturers. During these interviews, 
DOE discussed engineering, manufacturing, procurement, and financial 
topics to validate assumptions used in the GRIM and to identify key 
issues or concerns. As part of Phase 3, DOE also evaluated subgroups of 
manufacturers that may be disproportionately impacted by amended 
standards or that may not be accurately represented by the average cost 
assumptions used to develop the industry cash flow analysis. Such 
manufacturer subgroups may include small business manufacturers, low-
volume manufacturers (``LVMs''), niche players, and/or manufacturers 
exhibiting a cost structure that largely differs from the industry 
average. DOE identified one subgroup for a separate impact analysis: 
small business manufacturers. The small business subgroup is discussed 
in section VII.B, ``Review under the Regulatory Flexibility Act'' and 
in chapter 12 of the final rule TSD.
2. Government Regulatory Impact Model and Key Inputs
    DOE uses the GRIM to quantify the changes in cash flow due to 
amended standards that result in a higher or lower industry value. The 
GRIM uses a standard, annual discounted cash-flow analysis that 
incorporates manufacturer costs, markups, shipments, and industry 
financial information as inputs. The GRIM models changes in costs, 
distribution of shipments, investments, and manufacturer margins that 
could result from an amended energy conservation standard. The GRIM 
spreadsheet uses the inputs to arrive at a series of annual cash flows, 
beginning in 2023 (the base year of the analysis) and continuing to 
2055. DOE calculated INPVs by summing the stream of annual discounted 
cash flows during this period. For manufacturers of room air 
conditioners, DOE used a real discount rate of 7.2 percent, which was 
derived from industry financials and then modified according to 
feedback received during manufacturer interviews.
    The GRIM calculates cash flows using standard accounting principles 
and compares changes in INPV between the no-new-standards case and each 
standards case. The difference in INPV between the no-new-standards 
case and a standards case represents the financial impact of the 
amended energy conservation standard on manufacturers. As discussed 
previously, DOE developed critical GRIM inputs using a number of 
sources, including publicly available data, results of the engineering 
analysis and shipments analysis, and information gathered from industry 
stakeholders during the course of manufacturer interviews. The GRIM 
results are presented in section V.B.2 of

[[Page 34327]]

this document. Additional details about the GRIM, the discount rate, 
and other financial parameters can be found in chapter 12 of the final 
rule TSD.
a. Manufacturer Production Costs
    Manufacturing more efficient products is typically more expensive 
than manufacturing baseline products due to the use of more complex 
components, which are typically more costly than baseline components. 
The changes in the MPCs of covered products can affect the revenues, 
gross margins, and cash flow of the industry. DOE models the 
relationship between efficiency and MPCs as a part of its engineering 
analysis. For a complete description of the MPCs, see chapter 5 of the 
final rule TSD or section IV.C of this document.
b. Shipments Projections
    The GRIM estimates manufacturer revenues based on total unit 
shipment projections and the distribution of those shipments by 
efficiency level. Changes in sales volumes and efficiency mix over time 
can significantly affect manufacturer finances. For this analysis, the 
GRIM uses the NIA's annual shipment projections derived from the 
shipments analysis from 2023 (the base year) to 2055 (the end year of 
the analysis period). See chapter 9 of the final rule TSD for 
additional details or section IV.G of this document for additional 
details.
c. Product and Capital Conversion Costs
    Amended energy conservation standards could cause manufacturers to 
incur conversion costs to bring their production facilities and product 
designs into compliance. DOE evaluated the level of conversion-related 
expenditures that would be needed to comply with each considered 
efficiency level in each product class. For the MIA, DOE classified 
these conversion costs into two major groups: (1) product conversion 
costs; and (2) capital conversion costs. Product conversion costs are 
investments in research, development, testing, marketing, and other 
non-capitalized costs necessary to make product designs comply with 
amended energy conservation standards. Capital conversion costs are 
investments in property, plant, and equipment necessary to adapt or 
change existing production facilities such that new compliant product 
designs can be fabricated and assembled.
    To calculate the MPCs for room air conditioners at and above the 
baseline, DOE performed teardowns for representative units. The data 
generated from these analyses were then used to estimate the capital 
investments in equipment, tooling, and conveyor required of original 
equipment manufacturers (``OEMs'') at each efficiency level, taking 
into account such factors as product design, raw materials, purchased 
components, and fabrication method. Changes in equipment, tooling, and 
conveyer were used to estimate capital conversion costs. Additionally, 
capital conversion costs accounted for investments in appearance 
tooling made by manufacturers that are not OEMs.
    DOE relied on feedback from industry to evaluate the product 
conversion costs industry would likely incur at the considered standard 
levels. DOE integrated feedback from manufacturers, both OEM and non-
OEM, on redesign effort and staffing to estimate product conversion 
costs. Manufacturer numbers were aggregated to protect confidential 
information. DOE adjusted the conversion cost estimates developed in 
support of the April 2022 NOPR to 2021$ for this analysis.
    The conversion cost figures used in the GRIM can be found in 
section V.B.2 of this document. For additional information on the 
capital and product conversion costs, see chapter 12 of the final rule 
TSD.
    In general, DOE assumes all conversion-related investments occur 
between the year of publication of the final rule and the year by which 
manufacturers must comply with the new standard. The conversion cost 
figures used in the GRIM can be found in section V.B.2 of this 
document. For additional information on the estimated capital and 
product conversion costs, see chapter 12 of the final rule TSD.
d. Manufacturer Markup Scenarios
    MSPs include direct manufacturing production costs (i.e., labor, 
materials, and overhead estimated in DOE's MPCs) and all non-production 
costs (i.e., SG&A, R&D, and interest), along with profit. To calculate 
the MSPs in the GRIM, DOE applied a manufacturer markup to the MPCs 
estimated in the engineering analysis for each product class and 
efficiency level. Modifying these markups in the standards case yields 
different sets of impacts on manufacturers. For the MIA, DOE modeled 
two standards-case scenarios to represent uncertainty regarding the 
potential impacts on prices and profitability for manufacturers 
following the implementation of amended energy conservation standards: 
(1) a preservation of gross margin percentage scenario; and (2) a 
preservation of per-unit operating profit scenario. These scenarios 
lead to different markup values that, when applied to the MPCs, result 
in varying revenue and cash flow impacts.
    Under the preservation of gross margin percentage scenario, DOE 
applied a single uniform ``gross margin percentage'' across all 
efficiency levels, which assumes that manufacturers would be able to 
maintain the same amount of profit as a percentage of revenues at all 
efficiency levels within a product class. As MPCs increase with 
efficiency, this scenario implies that the absolute dollar markup will 
increase as well. DOE assumed a gross margin percentage of 21 percent 
for all product classes.\54\ Manufacturers tend to believe it is 
optimistic to assume that they would be able to maintain the same gross 
margin percentage markup as their production costs increase, 
particularly for minimally efficient products. Therefore, DOE assumes 
that this scenario represents a high bound to industry profitability 
under an amended energy conservation standard.
---------------------------------------------------------------------------

    \54\ The gross margin percentage of 21 percent is based on a 
manufacturer markup of 1.26.
---------------------------------------------------------------------------

    In the preservation of per-unit operating profit scenario, as the 
cost of production goes up under a standards case, manufacturers are 
generally required to reduce their markups to a level that maintains 
base-case operating profit. DOE implemented this scenario in the GRIM 
by lowering the manufacturer markups at each TSL to yield approximately 
the same earnings before interest and taxes in the standards case as in 
the no-new-standards case in the year after the compliance date of the 
amended standards. The implicit assumption behind this scenario is that 
the industry can only maintain its operating profit in absolute dollars 
after the standard. A comparison of industry financial impacts under 
the two scenarios is presented in section V.B.2.a of this document.
3. Discussion of MIA Comments
    In response to the April 2022 NOPR, AHAM submitted written comments 
about the impact of supply chain constraints, tariffs, cumulative 
regulatory burden, and elevated shipping costs on manufacturers of room 
air conditioners. (AHAM, No. 43 at pp. 28-31)
    AHAM noted that manufacturers continue to face global supply chain 
challenges--including procuring semiconductors and experiencing 
transportation delays--and urged DOE to further review the current 
situation manufacturers are facing and to account for this in the MIA. 
(AHAM, No. 43 at

[[Page 34328]]

p. 31) Although DOE is appreciative of these recent challenges, in the-
long term manufacturers of room air conditioners face both evolving 
challenges and evolving opportunities. DOE does not attempt the 
forecast the global supply chain challenges in the timeframe of 
compliance. Increased costs associated with recent supply chain issues 
have been implemented in the cost analysis by way of 5-year moving 
averages for materials, purchase parts, and shipping costs.
    AHAM noted that room air conditioners as well as room air 
conditioner chassis are currently subject to United States Trade 
Representative (``USTR'') China section 301 tariffs at 25 percent and 
10 percent, respectively. AHAM requested that DOE follow up with 
individual manufacturers to fully assess the impact of tariffs, as 
according to AHAM, these tariffs will likely remain in place. (AHAM, 
No. 43 at pp. 30-31) DOE contractors conducted manufacturer interviews 
during the NOPR phases of analysis to solicit information on 
manufacturer costs. Furthermore, DOE published its MPCs as part of the 
NOPR TSD. DOE's final rule analysis incorporates both confidential 
feedback and public comments from manufacturers on MPCs, which 
incorporates all costs and would include tariffs.
    AHAM encouraged DOE to incorporate the financial results of the 
cumulative regulatory burden analysis into the MIA, stating that this 
could be done by adding the combined cost of complying with multiple 
regulations into the product conversion costs in the GRIM. (AHAM, No. 
43 at pp. 28-29) AHAM noted other regulations impact room air 
conditioner manufacturers such as residential clothes washers, consumer 
clothes dryers, commercial clothes washers, consumer refrigerator/
freezers, miscellaneous refrigeration products, cooking products, 
dishwashers, room air conditioners, dehumidifiers, portable air 
conditioners, and room air cleaner rulemakings. (AHAM, No. 43 at p. 29) 
Additionally, AHAM noted that DOE should not discount the time and 
resources needed for stakeholders to review test procedure and energy 
conservation standard rulemakings and assess their potential impacts. 
(AHAM, No. 43 at p. 28)
    If DOE were to combine the conversion costs from multiple 
regulations, as requested, it would be appropriate to match the 
combined conversion costs against combined revenues of the regulated 
products. DOE expects that combined results would make it more 
difficult to discern the direct impact of this amended standard on room 
air conditioner manufacturers.
    With regard to AHAM's request that DOE not discount the costs for 
stakeholders to review rulemakings, although appreciative that 
monitoring and responding to rulemakings does impose costs for 
stakeholders, DOE believes that this is outside the scope of analysis 
for individual product rulemakings. Because EPCA requires DOE to 
establish and maintain the energy conservation program for consumer 
products and to periodically propose new and amended standards and test 
procedures, DOE considers this rulemaking activity to be part of the 
analytical baseline. That is, these activities would exist regardless 
of the regulatory option that DOE adopts through a rulemaking and would 
be independent from the conversion costs required to adapt product 
designs and manufacturing facilitates to meet an amended standard. 
Nonetheless, DOE welcomes any available data on the costs of 
monitoring. As noted in the April 2022 NOPR, a summary of the job 
titles and annual hours per job title at a prototypical company would 
allow DOE to construct a detailed analysis of AHAM's monitoring costs 
and would help DOE assess whether these costs would materially affect 
future analyses.
    AHAM noted that changes to room air conditioner chassis dimensions 
and product weight will increase shipping and transportation costs and 
requested that DOE account for this in its MIA through revision. (AHAM, 
No. 43 at p. 31)
    As noted in sections IV.A.2.b and IV.C.1.b of this document, DOE 
evaluated the impact of design options on weight and chassis 
dimensions. DOE evaluated the impact of those changes in weight and 
dimensions on overseas container and domestic shipping rates. For 
efficiency levels below max-tech, DOE did not find increases in 
shipping costs at efficiency levels. At max-tech, there are increases 
in shipping costs that could affect downstream analyses. However, as 
discussed in the walk-down, DOE is not adopting max-tech for any 
product classes. Additional information about shipping costs is 
available in chapter 5 of the TSD.

K. Emissions Analysis

    The emissions analysis consists of two components. The first 
component estimates the effect of potential energy conservation 
standards on power sector and site (where applicable) combustion 
emissions of CO2, NOX, SO2, and Hg. 
The second component estimates the impacts of potential standards on 
emissions of two additional greenhouse gases, CH4 and 
N2O, as well as the reductions in emissions of other gases 
due to ``upstream'' activities in the fuel production chain. These 
upstream activities comprise extraction, processing, and transporting 
fuels to the site of combustion.
    The analysis of electric power sector emissions of CO2, 
NOX, SO2, and Hg uses emissions intended to 
represent the marginal impacts of the change in electricity consumption 
associated with amended or new standards. The methodology is based on 
results published for the AEO, including a set of side cases that 
implement a variety of efficiency-related policies. The methodology is 
described in appendix 13A in the final rule TSD. The analysis presented 
in this rule uses projections from AEO2022. Power sector emissions of 
CH4 and N2O from fuel combustion are estimated 
using Emission Factors for Greenhouse Gas Inventories published by the 
EPA.\55\
---------------------------------------------------------------------------

    \55\ Available at www.epa.gov/sites/production/files/2021-04/documents/emission-factors_apr2021.pdf (last accessed July 12, 
2022).
---------------------------------------------------------------------------

    FFC upstream emissions, which include emissions from fuel 
combustion during extraction, processing, and transportation of fuels, 
and ``fugitive'' emissions (direct leakage to the atmosphere) of 
CH4 and CO2, are estimated based on the 
methodology described in chapter 15 of the final rule TSD.
    The emissions intensity factors are expressed in terms of physical 
units per megawatt-hour (``MWh'') or million British thermal units 
(``MMBtu'') of site energy savings. For power sector emissions, 
specific emissions intensity factors are calculated by sector and end 
use. Total emissions reductions are estimated using the energy savings 
calculated in the national impact analysis.
1. Air Quality Regulations Incorporated in DOE's Analysis
    DOE's no-new-standards case for the electric power sector reflects 
the AEO, which incorporates the projected impacts of existing air 
quality regulations on emissions. AEO2022 generally represents current 
legislation and environmental regulations, including recent government 
actions, that were in place at the time of preparation of AEO2022, 
including the emissions control programs discussed in the following 
paragraphs.\56\
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    \56\ For further information, see the Assumptions to AEO2022 
report that sets forth the major assumptions used to generate the 
projections in the Annual Energy Outlook. Available at www.eia.gov/outlooks/aeo/assumptions/ (last accessed September 6, 2022).

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[[Page 34329]]

    SO2 emissions from affected electric generating units 
(``EGUs'') are subject to nationwide and regional emissions cap-and-
trade programs. Title IV of the Clean Air Act sets an annual emissions 
cap on SO2 for affected EGUs in the 48 contiguous States and 
the District of Columbia (``DC''). (42 U.S.C. 7651 et seq.) 
SO2 emissions from numerous States in the eastern half of 
the United States are also limited under the Cross-State Air Pollution 
Rule (``CSAPR''). 76 FR 48208 (Aug. 8, 2011). CSAPR requires these 
States to reduce certain emissions, including annual SO2 
emissions, and went into effect as of January 1, 2015.\57\ AEO2022 
incorporates implementation of CSAPR, including the update to the CSAPR 
ozone season program emission budgets and target dates issued in 2016. 
81 FR 74504 (Oct. 26, 2016). Compliance with CSAPR is flexible among 
EGUs and is enforced through the use of tradable emissions allowances. 
Under existing EPA regulations, for states subject to SO2 
emissions limits under CSAPR, any excess SO2 emissions 
allowances resulting from the lower electricity demand caused by the 
adoption of an efficiency standard could be used to permit offsetting 
increases in SO2 emissions by another regulated EGU.
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    \57\ CSAPR requires states to address annual emissions of 
SO2 and NOX, precursors to the formation of 
fine particulate matter (``PM2.5'') pollution, in order 
to address the interstate transport of pollution with respect to the 
1997 and 2006 PM2.5 National Ambient Air Quality 
Standards (``NAAQS''). CSAPR also requires certain states to address 
the ozone season (May-September) emissions of NOX, a 
precursor to the formation of ozone pollution, in order to address 
the interstate transport of ozone pollution with respect to the 1997 
ozone NAAQS. 76 FR 48208 (Aug. 8, 2011). EPA subsequently issued a 
supplemental rule that included an additional five states in the 
CSAPR ozone season program; 76 FR 80760 (Dec. 27, 2011) 
(Supplemental Rule), and EPA issued the CSAPR Update for the 2008 
ozone NAAQS. 81 FR 74504 (Oct. 26, 2016).
---------------------------------------------------------------------------

    However, beginning in 2016, SO2 emissions began to fall 
as a result of the Mercury and Air Toxics Standards (``MATS'') for 
power plants. 77 FR 9304 (Feb. 16, 2012). The final rule establishes 
power plant emission standards for mercury, acid gases, and non-mercury 
metallic toxic pollutants. In order to continue operating, coal plants 
must have either flue gas desulfurization or dry sorbent injection 
systems installed. Both technologies, which are used to reduce acid gas 
emissions, also reduce SO2 emissions. Because of the 
emissions reductions under the MATS, it is unlikely that excess 
SO2 emissions allowances resulting from the lower 
electricity demand would be needed or used to permit offsetting 
increases in SO2 emissions by another regulated EGU. 
Therefore, energy conservation standards that decrease electricity 
generation will generally reduce SO2 emissions. DOE 
estimated SO2 emissions reduction using emissions factors 
based on AEO2022.
    CSAPR also established limits on NOX emissions for 
numerous States in the eastern half of the United States. Energy 
conservation standards would have little effect on NOX 
emissions in those States covered by CSAPR emissions limits if excess 
NOX emissions allowances resulting from the lower 
electricity demand could be used to permit offsetting increases in 
NOX emissions from other EGUs. In such case, NOX 
emissions would remain near the limit even if electricity generation 
goes down. Depending on the configuration of the power sector in the 
different regions and the need for allowances, however, NOX 
emissions might not remain at the limit in the case of lower 
electricity demand. That would mean that standards might reduce 
NOX emissions in covered States. Despite this possibility, 
DOE has chosen to be conservative in its analysis and has maintained 
the assumption that standards will not reduce NOX emissions 
in States covered by CSAPR. Standards would be expected to reduce 
NOX emissions in the States not covered by CSAPR. DOE used 
AEO2022 data to derive NOX emissions factors for the group 
of States not covered by CSAPR.
    The MATS limit mercury emissions from power plants, but they do not 
include emissions caps and, as such, DOE's energy conservation 
standards would be expected to slightly reduce Hg emissions. DOE 
estimated mercury emissions reduction using emissions factors based on 
AEO2022, which incorporates the MATS.

L. Monetizing Emissions Impacts

    As part of the development of this final rule, for the purpose of 
complying with the requirements of Executive Order 12866, DOE 
considered the estimated monetary benefits from the reduced emissions 
of CO2, CH4, N2O, NOX, and 
SO2 that are expected to result from each of the TSLs 
considered. In order to make this calculation analogous to the 
calculation of the NPV of consumer benefit, DOE considered the reduced 
emissions expected to result over the lifetime of products shipped in 
the projection period for each TSL. This section summarizes the basis 
for the values used for monetizing the emissions benefits and presents 
the values considered in this final rule.
    On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-
30087) granted the Federal Government's emergency motion for stay 
pending appeal of the February 11, 2022, preliminary injunction issued 
in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of 
the Fifth Circuit's order, the preliminary injunction is no longer in 
effect, pending resolution of the Federal Government's appeal of that 
injunction or a further court order. Among other things, the 
preliminary injunction enjoined the defendants in that case from 
``adopting, employing, treating as binding, or relying upon'' the 
interim estimates of the social cost of greenhouse gases--which were 
issued by the Interagency Working Group on the Social Cost of 
Greenhouse Gases on February 26, 2021--to monetize the benefits of 
reducing greenhouse gas emissions. In the absence of further 
intervening court orders, DOE has reverted to its approach prior to the 
injunction and present monetized benefits where appropriate and 
permissible under law. DOE requests comment on how to address the 
climate benefits and other non-monetized effects of the proposal.
1. Monetization of Greenhouse Gas Emissions
    DOE estimates the monetized benefits of the reductions in emissions 
of CO2, CH4, and N2O by using a 
measure of the SC of each pollutant (e.g., SC-CO2). These 
estimates represent the monetary value of the net harm to society 
associated with a marginal increase in emissions of these pollutants in 
a given year, or the benefit of avoiding that increase. These estimates 
are intended to include (but are not limited to) climate-change-related 
changes in net agricultural productivity, human health, property 
damages from increased flood risk, disruption of energy systems, risk 
of conflict, environmental migration, and the value of ecosystem 
services.
    DOE exercises its own judgment in presenting monetized climate 
benefits as recommended by applicable Executive orders, and DOE would 
reach the same conclusion presented in this final rule in the absence 
of the social cost of greenhouse gases including the February 2021 
interim estimates presented by the Interagency Working Group on the 
Social Cost of Greenhouse Gases.
    DOE estimated the global social benefits of CO2, 
CH4, and N2O reductions (i.e., SC-GHGs) using the 
estimates presented in the ``Technical Support Document: Social Cost of 
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive 
Order 13990,'' published in February

[[Page 34330]]

2021 by the IWG. The SC-GHGs is the monetary value of the net harm to 
society associated with a marginal increase in emissions in a given 
year, or the benefit of avoiding that increase. In principle, SC-GHGs 
includes the value of all climate change impacts, including (but not 
limited to) changes in net agricultural productivity, human health 
effects, property damage from increased flood risk and natural 
disasters, disruption of energy systems, risk of conflict, 
environmental migration, and the value of ecosystem services. The SC-
GHGs therefore, reflects the societal value of reducing emissions of 
the gas in question by one metric ton. The SC-GHGs is the theoretically 
appropriate value to use in conducting benefit-cost analyses of 
policies that affect CO2, N2O and CH4 
emissions. As a member of the IWG involved in the development of the 
February 2021 SC-GHG TSD, DOE agrees that the interim SC-GHG estimates 
represent the most appropriate estimate of the SC-GHG until revised 
estimates have been developed reflecting the latest, peer-reviewed 
science.
    The SC-GHGs estimates presented here were developed over many 
years, using transparent process, peer-reviewed methodologies, the best 
science available at the time of that process, and with input from the 
public. Specifically, in 2009, the IWG, that included the DOE and other 
executive branch agencies and offices was established to ensure that 
agencies were using the best available science and to promote 
consistency in the social cost of carbon (SC-CO2) values 
used across agencies. The IWG published SC-CO2 estimates in 
2010 that were developed from an ensemble of three widely cited 
integrated assessment models (IAMs) that estimate global climate 
damages using highly aggregated representations of climate processes 
and the global economy combined into a single modeling framework. The 
three IAMs were run using a common set of input assumptions in each 
model for future population, economic, and CO2 emissions 
growth, as well as equilibrium climate sensitivity--a measure of the 
globally averaged temperature response to increased atmospheric 
CO2 concentrations. These estimates were updated in 2013 
based on new versions of each IAM. In August 2016 the IWG published 
estimates of the social cost of methane (SC-CH4) and nitrous 
oxide (SC-N2O) using methodologies that are consistent with 
the methodology underlying the SC-CO2 estimates. The 
modeling approach that extends the IWG SC-CO2 methodology to 
non-CO2 GHGs has undergone multiple stages of peer review. 
The SC-CH4 and SC-N2O estimates were developed by 
Marten et al.\58\ and underwent a standard double-blind peer review 
process prior to journal publication. In 2015, as part of the response 
to public comments received to a 2013 solicitation for comments on the 
SC-CO2 estimates, the IWG announced a National Academies of 
Sciences, Engineering, and Medicine review of the SC-CO2 
estimates to offer advice on how to approach future updates to ensure 
that the estimates continue to reflect the best available science and 
methodologies. In January 2017, the National Academies released their 
final report, ``Valuing Climate Damages: Updating Estimation of the 
Social Cost of Carbon Dioxide,'' and recommended specific criteria for 
future updates to the SC-CO2 estimates, a modeling framework 
to satisfy the specified criteria, and both near-term updates and 
longer-term research needs pertaining to various components of the 
estimation process (National Academies, 2017).\59\ Shortly thereafter, 
in March 2017, President Trump issued Executive Order 13783, which 
disbanded the IWG, withdrew the previous TSDs, and directed agencies to 
ensure SC-CO2 estimates used in regulatory analyses are 
consistent with the guidance contained in OMB's Circular A-4, 
``including with respect to the consideration of domestic versus 
international impacts and the consideration of appropriate discount 
rates'' (E.O. 13783, section 5(c)). Benefit-cost analyses following 
E.O. 13783 used SC-GHG estimates that attempted to focus on the U.S.-
specific share of climate change damages as estimated by the models and 
were calculated using two discount rates recommended by Circular A-4, 3 
percent and 7 percent. All other methodological decisions and model 
versions used in SC-GHG calculations remained the same as those used by 
the IWG in 2010 and 2013, respectively.
---------------------------------------------------------------------------

    \58\ Marten, A.L., E.A. Kopits, C.W. Griffiths, S.C. Newbold, 
and A. Wolverton. Incremental CH4 and N2O 
mitigation benefits consistent with the US Government's SC-
CO2 estimates. Climate Policy. 2015. 15(2): pp. 272-298.
    \59\ National Academies of Sciences, Engineering, and Medicine. 
Valuing Climate Damages: Updating Estimation of the Social Cost of 
Carbon Dioxide. 2017. The National Academies Press: Washington, DC.
---------------------------------------------------------------------------

    On January 20, 2021, President Biden issued Executive Order 13990, 
which re-established the IWG and directed it to ensure that the U.S. 
Government's estimates of the social cost of carbon and other 
greenhouse gases reflect the best available science and the 
recommendations of the National Academies (2017). The IWG was tasked 
with first reviewing the SC-GHG estimates currently used in Federal 
analyses and publishing interim estimates within 30 days of the E.O. 
that reflect the full impact of GHG emissions, including by taking 
global damages into account. The interim SC-GHG estimates published in 
February 2021 are used here to estimate the climate benefits for this 
rulemaking. The E.O. instructs the IWG to undertake a fuller update of 
the SC-GHG estimates by January 2022 that takes into consideration the 
advice of the National Academies (2017) and other recent scientific 
literature. The February 2021 SC-GHG TSD provides a complete discussion 
of the IWG's initial review conducted under E.O. 13990. In particular, 
the IWG found that the SC-GHG estimates used under E.O. 13783 fail to 
reflect the full impact of GHG emissions in multiple ways.
    First, the IWG found that the SC-GHG estimates used under E.O. 
13783 fail to fully capture many climate impacts that affect the 
welfare of U.S. citizens and residents, and those impacts are better 
reflected by global measures of the SC-GHG. Examples of omitted effects 
from the E.O. 13783 estimates include direct effects on U.S. citizens, 
assets, and investments located abroad, supply chains, U.S. military 
assets and interests abroad, 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. 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 
mitigation actions will provide a benefit to U.S. citizens and 
residents by mitigating climate impacts that affect 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. If the United States does not consider 
impacts on other countries, it is difficult to convince other countries 
to consider the impacts of their emissions on the United States. The 
only way to achieve an efficient allocation of resources for emissions 
reduction on a global basis--and so benefit the United States and its 
citizens--is for all countries to base their policies on global 
estimates of damages. As a member of the IWG involved in the 
development of the

[[Page 34331]]

February 2021 SC-GHG TSD, DOE agrees with this assessment and, 
therefore, in this rule DOE centers attention on a global measure of 
SC-GHG. This approach is the same as that taken in DOE regulatory 
analyses from 2012 through 2016. A robust estimate of climate damages 
that accrue only to U.S. citizens and residents does not currently 
exist in the literature. As explained in the February 2021 TSD, 
existing estimates are both incomplete and an underestimate of total 
damages that accrue to the citizens and residents of the United States 
because they do not fully capture the regional interactions and 
spillovers discussed above, nor do they include all of the important 
physical, ecological, and economic impacts of climate change recognized 
in the climate change literature. As noted in the February 2021 SC-GHG 
TSD, the IWG will continue to review developments in the literature, 
including more robust methodologies for estimating a U.S.-specific SC-
GHG value, and explore ways to better inform the public of the full 
range of carbon impacts. As a member of the IWG, DOE will continue to 
follow developments in the literature pertaining to this issue.
    Second, the IWG found that the use of the social rate of return on 
capital (7 percent under current OMB Circular A-4 guidance) to discount 
the future benefits of reducing GHG emissions inappropriately 
underestimates the impacts of climate change for the purposes of 
estimating the SC-GHG. Consistent with the findings of the National 
Academies (2017) and the economic literature, the IWG continued to 
conclude that the consumption rate of interest is the theoretically 
appropriate discount rate in an intergenerational context,\60\ and 
recommended that discount rate uncertainty and relevant aspects of 
intergenerational ethical considerations be accounted for in selecting 
future discount rates.
---------------------------------------------------------------------------

    \60\ Interagency Working Group on Social Cost of Carbon. Social 
Cost of Carbon for Regulatory Impact Analysis under Executive Order 
12866. 2010. United States Government. (Last accessed April 15, 
2022.) www.epa.gov/sites/default/files/2016-12/documents/scc_tsd_2010.pdf; Interagency Working Group on Social Cost of 
Carbon. Technical Update of the Social Cost of Carbon for Regulatory 
Impact Analysis Under Executive Order No. 12866. 2013. (Last 
accessed April 15, 2022.) 78 FR 70586, November 26, 2013, 
www.federalregister.gov/documents/2013/11/26/2013-28242/technical-support-document-technical-update-of-the-social-cost-of-carbon-for-regulatory-impact; Interagency Working Group on Social Cost of 
Greenhouse Gases, United States Government. Technical Support 
Document: Technical Update on the Social Cost of Carbon for 
Regulatory Impact Analysis-Under Executive Order 12866. August 2016. 
(Last accessed January 18, 2022.) www.epa.gov/sites/default/files/2016-12/documents/sc_co2_tsd_august_2016.pdf; Interagency Working 
Group on Social Cost of Greenhouse Gases, United States Government. 
Addendum to Technical Support Document on Social Cost of Carbon for 
Regulatory Impact Analysis under Executive Order 12866: Application 
of the Methodology to Estimate the Social Cost of Methane and the 
Social Cost of Nitrous Oxide. August 2016. (Last accessed January 
18, 2022.) www.epa.gov/sites/default/files/2016-12/documents/addendum_to_sc-ghg_tsd_august_2016.pdf.
---------------------------------------------------------------------------

    Furthermore, the damage estimates developed for use in the SC-GHG 
are estimated in consumption-equivalent terms, and so an application of 
OMB Circular A-4's guidance for regulatory analysis would then use the 
consumption discount rate to calculate the SC-GHG. DOE agrees with this 
assessment and will continue to follow developments in the literature 
pertaining to this issue. DOE also notes that while OMB Circular A-4, 
as published in 2003, recommends using 3 percent and 7 percent discount 
rates as ``default'' values, Circular A-4 also reminds agencies that 
``different regulations may call for different emphases in the 
analysis, depending on the nature and complexity of the regulatory 
issues and the sensitivity of the benefit and cost estimates to the key 
assumptions.'' On discounting, Circular A-4 recognizes that ``special 
ethical considerations arise when comparing benefits and costs across 
generations,'' and Circular A-4 acknowledges that analyses may 
appropriately ``discount future costs and consumption benefits . . . at 
a lower rate than for intragenerational analysis.'' In the 2015 
Response to Comments on the Social Cost of Carbon for Regulatory Impact 
Analysis (``RIA''), OMB, DOE, and the other IWG members recognized that 
``Circular A-4 is a living document'' and ``the use of 7 percent is not 
considered appropriate for intergenerational discounting. There is wide 
support for this view in the academic literature, and it is recognized 
in Circular A-4 itself.'' Thus, DOE concludes that a 7% discount rate 
is not appropriate to apply to value the social cost of greenhouse 
gases in the analysis presented in this analysis.
    To calculate the present and annualized values of climate benefits, 
DOE uses the same discount rate as the rate used to discount the value 
of damages from future GHG emissions, for internal consistency. That 
approach to discounting follows the same approach that the February 
2021 TSD recommends ``to ensure internal consistency--i.e., future 
damages from climate change using the SC-GHG at 2.5 percent should be 
discounted to the base year of the analysis using the same 2.5 percent 
rate.'' DOE has also consulted the National Academies' 2017 
recommendations on how SC-GHG estimates can ``be combined in RIAs with 
other cost and benefits estimates that may use different discount 
rates.'' The National Academies reviewed several options, including 
``presenting all discount rate combinations of other costs and benefits 
with [SC-GHG] estimates.''
    As a member of the IWG involved in the development of the February 
2021 SC-GHG TSD, DOE agrees with the above assessment and will continue 
to follow developments in the literature pertaining to this issue. 
While the IWG works to assess how best to incorporate the latest, peer 
reviewed science to develop an updated set of SC-GHG estimates, it set 
the interim estimates to be the most recent estimates developed by the 
IWG prior to the group being disbanded in 2017. The estimates rely on 
the same models and harmonized inputs and are calculated using a range 
of discount rates. As explained in the February 2021 SC-GHG TSD, the 
IWG has recommended that agencies revert to the same set of four values 
drawn from the SC-GHG distributions based on three discount rates as 
were used in regulatory analyses between 2010 and 2016 and were subject 
to public comment. For each discount rate, the IWG combined the 
distributions across models and socioeconomic emissions scenarios 
(applying equal weight to each) and then selected a set of four values 
recommended for use in benefit-cost analyses: an average value 
resulting from the model runs for each of three discount rates (2.5 
percent, 3 percent, and 5 percent), plus a fourth value, selected as 
the 95th percentile of estimates based on a 3 percent discount rate. 
The fourth value was included to provide information on potentially 
higher-than-expected economic impacts from climate change. As explained 
in the February 2021 SC-GHG TSD, and DOE agrees, this update reflects 
the immediate need to have an operational SC-GHG for use in regulatory 
benefit-cost analyses and other applications that was developed using a 
transparent process, peer-reviewed methodologies, and the science 
available at the time of that process. Those estimates were subject to 
public comment in the context of dozens of proposed rulemakings as well 
as in a dedicated public comment period in 2013.
    There are a number of limitations and uncertainties associated with 
the SC-GHG estimates. First, the current scientific and economic 
understanding of discounting approaches suggests discount rates 
appropriate for intergenerational analysis in the context of climate 
change are likely to be less

[[Page 34332]]

than 3 percent, near 2 percent or lower.\61\ Second, the IAMs used to 
produce these interim estimates do not include all of the important 
physical, ecological, and economic impacts of climate change recognized 
in the climate change literature and the science underlying their 
``damage functions''--i.e., the core parts of the IAMs that map global 
mean temperature changes and other physical impacts of climate change 
into economic (both market and nonmarket) damages--lags behind the most 
recent research. For example, limitations include the incomplete 
treatment of catastrophic and non-catastrophic impacts in the 
integrated assessment models, their incomplete treatment of adaptation 
and technological change, the incomplete way in which inter-regional 
and intersectoral linkages are modeled, uncertainty in the 
extrapolation of damages to high temperatures, and inadequate 
representation of the relationship between the discount rate and 
uncertainty in economic growth over long time horizons. Likewise, the 
socioeconomic and emissions scenarios used as inputs to the models do 
not reflect new information from the last decade of scenario generation 
or the full range of projections. The modeling limitations do not all 
work in the same direction in terms of their influence on the SC-
CO2 estimates. However, as discussed in the February 2021 
TSD, the IWG has recommended that, taken together, the limitations 
suggest that the interim SC-GHG estimates used in this final rule 
likely underestimate the damages from GHG emissions. DOE concurs with 
this assessment.
---------------------------------------------------------------------------

    \61\ Interagency Working Group on Social Cost of Greenhouse 
Gases (IWG). 2021. Technical Support Document: Social Cost of 
Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive 
Order 13990. February. United States Government. Available at: 
www.whitehouse.gov/briefing-room/blog/2021/02/26/a-return-to-science-evidence-based-estimates-of-the-benefits-of-reducing-climate-pollution/.
---------------------------------------------------------------------------

    AHAM objected to DOE using the social cost of carbon and other 
monetization of emissions reductions benefits in its analysis of the 
factors EPCA requires DOE to balance to determine the appropriate 
standard. AHAM stated that while it may be acceptable for DOE to 
continue its current practice of examining the social cost of carbon 
and monetization of other emissions reductions benefits as 
informational so long as the underlying interagency analysis is 
transparent and vigorous, the monetization analysis should not impact 
the TSLs DOE selects as a new or amended standard. AHAM noted that the 
scientific and economic knowledge surrounding the contribution of 
CO2 and other greenhouse gases to climate change is an 
upgoing field of study and monetization values are subject to change. 
AHAM further commented that it was unclear whether DOE relied upon the 
emissions monetization analysis when proposing a TSL. (AHAM, No. 43 at 
pp. 29-30)
    As stated in section III.E.1.f of this document, DOE maintains that 
environmental and public health benefits associated with the more 
efficient use of energy, including those connected to global climate 
change, are important to take into account when considering the need 
for national energy conservation, which is one of the factors that EPCA 
requires DOE to evaluate in determining whether a potential energy 
conservation standard is economically justified. (42 U.S.C. 
6295(o)(2)(B)(i)(VI)) In addition, Executive Order 13563, which was re-
affirmed on January 20, 2021, states that each agency must, among other 
things: ``select, in choosing among alternative regulatory approaches, 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity).'' \62\ E.O. 13563, 
section 1(b). For these reasons, DOE includes monetized emissions 
reductions in its evaluation of potential standard levels. As 
previously stated, however, DOE would reach the same conclusion 
presented in this final rule in the absence of the social cost of 
greenhouse gases.
---------------------------------------------------------------------------

    \62\ www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/modernizing-regulatory-review/.
---------------------------------------------------------------------------

    The Climate Commenters stated that DOE appropriately applies the 
social cost estimates developed by the Interagency Working Group on the 
Social Cost of Greenhouse Gases to its analysis of emissions reduction 
benefits generated by the proposed rule. They stated that DOE should 
expand upon its rationale for adopting a global damages valuation and 
for the range of discount rates it applies to climate effects, as there 
are additional legal, economic, and policy reasons for such 
methodological decisions that can further bolster DOE's support for 
these choices. They added that DOE should consider conducting 
sensitivity analysis using a sound domestic-only social cost estimate 
as a backstop, and should explicitly conclude that the rule is cost-
benefit justified even using a domestic-only valuation that may still 
undercount climate benefits. They also urged DOE to consider providing 
additional sensitivity analysis using discount rates lower than 2.5 
percent for climate impacts. (Climate Commenters, No. 51 at pp. 1-2)
    In response, DOE maintains that the reasons for using global 
measures of the SC-GHG previously discussed are sufficient for the 
purposes of this rulemaking. DOE notes that further discussion of this 
topic is contained in the February 2021 SC-GHG TSD, and DOE agrees with 
the assessment therein. Regarding conducting sensitivity analysis using 
a domestic-only social cost estimate, DOE agrees with the assessment in 
the February 2021 SC-GHG TSD that the only currently-available 
quantitative characterization of domestic damages from GHG emissions is 
both incomplete and an underestimate of the share of total damages that 
accrue to the citizens and residents of the United States. Therefore, 
it would be of questionable value to conduct the suggested sensitivity 
analysis at this time. DOE considered performing sensitivity analysis 
using discount rates lower than 2.5 percent for climate impacts, as 
suggested by the IWG, but it concluded that such analysis would not add 
meaningful information or impact the rationale in the context of this 
rulemaking.
    The Climate Commenters also stated that DOE should provide 
additional justification for combining climate effects discounted at an 
appropriate consumption-based discount rate with other costs and 
benefits discounted at a capital-based rate (i.e., 7%).\63\ (Climate 
Commenters, No. 51 at p. 2) The reasons for using consumption-based 
discount rates for future climate effects were discussed previously, 
and are further elaborated in the February 2021 SC-GHG TSD. Combining 
climate benefits with health benefits and consumer economic benefits is 
in keeping with the guidance of OMB Circular A-4 to count all 
significant costs and benefits. DOE is aware that there are different 
approaches to combining climate benefits with other cost and benefits 
estimates that may use different discount rates, and the approach 
applied in this document (as well as in numerous other past DOE 
rulemaking actions) is among those discussed in the National Academies 
2017 report (p. 182).\64\
---------------------------------------------------------------------------

    \63\ In several places in this final rule (e.g., Tables I-3 and 
I-4), the climate benefits of potential standards are combined with 
other benefits and costs that are discounted at rates of 3% and 7%, 
based on OMB Circular A-4 guidance.
    \64\ National Academies of Sciences, Engineering, and Medicine. 
Valuing Climate Damages: Updating Estimation of the Social Cost of 
Carbon Dioxide. 2017. The National Academies Press: Washington, DC. 
Available at https://nap.nationalacademies.org/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-of.

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

[[Page 34333]]

    DOE's derivations of the SC-CO2, SC-N2O, and 
SC-CH4 values used for this final rule are discussed in the 
following sections, and the results of DOE's analyses estimating the 
benefits of the reductions in emissions of these pollutants are 
presented in section V.B.6 of this document.
a. Social Cost of Carbon
    The SC-CO2 values used for this final rule were based on 
the values developed for the IWG's February 2021 TSD. Table IV.8 shows 
the updated sets of SC-CO2 estimates from the IWG's TSD in 
5-year increments from 2020 to 2050. The full set of annual values that 
DOE used is presented in appendix 14A of the final rule TSD. For 
purposes of capturing the uncertainties involved in regulatory impact 
analysis, DOE has determined it is appropriate to include all four sets 
of SC-CO2 values, as recommended by the IWG.\65\
---------------------------------------------------------------------------

    \65\ For example, the February 2021 TSD discusses how the 
understanding of discounting approaches suggests that discount rates 
appropriate for intergenerational analysis in the context of climate 
change may be lower than 3 percent.

                    Table IV.8--Annual SC-CO2 Values From 2021 Interagency Update, 2020-2050
                                           [2020$ per metric ton CO2]
----------------------------------------------------------------------------------------------------------------
                                                                         Discount rate
                                              ------------------------------------------------------------------
                     Year                            5%              3%             2.5%               3%
                                              ------------------------------------------------------------------
                                                   Average         Average         Average      95th percentile
----------------------------------------------------------------------------------------------------------------
2020.........................................              14              51              76                152
2025.........................................              17              56              83                169
2030.........................................              19              62              89                187
2035.........................................              22              67              96                206
2040.........................................              25              73             103                225
2045.........................................              28              79             110                242
2050.........................................              32              85             116                260
----------------------------------------------------------------------------------------------------------------

    For 2051 to 2070, DOE used SC-CO2 estimates published by 
EPA, adjusted to 2021$.\66\ These estimates are based on methods, 
assumptions, and parameters identical to the 2020-2050 estimates 
published by the IWG. DOE expects additional climate benefits to accrue 
for any longer-life room air conditioners after 2070, but a lack of 
available SC-CO2 estimates for emissions years beyond 2070 
prevents DOE from monetizing these potential benefits in this analysis.
---------------------------------------------------------------------------

    \66\ See EPA, Revised 2023 and Later Model Year Light-Duty 
Vehicle GHG Emissions Standards: Regulatory Impact Analysis, 
Washington, DC, December 2021. Available at: www.epa.gov/system/files/documents/2021-12/420r21028.pdf (last accessed September 12, 
2022).
---------------------------------------------------------------------------

    DOE multiplied the CO2 emissions reduction estimated for 
each year by the SC-CO2 value for that year in each of the 
four cases. DOE adjusted the values to 2021$ using the implicit price 
deflator for gross domestic product (``GDP'') from the Bureau of 
Economic Analysis. To calculate a present value of the stream of 
monetary values, DOE discounted the values in each of the four cases 
using the specific discount rate that had been used to obtain the SC-
CO2 values in each case.
b. Social Cost of Methane and Nitrous Oxide
    The SC-CH4 and SC-N2O values used for this 
final rule were based on the values presented in the February 2021 TSD. 
Table IV.9 shows the updated sets of SC-CH4 and SC-
N2O estimates from the latest interagency update in 5-year 
increments from 2020 to 2050. The full set of annual values used is 
presented in appendix 14A of the final rule TSD. To capture the 
uncertainties involved in regulatory impact analysis, DOE has 
determined it is appropriate to include all four sets of SC-
CH4 and SC-N2O values, as recommended by the IWG. 
DOE derived values after 2050 using the approach described above for 
the SC-CO2.

                                   Table IV.9--Annual SC-CH4 and SC-N2O Values From 2021 Interagency Update, 2020-2050
                                                                 [2020$ per metric ton]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 SC-CH4                                        SC-N2O
                                                             -------------------------------------------------------------------------------------------
                                                                       Discount rate and statistic                   Discount rate and statistic
                                                             -------------------------------------------------------------------------------------------
                            Year                                  5%         3%        2.5%         3%          5%         3%        2.5%         3%
                                                             -------------------------------------------------------------------------------------------
                                                                                                   95th                                          95th
                                                               Average    Average    Average    percentile   Average    Average    Average    percentile
--------------------------------------------------------------------------------------------------------------------------------------------------------
2020........................................................        670       1500       2000         3900       5800      18000      27000        48000
2025........................................................        800       1700       2200         4500       6800      21000      30000        54000
2030........................................................        940       2000       2500         5200       7800      23000      33000        60000
2035........................................................       1100       2200       2800         6000       9000      25000      36000        67000
2040........................................................       1300       2500       3100         6700      10000      28000      39000        74000
2045........................................................       1500       2800       3500         7500      12000      30000      42000        81000
2050........................................................       1700       3100       3800         8200      13000      33000      45000        88000
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 34334]]

    DOE multiplied the CH4 and N2O emissions 
reduction estimated for each year by the SC-CH4 and SC-
N2O estimates for that year in each of the cases. DOE 
adjusted the values to 2021$ using the implicit price deflator for 
gross domestic product (``GDP'') from the Bureau of Economic Analysis. 
To calculate a present value of the stream of monetary values, DOE 
discounted the values in each of the cases using the specific discount 
rate that had been used to obtain the SC-CH4 and SC-
N2O estimates in each case.
2. Monetization of Other Emissions Impacts
    For the final rule, DOE estimated the monetized value of 
NOX and SO2 emissions reductions from electricity 
generation using benefit per ton estimates for that sector from the 
EPA's Benefits Mapping and Analysis Program.\67\ DOE used EPA's values 
for PM2.5-related benefits associated with NOX 
and SO2 and for ozone-related benefits associated with 
NOX for 2025 and 2030, and 2040, calculated with discount 
rates of 3 percent and 7 percent. DOE used linear interpolation to 
define values for the years not given in the 2025 to 2040 range; for 
years beyond 2040 the values are held constant. DOE derived values 
specific to the sector for room air conditioners using a method 
described in appendix 14B of the final rule TSD.
---------------------------------------------------------------------------

    \67\ Estimating the Benefit per Ton of Reducing PM2.5 
Precursors from 21 Sectors. www.epa.gov/benmap/estimating-benefit-ton-reducing-pm25-precursors-21-sectors.
---------------------------------------------------------------------------

    DOE multiplied the site emissions reduction (in tons) in each year 
by the associated $/ton values, and then discounted each series using 
discount rates of 3 percent and 7 percent as appropriate.

M. Utility Impact Analysis

    The utility impact analysis estimates several effects on the 
electric power generation industry that would result from the adoption 
of new or amended energy conservation standards. The utility impact 
analysis estimates the changes in installed electrical capacity and 
generation that would result for each TSL. The analysis is based on 
published output from the NEMS associated with AEO2022. NEMS produces 
the AEO Reference case, as well as a number of side cases that estimate 
the economy-wide impacts of changes to energy supply and demand. For 
the current analysis, impacts are quantified by comparing the levels of 
electricity sector generation, installed capacity, fuel consumption and 
emissions in the AEO2022 Reference case and various side cases. Details 
of the methodology are provided in the appendices to chapters 13 and 15 
of the final rule TSD.
    The output of this analysis is a set of time-dependent coefficients 
that capture the change in electricity generation, primary fuel 
consumption, installed capacity and power sector emissions due to a 
unit reduction in demand for a given end use. These coefficients are 
multiplied by the stream of electricity savings calculated in the NIA 
to provide estimates of selected utility impacts of potential new or 
amended energy conservation standards.

N. Employment Impact Analysis

    DOE considers employment impacts in the domestic economy as one 
factor in selecting a standard. Employment impacts from new or amended 
energy conservation standards include both direct and indirect impacts. 
Direct employment impacts are any changes in the number of employees of 
manufacturers of the products subject to standards. The MIA addresses 
those impacts. Indirect employment impacts are changes in national 
employment that occur due to the shift in expenditures and capital 
investment caused by the purchase and operation of more-efficient 
appliances. Indirect employment impacts from standards consist of the 
net jobs created or eliminated in the national economy, other than in 
the manufacturing sector being regulated, caused by (1) reduced 
spending by consumers on energy, (2) reduced spending on new energy 
supply by the utility industry, (3) increased consumer spending on the 
products to which the new standards apply and other goods and services, 
and (4) the effects of those three factors throughout the economy.
    One method for assessing the possible effects on the demand for 
labor of such shifts in economic activity is to compare sector 
employment statistics developed by the Labor Department's BLS. BLS 
regularly publishes its estimates of the number of jobs per million 
dollars of economic activity in different sectors of the economy, as 
well as the jobs created elsewhere in the economy by this same economic 
activity. Data from BLS indicate that expenditures in the utility 
sector generally create fewer jobs (both directly and indirectly) than 
expenditures in other sectors of the economy.\68\ There are many 
reasons for these differences, including wage differences and the fact 
that the utility sector is more capital-intensive and less labor-
intensive than other sectors. Energy conservation standards have the 
effect of reducing consumer utility bills. Because reduced consumer 
expenditures for energy likely lead to increased expenditures in other 
sectors of the economy, the general effect of efficiency standards is 
to shift economic activity from a less labor-intensive sector (i.e., 
the utility sector) to more labor-intensive sectors (e.g., the retail 
and service sectors). Thus, the BLS data suggest that net national 
employment may increase due to shifts in economic activity resulting 
from energy conservation standards.
---------------------------------------------------------------------------

    \68\ See U.S. Department of Commerce-Bureau of Economic 
Analysis. Regional Multipliers: A User Handbook for the Regional 
Input-Output Modeling System (``RIMS II''). 1997. U.S. Government 
Printing Office: Washington, DC. Available at www.bea.gov/scb/pdf/regional/perinc/meth/rims2.pdf (last accessed July 1, 2021).
---------------------------------------------------------------------------

    DOE estimated indirect national employment impacts for the standard 
levels considered in this final rule using an input/output model of the 
U.S. economy called Impact of Sector Energy Technologies version 4 
(``ImSET'').\69\ ImSET is a special-purpose version of the ``U.S. 
Benchmark National Input-Output'' (``I-O'') model, which was designed 
to estimate the national employment and income effects of energy-saving 
technologies. The ImSET software includes a computer- based I-O model 
having structural coefficients that characterize economic flows among 
187 sectors most relevant to industrial, commercial, and residential 
building energy use.
---------------------------------------------------------------------------

    \69\ Livingston, O.V., S.R. Bender, M.J. Scott, and R.W. 
Schultz. ImSET 4.0: Impact of Sector Energy Technologies Model 
Description and User's Guide. 2015. Pacific Northwest National 
Laboratory: Richland, WA. PNNL-24563.
---------------------------------------------------------------------------

    DOE notes that ImSET is not a general equilibrium forecasting 
model, and that the uncertainties involved in projecting employment 
impacts, especially changes in the later years of the analysis. Because 
ImSET does not incorporate price changes, the employment effects 
predicted by ImSET may over-estimate actual job impacts over the long 
run for this rule. Therefore, DOE used ImSET only to generate results 
for near-term timeframes (2026-2030), where these uncertainties are 
reduced. For more details on the employment impact analysis, see 
chapter 16 of the final rule TSD.

V. Analytical Results and Conclusions

    The following section addresses the results from DOE's analyses 
with respect to the considered energy conservation standards for room 
air conditioners. It addresses the TSLs examined by DOE, the projected

[[Page 34335]]

impacts of each of these levels if adopted as energy conservation 
standards for room air conditioners, and the standards levels that DOE 
is adopting in this final rule. Additional details regarding DOE's 
analyses are contained in the final rule TSD supporting this document.

A. Trial Standard Levels

    In general, DOE typically evaluates potential amended standards for 
products and equipment by grouping individual efficiency levels for 
each class into TSLs. Use of TSLs allows DOE to identify and consider 
manufacturer cost interactions between the product classes, to the 
extent that there are such interactions, and market cross elasticity 
from consumer purchasing decisions that may change when different 
standard levels are set.
    In the analysis conducted for this final rule, DOE analyzed the 
benefits and burdens of five TSLs for room air conditioners. DOE 
maintained the same TSL structure as proposed in the NOPR. TSL 5 
represents the max-tech energy efficiency for all product classes and 
corresponds to EL 5. TSL 4 corresponds to EL 4 for all product classes, 
consistent with the implementation of commercially available variable-
speed compressors based on the current availability of variable speed 
compressors at cooling capacities >=8,000 Btu/h. However, as of 2022, 
there are no models commercially available that incorporate variable-
speed compressors for cooling capacities less than 8,000 Btu/h, and the 
uncertainties of the possibilities of incorporating variable-speed 
compressors in smaller units may have the potential to eliminate room 
air conditioners with the smallest cooling capacities from the market. 
TSL 3, therefore, is constructed with EL 4 for product classes with 
cooling capacities >=8,000 Btu/h, corresponding to the inclusion of 
commercially available variable-speed compressors, and EL 3 for cooling 
capacities <8,000 Btu/h, corresponding to the incorporation of maximum 
energy efficient single-speed compressors. TSL 2 corresponds to EL 3 
for all product classes and represents room air conditioners with the 
maximum energy efficient single-speed compressor. TSL 1 corresponds to 
EL 2 for all product classes and represents the current ENERGY STAR 
level. DOE presents the results for the TSLs in this document, while 
the results for all efficiency levels that DOE analyzed are in the 
final rule TSD. DOE presents the results for the TSLs in this document, 
while the results for all efficiency levels that DOE analyzed are in 
the final rule TSD.
    Table V.1 presents the TSLs and the corresponding efficiency levels 
that DOE has identified for potential amended energy conservation 
standards for room air conditioners.

                           Table V.1--Trial Standard Levels for Room Air Conditioners
----------------------------------------------------------------------------------------------------------------
                      Product class                          TSL 1      TSL 2      TSL 3      TSL 4      TSL 5
----------------------------------------------------------------------------------------------------------------
                                                                               CEER (Btu/Wh)
                                                          ------------------------------------------------------
Room Air Conditioner without reverse cycle, with louvered
 sides:
    <6,000 Btu/h (PC 1)..................................       12.1       13.1       13.1       16.0       20.2
    6,000 to 7,900 Btu/h (PC 2)..........................       12.1       13.7       13.7       16.0       21.2
    8,000 to 13,900 Btu/h (PC 3).........................       12.0       14.3       16.0       16.0       21.9
    14,000 to 19,900 Btu/h (PC 4)........................       11.8       14.0       16.0       16.0       19.8
    20,000 to 27,900 Btu/h (PC 5a).......................       10.3       11.8       13.8       13.8       18.7
    >=28,000 Btu/h (PC 5b)...............................        9.9       10.3       13.2       13.2       16.3
Room Air Conditioner without reverse cycle, without
 louvered sides:
    <6,000 Btu/h (PC 6)..................................       11.0       12.8       12.8       14.7       19.4
    6,000 to 7,900 Btu/h (PC 7)..........................       11.0       12.8       12.8       14.7       19.4
    8,000 to 10,900 Btu/h (PC 8a)........................       10.6       12.3       14.1       14.1       18.7
    11,000 to 13,900 Btu/h (PC 8b).......................       10.5       12.3       13.9       13.9       19.0
    14,000 to 19,900 Btu/h (PC 9)........................       10.2       10.9       13.7       13.7       16.8
    >=20,000 Btu/h (PC 10)...............................       10.3       11.0       13.8       13.8       17.0
Room Air Conditioner with reverse cycle, with louvered
 sides:
    <20,000 Btu/h (PC 11)................................       10.8       12.3       14.4       14.4       18.0
    >=20,000 Btu/h (PC 13)...............................       10.2       11.7       13.7       13.7       18.5
Room Air Conditioner with reverse cycle, without louvered
 sides:
    <14,000 Btu/h (PC 12)................................       10.2       11.3       13.7       13.7       16.4
    >=14,000 Btu/h (PC 14)...............................        9.6       11.2       12.8       12.8       17.4
Casement:
    Casement-Only (PC 15)................................       10.5       12.2       13.9       13.9       17.6
    Casement-Slide (PC 16)...............................       11.4       13.2       15.3       15.3       19.1
----------------------------------------------------------------------------------------------------------------

    DOE constructed the TSLs for this final rule to include ELs 
representative of ELs with similar characteristics (i.e., using similar 
technologies and/or efficiencies, and having roughly comparable 
equipment availability). The use of representative ELs provided for 
greater distinction between the TSLs. While representative ELs were 
included in the TSLs, DOE considered all efficiency levels as part of 
its analysis.\70\ DOE did not consider a TSL with EL 1 because DOE's 
projected efficiency distribution indicated a significant portion of 
the market would meet or exceed EL 1 in the no-new-standards case by 
the compliance year leading to smaller national energy savings and 
lower LCC savings for a standard set at EL 1 relative to EL 2. As such, 
the least efficient level considered for TSLs in this final rule is EL 
2.
---------------------------------------------------------------------------

    \70\ Efficiency levels that were analyzed for this NOPR are 
discussed in section IV.C.1 of this document. Results by efficiency 
level are presented in chapters 8, 10, and 12 of the final rule TSD.
---------------------------------------------------------------------------

B. Economic Justification and Energy Savings

1. Economic Impacts on Individual Consumers
    DOE analyzed the economic impacts on room air conditioners 
consumers by looking at the effects that potential amended standards at 
each TSL would have on the LCC and PBP. DOE also examined the impacts 
of potential standards on selected consumer subgroups. These analyses 
are discussed in the following sections.

[[Page 34336]]

a. Life-Cycle Cost and Payback Period
    In general, higher-efficiency products affect consumers in two 
ways: (1) purchase price increases and (2) annual operating costs 
decrease. Inputs used for calculating the LCC and PBP include total 
installed costs (i.e., product price plus installation costs), and 
operating costs (i.e., annual energy use, energy prices, energy price 
trends, repair costs, and maintenance costs). The LCC calculation also 
uses product lifetime and a discount rate. Chapter 8 of the final rule 
TSD provides detailed information on the LCC and PBP analyses.
    Tables V.2 through V.25 show the LCC and PBP results for the TSLs 
considered for each product class. In the first of each pair of tables, 
the simple payback is measured relative to the baseline product. In the 
second table, the impacts are measured relative to the efficiency 
distribution in the in the no-new-standards case in the compliance year 
(see section IV.F.8 of this document). Because some consumers purchase 
products with higher efficiency in the no-new-standards case, the 
average savings are less than the difference between the average LCC of 
the baseline product and the average LCC at each TSL. The savings refer 
only to consumers who are affected by a standard at a given TSL. Those 
who already purchase a product with efficiency at or above a given TSL 
are not affected. Consumers for whom the LCC increases at a given TSL 
experience a net cost.

          Table V.2--Average LCC and PBP Results for Room Air Conditioners PC 1, Without Reverse Cycle and With Louvers, Less Than 6,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........       11.0          419              64          486        906  .........        9.3
1......................................................  .........       11.4          421              63          474        895        1.0        9.3
2......................................................          1       12.1          424              57          428        852        0.6        9.3
3......................................................        2,3       13.1          429              52          397        826        0.8        9.3
4......................................................          4       16.0          518              43          328        846        4.6        9.3
5......................................................          5       20.2          532              35          267        799        3.8        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


  Table V.3--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 1, Without
                              Reverse Cycle and With Louvers, Less Than 6,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                      11.4                        1                            0
1.........................................            12.1                       41                            2
2, 3......................................            13.1                       65                            3
4.........................................            16.0                       47                           41
5.........................................            20.2                       93                           34
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


            Table V.4--Average LCC and PBP Results for Room Air Conditioners PC 2, Without Reverse Cycle and With Louvers, 6,000-7,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........       11.0          437              82          635      1,072  .........        9.3
1......................................................  .........       11.4          440              80          614      1,054        1.0        9.3
2......................................................          1       12.1          444              73          563      1,007        0.7        9.3
3......................................................        2,3       13.7          463              65          504        967        1.5        9.3
4......................................................          4       16.0          539              56          431        970        3.8        9.3
5......................................................          5       21.2          599              44          337        936        4.2        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


  Table V.5--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 2, Without
                                Reverse Cycle and With Louvers, 6,000-7,900 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                      11.4                        0                            0
1.........................................            12.1                       35                            2

[[Page 34337]]

 
2, 3......................................            13.7                       72                           14
4.........................................            16.0                       69                           38
5.........................................            21.2                      103                           42
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


        Table V.6--Average LCC and PBP Results for Room Air Conditioners PC 3, Without Reverse Cycle, With Louvered Sides, and 8,000-13,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........       10.9          561             106          809      1,370  .........        9.3
1......................................................  .........       11.4          564             102          781      1,345        0.7        9.3
2......................................................          1       12.0          576              93          710      1,287        1.2        9.3
3......................................................          2       14.3          584              79          603      1,187        0.9        9.3
4......................................................        3,4       16.0          669              69          524      1,193        2.9        9.3
5......................................................          5       21.9          727              51          394      1,122        3.1        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


  Table V.7--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 3, Without
                           Reverse Cycle, With Louvered Sides, and 8,000-13,900 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                      11.4                        0                            0
1.........................................            12.0                       17                            2
2.........................................            14.3                      105                            2
3, 4......................................            16.0                      100                           26
5.........................................            21.9                      171                           30
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


           Table V.8--Average LCC and PBP Results for Room Air Conditioners PC 4, Without Reverse Cycle and With Louvers, 14,000-19,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........       10.7          703             121          921      1,623  .........        9.3
1......................................................  .........       11.1          705             118          896      1,601        0.7        9.3
2......................................................          1       11.8          713             107          813      1,526        0.7        9.3
3......................................................          2       14.0          739              91          692      1,431        1.2        9.3
4......................................................        3,4       16.0          835              77          588      1,423        3.0        9.3
5......................................................          5       19.8          868              63          479      1,347        2.8        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


  Table V.9--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 4, Without
                               Reverse Cycle and With Louvers, 14,000-19,900 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                      11.1                        0                            0
1.........................................            11.8                        0                            0
2.........................................            14.0                       85                            9
3,4.......................................            16.0                       92                           33

[[Page 34338]]

 
5.........................................            19.8                      168                           30
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


          Table V.10--Average LCC and PBP Results for Room Air Conditioners PC 5a, Without Reverse Cycle and With Louvers, 20,000-27,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........        9.4          876             148        1,086      1,962  .........        9.3
1......................................................  .........        9.8          879             142        1,047      1,926        0.6        9.3
2......................................................          1       10.3          893             132          969      1,862        1.1        9.3
3......................................................          2       11.8          909             115          849      1,758        1.0        9.3
4......................................................        3,4       13.8        1,014              93          688      1,703        2.5        9.3
5......................................................          5       18.7        1,057              69          511      1,567        2.3        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


 Table V.11--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 5a, Without
                               Reverse Cycle and With Louvers, 20,000-27,900 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                       9.8                        0                            0
1.........................................            10.3                        6                            1
2.........................................            11.8                       99                            5
3,4.......................................            13.8                      148                           30
5.........................................            18.7                      284                           27
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


       Table V.12--Average LCC and PBP Results for Room Air Conditioners PCs 5b, Without Reverse Cycle and With Louvers, Greater Than 28,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........        9.0          926             180        1,322      2,248  .........        9.3
1......................................................  .........        9.4          929             172        1,268      2,197        0.4        9.3
2......................................................          1        9.9          935             159        1,170      2,105        0.4        9.3
3......................................................          2       10.3          939             151        1,114      2,053        0.5        9.3
4......................................................        3,4       13.2        1,080             113          833      1,912        2.3        9.3
5......................................................          5       16.3        1,106              91          675      1,781        2.0        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


 Table V.13--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PCs 5b, Without
                            Reverse Cycle and With Louvers, Greater Than 28,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                       9.4                       21                            0
1.........................................             9.9                      101                            0
2.........................................            10.3                      150                            1
3, 4......................................            13.2                      284                           24
5.........................................            16.3                      415                           21
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


[[Page 34339]]


      Table V.14--Average LCC and PBP Results for Room Air Conditioners PC 8a, Without Reverse Cycle and Without Louvered Sides, 8,000-10,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........        9.6          577             108          823      1,400  .........        9.3
1......................................................  .........       10.1          580             103          787      1,368        0.8        9.3
2......................................................          1       10.6          584              96          731      1,316        0.6        9.3
3......................................................          2       12.3          611              83          634      1,245        1.4        9.3
4......................................................        3,4       14.1          695              71          539      1,234        3.2        9.3
5......................................................          5       18.7          764              54          417      1,181        3.5        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


 Table V.15--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 8a, Without
                          Reverse Cycle and Without Louvered Sides, 8,000-10,900 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                      10.1                        0                            0
1.........................................            10.6                        6                            0
2.........................................            12.3                       73                           15
3,4.......................................            14.1                       84                           34
5.........................................            18.7                      137                           38
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


     Table V.16--Average LCC and PBP Results for Room Air Conditioners PC 8b, Without Reverse Cycle and Without Louvered Sides, 11,000-13,999 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........        9.5          626             132        1,010      1,636  .........        9.3
1......................................................  .........       10.0          629             127          968      1,597        0.6        9.3
2......................................................          1       10.5          634             116          885      1,520        0.5        9.3
3......................................................          2       12.3          670             100          764      1,434        1.4        9.3
4......................................................        3,4       13.9          738              86          656      1,394        2.4        9.3
5......................................................          5       19.0          846              64          492      1,338        3.2        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


 Table V.17--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 8b, Without
                          Reverse Cycle and Without Louvered Sides, 11,000-13,900 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                      10.0                        0                            0
1.........................................            10.5                        0                            0
2.........................................            12.3                       81                           17
3,4.......................................            13.9                      119                           26
5.........................................            19.0                      175                           37
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


      Table V.18--Average LCC and PBP Results for Room Air Conditioners PC 9, Without Reverse Cycle and Without Louvered Sides, 14,000-19,900 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........        9.3          756             119          901      1,658  .........        9.3
1......................................................  .........        9.7          760             115          867      1,627        0.8        9.3
2......................................................          1       10.2          770             106          803      1,573        1.1        9.3

[[Page 34340]]

 
3......................................................          2       10.9          795              99          754      1,549        2.0        9.3
4......................................................        3,4       13.7          877              77          584      1,461        2.9        9.3
5......................................................          5       16.8          964              63          482      1,446        3.7        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


  Table V.19--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 9, Without
                          Reverse Cycle and Without Louvered Sides, 14,000-19,900 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                       9.7                       12                            1
1.........................................            10.2                       58                            4
2.........................................            10.9                       81                           19
3, 4......................................            13.7                      165                           24
5.........................................            16.8                      180                           39
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


       Table V.20--Average LCC and PBP Results for Room Air Conditioners PC 11, With Reverse Cycle and With Louvered Sides, Less Than 20,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........        9.8          659             108          829      1,488  .........        9.3
1......................................................  .........       10.4          663             102          788      1,451        0.8        9.3
2......................................................          1       10.8          668              94          725      1,392        0.6        9.3
3......................................................          2       12.3          705              83          645      1,349        1.9        9.3
4......................................................        3,4       14.4          778              71          546      1,324        3.2        9.3
5......................................................          5       18.0          826              58          448      1,274        3.4        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


   Table V.21--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 11, With
                          Reverse Cycle and With Louvered Sides, Less Than 20,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                      10.4                       18                            2
1.........................................            10.8                       69                            2
2.........................................            12.3                      110                           19
3,4.......................................            14.4                      134                           30
5.........................................            18.0                      185                           34
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


     Table V.22--Average LCC and PBP Results for Room Air Conditioners PC 12, With Reverse Cycle and Without Louvered Sides, Less Than 14,000 Btu/h
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........        9.3          776              88          674      1,449  .........        9.3
1......................................................  .........        9.7          779              85          649      1,428        1.0        9.3
2......................................................          1       10.2          788              79          603      1,391        1.3        9.3
3......................................................          2       11.3          812              72          550      1,362        2.2        9.3
4......................................................        3,4       13.7          854              59          449      1,302        2.6        9.3

[[Page 34341]]

 
5......................................................          5       16.4          915              50          383      1,298        3.6        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


   Table V.23--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 12, With
                        Reverse Cycle and Without Louvered Sides, Less Than 14,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                       9.7                        8                            2
1.........................................            10.2                       40                            8
2.........................................            11.3                       67                           22
3,4.......................................            13.7                      124                           21
5.........................................            16.4                      128                           36
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.


                                Table V.24--Average LCC and PBP Results for Room Air Conditioners PC 16, Casement-Slider
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Average costs (2021$)
                                                                              -----------------------------------------------------   Simple    Average
                           EL                               TSL        CEER                                   Lifetime               payback    lifetime
                                                                                Installed    First year's    operating      LCC      (years)    (years)
                                                                                   cost     operating cost      cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
0......................................................  .........       10.4          554              88          677      1,230  .........        9.3
1......................................................  .........       10.8          556              85          654      1,211        1.0        9.3
2......................................................          1       11.4          560              78          599      1,159        0.7        9.3
3......................................................          2       13.2          571              69          529      1,100        0.9        9.3
4......................................................        3,4       15.3          672              59          452      1,124        4.0        9.3
5......................................................          5       19.1          689              48          372      1,061        3.4        9.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative to the
  baseline product.


Table V.25--Average LCC Savings Relative to the No-New-Standards Case for Room Air Conditioners PC 16, Casement-
                                                     Slider
----------------------------------------------------------------------------------------------------------------
                                                                           Life-cycle cost savings
                                                           -----------------------------------------------------
                    TSL                          CEER        Average LCC savings *    Percent of consumers that
                                                                    (2021$)              experience net cost
----------------------------------------------------------------------------------------------------------------
                                                      10.8                        7                            2
1.........................................            11.4                       51                            3
2.........................................            13.2                      107                            5
3,4.......................................            15.3                       84                           38
5.........................................            19.1                      147                           32
----------------------------------------------------------------------------------------------------------------
* The savings represent the average LCC for affected consumers.

b. Consumer Subgroup Analysis
    In the consumer subgroup analysis, DOE estimated the impact of the 
considered TSLs on low-income households and senior-only households for 
product classes with a sufficient sample size in RECS 2015 to perform a 
Monte Carlo analysis. Tables V.26 through V.28 compares the average LCC 
savings and PBP at each efficiency level for the consumer subgroups 
with similar metrics for the entire consumer sample for product classes 
1, 2, and 3. The percentage of consumers with either a net benefit or 
cost are calculated relative to consumers within that subgroup. Product 
Classes 4, 5a, 5b, 8a, 8b, 9, 11, 12, and 16 were not analyzed due to 
their low presence (<5%) in low-income and senior-only households based 
on shipments and stock estimates from RECS 2015. In most cases, the 
average LCC savings and PBP for low-income households and senior-only 
households at the considered efficiency levels are not substantially 
different from the average for all households. Chapter 11 of the final 
rule TSD presents the complete LCC and PBP results for the subgroups.

[[Page 34342]]



 Table V.26--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households: Room Air Conditioners
                       PC 1, Without Reverse Cycle and With Louvers, Less Than 6,000 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                 Low-income       Senior-only     All households
                                                                households *     households **       [dagger]
----------------------------------------------------------------------------------------------------------------
Average LCC Savings (2021$):                                  ...............  ................  ...............
    TSL 1...................................................              $41  ................              $39
    TSL 2, 3................................................              $66  ................              $62
    TSL 4...................................................              $53  ................              $40
    TSL 5...................................................              $99  ................              $84
Payback Period (years):                                       ...............  ................  ...............
    TSL 1...................................................              0.7  ................              0.7
    TSL 2,3.................................................              0.8  ................              0.9
    TSL 4...................................................              4.7  ................              5.1
    TSL 5...................................................              3.9  ................              4.2
Consumers with Net Benefit (%):                               ...............  ................  ...............
    TSL 1...................................................              93%  ................              92%
    TSL 2, 3................................................              94%  ................              92%
    TSL 4...................................................              59%  ................              53%
    TSL 5...................................................              72%  ................              66%
Consumers with Net Cost (%):                                  ...............  ................  ...............
    TSL 1...................................................               0%  ................               1%
    TSL 2, 3................................................               1%  ................               3%
    TSL 4...................................................              36%  ................              42%
    TSL 5...................................................              28%  ................              34%
----------------------------------------------------------------------------------------------------------------
* Low-income households represent 60.0 percent of all households for this product class.
** Insufficient sample size to conduct subgroup analysis.
[dagger] The savings represent results of residential consumers only and exclude results from commercial
  consumers.


 Table V.27--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households: Room Air Conditioners
                         PC 2, Without Reverse Cycle and With Louvers, 6,000-7,900 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                 Low-income       Senior-only     All households
                                                                households *     households **       [dagger]
----------------------------------------------------------------------------------------------------------------
Average LCC Savings (2021$):                                  ...............  ................  ...............
TSL 1.......................................................              $37               $42              $36
TSL 2, 3....................................................              $78               $90              $75
TSL 4.......................................................              $76               $97              $72
TSL 5.......................................................             $117              $150             $109
Payback Period (years):                                       ...............  ................  ...............
TSL 1.......................................................              0.7               0.6              0.7
TSL 2, 3....................................................              1.5               1.3              1.5
TSL 4.......................................................              3.8               3.3              3.9
TSL 5.......................................................              4.1               3.6              4.2
Consumers with Net Benefit (%):                               ...............  ................  ...............
TSL 1.......................................................              74%               72%              73%
TSL 2, 3....................................................              83%               83%              80%
TSL 4.......................................................              60%               66%              59%
TSL 5.......................................................              61%               68%              60%
Consumers with Net Cost (%):                                  ...............  ................  ...............
TSL 1.......................................................               1%                3%               2%
TSL 2, 3....................................................              10%               10%              13%
TSL 4.......................................................              35%               29%              36%
TSL 5.......................................................              39%               32%              40%
----------------------------------------------------------------------------------------------------------------
* Low-income households represent 50.1 percent of all households for this product class.
** Senior-only households represent 24.7 percent of all households for this product class.
[dagger] The savings represent results of residential consumers only and exclude results from commercial
  consumers.


 Table V.28--Comparison of LCC Savings and PBP for Consumer Subgroups and All Households: Room Air Conditioners
                    PC 3, Without Reverse Cycle, With Louvered Sides, and 8,000-13,900 Btu/h
----------------------------------------------------------------------------------------------------------------
                                                                 Low-income       Senior-only     All households
                                                                households *     households **       [dagger]
----------------------------------------------------------------------------------------------------------------
Average LCC savings (2021$):
    TSL 1...................................................              $20               $16              $16
    TSL 2...................................................             $122               $98             $101
    TSL 3,4.................................................             $122               $83              $94
    TSL 5...................................................             $214              $149             $161
Payback Period (years):
    TSL 1...................................................              1.1               1.3              1.3
    TSL 2...................................................              0.8               0.9              0.9

[[Page 34343]]

 
    TSL 3,4.................................................              2.6               3.2              3.1
    TSL 5...................................................              2.8               3.4              3.3
Consumers with Net Benefit (%):
    TSL 1...................................................              27%               25%              27%
    TSL 2...................................................              86%               86%              87%
    TSL 3,4.................................................              64%               55%              64%
    TSL 5...................................................              71%               60%              70%
Consumers with Net Cost (%):
    TSL 1...................................................               2%                4%               2%
    TSL 2...................................................               2%                2%               2%
    TSL 3,4.................................................              25%               34%              26%
    TSL 5...................................................              29%               40%              30%
----------------------------------------------------------------------------------------------------------------
* Low-income households represent 25.7 percent of all households for this product class.
** Senior-only households represent 26.6 percent of all households for this product class.
[dagger] The savings represent results of residential consumers only and exclude results from commercial
  consumers.

c. Rebuttable Presumption Payback
    As discussed in section II.A of this document, EPCA establishes a 
rebuttable presumption that an energy conservation standard is 
economically justified if the increased purchase cost for a product 
that meets the standard is less than three times the value of the 
first-year energy savings resulting from the standard. In calculating a 
rebuttable presumption payback period for each of the considered TSLs, 
DOE used discrete values, and, as required by EPCA, based the energy 
use calculation on the DOE test procedures for room air conditioners. 
In contrast, the PBPs presented in section V.B.1.a of this document 
were calculated using distributions that reflect the range of energy 
use in the field.
    Table V.29 presents the rebuttable-presumption payback periods for 
the considered TSLs for room air conditioners. While DOE examined the 
rebuttable-presumption criterion, it considered whether the standard 
levels considered for this rule are economically justified through a 
more detailed analysis of the economic impacts of those levels, 
pursuant to 42 U.S.C. 6295(o)(2)(B)(i), that considers the full range 
of impacts to the consumer, manufacturer, Nation, and environment. The 
results of that analysis serve as the basis for DOE to definitively 
evaluate the economic justification for a potential standard level, 
thereby supporting or rebutting the results of any preliminary 
determination of economic justification.

                               Table V.29--Rebuttable-Presumption Payback Periods
----------------------------------------------------------------------------------------------------------------
                                                                                 Trial standard level
                           Product class                            --------------------------------------------
                                                                        1        2        3        4        5
----------------------------------------------------------------------------------------------------------------
                                                                                       (years)
----------------------------------------------------------------------------------------------------------------
PC 1: Room Air Conditioners, without reverse cycle, with louvered        1.1      1.2      1.2      7.2      5.5
 sides, and less than 6,000 Btu/h..................................
PC 2: Room Air Conditioners, without reverse cycle, with louvered        1.0      1.8      1.8      6.1      5.1
 sides, and 6,000 to 7,900 Btu/h...................................
PC 3: Room Air Conditioners, without reverse cycle, with louvered        1.4      0.9      4.0      4.0      3.2
 sides, and 8,000 to 13,900 Btu/h..................................
PC 4: Room Air Conditioners, without reverse cycle, with louvered        0.7      0.8      2.8      2.8      2.2
 sides, and 14,000 to 19,900 Btu/h.................................
PC 5a: Room Air Conditioners, without reverse cycle, with louvered       0.7      0.6      1.8      1.8      1.4
 sides, and 20,000 to 27,900 Btu/h.................................
PC 5b: Room Air Conditioners, without reverse cycle, with louvered       0.3      0.3      1.5      1.5      1.3
 sides, and 28,000 Btu/h or more...................................
PC 8a: Room Air Conditioners, without reverse cycle, without             0.7      1.2      4.3      4.3      3.5
 louvered sides, and 8,000 to 10,900 Btu/h.........................
PC 8b: Room Air Conditioners, without reverse cycle, without             0.6      1.3      3.7      3.7      3.2
 louvered sides, and 11,000 to 13,900 Btu/h........................
PC 9: Room Air Conditioners, without reverse cycle, without              0.8      1.2      2.7      2.7      2.4
 louvered sides, and 14,000 to 19,900 Btu/h........................
PC 11: Room Air Conditioners, with reverse cycle, with louvered          0.8      1.9      4.4      4.4      3.5
 sides, and less than 20,000 Btu/h.................................
PC 12: Room Air Conditioners, with reverse cycle, without louvered       1.5      2.1      3.6      3.6      3.7
 sides, and less than 14,000 Btu/h.................................
PC 16: Room Air Conditioners, Casement-Slider......................      0.8      1.0      4.9      4.9      3.9
----------------------------------------------------------------------------------------------------------------


[[Page 34344]]

2. Economic Impacts on Manufacturers
    DOE performed an MIA to estimate the impact of amended energy 
conservation standards on manufacturers of room air conditioners. The 
next section describes the expected impacts on manufacturers at each 
considered TSL. Chapter 12 of the final rule TSD explains the analysis 
in further detail.
a. Industry Cash Flow Analysis Results
    In this section, DOE provides GRIM results from the analysis, which 
examines changes in the industry that would result from a standard. The 
following tables summarize the estimated financial impacts (represented 
by changes in INPV) of potential amended energy conservation standards 
on manufacturers of room air conditioners, as well as the conversion 
costs that DOE estimates manufacturers of room air conditioners would 
incur at each TSL.
    The impact of potential amended energy conservation standards were 
analyzed under two scenarios: (1) the preservation of gross margin 
percentage; and (2) the preservation of per-unit operating profit, as 
discussed in section IV.J.2.d of this document. The preservation of 
gross margin percentage scenario provides the upper bound while the 
preservation of per-unit operating profit scenario results in the lower 
(or more severe) bound to impacts of potential amended standards on 
industry.
    Each of the modeled scenarios results in a unique set of cash flows 
and corresponding INPV for each TSL. INPV is the sum of the discounted 
cash flows to the industry from the publication of the final rule 
through the end of the analysis period (2023-2055). The ``change in 
INPV'' results refer to the difference in industry value between the 
no-new-standards case and standards case at each TSL. To provide 
perspective on the short-run cash flow impact, DOE includes a 
comparison of free cash flow between the no-new-standards case and the 
standards case at each TSL in the year before amended standards would 
take effect. This figure provides an understanding of the magnitude of 
the required conversion costs relative to the cash flow generated by 
the industry in the no-new-standards case.
    Conversion costs are one-time investments for manufacturers to 
bring their manufacturing facilities and product designs into 
compliance with potential amended standards. As described in section 
IV.J.2.c of this document, conversion cost investments occur between 
the year of publication of the final rule and the year by which 
manufacturers must comply with the new standard. The conversion costs 
can have a significant impact on the short-term cash flow on the 
industry and generally result in lower free cash flow in the period 
between the publication of the final rule and the compliance date of 
potential amended standards. Conversion costs are independent of the 
manufacturer markup scenarios and are not presented as a range in this 
analysis.

                                                    Table V.30--Manufacturer Impact Analysis Results for the Room Air Conditioner Industry *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     No-New STDs
                                        Units            case               TSL 1                     TSL 2                     TSL 3                    TSL 4                    TSL 5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
INPV............................  $2021 MM.........      1,198.5  1,188.7 to 1,192.9......  1,167.8 to 1,197.2......  1,140.8 to 1,284.1......  1,097.7 to 1,369.0.....  857.5 to 1,211.5.
Change in INPV..................  %................  ...........  (0.8) to (0.5)..........  (2.6) to (0.1)..........  (4.8) to 7.1............  (8.4) to 14.2..........  (28.4) to 1.1.
Free Cash Flow (2025)...........  $2021 MM.........         86.1  79.9....................  72.6....................  76.9....................  75.5...................  (55.3).
Change in Free Cash Flow (2025).  %................  ...........  (7.2)...................  (15.7)..................  (10.7)..................  (12.4).................  (164.2).
Conversion Costs................  $2021 MM.........  ...........  14.6....................  31.3....................  24.8....................  29.0...................  319.7.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Negative values denoted by parentheses.

    At TSL 1, the standard is set to existing ENERGY STAR levels (EL 2) 
for all product classes. DOE estimates the change in INPV to be minimal 
under both manufacturer markup scenarios. INPV is expected to range 
from -0.8 percent to -0.5 percent. At this level, free cash flow is 
estimated to decrease by 7.2 percent compared to the no-new-standards 
case value of $86.1 million in the year 2025, the year before the 
standards year. DOE's shipments analysis estimates approximately 32 
percent of current shipments meet this level. At TSL 1, DOE does not 
expect industry to adopt new or larger chassis sizes. Capital 
conversion costs may be necessary for incremental updates in tooling. 
Product conversion costs are driven by specification, sourcing, and 
testing of more efficient compressors. DOE estimates capital conversion 
costs of $11.4 million and product conversion costs of $3.2 million. 
Conversion costs total $14.6 million.
    At TSL 2, the standard reflects an efficiency level attainable by 
units with the most efficient R-32 single-speed compressor on the 
market, in combination with other design options, for all product 
classes (EL 3). DOE estimates the change in INPV to range from -2.6 
percent to -0.1 percent. At this level, free cash flow is estimated to 
decrease by 15.7 percent compared to the base-case value in the year 
before the standards year. DOE's shipments analysis estimates 
approximately 2 percent of current shipments meet this level. At TSL 2, 
DOE does not expect industry to adopt new or larger chassis designs. 
Capital conversion costs may be necessitated by the incorporation of 
additional design options, such as the inclusion of sub-cooling. 
Product conversion costs are driven by the need to redesign models to 
incorporate more efficient single-speed compressors as well as other 
design options. DOE estimates capital conversion costs of $26.2 million 
and product conversion costs of $5.1 million. Conversion costs total 
$31.3 million.
    At TSL 3, the standard varies based by product class. For product 
classes with cooling capacities less than 8,000 Btu/h, the standard 
reflects an efficiency level attainable by units with the most 
efficient R-32 single-speed compressor on the market (EL 3) in 
combination with other design options. For product classes with cooling 
capacities greater than or equal to 8,000 Btu/h, the standard reflects 
an efficiency level consistent with the implementation commercially 
available variable-speed compressors (EL 4). DOE estimates the change 
in INPV to range from -4.8 percent to 7.1 percent. At this level, free 
cash flow is estimated to decrease by 10.7 percent compared to the 
base-case value in the year before the standards year. DOE's shipments 
analysis estimates approximately 2 percent of current shipments meet 
this level.
    At this level, DOE does not expect industry to adopt new or larger 
chassis designs. For product classes with cooling capacities greater 
than or equal to the 8,000 Btu/h threshold, additional capital 
conversion costs may be necessary to adjust appearance tooling. DOE 
anticipates greater redesign efforts and product conversion costs as

[[Page 34345]]

manufacturers move these products to variable-speed compressor designs. 
DOE estimates capital conversion costs of $7.1 million and product 
conversion costs of $17.7 million. Conversion costs total $24.8 
million.
    In interviews and through review of market data, DOE found that all 
but one OEM currently produce R-32 room air conditioner models. 
Additionally, based on interview feedback, all OEMs intend to entirely 
transition to R-32 room air conditioners by 2023 regardless of DOE 
actions related to the energy conservation standards for room air 
conditioners. Thus, DOE did not consider the redesign costs related to 
R-32 as conversion costs that are the result of any amended energy 
conservation standards. DOE accounted for the costs associated with the 
transition to low-GWP refrigerants in its modeling of the GRIM, 
consistent with the April 2022 NOPR.
    At TSL 4, the standard reflects the efficiency consistent with the 
implementation of commercially available variable-speed compressors for 
all product classes (EL 4). DOE estimates the change in INPV to range 
from -8.4 percent to 14.2 percent. At this level, free cash flow is 
estimated to decrease by 12.4 percent compared to the base-case value 
in the year before the standards year. DOE's shipments analysis 
estimates that less than 2 percent of current shipments meet this 
level. At this level, DOE does not expect industry to adopt new or 
larger chassis designs. Capital conversion costs may be necessary for 
adjustments in appearance tooling. Compared to lower efficiency levels, 
DOE anticipates significantly greater redesign efforts and product 
conversion costs as manufacturers move all products to variable-speed 
compressor designs. Based on DOE's Compliance Certification Database 
(``CCD''),\71\ DOE estimates that OEMs would need to redesign all 
product platforms to meet the efficiency levels required by TSL 4. DOE 
estimates capital conversion costs of $6.9 million and product 
conversion costs of $22.0 million. Conversion costs total $29.0 
million.
---------------------------------------------------------------------------

    \71\ U.S. Department of Energy's Compliance Certification 
Database. Available at: regulations.doe.gov/certification-data/#q=Product_Group_s%3A* (last accessed: March 17, 2021).
---------------------------------------------------------------------------

    At TSL 5, the standard reflects max-tech efficiency (EL 5) for all 
product classes. DOE estimates the change in INPV to range from -28.4 
percent to 1.1 percent. At this level, free cash flow is estimated to 
decrease by 164.2 percent compared to the base-case value in the year 
before the standards year. In DOE's review of the market, no models 
currently meet this level. DOE estimates capital conversion costs of 
$297.5 million and product conversion costs of $22.2 million. 
Conversion costs total $319.7 million.
    At this level, DOE expects changes to chassis size for certain 
window and through-the-wall units. As a result, capital conversion 
costs increase significantly as manufacturers adjust equipment and 
tooling to accommodate new dimensions. As with EL 4, DOE anticipates 
significant redesign efforts and product conversion costs as 
manufacturers move all products to variable-speed compressor designs. 
OEMs would need to redesign all product platforms to meet the 
efficiency levels required by TSL 5.
    At TSL 5, the large conversion costs result in a free cash flow 
dropping below zero in the years before the standard year. The negative 
free cash flow calculation indicates manufacturers may need to access 
cash reserves or outside capital to finance conversion efforts.
b. Direct Impacts on Employment
    DOE's research indicates no room air conditioners are currently 
made in domestic production facilities. DOE expects that amended 
standards would have no impact on domestic production employment, which 
would remain at zero. Manufacturers maintain offices in the United 
States to handle design, marketing, technical support, and other 
business needs. Large changes in total annual shipments may lead to 
companies reducing their non-production room air conditioner staff. 
However, DOE's shipments model does not forecast substantial changes in 
total annual shipments for TSL 3. If total shipments remain relatively 
steady DOE would not expect any change to non-production employment as 
a result of amended standards. See section IV.G of this document for 
additional details on DOE's shipments analysis.
c. Impacts on Manufacturing Capacity
    In interviews, manufacturers noted that the majority of room air 
conditioners are manufactured overseas by high-volume manufacturers 
producing product for a range of international markets. Manufacturers 
had few concerns about production line constraints below the max-tech 
level (TSL 5). However, at the max-tech level, some manufacturers noted 
concerns about having sufficient technical resources to oversee the 
redesign and testing of all room air conditioner products to 
incorporate variable-speed technology. Additionally, DOE notes that the 
most efficient variable-speed compressors that were implemented at the 
max-tech level (TSL 5) are offered by only a single manufacturer. Based 
on public information, DOE was unable to determine the availability and 
pricing of these compressors. Given the lack of information regarding 
availability of these highest efficiency variable-speed compressors and 
the limited number of variable-speed compressors rated at or near the 
efficiency of compressors considered for the max-tech efficiency level, 
there may not be sufficient availability of the highest efficiency 
variable-speed compressors to meet the entire industry's production 
capacity needs at all cooling capacities of room air conditioners at 
the max-tech level (TSL 5).
d. Impacts on Subgroups of Manufacturers
    Using average cost assumptions to develop industry cash-flow 
estimates may not capture the differential impacts among subgroups of 
manufacturers. Small manufacturers, niche players, or manufacturers 
exhibiting a cost structure that differs substantially from the 
industry average could be affected disproportionately. DOE investigated 
small businesses as a manufacturer subgroup that could be 
disproportionally impacted by energy conservation standards and could 
merit additional analysis. DOE did not identify any other adversely 
impacted manufacturer subgroups for this rulemaking based on the 
results of the industry characterization.
    DOE analyzes the impacts on small businesses in a separate analysis 
in section VII.B of this document as part of the Regulatory Flexibility 
Analysis. For a discussion of the impacts on the small business 
manufacturer subgroup, see the Regulatory Flexibility Analysis in 
section VII.B of this document and chapter 12 of the final rule TSD.
e. Cumulative Regulatory Burden
    One aspect of assessing manufacturer burden involves looking at the 
cumulative impact of multiple DOE standards and the regulatory actions 
of other Federal agencies and States that affect the manufacturers of a 
covered product or equipment. While any one regulation may not impose a 
significant burden on manufacturers, the combined effects of several 
existing or impending regulations may have serious consequences for 
some manufacturers, groups of manufacturers, or an entire industry. 
Multiple regulations affecting the same manufacturer can strain profits 
and lead companies to abandon product lines or markets with lower 
expected

[[Page 34346]]

future returns than competing products. For these reasons, DOE conducts 
an analysis of cumulative regulatory burden as part of its rulemakings 
pertaining to appliance efficiency.
    Table V.31 presents the results of DOE's analysis which includes 
product-specific regulations that will take effect approximately three 
years before or after the 2026 compliance date of any amended energy 
conservation standards for room air conditioners.

   Table V.31--Compliance Dates and Expected Conversion Expenses of Federal Energy Conservation Standards Affecting Room Air Conditioner Manufacturers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Number of OEMs
                                                  affected from                                                                     Industry conversion
    Federal energy conservation      Number of     the room air     Approx. standards year    Industry conversion costs (millions  costs/product revenue
             standard                  OEMs *      conditioner                                                 $)                           ***
                                                     rule **
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial Warm Air Furnaces 81 FR           16                1  2023......................  $7.5 to $22.2 (2014$)..............  1.7% to 5.1%.[dagger]
 2420 (January 15, 2016).
Small, Large, and Very Large                 29                4  2018 and 2023 [Dagger]....  $520.8 (2014$).....................  4.9%.
 Commercial Package Air
 Conditioning and Heating
 Equipment 81 FR 2420 (January 15,
 2016).
Residential Central Air                      51                8  2023......................  $342.6 (2015$).....................  0.5%.
 Conditioners and Heat Pumps 82 FR
 1786 (January 6, 2017).
Portable Air Conditioners 85 FR              11                5  2025......................  $320.9 (2015$).....................  6.7%.
 1378 (January 10, 2020).
Commercial Packaged Boilers 85 FR            43                1  2023......................  $21.2 (2015$)......................  2.3%.
 1592 (January 10, 2020).
Commercial Water Heating Equipment           14                1  2026......................  $34.6 (2020$)......................  4.7%.
 [dagger][dagger] 87 FR 30610 (May
 19, 2022).
Consumer Furnaces [dagger][dagger]           15                2  2029......................  $150.6 (2020$).....................  1.4%.
 87 FR 40590 (July 7, 2022).
Consumer Pool Heaters                        21                1  2028......................  $38.8 (2020$)......................  1.9%.
 [dagger][dagger] 87 FR 22640
 (April 15, 2022).
Consumer Clothes Dryers                      15                4  2027......................  $149.7 (2020$).....................  1.8%.
 [dagger][dagger] 87 FR 51734
 (August 23, 2022).
Microwave Ovens [dagger][dagger]             18                4  2026......................  $46.1 (2021$)......................  0.7%.
 87 FR 52282 (August 24, 2022).
Consumer Conventional Cooking                34                3  2027......................  $183.4 (2021$).....................  1.2%.
 Products [dagger][dagger] 88 FR
 6818 (February 1, 2023).
Residential Clothes Washers                  19                4  2027......................  $690.8 (2021$).....................  5.2%.
 [dagger][dagger] 88 FR 13520
 (March 3, 2023).
Refrigerators, Freezers, and                 49                4  2027......................  $1,323.6 (2021$)...................  3.8%.
 Refrigerator-Freezers
 [dagger][dagger] 88 FR 12452
 (February 27, 2023).
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This column presents the total number of manufacturers identified in the energy conservation standard rule contributing to cumulative regulatory
  burden.
** This column presents the number of manufacturers producing room air conditioner products that are also listed as manufacturers in the listed energy
  conservation standard contributing to cumulative regulatory burden.
*** This column presents industry conversion costs as a percentage of product revenue during the conversion period. Industry conversion costs are the
  upfront investments manufacturers must make to sell compliant products/equipment. The revenue used for this calculation is the revenue from just the
  covered product/equipment associated with each row. The conversion period is the time frame over which conversion costs are made and lasts from the
  publication year of the final rule to the compliance year of the final rule. The conversion period typically ranges from 3 to 5 years, depending on
  the energy conservation standard.
[dagger] Low and high conversion cost scenarios were analyzed as part of this direct final rule. The range of estimated conversion expenses presented
  here reflects those two scenarios.
[Dagger] The direct final rule for small, large, and very large commercial package air conditioning and heating equipment adopts an amended standard in
  2018 and a higher amended standard in 2023. The conversion costs are spread over an 8-year conversion period ending in 2022, with over 80 percent of
  the conversion costs occurring between 2019 and 2022.
[dagger][dagger] These rulemakings are in the proposed rule stage and all values are subject to change until finalized.

3. National Impact Analysis
    This section presents DOE's estimates of the national energy 
savings and the NPV of consumer benefits that would result from each of 
the TSLs considered as potential amended standards.
a. Significance of Energy Savings
    To estimate the energy savings attributable to potential amended 
standards for room air conditioners, DOE compared their energy 
consumption under the no-new-standards case to their anticipated energy 
consumption under each TSL. The savings are measured over the entire 
lifetime of products purchased in the 30-year period that begins in the 
year of anticipated compliance with amended standards (2026-2055). 
Table V.32 presents DOE's projections of the national energy savings 
for each TSL considered for room air conditioners. The savings were 
calculated using the approach described in section IV.H.2 of this 
document.

         Table V.32--Cumulative National Energy Savings for Room Air Conditioners; 30 Years of Shipments
                                                   [2026-2055]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
                                                                             (quads)
----------------------------------------------------------------------------------------------------------------
Primary energy.................................         0.30         0.91         1.35         1.80         3.35
FFC energy.....................................         0.31         0.95         1.41         1.87         3.48
----------------------------------------------------------------------------------------------------------------


[[Page 34347]]

    OMB Circular A-4 \72\ requires agencies to present analytical 
results, including separate schedules of the monetized benefits and 
costs that show the type and timing of benefits and costs. Circular A-4 
also directs agencies to consider the variability of key elements 
underlying the estimates of benefits and costs. For this rulemaking, 
DOE undertook a sensitivity analysis using 9 years, rather than 30 
years, of product shipments. The choice of a 9-year period is a proxy 
for the timeline in EPCA for the review of certain energy conservation 
standards and potential revision of and compliance with such revised 
standards.\73\ The review timeframe established in EPCA is generally 
not synchronized with the product lifetime, product manufacturing 
cycles, or other factors specific to room air conditioners. Thus, such 
results are presented for informational purposes only and are not 
indicative of any change in DOE's analytical methodology. The NES 
sensitivity analysis results based on a 9-year analytical period are 
presented in Table V.33. The impacts are counted over the lifetime of 
room air conditioners purchased in 2026-2055.
---------------------------------------------------------------------------

    \72\ U.S. Office of Management and Budget. Circular A-4: 
Regulatory Analysis. September 17, 2003. https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/ (last accessed 
May 22, 2023).
    \73\ Section 325(m) of EPCA requires DOE to review its standards 
at least once every 6-years, and requires, for certain products, a 
3-year period after any new standard is promulgated before 
compliance is required, except that in no case may any new standards 
be required within 6-years of the compliance date of the previous 
standards. While adding a 6-year review to the 3-year compliance 
period adds up to 9 years, DOE notes that it may undertake reviews 
at any time within the 6-year period and that the 3-year compliance 
date may yield to the 6-year backstop. A 9-year analysis period may 
not be appropriate given the variability that occurs in the timing 
of standards reviews and the fact that for some products, the 
compliance period is 5 years rather than 3 years.

         Table V.33--Cumulative National Energy Savings for Room Air Conditioners; 9 Years of Shipments
                                                   [2026-2034]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
                                                                             (quads)
----------------------------------------------------------------------------------------------------------------
Primary energy savings.........................         0.12         0.36         0.50         0.64         1.09
FFC energy savings.............................         0.12         0.38         0.52         0.67         1.13
----------------------------------------------------------------------------------------------------------------

b. Net Present Value of Consumer Costs and Benefits
    DOE estimated the cumulative NPV of the total costs and savings for 
consumers that would result from the TSLs considered for room air 
conditioners. In accordance with OMB's guidelines on regulatory 
analysis,\74\ DOE calculated NPV using both a 7-percent and a 3-percent 
real discount rate. Table V.34 shows the consumer NPV results with 
impacts counted over the lifetime of products purchased in 2026-2055.
---------------------------------------------------------------------------

    \74\ U.S. Office of Management and Budget. Circular A-4: 
Regulatory Analysis. September 17, 2003. https://obamawhitehouse.archives.gov/omb/circulars_a004_a-4/ (last accessed 
May 22, 2023).

 Table V.34--Cumulative Net Present Value of Consumer Benefits for Room Air Conditioners; 30 Years of Shipments
                                                   [2026-2055]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                 Discount rate                  ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
                                                                         (billion 2021$)
----------------------------------------------------------------------------------------------------------------
3 percent......................................         2.89         8.76        11.46        13.83        24.27
7 percent......................................         1.47         4.45         5.39         6.11        10.63
----------------------------------------------------------------------------------------------------------------

    The NPV results based on the aforementioned 9-year analytical 
period are presented in Table V.35. The impacts are counted over the 
lifetime of products purchased in 2026-2055. As mentioned previously, 
such results are presented for informational purposes only and are not 
indicative of any change in DOE's analytical methodology or decision 
criteria.

  Table V.35--Cumulative Net Present Value of Consumer Benefits for Room Air Conditioners; 9 Years of Shipments
                                                   [2026-2034]
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                 Discount rate                  ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
                                                                         (billion 2021$)
----------------------------------------------------------------------------------------------------------------
3 percent......................................         1.45         4.39         4.94         5.34         9.33
7 percent......................................         0.92         2.77         2.96         3.02         5.31
----------------------------------------------------------------------------------------------------------------


[[Page 34348]]

    The previous results reflect the use of a default trend to estimate 
the change in price for room air conditioners over the analysis period 
(see section IV.H.3 of this document). DOE also conducted a sensitivity 
analysis that considered one scenario with a lower rate of price 
decline than the reference case and one scenario with a higher rate of 
price decline than the reference case. The results of these alternative 
cases are presented in appendix 10C of the final rule TSD. In the high-
price-decline case, the NPV of consumer benefits is higher than in the 
default case. In the low-price-decline case, the NPV of consumer 
benefits is lower than in the default case. Under each sensitivity 
scenario, net benefits remain positive at the adopted TSL.
c. Indirect Impacts on Employment
    DOE estimates that amended energy conservation standards for room 
air conditioners will reduce energy expenditures for consumers of those 
products, with the resulting net savings being redirected to other 
forms of economic activity. These expected shifts in spending and 
economic activity could affect the demand for labor. As described in 
section IV.N of this document, DOE used an input/output model of the 
U.S. economy to estimate indirect employment impacts of the TSLs that 
DOE considered. There are uncertainties involved in projecting 
employment impacts, especially changes in the later years of the 
analysis. Therefore, DOE generated results for near-term timeframes 
(2026-2030), where these uncertainties are reduced.
    The results suggest that the adopted standards are likely to have a 
negligible impact on the net demand for labor in the economy. The net 
change in jobs is so small that it would be imperceptible in national 
labor statistics and might be offset by other, unanticipated effects on 
employment. Chapter 16 of the final rule TSD presents detailed results 
regarding anticipated indirect employment impacts.
4. Impact on Utility or Performance of Products
    As discussed in section IV.C.1.b of this document, DOE has 
concluded that the standards adopted in this final rule will not lessen 
the utility or performance of the room air conditioners under 
consideration in this rulemaking. Manufacturers of these products 
currently offer units that meet or exceed the adopted standards.
5. Impact of Any Lessening of Competition
    DOE considered any lessening of competition that would be likely to 
result from new or amended standards. As discussed in section III.E.1.e 
of this document, EPCA directs the Attorney General of the United 
States (``Attorney General'') to determine the impact, if any, of any 
lessening of competition likely to result from a proposed standard and 
to transmit such determination in writing to the Secretary within 60 
days of the publication of a proposed rule, together with an analysis 
of the nature and extent of the impact. To assist the Attorney General 
in making this determination, DOE provided DOJ with copies of the NOPR 
and the TSD for review. In its assessment letter responding to DOE, DOJ 
concluded that the proposed energy conservation standards for room air 
conditioners are unlikely to have a significant adverse impact on 
competition. DOE is publishing the Attorney General's assessment at the 
end of this final rule.
6. Need of the Nation To Conserve Energy
    Enhanced energy efficiency, where economically justified, improves 
the Nation's energy security, strengthens the economy, and reduces the 
environmental impacts (costs) of energy production. Reduced electricity 
demand due to energy conservation standards is also likely to reduce 
the cost of maintaining the reliability of the electricity system, 
particularly during peak-load periods. Chapter 15 in the final rule TSD 
presents the estimated impacts on electricity generating capacity, 
relative to the no-new-standards case, for the TSLs that DOE considered 
in this rulemaking.
    Energy conservation resulting from potential energy conservation 
standards for room air conditioners is expected to yield environmental 
benefits in the form of reduced emissions of certain air pollutants and 
greenhouse gases. Table V.36 provides DOE's estimate of cumulative 
emissions reductions expected to result from the TSLs considered in 
this rulemaking. The emissions were calculated using the multipliers 
discussed in section IV.J.3 of this document. DOE reports annual 
emissions reductions for each TSL in chapter 13 of the final rule TSD.

            Table V.36--Cumulative Emissions Reduction for Room Air Conditioners Shipped in 2026-2055
----------------------------------------------------------------------------------------------------------------
                                                                       Trial standard level
                                                ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
                                         Power Sector and Site Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)......................         9.97        30.44        45.05        59.87       110.45
CH4 (thousand tons)............................         0.72         2.21         3.26         4.32         7.94
N2O (thousand tons)............................         0.10         0.31         0.45         0.60         1.10
NOX (thousand tons)............................         4.99        15.27        22.48        29.81        54.71
SO2 (thousand tons)............................         4.40        13.45        19.80        26.26        48.20
Hg (tons)......................................         0.03         0.08         0.12         0.16         0.30
----------------------------------------------------------------------------------------------------------------
                                               Upstream Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)......................         0.76         2.31         3.43         4.56         8.45
CH4 (thousand tons)............................        71.16       216.71       322.37       429.43       796.29
N2O (thousand tons)............................         0.00         0.01         0.02         0.02         0.04
NOX (thousand tons)............................        11.42        34.77        51.71        68.88       127.68
SO2 (thousand tons)............................         0.06         0.17         0.25         0.33         0.61
Hg (tons)......................................         0.00         0.00         0.00         0.00         0.00
----------------------------------------------------------------------------------------------------------------
                                               Total FFC Emissions
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)......................        10.73        32.74        48.48        64.43       118.90

[[Page 34349]]

 
CH4 (thousand tons)............................        71.88       218.92       325.63       433.76       804.23
N2O (thousand tons)............................         0.10         0.32         0.47         0.62         1.15
NOX (thousand tons)............................        16.41        50.04        74.20        98.69       182.39
SO2 (thousand tons)............................         4.46        13.62        20.05        26.60        48.82
Hg (tons)......................................         0.03         0.08         0.12         0.16         0.30
----------------------------------------------------------------------------------------------------------------

    As part of the analysis for this rule, DOE estimated monetary 
benefits likely to result from the reduced emissions of CO2 
that DOE estimated for each of the considered TSLs for room air 
conditioners. Section IV.L.1 of this document discusses the estimated 
SC-CO2 values that DOE used. Table V.37 presents the value 
of CO2 emissions reduction at each TSL for each of the SC-
CO2 cases. The time-series of annual values is presented for 
the selected TSL in chapter 14 of the final rule TSD.

       Table V.37--Present Value of CO2 Emissions Reduction for Room Air Conditioners Shipped in 2026-2055
----------------------------------------------------------------------------------------------------------------
                                                                           SC-CO2 case
                                               -----------------------------------------------------------------
                                                                  Discount rate and statistics
                      TSL                      -----------------------------------------------------------------
                                                      5%              3%             2.5%              3%
                                               -----------------------------------------------------------------
                                                    Average         Average         Average      95th percentile
----------------------------------------------------------------------------------------------------------------
                                                                         (million 2021$)
----------------------------------------------------------------------------------------------------------------
1.............................................             111             461             714             1,402
2.............................................             342           1,415           2,189             4,307
3.............................................             499           2,075           3,215             6,313
4.............................................             658           2,745           4,257             8,350
5.............................................           1,194           5,013           7,789            15,250
----------------------------------------------------------------------------------------------------------------

    As discussed in section IV.L.2 of this document, DOE estimated the 
climate benefits likely to result from the reduced emissions of methane 
and N2O that DOE estimated for each of the considered TSLs 
for room air conditioners. Table V.38 presents the value of the 
CH4 emissions reduction at each TSL, and Table V.39 presents 
the value of the N2O emissions reduction at each TSL. The 
time-series of annual values is presented for the selected TSL in 
chapter 14 of the final rule TSD.

     Table V.38--Present Value of Methane Emissions Reduction for Room Air Conditioners Shipped in 2026-2055
----------------------------------------------------------------------------------------------------------------
                                                                           SC-CH4 case
                                               -----------------------------------------------------------------
                                                                  Discount rate and statistics
                      TSL                      -----------------------------------------------------------------
                                                      5%              3%             2.5%              3%
                                               -----------------------------------------------------------------
                                                    Average         Average         Average      95th percentile
----------------------------------------------------------------------------------------------------------------
                                                                         (million 2021$)
----------------------------------------------------------------------------------------------------------------
1.............................................              34              95             132               253
2.............................................             103             292             403               775
3.............................................             151             431             596             1,144
4.............................................             200             573             793             1,519
5.............................................             365           1,055           1,463             2,797
----------------------------------------------------------------------------------------------------------------


[[Page 34350]]


  Table V.39--Present Value of Nitrous Oxide Emissions Reduction for Room Air Conditioners Shipped in 2026-2055
----------------------------------------------------------------------------------------------------------------
                                                                           SC-N2O case
                                               -----------------------------------------------------------------
                                                                  Discount rate and statistics
                      TSL                      -----------------------------------------------------------------
                                                      5%              3%             2.5%              3%
                                               -----------------------------------------------------------------
                                                    Average         Average         Average      95th percentile
----------------------------------------------------------------------------------------------------------------
                                                                         (million 2021$)
----------------------------------------------------------------------------------------------------------------
1.............................................             0.4             1.6             2.4               4.2
2.............................................             1.3             4.8             7.4              12.8
3.............................................             1.8             7.0            10.8              18.7
4.............................................             2.4             9.3            14.3              24.8
5.............................................             4.4            17.0            26.1              45.1
----------------------------------------------------------------------------------------------------------------

    DOE is well aware that scientific and economic knowledge about the 
contribution of CO2 and other GHG emissions to changes in 
the future global climate and the potential resulting damages to the 
global and U.S. economy continues to evolve rapidly. DOE, together with 
other Federal agencies, will continue to review methodologies for 
estimating the monetary value of reductions in CO2 and other 
GHG emissions. This ongoing review will consider the comments on this 
subject that are part of the public record for this and other 
rulemakings, as well as other methodological assumptions and issues. 
DOE notes, however, that the adopted standards would be economically 
justified even without inclusion of monetized benefits of reduced GHG 
emissions.
    DOE also estimated the monetary value of the economic benefits 
associated with NOX and SO2 emissions reductions 
anticipated to result from the considered TSLs for room air 
conditioners. The dollar-per-ton values that DOE used are discussed in 
section IV.L of this document. Table V.40 presents the present value 
for NOX emissions reduction for each TSL calculated using 7-
percent and 3-percent discount rates, and Table V.41 presents similar 
results for SO2 emissions reductions. The results in these 
tables reflect application of EPA's low dollar-per-ton values, which 
DOE used to be conservative. The time-series of annual values is 
presented for the selected TSL in chapter 14 of the final rule TSD.

    Table V.40--Present Value of NOX Emissions Reduction for Room Air
                    Conditioners Shipped in 2026-2055
------------------------------------------------------------------------
               TSL                 7% Discount rate    3% Discount rate
------------------------------------------------------------------------
                                              (million 2021$)
------------------------------------------------------------------------
1...............................                 329                 713
2...............................               1,022               2,196
3...............................               1,465               3,209
4...............................               1,915               4,238
5...............................               3,408               7,714
------------------------------------------------------------------------


    Table V.41--Present Value of SO2 Emissions Reduction for Room Air
                    Conditioners Shipped in 2026-2055
------------------------------------------------------------------------
               TSL                 7% Discount rate    3% Discount rate
------------------------------------------------------------------------
                                              (million 2021$)
------------------------------------------------------------------------
1...............................                 127                 264
2...............................                 394                 814
3...............................                 560               1,182
4...............................                 730               1,556
5...............................               1,290               2,813
------------------------------------------------------------------------

7. Other Factors
    The Secretary of Energy, in determining whether a standard is 
economically justified, may consider any other factors that the 
Secretary deems to be relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) No 
other factors were considered in this analysis.
8. Summary of Economic Impacts
    Table V.42 presents the NPV values that result from adding the 
estimates of the economic benefits resulting from reduced GHG and 
NOX and SO2 emissions to the NPV of consumer 
benefits calculated for each TSL considered in this rulemaking. The 
consumer benefits are domestic U.S. monetary savings that occur as a 
result of purchasing the covered room air conditioners, and are 
measured for the lifetime of products shipped in 2026-2055. The 
benefits associated with reduced GHG emissions resulting from the 
adopted standards are global benefits, and are also calculated based on 
the lifetime of room air conditioners shipped in 2026-2055.

[[Page 34351]]



            Table V.42--Consumer NPV Combined With Present Value of Benefits From Climate and Health
----------------------------------------------------------------------------------------------------------------
                    Category                        TSL 1        TSL 2        TSL 3        TSL 4        TSL 5
----------------------------------------------------------------------------------------------------------------
                    3% discount rate for NPV of Consumer and Health Benefits (billion 2021$)
----------------------------------------------------------------------------------------------------------------
5% d.r., Average SC-GHG case...................          4.0         12.2         16.5         20.5         36.4
3% d.r., Average SC-GHG case...................          4.4         13.5         18.4         22.9         40.9
2.5% d.r., Average SC-GHG case.................          4.7         14.4         19.7         24.7         44.1
3% d.r., 95th percentile SC-GHG case...........          5.5         16.9         23.3         29.5         52.9
----------------------------------------------------------------------------------------------------------------
                    7% discount rate for NPV of Consumer and Health Benefits (billion 2021$)
----------------------------------------------------------------------------------------------------------------
5% d.r., Average SC-GHG case...................          2.1          6.3          8.1          9.6         16.9
3% d.r., Average SC-GHG case...................          2.5          7.6          9.9         12.1         21.4
2.5% d.r., Average SC-GHG case.................          2.8          8.5         11.2         13.8         24.6
3% d.r., 95th percentile SC-GHG case...........          3.6         11.0         14.9         18.7         33.4
----------------------------------------------------------------------------------------------------------------

C. Conclusion

    When considering new or amended energy conservation standards, the 
standards that DOE adopts for any type (or class) of covered product 
must be designed to achieve the maximum improvement in energy 
efficiency that the Secretary determines is technologically feasible 
and economically justified. (42 U.S.C. 6295(o)(2)(A)) In determining 
whether a standard is economically justified, the Secretary must 
determine whether the benefits of the standard exceed its burdens by, 
to the greatest extent practicable, considering the seven statutory 
factors discussed previously. (42 U.S.C. 6295(o)(2)(B)(i)) The new or 
amended standard must also result in significant conservation of 
energy. (42 U.S.C. 6295(o)(3)(B))
    In the April 2022 NOPR, DOE proposed energy conservation standards 
for room air conditioners at TSL 3, as constructed for that analysis. 
The minimum CEERs corresponding to TSL 3 from the April 2022 NOPR are 
shown in Table V.43. 87 FR 20608, 20678 (Apr. 7, 2022).

 Table V.43--April 2022 NOPR Proposed Energy Conservation Standards for
                          Room Air Conditioners
------------------------------------------------------------------------
                     Equipment class                       CEER (Btu/Wh)
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and less             13.1
 than 6,000 Btu/h.......................................
2. Without reverse cycle, with louvered sides and 6,000             13.7
 to 7,900 Btu/h.........................................
3. Without reverse cycle, with louvered sides and 8,000             16.0
 to 13,900 Btu/h........................................
4. Without reverse cycle, with louvered sides and 14,000            16.0
 to 19,900 Btu/h........................................
5a. Without reverse cycle, with louvered sides and                  13.8
 20,000 to 27,900 Btu/h.................................
5b. Without reverse cycle, with louvered sides and                  13.2
 28,000 Btu/h or more...................................
6. Without reverse cycle, without louvered sides, and               12.8
 less than 6,000 Btu/h..................................
7. Without reverse cycle, without louvered sides and                12.8
 6,000 to 7,900 Btu/h...................................
8a. Without reverse cycle, without louvered sides and               14.1
 8,000 to 10,900 Btu/h..................................
8b. Without reverse cycle, without louvered sides and               13.9
 11,000 to 13,900 Btu/h.................................
9. Without reverse cycle, without louvered sides and                13.7
 14,000 to 19,900 Btu/h.................................
10. Without reverse cycle, without louvered sides and               13.8
 20,000 Btu/h or more...................................
11. With reverse cycle, with louvered sides, and less               14.4
 than 20,000 Btu/h......................................
12. With reverse cycle, without louvered sides, and less            13.7
 than 14,000 Btu/h......................................
13. With reverse cycle, with louvered sides, and 20,000             13.7
 Btu/h or more..........................................
14. With reverse cycle, without louvered sides, and                 12.8
 14,000 Btu/h or more...................................
15. Casement-Only.......................................            13.9
16. Casement-Slider.....................................            15.3
------------------------------------------------------------------------

    Gradient, NYSERDA, NEEA, and NWPCC supported DOE's proposed 
standards and stated that these proposed standards are technologically 
achievable and cost-effective, and should therefore be adopted in order 
to provide the predicted cost and energy savings. (Gradient, No. 40 at 
pp. 1-2; NYSERDA, No. 41 at p. 2; NEEA and NWPCC, No. 50 at pp. 1-2)
    While NYSERDA supported DOE's proposed energy conservation 
standards for room air conditioners, NYSERDA strongly urged DOE to set 
more aggressive standards at or potentially even above the proposed ELs 
if the analysis supports more aggressive standards such as those that 
incorporate ECM fan motors in the smaller capacity product class sizes, 
given the multitude of technology options DOE showed could be used to 
achieve higher efficiencies. (NYSERDA, No. 41 at p. 2)
    DOE reviewed the comments directly concerning proposed standards 
and TSLs analyzed in the April 2022 NOPR. In this final rule, DOE 
reassessed the benefits and burdens of the TSLs while considering all 
comments received, as detailed.
    For this final rule, DOE considered the impacts of amended 
standards for room air conditioners at each TSL, beginning with the 
maximum technologically feasible level, to determine whether that level 
was economically justified. Where the max-tech level was not justified, 
DOE then considered the next most efficient level and undertook the 
same evaluation until it reached the highest efficiency level that is 
both technologically feasible and economically justified and saves a 
significant amount of energy.
    To aid the reader as DOE discusses the benefits and/or burdens of 
each TSL, tables in this section present a summary of the results of 
DOE's quantitative analysis for each TSL. In addition to the

[[Page 34352]]

quantitative results presented in the tables, DOE also considers other 
burdens and benefits that affect economic justification. These include 
the impacts on identifiable subgroups of consumers who may be 
disproportionately affected by a national standard and impacts on 
employment.
    DOE also notes that the economics literature provides a wide-
ranging discussion of how consumers trade off upfront costs and energy 
savings in the absence of Government intervention. Much of this 
literature attempts to explain why consumers appear to undervalue 
energy efficiency improvements. There is evidence that consumers 
undervalue future energy savings as a result of (1) a lack of 
information; (2) a lack of sufficient salience of the long-term or 
aggregate benefits; (3) a lack of sufficient savings to warrant 
delaying or altering purchases; (4) excessive focus on the short term, 
in the form of inconsistent weighting of future energy cost savings 
relative to available returns on other investments; (5) computational 
or other difficulties associated with the evaluation of relevant 
tradeoffs; and (6) a divergence in incentives (for example, between 
renters and owners, or builders and purchasers). Having less than 
perfect foresight and a high degree of uncertainty about the future, 
consumers may trade off these types of investments at a higher than 
expected rate between current consumption and uncertain future energy 
cost savings.
    In DOE's current regulatory analysis, potential changes in the 
benefits and costs of a regulation due to changes in consumer purchase 
decisions are included in two ways. First, if consumers forego the 
purchase of a product in the standards case, this decreases sales for 
product manufacturers, and the impact on manufacturers attributed to 
lost revenue is included in the MIA. Second, DOE accounts for energy 
savings attributable only to products actually used by consumers in the 
standards case; if a standard decreases the number of products 
purchased by consumers, this decreases the potential energy savings 
from an energy conservation standard. DOE provides estimates of 
shipments and changes in the volume of product purchases in chapter 9 
of the final rule TSD. However, DOE's current analysis does not 
explicitly control for heterogeneity in consumer preferences, 
preferences across subcategories of products or specific features, or 
consumer price sensitivity variation according to household income.\75\
---------------------------------------------------------------------------

    \75\ P.C. Reiss and M.W. White. Household Electricity Demand, 
Revisited. Review of Economic Studies. 2005. 72(3): pp. 853-883. 
doi: 10.1111/0034-6527.00354.
---------------------------------------------------------------------------

    While DOE is not prepared at present to provide a fuller 
quantifiable framework for estimating the benefits and costs of changes 
in consumer purchase decisions due to an energy conservation standard, 
DOE is committed to developing a framework that can support empirical 
quantitative tools for improved assessment of the consumer welfare 
impacts of appliance standards. DOE has posted a paper that discusses 
the issue of consumer welfare impacts of appliance energy conservation 
standards, and potential enhancements to the methodology by which these 
impacts are defined and estimated in the regulatory process.\76\ DOE 
welcomes comments on how to more fully assess the potential impact of 
energy conservation standards on consumer choice and how to quantify 
this impact in its regulatory analysis in future rulemakings.
---------------------------------------------------------------------------

    \76\ Sanstad, A.H. Notes on the Economics of Household Energy 
Consumption and Technology Choice. 2010. Lawrence Berkeley National 
Laboratory. www1.eere.energy.gov/buildings/appliance_standards/pdfs/consumer_ee_theory.pdf (last accessed July 1, 2021).
---------------------------------------------------------------------------

1. Benefits and Burdens of TSLs Considered for Room Air Conditioner 
Standards
    Tables V.44 and V.45 summarize the quantitative impacts estimated 
for each TSL for room air conditioners. The national impacts are 
measured over the lifetime of room air conditioners purchased in the 
30-year period that begins in the anticipated year of compliance with 
amended standards (2026-2055). The energy savings, emissions 
reductions, and value of emissions reductions refer to full-fuel-cycle 
results. DOE is presenting monetized benefits in accordance with the 
applicable Executive orders and DOE would reach the same conclusion 
presented in this rule in the absence of the social cost of greenhouse 
gases, including the Interim Estimates presented by the Interagency 
Working Group. The efficiency levels contained in each TSL are 
described in section V.A of this document.

           Table V.44--Summary of Analytical Results for Room Air Conditioners TSLs--National Impacts
----------------------------------------------------------------------------------------------------------------
                      Category                           TSL 1       TSL 2       TSL 3       TSL 4       TSL 5
----------------------------------------------------------------------------------------------------------------
                                     Cumulative FFC National Energy Savings
----------------------------------------------------------------------------------------------------------------
Quads...............................................        0.31        0.95        1.41        1.87        3.48
----------------------------------------------------------------------------------------------------------------
                                       Cumulative FFC Emissions Reduction
----------------------------------------------------------------------------------------------------------------
CO2 (million metric tons)...........................       10.73       32.74       48.48       64.43      118.90
CH4 (thousand tons).................................       71.88      218.92      325.63      433.76      804.23
N2O (thousand tons).................................        0.10        0.32        0.47        0.62        1.15
NOX (thousand tons).................................       16.41       50.04       74.20       98.69      182.39
SO2 (thousand tons).................................        4.46       13.62       20.05       26.60       48.82
Hg (tons)...........................................        0.03        0.08        0.12        0.16        0.30
----------------------------------------------------------------------------------------------------------------
                      Present Value of Benefits and Costs (3% discount rate, billion 2021$)
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.....................        3.23        9.99       14.63       19.37       35.77
Climate Benefits *..................................        0.56        1.71        2.51        3.33        6.09

[[Page 34353]]

 
Health Benefits **..................................        0.98        3.01        4.39        5.79       10.53
                                                     -----------------------------------------------------------
    Total Benefits [dagger].........................        4.76       14.71       21.54       28.49       52.38
Consumer Incremental Product Costs [Dagger].........        0.33        1.23        3.17        5.55       11.49
                                                     -----------------------------------------------------------
    Consumer Net Benefits...........................        2.89        8.76       11.46       13.83       24.27
        Total Net Benefits..........................        4.43       13.48       18.37       22.95       40.89
----------------------------------------------------------------------------------------------------------------
                      Present Value of Benefits and Costs (7% discount rate, billion 2021$)
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings.....................        1.66        5.20        7.46        9.79       17.65
Climate Benefits *..................................        0.56        1.71        2.51        3.33        6.09
Health Benefits **..................................        0.46        1.42        2.02        2.65        4.70
                                                     -----------------------------------------------------------
    Total Benefits [dagger].........................        2.68        8.32       12.00       15.76       28.43
Consumer Incremental Product Costs [Dagger].........        0.19        0.75        2.08        3.67        7.02
                                                     -----------------------------------------------------------
    Consumer Net Benefits...........................        1.47        4.45        5.39        6.11       10.63
        Total Net Benefits..........................        2.49        7.58        9.92       12.08       21.41
----------------------------------------------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026-2055.
  These results include benefits to consumers which accrue after 2055 from the products shipped in 2026-2055.
* Climate benefits are calculated using four different estimates of the SC-CO2, SC-CH4, and SC-N2O. Together
  these represent the global SC-GHG. For presentational purposes of this table, the climate benefits associated
  with the average SC-GHG at a 3 percent discount rate are shown, but the Department does not have a single
  central SC-GHG point estimate. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-30087) granted
  the Federal Government's emergency motion for stay pending appeal of the February 11, 2022, preliminary
  injunction issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of the Fifth Circuit's
  order, the preliminary injunction is no longer in effect, pending resolution of the Federal Government's
  appeal of that injunction or a further court order. Among other things, the preliminary injunction enjoined
  the defendants in that case from ``adopting, employing, treating as binding, or relying upon'' the interim
  estimates of the social cost of greenhouse gases--which were issued by the Interagency Working Group on the
  Social Cost of Greenhouse Gases on February 26, 2021--to monetize the benefits of reducing greenhouse gas
  emissions. As reflected in this rule, DOE has reverted to its approach prior to the injunction and presents
  monetized greenhouse gas abatement benefits where appropriate and permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
  (for NOX and SO2) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
  continue to assess the ability to monetize other effects such as health benefits from reductions in direct
  PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
  of this document for more details.
[dagger] Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total
  and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
  percent discount rate, but the Department does not have a single central SC-GHG point estimate. DOE emphasizes
  the importance and value of considering the benefits calculated using all four sets of SC-GHG estimates.
[Dagger] Costs include incremental equipment costs as well as installation costs.


                                           Table V.45--Summary of Analytical Results for Room Air Conditioners TSLs: Manufacturer and Consumer Impacts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
             Category                            TSL 1                           TSL 2                           TSL 3                          TSL 4                          TSL 5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Manufacturer Impacts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Industry NPV (million 2021$) (No-   1,188.7 to 1,192.9............  1,167.8 to 1,197.2............  1,140.8 to 1,284.1............  1,097.7 to 1,369.0...........  857.5 to 1,211.5.
 new-standards case INPV =
 1,189.5).
Industry NPV (% change)...........  (0.8) to (0.5)................  (2.6) to (0.1)................  (4.8) to 7.1..................  (8.4) to 14.2................  (28.4) to 1.1.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Consumer Average LCC Savings (2021$)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PC1: Room Air Conditioners,         41............................  65............................  65............................  47...........................  93.
 without reverse cycle, with
 louvered sides, and less than
 6,000 Btu/h.
PC2: Room Air Conditioners,         35............................  72............................  72............................  69...........................  103.
 without reverse cycle, with
 louvered sides, and 6,000 to
 7,900 Btu/h.
PC3: Room Air Conditioners,         17............................  105...........................  100...........................  100..........................  171.
 without reverse cycle, with
 louvered sides, and 8,000 to
 13,900 Btu/h.
PC4: Room Air Conditioners,         0.............................  85............................  92............................  92...........................  168.
 without reverse cycle, with
 louvered sides, and 14,000 to
 19,900 Btu/h.
PC5a: Room Air Conditioners,        6.............................  99............................  148...........................  148..........................  284.
 without reverse cycle, with
 louvered sides, and 20,000 to
 27,900 Btu/h.
PC5b: Room Air Conditioners,        101...........................  150...........................  284...........................  284..........................  415.
 without reverse cycle, with
 louvered sides, and 28,000 Btu/h
 or more.
PC8a: Room Air Conditioners,        6.............................  73............................  84............................  84...........................  137.
 without reverse cycle, without
 louvered sides, and 8,000 to
 10,900 Btu/h.

[[Page 34354]]

 
PC8b: Room Air Conditioners,        0.............................  81............................  119...........................  119..........................  175.
 without reverse cycle, without
 louvered sides, and 11,000 to
 13,900 Btu/h.
PC9: Room Air Conditioners,         58............................  81............................  165...........................  165..........................  180.
 without reverse cycle, without
 louvered sides, and 14,000 to
 19,900 Btu/h.
PC11: Room Air Conditioners, with   69............................  110...........................  134...........................  134..........................  185.
 reverse cycle, with louvered
 sides, and less than 20,000 Btu/h.
PC12: Room Air Conditioners, with   40............................  67............................  124...........................  124..........................  128.
 reverse cycle, without louvered
 sides, and less than 14,000 Btu/h.
PC16: Room Air Conditioners,        51............................  107...........................  84............................  84...........................  147.
 Casement-Slider.
Shipment-Weighted Average *.......  27............................  83............................  85............................  78...........................  134.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Consumer Simple PBP (years)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PC1: Room Air Conditioners,         0.6...........................  0.8...........................  0.8...........................  4.6..........................  3.8.
 without reverse cycle, with
 louvered sides, and less than
 6,000 Btu/h.
PC2: Room Air Conditioners,         0.7...........................  1.5...........................  1.5...........................  3.8..........................  4.2.
 without reverse cycle, with
 louvered sides, and 6,000 to
 7,900 Btu/h.
PC3: Room Air Conditioners,         1.2...........................  0.9...........................  2.9...........................  2.9..........................  3.1.
 without reverse cycle, with
 louvered sides, and 8,000 to
 13,900 Btu/h.
PC4: Room Air Conditioners,         0.7...........................  1.2...........................  3.0...........................  3.0..........................  2.8.
 without reverse cycle, with
 louvered sides, and 14,000 to
 19,900 Btu/h.
PC5a: Room Air Conditioners,        1.1...........................  1.0...........................  2.5...........................  2.5..........................  2.3.
 without reverse cycle, with
 louvered sides, and 20,000 to
 27,900 Btu/h.
PC5b: Room Air Conditioners,        0.4...........................  0.5...........................  2.3...........................  2.3..........................  2.0.
 without reverse cycle, with
 louvered sides, and 28,000 Btu/h
 or more.
PC8a: Room Air Conditioners,        0.6...........................  1.4...........................  3.2...........................  3.2..........................  3.5.
 without reverse cycle, without
 louvered sides, and 8,000 to
 10,900 Btu/h.
PC8b: Room Air Conditioners,        0.5...........................  1.4...........................  2.4...........................  2.4..........................  3.2.
 without reverse cycle, without
 louvered sides, and 11,000 to
 13,900 Btu/h.
PC9: Room Air Conditioners,         1.1...........................  2.0...........................  2.9...........................  2.9..........................  3.7.
 without reverse cycle, without
 louvered sides, and 14,000 to
 19,900 Btu/h.
PC11: Room Air Conditioners, with   0.6...........................  1.9...........................  3.2...........................  3.2..........................  3.4.
 reverse cycle, with louvered
 sides, and less than 20,000 Btu/h.
PC12: Room Air Conditioners, with   1.3...........................  2.2...........................  2.6...........................  2.6..........................  3.6.
 reverse cycle, without louvered
 sides, and less than 14,000 Btu/h.
PC16: Room Air Conditioners,        0.7...........................  0.9...........................  4.0...........................  4.0..........................  3.4.
 Casement-Slider.
Shipment-Weighted Average *.......  0.8...........................  1.0...........................  1.9...........................  3.6..........................  3.5.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         Percent of Consumers That Experience a Net Cost
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
PC1: Room Air Conditioners,         2%............................  3%............................  3%............................  41%..........................  34%.
 without reverse cycle, with
 louvered sides, and less than
 6,000 Btu/h.
PC2: Room Air Conditioners,         2%............................  14%...........................  14%...........................  38%..........................  42%.
 without reverse cycle, with
 louvered sides, and 6,000 to
 7,900 Btu/h.
PC3: Room Air Conditioners,         2%............................  2%............................  26%...........................  26%..........................  30%.
 without reverse cycle, with
 louvered sides, and 8,000 to
 13,900 Btu/h.
PC4: Room Air Conditioners,         0%............................  9%............................  33%...........................  33%..........................  30%.
 without reverse cycle, with
 louvered sides, and 14,000 to
 19,900 Btu/h.
PC5a: Room Air Conditioners,        1%............................  5%............................  30%...........................  30%..........................  27%.
 without reverse cycle, with
 louvered sides, and 20,000 to
 27,900 Btu/h.
PC5b: Room Air Conditioners,        0%............................  1%............................  24%...........................  24%..........................  21%.
 without reverse cycle, with
 louvered sides, and 28,000 Btu/h
 or more.
PC8a: Room Air Conditioners,        0%............................  15%...........................  34%...........................  34%..........................  38%.
 without reverse cycle, without
 louvered sides, and 8,000 to
 10,900 Btu/h.

[[Page 34355]]

 
PC8b: Room Air Conditioners,        0%............................  17%...........................  26%...........................  26%..........................  37%.
 without reverse cycle, without
 louvered sides, and 11,000 to
 13,900 Btu/h.
PC9: Room Air Conditioners,         4%............................  19%...........................  24%...........................  24%..........................  39%.
 without reverse cycle, without
 louvered sides, and 14,000 to
 19,900 Btu/h.
PC11: Room Air Conditioners, with   2%............................  19%...........................  30%...........................  30%..........................  34%.
 reverse cycle, with louvered
 sides, and less than 20,000 Btu/h.
PC12: Room Air Conditioners, with   8%............................  22%...........................  21%...........................  21%..........................  36%.
 reverse cycle, without louvered
 sides, and less than 14,000 Btu/h.
PC16: Room Air Conditioners,        3%............................  5%............................  38%...........................  38%..........................  32%.
 Casement-Slider.
Shipment-Weighted Average *.......  2%............................  6%............................  17%...........................  34%..........................  34%.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Parentheses indicate negative (-) values.
* Weighted by shares of each product class in total projected shipments in 2026.

    DOE first considered TSL 5, which represents the max-tech 
efficiency levels. At this level, DOE expects room air conditioners 
would require the maximum available efficiency variable-speed 
compressor at all product classes. TSL 5 would save an estimated 3.48 
quads of energy, an amount DOE considers significant. Under TSL 5, the 
NPV of consumer benefit would be $10.63 billion using a discount rate 
of 7 percent, and $24.27 billion using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 5 are 118.9 Mt of 
CO2, 48.8 thousand tons of SO2, 182.4 thousand tons of 
NOX, 0.3 tons of Hg, 804.2 thousand tons of CH4, 
and 1.1 thousand tons of N2O. The estimated monetary value 
of the climate benefits from reduced GHG emissions (associated with the 
average SC-GHG at a 3-percent discount rate) at TSL 5 is $6.09 billion. 
The estimated monetary value of the health benefits from reduced 
SO2 and NOX emissions at TSL 5 is $4.70 billion 
using a 7-percent discount rate and $10.53 billion using a 3-percent 
discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
health benefits from reduced SO2 and NOX 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated total NPV at TSL 5 is $21.41 
billion. Using a 3-percent discount rate for all benefits and costs, 
the estimated total NPV at TSL 5 is $40.89 billion. The estimated total 
NPV is provided for additional information, however DOE primarily 
relies upon the NPV of consumer benefits when determining whether a 
proposed standard level is economically justified.
    At TSL 5, for the product classes with the largest market share, 
the average LCC impact is $93 for PC 1, $103 for PC 2, and $171 for PC 
3. The simple payback period is 3.8 years for PC 1, 4.2 years for PC 2, 
and 3.1 years for PC 3. The fraction of consumers who experience a net 
LCC cost is 34 percent for PC 1, 42 percent for PC 2, and 30 percent 
for PC 3. Overall, 34 percent of consumers would experience a net cost.
    At TSL 5, the projected change in INPV ranges from a decrease of 
$341.0 million to an increase of $13.0 million, which corresponds to a 
decrease of 28.4 percent and an increase of 1.1 percent, respectively. 
Conversion costs total $319.7 million.
    As discussed in section IV.C.1 of this document, DOE believes there 
is uncertainty regarding the estimated compressor cost and availability 
of the highest efficiency variable-speed compressors across the full 
range of capacities at TSL 5, particularly in the smaller capacity room 
air conditioners. These uncertainties stem from the fact that the 
efficiency level for TSL 5 is obtained by using the highest efficiency 
variable-speed compressors that are currently available to be 
incorporated into room air conditioners at the time the analysis was 
competed. In addition, variable speed compressors representing these 
efficiencies are manufactured by just one manufacturer. It is unclear 
whether the highest efficiency variable-speed compressors will be 
available to all manufacturers of room air conditioners since there is 
only a single supplier at this time. In addition, these highest 
efficiency variable-speed compressors are not currently available in 
the full range of capacities of air room air conditioners, which could 
limit the current product offerings by manufacturers. Furthermore, due 
to the single supplier for these highest efficiency variable-speed 
compressors and their unknown manufacturing volume and potential 
bottlenecks for ramp-up manufacturing capabilities, there is a 
likelihood that there may not be sufficient supply to meet the demand 
of the market for the full range of cooling capacities for room air 
conditioners, should TSL 5 be selected. This may have the potential to 
result in the unavailability of room air conditioners of certain 
cooling capacities from the market, which would contradict the 
requirements in 42 U.S.C. 6295(o)(4) for any amended energy 
conservation standards, as well impact the overall number of room air 
conditioners available on the market should TSL 5 be selected.
    The Secretary concludes that at TSL 5 for room air conditioners, 
the benefits of energy savings, positive NPV of consumer benefits, 
emission reductions, and the estimated monetary value of the climate 
and health benefits would be outweighed by the impacts on 
manufacturers, including the conversion costs and profit margin impacts 
that could result in a large reduction in INPV, and the potential for 
product unavailability due to limitations in key components such as the 
highest efficiency variable-speed compressors necessary to reach the 
max-tech efficiency levels. Consequently, the Secretary has concluded 
that TSL 5 is not economically justified.
    DOE then considered TSL 4. At TSL 4, DOE expects that all room air 
conditioners product classes would require variable-speed compressors. 
TSL 4 would save an estimated 1.87 quads of energy, an amount DOE 
considers significant. Under TSL 4, the NPV of consumer benefit would 
be $6.11 billion using a discount rate of 7 percent, and $13.83 billion 
using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 4 are 64.4 Mt of 
CO2, 26.6 thousand tons of SO2, 98.7 thousand

[[Page 34356]]

tons of NOX, 0.16 tons of Hg, 433.8 thousand tons of 
CH4, and 0.62 thousand tons of N2O. The estimated 
monetary value of the climate benefits from reduced GHG emissions 
(associated with the average SC-GHG at a 3-percent discount rate) at 
TSL 4 is $3.33 billion. The estimated monetary value of the health 
benefits from reduced SO2 and NOX emissions at 
TSL 4 is $2.65 billion using a 7-percent discount rate and $5.79 
billion using a 3-percent discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
health benefits from reduced SO2 and NOX 
emissions, and the 3-percent discount rate case for climate benefits 
from reduced GHG emissions, the estimated total NPV at TSL 4 is $12.08 
billion. Using a 3-percent discount rate for all benefits and costs, 
the estimated total NPV at TSL 4 is $22.95 billion. The estimated total 
NPV is provided for additional information, however DOE primarily 
relies upon the NPV of consumer benefits when determining whether a 
proposed standard level is economically justified.
    At TSL 4, for the product classes with the largest market share, 
the average LCC impact is $47 for PC 1, $69 for PC 2, and $100 for PC 
3. The simple payback period is 4.6 years for PC 1, 3.8 years for PC 2, 
and 2.9 years for PC 3. The fraction of consumers who experience a net 
LCC cost is 41 percent for PC 1, 38 percent for PC 2, and 26 percent 
for PC 3. Overall, 34 percent of consumers would experience a net cost 
across all product classes.
    At TSL 4, the projected change in INPV ranges from a decrease of 
$100.8 million to an increase of $170.5 million, which corresponds to a 
decrease of 8.4 percent and an increase of 14.2 percent, respectively. 
Conversion costs total $29.0 million.
    TSL 4 represents commercially available room air conditioners that 
implement variable-speed compressors, based on models with cooling 
capacities greater than 8,000 Btu/h. However, for room air conditioners 
with the smallest cooling capacities (i.e., less than 8,000 Btu/h), 
uncertainties exist regarding both the availability of variable-speed 
compressors that can be integrated into these smaller-size units and 
the feasibility of incorporating these variable-speed compressors with 
related components into a more space-constrained chassis than for 
larger-capacity room air conditioners. There are no models commercially 
available that incorporate variable-speed compressors for cooling 
capacities less than 8,000 Btu/h, and the uncertainty in the 
availability of those compressors may have the potential to eliminate 
room air conditioners with the smallest cooling capacities from the 
market, should TSL 4 be selected. While there are similarly no room air 
conditioners currently on the market with variable-speed compressors at 
cooling capacities greater than 22,000 Btu/h, other air conditioning 
products with such cooling capacities (e.g., mini-split air 
conditioners) do exist in the U.S. market, thereby not giving rise to 
the same uncertainties as for the smallest cooling capacities. Based on 
an analysis of RECS 2015 and historical shipments data, approximately 
78 percent of consumers in the low-income sample purchase units in PC 1 
and PC 2. The unavailability of products at this capacity range would 
disproportionally impact the low-income consumers and their ability to 
access cooling from room air conditioners.
    The Secretary concludes that at TSL 4 for room air conditioners, 
the benefits of energy savings, positive NPV of consumer benefits, 
emission reductions, and the estimated monetary value of the climate 
and health benefits would be outweighed by the impacts on 
manufacturers, including the conversion costs and profit margin impacts 
that could result in a reduction in INPV and potential unavailability 
of key components for small-capacity product classes. Consequently, the 
Secretary has concluded that TSL 4 is not economically justified.
    DOE then considered TSL 3, which would save an estimated 1.41 quads 
of energy, an amount DOE considers significant. TSL 3 represents the 
same efficiency levels as TSL 4 for product classes with cooling 
capacities greater than or equal to 8,000 Btu/h. For product classes, 
less than 8,000 Btu/h, TSL 3 corresponds to the implementation of the 
maximum efficiency single-speed compressor (i.e., one efficiency level 
lower than at TSL 4). At TSL 3, the NPV of consumer benefit would be 
$5.39 billion using a discount rate of 7 percent, and $11.46 billion 
using a discount rate of 3 percent.
    The cumulative emissions reductions at TSL 3 are 48.5 Mt of 
CO2, 20.1 thousand tons of SO2, 74.2 thousand 
tons of NOX, 0.1 tons of Hg, 325.6 thousand tons of 
CH4, and 0.5 thousand tons of N2O. The estimated 
monetary value of the climate benefits from reduced GHG emissions 
(associated with the average SC-GHG at a 3-percent discount rate) at 
TSL 3 is $2.51 billion. The estimated monetary value of the health 
benefits from reduced SO2 and NOX emissions at 
TSL 3 is $2.02 billion using a 7-percent discount rate and $4.39 
billion using a 3-percent discount rate.
    Using a 7-percent discount rate for consumer benefits and costs, 
SO2 reduction benefits, and NOX reduction 
benefits, and the 3-percent discount rate for GHG social costs, the 
estimated combined monetized NPV at TSL 3 is $9.92 billion. Using a 3-
percent discount rate for all consumer and emissions benefits and 
costs, the estimated combined monetized NPV at TSL 3 is $18.37 billion. 
The estimated total monetized NPV is provided for additional 
information; however, DOE primarily relies upon the consumer NPV when 
determining whether a standard level is economically justified.
    At TSL 3, for the product classes with the largest market share, 
the average LCC impact is $65 for PC 1, $72 for PC 2, and $100 for PC 
3. The simple payback period is 0.8 years for PC 1, 1.5 years for PC 2, 
and 2.9 years for PC 3. The fraction of consumers who experience a net 
LCC cost is 3 percent for PC 1, 14 percent for PC 2, and 26 percent for 
PC 3. Overall, 17 percent of consumers would experience a net cost 
across all product classes.
    Based on an analysis of RECS 2015 and historical shipments data, 
approximately 78% of consumers in the low-income sample purchase units 
in PC 1 and PC 2. At TSL 3, the percentage of consumers who experience 
a net LCC cost is 1 percent for PC 1 and 10 percent for PC 2. 
Additionally, the low-income subgroup analysis conservatively estimates 
the impact to low-income consumers by assuming all renters (64% of low-
income sample) are paying the first cost of a room air conditioner. In 
cases where the landlord purchases the unit and renter pays electricity 
bill, the renter would not pay an increased first cost, but would 
benefit from operating cost savings due to a higher efficiency 
standard.
    At TSL 3, the projected change in manufacturer INPV ranges from a 
decrease of $57.7 million to an increase of $85.6 million, which 
corresponds to a decrease of 4.8 percent and an increase of 7.1 
percent, respectively. Conversion costs total $24.8 million.
    After considering the analysis and weighing the benefits and 
burdens, the Secretary has concluded that a standard set at TSL 3 for 
room air conditioners would be economically justified. At this TSL, the 
average LCC savings for room air conditioner consumers is positive, 
meaning that the average consumer would experience net savings from the 
standard. An estimated 17 percent of room air conditioner consumers 
would experience a net cost. The FFC national energy savings of 1.41 
quads are

[[Page 34357]]

significant and the NPV of consumer benefits is positive using both a 
3-percent and 7-percent discount rate. Notably, the benefits to 
consumers vastly outweigh the cost to manufacturers. At TSL 3, the NPV 
of consumer benefits, even measured at the more conservative discount 
rate of 7 percent, is 96 times higher than the maximum estimated 
manufacturers' loss in INPV. The positive LCC savings--a different way 
of quantifying consumer benefits--reinforces this conclusion. The 
standard levels at TSL 3 are economically justified even without 
weighing the estimated monetary value of emissions reductions. When 
those monetized climate benefits from GHG emissions reductions and 
health benefits from SO2 and NOX emissions 
reductions are included--representing $2.51 billion in climate benefits 
(associated with the average SC-GHG at a 3-percent discount rate), and 
$4.39 billion (using a 3-percent discount rate) or $2.02 billion (using 
a 7-percent discount rate) in health benefits--the rationale becomes 
stronger still.
    As stated, DOE conducts the walk-down analysis to determine the TSL 
that represents the maximum improvement in energy efficiency that is 
technologically feasible and economically justified as required under 
EPCA. The walk-down is not a comparative analysis, as a comparative 
analysis would result in the maximization of net benefits instead of 
energy savings that are technologically feasible and economically 
justified, which would be contrary to the statute. 86 FR 70892, 70908. 
Although DOE has not conducted a comparative analysis to select the 
amended energy conservation standards, DOE notes that as compared to 
TSL 4 and TSL 5, TSL 3 has a shorter payback period, smaller 
percentages of consumer experiencing a net cost, a lower maximum 
decrease in INPV, and lower manufacturer conversion costs.
    Although DOE considered amended standard levels for room air 
conditioners by grouping the efficiency levels for each product class 
into TSLs, DOE evaluates all analyzed efficiency levels in its 
analysis. For room air conditioners with cooling capacities greater 
than or equal to 8,000 Btu/h, TSL 3 corresponds to EL 4, the highest 
efficiency level below max-tech, incorporating commercially available 
variable-speed compressors. The variable-speed compressor required to 
achieve the max-tech efficiency level is currently available from only 
a single manufacturer, leading to the likelihood there may not be 
sufficient supply at that efficiency level to meet the demand of the 
market for the full range of cooling capacities for room air 
conditioners. For room air conditioners with cooling capacities less 
than 8,000 Btu/h, TSL 3 corresponds to EL 3, incorporating the maximum 
energy efficient single-speed compressors commercially available. Both 
EL 4 and EL 5 for room air conditioners with cooling capacities less 
than 8,000 Btu/h incorporate variable-speed compressors based on 
modeling of available compressors for models with cooling capacities 
greater than or equal to 8,000 Btu/h. Uncertainties exist at those 
efficiency levels regarding both the availability of variable-speed 
compressors that can be integrated into these smaller-size units and 
the feasibility of incorporating these variable-speed compressors with 
related components into a more space-constrained chassis than for 
larger-capacity room air conditioners. There are no models commercially 
available that incorporate variable-speed compressors for cooling 
capacities less than 8,000 Btu/h. Additionally, average LCC savings are 
higher at EL 3 relative to EL 4 for product classes with cooling 
capacities less than 8,000 Btu/h. The adopted standard levels at TSL 3 
results in positive LCC savings for all product classes, significantly 
reduce the number of consumers experiencing a net cost, and reduce the 
decrease in INPV and conversion costs to the point where DOE has 
concluded they are economically justified, as discussed for TSL 3 in 
the preceding paragraphs.
    Therefore, based on the previous considerations, DOE adopts the 
energy conservation standards for room air conditioners at TSL 3. The 
amended energy conservation standards for room air conditioners, which 
are expressed as CEER, are shown in Table V.46.

     Table V.46--Amended Energy Conservation Standards for Room Air
                              Conditioners
------------------------------------------------------------------------
                                                  Adopted standard CEER
                 Product class                           (Btu/h)
------------------------------------------------------------------------
Room Air Conditioner without reverse cycle,
 with louvered sides:
    <6,000 Btu/h (1)..........................                      13.1
    6,000 to 7,900 Btu/h (2)..................                      13.7
    8,000 to 13,900 Btu/h (3).................                      16.0
    14,000 to 19,900 Btu/h (4)................                      16.0
    20,000 to 27,900 Btu/h (5a)...............                      13.8
    >=28,000 Btu/h (5b).......................                      13.2
Room Air Conditioner without reverse cycle,
 without louvered sides:
    <6,000 Btu/h (6)..........................                      12.8
    6,000 to 7,900 Btu/h (7)..................                      12.8
    8,000 to 10,900 Btu/h (8a)................                      14.1
    11,000 to 13,900 Btu/h (8b)...............                      13.9
    14,000 to 19,900 Btu/h (9)................                      13.7
    >=20,000 Btu/h (10).......................                      13.8
Room Air Conditioner with reverse cycle, with
 louvered sides:
    <20,000 Btu/h (11)........................                      14.4
    >=20,000 Btu/h (13).......................                      13.7
Room Air Conditioner with reverse cycle,
 without louvered sides:
    <14,000 Btu/h (12)........................                      13.7
    >=14,000 Btu/h (14).......................                      12.8
Casement:
    Casement-Only (15)........................                      13.9
    Casement-Slider (16)......................                      15.3
------------------------------------------------------------------------


[[Page 34358]]

2. Annualized Benefits and Costs of the Adopted Standards
    The benefits and costs of the adopted standards can also be 
expressed in terms of annualized values. The annualized net benefit is 
(1) the annualized national economic value (expressed in 2021$) of the 
benefits from operating products that meet the adopted standards 
(consisting primarily of operating cost savings from using less 
energy), minus increases in product purchase costs, and (2) the 
annualized monetary value of the climate and health benefits.
    Table V.47 shows the annualized values for room air conditioners 
under TSL 3, expressed in 2021$. The results under the primary estimate 
are as follows.
    Using a 7-percent discount rate for consumer benefits and costs and 
NOX and SO2 reductions, and the 3-percent 
discount rate case for GHG social costs, the estimated cost of the 
adopted standards for room air conditioners is $205.2 million per year 
in increased equipment installed costs, while the estimated annual 
benefits are $736.9 million from reduced equipment operating costs, 
$140.1 million in GHG reductions, and $199.9 million from reduced 
NOX and SO2 emissions. In this case, the net 
benefit amounts to $871.7 million per year.
    Using a 3-percent discount rate for all benefits and costs, the 
estimated cost of the adopted standards for room air conditioners is 
$176.8 million per year in increased equipment costs, while the 
estimated annual benefits are $815.8 million in reduced operating 
costs, $140.1 million from GHG reductions, and $244.8 million from 
reduced NOX and SO2 emissions. In this case, the 
net benefit amounts to $1,023.9 million per year.

        Table V.47--Annualized Benefits and Costs of Adopted Standards (TSL 3) for Room Air Conditioners
----------------------------------------------------------------------------------------------------------------
                                                                         Million 2021$/year
                                                  --------------------------------------------------------------
                                                                          Low-net-benefits    High-net-benefits
                                                     Primary estimate         estimate             estimate
----------------------------------------------------------------------------------------------------------------
                                                3% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings..................                815.8                784.9                851.9
Climate Benefits *...............................                140.1                137.6                142.5
Health Benefits **...............................                244.8                240.6                248.9
                                                  --------------------------------------------------------------
    Total Benefits [dagger]......................              1,200.6              1,163.2              1,243.3
Consumer Incremental Product Costs [Dagger]......                176.8                199.0                152.2
                                                  --------------------------------------------------------------
    Net Benefits.................................              1,023.9                964.1              1,091.1
----------------------------------------------------------------------------------------------------------------
                                                7% discount rate
----------------------------------------------------------------------------------------------------------------
Consumer Operating Cost Savings..................                736.9                712.3                765.4
Climate Benefits *...............................                140.1                137.6                142.5
Health Benefits **...............................                199.9                196.8                203.0
                                                  --------------------------------------------------------------
    Total Benefits [dagger]......................              1,076.9              1,046.7              1,111.0
Consumer Incremental Product Costs [Dagger]......                205.2                227.0                181.0
                                                  --------------------------------------------------------------
    Net Benefits.................................                871.7                819.7                930.0
----------------------------------------------------------------------------------------------------------------
Note: This table presents the costs and benefits associated with room air conditioners shipped in 2026-2055.
  These results include benefits to consumers which accrue after 2057 from the products shipped in 2028-2057.
  The Primary, Low Net Benefits, and High Net Benefits Estimates utilize projections of energy prices from the
  AEO2022 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition,
  incremental equipment costs reflect a medium decline rate in the Primary Estimate, a low decline rate in the
  Low Net Benefits Estimate, and a high decline rate in the High Net Benefits Estimate. The methods used to
  derive projected price trends are explained in sections IV.F.1 and IV.H.3 of this document. Note that the
  Benefits and Costs may not sum to the Net Benefits due to rounding.
* Climate benefits are calculated using four different estimates of the global SC-GHG (see section IV.L of this
  document). For presentational purposes of this table, the climate benefits associated with the average SC-GHG
  at a 3 percent discount rate are shown, but the Department does not have a single central SC-GHG point
  estimate, and it emphasizes the importance and value of considering the benefits calculated using all four
  sets of SC-GHG estimates. On March 16, 2022, the Fifth Circuit Court of Appeals (No. 22-30087) granted the
  Federal Government's emergency motion for stay pending appeal of the February 11, 2022, preliminary injunction
  issued in Louisiana v. Biden, No. 21-cv-1074-JDC-KK (W.D. La.). As a result of the Fifth Circuit's order, the
  preliminary injunction is no longer in effect, pending resolution of the Federal Government's appeal of that
  injunction or a further court order. Among other things, the preliminary injunction enjoined the defendants in
  that case from ``adopting, employing, treating as binding, or relying upon'' the interim estimates of the
  social cost of greenhouse gases--which were issued by the Interagency Working Group on the Social Cost of
  Greenhouse Gases on February 26, 2021--to monetize the benefits of reducing greenhouse gas emissions. As
  reflected in this rule, DOE has reverted to its approach prior to the injunction and presents monetized
  greenhouse gas abatement benefits where appropriate and permissible under law.
** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing
  (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will
  continue to assess the ability to monetize other effects such as health benefits from reductions in direct
  PM2.5 emissions. The health benefits are presented at real discount rates of 3 and 7 percent. See section IV.L
  of this document for more details.
[dagger] Total and net benefits include consumer, climate, and health benefits. For presentation purposes, total
  and net benefits for both the 3-percent and 7-percent cases are presented using the average SC-GHG with 3-
  percent discount rate, but the Department does not have a single central SC-GHG point estimate.
[Dagger] Costs include incremental equipment costs as well as installation costs.

VI. Cooling Capacity Verification

    In the April 2022 NOPR, DOE proposed to add the cooling capacity of 
room air conditioners to 10 CFR 429.134 to help regulated entities 
understand how DOE will determine the product class that applies to a 
given basic model in the context of an enforcement investigation. DOE 
proposed a similar approach to other products, where DOE would compare 
the mean of the tested cooling capacity from the units of a

[[Page 34359]]

given basic model that DOE has tested for enforcement rounded to the 
nearest hundred to the certified cooling capacity by the manufacturer. 
DOE would use the certified cooling capacity of the manufacturer if the 
mean of the DOE tested units is within 5 percent of the certified 
cooling capacity. If the manufacturer does not have a valid 
certification, including if the certified cooling capacity was 
incorrectly certified, or the certified cooling capacity is found to be 
outside of the 5 percent tolerance, DOE would use the rounded mean of 
the DOE tested units within the enforcement sample to determine the 
applicable product class and energy conservation standard for this 
particular basic model.
    DOE received no comments on the proposed cooling capacity 
verification instructions and maintains that the provisions proposed in 
the April 2022 NOPR provide additional clarity and transparency to the 
enforcement process. Therefore, DOE is adopting the 10 CFR 429.134 
amendments, as proposed in the April 2022 NOPR, in this final rule.

VII. Procedural Issues and Regulatory Review

A. Review Under Executive Orders 12866 and 13563

    Executive Order (``E.O.'') 12866, ``Regulatory Planning and 
Review,'' 58 FR 51735 (Oct. 4, 1993), as supplemented and reaffirmed by 
E.O. 13563, ``Improving Regulation and Regulatory Review'', 76 FR 3821 
(Jan. 21, 2011), requires agencies, to the extent permitted by law, to: 
(1) propose or adopt a regulation only upon a reasoned determination 
that its benefits justify its costs (recognizing that some benefits and 
costs are difficult to quantify); (2) tailor regulations to impose the 
least burden on society, consistent with obtaining regulatory 
objectives, taking into account, among other things, and to the extent 
practicable, the costs of cumulative regulations; (3) select, in 
choosing among alternative regulatory approaches, those approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety, and other advantages; distributive impacts; 
and equity); (4) to the extent feasible, specify performance 
objectives, rather than specifying the behavior or manner of compliance 
that regulated entities must adopt; and (5) identify and assess 
available alternatives to direct regulation, including providing 
economic incentives to encourage the desired behavior, such as user 
fees or marketable permits, or providing information upon which choices 
can be made by the public. DOE emphasizes as well that E.O. 13563 
requires agencies to use the best available techniques to quantify 
anticipated present and future benefits and costs as accurately as 
possible. In its guidance, the Office of Information and Regulatory 
Affairs (``OIRA'') in OMB has emphasized that such techniques may 
include identifying changing future compliance costs that might result 
from technological innovation or anticipated behavioral changes. For 
the reasons stated in the preamble, this final regulatory action is 
consistent with these principles.
    Section 6(a) of E.O. 12866 also requires agencies to submit 
``significant regulatory actions'' to OIRA for review. OIRA has 
determined that this final regulatory action constitutes a 
``significant regulatory action'' within the scope of section 3(f)(1) 
of E.O. 12866. Accordingly, pursuant to section 6(a)(3)(C) of E.O. 
12866, DOE has provided to OIRA an assessment, including the underlying 
analysis, of benefits and costs anticipated from the final regulatory 
action, together with, to the extent feasible, a quantification of 
those costs; and an assessment, including the underlying analysis, of 
costs and benefits of potentially effective and reasonably feasible 
alternatives to the planned regulation, and an explanation why the 
planned regulatory action is preferable to the identified potential 
alternatives. These assessments are summarized in this preamble and 
further detail can be found in the technical support document for this 
rulemaking.

B. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires 
preparation of an initial regulatory flexibility analysis (``IRFA'') 
and a final regulatory flexibility analysis (``FRFA'') for any rule 
that by law must be proposed for public comment, unless the agency 
certifies that the rule, if promulgated, will not have a significant 
economic impact on a substantial number of small entities. As required 
by E.O. 13272, ``Proper Consideration of Small Entities in Agency 
Rulemaking,'' 67 FR 53461 (Aug. 16, 2002), DOE published procedures and 
policies on February 19, 2003, to ensure that the potential impacts of 
its rules on small entities are properly considered during the 
rulemaking process. 68 FR 7990. DOE has made its procedures and 
policies available on the Office of the General Counsel's website 
(www.energy.gov/gc/office-general-counsel).
    DOE reviewed this final rule under the provisions of the Regulatory 
Flexibility Act and the procedures and policies published on February 
19, 2003. DOE certifies that the final rule would not have significant 
economic impact on a substantial number of small entities. The factual 
basis of this certification is set forth in the following paragraphs.
    For manufacturers of room air conditioners, the U.S. Small Business 
Administration (``SBA'') has set a size threshold, which defines those 
entities classified as ``small businesses'' for the purposes of the 
statute. DOE used the SBA's small business size standards to determine 
whether any small entities would be subject to the requirements of the 
rule. (See 13 CFR part 121.) The size standards are listed by North 
American Industry Classification System (``NAICS'') code and industry 
description and are available at www.sba.gov/document/support--table-size-standards. Manufacturing of room air conditioners is classified 
under NAICS 333415, ``Air-Conditioning and Warm Air Heating Equipment 
and Commercial and Industrial Refrigeration Equipment Manufacturing.'' 
The SBA sets a threshold of 1,250 employees or fewer for an entity to 
be considered as a small business for this category.
    EPCA authorizes DOE to regulate the energy efficiency of a number 
of consumer products and certain industrial equipment. (42 U.S.C. 6291-
6317) Title III, Part B of EPCA \77\ established the Energy 
Conservation Program for Consumer Products Other Than Automobiles. (42 
U.S.C. 6291-6309) These products include room air conditioners, the 
subject of this rulemaking.
---------------------------------------------------------------------------

    \77\ For editorial reasons, upon codification in the U.S. Code, 
Part B was redesignated Part A.
---------------------------------------------------------------------------

    Pursuant to EPCA, any new or amended energy conservation standard 
must be designed to achieve the maximum improvement in energy 
efficiency that DOE determines is technologically feasible and 
economically justified. (42 U.S.C. 6295(o)(2)(A)) Furthermore, the new 
or amended standard must result in significant conservation of energy. 
(42 U.S.C. 6295(o)(3)(B)) EPCA also provides that not later than 6 
years after issuance of any final rule establishing or amending a 
standard, DOE must publish either a notice of determination that 
standards for the product do not need to be amended, or a notice of 
proposed rulemaking including new proposed energy conservation 
standards

[[Page 34360]]

(proceeding to a final rule, as appropriate). (42 U.S.C. 6295(m))
    In accordance with these and other statutory provisions discussed 
in this document, DOE is adopting amended energy conservation standards 
for room air conditioners.
    To estimate the number of companies that could be small business 
manufacturers of products covered by this final rule, DOE conducted a 
market survey using public information and subscription-based company 
reports to identify potential small manufacturers. DOE's research 
involved DOE's Compliance Certification Database (``CCD''),\78\ 
California Energy Commission's Modernized Appliance Efficiency Database 
System (``MAEDbS''),\79\ ENERGY STAR Product Finder,\80\ individual 
company websites, and market research tools (e.g., reports from Dun & 
Bradstreet \81\) to create a list of companies that manufacture, 
produce, import, or assemble the products covered by this rulemaking. 
DOE also asked stakeholders and industry representatives if they were 
aware of any other small manufacturers during manufacturer interviews 
and at DOE public meetings.
---------------------------------------------------------------------------

    \78\ U.S. Department of Energy's Compliance Certification 
Database. Available at: regulations.doe.gov/certification-data/#q=Product_Group_s%3A* (last accessed: March 17, 2021).
    \79\ California Energy Commission's Modernized Appliance 
Efficiency Database System. Available at: 
cacertappliances.energy.ca.gov/Pages/ApplianceSearch.aspx (last 
accessed: March 17, 2021).
    \80\ U.S. Environmental Protection Agency's ENERGY STAR data 
set. Available at: energystar.gov/productfinder/ (last accessed 
March 17, 2021).
    \81\ Dun & Bradstreet subscription login is available at: 
app.dnbhoovers.com (last accessed September 14, 2022).
---------------------------------------------------------------------------

    DOE identified eight OEMs of room air conditioner products sold in 
the United States. Upon initial review, one OEM was identified as a 
small manufacturer based in the United States. However, in August 2021, 
a large manufacturer acquired the small manufacturer.\82\ Following 
that acquisition, no domestic room air conditioner OEMs qualify as a 
small business. Given the lack of small entities with a direct 
compliance burden, DOE certifies that the proposed rule would not have 
``a significant economic impact on a substantial number of small 
entities.''
---------------------------------------------------------------------------

    \82\ Rheem Manufacturing Company. Press Release. Available at: 
www.rheem.com/about/news-releases/rheem-acquires-friedrich-air-conditioning (published August 30, 2021).
---------------------------------------------------------------------------

    DOE did not receive written comments in response to the April 2022 
NOPR that specifically addressed the potential impacts on small 
businesses.
    DOE has transmitted the certification and supporting statement of 
factual basis to the Chief Counsel for Advocacy of the SBA for review 
under 5 U.S.C. 605(b).

C. Review Under the Paperwork Reduction Act

    Manufacturers of room air conditioners must certify to DOE that 
their products comply with any applicable energy conservation 
standards. In certifying compliance, manufacturers must test their 
products according to the DOE test procedures for room air 
conditioners, including any amendments adopted for those test 
procedures. DOE has established regulations for the certification and 
recordkeeping requirements for all covered consumer products and 
commercial equipment, including room air conditioners. (See generally 
10 CFR part 429.) The collection-of-information requirement for the 
certification and recordkeeping is subject to review and approval by 
OMB under the Paperwork Reduction Act (``PRA''). This requirement has 
been approved by OMB under OMB control number 1910-1400. Public 
reporting burden for the certification is estimated to average 35 hours 
per response, including the time for reviewing instructions, searching 
existing data sources, gathering and maintaining the data needed, and 
completing and reviewing the collection of information.
    Notwithstanding any other provision of the law, no person is 
required to respond to, nor shall any person be subject to a penalty 
for failure to comply with, a collection of information subject to the 
requirements of the PRA, unless that collection of information displays 
a currently valid OMB Control Number.

D. Review Under the National Environmental Policy Act of 1969

    Pursuant to the National Environmental Policy Act of 1969 
(``NEPA''), DOE has analyzed this rule in accordance with NEPA and 
DOE's NEPA implementing regulations (10 CFR part 1021). DOE has 
determined that this rule qualifies for categorical exclusion under 10 
CFR part 1021, subpart D, appendix B, section B5.1, because it is a 
rulemaking that establishes energy conservation standards for consumer 
products or industrial equipment, none of the exceptions identified in 
section B5.1(b) apply, no extraordinary circumstances exist that 
require further environmental analysis, and it meets the requirements 
for application of a categorical exclusion. See 10 CFR 1021.410. 
Therefore, DOE has determined that promulgation of this rule is not a 
major Federal action significantly affecting the quality of the human 
environment within the meaning of NEPA, and does not require an 
environmental assessment or an environmental impact statement.

E. Review Under Executive Order 13132

    E.O. 13132, ``Federalism,'' 64 FR 43255 (Aug. 10, 1999), imposes 
certain requirements on Federal agencies formulating and implementing 
policies or regulations that preempt State law or that have federalism 
implications. The Executive order requires agencies to examine the 
constitutional and statutory authority supporting any action that would 
limit the policymaking discretion of the States and to carefully assess 
the necessity for such actions. The Executive order also requires 
agencies to have an accountable process to ensure meaningful and timely 
input by State and local officials in the development of regulatory 
policies that have federalism implications. On March 14, 2000, DOE 
published a statement of policy describing the intergovernmental 
consultation process it will follow in the development of such 
regulations. 65 FR 13735. DOE has examined this rule and has determined 
that it would not have a substantial direct effect 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. EPCA governs and prescribes Federal preemption of State 
regulations as to energy conservation for the products that are the 
subject of this final rule. States can petition DOE for exemption from 
such preemption to the extent, and based on criteria, set forth in 
EPCA. (42 U.S.C. 6297) Therefore, no further action is required by 
Executive Order 13132.

F. Review Under Executive Order 12988

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of E.O. 12988, ``Civil 
Justice Reform,'' 61 FR 4729 (Feb. 7, 1996), imposes on Federal 
agencies the general duty to adhere to the following requirements: (1) 
eliminate drafting errors and ambiguity, (2) write regulations to 
minimize litigation, (3) provide a clear legal standard for affected 
conduct rather than a general standard, and (4) promote simplification 
and burden reduction. 61 FR 4729 (Feb. 7, 1996). Regarding the review 
required by section 3(a), section 3(b) of E.O. 12988 specifically 
requires that Executive agencies make every reasonable effort to ensure 
that the regulation (1) clearly specifies the

[[Page 34361]]

preemptive effect, if any, (2) clearly specifies any effect on existing 
Federal law or regulation, (3) provides a clear legal standard for 
affected conduct while promoting simplification and burden reduction, 
(4) specifies the retroactive effect, if any, (5) adequately defines 
key terms, and (6) addresses other important issues affecting clarity 
and general draftsmanship under any guidelines issued by the Attorney 
General. Section 3(c) of E.O. 12988 requires Executive agencies to 
review regulations in light of applicable standards in section 3(a) and 
section 3(b) to determine whether they are met or it is unreasonable to 
meet one or more of them. DOE has completed the required review and 
determined that, to the extent permitted by law, this final rule meets 
the relevant standards of E.O. 12988.

G. Review Under the Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (``UMRA'') 
requires each Federal agency to assess the effects of Federal 
regulatory actions on State, local, and Tribal governments and the 
private sector. Public Law 104-4, section. 201 (codified at 2 U.S.C. 
1531). For a regulatory action likely to result in a rule that may 
cause the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector of $100 million or more in any one 
year (adjusted annually for inflation), section 202 of UMRA requires a 
Federal agency to publish a written statement that estimates the 
resulting costs, benefits, and other effects on the national economy. 
(2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to 
develop an effective process to permit timely input by elected officers 
of State, local, and Tribal governments on a ``significant 
intergovernmental mandate,'' and requires an agency plan for giving 
notice and opportunity for timely input to potentially affected small 
governments before establishing any requirements that might 
significantly or uniquely affect them. On March 18, 1997, DOE published 
a statement of policy on its process for intergovernmental consultation 
under UMRA. 62 FR 12820. DOE's policy statement is also available at 
www.energy.gov/sites/prod/files/gcprod/documents/umra_97.pdf.
    DOE has concluded that this final rule may require expenditures of 
$100 million or more in any one year by the private sector. Such 
expenditures may include (1) investment in research and development and 
in capital expenditures by room air conditioner manufacturers in the 
years between the final rule and the compliance date for the new 
standards and (2) incremental additional expenditures by consumers to 
purchase higher-efficiency room air conditioners, starting at the 
compliance date for the applicable standard.
    Section 202 of UMRA authorizes a Federal agency to respond to the 
content requirements of UMRA in any other statement or analysis that 
accompanies the final rule. (2 U.S.C. 1532(c)) The content requirements 
of section 202(b) of UMRA relevant to a private sector mandate 
substantially overlap the economic analysis requirements that apply 
under section 325(o) of EPCA and Executive Order 12866. This 
SUPPLEMENTARY INFORMATION section and the TSD for this final rule 
respond to those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. (2 U.S.C. 1535(a)) DOE is required to select from those 
alternatives the most cost-effective and least burdensome alternative 
that achieves the objectives of the rule unless DOE publishes an 
explanation for doing otherwise, or the selection of such an 
alternative is inconsistent with law. As required by 42 U.S.C. 6295(m), 
this final rule establishes amended energy conservation standards for 
room air conditioners that are designed to achieve the maximum 
improvement in energy efficiency that DOE has determined to be both 
technologically feasible and economically justified, as required by 
6295(o)(2)(A) and 6295(o)(3)(B). A full discussion of the alternatives 
considered by DOE is presented in chapter 17 of the TSD for this final 
rule.

H. Review Under the Treasury and General Government Appropriations Act, 
1999

    Section 654 of the Treasury and General Government Appropriations 
Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family 
Policymaking Assessment for any rule that may affect family well-being. 
This rule would not have any impact on the autonomy or integrity of the 
family as an institution. Accordingly, DOE has concluded that it is not 
necessary to prepare a Family Policymaking Assessment.

I. Review Under Executive Order 12630

    Pursuant to E.O. 12630, ``Governmental Actions and Interference 
with Constitutionally Protected Property Rights,'' 53 FR 8859 (Mar. 18, 
1988), DOE has determined that this rule would not result in any 
takings that might require compensation under the Fifth Amendment to 
the U.S. Constitution.

J. Review Under the Treasury and General Government Appropriations Act, 
2001

    Section 515 of the Treasury and General Government Appropriations 
Act, 2001 (44 U.S.C. 3516, note) provides for Federal agencies to 
review most disseminations of information to the public under 
information quality guidelines established by each agency pursuant to 
general guidelines issued by OMB. OMB's guidelines were published at 67 
FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 
62446 (Oct. 7, 2002). Pursuant to OMB Memorandum M-19-15, Improving 
Implementation of the Information Quality Act (April 24, 2019), DOE 
published updated guidelines which are available at www.energy.gov/sites/prod/files/2019/12/f70/DOE%20Final%20Updated%20IQA%20Guidelines%20Dec%202019.pdf. DOE has 
reviewed this final rule under the OMB and DOE guidelines and has 
concluded that it is consistent with applicable policies in those 
guidelines.

K. Review Under Executive Order 13211

    E.O. 13211, ``Actions Concerning Regulations That Significantly 
Affect Energy Supply, Distribution, or Use,'' 66 FR 28355 (May 22, 
2001), requires Federal agencies to prepare and submit to OIRA at OMB, 
a Statement of Energy Effects for any significant energy action. A 
``significant energy action'' is defined as any action by an agency 
that promulgates or is expected to lead to promulgation of a final 
rule, and that (1) is a significant regulatory action under Executive 
Order 12866, or any successor order; and (2) is likely to have a 
significant adverse effect on the supply, distribution, or use of 
energy, or (3) is designated by the Administrator of OIRA as a 
significant energy action. For any significant energy action, the 
agency must give a detailed statement of any adverse effects on energy 
supply, distribution, or use should the proposal be implemented, and of 
reasonable alternatives to the action and their expected benefits on 
energy supply, distribution, and use.
    DOE has concluded that this regulatory action, which sets forth 
amended energy conservation standards for room air conditioners, is not 
a significant energy action because the standards are not likely to 
have a significant adverse effect on the supply,

[[Page 34362]]

distribution, or use of energy, nor has it been designated as such by 
the Administrator at OIRA. Accordingly, DOE has not prepared a 
Statement of Energy Effects on this final rule.

L. Information Quality

    On December 16, 2004, OMB, in consultation with the Office of 
Science and Technology Policy (``OSTP''), issued its Final Information 
Quality Bulletin for Peer Review (``the Bulletin''). 70 FR 2664 (Jan. 
14, 2005). The Bulletin establishes that certain scientific information 
shall be peer reviewed by qualified specialists before it is 
disseminated by the Federal Government, including influential 
scientific information related to agency regulatory actions. The 
purpose of the Bulletin is to enhance the quality and credibility of 
the Government's scientific information. Under the Bulletin, the energy 
conservation standards rulemaking analyses are ``influential scientific 
information,'' which the Bulletin defines as ``scientific information 
the agency reasonably can determine will have, or does have, a clear 
and substantial impact on important public policies or private sector 
decisions.'' 70 FR 2664, 2667.
    In response to OMB's Bulletin, DOE conducted formal peer reviews of 
the energy conservation standards development process and the analyses 
that are typically used and prepared a report describing that peer 
review.\83\ Generation of this report involved a rigorous, formal, and 
documented evaluation using objective criteria and qualified and 
independent reviewers to make a judgment as to the technical/
scientific/business merit, the actual or anticipated results, and the 
productivity and management effectiveness of programs and/or projects. 
Because available data, models, and technological understanding have 
changed since 2007, DOE has engaged with the National Academy of 
Sciences to review DOE's analytical methodologies to ascertain whether 
modifications are needed to improve the Department's analyses. DOE is 
in the process of evaluating the resulting report.\84\
---------------------------------------------------------------------------

    \83\ The 2007 ``Energy Conservation Standards Rulemaking Peer 
Review Report'' is available at the following website: energy.gov/eere/buildings/downloads/energy-conservation-standards-rulemaking-peer-review-report-0 (last accessed September 12, 2022).
    \84\ The report is available at www.nationalacademies.org/our-work/review-of-methods-for-setting-building-and-equipment-performance-standards.
---------------------------------------------------------------------------

M. Congressional Notification

    As required by 5 U.S.C. 801, DOE will report to Congress on the 
promulgation of this rule prior to its effective date. The report will 
state that it has been determined that the rule is a ``major rule'' as 
defined by 5 U.S.C. 804(2).

VIII. Approval of the Office of the Secretary

    The Secretary of Energy has approved publication of this final 
rule.

List of Subjects

10 CFR Part 429

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Household appliances, Reporting and 
recordkeeping requirements.

10 CFR Part 430

    Administrative practice and procedure, Confidential business 
information, Energy conservation, Household appliances, Imports, 
Intergovernmental relations, Reporting and recordkeeping requirements, 
Small businesses.

Signing Authority

    This document of the Department of Energy was signed on March 22, 
2023, by Francisco Alejandro Moreno, Acting Assistant Secretary for 
Energy Efficiency and Renewable Energy, pursuant to delegated authority 
from the Secretary of Energy. That document with the original signature 
and date is maintained by DOE. For administrative purposes only, and in 
compliance with requirements of the Office of the Federal Register, the 
undersigned DOE Federal Register Liaison Officer has been authorized to 
sign and submit the document in electronic format for publication, as 
an official document of the Department of Energy. This administrative 
process in no way alters the legal effect of this document upon 
publication in the Federal Register.

    Signed in Washington, DC, on May 10, 2023.
Treena V. Garrett,
Federal Register Liaison Officer, U.S. Department of Energy.

    For the reasons stated in the preamble, DOE amends parts 429 and 
430 of chapter II, subchapter D, of title 10 of the Code of Federal 
Regulations, as set forth below:

PART 429--CERTIFICATION, COMPLIANCE, AND ENFORCEMENT FOR CONSUMER 
PRODUCTS AND COMMERCIAL AND INDUSTRIAL EQUIPMENT

0
1. The authority citation for part 429 continues to read as follows:

    Authority:  42 U.S.C. 6291-6317; 28 U.S.C. 2461 note.


0
2. Amend Sec.  429.134 by adding paragraph (bb) to read as follows:


Sec.  429.134  Product-specific enforcement provisions.

* * * * *
    (bb) Room air conditioners. The cooling capacity will be measured 
pursuant to the test requirements of 10 CFR part 430 for each unit 
tested. The results of the measurement(s) will be averaged and compared 
to the value of cooling capacity certified by the manufacturer for the 
basic model. The certified cooling capacity will be considered valid 
only if the measurement is within five percent of the certified cooling 
capacity.
    (1) If the certified cooling capacity is found to be valid, the 
certified cooling capacity will be used as the basis for determining 
the minimum combined energy efficiency ratio allowed for the basic 
model.
    (2) If the certified cooling capacity is found to be invalid, the 
average measured cooling capacity of the units in the sample will be 
used as the basis for determining the minimum combined energy 
efficiency ratio allowed for the basic model.

PART 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

0
3. The authority citation for part 430 continues to read as follows:

    Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 2461 note.


0
4. Amend Sec.  430.32 by revising paragraph (b) to read as follows:


Sec.  430.32  Energy and water conservation standards and their 
compliance dates.

* * * * *
    (b) Room air conditioners. (1) The following standards remain in 
effect from June 1, 2014, until May 26, 2026:

[[Page 34363]]



                        Table 3 to Paragraph (b)
------------------------------------------------------------------------
                                                        Combined energy
                   Equipment class                      efficiency ratio
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and                  11.0
 with a certified cooling capacity \1\ less than
 6,000 Btu/h.........................................
2. Without reverse cycle, with louvered sides and                   11.0
 with a certified cooling capacity of 6,000 to 7,999
 Btu/h...............................................
3. Without reverse cycle, with louvered sides and                   10.9
 with a certified cooling capacity of 8,000 to 13,999
 Btu/h...............................................
4. Without reverse cycle, with louvered sides and                   10.7
 with a certified cooling capacity of 14,000 to
 19,999 Btu/h........................................
5a. Without reverse cycle, with louvered sides and                   9.4
 with a certified cooling capacity of 20,000 Btu/h to
 27,999 Btu/h........................................
5b. Without reverse cycle, with louvered sides and                   9.0
 with a certified cooling capacity of 28,000 Btu/h or
 more................................................
6. Without reverse cycle, without louvered sides, and               10.0
 with a certified cooling capacity less than 6,000
 Btu/h...............................................
7. Without reverse cycle, without louvered sides and                10.0
 with a certified cooling capacity of 6,000 to 7,999
 Btu/h...............................................
8a. Without reverse cycle, without louvered sides and                9.6
 with a certified cooling capacity of 8,000 to 10,999
 Btu/h...............................................
8b. Without reverse cycle, without louvered sides and                9.5
 with a certified cooling capacity of 11,000 to
 13,999 Btu/h........................................
9. Without reverse cycle, without louvered sides and                 9.3
 with a certified cooling capacity of 14,000 to
 19,999 Btu/h........................................
10. Without reverse cycle, without louvered sides and                9.4
 with a certified cooling capacity of 20,000 Btu/h or
 more................................................
11. With reverse cycle, with louvered sides, and with                9.8
 a certified cooling capacity less than 20,000 Btu/h.
12. With reverse cycle, without louvered sides, and                  9.3
 with a certified cooling capacity less than 14,000
 Btu/h...............................................
13. With reverse cycle, with louvered sides, and with                9.3
 a certified cooling capacity of 20,000 Btu/h or more
14. With reverse cycle, without louvered sides, and                  8.7
 with a certified cooling capacity of 14,000 Btu/h or
 more................................................
15. Casement-Only....................................                9.5
16. Casement-Slider..................................               10.4
------------------------------------------------------------------------
\1\ The certified cooling capacity is determined by the manufacturer in
  accordance with 10 CFR 429.15(a)(3).

    (2) The following standards apply to products manufactured starting 
May 26, 2026:

                       Table 4 to Paragraph (b)(2)
------------------------------------------------------------------------
                                                        Combined energy
                   Equipment class                      efficiency ratio
------------------------------------------------------------------------
1. Without reverse cycle, with louvered sides, and                  13.1
 with a certified cooling capacity \1\ less than
 6,000 Btu/h.........................................
2. Without reverse cycle, with louvered sides and                   13.7
 with a certified cooling capacity of 6,000 to 7,900
 Btu/h...............................................
3. Without reverse cycle, with louvered sides and                   16.0
 with a certified cooling capacity of 8,000 to 13,900
 Btu/h...............................................
4. Without reverse cycle, with louvered sides and                   16.0
 with a certified cooling capacity of 14,000 to
 19,900 Btu/h........................................
5a. Without reverse cycle, with louvered sides and                  13.8
 with a certified cooling capacity of 20,000 Btu/h to
 27,900 Btu/h........................................
5b. Without reverse cycle, with louvered sides and                  13.2
 with a certified cooling capacity of 28,000 Btu/h or
 more................................................
6. Without reverse cycle, without louvered sides, and               12.8
 with a certified cooling capacity less than 6,000
 Btu/h...............................................
7. Without reverse cycle, without louvered sides and                12.8
 with a certified cooling capacity of 6,000 to 7,900
 Btu/h...............................................
8a. Without reverse cycle, without louvered sides and               14.1
 with a certified cooling capacity of 8,000 to 10,900
 Btu/h...............................................
8b. Without reverse cycle, without louvered sides and               13.9
 with a certified cooling capacity of 11,000 to
 13,900 Btu/h........................................
9. Without reverse cycle, without louvered sides and                13.7
 with a certified cooling capacity of 14,000 to
 19,900 Btu/h........................................
10. Without reverse cycle, without louvered sides and               13.8
 with a certified cooling capacity of 20,000 Btu/h or
 more................................................
11. With reverse cycle, with louvered sides, and with               14.4
 a certified cooling capacity less than 20,000 Btu/h.
12. With reverse cycle, without louvered sides, and                 13.7
 with a certified cooling capacity less than 14,000
 Btu/h...............................................
13. With reverse cycle, with louvered sides, and with               13.7
 a certified cooling capacity of 20,000 Btu/h or more
14. With reverse cycle, without louvered sides, and                 12.8
 with a certified cooling capacity of 14,000 Btu/h or
 more................................................
15. Casement-Only....................................               13.9
16. Casement-Slider..................................               15.3
------------------------------------------------------------------------
\1\ The certified cooling capacity is determined by the manufacturer in
  accordance with 10 CFR 429.15(a)(3).

* * * * *

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix A--Letter From the Department of Justice to the Department of 
Energy

U.S. Department of Justice, Antitrust Division, Jonathan S. Kanter, 
Assistant Attorney General, Main Justice Building, 950 Pennsylvania 
Avenue NW, Washington, DC 20530-0001, (202) 514-2401/(202) 616-2645 
(Fax), May 31, 2022
Ami Grace-Tardy, Assistant General Counsel for Legislation, 
Regulation and Energy Efficiency, U.S. Department of Energy, 
Washington, DC 20585, [email protected]

    Dear Assistant General Counsel Grace-Tardy:

    I am responding to your April 7, 2022, letter seeking the views 
of the Attorney General about the potential impact on competition of 
proposed energy conservation standards for room air conditioners 
(room ACs). Your request was submitted under Section 
325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act, as 
amended (EPCA), 42 U.S.C. 6295(o)(2)(B)(i)(V) and 42 U.S.C. 6316(a), 
which requires the Attorney General to make a determination of the 
impact of any lessening of competition that is likely to result from 
the imposition of proposed energy conservation standards. The 
Attorney General's responsibility for responding to requests from 
other departments about the effect of a program on competition has 
been delegated to the Assistant Attorney General for the Antitrust 
Division in 28 CFR 0.40(g).
    In conducting its analysis, the Antitrust Division examines 
whether a proposed standard may lessen competition, for example, by 
substantially limiting consumer choice or increasing industry 
concentration. A lessening of competition could result in higher 
prices to manufacturers and consumers. We have reviewed the proposed 
standards contained in the Notice of Proposed Rulemaking (87 FR 
20608 April 7, 2022), and the related technical support documents. 
We also reviewed the transcript

[[Page 34364]]

from the public meeting held on May 3, 2022 and reviewed public 
comments submitted by industry members in response to DOE's Request 
for Information in this matter.
    Based on the information currently available, we do not believe 
that the proposed energy conservation standards for room ACs are 
likely to have a significant adverse impact on competition.
    Sincerely,

Jonathan S. Kanter,

[FR Doc. 2023-10287 Filed 5-25-23; 8:45 am]
BILLING CODE 6450-01-P

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